Document:

<PAGE>

                              SECURITY AGREEMENT
                              ------------------

                           Dated as of May 12, 2000

                                    between

                                 K.V. MART CO.

                                      and

                         UNIFIED WESTERN GROCERS, INC.
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
1.   DEFINITIONS..........................................................     1

     1.1  "Code"..........................................................     1
     1.2  "Collateral"....................................................     3
     1.3  "Debtor"........................................................     3
     1.4  "Debtor's Books"................................................     3
     1.5  "Event of Default"..............................................     3
     1.6  "Note"..........................................................     3
     1.7  "Obligations"...................................................     4
     1.8  "Secured Party".................................................     4
     1.9  "Secured Party Expenses"........................................     4

2.  CREATION OF SECURITY INTEREST.........................................     4

3.  INSURANCE.............................................................     5

4.  EVENTS OF DEFAULT.....................................................     5

    4.1  Payments.........................................................     5
    4.2  Statements.......................................................     5
    4.3  Changed Circumstances............................................     6
    4.4  Additional Security Interests and Liens..........................     6
    4.5  Cessation of Business............................................     6
    4.6  Event of Default under Loan Agreement............................     6

5.  RIGHTS AND REMEDIES...................................................     6

6.  WAIVERS...............................................................     8

7.  NOTICES...............................................................     8

8.  CHOICE OF LAW.........................................................     8

9.  GENERAL PROVISIONS....................................................     8
</TABLE>

                                      -i-
<PAGE>

                              SECURITY AGREEMENT
                              ------------------

          THIS SECURITY AGREEMENT (this "Agreement"), dated as of May ___, 2000,
is entered into by and between K.V. Mart Co., a California corporation
("Debtor") and Unified Western Grocers, Inc., a California corporation ("Secured
Party"), in light of the following facts:

                                   RECITALS
                                   --------

          A.   Debtor has requested that Secured Party provide Debtor with a
term loan in the amount of Seven Million Dollars ($7,000,000) (the "Loan") to be
evidenced by that certain Promissory Note, of even date herewith, in the amount
of the Loan, executed by Debtor to the order of Secured Party (the "Note")
pursuant to a Term Loan Agreement dated as of the date hereof (the "Loan
Agreement").

          B.   Secured Party is willing to provide Debtor with the Loan so long
as, among other conditions, Debtor secures the payment of its obligations to
Secured Party in connection with the Loan by granting Secured Party a security
interest in the Collateral referred to below.

          C.   To induce Secured Party to provide Debtor with the Loan, Debtor
is willing to enter into this Agreement with Secured Party.

          NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:

     1.   DEFINITIONS
          -----------

          As used in this Agreement, the following terms shall have the
following definitions:

          1.1  "Code" means the California Uniform Commercial Code, as amended
                ----
from time to time, and any and all terms used in this Agreement which are
defined in the Code, and which are not separately defined herein, shall be
construed and defined in accordance with the meaning and definition ascribed to
such terms under the Code.

          1.2  "Collateral" means all present and future right, title and
                ----------
interest of Borrower in or to any personal property whatsoever, wherever
located, and all rights and powers of Borrower to transfer any interest in or to
any personal property whatsoever, including, without limitation, any and all of
the following property:

                                      -1-
<PAGE>

               (a)  All present and future accounts, accounts receivable,
     agreements contracts, leases, contract rights, security agreements,
     guaranties, undertakings, surety bonds, insurance policies, notes and
     drafts and all forms of obligations owing to borrowers or in which Debtor
     may have any interest, however created or arising.

               (b)  All present and future general intangibles, all tax refunds
     of every kind and nature to which Debtor now or hereafter may become
     entitled, however arising, all other refunds, and deposits, goodwill,
     causes in action, trade, secret, computer programs, software customer
     lists, trademarks, trade names, patents, licenses, copyrights, technology,
     processes, proprietary information, franchise and insurance proceeds.

               (c)  All present and future deposit accounts of Debtor,
     including, without limitation, any demand, time, any bank, savings and loan
     association, credit union or like organization, and all money, cash and
     cash equivalents of Debtor, whether or not deposited in any such deposit
     account;

               (d)  All present and future books and records, including, without
     limitation books of account and ledgers of every kind and nature, all
     electronically recorded data relating to Debtor's business, all receptacles
     and containers for such records, and all files and correspondence;

               (e)  All present and future goods, including, without limitation,
     all consumer goods, farm products, inventory, equipment, machinery, tool
     molds, dies, furniture, furnishings, fixtures, trade fixtures, motor
     vehicles and all other goods used in connection with or in the conduct of
     Debtor's business, including, without limitation, all goods as defined in
     Section 9109(2) of the California Commercial Code;

               (f)  All present and future inventory and merchandise, including,
     without limitation, all present and future goods held for sale or lease or
     to be furnished under a contract of service, all raw materials, work in
     process and finished goods, all packing materials, supplies and containers
     relating to or used in connection with any of the foregoing, and all bills
     of lading, warehouse receipt or documents of title relating to any of the
     foregoing;

               (g)  All present and future accessions, appurtenances,
     components, repairs, repair parts, spare parts, replacements,
     substitutions, additions, issue and/or improvements to or of or with
     respect to any of the foregoing;

               (h)  All other tangible and intangible personal property of
     Debtor;

                                      -2-
<PAGE>

               (i)  All rights, remedies, powers and/or privileges of Debtor
     with respect to any of the foregoing; and

               (j)  Any and all proceeds and products of any of the foregoing,
     including without limitation, all money, accounts, general intangibles or
     intangible property received upon the sale, exchange, collection or other
     disposition of any of the foregoing.

          1.3  "Debtor" means K.V. Mart Co., a California corporation, with its
                ------
principal place of business at 1245 East Watson Center Road, Carson, California
90745-4207.

