S-4

As filed with the Securities and Exchange Commission on August 20, 2004

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Stater Bros. Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	5411	33-0350671
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

21700 Barton Road

Colton, California 92324

(909) 783-5100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Jack H. Brown

President and Chief Executive Officer

Stater Bros. Holdings Inc.

21700 Barton Road

Colton, California 92324

(909) 783-5100

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

COPIES TO:

Andrew E. Bogen, Esq.

Gibson, Dunn & Crutcher, LLP

333 South Grand Avenue

Los Angeles, California 90071

(213) 229-7159

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

CALCULATION OF REGISTRATION FEE

Title of Class of Securities to be Registered	Amount to be Registered		Proposed Maximum Offering Price per Note(1)		Proposed Maximum Aggregate Offering Price(1)		Amount of Registration Fee
8 1/8% Senior Notes due 2012	$	525,000,000	100	%	$	525,000,000	$	66,517.50
Floating Rate Senior Notes due 2010	$	175,000,000	100	%	$	175,000,000	$	22,172.50
Guaranties*		—	—			—		(2	)
TOTAL	$	700,000,000	100	%	$	700,000,000	$	88,690.00

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) promulgated under the Securities Act of 1933, as amended.

(2) No separate consideration will be received for the Guaranties, and therefore no additional registration fee is required.

 * Other Registrants

EXACT NAME OF CO-REGISTRANTS AS SPECIFIED IN ITS CHARTER	STATE OR OTHER JURISDICTION OF ORGANIZATION	PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBERS	I.R.S. EMPLOYER IDENTIFICATION NUMBER
Stater Bros. Markets	CA	5411	952586175
Stater Bros. Development, Inc.	CA	5411	953848941
Santee Dairies, Inc	CA	2026	954068896

The Registrant and the co-registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant and the co-registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Stater Bros. may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED AUGUST 20, 2004

PROSPECTUS

$700,000,000

Stater Bros. Holdings Inc.

$525,000,000 8 ¹/8% SENIOR NOTES DUE 2012

$175,000,000 FLOATING RATE SENIOR NOTES DUE 2010

OFFER TO EXCHANGE

NEW $525,000,000 8 ¹/8% SENIOR NOTES DUE 2012

FOR $525,000,000 OUTSTANDING PRINCIPAL AMOUNT OF

EXISTING 8 ¹/8% SENIOR NOTES DUE 2012

(CUSIP No. 857555AK2)

(CUSIP No. U85653AC4)

and

NEW $175,000,000 FLOATING RATE SENIOR NOTES DUE 2010

FOR $175,000,000 OUTSTANDING PRINCIPAL AMOUNT OF

EXISTING FLOATING RATE SENIOR NOTES DUE 2010

(CUSIP No. 857555AJ5)

(CUSIP No. U85653AB6)

The Exchange Offer will expire at 5:00 p.m. New York City Time,

on                     , 2004 unless extended

TERMS OF THE EXCHANGE OFFER:

• Stater Bros. will exchange all outstanding notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer.

• A holder may withdraw tendered outstanding notes at any time prior to the expiration of the exchange offer.

• The exchange of outstanding notes will not be a taxable exchange for United States federal income tax purposes.

• Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities.

• Stater Bros. will not receive any proceeds from the exchange offer. Stater Bros. will pay the expenses of the exchange offer.

INFORMATION ABOUT THE NEW NOTES

• The terms of the new notes to be issued are substantially identical to the terms of the outstanding notes, except that transfer restrictions, registration rights and liquidated damages provisions relating to the outstanding notes do not apply.

• The new 8 ¹/8% Senior Notes due 2012 (the “New Fixed Rate Notes”) will mature on June 15, 2012. The new Floating Rate Senior Notes due 2010 (the “New Floating Rate Notes”) will mature on June 15, 2010. Stater Bros. will refer to the New Fixed Rate Notes and the New Floating Rate Notes collectively as the “New Notes.”

• The New Fixed Rate Notes will pay interest semi-annually in cash in arrears on June 15 and December 15 of each year, starting on December 15, 2004. The New Floating Rate Notes will pay interest quarterly in cash in arrears on March 15, June 15, September 15 and December 15 of each year, starting on December 15, 2004.¹

• The New Fixed Rate Notes will be redeemable, in whole or in part, at any time on or after June 15, 2008 at the redemption prices specified under “Description of New Notes—Optional Redemption,” plus accrued and unpaid interest to the date of redemption. The New Floating Rate Notes will be redeemable, in whole or in part, at any time on or after June 15, 2006 at the redemption prices specified under “Description of New Notes—Optional Redemption,” plus accrued and unpaid interest to the date of redemption. Prior to June 15, 2007, Stater Bros. may also redeem up to 35% of the New Fixed Rate Notes at specified premiums with the net cash proceeds from certain equity offerings.

• The New Notes will be guaranteed by all of Stater Bros.’ current operating subsidiaries, including Santee Dairies, Inc., on a senior unsecured basis.

• The New Notes and the guarantees will be unsecured senior obligations and will rank equally with current and future unsecured senior indebtedness and junior to current and future secured indebtedness up to the value of the collateral securing such indebtedness.

• There is no existing market for the New Notes to be issued.

See the “Description of New Notes” section beginning on page 56 for more information about the New Notes to be issued in this exchange offer.

The New Notes involve substantial risks similar to those associated with the outstanding notes. See the section entitled “ Risk Factors” beginning on page 12 for a discussion of these risks.

Neither the Securities and Exchange Commission nor any state securities and exchange commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated                     , 2004

¹ Interest on the Old Floating Rate Notes will be paid on September 15, 2004 to record holders of such Old Floating Rate Notes as of September 1, 2004.

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS	ii
ADDITIONAL INFORMATION	iii
PROSPECTUS SUMMARY	1
RISK FACTORS	12
USE OF PROCEEDS	18
THE EXCHANGE OFFER	19
CAPITALIZATION	27
SELECTED CONSOLIDATED FINANCIAL DATA	28
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
BUSINESS	41
MANAGEMENT	47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	52
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	53
DESCRIPTION OF OTHER INDEBTEDNESS	54
DESCRIPTION OF NEW NOTES	56
FEDERAL INCOME TAX CONSIDERATIONS	92
PLAN OF DISTRIBUTION	96
LEGAL MATTERS	97
EXPERTS	97
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF STATER BROS. HOLDINGS INC.	F-1

i

FORWARD LOOKING STATEMENTS

This prospectus includes “forward-looking statements” within the meaning of the securities laws. Statements regarding Stater Bros.’ expected financial position, business, strategies and financing plans under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus are forward-looking statements. In addition, in those and other portions of this prospectus, the words “anticipates,” “expects,” “plans,” “intends” and similar expressions, as they relate to Stater Bros. or its management, indicate forward-looking statements. Although Stater Bros. believes that the expectations reflected in such forward-looking statements are reasonable, and has based these expectations on its beliefs as well as assumptions it has made, such expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from such expectations are disclosed in this prospectus, including, without limitation, the following factors:

• Stater Bros.’ substantial leverage and debt service requirements;

• pricing, market strategies, the expansion, consolidation and other activities of competitors;

• the effect of economic conditions in Southern California;

• customer demand;

• Stater Bros.’ relationship with unions and unionized employees;

• the effect of seasonal and weather fluctuations;

• the ability of Stater Bros. to retain key personnel;

• fluctuations in the price of commodities and fuel;

• the completion of Stater Bros.’ new distribution center, including the timing and cost of construction; and

• the other matters referred to elsewhere in this prospectus and in the materials incorporated by reference herein, in particular under the heading “Risk Factors.”

Investors are urged to consider these factors carefully in evaluating the forward-looking statements contained or incorporated by reference in this prospectus.

All subsequent written and oral forward-looking statements attributable to Stater Bros. or persons acting on its behalf are expressly qualified in their entirety by Stater Bros.’ cautionary statements. The forward-looking statements included or incorporated into this prospectus are made only as of the date of this prospectus (or as of the date of the document incorporated by reference). Stater Bros. does not intend, and undertakes no obligation, to update these forward-looking statements.

Investors should read carefully the factors described in the “Risk Factors” section of the prospectus for a description of certain risks that could cause actual results to differ from these forward-looking statements.

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ADDITIONAL INFORMATION

Stater Bros. files annual and quarterly reports and other information with the Securities and Exchange Commission (the “SEC”). Investors may read and copy any document filed by Stater Bros. at the SEC’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Investors can obtain copies of these materials from the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission (http://www.sec.gov).

Stater Bros. is “incorporating by reference” into this prospectus the information it has previously filed with the SEC. This means that Stater Bros. is disclosing important information to investors by referring to those documents. The information incorporated by reference is an important part of this prospectus, and information that Stater Bros. files later with the SEC will automatically update and supersede this information. Stater Bros. incorporates by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, which Stater Bros. refers to as the Exchange Act, until this exchange offer is completed:

• Annual Report on Form 10-K for the fiscal year ended September 28, 2003;

• Quarterly Reports on Form 10-Q for the fiscal quarters ended December 28, 2003, March 28, 2004 and June 27, 2004; and

• Current Reports on Form 8-K dated February 2, 2004, May 18, 2004, June 1, 2004, June 4, 2004, June 15, 2004, and June 18, 2004.

Investors may request a free copy of these filings by writing or telephoning Stater Bros. at the following address:

Stater Bros. Holdings Inc.

21700 Barton Road

P.O. Box 150

Colton, California 92324

Attn.: Corporate Secretary

Telephone: (909) 783-5000

To ensure timely delivery, requests for a copy of these filings must be received by Stater Bros. at least five days prior to the day the investor would like to receive the information.

iii

PROSPECTUS SUMMARY

Because this is a summary, it does not contain all the information that may be important to investors. Investors should read this entire prospectus carefully. In this prospectus, (i) the term “Stater Bros.” refers to Stater Bros. Holdings Inc., a Delaware corporation, and its direct subsidiaries, Stater Bros. Markets and Stater Bros. Development, Inc., as well as its indirect subsidiary, Santee Dairies, Inc., unless the context otherwise indicates, (ii) the term “Markets” refers to Stater Bros. Markets, the operating subsidiary of Stater Bros. that operates its supermarkets, (iii) the term “Development” refers to Stater Bros. Development, Inc., the direct subsidiary of Stater Bros. that serves as the general contractor for all of Markets’ store construction projects, (iv) the term “Santee” refers to Santee Dairies, Inc., a subsidiary of Markets and the indirect subsidiary of Stater Bros. that operates a dairy plant and provides fluid milk products to Markets and other customers in Southern California, and (v) the term “La Cadena” refers to La Cadena Investments, the sole shareholder of Stater Bros.

The Company

Stater Bros., founded in 1936, is the largest independently-owned supermarket chain in Southern California, operating 159 supermarkets, of which 90 are located in the Inland Empire, one of the fastest growing areas in the United States. The Inland Empire is comprised primarily of San Bernardino and Riverside counties. Stater Bros. also operates supermarkets in Orange, Los Angeles, San Diego and Kern counties. Stater Bros. has grown primarily by constructing supermarkets in its primary trading areas, as well as through the enlargement of existing supermarkets and through a strategic acquisition in August 1999 of 43 supermarkets in Southern California. Stater Bros.’ supermarkets offer a high level of customer service, a broad selection of brand-name merchandise, and quality meats and produce. All of Stater Bros.’ supermarkets have full-service meat departments and a broad selection of produce. In addition, many of the supermarkets have service delicatessens, service bakery departments, and fresh seafood counters. For the fiscal year ended September 28, 2003, Stater Bros. generated sales in excess of $2.75 billion.

Stater Bros. operates all of its supermarkets under the “Aggressive Everyday Low Price” format and management believes that Stater Bros. is recognized as a low price leader in its primary operating territory. Substantially all of Stater Bros.’ supermarkets are located in neighborhood shopping centers in well-populated residential areas. The average Stater Bros. supermarket is approximately 33,200 square feet, while newly constructed supermarkets range from approximately 40,000 to 46,000 square feet. Stater Bros.’ supermarkets carry an average of 35,000 items and are similarly designed and stocked for ease of shopping.

Stater Bros. currently distributes its products from a primary distribution center at Stater Bros.’ headquarters in Colton, California, and six satellite facilities. Approximately 77% of the merchandise sold in Stater Bros.’ supermarkets is processed through these facilities which are located an average of 39 miles from Stater Bros.’ 159 supermarket locations. Due to the close proximity of Stater Bros.’ distribution facilities to store locations, Stater Bros.’ supermarkets operate with minimal back-room storage space. Stater Bros.’ ratio of retail selling space to total store square footage is approximately 72%.

The Inland Empire continues to experience significant economic and population growth. Since 1990 the population has increased approximately 30% from 2.6 million to 3.4 million in 2002. During the same period the region experienced a 46.5% increase in jobs, and has seen positive annual job growth every year since 1983. Several factors have contributed to the Inland Empire’s significant growth, including affordable housing, availability of land, affordable industrial and commercial office space, and the region’s favorable geographic location and quality of life.

Stater Bros. believes that its 68 years of continuous service in the Inland Empire, its commitment to aggressive everyday low prices and the involvement of members of its management team in community activities

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have contributed significantly to Stater Bros.’ leading market position. To foster continued growth in sales, cash flow and net income and help Stater Bros. maintain its strong market share, Stater Bros.’ operating strategy is to:

• maintain its commitment to “Aggressive Everyday Low Prices”;

• offer its customers quality products and breadth of selection combined with a high level of customer service;

• enhance margins through a variety of merchandising strategies and cost control measures, including Stater Bros.’ decision to consolidate its warehouse and distribution operations through the construction of a new facility; and

• continue to grow its current store base, while actively maintaining and remodeling its existing supermarkets.

In addition to the existing supermarket operations, Markets owns Santee, which operates one of the largest dairy plants in California, based on fluid production. Santee provides fluid milk products to Markets and other customers in Southern California. Santee processes, packages and distributes whole, low-fat and non-fat milk, as well as orange juice, fruit drinks and certain other cultured milk products under the Knudsen^®, Foremost^® and certain other brand names, as well as store brand names.

Stater Bros. has an experienced management team led by Jack H. Brown, its Chairman of the Board, President and Chief Executive Officer, who has occupied his position as Stater Bros.’ President and Chief Executive Officer since 1981. In addition, the five members of the Stater Bros. senior management team have an average of 20 years with Stater Bros. and an average of over 34 years in the supermarket industry.

Recent Developments

New Distribution Facility

Markets is currently in negotiations to acquire approximately 160 acres located on the former Norton Air Force Base in the City of San Bernardino, California. Markets has reached an agreement with the Inland Valley Development Agency (“IVDA”), which is the entity responsible for the redevelopment of the former Norton Air Force Base, on an Owner Participation Agreement. The IVDA owns approximately 93 acres of the project property and is negotiating with another governmental agency for an additional 51 acres that would be transferred to Markets or leased with a purchase option. Additionally, Markets is negotiating the acquisition of four privately held parcels consisting of approximately 16 acres. The agreement with the IVDA requires Markets to acquire those parcels not owned by the IVDA, to relocate all tenants and other business owners requiring relocation, to commit to construct and complete the corporate and warehouse facilities and to obtain all City of San Bernardino building permits and entitlements required for the facility. Markets has reached an agreement with Hillwood/San Bernardino LLC (“Hillwood”), the master developer of the former Norton Air Force Base for infrastructure improvements. Under the Hillwood agreement, upon closing, Markets will share costs associated with the infrastructure improvements for water, sewer, streets and utilities which will be required by the City of San Bernardino. Markets, after completion of the acquisition of the project property, will secure its commitment with Hillwood for infrastructure improvements by the posting of either cash or letters of credits in the amount of $10.8 million. The agreements with the IVDA and Hillwood are contingent upon Markets successfully negotiating the acquisition of all needed property.

This site will be used to relocate and consolidate Stater Bros.’ corporate headquarters and all warehousing and distribution facilities to a single integrated facility from the 13 warehouse buildings at 7 different locations currently in use. This site is located within eight miles of the main distribution facility in Colton and therefore there will be no material change in the average distance between the new facility and the retail supermarkets. The

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facility will consist of approximately 2.1 million square feet and will include Stater Bros.’ corporate headquarters, truck maintenance and other support facilities required for consolidation of all of its Southern California retail grocery operations. The net projected cost of the facility is approximately $200 million and completion of the construction of the facility is planned for the fall of 2006.

Southern California Labor Dispute

A major labor dispute involving three of Stater Bros.’ principal competitors that lasted from October 11, 2003 through February 29, 2004 had a materially positive effect on Stater Bros.’ results of operations during that period. On October 11, 2003, the United Food and Commercial Workers Union (the “UFCW”), declared a strike against Safeway, Inc. (“Vons”); in turn, Albertson’s, Inc. (“Albertson’s”) and The Kroger Co. (“Ralphs”) locked out all of their UFCW employees (the “labor dispute”). The UFCW did not strike against Stater Bros. as a result of an agreement that Stater Bros. would accept the same contract terms that the UFCW negotiated with Vons, Albertson’s and Ralphs.

On February 29, 2004, members of the UFCW in Southern California ratified new collective bargaining agreements and ended their strike. Under the new collective bargaining agreements, Stater Bros. made special contributions to the UFCW’s health and welfare fund totaling $29.3 million, and made strike ratification bonus payments to its employees totaling $4.7 million.

The impact of the labor dispute on Stater Bros. was unprecedented and is not expected to be repeated in the future. Following the settlement of the labor dispute, management has taken steps through price promotions, customer service and attention to detail to retain as much of the increased volume as possible. However, the ultimate amount of increased volume retained, if any, cannot be forecast with any degree of certainty.

Santee Settlement

Until February 2004, Santee was owned by subsidiaries of Stater Bros. and the Kroger Co., with each company owning a 50% interest. Each of the two owners was party to a product purchase agreement for the purchase of fluid milk and other products produced by Santee.

Disagreements and litigation concerning Santee arose between Stater Bros. and Santee on the one hand and Ralphs on the other. The litigation was settled in January 2004. In the settlement, the product purchase agreement between Santee and Ralphs, which accounted for approximately 12.3% of Santee’s sales during calendar year 2003, was terminated, and Ralphs agreed to purchase declining volumes of fluid milk and certain other products from Santee through July 31, 2007. In addition, Ralphs paid $1,550,000 to Stater Bros. and relinquished its ownership interest in Santee. Beginning with February 6, 2004, the financial position and results of operations of Santee have been consolidated with those of Stater Bros.

The Transactions

This offer to exchange (the “Exchange Offer”) is one of a series of related transactions designed to reduce the average interest rate payable on outstanding debt and provide financial flexibility to Stater Bros. The transactions include the following:

• The Tender Offer, Consent Solicitation and Redemption. On May 14, 2004, Stater Bros. commenced a tender offer and solicitation of consents to purchase all of the $449.75 million outstanding principal amount of its 10 ³/4% Senior Notes due 2006 (the “10 ³/4% Notes”) which included $11.0 million in principal amount of 10 ³/4% Notes owned by Stater Bros., and amend the indenture governing the 10 ³/4% Notes to eliminate most of the covenants and certain events of default. On May 27, 2004, Stater Bros. received the required consents to the proposed amendments from holders of approximately 88.4% of the

3

outstanding principal amount of the 10 ³/4% Notes. The amendments became operative when Stater Bros. consummated the tender offer on June 17, 2004. Stater Bros. redeemed the remaining 10 ³/4% Notes on August 16, 2004.

• The Offering. On June 17, 2004, Stater Bros. issued an aggregate of $700.0 million principal amount of the unregistered 8 ¹/8% Senior Notes due 2012 (the “Old Fixed Rate Notes”) and unregistered Floating Rate Senior Notes due 2010 (the “Old Floating Rate Notes”) described in the offering memorandum dated June 9, 2004 (the “Offering Memorandum”) in a private offering (the “Offering”). The Old Fixed Rate Notes and the Old Floating Rate Notes will be referred to collectively as the “Old Notes.” The proceeds from the issuance of the Old Notes, together with cash on hand, have been and will be used to (i) pay for the purchase or redemption of all of the 10 ³/4% Notes; (ii) pay costs associated with acquisition and construction of the proposed new distribution center described above; (iii) pay a dividend of $45 million; (iv) repay a subordinated promissory note representing debt incurred in connection with the purchase of a retired executive’s interest in La Cadena in the outstanding principal amount of $20 million; and (v) pay fees and expenses related to the Offering and the purchase or redemption of the 10 ³/4% Notes.

• The Registration of the Notes. The 8 ¹/8% Senior Notes due 2012 that are being registered in the registration statement of which this prospectus is a part (the “New Fixed Rate Notes”) will mature on June 15, 2012. The Old Fixed Rate Notes and the New Fixed Rate notes will be referred to collectively as the “Fixed Rate Notes.” The Floating Rate Senior Notes due 2010 that are being registered in the registration statement of which this prospectus is a part (the “New Floating Rate Notes”) will mature on June 15, 2010. The Old Floating Rate notes and the New Floating Rate Notes will be referred to collectively as the “Floating Rate Notes.” The New Floating Rate Notes and the New Fixed Rate Notes will be referred to collectively as the “New Notes,” and the Old Notes and the New Notes will be referred to collectively as the “Notes.”

• The New Credit Facility. On June 17, 2004, Markets and Stater Bros. entered into a credit agreement with respect to a new senior unsecured revolving credit facility (the “New Credit Facility”) with Bank of America, N.A., as sole and exclusive administrative agent, and sole initial lender, consisting of a three-year revolving credit facility in a principal amount of up to $75.0 million, with the right to increase, under certain circumstances, the size of the revolving credit facility to an aggregate principal amount of $100.0 million. The New Credit Facility amended and restated the existing credit facility in its entirety. See “Description of Other Indebtedness.”

The principal executive office of Stater Bros. is located at 21700 Barton Road, Colton, California 92324, its telephone number is (909) 783-5000, and its mailing address is P.O. Box 150, Colton, California 92324.

4

SUMMARY OF THE EXCHANGE OFFER

The following is a summary of the principal terms of the Exchange Offer. More detailed information is found in the section “The Exchange Offer.” The term “Old Notes” refers to Stater Bros.’ outstanding 8 ¹/8% Senior Notes due 2012 and Floating Rate Senior Notes due 2010, and the term “New Notes” refers to Stater Bros.’ new 8 ¹/8% Senior Notes due 2012, and Floating Rate Senior Notes due 2010, being registered hereunder. The term “Notes” refers to the Old Notes and the New Notes collectively. The term “Indenture” refers to the Indenture dated as of June 17, 2004, among Stater Bros., the Guarantors named therein and The Bank of New York, as Trustee, that governs both the Old Notes and the New Notes. The form and terms of the New Notes will be the same as those of the Old Notes except that the New Notes will have been registered under the Securities Act of 1933, as amended (the “Securities Act”), and hence will not be subject to transfer restrictions imposed by the Securities Act, registration rights and related liquidated damages provisions applicable to the Old Notes.

The Exchange Offer Stater Bros. is offering to exchange an aggregate of $700,000,000 principal amount of New Notes for a like principal amount of Old Notes. The Old Notes may be exchanged only in multiples of $1,000 principal amount. Stater Bros. will issue the New Notes on or promptly after the Exchange Offer expires. See “The Exchange Offer.”

Expiration Date The Exchange Offer will expire at 5:00 p.m., New York City time, on                     , 2004, unless Stater Bros. extends it.

Conditions to the Exchange Offer The Exchange Offer is subject to specified conditions, which Stater Bros. may waive in whole or in part and from time to time in Stater Bros.’ discretion. See “The Exchange Offer—Certain Conditions to the Exchange Offer.” The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered for exchange.

Procedures for Tendering Old Notes If an investor wants to accept the Exchange Offer, such holder must:

• complete and sign the letter of transmittal,

• have the signature thereon guaranteed if required by the letter of transmittal, and

• mail or deliver the letter of transmittal, together with the Old Notes or a notice of guaranteed delivery and any other required documents (such as evidence of authority to act satisfactory to Stater Bros. in Stater Bros.’ sole discretion, if the letter of transmittal is signed by someone acting in a fiduciary or representative capacity), to the exchange agent prior to 5:00 p.m. New York City time on the expiration date.

If the investor is the beneficial owner of the Old Notes and the Old Notes are registered in the name of a nominee, such as a broker, dealer, commercial bank or trust company and the investor wishes to tender Old Notes in the Exchange Offer, the investor should instruct such entity or person to promptly tender on the investor’s behalf. See “The Exchange Offer—Procedures for Tendering Old Notes.”

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Guaranteed Delivery Procedures If the investor holds Old Notes and wishes to tender such Old Notes and (i) such Old Notes are not immediately available or (ii) the investor cannot deliver the Old Notes or any other documents required by the letter of transmittal to the exchange agent prior to the expiration date (or complete the procedure for book-entry transfer on a timely basis), the investor may tender the Old Notes according to the guaranteed delivery procedures set forth in the letter of transmittal. See “The Exchange Offer—Guaranteed Delivery Procedures.”

The letter of transmittal provides that each investor of Old Notes (other than participating broker-dealers) will represent to Stater Bros. that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, that neither such holder of Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder nor any such person is an “affiliate” of Stater Bros., as defined in Rule 405 under the Securities Act. Any tendered Old Notes not accepted for exchange for any reason will be returned promptly after the expiration or termination of the Exchange Offer. See “The Exchange Offer.”

Withdrawal Rights A holder may withdraw the tender of the Old Notes at any time on or prior to the expiration date by delivering a written notice to the exchange agent. See “The Exchange Offer—Withdrawal Rights.”

Acceptance of Old Notes and Delivery of New Notes Stater Bros. will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to the expiration date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the expiration date. See “The Exchange Offer—Terms of the Exchange Offer.”

Resales of New Notes Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, Stater Bros. believes that an investor may offer for resale, resell or otherwise transfer New Notes issued pursuant to the Exchange Offer in exchange for Old Notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:

• the investor is acquiring the New Notes in the ordinary course of the investor’s business;

• the investor has no arrangement or understanding with any person to participate in the distribution of the New Notes;

• the investor is not an affiliate of Stater Bros. within the meaning of Rule 405 under the Securities Act; and

• the investor is not broker-dealer who purchases such New Notes directly from Stater Bros. to resell pursuant to Rule 144A or any other available exemption under the Securities Act.

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Each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See “Plan of Distribution.”

The staff of the SEC has not considered this exchange offer in the context of a no-action letter, and Stater Bros. cannot assure investors that the staff of the SEC would make a similar determination with respect to this exchange offer. If Stater Bros.’ belief is not accurate and an investor transfers a New Note without delivering a prospectus meeting the requirements of the federal securities laws or without an exemption from these laws, such investor may incur liability under the federal securities laws. Stater Bros. does not and will not assume, or indemnify any investor against, this liability.

Consequences of Failure to Exchange If an investor does not exchange some or all of the investor’s Old Notes for New Notes pursuant to the Exchange Offer, the Old Notes that are not tendered will continue to be subject to the restrictions on transfer provided in the Old Notes and in the Indenture. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exception from, or in a transaction not subject to, the Securities Act and applicable state securities laws. If Stater Bros. completes the Exchange Offer, the investor will have no further rights to registration or liquidated damages pursuant to the registration rights agreement. See “The Exchange Offer—Consequences of Failure to Exchange” and “Description of New Notes.”

Material Tax Considerations An investor’s acceptance of the Exchange Offer and the related exchange of the investor’s Old Notes for New Notes will not be a taxable exchange for United States federal income tax purposes, and the investor will have the same adjusted basis and holding period in the New Notes as in the Old Notes immediately before the exchange.

Exchange Agent The Bank of New York is the exchange agent. The address and telephone number of the exchange agent are set forth in “The Exchange Offer—Exchange Agent.”

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THE NEW NOTES

Securities Offered $525,000,000 principal amount of 8 ¹/8% Senior Notes due 2012 and $175,000,000 principal amount of Floating Rate Senior notes due 2010.

Maturity The New Fixed Rate Notes will mature on June 15, 2012 and the New Floating Rate Notes will mature on June 15, 2010.

Interest Payment Dates For the New Fixed Rate Notes: Semi-annually on June 15 and December 15 of each year, commencing on December 15, 2004.

For the New Floating Rate Notes: Quarterly on March 15, June 15, September 15 and December 15 of each year, commencing on December 15, 2004.²

Guarantees The Notes are guaranteed by Stater Bros.’ principal operating subsidiary, Markets, its other current direct subsidiary, Development, as well as its current indirect subsidiary, Santee. The guarantees are unsecured senior obligations of the guarantors and rank equally with all of the current and future unsecured senior debt of the guarantors and senior to all future subordinated debt of the guarantors. The guarantees effectively rank junior to any secured debt of the guarantors to the extent of the value of the assets securing such debt.

Optional Redemption The New Fixed Rate Notes will be redeemable, in whole or in part, on or after June 15, 2008 at the redemption prices described in the section “Description of New Notes—Optional Redemption—Fixed Rate Notes.”

The New Floating Rate Notes will be redeemable in whole or in part, on or after June 15, 2006 at the redemption prices described in the section “Description of New Notes—Optional Redemption—Floating Rate Notes.”

Prior to June 15, 2007, Stater Bros. may redeem up to 35% of the New Fixed Rate Notes with the net cash proceeds from specified equity offerings at the redemption price described in the section “Description of New Notes—Optional Redemption—Redemption with the Proceeds of Certain Capital Contributions or Equity Issuances.” Stater Bros. may, however, only make these redemptions if at least 65% in aggregate of the originally issued principal amount of the Fixed Rate Notes remains outstanding after the redemptions.

Change of Control If a change of control event occurs, as defined in the Indenture governing the New Notes and the Old Notes, each holder of notes may require Stater Bros. to purchase all or a portion of the holder’s notes at a purchase price equal to 101% of the principal amount of the Notes, plus accrued interest. See “Description of New Notes—Purchase at the Option of Holders—Change of Control.”

² Interest on the Old Floating Rate Notes will be paid on September 15, 2004 to record holders of such Old Floating Rate Notes as of September 1, 2004.

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Ranking The New Notes and guarantees will be unsecured senior obligations of Stater Bros. and each of the guarantors and will rank equally with current and future unsecured senior debt and senior to future subordinated debt of Stater Bros. and the guarantors. The New Notes and guarantees will effectively rank junior to secured debt of Stater Bros. and the guarantors to the extent of the value of the assets securing the debt. As of June 27, 2004, after giving pro forma effect to the redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes on August 16, 2004, the New Notes would have ranked equally with approximately $48.2 million of debt (representing letters of credit) of Stater Bros. and the guarantors and would have ranked junior to approximately $11.1 million of secured debt of Stater Bros. and the guarantors.

Covenants The Indenture governing the New Notes limits Stater Bros.’ ability to:

• incur additional debt;

• create liens or other encumbrances;

• pay dividends or make other restricted payments;

• make investments, loans or other guarantees;

• enter into transactions with affiliates;

• issue or sell capital stock of restricted subsidiaries;

• sell or otherwise dispose of a portion of its assets; or

• make acquisitions or merge or consolidate with another entity.

The covenants are subject to a number of important qualifications and exceptions which are described in the section “Description of New Notes—Certain Covenants.”

Investors should refer to the section entitled “Risk Factors” for a discussion of factors that should be considered in connection with the New Notes.

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Summary Historical Financial And Statistical Data Of Stater Bros.

The following table sets forth summarized historical financial and statistical data derived from the audited consolidated financial statements of Stater Bros. and the related notes thereto as of and for the fiscal years ended September 30, 2001, September 29, 2002 and September 28, 2003. The financial statements of Stater Bros. and the related notes thereto appear elsewhere in this prospectus. The summary data for the 39-week periods are derived from unaudited financial statements which are included in this prospectus. In the opinion of management, such unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of this data. The information included in “Other Operating and Financial Data” and “Store Data” is unaudited. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the complete historical financial statements and related notes thereto contained elsewhere in this prospectus. The results for the 39 weeks ended June 29, 2003 and June 27, 2004 are not necessarily indicative of the results for a full year or for any future period. Investors should read the complete historical financial statements included elsewhere in this prospectus.

										Unaudited
	Fiscal Years Ended(1)									39 Weeks Ended
	Sept 30, 2001			Sept. 29, 2002			Sept. 28, 2003			June 29, 2003			June 27, 2004
	(in thousands of dollars except per share and store data)
Statement of Earnings Data:
Sales	$	2,573,913		$	2,666,346		$	2,753,774		$	2,046,776		$	2,863,955
Cost of goods sold		1,911,065			1,957,526			1,999,361			1,484,710			2,038,011
Gross profit		662,848			708,820			754,413			562,066			825,944
Selling, general and administrative expenses		579,549			615,482			659,720			491,437			631,145
Depreciation and amortization		22,327			24,300			26,879			19,615			23,331
Total operating expenses		601,876			639,782			686,599			511,052			654,476
Operating profit		60,972			69,038			67,814			51,014			171,468
Interest income		3,409			1,721			1,049			770			1,005
Other expense—net		(258	)		(1,579	)		(1,093	)		(756	)		(1,017	)
Interest expense		(52,410	)		(52,814	)		(53,254	)		(39,898	)		(39,416	)
Interest expense related to debt purchase(2)		—			—			—			—			(34,017	)
Equity in income from unconsolidated affiliate		1,584			2,914			1,330			1,196			929
Income before income taxes		13,297			19,280			15,846			12,326			98,952
Income taxes		5,452			7,491			5,719			4,798			39,803
Net income	$	7,845		$	11,789		$	10,127		$	7,528		$	59,149
Earnings per common share	$	156.90		$	280.92		$	264.41		$	196.55		$	1,544.32
Balance Sheet Data (end of period):
Working capital	$	120,457		$	119,643		$	124,517		$	126,384		$	324,062
Total assets		629,294			634,130			667,826			670,561			1,043,879
Long-term notes		439,000			458,750			458,750			458,750			700,000
Long-term capitalized lease obligations		12,098			10,981			9,926			10,190			9,823
Other long-term liabilities		24,608			45,014			54,916			55,076			99,007
Common stockholder’s deficit		(41,409	)		(74,121	)		(63,994	)		(66,593	)		(49,845	)
Dividends paid per share, Class A Common Stock	$	—		$	117.49		$	—		$	—		$	1,174.90

(footnotes on following page)

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										Unaudited
	Fiscal Years Ended(1)									39 Weeks Ended
	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003			June 29, 2003			June 27, 2004
	(in thousands of dollars except per share and store data)
Cash Flow Data:
Cash provided by operating activities	$	79,393		$	51,168		$	82,950		$	75,868		$	116,601
Cash provided by (used in) financing activities		(7,140	)		(31,218	)		(1,116	)		(859	)		144,423
Cash used in investing activities		(33,248	)		(40,543	)		(51,725	)		(37,574	)		(45,265	)
Other Operating and Financial Data:
Sales increases:
Total stores		6.5	%		3.6	%		3.3	%		2.9	%		37.6	%
Like stores (comparable period)(3)		4.5	%		5.3	%		2.8	%		2.4	%		36.2	%
Operating profit	$	60,972		$	69,038		$	67,814		$	51,014		$	171,468
Ratio of earnings to fixed charges(4)		1.19	x		1.25	x		1.21	x		1.22	x		2.08	x
Gross profit as a percentage of sales		25.75	%		26.58	%		27.40	%		27.46	%		28.84	%
Selling, general and administrative expenses as a percentage of sales		22.51	%		23.08	%		23.96	%		24.01	%		22.04	%
Store Data(5):
Number of stores (at end of period)		155			156			157			157			158
Average sales per store (000s)	$	16,606		$	17,092		$	17,619		$	13,120		$	17,897
Average store size:
Total square feet		33,018			33,083			33,111			33,083			33,173
Selling square feet		23,639			23,675			23,693			23,675			23,727
Total square feet (at end of period) (000s)		5,118			5,161			5,205			5,161			5,248
Total selling square feet (at end of period) (000s)		3,664			3,693			3,724			3,693			3,752
Sales per total sq. ft.	$	503		$	517		$	532		$	397		$	539
Sales per selling sq. ft.	$	702		$	722		$	744		$	554		$	754

(1) The fiscal year 2001 was a 53-week year, whereas fiscal years 2002 and 2003 were 52-week years.

(2) Interest expense related to debt purchase for the thirty-nine weeks ended June 27, 2004 included a $16.9 million payment for tender premium and fees on the purchase of $397.8 million principal amount of the 10 ³/4% Notes, a make whole payment by Santee of $8.5 million related to Santee’s redemption of all its outstanding Senior Secured 9.36% Notes due 2008 (the “Santee Notes”) and an $8.6 million charge for the write-off of deferred offering cost related to (i) the purchase of $397.8 million of the 10 ³/4% Notes, (ii) the early retirement of the $20.0 million 5.0% Subordinated Note of Stater Bros. due 2007 and (iii) the redemption of the Santee Notes.

(3) Like store sales are calculated by comparing year-to-year sales for stores that are opened in both years. For stores that were not opened for the entire previous year, only the current year’s weekly sales that correspond to the weeks the store was open in the previous year are used. All of the current year’s replacement store sales are included in the like store sales calculation. There were no stores closed in the periods considered in this table.

(4) For the purpose of determining the ratio of earnings to fixed charges, earnings consist of income before income taxes and amortization of previously capitalized interest. Fixed charges consist of interest expense whether expensed or capitalized, amortization of deferred debt expense, and such portion of rental expense as can be deemed by management to be representative of the interest factor in the particular case. Included in earnings and fixed charges is Stater Bros.’ 50% share of Santee. For the unaudited 39 weeks ended June 27, 2004, included in earnings and fixed charges is Stater Bros.’ 50% share of fixed charges and earnings of Santee through February 6, 2004. Santee has been consolidated into Stater Bros.’ consolidated results since that date.

(5) Average sales per store, sales per total square feet and sales per selling square feet are calculated by prorating the number of stores, total square feet and selling square feet by the period of time the store was opened, for new stores, or the period of time the expanded square footage was in service, for expanded stores.

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RISK FACTORS

In addition to the other information set forth in this prospectus, the investor should carefully consider the following risk factors prior to tendering the investor’s Old Notes in the Exchange Offer. This prospectus contains forward-looking statements which involve risks and uncertainties. Stater Bros.’ actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those described in the following risk factors and elsewhere in this prospectus.

Risks Related to the Exchange

Investors must comply with the procedures for the Exchange Offer in order to receive the New Notes.

The New Notes will be issued in exchange for Old Notes only after timely receipt by the exchange agent of the Old Notes. Therefore, if an investor desires to tender the Old Notes in exchange for New Notes, the investor should allow sufficient time to ensure timely delivery. The exchange agent does not have any duty to give notification of defects or irregularities, and neither does Stater Bros.

Old Notes that are not tendered will be subject to transfer restrictions and a limited trading market.

The Old Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. In addition, if an investor tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes, the investor will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer who receives New Notes for its own account in exchange for Old Notes, where the Old Notes were acquired by the broker-dealer as a result of market-making activities or any other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See “Plan of Distribution.” To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. See “The Exchange Offer.”

There may be no active trading market for the New Notes.

The liquidity of any trading market for the New Notes, and the market prices quoted for the New Notes, may be adversely affected by changes in the overall market for these types of securities, and by changes in Stater Bros.’ financial performance or prospects or in the prospects for companies in the supermarket industry generally. As a result, Stater Bros. cannot assure investors that they will be able to sell the New Notes or that, if they can sell their New Notes, they will be able to sell them at acceptable prices.

The New Notes may be subject to transfer restrictions imposed by state securities laws.

In order to comply with the securities laws of some jurisdictions, investors may not offer or resell the New Notes unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration of qualification is available and the requirements of such exemption have been satisfied. Stater Bros. does not currently intend to register or qualify the resale of the New Notes in any such jurisdictions. However, an exemption is generally available for sales to registered broker-dealers and some institutional buyers. Other exemptions under applicable state securities laws may also be available.

Risks Related to the Notes

Stater Bros.’ Substantial Indebtedness Could Adversely Affect its Financial Health and Prevent it From Fulfilling its Obligations Under the Notes

Stater Bros. has a significant amount of indebtedness and substantial debt service obligations. As of June 27, 2004, after giving pro forma effect to the redemption of the remaining approximately $41.0 million principal

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amount of 10 ³/4% Notes on August 16, 2004, Stater Bros. will have total indebtedness of $711.1 million and negative net worth of $50.8 million. As of June 27, 2004, after giving pro forma effect to redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes on August 16, 2004, Stater Bros. will also have $31.8 million of additional borrowing availability under its credit facilities and Stater Bros. may be able to incur substantial indebtedness in the future.

Stater Bros.’ substantial indebtedness could have important consequences to holders of the Notes. For example, it could:

• increase Stater Bros.’ vulnerability to general adverse economic and industry conditions;

• require Stater Bros. to dedicate a substantial portion of its cash flow from operations to payment of indebtedness, which would reduce the cash flow available to fund working capital, capital expenditures and other general corporate needs; and

• place Stater Bros. at a competitive disadvantage compared to its competitors with less debt.

Stater Bros.’ ability to meet its expenses and make payments on its indebtedness will depend on its future cash flow, which could be affected by financial, business, economic and other factors, many of which are beyond its control. If Stater Bros. does not generate enough cash flow to pay its debt obligations and fund its other liquidity needs, it may be required to finance all or part of its debt, sell assets, or borrow more money. There can be no assurance that Stater Bros. will be able to accomplish any of these alternatives on terms acceptable to it, if at all.

Stater Bros. Operations are Subject to Limitations Imposed by its Debt Instruments

The Indenture governing the New Notes and Stater Bros.’ New Credit Facility each contain financial and other covenants that restrict, among other things, the ability of Stater Bros. to:

• incur additional debt;

• create liens or other encumbrances;

• pay dividends or make other restricted payments;

• make investments, loans or other guarantees;

• enter into transactions with affiliates;

• issue or sell capital stock of certain subsidiaries;

• sell or otherwise dispose of a portion of its assets; or

• make acquisitions or merge or consolidate with another entity.

In addition, Stater Bros.’ New Credit Facility contains financial covenants requiring Markets and its subsidiaries to meet minimum financial tests. The need for Stater Bros. to remain in compliance with its covenants may restrict its flexibility in managing and making changes in its business.

The Notes Will Not be Secured

The Notes will not be secured by any assets of Stater Bros. or its subsidiaries. Accordingly, although the Notes and the subsidiary guarantees will constitute senior indebtedness, they will be effectively subordinated to any secured indebtedness that Stater Bros. or its subsidiaries incur to the extent of the value of the assets securing such indebtedness. In the event of a bankruptcy or similar proceeding involving Stater Bros. or its subsidiaries, the assets which serve as collateral securing the indebtedness of such entities will be available to satisfy their obligations under secured indebtedness. As of June 27, 2004, after giving pro forma effect to the redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes on August 16, 2004, the Notes and subsidiary guarantees would have been effectively junior to approximately $11.1 million of secured indebtedness of Stater Bros. and its subsidiaries.

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Fraudulent Conveyance Statutes Allow Courts, Under Specific Circumstances, to Avoid Subsidiary Guarantees

Various fraudulent conveyance and similar laws may be utilized by courts to avoid or limit the guarantees of the Notes by Stater Bros.’ subsidiaries. The requirements for establishing a fraudulent conveyance vary depending on the jurisdiction. Generally, if in a bankruptcy, reorganization, or other judicial proceeding, a court were to find that the guarantor received less than reasonably equivalent value or fair consideration for incurring indebtedness evidenced by guarantees, and that such guarantor

• was insolvent at the time of the incurrence of such indebtedness,

• was rendered insolvent by reason of incurring such indebtedness,

• was at such time engaged or about to engage in a business or transaction for which its assets constituted unreasonably small capital, or

• intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured,

such court could, with respect to such guarantor, declare void in whole or in part the obligations of such guarantor under a guarantee, as well as any liens granted by the guarantor securing such guarantee or the guaranteed obligations. Any payment by such guarantor pursuant to its guarantee could also be required to be returned to it, or to a fund for the benefit of its creditors. Generally, an entity will be considered insolvent if the sum of its debts is greater than (i) the fair saleable value of all of its property at a fair valuation, or (ii) if the present fair saleable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and mature.

Stater Bros. is a holding company whose principal asset is the stock of Markets. Stater Bros. has no operations of its own, and derives all of its revenue from its subsidiaries. If a guarantee of the Notes by a subsidiary were avoided as a fraudulent transfer, holders of other indebtedness of, and trade creditors of, that subsidiary would generally be entitled to payment of their claims from the assets of the subsidiary before such assets could be made available for distribution to Stater Bros. to satisfy its obligations under the Notes.

