SECURITY AGREEMENT
(Equipment and Inventory)
DATE: ----------- ----, 1992
Grant and Related Data
1.1 ----------------------------, ("Debtor"), hereby grants to
UNITED GROCERS, INC., an Oregon corporation, ("Secured Party"), a security
interest in the following described personal property:
All present and hereafter acquired inventory, trade fixtures, equipment
and all proceeds therefrom, including insurance proceeds, accounts
receivable, United Grocers, Inc. capital stock and patronage rebates
earned, contract rights, leasehold improvements, and leasehold
interest, now or hereafter used in connection with the operation of
that certain retail grocery business presently known as ---------,
located at -----------------, -------, ------- County, Oregon.
together with all accessories, substitutions, additions, replacements, parts,
equipment and accessories now or hereafter affixed to or used in connection
therewith ("Collateral"), to secure any and all present and hereinafter incurred
indebtedness, and any renewals and to cover any and all extensions of credit and
also to secure any and all other liabilities, absolute or contingent, primary or
secondary, direct or acquired, due or to become due, now or at any time
hereafter owing by Debtor to Secured Party or its wholly owned subsidiaries.
1.2 The Collateral is bought or used primarily for Debtor's
business purposes, and it will be permanently kept at -----------, ------,
------ County, Oregon, which is the address of Debtor's place of business.
1.3 The Collateral is not and will not be attached to real
estate so as to become incorporated in and made a part of said real property.
1.4 As often as Secured Party shall require, Debtor shall
deliver to Secured Party such lists, descriptions and designations of inventory
as Secured Party such lists, descriptions and designations of inventory as
Secured Party may require to identify the nature, extent and location thereof.
2. Warranties, Covenants and Agreements. In order to induce Secured
Party to enter into this Security Agreement and make each loan, Debtor warrants
and covenants to Secured Party that:
2.1 Organization. Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oregon, has
the necessary authority and power to own and sell the Collateral and its other
assets and to transact the business in which
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it is engaged, and is duly qualified to do business in the jurisdiction where
the Collateral is located and in each other jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification.
2.2 Power and Authority. Debtor has full power, authority and
legal right to execute and deliver this Security Agreement, the notes, and the
contracts to perform its obligations hereunder and thereunder, to borrow
hereunder and to grant the security interest created by this Security Agreement.
2.3 Consents and Permits. No consent of any other party
(including any stockholders, trustees or holders of indebtedness), and no
consent, license, approval or authorization of, exemption by, or registration or
declaration with, any governmental body, authority, bureau or agency is required
in connection with the execution, delivery or performance by Debtor of this
Security Agreement, the notes or the contracts, or the validity or
enforceability of this Security Agreement, the notes or the contracts.
2.4 No Legal Bar. The execution, delivery and performance by
Debtor of this Security Agreement, the notes and the contracts do not and will
not violate any provision of any applicable law or regulation or of any
judgment, award, order, writ or decree of any court or governmental
instrumentality, will not violate any provision of the charter of Bylaws of
Debtor and will not violate any provision of or cause a default under any
mortgage, indenture, contract, agreement or other undertaking to which Debtor is
a party or which purports to be binding upon Debtor or upon any of its assets,
and will not result in the creation or imposition of any lien on any of the
assets of Debtor other than the security interest intended to be created hereby.
2.5 No Defaults. Debtor is not in default, and no event or
condition exists which after the giving of notice or lapse of time or both would
constitute an event of default, under any mortgage, lease indenture, contract,
agreement, judgment or other undertaking to which Debtor is a party or which
purports to be binding upon Debtor or upon any of its assets, except for any
such default, event or condition which, individually or in the aggregate, would
not affect Debtor's ability to perform its obligations under this Security
Agreement or any such mortgage, indenture, contract, agreement, judgment or
other undertaking.
2.6 Enforceability. This Security Agreement has been duly
authorized, executed and delivered by Debtor and constitutes a legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. When
executed and delivered, each contract and note shall have been duly authorized,
executed and delivered by Debtor and constitute a legal, valid and binding
obligation of Debtor, enforceable in accordance with its terms.
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2.7 Laws. Obligations: Operations. Debtor will:
(a) duly observe and conform to all requirements of any
governmental authorities relating to the conduct of its business or to its
properties or assets insofar as such requirements may have a material impact
respecting Debtor's obligations under this Security Agreement;
(b) maintain its existence as a legal entity and obtain and
keep in full force and effect all rights, licenses and permits which are
necessary to the proper conduct of its business;
(c) obtain or cause to be obtained as promptly as possible any
governmental, administrative or agency approval and make any filing or
registration therewith which at the time shall be required with respect to the
performance of its obligations under this Security Agreement or the operation of
its business; and
(d) pay all fees, taxes, assessments and governmental charges
or levies imposed upon any of the Collateral.