          1.4  "Debtor's Books" means all of Debtor's books and records
                --------------
including, but not limited to: all records, ledgers and computer programs, disc
or tape files, printouts, runs, and other computer prepared information
indicating, summarizing, or evidencing the Collateral.

          1.5  "Event of Default" means the occurrence of any one of the events
                ----------------
set forth in Section 4 of this Agreement.

          1.6  "Note" means the $7,000,000 Promissory Note, of even date
                ----
herewith, executed by Debtor to the order of Secured Party.

          1.7  "Obligations"  means any and all liabilities, debt and
                -----------
indebtedness owing by Debtor to Secured Party of any kind and description,
advanced pursuant to or evidenced by the Note, Debtor's Books or by any other
type of instrument or agreement between Debtor and Secured Party, irrespective
of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including, without limitation, any debt, liability or obligation owing from
Debtor to others which Secured Party may have obtained by assignment or
otherwise, and further including, without limitation, all interest not paid when
due and all Secured Party's Expenses which Debtor is required to pay or
reimburse by this Agreement, by law, or otherwise. Debtor hereby acknowledges
and agrees that all obligations for borrowed money shall be due and payable on
demand by Secured Party.

          1.8  "Secured Party" means Unified Western Grocers, Inc., a California
                -------------
corporation, with its principal place of business at 5200 Sheila Street,
Commerce, California 90040, and any subsidiary of Unified Western Grocers, Inc.

          1.9  "Secured Party Expenses" means all costs or expenses required to
                ----------------------
be paid by Debtor under this Agreement which are paid or advanced by Secured
Party; all costs and expenses incurred by Secured Party to correct any default
or enforce any provision of this Agreement, or in gaining possession of,
maintaining, handling,

                                      -3-
<PAGE>

preserving, storing, shipping, selling, preparing for sale and/or advertising to
sell the Collateral, irrespective of whether a sale is consummated; all costs
and expenses of suit incurred by Secured Party in enforcing or defending this
Agreement, irrespective of whether suit is brought.

     2.   CREATION OF SECURITY INTEREST
          -----------------------------

          2.1  Debtor hereby grants to Secured Party a continuing security
interest in all presently existing and hereafter acquired or arising Collateral
in order to secure prompt repayment of any and all of the Obligations and in
order to secure prompt performance by Debtor of each and all of its covenants
and obligations under this Agreement and any other document, instrument or
agreement evidencing, executed and/or delivered to Secured Party or any other
party in connection with the Obligations.  Such security interest in the
Collateral shall attach to all Collateral without further act on the part of
Secured Party or Debtor.

          2.2  Until the occurrence of an Event of Default under this Agreement,
Debtor may, subject to the provisions hereof and consistent herewith, sell the
Inventory, but only in the ordinary course of Debtor's business.  A sale of
Inventory in Debtor's ordinary course of business does not include an exchange
or a transfer in partial or total satisfaction of a debt owing by Debtor, nor
does it include an exchange for less than a present fair consideration.

          2.3  Debtor shall execute and deliver to Secured Party, concurrent
with Debtor's execution of this Agreement, and at any time or times hereafter at
the request of Secured Party, all financing statements, continuation financing
statements, security agreements, assignments, and all other documents that
Secured Party may reasonably request, in a form satisfactory to Secured Party,
to perfect and maintain perfected the Secured Party's security interests in the
Collateral and in order to consummate fully all of the transactions contemplated
under this Agreement.  Debtor hereby irrevocably makes, constitutes and appoints
Secured Party (and any of Secured Party's officers, employees or agents
designated by Secured Party) as Debtor's true and lawful attorney with power,
upon Debtor's failure or refusal to comply with its undertakings contained in
this Section 2.3, to sign the name of Debtor on any of the above-described
documents and on any other similar documents which need to be executed,
recorded, and/or filed in order to perfect or continue perfected the Secured
Party's security interest in the Collateral.

     3.   INSURANCE
          ---------

          Debtor, at its expense, shall keep and maintain the Collateral insured
against loss or damage by fire, in such amounts as are ordinarily insured
against by other owners of such properties in similar businesses.  Debtor also
shall keep and maintain business interruption, public liability, and property
damage insurance relating

                                      -4-
<PAGE>

to Debtor's ownership and use of the Collateral and its other assets. To secure
the payment of the obligations, Debtor grants Secured Party a security interest
in and to all such policies of insurance (except those of public liability and
property damage) and the proceeds thereof.

          Debtor will not cancel, without suitable and similar replacements, any
of such policies without Secured Party's prior written consent.  At the request
of Secured Party, each such insurer shall agree by endorsement upon the policy
or policies of insurance issued by it to Debtor or by independent instruments
that it will give Secured Party at least ten (10) days written notice before any
such policy or policies of insurance will be altered or canceled, and that no
act or default of Debtor, or any other person, shall affect the right of Secured
Party to recover under such policy or policies of insurance or to pay any
premium in whole or in part relating thereto.

     4.   EVENTS OF DEFAULT
          -----------------

          Any one or more of the following events shall constitute an Event of
Default by Debtor under this Agreement:

          4.1  Payments.  Debtor's failure to pay any of its obligations under
               --------
the Note when demanded thereunder;

          4.2  Statements.  Any representation, warranty or statement made or
               ----------
furnished to Secured Party in or pursuant to this Security Agreement, the Note
or by or on behalf of Debtor is false or misleading in any material respect;

          4.3  Changed Circumstances.  The occurrence of any material
               ---------------------
deterioration or impairment of the Collateral or any part thereof or any decline
or depreciation in the value thereof which causes the Collateral in the judgment
of Secured Party to become unsatisfactory as to character or value;

          4.4  Additional Security Interests and Liens.  A security interest in,
               ---------------------------------------
a lien on or any attachment of the Collateral or any portion thereof is obtained
by any individual or entity without the prior written consent of Secured Party;

          4.5  Cessation of Business.  Debtor, for any reason, ceases to conduct
               ---------------------
its business or a substantial part thereof; or

          4.6  Event of Default under Loan Agreement.  Any Event of Default
               -------------------------------------
shall have occurred under the Loan Agreement and remain uncured.