Stater Bros. May Be Unable to Raise the Funds Necessary to Finance a Change of Control Offer Required by the Indenture

Upon the occurrence of certain change of control events, Stater Bros. will be required to offer to purchase all outstanding Notes at a price equal to 101% of the principal balance of the Notes, plus accrued and unpaid interest, if any. It is possible that Stater Bros. will not have sufficient funds at the time of the change of control to make the required purchase of the Notes. Indebtedness outstanding under the New Credit Facility may require prepayment before funds may be used to purchase the Notes in the event of a change of control.

Risks Related to the Supermarket Industry and Stater Bros.

Stater Bros.’ Results are Subject to Risks Relating to Intense Competition and Narrow Profit Margins in the Supermarket Industry

The supermarket industry is highly competitive and generally characterized by narrow profit margins. Stater Bros. competes with various types of retailers, including local, regional and national supermarket retailers, convenience stores, retail drug chains, general merchandisers and discount retailers, membership clubs, warehouse stores and independent and specialty grocers. Stater Bros. also faces increasing competition from restaurants and fast food chains due to the increasing portion of household food expenditures for food prepared outside the home.

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Stater Bros.’ principal competitors include national and regional supermarket chains which compete with it on the basis of location, quality of products, service, price, product variety and store condition. An overall lack of inflation in food prices and increasingly competitive markets have made it difficult generally for grocery store operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, Stater Bros.’ competitors have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to consistently increase year-over-year sales gains.

Stater Bros. faces increased competitive pressure from existing competitors and from the threatened entry by one or more major new competitors. The supermarket industry has undergone substantial consolidation, resulting in competitors with increased financial resources and purchasing power. Some of Stater Bros.’ competitors have greater resources than Stater Bros. and are not unionized, resulting in lower labor costs. These competitors could use these resources to take measures which could adversely affect Stater Bros.’ competitive position. For example, Stater Bros. will face increased competitive pressures with the entry of Wal-Mart’s Super Center format stores in and near the geographic area Stater Bros. serves. Wal-Mart currently has a number of Wal-Mart discount locations and Sam’s Clubs within Stater Bros.’ marketing area selling a variety of grocery products.

The New Distribution Center May Not be Completed on Time and May Cost More Than Anticipated

Stater Bros. will use part of the proceeds of the Offering to fund the construction of a new distribution center in the Inland Empire. At this time, purchase of the land for the new center is subject to significant contingencies. If the projected site is not acquired, Stater Bros. will be required to locate alternate property for the new distribution center, potentially at a higher price. In addition, Stater Bros.’ estimates of the costs to complete the new distribution center are based on preliminary estimates and actual costs could be materially higher. In the event that the new distribution center’s management information systems and other technology do not perform as anticipated, the efficiency with which Stater Bros. distributes products to its stores may be impaired. Stater Bros. will incur potentially significant transition costs as it phases out its current distribution operation and integrates the new distribution center into its business.

Construction projects, such as the proposed distribution center, involve significant risks, including:

• shortage of materials or skilled labor;

• unforeseen engineering, environmental or geological problems;

• weather interference; and

• unanticipated cost increases, including costs associated with construction materials,

any of which can give rise to delays or cost overruns. The discovery of hazardous substances on the property could indefinitely postpone construction of the new facility.

The anticipated costs and construction period for the proposed distribution facility are based upon preliminary budgets, conceptual design documents and estimates prepared by Stater Bros. in consultation with its architects and contractors. Construction, equipment or staffing requirements, or difficulties in obtaining any of the requisite licenses, permits, allocations, or authorizations from regulatory authorities could increase the cost or delay the construction of the proposed new distribution facility or otherwise affect its planned design and features. The construction plans for the new distribution center are currently being developed and may change, and the scope and cost of the project may vary significantly from what is currently anticipated. Stater Bros. has not entered into firm contracts for the construction of the new distribution center and it cannot be sure that it will not exceed the budgeted cost of the project or that the project will commence operations within the contemplated time frame, if at all. Budget overruns and delays with respect to the new distribution center could have a material adverse impact on Stater Bros.’ results of operations.

15

Stater Bros. is Heavily Dependent on Key Personnel

Stater Bros.’ success is largely dependent upon its senior management team, led by Jack H. Brown, Stater Bros.’ Chairman of the Board, President and Chief Executive Officer, and other key managers. The loss of such persons could have a material adverse effect on Stater Bros.’ business and results of operations.

Stater Bros. May Not be Able to Retain the Volume Attributable to the Southern California Labor Dispute

The recent labor dispute involving three of Stater Bros.’ principal competitors had a materially positive effect on Stater Bros.’ results of operations in the period. During the labor dispute, many Vons, Ralphs, and Albertson’s customers chose to honor the picket lines and took their business to Stater Bros. and other supermarkets. As a result, Stater Bros.’ financial performance in the period was unprecedented and is not expected to be repeated in the future. However, the ultimate amount of increased volume retained, if any, cannot be forecast with any degree of certainty, and the end of the labor dispute may have a materially adverse impact on Stater Bros.’ results of operations as competitors take steps to regain business lost during the dispute.

Santee May Not be Able to Find a Replacement for Ralphs Under the Fluid Milk and Other Products Requirements Agreement

Pursuant to the January 29, 2004 settlement agreement reached among Stater Bros., Ralphs, and Santee, Ralphs relinquished to Markets all of its rights, title, and interest in Santee, and a product purchase agreement between Santee and Ralphs, which accounted for approximately 12.3% of Santee’s sales during calendar year 2003, was terminated, although Ralphs agreed to purchase declining volumes of fluid milk and certain other products from Santee through July 31, 2007. If Santee is unable to find other customers to replace the sales formerly made to Ralphs, results of operations of Santee will be adversely affected, which may have a material adverse effect on Stater Bros.’ results of operations.

Stater Bros. is Affected by Increases in Utility, Fuel and Commodity Prices

Stater Bros. is dependent on the use of trucks to distribute goods to its markets. Therefore, fluctuations in the price of fuel affect Stater Bros.’ cost of doing business. Additionally, increases in the cost of electricity and other utilities affect the cost of illuminating and operating Stater Bros.’ stores, warehouses, and distribution facilities and the cost of goods sold by Stater Bros. can be significantly impacted by increases in commodity prices. Stater Bros. may not be able to recover these rising costs through increased prices charged to its customers and its results of operations could be materially adversely affected by increases in the cost of one or more of these resources.

The Geographic Concentration of Stater Bros. Supermarkets Creates a Heavy Exposure to the Risks of the Local Economy and Other Local Adverse Conditions

Stater Bros. operates in Southern California, with a strong concentration in the Inland Empire, which is comprised primarily of San Bernardino and Riverside counties. Stater Bros.’ headquarters, warehouse and distribution facilities and a significant number of its stores are located within a relatively limited geographic area. As a result, Stater Bros.’ business is more susceptible to regional conditions than the operations of more geographically diversified competitors. These factors include, among other things, changes in the economy, weather conditions, demographics and population.

Stater Bros.’ performance is heavily influenced by economic developments in Southern California generally and in the Inland Empire in particular. Although this area has experienced economic and demographic growth over the past several years, a significant economic downturn in the region could have a material adverse effect on Stater Bros.’ business, financial condition, or results of operations. Further, a natural disaster or other catastrophic event, such as fire or earthquake, that impaired Stater Bros.’ current primary distribution center or, if and when completed, Stater Bros.’ new distribution center, could significantly disrupt its operations and have a material adverse effect on Stater Bros.’ business, financial condition and results of operations.

16

Prolonged Labor Disputes with Unionized Employees May Impede Stater Bros.’ Ability to Timely Pay Interest on the Notes

Substantially all of Stater Bros.’ employees are represented by unions and covered by collective bargaining or similar agreements that are subject to periodic renegotiations. Although Stater Bros. believes that it will successfully negotiate new collective bargaining agreements when the current agreements expire, these negotiations may not prove successful, may result in a significant increase in labor costs, or may result in a disruption of Stater Bros.’ operations. Stater Bros. expects that it would incur additional costs and face increased competition if it lost customers during a work stoppage or labor disturbance. For example, even though the UFCW agreed not to strike against Stater Bros. during the recent labor dispute in Southern California, under the new collective bargaining agreements, Stater Bros. was required to make special contributions to the UFCW’s health and welfare fund totaling $29.3 million, as well as strike ratification bonus payments to its employees totaling $4.7 million. Prolonged disputes between Stater Bros. and any of the unions representing its employees could have a material adverse effect on Stater Bros.’ cash flow from operations and, as a result, its ability to pay interest on the Notes in a timely manner.

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USE OF PROCEEDS

Stater Bros. will not receive any proceeds from the Exchange Offer. The proceeds from the issuance of the Old Notes, together with cash on hand, have been and will be used to (i) pay for the purchase or redemption of all of the 10 ³/4% Notes; (ii) pay costs associated with acquisition and construction of the proposed new distribution center described above; (iii) pay a dividend of $45 million; (iv) repay a subordinated promissory note representing debt incurred in connection with the purchase of a retired executive’s interest in La Cadena in the outstanding principal amount of $20 million; and (v) pay fees and expenses related to the Offering and the purchase or redemption of the 10 ³/4% Notes.

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THE EXCHANGE OFFER

Purpose of the Exchange Offer

In connection with the sale of the Old Notes in June 2004, Stater Bros. and Banc of America Securities LLC entered into a registration rights agreement dated as of June 17, 2004. Under that agreement, Stater Bros. must, among other things, file with the SEC a registration statement under the Securities Act covering the Exchange Offer and use its best efforts to cause that registration statement to become effective under the Securities Act. Upon the effectiveness of that registration statement, Stater Bros. must also offer each holder of the Old Notes the opportunity to exchange its securities for an equal principal amount of the New Notes.

Stater Bros. is making the Exchange Offer to comply with its obligations under the registration rights agreement. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part. This description of the registration rights agreement is qualified in its entirety by reference to such exhibit. The registration statement, of which this prospectus is a part, is intended to satisfy Stater Bros.’ registration obligations under the registration rights agreement.

In order to participate in the Exchange Offer, an investor must represent to Stater Bros., among other things, that the investor:

• is not a broker-dealer;

• is not participating in a distribution of the New Notes; and

• is not an “affiliate” of Stater Bros., as the term is defined in Rule 144A under the Securities Act.

Terms of the Exchange Offer

Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, Stater Bros. will accept any and all Old Notes validly tendered by persons who are not affiliates of Stater Bros. and not withdrawn prior to the expiration date (as defined below). As of the date of this prospectus, $700,000,000 aggregate principal amount of the Old Notes is outstanding and held by persons who are not affiliates of Stater Bros. This prospectus, together with the letter of transmittal, is first being sent on or about                     , 2004 to all holders of Old Notes known to Stater Bros. Stater Bros.’ obligation to accept Old Notes for exchange pursuant to the Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. Stater Bros. will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the Exchange Offer. Holders who are not affiliates of Stater Bros. may tender some or all of their Old Notes pursuant to the Exchange Offer. See “Risk Factors—Failure to Exchange Old Notes.” However, Old Notes may be tendered only in integral multiples of $1,000.

The New Notes will evidence the same debt as the Old Notes for which they are exchanged, and are entitled to the benefits of the Indenture. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that the New Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof.

Holders do not have any appraisal or dissenters’ rights under the Indenture or otherwise in connection with the Exchange Offer. Stater Bros. intends to conduct the Exchange Offer in accordance with the applicable requirements of Regulation 14E under the Exchange Act.

Stater Bros. is considered to have accepted validly tendered Old Notes only when Stater Bros. has given notice to the exchange agent of acceptance. The exchange agent will act as agent for the tendering holders for the purpose of receiving the New Notes from Stater Bros.

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If Stater Bros. does not accept any tendered Old Notes for exchange because of an invalid tender, the occurrence of other events set forth herein or otherwise, such unaccepted tenders of Old Notes will be returned, without expense to the holder, as promptly as practicable after the expiration date.

Holders whose Old Notes are not tendered or are tendered but not accepted in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and subject to the limitations applicable thereto under the Indenture. After the Exchange Offer, the holders will continue to be subject to the existing restrictions upon transfer thereof and Stater Bros. will have no further obligation to the holders to provide for the registration under the Securities Act of the Old Notes held by them. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. See “Risk Factors—Restrictions Upon Transfer of and Limited Trading Market for Old Notes.”

Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. Stater Bros. will pay all charges and expenses, other than some taxes, in connection with the Exchange Offer. See “—Fees and Expenses; Solicitation of Tenders.”

Expiration Date; Extensions; Amendments

The term “expiration date” means 5:00 p.m., New York City time, on                     , 2004 unless Stater Bros. extends the Exchange Offer, in which case the term “expiration date” means the latest date and time to which the Exchange Offer is extended.

In order to extend the expiration date, Stater Bros. will notify the exchange agent of any extension and will make a release to the PR Newswire Service prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

Stater Bros. reserves the right at its sole discretion to:

• delay accepting any Old Notes;

• extend the Exchange Offer;

• terminate the Exchange Offer and not accept Old Notes not previously accepted if any of the conditions set forth below under “—Certain Conditions to the Exchange Offer” have occurred and not been waived by Stater Bros., by giving notice of such delay, extension or termination to the exchange agent; or

• amend the terms of the Exchange Offer in any manner.

Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by notice to the holders. If the Exchange Offer is amended in a manner determined by Stater Bros. to constitute a material change, Stater Bros. will promptly disclose such amendment by means of a prospectus supplement that will be distributed to all holders, and Stater Bros. will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to holders, if the Exchange Offer would otherwise expire during such five to ten business day period. During any extension of the expiration date, all Old Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by Stater Bros.

Stater Bros. shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the PR Newswire Service.

Interest on the New Notes

The New Fixed Rate Notes will pay interest semi-annually in cash in arrears on June 15 and December 15 of each year, starting on December 15, 2004. The New Floating Rate Notes will pay interest quarterly in cash in

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arrears on March 15, June 15, September 15 and December 15 of each year, starting on December 15, 2004.³ No interest is payable on the Old Notes on the date of the exchange for the New Notes and therefore no interest will be paid thereon to the Holders at such time.

Procedures for Tendering Old Notes

Except as stated below, a holder who wishes to tender Old Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed letter of transmittal, including all other documents required by such letter of transmittal, to the exchange agent at one of the addresses listed under “Exchange Agent” on or prior to the expiration date. In addition, one of the following must occur:

• certificates for the tendered Old Notes must be received by the exchange agent along with the letter of transmittal;

• a timely confirmation of a book-entry transfer of the tendered Old Notes into the exchange agent’s account at The Depository Trust Company (the “DTC”), pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the expiration date; or

• the holder must comply with the guaranteed delivery procedures described below.

THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, STATER BROS. RECOMMENDS THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT DIRECTLY TO STATER BROS.

Each signature on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Notes surrendered for exchange are tendered:

• by a registered holder of the Old Notes who has not completed the box entitled “Special Issuance Instructions” or the box entitled “Special Delivery Instructions” in the letter of transmittal; or

• for the account of an eligible institution.

An “eligible institution” is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or otherwise an “eligible guarantor institution” within the meaning of Rule 17Ad- 15 under the Exchange Act.

In the event that a signature on a letter of transmittal or a notice of withdrawal, as the case may be, is required to be guaranteed, such guarantee must be by an eligible institution. If Old Notes are registered in the name of a person other than the person signing the letter of transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by, a written instrument or instruments of transfer or exchange, in satisfactory form as determined by Stater Bros. in its sole discretion, duly executed by the registered holder with the holder’s signature guaranteed by an eligible institution.

³ Interest on the Old Floating Rate Notes will be paid on September 15, 2004 to record holders of such Old Floating Rate Notes as of September 1, 2004.

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If the letter of transmittal is signed by a person or persons other than the registered holder or holders of Old Notes, the tendered Old Notes must be endorsed by the registered holder with the signature guaranteed by an eligible institution or accompanied by appropriate powers of attorney with the signature guaranteed by an eligible institution, in either case signed exactly as the name or names of the registered holder or holders that appear on the Old Notes.

If the letter of transmittal or any Old Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person should so indicate when signing and proper evidence satisfactory to Stater Bros. of such person’s authority so to act must be submitted with the letter of transmittal, unless Stater Bros. waives this requirement.

By tendering, each holder will represent to Stater Bros. that, among other things:

• the New Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder;

• neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes;

• if the holder is not a broker-dealer, or is a broker-dealer but will not receive New Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in the distribution of such New Notes; and

• neither the holder nor any such other person is an “affiliate” of Stater Bros., as defined under Rule 405 of the Securities Act.

If the tendering holder is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

DELIVERY OF DOCUMENTS TO STATER BROS. DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT

All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Old Notes tendered for exchange will be determined by Stater Bros. in its sole discretion, which determination shall be final and binding. Stater Bros. reserves the right to reject any and all tenders of any particular Old Notes not properly tendered or to not accept any particular Old Notes when acceptance might, in the judgment of Stater Bros. or the judgment of the counsel to Stater Bros., be unlawful. Stater Bros. also reserve the right in its sole discretion to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Notes either before or after the expiration date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer, except that Stater Bros. will not waive the requirement that a holder of Old Notes seeking to participate in the Exchange Offer not be an affiliate of Stater Bros.). Stater Bros.’ interpretation of the terms and conditions of the Exchange Offer as to any particular Old Notes either before or after the expiration date (including the letter of transmittal and instructions thereto) is final and binding on all parties. Unless waived, any defects or irregularities in connection with the tenders of Old Notes for exchange must be cured within a reasonable period of time as Stater Bros. determines. Stater Bros., the exchange agent or any other person are not, individually or collectively, required to give notification of any defect or irregularity with respect to any tender of Old Notes for exchange, nor will Stater Bros., the exchange agent or any other person incur any liability for failure to so notify.

Acceptance of Old Notes for Exchange; Delivery of New Notes

Upon satisfaction or waiver of all of the conditions to the Exchange Offer, Stater Bros. will accept, promptly after the expiration date, all Old Notes properly tendered and will issue the New Notes promptly after acceptance

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of the Old Notes. See “—Certain Conditions to the Exchange Offer” below. For purposes of the Exchange Offer, Stater Bros. is considered to have accepted properly tendered Old Notes for exchange only when Stater Bros. has given notice to the exchange agent of acceptance.

In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the exchange agent of certificates for the Old Notes or a timely book-entry confirmation of the Old Notes into the exchange agent’s account at the DTC pursuant to the book-entry transfer procedures described below, a properly completed and duly executed letter of transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if certificates representing Old Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Old Notes will be returned without expense to the tendering holder (or, in the case of Old Notes tendered by book-entry transfer into the exchange agent’s account at the DTC, such non-exchanged Old Notes will be credited to an account maintained with the DTC) as promptly as practicable after the expiration or termination of the Exchange Offer.

The exchange agent will make a request to establish an account with respect to the Old Notes at the DTC for purposes of the Exchange Offer promptly after the date of this prospectus. Any financial institution that is a participant in the DTC’s systems may make book-entry delivery of Old Notes by causing the DTC to transfer such Old Notes into the exchange agent’s account at the DTC in accordance with the DTC’s procedures for transfer. However, the exchange for the Old Notes so tendered will only be made after timely confirmation of such book-entry transfer of Old Notes into the exchange agent’s account and timely receipt by the exchange agent of an agent’s message and any other documents required by the letter of transmittal on or prior to the expiration date or pursuant to the guaranteed delivery procedures described below. The term “agent’s message” means a message, transmitted by the DTC and received by the exchange agent and forming a part of a book-entry confirmation, which states that the DTC has received an express acknowledgment from a participant tendering Old Notes that are the subject of such book-entry confirmation that such participant has received and agrees to be bound by the terms of the letter of transmittal, and that Stater Bros. may enforce such agreement against such participant.

Guaranteed Delivery Procedures

If a registered holder of the Old Notes wants to tender such Old Notes and the Old Notes are not immediately available, or time does not permit the holder’s Old Notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if:

• the tender is made through an eligible institution;

• prior to the expiration date, the exchange agent receives from the eligible institution a properly completed and duly executed letter of transmittal (or a facsimile thereof) and notice of guaranteed delivery, substantially in the form provided by Stater Bros. (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificates of all physically tendered Old Notes, in proper form for transfer, or a book-entry confirmation, as the case may be, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and

• the certificates for all physically tendered Old Notes, in proper form for transfer, or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery.

Withdrawal Rights

Tenders of Old Notes may be withdrawn at any time prior to the expiration date.

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For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at one of the addresses set forth below under “Exchange Agent.” Any such notice of withdrawal must specify the name of the person having tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including the principal amount of such Old Notes), and where certificates for Old Notes have been transmitted, and specify the name in which such Old Notes are registered, if different from that of the withdrawing holder. If certificates for Old Notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an eligible institution unless such holder is an eligible institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by Stater Bros. and Stater Bros.’ determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer procedures, such Old Notes will be credited to an account maintained with DTC for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under “Procedures for Tendering Old Notes” above at any time on or prior to the expiration date.

Certain Conditions to the Exchange Offer

Notwithstanding any other provision of the Exchange Offer, Stater Bros. will not be required to accept for exchange, or to issue New Notes in exchange for, any Old Notes and may terminate or amend the Exchange Offer, at any time before the acceptance of such Old Notes for exchange or the exchange of the New Notes for such Old Notes, if:

• there shall be threatened, instituted or pending any action or proceeding before, or any injunction, order or decree shall have been issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission seeking to restrain or prohibit the making or consummation of the Exchange Offer or any other transaction contemplated by the Exchange Offer, or assessing or seeking any damages as a result thereof resulting in a material delay in Stater Bros.’ ability to accept for exchange or exchange some or all of the Old Notes pursuant to the Exchange Offer; or

• any statute, rule, regulation, order or injunction shall be sought, proposed, introduced, enacted, promulgated or deemed applicable to the Exchange Offer or any of the transactions contemplated by the Exchange Offer by any government or governmental authority, domestic or foreign, or any action shall have been taken, proposed or threatened, by any government, governmental authority, agency or court, domestic or foreign, that in the sole judgment of Stater Bros.:

• might directly or indirectly result in the restraint or prohibition of the making or consummation of the Exchange Offer or any transaction contemplated by the Exchange Offer, or the assessment of any damages as a result thereof;

• might directly or indirectly result in a material delay in Stater Bros.’ ability to accept for exchange or exchange some or all of the Old Notes pursuant to the Exchange Offer;

• might result in the holders of New Notes having obligations with respect to resales and transfers of New Notes which exceed those described herein; or

• would otherwise make it inadvisable to proceed with the Exchange Offer.

If Stater Bros. determines in good faith that any of the conditions are not met, Stater Bros. may

• refuse to accept any Old Notes and return all tendered Old Notes to exchanging holders;

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• extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Old Notes (see “—Withdrawal Rights”); or

• waive some of such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn or revoked. If such waiver constitutes a material change to the Exchange Offer, Stater Bros. will promptly disclose such waiver by means of a prospectus supplement that will be distributed to all holders.

The foregoing conditions are for the benefit of Stater Bros. and may be asserted by Stater Bros. in good faith regardless of the circumstances giving rise to them or may be waived by Stater Bros. at any time in Stater Bros.’ discretion. The failure by Stater Bros. at any time to exercise the foregoing rights shall not be deemed a waiver of any such right.

Exchange Agent

The Bank of New York has been appointed as exchange agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent, addressed as follows:

THE BANK OF NEW YORK

By mail, hand delivery or overnight courier:

The Bank of New York

101 Barclay Street, Floor 7 East

New York, NY 10286

Attention: Mr. David A. Mauer

By facsimile transmission:

(for eligible institutions only)

(212) 298-1915

Confirm by telephone:

(212) 815-2548

DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

Fees and Expenses; Solicitation of Tenders

The expenses of soliciting tenders will be borne by Stater Bros. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by the officers and regular employees of Stater Bros. and the affiliates of Stater Bros.

Stater Bros. has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. However, Stater Bros. will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith.

Stater Bros. will pay the cash expenses to be incurred in connection with the Exchange Offer.

Stater Bros. will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not

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tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted to the exchange agent, the amount of such transfer taxes will be billed directly to such tendering holder.

No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained in this prospectus. If given or made, such information or representations should not be relied upon as having been authorized by Stater Bros. Neither the delivery of this prospectus nor any exchange made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Stater Bros. since the respective dates as of which information is given herein. The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Exchange Offer is also not being made to holders of Old Notes who are “affiliates” of Stater Bros., as such term is defined in Rule 405 under the Securities Act.

Accounting Treatment

Stater Bros. will record the New Notes at the same carrying value as the Old Notes, which is face value, as reflected in the accounting records of Stater Bros. on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The costs of the Exchange Offer will be expensed over the term of the New Notes.

Consequences of Failure to Exchange

Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than the registration for resale of Old Notes held by Stater Bros.’ affiliates, Stater Bros. does not intend to register the Old Notes under the Securities Act. Stater Bros. believes that, based upon interpretations contained in no-action letters issued to third parties by the staff of the SEC, New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an “affiliate” of Stater Bros. within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders’ business and such holders have no arrangement with any person to participate in the distribution of such New Notes, and provided, further, that each broker-dealer that receives New Notes for its own account in exchange for Old Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See “Plan of Distribution.” If any holder (other than a broker-dealer described in the preceding sentence) has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder could not rely on the applicable interpretations of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. The staff of the SEC has not considered this exchange offer in the context of a no-action letter, and Stater Bros. cannot assure investors that the staff of the SEC would make a similar determination with respect to this exchange offer. If Stater Bros.’ belief is not accurate and an investor transfers a New Note without delivering a prospectus meeting the requirements of the federal securities laws or without an exemption from these laws, such investor may incur liability under the federal securities laws. Stater Bros. does not and will not assume, or indemnify any investor against, this liability. In addition, to comply with the securities laws of some jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. See “Risk Factors—Restrictions upon Transfer of and Limited Trading Market for Old Notes”.

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CAPITALIZATION

The following table sets forth the unaudited capitalization of Stater Bros. as of June 27, 2004 on an actual and on a pro forma basis after giving effect to the redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes on August 16, 2004. This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Stater Bros.’ consolidated financial statements.

	As of June 27, 2004
	Actual			Pro Forma
	(In thousands)
Cash and cash equivalents(1)(2) :	$	346,911		$	302,648
Long-term debt (including current maturities):
Capitalized lease obligations		11,123			11,123
Revolving Credit Facility		—			—
10 3/4% Senior Notes due 2006(2)		40,950			—
8 1/8% Senior Notes due 2012		525,000			525,000
Floating Rate Senior Notes due 2010		175,000			175,000
Total long-term debt		752,073			711,123
Total stockholder’s deficit(3)		(49,845	)		(50,767	)
Total capitalization	$	702,228		$	660,356

(1) Includes $20.0 million in restricted cash.

(2) Pro forma assumes the redemption of the remaining 10 ³/4% Notes which occurred on August 16, 2004 at a price of $1,026.875 per $1,000 principal amount, plus accrued interest.

(3) Pro forma amount includes redemption premium (before tax) of $1.1 million, and deferred debt issuance cost of $456,000 (before tax) on the redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes that were redeemed on August 16, 2004.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table shows selected consolidated financial data and other information. The annual data for 1999 and 2000 are derived from audited consolidated financial statements not included in this prospectus. The annual data for 2001, 2002, and 2003 are derived from the audited consolidated financial statements of Stater Bros. and the related notes which appear elsewhere in this document. The information for the 39-week periods is derived from unaudited consolidated financial statements contained elsewhere in this document. In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of this data. The results for the 39 weeks ended June 29, 2003 and June 27, 2004 are not necessarily indicative of the results for a full year or for any future period. Investors should read the complete historical financial statements included elsewhere in this prospectus and the registration statement and should read the following information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which appears elsewhere in the prospectus.

																Unaudited
	Fiscal Years Ended(1)															39 Weeks Ended
	Sept. 26, 1999			Sept. 24, 2000			Sept 30, 2001			Sept. 29, 2002			Sept. 28, 2003			June 29, 2003			June 27, 2004
	(in thousands of dollars except per share and store data)
Statement of Earnings Data:
Sales	$	1,830,195		$	2,417,710		$	2,573,913		$	2,666,346		$	2,753,774		$	2,046,776		$	2,863,955
Cost of goods sold		1,387,619			1,819,068			1,911,065			1,957,526			1,999,361			1,484,710			2,038,011
Gross profit		442,576			598,642			662,848			708,820			754,413			562,066			825,944
Selling, general and administrative expenses		380,663			537,370			579,549			615,482			659,720			491,437			631,145
Depreciation and amortization		13,123			20,357			22,327			24,300			26,879			19,615			23,331
Acquisition integration expenses		5,590			4,594			—			—			—			—			—
Total operating expenses		399,376			562,321			601,876			639,782			686,599			511,052			654,476
Operating profit		43,200			36,321			60,972			69,038			67,814			51,014			171,468
Interest income		3,308			3,244			3,409			1,721			1,049			770			1,005
Other expense—net		(357	)		(27	)		(258	)		(1,579	)		(1,093	)		(756	)		(1,017	)
Interest expense(2)		(33,630	)		(51,784	)		(52,410	)		(52,814	)		(53,254	)		(39,898	)		(39,416	)
Interest expense related to debt purchase(3)(4)(5)		(28,544	)		1,896			—			—			—			—			(34,017	)
Equity in income from unconsolidated affiliate		1,130			1,483			1,584			2,914			1,330			1,196			929
Income (loss) before income taxes (benefit)		(14,893	)		(10,763	)		13,297			19,280			15,846			12,326			98,952
Income taxes (benefit)(2)		(5,861	)		(4,596	)		5,452			7,491			5,719			4,798			39,803
Net income (loss)	$	(9,032	)	$	(6,167	)	$	7,845		$	11,789		$	10,127		$	7,528		$	59,149
Earnings (loss) per common share	$	(180.64	)	$	(123.34	)	$	156.90		$	280.92		$	264.41		$	196.55		$	1,544.32
Balance Sheet Data (end of period):
Working capital	$	127,029		$	107,907		$	120,457		$	119,643		$	124,517		$	126,384		$	324,062
Total assets		603,917			595,288			629,294			634,130			667,826			670,561			1,043,879
Long-term notes		455,048			439,000			439,000			458,750			458,750			458,750			700,000
Long-term capitalized lease obligations		15,625			13,679			12,098			10,981			9,926			10,190			9,823
Other long-term liabilities		10,960			14,070			24,608			45,014			54,916			55,076			99,007
Common stockholder’s deficit		(43,087	)		(49,254	)		(41,409	)		(74,121	)		(63,994	)		(66,593	)		(49,845	)
Dividends paid per share, Class A Common Stock	$	—		$	—		$	—		$	117.49		$	—		$	—		$	1,174.90
Cash Flow Data:
Cash provided by operating activities		59,296			15,385			79,393			51,168			82,950			75,868			116,601
Cash provided by (used in) financing activities		152,912			(10,664	)		(7,140	)		(31,218	)		(1,116	)		(859	)		144,423
Cash used in investing activities		(176,137	)		(35,442	)		(33,248	)		(40,543	)		(51,725	)		(37,574	)		(45,265	)

(footnotes on following page)

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																Unaudited
	Fiscal Years Ended(1)															39 Weeks Ended
	Sept. 26, 1999			Sept. 24, 2000			Sept 30, 2001			Sept. 29, 2002			Sept. 28, 2003			June 29, 2003			June 27, 2004
	(in thousands of dollars except per share and store data)
Other Operating and Financial Data:
Sales increases:
Total stores		6.0	%		32.1	%		6.5	%		3.6	%		3.3	%		2.9	%		37.6	%
Like stores (comparable period)(6)		1.9	%		1.4	%		4.5	%		5.3	%		2.8	%		2.4	%		36.2	%
Operating profit	$	43,200		$	36,321		$	60,972		$	69,038		$	67,814		$	51,014		$	171,468
Ratio of earnings to fixed charges(2)(7)		0.83	x		0.87	x		1.19	x		1.25	x		1.21	x		1.22	x		2.08	x
Gross profit as a percentage of sales		24.18	%		24.76	%		25.75	%		26.58	%		27.40	%		27.46	%		28.84	%
Selling, general and administrative expenses as a percentage of sales		20.79	%		22.23	%		22.51	%		23.08	%		23.96	%		24.01	%		22.04	%
Store Data(8):
Number of stores (at end of period)		155			155			155			156			157			157			158
Average sales per store (000s)	$	15,741		$	15,598		$	16,606		$	17,092		$	17,619		$	13,120		$	17,897
Average store size:
Total square feet		32,895			32,910			33,018			33,083			33,111			33,083			33,173
Selling square feet		23,570			23,570			23,639			23,675			23,693			23,675			23,727
Total square feet (at end of period) (000s)		5,099			5,101			5,118			5,161			5,205			5,161			5,248
Total selling square feet (at end of period) (000s)		3,653			3,653			3,664			3,693			3,724			3,693			3,752
Sales per total sq. ft.	$	531		$	474		$	503		$	517		$	532		$	397		$	539
Sales per selling sq. ft.	$	736		$	662		$	702		$	722		$	744		$	554		$	754

(1) The fiscal year 2001 was a 53-week year, whereas fiscal years 1999, 2000, 2002 and 2003 were 52-week years.

(2) Effective September 30, 2002, Stater Bros. adopted FASB Statement 145, “Rescission of FASB Statements 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Correction” (“SFAS 145”). SFAS 145 rescinds FASB Statement 4, “Reporting Gains and Losses from Extinguishment of Debt”. Under SFAS 145, gains and losses from extinguishment of debt previously reported as extraordinary items were reclassified to continuing operations. For fiscal 1999, a $17.3 million ($28.5 million less tax effect of $11.2 million) extraordinary loss from the early retirement of 9% Senior Subordinated Notes due 2004 and 11% Senior Notes due 2001 was reclassified to continuing operations. For fiscal 1999, $28.5 million was reclassified to interest expense related to debt purchase and $11.2 million was reclassified as a reduction to income taxes. For fiscal 2000, a $1.1 million ($1.9 million less tax effect of $0.8 million) extraordinary gain from the early retirement of $11 million of 10 ³/4% Notes was reclassified to continuing operations. For fiscal 2000, $1.9 million was reclassified to interest expense related to debt purchase, as a reduction in expenses, and $0.8 million was reclassified as an increase to income taxes.

(3) Interest expense related to debt purchase for fiscal year 1999 included $18.7 million for tender premium and fees related to the purchase of Stater Bros.’ 11% Senior Notes due 2001 and 9% Senior Subordinated Notes due 2004 and a charge of $9.8 million for the write-off of deferred offering cost related to these Notes.

(4) Interest expense related to debt repurchase for fiscal year 2000 includes a reduction in interest expense related to the gain of $1.9 million for the early retirement of $11 million of 10 ³/4% Notes.

(5) Interest expense related to debt purchase for the thirty-nine weeks ended June 27, 2004 included a $16.9 million payment for tender premium and fees on the purchase of $397.8 million principal amount of the 10 ³/4% Notes, a make whole payment by Santee of $8.5 million related to Santee’s redemption of all the outstanding Santee Notes and an $8.6 million charge for the write-off of deferred offering cost related to (i) the purchase of the 10 ³/4% Notes, (ii) the early retirement of the $20.0 million 5.0% Subordinated Note of Stater Bros. due 2007 and (iii) the redemption of the Santee Notes.

(6) Like store sales are calculated by comparing year-to-year sales for stores that are opened in both years. For stores that were not opened for the entire previous year, only the current year’s weekly sales that correspond to the weeks the store was open in the previous year are used. All of the current year’s replacement store sales are included in the like store sales calculation. There were no stores closed in the periods considered in this table.

(7) For the purpose of determining the ratio of earnings to fixed charges, earnings consist of income before income taxes and amortization of previously capitalized interest. Fixed charges consist of interest expense whether expensed or capitalized, amortization of deferred debt expense, and such portion of rental expense as can be deemed by management to be representative of the interest factor in the particular case. Included in earnings and fixed charges is Stater Bros.’ 50% share of Santee. For the unaudited 39 weeks ended June 27, 2004, included in earnings and fixed charges is Stater Bros.’ 50% share of fixed charges and earnings of Santee through February 6, 2004. Santee has been consolidated into Stater Bros.’ consolidated results since that date.

(8) Average sales per store, sales per total square feet and sales per selling square feet are calculated by prorating the number of stores, total square feet and selling square feet by the period of time the store was opened, for new stores, or the period of time the expanded square footage was in service, for expanded stores.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial Data” and Stater Bros.’ audited Consolidated Financial Statements and the notes thereto included elsewhere in this prospectus.

Ownership of Stater Bros.

La Cadena Investments (“La Cadena”) is the sole shareholder of Stater Bros. and holds all of the shares of Stater Bros.’ Class A Common Stock. La Cadena is a California general partnership whose partners include Jack H. Brown, Chairman of the Board, President and Chief Executive Officer of Stater Bros. and a former member of senior management of Stater Bros. Jack H. Brown has a majority interest in La Cadena and is the managing general partner with the power to vote the shares of Stater Bros. held by La Cadena.

Results of Operations

13 Weeks and 39 weeks Ended June 27, 2004 and June 29, 2003

The following table sets forth certain income statement components expressed as a percent of sales for the thirteen and thirty-nine weeks ended June 29, 2003 and June 27, 2004.

	Thirteen Weeks				Thirty-Nine Weeks
	2003		2004		2003		2004
Sales	100.00	%	100.00	%	100.00	%	100.00	%
Gross profit	27.50		26.50		27.46		28.84
Operating expenses:
Selling, general and administrative expenses	24.44		22.21		24.01		22.04
Depreciation and amortization	1.00		0.96		0.96		0.81
Operating profit	2.06		3.33		2.49		5.99
Interest income	0.04		0.02		0.04		0.04
Interest expense	(1.94	)	(4.55	)	(1.95	)	(2.56	)
Equity in unconsolidated affiliate	0.03		—		0.06		0.03
Other expenses—net	(0.02	)	(0.04	)	(0.04	)	(0.04	)
Income (loss) before income taxes (benefit)	0.17	%	(1.24	)%	0.60	%	3.46	%

As of February 6, 2004, the results of Santee, previously accounted for under the equity method of accounting, have been consolidated in Stater Bros.’ results of operations and all inter-company transactions have been eliminated.

The labor dispute involving three of Stater Bros.’ principal competitors from October 11, 2003 through February 29, 2004, had a materially positive effect on Stater Bros.’ results of operations in the period. On October 11, 2003, the UFCW declared a strike against Vons; in turn, Albertson’s and Ralphs locked out all of their UFCW employees. The UFCW did not strike against Stater Bros. as a result of an agreement whereby Stater Bros. agreed to accept the same contract terms that the UFCW negotiated with Vons, Albertson’s and Ralphs.

On February 29, 2004, members of the UFCW in Southern California ratified new collective bargaining agreements and ended their strike. Under the new collective bargaining agreements, Stater Bros. made special contributions to the UFCW’s health and welfare fund totaling $29.3 million, and made strike ratification bonus payments to its employees totaling $4.7 million.

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During the labor dispute, many of the former Vons, Albertson’s and Ralphs customers chose to honor the picket lines and took their business to Stater Bros. Markets and other grocery retailers. Subsequent to the labor dispute, Stater Bros. has been able to retain some of these additional customers. The labor dispute had both a significant and material effect on the Stater Bros.’ sales volume, results of operations and financial position.

The increased sales volume has had a positive effect on results of operations as Stater Bros. has been able to realize some economics of scale from the increased sales volume. As a result, cost of goods sold, labor and other operating expenses, as a percentage of sales, have decreased for the thirty-nine weeks ended June 27, 2004 when compared with the corresponding period of fiscal 2003.

The impact of the labor dispute on Stater Bros. was unprecedented and is not expected to be repeated in the future. As of June 27, 2004, Stater Bros. has been able to retain some of the increased volume gained during the labor dispute. Management has taken steps through price promotions, customer service and attention to detail to retain as much of the increased volume as possible. Management anticipates that some of the retained volume realized to date will be lost as its major competitors take continued marketing steps of their own to win back the business lost during the labor dispute. The ultimate amount of increased volume retained, if any, cannot be forecast with any degree of certainty.

Like store sales are calculated by comparing year-to-year sales for stores that are opened in both years. For stores that were not opened for the entire previous year periods, only the current year’s weekly sales that correspond to the weeks the stores were opened in the previous year are used. All of the current year’s replacement store sales are included in the like store sales calculation.

Sales for the thirteen weeks ended June 27, 2004, the third quarter of fiscal 2004, increased $159.9 million or 23.24% and amounted to $848.0 million compared to $688.1 million for the same period in the prior year. The consolidation of Santee in fiscal 2004 increased sales by $30.6 million or 4.45% over prior year sales. Like store sales increased $117.9 million or 17.13% over the prior year. The increase in like store sales for the thirteen weeks ended June 27, 2004 is primarily the result of Stater Bros.’ ability to retain some of the increased sales volume generated during the labor dispute. The remaining increase in total sales is due to the opening of a new store in Corona, California in June of 2003 and the opening of a new store in Moreno Valley, California in March of 2004.

Sales for the thirty-nine weeks ended June 27, 2004, increased $817.2 million or 39.93% and amounted to $2.864 billion compared to $2.047 billion for the same period in the prior year. The consolidation of Santee in fiscal 2004 increased sales by $47.0 million or 2.30% over prior year sales. Like store sales increased $739.8 million or 36.15% over the prior year. The increase in like store sales for the thirty-nine weeks ended June 27, 2004 is due primarily to the increased sales volume during the labor dispute and to Stater Bros.’ ability to retain some of the increased sales volume after the labor dispute. For the portion of the thirty-nine week period during the labor dispute, like store sales increased $576.2 million or 54.52% over the same time frame of fiscal 2003. For the portion of the thirty-nine week period after the labor dispute, like store sales increased $158.9 million or 17.75% over the same time frame of fiscal 2003. The remaining increase in sales is due to the opening of a new store in Corona, California in June of 2003 and the opening of a new store in Moreno Valley, California in March of 2004.

Gross profit for the thirteen weeks ended June 27, 2004, amounted to $224.7 million or 26.50% of sales compared to $189.2 million or 27.50% of sales in the same period of the prior year. Gross profit, as a percentage of sales, in the current year compared to the prior year decreased 1.00%. Store gross margins, as a percentage of sales, decreased 0.87% compared to the prior year and is attributed to pricing steps taken by Stater Bros. to retain volume gained during the labor dispute. Offsetting the reduction in store margins from pricing were favorable reductions in warehousing and transportation costs, as a percentage of sales, of approximately 0.52% attributed to the leveraging of fixed costs over the increased sales volume. The consolidation of Santee in fiscal 2004 contributed to reduction in gross profit, as a percentage of sales, of approximately 0.51%.

31

Gross profit for the thirty-nine weeks ended June 27, 2004, amounted to $825.9 million or 28.84% of sales compared to $562.1 million or 27.46% of sales in the same period of the prior year. Gross profit, as a percentage of sales, for the thirty-nine week period increased 1.38% compared to the prior year. The increase in the year-to-date gross profit is comprised of increased store gross profit of 0.93% attributed primarily to reduced shrink in the perishable departments during the labor dispute, a reduction, as a percentage of sales, of 0.88% in warehouse and transportation costs attributed to the leveraging of fixed costs over the increased sales volume offset by the consolidation of Santee in fiscal 2004 which created a reduction in gross profit, as a percentage of sales, for the year-to-date period of 0.27%.

Operating expenses include selling, general and administrative expenses, and depreciation and amortization. For the thirteen weeks ended June 27, 2004, selling, general and administrative expenses amounted to $188.4 million or 22.21% of sales compared to $168.2 million or 24.44% of sales for the thirteen weeks ended June 29, 2003. For the thirty-nine weeks ended June 27, 2004, selling, general and administrative expenses amounted to $631.1 million or 22.04% of sales compared to $491.4 million or 24.01% of sales for the thirty-nine weeks ended June 29, 2003.

The reduction in selling, general and administrative expenses, as a percentage of sales, for the thirteen week period of the current year compared to the prior year included a 0.53% reduction, as a percentage of sales, in labor expense due to changes to the new collective bargaining agreement with the UCFW and the ability to leverage labor expense against increased sales volume; a 0.40% reduction, as a percentage of sales, in workers’ compensation costs; and a 0.41% reduction, as a percentage of sales, in utility cost due both to reduced electric rates and continued energy conservations programs by Stater Bros. The consolidation of Santee in fiscal 2004 caused a reduction in selling general and administrative expenses, as a percentage of sales, of 0.56% in the current thirteen week period compared to the thirteen week period of the previous year.