2.8 Except for the security interest granted hereby, and a
grant of a security interest in inventory and fixtures to United Resources,
Inc., Debtor is the sole owner of the Collateral free from any lien, security
interest or encumbrance, and will defend the Collateral against the claims and
demands of all persons whomsoever.
2.9 Financial Condition of Debtor. The consolidated financial
statements of Debtor heretofore delivered to Secured Party are complete and
correct, have been prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly the financial position of
Debtor as at said date and the results of its operations for the period ended on
said date, and there has been no material adverse change in the financial
condition, business or operations of Debtor since said date.
2.10 Except as provided below with respect to inventory,
Debtor will not sell or offer to sell or otherwise transfer or dispose of the
Collateral or any part thereof by any interest herein, or create or cause or
permit to be created any lien, encumbrance or security interest in or upon any
part thereof.
2.11 While Debtor is not in default hereunder, Debtor may sell
the inventory, but only in the ordinary course of business and only to buyers
who qualify as a buyer in the ordinary course of business.
2.12 Insurance. Debtor will keep the Collateral fully insured
against loss or damage by fire, and such other hazards as Secured Party may from
time to time require, with such deductible provisions, upon such terms,
including loss payable and other endorsements, and in such company or companies
as Secured Party may approve; and Debtor will immediately deliver all such
insurance policies to Secured Party, to be retained while
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any indebtedness hereby secured remains owing. Secured Party shall hold all such
policies in pledge to secure payment of the indebtedness hereby secured, with
irrevocable authority to adjust any loss, receive and receipt for any sum
payable, surrender any policy, discharge and release any insurer, endorse any
loss or refund check or draft and, in general, exercise in the name of Debtor or
otherwise, any and all rights of Debtor in respect thereto or in respect to the
proceeds thereof.
2.13 Maintenance of Collateral. Debtor will, at its own
expense, keep and maintain the Collateral or cause the Collateral to be kept and
maintained in good repair, condition and working order and furnish or cause to
be furnished all parts, replacements, mechanisms, devices and servicing required
therefore so that the value, condition and operating efficiency thereof will at
all times be maintained and preserved, fair wear and tear excepted. All such
repairs, parts, mechanisms, devices and replacements shall immediately, without
further act, become part of the Collateral and subject to the security-interest
created by this Security Agreement. Debtor will not make or authorize any
improvement, change, addition or alteration to the Collateral if such
improvement, change, addition or alteration will impair the originally intended
function or use of the Collateral or impair the value of the Collateral as it
existed immediately prior to such improvement, change, addition or alteration.
Any part added to the Collateral in connection with any improvement, change,
addition or alteration shall immediately, without further act, become part of
the Collateral and subject to the security interest created by this Security
Agreement.
2.14 Inspection/Use of Collateral. Secured Party may enter any
premises in which any of the Collateral may be kept at any reasonable time for
the purpose of inspecting the same. Debtor will not permit any use of any of the
Collateral in violation of any law or ordinance, Debtor will not, without the
prior written consent of Secured Party cause or permit the Collateral or any
part thereof to be moved from its present location or to be used for hire or
under lease.
2.15 Taxes. Debtor will promptly pay when due all taxes,
license fees and governmental rates and charges upon or relating to any of the
Collateral or its use and relative to the indebtedness hereby secured.
2.16 Financial Reporting. Debtor shall provide to Secured
Party at least quarterly, and to Secured Party's officers, agents, attorneys or
accountants, reasonably complete financial data reflecting the inventory level,
debts and obligations of Debtor (not limited to those to Secured Party), the
current accounts receivable of Debtor, and all other information reasonably
calculated to provide Secured Party with information with respect to the
solvency of the Debtor, and to assure the Secured Party as of its rights
hereunder to the Collateral. All such financial information shall be accurate
and correct in all material respects and complete insofar as completeness may be
necessary to give the Secured Party true and accurate knowledge of the financial
condition of the Debtor.
2.17 As further consideration for the execution of this
Security Agreement, Debtor agrees to assign unto Secured Party, as collateral,
Debtor's interest in the lease,
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satisfactory to Secured Party, covering the premises wherein the business and
chattels are located. Any breach of said lease, shall be deemed a breach of this
Security Agreement and so also shall a breach of this Security Agreement be
deemed a breach of the lease. In the event of a breach of this Security
Agreement or of the lease, and in the event Secured Party finds it necessary to
exercise the right of possession, Debtor agrees to relinquish possession of the
premises, peaceably, to Secured Party, and in such event, this indenture shall
serve as an assignment of all the right, title and interest of Debtor of
Debtor's leasehold rights.