                                      -5-
<PAGE>

     5.   RIGHTS AND REMEDIES
          -------------------

          5.1  Upon the occurrence of an Event of Default, Secured Party may,
without notice of election and without demand, do any one or more of the
following all of which are authorized by Debtor:

               (a)  Make such payments and do such acts as it considers
     necessary or reasonable to protect its security interests in the
     Collateral. Debtor agrees to assemble the Collateral and make it available
     if Secured Party so requires. Debtor authorizes Secured Party to enter the
     premises where the Collateral is located, take and maintain possession of
     the Collateral, or any part of it, and to pay, purchase, contest or
     compromise any encumbrance, charge or lien which in the opinion of Secured
     Party or its assignee appears to be prior or superior to Secured Party's
     security interests and to pay all expenses incurred in connection
     therewith;

               (b)  Secured Party is hereby granted a license or other right to
     use, without charge, Debtor's labels, patents, copyrights, rights of use of
     any name, trade secrets, trade names, trademarks and advertising matter, or
     any property of a similar nature, as it pertains to the Collateral, in
     completing production of, advertising for sale and selling any Collateral,
     and Debtor's rights under all licenses and all franchise agreements shall
     inure to the benefit of Secured Party;

               (c)  Ship, reclaim, recover, store, finish, maintain, repair,
     prepare for sale, advertise for sale and sell (in the manner provided for
     herein) the Collateral;

               (d)  Sell the Collateral at either a public or private sale, or
     both, by way of one or more contracts or transactions, for cash or on
     terms, in such manner and at such places (including Debtor's premises) as
     are commercially reasonable.  It is not necessary that the Collateral be
     present at any such sale;

               (e)  Secured Party shall give notice of the disposition of the
     Collateral as follows:

                    (1)  Secured Party shall give Debtor notice in writing of
          the time and place of public sale, or, if the sale is a private sale
          or some other disposition other than a public sale is to be made of
          the Collateral, the time on or after which the private sale or other
          disposition is to be made;

                    (2)  The notice shall be personally delivered or mailed,
          postage prepaid, to Debtor at its address as set forth in Section 1.3
          of this

                                      -6-
<PAGE>

          Agreement, at least five (5) calendar days before the date fixed for
          the sale, or at least five (5) calendar days before the date on or
          after which the private sale or other disposition is to be made,
          unless the Collateral is perishable or threatens to decline speedily
          in value. Notice to persons other than Debtor claiming an interest in
          the Collateral shall be sent to such addresses as they have furnished
          to Secured Party;

                    (3)  If the sale is to be a public sale, Secured Party also
          shall give notice of the time and place by publishing a notice one
          time at least five (5) calendar days before the date of the sale in a
          newspaper of general circulation, if one exists, in the county in
          which the sale is to be held;

               (f)  Secured Party may credit bid and purchase at any public
     sale;

               (g)  Debtor shall pay all the Secured Party Expenses incurred in
     connection with the enforcement and exercise of any of the rights and
     remedies provided for herein, irrespective of whether suit is commenced;
     and

               (h)  Any deficiency which exists after disposition of the
     Collateral as provided above will be paid immediately by Debtor.  Any
     excess will be returned, without interest and subject to the rights of
     third parties, to Debtor by Secured Party.

          5.2  The rights and remedies of Secured Party under this Agreement and
the other agreements, instruments and documents delivered and/or executed in
connection with the Obligations shall be cumulative.  The Secured Party shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity.  No exercise by Secured Party of one right or
remedy shall be deemed an election, and no waiver by Secured Party of any
default on Debtor's part shall be deemed a continuing waiver.  No delay by
Secured Party shall constitute a waiver, election or acquiescence.

     6.   WAIVERS
          -------

          So long as Secured Party complies with the obligations if any, under
Section 9207 of the Code, it shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency or other person whomsoever.

                                      -7-
<PAGE>

     7.   NOTICES
          -------

          All notices or demands by any party relating to this Agreement shall
be made by personal delivery or certified mail, return receipt requested, as
follows:

               (a)  if to Debtor: c/o K.V. Mart Co. at the address set forth in
     Section 1.3 of this Agreement.

               (b)  if to Secured Party, at the address set forth in Section 1.8
     of this Agreement.

          All notices and demands hereunder shall be deemed effective upon the
earlier of actual receipt or three (3) days after transmission.  The parties
hereto may change the address at which they are to receive notice hereunder, by
notice in writing in the foregoing manner given to the other.

     8.   CHOICE OF LAW
          -------------

          The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined under, governed by, and construed in accordance
with the laws of the State of California.

     9.   GENERAL PROVISIONS
          ------------------

          9.1  This Agreement shall be binding and deemed effective when
executed by Debtor and accepted and executed by the Secured Party.

          9.2  This Agreement shall bind and inure to the benefit of the
respective successors and assigns of Secured Party; Debtor may not assign this
Agreement or any rights hereunder and any prohibited assignment shall be
absolutely void.

          9.3  Paragraph headings and paragraph numbers have been set forth
herein for convenience only.  Unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.

          9.4  Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Secured Party or Debtor, whether under
any rule of construction or otherwise.  On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.

                                      -8-
<PAGE>

          9.5  Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

          9.6  This Agreement cannot be changed or terminated orally.  All prior
agreements, understandings, representations, warranties, and negotiations, if
any, are merged into this Agreement.

          9.7  The parties intend and agree that their respective rights,
duties, powers, liabilities, obligations and discretion shall be performed,
carried out, discharged and exercised reasonably and in good faith.