Included in selling, general and administrative expenses for the thirty-nine week fiscal 2004 is a $22.4 million gain from a settlement agreement reached with Ralphs. The gain from litigation settlement reduced selling, general and administrative expenses, as a percentage of sales, by 0.81% for the thirty-nine week fiscal 2004.

Also, included in the thirty-nine week fiscal 2004 selling, general and administrative expenses is $34.0 million for special payments related to the labor dispute and contract ratification. Stater Bros. made special payments of approximately $29.3 million to UFCW union trust funds to bring the funds up to levels negotiated during collective bargaining contract negotiations. Under the new negotiated collective bargaining agreement, future union insurance payments by Stater Bros. are proscribed at specified hourly rates. In addition, Stater Bros. paid approximately $4.7 million to UFCW union members as a contract ratification bonus. The reduction in selling, general and administrative expenses, as a percentage of sales, for the thirty-nine week period is also attributed to Stater Bros. being able to leverage direct labor costs and fixed facility costs over the increased sales volume resulting from the labor dispute.

The amount of salaries, wages and administrative costs associated with the purchase of Stater Bros.’ products included in selling, general and administrative expenses for the fiscal third quarters of fiscal 2004 and fiscal 2003 is $245,000 and $217,000, respectively, and the amount in the thirty-nine week fiscal 2004 and fiscal 2003 is $767,000 and $658,000, respectively.

Depreciation and amortization expenses amounted to $8.1 million for the thirteen weeks ended June 27, 2004 and $6.9 million for the thirteen weeks ended June 29, 2003. Depreciation and amortization expense was $23.3 million and $19.6 million for the thirty-nine week periods ended June 27, 2004 and June 29, 2003, respectively. The increase in depreciation and amortization expense in fiscal 2004 was primarily due to an increase in fixed assets. Included in cost of goods sold is $3.1 million and $1.9 million of depreciation in the third quarters of fiscal 2004 and fiscal 2003, respectively, and $7.2 million and $5.6 million of depreciation in the thirty-nine week fiscal 2004 and fiscal 2003, respectively, related to dairy production and warehousing and distribution activities for the stores.

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Interest expense amounted to $13.1 million for the third quarter of 2004 compared to $13.3 million for the third quarter of 2003. For the fiscal year-to-date of 2004 and 2003, interest expense amounted to $39.4 million and $39.9 million, respectively. Interest expense related to debt purchase was $25.5 million and $34.0 million for the thirteen and thirty-nine weeks ended June 27, 2004, respectively. Interest expense related to debt purchase for the thirteen weeks ended June 27, 2004 included a $16.9 million payment for tender premium and fees on the purchase of $397.8 million of the 10 ³/4% Notes and an $8.6 million charge for the write-off of deferred offering cost related to i) the purchase of $397.8 million of the 10 ³/4% Notes, ii) the early retirement of the $20.0 million 5.0% Subordinated Note due 2007 and iii) the redemption of the Santee Notes. In addition to the above items, interest expense related to debt purchase for the thirty-nine weeks of fiscal 2004 included a make whole payment by Santee of $8.5 million related to Santee’s redemption of all outstanding Santee Notes.

Stater Bros.’ equity in earnings from unconsolidated affiliate amounted to $217,000 for the third quarter of fiscal 2003. There was no equity in earnings from unconsolidated affiliate in the third quarter of fiscal 2004. For the fiscal year-to-date periods of 2004 and 2003, Stater Bros.’ equity in earnings from unconsolidated affiliate amounted to $929,000 and $1,196,000, respectively. On February 6, 2004, Stater Bros. acquired 100% ownership of Santee as part of a litigation settlement and Santee has been consolidated into Stater Bros.’ results of operations subsequent to that date.

Income (loss) before income taxes (benefit) amounted to a loss of $10.5 million in the third quarter of 2004 and income of $1.2 million for the third quarter of 2003, respectively. Income before income taxes amounted to $99.0 million and $12.3 million for the thirty-nine weeks year-to-date periods of 2004 and 2003, respectively.

Net income (loss) for the third quarter of 2004 amounted to a loss of $5.8 million and net income of $769,000 for the third quarter of 2003, respectively. Net income for the fiscal year-to-date periods amounted to $59.1 million and $7.5 million for 2004 and 2003, respectively.

Fiscal Years Ended September 28, 2003, September 29, 2002, and September 30, 2001

The following table sets forth certain income statement components of Stater Bros. expressed as a percent of sales for the fiscal years ended September 30, 2001, September 29, 2002 and September 28, 2003. The fiscal year ended September 30, 2001 was a 53-week year whereas fiscal years ended September 29, 2002 and September 28, 2003 were 52-week years.

	Fiscal Years Ended
	2001		2002		2003
Sales	100.00	%	100.00	%	100.00	%
Gross profit	25.75		26.58		27.40
Operating expenses:
Selling, general and administrative expenses	22.51		23.08		23.96
Depreciation and amortization	0.87		0.91		0.98
Operating profit	2.37		2.59		2.46
Interest income	0.13		0.06		0.04
Interest expense	(2.04	)	(1.98	)	(1.93	)
Equity in income from unconsolidated affiliate	0.06		0.11		0.05
Other expenses—net	—		(0.06	)	(0.04	)
Income before income taxes	0.52	%	0.72	%	0.58	%

Total sales amounted to $2.754 billion in 2003 compared to $2.666 billion in 2002 and $2.574 billion in 2001. Like store sales increased $74.1 million or 2.78% in fiscal 2003, compared to $133.6 million or 5.30% in fiscal 2002 and $156.2 million or 4.50% (52-week basis) in fiscal 2001. The increase in sales in fiscal 2003 was due to favorable customer response to Stater Bros.’ marketing plan and to the addition of a new store in Corona, California. The increase in sales during fiscal 2002 was due to favorable customer response to Stater Bros.’ marketing plan and to the addition of a new store in Chino Hills, California.

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Gross profits increased to $754.4 million or 27.40% of sales in 2003 compared to $708.8 million or 26.58% of sales in 2002 and $662.8 million or 25.75% of sales in 2001. The increase in gross profits, as a percent of sales, during the last three fiscal years was due in large part to the introduction of higher gross margin products achieved through Stater Bros.’ merchandising expansion and upgrading programs including significant investments in product display fixtures. Also contributing to the increased gross profits in fiscal 2003 over fiscal 2002 was a $4.6 million reduction in cost of goods sold caused by the reclassification of the amount of vendor co-operative advertising allowances in excess of the fair value of advertising. This reclassification resulted from Stater Bros.’ adoption in fiscal 2003 of EITF Issue No. 02-16 “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” Prior year cost of goods sold were not reclassified. Stater Bros. adjusts its pricing strategy as necessary to retain its aggressive every day low price market position.

Operating expenses include selling, general and administrative expenses, and depreciation and amortization. In fiscal year 2003, selling, general and administrative expenses amounted to $659.7 million or 23.96% of sales compared to $615.5 million or 23.08% of sales in 2002 and $579.5 million or 22.51% of sales in 2001. Selling, general and administrative expenses, as a percentage of sales, increased for both fiscal 2003 over fiscal 2002 and for fiscal 2002 over fiscal 2001. The increase in selling, general and administrative expenses in fiscal 2003 over fiscal 2002 was due primarily to an increase of approximately $14.0 million in union insurance costs, an increase of approximately $6.3 million in union pension cost and to the reclassification of $4.6 million of vendor co-operative advertising allowances that were in excess of the fair value of advertising from selling, general and administrative expenses to cost of goods sold. The increase in selling, general and administrative expenses in fiscal 2002 over fiscal 2001 was due primarily to an increase of approximately $10.1 million in union pension cost and an increase of approximately $7.6 million in union insurance costs.

Depreciation and amortization expenses amounted to $26.9 million in 2003 compared to $24.3 million in 2002 and $22.3 million in 2001. Depreciation and amortization expense, as a percentage of sales, was 0.98%, 0.91% and 0.87% for fiscal years 2003, 2002 and 2001, respectively. The changes in depreciation expense from year-to-year are due primarily to store additions, remodels and store and warehouse expenditures.

Operating profits amounted to $67.8 million or 2.46% of sales in 2003 compared to $69.0 million or 2.59% of sales in 2002 and $61.0 million or 2.37% of sales in 2001.

Interest expense amounted to $53.3 million, $52.8 million and $52.4 million for the 2003, 2002 and 2001 fiscal years, respectively. The increase in interest expense in fiscal 2003 compared to fiscal 2002 was primarily due to the full year interest expense on the 5% subordinated promissory note in fiscal 2003 versus interest from only January 2002 in fiscal 2002. The increase in interest expense in fiscal 2002 over fiscal 2001 was due primarily to the issuance, in January 2002, of the $20 million subordinated promissory note due March 2007.

Equity in income from Santee amounted to $1.3 million in fiscal 2003 compared to $2.9 million in 2002 and $1.6 million in 2001. The decrease in income from Santee in fiscal 2003 was due primarily from a $1.1 million deferred tax revaluation, by Santee, in fiscal 2002 that was not present in fiscal 2003. Also, net sales and operating profits decreased at Santee in fiscal 2003 versus fiscal 2002. The increase in income from Santee in fiscal 2002 over fiscal 2001 was due primarily to the $1.1 million deferred tax revaluation in fiscal 2002.

Income before income taxes amounted to $15.9 million, $19.3 million and $13.3 million in fiscal 2003, fiscal 2002 and fiscal 2001, respectively.

Net income, for fiscal 2003, amounted to $10.1 million, compared to $11.8 million in fiscal 2002 and $7.8 million in fiscal 2001.

Liquidity and Capital Resources

Stater Bros. historically has funded its daily cash flow requirements through funds provided by operations and through borrowings from short-term revolving credit facilities. Stater Bros.’ credit agreement, as amended

34

and restated on June 17, 2004 expires in May 2007 and consists of a revolving loan facility for working capital and letters of credit of $75.0 million. As of June 27, 2004, Stater Bros. had $46.9 million of outstanding letters of credit and had $28.1 million available under the revolving loan facility. The letter of credit facility is maintained pursuant to Stater Bros.’ workers’ compensation and general liability self-insurance requirements.

Santee’s credit agreement, as amended, became effective December 1999, expires on September 1, 2004 and consists of a revolving loan facility for working capital of $5.0 million of which $2.0 million may be used to secure letters of credit issued to support workers’ compensation liabilities. The revolver is limited to a borrowing base equivalent to 75% of Santee’s outstanding accounts receivable, excluding balances owed by Markets, less the total amount of outstanding letters of credit. Borrowings under the revolver are secured by the receivables of Santee. Advances under the revolver bear interest at Bank of America’s prime rate plus 0.5% with interest due monthly or, if elected by Santee, at the Interbank Offered Rate plus 1.75%. The outstanding undrawn portion of the workers’ compensation letter of credit is subject to an annual commitment fee of 1.25%. As of June 27, 2004, Santee had $1.4 million of outstanding letters of credit and had $3.6 million available under the revolving loan facility.

The following table sets forth Stater Bros.’ contractual cash obligations and commercial commitments as of June 27, 2004.

	Contractual Cash Obligations (In thousands)
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
8 1/8% Senior Notes due June 2012
Principal	$	525,000	$	—	$	—	$	—	$	525,000
Interest		341,013		42,419		85,313		85,313		127,968
		866,013		42,419		85,313		85,313		652,968
Floating Rate Senior Notes due June 2010(1)
Principal		175,000		—		—		—		175,000
Interest		53,081		8,806		17,710		17,710		8,855
		228,081		8,806		17,710		17,710		183,855
10 3/4% Senior Notes due August 2006(2)
Principal		40,950		40,950		—		—		—
Interest		3,314		3,314		—		—		—
		44,264		44,264		—		—		—
Capital Lease Obligations(3)
Principal		11,123		1,300		2,353		2,063		5,407
Interest		8,433		1,623		2,716		2,126		1,968
		19,556		2,923		5,069		4,189		7,375
Operating Leases(3)		240,247		33,354		56,979		39,532		110,382
Total Contractual Cash Obligations	$	1,398,161	$	131,766	$	165,071	$	146,744	$	954,580
	Other Commercial Commitments (In thousands)
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Standby Letters of Credit(4)	$	48,240	$	48,240	$	—	$	—	$	—
Total Other Commercial Commitments	$	48,240	$	48,240	$	—	$	—	$	—

(footnotes on following page)

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(1) Interest on the Floating Rate Notes is based on the Three-month LIBOR plus 3.50% and is set quarterly based on the Three-month LIBOR rate for the second London Banking Day proceeding each interest period. The floating interest rate at June 27, 2004 was 5.06%.

(2) On June 29, 2004, Stater Bros. elected to redeem the remaining $41.0 million outstanding 10 ³/4% Notes on August 16, 2004. The outstanding notes will be redeemed at a price of $1,026.875 per $1,000 plus accrued interest. The redemption premium has been included with interest for purposes of this contractual cash obligations disclosure.

(3) Stater Bros. leases the majority of its retail stores, offices, warehouses and distribution facilities. Certain leases provide for additional rents based on sales. Primary lease terms range from 3 to 55 years and substantially all leases provide for renewal options.

(4) Standby letters of credit are committed as security for workers’ compensation obligations. Outstanding letters of credit expire between September 2004 and February 2005.

Working capital amounted to $324.1 million at June 27, 2004 and $124.5 million at September 28, 2003, and Stater Bros.’ current ratios were 2.14:1, and 1.60:1, respectively. Fluctuations in working capital and current ratios are not unusual in the industry.

Net cash provided by operating activities in the thirty-nine weeks ended June 27, 2004 improved significantly over the thirty-nine weeks ended June 29, 2003, primarily as a result of the increase in net income for such period attributable mainly to the labor dispute. Net cash provided by operating activities for the thirty-nine weeks ended June 27, 2004 amounted to $116.6 million compared to $75.9 million for the thirty-nine weeks ended June 29, 2003. In addition to the substantial increase in net income of $59.1 million in the current year compared to $7.5 million in the prior year, cash provided by operating activities in fiscal 2004 of $116.6 million reflected a $52.4 million increase in accrued liabilities, self-insurance reserves and other liabilities, an increase of $26.7 million in accounts payable, a $12.9 million decrease in other assets and $30.6 million of depreciation and amortization; partially offset by a $20.0 million increase in restricted cash, a $15.3 million increase in inventory and a $22.4 million gain from litigation settlement. Cash provided by operating activities in fiscal 2003 of $75.9 million consisted of a $22.3 million increase in accrued liabilities, self-insurance reserves and other liabilities, an increase of $7.5 million in accounts payable, a decrease in income tax receivables of $5.8 million, a decrease of $5.1 million in inventory and $25.2 million of depreciation and amortization. Fluctuations in cash provided by operating activities are not unusual in the industry.

Net cash used in investing activities for the thirty-nine weeks ended June 27, 2004, amounted to $45.3 million compared to $37.6 million for the thirty-nine weeks ended June 29, 2003. The difference in net cash used in investing activities between the comparable periods is due to Stater Bros.’ capital expenditures during such periods, net of proceeds from asset disposals. Capital expenditures amounted to $45.4 million in the fiscal year-to-date of 2004 compared to $37.7 million in the fiscal year-to-date of 2003.

Net cash provided by financing activities amounted to $144.4 million for the thirty-nine weeks ended June 27, 2004 and net cash used in financing activities amounted to $0.9 million in the thirty-nine weeks ended June 29, 2003. In the thirty-nine weeks to date of 2004, Stater Bros. issued $525.0 million of 8 ¹/8% Senior Notes due June 2012, issued $175.0 million of Floating Rate Senior Notes due June 2010, purchased $397.8 million of 10 ³/4% Notes, retired the $20 million 5.0% Subordinated Note due March 2007, redeemed $53.5 million of outstanding Santee Notes, paid $16.9 million in tender premium and fees for the purchase of the 10 ³/4% Notes, paid a make-whole payment of $8.5 million for the redemption of the Santee Notes, paid a dividend of $45.0 million to La Cadena, incurred fees of $22.3 million associated with the issuance of the 8 ¹/8% Senior Notes and Floating Rate Senior Notes and amortized remaining deferred offering costs of $8.6 million related to i) the purchase 10 ³/4% Notes, ii) the early retirement of the 5.0% Subordinated Note and iii) the redemption of the Santee Notes, executed a new capital lease for $0.7 million and had payments on capitalized leases of $0.9 million. The cash used in financing activities in the thirty-nine weeks to date of 2003 of $0.9 million consisted of payments on Stater Bros.’ capitalized lease obligations.

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Issuance of Debt and Early Retirement of Debt

On June 17, 2004, Stater Bros. issued $525.0 million of 8 ¹/8% Senior Notes due June 15, 2012 and $175.0 million Floating Rate Senior Notes due June 15, 2010. The 8 ¹/8% Senior Notes and the Floating Rate Senior Notes are unregistered. The interest rate on the Floating Rate Senior Notes as of June 27, 2004 was 5.06%. Stater Bros. incurred $22.3 million of debt issuance cost related to the issuance of these notes which will be amortized over the term of the respective notes.

On June 17, 2004, Stater Bros. used part of the proceeds from the issue of these notes for the purchase of $397.8 million of the 10 ³/4% Notes, the payment of $16.9 million for tender premium and fees on the purchased 10 ³/4% Notes, the early retirement of the $20.0 million 5.0% Subordinated Note due March 2007 and to pay accrued interest on the purchased 10 ³/4% Notes and the retired 5.0% Subordinated Note.

On June 29, 2004, Stater Bros. advised the trustee of the 10 ³/4% Notes that Stater Bros. has elected to redeem the remaining outstanding 10 ³/4% Notes due August 2006 at a price of $1,026.875 per $1,000 plus accrued interest.

The Credit Facilities

For a discussion of the credit facilities, see “Description of Certain Indebtedness.”

Labor Relations

Stater Bros.’ collective bargaining contract with the UFCW was ratified during the second quarter of fiscal 2004 and extends through March 2007. Stater Bros.’ collective bargaining agreement with the International Brotherhood of Teamsters was renewed in September 2002 and expires in September 2005. Santee’s collective bargaining agreement with the International Brotherhood of Teamsters was renewed in March 2004 and expires in March 2007. Management believes it has good relations with its employees.

Effect of Inflation and Competition

Stater Bros.’ performance is affected by inflation. In recent years the impact of inflation on the operations of Stater Bros. has been moderate. As inflation has increased expenses, Stater Bros. has recovered, to the extent permitted by competition, the increase in expenses by increasing prices over time. However, the economic and competitive environment in Southern California continues to challenge Stater Bros. to become more cost efficient as its ability to recover increases in expenses through price increases is diminished. The future results of operations of Stater Bros. will depend upon the ability of Stater Bros. to adapt to the current economic environment as well as the current competitive conditions.

Stater Bros.’ primary business function is the operation of retail food supermarkets, which offer for sale to the public most merchandise typically found in supermarkets. The supermarket industry is highly competitive and is characterized by low profit margins. Stater Bros.’ primary competitors include Vons, Albertson’s, Ralphs and a number of independent supermarket operators. Competitive factors typically include the price, quality and selection of products offered for sale, customer service, and the convenience and location of retail facilities. Through its wholly-owned subsidiary Santee, Stater Bros. operates one of the largest dairy plants in California, based on fluid production. Markets is the primary customer of Santee. Santee also sells to Ralphs, unaffiliated supermarkets, independent food distributors, military bases and food service providers in Southern California. Stater Bros.’ captive purchases limit the effect of competition on dairy operations. However, sales to nonrelated parties is highly competitive with competitive factors including price, quality and timely delivery of product. Stater Bros. monitors competitive activity and Senior Management regularly reviews Stater Bros.’ marketing and business strategy and periodically adjusts them to adapt to changes in Stater Bros.’ primary trading area.

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Critical Accounting Policies and Estimates

Stater Bros. discussion and analysis of financial condition and results of operations are based upon Stater Bros.’ unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. The preparation of the financial statements requires the use of estimates and judgments on the part of management. Stater Bros. based its estimates on Stater Bros.’ historical experience combined with management’s understanding of current facts and circumstances. Stater Bros. believes that the following critical accounting policies are the most important to Stater Bros.’ consolidated financial statements presentation and require the most difficult, subjective and complex judgments on the part of management.

Revenue Recognition

Markets, Stater Bros.’ principal operating entity, recognizes revenue from the sale of its products at the point of sale to the customer. Sales are recognized net of any discounts given to the customer. Santee recognizes revenue as shipments are received by its customers. Sales are recognized net of promotional discounts.

Cost of Goods Sold

Included in cost of goods sold are all manufacturing cost, direct product purchase costs, except for certain salary, wages and administration cost associated with the procurement of purchased products; all in-bound freight costs; all direct receiving and inspection costs; all quality assurance costs; all warehousing costs and all costs associated with transporting goods from Stater Bros.’ warehouses to its stores, net of earned vendor rebates and allowances. Stater Bros. recognizes, as a reduction to cost of goods sold, certain rebates and allowances (“allowances”) from its vendors as the allowances are earned. Allowances are earned by promoting certain products or by purchasing specified amounts of product. Stater Bros. records a liability for allowance funds that have been received but not yet earned.

Within the supermarket industry, there are a wide range of differences in the disclosure of costs related to the purchasing and distribution of products sold. Some companies include all of their purchasing and distribution costs in cost of goods sold while others include a portion of the costs in selling, general and administrative expenses. Therefore, Stater Bros.’ gross margins and selling, general and administrative expenses may not be comparable to those of other companies within the supermarket industry.

Inter-Company Eliminations

Markets is a significant customer of Santee, which supplies Markets with a significant portion of its fluid milk and dairy products. Santee pays interest and principal payments to Markets on a $55.0 million 5.25% Inter-Company Note due 2008. All inter-company transactions are eliminated in consolidation.

Selling, General and Administrative Expenses

Included in selling, general and administrative expenses are all store operating costs which includes all store labor costs associated with receiving, displaying and selling Stater Bros.’ products at the store level; all advertising costs, net of the portion of co-operative advertising allowances directly related to the fair value of the advertising; certain salary, wages and administrative costs associated with the purchasing of Stater Bros.’ products and all security, management information services, accounting and corporate management costs.

As noted under “Cost of Goods Sold”, Stater Bros. includes all purchasing and distribution costs to deliver the product for sale to its stores in cost of goods sold, except for certain salary, wages and administrative costs associated with the procurement of purchased products. As certain salary, wages and administrative cost associated with the purchase of Stater Bros.’ products is included in selling, general and administrative expenses, Stater Bros.’ gross margin and selling, general and administrative expenses may not be comparable to companies who disclose these costs differently.

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Vendor Rebates and Allowances

Stater Bros. receives certain allowances from its vendors that relate to the purchase and promotion of certain products. All allowances, except for advertising allowances described under “Advertising Allowances,” are recognized as a reduction in cost of goods sold as the performance is completed and inventory sold. Allowances, such as slotting fees, which are tied to the promotion of certain products, are recognized as reductions in cost of goods sold as Stater Bros. meets the required performance criteria.

Allowances that are based upon purchase or sales volumes are recognized as reductions in cost of goods sold as the products are sold. Stater Bros. receives lump-sum payments from vendors for the promotion or purchase of products over multi-year periods. Stater Bros. records a liability for unearned allowances and recognizes, as a reduction in cost of goods sold, these allowances over time as the criteria of these contracts are met.

Advertising Allowances

Stater Bros. receives co-operative advertising allowances from vendors for advertising specific vendor products over specific periods of time. Stater Bros. recognizes the portion of co-operative advertising allowances directly related to the fair value of the advertising as a reduction in advertising costs. A significant portion of Stater Bros.’ advertising expenditures is in the form of twice weekly print advertisements. Stater Bros. distributes its print ads through inserts in local newspapers, in direct mailers and as handouts distributed in its stores. Stater Bros. analyzes, on a monthly basis, the direct out-of-pocket costs for printing and distributing its print ads. Using the number of ads in a typical twice weekly advertisement, the actual direct cost of an individual advertisement is determined. The cost determined is deemed to be the fair value of advertising. The amount of co-operative advertising allowances in excess of the direct fair value of the advertising is recognized as a reduction in cost of goods sold.

Advertising

Stater Bros.’ advertising costs, net of vendor allowances for co-operative advertising, are recognized in the period the advertising is incurred and are included in selling, general and administrative expenses.

Leases

Certain of Stater Bros.’ operating leases provide for minimum annual payments that change over the life of the lease. The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. Stater Bros. recognizes a liability for minimum step rents when the amount of straight-line rent expense exceeds the actual lease payment and it reduces the step rent liability when the actual lease payment exceeds the amount of straight-line rent expense.

Self-Insurance Reserves

Stater Bros. is primarily self-insured, subject to certain retention levels for workers’ compensation, automobile and general liability costs. Stater Bros. is covered by umbrella insurance policies for catastrophic events. Stater Bros. records its self-insurance liability based on the claims filed and an estimate of claims incurred but not yet reported. The estimates used by management are based on Stater Bros.’ historical experiences as well as current facts and circumstances. Stater Bros. uses third party actuarial analysis in making its estimates. Actuarial projections and Stater Bros.’ estimate of ultimate losses are subject to a high degree of variability. The variability in the projections and estimates are subject to, but not limited to, such factors as judicial and administrative rulings, legislative actions, and changes in compensation benefits structure. In recent years, Stater Bros. and employers within the State of California as a whole have seen significant increases in the severity of workers’ compensation claims. While Stater Bros. has factored these increases into its estimates of ultimate loss, no assurance can be given that future events will not require a change in these estimates. Stater Bros. discounts its workers’ compensation, automobile and general liability insurance reserves at a discount rate of approximately 7.5%.

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Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market. Management believes that its inventory turns and inventory controls are sufficient and that reserves are not needed for excess, obsolete or discontinued inventory.

Deferred Debt Issuance Costs

Direct costs incurred as a result of financing transactions are capitalized and amortized to expense over the term of the applicable debt agreements.

Deferred Income Taxes

Although there can be no assurances as to future taxable income of Stater Bros., Stater Bros. believes that its expectations of future taxable income, when combined with the income taxes paid in prior years, will be adequate to realize its deferred tax assets.

Phantom Stock Plan

It is Stater Bros.’ policy to expense phantom stock units to the extent that they vest and appreciate during the accounting period.

Quantitative and Qualitative Disclosures About Market Risk

Stater Bros. is subject to interest rate risk on its Floating Rate Senior Notes due June 2010. Stater Bros.’ interest expense on the Floating Rate Senior Notes due June 2010 will increase as interest rates rise and will decrease as interest rates decline. Interest on the Floating Rate Senior Notes due June 2010 is based upon the Three-month LIBOR plus 3.50%. As of June 27, 2004, the floating interest rate was 5.06%. In addition, Stater Bros. is subject to interest rate risk on its fixed interest rate debt obligations. Stater Bros.’ fixed rate debt obligations are comprised of the 8 ¹/8% Senior Notes due June 2012, the 10 ³/4% Notes and capital lease obligations. In general, the fair value of fixed rate debt will increase as the market rate of interest decreases and will decrease as the market rate of interest increases. Stater Bros. has not engaged in any interest swap agreements, derivative financial instruments or other type of financial transactions to manage interest rate risk.

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BUSINESS

General

Stater Bros. was incorporated in Delaware in 1989 and together with its wholly-owned subsidiaries, Markets and Development, were founded in 1936 when the first market opened in Yucaipa, California. Stater Bros. is a leading supermarket chain in Southern California and operates 159 supermarkets under the Stater Bros. Markets name, and anticipates opening one new store by the end of calendar year 2004. Markets owns 100% of Santee.

Stater Bros. has grown primarily by constructing supermarkets in its primary trading areas, as well as through the enlargement of existing supermarkets and through a strategic acquisition in August 1999 of 43 supermarkets in Southern California. Stater Bros.’ supermarkets consist of approximately 5.2 million total square feet including approximately 3.8 million selling square feet. Stater Bros.’ supermarkets offer its customers a high level of customer service, broad selections of grocery, meat, produce, liquor and general merchandise. All of Stater Bros.’ supermarkets have expanded selections of produce and full-service meat departments. Nearly all of the supermarkets have hot service delicatessens and many have bakery departments and full-service seafood counters.

Stater Bros. currently distributes its products from a primary distribution center at Stater Bros.’ headquarters in Colton, California, and six satellite facilities. Approximately 77% of the merchandise sold in Stater Bros.’ supermarkets is processed through these facilities which are located an average of 39 miles from Stater Bros.’ 159 supermarket locations. Due to the close proximity of Stater Bros.’ distribution facilities to store locations, Stater Bros.’ supermarkets operate with minimal back-room storage space. Stater Bros.’ ratio of retail selling space to total store square footage is approximately 72%.

Ownership of Stater Bros.

La Cadena is the sole shareholder of Stater Bros. and holds all of the shares of Stater Bros.’ Class A Common Stock. La Cadena is a California General Partnership whose partners include Jack H. Brown, Chairman of the Board, President and Chief Executive Officer of Stater Bros. and a former member of the senior management of Stater Bros. Jack H. Brown has a majority interest in La Cadena and is the Managing General Partner with the power to vote the shares of Stater Bros. held by La Cadena.

Store Profile and Locations

Stater Bros.’ supermarkets have well-established locations and low overhead expenses, including fixed rent payments in most supermarkets. In addition, Stater Bros. believes that its existing supermarkets are well maintained and generally require capital expenditures only for customary maintenance. An average supermarket is approximately 33,200 square feet, while newly constructed supermarkets range from approximately 40,000 square feet to 46,000 square feet. Stater Bros. supermarkets typically utilize approximately 72% of total square feet for retail selling space. Stater Bros. operates its supermarkets with minimal back-room storage space because of the close proximity of its distribution facility to its store locations. Generally, all Stater Bros. supermarkets are similarly designed and stocked thereby allowing Stater Bros.’ customers to find items easily in any of Stater Bros.’ supermarkets.

Substantially all of Stater Bros.’ 159 supermarkets are located in neighborhood shopping centers in well populated residential areas. Stater Bros. endeavors to locate its supermarkets in growing areas that will be convenient to potential customers and will accommodate future supermarket expansion.

Management actively pursues the acquisition of sites for new supermarkets. In an effort to determine sales potential, new supermarket sites are carefully researched and analyzed by management for population shifts, zoning changes, traffic patterns, nearby new construction and competitive locations. Stater Bros. works with developers to attain Stater Bros.’ criteria for potential supermarket sites, and to insure adequate parking and a complementary co-tenant mix.

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Store Expansion and Remodeling

Stater Bros. has historically focused its expansion in the San Bernardino, Riverside, Orange, Los Angeles, San Diego and Kern counties of Southern California. Such expansion has been accomplished through improving and remodeling existing stores, constructing new supermarkets, and the acquisition of other supermarket operations. The number of supermarkets operated by Stater Bros. was 158 as of June 27, 2004. Stater Bros. intends to continue to expand its existing supermarket operations by enlarging and remodeling existing supermarkets and constructing new supermarkets. Stater Bros. may also make strategic acquisitions of existing supermarkets, if such opportunities arise.

Stater Bros. monitors sales and profitability of its operations on a store-by-store basis and enlarges, remodels or replaces stores in light of their performance and management’s assessment of their future potential. Approximately 75% of Stater Bros.’ supermarkets have been either newly constructed or remodeled within the last five years. Minor remodels cost between $100,000 and $500,000 and typically include new fixtures and may include a change in decor. Major remodels cost in excess of $500,000 and typically involve more extensive refurbishment of the store’s interior and may include the addition of one or more specialty service departments such as a hot service delicatessen or a bakery. Expansions entail enlargement of the store building and typically includes breaking through an exterior wall. The primary objectives of remodelings and expansions are to improve the attractiveness of supermarkets, increase sales of higher margin product categories and, where feasible, to increase selling area. Stater Bros. conducts all of its new construction and most of its remodeling through its wholly owned subsidiary, Development, which serves as the general contractor for all of Stater Bros.’ store construction projects.

The following table sets forth certain statistical information with respect to Stater Bros.’ supermarket expansion and remodeling for the periods indicated.

	Fiscal Year Ended							39 Weeks Ended
	Sept. 26, 1999		Sept. 24, 2000	Sept 30, 2001		Sept. 29, 2002	Sept. 28, 2003	June 27, 2004
Number of supermarkets:
Opened	1		—	1		1	1	1
Acquired	43		—	—		—	—	—
Replaced	(1	)	—	(1	)	—	—	—
Total at end of year	155		155	155		156	157	158	*
Minor Remodel	7		17	10		11	20	26
Major Remodel	10		2	2		3	4	4
Expansion	—		1	—		—	—	—

* Stater Bros. opened a store in Corona, California on July 21, 2004, which has increased the total number of stores to 159 as of the date of this prospectus.

Beyond 2004, Stater Bros. plans to open approximately three to six new stores per year, based upon a number of factors, including customer demand, market conditions, profitability, costs of opening, and availability of financing for such new stores. Stater Bros.’ plans with respect to major and minor remodels, expansion and new construction are reviewed continually and are revised, if appropriate, to take advantage of marketing opportunities. Stater Bros. finances its new store construction primarily from cash provided by operating activities and short-term borrowings under its credit facilities. Long-term financing of new stores generally will be obtained through either sale and leaseback transactions or secured long-term financings. However, no assurances can be made as to the availability of such financings.

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Warehouse and Distribution Facilities

Stater Bros.’ primary warehouse and distribution facilities and administrative offices are located in Colton, California and, along with its satellite facilities, encompass approximately 1,660,000 square feet. The facilities include warehouses for grocery, deli, produce, meat, meat deli, frozen, bakery, health and beauty care, and general merchandise products. Management believes that its existing warehouse and distribution facilities are adequate to meet its current volume. Approximately 77% of the volume of the products offered for sale in Stater Bros.’ supermarkets are processed through Stater Bros.’ warehouse and distribution facilities.

Stater Bros.’ warehouse and distribution facilities are centrally located to its retail operations and are an average distance of approximately 39 miles from its supermarkets. Most supermarkets can be reached without using the most congested portions of the Southern California freeway system.

Markets is currently in negotiations to acquire approximately 160 acres located on the former Norton Air Force Base in the City of San Bernardino, California. Markets has reached an agreement with the Inland Valley Development Agency (“IVDA”), which is the entity responsible for the redevelopment of the former Norton Air Force Base, on an Owner Participation Agreement. The IVDA owns approximately 93 acres of the project property and is negotiating with another governmental agency for an additional 51 acres that would be transferred to Markets or leased with a purchase option. Additionally, Markets is negotiating the acquisition of four privately held parcels consisting of approximately 16 acres. The agreement with the IVDA requires Markets to acquire those parcels not owned by the IVDA, to relocate all tenants and other business owners requiring relocation, to commit to construct and complete the corporate and warehouse facilities and to obtain all City of San Bernardino building permits and entitlements required for the facility. Markets has reached an agreement with Hillwood/San Bernardino LLC (“Hillwood”), the master developer of the former Norton Air Force Base for infrastructure improvements. Under the Hillwood agreement, upon closing, Markets will share costs associated with the infrastructure improvements for water, sewer, streets and utilities which will be required by the City of San Bernardino. Markets, after completion of the acquisition of the project property, will secure its commitment with Hillwood for infrastructure improvements by the posting of either cash or letters of credits in the amount of $10.8 million. The agreements with the IVDA and Hillwood are contingent upon Markets successfully negotiating the acquisition of all needed property.

This site will be used to relocate and consolidate Stater Bros.’ corporate headquarters and all warehousing and distribution facilities to a single integrated facility from the 13 warehouse buildings at 7 different locations currently in use. This site is located within eight miles of the main distribution facility in Colton and therefore there will be no material change in the average distance between the new facility and the retail supermarkets. The facility will consist of approximately 2.1 million square feet and will include Stater Bros.’ corporate headquarters, truck maintenance and other support facilities required for consolidation of all of its Southern California retail grocery operations. The net projected cost of the facility is approximately $200 million and completion of the construction of the facility is planned for the fall of 2006.

Stater Bros.’ transportation fleet consists of modern well-maintained vehicles. As of June 27, 2004, Stater Bros. operated approximately 145 tractors, 108 which were owned and 37 which were leased and 426 trailers, all of which were owned.

Purchasing and Marketing

Stater Bros. uses an “Aggressive Everyday Low Price” format supported heavily by radio, TV, newspaper and direct mail advertising programs as an integral part of its purchasing and marketing strategy to provide its customers with the best overall supermarket value in its primary market areas. Stater Bros. supplements its everyday low price structure with chain-wide temporary price reductions (“Stater Savers”) on selected food and non-food merchandise. The geographic location of Stater Bros.’ supermarkets allows it to reach its target consumers through a variety of media and Stater Bros. aggressively advertises its everyday low prices through local and regional newspapers, direct mail and printed circulars as well as extensive advertisements on radio and television.

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A key factor in Stater Bros.’ business strategy is to provide its customers with a variety of quality brand name merchandise as well as alternative selections of high-quality private label merchandise. To meet the needs of customers, most supermarkets are stocked with approximately 35,000 items. Stater Bros. places particular emphasis on the freshness and quality of its meat and produce merchandise and maintains high standards for these perishables by distributing the merchandise through its perishable warehouses and distribution facilities.

Retail Operations

Stater Bros.’ supermarkets are well maintained, have sufficient off-street parking and generally are open from 6:00 a.m. or 7:00 a.m. until 10:00 p.m. or 11:00 p.m., seven days a week, including all holidays with the exception of Christmas Day. Because Stater Bros. operates its supermarkets under similar formats, management believes it is able to achieve certain operating economies.

Store Management. Each supermarket is managed by a store manager and an assistant manager, each of whom receives a base salary and may receive a bonus based on the individual supermarket’s overall performance and management of labor costs within the supermarket. The store manager and assistant manager are supported by their store management staff who have the training and skills necessary to provide proper customer service, operate the store and manage personnel in each department. Each store has individual department managers for grocery, meat, produce, and where applicable, bakeries, hot service delicatessens and seafood. Store managers report to one of nine district managers, each of whom is responsible for an average of 18 supermarkets. District managers report to one of three Regional Vice Presidents.

Customer Service. Stater Bros. considers customer service and customer confidence to be critical to the success of its business strategy. This strategy, to provide courteous and efficient customer service through specific programs and training, is a focus of the Senior Management and is implemented by employees at all levels of Stater Bros. Stater Bros. maintains an intensive checker training school to train prospective checkers and to provide a refresher program for existing checkers. All of Stater Bros.’ supermarkets provide customers with carry-out service and have express checkout lanes.

Santee

Pursuant to the settlement agreement reached among Markets, Hughes Markets, Inc. (“Hughes”), Quality Food Centers, Inc., Ralphs, Fred Meyer, Inc., and the Kroger Co., Hughes relinquished to Markets its ownership in Santee, giving Markets 100% ownership of Santee. Santee had been jointly owned by Hughes and Markets since 1986.

Santee operates one of the largest dairy plants in California, based on fluid production, and provides fluid milk products to Stater Bros., Ralphs, and other customers in Southern California. Santee processes, packages and distributes whole, low-fat and non-fat milk, as well as orange juice, fruit drinks and certain other cultured milk products under the Knudsen^®, Foremost^® and certain other brand names, as well as store brand names. Santee is the exclusive licensee of the Knudsen^® trademark from Kraft Foods, Inc. for fluid milk, juices and certain other cultured milk products in the Southern California market. In addition, Santee is the exclusive licensee for Foremost Farms USA, cooperative of the Foremost trademark for fluid milk in Southern California. In calendar year 2003, Santee processed approximately 73.1 million gallons of fluid products, including 59.4 million gallons of fluid milk. Total revenues in Santee’s 52-week fiscal year ended January 3, 2004 were $190.4 million, of which approximately $99.8 million were sales to Markets and Ralphs. Ralphs has agreed to purchase fluid milk and certain other products from Santee in declining volumes through July 31, 2007. Santee also sells to unaffiliated supermarkets, independent food distributors, military bases and foodservice providers in Southern California.

The dairy’s capacity to process milk is approximately 250,000 to 350,000 gallons per day, with the ability to expand capacity to approximately 500,000 gallons per day.

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Management Information Systems

Stater Bros.’ management information systems and point-of-sale scanning technology reduce the labor costs attributable to product pricing and customer checkout, and provide management with information that facilitates purchasing, receiving and management of inventory and accounts payable. Stater Bros. has point-of-sale scanning checkout technology in all of its stores. All stores use electronic systems for employee time and attendance records, inventory orderings, and labor scheduling, which assist store management in developing a more efficient and customer-sensitive work schedule.

Stater Bros. uses the Stater Express system in all of Stater Bros.’ supermarkets. Stater Express is a combined supermarket technology platform that includes enhanced systems for check verification and acceptance and provides alternative pay choices such as most nationally recognized financial institution debit and credit cards. Stater Express also provides each supermarket with the technology required to print in-store-advertising signs and connects each supermarket to Stater Bros.’ host computer which provides certain efficiencies in data transfers between the supermarkets and Stater Bros.’ main office.

Employees

Stater Bros. has approximately 15,200 employees as of June 27, 2004, approximately 800 of whom are management and administrative employees and approximately 14,400 of whom are bargaining unit employees. Approximately 74% of Stater Bros.’ employees work part-time. Substantially all of Stater Bros.’ hourly employees are members of either the UFCW or International Brotherhood of Teamsters labor unions and are represented by several different collective bargaining agreements.

Stater Bros. values its employees and believes its relationship with them is good and that employee loyalty and enthusiasm are key elements of its operating performance.

Competition

Stater Bros. operates in a highly competitive industry characterized by narrow profit margins. Competitive factors include price, quality and variety of products, customer service, and store location and condition. Stater Bros. believes that its competitive strengths include its specialty services, everyday low prices, breadth of product selection, high product quality, one-stop shopping convenience, attention to customer service, convenient store locations, a long history of community involvement, established long-term customer base in the Inland Empire and a growing customer awareness in the counties of Orange, San Diego, Los Angeles, and Kern.

Given the wide assortment of products it offers, Stater Bros. competes with various types of retailers, including local, regional and national supermarket retailers, convenience stores, retail drug stores, national general merchandisers and discount retailers, membership clubs and warehouse stores. Stater Bros.’ primary competitors include Vons, Albertson’s, Ralphs, and a number of independent supermarket operators. Stater Bros., and its competitors, will be faced with additional competitive pressures with the entry in the geographic market area of Wal-Mart’s Super Center format stores. Wal-Mart currently has a number of Wal-Mart discount locations and Sam’s Clubs within Stater Bros.’ marketing area selling a variety of grocery products. Stater Bros. believes that its everyday low prices, breadth of product offering, specialty service departments and long-term customer relationships will help it withstand the increased competitive environment.

Government Regulation

Stater Bros. is subject to regulation by a variety of governmental authorities, including federal, state and local agencies that regulate trade practices, building standards, labor, health, safety and environmental matters. Stater Bros. is also subject to agencies that regulate the distribution and sale of alcoholic beverages, tobacco products, milk and other agricultural products and other food items.

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Santee is subject to periodic inspections by personnel from the California Department of Food and Agriculture, as well as the United States Food and Drug Administration, who test, among other things, Santee’s pasteurization and homogenization equipment, storage tanks, and bottling apparatuses to ensure compliance with applicable health and safety regulations. The price of raw milk is regulated by the federal government through federal market orders and price support programs, and by the State of California. The price of raw milk can fluctuate widely.

Environmental

Environmental remediation costs incurred over the past five years were approximately $1.5 million, in the aggregate, including remediation costs of approximately $101,000 in 1999, $198,000 in 2000, $495,000 in 2001, $324,000 in 2002, and $395,000 in 2003. For the thirty-nine weeks ended June 27, 2004, the costs were approximately $191,000. Management believes that any such future remediation costs will not have a material adverse effect on the financial condition or results of operations of Stater Bros.

Legal Proceedings

In the ordinary course of its business, Stater Bros. is party to various legal actions which Stater Bros. believes are incidental to the operation of the business of Stater Bros. and its subsidiaries. Stater Bros. records an appropriate provision when the occurrence of loss is probable and can be reasonably estimated. Stater Bros. believes that the outcome of such legal proceedings to which Stater Bros. is currently a party will not have a material adverse effect upon its results of operations or its consolidated financial condition.