2.18 Optional Advances. At its option, Secured Party may
discharge taxes, liens, security interests or other encumbrances upon any of the
Collateral, may place and pay premiums upon insurance on any of the Collateral
and may incur expenses for maintenance and preservation of any of the
Collateral. Debtor agrees to pay to Secured Party upon demand all sums incurred
or paid for any of said purposes with interest from the date on which the same
were incurred to the date of payment at the rate of 18 percent per annum.
Payment thereof is secured by the Collateral.
2.19 Proceeds Account. Upon default as hereinafter defined,
Debtor, forthwith, upon receipt of all checks, drafts, cash and other
remittances (hereinafter called proceeds) in part or full payment for any of the
Collateral, will deposit the proceeds in a cash collateral account as specified
by Secured Party, over which the Secured Party alone shall have power of
withdrawal. Pending such deposit, the Debtor shall not commingle any proceeds
with any other funds or property of the Debtor, but shall hold the proceeds
separate and apart therefrom and upon an express trust for the Secured Party
until deposited in the cash collateral account. Credit for proceeds deposited in
the cash collateral account shall be conditional upon final payment of the
deposited item. Once a month, the Secured Party will apply the whole or any part
of the collected funds on deposit in the cash collateral account against the
principal or interest of the notes and the other charges specified, the order
and method of such application to be in the discretion of the Secured Party. Any
part of the cash collateral account which the Secured Party elects not to so
apply may be paid over by the Secured Party to the Debtor.
3. General Provisions.
3.1 The obligations which this Security Agreement secures may
be evidenced by separate instruments which may be negotiated, extended or
renewed by Secured Party without releasing Debtor, the Collateral or any
guarantor or comaker.
3.2 All of the terms of this Security Agreement and the
rights, remedies and duties of the parties hereto shall be governed by the laws
of the State of Oregon or other applicable laws. If any provision of this
Security Agreement is in conflict with the law of any state having jurisdiction,
the remaining parts hereof shall be effective as if such provision had not been
made.
3.3 If any interest of Debtor in any of the Collateral shall
be transferred or if any indebtedness hereby secured shall be assigned, the
terms, covenants and conditions
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hereof shall be binding upon and inure to the benefit of the successors in
interest of the parties hereto.
3.4 If there be more than one Debtor or a guarantor or comaker
or more than one guarantor or comaker, the liability of all such parties shall
be primary and joint and several.
3.5 If Secured Party shall, once or often, extend the time for
paying any indebtedness hereby secured or fail promptly to exercise any right or
remedy it may have for any default hereunder or breach or violation hereof, such
indulgence or forbearance shall not be deemed a waiver of strict and prompt
performance by Debtor of all the terms and conditions hereof and shall not
preclude Secured Party from thereafter, without notice, exercising any right or
remedy for any subsequent breach or default in performance of the same or any
other provision hereof or for any other breach or violation of this Security
Agreement.
3.6 If any notice is given to Secured Party, it shall be given
by registered or certified mail directed to Secured Party at the place where
indebtedness hereby secured is payable. If any notice is to be given to Debtor,
mailing by registered or certified mail to the address stated above shall be
sufficient unless Secured Party shall have received from Debtor notice in
writing of a change of address. Reasonable notice, when such notice is required,
shall be deemed to be five (5) days notice.
3.7 Debtor will promptly notify Secured Party in writing of
any change in Debtor's business or residence address and agrees to execute any
additional financing statements as Secured Party shall require.
4. Negative Covenants. Without Secured Party's prior written consent,
until all obligations are fully paid, performed and satisfied and this Security
Agreement is terminated, Debtor covenants that Debtor shall not:
4.1 merge or consolidate with or acquire any other party,
partnership, joint venture or corporation, hereinafter designated "Person"
4.2 other than in the ordinary course of Debtor's business,
make any investment in the securities of any Person;
4.3 declare or pay cash or stock dividends upon any of
Debtor's stock or make any distributions of Debtor's property or assets or make
any loans, advances and/or extensions of credit to, or investments in, any
Person(s), including, without limitation, any of Debtor's affiliates, officers
or employees;
4.4 redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Debtor's capital stock, or make any material change in
Debtor's capital structure or in any
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of Debtor's business objectives, purposes and operations which might in any way
adversely affect the repayment of the obligations; and
4.5 enter into any transaction which materially and adversely
affects the Collateral or Debtor's ability to repay and satisfy its obligations
hereunder.
