SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended October 3, 1997
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:
$11,954,547 (computed on basis of 1997 adjusted book value and number
of shares outstanding at January 2, 1998).
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
582,013 shares of common stock, $5 par value, as of January 2, 1998.
Documents incorporated by reference: None.
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EXPLANATORY NOTE
United Grocers, Inc.'s consolidated 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.
Based on input from United's independent accountants, management
believes that the restatement affected United's consolidated financial
statements starting with fiscal year 1991. The summarized financial data
contained in Item 6 of this Form 10-K for the fiscal years 1993, 1994 and 1995
have been derived from previously audited consolidated financial statements of
the Company, as adjusted for the effect of the restatement. The information for
fiscal years 1993 to 1995 was not re-audited. Because re-audited information is
not available for 1995, Item 7 and Item 8 of this Form 10-K do no contain
information with respect to 1995. A re-audit of fiscal years 1993 through 1995
would involve unreasonable effort or expense and management believes that
certain critical records are not available. The Company believes that the
information contained in this Form 10-K, under these circumstances and in
reliance upon Exchange Act Rule 12b-21, represents the best and most current
financial information that the Company has at this time relating to fiscal years
1993 to 1995.
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PART I
Item 1. Business
General
The registrant, United Grocers, Inc. ("United" or "the Company"), is an Oregon
business corporation primarily engaged in the wholesale grocery and food service
distribution business. The Company was organized in 1915 and operates and is
taxed as a cooperative.
The Company supplies groceries and related products to independent retail
grocers located in Oregon, Western Washington and California. In addition, the
Company and certain of its wholly owned subsidiaries provide many services
needed for the operation of a modern, successful grocery business. These
services include marketing assistance, engineering, accounting, and financing.
The Company's food service distribution business is conducted through its Cash &
Carry division, and its wholly owned subsidiary, Rich and Rhine, Inc. The
Company's Cash & Carry division sells grocery and related products to non member
retail stores, restaurants, and other institutional entities through its 38
stores located in Oregon, Washington, California, and Idaho. Rich and Rhine
distributes tobacco and candy products to other non member retail businesses.
The Company is also engaged in providing multiple line insurance and related
insurance to the grocery industry in 29 states through various wholly owned
subsidiaries. These subsidiaries include Grocers Insurance Company, Grocers
Insurance Agency, Inc., UGIC, Ltd., United Work Place Consultants, Inc., and
Grocers Insurance Group, Inc (collectively, the "insurance segment"). During
fiscal 1997, the Company made a decision to sell its Cash & Carry division and
the Rich and Rhine and insurance segment.
The financial data regarding the Company's industry segment is included in the
consolidated financial statements appearing in Item 8.
Membership
Independent retail grocers within United's market area are eligible to apply for
membership. All applicants for membership are subject to approval by United's
board of directors on the basis of financial responsibility and operational
ability. On approval, and subject to compliance with applicable securities laws,
applicants are required to purchase shares of United's common stock. At October
3, 1997, United has approximately 254 members operating a total of approximately
360 retail grocery stores. At the end of fiscal year 1996, United had
approximately 250 members operating approximately 353 retail grocery stores.
By pooling the buying power of its members, United is able to purchase goods in
large quantities at prices lower than the prices generally available to
independent retail grocers. The savings from the bulk purchases are passed along
to members in the form of rebates, allowances and patronage dividends.
United may also pay its members annual patronage dividends based on the overage,
or excess of revenues over expenses, on sales to members for the year. Each year
United's board of directors determines the portion of the overage which is to be
distributed as patronage dividends.
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Decisions concerning the portion of the overage to be retained are based upon
various factors including United's future capital needs and the amount of
earnings available from operations not qualifying for distribution as patronage
dividends. The patronage dividends, if any, are allocated among the members in
proportion to the contribution to United's gross profit (before rebates and
allowances) attributable to their purchases from United. The patronage dividends
have historically been paid partly in cash and partly in Common Stock.
No member or other customer of United accounts for as much as 10 percent of its
sales. Management believes that the loss of any one or a few of its members or
other customers would not have a material effect on its business or financial
condition.
Consolidated revenues by principal product lines and services appear in the
following table (dollars in thousands):
For the Fiscal Year ended
October 3, 1997 September 27 1996
Percentage Percentage
of Total of Total
Product or Service Revenue Revenue Revenue Revenue
- ------------------ ---------- ----------- ---------- -----------
Grocery(1) $715,340 54.75% $668,321 52.20%
Dairy and Deli 114,045 8.73 113,094 8.83
Meat 59,990 4.59 76,850 6.00
Produce 45,772 3.50 48,456 3.78
Frozen Foods 63,136 4.83 71,602 5.59
General Merchandise 47,044 3.60 48,396 3.78
Institutional (2) 247,509 18.94 232,913 18.19
Retail Services 11,124 0.85 18,249 1.43
Store Finance 2,642 0.21 2,572 .20
---------- ----------- ---------- ------------
Total $1,306,602 100.00% $1,280,453 100.00%
========== =========== ========== ============
(1) Grocery revenue include sales from retail stores operated on a temporary
basis.
(2) Institutional revenue include sales of all product lines.
Member Services
United provides a number of retail services to its members. Services which do
not carry a specific fee or charge include marketing information, merchandising
assistance, competitive retail price reporting and developmental services such
as store site selection, design and engineering.
United also offers its members, at a fee, complete bookkeeping, accounting and
tax services for their retail operations. A computerized payroll service is also
available. Other miscellaneous
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retail services which generally carry a scheduled fee assessment include
customized retail pricing, retail shelf "unit pricing," and retail information
service products.
Members can receive finance services from United's subsidiary, United Resources,
Inc. United Resources makes loans and provides other financial services to
members. Loans to members are generally made at one and three quarters to two
and one quarter percentage points over the prime interest rate. Such loans
generally are for terms of one to ten years. Loan funds are obtained under a
note purchase agreement with National Consumer Cooperative Bank at rates varying
with market interest rates. At October 3, 1997, the aggregate principal amount
of member loans outstanding due the subsidiary was $20,044,547. The subsidiary's
interest income for the year then ended was approximately $2,641,800. In the
normal course of its activities, United Resources, Inc., acquires retail stores
through foreclosure or purchase and operates them on a temporary basis. United
Resources owned four such stores at October 3, 1997. During 1997, United
Resources acquired two stores through foreclosure, and disposed of two stores
through sale or closure.
United, where appropriate, leases retail space and subleases the space to
qualified members to enable them to obtain prime commercial space. At October 3,
1997, United was obligated on 49 such leases, compared to 51 such leases at
September 27, 1996. During 1996, the Company changed its policy of requiring
lease insurance on subleases whereby United is the main lessee, and replaced the
lease insurance with a program whereby United recognizes profits on its
subleases to compensate the Company for its sublease risk. See Notes to
Consolidated Financial Statements for more information on these subleases.
Technology
During 1997 United strategically focused its Information Services group on
building systems platforms to allow for future growth, and doing maintenance on
existing systems for peak performance and to preclude any difficulty with the
"2000" year problem. Further discussion of "Year 2000" preparations is found in
Item 7 of this report.
The Inventory and Distribution Management system in use by United is the DCS2000
system provided by British American Consulting Group (BACG). This system is a
full multi-warehouse distribution system with a complete set of modules to
support purchasing and warehousing functions. The system was upgraded in 1996.
Another key area updated in 1996 was the Finance and Accounting client-server
financial package provided by Oracle. This system went through further
enhancements during the year. The combination of these two systems helps
position United for maximum flexibility and capability for business expansion.
In the Retail Systems area, United has continued to build strategic computer
system platforms that will greatly assist in the success of independent retail
grocers while competing in today's marketplace against the large chains. To take
advantage of the economies of scale enjoyed by retail chains with the
development, purchase, implementation, and support of computer systems, United
has taken a strong leadership role in providing a high-quality, standard
computing package for its retail customers. This standard platform has been
marketed under the name Project Enterprise.
Project Enterprise bundles software, hardware, network connections, and
maintenance together into a single product offering. This entire system is
placed in the retail location and store
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personnel are trained by United staff. The retailer's only financial
responsibility is to pay a weekly fee for the use of the system. Project
Enterprise has allowed United to make a strong computing system affordable to
its retailers while allowing for volume discounts for hardware and maintenance.
United can leverage and build upon these systems in a similar fashion as a
standardized chain environment. The Project Enterprise platform includes an
integrated store processor (I.S.P.), UG's U-Link family of services, a laser
printer, and United's Ready Pay electronic payment system.
Food Service Distribution
The Company's food service distribution operations generate significant annual
volume for its distribution segment, as well as a prominent source of potential
growth in the future. The main source of food service volume is the Company's
Cash & Carry wholesale outlets. These outlets provide a convenient, low cost
method of purchasing groceries and institutional products for non member
grocers, restaurants, and institutional buyers. The Cash & Carry customers
select their merchandise at the outlet much in the same manner that a customer
at a retail grocery store would. Cash & Carry customers provide their own
transportation.
At October 3, 1997, the Cash & Carry outlets generated $248 million in sales, an
increase of 5% over 1996 sales of $233 million.
The Company authorized the sale of its food service distribution operations in
September of 1997. At the same time the Company authorized the sale of the
subsidiary Rich and Rhine, which targeted sales to convenience stores. The
Company intends to continue to supply products to the Cash & Carry stores
through an agreement with the purchaser.
Insurance
The Company decided to sell its insurance operations in September of 1997. The
results of operations for the 1996 and 1997 years are included under the heading
"Discontinued Operations," in the Consolidated Financial Statements included in
this report. Further discussion of these transactions is found in Item 7 of this
report.
Competition
The grocery industry is characterized by intense competition. United's wholesale
grocery marketing area includes Oregon, California and Western Washington.
United's principal competitors are two national grocery wholesalers (which
because of their operations in other areas are larger than United) and four
regional grocery wholesalers.
Other competitors include a number of local grocery wholesalers, many of whom
are limited to special product lines, such as candy, meat or produce, or sell
only to limited market segments, such as restaurants or institutions. United
also competes with a significant number of producers which market their products
directly to retailers and with several chain store organizations which control
both their wholesale and retail operations.
Based on information available, United estimates that its members, many of whom
are in competition with one another, account for approximately 14% of the retail
grocery market within United's marketing area. Although members are free to
purchase from sources other than United,
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members generally purchase goods (except goods which United does not supply,
such as beer and wine) principally from United. United does not account for a
significant percentage of the national wholesale grocery market.
Recent trends in the results of the Company's member stores have continued. In
general, members outside major metropolitan areas, and those operating newer
stores, price oriented or super store formats registered various gains in
volume. Members operating average-sized conventional stores generally registered
smaller volume increases. As a result of these trends, the Company's member unit
volume in the distribution segment increased approximately 2% in 1997.
Employees
United employed approximately 1,700 persons at October 3, 1997. Approximately
1,100 of its employees are members of Teamster or other unions.
United's collective bargaining agreements expire on April 1, 2001. The Company
considers its employee relations to be satisfactory.
Suppliers
United purchases goods from a wide variety of sources ranging from local farmers
to large multinational corporations. United attempts to obtain the lowest
possible price by pooling the buying power of its members. United is not
dependent on any single supplier and the loss of any single supplier would not
have a material effect on its business.
United is one of the six stockholders of Western Family Holding Company, a
corporation which pools the buying power of its stockholders in order to obtain
lower cost merchandise. Purchases from Western Family Holding Company, which
account for about 11% of United's total purchases in 1997, are distributed under
labels such as "Western Family."
United's operations are not of a type which ordinarily result in the discharge
of significant quantities of pollutants. United believes that its operations
substantially meet or exceed all applicable environmental regulations.
Income Taxes
United operates and is taxed as a cooperative. Accordingly, patronage dividends
are not included in United's taxable income but are instead taxed to the
individual members receiving the patronage dividends. The Internal Revenue Code
of 1986, as amended ("Code") requires that not less than 20 percent of each
member's patronage dividend be paid in cash. United's patronage dividend policy
meets that requirement, providing for cash payments of up to 100% of dividends
based on ratios of the value of stock holdings by member stores to their average
weekly purchases, and total number of shares of stock owned. Patronage dividends
not paid in cash are paid in additional Common Stock. Members are required to
agree to abide by all United's bylaw provisions, including those applicable to
federal income taxation of patronage dividends. Accordingly, members must report
as taxable income the total amount of patronage dividends, whether paid in cash
or Common Stock, in the year such patronage dividends are received, and such
amounts are not taxable to United.
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United is taxed on income which does not qualify for distribution as patronage
dividends and on the portion of overage which is not distributed to members.
United's subsidiaries retain all profits (or losses) from their operations and
are part of the consolidated federal income tax return.
Government Contract Business
The Company does not generate significant business based upon contracts with
local, state or federal government entities.
Item 2. Properties
United operates four distribution centers. Two of the centers are owned, the
other two are leased. Its main distribution center (owned), located in
Milwaukie, Oregon, contains over 815,000 square feet of warehouse space situated
on a 62-acre site owned by United. Also at this location are 84,900 square feet
of office space, a 20,000-square-foot truck repair shop, and a
114,000-square-foot frozen food distribution center.
United's southern Oregon division distribution center (owned), located in
Medford, Oregon, contains approximately 200,000 square feet of warehouse space,
plus related office and maintenance areas.
Its California grocery distribution center (leased), located in Modesto,
California, contains over 275,000 square feet of warehouse space situated on a
30 acre site. Also at this location are 12,900 square feet of office space, and
a 10,000-square-foot truck repair shop.
United's California refrigerated distribution center (leased), located in Tracy,
California, contains approximately 160,000 square feet of refrigerated warehouse
space, with areas for fresh meats and deli products and foot frozen foods. Also
at the site are related office and maintenance areas.
United's distribution center warehouses are of modern, one-floor, sprinklered,
concrete construction. Two of the warehouses are subject to various mortgages,
the terms of which are summarized in the Notes to the Consolidated Financial
Statements.
United's Cash & Carry division operates in facilities including five owned
stores and thirty three leased store locations. The stores range in size from
10,000 to 26,000 square feet. United intends to sell its owned stores and assign
the leases on the remaining stores as part of the disposition of the Cash &
Carry division's assets.
United also intends to sell the office building occupied by the Insurance group,
in conjunction with the sale of that business.
United and its subsidiaries operate a truck fleet consisting of 140 tractor cabs
and 300 dry freight and refrigerated semitrailers, including both owned and
leased units.
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United leases a mainframe computer, together with related peripheral equipment,
under various leases expiring in December 1999. The leases call for annual
rental of approximately $820,000.
United is also the prime lessee of retail stores, which are subleased to
members, totaling approximately 1.2 million square feet. Further, United and its
subsidiaries are the lessees and operators of three retail stores acquired
through foreclosure and purchase totaling an additional 99,000 square feet.
United owns an additional retail store occupying approximately 70,000 square
feet.
United rents several warehouses with lease terms and rents as follows:
Area in Lease Monthly
Facility Type Location Square Feet Expiration Rent
- ------------- -------- ----------- ----------- --------
Warehouse Santa Rosa, CA 244,000 7/27/05 $80,250
Modesto, CA 275,000 7/27/05 $74,250
Tracy, CA 160,166 7/27/05 $84,888
Portland, OR 16,000 6/30/02 $ 7,236
Milwaukie, OR 9,600 9/30/00 $ 2,836
Milwaukie, OR 14,097 12/31/02 $15,272
Woodland, CA 68,400 10/01/05 $24,640
Item 3. Legal Proceedings
The Company is regularly a party to routine legal proceedings not expected to
have a material effect on its business.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters.
There is no market for United's Common Stock, which is non-transferable. The
number of holders of United's Common Stock as of October 3, 1997, was 254.
United's earnings are distributed only in the form of patronage dividends.
Accordingly, no earnings are available for the purpose of paying dividends on
Common Stock.
Item 6. Selected Financial Data
The "Statement of Operations" and "Balance Sheet" data for fiscal years 1996 and
1997 in the five-year period ended October 3, 1997 have been derived from the
audited consolidated financial statements of United. The "Statement of
Operations" and "Balance Sheet" data for fiscal years 1993, 1994 and 1995 in the
five-year period ended October 3, 1997 have been derived from the unaudited
consolidated financial statements of United, as adjusted for the effect
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of the restatement described in Note 2 to the Consolidated Financial Statements
(See Explanatory Note at the beginning of this filing).
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):
(In thousands, except book value per share and operating data)
<TABLE>
Fiscal Year
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Restated)(1)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Net sales................ $856,450 $935,432 $995,453 $1,280,453 $1,306,602
Operating income (loss) (2) 9,354 16,244 20,340 9,948 (1,668)
Patronage dividends...... 9,000 8,730 8,350 4,000 0
Net earnings (loss)...... 2,280 2,044 3,685 (5,569) (8,660)
Balance Sheet Data
Working capital.......... $41,819 $ 45,678 $ 53,264 $ 56,328 $ 107,213
Total assets............. 285,342 307,255 323,209 379,265 365,427
Long-term notes payable.. 105,539 114,669 115,624 143,134 187,995
Members' equity.......... 26,320 28,114 32,352 25,733 14,651
- ----------
</TABLE>
(1) See Note 2 to Notes to Consolidated Financial Statements of United.
(2) Operating income (loss) 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
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.
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.
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The following is a summary of the assets and liabilities of the insurance
segment as of October 3, 1997:
Assets:
Investments.............................................. $51,512,510
Receivables and other current assets..................... 22,070,168
Long-term assets......................................... 1,328,392
-----------
$74,911,070
Liabilities:
Insurance reserves supported by investments.............. $26,356,313
Accounts payable and other current liabilities........... 19,543,582
-----------
Net investment in insurance segment...................... $29,011,175
===========
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. As of December 1997, planning for implementation of all infrastructure
issues was complete. Updating and testing will begin in 1998 and it is expected
that all infrastructure item tasks will 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 is negotiating to engage an independent expert to assist
in project management, and in conversion and testing of certain non-compliant
application software code. United estimates that the conversion phase will be
completed by March 31, 1999.
United uses software from The Armature Company for warehousing and purchasing
functions. "Year 2000" compliant software installation will be complete by
November 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 4,324 suppliers. In 1998, the Company plans to
contact suppliers requesting information on their plans and progress on the Year
2000 issue. The company anticipates a majority of the suppliers to respond and
is expecting full compliance by September 30, 1999. United has a follow-up plan
in place scheduled through 1999. Contingency planning in this area is scheduled
to begin in January 1999, with the completed plan in place by June 30,1999.
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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 will begin identification and
prioritization in 1998. Replacement and correction of identified problems is
expected to 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 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.
United expects to complete the Inventory, Prioritization, and Assessment phases
(phases A, B and C) of the Project by
November 1998.
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.
Phase E--Full systems testing is expected to be completed 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, 1997 was
$100,000, which related primarily to identification and an inventory of
potential Year 2000 items and assigning priorities. The estimated future cost of
completing the Year 2000 Project is estimated to be $5.5 million - $5.4 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 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
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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
1997 1996
---- ----
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 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 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 due to the uncertainty regarding the ability of United to utilize
deferred tax assets. 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.
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Net loss was $8.7 million (0.7% of net sales) in 1997 and $5.6 million in 1996
(0.4% of net sales). 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 million 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
In June 1997, the Financial Accounting Standards Board (FASB) issued 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. The statement is effective for
fiscal years beginning after December 15, 1997.
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.
United's management has studied the implications of SFAS No. 131, 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 statement becomes effective.
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
14
<PAGE>
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, 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;
15
<PAGE>
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 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.
16
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors:
Name Age Principal Occupation
---- --- --------------------
Directors whose terms began in 1995 and expire in 1998:
Dick Leonard 58 President, L & L Market, Inc.
Dean Ryan 39 President, Topps Industries, Inc.
Gordon Smith 52 President, Market Place Foods, Inc.
Directors whose terms began in 1996 and expire in 1999:
Ron Mancasola 60 President, Al Mancasola Grocery Market, Inc.
Robert A. Lamb 57 Partner, Lamb Lasko Partnership
H. Larry Montgomery 53 President, Larry's Market, Inc.
Directors whose terms began in 1997 and expire in 2000:
James F. Glassel 57 President, Fatewell, Inc.
Kenneth W. Findley 58 President, Bales for Food, Inc.
Gaylon G. Baese 60 President, Howards on Scholls, Inc.
Nominees for Director (three to be elected in 1998 for terms expiring in
2001):
Peter J. O'Neal 53 President, Quality Food Investment, Inc.
Floyd West 57 President, Pioneer Super Save, Inc.
Arthur J. Maybrun 55 President, Lad's Supermarket, Inc.
Mary J. McDonald 63 President, M & S Grocers, Inc.
Rick Harges 37 President, Big Al's Market, Inc.
Richard Morgan Jr. 42 President, North State Grocery, Inc.
B. Identification of Executive Officers at October 3, 1997:
Name Age Offices Held Officer Since
---- --- ------------ -------------
Charles E. Carlbom 60 C.E.O., Secretary, Treas. 1997
John W. White 44 Vice President/CFO 1988
George P. Fleming 57 Assistant Secretary 1980
Ralph Matile 40 Vice President 1993
Terrence Olsen 57 President/C.O.O., Asst. Secretary 1997
Paula Anctil 41 Vice President 1996
Mark Tweedie 39 Vice President/Controller 1997
Keith Miller 43 Vice President 1997
Suzi Weber 52 Vice President 1997
17
<PAGE>
C. Identification of Certain Significant Employees:
None.
D. Family Relationships:
None.
E. Business Experience:
All executive officers have been employed in the grocery industry in various
management and executive capacities for more than the past five years. Officers
employed with the Company for less than five (5) years were employed as
indicated in the following table:
Officer Former Employer Position(s)
------- --------------- -----------
Charles E. Carlbom Western Family Foods, Inc. President
Terrence W. Olsen United A.G Coop, Inc. President
Paula Anctil Brown & Cole, Inc. Vice President
Fleming Companies Asst Vice President
Mark Tweedie Foodland Distributors Director of Finance
Robin Thomas Super Value Marketing Director
The former employers of the officers named above were of a similar size (with
the exception of Brown & Cole, Inc.) to the Company. The duties and
responsibilities of the named officers were of similar scope to those they are
performing for the Company. The Company has an equity interest in the former
employer of Mr. Carlbom, Western Family Foods, Inc., and purchases product from
Western Family Foods, Inc. in the normal course of business.
All directors and nominees have been principally engaged in the retail grocery
business for more than the past five years with the firms shown opposite their
names. Except as described in Item 13 below, none of such firms is a parent,
subsidiary or other affiliate of United.
No director or nominee is a director in another company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
F. Involvement in Certain Legal Proceedings:
None
Item 11. Executive Compensation
Summary Compensation Table
The following table shows the compensation, during each of the fiscal years in
the three year period ended October 3, 1997, 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
18
<PAGE>
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 1997. 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> <C>
Alan Jones(3) 1997 $229,200 $ -0- $119,457
Former Secretary, 1996 268,676 60,000 37,228
Treasurer and Chief 1995 251,713 28,781 34,048
Executive Officer
Charles E. Carlbom 1997 55,385 -0- -0-
President, Secretary, 1996(2) -0- -0- -0-
Treasurer and Chief Executive Officer 1995(2) -0- -0- -0-
John W. White 1997 121,284 -0- -0-
Chief Financial Officer 1996 119,078 45,000 2,700
1995 112,195 38,000 2,767
Ralph Matile 1997 126,000 -0- -0-
Vice-President 1996 100,000 42,845 -0-
1995 77,692 30,000 -0-
</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 1997, $30,000 paid in 1996 and $27,000 paid in
1995 for the benefit of Mr. Jones as insurance benefits. United
provided 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 $45,800 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.
19
<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 $7,638 $11,457 $15,276 $19,096 $22,915 $26,734
75,000 12,263 18,394 24,527 30,658 36,790 42,921
100,000 16,888 25,332 33,777 42,221 50,665 59,109
125,000 21,513 32,269 43,027 53,783 64,540 75,296
150,000 26,138 39,207 52,277 65,346 78,415 91,484
160,000 27,988 41,982 55,977 69,971 83,965 97,959
----------------------- --------------- -------------- --------------- -------------- --------------- -------------
</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 ........................... 0
John W. White ................................ 10
George P. Fleming............................. 32
Ralph Matile.................................. 16
Terrence Olsen................................ 0
Paula Anctil.................................. 1
Mark Tweedie.................................. 0
Keith Miller.................................. 8
Suzi Weber.................................... 29
The amount of compensation used in calculation of pension benefits for all
officers is the dollar amount shown under "salary" and "bonus," subject to plan
limitations, in the Summary Compensation Table above. 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.
20
<PAGE>
Term of employment: Mr. Carlbom's term began on July 1, 1997 and will continue
through August 30, 1999.
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 12. Security Ownership of Certain Beneficial Owners and Management
A. Security Ownership of Certain Beneficial Owners
The following table sets forth information as of December 24, 1997, regarding
each person known to United to be the beneficial owner of more than 5 percent of
United's Common Stock.
Title of class Name and address Amount and nature of Percent of
of beneficial owner beneficial ownership class
United Grocers, Raymond L. Nidiffer 55,131 shares(1) 8.9% of class
Inc., Common P. O. Box 730
Stock Brookings, OR 97415
(1) Mr. Nidiffer has sole voting and investment power with respect to the shares
indicated in the table.
21
<PAGE>
B. Security Ownership of Management
As of December 24, 1997, the directors and nominees for election as directors of
United owned the indicated amounts of United's Common Stock, United's only class
of voting security.
<TABLE>
------------------------------- --------------------------- ----------- ---------------
Beneficial Owner Amount of Beneficial Percent Footnote(s)
Ownership (1)(2) of Class
------------------------------- --------------------------- ----------- ---------------
<S> <C> <C> <C>
Directors
------------------------------- --------------------------- ----------- ---------------
Dick Leonard 4,133,shares .7 (3)
------------------------------- --------------------------- ----------- ---------------
Dean Ryan 4,263 shares .7 (3)
------------------------------- --------------------------- ----------- ---------------
Gordon Smith 5,047 shares .8 (6)
------------------------------- --------------------------- ----------- ---------------
Gaylon G. Baese 4,216 shares .7 (3)
------------------------------- --------------------------- ----------- ---------------
Kenneth W. Findley 11,499 shares 1.9 (5)
------------------------------- --------------------------- ----------- ---------------
Robert A. Lamb 13,749 shares 2.2 (4)
------------------------------- --------------------------- ----------- ---------------
James F. Glassel 1,155 shares .2 (3)
------------------------------- --------------------------- ----------- ---------------
H.Larry Montgomery 858 shares .1 (3)
------------------------------- --------------------------- ----------- ---------------
Ron Mancasola 6,695 shares 1.1 (3)
------------------------------- --------------------------- ----------- ---------------
Directors and Officers as a shares 8.4
Group
------------------------------- --------------------------- ----------- ---------------
Nominees:
------------------------------- --------------------------- ----------- ---------------
Floyd West 3,273 shares .5 (3)
------------------------------- --------------------------- ----------- ---------------
Arthur J. Maybrun 321 shares .1 (3)
------------------------------- --------------------------- ----------- ---------------
Rick Harges 298 shares .0 (3)
------------------------------- --------------------------- ----------- ---------------
Richard Morgan, Jr. 17,723 shares 2.9 (3)
------------------------------- --------------------------- ----------- ---------------
Peter J. O'Neal 3,565 shares .6 (3)
------------------------------- --------------------------- ----------- ---------------
</TABLE>
(1) According to the bylaws, each stockholder of record is entitled to one vote
and one vote only, irrespective of number of shares owned. All of the
above-named individuals have only one vote, except for Messrs. O'Neal, Smith,
Lamb and Findley, who may be deemed to have more than one vote because they have
interests in various entities that own shares.
(2) Except as indicated below, all of the above-named individuals have sole
voting and investment power with respect to the shares indicated in the table.
(3) These shares are owned jointly by the person named and his spouse or by a
corporation whose stock is owned jointly by the person named and his spouse.
(4) These shares are owned by a corporation and a partnership in which Mr. Lamb
has an equity or voting interest.
(5) These shares are owned by two corporations in which Mr. Findley has a voting
interest.
(6) These shares are owned by two corporations in which Mr. Smith has an equity
interest.
C. Changes in Control
None
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.
22
<PAGE>
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.
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.
In the ordinary course of business, United enters into prime leases and
subleases property and equipment to qualified members. United presently is a
party to subleases with entities affiliated with Ron Mancasola, Gaylon Baese,
and Robert Lamb, directors of United. At October 3, 1997, monthly payments due
pursuant to the subleases were as follows:
--------------------------------------- -------------------
Mancansola $16,054
--------------------------------------- -------------------
Baese $20,625
--------------------------------------- -------------------
Lamb $102,758
--------------------------------------- -------------------
Certain Business Relationships
None.
Indebtedness of Management
The following directors, officers, nominees or related persons or entities were
indebted to United during the fiscal year ended October 3, 1997, or thereafter
and prior to the date of this report:
<TABLE>
------------------------ --------------------------- ------------------ --------------------------
Name of Debtor Largest aggregate amount Balance at # of Notes & Rate of
of debt outstanding November 30, 1997 Interest
during year ended October
3, 1997
------------------------ --------------------------- ------------------ --------------------------
<S> <C> <C> <C>
Morgan $400,000 $378,592 1 @ 9.25 %
------------------------ --------------------------- ------------------ --------------------------
O'Neal 300,000 277,827 1 @ 10.5 %
------------------------ --------------------------- ------------------ --------------------------
Mancasola 365,914 363,191 1 @ 8.00 %
------------------------ --------------------------- ------------------ --------------------------
Lamb 216,589 63,946 1 @ 10.5 %
------------------------ --------------------------- ------------------ --------------------------
</TABLE>
23
<PAGE>
Of the above loans, those to Morgan and O'Neal were for purchase of inventory
and equipment and are secured by inventory and equipment. Loans to Mancasola and
Lamb were in the form of deferred payments on real property subleases.
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 three (3) loans owed by Peter O'Neal (director) and four (4) loans
owed by Richard Morgan, Jr.(nominee for director) to National Consumer
Cooperative Bank. The balance of the loans as of September 30, 1997 was
$1,024,031 for Peter O'Neal and $2,537,109 for Richard Morgan, Jr.
24
<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 exhibits listed on the accompanying index of exhibits are
filed as part of this report.
(b) Reports on Form 8-K
None.
25
<PAGE>
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Report of Independent Accountants........................................................................... F-2
Consolidated Balance Sheets at September 27, 1996 and October 3, 1997....................................... F-3
Consolidated Statements of Operations for the years ended September 27, 1996 (as restated),
and October 3, 1997 .................................................................................. F-4
Consolidated Statements of Members' Equity for the years ended September 27, 1996 (as
restated) and October 3, 1997.......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended September 27, 1996 (as
restated) and October 3, 1997.......................................................................... F-6
Notes to Consolidated Financial Statements.................................................................. F-7
F-1
</TABLE>
<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 September 27, 1996 and October 3,
1997, and the results of their operations and their cash flows for each of the
years then ended, 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 2 to the consolidated financial statements, the
balance sheet as of September 27, 1996, results of operations and cash flows for
the year ended September 27, 1996 and members' equity as of September 29, 1995
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)
September 27,
1996 October 3,
(Restated) 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $16,510 $ 10,223
Investments restricted or maintained for insurance
reserves ................................................. 46,829 51,513
Accounts and notes receivable, net ....................... 77,912 78,537
Inventories .............................................. 104,645 102,333
Other current assets ..................................... 5,580 7,037
Deferred income taxes .................................... 2,318 8,147
----- -----
Total current assets .............................. 253,794 257,790
Notes receivable, net ........................................... 24,715 16,498
Investments in affiliated companies.............................. 12,477 6,971
Other receivables................................................ 3,693 4,837
Deferred income taxes............................................ --- 553
Other assets, net 16,992 17,335
Property, plant and equipment, net............................... 67,594 61,443
------ ------
$379,265 $365,427
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Notes payable, current portion ........................... $70,248 $ 10,191
Accounts payable.......................................... 82,723 97,587
Insurance reserves ....................................... 29,562 26,356
Member's patronage payable 3,200
Compensation and taxes payable............................ 5,022 8,328
Other current liabilities................................. 6,711 8,115
----- -----
Total current liabilities ......................... 197,466 150,577
Notes payable, net of current portion............................ 143,134 187,995
Deferred gains on sale-leaseback transactions.................... 1,000 3,650
Deferred income taxes............................................ 2,318 --
Other liabilities................................................ 9,614 7,434
----- -----
Total liabilities.................................. 353,532 349,656
------- -------
Commitments and contingencies
Redeemable members' equity....................................... --- 1,120
-----
Members' equity:
Common stock--authorized, 10,000,000 shares at $5.00
par value; issued and outstanding, 638,451 and
586,834 shares, respectively ........................... 3,192 2,934
Additional paid-in capital................................ 24,224 22,886
Retained earnings (accumulated deficit) .................. (1,883) (11,431)
Unrealized gain on investments............................ 200 262
------ ------
Total members' equity.............................. 25,733 14,651
------ ------
$379,265 $365,427
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-3
<PAGE>
United Grocers, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands)
Years Ended
September 27,
1996 October 3,
(Restated) 1997
Net sales and operations................... $1,280,453 $1,306,602
---------- ----------
Costs and expenses:
Cost of sales........................... 1,115,735 1,133,690
Operating expenses...................... 119,785 130,323
Selling and administrative expenses..... 15,365 22,425
Depreciation and amortization 8,015 11,483
---------- ----------
1,258,900 1,297,921
Other income (expense):
Interest expense........................ (14,825) (16,307)
Interest income......................... 828 733
Loss on write-down or disposition of
assets, net........................... -- (4,385)
---------- ----------
(13,997) (19,959)
Income (loss) from continuing operations
before members' allowances, members'
patronage dividends, and income taxes.