                                 [END OF TEXT]

                                      -9-
<PAGE>

          IN WITNESS WHEREOF, Debtor and Secured Party have executed this
Agreement as of the date first set forth hereinabove.

SECURED PARTY:                              DEBTOR:

Unified Western Grocers, Inc.,              K.V. Mart Co.,
a California corporation                    a California corporation

By:_____________________________            By:_____________________________
   Richard J. Martin                        Its:____________________________
   Executive Vice President,
   Finance and Administration, and
   Chief Financial Officer

By:_____________________________            By:_____________________________
   Robert M. Ling, Jr.                      Its:____________________________
   Executive Vice President,
   General Counsel and Secretary

                                      -10-<PAGE>

                                   GUARANTY

          This guaranty ("Guaranty"), dated as of May 12, 2000, is executed by
Darioush Khaledi and Shahpar Khaledi, husband and wife, Darioush Khaledi, as
trustee of the Khaledi Family Trust under declaration of Trust dated May 17,
1995, K.V. Property Company, a Californi general partnership and Parviz Vazin
and Vida Vazin, husband and wife (collectively, "Guarantors"), in favor of
Unified Western Grocers, Inc., a California corporation ("Lender"), in order to
induce Lender to make a loan or loans (the "Loan") to K.V. Mart Co., a
California corporation ("Borrower"), pursuant to that certain Term Loan
Agreement between Lender and Borrower, dated as of even date herewith (the "Loan
Agreement"), to be evidenced by a Promissory Note (the "Note") in the original
principal amount of $7,000,000.  Capitalized terms used and not otherwise
defined herein shall have the same meanings as set forth in the Loan Agreement.

     1.   Guaranty of Indebtedness.  For valuable consideration, receipt of
          ------------------------
which is hereby acknowledged, each Guarantor jointly, severally, irrevocably and
unconditionally guarantees and promises to pay to Lender, or order, on demand in
lawful money of the United States of America, any and all Indebtedness of
Borrower to Lender arising from or in connection with the Loan Agreement and all
other Loan Documents.  The word "Indebtedness" is used herein in its most
comprehensive sense and includes (a) the indebtedness evidenced by the Note; (b)
any and all existing and future obligations of Borrower to Lender under the Loan
Documents and any and all other existing and future obligations and liabilities
of Borrower made, incurred or created in connection with the transaction to
which the Loan Documents relate, whether due or not due, absolute or contingent,
voluntary or involuntary, liquidated or unliquidated, determined or
undetermined, whether Borrower may be liable individually or jointly with
others, whether recovery upon such indebtedness may be or hereafter become
barred by any statute of limitations, or whether such indebtedness may be or
hereafter become invalid or otherwise unenforceable; (c) any and all amendments,
modifications, renewals and/or extensions of any of the foregoing, including
without limitation amendments, modifications, renewals or extensions which are
evidenced by a new or additional instrument, document or agreement or which
change the rate of interest on any such indebtedness; and (d) any and all
interest that accrues on all or any part of such indebtedness after the filing
of any petition or pleading by or against Borrower or any other Person for a
proceeding under any chapter or provision of any present or future federal
bankruptcy legislation or amendments thereto.

     2.   Independent Obligations.  The obligations of each Guarantor hereunder
          -----------------------
are independent of the obligations of Borrower, any other guarantor or any other
Person, and Lender may enforce any of its rights hereunder independently of any
other right or remedy that Lender may at any time hold with respect to the
Indebtedness or any security or other guaranty therefor.  Without limiting the
generality of the foregoing, Lender may bring a separate action against any
Guarantor without first proceeding against Borrower, any other guarantor or any
other Person, or any security held by Lender, and regardless of whether Borrower
or any other guarantor or any other Person is joined in any such action.  The
liability of each Guarantor hereunder shall at all times remain effective with
respect to the full

                                      -1-
<PAGE>

amount of the Indebtedness notwithstanding any limitations on the liability of
Borrower to Lender contained in the Loan Documents or elsewhere. Lender's rights
hereunder shall not be exhausted by any action taken by Lender until all
Indebtedness has been fully paid and performed. The liability of each Guarantor
hereunder shall be reinstated and revived, and the rights of Lender shall
continue, with respect to any amount at any time paid on account of the
Indebtedness which shall thereafter be required to be restored or returned by
Lender upon the bankruptcy, insolvency or reorganization of Borrower, any other
guarantor or any other Person, or otherwise, all as though such amount had not
been paid.

     3.   Authority to Modify Indebtedness.  Each Guarantor authorizes Lender,
          --------------------------------
at any time and from time to time without notice and without affecting the
liability of any Guarantor hereunder, to:  (a) alter the terms of all or any
part of the Indebtedness and any security and guaranties therefor, including
without limitation modification of times for payment and rates of interest; (b)
accept new or additional instruments, documents, agreements, security or
guaranties in connection with all or any part of the Indebtedness; (c) accept
partial payments on the Indebtedness; (d) waive, release, reconvey, terminate,
abandon, subordinate, exchange, substitute, transfer, compound, compromise,
liquidate and enforce all or any part of the Indebtedness and any security or
guaranties therefor, and apply any such security and direct the order or manner
of sale thereof (and bid and purchase at any such sale), as Lender in its
discretion may determine; (e) release Borrower, any guarantor or any other
Person from any personal liability with respect to all or any part of the
Indebtedness; and (f) assign this Guaranty in whole or in part.

