Document:

Form of Severance Agreement for Executive Vice Presidents

 EXHIBIT 10.59 
  
 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  
 THIS AGREEMENT (the
“Agreement”) is made and entered into as of this 2nd day of October 2003, by and between
Unified Western Grocers, Inc. (the “Company”) located at 5200 Shelia Street Commerce, California 90040 and Philip S. Smith (the “Executive”). 
  
 WHEREAS, the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and 
  
 WHEREAS, the Executive’s position has been determined to be an important part of the senior management team of the Company; and 
  
 WHEREAS, the Company recognizes that the possibility of termination due to Change of
Control, Good Reason or without cause creates uncertainty among management personnel of the Company and may result in the departure or distraction of management personnel, all to the detriment of the Company and its shareholders. 
  
 NOW, THEREFORE, in consideration of the promises and of the mutual covenants herein
contained, the following is an agreement to provide severance benefits to the Executive in the event the Executive’s employment with the Company is terminated under the circumstances described herein. 
  

	1.	Right to Terminate. The Company or the Executive may terminate the Executive’s employment at any time, subject to the Company providing the benefits hereinafter
specified in accordance with the terms and eligibility requirements of this Agreement. Nothing contained in this Agreement is intended to be nor should be construed to create a contract of employment for a specified period of time, or otherwise
change or alter the at-will nature of the Executive’s employment with the Company. 

  

	2.	Eligibility Requirements. The Executive shall be entitled to the benefits provided in Section 5 upon his termination of employment from the Company subject to the
following terms and conditions: 

  

	 	(a)	The Company must have employed him as an Officer for a period of three (3) consecutive years immediately prior to the date of this Agreement and he must be employed as an Executive
Vice President of the Company immediately prior to the date of this Agreement, and “Officer” shall mean officer of the Company designated as such by and elected by the Board of Directors of the Company. For purposes of this Paragragh,
“employed by the Company” shall include employment with Certified Grocers of California, Ltd.; and 

  

 1 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	 	(b)	his termination is caused: 

  

	 	(i)	by the Company other than for Cause or Death; 

  

	 	(ii)	by Disability as defined below; 

  

	 	(iii)	by the Executive for Good Reason; or 

  

	 	(iv)	by the Executive within one (1) year of a Change of Control (as all such capitalized terms are hereinafter defined). 

  
 “Cause” means termination upon (i) the willful and
continued failure by the Executive to perform substantially his duties (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness), after demand for substantial performance is delivered in writing
by the Company to the Executive that specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties, (ii) the willful engaging by the Executive in illegal or fraudulent misconduct which is
materially injurious to the Company, or (iii) the willful material breach of the Confidentiality and Nonsolicitation Agreement set forth in Section 7. No act, or failure to act, on the Executive’s part shall be considered “willful”
unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. 
  

“Disability” means the Executive’s incapacity due to physical or mental illness to perform substantially his duties on a
full-time basis for six (6) consecutive months and, within thirty (30) days after a notice of termination is thereafter given by the Company, the Executive shall not have returned to the full-time performance of the Executive’s duties. However,
if the Executive shall not agree with the determination to terminate him because of Disability, the question of the Executive’s disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the
Executive or Executive’s legal representative, in the event of the Executive’s incapacity to designate a doctor. In the absence of an agreement between the Company and the Executive, each party shall nominate a qualified medical doctor and
the two doctors shall select a third doctor, who shall make the determination as to Disability. 
  
 “Good Reason” means (i) an adverse change in the Executive’s status or position(s), in effect immediately prior to the date
of this Agreement, or (ii) a reduction in the Executive’s base salary; provided, however, that any such basis for Good Reason shall be recognized only if the Executive has provided the Company written notice of the existence of such Good Reason
within ninety (90) days of its first occurrence and the Company has failed to correct the matter within thirty (30) days of such notice. 
  

 2 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  
 “Change of Control” means any of (i) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, of beneficial
ownership of more than fifty percent (50%) of the outstanding Class A Shares of United Western Grocers, Inc.; (ii) if the individuals who presently serve on the Board of Directors no longer constitute a majority of the members of the Company’s
Board of Directors; provided, however that any person who becomes a director subsequent to the commencement date of this Agreement who was elected to fill a vacancy by a majority of the Company’s members shall be considered as if a member prior
to the commencement date of this Agreement; and (iii) a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company. 
  

	3.	Notice of Termination. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto.
For purposes of this Agreement, a “Notice of Termination” means a notice indicating the specific termination provision in this Agreement relied upon. 

  

	4.	Date of Termination. “Date of Termination” means the date set forth by written Notice of Termination or, if none, then by mutual written agreement of
the parties. 

  

	5.	Benefits Upon Termination. 

  

	 	(a)	Subject to Section 9 hereof, if the Executive’s termination of employment with the Company satisfies the conditions set forth in Section 2, then the Executive will be paid the
equivalent of twenty-four (24) month’s pay based on an amount equal to the Executive’s highest annual base salary during the three year period immediately prior to the Date of Termination, plus an amount equal to two (2) times the highest
annual incentive bonus paid during the three year period prior to the Date of Termination. The Executive’s severance benefits shall be paid in one of the following manners as elected by the Executive: (1) within thirty (30) days of the Date of
Termination, (2) within ten (10) business days of January 1 of the year following the Date of Termination, (3) as salary continuation with equal weekly payments during the twenty-four (24) month term of the severance, or (4) through the purchase of
an annuity that has a value equal to the total severance benefit. The Executive shall make this payment election within twenty-one (21) days of the Date of Termination. If the Executive fails to make an election, payments will be made as outlined in
option (1), within thirty (30) days of the Date of Termination. Payments made under this subsection (a) shall not be taken into account under any other retirement plan of the Company. 

  

	 	(b)	With respect to the Executive’s continued coverage under the Company’s health insurance plan, or successor plan, the Executive’s “qualifying event” for
purposes of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) shall be his Date of Termination from the Company. If the Executive elects to continue health plan coverage pursuant to COBRA, the Company shall pay the
Executive’s COBRA premiums for a period terminating on the earlier of 

  

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 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	 	    	(i) twenty-four (24) months from the Date of Termination or (ii) the cessation of COBRA eligibility and coverage for the Executive (without regard to any other COBRA qualified
beneficiary). The Company’s obligation with respect to subsection (b) shall continue only if the Executive satisfies on a timely basis all of his premium payment obligations under COBRA. As applicable, continued coverage under this subsection
(b) shall be coordinated with corresponding benefits that the Executive may be eligible to receive under the Officer Retiree Medical Plan. 

  

	 	(c)	If the Executive incurs a termination of employment with the Company within one year of a Change of Control, as provided for in Section 2(b)(iv) above, then the Executive shall be
credited with an additional 5 years of service for purposes of calculating the Executive’s benefits under Unified Western Grocers, Inc. Executive Salary Protection Plan II (the ‘ESPP II’). The Executive’s benefits under ESPP II
shall otherwise be calculated and paid pursuant to the terms of such plan. 

  

	 	(d)	All unpaid benefits set forth in this section shall be forfeited if the Executive violates any material provision of this Agreement including, without limitation, the
Confidentiality and Nonsolicitation Agreement set forth in Section 7. 

  

	 	(e)	If the Executive’s termination of employment with the Company does not satisfy the conditions set forth in Section 2, no payment or benefits shall be provided under this
Agreement. This Agreement does not, and is not intended to, limit any rights or benefits of the Executive pursuant to any other non-severance type plan, policy or written agreement; provided, however, that this Agreement is intended to be the sole
agreement governing severance-type benefits. Under no circumstances will the Executive be entitled to or eligible for any other severance type benefits from the Employer, including any obligations that existed under any prior agreements including
but not limited to prior severance agreements or under the Unified Western Grocers’ Separation Payment Program. 

  

	6.	No Obligation to Mitigate. The Executive is under no obligation to mitigate damages in the amount of any payment provided for hereunder by seeking other employment or
otherwise. Subject to section 5(b), the amount of any payment provided for in this Agreement shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by the Executive as the result of employment by
another employer after the Date of Termination, or otherwise. 

  

	7.	Confidentiality and Nonsolicitation Agreement. 

  

	 	(a)	The Executive acknowledges that in the course of his employment by the Company, he will have access to and become informed of confidential and secret information which is a
competitive asset of the Company (“Confidential Information”), including (i) the terms of any agreement between the Company 

  

 4 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	 	    	and any employee, customer or supplier, (ii) pricing strategy, (iii) product development strategies, (iv) personnel training and development programs, (v) financial results, (vi)
strategic plans and demographic analyses, (vii) proprietary computer and systems software, and (viii) any confidential non-public information received from the Company concerning the Company, its employees, suppliers and customers.

  

	 	(b)	The Executive agrees that he will keep all Confidential Information in strict confidence during the term of his employment by the Company and thereafter and will never make known,
divulge, reveal, furnish, make available, or use any Confidential Information (except in the course of his regular authorized duties on behalf of the Company). The Executive agrees that the obligations of confidentiality hereunder shall survive
termination of his employment at the Company regardless of any actual or alleged breach by the Company of this Agreement and shall continue for one (1) year following such termination provided that such obligation shall terminate earlier (i) as to
specific information that shall have become known through no fault of the Executive or (ii) as to Confidential Information which the Executive is required by law to disclose (after giving the Company notice and an opportunity to contest such
requirement). The Executive’s obligations under this Section 7 are in addition to, and not in limitation or preemption of, any other obligation of confidentiality which the Executive may have to the Company under general legal or equitable
principles. 

  

	 	(c)	Except in the ordinary course of the Company’s business, the Executive has not made, nor shall at any time following the date of this Agreement, make or cause to be made, any
copies, pictures, duplicates, facsimiles, or other reproductions or recordings or any abstracts or summaries including or reflecting Confidential Information. All such documents and other property furnished to the Executive by the Company or
otherwise acquired or developed by the Company shall at all times be the property of the Company. Upon termination of the Executive’s employment by the Company, the Executive will immediately return to the Company any such documents or other
property of the Company which are in the possession, custody or control of the Executive. 

  

	 	(d)	In the event of the Executive’s termination of employment at the Company, the Executive agrees that he will not in any capacity, on his own behalf or on behalf of any other
firm, person, or entity, for a period of one (1) year, solicit, or assist in the solicitation of, any employee of the Company to terminate his or her employment with the Company. 

  

	 	(e)	The Executive acknowledges and agrees that a violation of the foregoing provisions of this Section 7 (referred to collectively as the “Confidentiality and Nonsolicitation
Agreement”) that results in material detriment to the Company would cause irreparable harm to the Company, and that the Company’s remedy at law for any such violation would be inadequate. In recognition of the foregoing,

  

 5 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	 	    	the Executive agrees that, in addition to any other relief afforded by law or this Agreement, including damages sustained by a breach of this Agreement and forfeiture of any and all
compensation or benefit otherwise provided under Section 5, and without any necessity or proof of actual damages, the Company shall have the right to enforce this Confidentiality and Nonsolicitation Agreement by specific remedies, which shall
include, among other things, temporary and permanent injunctions, it being the understanding of the undersigned parties hereto that damages, the forfeitures described above and injunctions shall all be proper modes of relief and are not to be
considered as alternative remedies. 

  

	8.	Successors; Binding Agreement. 

  

	 	(a)	The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) by agreement in form and substance satisfactory
to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. 

  

	 	(b)	This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive’s devisee, legatee, or other designee, or if there be no such designee, to the Executive’s estate. 

  

	 	(c)	This Agreement, and all of the provisions hereof, shall be binding upon the Company and all of its affiliates, successors, transferees, or surviving or continuing entity.

  

	9.	Taxes. 

  

	 	(a)	All payments to be made to the Executive under this Agreement will be subject to required withholding of federal, state, and local income and employment taxes.

  

	 	(b)	Notwithstanding anything in the foregoing to the contrary, if any of the payments provided for in this Agreement, together with any other payments which the Executive has the right
to receive from the Company, would constitute an “excess parachute payment” (as defined in Internal Revenue Code §280G(b)(2) as it may be amended), so as to cause the imposition of an excise tax payment pursuant to this Agreement
shall be reduced by an amount sufficient to avoid the payment of an any such excise tax; provided, however, that the determination as to whether any reduction in the payments otherwise owing under this Agreement pursuant to this provision is
necessary shall be made jointly by the Executive and the Company in good faith, based on then-effective final and proposed Treasury 

  

 6 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	 	    	regulations, and published rulings; provided further, that an independent qualified national accounting firm selected by mutual agreement of the parties shall provide conclusive
calculations in the event the parties cannot jointly agree. 

  

	10.	Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered by United States registered or certified mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned
Executive, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company, with a copy to the Secretary of the Company, or to such other address
as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 

  

	11.	Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. 

  

	12.	Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes any and all other agreements, either oral or in writing between the
parties hereto with respect to the subject matter hereof and contains all of the covenants and agreements between the parties with respect to such subject matter. 

  

	13.	Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modifications or discharge is agreed to in writing signed by
the Executive and the Chief Executive Officer of the Company. No waiver or any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding
unless in writing signed by the party waiving the breach. Unless otherwise noted, references to “Sections” are to sections of this Agreement. The captions used in this Agreement are designed for convenient reference only and are not to be
used for the purpose of interpreting any provision of this Agreement. 

  

	14.	Enforceability. Notwithstanding any other provision of this Agreement, to the extent that any payment to be made pursuant to this Agreement is prohibited by applicable
federal or state law or regulation, or by any action of any federal or state regulatory agencies, unless the Company has obtained prior approval for such otherwise prohibited payment from the appropriate regulatory authority, the Company shall not
be obligated to make such payments under this Agreement. No other employee shall be entitled to severance benefits under the plan described in Section 15, and of which this Agreement is a part, unless such employee has been promised such severance
benefits under a separate written agreement. 

  

 7 of 8 

 SEVERANCE AGREEMENT 
  
 (FOR EXECUTIVE VICE PRESIDENTS WITH THREE YEARS 
 OR MORE IN AN OFFICER POSITION) 
  

	15.	Agreement Part of ERISA Plan. This Agreement is made pursuant to a Company-sponsored severance plan covering selected Company Vice Presidents, Senior Vice Presidents,
and Executive Vice Presidents with less than 3 years of service. All of the terms of the plan that relate to the Executive are contained in this Agreement. Although the plan (including the Agreement) is generally subject to the provisions of the
Employee Retirement Income Security Act of 1974 (“ERISA”), the eligible employees constitute a select group of management or highly compensated employees. Accordingly, the plan is exempt from the reporting and disclosure provisions of
ERISA pursuant to ERISA Regulation 2520.104-24. In the event of a dispute, the claims procedures set forth in Section 16 shall apply unless both parties agree to settle the dispute through arbitration. The Company may amend or terminate the plan of
which this Agreement is a part; provided, however, that the plan may not be amended or terminated unilaterally by the Company if such amendment or termination would result in some or all benefits not being paid as the terms of the Agreement provide
as of the effective date set forth below. 