7,556 (11,278)
Members' allowances........................ (11,605) (10,349)
Members' patronage dividends............... (4,000) ---
---------- ----------
Loss from continuing operations before
income taxes..........................
(8,049) (21,627)
Income tax benefit......................... --- 10,466
---------- ----------
Net loss from continuing operations...
(8,049) (11,161)
Discontinued operations:
Income from operations of insurance segment
(less income taxes of $0 and $1,666,
respectively)........................... 2,480 2,501
---------- ----------
Net income (loss)..................... $(5,569) $ (8,660)
========== =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
United Grocers, Inc. and Subsidiaries
<TABLE>
Consolidated Statements of Members' Equity
(dollars in thousands, except for share data)
Common Stock
Retained
Additional Earnings Unrealized
Paid-in (Accumulated Gain on
Shares 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 62
-------- ------- ------- -------- ----------- --------
Balance, October 3, 1997.................... 586,834 $2,934 $22,886 $(11,431) $262 $14,651
======== ======= ======= ======== =========== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-5
<PAGE>
United Grocers, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
Years Ended
September, 27
1996 October 3,
(Restated) 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (5,569) $ (8,660)
Adjustments to reconcile net loss to net cash
provided by (used in) operating
activities:
Depreciation and amortization.................... 8,202 11,842
Patronage dividends paid in common stock......... 800 ---
Loss on write-down or disposition of assets, net. -- 4,385
Equity in earnings of affiliated companies (568) (107)
Deferred income taxes............................ --- (8,700)
Changes in assets and liabilities:
Accounts receivable............................ 4,731 (2,133)
Inventories.................................... (2,631) 2,312
Other assets................................... 1,354 (96)
Accounts payable............................... 8,902 14,864
Insurance reserves............................. (397) (3,206)
Compensation and taxes payable................. 403 3,306
Other liabilities.............................. 791 (1,117)
Members' patronage payable..................... (3,447) (2,427)
Deferred gains on sale leaseback transactions 2,650
-----------------------
Net cash flows provided by operating
activities....................................... 12,571 12,913
------ ---------
Cash flows from investing activities:
Loans to members................................... (22,512) (10,396)
Collections on member loans........................ 10,626 4,988
Proceeds from sale of member loans................. 10,549 13,205
Sale of investment in affiliated company........... --- 6,023
Purchase of investments restricted or maintained for
insurance reserves............................... (13,404) (10,226)
Sale of investments restricted or maintained for
insurance reserves............................... 7,385 5,604
Investment in affiliated companies................. (267) (48)
Proceeds from disposition of assets................ 6,884 11,036
Purchase of property, plant and equipment.......... (16,231) (15,607)
Purchase of other assets........................... (6,417) (6,446)
Acquisition of California operations............... (23,252)
--------
---
Net cash flows used in investing
activities (46,639) (1,867)
-------- --------
Cash flows from financing activities:
Sale of common stock............................... 1,153 76
Repurchase of common stock......................... (3,004) (2,213)
Proceeds from notes payable........................ 1,091,567 932,370
Repayments of notes payable........................ (1,052,183) (947,566)
----------- -----------
Net cash flows provided by (used in) financing
activities..................................... 37,533 (17,333)
----------- -----------
Net increase (decrease) in cash and cash equivalents 3,465 (6,287)
Cash and cash equivalents, beginning of year.......... 13,045 16,510
----------- -----------
Cash and cash equivalents, end of year................ $ 16,510 $ 10,223
=========== ===========
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
During 1996 and 1997, United Grocers, Inc. (the Parent) and
subsidiaries (United or the Company) had two operating segments, located
primarily in Oregon, Southern Washington and Northern California. The
distribution segment includes all operations relating to wholesale grocery and
related product sales, retail grocery sales, service department revenues and
financing income and fees. The insurance segment includes all operations
relating to insurance underwriting, commissions and reinsurance primarily to
provide workers' compensation and property-casualty coverage. As discussed in
Note 9, the insurance operations were sold in fiscal 1998 and those operations
were discontinued by the Company.
Its member customers own United's stock. Sales to these members
accounted for approximately 80% and 56% of sales from continuing operations for
the years ended September 27, 1996 and October 3, 1997, 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: Grocers Insurance
Group, Inc., Grocers Insurance Agency, Inc., UGIC, Ltd., Grocers Insurance
Company and United Workplace Consultants, Inc. (collectively, the insurance
segment -- see Notes 9 and 12); Western Passage Express, Inc.; Northwest
Process, Inc.; UG Resources, Inc.; United Resources, Inc.; Premier Consulting,
Inc.; Western Security Services, Ltd. and Rich and Rhine, Inc. All intercompany
balances and transactions have been eliminated upon consolidation.
Business Combination
On December 14, 1995, United acquired, using the purchase method of
accounting, certain assets of the Market Wholesale (Market) grocery division
operations of Bay Area Foods, Inc. (Bay Area Foods), for a cash purchase price
of approximately $21 million. The Company assumed certain liabilities including
obligations under certain real and personal property leases relating to Bay Area
Foods, including three leased warehouse locations and leased equipment. The
operations of Market are included in the consolidated statement of operations
from the date of acquisition.
F-7
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
The approximate values allocated to the assets acquired, amount of
liabilities assumed, and net value of assets acquired, are stated below:
Acquired assets Amount
Accounts receivable and customer loans $12,290,000
Inventories 20,796,000
Deposits and other assets 1,541,000
Equipment including capitalized leases 5,286,000
Goodwill amortized over 15 years 484,000
-------
Total acquired assets 40,397,000
Assumed liabilities
Accounts payable 13,360,000
Customer rebates and employee accruals 1,500,000
Capitalized lease payable 2,286,000
---------
Total assumed liabilities 17,146,000
----------
Net value of assets acquired $23,251,000
===========
In connection with the acquisition, the Company entered into a five year supply
agreement with Bay Area Foods and some of their retail stores. The agreement
calls for normal rebates, other than year-end patronage, that is available to
other customers. These retail stores account for approximately 20 percent of the
total warehouse volume of the acquired operations.
Funding for the acquisition was provided by increased short-term bank
credit. The Company anticipates refinancing the additional bank credit with new
senior debt, or the securitization of eligible trade accounts receivable.
The assets acquired include all owned warehouse equipment, furniture,
and fixtures of the Market operations, such as forklifts, warehouse racking,
office equipment and computers, and software. The Company intends to continue to
utilize these assets in the wholesale grocery distribution business in
substantially the same manner as used by Bay Area Foods.
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-8
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
Reinsurance
United accounts 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 seeks to reduce the losses
that may result 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
are 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 relate primarily to the distribution segment and 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 cost of distribution and insurance
operations. The distribution segment costs 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. The insurance segment costs include losses reported, a provision for
losses incurred but not reported and premium refunds.
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 were as follows:
Year Ended
----------
September 27, October 3,
1996 1997
Restricted cash............. $ 411,000 $ 401,000
Investments................. 16,417,000 18,486,000
---------- ----------
Total.................... $16,828,000 $18,887,000
=========== ===========
In addition, the balance of the investments of $30,001,000 and
$32,626,000 at September 27, 1996 and October 3, 1997, respectively, 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.
F-9
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
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.
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 and October 3,
1997.
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
Effective the beginning of the year ended October 3, 1997, management
made changes to the estimated lives of certain categories of property, plant and
equipment, generally resulting in shorter depreciation periods compared to
previous estimates. The effect of these changes in estimates was to increase
depreciation expense by approximately $700,000 for the year ended October 3,
1997.
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.
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
F-10
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
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.
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. Future
redemptions are at the discretion of the Board of Directors.
At October 3, 1997, there were 30,783 shares in the amount of
$1,120,000, 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.
Advertising Costs
United expenses the costs of advertising the first time the advertising
takes place. Advertising expense for the years ended September 27, 1996 and
October 3, 1997 was $2,593,000 and $1,734,000, 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.
Accounting Changes
Beginning in the year ended September 27, 1996, the Company adopted
SFAS No. 106, Employer's Accounting For Postretirement Benefits Other Than
Pensions. SFAS No. 106 requires that companies accrue the projected future cost
of providing postretirement benefits during the period that employees render the
services necessary to be eligible for such benefits. While the adoption of this
standard does have an impact on the Company's reported net income or loss, it
does not impact the Company's cash flow because the Company intends to continue
its current practice of paying the cost of postretirement benefits as incurred.
The Company has elected to recognize the effect of the change to SFAS No. 106 by
amortizing the transition obligation of $3,668,682 over 20 years (see Note 13).
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-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
F-11
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
that are sales from transfers that are collateralized 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
In June 1997, FASB issued 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 does not differ significantly from
reported net income in the periods presented. The statement is effective for
fiscal years beginning after December 15, 1997.
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.
United's management has studied the implications of SFAS No. 131, 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 statement becomes effective.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
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:
-------------------------------
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, 1996 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.................... $ 7,689,000 $163,000 $ 10,000 $ 7,842,000
Obligations of states, political subdivisions
and government agencies................... 1,893,000 32,000 --- 1,925,000
Corporate securities........................ 799,000 15,000 ---
----------- -------- -------- -----------
814,000
Total.................................. $10,381,000 $210,000 $ 10,000 $10,581,000
=========== ======== ======== ===========
Held-to-maturity securities
U.S. Treasury securities.................... $28,025,000 $371,000 $319,000 $28,077,000
Obligations of states, political subdivisions
and government agencies................... 4,926,000 93,000 16,000 5,003,000
Corporate securities........................ 3,296,000 39,000 43,000 3,292,000
----------- -------- -------- -----------
Total.................................. $36,247,000 $503,000 $378,000 $36,372,000
=========== ======== ======== ===========
Restricted assets
Cash and cash equivalents................... $411,000 $ --- $ --- $411,000
======== ------ ------- ========
Reconciliation to balance sheet:
Available-for-sale securities, at fair value $10,581,000
Held-to-maturity securities, at amortized
cost..................................... 36,247,000
Restricted assets, at fair value......... 411,000
-------
Total investments.................. $46,829,000
===========
</TABLE>
F-13
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
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>
The scheduled maturities of securities at October 3, 1997 are as
follows:
<TABLE>
Amortized Cost Fair Value
-------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Available-for-sale securities
Due in one year or less $2,549.000 $2,585,000
Due after one year through five years 2,066,000 2,157,000
Due after five years through ten years 2,891,000 2,989,000
Due after ten years 1,442,000 1,479,000
--------- ---------
Total $8,948,000 $9,210,000
========== ==========
Held-to-maturity securities
Due in one year or less $3,953,000 $3,958,000
Due after one year through five years 16,577,000 17,051,000
Due after five years through ten years 20,888,000 21,513,000
Due after ten years 259,000 272,000
----------- -----------
Total $41,677,000 $42,794,000
=========== ===========
</TABLE>
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. F-14
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
4. Accounts and Notes Receivable:
These consist of amounts due principally from members at the balance
sheet date as follows:
<TABLE>
Year Ended
September 27, October 3,
1996 1997
---- ----
<S> <C> <C>
Accounts receivable.................................... $63,980,000 $69,778,000
Insurance premiums receivable and related balances..... 12,238,000 14,521,000
Less allowance for doubtful accounts................... (1,141,000) (7,598,000)
----------- -----------
Net accounts receivable........................... 75,077,000 76,701,000
---------- -----------
Notes receivable, current portion...................... 3,071,000 1,977,000
Less allowance for doubtful notes...................... (236,000) (141,000)
------------- -----------
Net current notes receivable...................... 2,835,000 1,836,000
--------- -----------
Net accounts and current notes receivable......... $77,912,000 $78,537,000
=========== ===========
Notes receivable, non-current portion.................. $25,588,000 $18,886,000
Less allowance for doubtful accounts................... (873,000) (2,388,000)
------------- ------------
Net non-current notes receivable.................. $24,715,000 $16,498,000
=========== ===========
</TABLE>
The notes receivable from members are generally for periods of two to
ten years at annual interest rates of 3% to 11%. The annual maturities of notes
receivable for each of the next five fiscal years following October 3, 1997 are
as follows:
1998....................................... $1,977,000
1999....................................... 1,819,000
2000....................................... 1,429,000
2001....................................... 1,501,000
2002....................................... 9,031,000
---------
Thereafter 5,106,000
---------
$20,863,000
F-15
<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 and October 3, 1997 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
================= ================= ================ =================
</TABLE>
5. Other Assets:
Other assets consist of the following:
Year Ended
September 27, October 3,
1996 1997
---- ----
Software...................... $ 14,682,000 $ 18,356,000
Prepaid loan fees............. 1,230,000 --
Covenant not to compete 2,724,000 1,315,000
----------------- -----------------
Other......................... 3,273,000 1,255,000
----------------- -----------------
Subtotal................. 21,909,000 20,926,000
Less accumulated amortization. (4,917,000) (3,591,000)
----------------- -----------------
Total other assets, net.. $ 16,992,000 $ 17,335,000
================= =================
Amortization expense for the years ended September 27, 1996 and October
3, 1997 was $1,573,000 and $4,152,000, respectively.
F-16
<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
September 27, October 3,
1996 1997
---- ----
<S> <C> <C>
Land...................................... $ 3,425,000 $ 3,865,000
Buildings and improvements................ 57,908,000 55,999,000
Warehouse and truck equipment............. 31,800,000 31,316,000
Office equipment.......................... 13,622,000 14,185,000
Construction in progress.................. 4,528,000 5,069,000
----------------- -----------------
Total property, plant and equipment.. 111,283,000 110,434,000
Less accumulated depreciation............. (43,689,000) (48,991,000)
----------------- -----------------
Property, plant and equipment, net... $ 67,594,000 $ 61,443,000
================= =================
</TABLE>
Depreciation expense for the years ended September 27, 1996 and October
3, 1997 was $6,629,000 and $7,690,000, respectively, including $187,000 and
$359,000, 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 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 and October 3, 1997 of $601,000 and $520,000,
respectively. The carrying value of the store's assets at October 3, 1997 is
$10,000. The store is being operated but is being held for sale.
F-17
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
7. Notes Payable:
Notes payable consists of the following:
<TABLE>
Year Ended
September 27, October 3,
1996 1997
---- ----
<S> <C> <C>
Line of credit with financial institution................. $ 61,174,000 $ 69,000,000
Notes payable with financial institution:
Credit agreement notes with interest at the financial
institution's reference rate, as defined, which
ranged from 6.25% to 8%............................ 54,018,000 42,915,000
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 rate... 4,225,000 4,071,000
Capitalized equipment leases, payable in monthly
installments of $43,853, including interest at 12%
to 20% through 2005 (collateralized by equipment).. 2,124,000 2,276,000
Other notes payable.................................. 3,927,000 1,495,000
Redeemable notes and certificates:
Capital investment notes (subordinated), interest at
7.5%, maturity dates through 2005.................. 44,400,000 41,745,000
Registered redeemable building notes (subordinated),
interest at 8%, no fixed maturity date............. 3,138,000 3,088,000
Senior notes payable to insurance companies, with interest
rates of 8.42% and 9.15% per annum, interest 36,665,000 29,999,000
payable monthly principal repayments annually in the
amount of $3,333,000 until 2001; and $4,000,000 due
annually beginning in 2002, maturing in full 2006.......
Mortgage notes payable, interest at 7.25%................. 3,711,000 3,597,000
----------------- -----------------
Total................................................ 213,382,000 198,186,000
Less current portion...................................... (70,248,000) (10,191,000)
----------------- -----------------
Total notes payable, net of current portion.......... $ 143,134,000 $ 187,995,000
================= =================
</TABLE>
Maturities of notes payable which reflects the effect of the March 27,
1998 refinancing (see below) are as follows:
Fiscal Year Amount
----------- ------
1998 $ 10,191,000
1999 56,165,000
2000 65,807,000
2001 5,228,000
2002 8,528,000
Thereafter 52,267,000
$198,186,000
In September 1997, the Company entered into an agreement with four
major financial institutions to provide short-term and long-term lines of credit
totaling $70 million. Under the agreement, the Company receives short-term and
long-term borrowings of $35 million and $35 million, respectively. As of October
3, 1997, the Company had drawn $69,000,000 on the combined lines of credit.
Interest is payable monthly at the bank's Reference Rate, as defined (the
weighted average interest rate was 7.17% at October 3, 1997). The lines of
credit are collateralized by the Company's assets.
F-18
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
On March 27, 1998, the Company and certain of its lenders executed
amendments to existing credit agreements, which, among other things,
restructured the various agreements such that the requirements for complying
with certain financial ratios are maintained. Under the amended agreements, the
most restrictive covenants include requirements to maintain defined levels of
earnings before income taxes, depreciation and amortization; working capital;
adjusted net worth, subordinated debt; and leverage. In addition, the Company
has received waivers for violations of covenants through the effective dates of
the amended agreements. As of March 27, 1998, the Company is in compliance with
all amended covenants related to debt agreements. Amended maturity dates are
reflected in the above disclosures.
8. Income Taxes:
The income tax (provision) benefit, including amounts associated with
discontinued operations, for the years ended September 27, 1996 and October 3,
1997 consists of the following:
1996 1997
---- ----
Current:
Federal....................... $ --- $ 100,000
------------ -----------
Deferred:
Federal....................... --- 7,493,000
State......................... --- 1,207,000
------------- -----------
--- 8,700,000
------------- -----------
$ --- $8,800,000
============ ==========
The reconciliation of the statutory Federal tax rate to the effective
income tax rate for the years ended September 27, 1996 and October 3, 1997 is as
follows:
<TABLE>
1996 1997
---- ----
<S> <C> <C> <C>
Statutory income tax rate (34%)............... $ 1,893,000 $ 5,937,000
State income taxes, net of Federal income tax
benefit..................................... 223,000 797,000
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) --
----------------- -----------------
Total.................................... $ -- $ 8,800,000
================= =================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. As discussed in
Note 9, the Company has announced formal plans to sell its insurance operations
and its Cash & Carry division. The Company believes it is more likely than not
that the gain on the sales of these operations, along with the Company's
expected future profitability, will result in amounts sufficient for the Company
to realize the deferred tax assets on future income tax returns, and,
accordingly, no valuation allowance has been provided as of October 3, 1997.
F-19
<PAGE>
The significant components of deferred income taxes as of September 27,
1996 and October 3, 1997 is as follows:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
Deferred income taxes, current asset:
Insurance reserves..................................... $ 786,000 $ 1,359,000
Inventories............................................ 840,000 362,000
Allowance for doubtful accounts........................ 295,000 1,650,000
Unearned insurance premiums............................ 571,000
Accrued employee benefits.............................. --- 192,000
Capitalized lease insurance............................ --- 244,000
Nonpatronage net operating loss carryforward........... --- 4,128,000
Alternative minimum tax credit......................... --- 150,000
Other.................................................. (174,000) 62,000
----------------- -----------------
Net current deferred tax asset..................... 2,318,000 8,147,000
----------------- -----------------
Deferred income taxes, non-current asset (liability):
Accumulated depreciation............................... (5,017,000) (2,561,000)
Impairment reserve..................................... 402,000 689,000
Lease accrual.......................................... 1,923,000 1,474,000
Alternative minimum tax credit........................ 447,000 --
Deferred income on sale-leaseback transactions......... 634,000 845,000
Other (882,000)
-----------------
Deferred compensation.................................. 175,000 106,000
----------------- -----------------
Net non-current deferred tax asset (liability)..... (2,318,000) 553,000
----------------- -----------------
Total.............................................. $ 0 $ 8,700,000
================= =================
</TABLE>
United has federal nonpatronage net operating loss carryforwards of
approximately $12,000,000, which expire in 2012.
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 and October 3, 1997 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:
<TABLE>
September 27, 1996 October 3, 1997
------------------ ---------------
<S> <C> <C>
Assets:
Investments....................................... $ 46,829,000 $ 51,513,000
Receivables and other current assets.............. 21,531,000 22,070,000
Long-term assets.................................. 1,603,000 1,328,000
----------------- -----------------
69,963,000 74,911,000
Liabilities:
Insurance reserves supported by investments....... 29,562,000 26,356,000
Accounts payable and other current liabilities.... 15,618,000 19,544,000
----------------- -----------------
Net investment in insurance segment........... $ 24,783,000 $ 29,011,000
================= =================
</TABLE>
F-20
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
10. 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 year ended
October 3, 1997.
11. 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.
Reinsurance amounts reflected in the financial statements as of
September 27, 1996 and 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..................... $ 6,497,000 $ 9,440,000
Prepaid reinsurance premiums................ 2,831,000 3,746,000
----------------- -----------------
Total................................... $ 9,328,000 $ 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-21
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
12. 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:
Distribution........................................... $ 309,302,000 $ 290,516,000
Insurance.............................................. 69,963,000 74,911,000
----------------- -----------------
Total.............................................. $ 379,265,000 $ 365,427,000
================= =================
</TABLE>
- ----------
(1) Reported as discontinued operations.
13. 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% and 7.75% was used for the years ended
September 27, 1996 and October 3, 1997, respectively, and a future maximum
compensation increase rate of 4% and 3.75% was used for the years ended
September 27, 1996 and October 3, 1997, respectively. The expected long-term
rate of return on assets was 8%.
F-22
<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 and October 3, 1997, respectively:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
Company-sponsored:
Service costs of benefits earned................ $ 952,000 $ 1,155,000
Interest cost on the projected benefit obligation 1,668,000 1,788,000
Expected return on plan assets.................. (1,932,000) (2,197,000)
Amortization of:
Unrecognized net asset...................... (168,000) (168,000)
Unrecognized net gain....................... (38,000) (100,000)
Unrecognized prior service cost............. 61,000 61,000
---------------- -----------------
Net periodic pension cost................... $ 543,000 $ 539,000
================ =================
</TABLE>
The following table sets forth the plan's funded status as of the years
ended September 27, 1996 and October 3, 1997:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested..................................................... $ 14,458,000 $ 17,200,000
Non-vested................................................. 985,000 1,137,000
----------------- -----------------
Accumulated benefit obligation......................... 15,443,000 18,337,000
Effect of projected future compensation levels............. 5,838,000 5,268,000
----------------- -----------------
Projected benefit obligation........................... 21,281,000 23,605,000
Plan assets at fair value, primarily listed stocks, fixed income
and bond and equity funds..................................... 27,252,000 33,541,000
----------------- -----------------
Excess of plan assets over projected benefit obligation 5,971,000 9,936,000
Unrecognized net asset.......................................... (1,561,000) (1,393,000)
Unrecognized net gain........................................... (4,803,000) (9,064,000)
Unrecognized prior service cost................................. 656,000 594,000
----------------- -----------------
Prepaid pension cost....................................... $ 263,000 $ 73,000
================= =================
</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 and
October 3, 1997 were $3,326,000 and $3,874,000, 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-23
<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 September 27, 1996 and October 3, 1997:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees................................................... $ 1,675,000 $ 1,810,000
Fully eligible active plan participants.................... 1,460,000 1,578,000
Other active plan participants............................. 857,000 927,000
----------------- -----------------
Total accumulated post-retirement benefit obligation... 3,992,000 4,315,000
Unrecognized net transition obligation.......................... (3,500,000) (3,331,000)
----------------- -----------------
Accrued post-retirement benefit obligation............. $ 492,000 $ 984,000
================= =================
1996 1997
---- ----
Net periodic post-retirement benefit cost includes the following
components for the years ended September 27, 1996 and October 3, 1997:
Service cost..................................................... $ 52,000 $ 52,000
Interest cost.................................................... 271,000 271,000
Amortization of transition obligation............................ 169,000 169,000
----------------- -----------------
Net periodic post-retirement benefit cost................... $ 492,000 $ 492,000
================= =================
</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 and
$170,000 for the years ended September 27, 1996 and October 3, 1997,
respectively. The discount rate used in determining the accumulated
post-retirement benefit obligation was 7.75% and 8% as of September 27, 1996 and
October 3, 1997, 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 and October 3,
1997, United made matching contributions to the 401(k) plans totaling $291,000
and $305,000, respectively.
14. 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 and October 3, 1997:
1996 1997
---- ----
Minimum rentals............. $ 19,463,000 $ 24,551,000
Less sublease income........ (6,873,000) (10,506,000)
------------------ -----------------
Net rental expense..... $ 12,590,000 $ 14,045,000
================= =================
F-24
<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 3, 1997:
<TABLE>
Fiscal Year (a) (b)
Minimum Payments Minimum Net
Receipts Minimum
<S> <C> <C> <C>
1997-1998 23,908,000 $ 11,218,000 $ 12,690,000
1998-1999 23,367,000 11,334,000 12,033,000
1999-2000 21,826,000 11,141,000 10,685,000
2000-2001 19,842,000 10,671,000 9,171,000
2001-2002 18,714,000 10,120,000 8,594,000
Thereafter 123,581,000 88,862,000 34,719,000
---------------- ----------------- -----------------
Total 231,238,000 $ 143,346,000 $ 87,892,000
================ ================= =================
Summary:
Building leases 205,837,000 $ 137,267,000 $ 68,570,000
Equipment leases 25,401,000 6,079,000 19,322,000
---------------- ----------------- -----------------
Total 231,238,000 $ 143,346,000 $ 87,892,000
================ ================= =================
</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 $9,614,000 and $7,310,000 as of September 27, 1996
and October 3, 1997, respectively, for the estimated losses on subleasing
arrangements.
United has entered into sale-leaseback transactions for various
supermarket properties, which resulted in deferred gains of approximately
$1,000,000 and $3,650,000 as of September 27, 1996 and October 3, 1997,
respectively. The deferred gains are being amortized over the leaseback periods
of twenty years. The total remaining lease commitments at October 3, 1997 are
approximately $4,794,000 over fourteen years with an annual rental of
approximately $342,000.
F-25
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
15. Supplemental Cash Flow Information:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
Supplemental disclosures:
Cash paid during the years for:
Interest............................. $ 14,546,000 $ 16,342,000
Income taxes, net of refunds......... 279,000 151,000
Supplemental schedule of noncash
investing and financing activities:
Members' allowances paid in common
stock.............................. -- 773,000
Patronage dividends payable in common
stock.............................. 800,000 --
Exchange of member receivable for
equity interest in affiliate....... 3,250,000 362,000
</TABLE>
16. 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>
September 27, October 3,
1996 1997
---- ----
<S> <C> <C>
Balance sheet:
Investment in affiliated companies............ $ 12,477,000 $ 6,971,000
Accounts receivable........................... 3,800,000 2,898,000
Notes receivable.............................. 2,853,000 428,000
Accounts payable.............................. 5,259,000 7,046,000
Year ended
September 27, October 3,
1996 1997
---- ----
Statement of operations:
Sales.......................................... $ 129,855,000 $ 137,029,000
Purchases...................................... 111,348,000 118,268,000
Volume incentive rebate for purchases from
affiliated company........................... 2,931,000 3,909,000
Refunds, rebates and member allowances to
affiliated companies......................... 2,570,000 1,985,000
Equity in earnings of affiliated companies..... 568,000 107,000
</TABLE>
F-26
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
These affiliates and United's net investments as of September 27, 1996
and October 3, 1997 and percentages of ownership during the years then ended are
as follows:
<TABLE>
Net Percentage
1996 Investment Ownership
---- ---------- ---------
<S> <C> <C>
Western Family Holding Company.......................................... $ 1,961,000 22%
C&K Market, Inc......................................................... 5,979,000 22%
R.A.F. Limited Liability Company........................................ 919,000 94%
North State Grocery, Inc................................................ 3,540,000 26%
Other................................................................... 78,000
----------------
$ 12,477,000
1997
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
Combined unaudited financial information of the affiliated entities,
including third-party interests is as follows:
September 27, October 3,
1996 1997
---- ----
Current assets.......................................................... $ 60,583,000 $ 55,359,000
Non-current assets...................................................... 66,469,000 13,559,000
Current liabilities..................................................... 54,092,000 49,193,000
Non-current liabilities................................................. 42,871,000 3,872,000
Owners' equity.......................................................... 30,089,000 15,853,000
Year Ended Year Ended
September 27, October 3,
1996 1997
---- ----
Revenues.............................................................. $ 777,379,000 $ 633,124,000
Gross profit.......................................................... 98,929,000 46,506,000
Net income............................................................ 2,531,000 220,000
</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.
17. 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.
F-27
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
18. 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.
The insurance subsidiaries have investments primarily in federal
securities and state municipal bonds which are backed by the full faith and
credit of the respective governmental agency. Investments in corporate
securities and common stocks represent publicly-traded securities of high
quality institutions.
United performs ongoing credit evaluations of its members' financial
condition and maintains allowances for potential credit losses.
19. 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.
The following methods and assumptions were used by 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 3.
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 7.5% to 11% for 1996
and 1997.
F-28
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
The carrying amounts and approximate fair values of United's financial
instruments at the balance sheet dates are as follows:
<TABLE>
Carrying Fair
1996 Amounts Values
---- ------- ------
<S> <C> <C>
Cash and cash equivalents............................................... $ 16,510,000 $ 16,510,000
Long-term notes receivable, including the current portion, net of
allowance for doubtful notes....................................... 27,550,000 27,550,000
Investment in and accounts with affiliated companies.................... 12,477,000 12,477,000
Notes payable........................................................... 213,382,000 214,735,000
1997
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
</TABLE>
20. 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 and October 3, 1997, United sold notes totaling approximately
$10,549,000 and $13,205,000, respectively, and recognized $330,852 and
$1,734,000, respectively, of gains on the sales. The balances of transferred
notes that were outstanding and subject to recourse provisions were
approximately $27,426,000 and $39,313,000 at September 27, 1996 and October 3,
1997, respectively. The unamortized service asset as of September 27, 1996 and
October 3, 1997 was $1,259,000 and $1,969,000, 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.
In connection with its loan activities to members, United has approved
loan applications totaling approximately $3,600,000 for which funds have been
committed, but not disbursed, as of October 3, 1997.
United is guarantor of a covenant not to compete and loans by members
as of October 3, 1997 totaling approximately $6,781,000, with annual payments of
approximately $788,000.
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.
F-29
<PAGE>
United Grocers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
21. Subsequent Events:
On May 15, 1998, the Company 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. The
Company realized a gain on the sale, as follows:
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
===========
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-30
<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/ Terrence W. Olsen
Terrence W. Olsen
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
- ---------------------------------- ----------------------------------------------------- -----------------------------
Name Title Date
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Terrence W. Olsen President, Chief Executive Officer and Secretary September 16, 1999
Terrence W. Olsen (Principal executive officer)
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Mark Tweedie Vice President and Chief Financial Officer September 16, 1999
Mark Tweedie (Principal financial officer)
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Kenneth Tucker Director September 15, 1999
Kenneth Tucker
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Floyd West Director September 15, 1999
Floyd West
- ---------------------------------- ----------------------------------------------------- -----------------------------
Director
Peter J. O'Neal
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Mary McDonald Director September 16, 1999
Mary McDonald
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Gaylon G. Baese Director September 15, 1999
Gaylon G. Baese
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Kenneth W. Findley Director September 16, 1999
Kenneth W. Findley
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ James F. Glassel Director September 15, 1999
James F. Glassel
- ---------------------------------- ----------------------------------------------------- -----------------------------
Director
Richard L. Wright
- ---------------------------------- ----------------------------------------------------- -----------------------------
/s/ Gordon Smith Director September 16, 1999
Gordon Smith
- ---------------------------------- ----------------------------------------------------- -----------------------------
</TABLE>
31
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
Enclosed with this report is a copy of proxy soliciting material,
including the form of proxy, sent to United's shareholders for the February 25,
1998 annual meeting.
The enclosed proxy soliciting material is furnished to the Commission
for its information and shall not be deemed filed with the Commission or
otherwise subject to the liabilities of Section 18 of the Securities Exchange
Act of 1934, except to the extent that the Company specifically incorporates
them in its annual report on this form by reference.
32
<PAGE>
EXHIBIT INDEX
3.A Copy of the registrant's restated articles of incorporation, as amended
(incorporated by reference to Exhibit 4-E to the registrant's registration
statement on Form S-2, No. 33-26631).
3.B Copy of the registrant's bylaws, as amended (incorporated by reference to
Exhibit 3 to the registrant's quarterly report on Form 10-Q for the period ended
March 29, 1996).
4.A Copy of indenture dated as of February 1, 1978, between the registrant and
United States National Bank of Oregon, as trustee, relating to the registrant's
Capital Investment Notes (incorporated by reference to Exhibit 4-I to the
registrant's registration statement on Form S-1, No. 2-60488).
4.B1 Copy of supplemental indenture dated as of December 15, 1984, between the
registrant and United States National Bank of Oregon, as trustee, relating to
the registrant's Series D 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-F to the registrant's registration
statement on Form S-2, No. 33-95213).
4.B2 Copy of supplemental indenture dated as of December 15, 1986, between the
registrant and United States National Bank of Oregon, as trustee, relating to
the registrant's Series E 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-G to the registrant's registration
statement on Form S-2, No. 33-11212).