     4.   Waivers.  Each Guarantor hereby waives each of the following, to the
          -------
fullest extent allowed by law:

               (a)  all statutes of limitations as a defense to any action
     brought by Lender against any Guarantor;

               (b)  any defense based upon:

                    (i)   the unenforceability or invalidity of all or any part
          of the Indebtedness or any security or other guaranty for the
          Indebtedness or the lack of perfection or failure of priority of any
          security for the Indebtedness;

                    (ii)  any act or omission of Lender or any other Person that
          directly or indirectly results in the discharge or release of Borrower
          or any other Person or any of the Indebtedness or any security
          therefor; or

                    (iii) any disability or any other defense of Borrower or
          any other Person with respect to the Indebtedness, whether consensual
          or arising by operation of law or any bankruptcy, insolvency or
          debtor-relief proceeding, or from any other cause;

               (c)  any right (whether now or hereafter existing) to require
     Lender, as a condition to the enforcement of this Guaranty, to:

                    (i)   accelerate the Indebtedness;

                                      -2-
<PAGE>

                    (ii)  give notice to any Guarantor of the terms, time and
          place of any public or private sale of any security for the
          Indebtedness; or

                    (iii) proceed against Borrower, any other guarantor or any
          other Person, or proceed against or exhaust any security for the
          Indebtedness.

               (d)  any and all rights of subrogation, reimbursement, indemnity
     or contribution which any Guarantor may now or hereafter have against (i)
     Borrower, any other guarantor or any person who now or hereafter has direct
     or contingent liability (whether by contract, at law or in equity) for all
     or any portion of the Indebtedness, or (ii) any property which now or
     hereafter serves as collateral security for all or any portion of the
     Indebtedness (and each Guarantor further agrees that, if and to the extent
     that the waiver set forth in this subparagraph is ever held to be
     unenforceable, all such rights of subrogation, reimbursement, indemnity and
     contribution shall be junior and subordinate to the right of Lender to
     obtain payment and performance of the Indebtedness and to all rights of
     Lender in and to any property which now or hereafter serves as collateral
     security for all or any portion of the Indebtedness);

               (e)  presentment, demand, protest and notice of any kind,
     including without limitation notices of default and notice of acceptance of
     this Guaranty;

               (f)  all suretyship rights and defenses of every nature otherwise
     available under California law and the laws of any other state, including
     without limitation all rights and defenses arising under Sections 2787
     through 2855, inclusive, of the California Civil Code and any successor
     provisions to those Sections; and

               (g)  all other rights and defenses the assertion or exercise of
     which would in any way diminish the liability of any Guarantor hereunder.

     5.   Relationship of Parties.  Each Guarantor represents and warrants to
          -----------------------
Lender that:  (a) each Guarantor has received copies of the Loan Agreement, the
Note and the other Loan Documents and is familiar with and fully understands all
of their terms and conditions; (b) Lender has not made any representations or
warranties to any Guarantor regarding the creditworthiness of Borrower or the
prospects of repayment from sources other than Borrower; (c) this Guaranty is
executed at the request of Borrower; (d) each Guarantor has established adequate
means of obtaining from Borrower on a continuing basis financial and other
information pertaining to the business of Borrower; and (e) each Guarantor
assumes full responsibility for keeping fully informed with respect to the
business, operation, condition and assets of Borrower.  Each Guarantor hereby
agrees that Lender shall have no duty to disclose or report to any Guarantor any
information now or hereafter known to Lender relating to the business,
operation, condition or assets of Borrower.  Lender shall have no duty to
inquire into the authority or powers of Borrower or any officer, employee or
agent of Borrower with regard to any Indebtedness, and all Indebtedness made or
created in good faith reliance upon the professed exercise of any such authority
or powers shall be guaranteed hereunder.

                                      -3-
<PAGE>

     6.   Subordination.  Until all of the Indebtedness has been paid in full,
          -------------
each Guarantor agrees that all existing and future debts, obligations and
liabilities of Borrower to each Guarantor (hereinafter collectively referred to
as "Subordinated Debt") shall be and hereby are expressly subordinated to the
Indebtedness, and the payment thereof is expressly deferred in right of payment
to the prior payment in full of the Indebtedness.  For purposes of this Section
6, the Indebtedness shall not be deemed paid in full unless and until it has
been paid in full in cash.

          6.1  Until the Indebtedness has been paid in full:

               (a)  No Guarantor will (i) collect or receive any cash or non-
     cash payments on the Subordinated Debt, (ii) assert rights or declare a
     default under or enforce payment of the Subordinated Debt by legal
     proceedings or otherwise, or (iii) assign or transfer all or any part of
     the Subordinated Debt;

               (b)  No Guarantor will permit Borrower to (i) pay to any
     Guarantor all or any part of the Subordinated Debt, (ii) transfer any
     property to any Guarantor in payment of or as security for the payment of
     all or any part of the Subordinated Debt, (iii) execute or deliver any
     instrument as evidence of all or any part of the Subordinated Debt, or (iv)
     establish any sinking fund, reserve, or like set aside of funds or other
     property for the redemption, retirement or repayment of all or any part of
     the Subordinated Debt; and

               (c)  Without the prior written consent of Lender, no Guarantor
     will file any petition against Borrower under any chapter or provision of
     any present or future federal bankruptcy legislation, or amendments
     thereto, or any complaint, petition or other pleading against Borrower
     calling for its reorganization, liquidation, composition or receivership,
     or for other similar relief under federal or state law.

          6.2  Upon any distribution of assets of Borrower upon any dissolution,
winding up, liquidation or reorganization of Borrower, whether in bankruptcy,
insolvency, reorganization or receivership proceedings, or upon an assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of Borrower, or otherwise:

               (a)  the holders of the Indebtedness shall be entitled to receive
     payment in full of the Indebtedness before any Guarantor is entitled to
     receive any payment on account of the Subordinated Debt;

               (b)  any payment by, or distribution of assets of, Borrower of
     any kind or character, whether in cash, property or securities, to which
     any Guarantor would be entitled except for this subordination shall be paid
     or delivered by the Person making such payment or distribution, whether a
     trustee in bankruptcy, a receiver or liquidating trustee, or otherwise,
     directly to the holders of the Indebtedness to be held as additional
     security for the Indebtedness in an interest bearing account until the
     Indebtedness has been paid in full; and

               (c)  if, notwithstanding the foregoing, any payment by, or
     distribution of assets of, Borrower of any kind or character, whether in
     cash, property

                                      -4-
<PAGE>

     or securities, in respect of any Subordinated Debt shall be received by any
     Guarantor before the Indebtedness is paid in full, such payment or
     distribution shall be held in trust and immediately paid over in kind to
     the holders of the Indebtedness to be held as additional security for the
     Indebtedness in an interest bearing account until the Indebtedness has been
     paid in full.