  

	16.	Claims Procedure. If the Executive believes that severance benefits are not being paid as this Agreement provides, he must file a claim with the Company’s Vice
President, Human Resources. The parties shall attempt to resolve the matter during the 30-day period beginning on the date such claim is filed. Only after the 30-day period has expired may an action in court be filed. 

  
 IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed
as of the date set forth below. 
  
 UNIFIED WESTERN GROCERS, INC.

  
 Agreed to this 13th day of January, 2004. 
  

			
	 By:
	 	 /s/ Alfred A. Plamann

	 	 	 Alfred A. Plamann, President & Chief Executive Officer

  
 “The Executive”
Agreed to this 7th day of January, 2004. 
  

			
	 By:
	 	 /s/ Philip S. Smith

	 	 	 Philip S. Smith Executive Vice President

  
 Executive’s
Address:                     
  

 8 of 8Series A Preferred Stock Exchange Agreement

 EXHIBIT 10.60 
  

 SERIES A PREFERRED STOCK EXCHANGE AGREEMENT 
  
 by and between 
  
 C & K MARKET, INC. 
  
 and 
  
 UNIFIED WESTERN GROCERS, INC. 
  

Dated as of December 29, 2003 

 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	Page

			
	 1.
	 	 Interpretation.
	  	2
				
	 	 	 1.1
	  	 Definitions.
	  	2
				
	 	 	 1.2
	  	 Accounting Terms.
	  	2
			
	 2.
	 	 Authorization And Exchange of Shares.
	  	2
				
	 	 	 2.1
	  	 Authorization.
	  	2
				
	 	 	 2.2
	  	 Exchange of Shares.
	  	2
				
	 	 	 2.3
	  	 Discharge and Satisfaction of Accrued Dividends on the Old UWG Shares.
	  	2
			
	 3.
	 	 The Closing.
	  	2
				
	 	 	 3.1
	  	 Time and Place.
	  	2
				
	 	 	 3.2
	  	 Deliveries at Closing.
	  	2
			
	 4.
	 	 Representations and Warranties of the Company.
	  	3
				
	 	 	 4.1
	  	 Organization and Power; Subsidiaries.
	  	3
				
	 	 	 4.2
	  	 Capitalization.
	  	3
				
	 	 	 4.3
	  	 Agreements With Respect to Capital Stock.
	  	3
				
	 	 	 4.4
	  	 Issuance of Shares.
	  	4
				
	 	 	 4.5
	  	 Authority.
	  	4
				
	 	 	 4.6
	  	 Governmental Consent.
	  	4
				
	 	 	 4.7
	  	 Litigation.
	  	4
				
	 	 	 4.8
	  	 Financial Statements; Changes.
	  	5
				
	 	 	 4.9
	  	 Undisclosed Liabilities.
	  	6
				
	 	 	 4.10
	  	 Taxes.
	  	6
				
	 	 	 4.11
	  	 Property and Assets.
	  	7

  

 -i- 

							
				
	 	 	 4.12
	  	 Patents and Trademarks.
	  	7
				
	 	 	 4.13
	  	 Compliance with Laws and Agreements.
	  	7
				
	 	 	 4.14
	  	 Contracts.
	  	7
				
	 	 	 4.15
	  	 Environmental Matters.
	  	8
				
	 	 	 4.16
	  	 Obligations to and from Company Related Parties.
	  	8
				
	 	 	 4.17
	  	 License and Permits.
	  	9
				
	 	 	 4.18
	  	 Employees.
	  	9
				
	 	 	 4.19
	  	 Insurance Coverage.
	  	9
				
	 	 	 4.20
	  	 Brokers or Finders.
	  	9
				
	 	 	 4.21
	  	 Affiliate Transactions.
	  	9
				
	 	 	 4.22
	  	 Disclosures.
	  	10
			
	 5.
	 	 Representations and Warranties of UWG.
	  	10
				
	 	 	 5.1
	  	 Organization and Power.
	  	10
				
	 	 	 5.2
	  	 Authority for Agreement.
	  	10
				
	 	 	 5.3
	  	 Governmental Consent.
	  	10
				
	 	 	 5.4
	  	 Ownership of the Old UWG Shares.
	  	10
				
	 	 	 5.5
	  	 Litigation.
	  	11
				
	 	 	 5.6
	  	 Investment.
	  	11
				
	 	 	 5.7
	  	 Accredited Investor.
	  	11
				
	 	 	 5.8
	  	 Transferability.
	  	11
			
	 6.
	 	 Conditions to UWG's Obligation.
	  	11
				
	 	 	 6.1
	  	 Certificates and Documents.
	  	11
				
	 	 	 6.2
	  	 Accuracy of Representations and Warranties.
	  	12
				
	 	 	 6.3
	  	 Performance.
	  	12
				
	 	 	 6.4
	  	 Compliance with Covenants.
	  	12

  

 -ii- 

							
	 	 	6.5	  	 Closing Certificate.
	  	12
				
	 	 	6.6	  	 Consents and Waivers.
	  	12
				
	 	 	6.7	  	 Material Adverse Change.
	  	12
				
	 	 	6.8	  	 Statement of Withdrawal.
	  	12
				
	 	 	6.9	  	 Due Diligence Review.
	  	12
				
	 	 	6.10	  	 Supply Agreement.
	  	12
				
	 	 	6.11	  	 Shareholders Agreement.
	  	13
				
	 	 	6.12	  	 Litigation.
	  	13
				
	 	 	6.13	  	 Other Financing.
	  	13
				
	 	 	6.14	  	 Opinion of Company's Counsel.
	  	13
				
	 	 	6.15	  	 Update of Membership Documentation.
	  	13
				
	 	 	6.16	  	 Right of First Refusal Agreement.
	  	13
				
	 	 	6.17	  	 Articles of Restatement.
	  	13
				
	 	 	6.18	  	 Shareholders Guaranty.
	  	13
				
	 	 	6.19	  	 Nidiffer Subordination Agreement.
	  	13
				
	 	 	6.20	  	 Nidiffer Exchange Agreement.
	  	13
				
	 	 	6.21	  	 GECC Letter Agreement.
	  	14
				
	 	 	6.22	  	 Other Matters
	  	14
			
	7.	 	Conditions to the Company's Obligation	  	14
				
	 	 	7.1	  	 Accuracy of Representations and Warranties.
	  	14
				
	 	 	7.2	  	 Performance.
	  	14
				
	 	 	7.3	  	 Litigation.
	  	14
			
	8.	 	Covenants Of The Company.	  	14
				
	 	 	8.1	  	 Affirmative Covenants
	  	14
				
	 	 	8.2	  	 Negative Covenants
	  	18

  

 -iii- 

							
				
	 	 	8.3	  	 Other Covenants.
	  	24
			
	9.	 	Financial and Other Information.	  	25
				
	 	 	9.1	  	 Interim Period Financial Statements
	  	25
				
	 	 	9.2	  	 Unaudited Annual Statements
	  	25
				
	 	 	9.3	  	 Audited Annual Statements
	  	25
				
	 	 	9.4	  	 Compliance Certificate
	  	26
				
	 	 	9.5	  	 Monthly Reports
	  	26
				
	 	 	9.6	  	 Other Reports
	  	26
				
	 	 	9.7	  	 Notification
	  	26
			
	10.	 	Indemnification.	  	26
				
	 	 	10.1	  	 Obligation to Indemnify
	  	26
				
	 	 	10.2	  	 Notice of Asserted Liability
	  	27
				
	 	 	10.3	  	 Opportunity to Defend
	  	27
				
	 	 	10.4	  	 Right of Offset
	  	27
			
	11.	 	Miscellaneous.	  	28
				
	 	 	11.1	  	 Notices
	  	28
				
	 	 	11.2	  	 Governing Law
	  	28
				
	 	 	11.3	  	 Severability of Provisions
	  	29
				
	 	 	11.4	  	 Survival of Agreements
	  	29
				
	 	 	11.5	  	 Successors and Assigns
	  	29
				
	 	 	11.6	  	 Entire Agreement; 2000 Purchase Agreement
	  	29
				
	 	 	11.7	  	 Amendments and Waivers
	  	29
				
	 	 	11.8	  	 Waiver; Remedies Cumulative
	  	29
				
	 	 	11.9	  	 Expenses
	  	30
				
	 	 	11.10	  	 Counterparts
	  	30

  

 -iv- 

							
				
	 	 	 11.11
	  	 Exhibits and Schedules
	  	30
				
	 	 	 11.12
	  	 Headings; Table of Contents
	  	30
				
	 	 	 11.13
	  	 Public Announcements; Confidentiality.
	  	30
				
	 	 	 11.14
	  	 Stock Legend
	  	30

  
  

 -v- 

 SERIES A PREFERRED STOCK EXCHANGE AGREEMENT 
  
 THIS SERIES A PREFERRED STOCK EXCHANGE AGREEMENT
(“Agreement”) is entered into and executed as of December 29, 2003, by and between C & K Market, Inc., an Oregon corporation (the “Company”), and Unified Western Grocers, Inc., a California corporation
(“UWG”). 
  
 R E C I T A L S

  
 A. Pursuant to that certain Preferred Stock
Purchase Agreement (the “2000 Purchase Agreement”) dated as of December 19, 2000, by and between the Company and UWG, UWG purchased Eighty Thousand (80,000) shares (the “Old UWG Shares”) of the Company’s Series
A-1 Preferred Shares (the “Old Series A Preferred”). 
  
 B. The Company contemplates a recapitalization and exchange of all of the issued and outstanding shares of capital stock of the Company (the “Recapitalization”). 
  
 C. Dividends of $1,683,099.58 have accrued with respect to the Old UWG
Shares but remain unpaid to UWG as of December 31, 2003. 
  
 D. Pursuant to the Recapitalization, the Company and UWG have agreed that all of the Old UWG Shares will be exchanged for, and the obligation of the Company to pay to UWG the dividends accrued with respect to the Old UWG Shares but
unpaid as of December 31, 2003 (the “Accrued Dividends”) will be discharged and satisfied in full, in return for the issuance and delivery by the Company to UWG of Ninety-Five Thousand (95,000) shares (the “New UWG
Shares” or the “Shares”) of the Company’s newly issued Series A-2 Preferred Shares (the “New Series A Preferred”), having the rights, restrictions, privileges and preferences contained in the Articles
of Incorporation of the Company, as amended by the Articles of Restatement (the “Articles”), and the payment by the Company to UWG of an amount equal to the positive difference between the Accrued Dividends and $1,500,000 (such
difference, the “Excess Dividend Payment”) (such transaction, collectively, the “Exchange”). 
  
 E. The Board of Directors of the Company has determined that it is in the best interests of the Company and its shareholders that the Company and
UWG consummate the Exchange and the transactions contemplated hereby and by the Transaction Documents. 
  
 F. The Company and UWG intend that the Exchange be treated as a reorganization under Section 368(a)(1)(E) of the Internal Revenue Code of 1986 or
any successor law, and regulations issued by the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury (the “IRS”) pursuant thereto (the
“Code”), and that this Agreement constitute a “plan of reorganization” for such purposes. 
  
 G. As a condition to the obligation of UWG to effect the Exchange, the Company has agreed to execute a long term supply agreement with UWG and
certain shareholders of the Company (the “Shareholders”) have agreed to execute a Shareholders Agreement, among other agreements, with respect to the obligations of the Company to UWG and the operation of the Company in the future.

  

 -1- 

 A G R E E M E N T 
  
 NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings herein contained, the parties
agree as follows: 
  
 1. Interpretation. 
  
 1.1 Definitions. In addition to terms defined elsewhere in
this Agreement, when used in this Agreement, each term set forth on Annex A attached to this Agreement shall have the respective meaning given to that term in Annex A or in the provision of this Agreement referenced in
Annex A. In this Agreement the singular includes the plural and the plural the singular and words importing any gender include the other genders. 
  

1.2 Accounting Terms. Unless otherwise defined or specified in this Agreement, all accounting terms used in this Agreement shall be
interpreted and all accounting determinations shall be made in accordance with GAAP. 
  
 2. Authorization And Exchange of Shares. 
  
 2.1 Authorization. The Company has duly authorized the issuance and delivery to UWG of the Shares in exchange for the transfer and delivery to the Company at the Closing of all of the Old UWG Shares and the discharge and
satisfaction in full of the Accrued Dividends. 
  
 2.2
Exchange of Shares. Subject to the terms and conditions of this Agreement, at the Closing UWG will transfer and deliver to the Company all of the Old UWG Shares. In consideration of and in exchange for the Old UWG Shares and the discharge
and satisfaction in full of the Accrued Dividends, on the Closing Date the Company will issue and deliver to UWG the Shares and will pay the Excess Dividend Payment to UWG. 
  
 2.3 Discharge and Satisfaction of Accrued Dividends on the Old UWG Shares. The Company and UWG acknowledge and
agree that a portion of the consideration for the Shares being issued by the Company and transferred and delivered to UWG in exchange for the Old UWG Shares and the Excess Dividend Payment is being paid by the discharge and satisfaction of the
Accrued Dividends. 
  
 3. The Closing. 
  
 3.1 Time and Place. The closing (the
“Closing”) of the Exchange shall take place at the offices of Sheppard, Mullin, Richter & Hampton LLP, 333 South Hope Street, 48th floor, Los Angeles, California 90071, at 10:00 a.m. on December 31, 2003, or at such other time,
date and place as are mutually agreeable to the Company and UWG. The date of the Closing is herein referred to as the “Closing Date”. 
  
 3.2 Deliveries at Closing. 
  
 (a) Deliveries of the Company. At the Closing, the Company will issue and deliver to UWG a certificate representing the
Shares and deliver to UWG such 

  

 -2- 

 
other documents to evidence satisfaction of UWG’s conditions to the Closing set forth in Section 6. The certificate shall be registered on the
Company’s books in the name of UWG and shall be in form satisfactory to UWG and its counsel. At the Closing, the Company will pay UWG an amount equal to the Excess Dividend Payment by wire transfer of immediately available United States Dollars
to the account or accounts designated in writing by UWG. 
  
 (b) Deliveries of UWG. At the Closing, the Company will transfer and deliver to the Company the certificate(s) representing the Old UWG Shares for cancellation. 
  
 4. Representations and Warranties of the Company. Except to the extent
disclosed by the Company (with specific reference to the Section of this Section 4 to which such disclosure relates) in the Disclosure Schedule attached to this Agreement (the “Disclosure Schedule”), the Company hereby
represents and warrants to UWG as follows: 
  
 4.1
Organization and Power; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Oregon, and has all requisite power and authority (i) to own, lease and operate its
properties and to carry on its business as it is now conducted and as proposed to be conducted, (ii) to enter into and perform the terms of this Agreement and the Transaction Documents and to carry out the transactions contemplated by herein and
therein. The Company is duly qualified or licensed as a foreign corporation authorized to do business in all jurisdictions in which the character of its properties or the nature of its activities makes such qualification or licensing necessary. The
Company has no Subsidiaries. 
  