5. Default. Debtor shall be in default under this Security Agreement
upon the happening of any of the following events or conditions:
5.1 If Debtor shall fail to pay, when due, any obligation
within five (5) days after the same becomes due (whether at the stated maturity,
by acceleration or otherwise) of any indebtedness owing by Debtor to Secured
Party.
5.2 If Debtor shall fail to perform promptly at the time and
strictly in the manner provided by any covenant, representation or warranty of
Debtor contained in this or any other agreement between Debtor and Secured
Party.
5.3 If any warranty, representation, covenant or statement
made by Debtor to Secured Party in this or any other agreement is false in any
material respect.
5.4 If there shall be any loss, theft, substantial damage,
destruction, sale or encumbrance to or of any of the Collateral, or the making
of any levy, seizure or attachment thereof or thereon.
5.5 If there shall be any death, dissolution, termination of
existence, insolvency, business failure, appointment of a receiver of any part
of the property of, assignment for the benefit of creditors by, or commencement
of any proceeding under any bankruptcy or insolvency law, as now or hereafter
constituted, by or against Debtor or any guarantor or surety of Debtor.
5.6 If Debtor fails to maintain a marketable inventory at cost
of $-------.--, during the term of Debtor's indebtedness to the Secured Party,
at --------------------, -------, --- ---- County, Oregon.
5.7 If Secured Party deems or has reasonable cause to deem
itself insecure.
6. Remedies.
6.1 Upon an event of default, as specified in subparagraphs
5.1 through 5.7, and at any time thereafter, Secured Party may, without notice,
declare any and all promissory notes immediately due and payable, together with
all other amounts owing under this or any other agreement by and between Debtor
and Secured Party without demand, protest or other nature, all of which are
expressly waived.
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6.2 If an event of default shall occur and be continuing,
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the obligations, all rights and remedies of
secured parties under the Uniform Commercial Code of Oregon. Debtor agrees that
in any such event, Secured Party without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Debtor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase or otherwise dispose of and deliver the Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any of Secured Party's offices or else where at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in Debtor, which right or equity is hereby
expressly released. Debtor further agrees, at Secured Party's request, to
assemble the Collateral, make it available to Secured Party at places which
Secured Party shall reasonably select, whether at Debtor's premises or
elsewhere. Secured Party shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale (after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any way
relating to the rights of Secured Party hereunder, including attorneys fees and
legal expenses) to the payment in whole or in part of the obligations, in such
order as Secured Party may elect and only after so applying such net proceeds
and after the payment by Secured Party of any other amount required by any
provision of law, need Secured Party account for the surplus, if any, to Debtor.
To the extent permitted by applicable law, Debtor waives all claims, damages,
and demands against Secured Party arising out of the repossession, retention or
sale of the Collateral. Debtor agrees that no more than ton (10) days' notice
(which notification shall be deemed given when mailed, postage prepaid,
addressed to Debtor at its address set forth in subparagraph 7.2 hereof) of the
time and place of any public sale or of the time after which a private sale may
take place and that such notice is reasonable notification of such matters.
Debtor shall be liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Secured Party is entitled.
6.3 Debtor agrees to pay all expenses, including reasonable
attorneys fees, incurred by Secured Party in taking, holding, preparing for sale
and selling any of the Collateral, as well as attorneys fees and court costs in
such amount as shall be adjudged reasonable for services in the trial court and
for services in any appellate court in any suit or action to require performance
or for the breach of this Security Agreement or upon any promissory note hereby
secured.
6.4 In any suit or action to require performance or for the
breach of this Security Agreement the court may, upon application of plaintiff
and without regard to the
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condition of the property or the adequacy of the security for the indebtedness
hereby secured and without notice to Debtor or to any other party, appoint a
receiver to take possession and care of all of the Collateral and to collect and
receive any and all proceeds and receivables arising out of or generated by the
collection which had heretofore arisen or accrued or which may arise or accrue
during the pendency of such quit or action, and that any amounts so received
shall be applied toward payment of the indebtedness hereby secured, after first
paying therefrom the charges and expenses of such receivership.
7. Miscellaneous.
7 .1 No Waiver; Cumulative Remedies. No failure or delay on
the part of the Secured Party in exercising any right, remedy, power or
privilege hereunder or under the note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or thereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No right or remedy in
this Security Agreement is intended to be exclusive but each shall be cumulative
and in addition to any other remedy referred to herein or otherwise available to
Secured Party at law or in equity; and the exercise by Secured Party of any one
or more of such remedies shall not preclude the simultaneous or later exercise
by Secured Party of any or all such other remedies. To the extent permitted by
law, Debtor waives any rights now or hereafter conferred by statue or otherwise
which limit or modify any of Secured Party's rights or remedies under this
Security Agreement.