          6.3  Each Guarantor authorizes and directs Borrower to take such
action as may be necessary or appropriate to effectuate and maintain the
subordination provided herein.

          6.4  No right of any holder of the Indebtedness to enforce the
subordination herein shall at any time or in any way be prejudiced or impaired
by any act or failure to act on the part of Borrower, Lender or any other Person
or by any noncompliance by the Borrower, Lender or any other Person with the
terms, provisions and covenants hereof or of the Loan Documents regardless of
any knowledge thereof that any such holder of the Indebtedness may have or be
otherwise charged with.

          6.5  Nothing express or implied herein shall give any Person other
than Borrower, Lender and each Guarantor any benefit or any legal or equitable
right, remedy or claim hereunder.

          6.6  If any Guarantor shall institute or participate in any suit,
action or proceeding against Borrower in violation of the terms hereof, Borrower
may interpose as a defense or dilatory plea this subordination, and the holders
of the Indebtedness are irrevocably authorized to intervene and to interpose
such defense or plea in their name or in Borrower's name.

     7.   Representations and Warranties.  Each Guarantor represents and
          ------------------------------
warrants to Lender, with respect to itself, that:

          7.1  Authority of Guarantors.  Each Guarantor has all requisite power
               -----------------------
and authority to conduct its business and to own and lease its properties.

          7.2  Execution, Delivery and Performance of Guaranty.  Each Guarantor
               -----------------------------------------------
has all requisite power and authority to execute, deliver, and perform all of
its obligations under this Guaranty.  The execution, delivery, and performance
by each Guarantor of all of its obligations under this Guaranty have been duly
authorized by all necessary action and do not and will not:

               (a)  result in or require the creation or imposition of any lien,
     right of others, or other encumbrance of any nature (other than under this
     Guaranty and any related security documents) upon or with respect to any
     property now owned or leased or hereafter acquired by any Guarantor;

               (b)  violate any provision of any law, regulation, judgment,
     decree or award presently in effect having applicability to any Guarantor;

               (c)  result in a breach of, constitute a default under, or cause
     or permit the acceleration of any obligation owed under, any indenture,
     loan agreement,

                                      -5-
<PAGE>

     lease, or any other agreement or instrument, to which any Guarantor is a
     party or by which any Guarantor or any of its property is bound or
     affected;

               (d)  require any consent or approval not heretofore obtained of
     any Person having any interest in any Guarantor; or

               (e)  violate any provision of, or require any consent under, any
     partnership agreement, articles of incorporation, by-laws or any other
     governing document or charter applicable to any Guarantor or to any general
     partner of any Guarantor.

          7.3  Enforceability.  This Guaranty, when executed and delivered,
               --------------
shall constitute the valid and binding obligation of each Guarantor, enforceable
in accordance with its terms.

          7.4  Financial and Other Information.  All financial information
               -------------------------------
furnished to Lender with respect to each Guarantor in connection with the Loan
(a) is complete and correct in all material respects; (b) accurately presents
the financial condition of that Guarantor; and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied.
All other reports, papers, data and information furnished to Lender with respect
to each Guarantor in connection with the Loan are accurate and correct in all
material respects and complete insofar as completeness is necessary to give
Lender a true and accurate knowledge of their subject matter.  Without limiting
the generality of the foregoing, there has been no material adverse change in
the condition, financial or otherwise, of any Guarantor since the date of the
financial statements and other reports, papers, data and information furnished
to Lender.

          7.5  Tax Liability.  Each Guarantor has filed all tax returns
               -------------
(federal, state and local) required to be filed and has paid all taxes shown
thereon to be due and all property taxes due, including interest and penalties,
if any.  The charges, accruals and reserves on the books of each Guarantor in
respect of taxes or other governmental charges are adequate.

          7.6  Compliance with Laws.  Each Guarantor has complied in all
               --------------------
material respects with all laws, regulations and requirements applicable to its
business and has obtained all authorizations, consents, approvals, orders,
licenses, exemptions from, and has accomplished all filings or registrations or
qualifications with, any court or governmental department, public body,
authority, commission, board, bureau, agency or instrumentality, that may be
necessary for the transaction of its business.

          7.7  Compliance With Agreements.  Each Guarantor has complied in all
               --------------------------
material respects with all indentures, loan agreements, leases and all other
agreements and instruments to which such Guarantor is a party or by which such
Guarantor or any of its property is bound or affected.

          7.8  Litigation.  There are no material actions, suits or proceedings
               ----------
pending or threatened against or affecting any Guarantor or any property of any
Guarantor before any court or governmental department, public body or authority.

                                      -6-
<PAGE>

          7.9  No Default.  No Event of Default or condition, event, act or
               ----------
omission which, with the giving of notice or the passage of time, or both, would
be an Event of Default, has occurred and is continuing.

     8.   Notice of Certain Events.  Each Guarantor shall give written notice to
          ------------------------
Lender promptly (in any event within five (5) days after such Guarantor learns
of same) of any of the following:

               (a)  the institution of any litigation or legal or administrative
     proceeding or investigation pending against or materially affecting such
     Guarantor, or any of such Guarantor's properties; and

               (b)  the occurrence of any Event of Default or event or condition
     which, with the giving of notice or the passage of time, or both, would be
     an Event of Default.