 4.2 Capitalization.
All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and have been offered, issued and sold by the Company in compliance with all applicable
federal and state securities laws. Schedule 4.2 sets forth (both immediately prior to and immediately following the Closing): (a) the authorized capital stock of the Company; the number of shares thereof issued and outstanding; and a
list of the shareholders of the Company, showing the number of shares of each class and series of the Company’s capital stock held by each shareholder, and (b) the outstanding indebtedness of the Company (including the amount, interest rate,
maturity and other material terms thereof) and a list of the holders of such indebtedness. The Company has delivered true and complete copies of any agreements, documents and instruments evidencing such indebtedness to UWG. 
  
 4.3 Agreements With Respect to Capital Stock. Except (i) as
expressly contemplated in this Agreement, the Articles, the Shareholders Agreement or the Right of First Refusal Agreement with respect to the Shares, or (ii) as disclosed on Schedule 4.3, no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding; there is not any commitment of the Company to issue any subscription, warrant, option, convertible
security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company; the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its 

  

 -3- 

 
capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof; no person or entity is entitled to any
preemptive or similar right with respect to the issuance of any capital stock of the Company or any rights with respect to the registration of any capital stock of the Company under the Securities Act of 1933, as amended; and, there is no agreement,
written or oral, between the Company and the holders of its capital stock, or, to the best of the knowledge of the Company, among any holders of its capital stock, relating to the acquisition, disposition or transfer (either optional or otherwise)
or voting of the capital stock of the Company. 
  
 4.4
Issuance of Shares. The issuance, sale and delivery of the Shares in accordance with this Agreement have been, or will be on or prior to the Closing, duly authorized by all necessary corporate action on the part of the Company, and the
Shares when so issued, sold and delivered against exchange therefor in accordance with the provisions of this Agreement will be duly and validly issued, fully paid and non-assessable, free and clear of any Liens. 
  
 4.5 Authority. The execution, delivery and performance by the
Company of this Agreement, the Transaction Documents and the GECC Loan Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action, and this Agreement, the
Transaction Documents and the GECC Loan Agreement have been duly executed and delivered by the Company. Upon their execution and delivery by the Company, this Agreement, the Transaction Documents and the GECC Loan Agreement will constitute the
legal, valid and binding obligation of the Company enforceable against the Company in accordance with their terms. The execution, delivery and performance of this Agreement, the Transaction Documents and the GECC Loan Agreement by the Company and
the offer, issuance, exchange and delivery of the Shares will not violate any provision of law (including without limitation federal and state securities laws) and will not conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Articles or the Bylaws of the Company or any indenture, lease, contract, agreement or other instrument to which the Company is a party or by which it or any of its properties is bound, or any decree,
judgment, order, statute, rule or regulation applicable to the Company. 
  
 4.6 Governmental Consent. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority by the Company is required in connection with the
execution and delivery of this Agreement and the Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and the offer, issue, exchange and delivery of the Shares under this Agreement and the Transaction
Documents. 
  
 4.7 Litigation. There are no suits,
actions, arbitrations, or legal, administrative, or other proceedings, governmental investigations or contract renegotiations pending or, to the best of the Company’s knowledge, threatened against or affecting the Company or any of its
Subsidiaries which (i) if decided adversely to the Company or its Subsidiaries, could have a material adverse effect on its or their respective business, assets or financial condition, or (ii) question the validity of this Agreement, the Transaction
Documents or the Shares to be issued under this Agreement. The Company is not in violation of or default with 

  

 -4- 

 
respect to any judgments, orders, writs, injunctions or decrees of any court or governmental department, agency or instrumentality which violation or default
could have a material adverse effect on its business, assets or financial condition. 
  
 4.8 Financial Statements; Changes. 
  
 (a) The Company has furnished to UWG complete and correct copies of its (i) balance sheets, statements of income and retained
earnings and statements of cash flow, as at December 31, 2000, 2001 and 2002, in each case certified by Musser & Associates, the Company’s independent certified public accountants (the “Audited Financial Statements”), and
(ii) unaudited balance sheet, profit and loss statement and cash flow statement as at September 30, 2003, certified by the Company’s Chief Financial Officer (the “Interim Financial Statements” and together with the Audited
Financial Statements, the “Financial Statements”). The Financial Statements are complete and correct, are in accordance with the books and records of the Company and present fairly the financial condition and results of operations
of the Company, as at the dates and for the periods indicated, and have been prepared in accordance with GAAP, except that the Interim Financial Statements do not contain notes to financial statements required by GAAP. 
  
 (b) Except as set forth on Schedule
4.8, since the date of the Interim Financial Statements, there has not been with respect to the Company: 
  
 (i) any change in its assets, liabilities, financial condition or operating results from that reflected in the Interim Financial
Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse; 
  
 (ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting its assets, properties,
financial condition, operating results, prospects or business (as such business is presently conducted and as it is currently proposed to be conducted); 
  
 (iii) any waiver or compromise of a valuable right or of a material debt owed to it; 
  
 (iv) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation, except in the ordinary course of business and that is not material to its assets, properties, financial condition, operating results or business (as such business is presently conducted and as it is
currently proposed to be conducted); 
  
 (v) any
change or amendment to a material contract or arrangement by which it or any of its assets or properties is bound or subject; 
  

 -5- 

 (vi) any declaration or payment of any dividend or other distribution of any of its
assets; 
  
 (vii) any material change in any
compensation arrangement or agreement with any employee; 
  
 (viii) any other event or condition of any character that might materially and adversely affect its assets, properties, financial condition, operating results or business (as such business is presently conducted and
as it is currently proposed to be conducted); 
  
 (ix) any amendments or changes in its Articles of Incorporation or Bylaws except for those changes contemplated by the Statement of Withdrawal and the Articles of Restatement; 
  
 (x) any increase in or modification of any bonus, pension, insurance or other employee benefit plan,
payment or arrangement (including, but not limited to, the granting of stock options, restricted stock awards or stock appreciation rights) made to, for or with any of its employees; 
  
 (xi) any incurrence, assumption or guarantee of any debt for borrowed money; issuance or sale of any
securities convertible into or exchangeable for debt securities; or issuance or sale of options or other rights to acquire any securities convertible into or exchangeable for any such debt securities; 
  
 (xii) any making of any loan, advance or capital
contribution to any person other than travel loans or advances made in the ordinary course of business and not in excess of $10,000; or 
  
 (xiii) any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative
thereof to organize any of its employees. 
  
 4.9
Undisclosed Liabilities. The Company has no material liability or obligation, absolute or contingent (individually or in the aggregate), that is not disclosed in the Interim Financial Statements, except obligations and liabilities
incurred after the date of the Interim Financial Statements in the ordinary course of business that are not individually or in the aggregate material. 
  
 4.10 Taxes. Within the times and in the manner prescribed by law, the Company has filed all federal, state, county and local tax returns and
reports required by law and has paid all taxes, assessments, other governmental charges and penalties on the Company or any of its properties, assets, income or franchises shown on those returns to be due and payable. All of those tax returns were
substantially correct as filed, and the Company has no material unpaid taxes, assessments, other governmental charges and penalties on its properties, assets, income or franchises. None of the federal income, state sales or state franchise tax
returns of the Company 

  

 -6- 

 
has ever been audited by the Internal Revenue Service, the State of Oregon or any other jurisdiction where the Company has filed or is required to file a
state sales or franchise tax return. The Company is not presently under audit and has not executed any waiver of any statute of limitations as to taxes of any nature. There are no present disputes about taxes of any nature by the Company.

  
 4.11 Property and Assets. The Company has good
and marketable title to all the assets, interests in assets, and leasehold interests, whether real, personal, or mixed, tangible or intangible, including those reflected in the Interim Financial Statements (collectively, the
“Properties”). The Properties are free and clear of restrictions on or conditions to transfer or assignment, mortgages, liens, pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants, conditions, or
restrictions, except for (i) those disclosed in the Interim Financial Statements or in the Disclosure Schedule, (ii) the lien of current taxes not yet due and payable or those payable without penalty or interest, and (iii) minor matters that,
individually or in the aggregate, are not substantial in amount and do not materially detract from or interfere with the present use of any of the Properties nor materially impair present business operations. The Company enjoys peaceful and
undisturbed possession under all of the leases under which any of the Properties are held by it, none of which contains any unusual or burdensome provisions that will materially impair or adversely affect the operations of the Company or the
Company’s ability to perform its obligations under this Agreement and the Transaction Documents, and all such leases are valid, subsisting and in full force and effect, and no event has occurred which with the passage of time or the giving of
notice, or both, would constitute a default under any thereof. 
  
 4.12 Patents and Trademarks. Set forth on Schedule 4.12 attached to this Agreement is a true and complete list of all patents, trademarks, service marks, trade names, copyrights, licenses, and rights with respect
to them, used in or necessary for the conduct of the Company’s business as now conducted and proposed to be conducted (collectively, the “Licenses”). The Company owns or possesses the unrestricted right to use, free and clear
of any rights or claims of others, the Licenses necessary for the conduct of its business as now conducted and proposed to be conducted, and the Company is not obligated or under any liability whatever to make any payments as royalties, fees or
otherwise to any owner of, licensor of, or other claimant to, the Licenses. 
  
 4.13 Compliance with Laws and Agreements. The Company has complied with and is not in violation of, nor has it received notice of violation of, any applicable federal, state or local statute, law or
regulation affecting its properties or the operation of its business. The Company is not in violation, breach or default of any term or provision of (i) the Articles or its Bylaws, or (ii) any term or provision of any lease, license, note, contract,
commitment, indenture, mortgage, deed of trust, or other agreement, instrument, or arrangement applicable to or binding on it which violation, breach or default could have a material adverse effect on its business, assets or financial condition or
could impair or adversely affect the Company’s ability to perform its obligations under this Agreement or the Transaction Documents. 
  
 4.14 Contracts. Schedule 4.14 attached to this Agreement sets forth a list of all material agreements and all Guaranties of
any nature to which the Company is a party or by which it or its properties is bound (“Material Agreements”), including, without limitation, 

  

 -7- 

 
(i) each agreement (other than agreements for the purchase on open account of merchandise for resale in the ordinary course of business at the Company’s
supermarket locations) which requires future expenditures by the Company in excess of $100,000, (ii) all employment and consulting agreements, employee benefit, bonus, pension, profit sharing, stock option, stock purchase and similar plans and
arrangements, (iii) any agreement to which any shareholder, officer or director of the Company or any of its Subsidiaries, or any “affiliate” or “associate” of such persons (as such terms are defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended), is presently a party, including, without limitation, any agreement or other arrangement providing for the furnishing of services by, rental of real or personal property from, or otherwise
requiring payment to, any such shareholder, officer, director, affiliate or associate, or providing for the guarantee by the Company of any debt or other obligation of any such shareholder, officer, director, affiliate or associate and (iv) any
other existing or currently effective agreement, contract, or commitment that is material to the Company or any of its affiliates. All the Material Agreements are valid and binding obligations of the Company, in full force and effect in all material
respects. The Company is not in material default or aware of any material default by another party, either pending or threatened, with respect to any of the Material Agreements. The Company is not a party to or bound by any material contract,
agreement or instrument, or subject to any restriction under the Articles or its Bylaws, that adversely affects its business as presently conducted or as currently proposed to be conducted, its properties, its financial condition, or its ability to
perform its obligations under this Agreement and the Transaction Documents. 
  
 4.15 Environmental Matters. Except as disclosed in Schedule 4.15, none of the presently or previously owned, leased or occupied real property of the Company has: (i) ever been used by the
Company or any of its Subsidiaries or any previous owners, lessees or operators in the disposal of or to refine, generate, manufacture, produce, store, handle, treat, transfer, release, process or transport any Hazardous Waste or Hazardous
Substance, except as specifically authorized by, or in compliance with, law or pursuant to valid and effective permits or other appropriate forms of governmental approval; (ii) been designated, listed or identified in any manner by the EPA or any
other federal or state governmental agency charged with administering and enforcing an Environmental Protection Statute; or (iii) been the subject of any written summons, citation, notice, directive, letter or other communication from the EPA or any
other federal or state governmental agency or instrumentality, authorized pursuant to an Environmental Protection Statute concerning any intentional or unintentional action or omission by the Company or any of its Subsidiaries resulting in the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise disposing of Hazardous Waste or Hazardous Substances into the Environment resulting in damage thereto. 
  
 4.16 Obligations to and from Company Related Parties. Set forth
on Schedule 4.16 is a true, correct and complete schedule of (a) all of the material obligations of the Company to all officers, directors, shareholders and key employees of the Company, including any member of their immediate families
and (b) all of the obligations of the Company’s officers, directors, shareholders and key employees, including any member of their immediate families (other than expense advances made in the ordinary course of business) to the Company both
immediately prior to and immediately after the Closing. Except as disclosed in Schedule 4.16, the Company’s officers, directors and shareholders have no interest (other than as non-controlling holders of securities of a
publicly-traded company), either directly or indirectly, in any entity, 

  

 -8- 

 
including, without limitation, any corporation, partnership, joint venture, proprietorship, firm, person, licensee, business or association (whether as an
employee, officer, director, shareholder, agent, independent contractor, security holder, creditor, consultant or otherwise) that presently or in the past two years: (a) provides any services or designs, produces and/or sells any products or product
lines, or engages in any activity which is the same, similar to, or competitive with any activity of the business in which the Company is now engaged; (b) is a supplier of, customer of, creditor of, or has an existing contractual relationship (other
than employment contracts) with the Company; or (c) has any direct or indirect interest in any asset or property, real or personal, tangible or intangible, of or used by the Company or any property, real or personal, tangible or intangible, that is
necessary or desirable for the conduct of the business of the Company. 
  
 4.17 License and Permits. The Company has all licenses, permits and other authorizations of governmental authorities, domestic and foreign, necessary in the conduct of its business. The Company has not received any notice
(nor, to its best knowledge, does it have any reason to believe) that revocation is being considered with respect to any of such licenses, permits or authorizations. 
  
 4.18 Employees. The Company has complied in all respects with all laws relating to the employment of labor,
including, without limitation, provisions relating to wages, hours, equal opportunity, collective bargaining, payment of social security and other taxes, and ERISA, except where the failure to comply would or could not have a materially adverse
effect on the condition (financial or otherwise), properties, assets, operations, results of operations, business, prospects or rights of the Company. The Company’s employees are not represented by any union, and the Company is not aware of any
organizing activities with respect to any of its employees. 
  
 4.19 Insurance Coverage. There is in full force and effect one or more policies of insurance issued by insurers of recognized responsibility insuring the Company and its Properties and business against losses and risks. Such
policies include, without limitation, property loss insurance policies with extended coverage, sufficient in amount to allow the Company to replace any of its tangible properties which might be damaged or destroyed by the risks normally covered by
such policies. 
  