4.B3 Copy of supplemental indenture dated as of January 27, 1989, between the
registrant and United States National Bank of Oregon, as trustee, relating to
the registrant's Series F 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-G to the registrant's Form 10-K for the
fiscal year ended September 30, 1989).
4.B4 Copy of supplemental indenture dated as of January 22, 1991, between the
registrant and United States National Bank of Oregon, as trustee, relating to
the registrant's Series G 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-D to the registrant's registration
statement on Form S-2, No. 33-38617).
4.B5 Copy of supplemental indenture dated as of July 6, 1992, between the
registrant and United States National Bank of Oregon, as trustee, relating to
the registrant's Series H 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-C to the registrant's registration
statement on Form S-2, No. 33-49450).
33
<PAGE>
4.B6 Copy of supplemental indenture dated as of January 9, 1995, between the
registrant and First Bank National Association, as trustee, relating to the
registrant's Series J 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-C to the registrant's registration
statement on Form S-2, No. 33-57199).
4.B7 Copy of supplemental indenture dated as of January 21, 1997, between the
registrant and First Bank National Association, as trustee, relating to the
registrant's Series K 5% Subordinated Redeemable Capital Investment Notes
(incorporated by reference to Exhibit 4-C to the registrant's registration
statement on Form S-2, No. 333-26285).
4.D1 Copy of Loan Purchase and Servicing Agreement dated as of May 13, 1994,
among United Resources, Inc., as Seller and Servicer, the registrant, as
Guarantor, and National Consumer Cooperative Bank, as Buyer, relating to the
selling of loans originated by the registrant's subsidiary, United Resources,
Inc. (incorporated by reference to Exhibit 4.F1 to the registrant's Form 10-K
for the fiscal year ended September 30, 1994).
4.D2 Copy of First Amendment to Loan Purchase and Servicing Agreement of May 13,
1994, dated as of July 15, 1994, among United Resources, Inc., the registrant,
and National Consumer Cooperative Bank (incorporated by reference to Exhibit
4.F2 to the registrant's Form 10-K for the fiscal year ended September 30,
1994).
4.D3 Copy of Second Amendment to Loan Purchase and Servicing Agreement of May
13, 1994, dated as of September 28, 1995, among United Resources, Inc., the
registrant, and National Consumer Cooperative Bank (incorporated by reference to
Exhibit 4.F3 to the registrant's Form 10-K for the fiscal year ended September
29, 1995).
4.D4 Copy of Loan Purchase and Servicing Agreement (Holdback Program) dated as
of September 28, 1995, between United Resources, Inc., as Seller and Servicer,
and National Consumer Cooperative Bank, as Buyer, and related guaranty agreement
between the registrant and National Consumer Cooperative Bank (incorporated by
reference to Exhibit 4.F4 to the registrant's Form 10-K for the fiscal year
ended September 29, 1995).
Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, the registrant is
not filing certain instruments with respect to its long-term debt because the
amount authorized under any such instrument does not exceed 10 percent of the
total consolidated assets of the registrant at October 3, 1997. The registrant
agrees to furnish a copy of any such instrument to the Securities and Exchange
Commission upon request.
10.A* Copy of United Grocers, Inc., pension plan and trust agreement dated as of
October 1, 1985 (incorporated by reference to Exhibit 10-A to the registrant's
registration statement on Form S-2, No. 33-11212).
34
<PAGE>
10.B* Copy of first amendment to United Grocers, Inc., pension plan and trust
agreement dated as of October 1, 1987 (incorporated by reference to Exhibit 10-B
to post-effective amendment No. 1 to the registrant's registration statement on
Form S-2, No. 33-11212).
10.C Amended and Restated Credit Agreement among Bank of America NW, N.A.,
United States National Bank of Oregon, The Hongkong and Shanghai Banking
Corporation, Limited and United Grocers, Inc. dated May 31, 1996, as amended by
thirteen separate amendments.
10.D1 Typical forms executed in connection with loans to members, including
directors:
10.D1a Installment note (Stevens-Ness form 217) (incorporated by reference to
Exhibit 10.D1a to the registrant's Form 10-K for the fiscal year ended October
2, 1998).
10.D1b Promissory note (Stevens-Ness form 216) (incorporated by reference to
Exhibit 10.D1b to the registrant's Form 10-K for the fiscal year ended October
2, 1998).
10.D1c Installment note (incorporated by reference to Exhibit 10.D1c to the
registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.D1d Renewal note for fixed rate loan (incorporated by reference to Exhibit
10-D1d to the registrant's Form 10-K for the fiscal year ended September 29,
1995).
10.D1e Loan agreement for subsequent notes (incorporated by reference to Exhibit
10.D1e to the registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.D1f Loan agreement (incorporated by reference to Exhibit 10.D1f to the
registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.D1g Amendment to installment note and security agreements (incorporated by
reference to Exhibit 10-D1i to the registrant's Form 10-K for the fiscal year
ended September 29, 1995).
10.D1h Security agreement (Stevens-Ness form 1201) (incorporated by reference to
Exhibit 10.D1h to the registrant's Form 10-K for the fiscal year ended October
2, 1998).
10.D1i Purchase money security agreement (Stevens-Ness form 1202) (incorporated
by reference to Exhibit 10.D1i to the registrant's Form 10-K for the fiscal year
ended October 2, 1998).
10.D1j Security agreement for equipment (Stevens-Ness form 1203) (incorporated
by reference to Exhibit 10.D1j to the registrant's Form 10-K for the fiscal year
ended October 2, 1998).
35
<PAGE>
10.D1k Inventory loan and security agreement (Stevens-Ness form 1206)
(incorporated by reference to Exhibit 10.D1k to the registrant's Form 10-K for
the fiscal year ended October 2, 1998).
10.D1l Security agreement (Equipment and Inventory) (incorporated by reference
to Exhibit 10.D1l to the registrant's Form 10-K for the fiscal year ended
October 2, 1998).
10.D1m Security agreement for subsequent notes (Equipment and Inventory)
(incorporated by reference to Exhibit 10.D1m to the registrant's Form 10-K for
the fiscal year ended October 2, 1998).
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant
has filed the forms listed above in lieu of filing each copy executed in
connection with loans to directors. A schedule showing the principal amount and
interest rate of each director loan at October 2, 1998, appears in Item 13 of
this Form 10-K. The registrant agrees to furnish a copy of any omitted loan
document to the Securities and Exchange Commission upon request.
10.D2 Typical form of residual stock redemption note executed in connection with
redemption of common stock from members (incorporated by reference to Exhibit
10.D2 to the registrant's Form 10-K for the fiscal year ended October 2, 1998).
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant
has filed the form listed above in lieu of filing each copy executed in
transactions with directors. The registrant agrees to furnish a copy of any
omitted document to the Securities and Exchange Commission upon request.
10.E1* Transition Agreement between the registrant and Alan C. Jones dated May
1997.
10.E2* Executive Compensation Agreement between the registrant and Charles E.
Carlbom dated July 1, 1997.
10.F1 Copy of sublease agreement for Troutdale store dated December 15, 1993,
between the registrant and a partnership in which Robert A. Lamb, a director of
the registrant, is a partner (incorporated by reference to Exhibit 10-F1 to the
registrant's Form 10-K for the fiscal year ended September 29, 1995).
10.F2 Copy of sublease agreement for Wilsonville store dated June 25, 1991,
between the registrant and a partnership in which Robert A. Lamb, a director of
the registrant, is a partner (incorporated by reference to Exhibit 10-F2 to the
registrant's Form 10-K for the fiscal year ended September 29, 1995).
36
<PAGE>
10.F3 Copy of sublease agreement for Portland store dated July 30, 1997, between
the registrant and a corporation in which Robert A. Lamb, a director of the
registrant, has an interest (incorporated by reference to Exhibit 10.F3 to the
registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.F4 Copy of sublease agreement for equipment located at Wilsonville store
dated June 25, 1991, between the registrant and a partnership in which Robert A.
Lamb, a director of the registrant, is a partner (incorporated by reference to
Exhibit 10.F4 to the registrant's Form 10-K for the fiscal year ended October 2,
1998).
10.G Copy of sublease agreement for Tigard store dated August 28, 1991, between
the registrant and a corporation in which Gaylon G. Baese, a director of the
registrant, has an interest (incorporated by reference to Exhibit 10.G to the
registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.H1 Copy of sublease agreement for Eugene store dated October 27, 1991,
between the registrant and a corporation in which Richard L. Wright, a director
of the registrant, has an interest (incorporated by reference to Exhibit 10.H1
to the registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.H2 Copy of sublease agreement for Cottage Grove store dated October 27, 1990,
between the registrant and a corporation in which Richard L. Wright, a director
of the registrant, has an interest (incorporated by reference to Exhibit 10.H2
to the registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.H3 Copy of sublease agreement for Albany store dated February 1, 1994,
between the registrant and a corporation in which Richard L. Wright, a director
of the registrant, has an interest (incorporated by reference to Exhibit 10.H3
to the registrant's Form 10-K for the fiscal year ended October 2, 1998).
10.I1 Copy of sublease agreement for Gold Beach store dated July 6, 1979,
between the registrant and Raymond L. Nidiffer, a holder of more than five
percent of the registrant's stock ("Nidiffer") (incorporated by reference to
Exhibit 10-Q3 of the registrant's registration statement on Form S-2, No.
33-26631).
10.I2 Copy of assignment of lease and related documents for Mt. Shasta store
between the registrant and C & K Market, Inc., an affiliate of Nidiffer
(incorporated by reference to Exhibit 10-Q4 of the registrant's registration
statement on Form S-2, No. 33-26631).
10.I3 Copy of loan guaranties dated June 12, 1980 and September 30, 1988, given
by registrant for the benefit of C & K Market, Inc., an affiliate of Nidiffer
(incorporated by reference to Exhibit 10-I12 to the registrant's Form 10-K for
the fiscal year ended September 30, 1989).
37
<PAGE>
10.I4 Copy of stock purchase agreement dated as of June 20, 1994, between the
registrant and C & K Market, Inc., an affiliate of Nidiffer (incorporated by
reference to Exhibit 10.F8 to the registrant's Form 10-K for the fiscal year
ended September 30, 1994).
10.I5 Copy of Agreement for Purchase and Sale and Escrow Instructions dated
September 17, 1997, between the registrant and C & K Market, Inc., an affiliate
of Nidiffer (incorporated by reference to Exhibit 10.I5 to the registrant's Form
10-K for the fiscal year ended October 2, 1998).
10.I6 Stock Purchase Agreement dated November 17, 1997, by and among the
registrant and C & K Market, an affiliate of Nidiffer (incorporated by reference
to Exhibit 10.I6 to the registrant's Form 10-K for the fiscal year ended October
2, 1998).
12 Statement of Computation of Ratio of Adjusted Income to Fixed Charges.
21 Subsidiaries of the registrant.
27 Financial Data Schedule.
* Denotes management contract or compensatory plan or arrangement.
39
Exhibit 10.C
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is made
as of May ___, 1996, by and among BANK OF AMERICA NW, N.A., successor by
name change to Seattle-First National Bank, a national banking association
("Seafirst"), UNITED STATES NATIONAL BANK OF OREGON, a national banking
association ("U.S. Bank"), THE HONGKONG AND SHANGHAI BANKING CORPORATION,
LIMITED, an extra national banking institution ("Hong Kong Bank") (each
individually a "Lender" and collectively the "Lenders"), SEAFIRST, as agent
for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. Borrower is primarily in the business of selling food products
and other miscellaneous items to its shareholder members who operate retail
grocery stores. Borrower requires various credit facilities for its day to
day business affairs and operations.
B. As of May 31, 1995, Seafirst, U.S. Bank, Borrower and Agent
executed an Amended and Restated Credit Agreement (the "Restated Credit
Agreement"). Pursuant to the terms of the Restated Credit Agreement,
Seafirst and U.S. Bank agreed to make certain revolving credit facilities
available to Borrower.
C. As of November 30, 1995, Seafirst and U.S. Bank agreed to
assign a portion of their respective interests in and to all Operating
Loans and Revolving Loans together with a corresponding assignment of
related interests in the Restated Credit Agreement and related loan
documents to Hong Kong Bank all pursuant to that certain Loan Purchase
Agreement executed as of November 30, 1995 by and among Lenders. In
connection therewith the parties hereto executed Amendment Number One to
the Amended and Restated Credit Agreement as of November 30, 1995. As of
April 30 1996, the parties hereto executed Amendment Number Two to the
Amended and Restated Credit Agreement. The Restated Credit Agreement as
amended by such Amendment Number One and Amendment Number Two is referred
to herein as the "Prior Credit Agreement."
D. The parties hereto now desire to amend and restate the Prior
Credit Agreement to extend the applicable Maturity Dates by one additional
year and to make certain other changes all as set forth below.
NOW THEREFORE, the parties hereto hereby agree to amend and
restate the Prior Credit Agreement as follows:
AGREEMENT
Article 1
DEFINITIONS
Section 1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following
meanings:
"Acceptance Advances" means, as of any date of determination, the
sum of (a) the aggregate face amount of all outstanding unmatured Drafts
plus (b) the aggregate face amount of all matured Drafts for which the
Borrower has not yet paid.
"Acceptance Request" has the meaning given in Section 3.2(a).
"Agent" means Seafirst and any successor agent selected pursuant
to Section 10.6 hereof.
"Borrower" means United Grocers, Inc., an Oregon corporation, and
any Successor or permitted assign.
"Business Day" means any day other than Saturday, Sunday or
another day on which banks are authorized or obligated to close in Seattle,
Washington, except in the context of the selection of a LIBOR Loan or the
calculation of the LIBOR Rate for any Applicable Interest Period, in which
event "Business Day" means any day other than Saturday or Sunday on which
dealings in foreign currencies and exchange between banks may be carried on
in London, England and Seattle, Washington.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Consolidated Tangible Net Worth" has the meaning given in Section
7.15.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower, are treated as a
single employer under Section 414(b) or 414(c) of the Code.
"Default" means any event which but for the passage of time, the
giving of notice, or both would be an Event of Default.
"Draft" has the meaning given in Section 3.2(d).
"Eligible Draft" means a draft that is eligible for discount under
the Federal Reserve Act (12 U.S.C. ss. 372), and is eligible for purchase
under the rules and regulations established from time to time by the
Federal Reserve Bank of New York.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" has the meaning given in Section 9.1.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on transactions received by the
Agent from three federal funds brokers of recognized standing selected by
the Agent.
"Funded Debt" has the meaning given in Section 7.11.
"GIC" has the meaning given in Section 7.19.
"Government Approval" means an approval, permit, license,
franchise, right, privilege, authorization, certificate, or consent of any
Governmental Authority.
"Governmental Authority" means the government of the United States
or any State or any foreign country or any political subdivision of any
thereof or any branch, department, agency, instrumentality, court, tribunal
or regulatory authority which constitutes a part or exercises any sovereign
power of any of the foregoing.
"Incipient Payment Default" means any event which but for the
passage of time, the giving of notice or both would be an Event of Default
described in subsection 9.1(a) hereof.
"Indebtedness" means for any person (a) all items of indebtedness
or liability (except capital, surplus, deferred credits and reserves, as
such) which would be included in determining total liabilities as shown on
the liability side of a balance sheet as of the date as of which
indebtedness is determined, (b) indebtedness secured by any Lien, whether
or not such indebtedness shall have been assumed, (c) any other
indebtedness or liability for borrowed money or for the deferred purchase
price of property or services for which such person is directly or
contingently liable as obligor, guarantor, or otherwise, or in respect of
which such person otherwise assures a creditor against loss, and (d) any
other obligations of such person under leases which shall have been or
should be recorded as capital leases.
"Lenders" means Seafirst, U.S. Bank and Hong Kong Bank and any
Successors thereto or permitted assigns thereof.
"Letter of Credit" means a stand-by letter of credit issued by
Seafirst or a Seafirst Affiliate pursuant to Section 4.2 hereof for the
account of Borrower.
"Letter of Credit Commitment" has the meaning given in Section 4.2(b).
"Letter of Credit Usage" means as of any date of determination,
the sum of (i) the aggregate face amount of all outstanding unmatured
Letters of Credit, plus (ii) the aggregate amount of all payments made by
Seafirst and any Seafirst Affiliates under Letters of Credit and not yet
reimbursed by Borrower pursuant to Section 4.4.
"Lien" means, for any person, any security interest, pledge,
mortgage, charge, assignment, hypothecation, encumbrance, attachment,
garnishment, execution or other voluntary or involuntary lien upon or
affecting the revenues of such person or any real or personal property in
which such person has or hereafter acquires any interest, except (a) liens
for Taxes which are not delinquent or which remain payable without penalty
or the validity or amount of which is being contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof;
(b) liens imposed by law (such as mechanics' liens) incurred in good faith
in the ordinary course of business which are not delinquent or which remain
payable without penalty or the validity or amount of which is being
contested in good faith by appropriate proceedings upon stay of execution
of the enforcement thereof with, in the case of liens on property of the
Borrower, provision having been made to the satisfaction of the Agent for
the payment thereof in the event the contest is determined adversely to the
Borrower; and (c) deposits or pledges under worker's compensation,
unemployment insurance, social security or other similar laws or made to
secure the performance of bids, tenders, contracts (except for repayment of
borrowed money), or leases, or to secure statutory obligations or surety or
appeal bonds or to secure indemnity, performance or other similar bonds
given in the ordinary course of business.
"Loans" shall mean the Revolving Loans, the Operating Loans, the
Short-term Acquisition Loans, the Long-term Acquisition Loans and the Overnight
Loans.
"Loan Documents" means this Agreement, the Notes, the Drafts, the
Letters of Credit, the Reimbursement Agreements, and all other
certificates, instruments and other documents executed by or on behalf of
the Borrower in connection with this Agreement or the transactions
contemplated hereby.
"Long-term Acquisition Commitment" has the meaning given in Section 2.1
(c).
"Long-term Acquisition Line Maturity Date" means July 31, 1997.
"Long-term Acquisition Loan" has the meaning given in Section 2.1(c).
"Long-term Acquisition Note" has the meaning given in Section 2.7(c).
"Long-term Maturity Date" means April 30, 1998.
"Majority Lenders" means at any time Lenders having at least
sixty-six 2/3% of the Total Commitment.
"Maturity Date" means the Long-term Maturity Date, the Long-term
Acquisition Line Maturity Date, the Short-term Maturity Date, or the
Short-term Acquisition Line Maturity Date, as applicable.
"Members' Equity" has the meaning given in Section 7.11.
"Notes" has the meaning given in Section 2.7.
"Notice of Borrowing" means a written or oral request for a Loan
(other than an Overnight Loan) from the Borrower delivered to the Agent in
the manner, at the time, and containing the information required by the
terms of Section 2.2(a) or a written or oral request for an Overnight Loan
from the Borrower delivered to U.S. Bank in the manner, at the time, and
containing the information required by the terms of Section 2.2(b).
"Operating Commitment" has the meaning given in Section 2.1(b).
"Operating Loan" has the meaning given in Section 2.1(b).
"Operating Note" has the meaning given in Section 2.7(b).
"Overnight Commitment" has the meaning given in Section 2.1(e).
"Overnight Loan" has the meaning given in Section 2.1(e).
"Overnight Note" has the meaning given in Section 2.7(e).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means an "employee pension benefit plan" (as such
term is defined in ERISA) from time to time maintained by the Borrower or a
member of the Controlled Group.
"Plan" shall mean, at any time, an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (a) maintained by the
Borrower or any member of the Controlled Group for employees of the
Borrower or any member of the Controlled Group or (b) maintained pursuant
to a collective bargaining agreement or any other arrangement under which
more than one employer makes contributions and to which the Borrower or any
member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.
"Prime Rate" means, on any day, the Agent's publicly announced
prime rate of interest at its principal office (which prime rate is a
reference rate and not necessarily the lowest rate of interest charged by
the Agent to its prime customers), changing as such prime rate changes.
"Prior Credit Agreement" shall have the meaning given in the Recitals.
"Private Placement Agreement" means any agreement currently
existing or hereafter entered into by Borrower for the private placement of
debt securities issued by Borrower.
"Reimbursement Agreements" has the meaning given in Section 4.2(c).
"Revolving Commitment" has the meaning given in Section 2.1(a).
"Revolving Loan" means a Loan made pursuant to Section 2.1(a).
"Revolving Note" has the meaning given in Section 2.7(a).
"Seafirst Affiliate" means any person that directly or indirectly
controls or is controlled by or under common control with Seafirst.
"Short-term Acquisition Commitment" has the meaning given in Section 2.
1(d).
"Short-term Acquisition Line Maturity Date" means July 31, 1996.
"Short-term Acquisition Loan" has the meaning given in Section 2.1(d).
"Short-term Acquisition Note" has the meaning given in Section 2.7(d).
"Short-term Maturity Date" means April 30, 1997.
"Subordinated Debt" has the meaning given in Section 7.11.
"Successor" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially
all of the assets of the predecessor.
"Tax" means, for any person, any tax, assessment, duty, levy,
impost or other charge imposed by any Governmental Authority on such person
or on any property, revenue, income, or franchise of such person and any
interest or penalty with respect to any of the foregoing.
"Total Commitment" means the total of U.S. Bank's Overnight
Commitment, Seafirst's Letter of Credit Commitment, Seafirst's and U.S.
Bank's Short-term Acquisition Commitment and Long-term Acquisition
Commitment and each Lender's Revolving Commitment and Operating Commitment.
"Unfunded Vested Liabilities" means, with respect to any Plan at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value
of all Plan assets allocable to such benefits, all determined as of the
then most recent evaluation date for such Plan, but only to the extent that
such excess represents a potential liability of the Borrower or any member
of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.
Section 1.2 Interest Rate Definitions.
Certain definitions related to the provisions governing the
calculation and payment of interest are set forth in Section 2.5(a).
Section 1.3 General Principles Applicable to Definitions.
Definitions given in Sections 1.1 and 2.5(a) shall be equally
applicable to both singular and plural forms of the terms therein defined
and references herein to "he" or "it" shall be applicable to persons
whether masculine, feminine or neuter. References herein to any document
including, but without limitation, this Agreement, shall be deemed a
reference to such document as it now exists, and as, from time to time
hereafter, the same may be amended. Reference herein to a "person" or
"persons" shall be deemed to be a reference to an individual, corporation,
partnership, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental
Authority or agency or any other entity. In the computation of periods of
time from a date to a later date, "from" means "from and including" and
"to" and "until" each means "to but excluding."
Section 1.4 Accounting Terms.
Except as otherwise provided herein, accounting terms not
specifically defined shall be construed, and all accounting procedures
shall be performed, in accordance with generally accepted United States
accounting principles consistently applied.
Article 2
THE LOANS
Section 2.1 Loans.
(a) Revolving Line of Credit.
Subject to the terms and conditions of this Agreement,
each Lender hereby severally agrees to make loans ("Revolving Loans") to
the Borrower from time to time on Business Days during the period beginning
on the date hereof and ending on the Long-term Maturity Date in amounts
equal to such Lender's pro rata share (as set forth below) of each
requested loan provided that, after giving effect to any requested loan the
aggregate of all Revolving Loans from such Lender will not exceed at any
one time outstanding the sum set forth opposite its name below (such
Lender's "Revolving Commitment").
<TABLE>
Lender Commitment Pro Rata Share
<S> <C> <C>
Seafirst $18,750,000 44.1176%
U.S. Bank $18,750,000 44.1176%
Hong Kong Bank $ 5,000,000 11.7648%
Total Revolving Commitment $42,500,000 100.00%
</TABLE>
The Revolving Loans described in this Section 2.1(a) constitute a revolving
credit and within the amount and time specified, the Borrower may pay, prepay
and reborrow.
(b) Operating Line of Credit.
Subject to the terms and conditions of this Agreement,
each Lender hereby severally agrees to make loans ("Operating Loans") to
the Borrower from time to time on Business Days during the period beginning
on the date hereof and ending on the Short-term Maturity Date in amounts
equal to such Lender's pro rata share (as set forth below) of each
requested loan provided that, after giving effect to any requested loan the
aggregate of all Operating Loans from such Lender will not exceed at any
one time outstanding an amount equal to (a) the sum set forth opposite such
Lender's name below (such Lender's "Operating Commitment"); less (b) the
Acceptance Advances in respect of Drafts accepted and discounted by such
Lender in accordance with the terms of Article 3 hereof.
<TABLE>
Lender Commitment Pro Rata Share
------ ---------- --------------
<S> <C> <C>
Seafirst $18,750,000 44.1176%
U.S. Bank $18,750,000 44.1176%
Hong Kong Bank $ 5,000,000 11.7648%
Total Revolving Commitment $42,500,000 100.00%
</TABLE>
The Operating Loans described in this Section 2.1(b) constitute a
revolving credit and within the amount and time specified, the Borrower may
pay, prepay and reborrow.
(c) Long-term Acquisition Line of Credit.
Subject to the terms and conditions of this Agreement,
each of Seafirst and U.S. Bank hereby severally agrees to make loans
("Long-term Acquisition Loans") to the Borrower from time to time on
Business Days during the period beginning on the date hereof and ending on
the Long-term Acquisition Line Maturity Date in amounts equal to such
Lender's pro rata share (as set forth below) of each requested loan
provided that, after giving effect to any requested loan the aggregate of
all Long-term Acquisition Loans from such Lender will not exceed at any one
time outstanding the sum set forth opposite its name below (such Lender's
"Long-term Acquisition Commitment").
<TABLE>
Lender Commitment Pro Rata Share
<S> <C> <C>
Seafirst $4,000,000 44.44%
U.S. Bank $5,000,000 55.56%
Total Long-Term $9,000,000 100.00%
</TABLE>
Acquisition Commitment
The Long-term Acquisition Loans described in this Section 2.1(c) constitute
a revolving credit and within the amount and time specified, the Borrower
may pay, prepay and reborrow.
(d) Short-term Acquisition Line of Credit.
Subject to the terms and conditions of this Agreement,
each of Seafirst and U.S. Bank hereby severally agrees to make loans
("Short-term Acquisition Loans") to the Borrower from time to time on
Business Days during the period beginning on the date hereof and ending on
the Short-term Acquisition Line Maturity Date in amounts equal to such
Lender's pro rata share (as set forth below) of each requested loan
provided that, after giving effect to any requested loan the aggregate of
all Short-term Acquisition Loans from such Lender will not exceed at any
one time outstanding the sum set forth opposite its name below (such
Lender's "Short-term Acquisition Commitment").
<TABLE>
Lender Commitment Pro Rata Share
<S> <C> <C>
Seafirst $ 5,000,000 50.00%
U.S. Bank $ 5,000,000 50.00%
Total Short-Term $10,000,000 100.00%
</TABLE>
Acquisition Commitment
The Short-term Acquisition Loans described in this Section 2.1(d)
constitute a revolving credit and within the amount and time specified, the
Borrower may pay, prepay and reborrow.
(e) Overnight Line of Credit.
Subject to the terms and conditions of this Agreement,
U.S. Bank hereby agrees to make loans ("Overnight Loans") to the Borrower
from time to time on Business Days during the period beginning on the date
hereof and ending on the Short-term Maturity Date provided that, after
giving effect to any requested loan the aggregate of all Overnight Loans
will not exceed at any one time outstanding the sum of Ten Million Dollars
($10,000,000) (U.S. Bank's "Overnight Commitment"). The Overnight Loans
described in this Section 2.1(e) constitute a revolving credit and within
the amount and time specified, the Borrower may pay, prepay and reborrow.
(f) Relationship to Prior Credit Agreement.
The Revolving Loans, the Operating Loans, the Long-Term
Acquisition Loans, the Short-Term Acquisition Loans and the Overnight Loans
outstanding under the Prior Credit Agreement as of the effective date of
this Agreement, shall be deemed to have been advanced under Sections
2.1(a), (b), (c), (d) and (e) hereof, respectively.
Section 2.2 Manner of Borrowing.
(a) For each requested Loan other than an Overnight Loan, the Borrower
shall give the Agent a Notice of Borrowing specifying the date of a
requested borrowing and the amount thereof. The Borrower may give a written
or oral Notice of Borrowing on the same day it wishes a Loan to be made if
said Notice of Borrowing is received by the Agent no later than 10:00 a.m.
(Seattle time) on the date of the requested borrowing, provided that if the
Borrower shall simultaneously elect to have interest accrue on a Loan at a
rate other than the Prime Rate by giving an Interest Rate Notice (as
defined in Section 2.5(c)(1)) in respect of such borrowing, the Notice of
Borrowing shall be given prior to 10:00 a.m. (Seattle time) on a Business
Day at least three (3) Business Days prior to the requested date of
borrowing. Requests for borrowing, or confirmations thereof, received after
the designated hour will be deemed received on the next succeeding Business
Day. Each such Notice of Borrowing shall be irrevocable and shall be deemed
to constitute a representation and warranty by the Borrower that as of the
date of such notice the statements set forth in Article 6 hereof are true
and correct and that no Default or Event of Default has occurred and is
continuing. On receipt of a Notice of Borrowing, the Agent shall promptly
notify each Lender by telephone, telex or facsimile of the date of the
requested borrowing and the amount thereof. Each Lender shall before 12:00
noon (Seattle time) on the date of the requested borrowing, pay such
Lender's pro rata share of the aggregate principal amount of the requested
borrowing in immediately available funds to the Agent at its Commercial
Loan Processing Center, Seattle, Washington. Upon fulfillment to the
Agent's satisfaction of the applicable conditions set forth in Article 5,
and after receipt by the Agent of such funds, the Agent will promptly make
such funds available to the Borrower at Borrower's general checking account
maintained at the Main Branch of U.S. Bank in Portland, Oregon or at such
other place as may be designated by Borrower in a writing delivered to
Agent.
(b) For each requested Overnight Loan, the Borrower shall give U.S. Bank a
Notice of Borrowing specifying the date of the requested borrowing and the
amount thereof. The Borrower may give a written or oral Notice of Borrowing
on the same day it wishes an Overnight Loan to be made if said Notice of
Borrowing is received by U.S. Bank not later than 10:00 a.m. (Portland
time) on the date of the requested borrowing provided, that, any Notice of
Borrowing given orally shall be confirmed by the Borrower in a writing
delivered to U.S. Bank not later than 1:00 p.m. (Portland time) on the date
such oral notice is given. Requests for borrowing or confirmations thereof
received after the designated hour will be deemed received on the next
succeeding Business Day. Each such Notice of Borrowing shall be irrevocable
and shall be deemed to constitute a representation and warranty by the
Borrower that as of the date of such notice the statements set forth in
Article 6 hereof are true and correct and that no Default or Event of
Default has occurred and is continuing. Upon fulfillment to U.S. Bank's
satisfaction of the applicable conditions set forth in Article 5, U.S. Bank
will promptly make such funds available to the Borrower at Borrower's
general checking account maintained at the Main Branch of U.S. Bank in
Portland, Oregon or at such other place as may designated by Borrower in a
writing delivered to U.S. Bank. Promptly upon request, U.S. Bank shall
provide Agent with information regarding Overnight Loans made to Borrower,
including without limitation information regarding the date, amount,
interest rate, and payments made by Borrower in respect of any such Loans.
Section 2.3 Agent's Right to Fund.
Unless the Agent shall have received notice from a Lender prior to
12:00 noon (Seattle time) on the date of any requested borrowing that such
Lender will not make available to the Agent its pro rata share of the
requested borrowing, the Agent may assume that such Lender has made such
funds available to the Agent on the date such Loan is to be made in
accordance with Section 2.2(a) hereof and the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have
so made such portion available to the Agent, such Lender and the Borrower,
jointly and severally, agree to pay to the Agent forthwith on demand such
corresponding amount, together with interest thereon for each day from the
date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (a) in the case of the Borrower, the
Prime Rate and (b) in the case of such Lender, the Federal Funds Rate. Any
such repayment by the Borrower shall be without prejudice to any rights it
may have against the Lender that has failed to make available its funds for
any requested borrowing.
Section 2.4 Repayment of Principal.
(a) The Borrower shall repay to the Lenders the principal amount of each
Revolving Loan on the Long-term Maturity Date, the principal amount of each
Long-term Acquisition Loan on the Long-term Acquisition Line Maturity Date,
the principal amount of each Operating Loan on the Short-term Maturity
Date, the principal amount of each Short-term Acquisition Loan on the
Short-term Acquisition Line Maturity Date, and the principal amount of each
Overnight Loan on demand made by U.S. Bank; provided, however, if U.S. Bank
makes no such demand, then on the Short-term Maturity Date.
(b) Borrower agrees to pay to Agent for the account of Seafirst and U.S.
Bank immediately upon the receipt thereof, as a mandatory prepayment, an
amount equal to the net proceeds received by Borrower from the sale of any
trade receivables (other than sales made in the ordinary course of
Borrower's business). Any such payment shall be applied by Agent as
provided in Section 2.9(a)(iii) and upon Borrower's making of any such
payment, (A) the aggregate Long-term Acquisition Commitments for both
Lenders shall be immediately, permanently and irrevocably reduced by an
amount equal to one-half of such payment and (B) the aggregate Short-term
Acquisition Commitments for both Lenders shall be immediately, permanently
and irrevocably reduced by an amount equal to one-half of such payment.
Section 2.5 Interest on Loans.
(a) Interest Definitions.