For a discussion of the Santee Settlement, see “Recent Developments—Santee Settlement.”

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MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information with respect to the current executive officers and directors of Stater Bros., their ages and principal occupations for at least the past five years. Directors of Stater Bros. each serve for a term of one year, or until their successors are elected. The officers serve at the discretion of the Board of Directors of Stater Bros.

Name	Age	Position
Jack H. Brown	65	Chairman of the Board, President and Chief Executive Officer
Donald I. Baker	63	Executive Vice President and Chief Operating Officer
Phillip J. Smith	57	Senior Vice President and Chief Financial Officer
Dennis L. McIntyre	43	Group Senior Vice President of Marketing
James W. Lee	53	Group Senior Vice President of Retail Operations
Edward A. Stater	53	Senior Vice President of Retail Operations
Bruce D. Varner	67	Director and Secretary
Thomas W. Field, Jr.	69	Vice Chairman of the Board of Directors
C. Dale Warman	74	Director and Chairman of the Audit Committee

Background of Directors and Executive Officers

Jack H. Brown. Jack H. Brown has been President and Chief Executive Officer of Stater Bros. since June 1981 and Chairman of the Board since 1986. From September 1978 to June 1981, Mr. Brown served as President of Pantry Food Markets, Inc. and American Community Stores Corporation, Inc., both wholly owned subsidiaries of Cullum Companies, Inc., a publicly held corporation. From 1972 to 1978, Mr. Brown served as Corporate Vice President of Marsh Supermarkets, Inc., a publicly held corporation. Mr. Brown has been employed in various capacities in the supermarket industry for 51 years. Mr. Brown has a majority interest and is the managing general partner of La Cadena. Mr. Brown serves as a Director for the Automobile Club of Southern California.

Donald I. Baker. Donald I. Baker has been Executive Vice President and Chief Operating Officer since November 2001 and Executive Vice President of Stater Bros. since October 1998. Mr. Baker joined Stater Bros. in November 1983 as Vice President-Warehouse and Transportation and was Group Senior Vice President-Administration from July 1996 to October 1998. From July 1992 to July 1996, Mr. Baker was Group Senior Vice President-Human Resources and Distribution. From August 1986 to July 1992, Mr. Baker was Senior Vice President-Human Resources and Distribution. Mr. Baker has approximately 37 years of experience in the supermarket industry. Prior to joining Stater Bros., Mr. Baker was employed by American Community Stores Corporation, Inc., a subsidiary of Cullum Companies, Inc., a publicly held corporation, from 1972 to 1983 in various capacities including Vice President of Retail Operations, and was also employed by The Kroger Co. from 1966 to 1972.

Phillip J. Smith. Phillip J. Smith has been Senior Vice President and Chief Financial Officer since November 2000, and was Vice President and Controller from April 1998 until November 2000. Mr. Smith joined Stater Bros. in 1987 as Controller. Mr. Smith has approximately 28 years experience in the supermarket industry. Prior to joining Stater Bros., Mr. Smith was employed by Market Basket Foodstores as Vice President and Chief Financial Officer from 1985 to 1987. From 1975 until 1985, Mr. Smith was employed by various divisions of Cullum Companies, Inc., a publicly held corporation, in various financial capacities.

Dennis L. McIntyre. Dennis L. McIntyre has been Group Senior Vice President of Marketing since August 2002. Mr. McIntyre has served Stater Bros. for 25 years in various capacities including Courtesy Clerk, Assistant Manager, Buyer, Assistant Vice President of Marketing from 1994 until 1999, Vice President of Marketing from 1999 to 2000 and Senior Vice President of Marketing from 2000 to 2002.

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James W. Lee. James W. Lee joined Stater Bros. in August 2002 as Group Senior Vice President of Retail Operations. Mr. Lee has over 31 years experience in the supermarket industry. Prior to joining Stater Bros., Mr. Lee was with Wild Oats Markets, Inc. between 1997 and 2001 as Chief Operating Officer. Mr. Lee was employed in various operating capacities with Ralphs Grocery Company, a division of The Kroger Co., from 1972 until 1996.

Edward A. Stater. Edward A. Stater has been Senior Vice President of Retail Operations since April 2000. Mr. Stater has served Stater Bros. for 35 years in various capacities including Clerk, Produce Buyer, Assistant Warehouse Supervisor, New Store Set-up Manager, Grocery Supervisor, District Manager and Regional Vice President from 1986 until 2000.

Bruce D. Varner. Bruce D. Varner has been a Director of Stater Bros. Markets since September 1985 and a Director of Stater Bros. Holdings Inc. since May 1989. Since February 1997, Mr. Varner has been a partner in the law firm of Varner, Saleson & Brandt LLP. From 1967 to February 1997, Mr. Varner was a partner in the law firm of Gresham, Varner, Savage, Nolan & Tilden. Mr. Varner specializes in business and corporate matters. Mr. Varner and the law firm of Varner, Saleson & Brandt LLP have performed legal services in the past for Stater Bros. and Stater Bros. expects such services to continue in the future.

Thomas W. Field, Jr. Thomas W. Field, Jr. has been Vice Chairman of the Board of Directors of Stater Bros. since May 1998 and a Director of Stater Bros. since 1994. Mr. Field has been President of Field and Associates since 1989. From 1988 to 1989, Mr. Field was Chairman of the Board, President and Chief Executive Officer of McKesson Corporation and was its President since 1984, and President and Chief Executive Officer from 1986 to 1988. Mr. Field was President of American Stores Company from 1981 to 1984 and was President of Alpha Beta Company from 1976 to 1984. Mr. Field was a Director of American Stores Company from 1979 to 1984. Mr. Field is a nationally recognized and highly regarded supermarket executive. Mr. Field has held various positions in the Supermarket Industry for over 44 years and serves as a Director for the Campbell Soup Company.

C. Dale Warman. C. Dale Warman has been a Director of Stater Bros. since 2000. Mr. Warman served the Fred Meyer Company for over 42 years. Mr. Warman served as a Director of Fred Meyer from 1975 to 1990, Mr. Warman served as President from 1982 to 1990 and was its Executive Vice President from 1981 to 1990. Mr. Warman was Executive Vice President of Allied Foods from 1972 to 1975. Mr. Warman served as a Director of Big Bear Stores from 1987 to 1989 and as a Director of Allied Stores from 1973 to 1975.

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Executive Compensation

The following table summarizes the compensation for services rendered during the prior three fiscal years paid to the Chief Executive Officer and the four most highly compensated executive officers other than the Chief Executive Officer of Stater Bros.:

	Annual Compensation					Other Compensation (1)(2)(3)
Name and Position	Year	Salary		Bonus
Jack H. Brown: Chairman, President and Chief Executive Officer	2003	$	1,260,000	$	1,848,000	$	53,066
	2002	$	1,188,000	$	1,540,000	$	53,340
	2001	$	1,128,000	$	1,400,000	$	52,161
Donald I. Baker: Executive Vice President and Chief Operating Officer	2003	$	515,000	$	295,000	$	2,066
	2002	$	473,000	$	250,000	$	1,840
	2001	$	412,000	$	225,000	$	1,661
Phillip J. Smith: Senior Vice President and Chief Financial Officer	2003	$	215,000	$	125,000	$	2,066
	2002	$	202,000	$	100,000	$	1,840
	2001	$	187,000	$	90,000	$	1,661
Dennis L. McIntyre: Group Senior Vice President of Marketing	2003	$	240,000	$	80,000	$	2,066
	2002	$	192,000	$	60,000	$	1,840
	2001	$	173,000	$	55,000	$	1,661
James W. Lee: Group Senior Vice President of Retail Operations	2003	$	232,000	$	80,000	$	2,066
	2002	$	28,000	$	20,000		—
	2001		—		—		—

(1) The dollar value of perquisites and other personal benefits, if any, for each of the Named Executive Officers was less than the reporting thresholds established by the Securities and Exchange Commission.

(2) Amounts shown for the Named Executive Officers represent Stater Bros.’ contributions to Stater Bros.’s Profit Sharing Plan, a defined contribution plan, for the account of each Named Executive Officer. Plan participants become fully vested in the plan after seven years of service.

(3) Includes Mr. Brown’s Director Fees for 2001, 2002 and 2003, which amounted to $51,000, $50,500, and $51,500, respectively.

Option Plans and SARs

None

Pension Plan

Stater Bros.’ Pension Plan for Salaried Employees, or the “Pension Plan,” is a non-contributory, defined benefit plan which applies to all salaried employees who have completed one year of qualified service, including directors who are employees. For each year of credited service, the annual pension to which an employee is entitled under the Pension Plan upon normal retirement at age 65 is an amount equal to three quarters of one percent of the employee’s compensation for each year up to the social security wage base, plus 2.15 percent of the employee’s compensation for each year in excess of the social security wage base. The named executive

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officers have the following years of credited service under the Pension Plan as of September 28, 2003: Jack H. Brown—22 years, Donald I. Baker—20 years, Phillip J. Smith—16 years, Dennis L. McIntyre—25 years and James W. Lee—1 year.

The amounts shown in the following table are estimated annual retirement benefits under the Pension Plan (assuming payments are made on the normal life annuity and not under any of the various survivor forms of benefits) based upon retirement at age 65, after various years of service at selected salary levels. Benefits under the Pension Plan do not become fully vested until the employee has five years of credited service with Stater Bros. The Internal Revenue Code of 1986, as amended, places certain limitations on pension benefits that can be paid from a tax-qualified pension plan and trust, as well as the compensation that may be taken into account in determining such benefits. Such limitations are not reflected in the table below. The maximum annual benefit for 2003 retirees with ten or more years of service at retirement is $200,000. The maximum annual compensation that may be considered for 2003 retirees is $160,000.

	Pension Plan Table Years of Service
Remuneration	15		20		25		30		35
$  50,000	$	5,625	$	7,500	$	9,375	$	11,250	$	13,125
75,000		12,911		17,214		21,518		25,821		30,125
100,000		20,973		27,964		34,955		41,946		48,937
125,000		29,036		38,714		48,393		58,071		67,750
150,000		37,098		49,464		61,830		74,196		86,562
175,000		45,161		60,214		75,268		90,321		105,375
200,000		53,223		70,964		88,705		106,446		124,187

Compensation Of Directors

Directors of Stater Bros. are paid an annual fee of $50,000 plus $500 for each board meeting attended. The Board had two standing committees during fiscal 2003.

The Audit Committee recommends the appointment or removal of Stater Bros.’ independent registered public accounting firms, reviews the scope and results of the independent audit of Stater Bros., reviews audit fees and reviews changes in accounting policies that have a significant effect on Stater Bros.’ financial statements. The Audit Committee members are Mr. Warman and Mr. Field. Mr. Field is the Audit Committee’s Financial Expert and is an independent member of the Board.

The Compensation Committee approves compensation and annual performance bonuses paid to the Chief Executive Officer and the Senior Management of Stater Bros. The Compensation Committee members are Mr. Varner and Mr. Field.

Code of Ethics

Stater Bros. has adopted a Financial Code of Ethics which has been signed by the CEO, CFO and Controllers of Stater Bros.

Employment and Severance Agreements

In June of 2000, Stater Bros.’ principal operating subsidiary, Markets, entered into Employment Agreements or the “agreements” with Messrs. Brown, Baker, Smith and McIntyre. In August of 2002, a similar agreement was entered into with Mr. Lee. Under each of the agreements, the employee is employed to serve as an officer of Stater Bros. and with certain exceptions the agreements prohibit the employee from employment in any other business except for a parent or subsidiary of Stater Bros. Each of the agreements may be terminated by Stater Bros. with cause and by either party without cause upon ninety (90) days written notice. If the employment is

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terminated without cause, the employee’s compensation continues through the expiration of the term of the agreement then in effect, except in the event of termination of any of the agreements of Messrs. Baker, Smith, McIntyre and Lee by Mr. Brown or by the Board of Directors with the consent of Mr. Brown. If the employee is terminated as a result of a change of control, he is entitled to receive all salary and benefits provided under the agreement for the original term notwithstanding termination of his employment. Each agreement provides for annual base compensation at the employee’s current level with annual increases plus employee benefits and incentive bonus calculated in accordance with a formula based on Stater Bros.’ earnings. Mr. Brown’s agreement has an original term of five (5) years which is automatically renewed on July 1 of each year for a five (5) year term unless ninety (90) days notice of termination is given by either party. Mr. Baker’s agreement has an original term of four (4) years and unless sooner terminated is renewed automatically through April 20, 2006, the date of Mr. Baker’s sixty-fifth (65th) birthday, Stater Bros.’ normal retirement age. Mr. Smith’s, Mr. McIntyre’s and Mr. Lee’s Agreements have an original term of three (3) years, which is automatically renewed for an additional term of three (3) years unless sooner terminated.

In addition, Stater Bros.’ operating entity, Markets has entered into employment contracts with 43 additional key members of Management.

Stater Bros.’ severance policies generally provide for two weeks of severance pay to full-time, non-bargaining unit employees for every year of service to Stater Bros., up to a maximum of twelve weeks.

Phantom Stock Plan

Stater Bros. maintains a phantom stock plan to provide additional incentive compensation to certain executives of Markets whose performance is considered especially critical to Stater Bros.’ business. Under the plan, grants may be made by the Compensation Committee and Board of Directors to persons recommended by the Chairman of the Board or Chief Executive Officer. Existing stockholders and partners of La Cadena are not eligible to receive awards. Awards under the plan are for units that have an assigned value. The value of the units awarded under the plan will increase or decrease in accordance with net profits of Stater Bros. Subject to vesting provisions of the plan, units are paid in cash either (i) in a lump sum upon a change in control of Stater Bros.; or (ii) if sooner, in either a lump sum or installments (with interest) over a five-year period (as Stater Bros. may determine) following termination of the participant’s employment by reason of retirement, permanent total disability or death. Awards under the plan vest after five years, except that upon a participant’s early retirement, permanent total disability or death, awards are considered partially vested at the rate of 20% for each year of employment following the grant. If a participant voluntarily terminates his or her employment, or is terminated for cause, any unvested awards under the plan will terminate and no payment will be made thereunder. As of September 30, 2001, September 29, 2002 and September 28, 2003, there were 663,000, 668,000 and 693,000 units outstanding, respectively.

Payments pursuant to units awarded under the plan are based upon the value of a unit at the date of retirement, permanent total disability or death, except that if such date occurs within two years of the grant the amount of payment, per unit, is limited to the appreciated value of the units during the period. Upon a change of control, the payment on all units is equal to the full value of the units.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of June 27, 2004, the number and percentage of outstanding shares of common stock beneficially owned by (a) each person known by Stater Bros. to beneficially own more than 5% of such stock; (b) each director of Stater Bros.; (c) each of the named executive officers; and (d) all directors and executive officers of Stater Bros. as a group:

Name and Address of Beneficial Owner	Shares of Class A Common Stock Beneficially Owned	Percentage of Class A Common Stock Outstanding
La Cadena(1)	38,301	100	%
Jack H. Brown(1)(2)	38,301	100	%
Richard C. Moseley(1)(2)	38,301	100	%
Donald I. Baker(2)	—	—
Phillip J. Smith(2)	—	—
Dennis L. McIntyre(2)	—	—
James W. Lee(2)	—	—
Edward A. Stater(2)	—	—
Bruce D. Varner(2)	—	—
Thomas W. Field, Jr.(2)	—	—
C. Dale Warman(2)	—	—
All directors and executive officers as a group (10 persons)(1)	38,301	100	%

(1) The 38,301 outstanding shares of Stater Bros.’ Class A Common Stock are owned by La Cadena and may be deemed to be beneficially owned by the partners of La Cadena. The general partners of La Cadena are Jack H. Brown and Richard C. Moseley. Mr. Brown has the majority interest and is the Managing General Partner of La Cadena and has the power to vote the shares of Stater Bros. owned by La Cadena on all matters. Certain La Cadena issues, such as the disposition of such shares of Stater Bros., may require approval of 60% of the voting power of La Cadena. Accordingly, Messrs. Brown and Moseley may be deemed to have shared voting power or shared investment power with respect to the shares owned by La Cadena, and such individuals therefore may be deemed to be the beneficial owners thereof. The address of La Cadena is 3750 University Avenue, Suite 610, Riverside, California 92501.

(2) The address of Messrs. Brown, Moseley, Baker, Smith, McIntyre, Lee, Stater, Varner, Field and Warman is c/o Stater Bros. at 21700 Barton Road, Colton, California 92324.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Bruce D. Varner and the law firm of Varner, Saleson & Brandt LLP, of which Mr. Varner is a partner, have performed legal services in the past for Stater Bros. The total cost of such legal services (including reimbursement of costs) incurred by Stater Bros. during fiscal 2003 was approximately $1.4 million. Stater Bros. believes that the terms and costs of such legal services provided by Mr. Varner and the law firm of Varner, Saleson & Brandt LLP were at least as fair to Stater Bros. as could have been obtained from unaffiliated law firms. Stater Bros. expects such services to continue in the future.

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DESCRIPTION OF OTHER INDEBTEDNESS

The following is a summary of important terms of Stater Bros.’ material indebtedness:

The New Credit Facility

On June 17, 2004, Markets and Stater Bros. entered into the New Credit Facility with Bank of America, N.A., as sole and exclusive administrative agent, and sole initial lender, consisting of a three-year revolving credit facility in a principal amount of up to $75.0 million, with the right to increase, under certain circumstances, the size of the New Credit Facility to an aggregate principal amount of $100.0 million. The New Credit Facility amended and restated the existing credit facility in its entirety. Subject to certain restrictions, the entire amount of the New Credit Facility may be used for loans, letters of credit, or a combination thereof. Borrowings under the New Credit Facility are unsecured and will be used for working capital, capital expenditures and other corporate purposes. Letters of credit under the letter of credit facility are expected to be used to support obligations incurred in connection with the construction of stores and workers’ compensation insurance obligations.

The availability of the loans and letters of credit are subject to certain borrowing restrictions.

The New Credit Facility is guaranteed by Stater Bros. and all of its existing and future material subsidiaries, including Development and Santee (subject, in the case of Santee, to termination upon certain specified events.)

Loans under the New Credit Facility bear interest at a rate based upon either (i) the “Base Rate” (defined as the higher of (a) the federal funds rate plus 0.50% and (b) the rate of interest publicly announced by Bank of America as its “reference rate”), plus 1.00%, or (ii) the “Offshore Rate” (defined as the average British Bankers Association Interest Settlement Rate for deposits in dollars, adjusted for the maximum reserve requirement for Eurocurrency funding), plus 1.75%. For Offshore Rate Loans, the Offshore Rate will be applied in consecutive periods of the earlier of (a) the maturity date of the loan or (b) periods, as selected by Markets, of one, two, three or six months.

The New Credit Facility will cease to be available and will be payable in full on May 31, 2007. Notwithstanding such maturity date, at any time prior thereto, Markets shall be entitled to request the issuance of standby letters of credit having a term which is up to one year following such maturity date, and commercial letters of credit having a term which is up to six months following such maturity date. Loans under the New Credit Facility must be repaid for a period of ten consecutive days semi-annually.

Loans under the New Credit Facility may be repaid and re-borrowed. The loans under the New Credit Facility may be prepaid at any time without penalty, subject to certain minimums and payment of any breakage and re-deployment costs in the case of loans based on the offshore rate. The commitments under the New Credit Facility may be reduced by Markets. Markets will be required to pay a commitment fee equal to 0.25% per annum on the actual daily unused portion of the revolving loan facility and the letter of credit facility, payable quarterly in arrears. Outstanding letters of credit under the New Credit Facility are subject to a fee of 1.25% per annum on the face amount of such letters of credit, payable quarterly in arrears. Markets will be required to pay standard fees charged by Bank of America with respect to the issuance, negotiation, and amendment of commercial letters of credit issued under the letter of credit facility.

The New Credit Facility requires Markets to meet certain financial tests, including minimum net worth and other tests. The New Credit Facility contains covenants which, among other things, limit the ability of Markets and its subsidiaries to (i) incur indebtedness, grant liens, and guarantee obligations, (ii) enter into mergers, consolidations, liquidations and dissolutions, asset sales, investments, leases, and transactions with affiliates, and (iii) make restricted payments. The New Credit Facility also contains covenants that apply to Stater Bros. and its subsidiaries, and Stater Bros. is a party to the New Credit Facility for purposes of these covenants. These covenants, among other things, limit the ability of Stater Bros. and its subsidiaries to incur indebtedness, make restricted payments, enter into transactions with affiliates, and make amendments to the Indenture governing the Notes.

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The New Credit Facility contains customary events of default, including payment defaults; material inaccuracies in representations and warranties; covenant defaults; cross-defaults to certain other indebtedness; certain bankruptcy events; certain ERISA events; judgment defaults; invalidity of any guaranty; and change of control.

As of June 27, 2004, both Markets and Stater Bros. were in compliance with all restrictive covenants under the New Credit Facility.

Santee Credit Facility

In December 1999, Santee entered into a revolving line of credit with Bank of America, N.A. or the “revolver”. Under the revolver, Santee may borrow up to $5.0 million of which $2.0 million may be used to secure letters of credit issued to support workers’ compensation liabilities. The revolver is limited to a borrowing base equivalent to 75% of Santee’s outstanding accounts receivable, excluding balances owed by Markets, less the total amount of outstanding letters of credit. Borrowings under the revolver are secured by the receivables of Santee. The revolver is scheduled to expire September 1, 2004 and is being renegotiated. Advances under the revolver bear interest at Bank of America’s prime rate plus 0.5% with interest due monthly or, if elected by Santee, at the Interbank Offered Rate plus 1.75%. The outstanding undrawn portion of the workers’ compensation letter of credit is subject to an annual commitment fee of 1.25%.

Under the revolver, Santee is required to comply with certain financial covenants, which include certain financial ratios. As of June 27, 2004, Santee was in compliance with all restrictive covenants.

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DESCRIPTION OF NEW NOTES

In this description, the term “Stater Bros.,” refers only to Stater Bros. Holdings Inc. and not to any of its subsidiaries. Additionally, “Guarantors” refers to the subsidiaries of Stater Bros. that are guarantors of the New Notes, which initially will be Stater Bros. Markets, Stater Bros. Development, Inc. and Santee Dairies, Inc., and “Notes” refers collectively to the New Notes and the Old Notes. Definitions of certain other terms used in this description are found under the subheading “—Certain Definitions.”

The terms of the New Notes are nearly identical to the terms of the Old Notes in all material respects, including interest rates and maturity, except that the New Notes (i) will not contain transfer restrictions and registration rights that relate to the Old Notes, and (ii) will not contain provisions relating to the payment of Liquidated Damages to be made to the holders of the Old Notes under circumstances related to the timing of the Exchange Offer.

The Old Notes and the New Notes will constitute a single class of securities under the Indenture and therefore will vote together as a single class for purposes of determining whether Holders of the requisite percentage in principal amount thereof have taken actions or exercised rights they are entitled to take or exercise under the Indenture.

The New Notes will be issued under an Indenture dated as of June 17, 2004, which is referred to as the “Indenture” among Stater Bros., the Guarantors named therein and The Bank of New York, as “Trustee.” The Old Notes were also issued under the Indenture. The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended, which is referred to as the “TIA”, and to all of the provisions of the Indenture, including the definitions of terms therein and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. A copy of the Indenture is attached as exhibits to the registration statement of which this prospectus is a part. Certain defined terms used in this description but not defined below under “—Certain Definitions” have the meanings assigned to them in the Indenture.

The New Notes

The New Notes will be:

• general unsecured obligations of Stater Bros.;

• ranked equally in right of payment with all existing and future unsecured senior Indebtedness of Stater Bros.;

• ranked senior in right of payment to all future subordinated Indebtedness of Stater Bros.;

• ranked effectively junior to (i) all Indebtedness and other liabilities (including trade payables) of Stater Bros.’ Subsidiaries (if any) that are Unrestricted Subsidiaries (and thus not Guarantors) or that are otherwise not Guarantors, (ii) all Indebtedness and other liabilities (including trade payables) of any Guarantor if such Guarantor’s Guarantee is subordinated or avoided by a court of competent jurisdiction, and (iii) all secured obligations to the extent of the value of the collateral securing such obligations, including secured capital leases and other secured borrowings, if any, of Stater Bros. and its Restricted Subsidiaries; and

• unconditionally guaranteed by the Guarantors.

Although the Notes are titled “senior,” Stater Bros. has not issued, and does not have any plans to issue, any Indebtedness to which the New Notes would be senior.

The New Notes as issued will be in book-entry form and represented by a single global certificate which will be deposited with, or on behalf of, The Depository Trust Company, or the “DTC” and registered in the name of Cede & Co., as nominee of DTC. A beneficial owner may request physical delivery of New Notes in certificated form.

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The Guarantees

The New Notes will be guaranteed by the Guarantors, which will initially include all of Stater Bros. principal operating subsidiaries. The guarantee of each Guarantor will be:

• a general unsecured obligation of such Guarantor;

• ranked equally in right of payment with all existing and future unsecured senior Indebtedness of such Guarantor;

• ranked senior in right of payment to all existing and future subordinated Indebtedness of such Guarantor; and

• ranked effectively junior to all secured obligations of such Guarantor to the extent of the value of the collateral securing such obligations, including any secured capital leases and other secured borrowings, if any, of the Guarantors.

As of June 27, 2004, on a pro forma basis after giving effect to the redemption of the remaining approximately $41.0 million principal amount of 10 ³/4% Notes on August 16, 2004:

• no secured obligations of Stater Bros. that would be effectively senior to the Notes to the extent of the value of the assets securing such obligations,

• approximately $11.1 million of secured obligations of the Guarantors that would be effectively senior to the Guarantees to the extent of the value of the assets securing such obligations,

• approximately $48.2 million of outstanding Indebtedness (representing letters of credit) of Stater Bros. and its Subsidiaries ranking equally with the Notes and the Guarantees, as the case may be, and

• no outstanding Indebtedness of Stater Bros. and its Subsidiaries ranking junior to the Notes and the guarantees.

In addition, the Indenture permits Stater Bros. and the Guarantors to incur additional Indebtedness, including secured and unsecured Indebtedness that ranks equally with the Notes. Any secured Indebtedness will, as to the collateral securing such Indebtedness, be effectively senior to the Notes or the guarantees, as the case may be, to the extent of the value of such collateral.

Principal, Maturity and Interest

Stater Bros. will issue $700.0 million aggregate principal amount of New Notes in this Exchange Offer ($525.0 million of which will be New Fixed Rate Notes and $175.0 million of which will be New Floating Rate Notes). Additional Notes may be issued in compliance with the covenant described below under “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock.”

New Fixed Rate Notes. The New Fixed Rate Notes will mature on June 15, 2012 at their principal amount, plus accrued and unpaid interest to such maturity date. Interest on the New Fixed Rate Notes will accrue at the rate of 8 ¹/8% per annum and will be payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2004. Stater Bros. will make each interest payment to the holders of record of the Fixed Rate Notes on the immediately preceding June 1 and December 1. Interest on the Fixed Rate Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the Issue Date with respect to the New Fixed Rate Notes and will be computed on the basis of a 360-day year comprised of twelve 30-day months.

New Floating Rate Notes. The New Floating Rate Notes will mature on June 15, 2010 at their principal amount, plus accrued and unpaid interest to such maturity date. The New Floating Rate Notes will bear interest at a rate per annum, reset quarterly, equal to LIBOR plus 3.50%, as determined by the calculation agent, which shall initially be the trustee. Interest on the New Floating Rate Notes will be payable quarterly in arrears on

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March 15, June 15, September 15 and December 15, commencing on December 15, 2004.⁴ Stater Bros. will make each interest payment to the holders of record of the New Floating Rate Notes on the immediately preceding March 1, June 1, September 1 and December 1. Interest on the New Floating Rate Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the Issue Date with respect to the New Floating Rate Notes.

Set forth below is a summary of certain of the defined terms used in the Indenture relating solely to the Floating Rate Notes.

“Determination Date,” with respect to an Interest Period, will be the second London Banking Day preceding the first day of such Interest Period.

“Interest Period” means the period commencing on and including an interest payment date and ending on and including the day immediately preceding the next succeeding interest payment date, with the exception that the first Interest Period with respect to the Old Floating Rate Notes shall commence on and include the Issue Date of the Old Floating Rate Notes and end on and include September 14, 2004.

“LIBOR,” with respect to an Interest Period, will be the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period beginning on the second London Banking Day after the Determination Date that appears on Telerate Page 3750 as of 11:00 a.m., London time, on the Determination Date. If Telerate Page 3750 does not include such a rate or is unavailable on a Determination Date, the Calculation Agent will request the principal London office of each of four major banks in the London interbank market, as selected by the Calculation Agent, to provide such bank’s offered quotation (expressed as a percentage per annum), as of approximately 11:00 a.m., London time, on such Determination Date, to prime banks in the London interbank market for deposits in a Representative Amount in U. S. dollars for a three-month period beginning on the second London Banking Day after the Determination Date. If at least two such offered quotations are so provided, the rate for the Interest Period will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, the Calculation Agent will request each of three major banks in New York City, as selected by the Calculation Agent, to provide such bank’s rate (expressed as a percentage per annum), as of approximately 11:00 a.m., New York City time, on such Determination Date, for loans in a Representative Amount in U.S. dollars to leading European banks for a three-month period beginning on the second London Banking Day after the Determination Date. If at least two such rates are so provided, the rate for the Interest Period will be the arithmetic mean of such rates. If fewer than two such rates are so provided, then the rate for the Interest Period will be the rate in effect with respect to the immediately preceding Interest Period.

“London Banking Day” is any day on which dealings in U.S. dollars are transacted or, with respect to any future date, are expected to be transacted in the London interbank market.

“Representative Amount” means a principal amount of not less than $1,000,000 for a single transaction in the relevant market at the relevant time.

“Telerate Page 3750” means the display designated as “Page 3750” on the Moneyline Telerate service (or such other page as may replace Page 3750 on that service). The amount of interest for each day that the Floating Rate Notes are outstanding (the “Daily Interest Amount”) will be calculated by dividing the interest rate in effect for such day by 360 and multiplying the result by the principal amount of the Floating Rate Notes.

The amount of interest for each day that the Floating Rate Notes are outstanding (the “Daily Interest Amount”) will be calculated by dividing the interest rate in effect for such day by 360 and multiplying the result by the principal amount of the Floating Rate Notes. The amount of interest to be paid on the Floating Rate Notes for each Interest Period will be calculated by adding the Daily Interest Amounts for each day in the Interest Period.

⁴ Interest on the Old Floating Rate Notes will be paid on September 15, 2004, to record holders of such Old Floating Rate Notes as of September 1, 2004.

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All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one-millionths of a percentage point being rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards).

The interest rate on the Floating Rate Notes will in no event be higher than the maximum rate permitted by New York law as the same may be modified by United States law of general application.

The Calculation Agent will, upon the request of the holder of any Floating Rate Note, provide the interest rate then in effect with respect to the Floating Rate Notes. All calculations made by the Calculation Agent in the absence of manifest error will be conclusive for all purposes and binding on Stater Bros., the Guarantors and the Holders of the Floating Rate Notes.

Methods of Receiving Payments on the New Notes

If a Holder has given wire transfer instructions to Stater Bros., Stater Bros. will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder’s Notes in accordance with those instructions. All other payments on the Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless Stater Bros. elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders.

Paying Agent and Registrar for the New Notes

The Trustee will initially act as Paying Agent and Registrar. Stater Bros. may change the Paying Agent or Registrar without prior notice to the Holders, and Stater Bros. or any of its Subsidiaries may act as Paying Agent or Registrar.

Transfer and Exchange

A Holder may transfer or exchange the New Notes in accordance with the Indenture. Stater Bros. is not required to transfer or exchange any New Note selected for redemption. Also, Stater Bros. is not required to transfer or exchange any New Note for a period of 15 days before a selection of New Notes to be redeemed. The registered holder of a New Note will be treated as the owner of it for all purposes.

Guarantees

Each Guarantor will jointly and severally guarantee the obligations of Stater Bros. under the Notes. The obligations of each Guarantor under its Guarantee for each series of Notes will be limited as necessary to prevent such Guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law. See “Risk Factors—Fraudulent Conveyance Statutes allow Courts, Under Specific Circumstances, to Avoid Subsidiary Guarantees.” Each Guarantor that makes a payment or distribution under a Guarantee will be entitled to a pro rata contribution from each other Guarantor based on the net assets of each other Guarantor.

Each Guarantor may consolidate with or merge into or sell its assets to Stater Bros. or a Guarantor that is a Restricted Subsidiary, or with or to other Persons upon the terms and conditions set forth in the Indenture. A Guarantor may not sell or otherwise dispose of all or substantially all of its assets, or consolidate with or merge with or into another Person (whether or not such Guarantor is the surviving Person), unless certain conditions are met. See “—Certain Covenants—Merger, Consolidation or Sale of Assets.”

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A Guarantee of a Guarantor will be deemed automatically discharged and released in accordance with the terms of the Indenture:

(1) in connection with any direct or indirect sale, conveyance or other disposition of all of the capital stock or all or substantially all of the assets of that Guarantor (including by way of merger or consolidation), if such sale or disposition is made in compliance with the applicable provisions of the Indenture (see “—Repurchase at the Option of Holders—Asset Sales”);

(2) if such Guarantor is dissolved or liquidated in accordance with the provisions of the Indenture;

(3) if Stater Bros. designates any such Guarantor as an Unrestricted Subsidiary in compliance with the terms of the Indenture;

(4) in the event that any such Guarantor, other than Markets, Development and Santee, has Total Assets of less than $10.0 million and Stater Bros. provides written notice to the Trustee requesting such release and an Officer’s Certificate certifying the amount of such Total Assets; or

(5) in the case of Santee, at the election of Stater Bros., by written notice to the Trustee, upon the consummation of a Qualified Santee Sale.

Optional Redemption

Fixed Rate Notes. Except as set forth below, the Fixed Rate Notes may not be redeemed prior to June 15, 2008. After June 15, 2008, Stater Bros. may redeem all or a part of the Fixed Rate Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

Year	Percentage
2008	104.063	%
2009	102.031	%
2010 and thereafter	100.000	%

Floating Rate Notes. Except as set forth below, the Floating Rate Notes may not be redeemed prior to June 15, 2006. After June 15, 2006, Stater Bros. may redeem all or part of the Floating Rate Notes, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning June 15 of the years indicated below:

Year	Redemption Price
2006	102.000	%
2007	101.000	%
2008 and thereafter	100.000	%

Redemption with the Proceeds of Certain Capital Contributions or Equity Issuances. Notwithstanding the foregoing, (i) at any time prior to June 15, 2007, Stater Bros. may redeem up to 35% of the aggregate principal amount of the Fixed Rate Notes outstanding at a redemption price equal to 108 ¹/8% of the principal amount thereof, together with accrued and unpaid interest to such redemption date, with the net cash proceeds of one or more sales of Capital Stock of Stater Bros., resulting for each sale in net cash proceeds to Stater Bros. in excess of $25 million; provided that:

• at least 65% in aggregate of the originally issued principal amount of the Fixed Rate Notes remains outstanding immediately after the occurrence of such redemption; and

• the redemption must occur within 45 days of the date of the closing of the sale.

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Mandatory Redemption

Stater Bros. is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, each Holder of Notes will have the right to require Stater Bros. to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder’s Notes pursuant to an offer on the terms set forth in the Indenture or a “Change of Control Offer”. In the Change of Control Offer, Stater Bros. will offer a payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase or the “Change of Control Payment”. Within thirty (30) days following any Change of Control, Stater Bros. will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice (the “Change of Control Payment Date”), which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. Stater Bros. will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, Stater Bros. will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such conflict.

On the Change of Control Payment Date, Stater Bros. will, to the extent lawful:

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by Stater Bros.

The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof.

Prior to complying with any of the provisions of this “Change of Control” covenant, but in any event within 90 days following a Change of Control, Stater Bros. will either (i) cause each of its Restricted Subsidiaries to obtain the requisite consents, if any, under any agreements governing outstanding Indebtedness of such Restricted Subsidiary to permit the repurchase of Notes required by such “Change in Control” covenant or (ii) if any of such requisite consents cannot be obtained, cause the applicable Restricted Subsidiary or Restricted Subsidiaries to repay the Indebtedness pursuant to which such consent is required.

Stater Bros. will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The provisions described above that require Stater Bros. to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that Stater Bros. repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

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Stater Bros. will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by Stater Bros. and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of Stater Bros. and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require Stater Bros. to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Stater Bros. and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain.

Asset Sales

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) Stater Bros. (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;

(2) such fair market value is evidenced by (i) for any Asset Sale resulting in Net Proceeds less than or equal to $2.5 million, an Officers’ Certificate delivered to the Trustee or (ii) for any Asset Sale resulting in Net Proceeds in excess of $2.5 million, a resolution of Stater Bros.’ Board of Directors set forth in an Officers’ Certificate delivered to the Trustee; and

(3) at least 75% of the consideration therefor received by Stater Bros. or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash:

(a) any liabilities (as shown on Stater Bros.’ or such Restricted Subsidiary’s most recent balance sheet) of Stater Bros. or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Stater Bros. or such Restricted Subsidiary from further liability; and

(b) any securities, notes or other obligations received by Stater Bros. or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by Stater Bros. or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion);

provided, that any non-cash consideration that becomes Net Proceeds will thereafter be subject to the provisions of the next paragraph.

Within 12 months of the date of consummation (each such date, a “Consummation Date”) by Stater Bros. or any Restricted Subsidiary of (x) any Asset Sale, other than a Qualified Santee Sale, which, taken individually or together with all such Asset Sales other than one or more Qualified Santee Sales, since the date of the Indenture or (y) any Qualified Santee Sale which, taken individually or together with all such Qualified Santee Sales, results, in the case of (x) or (y), in the receipt of Net Proceeds in excess of $25.0 million, such Net Proceeds and all Net Proceeds from all such Asset Sales or Qualified Santee Sales, as applicable, consummated concurrently therewith or consummated thereafter will be applied by Stater Bros. or a Restricted Subsidiary to:

(a) investments in assets or businesses in the same line of business as Stater Bros. or such Restricted Subsidiary (including without limitation the payment of a dividend or other distribution on account of the Equity Interests of any Wholly-Owned Subsidiary of Stater Bros. to the holder of its Equity Interests on a

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pro rata basis; provided, that the proceeds of such dividend or other distribution are used by such holder for investments as contemplated in this clause (a));

(b) the permanent repayment of (and permanent reduction of commitments, if any, under) any Indebtedness (a) that is secured by or incurred to construct such assets or (b) of a Restricted Subsidiary; or

(c) a combination of payment and investment permitted by the foregoing clauses (a) and (b);

provided that, pending the final application of any such Net Proceeds, such Net Proceeds may be applied to the temporary reduction of revolving credit borrowings or other investment of such Net Proceeds in any manner that is not prohibited by the Indenture; provided, further, that Net Proceeds resulting from a Qualified Santee Sale or Qualified Santee Sales consisting of the issuance by Santee of Equity Interests in Santee that, individually or collectively, result in Santee no longer being a Subsidiary of Stater Bros., or an amount equal thereto, will be applied first to permanently repay all or a portion, as applicable, of the outstanding Indebtedness represented by the Santee Note, and thereafter as set forth in clauses (a), (b) or (c) above.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in clauses (a), (b), or (c) of the preceding paragraph, or applied to repay all or a portion of the Indebtedness represented by the Santee Note, will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $25.0 million, Stater Bros. will be required under the Indenture to make an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds (an “Asset Sale Offer”). The offer price in any Asset Sale Offer will be equal to 100% of the principal amount of such Notes or other Indebtedness plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, Stater Bros. or its Restricted Subsidiaries may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

Stater Bros. will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Indenture, Stater Bros. will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of such conflict.

The agreements governing certain Indebtedness of Markets limit the ability of Stater Bros. to purchase the Notes in the event of a Change of Control or an Asset Sale, and also provide that certain change of control or asset sale events with respect to Stater Bros. would constitute a default under these agreements. Any future credit agreements or other agreements relating to Indebtedness to which Markets or other Subsidiaries of Stater Bros. becomes a party may contain similar restrictions and provisions. In the event a Change of Control or Asset Sale occurs at a time when the ability of Stater Bros. to purchase the Notes is restricted, Markets or the applicable other Subsidiary of Stater Bros. could seek the consent of its lenders to the purchase of Notes or could attempt to repay the Indebtedness that contains such restriction. If Markets or the applicable other Subsidiary did not obtain such a consent or repay such borrowings, Stater Bros. might not be able to purchase the Notes. In such case, Stater Bros.’ failure to purchase tendered Notes would constitute an Event of Default under the Indenture. In addition, the exercise by the Holders of Notes of their right to require Stater Bros. to repurchase the Notes upon a Change of Control or an Asset Sale could cause a default under these other agreements, even if the Change of Control or Asset Sale itself does not, due to the financial effect of such repurchases on Stater Bros. Finally, Stater

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Bros.’ ability to pay cash to the Holders of Notes upon a repurchase may be limited by Stater Bros.’ then existing financial resources. See “Risk Factors—Stater Bros. May Be Unable to Raise the Funds Necessary to Finance a Change of Control Offer Required by the Indenture.”

Selection and Notice

If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:

• if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

• if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

No Notes in a principal amount of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional.

If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest and Liquidated Damages, if any, ceases to accrue on Notes or portions of them called for redemption.

Certain Covenants

Restricted Payments

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of Stater Bros.’ or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any such payment in connection with any merger or consolidation involving Stater Bros. or any of its Restricted Subsidiaries) or to the direct or indirect holders of Stater Bros.’ or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Stater Bros. or payable to Stater Bros. or a Restricted Subsidiary of Stater Bros.);

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Stater Bros.) any Equity Interests of Stater Bros. or any direct or indirect parent or Affiliate of Stater Bros.;

(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at the Stated Maturity thereof; or

(4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as “Restricted Payments”);

unless such Restricted Payment occurs on or after June 28, 2004 and, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof; and

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(2) Stater Bros. would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock;” and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Stater Bros. and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9), (10) and (11) of the next succeeding paragraph), is less than the sum, without duplication, of:

(a) 50% of the Consolidated Net Income of Stater Bros. for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of Stater Bros.’ most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

(b) 100% of the aggregate net cash proceeds received by Stater Bros. since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of Stater Bros. (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of Stater Bros. that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of Stater Bros.); plus

(c) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment; plus

(d) an amount equal to the fair market value of the Equity Interests of each Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary pursuant to the terms of the Indenture; provided, that such amount shall not in any case exceed the amount of Restricted Investments previously made by Stater Bros. or any Restricted Subsidiary in such Person.

The preceding provisions will not prohibit:

(1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture;

(2) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of Stater Bros. or of any Equity Interests of Stater Bros. in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of Stater Bros.) of, Equity Interests of Stater Bros. (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3) (b) of the preceding paragraph;

(3) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of Stater Bros. with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(4) the payment of any dividend by a Restricted Subsidiary of Stater Bros. to the holders of its Equity Interests on a pro rata basis;

(5) the payment to La Cadena Investments of a dividend in an amount not to exceed $45.0 million substantially concurrently with the issuance of the Notes;

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(6) the payment of any costs and expenses (including any related premium) in connection with the Offering of the Notes and the tender offer and consent solicitation for the Existing Notes and the redemption of any and all the Existing Notes remaining outstanding following the consummation of such tender offer;

(7) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (7) since the date of the Indenture not to exceed $25.0 million;

(8) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Stater Bros. held by any key employee of Stater Bros. or its Restricted Subsidiaries (other than any key employee that is a partner of or otherwise holds any Equity Interest in La Cadena Investments or any La Cadena Successor) upon any such person’s death, disability or termination of employment and pursuant to any management equity subscription agreement, stock option agreement or other incentive compensation plan or agreement entered into in the ordinary course of business; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million, which aggregate amount shall increase by $1.0 million on each anniversary of the date of the Indenture;

(9) Restricted Payments that, when taken with all other Restricted Payments made pursuant to this clause (9) since the date of the Indenture, do not exceed $25.0 million;

(10) the payment substantially concurrently with the issuance of the Notes of principal and interest on that certain 5% subordinated note due 2007 owed by Stater Bros. to a retired executive of La Cadena Investments in an aggregate amount not to exceed $20.3 million; and

(11) Investments in the Equity Interests of Santee resulting exclusively from the sale of a majority of the Equity Interests of Santee.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by Stater Bros. or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by a majority of Stater Bros.’ directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment (other than Restricted Payments permitted pursuant to clauses (1), (4), (5), (6), (7) and (10) of the preceding paragraph), Stater Bros. shall deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this “Restricted Payments” covenant were computed.