 4.20 Brokers or Finders. The
Company has not retained any broker or finder in connection with the transactions contemplated by this Agreement and shall indemnify UWG against, and hold UWG harmless of and from, any liability for any commission or compensation in the nature of a
commission or finder’s fee to any broker or other person or firm allegedly retained by the Company (and the costs and expenses of defending against such liability or asserted liability) or for which the Company, its employees or its
representatives are responsible. 
  
 4.21 Affiliate
Transactions. Except pursuant to the Nidiffer Exchange Agreement as in effect on the date hereof and as set forth on Schedule 4.21, the Company and its Subsidiaries have not entered into any lending, borrowing or other
commercial transaction with any of its Subsidiaries, Affiliates, officers, directors or employees, including, without limitation, payment of any management, consulting, advisory or similar fee. 
  

 -9- 

 4.22 Disclosures. This Agreement, including all schedules attached to this Agreement, and
all statements, certificates and other written instruments or material furnished to UWG or its counsel by or on behalf of the Company under or in connection with this Agreement and the transactions contemplated by this Agreement, when read together,
do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in them, in light of the circumstances under which they were made, not misleading. The Company knows of no
information or fact which has or would have a material adverse effect on the financial condition, business, operations or prospects of the Company or any of its Subsidiaries, any of its or their properties or assets or its ability to perform its
obligations under this Agreement and the Transaction Documents that has not been set forth in this Agreement or otherwise previously disclosed to UWG in writing. 
  
 5. Representations and Warranties of UWG. UWG hereby represents and warrants to the Company as follows: 
  
 5.1 Organization and Power. UWG is a corporation duly
organized, validly existing and in good standing under the laws of the State of California, and has all requisite power and authority to enter into and perform the terms of this Agreement and to carry out the transactions contemplated by this
Agreement. UWG is duly qualified or licensed as a foreign corporation authorized to do business in all jurisdictions in which the character of its properties or the nature of its activities makes such qualification or licensing necessary.

  
 5.2 Authority for Agreement. The execution,
delivery and performance by UWG of this Agreement have been duly authorized by all necessary corporate action, and this Agreement has been duly executed and delivered by UWG. Upon its execution and delivery by UWG, this Agreement will constitute the
legal, valid and binding obligation of UWG enforceable against UWG in accordance with its terms. Except for federal and state securities laws, statutes, rules and regulations (as to which no representation or warranty is made), the execution,
delivery and performance of this Agreement by UWG will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the Articles or Bylaws of UWG
or any indenture, lease, contract, agreement or other instrument to which UWG is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to UWG. 
  
 5.3 Governmental Consent. Except for such as may be required
under any federal or state securities laws, statutes, rules or regulations (as to which no representation or warranty is made), no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with,
any governmental authority by UWG is required in connection with the execution and delivery of this Agreement, its acquisition of the Shares under this Agreement, or the issuance to UWG of the common stock of the Company on the conversion of the
Shares. 
  
 5.4 Ownership of the Old UWG Shares. UWG
is the sole record and beneficial owner and holder of the Old UWG Shares, and has good and marketable title to the old UWG Shares, free and clear of restrictions to transfer or assignment (other than restrictions imposed by federal and state
securities laws), and the full power of disposition over and full right to transfer the Old UWG Shares to the Company in exchange for the Shares and the Excess Dividend Payment in accordance with the terms and conditions of this Agreement.

  

 -10- 

 5.5 Litigation. There are no suits, actions, arbitrations, or legal, administrative, or
other proceedings, governmental investigations or contract renegotiations pending nor, to the best of UWG’s knowledge, threatened against or affecting UWG which question the authority of UWG to enter into this Agreement or the validity of this
Agreement. 
  
 5.6 Investment. UWG is acquiring the
Shares for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof. 
  
 5.7 Accredited Investor. UWG is an accredited investor within the meaning of Rule 501(a) (3) of Regulation D promulgated under the
Securities Act of 1933, as amended. UWG is capable of evaluating the merits and risks of the investment of the Shares and protecting its own interests in connection therewith by virtue of preexisting business relationships with the Company and
because UWG has sufficient knowledge and experience in financial and business matters. UWG has not been organized, reorganized or recapitalized for the specific or primary purpose of acquiring the Shares. 
  
 5.8 Transferability. UWG understands that the Shares have not
been registered under the Securities Act of 1933, as amended, or qualified under applicable state securities laws and therefore cannot be sold unless they are subsequently registered under that Act and qualified under applicable state securities
laws, or unless resale is exempt from registration and qualification thereunder; and further acknowledges that UWG must bear the economic risk of ownership thereof for an indefinite period of time (subject, however, to any put rights with respect to
the Shares as set forth in the Transaction Documents). 
  
 6. Conditions to
UWG’s Obligation. The obligation of UWG to accept the Shares and the Excess Dividend Payment at the Closing in exchange for the Old UWG Shares and the discharge and satisfaction in full of the Accrued Dividends and to take the other
actions required to be taken by UWG at the Closing is subject to the fulfillment to the satisfaction of UWG (unless waived in a writing signed by UWG), at or before the Closing, of each of the following conditions: 
  
 6.1 Certificates and Documents. The Company shall have
delivered to UWG (i) certificates of corporate status with respect to the Company, dated as of the most recent practicable dates, showing that the Company is in good standing under the laws of the State of Oregon, and showing that the Company is
qualified to transact business in every other state where such qualification is required by law; (ii) the Articles in effect on the Closing Date, certified by the Secretary of State of the State of Oregon as of the most recent practicable date and
by the Secretary of the Company as of the Closing Date; (iii) the Bylaws of the Company, as amended and in effect on the Closing Date, certified by the Secretary of the Company as of the Closing Date; (iv) a signature and incumbency certificate of
the Secretary of the Company, dated the Closing Date, attesting to the genuineness of the signatures and the incumbency of the officers of the Company executing this Agreement and each other agreement, document and instrument required to be executed
and delivered by the Company in connection herewith; and (v) a certificate of the Secretary of the Company, dated the Closing Date, attesting to the due 

  

 -11- 

 
adoption and subsisting validity without modification at the Closing Date of (A) the resolutions of the Company’s Board of Directors and shareholders
authorizing the execution and delivery of this Agreement, the Articles of Restatement and each other agreement, document and instrument required to be executed and delivered by the Company in connection therewith, authorizing specific responsible
officers of the Company to execute and deliver the same, and authorizing all other matters in connection with this Agreement, the Articles of Restatement and the transactions contemplated thereby. 
  
 6.2 Accuracy of Representations and Warranties. The
representations and warranties made by the Company in Section 4 of this Agreement shall be true and correct when made and shall be true and correct at and as of the Closing Date. 
  
 6.3 Performance. The Company shall have performed and complied with all agreements and conditions contained in
this Agreement required to be performed or complied with by the Company prior to or at the Closing. 
  
 6.4 Compliance with Covenants. At the Closing Date the Company shall be in full compliance with each of the covenants of the Company set
forth in Section 8 of this Agreement.  
  
 6.5
Closing Certificate. The Company shall have delivered to UWG a certificate, dated as of the Closing Date and validly executed on behalf of the Company, to the effect that the conditions set forth in Sections 6.2, 6.3 and
6.4 have been satisfied. 
  
 6.6 Consents and
Waivers. The Company shall have obtained, and shall have provided evidence satisfactory to UWG and its counsel of, all approvals, consents and waivers necessary or appropriate for the offer, exchange, issuance and delivery to UWG of the
Shares, the consummation of the transactions contemplated by this Agreement and the performance by the Company of its obligations hereunder, including, but not limited to, all necessary or appropriate approvals, consents and waivers by the
shareholders of, and the lenders to, the Company. 
  
 6.7
Material Adverse Change. From the date of the Interim Financial Statements to the Closing Date, the Company’s business, operations or financial conditions shall not have been adversely affected in any material way in the sole
judgment of UWG. 
  
 6.8 Statement of Withdrawal.
The Company shall have duly filed with the Oregon Secretary of State the Statement of Withdrawal attached hereto as Exhibit 6.8 (the “Statement of Withdrawal”) with respect to the Articles of Amendment. 
  
 6.9 Due Diligence Review. UWG must have received results
satisfactory to it, in its sole discretion, from its due diligence review of the Company. 
  
 6.10 Supply Agreement. The Company shall have executed and delivered the supply agreement in the form attached hereto as Exhibit 6.10 (the “Supply Agreement”). 

 

 -12- 

 6.11 Shareholders Agreement. The Company and the Senior Management shall have duly executed
and delivered that certain Shareholders Agreement in the form attached hereto as Exhibit 6.11 (the “Shareholders Agreement”). 
  
 6.12 Litigation. No litigation or claim shall be pending or threatened against UWG or the Company with respect to any material element of
the transactions contemplated by this Agreement. 
  
 6.13
Other Financing. The Company shall have executed and be in a position to simultaneously close (i.e., that all conditions to closing other than the disbursements of funds have been satisfied) a credit agreement (as in effect on the date
hereof, without any subsequent amendment, modification, waiver or restatement thereto, the “GECC Loan Agreement”) with respect to a $30 million senior secured term loan facility arranged by General Electric Capital Corporation
(“GECC”) as agent, a senior secured revolving credit facility of not less than $10 million arranged by GECC as agent, and the placement of not less than $16 million of subordinated debt by GECC as agent, in each case pursuant to
commitments received by Company and satisfactory to UWG and the final terms of which are substantially in accordance with the terms of such commitments. The Company shall have delivered to UWG a schedule listing the sources and uses of such
financing which reflects the availability of funds that are sufficient to pay all outstanding purchase orders to purchase equipment from UWG or its affiliates. 
  

6.14 Opinion of Company’s Counsel. UWG shall have received from Doyle, Gartland, Nelson, McCleery & Wade, P.C., counsel for the
Company, a favorable written legal opinion, dated as of the Closing Date, addressed to UWG, in form and substance satisfactory to UWG and its counsel. 
  
 6.15 Update of Membership Documentation. The Company shall have prepared and filed with UWG such documents as are reasonably required by UWG
to update the Company’s membership documentation with UWG, which documents shall reflect all ownership changes resulting from the Transaction Documents and the transactions contemplated hereby and thereby. 
  
 6.16 Right of First Refusal Agreement. The Company and the
Senior Management shall have executed and delivered the Right of First Refusal Agreement. 
  
 6.17 Articles of Restatement. The Company shall have duly filed with the Oregon Secretary of State the Articles of Restatement attached hereto as Exhibit 6.17 (the “Articles of
Restatement”). 
  
 6.18 Shareholders
Guaranty. The Senior Management shall have executed and delivered the Shareholders Guaranty. 
  
 6.19 Nidiffer Subordination Agreement. The Company and the Nidiffer Family shall have executed and delivered the Nidiffer Subordination
Agreement. 
  
 6.20 Nidiffer Exchange Agreement. The
transactions contemplated by the Nidiffer Exchange Agreement shall have been consummated. 
  

 -13- 

 6.21 GECC Letter Agreement. GECC, the Company and the Senior Management shall have executed
and delivered a letter agreement regarding that certain letter agreement dated as of December 19, 2000. 
  
 6.22 Other Matters. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents
and instruments incident to such transactions shall be reasonably satisfactory in substance and form to UWG and its counsel, and UWG and its counsel shall have received all such counterpart originals or certified or other copies of such documents as
they may reasonably request. 
  
 7. Conditions to the Company’s
Obligation. The Company’s obligation to issue and deliver the Shares and to pay the Excess Dividend Payment to UWG at the Closing in exchange for the Old UWG Shares and the discharge and satisfaction in full of the Accrued Dividends and
to take the other actions required to be taken by the Company at the Closing is subject to the fulfillment by UWG to the satisfaction of the Company (unless waived in a writing signed by the Company), at or before the Closing, of each of the
following conditions: 
  
 7.1 Accuracy of Representations
and Warranties. The representations and warranties made by UWG in Section 5 of this Agreement shall be true and correct and shall be true and correct at and as of the Closing Date. 
  
 7.2 Performance. UWG shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed or complied with by the Company prior to or at the Closing. 
  
 7.3 Litigation. No litigation or claim shall be pending or threatened against the Company with respect to any material element of the
transactions contemplated by this Agreement.  
  
 8. Covenants Of The
Company. 
  
 8.1 Affirmative Covenants. The
Company covenants and agrees that it will comply with and perform each of the following covenants:  
  
 (a) Maintenance of Existence and Conduct of Business. The Company shall (and shall cause each of its Subsidiaries to) (i) do
or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; (ii) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder;
(iii) at all times maintain, preserve and protect all of its material Intellectual Property, and preserve all the remainder of its property, in use or useful in the conduct of its business and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear and except for dispositions of obsolete property having an aggregate value of up to $250,000 per year) and from time to time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; and (d) transact business only under the names set forth on
Schedule 8.1(a). 
  

 -14- 

 (b) Payment of Charges and Claims. The Company shall pay and discharge, or
cause to be paid and discharged in accordance with the terms thereof, (i) all Charges imposed upon it or any Subsidiary or its or their income and profits, or any of its property (real, personal or mixed), and (ii) lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid might by law become a Lien on its property; provided, however, that the Company or any Subsidiary shall not be required to pay any such Charge or claim which is being contested in good
faith by proper legal actions or proceedings, so long as at the time of commencement of any such action or proceeding and during the pendency thereof (A) no Event of Default shall have occurred and be continuing, (B) adequate reserves with respect
thereto are established and are maintained in accordance with GAAP, (C) such contest operates to suspend collection of the contested Charges or claims and is maintained and prosecuted continuously with diligence (or is bonded or insured to
UWG’s reasonable satisfaction), (iv) none of the Collateral would be subject to forfeiture or loss or any Lien by reason of the institution or prosecution of such contest, (v) no Lien shall exist, be imposed or be attempted to be imposed for
such Charges or claims during such action or proceeding unless the full amount of such Charge or claim is covered by insurance satisfactory in all respects to UWG, and (vi) the Company shall promptly pay or discharge, bond or insure such contested
Charges and all additional charges, interest penalties and expenses, if any, and shall deliver to UWG evidence acceptable to UWG of such compliance, payment, discharge, bond or insurance if such contest is terminated or discontinued adversely to the
Company. 
  
 (c) Books and Records.
The Company shall (and shall cause each Subsidiary to) keep adequate records and books of account with respect to its business activities, in which proper entries, reflecting all of its consolidated and consolidating financial transactions, are made
in accordance with GAAP and on a basis consistent with the Financial Statements. 
  
 (d) Litigation. The Company shall notify UWG in writing, promptly upon learning thereof, of any litigation, Claim or other
action commenced or threatened against the Company, and of the institution against any such Person of any suit or administrative proceeding which (i) may involve payment by the Company of an uninsured amount of damages in excess of $100,000
individually or in the aggregate or (ii) could have or result in a Material Adverse Effect if adversely determined. 
  