As used in this Section 2.5 and elsewhere in the
Agreement the following terms have the following meanings:
"Applicable Interest Period" means, with respect to any
Loan accruing interest at a LIBOR Rate, the period commencing on the first
date the Borrower elects to have such LIBOR Rate apply to such Loan
pursuant to Section 2.5(c) and ending one, two, three or six months
thereafter as specified in the Interest Rate Notice given in respect of
such Loan; provided, however, that Borrower may not select a six-month
interest period for an Operating Loan and provided further, that no
Applicable Interest Period may be selected for any LIBOR Loan if it extends
beyond such Loan's Maturity Date.
"Applicable Interest Rate" means (i) for each Loan other
than an Overnight Loan, the Prime Rate or the LIBOR Rate, as designated by
the Borrower in an Interest Rate Notice given with respect to such Loan (or
portion thereof) or otherwise determined pursuant to Section 2.5(c); and
(ii) for each Overnight Loan, the U.S. Bank Prime Rate or the Interim Rate,
as designated by the Borrower in an Interest Rate Notice given with respect
to such Loan or otherwise determined pursuant to Section 2.5(d).
"Interest Rate Notice" has the meaning given in Section 2.5(c)
and (d).
"Interim Rate" means, a per annum rate of interest equal
to the sum of (a) the per annum rate of interest established from time to
time by U.S. Bank as its "overnight money market rate" for loans of
comparable amounts; and (b) seventy-five (75) basis points (three-fourths
of one percent) changing as such "overnight money market rate" changes from
time to time.
"LIBOR Loan" means any Loan or portion thereof bearing
interest at the LIBOR Rate.
"LIBOR Rate" means, with respect to any LIBOR Loan for
any Applicable Interest Period, an interest rate per annum equal to the sum
of (a) seventy-five (75) basis points (three-fourths of one percent) and
(b) the product of (i) the Euro-dollar Rate in effect for such Applicable
Interest Period and (ii) the Euro-dollar Reserves in effect on the first
day of such Applicable Interest Period.
As used herein the "Euro-dollar Rate" will be determined by
reference to that rate (rounded upward, if necessary, to the next
one-hundredth of one percent (.01%)) which appears on the Reuters Screen
LIBO Page as of 11:00 a.m. (London time) on the day that is two (2)
Business Days prior to the first date of the proposed Applicable Interest
Period. If more than one such rate appears on the Reuters Screen LIBO Page,
the rate will be the arithmetic mean of such rates. If there are no
applicable quotes on such Reuters Screen LIBO Page, the Euro-dollar Rate
will be determined by reference to that rate (rounded upward, if necessary,
to the next one-hundredth of one percent (.01%)) appearing on the display
designated as "Page 3750" on the Telerate Service (or on such other page on
that service or such other service designated by the British Banker's
Association for the display of that Association's Interest Settlement Rates
for U.S. Dollar deposits) as of 11:00 a.m. (London time) on the day that is
two (2) Business Days prior to the first date of the proposed Applicable
Interest Period. If there are no applicable quotes on the Reuters Screen
LIBO Page or available through Telerate Service, then the LIBOR Rate shall
be deemed unavailable as provided in Section 2.5(f) hereof.
As used herein, the term "Euro-dollar Reserves" means a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including, without limitation, any special,
supplemental, marginal or emergency reserves) expressed as a decimal
established by the Board of Governors of the Federal Reserve System or any
other banking authority to which the Agent is subject for Eurocurrency
Liability (as defined in Regulation D of such Board of Governors). It is
agreed that for purposes hereof, each LIBOR Loan shall be deemed to
constitute a Eurocurrency Liability and to be subject to the reserve
requirements of Regulation D, without benefit of credit or proration,
exemptions or offsets which might otherwise be available to any Lender from
time to time under such Regulation D. Euro-dollar Reserves shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage and shall apply to Applicable Interest Periods
commencing after the effective date of such change.
"U.S. Bank Prime Rate" means, on any day, U.S. Bank's
publicly announced prime rate of interest at its principal office (which
prime rate is a reference rate and not necessarily the lowest rate of
interest charged by U.S. Bank to its prime customers), changing as such
prime rate changes.
(b) General Provisions.
The Borrower agrees to pay interest to Lenders on the
unpaid principal amount of each Loan from the date of such Loan until such
Loan shall be due and payable at a per annum rate equal to the Applicable
Interest Rate, and, if default shall occur in the payment when due of any
such Loan (or portion thereof), from the maturity of that Loan until it is
paid in full at a per annum rate equal to two percentage points (2%) above
the Prime Rate (changing as the Prime Rate changes) provided, however, that
if default shall occur in the payment when due of any Overnight Loan (or
portion thereof), Borrower agrees to pay to U.S. Bank interest on the
unpaid principal amount of such Loan from the maturity thereof until it is
paid in full at a per annum rate equal to two percentage points (2%) above
the U.S. Bank Prime Rate (changing as the U.S. Bank Prime Rate changes).
Accrued but unpaid interest on each LIBOR Loan shall be paid on the last
day of each Applicable Interest Period, on the applicable Maturity Date
and, additionally, in the case of a LIBOR Loan for which the Applicable
Interest Period is six months, on the day that is three months after the
commencement of such Applicable Interest Period. Accrued but unpaid
interest on each Loan accruing interest at the Prime Rate, the U.S. Bank
Prime Rate or the Interim Rate shall be paid on the last Business Day of
each calendar month commencing May 31, 1996 and on the applicable Maturity
Date. Unpaid interest accruing on amounts in default shall be payable on
demand.
(c) Selection of Alternative Rates for Loans.
(1) The Borrower may, subject to the requirements of this Section 2.5(c),
on at least three (3) Business Days' prior oral or written notice elect to
have interest accrue on any Loan (other than an Overnight Loan) or any
portion thereof at a LIBOR Rate for an Applicable Interest Period. Such
notice (herein, an "Interest Rate Notice") shall be deemed delivered when
communicated to the Agent (in the case of an oral notice) or when received
by the Agent (in the case of a written notice) except that an Interest Rate
Notice communicated to or received by the Agent after 10:00 a.m. (Seattle
time) on any Business Day, shall be deemed to have been delivered or
received on the immediately succeeding Business Day. Such Interest Rate
Notice shall identify, subject to the conditions of this Section 2.5(c),
the Loan or portions thereof and the Applicable Interest Period which the
Borrower selects. Any such Interest Rate Notice shall be irrevocable and
shall constitute a representation and warranty by the Borrower that as of
the date of such Interest Rate Notice, the statements set forth in Article
6 are true and correct and that no Event of Default or Default has occurred
and is continuing. If the Interest Rate Notice is given orally, the
Borrower agrees to promptly confirm such notice in a writing delivered to
the Agent.
(2) The Borrower's right to select a LIBOR Rate to apply to a Loan (other
than an Overnight Loan) or any portion thereof shall be subject to the
following conditions: (i) the aggregate of all Loans or portions thereof to
accrue interest at a particular LIBOR Rate for the same Applicable Interest
Period shall be an integral multiple of One Hundred Thousand Dollars
($100,000) and not less than One Million Dollars ($1,000,000); (ii) a LIBOR
Rate may not be selected for any Loan or portion thereof which is already
accruing interest at a LIBOR Rate unless such selection is only to become
effective at the maturity of the Applicable Interest Period then in effect;
(iii) the LIBOR Rate shall not be unavailable pursuant to Section 2.5(f);
(iv) no Default or Event of Default shall have occurred and be continuing;
and (v) if the Borrower elects to have some portion (but less than all) of
the Loans accrue interest at the LIBOR Rate, the Borrower shall select a
portion of each Lender's outstanding Loans of the same type (e.g. Revolving
Loans, Operating Loans) to accrue interest at such rate in proportion to
their respective pro rata shares.
(3) In the absence of an effective request for the application of a LIBOR
Rate, the Loans (other than the Overnight Loans) or remaining portions
thereof shall accrue interest at the Prime Rate. Any Interest Rate Notice
which specifies a LIBOR Rate but fails to identify an Applicable Interest
Period shall be deemed to be a request for the LIBOR Rate for an Applicable
Interest Period of one (1) month. The Interest Rate Notice may be given
with and contained in any Notice of Borrowing provided that the requisite
number of days for prior notice for both the borrowing and the selection of
a LIBOR Rate shall be satisfied.
(4) If the Borrower delivers an Interest Rate Notice with any Notice of
Borrowing for a Loan and the Borrower thereafter declines to take such Loan
or a condition precedent to the making of such Loan is not satisfied or
waived, the Borrower shall indemnify the Agent and each Lender for all
losses and any costs which the Agent or any Lender may sustain as a
consequence thereof including, without limitation, the costs of
re-employment of funds at rates lower than the cost to the Lenders of such
funds. A certificate from the Agent or any Lender setting forth the amount
due to it pursuant to this subparagraph (c) and the basis for, and the
calculation of, such amount shall be conclusive evidence of the amount due
to it hereunder. Payment of the amount owed shall be due within fifteen
(15) days after the Borrower's receipt of such certificate.
(d) Selection of Applicable Interest Rate for Overnight Loans.
(1) The Borrower may, subject to the requirements of this Section 2.5(d),
on at least three (3) Business Days' prior oral or written notice elect to
have interest accrue on an Overnight Loan at the Interim Rate. Such
Interest Rate Notice shall be deemed delivered when communicated to U.S.
Bank (in the case of oral notice) or when received by U.S. Bank (in the
case of written notice) except that an Interest Rate Notice communicated to
or received by U.S. Bank after 10:00 a.m. (Portland time) on any Business
Day, shall be deemed to have been delivered or received on the immediately
succeeding Business Day. Such Interest Rate Notice shall identify, subject
to the conditions of this Section 2.5(d), the Loan which the Borrower
selects. Any such Interest Rate Notice shall be irrevocable and shall
constitute a representation and warranty by the Borrower that as of the
date of such Interest Rate Notice, the statements set forth in Article 6
are true and correct and that no Event of Default or Default has occurred
and is continuing. If the Interest Rate Notice is given orally, the
Borrower agrees to promptly confirm such notice in a writing delivered to
U.S. Bank.
(2) The Borrower's right to select an Interim Rate to apply to an Overnight
Loan or any portion thereof shall be subject to the following conditions:
(i) the aggregate of all Overnight Loans or portions thereof to accrue
interest at a particular Interim Rate shall be an integral multiple of One
Hundred Thousand Dollars ($100,000) and not less than One Million Dollars
($1,000,000); and (ii) no Default or Event of Default shall have occurred
and be continuing.
(3) In the absence of an effective request for the application of an
Interim Rate, the Overnight Loans or remaining portions thereof shall
accrue interest at the U.S. Bank Prime Rate.
(4) If the Borrower delivers an Interest Rate Notice with any Notice of
Borrowing for an Overnight Loan and the Borrower thereafter declines to
take such Loan or a condition precedent to the making of such Loan is not
satisfied or waived, the Borrower shall indemnify U.S. Bank for all losses
and any costs which U.S. Bank may sustain as a consequence thereof
including, without limitation, the costs of reemployment of funds at rates
lower than the cost to U.S. Bank of such funds. A certificate from U.S.
Bank setting forth the amount due to it pursuant to this subparagraph (d)
and the basis for, and the calculation of, such amount shall be conclusive
evidence of the amount due to it hereunder. Payment of the amount owed
shall be due within fifteen (15) days after the Borrower's receipt of such
certificate.
(e) Applicable Days For Computation of Interest.
Computations of interest shall be made on the basis of a
year of three hundred sixty (360) days for the actual number of days
(including the first day but excluding the last day) occurring in the
period for which such interest is payable.
(f) Unavailable Fixed Rate.
If any Lender determines that for any reason, fair and
adequate means do not exist for establishing a particular LIBOR Rate or
that a LIBOR Rate will not adequately and fairly reflect the cost to it of
making or maintaining the principal amount of a particular LIBOR Loan or
that accruing interest on any LIBOR Loan has become unlawful or is contrary
to any internal policies (of general application), such Lender may give
notice of that fact to the Agent and the Borrower and such determination
shall be conclusive and binding absent manifest error. After such notice
has been given and until the Lender notifies the Agent and the Borrower
that the circumstances giving rise to such notice no longer exist, the
interest rate or rates so identified in such notice shall no longer be
available. Any subsequent request by the Borrower to have interest accrue
at such a LIBOR Rate shall be deemed to be a request for interest to accrue
at the Prime Rate. If the circumstances giving rise to the notice described
herein no longer exist, the Lender who had previously given notice of the
unavailability of rate(s) shall notify the Agent and the Borrower in
writing of that fact, and the Borrower shall then once again become
entitled to request that such LIBOR Rates apply to the Loans in accordance
with Section 2.5(c) hereof.
(g) Compensation for Increased Costs.
In the event that after the date hereof any change occurs
in any applicable law, regulation, treaty or directive or interpretation
thereof by any authority charged with the administration or interpretation
thereof, or any condition is imposed by any authority after the date hereof
or any change occurs in any condition imposed by any authority on or prior
to the date hereof which:
(1) subjects any Lender to any Tax, (other than any Tax measured by such
Lender's net income) or changes the basis of taxation of any payments to
any Lender on account of principal of or interest on any LIBOR Loan, the
Note (to the extent the Note evidences a LIBOR Loan) or fees in respect of
such Lender's obligation to make LIBOR Loans or other amounts payable with
respect to its LIBOR Loans; or
(2) imposes, modifies or determines applicable any reserve, deposit or
similar requirements against any assets held by, deposits with or for the
account of, or loans or commitments by, any office of any Lender in
connection with its LIBOR Loans to the extent the amount of which is in
excess of, or was not applicable at the time of computation of, the amounts
provided for in the definition of such LIBOR Rate; or
(3) affects the amount of capital required or expected to be maintained by
banks generally or corporations controlling banks and any Lender determines
that the amount by which it or any corporation controlling it is required
or expected to maintain or increase its capital is increased by, or based
upon, the existence of this Agreement or of any Lender's Loans or
Commitment hereunder;
(4) imposes upon any Lender any other condition with respect to its LIBOR
Loans or its obligation to make LIBOR Loans;
which, as a result thereof, (A) increases the cost to any Lender of making
or maintaining its Loans or any of its Commitments hereunder, or (B)
reduces the net amount of any payment received by any Lender in respect of
its LIBOR Loans (whether of principal, interest, commitment fees or
otherwise), or (C) requires any Lender to make any payment on or calculated
by reference to the gross amount of any sum received by it in respect of
its LIBOR Loans, in each case by an amount which such Lender in its sole
judgment deems material, then and in any such case the Borrower shall pay
to such Lender on demand such amount or amounts as will compensate such
Lender for any increased cost, deduction or payment actually incurred or
made by such Lender. The demand for payment by any Lender shall be
delivered to the Agent and the Borrower and shall state the subjection or
change which occurred or the reserve or deposit requirements or other
conditions which have been imposed upon such Lender or the request,
direction or requirement with which it has complied, together with the date
thereof, the amount of such cost, reduction or payment and the manner in
which such amount has been calculated. The statement of any Lender as to
the additional amounts payable pursuant to this Section 2.5(g) shall be
conclusive evidence of the amounts due hereunder absent manifest error.
The protection of this Section 2.5(g) shall be available to the
Lenders regardless of any possible contention of invalidity or
inapplicability of the relevant law, regulation, treaty, directive,
condition or interpretation thereof. In the event that the Borrower pays
any Lender the amount necessary to compensate such Lender for any charge,
deduction or payment incurred or made by such Lender as provided in this
Section 2.5(g), and such charge, deduction or payment or any part thereof
is subsequently returned to such Lender as a result of the final
determination of the invalidity or inapplicability of the relevant law,
regulation, treaty, directive or condition, then such Lender shall remit to
the Borrower the amount paid by the Borrower which has actually been
returned to such Lender (together with any interest actually paid to such
Lender on such returned amount), less such Lender's costs and expenses
incurred in connection with such governmental regulation or any challenge
made by such Lender with respect to its validity or applicability.
Section 2.6 Prepayments.
Loans accruing interest at the Prime Rate, the U.S. Bank Prime
Rate and the Interim Rate may be repaid at any time without penalty or
premium. If a LIBOR Loan is paid prior to the end of the Applicable
Interest Period, a fee computed in the manner set out in Schedule 1 shall
be assessed and paid at the time of such payment. Such fee shall apply in
all circumstances where a LIBOR Loan is paid prior to the end of the
Applicable Interest Period, regardless of whether such payment is
voluntary, mandatory, required by Section 2.4(b) or the result of the
Agent's or any Lender's collection efforts.
Section 2.7 Notes.
(a) The Revolving Loans shall be evidenced by amended and restated
promissory notes in the form of Exhibits A-1, A-2 and A-3 hereto, each
payable to the order of a Lender, dated the date of this Agreement, and in
the principal amount of such Lender's Revolving Commitment (the "Revolving
Notes").
(b) The Operating Loans shall be evidenced by amended and restated
promissory notes in the form of Exhibits B-1, B-2 and B-3 hereto, each
payable to the order of a Lender, dated the date of this Agreement, and in
the principal amount of such Lender's Operating Commitment (the "Operating
Notes").
(c) The Long-term Acquisition Loans shall be evidenced by amended and
restated promissory notes in the form of Exhibits C-1 and C-2 hereto,
payable to the order of Seafirst and U.S. Bank, respectively, dated the
date of this Agreement, and in the principal amount of each such Lender's
Long-term Acquisition Commitment (the "Long-term Acquisition Notes").
(d) The Short-term Acquisition Loans shall be evidenced by amended and
restated promissory notes in the form of Exhibits D-1 and D-2 hereto,
payable to the order of Seafirst and U.S. Bank, respectively, dated the
date of this Agreement and in the principal amount of each such Lender's
Short-term Acquisition Commitment (the "Short-term Acquisition Notes").
(e) The Overnight Loans shall be evidenced by an amended and restated
promissory note in the form of Exhibit E hereto, payable to the order of
U.S. Bank, dated the date of this Agreement and in the principal amount of
U.S.
Bank's Overnight Commitment (the "Overnight Note").
Each Lender shall record in its records, or at its option on a
schedule attached to its Note, the date and amount of each Loan, the
interest rate applicable to such Loan and, in the case of LIBOR Loans, the
Applicable Interest Period. The aggregate unpaid principal amount so
recorded shall be presumptive evidence of the principal amount owing and
unpaid on the Note. The failure to so record any such amount or error in so
recording such amount shall not, however, limit or otherwise affect the
obligations of Borrower hereunder or under the Notes to repay the principal
amount of the Loans together with all interest accruing thereon.
Section 2.8 Manner of Payments.
(a) All payments and prepayments of principal and interest on any Loan
(other than an Overnight Loan) and all other amounts payable hereunder
(other than commitment fees payable under Section 2.10(c) hereof) or under
any other Loan Document due from the Borrower to the Agent or any Lender
shall be made by paying the same in United States Dollars and in
immediately available funds to the Agent at its Commercial Loan Service
Center, Seattle, Washington not later than 12:00 noon (Seattle time) on the
date on which such payment or prepayment shall become due. Any payment made
after 12:00 noon (Seattle time) on any Business Day shall be deemed to have
been received on the next Business Day. All payments and prepayments of
principal and interest on any Overnight Loan and all payments of commitment
fees payable under Section 2.10(c) hereof shall be made by the Borrower by
paying the same in United States Dollars and in immediately available funds
to U.S. Bank at its Commercial Loan Service Center, Portland, Oregon not
later than 3:00 p.m. (Portland time) on the date on which such payment or
prepayment shall become due. Any payment made after 3:00 p.m. (Portland
time) on any Business Day shall be deemed to have been received on the next
Business Day.
(b) The Borrower hereby authorizes the Agent and each Lender, if and to the
extent any payment is not promptly made pursuant to this Agreement or any
other Loan Document, to charge from time to time against any or all of the
accounts of the Borrower with any Lender or any affiliate of any Lender any
amount due hereunder or under such other Loan Document.
(c) Whenever any payment hereunder or under any other Loan Document shall
be stated to be due or whenever the last day of any interest period would
otherwise occur on a day other than a Business Day, such payment shall be
made and the last day of such interest period shall occur on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation and payment of interest or commitment fees, as
the case may be, unless such extension would cause such payment to be made
or the last day of such interest period to occur in the next following
calendar month, in which case such payment shall be due and the last day of
such interest period shall occur on the next preceding Business Day.
Section 2.9 Application of Proceeds.
(a) Before Default.
Any payment made by Borrower or received for Borrower's
account shall be applied as follows if after applying such payment no Event
of Default or Incipient Payment Default shall have occurred and be
continuing:
(i) Payments made by Borrower to, or received for Borrower's account by,
U.S. Bank shall be applied to amounts due in respect of Overnight Loans in
accordance with the following priorities:
(A) First, to expenses and indemnities due to U.S. Bank hereunder or under
any other Loan Document;
(B) Second, to fees due to U.S. Bank under Section 2.10(c) hereof;
(C) Third, to interest due on any Overnight Loans;
(D) Fourth, to repay principal then due in respect of Overnight Loans;
(E) Fifth, to prepay principal of such of the Overnight Loans as may be
designated by Borrower if such prepayment is permitted in a notice provided
contemporaneously with any such payment and, in the absence of any such
designation, as U.S. Bank may elect; and
(F) Sixth, if all amounts due to U.S. Bank in respect of the Overnight
Loans have been paid in full and such Loans have been fully repaid, U.S.
Bank shall immediately transfer amounts remaining, if any, to Agent for
application pursuant to Section 2.9(a)(ii).
(ii) Payments made by Borrower to, or received for Borrower's account by
Agent shall be applied to amounts due in respect of Revolving Loans,
Operating Loans, Short-term Acquisition Loans, Long-term Acquisition Loans,
Drafts, and Letters of Credit in accordance with the following priorities:
(A) First, to expenses and indemnities due to Agent and the Lenders
hereunder or under any other Loan Documents;
(B) Second, to fees due to Agent and Lenders under Sections 2.10(a), (b)
and (d) hereof;
(C) Third, to interest due on any Operating, Revolving, Short-term
Acquisition and Long-term Acquisition
Loans;
(D) Fourth, to repay principal then due in respect of the Operating,
Revolving, Short-term Acquisition and Long-term Acquisition Loans;
(E) Fifth, to pay all amounts due in respect of any Draft;
(F) Sixth, to pay all amounts due in respect of any Letter of Credit;
(G) Seventh, to prepay principal of such of the Revolving, Operating,
Short-term Acquisition and Long-term Acquisition Loans and to fund a cash
collateral account to be held by Agent to secure Borrower's payment
obligations not yet due in respect of Letters of Credit, all as may be
designated by Borrower, provided, however, that any designation by Borrower
under this Section 2.9(a)(ii)(G) shall be communicated in a notice provided
contemporaneously with any such payment and, provided further, that if
Borrower elects to prepay the Long-term Acquisition Loans or to fund a cash
collateral account to secure its payment obligations not yet due in respect
of Letters of Credit, Borrower must elect both to prepay the Long-term
Acquisition Loans and to fund such cash collateral account in the same
proportion that the then outstanding principal balance of the Long-term
Acquisition Loans bears to the Letter of Credit Usage; in the absence of
any designation by Borrower under this Section 2.9(a)(ii)(G), such payments
shall be applied to prepay the Revolving, Operating, Short-term Acquisition
and Long-term Acquisition Loans and to fund a cash collateral account to be
held by Agent to secure Borrower's payment obligations not yet due in
respect of Letters of Credit proportionally to the then outstanding
principal balances of the Revolving, Operating, Short-term Acquisition and
Long-term Acquisition Loans and the Letter of Credit Usage;
(H) Eighth, to fund a cash collateral account to be held by Agent to secure
Borrower's payment obligations not yet due in respect of Drafts in
proportion to the then outstanding Acceptance Advances; and
(I) Ninth, if all amounts due to Lenders, any Seafirst Affiliate and Agent
in respect of the Revolving Loans, Operating Loans, Short-term Acquisition
Loans, Long-term Acquisition Loans, Drafts, and Letters of Credit have been
paid in full, all such Loans have been fully repaid, and an amount equal to
the sum of the then-outstanding Acceptance Advances and Letter of Credit
Usage is held by Agent as cash collateral to secure Borrower's obligations
in respect of Drafts and Letters of Credit, Agent shall immediately
transfer amounts remaining, if any, to U.S. Bank for application pursuant
to Section 2.9(a)(i).
(iii) Notwithstanding anything herein to the contrary, if after applying
such payment no Event of Default or Incipient Payment Default shall have
occurred and be continuing, the net proceeds received by the Borrower from
the sale of any trade receivables (other than sales made in the ordinary
course of Borrower's business) shall be paid to Agent upon receipt and
applied first as if Section 2.9(a)(ii) (other than subsection I thereof)
applied and as if there were no expenses, fees, indemnities, interest, or
principal due in respect of the Operating or Revolving Loans, no
outstanding principal balances of the Operating or Revolving Loans, and no
outstanding Acceptance Advances. The balance of such proceeds, if any,
shall then be applied in accordance with Section 2.9(a)(ii).
(b) Payments after Default.
Any payment made by Borrower or received or obtained for
Borrower's account hereunder (whether received by any Lender or Agent)
shall be applied as follows if after applying such payment an Event of
Default or Incipient Payment Default shall have occurred and be continuing:
(i) As used in this Section 2.9(b) the Revolving Commitments, the Operating
Commitments, the Short-term Acquisition Commitments, the Long-term
Commitments, the Overnight Commitment and the Letter of Credit Commitment
shall each be referred to as a "Line of Credit" and together may sometimes
be referred to as the "Commitments." Each Line of Credit will be assigned a
percentage (such Line of Credit's "Default Payment Percentage") which shall
be a fraction (expressed as a decimal) for which the numerator is the sum
of (A) all fees, expenses, indemnities and interest accrued but unpaid
(whether or not then due) under or in respect of such Line of Credit as of
the date on which the payment which is to be applied was first received and
(B) (1) in the case of all Lines of Credit other than the Operating Line of
Credit and the Letter of Credit Line of Credit, the then outstanding
principal balance for all Loans made under such Line of Credit; (2) in the
case of the Operating Line of Credit, the sum of the then outstanding
principal balance for all Operating Loans and the then outstanding
Acceptance Advances; or (3) in the case of the Letter of Credit Line of
Credit, the then outstanding Letter of Credit Usage, and the denominator is
the sum of (A) all fees, expenses, indemnities and interest accrued but
unpaid (whether or not then due) under the Loan Documents through such date
and (B) the sum of the then outstanding principal balance for all Loans,
the then outstanding Acceptance Advances and the then outstanding Letter of
Credit Usage. For purposes of this Section 2.9(b)(i), fees, expenses, and
indemnities which are incurred in respect of the Drafts shall be deemed to
have been incurred in respect of the Operating Line of Credit. For purposes
of this Section 2.9(b), fees, expenses and indemnities which are not
incurred in respect of any one Line of Credit or which are incurred in
respect of more than one Line of Credit, shall be deemed to have been
incurred in respect of the Short-term Acquisition Line of Credit.
(ii) A portion of each payment equal to the product of the Line of Credit's
Default Payment Percentage and the total amount of the payment made shall
be applied to the Indebtedness incurred in respect of such Line of Credit
in the following order of priority:
(A) First, to expenses and indemnities accrued thereunder;
(B) Second, to fees due in respect thereof;
(C) Third, to interest due on any Loans made thereunder;
(D) Fourth, to repay the principal then due in respect of any Loans made
thereunder;
(E) Fifth, to pay all amounts due in respect of any Draft or Letter of
Credit;
(F) Sixth, to prepay principal of such of the Loans as are made thereunder
and as are selected by the Majority Lenders for payment or, in the case of
Overnight Loans, as are selected by U.S. Bank for payment; and
(G) Seventh, to fund a cash collateral account to be held by Agent to
secure such of Borrower's payment obligations not yet due in respect of
Drafts and Letters of Credit accepted or issued thereunder.
For purposes of this Section 2.9(b)(ii), Drafts shall be deemed to have
been accepted under the Operating Line of Credit.
(iii) Lenders each agree to immediately advise Agent as to any payment
received from Borrower or for Borrower's account and, if after applying
such payment an Event of Default or Incipient Payment Default shall have
occurred and be continuing, to immediately disburse such payment (or
portions thereof) to the other Lenders in accordance with instructions
received from Agent, which instructions shall be drawn to result in an
application of proceeds as herein provided for.
(c) Setoffs.
If any Lender shall obtain any payment for Borrower's
account through the exercise of any right of counterclaim, setoff, banker's
lien or similar rights, in excess of that portion of the payment to which
it would otherwise be entitled to receive pursuant to the terms of Sections
2.9(a), 2.9(b), and 2.9(d) hereof, such Lender shall forthwith purchase
from the other Lenders such participations in the Loans (or where
applicable, the Drafts and Letters of Credit) made by them as shall be
necessary to cause such purchasing Lender to share the excess payment with
them in the same proportion as such payment would have been shared had it
been received as a voluntary payment from Borrower pursuant to the terms of
Section 2.9(a) or (b) as the case may be. If any of such excess payment is
afterwards recovered from such purchasing Lender, the purchase of the
participations shall be rescinded and the purchase price restored, without
interest, to the extent of such recovery. Borrower authorizes the purchase
of such participations and agrees that any Lender so purchasing a
participation from another Lender may exercise all of its rights to payment
(including the right of setoff) with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of
such participation.
(d) General Provisions.
Where, pursuant to the Sections 2.9(a) and 2.9(b) hereof,
amounts are to be applied to Borrower's obligations to pay fees, interest,
principal in respect of any particular Loan, or amounts outstanding in
respect of Drafts, the amount to be so applied shall be applied to
Borrower's obligations and disbursed to the Lenders pro rata in the same
proportion that their respective Commitments bear to the sum of all
Commitments for the applicable Line of Credit, and Agent will remit such
amounts to the Lenders promptly upon the receipt thereof. Amounts to be
applied to Borrower's obligations in respect of Letters of Credit, however,
shall be disbursed to Seafirst for application in accordance with Article 4
hereof. Whenever pursuant to the terms of Section 2.9(a) or (b) hereof, the
Agent or any Lender is authorized to elect particular loans for prepayment,
it shall, to the extent consistent with the foregoing order of priority
elect to cause Loans accruing interest at the Prime Rate and the U.S. Bank
Prime Rate to be prepaid prior to the prepayment of any other Loans.
Section 2.10 Fees.
(a) Agent's Fee.
Borrower promises to pay to Agent an agent's fee as
agreed in writing between Agent and Borrower, in advance, throughout the
term of this Agreement payable as of July 31, 1996 and upon each July 31 of
each year thereafter which fee shall be solely for Agent's account and
shall not be shared with the Lenders. All such fees shall be fully earned
when due and nonrefundable, in whole or in part, when paid.
(b) Certain Commitment Fees.
The Borrower agrees to pay to the Agent, for the account
of the Lenders the following commitment fees:
(i) Revolving Line of Credit. From the date hereof until the Long-term
Maturity Date, a commitment fee shall be computed daily at the rate of 1/4
of 1% per annum on the unused portion of the Revolving Commitments;
(ii) Operating Line of Credit. From the date hereof until the Short-term
Maturity Date, a commitment fee shall be computed daily at the rate of 1/4
of 1% per annum on an amount equal to the unused portion of the Operating
Commitments less the Acceptance Advances;
(iii) Short-term Acquisition Line of Credit. From the date hereof until the
Short-term Acquisition Line Maturity Date, a commitment fee shall be
computed daily at the rate of 1/4 of 1% per annum on the unused portion of
the Short-term Acquisition Commitments; and
(iv) Long-term Acquisition Line of Credit. From the date hereof until the
Long-term Acquisition Line Maturity Date, a commitment fee shall be
computed daily at the rate of 1/4 of 1% per annum on the unused portion of
the Long-term Acquisition Commitments.
(c) U.S. Bank Commitment Fees.
From the date hereof until the Short-term Maturity Date,
a commitment fee shall be computed daily at the rate of 1/4 of 1% per annum
on the difference between the Overnight Commitment and the then outstanding
principal balance of the Overnight Loans and paid to U.S. Bank.
(d) Seafirst Commitment Fees.
From the date hereof until the Long-term Maturity Date, a
commitment fee shall be computed daily at the rate of 1/4 of 1% per annum
on the difference between the Letter of Credit Commitment and the then
outstanding Letter of Credit Usage and paid to Agent for the account of
Seafirst.
(e) Payment of Commitment Fees.
Commitment fees payable under Section 2.10(b), (c) and
(d) shall commence accruing as of the date hereof and shall be payable in
arrears at quarterly intervals commencing on July 1, 1996, and payable on
the first Business Day of each October, January, April and July thereafter,
except that accrued commitment fees shall be payable on any applicable
Maturity Date and on demand after the occurrence of an Event of Default.
Computations of commitment fees shall be made on the basis of a year of
three hundred sixty (360) days for the actual number of days (including the
first day but excluding the last day) occurring in the period for which
such fees are payable. Section 2.11 Reduction in Commitments.
(a) Voluntary Reduction in Commitments.