Incurrence of Indebtedness and Issuance of Preferred Stock

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and Stater Bros. will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock other than an issuance by Santee in a Qualified Santee Sale of Capital Stock that is not Disqualified Stock; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness, Stater Bros. or any Guarantor may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock if the Fixed Charge Coverage Ratio for Stater Bros.’ most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.

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The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the incurrence by Stater Bros. or its Restricted Subsidiaries of Indebtedness in an aggregate principal amount not to exceed $100.0 million at any time outstanding under any Credit Facilities or any replacement facility thereof;

(2) the incurrence by Stater Bros. and its Restricted Subsidiaries of the Existing Indebtedness;

(3) the incurrence by Stater Bros. and the Guarantors of Indebtedness represented by the Notes and the Guarantees to be issued on the date of the Indenture and the Exchange Notes and the Guarantees thereto to be issued pursuant to the Registration Rights Agreement;

(4) the incurrence by Stater Bros. or any of the Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations or Permitted Construction Indebtedness in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed $25.0 million at any time outstanding;

(5) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph of this covenant or clauses (1), (2) or (3) of this paragraph;

(6) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of intercompany Indebtedness owing to Stater Bros. or any Restricted Subsidiary; provided, however, that:

(a) if Stater Bros. is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes;

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Stater Bros. or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either Stater Bros. or a Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Stater Bros. or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

(7) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding;

(8) the guarantee by Stater Bros. of Indebtedness of Stater Bros. or a Restricted Subsidiary that was permitted to be incurred by another provision of this covenant;

(9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in Fixed Charges of Stater Bros. as accrued;

(10) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Indebtedness to secure workers’ compensation and other insurance coverages, not to exceed the minimum amount required by Stater Bros.’ or any of its Restricted Subsidiaries insurance carriers or applicable regulatory agencies (which may be Indebtedness under Credit Facilities in addition to that permitted under clause (1));

(11) the incurrence of Indebtedness arising from agreements of Stater Bros. or any Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of Stater Bros. or any Restricted Subsidiary pursuant to such agreements, incurred or assumed in connection with the

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disposition of any business, assets or Subsidiary of Stater Bros. or any Restricted Subsidiary, other than guarantees or similar credit support by Stater Bros. or such Restricted Subsidiary of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness described in this clause shall not exceed the net proceeds actually received in connection with any such disposition;

(12) the incurrence by Stater Bros. or any of the Guarantors of other Indebtedness not to exceed $50.0 million (which may be Indebtedness under Credit Facilities in addition to that permitted by clause (1));

(13) the incurrence by Santee of Permitted Santee Indebtedness;

(14) the incurrence by Santee of Indebtedness in an aggregate principal amount not to exceed $5.0 million at any time outstanding under the Santee Credit Facility; and

(15) the Existing Notes.

Stater Bros. will not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of Stater Bros. unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of Stater Bros. shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of Stater Bros. solely by virtue of being unsecured.

For purposes of determining compliance with this “Incurrence of Indebtedness and Issuance of Preferred Stock” covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (15) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, Stater Bros. will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant.

Indebtedness under the Revolving Credit Facility outstanding on the date on which Notes are first issued and authenticated under the Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt.

Liens

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens.

Dividend and Other Payment Restrictions Affecting Subsidiaries

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction of any kind:

(1) on the ability of any Restricted Subsidiary to:

(a) pay dividends or make any other distributions on its Capital Stock to Stater Bros. or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Stater Bros. or any of its Restricted Subsidiaries;

(b) make loans or advances to Stater Bros. or any of its Restricted Subsidiaries; or

(c) transfer any of their respective properties or assets to Stater Bros. or any of its Restricted Subsidiaries;

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(2) on the ability of Stater Bros. or any of its Restricted Subsidiaries to receive or retain any such:

(a) dividends, payments or distributions;

(b) loans or advances; or

(c) transfer of property (any such restriction being referred to herein as a “Payment Restriction”).

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements in effect as of the date of the Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, (provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the date of the Indenture) or any provisions of any articles of incorporation or certificate of incorporation with respect to Stater Bros. or any Restricted Subsidiary (including without limitation the rights, preferences and privileges of any class or series of preferred stock included therein) in effect as of the date of the Indenture or as amended thereafter in accordance with the terms of the Indenture;

(2) the Indenture and the Notes;

(3) applicable law;

(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by Stater Bros. or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred;

(5) customary non-assignment provisions in leases and other contracts entered into in the ordinary course of business;

(6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (2)(c) of the preceding paragraph;

(7) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(8) the Revolving Credit Facility and the Santee Credit Facility;

(9) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien;

(10) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and

(11) Permitted Santee Indebtedness.

Subsidiary Guarantees

The Indenture provides that if Stater Bros. or any of its Restricted Subsidiaries acquires or creates a Subsidiary that is organized and existing under the laws of any state in the United States or the District of Columbia after the date of the Indenture, then the newly acquired or created Subsidiary will execute a supplemental indenture setting forth its Guarantee and deliver an opinion of counsel relating to the enforceability and authorization of that Guarantee pursuant to which that Restricted Subsidiary will become a Guarantor, on a senior basis of the payment obligations of Stater Bros. under the Notes and the Indenture; provided that this

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covenant will not apply to any Subsidiary during a period when that Subsidiary (i) has been properly designated as an Unrestricted Subsidiary in accordance with the Indenture for so long as it continues to constitute an Unrestricted Subsidiary or (ii) has Total Assets of less than $10.0 million and Stater Bros. has provided the Trustee with written notice requesting such release and an Officer’s Certificate certifying the amount of such Total Assets.

In the event of a sale or other disposition of all of the assets of any Guarantor by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, then that Guarantor (in the event of a sale or other disposition, by way of a merger, consolidation or otherwise, of all of the Capital Stock of that Guarantor) or the corporation or other Person acquiring the property (in the event of a sale or other disposition of all of the assets of that Guarantor) will be released and relieved of any obligations under that Guarantor’s Guarantee; provided that the Net Proceeds of the sale or other disposition are applied in accordance with the Indenture. In addition, (x) in the event the Board of Directors of Stater Bros. designates a Guarantor to be an Unrestricted Subsidiary, then that Guarantor will be released and relieved of any obligations under its Guarantee, provided that the designation is made in accordance with the Indenture, (y) in the event that a Guarantor, other than Markets, Development or Santee, has Total Assets of less than $10.0 million, that Guarantor will be released and relieved of any obligations under its Guarantee following receipt by the Trustee from Stater Bros. of written notice requesting such release and an Officer’s Certificate certifying the amount of such Total Assets and (z) Santee will be released and relieved of any obligations under the Guarantee upon written notice to the Trustee requesting such release from Stater Bros. upon consummation of a Qualified Santee Sale.

Merger, Consolidation or Sale of Assets

Stater Bros. may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not Stater Bros. is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Stater Bros. and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1) either: (a) Stater Bros. would be the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made would be a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of Stater Bros. under the Notes, the Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

(3) immediately after giving effect to such transaction (including giving effect to any Indebtedness incurred or anticipated to be incurred in connection with or in respect of the transaction) no Default or Event of Default would exist or be continuing;

(4) Stater Bros. or the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made would, on the date of such transaction, after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “—Incurrence of Indebtedness and Issuance of Preferred Stock”; and

(5) Stater Bros. or such Person will have delivered to the Trustee (a) an Officers’ Certificate of Stater Bros. and an opinion of counsel (which counsel may not be in-house counsel of Stater Bros.), each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this provision of the Indenture

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and that all conditions precedent in the Indenture relating to such transaction have been satisfied and (b) a certificate from Stater Bros.’ independent certified public accountants stating that Stater Bros. has made the calculations required by clause (4) above in accordance with the terms of the Indenture.

In addition, Stater Bros. may not, and may not permit any of its Restricted Subsidiaries to, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This “Merger, Consolidation or Sale of Assets” covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Stater Bros. and any of its Restricted Subsidiaries. The Indenture will provide that each Guarantor of the Notes issued thereunder (other than any Guarantor whose Guarantee is to be released in accordance with the terms of such Guarantee and such Indenture) will not, and Stater Bros. will not cause or permit any Guarantor to, consolidate or merge with or into (whether or not such Guarantor is the surviving entity), or sell, assign, transfer, lease, convey, or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person other than to Stater Bros. or a Guarantor unless:

(a) the Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia;

(b) the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Guarantor under the Indenture and the Notes issued under the Indenture, pursuant to a supplemental indenture to the Indenture in form reasonably satisfactory to the Trustee; and

(c) immediately after such transaction, no Default or Event of Default exists.

Designation of Restricted and Unrestricted Subsidiaries

The Board of Directors of Stater Bros. may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of any Wholly-Owned Subsidiary of Stater Bros. other than a Wholly-Owned Subsidiary of such Subsidiary; provided, that Stater Bros. provides the Trustee with an Officers’ Certificate accompanied by a resolution of Stater Bros.’ Board of Directors stating that (x) such designation complies with the covenant described above under “—Restricted Payments” and (y) such designation will not otherwise result in any Default or Event of Default. The Board of Directors of Stater Bros. may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, Stater Bros. is able to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) in compliance with the covenant described above under “—Incurrence of Indebtedness and Issuance of Preferred Stock” and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly providing the Trustee a copy of the board resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

Transactions with Affiliates

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an “Affiliate Transaction”), unless:

(1) such Affiliate Transaction is on terms that are consistent with industry practice and no less favorable to Stater Bros. or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Stater Bros. or such Restricted Subsidiary with an unrelated Person; and

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(2) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, Stater Bros. delivers to the Trustee a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the members of the Board of Directors.

The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1) transactions, to the extent not otherwise prohibited under the Indenture, between or among Stater Bros. and/or its Wholly-Owned Subsidiaries;

(2) payment of reasonable directors fees to directors of Stater Bros.;

(3) sales of Equity Interests (other than Disqualified Stock) to Affiliates of Stater Bros.;

(4) payment to La Cadena Investments of a dividend in an amount not to exceed $45 million substantially concurrently with the issuance of the Notes; and

(5) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption “—Restricted Payments.”

Limitation on Issuances and Sales of Equity Interests in Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary)

Stater Bros. will not, and will not permit any of its Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary) to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests in any Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to any Person (other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros.), unless:

(1) such transfer, conveyance, sale, lease or other disposition is of all the Equity Interests in such Restricted Subsidiary; and

(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales.”

In addition, Stater Bros. will not permit any Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors’ qualifying shares) to any Person other than to Stater Bros. or a Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros.; provided that Santee may issue Equity Interests to a Person other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros. so long as the cash Net Proceeds of such issuance are applied in accordance with the covenant described under the caption “—Repurchase at the Option of Holders—Asset Sales.”

Notwithstanding the foregoing, Stater Bros. or its Wholly-Owned Subsidiary may transfer, convey, sell, lease or otherwise dispose of Equity Interests of Santee or Santee may issue Equity Interests in a Qualified Santee Sale, in each case so long as (x) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales” and (y) to the extent that such transaction results in the disposition of a majority of the Equity Interests of Santee, all Indebtedness remaining outstanding following such transaction and owed by Santee to Stater Bros. or any Restricted Subsidiary would be permitted pursuant to the covenant described under the caption “—Restricted Payments.”

Advances to Restricted Subsidiaries

All advances made by Stater Bros. or any Guarantor following the Issue Date to Restricted Subsidiaries that are not Guarantors shall be evidenced by an intercompany note that shall evidence senior Indebtedness, which, in

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all cases other than Indebtedness owed by Santee, shall bear interest at the then current fair market interest rate as of the date of issuance of such intercompany note.

Payments for Consent

Stater Bros. will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Reports

Whether or not required by the SEC, so long as any Notes are outstanding, Stater Bros. will furnish to the Holders of Notes, within the time periods specified in the SEC’s rules and regulations:

(1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if Stater Bros. were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by Stater Bros.’ certified independent accountants; and

(2) all current reports that would be required to be filed with the SEC on Form 8-K if Stater Bros. were required to file such reports.

In addition, following the consummation of this Exchange Offer, Stater Bros. will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request.

Events of Default and Remedies

Each of the following is an Event of Default:

(1) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes;

(2) default in payment when due of the principal of, or premium, if any, on the Notes;

(3) failure by Stater Bros. or any of its Restricted Subsidiaries to comply with the provisions described under the captions “—Repurchase at the Option of Holders—Change of Control,” “—Repurchase at the Option of Holders—Asset Sales,” or “—Certain Covenants—Merger, Consolidation or Sale of Assets”;

(4) failure by Stater Bros. or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Indenture or the Notes (other than a default set forth in clauses (1), (2) or (3) above);

(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Stater Bros. or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, if that default:

(a) is caused by a Payment Default; or

(b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such

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Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more;

(6) failure by Stater Bros. or any of its Restricted Subsidiaries to pay final judgments to the extent not covered by insurance underwritten by third parties aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(7) certain events of bankruptcy or insolvency with respect to Stater Bros. or any of its Restricted Subsidiaries; and

(8) any Guarantee of the Notes shall be held in a judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect, or any Guarantor of the Notes, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee of the Notes.

In the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to Stater Bros. or any Restricted Subsidiary, all outstanding Notes will become due and payable immediately and automatically without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages, if any) if it determines that withholding notice is in their interest.

The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the Holders of all of the Notes, waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages, if any, on, or the principal of, the Notes.

Stater Bros. is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, Stater Bros. is required to deliver to the Trustee a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of Stater Bros. or any Subsidiary, as such, shall have any liability for any obligations of Stater Bros. under the Notes or the Indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Legal Defeasance and Covenant Defeasance

Stater Bros. may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes (“Legal Defeasance”) except for:

(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to below;

(2) Stater Bros.’ obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

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(3) the rights, powers, trusts, duties and immunities of the Trustee, and Stater Bros.’ obligations in connection therewith; and

(4) the Legal Defeasance provisions of the Indenture.

In addition, Stater Bros. may, at its option and at any time, elect to have the obligations of Stater Bros. released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under “Events of Default” will no longer constitute an Event of Default with respect to the Notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) Stater Bros. must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and Stater Bros. must specify whether the Notes are being defeased to maturity or to a particular redemption date;

(2) in the case of Legal Defeasance, Stater Bros. shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) Stater Bros. has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, Stater Bros. shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4) no Default or Event of Default has occurred and is continuing either: (a) on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); or (b) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit;

(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which Stater Bros. or any of its Subsidiaries is a party or by which Stater Bros. or any of its Subsidiaries is bound;

(6) Stater Bros. must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by Stater Bros. with the intent of preferring the Holders of Notes over the other creditors of Stater Bros. with the intent of defeating, hindering, delaying or defrauding creditors of Stater Bros. or others; and

(7) Stater Bros. must deliver to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Defeasance of the Notes will result in the termination of the obligations of the Guarantors under their respective Guarantees.

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Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).

Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder):

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption “—Repurchase at the Option of Holders”);

(3) reduce the rate of or change the time for payment of interest on any Note;

(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

(5) make any Note payable in money other than that stated in the Notes;

(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or Events of Default or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes;

(7) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption “—Repurchase at the Option of Holders”); or

(8) make any change in the preceding amendment and waiver provisions.

Notwithstanding the foregoing, without the consent of any Holder of Notes, Stater Bros. and the Trustee may amend or supplement the Indenture or the Notes:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to provide for the assumption of Stater Bros.’ obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of Stater Bros.’ assets;

(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder; or

(5) to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

provided, however, that in the case of a change pursuant to clause (1) or (4) above, Stater Bros. has delivered to the Trustee an opinion of counsel stating that such change does not adversely affect the rights of any Holder.

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Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when:

(1) either:

(a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to Stater Bros.) have been delivered to the Trustee for cancellation; or

(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and Stater Bros. has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption;

(2) no Default or Event of Default has occurred and is continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which Stater Bros. is a party or by which Stater Bros. is bound;

(3) Stater Bros. has paid or caused to be paid all sums payable by it under the Indenture; and

(4) Stater Bros. has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

In addition, Stater Bros. must deliver an Officers’ Certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Concerning the Trustee

If the Trustee becomes a creditor of Stater Bros., the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of its own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, costs, liability or expense that might be incurred by it in connection with such request or direction.

Governing Law

The Indenture will provide that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

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Additional Information

Anyone who receives this Prospectus may obtain a copy of the Indenture without charge by writing to Stater Bros. Holdings Inc., 21700 Barton Road, P.O. Box 150, Colton, California 92324, Attention: Chief Financial Officer.

Form, Denomination and Registration

The New Notes will be represented by one or more global certificates in fully registered, book-entry form without interest coupons, will be deposited with the trustee as custodian for The Depository Trust Company, or “DTC,” and will be registered in the name of Cede & Co. (“Cede”) or another nominee designated by DTC except in limited circumstances. The global new notes are sometimes referred to individually as a “Global Note” and collectively as the “Global Notes” in this prospectus. Beneficial interests in the Global Notes may be held directly through DTC or indirectly through organizations which are participants in DTC. Except as indicated in the following paragraphs, the record ownership of the Global Notes may be transferred, in whole or in part, only to DTC, another nominee of DTC or to a successor of DTC or its nominee.

Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in immediately available funds.

Persons who are not participants in DTC may beneficially own interests in a Global Note held by DTC only through participants or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly, and have indirect access to the DTC system. So long as Cede, as the nominee of DTC, is the registered owner of any Global Note, Cede for all purposes will be considered the sole holder of that Global Note. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have certificates registered in their names, will not receive physical delivery of certificates in definitive form, and will not be considered the holder of the Global Note.

The trustee (or any registrar or paying agent) will not have any responsibility for the performance by DTC or any of the participants or indirect participants of their respective obligations under the rules and procedures governing their operations. DTC has advised Stater Bros. that it will take any action permitted to be taken by a holder of New Notes only at the direction of one or more participants whose accounts are credited with DTC interests in a Global Note.

DTC has advised Stater Bros. as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions, such as transfers and pledges, among participants in deposited securities through electronic book-entry charges to accounts of its participants, thereby eliminating the need for physical movement of securities certificates. Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Certain of those participants (or other representatives), together with other entities, own DTC. The rules applicable to DTC and its participants are on file with the Commission.

Purchases of New Notes under the DTC system must be made by or through participants, which will receive a credit for the New Notes on DTC’s records. The ownership interest of each actual purchaser of each New Note is in turn to be recorded on the participants’ and indirect participants’ records. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the participant or indirect participant through which the beneficial owner entered into the transaction. Transfers of ownership interests in the New Notes are to be accomplished by entries made on the books of participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests in New Notes, except in the event that use of the book-entry system for the New Notes is discontinued.

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The deposit of New Notes with a custodian for DTC and their registration in the name of Cede effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the New Notes; DTC’s records reflect only the identity of the participants to whose accounts the New Notes are credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.

Stater Bros. will make principal and interest payments on the New Notes to DTC by wire transfer of immediately available funds. DTC’s practice is to credit participants’ accounts on the payable date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers or registered in “street name” and will be the responsibility of such participant and not of DTC, the Trustee or Stater Bros., subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is responsibility of Stater Bros., disbursement of those payments to participants will be the responsibility of DTC, and disbursement of those payments to the beneficial owners will be the responsibility of participants and indirect participants. Neither Stater Bros. nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.

DTC may discontinue providing its services as securities depositary with respect to the New Notes at any time by giving reasonable notice to Stater Bros.

New Notes represented by a Global Note will be exchangeable for New Note certificates with the same terms in authorized denominations only if:

• DTC notifies Stater Bros. that it is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under applicable law and a successor depositary is not appointed by Stater Bros. within 90 days;

• Stater Bros. determines not to require all of the New Notes to be represented by a Global Note and notify the trustee of its decision; or

• an Event of Default has occurred with respect to the New Notes and has not been cured.

In any such instance, an owner of a beneficial interest in the Global Notes will be entitled to physical delivery in definitive form of New Notes represented by the Global Notes equal in principal amount to that beneficial interest and to have those New Notes registered in its name. New Notes so issued in definitive form will be issued as registered New Notes in denominations of $1,000 and integral multiples thereof, unless otherwise specified by Stater Bros. Stater Bros.’ definitive New Notes can be transferred by presentation for registration to the registrar at its New York offices and must be duly endorsed by the holder or his attorney duly authorized in writing, or accompanied by a written instrument or instruments of transfer in form satisfactory to Stater Bros. or the trustee duly executed by the holder or his attorney duly authorized in writing. Stater Bros. may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of definitive New Notes.

Certain Definitions

Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

“Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into, became a Subsidiary of, or substantially all of its business and assets were acquired by, such specified

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Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, becoming a Subsidiary of, or substantially all of its business and assets being acquired by, such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 5% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” shall have correlative meanings.

“Asset Sale” means:

(1) the sale, lease, conveyance or other disposition of any assets or rights (including but not limited to sale and leaseback transactions), other than any such sale or other disposition in the ordinary course of business; provided that the sale, conveyance or other disposition of all or substantially all of the assets of Stater Bros. and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption “—Repurchase at the Option of Holders—Change of Control” and/or the provisions described above under the caption “—Certain Covenants—Merger, Consolidation or Sale of Assets” and not by the provisions of the Asset Sale covenant; and

(2) the issuance of Equity Interests by any of Stater Bros.’ Restricted Subsidiaries or the sale of Equity Interests by Stater Bros. or any of its Restricted Subsidiaries in any of their respective Subsidiaries.

Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales:

(1) any single transaction or series of related transactions that involves assets having a fair market value of less than $5.0 million;

(2) a transfer of assets between or among Stater Bros. and its Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary);

(3) an issuance of Equity Interests by a Restricted Subsidiary to Stater Bros. or to another Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros.;

(4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business;

(5) the sale or other disposition of cash or Cash Equivalents;

(6) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption “—Certain Covenants—Restricted Payments;” and

(7) any transaction, or series of transactions, that results in the payment to Stater Bros., or one of its Subsidiaries, for the construction of a new supermarket built by Stater Bros., or one of its Subsidiaries, and leased by Stater Bros., or one of its Subsidiaries, whether or not the lessor requires documentation confirming the lessor’s ownership in the supermarket building.

“Beneficial Owner”has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time or upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.

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“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation;

(2) with respect to a partnership, the board of directors of the general partner of the partnership; and

(3) with respect to any other Person, the board or committee of such Person serving a similar function.

“Capital Lease Obligation”means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person;

provided, however, that no payment, account, credit, award or other obligations pursuant to the Phantom Stock Plan shall be Capital Stock under the Indenture.

“Cash Equivalents” means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition;

(3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better;

(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and in each case maturing within six months after the date of acquisition; and

(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

“Change of Control” means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Stater Bros. and its Restricted Subsidiaries taken as a whole to any “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act) other than either La Cadena Investments or any La Cadena Successor;

(2) the adoption of a plan relating to the liquidation or dissolution of Stater Bros.;

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(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as defined above), other than either La Cadena Investments or any La Cadena Successor, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of Stater Bros., measured by voting power rather than number of shares;

(4) the first day on which a majority of the members of the Board of Directors of Stater Bros. are not Continuing Directors;

(5) Stater Bros. consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, Stater Bros., in any such event pursuant to a transaction in which any of the outstanding Voting Stock of Stater Bros. or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where all or a portion of the Voting Stock of Stater Bros. outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); or

(6) at any time prior to the date that a La Cadena Successor is the Beneficial Owner of more than 50% of the Voting Stock of Stater Bros., Permitted Holders shall cease to (A) have the power to vote the majority of the Capital Stock of La Cadena Investments, (B) be the Beneficial Owner of at least 35% of the Equity Interests in La Cadena Investments, or (C) be the Beneficial Owner of a higher percentage of the Equity Interests in La Cadena Investments than any other “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act).

“SEC”means the Securities and Exchange Commission.

“Consolidated Cash Flow”means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any extraordinary loss plus the amount of any net loss realized by such Person or any of its Consolidated Subsidiaries in connection with (a) an Asset Sale, or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries, in each case to the extent such losses were deducted in computing such Consolidated Net Income; plus

(2) provision for taxes based on income or profits of such Person and its Consolidated Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

(3) consolidated interest expense of such Person and its Consolidated Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

(4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period other than accruals or reserves made with respect to obligations of Stater Bros. under the Phantom Stock Plan, which accruals or reserves made with respect to obligations of Stater Bros. under the Phantom Stock Plan shall be included in non-cash expenses added to Consolidated Net Income for purposes of this clause (4)) of such Person and its Consolidated Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

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(5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP.

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Consolidated Subsidiary of Stater Bros. shall be added to Consolidated Net Income to compute Consolidated Cash Flow of Stater Bros. only to the extent that a corresponding amount would be permitted at the date of determination to be distributed to Stater Bros. by such Consolidated Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Consolidated Subsidiary or its stockholders.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Consolidated Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

(1) the Net Income (but not loss) of any Person that is not a Consolidated Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof;

(2) the Net Income of any Consolidated Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Consolidated Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement (other than the Revolving Credit Facility, the Santee Credit Facility and Permitted Santee Indebtedness), instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary or its stockholders;

(3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; and

(4) the cumulative effect of a change in accounting principles shall be excluded.

“Consolidated Subsidiary” of any Person means a subsidiary which for financial reporting purposes is or, in accordance with GAAP, should be, accounted for by such Person as a consolidated subsidiary; provided, however, that the Unrestricted Subsidiaries of Stater Bros. will not be included as Consolidated Subsidiaries of Stater Bros. for purposes of the Indenture, regardless of whether such Unrestricted Subsidiaries are or, in accordance with GAAP, should be accounted for as consolidated subsidiaries; provided, further, that any Person that is not a Subsidiary (as such term is defined herein) of a Person will not be included as a Consolidated Subsidiary of such Person, regardless of whether such Person is, or in accordance with GAAP, should be accounted for as a consolidated subsidiary.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of Stater Bros. who:

(1) was a member of such Board of Directors on the date of the Indenture; or

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Credit Facilities” means one or more debt facilities (including, without limitation, the Revolving Credit Facility) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special-purpose entities formed to borrow from such lenders against such receivables) or letters of

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credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part (whether by revolving or other long-term Indebtedness) from time to time.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Stater Bros. to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Stater Bros. may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption “—Certain Covenants—Restricted Payments.”

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock and excluding any payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Indebtedness” means up to $11.2 million in aggregate principal amount of Indebtedness of Stater Bros. and its Restricted Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in existence on the date of the Indenture until such amounts are repaid.

“Existing Notes” means the 10 ³/4% Senior Notes due 2006 of Stater Bros.

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions that have been made by the specified Person or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income;

(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded; and

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(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:

(1) the consolidated interest expense of such Person and its Consolidated Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and excluding (A) the amortization of any debt issuance costs and (B) the effect of all payments made or received pursuant to Hedging Obligations; plus

(2) the consolidated interest of such Person and its Consolidated Subsidiaries that was capitalized during such period; plus

(3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Consolidated Subsidiaries or secured by a Lien on assets of such Person or one of its Consolidated Subsidiaries, whether or not such guarantee or Lien is called upon; plus

(4) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Consolidated Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of Stater Bros. (other than Disqualified Stock) or to Stater Bros. or a Consolidated Subsidiary of Stater Bros.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for payment of which guarantee or obligations the full faith and credit of the United States is pledged.

“guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

“Guarantees” means the guarantees of the Guarantors with respect to the obligations of Stater Bros. under the Notes and the Indenture.

“Guarantors” means Stater Bros. Markets, Stater Bros. Development, Inc., Santee and each other Person that is required to become a Guarantor by the terms of the Indenture after the Issue Date, in each case until such Person is released from its Guarantee pursuant to the terms of the Indenture.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and

(2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates.

“Holders” means the holders of the Notes.

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“Indebtedness” means, with respect to any specified Person and without duplication, any liability of such Person, whether or not contingent:

(1) for borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3) in respect of banker’s acceptances;

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the guarantee by the specified Person of any indebtedness of any other Person, but does not include any payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan.

The amount of any Indebtedness outstanding as of any date shall be:

(1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and

(2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

For the avoidance of doubt, (x) obligations pursuant to contracts for the refurbishment or construction of existing or new distribution or supermarket facilities of Stater Bros. or of Restricted Subsidiaries shall not constitute Indebtedness and (y) reclassification of operating leases existing on the Issue Date into Capital Lease Obligations in accordance with GAAP and required as a result of changes to GAAP occurring following the Issue Date shall not constitute an incurrence of Indebtedness.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Stater Bros. or any Restricted Subsidiary of Stater Bros. sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Stater Bros. such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Stater Bros., then Stater Bros. shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of pursuant to such sale or disposition in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments.” If Stater Bros. or any Restricted Subsidiary of Stater Bros. designates a Restricted Subsidiary to be an Unrestricted Subsidiary pursuant to the provisions of the Indenture, then Stater Bros. shall be deemed to have made an Investment on the date of such designation equal to the fair market value of the Equity Interests of such Subsidiary in an amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments.” The acquisition by Stater Bros. or any Restricted Subsidiary of Stater Bros. of a Person that holds an Investment in any third Person shall be deemed to be an Investment by Stater Bros. or such Subsidiary in such third Person in an amount equal to the fair market of the Investment held by the acquired Person in such third Person in an

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amount determined as provided in the final paragraph of the covenant described above under the caption “—Certain Covenants—Restricted Payments.” For the avoidance of doubt, Investments shall not include any transaction, or series of transactions, that results in the payment to Stater Bros., or one of its Subsidiaries, for the construction of a new supermarket built by Stater Bros., or one of its Subsidiaries, and leased by Stater Bros., or one of its Subsidiaries, whether or not the lessor requires documentation confirming the lessor’s ownership in the supermarket building.

“Issue Date” means the first date on which the Fixed Rate Notes and Floating Rate Notes are issued.

“La Cadena Investments” means La Cadena Investments, a California general partnership.

“La Cadena Successor” means a partnership or limited liability company (other than La Cadena Investments) with respect to which (a) a Permitted Holder is a general partner or managing member, (b) Permitted Holders have the power to vote the majority of the Capital Stock, (c) Permitted Holders are the Beneficial Owners of at least 35% of the Equity Interests therein and (d) Permitted Holders are the Beneficial Owners of a higher percentage of the Equity Interests therein than any other “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any duly authorized filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1) (a) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with any Asset Sale; or (b) any gain or loss, together with any related provision for such gain or loss, realized in connection with the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and

(2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

“Net Proceeds” means the aggregate cash proceeds received by Stater Bros. or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under the Revolving Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

“Notes” means the Fixed Rate Notes and the Floating Rate Notes.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officers’ Certificate” means a certificate executed by two officers.

“Payment Default” means a default caused by the failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default; provided, however, that in the case of the Revolving Credit Facility, such a default shall only constitute a

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Payment Default if it consists of the failure to pay principal of, or interest or premium, if any, on the Indebtedness incurred pursuant to the Revolving Credit Facility as of the final Maturity Date (as defined in such Revolving Credit Facility).

“Permitted Construction Indebtedness” means Indebtedness of Stater Bros. or any Restricted Subsidiary representing the deferred purchase price, or the net proceeds of which are used solely to finance the purchase price, of any new or existing distribution or supermarket facilities (including any fixtures therein) operated or to be operated by Stater Bros. or Stater Bros. Markets.

“Permitted Holder” means (a) Jack H. Brown and his spouse and immediate family members, (b) any trust, corporation, partnership or other entity, the beneficial interests of which are owned exclusively by the Persons referred to in clause (a), and (c) any trustee, executor or receiver appointed to manage or administer the assets of any Person referred to in clause (a) following the death or incapacity of such Person and the heirs of any such Person referred to in clause (a).

“Permitted Investments” means:

(1) any Investment in Stater Bros. or in a Guarantor (including any Person who becomes a Guarantor as a result of any Investment), provided that any Indebtedness evidencing such Investment in a Guarantor is not subordinated to any Indebtedness or other obligation of such Guarantor;

(2) The making of Investments in Stater Bros. by any Subsidiary (provided that any Indebtedness evidencing such Investment is subordinated and junior to the Notes);

(3) any Investment in Cash Equivalents;

(4) any Investment by Stater Bros. or any Restricted Subsidiary in a Person, if as a result of such Investment:

(a) such Person becomes a Guarantor of Stater Bros.; or

(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Stater Bros. or a Guarantor;

(5) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “—Repurchase at the Option of Holders—Asset Sales”;

(6) any acquisition of assets or any Investment in any Person solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Stater Bros.;

(7) the extensions of trade credit and advances to customers and suppliers to the extent in the ordinary course of business and made in accordance with customary industry practice; and

(8) Hedging Obligations.

“Permitted Liens” means:

(1) Liens of Stater Bros. and any Restricted Subsidiary securing Indebtedness and other Obligations (a) under the Revolving Credit Facility and (b) under other Credit Facilities that, in each case, were permitted by the terms of the Indenture to be incurred;

(2) Liens in favor of Stater Bros. or any Restricted Subsidiary;

(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Stater Bros. or any Restricted Subsidiary of Stater Bros.; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Stater Bros. or the Restricted Subsidiary;

(4) Liens on property existing at the time of acquisition thereof by Stater Bros. or any Restricted Subsidiary of Stater Bros., provided that such Liens were in existence prior to the contemplation of such

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acquisition and do not extend to any assets other than such acquired property, and Liens incurred in the ordinary course of business to secure the payment of all or a portion of the purchase price of goods held for sale, provided that such Liens do not extend to any assets other than such goods;

(5) Liens or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

(6) Liens to secure Indebtedness (including Capital Lease Obligations and Permitted Construction Indebtedness) permitted by clauses (2), (4), (7), (10), (11) and (12) of the second paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock” covering only the assets acquired with or improved with the proceeds of such Indebtedness;

(7) Liens securing the Notes;

(8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor;

(9) Liens incurred in the ordinary course of business of Stater Bros. or any Restricted Subsidiary with respect to obligations that do not exceed $5.0 million at any one time outstanding;

(10) Liens existing on the date of the Indenture and renewals, extensions and replacements thereof, provided that such renewals, extensions or replacements will not apply to any property or assets not previously subject to such Liens or increase the principal amount of obligations secured thereby;

(11) Liens on deposits made in the ordinary course of business;

(12) Liens in favor of collecting banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of Stater Bros. or any Restricted Subsidiary on deposit with or in possession of such banks;

(13) Liens in respect of Permitted Refinancing Indebtedness; provided that the terms of such liens in respect of such Permitted Refinancing Indebtedness are not less favorable to the Holders of the Notes than the terms of the Liens securing the indebtedness being refinanced and do not extend to any assets not securing such indebtedness;

(14) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business and not overdue for a period of more than 90 days or which are being contested in good faith by appropriate proceedings;

(15) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation;

(16) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary course of business of Stater Bros. or its Subsidiaries, as the case may be, and any exceptions to title set forth in any title policies;

(17) any attachment or judgment Lien so long as the execution or other enforcement thereof is effectively stayed, the claims secured thereby are being contested in good faith by appropriate proceedings, adequate reserves have been established with respect to such claims in accordance with GAAP and no Default or Event of Default would result thereby;

(18) any Liens relating solely to property leased by Stater Bros. or any Subsidiary and arising solely out of the lease for such property;

(19) Liens securing Capital Lease Obligations incurred pursuant to the first paragraph of the covenant entitled “—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock”; and

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(20) Liens securing the Santee Note or Permitted Santee Indebtedness.

“Permitted Refinancing Indebtedness” means any Indebtedness of Stater Bros. or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Stater Bros. or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

(4) such Indebtedness is incurred either by Stater Bros. or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

“Permitted Santee Indebtedness”means Indebtedness of Santee in an aggregate principal amount not to exceed $55.0 million, the proceeds of which are used solely to repay the Santee Note; provided, that so long as at least $35.0 million in principal amount of the Santee Note remains outstanding, the Santee Note shall remain secured on a first priority basis in accordance with its terms as in effect on the date of the Indenture.

“Person”means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Phantom Stock Plan”means, collectively, the Stater Bros. Holdings Inc. Phantom Stock Plan effective as of June 27, 2000 and any related documents or instruments executed or to be executed in connection therewith (including without limitation any Phantom Stock Award Agreement thereunder), in each case as amended, modified, renewed, or replaced from time to time, with the exception of any amendment, modification, renewal or replacement that would expand the definition of “Eligible Employee” thereunder to include any shareholder of Stater Bros. Holdings or any partner in La Cadena Investments.

“Qualified Santee Sale”means (1) a sale by Stater Bros. Markets of a portion of the Equity Interests of Santee to a third party that is not an Affiliate of Stater Bros., (2) the issuance by Santee of additional Equity Interests to a third party that is not an Affiliate of Stater Bros. or (3) a combination of related transactions described in (1) and (2) above.

“Restricted Investment”means an Investment other than a Permitted Investment.

“Restricted Subsidiary”means any Subsidiary of Stater Bros. that is not an Unrestricted Subsidiary.

“Revolving Credit Facility”means the credit facility governed by that certain Credit Agreement, dated on or about August 6, 1999, and amended by that certain First Amendment, dated as of September 15, 2000, that certain Second Amendment dated as of December 13, 2001, that certain Third Amendment, dated as of January 18, 2002, and that certain Fourth Amendment dated as of February 4, 2003 by and among Stater Bros. Markets, Stater Bros., the Lenders from time to time parties thereto, and Bank of America, N.A., as agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith,

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and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing facility that alters the maturity thereof.

“Santee”means Santee Dairies, Inc., a California corporation, a wholly-owned Subsidiary of Stater Bros. Markets.

“Santee Credit Facility”means the credit facility governed by that certain Credit Agreement, dated on or about December 22, 1999 by and among Santee and Bank of America, N.A., as agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing facility that alters the maturity thereof.

“Santee Note”means that certain 5 ¹/4% note due March 31, 2009 in an aggregate principal amount of $55.0 million owed by Santee to Stater Bros. Markets, as in effect on the Issue Date.

“Stated Maturity”means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subsidiary”means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

“Total Assets”means, with respect to any Person, the aggregate of all assets of such Person and its subsidiaries as would be shown on the balance sheet of such Person prepared in accordance with GAAP.

“Unrestricted Subsidiary”means (a) any Subsidiary of Stater Bros. that is designated by the Board of Directors of Stater Bros. as an Unrestricted Subsidiary pursuant to a Board resolution in accordance with the terms of the Indenture, and (b) any Subsidiary of an Unrestricted Subsidiary.

“Voting Stock”of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity”means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Subsidiary”of any specified Person means any subsidiary of such Person all the outstanding shares of Capital Stock (other than Directors’ qualifying shares, if applicable) of which are owned directly by such Person or another Wholly-Owned Subsidiary of such Person.

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FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of United States federal income and estate tax consequences of the ownership and disposition of the Notes by an initial beneficial owner of the Notes. These consequences depend on whether the beneficial owner is or is not a “United States person.” For purposes of this discussion, a “United States person” generally means (a) a citizen or resident of the United States, (b) a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or of any political subdivision thereof, (c) an estate whose income is includible in gross income for United States federal income tax purposes regardless of its source, or (d) a trust, if a United States court is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or certain electing trusts that were in existence on August 19, 1996, and treated as a domestic trust on such date.

This discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations, judicial authority and administrative rulings and practice, any of which may be altered with retroactive effect thereby changing the federal tax consequences discussed herein. The tax treatment of the holders of the Notes may vary depending upon their particular situations. In addition, certain other holders, including insurance companies, tax exempt organizations, financial institutions and broker-dealers, may be subject to special rules not included in this discussion. Stater Bros. will not seek a ruling from the Internal Revenue Service (the “IRS”) with respect to any of the matters discussed herein and there can be no assurance that the IRS will not challenge one or more of the tax consequences described herein. Investors should consult their own tax advisor concerning the consequences of the ownership and disposition of the Notes, including the tax consequences under the laws of any foreign, state, local or other taxing jurisdictions and the possible effects on investors of changes in United States federal or other tax laws.

United States Holders

Exchange Offer

The exchange of the Old Notes for New Notes should not be a taxable exchange for United States federal income tax purposes, because the New Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, any New Notes received by investors should be treated as a continuation of their investment in the Old Notes. As a result, there should be no U.S. federal income tax consequences to investors resulting from the exchange offer, and investors should have the same adjusted tax basis and holding period in the New Notes as they had in the Old Notes immediately prior to the exchange.

Stated Interest

Interest on a Note will be includable by a United States person holding a Note (a “United States Holder”) as ordinary interest income at the time it accrues or is received in accordance with such holder’s method of accounting for tax purposes.

Sale, Exchange or Redemption of the Notes

Upon the disposition of a Note by sale, exchange or redemption, a United States Holder will generally recognize gain or loss equal to the difference between (i) the amount realized on the disposition (other than amounts attributable to accrued but unpaid interest, which will be taxed as such) and (ii) the United States Holder’s tax basis in the Note. A United States Holder’s tax basis in a Note generally will equal the cost of the Note (other than any cost attributable to accrued interest as of the date the United States Holder acquired the Note).

Assuming that the Note is held as a capital asset, such gain or loss will generally constitute capital gain or loss and will be long-term capital gain or loss if the United States Holder has held such Note for longer than one

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year. Non-corporate taxpayers are generally subject to a maximum regular federal income tax rate of 15% on net long-term capital gains. The deductibility of capital losses is subject to certain limitations.

Backup Withholding and Information Reporting

Under the Code, a United States Holder of a Note may be subject, under certain circumstances, to information reporting and/or backup withholding at a 28% rate with respect to cash payments in respect of interest or the gross proceeds from dispositions thereof. This withholding applies only if the holder (i) fails to furnish its social security or other taxpayer identification number (“TIN”) within a reasonable time after a request therefor, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it failed to report interest or dividends properly, or (iv) fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that it has provided its correct TIN and that it is not subject to backup withholding.

To be eligible for exemption from backup withholding, a United States Holder also must provide a properly completed IRS Form W-9 (or substitute form) to Stater Bros. or its paying agent. Any amount withheld from a payment to a United States Holder under the backup withholding rules is allowable as a credit against such holder’s United States federal income tax liability (and may entitle such holder to a refund), provided that the required information is furnished to the IRS. Certain persons are exempt from backup withholding, including corporations and certain financial institutions. Holders of Notes should consult their tax advisors as to their qualification for exemption from withholding and the procedure for obtaining such exemption.

Non-United States Holders

Interest

Generally, interest income of a non-United States person holding a Note (a “Non-United States Holder”) that is not effectively connected with a United States trade or business will be subject to a United States federal income tax and withholding at a 30% rate. However, such interest may be exempt from, or subject to a lower rate of, withholding pursuant to an income tax treaty between the United States and the country of residence of the Non-United States Holder. A Non-United States Holder claiming the benefit of such a treaty must provide Stater Bros. or its paying agent with a properly executed IRS Form W-8BEN (or a suitable substitute or successor form or such other form as the IRS may prescribe). Moreover, interest paid on the Notes by Stater Bros. or its paying agent to a Non-United States Holder will qualify for the so-called “portfolio-interest exemption” and, therefore, will not be subject to United States federal income tax or withholding provided that such interest income is not effectively connected with a United States trade or business of the Non-United States Holder and provided that:

• the Non-United States Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of Stater Bros. that is entitled to vote;

• the Non-United States Holder is not (i) a controlled foreign corporation related to Stater Bros. actually or constructively through the stock ownership rules under Section 864(d)(4) of the Code; or (ii) a bank which acquired the Notes in consideration for an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business;

• the interest paid to the Non-United States Holder is not considered contingent interest under Section 871(h)(4) of the Code and the regulations thereunder; and

• the beneficial owner satisfies the requirements set forth in Section 871(h) and 881(c) of the Code and the Treasury regulations issued thereunder relating to registered securities.

Currently, this requirement will be satisfied in either of the following circumstances:

• First, this requirement will be satisfied if the Non-United States Holder provides to Stater Bros. or its paying agent a Form W-8BEN (or a suitable substitute or successor form), that is signed under penalties of perjury, includes its name and address, and contains a certification that the holder is not a United States person.