 (e) Insurance. The Company shall, at its (or its Subsidiary’s) sole cost and expense maintain or cause to be
maintained, the policies of insurance in such amounts and as otherwise described in Schedule 8.1(e). The Company shall notify UWG promptly of any occurrence causing a material loss of any real or personal property and the estimated (or
actual, if available) amount of such loss, except as specified otherwise on Schedule 8.1(e). 
  
 (f) Compliance with Laws. The Company shall (and shall cause each of its Subsidiaries to) comply in all respects with all
material federal, state and local laws, permits and regulations applicable to it, including, without limitation, those relating to licensing, environmental, ERISA and labor matters. Without limiting the generality of 

  

 -15- 

 
the foregoing, the Company and each of its Subsidiaries shall ensure that (i) it is not (A) listed on the Specially Designated Nationals and Blocked Person
List maintained by the Office of Foreign Assets Control (“OFAC”), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (B) a person
designated under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders; (ii) no person who owns a controlling interest in or otherwise controls such Person
is or shall be listed or designated under the provisions specified in clauses (A) or (B) above; and (iii) it is in compliance with all applicable Bank Secrecy Act (“BSA”) laws, regulations and government guidance on BSA compliance
and on the prevention and detection of money laundering violations. 
  
 (g) Agreements. The Company shall (and shall cause each of its Subsidiaries to) perform in all material respects, within all required time periods (after giving effect to any applicable grace periods),
all of its obligations and enforce all of its material rights under each agreement, contract, instrument or other document to which it is a party, including, without limitation, any leases and customer contracts to which it is a party where the
failure to so perform and enforce could have or result in a Material Adverse Effect. The Company shall not (and shall not permit any of its Subsidiaries to) terminate or modify any provision of any agreement, contract, instrument or other document
to which it is a party which termination or modification could have or result in a Material Adverse Effect. 
  
 (h) Supplemental Disclosure. On the request of UWG (in the event that such information is not otherwise delivered by the
Company to UWG pursuant to this Agreement) but not more frequently than every three (3) months, the Company will supplement (or cause to be supplemented) each Schedule hereto, or representation herein or in any other Transaction Document with
respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an exception to such representation or which is necessary to correct
any information in such Schedule or representation which has been rendered inaccurate thereby; provided, however, that such supplement to such Schedule or representation shall not be deemed an amendment thereof unless expressly consented to in
writing by UWG, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by UWG of any default disclosed therein. 
  
 (i) Environmental Matters. The Company shall
(i) comply with the Environmental Laws and permits applicable to it, (ii) notify UWG promptly after the Company becomes aware of any Release upon any Subject Property, and (iii) promptly forward to UWG a copy of any order, notice, permit,
application, or any communication or report received by the Company or its Subsidiaries in connection with any such Release or any other matter relating to the Environmental Laws that may materially and adversely affect any Subject Property or the
Company or its Subsidiaries. The provisions of this Section 8.1(i) shall apply whether or not the Environmental Protection Agency, any other federal agency or any state or local environmental agency has taken or threatened any action in
connection with any Release or the presence of any Hazardous Materials. 
  

 -16- 

 (j) Certain Obligations Respecting Subsidiaries. The Company will, and will
cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Subsidiaries is a wholly owned Subsidiary. The Company will not permit any of its Subsidiaries to enter into, after the date of
this Agreement, any indenture, agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment
of Indebtedness, the granting of Liens, the declaration or payment of dividends or other Restricted Payments, the making of loans, advances or the sale, assignment, transfer or other disposition of any property or assets. 

 
 (k) Fiscal Year. The Company shall, and
shall cause each Subsidiary to, maintain as its Fiscal Year the twelve month period ending on December 31 of each year. 
  
 (l) Future Information. All data, certificates, reports, statements, documents and other information furnished to UWG by or
on behalf of the Company or its Subsidiaries, any of their respective representatives or agents in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby, at the time the information is so
furnished, taken as a whole, shall not contain any untrue statement of a material fact, shall be complete and correct in all material respects to the extent necessary to give UWG sufficient and accurate knowledge of the subject matter thereof, and
shall not omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such information is furnished. 
  
 (m) Further Assurances. Within five (5)
Business Days of a request from UWG, from time to time after the date hereof, each of the Company and its Subsidiaries shall execute and deliver, and shall cause any other Persons who are required to give their consent to execute and deliver, such
instruments, certificates and documents, and will take all such actions, for the purposes of implementing or effectuating the provisions of this Agreement and the other Transaction Documents. Upon exercise by UWG of any power, right, privilege or
remedy pursuant to this Agreement or any other Transaction Document which requires any consent, each of the Company and its Subsidiaries will execute and deliver, and will cause any other Persons to execute and deliver, all applications,
certifications, instruments and other documents and papers that may be required to be obtained for such consent. Promptly upon request by UWG, each of the Company and its Subsidiaries shall correct any material defect or error that may exist or be
discovered in this Agreement or any other Transaction Document or in the execution, acknowledgment, filing or recordation thereof. Promptly upon request by UWG, each of the Company and its Subsidiaries shall do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register any and all such further acts, conveyances, transfers, certificates, assurances and other instruments as UWG may require from time to time in order to (i) carry out more effectively the
purposes of the 

  

 -17- 

 
Transaction Documents, and (ii) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the rights granted or now or
hereafter intended to be granted to UWG under any Transaction Document or under any other instrument executed in connection with any Transaction Document to which the Company and its Subsidiaries is to be a party. No later than quarterly, the
Company shall provide UWG with a report of all new properties and assets acquired by the Company and its Subsidiaries. 
  
 8.2 Negative Covenants. The Company covenants that it will not and will not permit any Subsidiary to:  
  
 (a) Mergers, Subsidiaries, Etc. The Company
shall not (and shall not permit any of its Subsidiaries to), directly or indirectly, by operation of law or otherwise, merge with, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with, any
Person or form or acquire any Subsidiary. The Company shall not make any store acquisition without the prior written approval of UWG. Prior to forming any Subsidiary, the Company shall (a) provide not less than thirty (30) days prior written notice
to UWG, (b) take all actions reasonably requested by UWG to protect and preserve the rights, preferences and privileges of the Shares, and (c) receive the prior written consent of UWG. 
  
 (b) Investments. The Company shall not (and shall not permit any of its Subsidiaries to),
directly or indirectly, make or maintain any Investment except (i) as otherwise permitted by Section 8.2(c); (ii) Investments outstanding on the date hereof and listed on Schedule 8.2(b); (iii) advances constituting trade credit
representing the purchase price of inventory, supplies sold to any Person (other than a Subsidiary or Affiliate of the Company) in the ordinary course of business and payable on terms not exceeding 120 days; and (iv) Investments in the deposits with
and the cooperative stock of UWG. 
  
 (c)
Indebtedness. Without UWG’s prior written consent, which may be withheld at UWG’s sole discretion, the Company shall not (and shall not permit any of its Subsidiaries to) create, incur, assume or permit to exist any
Indebtedness, except (i) the Obligations owing under the GECC Loan Agreement in a principal amount not to exceed (a) $10,000,000 with respect to any Revolving Credit Loan (as defined in the GECC Loan Agreement) less any permanent commitment
reductions made, (b) $30,000,000 with respect to any Senior Term Loan (as defined in the GECC Loan Agreement) less any scheduled principal payments or prepayments made or (c) $16,000,000 with respect to the Subordinated Term Loan (as defined in the
GECC Loan Agreement) less any prepayments made (plus the amount of any interest paid in kind with respect to the Subordinated Term Loan in accordance with the terms thereof ); provided, that the amount of the Revolving Credit Commitments (as defined
in the GECC Loan Agreement) and/or the Senior Term Loan may be increased by an aggregate of up to $6,000,000; (ii) Capital Lease Obligations and Indebtedness secured by purchase money Liens permitted under clause (v) of Section 8.2(g) in a
maximum aggregate amount outstanding not to exceed $500,000; (iii) other Indebtedness existing as of the date hereof and set forth on Schedule 8.2(c); (iv) the Indebtedness under the Nidiffer 

  

 -18- 

 
Exchange Agreement in an amount not to exceed $10,000,000 and subject to the Nidiffer Subordination Agreement; (v) Indebtedness owing to UWG or its
Subsidiaries; and (vi) subordinated seller financing in connection with the purchase of additional stores not to exceed in the aggregate $5,000,000 over any twelve-month period; provided, that UWG shall not unreasonably withhold its consent with
respect to subordinated seller financing in connection with the purchase of additional stores exceeding $5,000,000 in the aggregate over any twelve-month period. 
  
 (d) Affiliate and Employee Loans and Transactions; Employment Agreements. Except pursuant to
the Nidiffer Exchange Agreement as in effect on the date hereof, the Company shall not (and shall not permit any of its Subsidiaries to) enter into any lending, borrowing or other commercial transaction with any of its Subsidiaries, Affiliates,
officers, directors or employees, including, without limitation, payment of any management, consulting, advisory or similar fee. 
  
 (e) Capital Structure and Business. After the Closing, except as permitted under Section 8.1(a), the Company shall
not (and shall not permit any of its Subsidiaries to), (i) make any changes in its business objectives, or purposes, or operations which could materially and adversely affect the repayment of the Obligations or have or result in a Material Adverse
Effect, (ii) make any change in its capital structure (including, without limitation, the issuance or recapitalization of any shares of Stock or other securities convertible into Stock or any revision of the terms of its outstanding Stock) except
for the sale or issuance by the Company of common Stock in an aggregate amount not to exceed 20% of the issued and outstanding non-voting Stock of the Company sold or issued pursuant to an employee stock ownership plan, or similar program adopted by
the Company (iii) engage in any business other than the business currently engaged in by such Person, (iv) amend the Articles, (v) change its name, state of incorporation, type of organization or organizational ID Number, (vi) amend, alter, modify
or waive, or permit the amendment, modification, alteration or waiver of (A) any loan or other financing agreement to which GECC and the Company are a party or (B) the Nidiffer Exchange Agreement, or (vii) enter into any agreement or obligation or
incur any obligation to repurchase or redeem Stock other than the Transaction Documents or amend any existing agreement or obligation to repurchase or redeem Stock. 
  
 (f) Guaranteed Indebtedness. The Company shall not (and shall not permit any of its
Subsidiaries to) incur any Guaranteed Indebtedness except (i) by endorsement of instruments or items of payment for deposit to the general account of such Person, (ii) for Guaranteed Indebtedness incurred for the benefit of the Company if the
primary obligation is permitted by this Agreement for the Company to incur (and such Guaranteed Indebtedness shall be treated as a primary obligation for all purposes hereof), and (iii) for performance bonds or indemnities entered into in the
ordinary course of business consistent with past practices or otherwise required by Governmental Authorities in connection with the operation of the business of the Company. 
  
 (g) Liens. The Company shall not (and shall not permit any of its Subsidiaries to) create or
permit to exist any Lien on any of its properties or assets except for (i) presently existing or hereafter created Liens to secure the Obligations; (ii) Liens set 

  

 -19- 

 
forth on Schedule 8.2(g) existing on the Closing Date; (iii) Permitted Encumbrances; (iv) purchase money liens or purchase money security
interests upon or in Equipment acquired by the Company or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such Equipment or to secure Indebtedness or Capital Lease Obligations permitted under Section
8.2(c) incurred solely for the purpose of financing the acquisition of such Equipment, so long as such Equipment is not a component, part or accessory installed on, or an accession, addition or attachment to, any other Equipment or other
property of the Company or any Subsidiary thereof (except other Equipment on which a security interest exists under this clause); and (v) extensions, renewals and replacements of Liens referred to in clauses (ii) and (v) above, provided that any
such extension, renewal or replacement Lien is limited to the property or assets covered by the Lien extended, renewed or replaced and does not secure Indebtedness in an amount greater than the amount of the outstanding Indebtedness secured thereby
immediately prior to such extension, renewal or replacement. 
  
 (h) Sale of Assets. The Company shall not (and shall not permit any of its Subsidiaries to) sell, transfer, convey, assign or otherwise dispose of any of its assets or properties; provided, however, that
the foregoing shall not prohibit (i) the sale of Inventory in the ordinary course of business; (ii) the sale or disposition of any assets which have become obsolete or surplus to the business of the Company, or any of its Subsidiaries and which have
a value of not more than $1,000,000 individually or an aggregate of $2,000,000 over the term of this Agreement, (iii) the sale of Store #27 located in Klamath Falls, Oregon and Store #40 located in Davis, California, and (iv) the disposition of
assets not exceeding a value of $250,000 in the aggregate in any single fiscal year, provided the same are substantially replaced by the Company within a reasonable period of time following such disposition. 
  
 (i) Material Contracts. The Company shall not
(and shall not permit any of its Subsidiaries to) cancel or terminate any Material Contract or amend or otherwise modify any Material Contract, or waive any default or breach any Material Contract, or take any other action in connection with any
Material Contract that would have a Material Adverse Effect. 
  
 (j) ERISA. Neither the Company nor any ERISA Affiliate shall acquire any new ERISA Affiliate that maintains or has an obligation to contribute to a Pension Plan that has either an “accumulated
funding deficiency,” as defined in Section 302 of ERISA, or any “unfunded vested benefits,” as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of any Pension Plan other than a Multiemployer Plan and in Section 4211 of ERISA
in the case of a Multiemployer Plan. Additionally, neither the Company nor any ERISA Affiliate shall permit or suffer any condition set forth on Schedule 3.13 of the GECC Loan Agreement to cease to be met and satisfied at any time; terminate any
Pension Plan that is subject to Title IV of ERISA where such termination could reasonably be anticipated to result in liability to the Company; (b) permit any material accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to be
incurred with respect to any Pension Plan; fail to make any contributions or fail to pay any amounts due and owing as required by the terms of any Plan before such contributions or amounts become delinquent; make a complete or 

  

 -20- 

 
partial withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer Plan; at any time fail to provide UWG with copies of any Plan
documents or governmental reports or filings, if reasonably requested by UWG. 
  
 (k) Financial Covenants. The Company shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated quarterly in accordance with GAAP consistently
applied (and based upon the financial statements delivered hereunder): 
  
 (1) Minimum Net Worth. The Company shall at all times maintain Net Worth in an amount not less than $30,000,000 for the period ending December 31, 2003 and for each Fiscal Quarter subsequent to December
31, 2003 the Company shall at all times maintain Net Worth in an amount not less than the sum of (i) $30,000,000, plus (ii) 85% of cumulative Net Income, if positive for any Fiscal Quarter, i.e. exclusive of negative net income, for any Fiscal
Quarter after December 31, 2003, less any Restricted Payments permitted pursuant to Section 8.2(m)(1), plus (iii) all net proceeds from any equity issuance. 
  