Upon sixty (60) days' advance written notice by Borrower
to Agent and all of the Lenders, Borrower may reduce the Lenders' Revolving
Commitments, Operating Commitments, Short-term Acquisition Commitments,
Long-term Acquisition Commitments, Overnight Commitment or Letter of Credit
Commitment provided, that after giving effect to such reduction, the
outstanding principal balance of the corresponding Loans does not exceed
the Commitments being reduced and provided further that after giving effect
to such reduction, the sum of the outstanding principal balance of the
Operating Loans and the Acceptance Advances does not exceed the Operating
Commitments and provided further that after giving effect to such
reduction, the then outstanding Letter of Credit Usage does not exceed the
Letter of Credit Commitment and provided further that neither the Long-term
Acquisition Commitment nor the Letter of Credit Commitment may be
voluntarily reduced under this Section 2.11(a) unless both such Commitments
are fully and simultaneously terminated. Any reduction in the Commitments
for any line of credit hereunder shall be in an amount not less than an
amount equal to the lesser of (a) One Million Dollars ($1,000,000), and (b)
the applicable Commitments then in effect, and shall permanently reduce
each Lender's corresponding Commitment, so that, after giving effect to
such reduction, each Lender's pro rata share of the Commitments for such
line of credit will be unchanged.
(b) Automatic Reduction in Commitments.
The Short-term and Long-term Acquisition Commitments
shall each be automatically reduced, on a dollar-for-dollar basis, with
each payment or prepayment of the outstanding principal balance of the
Short-term and Long-term Acquisition Loans, respectively. Each reduction of
the Long-term Acquisition Commitment under this Section 2.11(b) shall also
result in an automatic reduction of the Letter of Credit Commitment on a
nine dollar-to-one dollar basis. Any reduction in the Commitments for any
line of credit hereunder shall permanently reduce each Lender's
corresponding Commitment, so that, after giving effect to such reduction,
each Lender's pro rata share of the Commitments for such line of credit
will be unchanged.
Article 3
BANKERS' ACCEPTANCES
Section 3.1 Bankers' Acceptances.
The Borrower may present drafts drawn by it on the Lenders to the
Lenders for acceptance and discount in accordance with the terms and
conditions of this Article 3.
Section 3.2 Manner of Presenting Drafts.
(a) From time to time, the Borrower may request that the Lenders accept and
discount drafts which the Borrower proposes to present under this
Agreement. Such request will be made by delivering a written request or
making an oral request (an "Acceptance Request") to the Agent on a Business
Day not later than 9:00 a.m. (Seattle time) on the date on which the
Borrower proposes to present its draft for acceptance and discount,
provided that, any Acceptance Request given orally shall be confirmed by
the Borrower in a writing delivered to the Agent not later than 11:00 A.M.
(Seattle time) on the date such oral Acceptance Request is made. Each
Acceptance Request shall be deemed to constitute a representation and
warranty by the Borrower that as of the date of such Request statements set
forth in Article 6 hereof are true and correct (and apply to the drafts and
underlying transactions described in such Request) and that no Default or
Event of Default has occurred and is continuing. Each Acceptance Request
shall identify the drafts for which a quote is requested by specifying the
total face amount for all such drafts, the proposed date of presentment and
the maturity of such drafts and the nature of the underlying transaction(s)
relating to such drafts. Each draft identified in an Acceptance Request
shall (i) be scheduled for presentment on a Business Day prior to the
Short-term Maturity Date; (ii) shall be in a face amount such that after
giving effect to the acceptance of all drafts identified in the Acceptance
Request (and in any other Acceptance Request given at the same time), the
sum of the then-outstanding principal balance of the Operating Loans and
the then-outstanding Acceptance Advances will not exceed the total of the
Lenders' Operating Commitments; (iii) shall have a maturity of not more
than ninety-two (92) days and, in any event, shall mature not later than
the Short-term Maturity Date; and (iv) shall be an Eligible Draft. The
aggregate of all drafts identified in any one Acceptance Request shall be
in a face amount which is an integral multiple of One Million Dollars
($1,000,000) and not less than Three Million Dollars ($3,000,000). Drafts
identified in any one Acceptance Request shall be related to the same
transaction, shall have the same maturity date and be shall be scheduled
for presentment to each Lender in the same proportion that such Lenders'
Operating Commitment bears to the aggregate Operating Commitment for all
Lenders.
(b) On receipt of any Acceptance Request, the Agent shall promptly notify
each Lender by telephone, telex or facsimile of the scheduled date for
presentment of the drafts and the amount thereof. Upon fulfillment to each
Lender's satisfaction of the applicable conditions set forth in this
Article 3 and Article 5 of this Agreement, each Lender shall before 12:00
noon (Seattle time) on the date of the scheduled presentment accept each
draft presented to it which complies with the terms of Section 3.2(a)
hereof, discount such draft in the manner hereinafter provided for, and pay
the net proceeds thereof in immediately available funds to the Agent at its
Commercial Loan Processing Center, Seattle, Washington. Upon fulfillment to
the Agent's satisfaction of the applicable conditions set forth in this
Article 3 and Article 5 of this Agreement, and after receipt by the Agent
of such funds, the Agent will promptly make such funds available to the
Borrower at Borrower's general checking account maintained at the Main
Branch of U. S. Bank in Portland, Oregon or at such other place as may be
designated by Borrower in a writing delivered to Agent.
(c) Unless the Agent shall have received notice from a Lender prior to
12:00 noon (Seattle time) on the date of any scheduled presentment that
such Lender will not accept and discount the draft(s) presented to it or
will not make available to the Agent the discounted proceeds thereof, the
Agent may assume that such Lender has made such funds available to the
Agent on the date such draft is scheduled for presentment in accordance
with Section 3.2(b) hereof and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such
net proceeds available to the Agent, such Lender and the Borrower, jointly
and severally, agree to pay to the Agent forthwith on demand such
corresponding amount, together with interest thereon for each day from the
date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (a) in the case of the Borrower, the
Prime Rate and (b) in the case of such Lender, the Federal Funds Rate. Any
such repayment by the Borrower shall be without prejudice to any rights it
may have against the Lender that has failed to accept and discount the
presented draft or that has failed to make the net proceeds thereof
available to Agent.
(d) Any draft accepted and discounted by a Lender pursuant to the terms
hereof is referred to herein as a "Draft." Each Lender may retain or
rediscount any such Draft, at its sole election, and any amounts received
by such Lender upon rediscounting shall be solely for the account of such
Lender.
(e) In order to facilitate the acceptance and discounting of drafts, the
Borrower may from time to time deliver to each Lender a supply of drafts
executed by the Borrower as drawer and designating the Lender as drawee and
payee, but with the face amount and the maturity left blank. Each Lender
agrees to hold the drafts delivered to it pursuant to the terms hereof and
in so doing give such drafts the same physical care and provide the same
safeguards as it affords other similar property. On each occasion on which
the Borrower elects to present a draft to a Lender for acceptance and
discount pursuant to subsection 3.2(a) above, such Lender shall fill in the
date, the face amount and the maturity of such draft in accordance with the
corresponding Acceptance Request and such draft shall be deemed presented,
accepted and discounted on such date.
Section 3.3 Discounting of Drafts.
On the date scheduled for presentment and acceptance of any draft
hereunder, and upon fulfillment to each Lender's satisfaction of the
applicable conditions set forth in this Article 3 and Article 5 of this
Agreement, such Lender shall discount the presented draft as follows: The
amount of such discount shall be the product of (a) the face amount of the
presented draft; (b) the sum of (i) seventy-five (75) basis points
(three-fourths of one percent) and the Applicable Acceptance Rate; and (c)
a fraction, the numerator of which is the number of days (including the
first day but excluding the last day) in the period commencing on the date
such draft is to be accepted and the date on which such draft matures, and
the denominator of which is three hundred sixty (360). As used herein,
"Applicable Acceptance Rate" shall mean the per annum rate equal to the
highest of the rates quoted by each Lender to the Agent on the date such
draft is to be accepted as such Lender's rate for discounting an eligible
banker's acceptance. After soliciting such quotes from the Lenders, Agent
shall promptly advise each Lender of the "Applicable Acceptance Rate." Each
Lender shall retain for its own account the amount of the discount
determined in accordance with the terms hereof and shall pay an amount
equal to the face amount of the presented draft less such discount to the
Agent for disbursal to the Borrower in accordance with the terms hereof.
Section 3.4 Indemnification; Increased Costs.
In the event that any Draft for any reason whatsoever is deemed by
any Lender not to be an Eligible Draft, the Borrower agrees to indemnify
such Lender on demand for any and all additional costs, expenses, or
damages incurred by such Lender, directly or indirectly, arising out of
such ineligibility, including, without limitation, any costs of maintaining
reserves in respect of such Draft, any premium rates imposed by the Federal
Deposit Insurance Corporation and any costs or expenses arising in any
manner from the lack of liquidity of such Draft. A certificate as to such
additional amounts submitted to the Borrower by any Lender shall be final,
conclusive, and binding, absent manifest error.
If at any time after the date hereof the introduction of or any
change in applicable law, rule, or regulation or in the interpretation or
the administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with
any requests directed by any such Governmental Authority (whether or not
having the force of law) shall, with respect to any Draft subject such
Lender to any Tax or impose, modify, or deem applicable any reserve,
special deposit, or similar requirements against assets of, deposits with
or for the account of, credit extended by the Lender or shall impose on the
Lender any other conditions affecting Drafts and the result of any of the
foregoing is to increase the cost to the Lender of accepting, discounting,
rediscounting or holding Drafts or to reduce the amount of any sum received
or receivable by the Lender hereunder with respect to the Drafts, then,
upon demand by such Lender, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate the Lender for such
increased cost or reduction. A certificate submitted to the Borrower by the
Lender setting forth the basis for the determination of such additional
amount or amounts necessary to compensate the Lender as aforesaid, shall be
conclusive evidence of the amounts due hereunder, absent manifest error.
The Borrower agrees to indemnify and hold the Agent and Lenders
harmless from and against any and all (a) Taxes and other fees payable in
connection with Drafts or the provisions of this Agreement relating to the
acceptance and discounting of drafts, and (b) any and all actions, claims,
damages, losses, liabilities, fines, penalties, costs, and expenses of
every nature, including reasonable attorney's fees, (i) suffered or
incurred by the Agent or any Lender by reason of any Lender's having
accepted, discounted or rediscounted Drafts, or (ii) suffered or incurred
by the Agent or any Lender in connection with the Agent's or Lender's
exercising or preserving any of its rights hereunder, or (iii) otherwise
arising out of or relating to this Article 3 or any Drafts; provided,
however, said indemnification shall not apply to the extent that any such
action, claim, damage, loss, liability, fine, penalty, cost, or expense
arises out of or is based solely upon the willful misconduct or gross
negligence of the party seeking indemnity hereunder.
Any Lender requesting any indemnity or other payment from the
Borrower under this Section 3.4 shall simultaneously provide a copy of such
request to Agent.
Section 3.5 Payment of Drafts by Borrower.
The Borrower agrees to pay to the Agent, the face amount of each
Draft in immediately available funds at the Agent's Commercial Loan
Processing Center not later than 10:30 a.m. (Seattle time) on the date of
such Draft's maturity; provided, that, pursuant to the terms of Section
9.2, following the occurrence of an Event of Default, the face amount of
each Draft may become immediately due and payable. If prior to the
occurrence of an Event of Default, Borrower fails to pay any Drafts on
their maturity date, such failure shall be deemed to be a Notice of
Borrowing for a Operating Loans in the amount of all such Drafts. If the
Borrower shall default in its obligations to pay a Draft at maturity (or
upon an earlier acceleration) either directly or with the proceeds of
Operating Loans deemed requested as of such maturity date, interest shall
accrue on the unpaid face amount thereof at a per annum rate equal to two
(2) percentage points above the Prime Rate changing as such Prime Rate
changes from the maturity date (or such earlier date as the face amount may
become due and payable) until payment in full by the Borrower. Interest on
such unpaid amounts shall be payable on demand.
Section 3.6 Compliance With Governmental Regulations; Insurance.
The Borrower agrees to procure promptly any essential import,
export or other license and in all other material respects comply with all
laws, statutes, rules, regulations and orders of any Governmental Authority
with respect to the import, export, shipping, financing or warehousing of
goods as part of any transaction relating to any Draft. The Borrower
furthermore agrees to pay all Taxes, shipping, warehousing, cartage or
other charges or expenses upon or with regard to such goods involved in any
such transaction and should the Agent, any Lender or any of their
respective correspondents pay for, or incur any liability in connection
with, any above-mentioned shipping or other license or any insurance, tax,
shipping, warehousing, cartage or other charges, the Borrower will satisfy
the same or reimburse the Agent, such Lender or their correspondents, as
the case may be, promptly therefor upon demand. From time to time, upon
request by the Agent or any Lender, the Borrower shall provide the Agent
with evidence reasonably satisfactory to the Agent of its compliance with
the terms of this Section 3.6.
Section 3.7 Guaranty of Documents and Instruments.
The Borrower agrees to furnish the Agent and the Lenders with such
documents and other information as the Agent or any Lender may from time to
time reasonably request relating to drafts presented for acceptance and
discount and the related underlying import, export or distribution
transactions. The Borrower guarantees the existence, genuineness, validity,
correctness and sufficiency of all documents and other instruments
(including but not limited to any documents of title and insurance and
governmental certificates) provided or exhibited to the Agent or any Lender
and represents that such documents and the property represented thereby are
free from all Liens. The Borrower agrees that it will take all necessary or
proper action to meet all legal and other conditions and will warrant and
defend same against the lawful claims and demands of all persons.
Section 3.8 Revocation by Operation of Law.
If this Agreement or any provisions herein relating to the
acceptance and discounting of drafts should be terminated or revoked by
operation of law, the Borrower will indemnify and hold the Agent and each
Lender harmless from any loss which may be suffered or incurred by the
Agent or any Lender in accepting, discounting or rediscounting any Draft or
otherwise acting hereunder but nothing in this Section 3.8 shall require
any Lender to accept, discount or rediscount any draft contrary to any
applicable laws.
Section 3.9 Relationship to Prior Credit Agreement.
Any draft accepted by a Lender under the Prior Credit Agreement
which remains outstanding on the effective date of this Agreement shall be
deemed to be a "Draft" accepted and discounted hereunder.
Article 4
LETTERS OF CREDIT
Section 4.1 Letters of Credit.
Upon Borrower's request, Seafirst shall issue or shall cause a
Seafirst Affiliate to issue one or more standby letters of credit for the
Borrower's account in accordance with the terms and conditions of this
Article 4.
Section 4.2 Manner of Requesting Letters of Credit.
(a) From time to time, the Borrower may request that Seafirst issue standby
letters of credit for Borrower's account or extend or renew any existing
Letters of Credit. Such request will be made by delivering a written
request for the issuance, extension or renewal of such a letter of credit
to Seafirst not later than 12:00 noon (Seattle time) one Business Day prior
to the date a new letter of credit is to be issued or an existing Letter of
Credit is scheduled to be renewed. Each such request shall be deemed to
constitute a representation and warranty by the Borrower that as of the
date of such request, statements set forth in Article 6 hereof are true and
correct and that no Default or Event of Default has occurred and is
continuing. Each such request shall specify the face amount of the
requested letter of credit, the proposed date of expiration for such letter
of credit, the name of the intended beneficiary thereof, and whether such
letter of credit is an extension or renewal of a Letter of Credit.
(b) Each letter of credit requested hereunder shall be in a face amount
such that after issuance of such letter of credit, the Letter of Credit
Usage does not exceed One Million Dollars ($1,000,000) or such lower amount
as is determined pursuant to Section 2.11 hereof (Seafirst's "Letter of
Credit Commitment"). In addition, each letter of credit requested hereunder
(i) shall be in a face amount which is an integral multiple of Fifty
Thousand Dollars ($50,000) and not less than One Hundred Thousand Dollars
($100,000); and (ii) and unless otherwise acceptable to Seafirst shall have
an expiration date of not later than the earlier of the first anniversary
of the date on which such letter of credit is to be issued or the Long-term
Acquisition Line Maturity Date.
(c) At the request of Seafirst, the Borrower shall execute a letter of
credit application and reimbursement agreement ("Reimbursement
Agreements"), in the standard form then used by Seafirst or any Seafirst
Affiliate, in respect of each letter of credit requested hereunder.
(d) Subject to the satisfaction of the conditions precedent set forth in
Article 5 and the Borrower's compliance with the terms of this Section 4.2,
Seafirst shall issue and deliver the requested letter of credit or shall
cause a Seafirst Affiliate to issue and deliver the requested letter of
credit to the Borrower or to the Borrower's designated beneficiary at such
address as the Borrower may specify. New Letters of Credit and extensions
or renewals of any existing Letters of Credit shall contain terms and
conditions customarily included in Seafirst's or any Seafirst Affiliate's
letters of credit and shall otherwise be in a form acceptable to Seafirst.
For each such Letter of Credit, Borrower shall pay to Seafirst a letter of
credit fee on the date such Letter of Credit is issued in an amount equal
to three-fourths of one percent (.75%) of the face amount thereof.
(e) In the event of any conflict between the terms of any Reimbursement
Agreement and the terms of this Agreement, the terms of this Agreement
shall control; provided, however, with respect to letters of credit issued
by any Seafirst Affiliate, the terms of the Reimbursement Agreement shall
control.
Section 4.3 Indemnification; Increased Costs.
The Borrower agrees to indemnify Seafirst and the Seafirst
Affiliates on demand for any and all additional costs, expenses, or damages
incurred by Seafirst or any Seafirst Affiliate, directly or indirectly,
arising out of the issuance of any Letter of Credit, including, without
limitation, any costs of maintaining reserves in respect thereof and any
premium rates imposed by the Federal Deposit Insurance Corporation in
connection therewith. A certificate as to such additional amounts submitted
to the Borrower by Seafirst shall be final, conclusive, and binding, absent
manifest error.
If at any time after the date hereof the introduction of or any
change in applicable law, rule, or regulation or in the interpretation or
the administration thereof by any Government Authority charged with the
interpretation or administration thereof, or compliance by Seafirst or any
Seafirst Affiliate with any requests directed by any such Government
Authority (whether or not having the force of law) shall, with respect to
any Letter of Credit subject Seafirst or any Seafirst Affiliate to any Tax
or impose, modify, or deem applicable any reserve, special deposit, or
similar requirements against assets of, deposits with or for the account
of, credit extended by Seafirst or any Seafirst Affiliate or shall impose
on Seafirst or any Seafirst Affiliate any other conditions affecting the
Letters of Credit and the result of any of the foregoing is to increase the
cost to Seafirst or any Seafirst Affiliate of issuing a Letter of Credit or
to reduce the amount of any sum received or receivable by Seafirst or any
Seafirst Affiliate hereunder with respect to the Letters of Credit, then,
upon demand by Seafirst, the Borrower shall pay to Seafirst such additional
amount or amounts as will compensate Seafirst or such Seafirst Affiliate
for such increased cost or reduction. A certificate submitted to the
Borrower by Seafirst setting forth the basis for the determination of such
additional amount or amounts shall be final, conclusive, and binding,
absent manifest error.
The borrower agrees to indemnify and hold Seafirst and each
Seafirst Affiliate (an "Indemnitee") harmless from and against any and all
(a) Taxes and other fees payable in connection with Letters of Credit or
the provisions of this Agreement relating thereto, and (b) any and all
actions, claims, damages, losses, liabilities, fines, penalties, costs, and
expenses of every nature, including reasonable attorney's fees, suffered or
incurred by the Indemnitee otherwise arising out of or relating to this
Article 4, or any Letter of Credit; provided, however, said indemnification
shall not apply to the extent that any such action, claim, damage, loss,
liability, fine, penalty, cost, or expense arises solely out of or is based
solely upon the Indemnitee's willful misconduct or gross negligence.
Section 4.4 Payment by Borrower.
The Borrower agrees to fully reimburse Seafirst and all Seafirst
Affiliates for all amounts paid under any Letter of Credit together with
interest thereon at the Prime Rate from the date such payment is made until
the date Seafirst notifies the Borrower that such payment was made. Such
reimbursement shall be made in immediately available funds at Seafirst's
Commercial Loan Processing Center not later than 12:00 noon (Seattle time)
on the date the Borrower is first notified by Seafirst that payment has
been made under the Letter of Credit; provided, that, if Seafirst so elects
pursuant to the terms of Section 9.2, following the occurrence of an Event
of Default, the face amount of each Letter of Credit shall become
immediately due and payable. If the Borrower shall default in its
obligations to reimburse Seafirst or any Seafirst Affiliate or to make any
other payment required hereunder, interest shall accrue on the unpaid
amount thereof at the Default Rate from the date such amount becomes due
and payable until payment in full by the Borrower. Interest on unpaid
amounts shall be calculated on the basis of a year of three hundred sixty
(360) days and shall be payable on demand.
Section 4.5 Relationship to Prior Credit Agreement.
All letters of credit issued by Seafirst or any Seafirst Affiliate
in response to requests for such issuance received under the Prior Credit
Agreement which are issued and outstanding as of the effective date of this
Agreement, shall be deemed to be Letters of Credit issued hereunder.
Article 5
CONDITIONS
The obligation of any Lender to make any Loan or accept and
discount any draft presented by the Borrower, the obligation of the Agent
to disburse the Loan proceeds and the obligation of Seafirst to issue or to
cause a Seafirst Affiliate to issue a Letter of Credit are subject to the
fulfillment of the following conditions:
Section 5.1 Notice of Borrowing, Promissory Notes, Etc.
In respect of any Loan (other than an Overnight Loan), the Agent
shall have received the Notice of Borrowing and Lenders shall have received
their respective Notes each duly executed and delivered by the Borrower; in
respect of any Overnight Loan, U.S. Bank shall have received the Notice of
Borrowing and the Overnight Note each duly executed and delivered by the
Borrower; in respect of any request for acceptance of a draft, the Agent
shall have received an Acceptance Request duly executed and delivered by
the Borrower, and each Lender shall have received a duly executed draft
complying with the terms of Section 3.2; and in respect of any request for
the issuance of a letter of credit, Seafirst shall have received a written
request for the issuance thereof complying with the terms of Section 4.2.
Section 5.2 Corporate Authority.
The Agent shall have received in form and substance satisfactory
to it certificates of good standing and a certified copy of a resolution
adopted by the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement and the other Loan
Documents, together with evidence of the authority and specimen signatures
of the persons who have signed this Agreement and such other Loan Documents
and such other evidence of corporate authority as the Agent shall
reasonably require.
Section 5.3 Legal Opinion.
The Agent shall have received a written legal opinion addressed to
the Agent and the Lenders substantially in the form attached hereto as
Exhibit F, of counsel for the Borrower, who shall be selected by the
Borrower and approved by the Agent.
Section 5.4 Defaults, Etc.
No Default or Event of Default shall have occurred and be
continuing or will have occurred as a result of the making of the requested
Loan, the acceptance and discount of the presented draft or the issuance of
the requested letter of credit; and the representations and warranties of
the Borrower in Article 6 shall be true on and as of the date such Loan is
made, such draft is presented, or such Letter of Credit is issued with the
same force and effect as if made on and as of such date.
Section 5.5 Payment of All Accrued Interest and Fees.
On the date of this Agreement, the Borrower shall have paid all
interest and commitment fees which accrued prior to the date hereof
pursuant to the terms of the Prior Credit Agreement.
Section 5.6 Other Information.
Agent and Lenders shall have received such other statements,
opinions, certificates, documents and information with respect to matters
contemplated by this Agreement as Agent or any Lender may reasonably
request.
Article 6
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders
as follows:
Section 6.1 Corporate Existence and Power.
The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Oregon. The Borrower is
duly qualified to do business in each other jurisdiction where the nature
of its activities or the ownership of its properties requires such
qualification, except to the extent that failure to be so qualified does
not have a material adverse effect on its business, operations or financial
condition. The Borrower has full corporate power, authority and legal right
to carry on its business as presently conducted, to own and operate its
properties and assets, and to execute, deliver and perform this Agreement
and the other Loan Documents.
Section 6.2 Corporate Authorization.
The execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents, any borrowing hereunder or
thereunder, the presentment of any drafts for acceptance hereunder, and the
request for issuance of letters of credit hereunder have been duly
authorized by all necessary corporate action of the Borrower, do not
require any shareholder approval or the approval or consent of any trustee
or the holders of any Indebtedness of the Borrower, except such as have
been obtained (certified copies thereof having been delivered to the
Agent), do not contravene any law, regulation, rule or order binding on it
or its Articles of Incorporation or Bylaws and do not contravene the
provisions of or constitute a default under any indenture, mortgage,
contract or other agreement or instrument to which the Borrower is a party
or by which the Borrower or any of its properties may be bound or affected.
Section 6.3 Government Approvals, Etc.
No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by the
Borrower of this Agreement or the other Loan Documents or in connection
with any of the transactions contemplated hereby or thereby, except such as
have been heretofore obtained and are in full force and effect (certified
copies thereof having been delivered to the Agent).
Section 6.4 Binding Obligations, Etc.
This Agreement has been duly executed and delivered by the
Borrower and constitutes, and the other Loan Documents when duly executed
and delivered will constitute, the legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally. Section 6.5 Litigation.
Except as reflected in the financial statements referred to in
Section 6.7 or otherwise disclosed to the Agent in writing prior to the
date of this Agreement, there are no actions, proceedings, investigations,
or claims against or affecting the Borrower now pending before any court,
arbitrator or Governmental Authority (nor to the knowledge of the Borrower
has any thereof been threatened nor does any basis exist therefor) which if
determined adversely to the Borrower would be likely to have a material
adverse effect on the business, operations or financial condition of the
Borrower, or which if determined adversely to the Borrower would be likely
to result in a judgment or order against the Borrower for more than One
Million Dollars ($1,000,000) in the aggregate.
Section 6.6 Indebtedness.
Borrower is not now in default in the payment of any Indebtedness
in an aggregate amount exceeding One Million Dollars ($1,000,000).
Section 6.7 Financial Condition.
The balance sheet of the Borrower as at September 29, 1995 and as
at December 29, 1995, and the related statements of income and retained
earnings of the Borrower for the fiscal year and fiscal quarter then ended,
copies of which have been furnished to the Lenders, fairly present the
financial condition of the Borrower as at such date and the results of
operations of the Borrower for the period then ended, all in accordance
with generally accepted accounting principles consistently applied. The
Borrower did not have on such date any material contingent liabilities,
unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected
or provided for in that balance sheet and in the notes to those financial
statements and since December 29, 1995 there has been no material adverse
change in the business, operations or financial condition of the Borrower.
Section 6.8 Title and Liens.
The Borrower has good and marketable title to each of the
properties and assets reflected in its balance sheet referred to in Section
6.7 (except such as have been since sold or otherwise disposed of in the
ordinary course of business). No assets or revenues of the Borrower are
subject to any Lien except as permitted by this Agreement. All properties
of the Borrower and its use thereof comply with applicable zoning and use
restrictions.
Section 6.9 Taxes.
The Borrower has filed all tax returns and reports required of it,
has paid all Taxes which are shown to be due and payable on such returns
and reports, and has provided adequate reserves for payment of any Tax
whose payment is being contested. The charges, accruals and reserves on the
books of the Borrower in respect of Taxes for all fiscal periods to date
are accurate in all material respects and there are no material questions
or disputes between the Borrower and any Governmental Authority with
respect to any Taxes except as disclosed in the balance sheet referred to
in Section 6.7 or otherwise disclosed to the Agent in writing prior to the
date of this Agreement.
Section 6.10 Laws, Orders, Other Agreements.
The Borrower is not in violation of or subject to any contingent
liability on account of any laws, statutes, rules, regulations or orders of
any Governmental Authority, except for violations which in the aggregate do
not and will not have a material adverse effect on the business, operations
or financial condition of the Borrower. The Borrower is not in material
breach of or default under any agreement to which it is a party or which is
binding on it or any of its assets.
Section 6.11 Federal Reserve Regulations.
The Borrower is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of
purchasing or carrying any margin stock (within the meaning of Federal
Reserve Regulation U), and no part of the proceeds of any Loan or the
proceeds received from the acceptance of any Draft will be used to purchase
or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any other
purpose that violates the applicable provisions of any Federal Reserve
Regulation. The Borrower will furnish to any Lender on request a statement
conforming with the requirements of Regulation U.
Section 6.12 ERISA.
(a) The present value of all benefits vested under all Pension Plans did
not, as of the most recent valuation date of such Pension Plans, exceed the
value of the assets of the Pension Plans allocable to such vested benefits
by an amount which would represent a potential material liability of the
Borrower or affect materially the ability of the Borrower to perform this
Agreement.
(b) To the best of Borrower's knowledge, no Plan or trust created
thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406 or Section
2003(a) of ERISA) which could subject such Plan or any other Plan, any
trust created thereunder, or any trustee or administrator thereof, or any
party dealing with any Plan or any such trust to any material tax or
penalty on prohibited transactions imposed by Section 502 or Section
2003(a) of ERISA.
(c) No Pension Plan or trust has been terminated, and there have been no
"reportable events" as that term is defined in Section 4043 of ERISA since
the effective date of ERISA.
(d) No Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA.
(e) The required allocations and contributions to Pension Plans will not
violate Section 415 of the Code in any material respect.
Section 6.13 Security Offerings.
Neither the Borrower nor anyone acting on its behalf has directly
or indirectly offered any Note or any Draft or similar instrument or
security for sale to any person or solicited from any person any offer to
buy any such instrument or security or approached or negotiated with any
person concerning any such instrument or security in any manner which would
violate any applicable state or federal securities laws, including without
limitation, the Securities Act of 1933, as amended.
Section 6.14 Warranties with Respect to Drafts.
Each draft which the Borrower has identified in an Acceptance
Request (a) will grow out of one or more transactions involving the
importation or exportation of goods; or (b) will grow out of one or more
transactions involving the domestic shipment of goods.
Section 6.15 Further Warranties with Respect to Drafts.
In respect of each draft which the Borrower has identified in an
Acceptance Request (a) completion of each transaction related to such draft
is anticipated to occur on or before the maturity date of such draft, (b)
the maturity of such draft will be consistent with the period usually and
reasonably necessary to finance transactions of such kind, (c) any amounts
received by the Borrower from the Agent in connection with the acceptance
and discount of such draft will be used by the Borrower to finance the
related import, export or distribution transaction, (d) the proceeds of the
related import, export or distribution transaction will be used by the
Borrower to liquidate its obligations to repay the face amount of the draft
on its maturity date, and (e) such draft is an Eligible Draft.
Section 6.16 Acceptances.
No acceptances other than an acceptance of a Draft by a Lender
hereunder have been or shall be outstanding with respect to the goods
covered by or relating to such Draft.
Section 6.17 Patents, Licenses, Franchises.
The Borrower owns or possesses all the patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and
rights with respect to the foregoing necessary to own and operate its
properties and to carry on its business as presently conducted and
presently planned to be conducted without conflict with the rights of
others except as disclosed in writing to the Agent prior to the date
hereof.
Section 6.18 Investment Company; Public Utility Holding Company.
The Borrower is not (a) an "investment company" or a company
"controlled" by an investment company within the meaning of the Investment
Company Act of 1940, as amended; or (b) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
Section 6.19 Environmental and Safety Health Matters.
To the best of Borrower's knowledge, Borrower is in compliance
with all environmental laws and Occupational Safety and Health Laws where
failure to comply could have a material adverse effect on the ability of
Borrower to perform its obligations hereunder or on the business,
operations, or financial condition of the Borrower. Borrower has not
received notice of any claims that it is not in compliance in all material
respects with the environmental laws where failure to comply could have a
material adverse effect on the ability of Borrower to perform its
obligations hereunder or on the business, operations, or financial
condition of the Borrower.
Section 6.20 Reaffirmation.
As of the date of this Agreement all representations and
warranties made or deemed made pursuant to the Prior Credit Agreement were
true and correct on and as of each date when made or deemed made thereunder
and as of the moment immediately prior to this Agreement becoming
effective, no "Default" or "Incipient Default" (as such words were defined
in the Prior Credit Agreement) had occurred and was continuing.
Section 6.21 Representations as a Whole.
This Agreement, the other Loan Documents, the financial statements
referred to in Section 6.7, and all other instruments, documents,
certificates and statements furnished to the Agent or the Lenders by the
Borrower, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements contained herein or therein not misleading.
Article 7
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or there
shall be any outstanding Acceptance Advances or Letter or Credit Usage and,
until payment in full of each Loan and performance of all other obligations
of the Borrower under this Agreement and the other Loan Documents, the
Borrower agrees to do all of the following unless the Agent shall otherwise
consent in writing.
Section 7.1 Preservation of Corporate Existence, Etc.
The Borrower will preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation
and will qualify and remain qualified as a foreign corporation in each
jurisdiction where such qualification is necessary or advisable in view of
its business and operations or the ownership of its properties.
Section 7.2 Keeping of Books and Records; Visitation Rights.
The Borrower will keep adequate records and books of account in
which complete entries will be made, in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Borrower. At any reasonable time and from time to time
Borrower will permit the Agent or any Lender to examine and make copies of
and abstracts from Borrower's records and books and to visit the properties
of Borrower and to discuss the affairs, finances, and accounts of Borrower
with any of its officers or directors.
Section 7.3 Maintenance of Property, Etc.
The Borrower will maintain and preserve all of its properties in
good working order and condition, ordinary wear and tear excepted, and will
from time to time make all needed repairs, renewals or replacements so that
the efficiency of such properties shall be fully maintained and preserved.
Section 7.4 Compliance with Laws, Etc.
The Borrower will comply in all material respects with all laws,
regulations, rules, and orders of Governmental Authorities applicable to
the Borrower or to its operations or property, except any thereof whose
validity is being contested in good faith by appropriate proceedings upon
stay of execution of the enforcement thereof, with provision having been
made to the satisfaction of the Agent for the payment thereof in the event
the contest is determined adversely to the Borrower.