93

• Second, the requirement will be satisfied if (a) the Non-United States Holder provides a Form W-8BEN (or a suitable substitute or successor form), signed under the penalties of perjury, to a qualified intermediary, such as a securities clearing organization, bank, or other financial institution who holds customers’ securities in the ordinary course of its trade or business and holds the Notes on behalf of a beneficial owner, and (b) the qualified intermediary certifies to Stater Bros. or its paying agent, under the penalties of perjury, that such statement has been received by it from the beneficial owner, directly or through another intermediary financial institution, and furnishes Stater Bros. or its paying agent with a copy thereof.

• Alternative documentation procedures for satisfying the certification requirement described above are available in respect of interest paid after December 31, 2000. Such procedures add intermediary certification options for certain qualifying agents. For instance, under one such option, a withholding agent would be allowed to rely on an IRS Form W-8IMY (or suitable substitute or successor form) furnished by a financial institution or other intermediary on behalf of one or more beneficial owners or other intermediaries without having to obtain the beneficial owner certificate described in the preceding paragraph, provided that the financial institution or intermediary has entered into a withholding agreement with the IRS and thus is a qualified intermediary.

Except to the extent that an applicable treaty otherwise provides, interest received by a Non-United States Holder that is effectively connected with a United States trade or business conducted by such holder will be taxed at the graduated rates applicable to United States persons. Effectively connected interest received by a corporate Non-United States Holder may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate, or, if applicable, a lower treaty rate. Even though such effectively connected interest will be subject to federal income tax, and possibly subject to the branch profits tax, it will not be subject to withholding if the Non-United States Holder delivers a properly executed IRS Form W-8ECI (or suitable substitute or successor form or such other form as the IRS may prescribe) to Stater Bros. or its agent.

Gain on Disposition

A Non-United States Holder will generally not be subject to United States federal income tax on gain realized on a sale, redemption or other disposition of the Notes unless:

• the gain is effectively connected with the conduct of a trade or business within the United States by the Non-United States Holder, or

• in the case of a Non-United States Holder who is a nonresident alien individual and holds the Note as a capital asset, such holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met.

If a Non-United States Holder falls under the first clause in the preceding paragraph, the holder will be taxed on the net gain derived from the sale under the graduated United States federal income tax rates that are applicable to United States persons and, if the Non-United States Holder is a foreign corporation, it may also be subject to the branch profits tax described above. Even though the effectively connected income will be subject to federal income tax, and possibly subject to the branch profits tax, it will not be subject to withholding if the Non-United States Holder delivers a properly executed IRS Form W-8ECI (or a suitable substitute or successor form) to Stater Bros. or its agent. If an individual Non-United States Holder falls under the second clause in the preceding paragraph, the holder generally will be subject to United States federal income tax at a rate of 30% on the amount by which the gain derived from the sale from sources within the United States were to exceed such holder’s capital losses allocable to sources within the United States for the taxable year of the sale.

Federal Estate Taxes

If interest on the Notes is exempt from withholding of United States federal income tax under the rules described above, the Notes will not be included in the estate of a deceased Non-United States Holder for United States federal estate tax purposes.

94

Backup Withholding and Information Reporting

Stater Bros. will, when required, report to the IRS and to each Non-United States Holder the amount of any interest paid on the Notes in each calendar year, and the amount of tax withheld, if any, with respect to the payments.

Treasury Regulations provide that backup withholding and additional information reporting will not apply to payments on the Notes by Stater Bros. to a Non-United States Holder if the holder certifies as to its status as a Non-United States Holder under penalties of perjury or otherwise establishes an exemption, provided that neither Stater Bros. nor its paying agent has actual knowledge that the holder is a United States person or that the conditions of any other exemption are not, in fact, satisfied.

Information reporting and backup withholding requirements with respect to the payment of the proceeds from the disposition of the Notes by a Non-United States Holder, if applicable, are as follows:

• If the proceeds are paid to or through the United States office of a broker, they generally will be subject to information reporting and backup withholding at a rate of 28%. However, no such reporting and withholding is required if: (a) the holder either certifies as to its status as a Non-United States Holder under penalties of perjury on an IRS Form W-8BEN or suitable substitute or successor form (as described above) or otherwise establishes an exemption, and (b) the broker does not have actual knowledge that the holder is a United States person or that the conditions of any other exemption are not, in fact, satisfied.

• If the proceeds are paid to or through a non-United States office of a broker that is not a United States person or a “United States related person,” as defined below, they will not be subject to backup withholding or information reporting.

• If the proceeds are paid to or through a Non-United States office of a broker that is either a United States person or a “United States related person,” they generally will be subject to information reporting. However, no such reporting is required if (a) the holder certifies as to its status as a Non-United States Holder under penalties of perjury or the broker has certain documentary evidence in its files as to the Non-United States Holder’s foreign status, and (b) the broker has no actual knowledge to the contrary. Backup withholding will generally not apply to payments made through foreign offices of a United States person or United States related person.

For purposes of this paragraph, a “United States related person” is:

• a “controlled foreign corporation” for United States federal income tax purposes;

• a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment (or for such part of the period that the broker has been in existence) is derived from activities that are effectively connected with the conduct of a United States trade or business; or

• for payments made after December 31, 2000, a foreign partnership if at any time during its tax year one or more of its partners are United States persons who, in the aggregate, hold more than 50% of the income or capital interest of the partnership or if, at any time during its taxable year, the partnership is engaged in the conduct of a United States trade or business.

Any amounts withheld under the backup withholding rules from a payment to a Non-United States Holder will be allowed as a refund or a credit against such Non-United States Holder’s United States federal income tax liability provided that the requisite procedures are followed.

The federal tax discussion set forth above as to both United States Holders and Non-United States Holders is included for general information only and may not be applicable depending upon a Holder’s particular situation. Holders should consult their own tax advisors with respect to the tax consequences to them of the ownership and disposition of the Notes, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in federal or other tax laws.

95

PLAN OF DISTRIBUTION

This prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer (a “Participating Broker-Dealer”) in connection with the resale of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. Each such Participating Broker-Dealer that participates in the Exchange Offer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. Stater Bros. has agreed that for a period of 180 days after the expiration date, Stater Bros. will make this prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until                     , 2004, all dealers effecting transactions in the New Notes may be required to deliver a prospectus.

Stater Bros. will not receive any proceeds from any sale of New Notes by Participating Broker-Dealers. New Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any Participating Broker-Dealer and/or the purchasers of any such New Notes. Any Participating Broker-Dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the expiration date, Stater Bros. will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any Participating Broker-Dealer that requests such documents in the letter of transmittal.

96

LEGAL MATTERS

The validity of the New Notes offered hereby and certain other legal matters will be passed upon for Stater Bros. by Gibson, Dunn & Crutcher LLP, Los Angeles, California. Certain legal matters for Stater Bros. will be passed upon by Varner, Saleson & Brandt LLP, Riverside, California. Bruce D. Varner, a partner at Varner, Saleson & Brandt LLP, is a director of Stater Bros.

EXPERTS

The consolidated financial statements of Stater Bros. Holdings Inc. as of September 30, 2001, September 29, 2002 and September 28, 2003, and for the 52-week periods ended September 29, 2002 and September 28, 2003 and the 53-week period ended September 30, 2001, included in the Prospectus, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report appearing herein.

97

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF STATER BROS. HOLDINGS INC.

Audited Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at September 30, 2001, September 29, 2002 and September 28, 2003	F-3
Fiscal years ended September 30, 2001, September 29, 2002 and September 28, 2003:
Consolidated Statements of Income	F-5
Consolidated Statements of Cash Flows	F-6
Consolidated Statements of Stockholder’s Deficit	F-7
Notes to Consolidated Financial Statements	F-8
Unaudited Financial Statements:
Consolidated Balance Sheets at September 28, 2003 and June 27, 2004	F-22
Consolidated Statements of Income for the 39 weeks Ended June 29, 2003 and June 27, 2004	F-24
Consolidated Statements of Operations for the 13 Weeks Ended June 29, 2003 and June 27, 2004	F-25
Consolidated Statements of Cash Flows for the 39 weeks Ended June 29, 2003 and June 27, 2004	F-26
Notes to Consolidated Financial Statements	F-27

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of

Stater Bros. Holdings Inc.

We have audited the accompanying consolidated balance sheets of Stater Bros. Holdings Inc. (and subsidiaries) as of September 30, 2001, September 29, 2002 and September 28, 2003, and the related consolidated statements of income, stockholder’s deficit, and cash flows for the 52-week periods ended September 29, 2002 and September 28, 2003 and the 53-week period ended September 30, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Stater Bros. Holdings Inc. at September 30, 2001, September 29, 2002 and September 28, 2003, and the consolidated results of their operations and their cash flows for the 52-week periods ended September 29, 2002 and September 28, 2003 and the 53-week period ended September 30, 2001, in conformity with U.S. generally accepted accounting principles.

/s/    ERNST & YOUNG LLP

Orange County, California

December 5, 2003

F-2

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
Current assets
Cash and cash equivalents	$	101,636	$	81,043	$	111,152
Receivables		29,894		26,500		23,217
Income tax receivables		358		7,061		4,354
Inventories		170,189		175,404		172,267
Prepaid expenses		6,743		7,860		6,962
Deferred income taxes		6,634		15,281		14,793
Total current assets		315,454		313,149		332,745
Investment in unconsolidated affiliate		12,666		15,580		16,910
Property and equipment
Land		50,930		50,930		50,930
Buildings and improvements		182,269		191,514		200,349
Store fixtures and equipment		190,581		212,741		242,562
Property subject to capital leases		24,670		24,670		24,670
		448,450		479,855		518,511
Less accumulated depreciation and amortization		170,123		194,039		216,366
		278,327		285,816		302,145
Deferred income taxes		4,897		—		—
Deferred debt issuance costs, net		12,042		13,936		10,486
Other assets		5,908		5,649		5,540
		22,847		19,585		16,026
Total assets	$	629,294	$	634,130	$	667,826

See accompanying notes to consolidated financial statements.

F-3

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except share amounts)

LIABILITIES AND STOCKHOLDER’S DEFICIT

	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
Current liabilities:
Accounts payable	$	107,485		$	104,166		$	112,458
Accrued payroll and related expenses		41,737			41,567			44,362
Other accrued liabilities		44,340			46,656			50,352
Current portion of capital lease obligations		1,435			1,117			1,056
Total current liabilities		194,997			193,506			208,228
Deferred income taxes		—			6,500			6,708
Long-term debt		439,000			458,750			458,750
Capital lease obligations, less current portion		12,098			10,981			9,926
Long-term portion of self-insurance and other reserves		15,852			23,855			27,941
Other long-term liabilities		8,756			14,659			20,267
Total liabilities		670,703			708,251			731,820
Stockholder’s deficit
Common Stock, $.01 par value:
Authorized shares—100,000 Issued and outstanding shares 0 in 2001, 2002 and 2003		—			—			—
Class A Common Stock, $.01 par value:
Authorized shares—100,000 Issued and outstanding shares 50,000 in 2001; 38,301 in 2002 and 2003		1			—			—
Additional paid-in capital		12,715			9,740			9,740
Retained deficit		(54,125	)		(83,861	)		(73,734	)
Total stockholder’s deficit		(41,409	)		(74,121	)		(63,994	)
Total liabilities and stockholder’s deficit	$	629,294		$	634,130		$	667,826

See accompanying notes to consolidated financial statements.

F-4

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share and share amounts)

	Fiscal Year Ended
	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
Sales	$	2,573,913		$	2,666,346		$	2,753,774
Cost of goods sold		1,911,065			1,957,526			1,999,361
Gross profit		662,848			708,820			754,413
Operating expenses:
Selling, general and administrative expenses		579,549			615,482			659,720
Depreciation and amortization		22,327			24,300			26,879
Total operating expenses		601,876			639,782			686,599
Operating profit		60,972			69,038			67,814
Interest income		3,409			1,721			1,049
Interest expense		(52,410	)		(52,814	)		(53,254	)
Equity in income from unconsolidated affiliate		1,584			2,914			1,330
Other expense—net		(258	)		(1,579	)		(1,093	)
Income before income taxes		13,297			19,280			15,846
Income taxes		5,452			7,491			5,719
Net income	$	7,845		$	11,789		$	10,127
Earnings per common share	$	156.90		$	280.92		$	264.41
Average common shares outstanding		50,000			41,965			38,301
Common shares outstanding at end of year		50,000			38,301			38,301

See accompanying notes to consolidated financial statements.

F-5

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Fiscal Year Ended
	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
Operating activities:
Net income	$	7,845		$	11,789		$	10,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,061			31,493			34,308
Deferred income taxes		2,921			2,750			696
Loss on disposals of assets		258			1,579			1,093
Net undistributed income in unconsolidated affiliate		(1,584	)		(2,914	)		(1,330	)
Changes in operating assets and liabilities:
(Increase) decrease in receivables		(1,713	)		3,394			3,283
(Increase) decrease in income tax receivables		(95	)		(6,703	)		2,707
(Increase) decrease in inventories		(4,857	)		(5,215	)		3,137
(Increase) decrease in prepaid expenses		(1,427	)		(1,136	)		893
Decrease in other assets		15,683			3,398			3,559
Increase (decrease) in accounts payable		6,708			(3,319	)		8,292
Increase in accrued liabilities and long-term portion of self-insurance reserves		26,593			16,052			16,185
Net cash provided by operating activities		79,393			51,168			82,950
Financing activities:
Debt issuance costs		—			(5,033	)		—
Stock redemption		—			(20,000	)		—
Dividends paid		—			(4,500	)		—
Principal payments on long-term debt		(5,048	)		(250	)		—
Principal payments on capital lease obligations		(2,092	)		(1,435	)		(1,116	)
Net cash used in financing activities		(7,140	)		(31,218	)		(1,116	)
Investing activities:
Purchase of property and equipment		(33,499	)		(40,722	)		(51,890	)
Proceeds from sale of property and equipment		251			179			165
Net cash used in investing activities		(33,248	)		(40,543	)		(51,725	)
Net increase (decrease) in cash and cash equivalents		39,005			(20,593	)		30,109
Cash and cash equivalents at beginning of year		62,631			101,636			81,043
Cash and cash equivalents at end of year	$	101,636		$	81,043		$	111,152
Interest paid	$	49,848		$	49,927		$	49,560
Income taxes paid	$	2,890		$	11,443		$	3,000

See accompanying notes to consolidated financial statements.

F-6

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S DEFICIT

(In thousands)

	Common Stock		Class A Common Stock			Additional Paid-In Capital			Retained Deficit			Total
Balances at September 24, 2000	$	—	$	1		$	12,715		$	(61,970	)	$	(49,254	)
Net income for 53 weeks ended September 30, 2001		—		—			—			7,845			7,845
Balances at September 30, 2001		—		1			12,715			(54,125	)		(41,409	)
Net income for 52 weeks ended September 29, 2002		—		—			—			11,789			11,789
Dividend paid		—		—			—			(4,500	)		(4,500	)
Stock redemption		—		(1	)		(2,975	)		(37,025	)		(40,001	)
Balances at September 29, 2002		—		—			9,740			(83,861	)		(74,121	)
Net income for 52 weeks ended September 28, 2003		—		—			—			10,127			10,127
Balances at September 28, 2003	$	—	$	—		$	9,740		$	(73,734	)	$	(63,994	)

See accompanying notes to consolidated financial statements.

F-7

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 28, 2003

Note 1—The Company and Summary of Significant Accounting Policies

Description of Business

Stater Bros. Holdings Inc. (the “Company”) is engaged primarily in the operation of retail supermarkets. As of September 28, 2003, the Company operated 157 retail grocery supermarkets under the name “Stater Bros. Markets.” The Company’s supermarkets are located in Southern California’s San Bernardino, Riverside, Los Angeles, Orange, San Diego and Kern counties. The Company and its predecessor companies have operated retail grocery stores under the “Stater Bros. Markets” name in the Inland Empire of Southern California since 1936.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Stater Bros. Markets (“Markets”) and Stater Bros. Development, Inc. All significant inter-company transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Fiscal Year

The Company’s fiscal year ends on the last Sunday in September. The fiscal years ended September 29, 2002 and September 28, 2003 were 52-week years and the fiscal year ended September 30, 2001 was a 53-week year.

Cash and Cash Equivalents

Cash and cash equivalents are reflected at cost, which approximates their fair value, and consist primarily of overnight repurchase agreements, certificates of deposit and money market funds with maturities of less than three months when purchased.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.

Receivables

Receivables represent amounts expected to be received during the next operating cycle of the Company. The carrying amount reported in the balance sheet for receivables approximates their fair value.

Investment in Affiliate

The Company owns 50% of Santee Dairies, LLC. The Company is not the controlling stockholder and accordingly accounts for its investment using the equity method of accounting.

F-8

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 1—The Company and Summary of Significant Accounting Policies (continued)

Long-Lived Assets

Financial Accounting Standards Board Statement No. 144 (“SFAS No. 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets” became effective for the Company on September 30, 2002. This standard replaces SFAS No. 121 and APB No. 30 and amends APB No. 51 among others. Adoption of this standard did not have a material effect on the Company’s financial statements. As part of the adoption of this standard, assets previously classified as “Properties held for sale” on the consolidated balance sheets were reclassified to “Property and equipment.”

The Company reviews the recoverability of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the estimated future, undiscounted cash flows from the use of an asset are less than its carrying value, a write-down is recorded to reduce the related asset to estimated fair value.

Property and Equipment

Property and equipment are stated at cost and are depreciated or amortized, principally on a straight-line basis over the estimated useful lives of the assets, and for capitalized leases over the initial lease term or the estimated economic life of the asset.

The average estimated economic lives are as follows:

	Range	Most Prevalent
Buildings and improvements	8 - 30 Years	25 Years
Store furniture and equipment	3 - 10 Years	5 Years
Property subject to capital leases	Life of Lease	25 Years

Deferred Debt Issuance Costs

Direct costs incurred as a result of financing transactions are capitalized and amortized to interest expense over the terms of the applicable debt agreements.

Phantom Stock Plan

It is the Company’s policy to expense phantom stock units to the extent that they vest and appreciate during the accounting period.

Self-insurance Reserves

The Company is primarily self-insured, subject to certain retention levels for workers’ compensation, automobile and general liability costs. The Company is covered by umbrella insurance policies for catastrophic events. The Company records its self-insurance liability based on the claims filed and an estimate of claims incurred but not yet reported. The estimates used by management are based on the Company’s historical experiences as well as current facts and circumstances. The Company uses third party actuarial analysis in making its estimates. Actuarial projections and the Company’s estimate of ultimate losses are subject to a high degree of variability. The variability in the projections and estimates are subject to, but not limited to, such factors as judicial and administrative rulings, legislative actions, and changes in compensation benefits structure. In recent years, the Company and employers within the State of California as a whole have seen significant

F-9

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 1—The Company and Summary of Significant Accounting Policies (continued)

Self-insurance Reserves (continued)

increases in the severity of workers’ compensation claims. The Company discounts its workers’ compensation, automobile and general liability insurance reserves at a discount rate of approximately 7.5%. The Company is self-insured, subject to certain retention levels, for health care costs of eligible non-bargaining unit employees. Such health care reserves are not discounted.

Income Taxes

The Company provides for deferred income taxes as timing differences arise between income and expenses recorded for financial and income tax reporting purposes.

Revenue Recognition

The Company recognizes revenue from the sale of its products at the point of sale to the customer. Sales are recognized net of any discounts given to the customer.

Cost of Goods Sold

Included in cost of goods sold are direct product purchase costs, all in-bound freight costs, all direct receiving and inspection costs, all quality assurance costs, all warehousing costs and all costs associated with transporting goods from the Company’s warehouses to its stores, net of earned vendor rebates and allowances. The Company recognizes, as a reduction to cost of goods sold, certain rebates and allowances (“allowances”) from its vendors as the allowances are earned. Allowances are earned by promoting certain products or by purchasing specified amounts of product. The Company records a liability for allowance funds that have been received but not yet earned. Included as a reduction in cost of goods sold for fiscal 2003 is $4.6 million of advertising costs in excess of the fair value of the co-operative advertising.

Selling, General and Administrative Expenses

Included in selling, general and administrative expenses are all store operation costs which includes all store labor costs associated with receiving, displaying and selling the Company’s products at the store level; all advertising costs, net in fiscal 2003 of the portion of co-operative advertising allowances directly related to the fair value of the advertising and net of all co-operative advertising allowances in the prior years; certain salary, wages and administrative costs associated with the purchasing of the Company’s products and all security, management information services, accounting and corporate management costs.

As noted under “Cost of Goods Sold”, the Company includes all purchasing and distribution costs to deliver the product for sale to its stores in cost of goods sold, except for certain salary, wages and administrative costs associated with the purchasing of its products. The amount of salary, wages and administrative costs associated with the purchase of its product included in selling, general and administrative costs was $808,000, $861,000 and $891,000 in fiscal 2001, fiscal 2002 and fiscal 2003, respectively.

Vendor Rebates and Allowances

The Company receives certain allowances from its vendors that relate to the purchase and promotion of certain products. All allowances, except for advertising allowances described under “Advertising Allowances”, are recognized as a reduction in cost of goods sold as the performance is completed and inventory sold.

F-10

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 1—The Company and Summary of Significant Accounting Policies (continued)

Vendor Rebates and Allowances (continued)

Allowances, such as slotting fees, which are tied to the promotion of certain products are recognized as reductions in cost of goods sold as the Company meets the required performance criteria. Allowances that are based upon purchase or sales volumes are recognized as reductions in cost of goods sold as the products are sold. The Company receives lump-sum payments from vendors for the promotion or purchase of products over multi-year periods. The Company records a liability for unearned allowances and recognizes, as a reduction in cost of goods sold, these allowances over time as the criteria of these contracts are met.

Advertising Allowances

The Company receives co-operative advertising allowances from vendors for advertising specific vendor products over specific periods of time. For fiscal 2003, the Company recognized the portion of co-operative advertising allowances directly related to the fair value of advertising as a reduction in advertising costs. In fiscal 2003, $4.6 million of excess allowances received over the fair value of advertising were recorded as a reduction to cost of goods sold. In fiscal 2001 and fiscal 2002, all co-operative advertising allowances were recognized as reductions in advertising expense. A significant portion of the Company’s advertising expenditures is in the form of twice weekly print advertisements. The Company distributes its print ads through inserts in local newspapers, in direct mailers and as handouts distributed in its stores. The Company analyzes, on an annual basis, the direct out-of-pocket costs for printing and distributing its print ads. Using the number of ads in a typical twice weekly advertisement, the actual direct costs of an individual advertisement is determined. The cost determined is deemed to be the fair value of advertising. The amount of co-operative advertising allowance recognized as a reduction in advertising expense was $11.8 million, $11.9 million and $5.9 million in fiscal 2001, fiscal 2002 and fiscal 2003, respectively.

Advertising

The Company’s advertising costs, net of vendor allowances for co-operative advertising, are recognized in the period the advertising is incurred and are included in selling, general and administrative expenses. Advertising costs, net of vendor allowances, were $20.8 million, $23.7 million and $27.4 million in fiscal 2001, 2002 and 2003, respectively.

Leases

Certain of the Company’s operating leases provide for minimum annual payments that change over the life of the lease. The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a liability for minimum step rents when the amount of straight-line rent expense exceeds the actual lease payment and it reduces the step rent liability when the actual lease payment exceeds the amount of straight-line rent expense.

Recent Accounting Pronouncements

In April 2003, the FASB issued Statement 149, Amendment of Statement 133, “Accounting for Derivative Instruments and Hedging Activities”. Statement 149 requires that contracts with comparable characteristics be accounted for similarly. The Company does not expect the adoption of this pronouncement to have a material impact on the results of its operations, financial position or liquidity. In May 2003, the FASB issued Statement 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. Statement 150 establishes standards for classifying and measuring certain financial instruments with

F-11

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 1—The Company and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

characteristics of both liabilities and equity. The Company does not expect the adoption of this pronouncement to have a material impact on the results of its operations, financial position or liquidity. In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“Interpretation 46”), an interpretation of ARB No. 51. The Company is in the initial stages of reviewing this interpretation, but does not believe it has any variable interest entities to which Interpretation 46 would apply.

Reclassifications

Certain amounts in the prior periods have been reclassified to conform to the current period financial statement presentation.

Note 2—Impact of Recent EITF

Effective September 30, 2002, the Company adopted EITF Issue No. 02-16 “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.” The Company’s adoption of the EITF has had no effect on the Company’s current year or prior years’ net income. In fiscal 2003, as a result of EITF Issue No. 02-16, vendor payments of $4.6 million related to advertising reimbursements, previously classified as a reduction in selling, general and administrative expenses were reclassified as a reduction in cost of goods sold. Prior year financial statements were not reclassified. The following table shows the pro forma consolidated operating profit for fiscal 2001 and fiscal 2002 if the impact of EITF Issue No. 02-16 had been applied to fiscal 2001 and fiscal 2002.

	Fiscal Year Ended
	Sept. 30, 2001		Sept. 29, 2002
	(In thousands)
Sales	$	2,573,913	$	2,666,346
Costs of good sold		1,906,842		1,953,761
Gross profit		667,071		712,585
Operating expenses:
Selling, general and administrative expenses		583,772		619,247
Depreciation and amortization		22,327		24,300
Total operating expenses		606,099		643,547
Operating profit	$	60,972	$	69,038

Note 3—Debt

Long-term debt consisted of the following:

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
	(In thousands)
5% Subordinated Note due 2007	$	—	$	20,000	$	20,000
10 3/4% Senior Notes due 2006		439,000		438,750		438,750
Total long-term debt	$	439,000	$	458,750	$	458,750

F-12

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 3—Debt (continued)

Interest on the 10 ³/4% Senior Notes due August 2006, is payable semi-annually on February 15 and August 15. Principal on the 10 ³/4% Senior Notes is due in the fiscal year 2006.

Interest on the 5% subordinated note due March 2007, is payable semi-annually on March 31 and September 30. Principal on the 5% subordinated note is due in the fiscal year 2007.

Interest capitalized during fiscal years 2001, 2002 and 2003 amounted to $238,000, $144,000 and $126,000 respectively. Interest expense incurred, before the effect of capitalized interest, during 2001, 2002 and 2003 amounted to $52,648,000, $52,958,000 and $53,380,000, respectively.

During fiscal 2002, the Company redeemed $250,000 of its 10 ³/4% Senior Notes due 2006. The Notes were restricted and unregistered. The Notes were redeemed for $250,000 plus accrued interest.

Note 4—Unconsolidated Affiliate

The Company owns 50% of Santee Dairies LLC. Through its wholly owned subsidiary, Santee Dairies, Inc. (“Santee”), it operates a fluid milk processing plant located in City of Industry. The Company is not the controlling stockholder. Accordingly, the Company accounts for its investment in Santee Dairies LLC using the equity method of accounting and recognized income of $1,584,000, $2,914,000 and $1,330,000 for fiscal years 2001, 2002 and 2003, respectively. The Company is a significant customer of Santee which supplies the Company with a substantial portion of its fluid milk and dairy products.

Summary of unaudited financial information for Santee Dairies LLC is as follows:

	52 Weeks		52 Weeks		52 Weeks
	Sept. 29, 2001		Sept. 28, 2002		Sept. 27, 2003
	(In thousands)
Current Assets	$	24,060	$	24,918	$	25,771
Non-current assets		95,236		91,674		89,096
Current liabilities		26,754		23,257		24,952
Non-current liabilities		67,046		62,012		56,215
Shareholders’ equity		25,496		31,323		33,700
Sales		188,627		181,686		172,718
Gross profit		29,663		30,497		27,962
Net income	$	3,168	$	5,826	$	2,660

Note 5—Bank Facilities

The Company’s principal operating subsidiary, Markets, entered into a credit facility, as amended, with Bank of America N.A. on August 6, 1999 (the “credit facility”). The credit facility provides for (i) a $75.0 million revolving loan facility and (ii) a “Letter of Credit Sublimit” which is defined as an amount equal to the lesser of (a) the Revolving Loan Commitment and (b) $50,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Loan Commitment. Borrowings under the revolving loan facility are unsecured and expected to be used for certain working capital and corporate purposes. Letters of credit under the letter of credit facility are expected to be used to support obligations incurred in connection with the construction of stores, workers’ compensation insurance obligations and as security for certain rent obligations.

F-13

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 5—Bank Facilities (continued)

The availability of the loans and letters of credit are subject to certain sublimits and other borrowing restrictions. Indebtedness of Markets under the credit facility is guaranteed by Stater Bros. Development, Inc., a subsidiary of the Company, and any subsidiaries that Markets or Stater Bros. Development, Inc. acquires or forms after the date of the credit facility.

Loans under the credit facility bear interest at a rate based upon either (i) the “Base Rate” (defined as the higher of (a) the federal funds rate plus 0.50% and (b) the rate of interest publicly announced by Bank of America as its “reference rate”), plus 1.00%, or (ii) the “Offshore Rate” (defined as the average British Bankers Association Interest Settlement Rate for deposits in dollars, adjusted for the maximum reserve requirement for Eurocurrency funding), plus 1.75%. For Offshore Rate Loans, the Offshore Rate will be applied in consecutive periods of the earlier of (a) the maturity date of the loan or (b) periods, as selected by Markets of one, two, three or six months.

The revolving loan facility will cease to be available and will be payable in full on March 31, 2005. Letters of credit under the credit facility can be issued until March 31, 2005. The loans under the revolving loan facility must be repaid for a period of ten consecutive days semi-annually.

Loans under the revolving loan facility may be repaid and re-borrowed. The loans under the revolving loan facility may be prepaid at any time without penalty, subject to certain minimums and payment of any breakage and re-deployment costs in the case of loans based on the offshore rate. The commitments under the credit facility may be reduced by Markets. Markets will be required to pay a commitment fee equal to 0.25% per annum on the actual daily unused portion of the revolving loan facility and the letter of credit facility, payable quarterly in arrears. Outstanding letters of credit under the credit facility are subject to a fee of 1.25% per annum on the face amount of such letters of credit, payable quarterly in arrears. Markets will be required to pay standard fees charged by Bank of America with respect to the issuance, negotiation, and amendment of commercial letters of credit issued under the letter of credit facility.

The Company had no short-term borrowings outstanding at the end of fiscal years 2001, 2002 and 2003, and the Company did not incur short-term borrowings during fiscal years 2001, 2002 and 2003.

Availability of the loans and letters of credit under the credit facility is subject to a monthly borrowing base test based on inventory. The credit facility requires Markets to meet certain financial tests, including minimum net worth and minimum EBITDA tests. The credit facility contains covenants which, among other things, will limit indebtedness, liens, guarantee obligations, mergers, consolidations, liquidations and dissolutions, asset sales, leases, investments, loans and advances, transactions with affiliates, sale and leasebacks, other matters customarily restricted in such agreements and modifications to the holding company status of the Company.

The credit facility also contains covenants that apply to the Company and the Company is a party to the credit facility for purposes of these covenants. These covenants, among other things, limit dividends and other payments in respect to the Company’s capital stock, prepayments and redemptions of the exchange notes and other debt, and limit indebtedness, investments, loans and advances by the Company.

The credit facility requires the Company and Markets to comply with certain covenants intended to ensure that their legal identities remain separate.

The credit facility contains customary events of default, including payment defaults; material inaccuracies in representations and warranties; covenant defaults; cross-defaults to certain other indebtedness; certain bankruptcy events; certain ERISA events; judgments; defaults; invalidity of any guaranty; failure of Jack H. Brown to be Chairman of the Board and Chief Executive Officer of Stater Bros. Markets; and change of control.

F-14

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 5—Bank Facilities (continued)

As of September 28, 2003, for purposes of the credit facility with Bank of America, both Markets and the Company were in compliance with all restrictive covenants. The Company is also subject to certain covenants associated with its 10 ³/4% Senior Notes due 2006. As of September 28, 2003, the Company was in compliance with all such covenants. However, there can be no assurance that Markets or the Company will be able to achieve the expected operating results or implement the capital expenditure strategy upon which future compliance with such covenants is based.

Note 6—Leases

The Company leases the majority of its retail stores, offices, warehouses and distribution facilities. Certain of the operating leases provide for minimum annual payments that change over the life of the lease. The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. In addition, certain leases provide for additional rents based on sales and some of these leases allow the Company to reduce current year contingent rent payments by amounts paid for property taxes, insurance and in some cases capital expenditures. Primary lease terms range from 3 to 55 years and substantially all leases provide for renewal options.

As of September 24, 2000, a portion of the Company’s lease obligations were guaranteed by Petrolane Incorporated (“Petrolane”) or its successor. The leases guaranteed by Petrolane had initial terms of 20 years and expired in 2003. Lease payments for the properties subject to the Petrolane guarantees were approximately $10.0 million per year. Under the terms of the agreement related to the Company’s acquisition of Stater Bros. Markets from Petrolane in 1983, as amended in 1985, Stater Bros. Markets was required to make annual deposits into a lease guarantee escrow account. In addition, 10 shares of Stater Bros. Markets’ $11.00 Cumulative Redeemable Preferred Stock due 2003 were held by Petrolane in connection with the lease guarantees.

During the first quarter of fiscal 2001, Stater Bros. Markets redeemed all 10 outstanding shares of its $11.00 Cumulative Redeemable Preferred Stock due 2003 from Texas Eastern Corporation, Petrolane’s assignee of such preferred stock. The Petrolane lease guarantees were terminated in exchange for a $400,000 fee and a letter of credit was issued in favor of Texas Eastern to secure a portion of the remaining lease payments through 2003. As part of these transactions, the lease guarantee escrow account was terminated and the $13.2 million in such account was released to Stater Bros. Markets. All of the store leases that had been guaranteed by Petrolane were extended for an additional five years following expiration of their respective initial terms in 2003.

Following is a summary of future minimum lease payments as of September 28, 2003:

Fiscal Year	Capital Leases		Operating Leases Minimum Payment
	(In thousands)
2004	$	2,781	$	31,312
2005		2,453		30,896
2006		2,225		28,167
2007		2,139		23,074
2008		2,095		20,526
Thereafter		8,946		94,142
Total minimum lease payments		20,639	$	228,117
Less amounts representing interest		9,657
Present value of minimum lease payments		10,982
Less current portion		1,056
Long-term portion	$	9,926

F-15

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 6—Leases (continued)

Rental expense and sublease income were as follows:

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
	(In thousands)
Minimum rental	$	23,612	$	25,009	$	26,383
Rentals based on sales	$	10,372	$	10,487	$	10,951
Sublease income	$	1,165	$	1,200	$	1,213

Aggregate sublease income to be received subsequent to September 28, 2003 is approximately $4,422,000.

Note 7—Preferred Stock

During fiscal 2001, the Company paid all cumulative deferred dividends and redeemed all outstanding $11.00 Cumulative Redeemable Preferred Stock due 2003 of Stater Bros. Markets (see Note 6).

Note 8—Income Taxes

The provision for income taxes consisted of the following:

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
	(In thousands)
Current
Federal	$	3,642	$	3,317	$	2,590
State		933		1,037		1,343
		4,575		4,354		3,933
Deferred
Federal		635		2,459		1,707
State		242		678		79
		877		3,137		1,786
Income tax expense	$	5,452	$	7,491	$	5,719

A reconciliation of the provision for income taxes to amounts computed at the federal statutory rate is as follows:

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
	(In thousands)
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State franchise tax rate, net of federal income tax benefit	5.8		5.8		5.8
Tax credits	(4.6	)	(3.3	)	(3.3	)
Other	4.8		1.4		(1.4	)
	41.0	%	38.9	%	36.1	%

F-16

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 8—Income Taxes (continued)

Components of deferred income taxes are as follows:

	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
	(In thousands)
Deferred income tax assets:
Self-insurance reserves	$	10,646		$	15,034		$	18,592
Pension and vacation liabilities		3,844			4,138			4,893
Inventories		1,862			2,010			2,318
Investment in unconsolidated affiliate		427			—			—
Income deferred for book purposes		2,762			3,591			2,765
Tax credits and operating loss carry forwards		4,190			5,514			1,650
Other, net		—			—			3,509
Total deferred income tax assets		23,731			30,287			33,727
Deferred income tax liabilities:
Property and equipment		(7,936	)		(18,453	)		(22,282	)
Other assets		(2,058	)		(2,058	)		(2,058	)
Investment in unconsolidated affiliate		—			(760	)		(1,302	)
Other, net		(2,206	)		(235	)		—
Total deferred income tax liabilities		(12,200	)		(21,506	)		(25,642	)
Net deferred income tax assets	$	11,531		$	8,781		$	8,085

Although there can be no assurances as to future taxable income of the Company, the Company believes that its expectations of future taxable income, when combined with the income taxes paid in prior years, will be adequate to realize the deferred income tax assets.

Note 9—Retirement Plans

Pension Plan

The Company has a noncontributory defined benefit pension plan covering substantially all non-union employees. The plan provides for benefits based on an employee’s compensation during the eligibility period while employed with the Company. The Company’s funding policy for this plan is to contribute annually at a rate that is intended to provide sufficient assets to meet future benefit payment requirements.

Net periodic pension cost included the following components:

	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
	(In thousands)
Service cost—benefits earned during the period	$	1,299		$	1,577		$	2,095
Interest cost on projected benefit obligation		1,671			2,041			2,256
Actual return on assets		(1,528	)		(1,719	)		(2,047	)
Net amortization and deferral		27			27			27
Recognized gains or losses		60			281			467
Prior service cost recognized		(5	)		(2	)		(2	)
Net periodic pension cost	$	1,524		$	2,205		$	2,796
Assumptions used for accounting were:
Discount rate		7.75	%		7.25	%		6.50	%
Rate of increase in compensation levels		5.00	%		5.00	%		5.00	%
Expected long-term rate of return on assets		9.00	%		8.00	%		8.00	%

F-17

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 9—Retirement Plans (continued)

Pension Plan (continued)

The following table sets forth the plan’s funded status and amounts recognized in the Company’s balance sheet at:

	Sept. 30, 2001			Sept. 29, 2002			Sept. 28, 2003
	(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation	$	20,159		$	27,595		$	33,342
Vested benefit obligation	$	20,397		$	26,860		$	32,505
Projected benefit obligation	$	(26,622	)	$	(34,963	)	$	(41,354	)
Plan assets at fair value, primarily notes and bonds		20,497			24,865			27,792
Projected benefit obligation in excess of plan assets		(6,125	)		(10,098	)		(13,562	)
Unrecognized net loss		4,851			9,679			13,381
Unrecognized prior service cost		(5	)		(2	)		—
Unrecognized net obligations established October 1, 1987		81			54			27
Pension liability recognized in the balance sheet	$	(1,198	)	$	(367	)	$	(154	)

Expenses recognized for this retirement plan were $1,795,000, $2,418,000 and $3,068,000 in 2001, 2002 and 2003, respectively.

Profit Sharing Plan

The Company has a noncontributory defined contribution profit sharing plan covering substantially all non-union employees. Union employees may participate if their collective bargaining agreement specifically provides for their inclusion. The Company may contribute up to 7.5% of total compensation paid or accrued during the year to each plan participant subject to limitations imposed by the Internal Revenue Code. The Company recognized expenses for this plan in the amount of $787,000, $550,000 and $668,000 in 2001, 2002 and 2003, respectively.

Multi-Employer Plans

The Company also contributes to multi-employer defined benefit retirement plans in accordance with the provisions of the various labor agreements that govern the plans. Contributions to these plans are generally based on the number of hours worked. Information for these plans as to vested and non-vested accumulated benefits and net assets available for benefits is not available. The Company’s expense for these retirement plans and health and welfare plans consisted of the following:

	Sept. 30, 2001		Sept. 29, 2002		Sept. 28, 2003
	(In thousands)
Multi-Employer Pension Plans	$	6,579	$	16,726	$	22,986
Multi-Employer Health and Welfare		58,000		65,588		79,561
Total Multi-Employer Benefits	$	64,579	$	82,314	$	102,547

The Company’s employer contributions fluctuate as a result of periodic resumptions and suspensions of employer contributions to collective bargaining trusts.

F-18

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 10—Labor Relations

The Company’s collective bargaining agreement with the United Food and Commercial Workers (“UFCW”), which covers the largest number of employees, expired in October 2003. The UFCW had the same collective bargaining agreement with the Company and with the Company’s three major competitors, Vons, Albertson’s and Ralphs. On April 14, 2003, prior to the expiration of the collective bargaining agreement, the Company signed an agreement with the UFCW which stated that the Company would accept the same contract terms that the UFCW negotiated with Vons, Albertson’s and Ralphs. In return, the UFCW agreed not to strike the Company. The Company is not a party to the contract negotiations between the UFCW and Vons, Albertson’s and Ralphs.

Prior to the labor action, Vons, Albertson’s and Ralphs informed the UFCW that a strike against any one of the grocery chains would be considered as a strike against all three chains. On October 11, 2003, the UFCW declared a strike against Vons; in turn Albertson’s and Ralphs locked out all of their UFCW employees. As of the date of this filing, a new agreement has not been reached and the strike and lock out continue.

The International Brotherhood of Teamsters’ collective bargaining agreement was renewed in September 2002 and expires in September 2005.

Note 11—Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Receivables

The carrying amount approximates fair value because of the short-term maturity of these instruments.

Long-Term Debt and Capital Lease Obligations

The fair value of the 10 ³/4% Notes, is based on quoted market prices. Although market quotes for the fair value of the Company’s capitalized lease obligations and the 5% Subordinated Note are not readily available, the Company believes the stated value approximates fair value.

The estimated fair values of the Company’s financial instruments are as follows:

	As of September 28, 2003
	(In thousands)
	Carrying Amount		Fair Value
Cash and cash equivalents	$	111,152	$	111,152
Receivables	$	27,571	$	27,571
Long-term debt	$	458,750	$	481,784
Capitalized lease obligations	$	10,982	$	10,982

F-19

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 12—Litigation Matters

In the ordinary course of its business, the Company is party to various legal actions which the Company believes are incidental to the operation of the business of the Company and its subsidiaries. The Company records an appropriate provision when the occurrence of loss is probable and can be reasonably estimated. The Company believes that the outcome of such legal proceedings to which the Company is currently a party will not have a material adverse effect upon its results of operations or its consolidated financial condition.

On July 9, 2003, the Company’s principal operating subsidiary Markets agreed to a settlement of two lawsuits which had been filed on behalf of certain of Markets’ existing and former store managers and assistant managers which alleged that such workers are non-exempt under California labor laws and are therefore entitled to overtime wages. Markets admitted no wrong doing under the settlement and it believes it has appropriately followed California law in the classification and payment of its employees. Markets believes that the store managers and assistant managers are highly compensated employees with duties and responsibilities which place them in the exempt category under California law and that such employees are not entitled to overtime wages. Markets continues to feel the case was without merit; however, because of escalating litigation expenses, Markets determined a settlement was the best solution. The amount of the settlement was $3.2 million. Of the $3.2 million, $1.2 million of the settlement was recognized as expense in fiscal 2003 and $2.0 million was recognized as expense in fiscal 2001. Subsequent to year-end, the settlement was paid.

In July of 2002, Markets initiated litigation on its own behalf and derivatively on behalf of Santee in the Superior Court for the State of California, County of Los Angeles, against Hughes Markets, Inc., Ralphs Grocery Company (“Ralphs”), Fred Meyer, Inc. and The Kroger Company (“Defendants”) alleging among other things breaches of their Product Purchase Agreement with Santee and failure to make certain capital contributions for Santee’s dairy facility in the City of Industry. In July of 2003, Defendants filed a cross-complaint against Markets, Santee and others seeking among other things Declaratory Relief for interpretation of the requirements of the Product Purchase Agreements and for damages against Markets, Santee and certain directors of Santee for adoption of a Milk Incentive Program and payments to Markets under that program and other claims for damages. Subsequent to year-end, the parties mediated and reached a settlement agreement that is subject to a sixty day close. A component of the settlement requires the parties to execute a transfer agreement whereby Defendants will relinquish its right, title and interest in Santee to the Company.

Note 13—Stock Redemption

During fiscal 2002, the Company obtained consent of the holders of its 10 ³/4% Senior Notes due 2006 to make a distribution and payment to stockholders consisting of $25.0 million in cash and a subordinated note in the principal amount of $20.0 million. On January 22, 2002, the Company redeemed 11,699 shares of the Company’s stock previously held by La Cadena Investments (“La Cadena”), the sole shareholder of the Company, and made a cash payment of $20.0 million and executed a $20.0 million subordinated note due March 31, 2007 to a former partner of La Cadena. The subordinated note bears interest at a rate of 5% per annum, payable semi-annually. On February 1, 2002, the Company paid a $4.5 million dividend to La Cadena. Fees for consent of the holders of its 10 ³/4% Senior Notes and fees and expenses of the transaction, including a $500,000 financial advisory service fee to La Cadena, were approximately $5.0 million.