 (2) Capital Expenditures. The Company and its Subsidiaries shall not make aggregate Capital Expenditures (excluding any
Capital Expenditures made by the Company pursuant to Section 5.15 of the GECC Loan Agreement from insurance proceeds to replace, repair or restore any Property (as defined in the GECC Loan Agreement) subject to any loss or taking described therein)
in any Fiscal Year in excess of the amount set forth below for such Fiscal Year: 
  

				
	 Fiscal Year
 Ending

	  	 Maximum Amount of
 Capital Expenditures

	 December 31, 2004
	  	$	5,000,000
	 December 31, 2005
	  	$	5,500,000
	 December 31, 2006
	  	$	6,500,000
	 December 31, 2007 and thereafter
	  	$	7,500,000

  
 (3)
Fixed Charge Coverage. 
  
 (i) The
Company will maintain a Transaction Fixed Charge Coverage Ratio at the end of each Fiscal Quarter (measured on a trailing four Fiscal Quarter basis) of not less than 1.25. 
  
 (ii) The Company will maintain a Fixed Charge Coverage Ratio at the end of each Fiscal Quarter (measured on
a trailing four Fiscal Quarter basis) of not less than 1.0. Solely for purposes of calculation of the Fixed Charge Coverage Ratio only, non-financed capital expenditures incurred after the Closing Date will be included in Fixed Charges. 

 

 -21- 

 (4) Leverage Ratios. The Company will maintain a Leverage Ratio at the end
of each Fiscal Quarter of not greater than the ratios set forth below: 
  

			
	Funded Debt
	 December 31, 2003
	  	4.50
	 December 31, 2004
	  	4.25
	 December 31, 2005
	  	4.00
	 December 31, 2006 and thereafter
	  	3.75
	Senior Debt
	 December 31, 2003
	  	2.75
	 December 31, 2004
	  	2.50
	 December 31, 2005
	  	2.25
	 December 31, 2006 and thereafter
	  	2.00

  
 EBITDA used in determining the
Leverage Ratios specified above will be measured on a cumulative four Fiscal Quarter basis and shall include the full year impact of any store acquisition consummated within the 12 month period with the written consent of UWG pursuant to Section
8.2(a). 
  
 (5) Compensation.
The Company and its Subsidiaries shall not pay salary and bonuses to their Senior Management in the aggregate in excess of $900,000 in the 2003 Fiscal Year. In any subsequent Fiscal Year the aggregate amount of salary and bonuses to the Senior
Management shall not exceed, in the aggregate, an amount equal to 110% of the total paid in the prior Fiscal Year. 
  
 (6) Interest Coverage Ratio. At all times, the Company will maintain an Interest Coverage Ratio on a trailing four fiscal
quarter basis not less than the ratio of 3.2 to 1.0. 
  
 (7) Minimum EBITDA. At all times, the Company will maintain an EBITDA of $20,000,000 on a cumulative four quarter basis. 
  
 EBITDA used in determining the Minimum EBITDA specified above will be measured on a cumulative four Fiscal Quarter basis and shall include the full year impact of any
store acquisition consummated within the 12 month period with the written consent of UWG pursuant to Section 8.2(a). 
  

 -22- 

 (l) Hazardous Materials. Except as set forth in Schedule 8.2(l), the
Company shall not and shall not permit any of its Subsidiaries or any other Person within the control of the Company to (a) cause or permit a Release of Hazardous Material on, under in or about any Subject Property; (b) use, store, generate, treat
or dispose of Hazardous Materials, except in compliance with Environmental Laws; or (c) transport any Hazardous Materials to or from any Subject Property, except in compliance with Environmental Laws. 
  
 (m) Restricted Payments; Amendments of Debt.

  
 (1) The Company shall not make any
Restricted Payment to any Person other than UWG and shall not permit any Subsidiary to make any Restricted Payment other than to the Company or UWG provided, however, if no Event of Default has occurred and is continuing and no Event of Default
would occur as a result of such Restricted Payment, the Company shall be permitted to (i) repurchase shares of Class B Common Stock and Class C Common Stock outstanding immediately after the Closing from their initial holders who are not the Senior
Management or their assigns, successors or transferees, so long as the aggregate amount of such repurchases of such shares in any 12-month period do not exceed $600,000 (other than as set forth in clause (ii) hereafter), (ii) repurchase 14,335
shares of Class C Common Stock in exchange for $1,096,340.18 if such repurchase is closed within 30 days of the Closing, (iii) repurchase shares of Class D Common Stock outstanding immediately after the Closing from their initial holders who are not
Senior Management or their assigns, successors or transferees, (iv) repurchase shares of Series B Preferred Stock, (v) pay dividends to the holders of Class D Common Stock and (vi) pay dividends to the holders of Series B Preferred Stock.

  
 (2) Without UWG’s prior written
consent, agree to any amendment or modification to any documentation evidencing any Indebtedness in any manner that adversely affects UWG in any material respect. 
  
 (n) Real Property Leases. The Company shall not (and shall not permit any of its Subsidiaries
to) enter into or renew (by amendment, modification or otherwise) any Lease other than renewals of existing Leases upon substantially the same terms as are in effect on the initial Closing Date without the prior written consent of UWG and UWG agrees
that its consent will not be unreasonably withheld or delayed. 
  
 (o) Bank Accounts. The Company shall not (and shall not permit any of its Subsidiaries to) maintain any deposit, operating or other bank accounts except for those accounts identified on Schedule
3.20 to the GECC Loan Agreement. 
  
 (p)
No Speculative Transactions. The Company shall not (and shall not permit any of its Subsidiaries to) engage in any speculative transaction or any transaction involving commodity options or futures contracts (other than (i) transactions in
the ordinary course of business consistent with past practice and (ii) interest rate swap, cap or collar agreements pursuant to the GECC Loan Agreement). 
  

 -23- 

 (q) Accounting Changes. The Company shall not (and shall not permit any of
its Subsidiaries to) make, any significant change in accounting treatment and reporting practices except for changes concurred in by the Company’s independent public accountants. 
  
 (r) Sale-Leasebacks. The Company shall not (and shall not permit any of its Subsidiaries to)
engage in any sale-leaseback or similar transaction involving any of its property or assets, except for a transaction on terms and conditions satisfactory to UWG relating to the 2.5 acre parcel of real property owned by the Company on Galice Road in
Merlin, Oregon. 
  
 (s) Cancellation of
Indebtedness. The Company shall not (and shall not permit any of its Subsidiaries to) cancel any material claim or Indebtedness owing to it, except for reasonable consideration and in the ordinary course of its business, or voluntarily
prepay any Indebtedness (other than Indebtedness in the aggregate amount of less than $5,000,000 during any twelve-month period). 
  
 8.3 Other Covenants. 
  
 (a) 368(a)(1)(E) Reorganization. The Company and UWG intend that the Exchange be treated as a reorganization under Section
368(a)(1)(E) of the Code and that this Agreement constitute a “plan of reorganization” for such purposes. The Company and UWG shall execute and file all tax returns in a manner consistent with this treatment and shall not take any position
before any governmental authority or in any judicial proceeding that is inconsistent with such treatment. 
  
 (b) Meat Division Proposals. The Company will give its good faith consideration to the pending proposals of the Meat
Division of UWG, which proposals are subject to change. 
  
 (c) Notices. 
  
 (1) The Company shall deliver to UWG all compliance certificates, financial statements or other documents provided by the Company to the lenders under the GECC Loan Agreement, as amended, modified or restated,
simultaneously with the delivery of such certificates, financial statements or other documents to such lenders. 
  
 (2) The Company shall promptly notify UWG of all written requests for covenant waivers, covenant waivers given and defaults under the
GECC Loan Agreement, as amended, modified or restated. 
  
 (3) The Company shall promptly notify UWG of any store openings or closings. 
  
 (d) GECC Waivers of Covenants. The waiver by the lenders under the GECC Loan Agreement of the following covenants set forth
in the GECC Loan Agreement shall be effective as a waiver of the corresponding covenants set forth in this 
  

 -24- 

 
Agreement: (i) Section 6.8 (Sale of Assets); (ii) Section 6.9 (Material Contracts); (iii) Section 6.10 (ERISA); (iv) Section 6.11 (Financial Covenants); (v)
Section 6.12 (Hazardous Materials); (vi) Section 6.14 (Real Property Leases); (vii) Section 6.15 (Bank Accounts); (viii) Section 6.16 (No Speculative Transactions); and (ix) Section 6.19 (Accounting Changes); provided, that (A) the waiver by such
lenders is effective; (B) the waiver by such lenders is only effective against UWG to the extent of the effectiveness of such waiver as against such lenders; and (C) as of the effective date of such waiver, no Put Default (as defined in the
Shareholders Agreement) exists. For purposes of this Section 8.3(d), the term “waiver” shall mean an agreement not to enforce a covenant which has already been breached by the Company (rather than an agreement to eliminate a covenant or to
prospectively agree not to enforce a covenant more than one Fiscal Quarter in the future). 
  
 9. Financial and Other Information. 
  
 9.1 Interim Period Financial Statements. As soon as reasonably possible, and in any event within forty-five (45) days of the end of each fiscal quarter, the Company shall provide to UWG a consolidated
balance sheet of the Company as at the end of such period and consolidated profit and loss statements and cash flow statements of the Company as at the end of such period, prepared in accordance with GAAP. Interim period financial statements shall
show in comparative form corresponding figures for the corresponding period of the preceding fiscal year of the Company. The interim period financial statements shall be certified as being accurate and complete, subject to normal year-end audit
adjustments, in a certificate of the Company executed by the Chief Financial Officer of the Company. 
  
 9.2 Unaudited Annual Statements. As soon as reasonably possible, and in any event within sixty (60) days after the close of each fiscal year
of the Company, the Company shall provide to UWG unaudited financial statements consisting of a consolidated balance sheet of the Company as at the end of such period and consolidated profit and loss statements and cash flow statements of the
Company for such fiscal year, prepared in accordance with GAAP. The financial statements shall be certified as being accurate and complete, subject to normal year-end audit adjustments, in a certificate of the Company executed by the Chief Financial
Officer of the Company. 
  
 9.3 Audited Annual
Statements. As soon as reasonably possible, and in any event within one hundred and fifty (150) days after the close of each fiscal year of the Company, the Company shall provide to UWG audited financial statements consisting of a
consolidated balance sheet of the Company as at the end of such period and consolidated profit and loss statements and cash flow statements of the Company for such fiscal year (the “Annual Audited Statements”). The Annual Audited
Statements shall be accompanied by a report and opinion of Musser & Associates or a nationally recognized firm of independent public accountants, which report and opinion shall be prepared in accordance with generally accepted auditing standards
relating to reporting. The Annual Audited Statements shall also include a statement of such independent public accountants that in the course of making the annual audit of the Company’s accounts, they became aware of no default by the Company
under the provisions of this Agreement or the Company’s Articles of Incorporation then in effect, or if there is such a default, specifying it. 
  

 -25- 

 9.4 Compliance Certificate. With respect to the financial statements to be provided to UWG
under Sections 9.1 and 9.2 of this Agreement at the end of each fiscal quarter, such financial statements shall be accompanied by a certificate signed by the President and the Chief Financial Officer of the Company stating that a
review of the activities of the Company and its Subsidiaries during the fiscal period to which the financial statement relates has been made under their supervision with a view to determining whether during such fiscal period the Company performed
and observed all its obligations under this Agreement and the Articles of Incorporation then in effect, and either (i) stating that, to the best of their knowledge, the Company had during such fiscal period performed and observed all of such
obligations or, (ii) if the Company has not performed and observed all such obligations, specifying the nature and status of such nonperformance or nonobservance. 
  
 9.5 Monthly Reports. The Company will provide UWG with monthly income statements showing the results of the
Company’s operations during each such month upon UWG’s request within a reasonable time after such request. The income statements required by this Section 9.5 are not required to be in compliance with GAAP. 
  
 9.6 Other Reports. The Company shall promptly provide to UWG
such other information regarding the business, operations, affairs and financial condition of the Company or any Subsidiary as UWG may from time to time reasonably request. 
  
 9.7 Notification. The Company shall promptly notify UWG of any condition or event which has resulted or, with
the passage of time or the giving of notice or both, could result in (i) a material adverse change in the Company’s business, operations or conditions, financial or otherwise or that of any Subsidiary, (ii) any litigation affecting the Company
or any Subsidiary in which the amount in controversy exceeds $100,000, (iii) any failure by the Company to fully comply with the terms and provisions of this Agreement, the Articles of Incorporation then in effect, any contract or agreement relating
to the Licenses, or any contract or agreement with any holder of the Company’s capital stock, or (iv) a breach of or noncompliance with any term, condition or covenant of any indenture, loan agreement, credit agreement, mortgage, deed of trust,
agreement or contract to which the Company is a party or by which the Company or any Subsidiary or its or any Subsidiary’s property may be bound. 
  
 10. Indemnification. 
  
 10.1 Obligation to Indemnify. The Company agrees to indemnify, defend and hold harmless UWG (and UWG’s past, present and future
directors, officers, employees, Representatives, Affiliates and assigns) from and against all Losses resulting from or arising out of (i) any inaccuracy in or any breach of any representation, warranty, covenant or agreement of the Company contained
in this Agreement or any Transaction Document; (ii) any misrepresentation in or omission from any certificate or other instrument furnished hereunder; (iii) the effectiveness or enforceability of any provision of this Agreement or any Transaction
Document, including without limitation the put rights set forth in the Shareholders Agreement and the dividends on the Shares set forth in the Articles; or (iv) the failure of the Exchange and the other transactions contemplated hereby and by the
Transaction Documents to qualify as a reorganization under Section 368(a)(1)(E) of the Code. 
  

 -26- 

 10.2 Notice of Asserted Liability. Promptly after any party entitled to indemnification
becomes aware of any fact, condition or event that may give rise to Losses for which indemnification may be sought under this Section 10, the party entitled to indemnification (“Indemnitee”) shall give notice thereof in the manner
provided in Section 11.1 of this Agreement (the “Claims Notice”) to the other party or parties (“Indemnitor”). The Claims Notice shall include a description in reasonable detail of any claim by or the commencement
(or threatened commencement) of any action, proceeding or investigation against Indemnitee (an “Asserted Liability”), and shall indicate the amount (estimated, if necessary) of the Losses that have been or may be suffered by
Indemnitee. Failure of Indemnitee to promptly give notice hereunder shall not affect rights to indemnification hereunder, except to the extent that Indemnitor demonstrates actual damage caused by such failure (e.g., the loss of rights or
defenses). Upon Indemnitor’s request, Indemnitee shall provide Indemnitor with such reasonable documentation as Indemnitor shall request pertaining to any claim. 
  