     9.   Continuing Financial Reports.  Each Guarantor shall deliver to Lender,
          ----------------------------
promptly and in any event within thirty (30) days of filing the same with the
Internal Revenue Service, a copy of each federal income tax return filed while
this Guaranty remains in effect.  In addition, each Guarantor shall deliver to
Lender, on or before March 31 during each year in which this Guaranty remains in
effect, a balance sheet for such Guarantor prepared by a certified public
accountant which fairly presents the financial position of Guarantor as of
December 31 of the prior year.

     10.  Deeds of Trust on Real Property.  In the event that all or any part of
          -------------------------------
the Indebtedness is at any time secured by a deed of trust or deeds of trust
encumbering interests in real property, each Guarantor authorizes Lender, at its
sole option, without notice or demand and without affecting the liability of any
Guarantor hereunder, to foreclose any or all of such deeds of trust by judicial
or nonjudicial sale.  Each Guarantor expressly waives any defense to the
recovery by Lender from such Guarantor of any deficiency after a nonjudicial
sale, including without limitation any defense arising as a result of any
election of remedies by Lender which limits or destroys any Guarantor's
subrogation rights or any Guarantor's rights to proceed against Borrower for
reimbursement (including without limitation any election by Lender to exercise
its rights under the power of sale in any mortgage or deed of trust and any
consequential loss by any Guarantor of the right to recover any deficiency from
Borrower).  Each Guarantor waives any defense or benefit that may be derived
from California Code of Civil Procedure Sections 580a, 580b, 580d or 726, or
comparable provisions of the laws of any other state, and all other suretyship
defenses it would otherwise have under California law or the laws of any other
state.  Each Guarantor waives any right to receive notice of any judicial or
nonjudicial sale or foreclosure of any real property, and the failure of any
Guarantor to receive such notice shall not impair or affect that Guarantor's
liability hereunder.  Without limiting the generality of any of the foregoing:

          10.1 Each Guarantor waives all rights and defenses that such Guarantor
may have because any Obligation guaranteed hereby is secured by real property.
This means, among other things:

                                      -7-
<PAGE>

                    (1)  Lender may collect from any Guarantor without first
          foreclosing on any real or personal property collateral pledged by
          Borrower (or by any other Person) with respect to any such guaranteed
          Obligation.

                    (2)  If Lender forecloses on any real property collateral
          pledged by Borrower (or by any other Person) with respect to any such
          guaranteed Obligation:

                         (A)  The amount of such Obligation may be reduced only
               by the price for which that collateral is sold at the foreclosure
               sale, even if the collateral is worth more than the sale price.

                         (B)  Lender may collect from any Guarantor even if
               Lender, by foreclosing on the real property collateral, has
               destroyed any right such Guarantor may have to collect from
               Borrower (or from any other Person who pledged such collateral).

This is an unconditional and irrevocable waiver of any rights and defenses any
Guarantor may have because any Obligation that is guaranteed hereby is secured
by real property.  These rights and defenses include, but are not limited to,
any rights or defenses based upon Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure.

          10.2 Each Guarantor waives all rights and defenses arising out of an
election of remedies by Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed Obligation,
has destroyed such Guarantor's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the California Code of Civil
Procedure or otherwise.  Pursuant to Section 580a of the California Code of
Civil Procedure, each Guarantor, after a nonjudicial sale under any deed of
trust under which Borrower is the trustor and which secures obligations
guarantied hereby), may have the right to limit Lender's recovery against such
Guarantor under this Guaranty to the lesser of:  (i) the difference between the
Obligations due at the time of such foreclosure sale and the fair market value
of the real property sold at the foreclosure sale, with interest thereon from
the date of the sale, or (ii) the difference between the Obligations and the
sale price of such real property at such sale, exclusive of interest after the
date of the sale.  Each Guarantor hereby waives such right and the comparable
right under Section 726b of the California Code of Civil Procedure and agrees
that, in the event of a foreclosure sale under any deed of trust under which
Borrower is the trustor and which secures obligations guarantied hereby, whether
judicial or nonjudicial, the Obligations shall be reduced only by the amount
credit bid by Lender or actually received by Lender through a third party bid at
such sale, whether or not such sale is deemed to be commercially reasonable, and
not by the fair value (as referred to in Section 726b) or the fair market value
(as referred to in Section 580a) of the property sold at that sale or any other
amounts that Lender may be deemed under law to have received.

     11.  Security Interest in Deposits, Etc.  Each Guarantor hereby assigns to
          ----------------------------------
Lender, as security for that Guarantor's obligations hereunder, all moneys,
securities and other property of that Guarantor now or hereafter in the
possession of or on deposit with Lender, whether

                                      -8-
<PAGE>

held in a general or special account or deposit, or for safekeeping or otherwise
(collectively, the "Collateral"); and every such right to or relating to the
Collateral may be exercised without demand upon or notice to any Guarantor. No
right to or relating to the Collateral shall be deemed to have been waived by
any act or conduct on the part of Lender, or by any neglect to exercise such
right or by any delay in doing so, and every such right shall continue in full
force and effect until specifically waived or released by an instrument in
writing executed by Lender.

     12.  Reasonableness and Effect of Waivers.  Each Guarantor warrants and
          ------------------------------------
agrees that each of the waivers set forth in this Guaranty is made with full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law.  If any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.

     13.  Cumulative Remedies; No Waiver.  The rights, powers and remedies of
          ------------------------------
Lender hereunder are cumulative and not exclusive of any other right, power or
remedy which Lender would otherwise have.  No failure or delay on the part of
Lender in exercising any such right, power or remedy may be, or may be deemed to
be, a waiver thereof; nor may any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or under the other Loan Documents.