Note 14—Phantom Stock Plan

The Company maintains a phantom stock plan for certain executives of Stater Bros. Markets. Existing stockholders and partners of La Cadena are not eligible to receive awards. Awards under the plan are for units that have an assigned value. Awards under the plan vest after five years, except that upon a participant’s early

F-20

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 14—Phantom Stock Plan (continued)

retirement, permanent total disability or death, awards are considered partially vested at the rate of 20% for each year of employment following the grant. If a participant voluntarily terminates his or her employment, or is terminated for cause, any unvested awards under the plan will terminate and no payment will be made thereunder. As of September 30, 2001, September 29, 2002 and September 28, 2003, there were 663,000, 668,000 and 693,000 units outstanding, respectively. The Company recognized an expense for the plan of $4.8 million, $6.0 million and $6.0 million in 2001, 2002 and 2003, respectively.

Note 15—Quarterly Results (unaudited)

Quarterly results for fiscal 2001, 2002 and 2003 are as follows:

	Sales		Gross Profits			Operating Profit		Net Income		Earnings Per Share
	(In thousands)
Fiscal 2001 Quarters
13 weeks ended 12/24/00	$	624,849	$	157,892		$	14,432	$	1,822	$	36.44
13 weeks ended 03/25/01		612,305		155,670			13,680		1,360		27.20
13 weeks ended 06/24/01		639,925		166,119			15,939		2,269		45.38
14 weeks ended 09/30/01		696,834		183,167			16,921		2,394		47.88
	$	2,573,913	$	662,848		$	60,972	$	7,845	$	156.90
Fiscal 2002 Quarters
13 weeks ended 12/30/01	$	662,587	$	176,163		$	18,723	$	3,932	$	78.64
13 weeks ended 03/31/02		654,213		172,813			19,476		4,294		104.08
13 weeks ended 06/30/02		672,779		177,142			17,707		2,911		76.00
13 weeks ended 09/29/02		676,767		182,702			13,132		652		17.02
	$	2,666,346	$	708,820		$	69,038	$	11,789	$	280.92
Fiscal 2003 Quarters
13 weeks ended 12/29/02	$	681,509	$	184,775	(1)	$	17,429	$	2,928	$	76.45
13 weeks ended 03/30/03		677,196		188,058	(1)		19,415		3,831		100.02
13 weeks ended 06/29/03		688,071		189,233	(1)		14,170		769		20.08
13 weeks ended 09/28/03		706,998		192,347			16,800		2,599		67.86
	$	2,753,774	$	754,413		$	67,814	$	10,127	$	264.41

(1) Gross profit for the first three quarters of fiscal 2003 has been restated to reflect the adoption of EITF 02-16 effective September 30, 2002. The adoption caused a reclassification between cost of goods sold and selling, general and administrative expenses. There was no net income impact from the adoption. The effect of the restatement was to reduce cost of goods sold by $1.1 million, $1.3 million and $1.0 million in quarters ended December 29, 2002, March 30, 2003 and June 29, 2003, respectively.

F-21

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

	Sept. 28, 2003		June 27, 2004
			(Unaudited)
Current assets
Cash and cash equivalents	$	111,152	$	326,911
Restricted cash		—		20,000
Receivables		23,217		36,277
Income tax receivables		4,354		9,285
Inventories		172,267		190,248
Prepaid expenses		6,962		11,442
Deferred income taxes		14,793		14,793
Total current assets		332,745		608,956
Investment in unconsolidated affiliate		16,910		—
Property and equipment:
Land		50,930		68,120
Buildings and improvements		200,349		250,659
Store fixtures and equipment		242,562		327,230
Property subject to capital leases		24,670		25,891
		518,511		671,900
Less accumulated depreciation and amortization		216,366		265,981
		302,145		405,919
Deferred debt issuance costs, net		10,486		22,722
Other assets		5,540		6,282
		16,026		29,004
Total assets	$	667,826	$	1,043,879

See accompanying notes to unaudited consolidated financial statements.

F-22

STATER BROS. HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands, except share amounts)

LIABILITIES AND STOCKHOLDER’S DEFICIT

	Sept. 28, 2003			June 27, 2004
				(Unaudited)
Current liabilities:
Accounts payable	$	112,458		$	146,785
Accrued payroll and related expenses		44,362			55,976
Other accrued liabilities		50,352			39,883
Current portion of capital lease obligations and long-term debt		1,056			42,250
Total current liabilities		208,228			284,894
Deferred income taxes		6,708			12,424
Long-term debt, less current portion		458,750			700,000
Capital lease obligations, less current portion		9,926			9,823
Long-term portion of self-insurance and other reserves		27,941			43,420
Other long-term liabilities		20,267			43,163
Total liabilities		731,820			1,093,724
Stockholder’s deficit
Common Stock, $.01 par value:
Authorized shares—100,000 Issued and outstanding shares—0		—			—
Class A Common Stock, $.01 par value:
Authorized shares—100,000 Issued and outstanding shares—38,301		—			—
Additional paid-in capital		9,740			9,740
Retained deficit		(73,734	)		(59,585	)
Total stockholder’s deficit		(63,994	)		(49,845	)
Total liabilities and stockholder’s deficit	$	667,826		$	1,043,879

See accompanying notes to unaudited consolidated financial statements.

F-23

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share and share amounts)

	39 Weeks Ended
	June 29, 2003			June 27, 2004
Sales	$	2,046,776		$	2,863,955
Cost of goods sold		1,484,710			2,038,011
Gross profit		562,066			825,944
Operating expenses:
Selling, general and administrative expenses		491,437			631,145
Depreciation and amortization		19,615			23,331
Total operating expenses		511,052			654,476
Operating profit		51,014			171,468
Interest income		770			1,005
Interest expense		(39,898	)		(39,416	)
Interest expense related to debt purchase		—			(34,017	)
Equity in earnings from unconsolidated affiliate		1,196			929
Other expenses—net		(756	)		(1,017	)
Income before income taxes		12,326			98,952
Income taxes		4,798			39,803
Net income	$	7,528		$	59,149
Earnings per share	$	196.55		$	1,544.32
Dividends per share	$	—		$	1,174.90
Average common shares outstanding		38,301			38,301
Shares outstanding at end of period		38,301			38,301

See accompanying notes to unaudited consolidated financial statements.

F-24

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share and share amounts)

	13 Weeks Ended
	June 29, 2003			June 27, 2004
Sales	$	688,071		$	847,984
Cost of goods sold		498,838			623,261
Gross profit		189,233			224,723
Operating expenses:
Selling, general and administrative expenses		168,194			188,365
Depreciation and amortization		6,869			8,145
Total operating expenses		175,063			196,510
Operating profit		14,170			28,213
Interest income		244			157
Interest expense		(13,339	)		(13,103	)
Interest expense related to debt purchase		—			(25,495	)
Equity in earnings from unconsolidated affiliate		217			—
Other expenses—net		(129	)		(308	)
Income (loss) before income taxes (benefit)		1,163			(10,536	)
Income taxes (benefit)		394			(4,763	)
Net income (loss)	$	769		$	(5,773	)
Earnings (loss) per share	$	20.08		$	(150.73	)
Dividends per share	$	—		$	1,174.90
Average common shares outstanding		38,301			38,301
Shares outstanding at end of period		38,301			38,301

See accompanying notes to unaudited consolidated financial statements.

F-25

STATER BROS. HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	39 Weeks Ended
	June 29, 2003			June 27, 2004
Operating activities:
Net income	$	7,528		$	59,149
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,237			30,557
Gain from litigation settlement		—			(22,371	)
Deferred income taxes		—			(707	)
Loss on disposals of assets		756			1,115
Net undistributed gain in investment in unconsolidated affiliate		(1,196	)		(929	)
Changes in operating assets and liabilities:
Increase in restricted cash		—			(20,000	)
Decrease in receivables		1,133			1,276
(Increase) decrease in income tax receivables		5,849			(4,931	)
(Increase) decrease in inventories		5,146			(15,285	)
Increase in prepaid expenses		(1,071	)		(3,311	)
Decrease in other assets		2,724			12,944
Increase in accounts payable		7,486			26,693
Increase in accrued liabilities, long-term portion of self-insurance reserves and other liabilities		22,276			52,401
Net cash provided by operating activities		75,868			116,601
Investing activities:
Purchase of property and equipment		(37,659	)		(45,389	)
Proceeds from sale of property and equipment		85			124
Net cash used in investing activities		(37,574	)		(45,265	)
Financing activities:
Proceeds from long-term debt		—			700,000
Proceeds from equipment financing		—			718
Debt issuance costs		—			(22,318	)
Amortization of debt issuance costs related to debt purchase		—			8,599
Premium and fees paid on debt purchase		—			(16,897	)
Make whole payment on redemption of debt		—			(8,521	)
Principal payments on long-term debt		—			(471,300	)
Principal payments on capital lease obligations		(859	)		(858	)
Payment of dividends		—			(45,000	)
Net cash provided by (used in) financing activities		(859	)		144,423
Net increase in cash and cash equivalents		37,435			215,759
Cash and cash equivalents at beginning of period		81,043			111,152
Cash and cash equivalents at end of period	$	118,478		$	326,911
Interest paid	$	25,519		$	66,505
Income taxes paid	$	750		$	42,200

See accompanying notes to unaudited consolidated financial statements.

F-26

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 27, 2004

Note 1—Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the thirteen and thirty-nine weeks ended June 27, 2004 are not necessarily indicative of the results that may be expected for the year ending September 26, 2004.

The consolidated balance sheet at September 28, 2003 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the report on Form 10-K for the year ended September 28, 2003 of Stater Bros. Holdings Inc. (the “Company”).

Note 2—Reclassifications

Certain amounts in the prior period have been reclassified to conform to the current period financial statements presentation.

Note 3—Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Note 4—Restricted Cash

Restricted cash represents cash that has been contractually set aside as collateral for certain workers’ compensation and general liability self-insurance reserves. Interest earned on the restricted cash is controlled by the Company and is included in cash and cash equivalents.

Note 5—Retirement Plans

The Company has a noncontributory defined benefit pension plan covering substantially all non-union employees. The plan provides for benefits based on an employee’s compensation during the eligibility period while employed with the Company. The Company’s funding policy for this plan is to contribute annually at a rate that is intended to provide sufficient assets to meet future benefit payment requirements.

F-27

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

June 27, 2004

Note 5—Retirement Plans (continued)

Net periodic pension cost included the following components:

	13 Weeks Ended						39 Weeks Ended
	June 29, 2003			June 27, 2004			June 29, 2003			June 27, 2004
	(In thousands)
Service cost—benefits earned during the period	$	524		$	521		$	1,572		$	1,664
Interest cost on projected benefit obligation		564			641			1,692			1,867
Actual return on assets		(512	)		(462	)		(1,535	)		(1,458	)
Net amortization and deferral		6			7			19			20
Recognized gains or losses		117			225			350			540
Prior service cost recognized		—			(1	)		(1	)		(1	)
Net periodic pension cost	$	699		$	931		$	2,097		$	2,632

Note 6—Santee

In 1997, in connection with the construction of a new dairy facility in City of Industry, California, Stater Bros. Markets (“Markets”) and Hughes Markets (“Hughes”), the owners of Santee Dairies, Inc. (“Santee”) contributed the outstanding shares of Santee to a new entity Santee Dairies, LLC (“SDL”) with each company owning 50% of SDL. Markets and Hughes each entered into separate product purchase agreements (“PPA”) with Santee for the purchase of fluid milk and other products. Financing for the new dairy was provided through the issuance of $80 million Senior Secured 9.36% Notes due 2008 (“Santee Notes”). One of the covenants of the Santee Notes was a covenant that required the payment of the outstanding Santee Notes in the event of change in control of Santee.

Certain disagreements arose regarding the PPA’s and other matters between Markets and Ralphs and Ralphs and Santee. In order to settle the resulting litigation, Markets, Hughes, Santee and SDL entered into three separate but interconnected agreements “Settlement Agreement and Release of all Claims”, “Dissolution and Transfer Agreement” and “Assignment and Assumption Agreement” all three agreements collectively known as the “Settlement Agreement”. Under the Settlement Agreement, the Ralphs Guaranty was terminated, a new purchase of products schedule for Ralphs was established, Hughes agreed to pay $1,550,000 to Markets, SDL was dissolved and the shares of Santee, previously held by SDL, were transferred equally to Markets and Hughes. Concurrently with this transfer, Hughes immediately transferred Hughes’ Santee shares to Santee for cancellation and retirement.

Through the Settlement Agreement, Hughes relinquished its interest in Santee to Markets. The consideration received by Markets under the Settlement Agreement was $1,550,000 in cash and the value of the additional 50% ownership interest in Santee. The value assigned to the additional 50% interest in Santee is $21.8 million which was determined by Management based upon the present value of the most probable future cash flows. The Settlement Agreement’s effective date was the close of business on February 6, 2004. In the second quarter of fiscal 2004, the Company incurred legal fees of $500,000 related to the Settlement Agreement. In addition, the Company, through Santee, made payments, aggregating $500,000, to four Directors of Santee who had been named by Hughes as defendants in litigation settled by the Settlement Agreement. Three of the four Directors are related parties to the Company. The net consideration received by the Company under the Settlement

F-28

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

June 27, 2004

Note 6—Santee (continued)

Agreements was $22.4 million which was recorded as a gain in the Consolidated Statements of Income (unaudited) under the line item “Selling, general and administrative expenses.”

The following table is a condensed balance sheet that discloses the value assigned to the Santee assets acquired and the liabilities assumed as a result of the Settlement Agreement:

	February 6, 2004:
	(in thousands)
Current assets	$	13,246
Property and equipment		47,630
Other long-term assets		550
Total assets acquired		61,426
Current liabilities		14,005
Long-term liabilities		25,600
Total liabilities assumed		39,605
Net assets acquired	$	21,821

Previously, Markets accounted for Santee under the equity method of accounting as Markets owned 50% of the stock and did not exercise control over Santee. The dissolution of SDL and the retirement of the Hughes’ shares gave Markets 100% direct ownership of Santee and caused a change in control of Santee. The change in control triggered the early payment requirement of the Santee Notes, which included a make whole provision. In order to finance the payment of the Santee Notes and the make whole payment, Markets loaned Santee $55.0 million. On February 6, 2004, Santee redeemed $53.5 million of Santee Notes, all the notes outstanding, and paid a make whole fee of $8.5 million. The make whole fee has been recorded as a component of interest expense in the Consolidated Statements of Income (unaudited) of the Company.

Santee has been included in the consolidated financial statements of the Company as a wholly-owned subsidiary as of the effective date of the Settlement Agreement. The following table provides supplemental pro forma results of operations presented as though Santee had been consolidated as of the beginning of the reporting periods.

	Condensed Pro Forma Results of Operations (in thousands, except per share amounts)
	13 Weeks Ended					39 Weeks Ended
	June 29, 2003		June 27, 2004			June 29, 2003		June 27, 2004
Sales	$	714,301	$	847,983		$	2,127,598	$	2,910,348
Income (loss) before income taxes (benefit)	$	1,669	$	(10,536	)	$	14,761	$	100,873
Net income (loss)	$	1,074	$	(5,773	)	$	8,929	$	60,311
Earnings (loss) per share	$	28.04	$	(150.73	)	$	233.13	$	1,574.66

F-29

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

June 27, 2004

Note 7—Issuance of New Debt and Early Extinguishment of Debt

On June 17, 2004, the Company issued $525.0 million of 8.125% Senior Notes due June 15, 2012 and $175.0 million Floating Rate Senior Notes due June 15, 2010 collectively, (the “Notes”). The Notes are unregistered. The interest rate on the Floating Rate Senior Notes as of June 27, 2004 was 5.06%. The Company incurred $22.3 million of debt issuance cost related to the issuance of the Notes which will be amortized over the term of the respective Notes.

On June 17, 2004 the Company used part of the proceeds from the issuance of these notes for the purchase of $397.8 million of the 10.75% Senior Notes due August 2006, the payment of $16.9 million for tender premium and fees on the purchased 10.75% Senior Notes, the early retirement of the $20.0 million 5.0% Subordinated Note due March 2007 and to pay accrued interest on the purchased 10.75% Senior Notes and the retired 5.0% Subordinated Note.

On June 29, 2004, the Company advised the trustee of the 10.75% Senior Notes that the Company has elected to redeem the remaining outstanding 10.75% Notes on August 16, 2004 at a price of $1,026.875 per $1,000 plus accrued interest. On August 16, 2004, subsequent to the issuance of the Company’s report on Form 10-Q dated August 11, 2004, the Company redeemed all remaining outstanding 10.75% Notes.

The Notes are guaranteed by Markets, Stater Bros Development, Inc., and the Company’s indirect subsidiary Santee (each, a “subsidiary guarantor,” and collectively, the “subsidiary guarantors”). Condensed consolidating financial information with respect to the subsidiary guarantors is not provided because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several, and there are no other subsidiaries of the Company other than the subsidiary guarantors.

There are material restrictions on the ability of the Company to obtain funds from each of the subsidiary guarantors by distributions (including dividends) or loans under (a) the new senior unsecured revolving credit facility between Markets, the Company and Bank of America, N.A. dated June 17, 2004 (the “New Credit Facility”), (b) the Indenture dated as of June 17, 2004 (the “Indenture”), among the Company, the subsidiary guarantors and The Bank of New York, as Trustee, governing the Notes, and (c) in the case of Santee, the revolving line of credit between Santee and Bank of America, N.A. dated as of December 22, 1999 (as amended through and including the date hereof, the “Santee Credit Facility”). The Indenture and the New Credit Facility have been filed as exhibits to the registration statement of which this prospectus is a part, and the summary of the material restrictions of the Indenture and the New Credit Facility set forth below is qualified in its entirety by reference to such exhibits.

The New Credit Facility restricts Markets from making any restricted payment, as defined in the New Credit Facility (which includes cash dividends), to the Company, except that (a) Markets may make distributions to the Company in an amount sufficient to make regularly scheduled payments of interest on the Notes as and when the same become due, (b) Markets may make other distributions to the Company in the amounts required to pay for the Company’s corporate overhead and similar expenses, not to exceed $1,000,000 in the aggregate in any fiscal year, (c) Markets may make permitted tax distributions (as defined in the New Credit Facility) to the Company, and (d) subject to certain pro forma financial tests, Markets may pay other distributions to the Company which are in an aggregate amount not to exceed, as of any date of determination, an amount equal to the sum of $25.0 million plus 50% of the Company’s consolidated net income for the period then ending following June 27, 2004. The New Credit Facility restricts Markets from making any loans to the Company, other than loans pursuant to a general $5.0 million exception for investments otherwise not permitted under the New Credit Facility (to the extent available); provided, that any such loans would have to be on arm’s-length terms.

F-30

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

June 27, 2004

Note 7—Issuance of New Debt and Early Extinguishment of Debt (continued)

The Indenture governing the Notes does not restrict the ability of the subsidiary guarantors to pay dividends to the Company. The Indenture permits loans from the subsidiary guarantors to the Company, provided generally (and subject to certain other exceptions and conditions) that such loans are subordinated to the Notes.

The Santee Credit Facility does not restrict the ability of Santee to pay dividends. The Santee Credit Facility does not permit Santee to make any loans to the Company.

Note 8—Dividend Payment

On June 17, 2004, the Company paid a $45.0 million dividend to La Cadena Investments, the sole stockholder of the Company.

Note 9—Corporate Office and Warehouse Facilities

Markets is currently in negotiations to acquire approximately 160 acres located on the former Norton Air Force Base in the City of San Bernardino, California. The Company has reached an agreement with the Inland Valley Development Agency (“IVDA”), which is the entity responsible for the redevelopment of the former Norton Air Force Base, on an Owner Participation Agreement. The IVDA owns approximately 93 acres of the project property and is negotiating with another governmental agency for an additional 1 acres that would be transferred to Markets or leased with a purchase option. Additionally, Markets is negotiating the acquisition of four privately held parcels consisting of approximately 16 acres. The agreement with the IVDA requires the Company to acquire those parcels not owned by the IVDA, to relocate all tenants and other business owners requiring relocation, to commit to construct and complete the corporate and warehouse facilities and to obtain all City of San Bernardino building permits and entitlements required for the facility. The Company has reached an agreement with Hillwood/San Bernardino LLC (“Hillwood”), the master developer of the former Norton Air Force Base for infrastructure improvements. Under the Hillwood agreement, upon closing, the Company will share costs associated with the infrastructure improvements for water, sewer, streets and utilities which will be required by the City of San Bernardino. The Company, after completion of the acquisition of the project property, will secure its commitment with Hillwood for infrastructure improvements by the posting of either cash or letters of credits in the amount of $10.8 million. The agreements with the IVDA and Hillwood are contingent upon the Company successfully negotiating the acquisition of all needed property.

This site will be used to relocate and consolidate the Company’s corporate headquarters and all warehousing and distribution facilities to a single integrated facility from the 13 warehouse buildings at 7 different locations currently in use. This site is located within eight miles of the main distribution facility in Colton and therefore there will be no change in the average distance between the new facility and the Stater Bros. Markets retail supermarkets. The facility will consist of approximately 2.1 million square feet and will include the Company’s corporate headquarters, truck maintenance and other support facilities required for consolidation of all of its Southern California office, warehousing, distribution and maintenance operations. The net projected cost of the facility is approximately $200 million and completion of the construction of the facility is planned for the fall of 2006.

F-31

STATER BROS. HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

June 27, 2004

Note 10—Quarterly Results

The Quarterly results of the first three quarters of fiscal year 2003 and 2004 are as follows:

	Sales		Gross Profits		Operating Profit		Net Income (Loss)			Earnings (Loss) Per Share
Fiscal 2003 Quarters
13 weeks ended 12/29/02	$	681,509	$	184,775	$	17,429	$	2,928		76.45
13 weeks ended 03/30/03		677,196		188,058		19,415		3,831		100.02
13 weeks ended 06/29/03		688,071		189,233		14,170		769		20.08
	$	2,046,776	$	562,066	$	51,014	$	7,528		196.55
Fiscal 2004 Quarters
13 weeks ended 12/28/03	$	1,026,553	$	304,882	$	70,562	$	34,643		904.49
13 weeks ended 03/28/04		989,418		296,339		72,693		30,279		790.55
13 weeks ended 06/27/04		847,984		224,723		28,213		(5,773	)	(150.73	)
	$	2,863,955	$	825,944	$	171,468	$	59,149		1,544.32

F-32

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. Investors must not rely on any unauthorized information or representations. This prospectus does not offer to sell or ask for offers to buy any securities other than those to which this prospectus relates and it does not constitute an offer to sell or ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information contained in this prospectus is current only as of its date.

Until                     , 2004 (90 days after the date of this prospectus), all dealers effecting transactions in the New Notes, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PROSPECTUS

$700,000,000

Stater Bros. Holdings Inc.

$525,000,000 8 ¹/8% Senior Notes due 2012

$175,000,000 Floating Rate Senior Notes due 2010

PROSPECTUS

                    , 2004

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. Indemnification of Officers and Directors

Delaware Registrant

Section 145 of the Delaware General Corporation Law (“DGCL”) permits a corporation to indemnify any of its directors or officers who was or is a party or is threatened to be made a party to any third party proceeding by reason of the fact that such person is or was a director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such person’s conduct was unlawful. In a derivative action, i.e., one by or in the right of a corporation, the corporation is permitted to indemnify any of its directors or officers against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

Stater Bros. Holdings Inc.

Pursuant to Section 102(b)(7) of the DGCL, Stater Bros.’ Certificate of Incorporation eliminates the liability of its directors to Stater Bros. or its stockholders, except for liabilities related to breach of the duty of loyalty, actions not in good faith, and certain other liabilities. As permitted by Section 145 of the DGCL, Article V of Stater Bros.’ Bylaws provides, under certain stated conditions, that Stater Bros. shall indemnify any person who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of Stater Bros., and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director, officer or employee of Stater Bros., or is or was serving at the request of Stater Bros. as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise; provided that Stater Bros. shall indemnify any person with respect to an action, suit or proceeding initiated by such person (other than an action, suit or proceeding to enforce the indemnification rights provided herein) only if it was authorized by the Board of Directors of Stater Bros. The indemnification provided herein shall include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement.

California Registrants

The following registrants are corporations incorporated under the laws of the State of California: Stater Bros. Markets Inc., Stater Bros. Development, Inc. and Santee Dairies, Inc.

Subject to certain limitations, Section 317 of the California Corporations Code provides in part that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that the person is or was a director, officer, employee or other agent of the corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful.

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Stater Bros. Markets Inc.

Article IV of Markets’ Articles of Incorporation (the “Markets Articles”) provide that the liability of directors of Markets for monetary damages shall be eliminated to the fullest extent permissible under California law. Article V of the Markets Articles authorizes Markets to provide indemnification of agents to the fullest extent permissible under California Law.

Article VI of Markets’ Bylaws provides that Markets shall indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding, other than an action by or in right of Markets to procure judgment in its favor, by reason of the fact that such person is or was an agent of Markets, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with such proceeding if that person acted in good faith and in a manner that person reasonably believed to be in the best interests of Markets, and in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful.

In addition, Article VI of Markets’ Bylaws provides that Markets shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action by or in the right of Markets to procure a judgment in its favor by reason of the fact that that person is or was an agent of Markets, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of that action if that person acted in good faith, in a manner that person believed to be in the best interests of Markets and its shareholders.

Stater Bros. Development, Inc.

Section 5 of Development’s Bylaws permit Development to indemnify any director, officer, agent or employee as to those liabilities and on those terms and conditions as are specified in Section 317 of the California Corporations Code.

Santee Dairies, Inc.

Article VI of Santee’s Bylaws provides that Santee shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of Santee) by reason of the fact that he is or was a director, officer, employee or agent of Santee, or is or was serving at the request of Santee as a director, officer, employee or agent or another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Santee, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

In addition, Article VI of Santee’s Bylaws provide that Santee shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of Santee to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of Santee, or is or was serving at the request of Santee as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Santee and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to Santee unless and only to the extent that the Superior Court of the State of California or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court shall deem proper.

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ITEM 21. Exhibits.

(a) Exhibits:

Exhibit Number		Description
3.1	*	Certificate of Incorporation of Stater Bros. Holdings Inc.
3.2		By-Laws of Stater Bros. Holdings Inc. (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
3.3	*	Articles of Incorporation of Stater Bros. Markets
3.4	*	By-Laws of Stater Bros. Markets
3.5	*	Articles of Incorporation of Stater Bros. Development, Inc.
3.6	*	By-Laws of Stater Bros. Development, Inc.
3.7	*	Articles of Incorporation of Santee Dairies, Inc
3.8	*	By-Laws of Santee Dairies, Inc.
4.1	*	Indenture dated as of June 17, 2004 among Stater Bros. Holdings Inc. as Issuer, Stater Bros. Markets, Stater Bros. Development, Inc. and Santee Dairies Inc., as Guarantors, and The Bank of New York, as Trustee
4.2	*	Registration Rights Agreement dated as of June 17, 2004 between Stater Bros. Holdings Inc., as Issuer, Stater Bros. Markets, Stater Bros. Development, Inc. and Santee Dairies, Inc., as Guarantors and Bank of America Securities LLC, as Initial Purchaser
4.3	*	Specimen Form of Fixed Rate Global Note
4.4	*	Specimen Form of Floating Rate Global Note
4.5	*	First Supplemental Indenture, dated as of January 11, 2002, between Stater Bros. Holdings Inc. and The Bank of New York, as successor in interest to IBJ Whitehall Bank & Trust Company, as Trustee for the 10.75% Senior Notes due 2006
4.6		Second Supplemental Indenture, dated as of May 27, 2004 between Stater Bros. Holdings Inc. and The Bank of New York, as successor in interest to IBJ Whitehall Bank & Trust Company, as Trustee for the 10.75% Senior Notes due 2006 (incorporated by reference to Exhibit 10.34 to Stater Bros. Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
5.1	**	Opinion of Gibson, Dunn & Crutcher LLP
10.1		Reclassification Agreement dated September 3, 1993, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.2		Amendment to Reclassification Agreement, dated January 12, 1994, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.3		Agreement of Stockholders dated May 10, 1989, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.4		Amendment to Agreement of Stockholders dated September 3, 1993, by and among Stater Bros., Craig, Craig Management, Inc. and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)

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Exhibit Number		Description
10.5		Option Agreement dated September 3, 1993, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.6		Amendment to Option Agreement dated January 12, 1994, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.7		Consulting Agreement dated September 3, 1993, by and between Stater Bros., Craig and CMI (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.8		Letter Agreement regarding Consulting Agreement, dated March 8,1994, by and between Stater Bros., Craig and CMI (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.9		Second Amended and Restated Stock Agreement dated January 12, 1994, by and among Stater Bros., Craig, CMI, La Cadena and James J. Cotter (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.10		Security Agreement dated March 8, 1994, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.11		Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.12		Amendment dated June 23, 1995 to the Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.13		Amendment dated July 22, 1996 to the Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.14	*	Credit Agreement dated as of June 17, 2004 by and among Stater Bros. Markets, Stater Bros. and Bank of America, N.A
10.15		Continuing Guaranty dated March 8, 1994, of Stater Bros. Development, Inc. in favor of Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.16		Subordination Agreement dated March 8, 1994, by and among Stater Bros., Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.17		Amended and Restated Sublease Agreement dated June 1, 1983, between Wren Leasing Corp., as Lessor, and Stater Bros. Markets, as Lessee (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.18		Preferred Stock Agreement dated March 22, 1983, between Stater Bros. Markets and Petrolane Incorporated (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)

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Exhibit Number	Description
10.19	Escrow Agreement dated September 19, 1985, by and among Stater Bros. Markets, Petrolane Incorporated and First Interstate Bank of California (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.20	Dealer Manager Agreement dated as of July 1, 1999, by and between Stater Bros. and Banc of America Securities LLC (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.21	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Jack H. Brown (Previously filed with the Securities and Exchange Commission as exhibits to Registrant’s Quarterly Report on Form 10-Q dated June 25, 2000 and filed on August 9, 2000)
10.22	Employment contract dated June 1, 2000, as amended, by and between Stater Bros. Markets and Donald I. Baker (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.23	Employment contract dated June 1, 2000, as amended, by and between Stater Bros. Markets and A. Gayle Paden (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.24	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and H. Harrison Lightfoot (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.25	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Phillip J. Smith (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.26	Stater Bros. Holdings Inc. Phantom Stock Plan (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.27	First Amendment dated September 15, 2000 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.28	Second Amendment dated December 13, 2001 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.29	Third Amendment dated January 18, 2002 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.30	Subordinated Note for $20,000,000 dated January 22, 2002 between Stater Bros. and H. Harrison Lightfoot with an interest rate of 5% due March 31, 2007 (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.31	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Dennis L. McIntyre (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)

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Exhibit Number	Description
10.32	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Edward A. Stater (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)
10.33	Employment contract dated August 1, 2002 by and between Stater Bros. Markets and James W. Lee (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)
10.34	Fourth Amendment dated February 4, 2003 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 29, 2002)
10.35	Owner Participation Agreement, dated as of April 14, 2004 between Stater Bros. Markets and the Inland Valley Development Agency (incorporated by reference to Exhibit 10.35 to the Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
10.36	Development Parcel Disposition Agreement, dated as of June 16, 2004 between Stater Bros. Markets and Hillwood/San Bernardino, LLC (incorporated by reference to Exhibit 10.35 to the Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
10.37*	Subsidiary Guaranty entered into as of June 17, 2004 by Stater Bros. Holdings Inc., Stater Bros. Development, Inc. and Santee Dairies, Inc.
12.1*	Computation of ratio of earnings to fixed charges
14.1	Copy of Financial Code of Ethics (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 28, 2003)
21.1*	Subsidiaries of Stater Bros. Holdings Inc.
21.2*	Subsidiaries of Stater Bros. Markets
23.1**	Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.2*	Consent of Ernst & Young LLP
24.1*	Power of Attorney (included on signature pages of this Registration Statement on Form S-4)
25.1*	T-1 Statement of Eligibility and Qualification of The Bank of New York, as Trustee
99.1*	Form of Letter of Transmittal
99.2*	Form of Notice of Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4*	Form of Letter to Clients

* Filed herewith

** To be filed by amendment

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ITEM 22. Undertakings

The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of the receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

The undersigned registrants hereby undertake to supply by means of post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described in Item 20 above, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the applicable registrant or registrants will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrants have duly caused this registration statement to be signed on its behalf by the undersigned, hereunto authorized, in the city of Colton, state of California, on August 20, 2004

STATER BROS. HOLDINGS INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
STATER BROS. MARKETS
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
STATER BROS. DEVELOPMENT, INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
SANTEE DAIRIES, INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board and Chief Executive Officer

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POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Jack H. Brown and Bruce D. Varner, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or his substitute or their substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE DATES INDICATED.

NAME	TITLE	DATE
/S/    JACK H. BROWN         Jack H. Brown	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer), Stater Bros. Holdings Inc.	August 20, 2004
	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer), Stater Bros. Markets
	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer), Stater Bros. Development, Inc.
	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer), Santee Dairies, Inc.
/S/    THOMAS W. FIELD, JR.         Thomas W. Field, Jr.	Vice-Chair of the Board and Director, Stater Bros. Holdings Inc.	August 20, 2004
	Director, Stater Bros. Markets
	Director, Stater Bros. Development, Inc.

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NAME	TITLE	DATE
/S/    BRUCE D. VARNER         Bruce D. Varner	Secretary and Director, Stater Bros. Holdings Inc.	August 20, 2004
	Secretary and Director, Stater Bros. Markets
	Secretary and Director, Stater Bros. Development, Inc.
	Secretary and Director, Santee Dairies, Inc.
/S/    C. DALE WARMAN         C. Dale Warman	Director, Stater Bros. Holdings Inc. Director, Stater Bros. Markets	August 20, 2004
	Director, Stater Bros. Development, Inc.
/S/    PHILLIP J. SMITH         Phillip J. Smith	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Stater Bros. Holdings Inc.	August 20, 2004
	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Stater Bros. Markets
	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Stater Bros. Development, Inc.
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), Santee Dairies, Inc.
/S/    RICHARD C. MOSELEY         Richard C. Moseley	Director, Santee Dairies, Inc.	August 20, 2004
/S/    C. CHASE HOFFMAN         C. Chase Hoffman	Director, Santee Dairies, Inc.	August 20, 2004
/S/    PAUL W. BIKOWITZ         Paul W. Bikowitz	Director, Santee Dairies, Inc.	August 20, 2004

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EXHIBIT INDEX

Exhibit Number		Description
3.1	*	Certificate of Incorporation of Stater Bros. Holdings Inc.
3.2		By-Laws of Stater Bros. Holdings Inc. (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
3.3	*	Articles of Incorporation of Stater Bros. Markets
3.4	*	By-Laws of Stater Bros. Markets
3.5	*	Articles of Incorporation of Stater Bros. Development, Inc.
3.6	*	By-Laws of Stater Bros. Development, Inc.
3.7	*	Articles of Incorporation of Santee Dairies, Inc
3.8	*	By-Laws of Santee Dairies, Inc.
4.1	*	Indenture dated as of June 17, 2004 among Stater Bros. Holdings Inc. as Issuer, Stater Bros. Markets, Stater Bros. Development, Inc. and Santee Dairies Inc., as Guarantors, and The Bank of New York, as Trustee
4.2	*	Registration Rights Agreement dated as of June 17, 2004 between Stater Bros. Holdings Inc., as Issuer, Stater Bros. Markets, Stater Bros. Development, Inc. and Santee Dairies, Inc., as Guarantors and Bank of America Securities LLC, as Initial Purchaser
4.3	*	Specimen Form of Fixed Rate Global Note
4.4	*	Specimen Form of Floating Rate Global Note
4.5	*	First Supplemental Indenture, dated as of January 11, 2002, between Stater Bros. Holdings Inc. and The Bank of New York, as successor in interest to IBJ Whitehall Bank & Trust Company, as Trustee for the 10.75% Senior Notes due 2006
4.6		Second Supplemental Indenture, dated as of May 27, 2004 between Stater Bros. Holdings Inc. and The Bank of New York, as successor in interest to IBJ Whitehall Bank & Trust Company, as Trustee for the 10.75% Senior Notes due 2006 (incorporated by reference to Exhibit 10.34 to Stater Bros. Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
5.1	**	Opinion of Gibson, Dunn & Crutcher LLP
10.1		Reclassification Agreement dated September 3, 1993, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.2		Amendment to Reclassification Agreement, dated January 12, 1994, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.3		Agreement of Stockholders dated May 10, 1989, by and among Stater Bros., Craig and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.4		Amendment to Agreement of Stockholders dated September 3, 1993, by and among Stater Bros., Craig, Craig Management, Inc. and La Cadena (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.5		Option Agreement dated September 3, 1993, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)

1

Exhibit Number		Description
10.6		Amendment to Option Agreement dated January 12, 1994, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.7		Consulting Agreement dated September 3, 1993, by and between Stater Bros., Craig and CMI (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.8		Letter Agreement regarding Consulting Agreement, dated March 8,1994, by and between Stater Bros., Craig and CMI (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.9		Second Amended and Restated Stock Agreement dated January 12, 1994, by and among Stater Bros., Craig, CMI, La Cadena and James J. Cotter (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.10		Security Agreement dated March 8, 1994, by and between Stater Bros. and Craig (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.11		Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.12		Amendment dated June 23, 1995 to the Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.13		Amendment dated July 22, 1996 to the Credit Agreement dated March 8, 1994, by and between Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.14	*	Credit Agreement dated as of June 17, 2004 by and among Stater Bros. Markets, Stater Bros. and Bank of America, N.A
10.15		Continuing Guaranty dated March 8, 1994, of Stater Bros. Development, Inc. in favor of Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.16		Subordination Agreement dated March 8, 1994, by and among Stater Bros., Stater Bros. Markets and Bank of America Trust and Savings Association (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.17		Amended and Restated Sublease Agreement dated June 1, 1983, between Wren Leasing Corp., as Lessor, and Stater Bros. Markets, as Lessee (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.18		Preferred Stock Agreement dated March 22, 1983, between Stater Bros. Markets and Petrolane Incorporated (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)
10.19		Escrow Agreement dated September 19, 1985, by and among Stater Bros. Markets, Petrolane Incorporated and First Interstate Bank of California (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 33-77296 dated July 21, 1994)

2

Exhibit Number	Description
10.20	Dealer Manager Agreement dated as of July 1, 1999, by and between Stater Bros. and Banc of America Securities LLC (previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement S-4 No. 333-85723 dated August 20, 1999)
10.21	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Jack H. Brown (Previously filed with the Securities and Exchange Commission as exhibits to Registrant’s Quarterly Report on Form 10-Q dated June 25, 2000 and filed on August 9, 2000)
10.22	Employment contract dated June 1, 2000, as amended, by and between Stater Bros. Markets and Donald I. Baker (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.23	Employment contract dated June 1, 2000, as amended, by and between Stater Bros. Markets and A. Gayle Paden (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.24	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and H. Harrison Lightfoot (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.25	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Phillip J. Smith (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.26	Stater Bros. Holdings Inc. Phantom Stock Plan (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 24, 2000)
10.27	First Amendment dated September 15, 2000 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.28	Second Amendment dated December 13, 2001 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.29	Third Amendment dated January 18, 2002 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.30	Subordinated Note for $20,000,000 dated January 22, 2002 between Stater Bros. and H. Harrison Lightfoot with an interest rate of 5% due March 31, 2007 (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 31, 2001)
10.31	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Dennis L. McIntyre (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)
10.32	Employment contract dated June 1, 2000 by and between Stater Bros. Markets and Edward A. Stater (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)
10.33	Employment contract dated August 1, 2002 by and between Stater Bros. Markets and James W. Lee (previous filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 29, 2002)

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Exhibit Number	Description
10.34	Fourth Amendment dated February 4, 2003 to the Credit Agreement dated as of August 6, 1999 by and among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A. (previously filed with the Securities and Exchange Commission as exhibits to the Registrant’s Quarterly Report on Form 10-Q dated December 29, 2002)
10.35	Owner Participation Agreement, dated as of April 14, 2004 between Stater Bros. Markets and the Inland Valley Development Agency (incorporated by reference to Exhibit 10.35 to the Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
10.36	Development Parcel Disposition Agreement, dated as of June 16, 2004 between Stater Bros. Markets and Hillwood/San Bernardino, LLC (incorporated by reference to Exhibit 10.35 to the Quarterly Report on Form 10-Q for the quarter ended June 27, 2004)
10.37*	Subsidiary Guaranty entered into as of June 17, 2004 by Stater Bros. Holdings Inc., Stater Bros. Development, Inc. and Santee Dairies, Inc.
12.1*	Computation of ratio of earnings to fixed charges
14.1	Copy of Financial Code of Ethics (previously filed with the Securities and Exchange Commission as exhibits with the Annual Report on Form 10-K for the fiscal year ended September 28, 2003)
21.1*	Subsidiaries of Stater Bros. Holdings Inc.
21.2*	Subsidiaries of Stater Bros. Markets
23.1**	Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.2*	Consent of Ernst & Young LLP
24.1*	Power of Attorney (included on signature pages of this Registration Statement on Form S-4)
25.1*	T-1 Statement of Eligibility and Qualification of The Bank of New York, as Trustee
99.1*	Form of Letter of Transmittal
99.2*	Form of Notice of Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4*	Form of Letter to Clients

* Filed herewith

** To be filed by amendment

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EX-3.1

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

STATER BROS. HOLDINGS INC.

Stater Bros. Holdings Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

I. The name of the Corporation is STATER BROS. HOLDINGS INC.

II. The date of filing of its original Certificate of Incorporation with the Secretary of State of Delaware was May 4, 1989.

III. The Certificate of Incorporation of this Corporation shall be amended and restated to read in full as follows:

FIRST: The name of this Corporation is

STATER BROS. HOLDINGS INC.

SECOND: The address of the registered office of the Corporation in the State of Delaware is 15 East North Street, in the City of Dover, County of Kent, and the name of its registered agent at that address is Incorporating Services, Ltd.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH:

(A) Classes and Series of Stock. The total number of shares of all classes and series of capital stock which the Corporation is authorized to issue is One Million Thirty Seven Thousand Six Hundred Fifty (1,037,650) shares, consisting of One Hundred Forty-Four Thousand (144,000) shares of Series A Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), Six Hundred Ninety Three Thousand Six Hundred Fifty (693,650) shares of Series B Preferred Stock, par value $0.01 per share (“Series B Preferred Stock”), One Hundred Thousand (100,000) shares of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), and One Hundred Thousand (100,000) shares of Common Stock, par value $0.01 per share (“Common Stock”). Upon the effectiveness of this Restated Certificate of Incorporation, each issued and outstanding share of Series A Preferred Stock, par value $0.01 per share shall continue to be outstanding and shall constitute Series A Preferred Stock of the Corporation and each issued and outstanding share of Common Stock, par value $0.01 per share, of the Corporation shall continue to be outstanding and shall constitute Common Stock of the Corporation.

(B) Rights, Preferences and Restrictions of Series A Preferred Stock. The stated value of each share of Series A Preferred Stock is hereby fixed as Twenty Five Dollars ($25.00) per share; and the further powers, designations, preferences and relative participating, optional or other special rights, and the qualifications or restrictions thereof, of Series A Preferred Stock are as follows:

1. Subject to the rights of the Series B Preferred Stock and the provisions of this Restated Certificate of Incorporation, the Board of Directors shall have the authority to issue any or all of the shares of Series A Preferred Stock at such time or times and for such consideration as it shall deem appropriate subject to the provisions of applicable law. Shares of Series A Preferred Stock redeemed or purchased by the Corporation shall be retired and shall not be reissued by the Corporation.