 10.3 Opportunity to Defend. Indemnitor may elect to compromise or defend, at its own expense and by its own
counsel, any Asserted Liability; provided, however, that Indemnitor may not compromise or settle any Asserted Liability without the consent of Indemnitee, such consent not to be unreasonably withheld, unless such compromise or settlement provides
for a full release of Indemnitee and requires no more than a monetary payment for which Indemnitee and any other indemnifiable parties hereunder are fully indemnified or involves other matters not binding upon Indemnitee or such other indemnifiable
parties; provided, further, that Indemnitor may not make such election (and for the avoidance of doubt and without limiting Indemnitor’s obligations under this Section 10, Indemnitor shall pay for all costs and expenses of Indemnitee’s
defense of the Asserted Liability, including expenses of Indemnitee’s counsel) if (i) the Indemnitor is also a party to such Asserted Liability and the Indemnitee determines in good faith that joint representation would be inappropriate, (ii)
the Indemnitor fails to provide reasonable assurance to the Indemnitee of its financial capacity to defend such Asserted Liability and provide indemnification with respect to such Asserted Liability, (iii) the Indemnitee determines in good faith
that there is a reasonable probability that such Asserted Liability may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, or (iv) the claim
involves taxes. If Indemnitor elects to compromise or defend such Asserted Liability, it shall within fifteen (15) days (or sooner, if the nature of the Asserted Liability so requires) notify Indemnitee of its intent to do so and Indemnitee shall
cooperate in the compromise of, or defense against, such Asserted Liability. If Indemnitor elects not to compromise or defend any Asserted Liability, fails to notify Indemnitee of its election as herein provided or contests its obligation to
indemnify or fails to defend in good faith and with diligence, Indemnitee may pay, compromise or defend such Asserted Liability without prejudice to any right it may have hereunder. In any event, an Indemnitee may participate, at its own expense, in
the defense of any Asserted Liability in respect of which it may have an indemnification claim under Section 10.1. If any party chooses to defend or participate in the defense of any Asserted Liability, it shall have the right to receive from the
other parties any books, records or other documents within such parties’ control that are necessary or appropriate for such defense (subject to execution of appropriate confidentiality agreements). 
  
 10.4 Right of Offset. Notwithstanding any other provision in
this Agreement, UWG may in good faith withhold and set off against any other amounts otherwise due the 

  

 -27- 

 
Company that amount as to which UWG is obligated to indemnify Buyer pursuant to this Section 10. If UWG believes in good faith that it has a claim against
the Company, UWG may defer making payment of other amounts otherwise due the Company, up to the amount of UWG’s claim, until the resolution of such claim. Neither the exercise of nor the failure to exercise such right of set-off will constitute
an election of remedies or limit UWG in any manner in the enforcement of any other remedies that may be available to it. 
  
 11. Miscellaneous. 
  
 11.1 Notices. All notices, requests, demands, consents and other communications required or permitted to be given hereunder by one party to
the other shall be in writing addressed to the recipient party’s Notice Address set forth after its signature to this Agreement and shall be deemed to have been duly given or made (i) if delivered personally or by recognized overnight courier
to the party at its Notice Address, then as of the date delivered (or if delivery is refused, upon presentation), (ii) if sent to the party by facsimile to the Fax Number listed below the party’s Notice Address, then at the time the appropriate
electronic confirmation of receipt by the receiving party is received by the sending party, or (iii) if sent or mailed by Certified Mail to the party’s Notice Address, postage prepaid and return receipt requested, then at the time received at
the party’s Notice Address as evidenced by the return receipt. A party may change its Notice Address or Fax Number by a notice given in the foregoing form and manner. 
  
 11.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State
of California, without regard to any otherwise governing principles of conflicts of law. The parties hereby agree that any action, suit, arbitration or other proceeding arising out of or related to this Agreement or any document referenced in this
Agreement shall be conducted only in Los Angeles County, California. Each party hereby irrevocably consents and submits to the personal jurisdiction of and venue in United States District Court for the Central District of California and in the
Superior Court and Municipal Court for Los Angeles County in any legal action, equitable suit or other proceeding arising out of or related to this Agreement or any document referenced in this Agreement. THE COMPANY HEREBY UNCONDITIONALLY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE TRANSACTION DOCUMENTS, ANY DEALINGS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN THE PARTIES. The scope of this waiver is intended to be all encompassing of any and all disputes that may be filed in any court (including, without limitation, contract
claims, tort claims, breach of duty claims, and all other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY TRANSACTION DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court. 
  

 -28- 

 11.3 Severability of Provisions. Any provision of this Agreement that is invalid, illegal
or unenforceable shall be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating, diminishing or rendering unenforceable the rights and obligations of the parties under the remaining provisions of this
Agreement. 
  
 11.4 Survival of Agreements. All
covenants, agreements, representations and warranties in this Agreement, or made in writing by or on behalf of the Company in connection with the transactions contemplated by this Agreement, shall survive the execution and delivery of this
Agreement, any investigation at any time made by UWG or on its behalf, the sale and issuance of the Shares under this Agreement, any disposition of the Shares, any conversion of the Shares and any disposition of the securities acquired on such
conversion. 
  
 11.5 Successors and Assigns. Except
as otherwise expressly provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of the parties to this Agreement; provided, however, no assignment of this Agreement
may be made by the Company at any time, or by UWG at or before the Closing. Except as provided in the preceding sentence, nothing in this Agreement, express or implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons or entities other than the parties to it, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third person or entity to any party to this Agreement, nor shall any provision
give any third person or entity any right of subrogation or action over or against any party to this Agreement. 
  
 11.6 Entire Agreement; 2000 Purchase Agreement. This Agreement and the other documents expressly referred to in it and delivered under it
constitute the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement and those documents, and supersede all prior and contemporaneous agreements and understandings of the parties whether
written or oral. This Agreement shall supersede in its entirety the 2000 Purchase Agreement. 
  
 11.7 Amendments and Waivers. No term or provision of this Agreement may be amended, altered, modified or waived orally or by a course of conduct, but only by an instrument in writing signed by a duly
authorized officer or representative of the party against which enforcement of such amendment, alteration, modification or waiver is sought. Any amendment, alteration, modification or waiver shall be for such period and subject to such conditions as
shall be specified in the written instrument effecting the same. Any waiver shall be effective only in the specific instance and for the purpose for which given. 
  
 11.8 Waiver; Remedies Cumulative. No delay or omission to exercise any right, power or remedy accruing to UWG
on any breach or default of the Company under this Agreement shall impair any such right, power or remedy of UWG nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of or in any similar breach or default
occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. All remedies, either under this Agreement or by law or otherwise afforded to UWG shall be
cumulative and not alternative. 
  

 -29- 

 11.9 Expenses. The Company will reimburse UWG for the fees, expenses and disbursements of
its legal counsel in connection with the transaction contemplated by this Agreement and the Transaction Documents and shall pay all of the Company’s fees, expenses and disbursements incurred in connection with the transactions contemplated by
this Agreement and the Transaction Documents. The Company shall reimburse UWG for such amounts promptly upon receipt of an invoice or invoices from UWG setting forth such amounts. 
  
 11.10 Counterparts. This Agreement may be executed in several counterparts and by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument. 
  
 11.11 Exhibits and Schedules. All exhibits and schedules attached to this Agreement are a part of this Agreement and are incorporated into
this Agreement as if set forth in full. 
  
 11.12 Headings;
Table of Contents. The various headings of this Agreement and the Table of Contents to this Agreement are for convenience of reference only, shall not affect the meaning or interpretation of this Agreement and shall not be considered in
construing this Agreement. 
  
 11.13 Public Announcements;
Confidentiality. Except as required by law (including state and federal securities laws), neither party hereto shall issue any news release or make any public announcement or similar publicity with respect to the economic and business terms
of this Agreement or the other Transaction Documents or the transactions contemplated hereby and thereby without the prior written consent of the other party hereto. 
  
 11.14 Stock Legend. UWG agrees that the certificates representing the Shares shall bear a legend substantially
in the following form: 
  
 THE SERIES A-2
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE (1) HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES LAWS, (2) HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR IN CONNECTION WITH A SALE OR DISTRIBUTION THEREOF, AND
(3) MAY NOT BE SOLD, ENCUMBERED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE FEDERAL REGISTRATION STATEMENT AND STATE QUALIFICATION RELATED THERETO OR AN EXEMPTION PROVIDED BY THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE LAW.

  
 [SIGNATURE PAGE
FOLLOWS] 
  

 -30- 

 IN WITNESS WHEREOF, the parties hereto have caused this Series A Preferred Stock Exchange
Agreement to be executed by their respective duly authorized officers as of the date first set forth above. 
  

							
	UNIFIED WESTERN GROCERS, INC.	 	C & K MARKET, INC.
				
	 By:
	 	         /s/ Christine Neal

	 	 By:
	 	         /s/ Douglas A. Nidiffer

	 Name:
	 	 Christine Neal
	 	 Name:
	 	 Douglas A. Nidiffer

	 Title:
	 	 Vice President, Treasurer
	 	 Title:
	 	 President

		
	Notice Address	 	Notice Address
		
	 Robert M. Ling, Jr., Esquire Senior Vice President,
 General Counsel and Secretary
 Unified Western Grocers, Inc.
 5200 Sheila Street
 Commerce, California 90040
 Fax No.: (323) 265-3716
	 	 Rex Scoggins
 615 5th Street
 Brookings, Oregon 97415
 Fax No.: (541) 469-9018

  
 with
a copy to: 
  
 Lawrence M. Braun, Esquire

 Sheppard, Mullin, Richter & Hampton LLP 
 333 South Hope Street, 48th Floor 
 Los Angeles, California 90071 
 Fax No.: (213) 620-1780 
  

 S-1 

 ANNEX A 
 DEFINITIONS 
  
 “Accrued Dividends” has the meaning set forth in the Recitals. 
  
 “Affiliate” shall mean, with respect to any Person, (i) each Person that, controls, is controlled by or is under common control
with such Person or any Affiliate of such Person or (ii) each of such Person’s officers, directors, joint ventures and general partners. For the purpose of this definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership or voting securities, by contract or otherwise. 
  
 “Agreement” means this Series A Preferred Stock Exchange Agreement, as the same may be amended from
time to time. 
  
 “Annual Audited
Statement” has the meaning set forth in Section 9.3. 
  
 “Articles” has the meaning set forth in the Recitals. 
  
 “Articles of Amendment” means the Company’s Articles of Amendment filed with the Oregon Secretary of State on December 4,
2003. 
  
 “Articles of Restatement” has
the meaning set forth in Section 6.17. 
  
 “Audited Financial Statements” has the meaning set forth in 4.8(a). 
  
 “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed
in the State of California or New York. 
  
 “Cash
Flow” means EBITDA plus any cash patronage dividends less any non-financed Capital Expenditures. 
  
 “Capital Expenditures” shall mean all payments or accruals (including Capital Lease Obligations) for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP. 
  
 “Capital Lease” shall mean any lease of any property (whether real, personal or mixed) by the
Company as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of the Company or otherwise be disclosed as such in a note to such balance sheet, other than any such
lease under which the Company is the lessor. 
  
 “Capital Lease Obligation” shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet. 
  

 A-1 

 “Charges” shall mean all federal, state, county, city, municipal, local, foreign
or other governmental taxes (including, without limitation, taxes owed to PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (i) the employees, payroll, income or gross receipts of the
Company, (ii) the Company’s ownership or use of its assets, or (iii) any other aspect of the Company’s business. 
  
 “Claim” shall mean any and all suits, actions, costs, fines, deficiencies, penalties, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys’ fees and disbursements and other costs of investigations or defense, including those incurred upon any appeal). 
  
 “Class B Common Stock” means the Company’s Class B nonvoting common shares, without par value,
having the rights, restrictions, privileges and preferences contained in the Articles. 
  
 “Class C Common Stock” means the Company’s Class C nonvoting common shares, having the rights, restrictions, privileges and preferences contained in the Articles. 
  
 “Class D Common Stock” means the Company’s Class
D nonvoting common shares, stated value $100 per share, having the rights, restrictions, privileges and preferences contained in the Articles. 
  
 “Closing” has the meaning set forth in Section 3.1. 
  
 “Closing Date” has the meaning set forth in Section 3.1. 
  
 “Code” has the meaning set forth in the Recitals.

  
 “Company” has the meaning set forth in
the Preamble. 
  
 “Copyrights” shall mean
any U.S. copyright to which the Company now or hereafter has title, as well as any application for a U.S. copyright hereafter made by the Company. 
  
 “Disclosure Schedules” has the meaning set forth in Section 4. 
  
 “EBITDA” means, for any period, the Net Income (Loss)
of the Company for such period (exclusive of any patronage dividend from UWG), plus the sum of the following amounts of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP to the extent
included in the determination of such Net Income (Loss): (i) interest expense, (ii) income tax expense, and (iii) depreciation and amortization expense. 
  
 “Equipment” shall mean any “equipment” as such term is defined in the Uniform Commercial Code, and, in any event, shall
include, but shall not be limited to, all machinery, equipment, furnishings, fixtures and vehicles and any and all additions, accessions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed thereto. 
  
 “Environment” has the meaning set forth in 42 U.S.C. § 9601(8). 
  

 A-2 

 “Environmental Laws” shall mean all federal, state and local laws, statutes,
ordinances, orders and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human
health, safety, the environment and natural resources (including, without limitation, ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include, but
are not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous Material Transportation Act, as amended (49 U.S. C.
§§ 1801 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. §§ 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. §§ 6901 et seq.)
(“RCRA”); the Toxic Substance Control Act, as amended (15 U.S.C. §§ 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. §§ 740 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C.
§§ 1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. §§ 651 et seq.) (“OSHA”); and the Safe Drinking Water Act, as amended (42 U.S.C. §§ 300(f) et seq.), and any
and all regulations promulgated thereunder, and all analogous state and local counterparts or equivalents and any transfer of ownership notification or approval statutes relating to the protection of human health, safety and the environment.

  
 “Environmental Protection Statute”
means any federal or state law, statute, rule or regulation enacted in connection with or relating to the protection or regulation of the Environment, including those laws, statutes, rules and regulations regulating the disposal, removal,
production, storing, refining, handling, transferring, processing or transporting of Hazardous Waste or Hazardous Substances, and any regulations issued or promulgated in connection therewith or thereunder by any governmental agency or
instrumentality. 
  
 “EPA” means the
United States Environmental Protection Agency or any successor thereto. 
  
 “Equipment” shall mean any “equipment” as such term is defined in the Uniform Commercial Code, and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures
and vehicles and any and all additions, accessions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

  
 “ERISA” means the Employee Retirement
Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder. 
  
 “ERISA Affiliate” shall mean, with respect to the Company, any trade or business (whether or not incorporated) under common
control with the Company and which, together with the Company are treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code. 
  
 “Event of Default” shall mean the occurrence of any (i) ”Event of Default” as defined
under the GECC Loan Agreement or (ii) ”Put Default” as defined under the Shareholders Agreement.  
  

 A-3 

 “Excess Dividend Payment” has the meaning set forth in the Recitals. 

 
 “Exchange” has the meaning set forth in the
Recitals. 
  
 “Financial Statements” has
the meaning set forth in Section 4.8(a). 
  
 “Fiscal Quarter” shall mean any of the quarterly accounting periods of the Company. 
  