     14.  Costs and Expenses of Enforcement.  Each Guarantor agrees to pay to
          ---------------------------------
Lender, on demand, all costs and expenses, including attorneys' fees, incurred
by Lender in exercising any right, power or remedy conferred by this Guaranty,
or in the enforcement of this Guaranty, whether or not any action is filed in
connection therewith.  Until paid to Lender, such amounts shall bear interest,
commencing with Lender's demand therefor, at the default rate of interest set
forth in the Note or, if there is no such default rate, at the rate of interest
set forth in the Note.

     15.  Notices.  Any notice or demand which is required or permitted to be
          -------
given or served upon any Guarantor hereunder shall be deemed so given or served
if personally delivered or if sent by certified or registered United States
mail, postage prepaid, with return receipt requested.  If mailed, any such
notice or demand shall be effective upon the earlier of (a) 3 business days
after mailing, or (b) actual receipt as evidenced by the return receipt, and
shall be addressed as follows:

                    Darioush Khaledi and Shahpar Khaledi
                    c/o K.V. Mart Co.
                    1245 East Watson Center Road
                    Carson, California 90745-4207
                    Attention: Mr. Darioush Khaledi

                    Darioush Khaledi, as trustee of the Khaledi Family Trust
                    c/o K.V. Mart Co.
                    1245 East Watson Center Road

                                      -9-
<PAGE>

                    Carson, California 90745-4207
                    Attention: Mr. Darioush Khaledi

                    K.V. Property Company
                    c/o K.V. Mart Co.
                    1245 East Watson Center Road
                    Carson, California 90745-4207
                    Attention: Mr. Darioush Khaledi

                    Parviz Vazin and Vida Vazin
                    c/o K.V. Mart Co.
                    1245 East Watson Center Road
                    Carson, California 90745-4207
                    Attention: Mr. Parviz Vazin

Any Guarantor may change its address for service of notice by giving written
notice of such change to Lender.  If mailed, such notice to Lender shall be
effective only upon actual receipt and shall be addressed to Lender as follows:

                    Unified Western Grocers, Inc.
                    5200 Sheila Street
                    Commerce, CA 90040
                    Attention: Robert M. Ling, Jr.
                    Executive Vice President,
                    General Counsel and Secretary

                    With a copy to:

                    Sheppard, Mullin, Richter & Hampton LLP
                    333 South Hope Street, 48th Floor
                    Los Angeles, CA 90071
                    Attention: John D. Hussey, Esquire

     16.  Binding Agreement; Assignment; Amendment.  This Guaranty and the
          ----------------------------------------
terms, covenants and conditions hereof shall be binding upon and inure to the
benefit of each Guarantor, Lender and their respective successors and assigns,
except that no Guarantor shall be permitted to transfer, convey or assign this
Guaranty or any right or obligation hereunder without the prior written consent
of Lender (and any attempt to do so shall be void).  Lender may assign its
interest hereunder in whole or in part.  Neither this Guaranty nor any provision
hereof may be amended, modified, waived, discharged or terminated except by an
instrument in writing duly signed by or on behalf of Lender.

     17.  Counterparts.  This Guaranty may be executed in any number of
          ------------
counterparts and any party hereto may execute any counterpart, each of which
when executed and delivered shall be deemed to be an original and all of which,
taken together, shall be deemed to be but one and the same instrument.  The
execution and delivery of this Guaranty by any

                                      -10-
<PAGE>

Guarantor shall be effective regardless of whether any other Guarantor has
executed this or any other copy of this Guaranty.

     18.  Severability.  In the event that any right or remedy of Lender
          ------------
hereunder is held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other right or remedy
granted hereunder.

     19.  Governing Law.  This Guaranty shall be governed by, and construed and
          -------------
enforced in accordance with, the laws of the State of California.

     20.  Civil Code Section 2822.  In the event that, at any time and for any
          -----------------------
reason, any Guarantor's liability with respect to any obligation guaranteed
constitutes only a portion of the applicable obligation, each Guarantor hereby
waives any right it might otherwise have under Section 2822 of the California
Civil Code to have Borrower designate the portion of any such obligation to be
satisfied in the event that Borrower provides partial satisfaction of such
obligation.  Each Guarantor acknowledges and agrees that Borrower may already
have agreed with Lender, or may hereafter agree, that in any such event the
designation of the portion of the obligation to be satisfied shall, to the
extent not expressly made by the terms of the Loan Documents, be made by Lender
rather than Borrower.

     21.  Joint and Several Liability.  All obligations of Guarantors under this
          ---------------------------
Guaranty shall constitute the joint and several liability of each Guarantor.

     22.  Miscellaneous.  Whenever the context requires, all terms used herein
          -------------
in the singular shall be construed in the plural and vice versa, and each gender
shall include each other gender.  The term "Borrower" shall mean both the named
Borrower and any other Person at any time and from time to time assuming or
otherwise becoming primarily liable on all or any part of the Indebtedness.
Section headings in this Guaranty are included for convenience of reference only
and are not a part of this Guaranty for any other purpose.

     23.  Married Persons.  Any married person who signs this Guaranty hereby
          ---------------
agrees that recourse may be had against his or her separate property, and
against any community property in which he or she has an interest, for all of
his or her obligations hereunder.

                                 [END OF TEXT]

                                      -11-
<PAGE>

          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed as of the date first written above.

                                  _____________________________________________
                                  Darioush Khaledi

                                  _____________________________________________
                                  Shahpar Khaledi

                                  _____________________________________________
                                  Darioush Khaledi, as trustee of the Khaledi
                                  Family Trust under declaration of Trust dated
                                  May 17, 1995

                                  K.V. PROPERTY COMPANY

                                  _____________________________________________
                                  By:
                                  Its:

                                  _____________________________________________
                                  Parviz Vazin

                                  _____________________________________________
                                  Vida Vazin

                                      -12-

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