7.2 Notices. All notices, requests and demands to or upon any
part hereto shall be deemed to have been duly given or made when delivered or
when deposited in the United States mail, first class postage prepaid, addressed
to such party as follows, or to such other address as may be hereafter
designated in writing by such party to the other party hereto:
Debtor:
DBA
Secured Party: UNITED GROCERS, INC.
P. 0. Xxx 00000
Xxxxxxxx, XX 00000
7.3 Survival of Representations and Warranties. All
representations and warranties made in this Security Agreement shall survive the
execution and delivery of this Security Agreement and the making of the loan
hereunder.
7.4 Amendments; Waivers. No provision of this Security
Agreement, the note or any related agreements, may be amended or modified in any
way, nor may
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noncompliance therewith be waived, except pursuant to a written instrument
executed by Secured Party and Debtor.
7.5 Counterparts. This Security Agreement may be executed by
the parties hereto on any number of separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
7.6 Headings. The headings of the paragraphs and subparagraphs
are for convenience only, are not part of this Security Agreement and shall not
be deemed to affect the meaning or construction of any of the provisions hereof.
7.7 Successors or Assigns. This Security Agreement shall be
binding upon and inure to the benefit of Debtor and Secured Party and their
respective successors and assigns, except that Debtor may not assign or transfer
its rights hereunder or any interest herein without the prior written consent of
Secured Party.
7.8 Merger Clause. This Security Agreement contains the full,
final and exclusive statement of the agreement relating to the transactions
hereby contemplated.
7.9 Construction. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition of
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by law, Debtor hereby waives any provision of law which renders any provision
hereby prohibited or unenforceable in any respect. This Security Agreement and
the note shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Oregon.
7.10 Jurisdiction. Debtor hereby irrevocably consents and
agrees that any legal action, suit, or proceeding arising out of or in any way
in connection with this Security Agreement, say be instituted or brought in the
courts of the State of Oregon, in the County of Multnomah.
7.11 Purchase Requirements. Debtor agrees to maintain or cause
to be maintained the membership of the store in good standing with United
Grocers in accordance with the Bylaws of United Grocers, Inc., as long as this
Agreement remains in effect.
7.12 Debtor acknowledges and agrees that as a material
consideration and condition precedent to UG's extension of credit hereunder,
Debtor covenants and agrees to purchase goods and merchandise from UG for a
period of five (5) years. Debtor agrees that the weekly purchases from UG shall
be in accordance with UG credit terms and that the weekly purchase of goods and
merchandise shall not be less than 55 percent of Debtor's retail weekly sales
volume of all goods and merchandise sold on or from the store(s)' premises and
UG will supply all of Debtor's requirements at such prices and on such terms
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as are reasonably comparable to those offered by UG to other purchasers of like
kind and like quantities carrying. on businesses similar to that of the Debtor.
If, at any time, the Debtor contends that UG is not able to supply particular
goods or merchandise customarily stocked by retail supermarkets, or that terms
offered by UG are not reasonably comparable to those offered by UG to other
purchasers described above, the Debtor shall so advise UG in writing, specifying
such contention with particularity. If, within 20 days after receipt of such
notice, UG does not offer to supply goods or merchandise so specified or does
not advise Debtor that the terms and conditions offered are reasonably
comparable to those offered to such other purchasers, Debtor shall be free to
secure such specified goods and merchandise from any source which it desires. If
UG asserts that it is offering reasonably comparable terms and Debtor
nonetheless purchases from another source, such purchase, if above percentage
requirements are not complied with, shall be a default. In the event of a breach
of this purchase covenant, Debtor agrees to pay UG, as liquidated damages, and
not as a penalty or forfeiture, a sum computed as follows:
(a) The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
(b) The average weekly purchases so determined shall then be
multiplied by the number of weeks from the date of the breach to the end of the
term of the purchase agreement; and
(c) The computed sum shall be multiplied by one and
one-quarter percent (1 1/4%) to determine the liquidated damages due and owing
UG by reason of Debtor's default. Said sum shall become immediately due and
owing within 15 days from date of written notice of the liquidated damage.
Debtor's default hereunder shall also be a default under the Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DEBTOR:
-------------------------
DBA----------------------
By-----------------------
, President
By-----------------------
, Secretary
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INDIVIDUALLY:
-------------------------
-------------------------
SECURED PARTY: UNITED GROCERS, INC.
By-----------------------
X. X. Xxxxxxx
Assistant Secretary
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