Section 7.5 Other Obligations.
The Borrower will pay and discharge before the same shall become
delinquent (after giving effect to all applicable grace periods) all
Indebtedness, Taxes and other obligations for which the Borrower is liable
or to which its income or property is subject and all claims for labor and
materials or supplies which, if unpaid, might become by law a Lien upon
assets of the Borrower, except any thereof whose validity or amount is
being contested in good faith by the Borrower in appropriate proceedings
upon stay of execution of the enforcement thereof, with provision having
been made to the satisfaction of the Agent for the payment thereof in the
event the contest is determined adversely to the Borrower; and except other
Indebtedness, Taxes, and other obligations which, in the aggregate do not
exceed One Million Dollars ($1,000,000), provided, however, that the
foregoing exceptions to this covenant shall not extend to any obligation of
Borrower identified in Section 8.4 or 9.1(j).
Section 7.6 Insurance.
The Borrower will keep in force upon all of its properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry.
The Borrower will on request furnish to the Agent or any Lender
certificates of insurance or duplicate policies evidencing such coverage.
Section 7.7 Financial Information.
The Borrower will deliver to the Agent and to each Lender:
(a) Annual Audited Financial Statements.
As soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower as of the end of such fiscal
year and the related consolidated statement of income and retained earnings
and statement of changes in financial position of the Borrower for such
year, accompanied by the audit report thereon by independent certified
public accountants selected by the Borrower and reasonably satisfactory to
the Agent (which report shall be prepared in accordance with generally
accepted accounting principles consistently applied and shall not be
qualified by reason of restricted or limited examination of any material
portion of the Borrower's records and shall contain no disclaimer of
opinion or adverse opinion);
(b) Quarterly Unaudited Financial Statements.
As soon as available and in any event within sixty (60)
days after the end of each of the Borrower's first three fiscal quarters,
the unaudited consolidated and consolidating balance sheet and statement of
income and retained earnings of the Borrower as of the end of such fiscal
quarter (including the fiscal year to the end of such fiscal quarter)
accompanied by an officer's certificate of the chief financial officer of
the Borrower that such unaudited consolidated and consolidating balance
sheet and statement of income and retained earnings have been prepared in
accordance with generally accepted accounting principles consistently
applied and present fairly the financial position and the results of
operations of the Borrower as of the end of and for such fiscal quarter and
that since the fiscal year-end report referred to in subsection (a) there
has been no material adverse change in the financial condition or
operations of the Borrower as shown on the balance sheet as of said date;
(c) Quarterly Compliance Certificates.
Within sixty (60) days after the close of each of the
Borrower's first three fiscal quarters and within ninety (90) days after
the close of the Borrower's fourth fiscal quarter, an officer's certificate
signed by the chief financial officer of the Borrower stating that as of
the close of such fiscal year no Default or Event of Default had occurred
and was continuing and setting forth calculations evidencing compliance
with Sections 7.11, 7.12, 7.13, 7.14, 7.15, 8.2 and 8.3 hereof;
(d) Other.
All other statements, reports and other information as
the Agent or any Lender may reasonably request concerning the financial
condition, operations or business affairs of the Borrower.
Section 7.8 Notification.
Promptly after learning thereof, the Borrower shall notify the
Lenders and the Agent of (a) any action, proceeding, investigation or claim
against or affecting the Borrower instituted before any court, arbitrator
or Governmental Authority or, to the Borrower's knowledge threatened to be
instituted, which if determined adversely to the Borrower would be likely
to have a material adverse effect on the business, operations or financial
condition of the Borrower, or to result in a judgment or order against the
Borrower for more than One Million Dollars ($1,000,000); (b) any
substantial dispute between the Borrower and any Governmental Authority;
(c) any labor controversy which has resulted in or, to the Borrower's
knowledge, threatens to result in a strike which would materially affect
the business operations of the Borrower; (d) if the Borrower or any member
of the Controlled Group gives or is required to give notice to the PBGC of
any "reportable event" (as defined in subsections (b)(1),(2),(5) or (6) of
Section 4043 of ERISA) with respect to any Plan (or the Internal Revenue
Service gives notice to the PBGC of any "reportable event" as defined in
subsection (c)(2) of Section 4043 of ERISA and the Borrower obtains
knowledge thereof), which might constitute grounds for a termination of
such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required to
be given to the PBGC; and (e) the occurrence of any Default or Event of
Default. In the case of the occurrence of a Default or Event of Default,
the Borrower will deliver to the Agent and the Lenders an officer's
certificate specifying the nature thereof, the period of existence thereof,
and what action the Borrower proposes to take with respect thereto.
Section 7.9 Additional Payments; Additional Acts.
From time to time, the Borrower will (a) pay or reimburse the
Agent and the Lenders on request for all Taxes (other than Taxes on or
measured by Agent's or a Lender's net income) imposed on any Loan Document
and for all reasonable expenses, including legal fees, actually incurred by
the Agent or any Lender in connection with the preparation or modification
of the Loan Documents, the making of the Loans, the acceptance and
discounting of any Draft, the issuance of any Letter of Credit and the
enforcement by judicial proceedings (including appeals) or otherwise of any
of the rights of the Agent or the Lenders under the Loan Documents; and (b)
obtain and promptly furnish to the Lenders and the Agent evidence of all
such Government Approvals as may be required to enable the Borrower to
comply with its obligations under the Loan Documents.
Section 7.10 Use of Proceeds from Acceptances.
The proceeds of all Drafts shall be used by the Borrower solely
for the purpose of financing the transactions to which such Drafts relate,
all as specified by the Borrower in its corresponding Acceptance Request.
Section 7.11 Funded Debt.
Borrower shall maintain on a consolidated basis a ratio of Funded
Debt to Total Capitalization of not more than 0.8 to 1 and a ratio of
Funded Debt minus Subordinated Debt to Total Capitalization of not more
than .55 to 1. As used in this Agreement, "Funded Debt" means Indebtedness
which matures by its terms more than one year from the date it was
originally incurred, or is unconditionally renewable or extendable at the
option of the Borrower to a date more than one year from such date, or
which arises under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from
such date and includes the current portion of such Indebtedness. As used in
this Agreement, "Total Capitalization" means the sum of Members' Equity and
Funded Debt. As used in this Agreement, "Members' Equity" means, as of any
date of determination, the consolidated balance sheet "members equity" of
Borrower determined in accordance with generally accepted accounting
principles consistently applied. As used in this Agreement, "Subordinated
Debt" means Indebtedness of Borrower which by its terms provides that no
payments or distributions may be made thereon or in respect thereto at any
time when a default has occurred and is continuing under a document
providing for repayment of Indebtedness of Borrower for borrowed money
(other than such Subordinated Debt) or for the payment by Borrower of the
purchase price of tangible property.
Section 7.12 Working Capital.
Borrower shall maintain, on a consolidated basis, a ratio of
current assets to current liabilities of at least 1.3 to 1.0. For purposes
of this Section 7.12 current assets shall not include (i) any deferred
assets other than prepaid items such as insurance, Taxes, or other similar
items; (ii) any amounts due from corporations which are subsidiaries of
Borrower or of any other person directly or indirectly controlling,
controlled by, or under common control with Borrower; and (iii) an amount
equal to the appropriate deduction for depreciation, depletions,
obsolescence, amortization, valuation, contingency, or other reserves
determined in accordance with generally accepted accounting principles. For
purposes of this Section 7.12, current liabilities shall not include Funded
Debt maturing within one year from the date of determination whether or not
extendable at the option of Borrower.
Section 7.13 Fixed Charge Coverage.
Borrower shall maintain on a consolidated basis a ratio of Fixed
Charge Coverage (for the four most recent fiscal quarters) of at least 1.4
to 1.0. As used in this Agreement, "Fixed Charge Coverage" means for any
period the ratio derived by dividing (a) the sum of net income for such
period (before income taxes, patronage dividends, and extraordinary items)
plus Fixed Charges by (b) Fixed Charges. As used in this Agreement, "Fixed
Charges" means the sum of (a) interest expense on all of Borrower's
Indebtedness, (b) the amortization of any discount applied in advancing
Funded Debt to Borrower, and (c) gross rental expense net of pass-through
rental income from Borrower's members.
Section 7.14 Minimum Capital and Subordinated Debt.
Borrower shall maintain the sum of Subordinated Debt and Members'
Equity at a total of not less than Eighty-five Million Dollars
($85,000,000).
Section 7.15 Member Notes Receivable Ratio.
Borrower shall maintain, on a consolidated basis, a Member
Portfolio of not more than one hundred fifty percent (150%) of Consolidated
Tangible Net Worth. As used in this Agreement, "Member Portfolio" means the
sum of (i) all Indebtedness of members owing to Borrower or any of its
subsidiaries which have not been sold; plus (ii) all investments by
Borrower or any of its subsidiaries in Borrower's members; plus (iii) all
Indebtedness of members of Borrower or any of its subsidiaries which have
been sold with recourse to Borrower or any of its subsidiaries at 50% or
greater. As used herein, "Consolidated Tangible Net Worth" means, with
respect to any Person, at any date, Consolidated Net Worth less (i) all
assets which should be classified as intangible assets (such as good will,
patents, trademarks, copyrights, franchises and covenants not to compete)
and (ii) to the extent not already deducted from total assets, all reserves
including those for deferred income taxes, depreciation, obsolescence or
amortization of properties and (iii) all capital stock or other investments
in any direct or indirect subsidiary other than in (x) any offshore
investment subsidiary, or (y) a subsidiary having all or substantially all
of its operations in the United States; provided, however, that, if and to
the extent Buyer consents thereto, for the purpose of determining the
recourse classification of Loans, an Obligor Group's Consolidated Tangible
Net Worth shall be determined without deducting from its Consolidated Net
Worth that portion of the value assigned to covenants not to compete
relating to the purchase of any facilities located in the States of
Washington and California, as shown on such Obligor Group Financial
Statements.
Section 7.16 Relocation of Offices.
Borrower shall give Agent at least sixty (60) days' prior written
notice of any relocation of its chief executive offices or the offices
where Borrower's books and records are kept.
Section 7.17 Use of Proceeds.
Borrower shall use the proceeds of Loans only for working capital
needs provided, however, that the proceeds of Short-term and Long-term
Acquisition Loans may be used as bridge financing for the acquisition of
the wholesale related assets of Bay Area Foods, Inc.
Section 7.18 Amendments to Private Placement; Prepayments of Private
Placement.
Borrower shall promptly provide to Lenders a copy of each Private
Placement Agreement now or hereafter executed by Borrower and, as to any
Private Placement Agreement not executed as of the date hereof, Borrower
shall notify the Lenders at least five (5) days in advance of the execution
thereof. Borrower will not agree to or permit to be made any amendments to
nor request any waivers of the terms of any Private Placement Agreement if
such an amendment or waiver pertains to an increase in the commitment
amounts thereunder or to the terms of repayment thereof or to the terms of
any promissory notes issued thereunder. Borrower shall deliver to Agent and
the Lenders, prompt written notice and a copy of any anticipated amendment
to or requested waiver of any financial covenants contained in or reduction
in the commitment amounts under any Private Placement Agreement, and shall
deliver to Agent and Lenders a substantially contemporaneous confirming
notice and a copy of any amendment or waiver actually made or granted.
Borrower shall not make any prepayments in respect of any Private Placement
Agreement or any of the promissory notes issued pursuant thereto.
Section 7.19 Insurance Company.
Borrower shall cause Grocers Insurance Company or any successor
thereto ("GIC") to (a) comply in all material respects with all laws,
regulations, rules and orders of any Government Authority applicable to
GIC, except any thereof whose validity is being contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
and (b) keep in force upon all of its operations policies of reinsurance
carried with responsible companies in such amounts and covering all such
risks as shall be customary in the industry. GIC is a wholly-owned Oregon
subsidiary corporation of Grocers Insurance Group, which in turn is a
wholly-owned subsidiary of Borrower.
Article 8
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or there
shall be any outstanding Acceptance Advances or Letter of Credit Usage and
until payment in full of each Loan and performance of all other obligations
of the Borrower under this Agreement and the other Loan Documents, the
Borrower agrees that it will not do any of the following unless the Agent
shall otherwise consent in writing.
Section 8.1 Liquidation, Merger, Sale of Assets.
The Borrower shall not liquidate, dissolve or enter into any
merger, consolidation, joint venture, partnership or other combination or
sell, lease, or dispose of all or any substantial portion of its business
or assets (excepting sales of goods in the ordinary course of business and
excepting sales of notes pursuant to note purchase agreements) as
constitutes a substantial portion thereof; provided, however, so long as no
Default or Event of Default shall have occurred and be continuing or will
occur as a result of such merger or consolidation, Borrower may merge or
consolidate with any person provided that the surviving person be a
corporation duly incorporated and validly existing under the laws of any
state of the United States and provided further that such surviving
corporation expressly assumes Borrower's obligations under this Agreement
in a writing delivered to the Agent and the Lenders. Without limiting the
foregoing, Borrower, and its consolidated subsidiaries, shall not in any
fiscal year sell any portion of their business or assets having a value in
excess of ten percent (10%) of their Consolidated Tangible Net Worth unless
the proceeds of such sale or sales are reinvested within twelve (12) months
in assets to be owned and utilized by Borrower in the ordinary course of
its business; provided, however, in determining compliance with the
foregoing requirement, sales of the following assets will be disregarded:
(a) individual assets having a book value of less than Two Hundred Fifty
Thousand Dollars ($250,000), not to exceed in the aggregate One Million
Five Hundred Thousand Dollars ($1,500,000) in any fiscal year, and (b)
Indebtedness of Borrower's members owing to Borrower and incurred in
connection with equipment, store or inventory financing provided by
Borrower to such members.
Section 8.2 Contingent Indebtedness.
Borrower shall not, at any time, have outstanding Contingent
Indebtedness in an amount exceeding the sum of (a) Six Million Dollars
($6,000,000) and (b) fifty percent (50%) of Borrower's consolidated
cumulative net income between September 29, 1990 and the date of
determination. "Contingent Indebtedness" shall, as of any date of
determination, mean the sum of (i) guaranties of the obligations of others
(including the guaranty of lease obligations of Borrower's members to the
extent such lease obligations are insured) and (ii) the product of (x) the
Portfolio Loss Factor and (y) the total principal amount of Indebtedness
owed by Borrower's members to Borrower in respect of store and equipment
financing which has been sold by Borrower on a recourse basis. The term
"Portfolio Loss Factor" shall mean the greater of (i) five (5) times the
average for the three (3) most recently ended fiscal years of Borrower of
the actual losses incurred during such fiscal year on the portfolio of
Indebtedness owed to Borrower (or to a buyer of such Indebtedness from
Borrower) by members for equipment and store financing divided by the
average principal amount of such portfolio during such fiscal year; or (ii)
three percent (3%).
Section 8.3 Liens.
Borrower shall not create, assume or suffer to exist any Lien upon
its assets except (i) liens on Borrower's Milwaukee, Oregon and Medford,
Oregon properties securing mortgage indebtedness relating to such
properties and any extensions, refinancing, or renewals thereof in an
amount not exceeding the amount of such mortgage indebtedness outstanding
immediately prior to such extension, refinancing or renewal; (ii) capital
lease obligations; and (iii) Liens to secure indebtedness for the deferred
purchase price of property acquired after the date hereof, but only if such
Liens are limited to such property and its proceeds. Without limiting the
generality of the foregoing, Borrower shall not pledge, grant a security
interest in, or otherwise permit or suffer a lien to encumber all or any
portion of its accounts receivables, chattel paper, documents, instruments,
general intangibles or inventory. Notwithstanding the foregoing to
contrary, the total amount of Indebtedness secured by (a) all Liens
(excluding the Liens described in clause (iii) above; and (b) all liens
described in subclauses (a), (b) and (c) of the definition of "Liens" set
forth in Section 1.1 hereof, shall not at any time exceed fifteen percent
(15%) of Borrower's Consolidated Tangible Net Worth.
Section 8.4 ERISA Compliance.
Neither the Borrower nor any member of the Controlled Group nor
any Plan will:
(a) engage in any "prohibited transaction" (as such term is defined in
Section 406 or Section 2003(a) of ERISA) which could result in a material
liability to the Borrower;
(b) incur any "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA) whether or not waived which could result in a
material liability to the Borrower;
(c) terminate any Pension Plan in a manner which could result in the
imposition of a Lien on any property of the Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA; or
(d) violate state or federal securities laws applicable to any Plan in any
material respect.
Section 8.5 No Name Change, Etc.
Borrower shall not change its name, identity, or corporate
structure in any manner.
Section 8.6 Transactions With or by Affiliates.
Borrower will not directly or indirectly enter into or permit to
exist any transaction (including, without limitation, the purchase, sale,
lease, or exchange of any property) with any Borrower Affiliate on terms
that are less favorable to Borrower than those which might be obtained at
the time from persons who are not Borrower Affiliates. Borrower will not
permit the sale or other disposition of, or suffer any Borrower Affiliate
which Borrower directly or indirectly controls to sell or otherwise dispose
of substantially all the assets of such Borrower Affiliate, except in the
ordinary course of such Affiliate's business; and Borrower will not permit
or suffer the sale or issuance by any Borrower Affiliate of any of its
stock of any class, except stock issued to Borrower. A "Borrower Affiliate"
is any person (or group of related persons) that (a) directly or indirectly
controls or is controlled by or under common control with Borrower, or (b)
owns more than five percent (5%) of Borrower's voting stock, or (c) is a
director or officer of Borrower.
Article 9
EVENTS OF DEFAULT
Section 9.1 Events of Default.
The occurrence of any of the following events shall constitute an
"Event of Default" hereunder.
(a) Payment Default.
The Borrower shall fail to pay for a period of five (5)
Business Days after such payment becomes due any amount of principal of or
interest on any Loan or any other amount payable by it hereunder or under
any other Loan Document; or
(b) Breach of Warranty.
Any representation or warranty made or deemed made by the
Borrower under or in connection with this Agreement or any other Loan
Document shall prove to have been incorrect in any material respect when
made; or
(c) Breach of Certain Covenants.
The Borrower shall fail to comply with any of the
provisions of Sections 7.8(e), 7.11, 7.12, 7.13, 7.14, 7.15, 8.1, 8.2, 8.3
or 8.4 of this Agreement; or
(d) Breach of Other Covenant.
The Borrower shall fail to perform or observe any other
covenant, obligation or term of any Loan Document and such failure
continues for thirty (30) days after written notice thereof shall have been
given to Borrower by the Agent or, if the failure cannot be remedied either
by the payment of money or with diligent efforts during such 30-day period
then, so long as Borrower has commenced and diligently proceeded to remedy
such failure during such 30-day period, for such longer period as is
necessary to remedy the failure, provided that Borrower continues to use
diligent efforts to remedy the failure within such longer period; or
(e) Cross-default.
The Borrower shall fail (A) to pay when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise)
any Indebtedness which in the aggregate exceeds One Million Dollars
($1,000,000) (except any Loans or Drafts) or any interest or premium
thereon and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such
Indebtedness, or (B) to perform any term or covenant on its part to be
performed under any agreement or instrument relating to any such
Indebtedness and required to be performed and such failure shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such failure to perform is to accelerate or to
permit the acceleration of the maturity of such Indebtedness; or (ii) any
Indebtedness which in the aggregate exceeds One Million Dollars
($1,000,000) (except any Loans or Drafts) shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof; or (iii) a
"Termination Event" as such term is defined in any note purchase agreement
or any other event which would entitle any party committed to purchase
notes under a note purchase agreement to terminate such commitment prior to
its scheduled expiration shall have occurred; or
(f) Voluntary Bankruptcy, Etc.
The Borrower shall: (i) file a petition seeking relief
for itself under Title 11 of the United States Code, as now constituted or
hereafter amended, or file an answer consenting to, admitting the material
allegations of or otherwise not controverting, or fail timely to controvert
a petition filed against it seeking relief under Title 11 of the United
State Code, as now constituted or hereafter amended; or (ii) file such
petition or answer with respect to relief under the provisions of any other
now existing or future applicable bankruptcy, insolvency, or other similar
law of the United States of America or any State thereof or of any other
country or jurisdiction providing for the reorganization, winding-up or
liquidation of corporations or an arrangement, composition, extension or
adjustment with creditors; or
(g) Involuntary Bankruptcy, Etc.
An order for relief shall be entered against the Borrower
under Title 11 of the United States Code, as now constituted or hereafter
amended, which order is not stayed; or upon the entry of an order, judgment
or decree by operation of law or by a court having jurisdiction in the
premises which is not stayed adjudging it a bankrupt or insolvent under, or
ordering relief against it under, or approving as properly filed a petition
seeking relief against it under the provisions of any other now existing or
future applicable bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or
jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors; or appointing a receiver, liquidator, assignee, sequestrator,
trustee or custodian of the Borrower or of any substantial part of its
property, or ordering the reorganization, winding-up or liquidation of its
affairs; or upon the expiration of sixty (60) days after the filing of any
involuntary petition against it seeking any of the relief specified in
Section 9.1(f) or this Section 9.1(g) without the petition being dismissed
prior to that time; or
(h) Insolvency, Etc.
The Borrower shall (i) make a general assignment for the
benefit of its creditors or (ii) consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, or custodian of
all or a substantial part of the property of the Borrower, or (iii) admit
its insolvency or inability to pay its debts generally as they become due,
or (iv) fail generally to pay its debts as they become due, or (v) take any
action (or suffer any action to be taken by its directors or shareholders)
looking to the dissolution or liquidation of the Borrower; or
(i) Judgment.
A final judgment or order for the payment of money in
excess of One Million Dollars ($1,000,000), shall be rendered against the
Borrower and such judgment or order (a) is not covered by insurance and (b)
shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days following entry, or all or a substantial part of the
assets of Borrower are attached, seized, subject to writ or warrant or are
levied on or come into the possession or control of a receiver, trustee,
custodian or assignee for the benefit of creditors; or
(j) ERISA.
The Borrower or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of One
Million Dollars ($1,000,000) which it shall have become liable to pay to
the PBGC or to a Plan under Section 515 of ERISA or Title IV of ERISA; or
notice of intent to terminate a Plan or Plans (other than a multi-employer
plan, as defined in Section 4001(3) of ERISA, having aggregate Unfunded
Vested Liabilities in excess of Five Million Dollars ($5,000,000)) shall be
filed under Title IV of ERISA by the Borrower, any member of the Controlled
Group, any plan administrator or any combination of the foregoing; or the
PBGC shall institute proceedings under Title IV of ERISA to terminate any
Plan or Plans which could result in any liability of the Borrower in excess
of One Million Dollars ($1,000,000); or
(k) Government Action.
Borrower is enjoined or restrained or in any way
prevented by order of a court or other Governmental Authority from
conducting all or a substantial part of its business affairs or operations;
or
(l) Change in Control.
Any person, or group of persons directly or indirectly
under common control, shall obtain in excess of fifty percent (50%) of the
outstanding voting stock of Borrower; or
(m) Validity Contest.
The validity or enforceability of this Agreement, the
Notes, or any other Loan Document is contested by Borrower or Borrower
denies liability in respect of its obligations hereunder or thereunder; or
(n) Insurance Claim.
A claim or claims that would normally be covered by
insurance according to industry practices is made against GIC for the
payment of more than One Million Dollars ($1,000,000) individually or in
the aggregate and is not covered by reinsurance; or all or a material part
of GIC's reinsurance policies shall be terminated for any reason. Section
9.2 Consequences of Default.
If an Event of Default described in Section 9.1(f) or 9.1(g) shall
occur and be continuing, then in any such case, the Commitments shall be
immediately terminated and, if any Loans shall have been made, the
principal of and interest on the Loans shall become immediately due and
payable, if any Drafts have been accepted, all outstanding Acceptance
Advances shall become immediately due and payable, and if any Letter of
Credit has been issued, an amount equal to the Letter of Credit Usage shall
become immediately due and payable all without notice or demand of any
kind. If any other Event of Default shall occur and be continuing, then in
any such case and at any time thereafter so long as any such Event of
Default shall be continuing, the Agent may, and shall upon the request of
Majority Lenders, immediately terminate the Commitments, and if Loans shall
have been made, the Agent may, and shall upon the request of Majority
Lenders, declare the principal of and the interest on the Loans and all
other sums payable by the Borrower hereunder or under any other Loan
Document to be immediately due and payable, if any Drafts have been
accepted, the Agent may, and shall upon the request of Majority Lenders,
declare the outstanding Acceptance Advances immediately due and payable,
and if any Letter of Credit has been issued the Agent may, and on the
request of Seafirst, shall declare an amount equal to the Letter of Credit
Usage immediately due and payable whereupon the same shall become
immediately due and payable all without protest, presentment, notice, or
demand, all of which the Borrower expressly waives. Amounts paid or
received hereunder in respect of issued and outstanding Letters of Credit
which exceed amounts paid by Seafirst or a Seafirst Affiliate under such
Letters of Credit shall be held (and applied) as cash collateral to secure
the performance of all obligations of the Borrower owing to Seafirst and
any Seafirst Affiliate in respect of Letter of Credits. Agent shall use its
best efforts to provide same day notice of acceleration to Borrower,
provided, however, that failure to give such notice shall not affect the
rights of the Agent and Lenders hereunder. The Agent and Lenders may
exercise or pursue any remedy or cause of action permitted by this
Agreement, the Notes, any other Loan Document or applicable law. The rights
and remedies provided by law, this Agreement, the Notes, and the other Loan
Documents are cumulative and not exclusive, and the exercise or partial
exercise of any right, power or remedy hereunder or thereunder shall not
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
Article 10
THE AGENT
Section 10.1 Authorization and Action.
Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto. The Agent shall have no
duties or responsibilities except those expressly set forth in this
Agreement. The duties of the Agent shall be mechanical and administrative
in nature; the Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or the
other Loan Documents, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement or the other Loan Documents except as expressly set forth herein.
As to any matters not expressly provided for by this Agreement, including
enforcement or collection of the Loans and Drafts, the Agent shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining) upon the instructions of the Majority Lenders, and
such instructions shall be binding upon all the Lenders, provided that the
Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to the Loan Documents or applicable
law and provided, further, that without the consent of all Lenders, the
Agent shall not change or modify any Lender's Commitment, the definition of
"Majority Lenders", the timing or rates of interest payments, the timing or
amounts of principal payments due in respect of Loans and Drafts, and
provided, further, that the terms of Article 4 shall not be amended without
the consent of Seafirst, and provided, further, that the terms of Sections
2.3 and 2.10(a), and this Article 10 shall not be amended without the prior
written consent of the Agent (acting for its own account). In the absence
of instructions from the Majority Lenders, the Agent shall have authority
(but no obligation), in its sole discretion, to take or not to take any
action, unless this Agreement specifically requires the consent of the
Lenders or the consent of the Majority Lenders and any such action or
failure to act shall be binding on all the Lenders. Each Lender and each
holder of any Note shall execute and deliver such additional instruments,
including powers of attorney in favor of the Agent, as may be necessary or
desirable to enable the Agent to exercise its powers hereunder.
Section 10.2 Duties and Obligations.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it
or any of them under or in connection with this Agreement or any other Loan
Document except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the Agent (i)
may treat each Lender which is a party hereto as the party entitled to
receive payments hereunder until the Agent receives written notice of the
assignment of such Lender's interest herein signed by such Lender and made
in accordance with the terms hereof and a written agreement of the assignee
that it is bound hereby to the same extent as it would have been had it
been an original party hereto, in each case in form satisfactory to the
Agent; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such experts; (iii) makes no
warranty or representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations made in or in
connection with this Agreement, any other Loan Document, or in any
instrument or document furnished pursuant hereto or thereto; (iv) shall not
have any duty to ascertain or to inquire as to the performance of any of
the terms, covenants, or conditions of the Loan Documents, or of any
instrument or document furnished pursuant thereto on the part of the
Borrower or as to the use of the proceeds of any Loan or the proceeds
received in respect of any Draft; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability,
genuineness, effectiveness, or value of this Agreement, of any other Loan
Document, or of any instrument or document furnished pursuant hereto or
thereto; and (vi) shall incur no liability under or in respect to this
Agreement or any other Loan Document by acting upon any oral or written
notice, consent, certificate or other instrument or writing (which may be
by telex, facsimile transmission, telegram or cable) believed by it to be
genuine and signed, sent or made by the proper party or parties or by
acting upon any representation or warranty of the Borrower made or deemed
to be made in this Agreement or any other Loan Document. The Agent may
execute any of its duties under this Agreement or any other Loan Document
by or through agents, employees or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
(b) The Agent will promptly transmit to each Lender copies of all documents
received from the Borrower pursuant to the requirements of this Agreement
other than documents which by the terms of this Agreement, the Borrower is
obligated to deliver directly to Lenders.
(c) Each Lender or its assignee shall furnish to the Agent in a timely
fashion such documentation (including, but not by way of limitation, IRS
Forms Nos. W-8, 1001 and 4224) as may be reasonably requested by the Agent
to establish such Lender's status for tax withholding purposes.
(d) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default under any of the Loan
Documents unless the Agent has received written notice from a Lender or the
Borrower referring to one or more of the Loan Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Agent receives such a notice, the Agent
shall promptly notify each of the Lenders.
Section 10.3 Dealings Between Seafirst and Borrower.
With respect to its Commitment, the Loans made by it, the Drafts
accepted by it, and the Letters of Credit issued by it, Seafirst shall have
the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were
not the Agent, and the term "Lender" as used herein and in the other Loan
Documents shall unless otherwise expressly indicated include Seafirst in
its individual capacity. Seafirst may accept deposits from, lend money to,
act and generally engage in any kind of business with the Borrower and any
person which may do business with the Borrower, all as if Seafirst were not
the Agent hereunder and without any duty to account therefor to the
Lenders.
Section 10.4 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or the other Lenders and based upon such documents
and information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or the other Lenders and based upon such documents
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
Section 10.5 Indemnification.
Each Lender agrees to indemnify the Agent (to the extent not
reimbursed by the Borrower) ratably, in the same proportion that its
aggregate Commitments bear to the Total Commitment, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or any other
Loan Document or any action taken or omitted by the Agent under this
Agreement or any other Loan Document, except any such as result from the
Agent's gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse the Agent promptly on demand
ratably, in the same proportion that its aggregate Commitments bear to the
Total Commitment, for any out-of-pocket expenses, including legal fees,
incurred by the Agent in connection with the administration or enforcement
or preservation of any rights under any Loan Document (to the extent that
the Agent is not reimbursed for such expenses by the Borrower).
Section 10.6 Successor Agent.
The Agent may give written notice of resignation at any time to
the Lenders and may be removed at any time with cause by the Majority
Lenders. The Majority Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Lenders
and shall have accepted such appointment within thirty (30) days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may on behalf of the
Lenders, appoint a successor Agent, which shall be one of the Lenders or a
bank organized under the laws of the United States or of any state thereof,
or any affiliate of such bank, and having a combined capital and surplus of
at least Five Hundred Million Dollars ($500,000,000). Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement.
Until the acceptance by such a successor Agent, the retiring Agent shall
continue as "Agent" hereunder. After any retiring Agent's resignation or
removal hereunder as Agent shall become effective, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. Any person into
which the Agent may be merged or converted or with which it may be
consolidated or any person resulting from any merger, conversion or
consolidation to which it shall be a party or any person to which the Agent
may sell or transfer all or substantially all of its agency relationships
shall be the successor to the Agent hereunder without the execution or
filing of any paper or further act, anything herein to the contrary
notwithstanding.
Article 11
MISCELLANEOUS
Section 11.1 No Waiver; Remedies Cumulative.
No failure by the Agent or any Lender to exercise, and no delay in
exercising, any right, power or remedy under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy under this Agreement or any
other Loan Document preclude any other or further exercise thereof or the
exercise of any other right, power, or remedy. The exercise of any right,
power, or remedy shall in no event constitute a cure or waiver of any Event
of Default under this Agreement or any other Loan Document or prejudice the
rights of the Agent and the Lenders in the exercise of any right hereunder
or thereunder. The rights and remedies provided herein and therein are
cumulative and not exclusive of any right or remedy provided by law.
Section 11.2 Right of Setoff.
Upon the occurrence of an Event of Default, the Lenders shall have
the right, but not the obligation, to setoff and apply all deposits of
every kind held by the Lenders and their affiliates or obligations owed by
the Lenders and their affiliates to Borrower against the Indebtedness and
obligations of Borrower evidenced by this Agreement, the Notes and the
other Loan Documents.
Section 11.3 Governing Law.
This Agreement and the other Loan Documents shall be governed by
and construed in accordance with the internal laws of the State of
Washington, U.S.A.
Section 11.4 Consent to Jurisdiction; Waiver of Immunities; Attorneys'
Fees.
The Borrower hereby irrevocably submits to the nonexclusive
jurisdiction of any state or federal court sitting in Seattle, King County,
Washington, in any action or proceeding brought to enforce or otherwise
arising out of or relating to this Agreement or any other Loan Document and
irrevocably waives to the fullest extent permitted by law any objection
which it may now or hereafter have to the laying of venue in any such
action or proceeding in any such forum, and hereby further irrevocably
waives any claim that any such forum is an inconvenient forum. The Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section
11.4 shall impair the right of the Agent, any Lender or the holder of any
Note to bring any action or proceeding against the Borrower or its property
in the courts of any other jurisdiction, and the Borrower irrevocably
submits to the nonexclusive jurisdiction of the appropriate courts of the
jurisdiction in which the Borrower is incorporated or sitting or of any
place where property or an office of the Borrower is located.