 “Fiscal Year” shall mean the 12-month period of the Company and its Subsidiaries ending December 31 of each year. Subsequent
changes of the fiscal year of the Company and its Subsidiaries shall not change the term “Fiscal Year,” unless UWG shall consent in writing to such change. 
  
 “Fixed Charges” means scheduled principal amortization amounts on Funded Debt plus cash Taxes (as
defined in the GECC Loan Agreement) plus cash payments on any preferred stock (other than a payment to UWG in the amount of $1,458,461.13) plus Net Cash Interest Expense measured on a trailing four Fiscal Quarter basis. 
  
 “Fixed Charge Coverage Ratio” means Cash Flow divided
by Fixed Charges. 
  
 “Funded Debt” shall
mean, with respect to any Person, all of its Indebtedness which by the terms of the agreement governing or instrument evidencing such Indebtedness matures more than one year from, or is directly or indirectly renewable or extendible at the option of
such Person under a revolving credit or similar agreement obligating the lenders to extend credit over a period of more than one year from, the date of creation thereof, including current maturities of long-term debt, revolving credit, and
short-term debt extendible beyond one year at the option of the debtor, and shall also include, without limitation, the Obligations. 
  
 “GAAP” means generally accepted accounting principles as currently in effect in the United States, consistently applied.

  
 “GECC” has the meaning set forth in
Section 6.13. 
  
 “GECC Loan
Agreement” has the meaning set forth in Section 6.13. 
  
 “Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government. 
  
 “Guaranteed Indebtedness” shall mean any obligation of the Company guaranteeing any indebtedness, lease, dividend, or other obligation (“primary obligations”) of any other person (the
“primary obligor)” in any manner including, without limitation, any obligation or arrangement of the Company (i) to purchase or repurchase any such primary obligation, (ii) to advance or supply funds (a) for the purchase or payment of any
such primary obligation or (b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) to indemnify the owner of such primary obligation against loss in
respect thereof. 
  

 A-4 

 “Hazardous Material” shall mean a Hazardous Substance and/or a Hazardous Waste.

  
 “Hazardous Substance” shall mean any
element, material, compound, mixture, solution, chemical, substance, or pollutant within the definition of “hazardous substance” under Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC
§ 9601(14); petroleum or any fraction, byproduct or distillation product thereof, asbestos, polychlorinated biphenyls, or any radioactive substances; and any material regulated as a hazardous substance by any jurisdiction in which the Company
or it Subsidiaries owns or operates or has owned or operated a facility. 
  
 “Hazardous Waste” shall mean any element, pollutant, contaminate or discarded material (including any radioactive material) within the definition of Section 103(6) of the Resource Conservation
and Recovery Act, 42 USCA § 6903(6); and any material regulated as a hazardous waste by any jurisdiction in which the Company or it Subsidiaries own or operate or has owned or operated a facility, or to which the Company or it Subsidiaries send
material for treatment, storage or disposal as waste. 
  
 “Indebtedness” shall mean (i) all indebtedness of the Company for borrowed money or for the deferred purchase price of property or services (including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by the Company (even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale of such property), (iv) all Capital Lease Obligations, (v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above
secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by the Company, even though
the Company has not assumed or become liable for the payment of such Indebtedness, (vii) the Obligations, and (viii) all liabilities under Title IV of ERISA. 
  
 “Intellectual Property” shall mean, collectively, all Trademarks, all Patents, all Copyrights and all Licenses now held or
hereafter acquired by the Company, together with all franchises, tax refund claims, rights of indemnification, payments under insurance, indemnities, warranties and guarantees payable with respect to the foregoing. 
  
 “Interest Coverage Ratio” shall mean, with respect to
any period, the ratio of (i) EBITDA of the Company for such period to (ii) Interest Expense of the Company for such period. 
  

 A-5 

 “Interest Expense” shall mean for any period the amount which would, in
conformity with GAAP, be set forth opposite the caption “interest expense” or any like caption on an income statement of the Company. 
  
 “Interim Financial Statements” has the meaning set forth in Section 4.8(a). 
  
 “Inventory” shall mean any “inventory,” as
such term is defined in the Uniform Commercial Code, now or hereafter owned or acquired by, the Company or any of its Subsidiaries, wherever located, and, in any event, including, without limitation inventory, merchandise, goods and other personal
property which are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed
in the Company’s or its Subsidiaries’ business or in the processing, production, packaging, promotion, delivery or shipping of the same, including, without limitation, other supplies, and all accessions and additions thereto and all
documents of title covering any of the foregoing. 
  
 “Investment” shall mean, for any Person (a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such acquisition; (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person); and (c) the entering into of any Guaranteed Indebtedness of, or other contingent obligation with respect to, Indebtedness or other liability
of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person. 
  
 “IRS” has the meaning set forth in the Recitals. 
  
 “Leases” shall mean all of those leasehold estates in real property now owned or hereafter acquired
by the Company or any of its Subsidiaries, as lessee. 
  
 “Leverage Ratio” means the quotient of the Company’s Funded Debt or Senior Debt divided by the Company’s EBITDA. 
  
 “License” shall mean any Patent License, Trademark License or other license of rights or interests now held or hereafter acquired
by the Company. 
  
 “Liability” or
“Liabilities” means, with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, secured or unsecured, joint or several, due
or to become due, vested or unvested, executory, determined, determinable or otherwise and whether or not the same is required to be accrued on the financial statements of such Person. 
  
 “Lien” shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation any lease or title
retention agreement, any financing 

  

 A-6 

 
lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any jurisdiction). 
  
 “Losses” means all losses, costs (including without limitation, attorneys’ fees), claims, fees, Liabilities, damages, lawsuits, deficiencies, demands and expenses (whether or not arising
out of third-party claims), including without limitation, interest, penalties, costs of litigation, lost profits, opportunity costs, and all amounts paid in the investigation, defense or settlement of any of the foregoing. “Losses” is not
limited to matters asserted by third parties, but includes Losses incurred or sustained in the absence of third party claims, such as a diminution in the value of the Shares. 
  
 “Material Adverse Effect” shall mean a material adverse effect on (i) the business, assets,
operations, prospects, or financial or other condition of the Company taken as a whole, or (ii) the Company’s ability to pay or perform its obligations under the Transaction Documents executed by it in accordance with the terms thereof.

  
 “Material Agreements” has the meaning
set forth in Section 4.14. 
  
 “Material
Contracts” shall mean each contract to which the Company or any of its Subsidiaries is now or hereafter a party involving aggregate consideration payable to or by the Company or any of its Subsidiaries, contingent or otherwise, in
excess of $100,000, except contracts as to which the remaining consideration payable to or by the Company or any of its Subsidiaries is less than $100,000. 
  
 “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, and to which the
Company or any ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. 
  
 “Net Cash Interest Expense” shall mean cash Interest Expense less cash interest income. 

 
 “Net Income (Loss)” means, for any period, the
aggregate net income (or loss) from continuing operations (excluding any income (or loss) included therein resulting from extraordinary items) of the Company and its Subsidiaries for such period. 
  
 “Net Worth” means, at any date, the total assets
minus the total liabilities, in each case, of the Company at such date determined in accordance with GAAP. 
  
 “New Series A Preferred” has the meaning set forth in the Recitals. 
  
 “Nidiffer Exchange Agreement” means that certain Memorandum of Exchange Agreement, dated as of
December 18, 2003, by and between the Company and the Nidiffer Family. 
  
 “Nidiffer Family” means Raymond L. Nidiffer, M. June Nidiffer, Douglas A. Nidiffer Irrevocable Trust, Patricia A. Nidiffer Irrevocable Trust, Ethan R. Fletcher Irrevocable Trust, Jacob B. Fletcher Irrevocable Trust,
Alan W. Nidiffer Irrevocable Trust, Mary H. Nidiffer Irrevocable Trust, and Sara M. Nidiffer Irrevocable Trust. 
  

 A-7 

 “Nidiffer Subordinated Debt” means that certain subordinated debt of the Company
set forth in the Nidiffer Exchange Agreement made by the Company to the Nidiffer Family in the original aggregate principal amount of $10,000,000. 
  
 “Nidiffer Subordination Agreement” means that certain Intercreditor and Subordination Agreement by and among the Company, UWG and
the Nidiffer Family. 
  
 “Nidiffer Preferred
Stock” means Seven Million (7,000,000) shares of Series B Preferred Stock, representing all of the authorized, issued and outstanding shares of Series B Preferred Stock. 
  
 “Nidiffer Senior” means Raymond L. Nidiffer, an individual resident in the State of Oregon.

  
 “Obligations” shall mean all loans,
advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by
the Company pursuant to the loan agreements with GECC, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the loan
agreements with GECC. 
  
 “Old Series A
Preferred” has the meaning set forth in the Recitals. 
  
 “Old UWG Shares” has the meaning set forth in the Recitals. 
  
 “Patent License” shall mean rights under any written agreement now owned or hereafter acquired by the Company granting any fight with respect to any invention on which a Patent is in existence.

  
 “Patents” shall mean all of the
following in which the Company now holds or hereafter acquires any interest: (i) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or
any other country, including registrations, recordings and applications in the United similar office or agency of the United States, any States Patent and Trademark Office or in any State or Territory thereof, or any other country, and (ii) all
reissues, divisions, continuations, continuations-in-part or extensions thereof. 
  
 “PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto. 
  
 “Pension Plan” shall mean an employee pension benefit plan, as defined in Section (3)(2) of ERISA (other than a Multiemployer
Plan), which is not an individual account plan, as defined in Section 3(34) of ERISA, and which the Company or, if a Title IV Plan, any Subsidiary of the Company or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them. 
  

 A-8 

 “Permitted Encumbrances” shall mean the following encumbrances: (i) Liens for
taxes or assessments or other governmental Charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of Section 8.1(b); (ii) pledges or deposits securing obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which the Company is a
party as lessee made in the ordinary course of business; (iv) deposits securing public or statutory obligations of the Company; (v) inchoate and unperfected workers’, mechanics’, suppliers’ or similar liens arising in the ordinary
course of business; (vi) carriers’, warehousemen’s or other similar possessory liens arising in the ordinary course of business and securing indebtedness not yet due and payable in an outstanding aggregate amount not in excess of $250,000
at any time; (vii) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which the Company is a party; (viii) any attachment or judgment lien, unless the judgment it secures shall not, within 60 days after the entry
thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; and (ix) zoning restrictions, easements, licenses, or other restrictions on the use of
real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real property, leases or leasehold estates. 
  
 “Person” shall mean any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof). 
  
 “Properties” has the meaning set forth in Section 4.11. 
  
 “Recapitalization” has the meaning set forth in the Recitals. 
  
 “Release” shall mean, as to any Person, any release or any spilling, leaking, pumping, pouring,
emitting emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration of a Hazardous Material into the indoor or outdoor environment by such Person (or by a person under such Person’s direction or control), including
the movement of a Hazardous Material through or in the air, soil, surface water, ground water or property; but shall exclude any release, discharge, emission or disposal in material compliance with a then effective permit or order of a Governmental
Authority. 
  
 “Representative” means with
respect to any Person, any officer, director, manager, principal, attorney, accountant, investment bankers, agent, employee or other representative. 
  
 “Restricted Payment” shall mean, with respect to any Person, (i) the declaration or payment of any dividend or the occurrence of
any liability to make any other payment or distribution of cash or other property or assets in respect of such Person’s Stock, (ii) any payment on account of the purchase, redemption, defeasance or other retirement of such Person’s Stock
or any other payment or distribution made in respect thereof, either directly or indirectly, (iii) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Person, except payment of funds to UWG in
accordance with the terms of business 

  

 A-9 

 
conducted with UWG, or (iv) any payment to a holder of subordinated debt other than the Subordinated Term Note (as defined in the GECC Loan Agreement) in
accordance with the GECC Loan Agreement. 
  
 “Right of
First Refusal Agreement” means that certain Right of First Refusal Agreement, of even date herewith, by and among the Company, UWG and the Senior Management. 
  
 “Senior Debt” shall mean the Indebtedness of the Company which is not subject to a subordination
agreement, and shall include, but is not limited to, the Indebtedness of the Company to the Senior Lenders (as defined in the GECC Loan Agreement). 
  
 “Senior Management” shall mean Douglas A. Nidiffer, Rex R. Scoggins, and Larry Hage. 
  
 “Series A Preferred Stock” has the meaning set forth
in the Recitals. 
  
 “Series B Preferred
Stock” means the Company’s Series B nonconvertible preferred shares, stated value $100 per share, having the rights, restrictions, privileges and preferences contained in the Articles. 
  
 “Shareholder” has the meaning set forth in the
Recitals. 
  
 “Shareholders Agreement” has
the meaning set forth in Section 6.11. 
  
 “Shareholder
Guaranty” means that certain Continuing Guaranty executed by the Senior Management in favor of UWG. 
  
 “Stock” shall mean all shares, options, warrants, general or limited partnership interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including, without limitation common stock, preferred stock, or any other “equity security” (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended). 
  

“Stockholder” shall mean each holder of Stock of the Company. 
  
 “Subject Property” shall mean all real property owned, leased or operated by the Company or any
Subsidiary thereof or any Affiliate of any of the foregoing. 
  
 “Subsidiary” shall mean with respect to any Person, (i) any corporation of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise
and (ii) any partnership in which 

  

 A-10 

 
such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital
contribution) of 50% or more or of which any such Person is a general partner or may exercise the powers of a general partner. 
  
 “Supply Agreement” has the meaning set forth in Section 6.10. 
  
 “Title IV Plan” shall mean a Pension Plan, other than a Multiemployer Plan, which is covered by
Title IV of ERISA. 
  
 “Trademark License”
shall mean rights under any written agreement now owned or hereafter acquired by the Company granting any right to use any Trademark or Trademark registration. 
  

“Trademarks” shall mean all of the following now owned or hereafter acquired by the Company: (i) all common law and statutory
trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or Territory thereof, or any other country or any political subdivision thereof, (ii) all reissues, extensions or renewals thereof, and (iii) all licenses thereunder and together with
the goodwill associated with and symbolized by such trademark. 
  
 “Transaction” has the meaning set forth in Section 11.2(c). 
  
 “Transaction Documents” means this Agreement, the Supply Agreement, the Shareholders Agreement, the Right of First Refusal
Agreement, the Articles, the Statement of Withdrawal, the Shareholder Guaranty, the Nidiffer Subordination Agreement, and the Nidiffer Exchange Agreement. 
  
 “Transaction Fixed Charges” shall mean scheduled principal amortization amounts on the Senior Term Loan Note (as defined in the
GECC Loan Agreement) and Subordinated Term Loan Note (as defined in the GECC Loan Agreement) plus cash Taxes (as defined in the GECC Loan Agreement) plus Net Cash Interest Expense measured on a trailing four Fiscal Quarter basis. 
  
 “Transaction Fixed Charge Coverage” shall mean Cash
Flow divided by Transaction Fixed Charges. 
  
 “UWG” has the meaning set forth in the Preamble. 
  

 A-11

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