Section 11.5 Notices.
All notices and other communications provided for in this
Agreement shall be in writing or (unless otherwise specified) by telex,
facsimile transmission, telegram or cable and shall be mailed (with first
class postage prepaid) or sent or delivered to each party at the address
set forth under its name on the signature page hereof, or at such other
address as shall be designated by such party in a written notice to each
other party. Except as otherwise specified all notices sent by mail, if
duly given, shall be effective three (3) Business Days after deposit into
the mails, all notices sent by a nationally recognized overnight courier
service, if duly given, shall be effective one (1) Business Day after
delivery to such courier service, and all other notices and communications
if duly given or made shall be effective upon receipt.
Section 11.6 Mandatory Arbitration.
Any controversy or claim between or among the parties, including
those arising out of or relating to this Agreement or Loan Documents and
any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted
in accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the AAA. The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. No provision of this Section 11.6 shall limit the right of
any party to this Agreement to exercise self-help remedies such as setoff,
foreclosure against or sale of any collateral or security, or to obtain
provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy does not waive the right of
either party to resort to arbitration.
Section 11.7 Assignment and Participations.
This Agreement shall be binding upon and inure to the benefit of
the parties and their respective Successors and assigns, provided that the
Borrower may not assign or otherwise transfer all or any part of its rights
or obligations hereunder or under any other Loan Document without the prior
written consent of the Agent, and any such assignment or transfer purported
to be made without such consent shall be ineffective. Any Lender may at any
time sell participation interests in its Loans and Commitments to another
bank or financial institution. Such sales may be made without the consent
of the Agent, the Borrower or any other Lender provided, however, that (a)
the selling Lender shall have provided the Borrower and the Agent with
prior written notice of the proposed sale of any participation interest in
any Loan or in such Lender's Commitment; and (b) that the selling Lender
retains the right to vote as a Lender hereunder in respect of the interest
sold without being bound to obtain the consent of its participant or to
exercise its rights in accordance with instructions received from its
participant (except that the participant's consent can be required for
proposed changes to the timing or amount of principal payments or changes
to the timing, rate or amount of payments of interest or fees). Any Lender
may assign or otherwise transfer all or any part of its interest under the
Loan Documents to another bank or financial institution with the prior
written consent of the Agent which consent will not be unreasonably
withheld or delayed. The assignee of any permitted sale or assignment
(including assignments for security and sales of participations) shall have
the same rights and benefits against the Borrower and otherwise under the
Loan Documents (excepting however, in the case of sales of participations,
the right to grant or withhold consents or otherwise vote in respect
thereof) including the right of setoff, and in the case of any outright
assignment (as distinguished from an assignment for security or the sale of
a participation) the same obligations in respect thereof, as if such
assignee were an original Lender. Except to the extent otherwise required
by the context of this Agreement, the word "Lender" where used in this
Agreement shall mean and include any holder of a Note originally issued to
a Lender hereunder, and subject to the terms of this Section 11.7, each
such holder shall be bound by and have the benefits of this Agreement the
same as if such holder had been a signatory hereto. Any outright assignment
of a Lender's interest hereunder to another Lender made in conformance with
the terms of this Section 11.7 shall result in a corresponding adjustment
to the selling and purchasing Lenders' Commitments.
Section 11.8 Severability.
Any provision of this Agreement or any other Loan Document which
is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
Section 11.9 Survival.
The representations, warranties and indemnities of the Borrower in
favor of the Agent and Lenders shall survive indefinitely and, without
limiting the foregoing, shall survive the execution and delivery of this
Agreement and the other Loan Documents, the making of any Loan, the
acceptance and discount of any Draft, the issuance of any Letter of Credit,
the expiration of the Commitments and the repayment of all Loans,
Acceptance Advances, Letters of Credit and other amounts due hereunder or
under the other Loan Documents.
Section 11.10 Conditions Not Fulfilled.
If any Commitment is not borrowed, any drafts presented are not
accepted, or any requested letter of credit is not issued owing to
nonfulfillment of any condition precedent specified in Article 5 or, in the
case of drafts, any additional conditions specified in Article 3, or, in
the case of letters of credit, any additional conditions specified in
Article 4, no party hereto shall be responsible to any other party for any
damage or loss by reason thereof, except that the Borrower shall in any
event be liable to pay the fees, Taxes, and expenses for which it is
obligated hereunder. If for any other reason the Commitment of any Lender
is not borrowed, any presented draft is not accepted or any requested
letter of credit is not issued, neither the Agent nor any other Lender
shall be responsible to the Borrower for any damage or loss by reason
thereof, nor shall any other Lender or the Borrower be excused from its
performance hereunder.
Section 11.11 Entire Agreement; Amendment, Etc.
This Agreement together with the exhibits hereto comprises the
entire agreement of the parties and may not be amended or modified except
by written agreement of the Borrower and the Agent. No provision of this
Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
Section 11.12 Other Debt.
Borrower expressly agrees that the payment and performance of the
Indebtedness evidenced by this Agreement, the Notes and the other Loan
Documents shall not be inferior or subordinate to, but rather shall rank no
less than pari passu with, all other Indebtedness of Borrower, except to
the extent such other Indebtedness shall be secured by a Lien described in
and permitted under Section 8.3 hereof.
Section 11.13 Authorized Officers.
A list of officers and employees initially authorized to request
Loans, present drafts, or request letters of credit is attached hereto as
Schedule 2. Borrower may amend that list from time to time by supplements
executed by the Borrower's president and chief financial officer. The Agent
and Lenders may act in reliance upon any oral, telephonic, or written
request believed in good faith to have been received from or authorized by
any of the persons identified on the list attached hereto as Schedule 2 (as
the same may be supplemented from time to time).
Section 11.14 Headings.
The headings of the various provisions of this Agreement are for
convenience of reference only, do not constitute a part hereof, and shall
not affect the meaning or construction of any provision hereof.
Section 11.15 Counterparts.
This Agreement may be executed in any number of counterparts, all
of which when taken together shall be deemed a single original.
Section 11.16 Oral Agreements Not Enforceable.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers or agents thereunto duly
authorized as of the date first above written.
BORROWER: UNITED GROCERS, INC.
By: /s/ JOHN W. WHITE
Its: Vice President
Address:
Facsimile Number:
LENDERS: BANK OF AMERICA NW, N.A.
d/b/a SEAFIRST BANK
By: /s/ Gordon A. Gray
Its: VP
Address: 701 Fifth Avenue, Floor 12
Seattle, WA 98104
Facsimile Number: (206) 358-3113
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ William H. Long
Its: Vice President
Address: 111 S.W. Fifth, Suite 400
PO Box 4412
Portland, Oregon 97208
Facsimile Number: (503) 275-7290
THE HONGKONG AND SHANGHAI BANKING CORPORATION, LIMITED
By: /s/ L. Randolph Todd
Its: Senior Vice President
Address: The Hongkong and Shanghai Banking
Corporation, Portland, Oregon
Facsimile Number: 242-2413
900 SW Fifth Avenue, Ste. 1550
Portland, OR 97204
AGENT: AGENT:BANK OF AMERICA NW, N.A.
d/b/a SEAFIRST BANK
By: /s/ Dora A. Brown
Its: A.V.P.
Address: 701 Fifth Avenue, Floor 16
Seattle, WA 98104
Facsimile Number: (206) 358-0971
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
By and Among
BANK OF AMERICA NW, N.A.
UNITED STATES NATIONAL BANK OF OREGON
THE HONGKONG AND SHANGHAI BANKING CORPORATION, LIMITED
as Lenders,
BANK OF AMERICA NW, N.A.
as Agent,
and
UNITED GROCERS, INC.
as Borrower
---------------------------------------------
May 31, 1996
---------------------------------------------
$115,000,000
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
iv - TABLE OF CONTENTS
<S> <C>
Article 1 DEFINITIONS 2
Section 1.1 Certain Defined Terms................................................ 2
Section 1.2 Interest Rate Definitions............................................ 6
Section 1.3 General Principles Applicable to Definitions......................... 6
Section 1.4 Accounting Terms..................................................... 7
Article 2 THE LOANS 7
Section 2.1 Loans.7
(a) Revolving Line of Credit............................................. 7
(b) Operating Line of Credit............................................. 7
(c) Long-term Acquisition Line of Credit................................. 8
(d) Short-term Acquisition Line of Credit................................ 8
(e) Overnight Line of Credit............................................. 9
(f) Relationship to Prior Credit Agreement............................... 9
Section 2.2 Manner of Borrowing.................................................. 9
Section 2.3 Agent's Right to Fund................................................ 10
Section 2.4 Repayment of Principal............................................... 10
Section 2.5 Interest on Loans.................................................... 11
(a) Interest Definitions................................................. 11
(b) General Provisions................................................... 12
(c) Selection of Alternative Rates for Loans............................. 13
(d) Selection of Applicable Interest Rate for Overnight Loans............ 14
(e) Applicable Days For Computation of Interest.......................... 15
(f) Unavailable Fixed Rate............................................... 15
(g) Compensation for Increased Costs..................................... 15
Section 2.6 Prepayments.......................................................... 16
Section 2.7 Notes.17
Section 2.8 Manner of Payments................................................... 17
Section 2.9 Application of Proceeds.............................................. 18
(a) Before Default....................................................... 18
(b) Payments after Default............................................... 20
(c) Setoffs.............................................................. 21
(d) General Provisions................................................... 213
Section 2.10 Fees. 22
(a) Agent's Fee.......................................................... 22
(b) Certain Commitment Fees.............................................. 22
(c) U.S. Bank Commitment Fees............................................ 23
(d) Seafirst Commitment Fees............................................. 23
(e) Payment of Commitment Fees........................................... 23
Section 2.11 Reduction in Commitments............................................. 23
(a) Voluntary Reduction in Commitments................................... 23
(b) Automatic Reduction in Commitments................................... 24
Article 3 BANKERS'ACCEPTANCES........................................................ 24
Section 3.1 Bankers'Acceptances.................................................. 24
Section 3.2 Manner of Presenting Drafts.......................................... 24
Section 3.3 Discounting of Drafts................................................ 26
Section 3.4 Indemnification; Increased Costs..................................... 26
Section 3.5 Payment of Drafts by Borrower........................................ 27
Section 3.6 Compliance With Governmental Regulations; Insurance.................. 27
Section 3.7 Guaranty of Documents and Instruments................................ 28
Section 3.8 Revocation by Operation of Law....................................... 28
Section 3.9 Relationship to Prior Credit Agreement............................... 28
Article 4 LETTERS OF CREDIT.......................................................... 28
Section 4.1 Letters of Credit.................................................... 28
Section 4.2 Manner of Requesting Letters of Credit............................... 29
Section 4.3 Indemnification; Increased Costs..................................... 30
Section 4.4 Payment by Borrower.................................................. 30
Section 4.5 Relationship to Prior Credit Agreement............................... 31
Article 5 CONDITIONS 31
Section 5.1 Notice of Borrowing, Promissory Notes, Etc........................... 31
Section 5.2 Corporate Authority.................................................. 31
Section 5.3 Legal Opinion........................................................ 31
Section 5.4 Defaults, Etc........................................................ 32
Section 5.5 Payment of All Accrued Interest and Fees............................. 32
Section 5.6 Other Information.................................................... 32
Article 6 REPRESENTATIONS AND WARRANTIES............................................. 32
Section 6.1 Corporate Existence and Power........................................ 32
Section 6.2 Corporate Authorization.............................................. 32
Section 6.3 Government Approvals, Etc............................................ 33
Section 6.4 Binding Obligations, Etc............................................. 33
Section 6.5 Litigation........................................................... 33
Section 6.6 Indebtedness......................................................... 33
Section 6.7 Financial Condition.................................................. 33
Section 6.8 Title and Liens...................................................... 34
Section 6.9 Taxes.34
Section 6.10 Laws, Orders, Other Agreements....................................... 34
Section 6.11 Federal Reserve Regulations.......................................... 34
Section 6.12 ERISA.34
Section 6.13 Security Offerings................................................... 35
Section 6.14 Warranties with Respect to Drafts.................................... 35
Section 6.15 Further Warranties with Respect to Drafts............................ 35
Section 6.16 Acceptances.......................................................... 36
Section 6.17 Patents, Licenses, Franchises........................................ 36
Section 6.18 Investment Company; Public Utility Holding Company................... 36
Section 6.19 Environmental and Safety Health Matters.............................. 36
Section 6.20 Reaffirmation........................................................ 36
Section 6.21 Representations as a Whole........................................... 36
Article 7 AFFIRMATIVE COVENANTS...................................................... 37
Section 7.1 Preservation of Corporate Existence, Etc............................. 37
Section 7.2 Keeping of Books and Records; Visitation Rights...................... 37
Section 7.3 Maintenance of Property, Etc......................................... 37
Section 7.4 Compliance with Laws, Etc............................................ 37
Section 7.5 Other Obligations.................................................... 37
Section 7.6 Insurance............................................................ 38
Section 7.7 Financial Information................................................ 38
(a) Annual Audited Financial Statements.................................. 38
(b) Quarterly Unaudited Financial Statements............................. 38
(c) Quarterly Compliance Certificates.................................... 38
(d) Other.39
Section 7.8 Notification......................................................... 39
Section 7.9 Additional Payments; Additional Acts................................. 39
Section 7.10 Use of Proceeds from Acceptances..................................... 40
Section 7.11 Funded Debt.......................................................... 40
Section 7.12 Working Capital...................................................... 40
Section 7.13 Fixed Charge Coverage................................................ 40
Section 7.14 Minimum Capital and Subordinated Debt................................ 41
Section 7.15 Member Notes Receivable Ratio........................................ 41
Section 7.16 Relocation of Offices................................................ 41
Section 7.17 Use of Proceeds...................................................... 41
Section 7.18 Amendments to Private Placement; Prepayments of Private Placement.... 41
Section 7.19 Insurance Company.................................................... 42
Article 8 NEGATIVE COVENANTS......................................................... 42
Section 8.1 Liquidation, Merger, Sale of Assets.................................. 42
Section 8.2 Contingent Indebtedness.............................................. 43
Section 8.3 Liens.43
Section 8.4 ERISA Compliance..................................................... 43
Section 8.5 No Name Change, Etc.................................................. 44
Section 8.6 Transactions With or by Affiliates................................... 44
Article 9 EVENTS OF DEFAULT.......................................................... 44
Section 9.1 Events of Default.................................................... 44
(a) Payment Default...................................................... 44
(b) Breach of Warranty................................................... 45
(c) Breach of Certain Covenants.......................................... 45
(d) Breach of Other Covenant............................................. 45
(e) Cross-default........................................................ 45
(f) Voluntary Bankruptcy, Etc............................................ 45
(g) Involuntary Bankruptcy, Etc.......................................... 46
(h) Insolvency, Etc...................................................... 46
(i) Judgment............................................................. 46
(j) ERISA.46
(k) Government Action.................................................... 47
(l) Change in Control.................................................... 47
(m) Validity Contest..................................................... 47
(n) Insurance Claim...................................................... 47
Section 9.2 Consequences of Default.............................................. 47
Article 10 THE AGENT 48
Section 10.1 Authorization and Action............................................. 48
Section 10.2 Duties and Obligations............................................... 49
Section 10.3 Dealings Between Seafirst and Borrower............................... 50
Section 10.4 Lender Credit Decision............................................... 50
Section 10.5 Indemnification...................................................... 50
Section 10.6 Successor Agent...................................................... 50
Article 11 MISCELLANEOUS............................................................. 51
Section 11.1 No Waiver; Remedies Cumulative....................................... 51
Section 11.2 Right of Setoff...................................................... 51
Section 11.3 Governing Law........................................................ 51
Section 11.4 Consent to Jurisdiction; Waiver of Immunities; Attorneys'Fees........ 51
Section 11.5 Notices.............................................................. 52
Section 11.6 Mandatory Arbitration................................................ 52
Section 11.7 Assignment and Participations........................................ 52
Section 11.8 Severability......................................................... 53
Section 11.9 Survival............................................................. 53
Section 11.10 Conditions Not Fulfilled....................................... 53
Section 11.11 Entire Agreement; Amendment, Etc............................... 54
Section 11.12 Other Debt..................................................... 54
Section 11.13 Authorized Officers............................................ 54
Section 11.14 Headings....................................................... 54
Section 11.15 Counterparts................................................... 54
Section 11.16 Oral Agreements Not Enforceable................................ 55
</TABLE>
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER ONE TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 25th day of July, 1996 by and among BANK
OF AMERICA NW, N.A., successor by name change to Seattle-First National Bank, a
national banking association ("Seafirst"), UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND SHANGHAI
BANKING CORPORATION, LIMITED, an extra national banking institution ("Hong Kong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996 (as the same has
been or may be amended, modified or extended from time to time the "Credit
Agreement"). Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until September 30, 1996. The Agent
and the Lenders are prepared extend the Short-term Acquisition Line Maturity
Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement, the
definition of "Short-term Acquisition Line Maturity Date" is amended and
restated to read as follows:
"Short-term Acquisition Line Maturity Date" means September 30, 1996.
3. Promissory Notes. All references to the "Short-term Acquisition Line Maturity
Date" contained in the Short-term Acquisition Notes shall mean the Short-term
Acquisition Line Maturity Date as defined in the Credit Agreement, as hereby
amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before July 31, 1996:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number One to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NW, N.A.
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
THE HONGKONG AND SHANGHAI BANKING CORPORATION,
LIMITED
By:
Its:
AGENT: BANK OF AMERICA NW, N.A.
By:
Its:
<PAGE>
AMENDMENT NUMBER TWO TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER TWO TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 27th day of September, 1996 by and among
BANK OF AMERICA NW, N.A., successor by name change to Seattle-First National
Bank, a national banking association ("Seafirst"), UNITED STATES NATIONAL BANK
OF OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND
SHANGHAI BANKING CORPORATION, LIMITED, an extra national banking institution
("Hong Kong Bank") (each individually a "Lender" and collectively the
"Lenders"), SEAFIRST, as agent for the Lenders (the "Agent") and UNITED GROCERS,
INC., an Oregon corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number Two to Amended and Restated Credit Agreement dated
as of July 25, 1996 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until October 31, 1996 and extend the
Long-term Acquisition Line Maturity Date until October 31, 1997. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means October 31, 1996.
2.2 Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means October 31, 1997.
3. Promissory Notes.
3.1 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.2 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before September 30,
1996:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Two to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NW, N.A.
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
THE HONGKONG AND SHANGHAI BANKING CORPORATION,
LIMITED
By:
Its:
AGENT: BANK OF AMERICA NW, N.A.
By:
Its:
<PAGE>
AMENDMENT NUMBER THREE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER THREE TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 28th day of October, 1996 by and among
BANK OF AMERICA NW, N.A., successor by name change to Seattle-First National
Bank, a national banking association ("Seafirst"), UNITED STATES NATIONAL BANK
OF OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND
SHANGHAI BANKING CORPORATION, LIMITED, an extra national banking institution
("Hong Kong Bank") (each individually a "Lender" and collectively the
"Lenders"), SEAFIRST, as agent for the Lenders (the "Agent") and UNITED GROCERS,
INC., an Oregon corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996 and by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 (as the same has been
or may be amended, modified or extended from time to time the "Credit
Agreement"). Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until December 31, 1996 and extend the
Long-term Acquisition Line Maturity Date until December 31, 1997. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means December 31, 1996.
2.2 Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means December 31, 1997.
3. Promissory Notes.
3.1 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.2 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before October 31, 1996:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Three to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NW, N.A.
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
THE HONGKONG AND SHANGHAI BANKING CORPORATION,
LIMITED
By:
Its:
AGENT: BANK OF AMERICA NW, N.A.
By:
Its:
<PAGE>
FAX TRANSMISSION
ORIGINAL SENT BY U.S. MAIL
Doris A. Brown
Assistant Vice President
Seafirst Agency Services
November 29, 1996
Gordon Gray, V.P. William Long, V.P.
Seafirst Bank U.S. National Bank of Oregon
701 Fifth Avenue, Floor 12 111 SW 5th Avenue, Suite 400
Seattle, WA 98104 Portland, OR 97208
Randy Todd, S.V.P. John White, V.P. & C.F.O.
The Hongkong & Shanghai Banking Corp. Ltd. United Grocers, Inc.
900 SW Fifth Avenue, Suite 1550 6433 SE Lake Road
Portland, OR 97204 Portland, OR 97222-2198
RE: United Grocers, Inc. (the "Borrower")
Amended and Restated Credit Agreement dated May 31, 1996
Gentlemen:
This letter, if agreed to by all parties, shall be deemed Amendment Number Four
to the above referenced Amended and Restated Credit Agreement.
Pursuant to Section 2.2 Manner of Borrowing of the credit agreement, the
Borrower is to deliver to the Agent a Notice of Borrowing no later than 10:00
a.m., Seattle time for same day Prime Rate advances or, in the case of LIBOR
advances, no later than 10:00 a.m., Seattle time three days prior to the
requested date of borrowing. Notices received after the designated hour will be
deemed received on the next succeeding Business Day.
The Borrower has notified the Agent that due to its new lock box service, the
earliest it can deliver its Notice of Borrowing to the Agent is 12:00 p.m. Each
Lender's operations department have confirmed to the Agent that the later
designated hour would not be a problem for meeting wire transfer deadlines.
Your signature below is evidence of your agreement to the above amendment.
Please fax (206-358-0971) your signature to me by Thursday, December 5, 1996,
and return your original by mail.
Please call me (206-358-0101) if I can be of further assistance.
Sincerely,
Seafirst Bank, as Agent AGREED TO
/s/ Dora Brown U.S. National Bank of Oregon
Name of Institution
Dora Brown
A.V.P./Senior Agency Services By /s/ William A. Long
Its Vice President
cc: Brenda Little, Seafirst Agency Services
<PAGE>
AMENDMENT NUMBER FIVE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER FIVE TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 26th day of December, 1996 by and among
BANK OF AMERICA NW, N.A., successor by name change to Seattle-First National
Bank, a national banking association ("Seafirst"), UNITED STATES NATIONAL BANK
OF OREGON, a national banking association ("U.S. Bank"), HONGKONG BANK OF
CANADA, assignee in interest to the Hongkong and Shanghai Banking Corporation,
Limited, an extra national banking institution ("Hongkong Bank") (each
individually a "Lender" and collectively the "Lenders"), SEAFIRST, as agent for
the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon corporation (the
"Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 , by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996 and by that certain Amendment Number Four to Amended and
Restated Credit Agreement dated as of November 29, 1996 (as the same has been or
may be amended, modified or extended from time to time the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment shall have the
meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until January 31, 1997 and extend the
Long-term Acquisition Line Maturity Date until January 31, 1998. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means January 31, 1997.
2.2 Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means January 31, 1998.
3. Promissory Notes.
3.1 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.2 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before December 31, 1996:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Five to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NW, N.A.
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NW, N.A.
By:
Its:
<PAGE>
WAIVER AND AMENDMENT NUMBER SIX TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NUMBER SIX TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made as of this 31st day of January, 1997 by and
among BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST
BANK, successor by merger to Bank of America NW, N.A., successor by name change
to Seattle-First National Bank, a national banking association ("Seafirst"),
UNITED STATES NATIONAL BANK OF OREGON, a national banking association ("U.S.
Bank"), HONGKONG BANK OF CANADA, assignee in interest to The Hongkong and
Shanghai Banking Corporation, Limited, an extra national banking institution
("Hongkong Bank") (each individually a "Lender" and collectively the "Lenders"),
SEAFIRST, as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an
Oregon corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 , by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996 ("Amendment Four") and by that
certain Amendment Number Five to Amended and Restated Credit Agreement dated as
of December 26, 1996 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date.
C. The Credit Agreement contains certain financial covenants binding
upon the Borrower. It is known that the Borrower was in breach of the fixed
charge coverage ratio set forth in the Credit Agreement as of its fiscal year
ended September 27, 1996 and based on operating experience it is anticipated
that the Borrower's financial statements will disclose that the Borrower will be
in breach of such fixed charge coverage ratio as of its fiscal quarter ended
December 27, 1996.
D. The Borrower has requested that the Agent and the Lenders waive
their rights to exercise remedies in respect of such defaults and has requested
the Lenders to extend the Short-term Acquisition Line Maturity Date until April
30, 1997 and extend the Long-term Acquisition Line Maturity Date until April 30,
1998. The Agent and the Lenders are prepared to grant such waivers and extend
the Short-term Acquisition Line Maturity Date and extend the Long-term
Acquisition Line Maturity Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Waiver of Defaults.
2.1 On or Before September 27, 1996. Subject to the terms and conditions of this
Amendment, the Agent and the Lenders hereby waive their respective rights to
exercise remedies under the Credit Agreement in respect of a breach occurring on
or before September 27, 1996 of the Borrower's obligations under Section 7.13 of
the Credit Agreement.
2.2 On or Before December 27, 1996. Subject to the terms and conditions of this
Amendment, the Agent and the Lenders hereby waive their respective rights to
exercise remedies under the Credit Agreement in respect of a breach occurring on
or before December 27, 1996 of the Borrower's obligations under Section 7.13 of
the Credit Agreement provided, however, that the waiver provided for in this
Section 2.2 shall not become effective unless Borrower shall have maintained, on
a consolidated basis for the four consecutive fiscal quarters ended December 27,
1996, a ratio of Fixed Charge Coverage of at least 1.0 to 1.0.
3. Amendments to Credit Agreement.
3.1 Amendments to Section 1.1. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
(a) Interim Rate. The definition of "Interim Rate" is amended and restated to
read as follows:
"Interim Rate" means, a per annum rate of interest equal to
the sum of (a) the per annum rate of interest established from
time to time by U.S. Bank as its "overnight money market rate"
for loans of comparable amounts; and (b) one hundred
twenty-five (125) basis points (one and one-quarter percent)
changing as such "overnight money market rate" changes from
time to time.
(b) Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means April 30, 1997.
(c) Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means April 30, 1998.
3.2 Amendment to Section 2.5. In Section 2.5(a) of the Credit Agreement, the
definition of "LIBOR Rate" is amended and restated to read as follows:
"LIBOR Rate" means, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal
to the sum of (a) one hundred twenty-five (125) basis points
(one and one-quarter percent) and (b) the product of (i) the
Euro-dollar Rate in effect for such Applicable Interest Period
and (ii) the Euro-dollar Reserves in effect on the first day
of such Applicable Interest Period.
3.3 Amendment to Section 3.3. In Section 3.3 of the Credit Agreement, clause
(b)(i) is hereby deleted and the following substituted in its stead:
(i) one hundred twenty-five (125) basis points (one and one-quarter
percent) and the Applicable Acceptance Rate; and
4. Promissory Notes.
4.1 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4.2 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
5. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before January 31, 1997:
5.1 Delivery of Amendments. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment and Amendment Four to
Agent.
5.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
5.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
5.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
6. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
7. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
9. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
10. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver and
Amendment Number Six to Amended and Restated Credit Agreement as of the date
first above written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:
Its:
By:
Its:
<PAGE>
AMENDMENT NUMBER SEVEN TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER SEVEN TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 28th day of February, 1997 by and among
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK,
successor by merger to Bank of America NW, N.A., successor by name change to
Seattle-First National Bank, a national banking association ("Seafirst"), UNITED
STATES NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"),
HONGKONG BANK OF CANADA, assignee in interest to The Hongkong and Shanghai
Banking Corporation, Limited, an extra national banking institution ("Hongkong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain Amended
and Restated Credit Agreement dated as of May 31, 1996, as amended by that
certain Amendment Number One to Amended and Restated Credit Agreement dated as
of July 25, 1996, by that certain Amendment Number Two to Amended and Restated
Credit Agreement dated as of September 27, 1996 , by that certain Amendment
Number Three to Amended and Restated Credit Agreement dated as of October 28,
1996, by that certain Amendment Number Four to Amended and Restated Credit
Agreement dated as of November 29, 1996, by that certain Amendment Number Five
to Amended and Restated Credit Agreement dated as of December 26, 1996 and by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997 (as the same has been or may be amended,
modified or extended from time to time the "Credit Agreement"). Capitalized
terms not otherwise defined in this Amendment shall have the meanings given in
the Credit Agreement.
B. The Credit Agreement contains certain financial covenants binding upon the
Borrower. The Borrower has requested that the Agent and the Lenders modify the
required fixed charge coverage ratio set forth in Section 7.13 of the Credit
Agreement through its fiscal quarter ending March 25, 1998. The Agent and the
Lenders are prepared to modify the fixed charge coverage ratio on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendment to Credit Agreement. Section 7.13 of the Credit Agreement is hereby
deleted and the following substituted in its stead:
Section 7.13 Fixed Charge Coverage. Borrower shall maintain on
a consolidated basis a Fixed Charge Coverage ratio (for the
four most recent fiscal quarters) as follows:
Period Ratio
December 28, 1996 through
June 27, 1997 at least 1.0 to 1.0
June 28, 1997 through
September 26, 1997 at least 1.15 to 1.0
September 27, 1997 through
December 26, 1997 at least 1.2 to 1.0
December 27, 1997 through
March 25, 1998 at least 1.25 to 1.0
As used in this Agreement, "Fixed Charge Coverage" means for
any period the ratio derived by dividing (a) the sum of net
income for such period (before income taxes, patronage
dividends, and extraordinary items) plus Fixed Charges by (b)
Fixed Charges. As used in this Agreement, "Fixed Charges"
means the sum of (a) interest expense on all of Borrower's
Indebtedness, (b) the amortization of any discount applied in
advancing Funded Debt to Borrower, and (c) gross rental
expense net of pass-through rental income from Borrower's
members.
3. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before February 28, 1997:
3.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
3.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
3.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
3.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
4. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
5. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
7. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
8. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Seven to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
By:
Its:
<PAGE>
AMENDMENT NUMBER EIGHT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER EIGHT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 30th day of April, 1997 by and among BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK, successor
by merger to Bank of America NW, N.A., successor by name change to Seattle-First
National Bank, a national banking association ("Seafirst"), UNITED STATES
NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"), HONGKONG
BANK OF CANADA, assignee in interest to The Hongkong and Shanghai Banking
Corporation, Limited, an extra national banking institution ("Hongkong Bank")
(each individually a "Lender" and collectively the "Lenders"), SEAFIRST, as
agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997 and by that certain Amendment Number
Seven to Amended and Restated Credit Agreement dated as of February 28, 1997 (as
the same has been or may be amended, modified or extended from time to time the
"Credit Agreement"). Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Borrower has requested that the Agent and the Lenders extend the
Short-term Maturity Date and the Short-term Acquisition Line Maturity Date until
May 30, 1997, and the Long-term Maturity Date and the Long-term Acquisition Line
Maturity Date until May 30, 1998. The Agent and the Lenders are prepared to
extend the Maturity Dates on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement.
2.1 Amendments to Section 1.1. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
(a) Interim Rate. The definition of "Interim Rate" is amended and restated
to read as follows:
"Interim Rate" means, a per annum rate of interest equal to the sum of (a)
the per annum rate of interest established from time to time by U.S. Bank
as its "overnight money market rate" for loans of comparable amounts; and
(b) one hundred fifty (150) basis points (one and one-half percent)
changing as such "overnight money market rate" changes from time to time.
(b) Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means May 30, 1998.
(c) Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as follows:
"Long-term Maturity Date" means May 30, 1998.
(d) Short-term Acquisition Line Maturity Date. The definition of
"Short-term Acquisition Line Maturity Date" is amended and restated to read
as follows:
"Short-term Acquisition Line Maturity Date" means May 30, 1997.
(e) Short-term Maturity Date. The definition of "Short-term Maturity Date"
is amended and restated to read as follows:
"Short-term Maturity Date" means May 30, 1997.
2.2 Amendment to Section 2.5. In Section 2.5(a) of the Credit Agreement, the
definition of "LIBOR Rate" is amended and restated to read as follows:
"LIBOR Rate" means, with respect to any LIBOR Loan for any Applicable
Interest Period, an interest rate per annum equal to the sum of (a) one
hundred fifty (150) basis points (one and one-half percent) and (b) the
product of (i) the Euro-dollar Rate in effect for such Applicable Interest
Period and (ii) the Euro-dollar Reserves in effect on the first day of such
Applicable Interest Period.
2.3 Amendment to Section 3.3. In Section 3.3 of the Credit Agreement, clause
(b)(i) is hereby deleted and the following substituted in its stead:
(i) one hundred fifty (150) basis points (one and one-half percent) and the
Applicable Acceptance Rate; and
3. Promissory Notes.
3.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.3 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.4 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before April 30, 1997:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Extension Fee. The Borrower shall have paid to the Agent for the account of
the Lenders, in proportion to the percentage that aggregate of such Lender's
Commitments bears to the Total Commitment, an extension fee in an amount equal
to one-twelfth of one-eighth percent of the Total Commitment.
4.3 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.4 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.5 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Eight to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
<PAGE>
AMENDMENT NUMBER NINE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER NINE TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 30th day of May, 1997 by and among BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK, successor by
merger to Bank of America NW, N.A., successor by name change to Seattle-First
National Bank, a national banking association ("Seafirst"), UNITED STATES
NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"), HONGKONG
BANK OF CANADA, assignee in interest to The Hongkong and Shanghai Banking
Corporation, Limited, an extra national banking institution ("Hongkong Bank")
(each individually a "Lender" and collectively the "Lenders"), SEAFIRST, as
agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997, by that certain Amendment Number Seven
to Amended and Restated Credit Agreement dated as of February 28, 1997 and by
that certain Amendment Number Eight to Amended and Restated Credit Agreement
dated as of April 30, 1997 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date and the Short Term Maturity Date until
June 30, 1997 and extend the Long-term Acquisition Line Maturity Date and the
Long Term Maturity Date until June 30, 1998. The Agent and the Lenders are
prepared to extend the Short-term Acquisition Line Maturity Date and extend the
Long-term Acquisition Line Maturity Date on the terms and conditions set forth
below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means June 30, 1998.
2.2 Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as - follows:
"Long term Maturity Date" means June 30, 1998.
2.3 Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means June 30, 1997.
2.4 Short-term Maturity Date. The definition of "Short-term Maturity Date" is
amended and restated to read as follows:
"Short-term Maturity Date" means June 30, 1997.
3. Promissory Notes.
3.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.3 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.4 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before May 30, 1997:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Nine to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
<PAGE>
AMENDMENT NUMBER TEN TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER TEN TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 30th day of June, 1997 by and among BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK, successor
by merger to Bank of America NW, N.A., successor by name change to Seattle-First
National Bank, a national banking association ("Seafirst"), UNITED STATES
NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"), HONGKONG
BANK OF CANADA, assignee in interest to The Hongkong and Shanghai Banking
Corporation, Limited, an extra national banking institution ("Hongkong Bank")
(each individually a "Lender" and collectively the "Lenders"), SEAFIRST, as
agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997, by that certain Amendment Number Seven
to Amended and Restated Credit Agreement dated as of February 28, 1997, by that
certain Amendment Number Eight to Amended and Restated Credit Agreement dated as
of April 30, 1997 and by that certain Amendment Number Nine to Amended and
Restated Credit Agreement dated as of May 30, 1997 (as the same has been or may
be amended, modified or extended from time to time the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment shall have the
meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date and the Short Term Maturity Date until
July 29, 1997 and extend the Long-term Acquisition Line Maturity Date and the
Long Term Maturity Date until July 29, 1998. The Agent and the Lenders are
prepared to extend the Short-term Acquisition Line Maturity Date and extend the
Long-term Acquisition Line Maturity Date on the terms and conditions set forth
below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means July 29, 1998.
2.2 Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as follows:
"Long-term Maturity Date" means July 29, 1998.
2.3 Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means July 29, 1997.
2.4 Short-term Maturity Date. The definition of "Short-term Maturity Date" is
amended and restated to read as follows:
"Short-term Maturity Date" means July 29, 1997.
3. Promissory Notes.
3.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.3 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.4 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before June 30, 1997:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Ten to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
<PAGE>
AMENDMENT NUMBER ELEVEN TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER ELEVEN TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made as of this 29th day of July, 1997 by and among BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK, successor
by merger to Bank of America NW, N.A., successor by name change to Seattle-First
National Bank, a national banking association ("Seafirst"), UNITED STATES
NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"), HONGKONG
BANK OF CANADA, assignee in interest to The Hongkong and Shanghai Banking
Corporation, Limited, an extra national banking institution ("Hongkong Bank")
(each individually a "Lender" and collectively the "Lenders"), SEAFIRST, as
agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997, by that certain Amendment Number Seven
to Amended and Restated Credit Agreement dated as of February 28, 1997, by that
certain Amendment Number Eight to Amended and Restated Credit Agreement dated as
of April 30, 1997, by that certain Amendment Number Nine to Amended and Restated
Credit Agreement dated as of May 30, 1997 and by that certain Amendment Number
Ten to Amended and Restated Credit Agreement dated as of June 30, 1997 (as the
same has been or may be amended, modified or extended from time to time the
"Credit Agreement"). Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date and the Short Term Maturity Date until
August 15, 1997 and extend the Long-term Acquisition Line Maturity Date and the
Long Term Maturity Date until August 15, 1998. The Agent and the Lenders are
prepared to extend the Short-term Acquisition Line Maturity Date and extend the
Long-term Acquisition Line Maturity Date on the terms and conditions set forth
below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is amended as follows:
2.1 Amendment to Section 1.1. In Section 1.1, amendments are made to the
definitions, as follows:
(a) Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means August 15, 1998.
(b) Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as follows:
"Long-term Maturity Date" means August 15, 1998.
(c) Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means August 15, 1997.
(d) Short-term Maturity Date. The definition of "Short-term Maturity Date" is
amended and restated to read as follows:
"Short-term Maturity Date" means August 15, 1997.
2.2 Amendment to Section 2.5. In Section 2.5, the second proviso in definition
of "Applicable Interest Period" is amended and restated to read as follows:
provided further, that no Applicable Interest Period may be
selected for any LIBOR Loan if it extends beyond August 29, 1997.
3. Promissory Notes.
3.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.3 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.4 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
3.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before July 29, 1997:
4.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
4.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
4.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
4.4 Representations True; No Default. The representations of the Borrower as set
forth in Article 6 of the Credit Agreement shall be true on and as of the date
of this Amendment with the same force and effect as if made on and as of this
date. No Event of Default and no event which, with notice or lapse of time or
both, would constitute a Event of Default, shall have occurred and be continuing
or will occur as a result of the execution of this Amendment.
5. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
6. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
9. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Number Eleven to Amended and Restated Credit Agreement as of the date first
above written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
UNITED STATES NATIONAL BANK OF OREGON
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
<PAGE>
WAIVER AND AMENDMENT NUMBER TWELVE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NUMBER TWELVE TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made as of this 15th day of August, 1997 by and
among BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST
BANK, successor by merger to Bank of America NW, N.A., successor by name change
to Seattle-First National Bank, a national banking association ("Seafirst"),
U.S. BANK NATIONAL ASSOCIATION, successor by merger to United States National
Bank of Oregon, a national banking association ("U.S. Bank"), HONGKONG BANK OF
CANADA, assignee in interest to The Hongkong and Shanghai Banking Corporation,
Limited, an extra national banking institution ("Hongkong Bank") (each
individually a "Lender" and collectively the "Lenders"), SEAFIRST, as agent for
the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon corporation (the
"Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997, by that certain Amendment Number Seven
to Amended and Restated Credit Agreement dated as of February 28, 1997, by that
certain Amendment Number Eight to Amended and Restated Credit Agreement dated as
of April 30, 1997, by that certain Amendment Number Nine to Amended and Restated
Credit Agreement dated as of May 30, 1997, by that certain Amendment Number Ten
to Amended and Restated Credit Agreement dated as of June 30, 1997 and by that
certain Amendment Number Eleven to Amended and Restated Credit Agreement dated
as of July 29, 1997 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Credit Agreement contains certain financial covenants binding
upon the Borrower. Based on the Borrower's operating experience it is
anticipated that the Borrower's financial statements will disclose that the
Borrower was in breach of the working capital and the minimum capital plus
subordinated debt covenants set forth in the Credit as of its fiscal quarter
ended June 27, 1997.
E. The Borrower has requested that the Agent and the Lenders waive
their rights to exercise remedies in respect of such defaults and has requested
the Lenders extend the Short-term Acquisition Line Maturity Date and the Short
Term Maturity Date until August 29, 1997 and extend the Long-term Acquisition
Line Maturity Date and the Long Term Maturity Date until August 29, 1998. The
Agent and the Lenders are prepared to grant such waivers and to extend the
Short-term Acquisition Line Maturity Date and extend the Long-term Acquisition
Line Maturity Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Waiver of Defaults. Subject to the terms and conditions of this Amendment,
the Agent and the Lenders hereby waive their respective rights to exercise
remedies under the Credit Agreement in respect of a breach occurring on or
before August 29, 1997 of the Borrower's obligations under Section 7.12 and 7.14
of the Credit Agreement.
3. Amendments to Credit Agreement. The Credit Agreement is amended as follows:
3.1 Amendment to Section 1.1. In Section 1.1, amendments are made to the
definitions, as follows:
(a) Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means August 29, 1998.
(b) Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as follows:
"Long-term Maturity Date" means August 29, 1998.
(c) Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means August 29, 1997.
(d) Short-term Maturity Date. The definition of "Short-term Maturity Date" is
amended and restated to read as follows:
"Short-term Maturity Date" means August 29, 1997.
3.2 Amendment to Section 2.5. In Section 2.5, the second proviso in definition
of "Applicable Interest Period" is amended and restated to read as follows:
provided further, that no Applicable Interest Period may be
selected for any LIBOR Loan if it extends beyond September 15, 1997.
4. Promissory Notes.
4.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4.3 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4.4 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
5. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before August 15, 1997:
5.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
5.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
5.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
5.4 Representations True. The representations of the Borrower as set forth in
Article 6 of the Credit Agreement shall be true on and as of the date of this
Amendment with the same force and effect as if made on and as of this date.
6. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
7. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
9. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
10. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver and
Amendment Number Twelve to Amended and Restated Credit Agreement as of the date
first above written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
U.S. BANK NATIONAL ASSOCIATION, successor by merger
to United States National Bank of Oregon
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
<PAGE>
WAIVER AND AMENDMENT NUMBER THIRTEEN TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NUMBER THIRTEEN TO AMENDED AND RESTATED
CREDIT AGREEMENT (this "Amendment") is made as of this 29th day of August, 1997
by and among BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a
SEAFIRST BANK, successor by merger to Bank of America NW, N.A., successor by
name change to Seattle-First National Bank, a national banking association
("Seafirst"), U.S. BANK NATIONAL ASSOCIATION, successor by merger to United
States National Bank of Oregon, a national banking association ("U.S. Bank"),
HONGKONG BANK OF CANADA, assignee in interest to The Hongkong and Shanghai
Banking Corporation, Limited, an extra national banking institution ("Hongkong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996, by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996, by
that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997, by that certain Amendment Number Seven
to Amended and Restated Credit Agreement dated as of February 28, 1997, by that
certain Amendment Number Eight to Amended and Restated Credit Agreement dated as
of April 30, 1997, by that certain Amendment Number Nine to Amended and Restated
Credit Agreement dated as of May 30, 1997, by that certain Amendment Number Ten
to Amended and Restated Credit Agreement dated as of June 30, 1997, by that
certain Amendment Number Eleven to Amended and Restated Credit Agreement dated
as of July 29, 1997 and by that certain Amendment Number Twelve to Amended and
Restated Credit Agreement dated as of August 15, 1997 (as the same has been or
may be amended, modified or extended from time to time the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment shall have the
meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Lenders
have agreed to make Operating Loans to the Borrower and U.S. Bank has agreed to
make Overnight Loans to the Borrower during the period beginning on the date of
the Credit Agreement and ending on the Short-term Maturity Date. Lenders have
also agreed to make Revolving Loans to the Borrower, as provided therefor in the
Credit Agreement, during the period beginning on the date of the Credit
Agreement and ending on the Long-term Maturity Date.
C. Subject to the terms and conditions of the Credit Agreement,
Seafirst and U.S. Bank have agreed to make Short-term Acquisition Loans to the
Borrower during the period beginning on the date of the Credit Agreement and
ending on the Short-term Acquisition Line Maturity Date. Seafirst and U.S. Bank
have also agreed to make Long-term Acquisition Loans to the Borrower, as
provided therefor in the Credit Agreement, during the period beginning on the
date of the Credit Agreement and ending on the Long-term Acquisition Line
Maturity Date.
D. The Credit Agreement contains certain financial covenants binding
upon the Borrower. Based on the Borrower's operating experience it is
anticipated that the Borrower's financial statements will disclose that the
Borrower was in breach of the working capital and the minimum capital plus
subordinated debt covenants set forth in the Credit as of its fiscal quarter
ended June 27, 1997.
E. The Borrower has requested that the Agent and the Lenders waive
their rights to exercise remedies in respect of such defaults and has requested
the Lenders extend the Short-term Acquisition Line Maturity Date and the Short
Term Maturity Date until September 12, 1997 and extend the Long-term Acquisition
Line Maturity Date and the Long Term Maturity Date until September 12, 1998. The
Agent and the Lenders are prepared to grant such waivers and to extend the
Short-term Acquisition Line Maturity Date and extend the Long-term Acquisition
Line Maturity Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
2. Waiver of Defaults. Subject to the terms and conditions of this Amendment,
the Agent and the Lenders hereby waive their respective rights to exercise
remedies under the Credit Agreement in respect of a breach occurring on or
before September 12, 1997 of the Borrower's obligations under Section 7.12 and
7.14 of the Credit Agreement.
3. Amendments to Credit Agreement. The Credit Agreement is amended as follows:
3.1 Amendment to Section 1.1. In Section 1.1, amendments are made to the
definitions, as follows:
(a) Long-term Acquisition Line Maturity Date. The definition of "Long-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Long-term Acquisition Line Maturity Date" means September 12, 1998.
(b) Long-term Maturity Date. The definition of "Long-term Maturity Date" is
amended and restated to read as follows:
"Long-term Maturity Date" means September 12, 1998.
(c) Short-term Acquisition Line Maturity Date. The definition of "Short-term
Acquisition Line Maturity Date" is amended and restated to read as follows:
"Short-term Acquisition Line Maturity Date" means September 12, 1997.
(d) Short-term Maturity Date. The definition of "Short-term Maturity Date" is
amended and restated to read as follows:
"Short-term Maturity Date" means September 12, 1997.
3.2 Amendment to Section 2.5. In Section 2.5, amendments are made to the
definitions, as follows:
(a) Applicable Interest Period. The second proviso in definition of "Applicable
Interest Period" is amended and restated to read as follows:
provided further, that no Applicable Interest Period may be
selected for any LIBOR Loan if it extends beyond such Loan's
Maturity Date.
(b) Applicable Interest Rate. The definition of "Applicable Interest Rate" is
amended and restated to read as follows:
"Applicable Interest Rate" means (i) for each Loan other than an Overnight
Loan, the Prime Rate; and (ii) for each Overnight Loan, the U.S. Bank
Prime Rate.
4. Promissory Notes.
4.1 Revolving Notes. All references to the "Long-term Maturity Date" contained
in the Revolving Notes shall mean the Long-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4.2 Operating Notes. All references to the "Short-term Maturity Date" contained
in the Operating Notes shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
4.3 Short-term Acquisition Notes. All references to the "Short-term Acquisition
Line Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4.4 Long-term Acquisition Notes. All references to the "Long-term Acquisition
Line Maturity Date" contained in the Long-term Acquisition Notes shall mean the
Long-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4.5 Overnight Note. All references to the "Short-term Maturity Date" contained
in the Overnight Note shall mean the Short-term Maturity Date as defined in the
Credit Agreement, as hereby amended.
5. Conditions to Effectiveness. Notwithstanding anything contained herein to the
contrary, this Amendment shall not become effective until each of the following
conditions is fully and simultaneously satisfied on or before August 15, 1997:
5.1 Delivery of Amendment. The Borrower, the Agent and each Lender shall have
executed and delivered counterparts of this Amendment to Agent.
5.2 Reimbursement for Expenses. The Borrower shall have reimbursed the Agent for
all expenses actually incurred by the Agent in connection with the preparation
of the Credit Agreement and the other Loan Documents and shall have paid all
other amounts due and owing under the Loan Documents.
5.3 Borrower Corporate Authority. The Agent shall have received such evidence of
corporate authority as the Agent shall request.
5.4 Representations True. The representations of the Borrower as set forth in
Article 6 of the Credit Agreement shall be true on and as of the date of this
Amendment with the same force and effect as if made on and as of this date.
6. Representations and Warranties. The Borrower hereby represents and warrants
to the Lenders and the Agent that each of the representations and warranties set
forth in Article 6 of the Credit Agreement is true and correct in each case as
if made on and as of the date of this Amendment and the Borrower expressly
agrees that it shall be an additional Event of Default under the Credit
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
7. No Further Amendment. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
8. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
9. Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
10. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver and
Amendment Number Thirteen to Amended and Restated Credit Agreement as of the
date first above written.
BORROWER: UNITED GROCERS, INC.
By:
Its:
LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
U.S. BANK NATIONAL ASSOCIATION, successor by merger
to United States National Bank of Oregon
By:
Its:
HONGKONG BANK OF CANADA
By:
Its:
AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
Its:
Exhibit 10E1
TRANSITION AGREEMENT
--------------------
This agreement is made and executed this ___ day of May, 1997, by and
between UNITED GROCERS, INC., an Oregon corporation, hereinafter referred to as
"UG," and ALAN C. JONES, hereinafter referred to as "Jones."
WHEREAS, Jones has occupied the position of Chief Executive Officer of
UG since 1983, and was previously employed by UG in various positions prior
thereto since 1964, and
WHEREAS, UG and Jones previously entered into an Executive Compensation
Agreement - 1991 ("Compensation Agreement"), dated March 7, 1991, and
WHEREAS, Jones and UG are desirous of terminating the aforesaid
Compensation Agreement effective the date hereof, and
WHEREAS, the parties hereto are also desirous of settling any and all
claims either party may have against the other of whatsoever kind, nature or
description, and
WHEREAS, UG is further desirous of retaining the unique experience,
ability and services of Jones as acting Chief Executive Officer for an interim
period until such time as a replacement Chief Executive Officer is retained;
until the Board of Directors determines Jones's services are no longer required;
or December 1, 1997, whichever first occurs, and
WHEREAS, UG is further desirous of obtaining Jones's assurances as a
condition to the performance by UG of its obligations hereunder, that during the
term of this agreement and of any renewal thereof, he will not directly or
indirectly render any services of an advisory nature, or otherwise to or become
Page 1 - TRANSITION AGREEMENT
<PAGE>
employed by or participate in, or engage in any business which, directly or
indirectly, is competitive with the wholesale distribution of grocery and
related products which are customarily stocked by retail supermarkets within the
States of Oregon, Washington and California, without the prior written consent
of UG. Provided, however, that nothing herein contained shall prohibit Jones
from owning stock or other securities of a competitor which are relatively
insubstantial to the total outstanding stock of such competitor and so long as
he, in fact, does not have the power to control, participate in or direct the
management or polices of such competitor, and does not serve as a director or
officer of, or is not otherwise associated with any competitor. It is expressly
acknowledged, however, by and between the parties hereto, that Jones's
involvement, employment, affiliation or ownership in the retail grocery industry
shall not constitute a violation of this agreement or a prohibited activity.
NOW, THEREFORE, in consideration of the promises of the parties one
unto the other, and the above recitals which by reference are hereby
incorporated herein, it is hereby agreed as follows:
1. Jones will continue to serve as Chief Executive Officer during the
transition until such time as UG retains the services of a new Chief Executive
Officer or until December 1, 1997, whichever first occurs. Following UG's
employment of a new Chief Executive Officer, Jones will thereafter act as and
serve as an employee of UG and be available upon reasonable notice to provide
Page 2 - TRANSITION AGREEMENT
<PAGE>
advice and assistance to the Board of Directors or the replacement Chief
Executive Officer. However, such services shall not exceed five hours per month.
2. Term. The term of this agreement shall commence on March 1, 1997, and shall
continue for a period of seven years from said date.
3. Compensation. As compensation for the services to be rendered by
Jones, UG shall pay Jones base compensation of $275,000 per annum for a period
from March 1, 1997, through February 28, 1999. Thereafter, for a period of five
years, UG shall pay Jones base compensation of $137,500 per annum from March 1,
1999, to February 28, 2004. Such compensation shall be paid to Jones with the
same frequency as executives of UG are compensated. In addition thereto, Jones
will have the continuing use of his company car through the expiration of the
current lease in January, 2000. The company shall be responsible for
maintenance, repairs, insurance and other incidental costs attendant thereto.
4. Employee Benefits/Expenses. UG shall reimburse Jones for all
reasonable, customary and necessarily incurred expenses in carrying out his
duties. Jones shall present to UG from time to time an itemized account of such
expenses and in such form as may be required by UG. This reimbursement of
expenses will continue as long as Jones continues to perform the duties of Chief
Executive Officer.
5. Employee Benefits. This agreement is not, however, intended and
shall not be deemed to waive, release and/or modify
Page 3 - TRANSITION AGREEMENT
<PAGE>
any rights, benefits and/or privileges to which Jones and/or his spouse may be
entitled to as an employee of UG under any retirement or pension plan (qualified
or non-qualified), including without limitation the Executive Deferred
Compensation Plan, 401(k), supplemental 401(k) and medical, dental or other
plans which are now in effect or such other medical and dental plans as may
subsequently be offered to senior management of UG. In the event UG is unable to
include Jones and his spouse in the group medical and dental plans, UG agrees to
provide medical and dental insurance providing comparable benefits for Jones and
his spouse. UG represents and warrants that the benefits Jones will receive
under the pension plan will be determined in the same manner and at the same
level of benefits as if he retired at age 62. The 401(k) benefits will, however,
be based upon the salary actually earned each year during the term of this
agreement. In addition thereto, UG shall continue to pay annually, in addition
to the compensation set forth herein, the sum of $48,387 per year, which sum
shall be used by Jones to satisfy the insurance premium policy with Guardian
Life Insurance Company. The company shall pay to Jones the aforesaid $48,387 sum
prior to the premium due dates through December 1, 2003. The company will, upon
expiration of this agreement, cause the collateral assignment of benefits under
the November 14, 1994 assignment, to be released.
6. Release/Jones. In consideration of the foregoing payments and as a material
inducement to UG to enter into this agreement, Jones does hereby completely
release and forever discharge UG and its officers, directors, agents, employees,
Page 4 - TRANSITION AGREEMENT
<PAGE>
successors, estate, heirs and assigns from any and all claims, rights, demands,
actions, obligations and causes of action in every kind, nature, character,
known or unknown, which Jones may now have or has ever had against UG arising
from or in any way connected with Jones's prior employment, termination of
employment or lack of employment with UG, including, but not limited to, all
"constructive discharge" and "wrongful discharge" claims, all claims relating to
any contracts of employment, whether express or implied, all past claims
relating to wages, salary, compensation payments, expense reimbursements, loans,
costs, expenses or attorney's fees, any covenant of good faith in fair dealing,
whether express or implied, and any tort of any nature, any legal restriction on
UG's right to terminate employees, or any federal, state or municipal law, rule,
regulation or ordinance, including, without limitation, the Federal Age
Discrimination and Employment Act, as amended, Title VII of the Civil Rights Act
of 1964, as amended, and any other laws or regulations relating to prior
employment, discrimination and expense reimbursement.
7. Release/UG. In consideration for entering into this agreement,
UG hereby releases and forever discharges Jones from any and all claims, rights,
demands, actions, obligations and causes of action of any and every kind, nature
and character, known or unknown, which UG may now have, has ever had, or may
have in the future against Jones arising from or in any way connected with
Jones's prior employment, including, but not limited to, any and all claims
arising out of any tort of any
Page 5 - TRANSITION AGREEMENT
<PAGE>
nature, or any federal, state or municipal law, rule, regulation or ordinance,
excepting therefrom only claims arising from criminal wrongdoings, obligations,
preserved or created, by this agreement.
8. Restrictive Covenant. Jones expressly agrees as a condition to the
performance by UG of its obligations hereunder, that during the term of this
agreement and of any renewal thereof, he will not directly or indirectly render
any services of an advisory nature, or otherwise to or become employed by or
participate in, or engage in any business which, directly or indirectly, is
competitive with the wholesale distribution of grocery and related products
which are customarily stocked by retail supermarkets within the States of
Oregon, Washington and California, without the prior written consent of UG.
Provided, however, that nothing herein contained shall prohibit Jones from
owning stock or other securities of a competitor which are relatively
insubstantial to the total outstanding stock of such competitor and so long as
he, in fact, does not have the power to control, participate in or direct the
management or polices of such competitor, and does not serve as a director or
officer of, or is not otherwise associated with any competitor. It is expressly
acknowledged, however, by and between the parties hereto, that Jones's
involvement, employment, affiliation or ownership in the retail grocery industry
shall not constitute a violation of this agreement or a prohibited activity.
9. This agreement shall be binding and enforceable by Jones against UG,
its successors and assigns.
Page 6 - TRANSITION AGREEMENT
<PAGE>
10. The parties hereto agree that they respectively will refrain from
making any disparaging statements, releases, comments or publications with
respect to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed the day and year first above written.
UNITED: United Grocers, Inc.
By: /s/ Gordon E. Smith
-------------------
Name: Gordon E. Smith
Title: Chairman of the Board
JONES:
/s/Alan C. Jones
Alan C. Jones
Page 7 - TRANSITION AGREEMENT
Exhibit 10.E2
EXECUTIVE COMPENSATION AGREEMENT
--------------------------------
THIS AGREEMENT, effective the 1st day of July, 1997 (the "Agreement"),
by and between UNITED GROCERS, INC., an Oregon corporation (the "Company"), with
principal offices at 6433 SE Lake Road, Portland, Oregon, and CHARLES E. CARLBOM
("Carlbom"), residing in Portland, Oregon.
WHEREAS, The company desires to employ and obtain the unique
experience, ability and leadership skills of Carlbom as President and Chief
Executive Officer, from July 1, 1997, through August 30, 1999, and to preclude
any other competitive business from securing his services and utilizing his
experience, background and know-how; and
WHEREAS, the terms, conditions and undertakings of this Agreement were
submitted to and duly approved and authorized by the Company's Board of
Directors at a meeting held on June 2, 1997, and July 9, 1997;
NOW, THEREFORE, in consideration of the promises of the parties, one
unto the other, it is hereby agreed as follows:
1. Employment.
----------
1.1 The Company employs Carlbom and Carlbom accepts employment as
the Chief Executive Officer and President of the Company and agrees to perform
services in such an executive capacity. The Company and Carlbom also agree that
Carlbom may occupy and perform services in an executive and/or board capacity to
such wholly owned subsidiaries of the Company as Carlbom may determine
appropriate and/or desirable.
1.2 As the President and Chief Executive Officer,
Page 1 - EXECUTIVE COMPENSATION AGREEMENT
<PAGE>
Carlbom's responsibilities shall be the overall operation and management of the
Company, and subject solely to the direction and guidance of the Board of
Directors.
1.3 Carlbom shall devote his full time, effort and energies to the
successful and profitable operation of Company and its wholly owned
subsidiaries. However, the foregoing shall not preclude and/or prevent Carlbom
from serving on the Board of Directors of non-competitor, nonprofit or for
profit companies and/or entities so long as such services do not adversely
affect his ability to perform the services requested hereunder. Any and all
compensation received by Carlbom for such director services shall be for his own
account and benefit.
2. Term.
----
2.1 The term of this Agreement shall commence on July 1, 1997, and
shall continue through and including August 30, 1999.
3. Compensation.
------------
3.1 As compensation for the services to be rendered, the Company
shall pay Carlbom a base compensation of $180,000 per annum. The amount of base
compensation as herein provided may be increased annually by such percentage
amount as the Board of Directors shall determine appropriate in order to address
cost of living increases. Such compensation shall be paid to Carlbom with the
same frequency as other executives of the Company are compensated.
3.2 The salary payments are subject to appropriate withholding, e.g.
federal and state income taxes, FICA, etc.
Page 2 - EXECUTIVE COMPENSATION AGREEMENT
<PAGE>
3.3 In addition to the base salary, in December of each year, the
Board of Directors or the Compensation Committee shall determine what
appropriate amount of bonus, if any, is to be paid to Carlbom. Such
determination shall take into account such factors as the Board of Directors
shall consider relevant in judging the performance of Carlbom.
Any bonus to be paid to Carlbom shall be paid by January 10 of the
following year. In the event of the death of Carlbom, payment of any
compensation due and owing shall be paid to his then surviving spouse, or if no
surviving spouse, then to his estate.
4. Restrictive Covenant. Carlbom acknowledges and agrees that because
--------------------
of and by reason of his employment as President and Chief Executive Officer of
the Company he will become privy to the most confidential and privileged
information possessed by the Company (collectively "Privileged Information").
This Privileged Information shall consist of, without limiting the generality of
the foregoing, financial statements, costs and sales analyses data, supply
sources, business opportunities, general operating procedures and business plans
of the Company. Accordingly, Carlbom covenants and agrees that he will not,
during the term of this Agreement and for a period of five years following
termination of this Agreement, use or disclose any Privileged Information to
anyone other than Company's officers, directors, employees and representatives.
Carlbom will not use any of the Privileged Information for his own account or
any purposes other than for the benefit of Company.
Page 3 - EXECUTIVE COMPENSATION AGREEMENT
<PAGE>
5. Employee Benefits/Expenses.
--------------------------
5.1 Expenses. The Company shall reimburse Carlbom for all
--------
reasonable, customary and necessarily incurred expenses in carrying out his
duties under this Agreement. Carlbom shall present to the Company by the 30th
day of each month an itemized account of such expenses in such form as may be
required by the Company.
5.2 Automobile. In recognition of Carlbom's need for an automobile
----------
for business purposes, the Company will provide a suitable vehicle for Carlbom's
sole and exclusive use or, at his option, reimburse him monthly for all business
related automobile expenses, including mileage, maintenance, repairs,
depreciation, insurance and all operational costs incident thereto.
5.3 Employee Benefits. This Agreement is not intended and shall not
----------------
be deemed to be in lieu of any rights, benefits and privileges to which Carlbom
may be entitled as an employee of the Company under any retirement, pension
(qualified or nonqualified) profit sharing, insurance, 401(k), medical/dental or
other plans which may now be in effect or which may hereinafter be adopted by
the Company; it being understood the Carlbom shall have the same rights and
privileges to participate in such plans and benefits as any other management
employee during his employment period.
6. Termination.
-----------
6.1 This Agreement may be terminated at any time, with or without
cause, by a two-thirds (2/3) vote of the Board of Directors. However, in the
event of a termination without cause, the Company shall continue to pay
Carlbom's base compensation
Page 4 - EXECUTIVE COMPENSATION AGREEMENT
<PAGE>
following termination for a period of six months following such termination.
6.2 The Company may terminate this Agreement for "cause" in which
event no further compensation whatsoever shall be due and payable unto Carlbom
(exclusive of any vested pension benefits). Termination for "cause" shall
include:
(a) The employee's unauthorized disclosure of Privileged
Information.
(b) Failure to perform or meet reasonable objective and
measurable standards as from time to time may be provided by the Board of
Directors.
(c) Disloyal, dishonest or illegal conduct.
6.3 Termination either with or without cause shall not and does not
terminate Carlbom's obligations under any restrictive covenant contained herein.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its corporate name by its duly authorized Board of Directors and
Charles E. Carlbom has executed this Agreement as of the day and year first
above written.
COMPANY: UNITED GROCERS, INC.
By: /s/Gordon Smith
-----------------
Name: Gordon Smith
Title: Chairman of the Board
CARLBOM:
By: /s/Charles E. Carlbom
------------------------
Charles E. Carlbom
Page 4 - EXECUTIVE COMPENSATION AGREEMENT
EXHIBIT 12
UNITED GROCERS, INC. AND SUBSIDIARIES
Schedule of Computation of Ratio of Earnings to Fixed Charges
For the Year Ended
October 3, 1997
Computation of Earnings:
Pretax income $(11,278,000)
Plus patronage dividend -0-
Less capitalized interest -0-
Total earnings (11,278,000)
Computation of Fixed Charges:
Total interest expense 16,307,000
Interest factor in rental 12,949,000
expense
Total fixed charges (1) 29,256,000
Total earnings and fixed 17,978,000
charges(2)
Ratio of earnings to fixed 0.61
charges (2)/(1)
Notes:
A. Adjusted income used to compute the ratio of adjusted income to fixed
charges represents net income to which has been added income taxes,
patronage dividends and fixed charges. Fixed charges consist of interest on
all indebtedness and that portion of rentals considered to be the interest
factor.
B. Interest portion of buildings and equipment rental expense was calculated
at 60% for the year.
EXHIBIT 21
SUBSIDIARIES OF UNITED GROCERS, INC.
October 3, 1997
State of Assumed Business Names
Name of Subsidiary Organization
United Resources, Inc. OR
UG Resources, Inc. CA
Western Passage Express, Inc. OR
Northwest Process, Inc. OR Creative Process
Western Security Services, Ltd. OR
Rich and Rhine, Inc. OR
Premiere Consulting, Inc. OR
Grocers Insurance Group, Inc. OR
Grocers Insurance Company, Inc. OR
Grocers Insurance Agency, Inc. OR
Grocers Risk Services, Inc. OR
UGIC, Ltd. Bermuda
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the consolidated
financial statements of United Grocers, Inc., for
the fiscal year ended October 3, 1997 and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> OCT-03-1997
<CASH> 10,223
<SECURITIES> 51,513
<RECEIVABLES> 86,276
<ALLOWANCES> 7,739
<INVENTORY> 102,333
<CURRENT-ASSETS> 257,790
<PP&E> 110,434
<DEPRECIATION> 48,991
<TOTAL-ASSETS> 365,427
<CURRENT-LIABILITIES> 150,577
<BONDS> 0
0
0
<COMMON> 25,820
<OTHER-SE> (11,169)
<TOTAL-LIABILITY-AND-EQUITY> 365,427
<SALES> 1,306,602
<TOTAL-REVENUES> 1,306,602
<CGS> 1,133,690
<TOTAL-COSTS> 164,231
<OTHER-EXPENSES> (19,959)
<LOSS-PROVISION> 10,772
<INTEREST-EXPENSE> 16,307
<INCOME-PRETAX> (21,627)
<INCOME-TAX> (10,466)
<INCOME-CONTINUING> (11,161)
<DISCONTINUED> 2,501
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,660)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