2. (a) Subject to the rights of, and restrictions imposed by, Series B Preferred Stock, the holders of the shares of Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the Corporation legally available for dividends, cumulative dividends in cash, at the annual rate per share of Twenty and Eighteen One Hundredths Percent (20.18%) of its stated value. Dividends shall be payable on March 31, June 30, September 30 and December 31 in each year, beginning on June 30, 1989, with respect to the quarterly dividend period (or portion thereof) ending on the day preceding such respective dividend payment date, to stockholders of record on the respective date, not exceeding fifty (50) days preceding such dividend payment fixed for the purpose by the Board of Directors in advance of the particular dividend or if no date is so fixed, on the date five (5) business days prior to the dividend payment date.

(b) Dividends on the shares of Series A Preferred Stock shall be cumulative as follows:

(i) if issued prior to the record date for the first dividend on shares of Series A Preferred Stock, from the date shares of Series A Preferred Stock shall have first been issued;

(ii) if issued during the period commencing immediately after any record date for a dividend on shares of Series A Preferred Stock and ending on the payment date for such dividend, from such dividend payment date; and

(iii) otherwise from the last day of March, June, September and December preceding the date of issue of such shares.

3. Subject to the rights of the Series B Preferred Stock, in the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, then, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of the shares of Series A Preferred Stock shall be entitled to be paid in full an amount equal to Twenty-Five Dollars ($25) per share, together with accrued dividends to such distribution or payment date whether or not earned or declared.

Subject to the rights of the Series B Preferred Stock, if such payment shall have been made in full to all holders of the shares of Series A Preferred Stock, the remaining assets of the Corporation shall be distributed among the holders of Junior Stock, according to their respective rights and preferences and in each case according to their respective numbers of shares.

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4. (a) Subject to the rights of the Series B Preferred Stock, shares of Series A Preferred Stock may be redeemed, at the option of the Corporation, at any time, at a price of Twenty Five Dollars ($25) per share, plus an amount equal to the accrued dividends thereon.

(b) Unless waived in writing by the holders of the Series A Preferred Stock being redeemed, notice of every such redemption shall be given at least 20 and not more than 60 days prior to the date fixed for such redemption to the holders of record of the shares of Series A Preferred Stock to be so redeemed, and shall be sufficiently given if the Corporation shall cause a copy thereof to be mailed to such holders of record at their respective addresses as shown by the books of the Corporation by first class mail, postage prepaid: provided, however, that the failure to mail such notice to one or more of such holders shall not affect the validity of such redemption as to the other such holders.

(c) In case of redemption of a part only of the shares of Series A Preferred Stock at the time outstanding, the Corporation shall select the shares to be so redeemed pro rata, by lot or any other method permitted under applicable law. The Board of Directors shall have full power and authority to prescribe the manner in which the selection shall be conducted and, subject to the limitations and provisions herein contained, the terms and conditions upon which the shares of Series A Preferred Stock shall be redeemed from time to time.

(d) All notices of redemption shall state:

(i) the date fixed for redemption,

(ii) the redemption price,

(iii) if less than all the outstanding shares of Series A Preferred Stock are to be redeemed, the identification of the particular shares to be redeemed,

(iv) that on the redemption date the redemption price will become due and payable upon each share to be redeemed and that dividends thereon will cease to accrue on and after said date, and

(v) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(e) If such notice of redemption shall have been duly given, or if the Corporation shall have granted to the bank or trust company hereinafter referred to, irrevocable authorization promptly to give or complete such notice, and if on or before the redemption date specified therein the funds necessary for such redemption shall have been deposited in trust for the pro rata benefit of the holders of the shares so called for redemption with a bank or trust company, designated in such notice, in good standing and organized under the laws of the United States of America, any State thereof or the District of Columbia and having capital, surplus and undivided profits aggregating at least $25,000,000 according to its then latest published statement of condition, then, notwithstanding that any certificates for shares so called for redemption shall not have been surrendered for cancellation, from and after such deposit all shares of Series A Preferred Stock with respect to which such deposit shall have been made shall no longer be deemed to be outstanding and all rights with respect to such shares shall forthwith terminate,

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except the right of the holders thereof, upon surrender thereof, to receive at any time after the time of such deposit the funds so deposited, without interest. Any interest accrued on such funds shall be paid to the Corporation from time to time.

(f) Any funds so deposited by the Corporation and unclaimed at the end of two years from the redemption date, shall, to the extent permitted by law, be released or repaid to the Corporation, after which repayment the holders of shares so called for redemption shall look only to the Corporation, for payment thereof.

5. Subject to the rights of the Series B Preferred Stock, so long as any share of Series A Preferred Stock remains outstanding, no dividend whatever shall be paid or declared and no distribution made on any Junior Stock other than a dividend payable in Junior Stock, and no shares of Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock, or the exchange or conversion of one Junior Stock for or into another Junior Stock, or other than through the use of the proceeds of a substantially contemporaneous sale of other Junior Stock) unless (i) all dividends on the shares of Series A Preferred Stock for all past dividend periods shall have been paid and the full dividend thereon for the then current quarterly (or other applicable) dividend period shall have been paid or declared and set apart for payment and (ii) all prior mandatory redemption requirements with respect to all shares of Series A Preferred Stock shall have been complied with.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on any Junior Stock from time to time out of any funds legally available therefor, and the shares of Series A Preferred Stock shall not be entitled to participate in any such dividends, whether payable in cash, stock or otherwise.

6. Except with respect to the issuance of Series B Preferred Stock, so long as any shares of Series A Preferred Stock are outstanding, in the event of and as a condition for effecting or validating:

(a) any amendment, alteration or repeal, whether by merger or consolidation of the Corporation or otherwise, of any of the provisions of the Certificate of Incorporation of the Corporation, which affects materially and adversely the voting powers, rights or preferences of the holders of shares of the Series A Preferred Stock; or

(b) the authorization, creation or issuance, whether by merger or consolidation of the Corporation or otherwise, of any shares of any series of preferred stock, or any security convertible into shares of any series of preferred stock (other than the Series B Preferred Stock) ranking prior to the shares of the Series A Preferred Stock in the distribution of assets on any liquidation, dissolution, or winding up of the Corporation or in the payment of dividends; or

(c) the merger or consolidation of the Corporation with or into any other corporation, unless the resulting corporation will thereafter have no class of shares and no other capital stock either authorized or outstanding ranking prior to the Series A Preferred Stock in the distribution of its assets on liquidation, dissolution or winding up or in the payment of dividends, except the

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same number of shares with the same rights and preferences as the shares of the Corporation respectively authorized and outstanding immediately preceding such merger or consolidation, and each holder of shares of the Series A Preferred Stock immediately preceding such merger or consolidation shall receive the same number of shares, with the same rights and preferences, of the resulting corporation;

in addition to any other vote or consent of shareholders required by law or by the Certificate of Incorporation, the consent of the holders of at least 66 ²/3% of the share of the Series A Preferred Stock, acting as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be required.

7. The holders of the shares of Series A Preferred Stock shall have no right to vote except as set forth herein and as by statute specifically required; provided that to the fullest extent possible under Delaware Law, any right to vote granted by statute is here expressly negated.

8. The shares of Series A Preferred Stock shall not have any relative, participating, optional or other special rights or powers other than as set forth herein or as provided by law.

(C) Rights, Preferences and Restrictions of Series B Preferred Stock. The stated value of each share of Series B Preferred Stock is hereby fixed as One Hundred Dollars ($100) per share; and the further powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications or restrictions thereof, of the Series B Preferred Stock are as follows:

l. Dividends.

(a) The holders of the shares of Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the Corporation legally available therefor, prior and in preference to any declaration or payment of any dividend on Junior Stock (as defined below) of the Corporation, cumulative dividends, at the annual rate per share of Ten and One-Half Percent (10.50%) of the stated value for seventy-eight (78) months commencing on the date specified by the Board of Directors in the resolution authorizing the issuance of such shares (the “Accrual Date”), and thereafter such annual rate per share will increase, commencing the seventy-ninth (79th) month following the Accrual Date, to Twelve Percent (12%) per year, and further increasing each twelfth (12th) month thereafter by One Hundred basis points (1.00%) per year, to a maximum annual rate per share of Fifteen Percent (15%) of the stated value. Dividends shall be payable, from and after the Accrual Date, quarterly in arrears on March 31, June 30, September 30 and December 31 in each year, to stockholders of record on such date, not exceeding fifty (50) days preceding such dividend payment date, fixed for the purpose by the Board of Directors in advance of the particular dividend, or if no date is so fixed, on the date five (5) business days prior to the dividend payment date. Dividends on the shares of Series B Preferred Stock shall be cumulative from the Accrual Date.

(b) For so long as any shares of Series B Preferred Stock are outstanding, no dividend whatsoever shall be paid or declared and no distribution made on any Junior Stock, and no shares of Junior Stock shall be purchased, redeemed or otherwise acquired for consideration by the

5

Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock in which no consideration other than Junior Stock is distributed in exchange for other shares of Junior Stock).

2. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, then, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of the shares of Series B Preferred Stock shall be entitled to be paid in full an amount equal to One Hundred Dollars ($100) per share, together with accrued dividends to such distribution or payment date whether or not earned or declared (the “Liquidation Value”). If upon the occurrence of such event, the assets and funds thus distributed among the holders of Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amounts set forth above, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the number of such shares owned by each such holder.

(b) If such payment shall have been made in full to all holders of the shares of Series B Preferred Stock, the remaining assets of the Corporation shall be distributed among the holders of Junior Stock, according to their respective rights and preferences and in each case according to their respective numbers of shares.

3. Redemption.

(a) Redemption at the Option of the Holders. From and after the thirteenth (13th) anniversary of the Accrual Date, any holder of Series B Preferred Stock may, at its option, require the Corporation, from time to time, to redeem all or any part of the shares of Series B Preferred Stock held by it by delivery of written notice requesting such redemption (the “Redemption Notice”) under the provisions hereof; provided, however, that in no event will the Corporation be required to make more than one redemption pursuant to this Section C3(a) in any six (6) month period. Within ten business days after the receipt of a Redemption Notice (“Date of Receipt”), the Corporation shall deliver written notice to all other holders of Series B Preferred Stock at the address for such holders appearing in the books of the Company, informing each such holder of (i) the receipt of such Redemption Notice, (ii) the Date of Receipt, (iii) the number of shares of Series B Preferred Stock requested to be redeemed in the Redemption Notice, and (iv) the total number of shares of Series B Preferred Stock outstanding as of the Date of Receipt and shall provide appropriate forms for the exercise of such redemption right and the delivery of shares (the “Redemption Exercise Form”). Any holder desiring to have any of its shares of Series B Preferred Stock redeemed by the Corporation at such time shall have until thirty (30) days after the Date of Receipt (the “Exercise Period”) in which to complete and deliver to the Corporation a completed and executed Redemption Exercise Form. The Corporation shall redeem the shares of such holder so requested to be redeemed at a per share price equal to 100% of the Liquidation Value of such shares calculated as of the Redemption Date, as defined below (the “Redemption Price”). The Corporation shall pay for shares redeemed hereunder by delivery of cash in the amount the Redemption Price on or before the tenth (10th) business day following expiration of the Exercise Period (the “Redemption Date”).

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In the event there is only one holder of Series B Preferred Stock, the Corporation will be relieved of any obligation to give notice and to deliver a Redemption Exercise Form, and will redeem the shares subject to the Redemption Notice on or before the tenth (10th) business day following the Date of Receipt, in which case such date shall be the Redemption Date for purposes of this Section C3(a).

(b) Surrender of Stock. On or before the Redemption Date, each holder of shares of Series B Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, and thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(c) Legal Availability of Funds. If the funds of the Corporation legally available for redemption of shares of Series B Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Series B Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum number of such shares ratably among the holders of such shares to be redeemed in proportion to the number of shares requested to be redeemed. The shares of Series B Preferred Stock tendered for redemption but not redeemed (the “Excess Shares”) shall remain outstanding and entitled to all the rights and preferences provided herein. Thereafter as additional funds of the Corporation become legally available for the redemption of Excess Shares, such funds shall be used quarterly to redeem Excess Shares, in accordance with the procedures specified below. The Corporation shall within 50 days of the end of each such fiscal quarter notify the holders of such Excess Shares in writing (the “Excess Shares Notification Date”) as to the amount of funds expected to be available for the redemption of Excess Shares with respect to such fiscal quarter and provide each such holder with appropriate forms for the transmittal of shares to be submitted for redemption (the “Excess Shares Exercise Form”). Such holders will have twelve (12) business days over the Excess Shares Notification Date in which to complete and deliver to the Corporation a completed and executed Excess Shares Exercise Form (the “Excess Shares Exercise Period”). Failure by any holder of Excess Shares to timely deliver a completed and executed Excess Shares Exercise Form shall be deemed to revoke the Redemption Notice previously given with respect to such shares, and such shares shall no longer be Excess Shares and shall be entitled only to such rights and preferences otherwise provided to holders of the Series B Preferred Stock.

In the event there are not legally available funds to redeem all Excess Shares having the same Redemption Date, Excess Shares shall be redeemed, prior to any redemption of Series B Preferred Stock having a later Redemption Date, ratably among the holders of such Excess Shares to be redeemed. The Corporation shall to the extent of legally available funds pay for Excess Shares within ten (10) business days following the expiration of the Excess Shares Exercise Period (the “Excess Shares Redemption Date”) to the order of the person or entity whose name appears on such certificate or certificates, and each surrendered certificate shall be cancelled and retired. The redemption price will be that price per share equal to 100% of the Liquidation Value of such shares as of the applicable Excess Shares Redemption Date. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

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4. Voting Rights.

(a) Election of Board of Directors. Subject to Sections C4(b) and C4(c) below, for so long as authorized shares of Series B Preferred Stock are outstanding, the holders of the issued and outstanding Series B Preferred Stock, voting together as a single class (with each share being entitled to one vote) and to the exclusion of all other classes of the capital stock of the Corporation, shall be entitled, at any election of directors to the Corporation’s Board of Directors, to elect one (1) director (the “Series B Director”). Subject to Sections C4(b) and C4(c) below, all members of the Board of Directors other than the Series B Director shall be elected as follows:

(i) In the event that and as long as Craig Corporation, a Delaware corporation (“Craig”) is the beneficial owner of all of the issued and outstanding shares of Series B Preferred Stock, the holder(s) of the Series B Preferred Stock shall be entitled to an aggregate number of votes equal to 20% of the total number of votes entitled to be cast in such election, voting as a single class together with all other shares of capital stock of the Corporation entitled to vote in such election.

(ii) In the event that, and as long as, Craig is not the beneficial owner of all of the issued and outstanding shares of Series B Preferred Stock, the holders of the other shares of capital stock of the Corporation entitled to vote in the election of directors shall be entitled to elect all of the members of the Board of Directors other than the Series B Director.

As used herein “beneficial owner” shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (or any successor thereto) (the “1934 Act”). There shall be no cumulative voting in elections of the Board of Directors.

(b) Default in the Payment of Series B Preferred Stock Dividends. Subject to Section C4(c) below, in the event, any Series B Preferred Stock dividends described in Section C1(a) above shall have accrued and shall remain unpaid in whole or in part for two (2) or more quarterly dividend periods, whether or not consecutive, then for so long as any such dividends shall remain unpaid, the Board of Directors of the Corporation shall automatically, and without any action by the stockholders or directors of the Corporation, consist of seven (7) persons, (i) of which the holders of the issued and outstanding Series B Preferred Stock, voting together as a single class (with each share being entitled to one vote), and to the exclusion of all other classes of the capital stock of the Corporation, shall be entitled to elect four (4) directors (including the Series B Director), and of such four (4) directors at least one (1) director shall be a person with no financial interest in or professional relationship with Craig (or any successor entity), or any affiliate thereof, or any other holder of 10% or more of the Series B Preferred Stock and (ii) the holders of the shares of the other classes of the shares of voting capital stock of the Corporation shall be entitled to elect the remaining three (3) directors, of which at least one director shall be a person with no financial interest in or professional relationship with La Cadena Investments (“La Cadena”), a California general partnership (or any successor entity), or any affiliate thereof. As used herein, “affiliate” shall have the meaning set forth in Rule 12b-2 under the 1934 Act. At any time after such special voting rights shall have so vested in the holders of shares of Series B Preferred Stock, the holders of an aggregate of 50% or more of the Series B Preferred Stock shall be entitled to call a special meeting of the holders of capital stock of the Corporation entitled to vote in election of directors as provided in this Section C4(b), to be held within thirty (30) days

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after such call and at the place and upon the notice provided by law for the holding of meetings of stockholders. During the period commencing upon the date and time any Series B Preferred Stock dividends described in Section C1(a) above shall have accrued and shall remain unpaid in whole or in part for two (2) or more quarterly dividend periods, whether or not consecutive, and ending upon the election provided for in the previous sentence, the directors previously in office shall continue in office notwithstanding the increase or decrease in the number of directors and their terms shall end upon such election (whether pursuant to a meeting or action by written consent), provided however, that during such period, no action shall be taken by the Board of Directors unless approved unanimously by all directors then in office, and provided further that no action shall be taken by the Board of Directors during such period in the event that and for so long as there shall be no Series B Director then in office. Whenever all dividends on the shares of Series B Preferred Stock shall have been paid in full or declared and set apart for payment, then (w) the right of the holders of the Series B Preferred Stock to elect such number of directors as provided herein shall cease (but subject always to the same provisions for the vesting of such voting rights in the case of any similar future nonpayment of dividends), (x) the term of all but one (representing the Series B Director) of the directors then in office elected by the holders of the Series B Preferred Stock as a class shall terminate, (y) the number of directors constituting the Board of Directors of the Corporation shall automatically and without any action by the stockholders or directors of the Corporation be increased or reduced to the number of directors authorized prior to such vesting of such special voting rights of the Series B Preferred Stock, provided however, that in the event such number of directors would be less than four (4), then the number of directors shall automatically and without any action by the stockholders or directors of the Corporation be increased to four (4), and (z) the Secretary of the Corporation shall call a special meeting of the holders of capital stock of the Corporation entitled to vote thereon to fill any vacancies in the Board of Directors created thereby, if any, to be held within thirty (30) days after such call and at the place and upon the notice provided by law for the holding of meetings of stockholders.

(c) Ownership of Series B Preferred Stock. In the event that, and as long as Craig is not the beneficial owner of a majority of the issued and outstanding shares of Series B Preferred Stock, the right of the holders of the Series B Preferred Stock to elect a Series B Director, and to elect a majority of the Board of Directors under Section C4(b) will be suspended and the term of office of any person then serving as a Series B Director shall terminate; provided, however, that in the event any Series B Preferred Stock dividends described in Section C1(a) shall remain unpaid in whole or in part for two (2) or more quarterly dividend periods, whether or not consecutive, then for so long as any such dividends shall remain unpaid and for so long as shares of Series B Preferred Stock are outstanding, the Board of Directors of the Corporation shall automatically, and without any action by the stockholders or directors of the Corporation, be increased by two (2), of which the holders of the issued and outstanding Series B Preferred Stock, voting together as a single class (with each share being entitled to one vote), and to the exclusion of all other classes of the capital stock of the Corporation, shall be entitled to fill such newly created directorships. At any time after such special voting rights shall have so vested in the holders of shares of Series B Preferred Stock the Secretary of the Corporation shall, within two (2) business days of such vesting, call a special meeting of the holders of Series B Preferred Stock so entitled to vote, for the election of directors as provided in this Section C4(c), to be held within thirty (30) days after such call and at the place and upon the notice provided by law for the holding of meetings of stockholders. Whenever all dividends on the shares of Series B

9

Preferred Stock shall have been paid in full or declared and set apart for payment, then (w) the right of the holders of the Series B Preferred Stock to elect such number of directors shall cease (but subject always to the same provisions for the vesting of such voting rights in the case of any similar future nonpayment of dividends), (x) the term of the directors then in office elected by the holders of the Series B Preferred Stock as a class shall terminate and (y) the number of directors constituting the Board of Directors of the Corporation shall automatically and without any action by the stockholders or directors of the Corporation be reduced by two (2).

Whenever the vote of the holders of shares of the Series B Preferred Stock at any special meeting thereof is required or permitted to be taken for or in connection with this Section C4, the special meeting and vote of the holders of shares of the Series B Preferred Stock or the other shares of capital stock of the Corporation entitled to vote at such meeting (“Other Capital Stock”) may be dispensed with and the action taken without such meeting and vote at or prior to the time of the meeting, if a consent in writing, setting forth the action so taken, shall be signed by such holders of outstanding shares of Series B Preferred Stock or Other Capital Stock, as the case may be, having not less than the minimum number of votes that would be necessary to authorize or take such action at a special meeting at which all shares of Series B Preferred Stock or Other Capital Stock, as the case may be, entitled to vote thereon were present and voted. Such action shall be effective upon the delivery of such consent in writing in accordance with Section 228 of the Delaware General Corporation Law or any successor statutory provisions. With respect to such election of directors, the holders of shares of Series B Preferred Stock may proceed by written consent whether or not the holders of Other Capital Stock elect to proceed by meeting or by written consent.

The Bylaws of the Corporation shall automatically be amended from time to time to provide for the increase or reduction in the number of the Corporation’s Board of Directors and for the election procedures provided in Sections C4(b) and (c).

(d) Protective Provisions. For so long as shares of Series B Preferred Stock are outstanding, the Corporation shall not, without first obtaining the consent of a majority of the holders of Series B Preferred Stock, given in person or by proxy, either in writing or by vote at a meeting called for such purpose at which the holders of Series B Preferred Stock shall vote as a separate class, by amendment to the Certificate of Incorporation, as amended, the bylaws of the Corporation, or in any other manner:

(i) create (by new authorization, reclassification, recapitalization, designation or otherwise) any additional class or classes of equity security or any other securities convertible into equity securities of the Corporation having rights, preferences or privileges superior to or on a parity with, the Series B Preferred Stock or issue any additional shares of Series B Preferred Stock;

(ii) sell, convey or otherwise dispose of all or substantially all of its property or business;

10

(iii) merge into or consolidate with any other corporation, as the result or effect of which:

(aa) the rights, preferences or privileges of the Series B Preferred Stock would be changed, altered, or amended in any manner materially adverse to the holders of Series B Preferred Stock;

(bb) all of the common stock of the Corporation will be exchanged for or converted into cash or property or securities of another corporation, other than a corporation of which the majority of the common equity securities will be issued to the holders of the common stock of the Corporation in such transaction; or

(cc) a majority of the outstanding shares of common stock of the Corporation, as surviving corporation, will be issued to stockholders of the other constituent corporation;

(iv) otherwise alter or change the rights, preferences and privileges of the Series B Preferred Stock so as to materially adversely affect the holders of such shares;

(v) amend Article SIXTH in any manner which does not provide to the director(s) elected by the holders of Series B Preferred Stock all of the same benefits as provided to any other director(s); or

(vi) permit or allow any direct or indirect wholly-owned subsidiary of the Corporation to issue any (A) equity securities to any person or entity other than the Corporation or a direct or indirect wholly-owned subsidiary of the Corporation, or (B) debt (other than cash borrowing on commercially reasonable terms) to La Cadena or any of its partners or affiliates (other than direct or indirect subsidiaries of the Corporation in which neither La Cadena nor any of its partners or affiliates (excluding solely for this purpose, the Corporation and its direct and indirect subsidiaries) owns a beneficial interest) or any other holder of 10% or more of the capital stock of the Corporation.

Notwithstanding the foregoing, the holders of Series B Preferred Stock shall not be entitled to the rights set forth in this Section C4(d) with respect to any transaction in which all of the shares of Series B Preferred Stock will be redeemed or exchanged for cash in an amount not less than the Liquidation Value of such shares at the time of consummation of such transaction.

(e) Other Matters. On all matters to come before the stockholders other than the election of directors provided for in Sections C4(a), (b) and (c), in the event that and as long as Craig is the beneficial owner of all of the issued and outstanding shares of Series B Preferred Stock, the holder of Series B Preferred Stock shall be entitled to a number of votes equal to 20% of the total number of votes entitled to be cast on such matters, voting as a single class together with all other capital stock of the Corporation entitled to vote on such matters, and not as a separate class or series. In the event that and as long as Craig is not the beneficial owner of all of the issued and outstanding shares of Series B Preferred Stock, the holders of Series B Preferred Stock shall have no right to vote on such matters, except as required by applicable law.

5. The shares of Series B Preferred Stock shall not have any relative, participating, optional or other special rights or powers other than as set forth herein or as provided by law.

11

(D) Rights, Preferences and Restrictions of Class A Common Stock and Common Stock. The respective powers, designation, preferences, and relative, participating optional or other special rights, and the qualifications or restrictions thereto of the Class A Common Stock and Common Stock shall be identical, except as follows:

1. Voting Rights.

(a) Initial Five (5) Year Period. Until the fifth (5th) anniversary of the initial issuance of Class A Common Stock, the respective voting rights of the Class A Common Stock and Common Stock shall be as follows.

(i) Election of Board of Director. The holders of the issued and outstanding shares of Common Stock, voting as a single class (with each share being entitled to one (1) vote), and to the exclusion of all other classes of capital stock of the Corporation, shall be entitled to elect one (1) director to the Corporation’s Board of Directors. The remaining members of the Board of Directors of the Corporation shall be elected in the manner set forth in Section D1(a)(ii) below.

(ii) Other Matters. Subject to Sections D1(a)(i) and D1(d), (aa) the holder of each share of Class A Common Stock shall have the right to one and one-tenth (1.1) vote upon all matters that may require the vote of shares of the Corporation’s common stock; and (bb) the holder of each share of Common Stock shall have the right to one (1) vote upon such matters, voting as a single class with the holders of the outstanding shares of Class A Common Stock, and not as a separate class or series.

(b) After Initial Five (5) Year Period. Following the fifth anniversary of the issuance of Class A Common Stock, the provisions of Sections D1(a) and D1(d) will lapse and all matters requiring the vote or consent of the holders of the Corporation’s common stock will require the approval of the holders of each of the Class A Common Stock and the Common Stock, voting together as a single class, with each share entitled to one vote.

(c) There shall be no cumulative voting in elections of the Board of Directors of this Corporation.

(d) Protective Provisions. The Corporation shall not, without first obtaining the consent of a majority of the holders of Common Stock, given in person or by proxy, either in writing or by vote at a meeting called for such purpose at which the holders of Common Stock shall vote as a separate class, by amendment to the Certificate of Incorporation of the Corporation, as amended, the Bylaws of the Corporation, or in any other manner:

(i) create (by new authorization, reclassification, recapitalization, designation or otherwise) any additional class or classes of equity security or any other securities convertible into equity securities of the Corporation, having rights, preferences or privileges superior to or on a parity with, the Common Stock;

(ii) sell, convey or otherwise dispose of all or substantially all of its property or business;

12

(iii) merge into or consolidate with any other corporation, as the result or effect of which:

(aa) the rights, preferences or privileges of the Common Stock would be changed, altered, or amended in any manner materially adverse to the holders of Common Stock;

(bb) all of the common stock of the Corporation will be exchanged for or converted into cash or property or securities of another corporation, other than a corporation of which the majority of the common equity securities will be issued to the holders of the common stock of the Corporation in such transactions; or

(cc) a majority of the outstanding shares of common stock of the Corporation, as surviving corporation, will be issued to stockholders of the other constituent corporation;

(iv) increase or decrease the authorized number of shares of Series B Preferred Stock or amend in any manner Section C of Article FOURTH;

(v) otherwise alter or change the rights, preferences and privileges of the Common Stock so as to materially adversely affect the holders of such shares;

(vi) amend Article SIXTH in any manner which does not provide to the director(s) elected by the holders of Common Stock all of the same benefits as provided to any other director(s); or

(vii) permit or allow any direct or indirect wholly-owned subsidiary of the Corporation to issue any (A) equity securities to any person or entity other than the Corporation or a direct or indirect wholly-owned subsidiary of the Corporation, or (B) debt (other than cash borrowing on commercially reasonable terms) to La Cadena or any of its partners or affiliates (other than direct or indirect subsidiaries of the Corporation in which neither La Cadena nor any of its partners or affiliates (excluding solely for this purpose, the Corporation and its direct and indirect subsidiaries) owns a beneficial interest) or any holder of 10% or more of the capital stock of the Corporation.

(E) As used herein, the following terms shall have the following meanings:

(1) With respect to the Series A Preferred Stock, the term “Junior Stock” shall mean the Class A Common Stock, Common Stock and any other class or series of shares of the Corporation hereafter authorized over which Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation, provided, however, that Junior Stock shall not include the Series B Preferred Stock;

(2) With respect to the Series B Preferred Stock, the term “Junior Stock” shall mean the Series A Preferred Stock, Class A Common Stock, Common Stock and any other class or series of shares of the Corporation hereafter authorized over which Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

13

(3) The term “accrued dividends”, with respect to any share of any class or series, shall mean an amount computed at the annual dividend rate for the class or series of which the particular share is a part, from the date on which dividends on such share became cumulative to and including the date to which such dividends are to be accrued, less the aggregate amount of all dividends theretofore paid thereon.

(F) (1) In the event that and for so long as Craig beneficially owns all of the issued and outstanding shares of Common Stock or Series B Preferred Stock: (a) Craig shall have the right to designate one (1) director to each direct and indirect subsidiary of the Corporation of which the Corporation and its affiliates beneficially owns 90% or more of the outstanding capital stock, and (b) the Corporation shall provide notice to Craig at least thirty (30) days prior to any election of the Board of Directors of any such subsidiary. Craig shall exercise its right to designate its one director by delivering notice to the Corporation at least fifteen (15) days prior to the date of such election and the Corporation shall vote its shares and cause any subsidiary to vote its shares in a manner to elect the person designated by Craig. In the event no such notice is received by the Corporation, Craig shall be deemed to have declined to exercise such right with respect to such election. The Corporation shall cause such each subsidiary to which Craig elects to designate a director to deliver to Craig notice of any meeting of the Board of Directors of such subsidiary to the extent required by law but at least 72 hours prior to such meeting, together with an agenda of business to be considered at such meeting, provided however, that the rights provided in this Section F(1) may be enforced only by Craig and is not intended to confer rights on or be enforceable by any other person or entity.

(2) In the event that and for so long as La Cadena beneficially owns all of the issued and outstanding shares of Common Stock: (a) La Cadena shall have the right to designate one (1) director to each direct and indirect subsidiary of the Corporation of which the Corporation beneficially owns 90% or more of the outstanding capital stock and (b) the Corporation shall provide notice to La Cadena at least (30) days prior to any election of the Board of Directors of any such subsidiary. La Cadena shall exercise its right to designate its one director by delivering notice to the Corporation at least fifteen (15) days prior to the date of such election and the Corporation shall vote its shares and cause any subsidiary to vote its shares in a manner to elect the person designated by La Cadena. In the event no such notice is received by the Corporation, La Cadena shall be deemed to have declined to exercise such right granted in this Section F(2) with respect to such election. The Corporation shall cause such each subsidiary to which La Cadena elects to designate a director to deliver to La Cadena notice of any meeting of the Board of Directors of such subsidiary to the extent required by law but at least 72 hours prior to such meeting, together with an agenda of business to be considered at such meeting, provided however, that the rights provided in this Section F(2) may be enforced only by La Cadena and is not intended to confer rights on or be enforceable by any other person or entity.

FIFTH: Subject to the provisions hereof, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this reservation.

SIXTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a

14

director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) pursuant to Section 174 of the General Corporation Law of the State of Delaware, or (d) for any transaction from which such director derived an improper personal benefit. No amendment to or repeal of this paragraph of Article SIXTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

In furtherance and not in limitation of the powers conferred by statute:

(i) the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of law; and

(ii) the Corporation may, to the fullest extent authorized or permitted by law, create a trust fund, grant a security interest and/or use other means (including, without imitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere.

SEVENTH: Subject to the provisions hereof, the power to adopt, amend or repeal bylaws shall be vested exclusively in the stockholders. The affirmative vote of the holders of not less than a majority of the then outstanding shares of capital stock of the Corporation entitled to vote on such matters, voting as a single class, shall be required for any such adoption, amendment or repeal. In addition, in the event that and for as long as Craig is the beneficial owner of a majority of the issued and outstanding Series B Preferred Stock, the written consent of the holders of a majority of the issued and outstanding shares of Series B Preferred Stock shall be required for any such adoption, amendment or repeal which would adversely affect the rights of Craig or CMI granted hereunder.

IV. This Restated Certificate of Incorporation was duly adopted by the Board of Directors of this Corporation.

V. This Restated Certificate of Incorporation, which amends and restates the Corporation’s Certificate of Incorporation, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware.

15

IN WITNESS WHEREOF, Stater Bros. Holdings Inc. has caused this Restated Certificate of Incorporation to be signed by its President, Jack H. Brown, and its Secretary, Bruce D. Varner, this 2nd day of March, 1994.

STATER BROS. HOLDINGS INC.
By:	/s/ Jack H. Brown
	Jack H. Brown President

Attest:

/s/ Bruce D. Varner

Bruce D. Varner

Secretary

16

CERTIFICATE OF AMENDMENT

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

STATER BROS. HOLDINGS INC.

Stater Bros. Holdings Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That the Board of Directors on April 29, 1997, duly adopted resolutions setting forth the proposed amendment of the corporation’s Restated Certificate of Incorporation, declaring said amendment to be advisable and directing that it be submitted to the stockholders of said corporation for consideration and approval. The resolutions setting forth the proposed amendment is as follows:

RESOLVED, that Article FOURTH, Section (C), Subsection 4, Paragraph (b) of the corporation’s Restated Certificate of Incorporation be amended by deleting the fourth sentence, which presently reads:

“During the period commencing upon the date and time any series B Preferred Stock dividends described in Section C1(a) above shall have accrued and shall remain unpaid in whole or in part for two (2) or more quarterly dividend periods, whether or not consecutive, and ending upon the election provided for in the previous sentence, the directors previously in office shall continue in office notwithstanding the increase or decrease in the number of directors and their terms shall end upon such election (whether pursuant to a meeting or action by written consent), provided however, that during such period, no action shall be taken by the Board of Directors unless approved unanimously by all directors then in office, and provided further that no action shall be taken by the Board of Directors during such period in the event that for so long as there shall be no Series B Director then in office.”

and replacing it with the following:

“During the period commencing upon the date and time any Series B Preferred Stock dividends describe in Section C1(a) above shall have accrued and shall remain unpaid in whole or in part for two (2) or more quarterly dividend periods, whether or not consecutive, and ending upon the election provided for in the previous sentence, the directors previously in office shall continue in office notwithstanding the increase or decrease in the number of directors and their terms shall end upon such election (whether pursuant to a meeting or action by written consent), provided however, that unless the holder or holders of all of the outstanding Series B Preferred Stock shall have otherwise agreed in writing, during such period: (i) no action shall be taken by the Board of Directors unless approved unanimously by all directors then in office and (ii) no action shall be

taken by the Board of Directors in the event that and for so long as there shall be no Series B Director then in office.”

SECOND: That the holders of all of the Common Stock and all of the Preferred Stock of the corporation have approved such amendment, by written consent to action without a meeting.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, Stater Bros. Holdings Inc. has caused this certificate to be signed by Jack H. Brown, its Chairman of the Board, President and Chief Executive Officer and Bruce D. Varner, its Secretary, as of the 29th day of April, 1997.

STATER BROS. HOLDINGS, INC., a Delaware corporation
By:	/s/ Jack H. Brown
	Jack H. Brown Chairman of the Board, President and Chief Executive Officer
By:	/s/ Bruce D. Varner
	Bruce D. Varner Secretary

18

EX-3.3

Exhibit 3.3

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

STATER BROS. MARKETS

1. Jack H. Brown and Bruce D. Varner certify that they are the President and Secretary, respectively of Stater Bros. Markets, a California corporation.

2. The articles of incorporation of Stater Bros. Markets are amended and restated to read as follows:

ARTICLE I

The name of this corporation is:

STATER BROS. MARKETS

ARTICLE II

The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code.

ARTICLE III

This corporation is authorized to issue one class of shares of stock designated as “Common Stock”. The total number of shares which this corporation is authorized to issue is twenty-five thousand (25,000).

ARTICLE IV

The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

ARTICLE V

The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with agents, vote of shareholders or otherwise, to the fullest extent permissible under California law.

ARTICLE VI

Any amendment, repeal, or modification of any provision of Article IV or Article V shall not adversely affect any right or protection of an agent of this corporation existing at the time of such amendment.

3. The foregoing Amended and Restated Articles of Incorporation has been duly approved by the board of directors.

4. The foregoing Amended and Restated of Articles of Incorporation has been duly approved by the required vote of the shareholders of the corporation in accordance with Section 902 of the Corporations Code. The total number of outstanding shares of Common Stock of the corporation is one thousand (1,000) and there are no shares of $11.00 cumulative preferred stock outstanding. The number of shares of Common Stock voting in favor of the amendment was 100% which equaled or exceeded the vote percentage required which was more than 50%.

The undersigned hereby declare under penalty of perjury that under the laws of the State of California that the matters set forth in this Certificate are true and correct of our own knowledge.

Executed at Colton, California, on March 6, 2001.

/s/    JACK H. BROWN        

Jack H. Brown, President

/s/    BRUCE D. VARNER        

Bruce D. Varner, Secretary

2

EX-3.4

Exhibit 3.4

BYLAWS

OF

STATER BROS. MARKETS

a California corporation

TABLE OF CONTENTS

BYLAWS

Article	Section		Page
ARTICLE I	OFFICES
	Section 1.01	PRINCIPAL OFFICES	1
	Section 1.02	OTHER OFFICES	1
ARTICLE II	MEETINGS OF SHAREHOLDERS
	Section 2.01	PLACE OF MEETINGS	1
	Section 2.02	ANNUAL MEETING	1
	Section 2.03	SPECIAL MEETING	1
	Section 2.04	NOTICE OF SHAREHOLDERS’ MEETINGS	2
	Section 2.05	MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE	2
	Section 2.06	QUORUM	3
	Section 2.07	ADJOURNED MEETING; NOTICE	3
	Section 2.08	VOTING	3
	Section 2.09	WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS	4
	Section 2.10	SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING	4
	Section 2.11	RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS	4
	Section 2.12	PROXIES	5
	Section 2.13	INSPECTORS OF ELECTION	5
	Section 2.14	SUBSIDIARY CORPORATIONS	6
ARTICLE III	DIRECTORS
	Section 3.01	POWERS	6
	Section 3.02	NUMBER AND QUALIFICATION OF DIRECTORS	7
	Section 3.03	ELECTION AND TERM OF OFFICE OF DIRECTORS	8
	Section 3.04	VACANCIES	8
	Section 3.05	PLACE OF MEETINGS AND MEETINGS BY TELEPHONE	8
	Section 3.06	ANNUAL MEETING	8
	Section 3.07	OTHER REGULAR MEETINGS	9
	Section 3.08	SPECIAL MEETINGS	9

i

Article	Section		Page
	Section 3.09	QUORUM	9
	Section 3.10	WAIVER OF NOTICE	9
	Section 3.11	ADJOURNMENT	9
	Section 3.12	ACTION WITHOUT MEETING	10
	Section 3.13	FEES AND COMPENSATION OF DIRECTORS	10
	Section 3.14	MANIFESTATION OF DISSENT	10
	Section 3.15	REMOVAL OF DIRECTORS	10
ARTICLE IV	COMMITTEES
	Section 4.01	COMMITTEES OF DIRECTORS	10
	Section 4.02	MEETINGS AND ACTION OF COMMITTEES	11
ARTICLE V	OFFICERS
	Section 5.01	OFFICERS	11
	Section 5.02	ELECTION OF OFFICERS	12
	Section 5.03	SUBORDINATE OFFICERS	12
	Section 5.04	REMOVAL AND RESIGNATION OF OFFICERS	12
	Section 5.05	VACANCIES IN OFFICES	12
	Section 5.06	CHAIRMAN OF THE BOARD	12
	Section 5.07	PRESIDENT	12
	Section 5.08	VICE PRESIDENTS	12
	Section 5.09	SECRETARY	13
	Section 5.10	CHIEF FINANCIAL OFFICER	13
ARTICLE VI	INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
	Section 6.01	AGENTS, PROCEEDINGS, AND EXPENSES	13
	Section 6.02	ACTIONS OTHER THAN BY THE CORPORATION	14
	Section 6.03	ACTIONS BY THE CORPORATION	14
	Section 6.04	SUCCESSFUL DEFENSE BY AGENT	14
	Section 6.05	REQUIRED APPROVAL	15
	Section 6.06	ADVANCE OF EXPENSES	15
	Section 6.07	OTHER CONTRACTUAL RIGHTS	15
	Section 6.08	LIMITATIONS	15
	Section 6.09	INSURANCE	16
	Section 6.10	FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN	16

ii

Article	Section		Page
ARTICLE VII	RECORDS AND REPORTS - STATUTORY AGENT
	Section 7.01	MAINTENANCE AND INSPECTION OF SHARE REGISTER	17
	Section 7.02	MAINTENANCE AND INSPECTION OF BYLAWS	17
	Section 7.03	MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS	17
	Section 7.04	INSPECTION BY DIRECTORS	18
	Section 7.05	ANNUAL REPORT TO SHAREHOLDERS	18
	Section 7.06	FINANCIAL STATEMENTS	18
	Section 7.07	ANNUAL STATEMENT OF GENERAL INFORMATION	19
ARTICLE VIII	GENERAL CORPORATE MATTERS
	Section 8.01	RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING	19
	Section 8.02	CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS	19
	Section 8.03	EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS	19
	Section 8.04	CERTIFICATES FOR SHARES	20
	Section 8.05	LOST CERTIFICATES	20
	Section 8.06	SHARE TRANSFERS	20
	Section 8.07	REPRESENTATION OF SHARES OF OTHER CORPORATIONS	20
	Section 8.08	CONSTRUCTION AND DEFINITIONS	20
ARTICLE IX	AMENDMENTS
	Section 9.01	AMENDMENT BY SHAREHOLDERS	21
	Section 9.02	AMENDMENT BY DIRECTORS	21

iii

BYLAWS

OF

STATER BROS. MARKETS

a California corporation

ARTICLE I

OFFICES

Section 1.01 PRINCIPAL OFFICES. The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the board of directors shall fix and designate a principal business office in the State of California.

Section 1.02 OTHER OFFICES. The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 2.01 PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside the State of California designated by resolution of the board of directors. In the absence of any such designation, shareholders’ meetings shall be held at such place as may be designated in the notice of the meeting, or if no such place is designated, then at the principal executive office of the corporation.

Section 2.02 ANNUAL MEETING. The annual meeting of shareholders shall be held each year on the second Wednesday of November at 10:00 a.m. or on a date and at a time designated by the board of directors. At each annual meeting, directors shall be elected and any other proper business may be transacted.

Section 2.03 SPECIAL MEETING. A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.

If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting, the place of such meeting, and the general nature of the business proposed to be transacted, and shall be delivered personally or sent

1

by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.04 and 2.05, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.03 shall be construed as limiting, fixing, or affecting the time when or the place where a meeting of shareholders called by action of the board of directors may be held.

Section 2.04 NOTICE OF SHAREHOLDERS’ MEETINGS. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.05 not less than ten (10), or if sent by third class mail thirty (30), nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal.

Section 2.05 MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first class mail (or, if the corporation shall have outstanding shares held of record by 500 or more persons on the record date, notice may be sent by third class mail) or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation’s books or is given, notice shall be deemed to have been given if sent to that shareholder by first class mail or telegraphic or other written communication to the corporation’s principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the

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shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice of any shareholders’ meeting shall be executed by the secretary, assistant secretary, or any transfer agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation.

Section 2.06 QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken, other than adjournment, is approved by at least a majority of the shares required to constitute a quorum.

Section 2.07 ADJOURNED MEETING; NOTICE. Any shareholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 2.06.

When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.04 and 2.05. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

Section 2.08 VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11, subject to Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders’ vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares that the shareholder is entitled to vote. Except as provided in Section 2.06, the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the California General Corporation Law, by the articles of incorporation, or by the bylaws.

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At a shareholders’ meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes, i.e. cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast, unless the candidates’ names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder’s intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder’s shares are entitled, or distribute the shareholder’s votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected.

Section 2.09 WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting, or an approval of the minutes. Any waiver of notice, consent to the holding of a meeting, or approval of the minutes thereof, need not specify either the business to be transacted at or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.04, the waiver of notice, consent, or approval shall state the general nature of the proposal. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting.

Section 2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing setting forth the action so taken is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) indemnifications of agents of the corporation, pursuant to Section 317 of that Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.

Section 2.11 RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting

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or to vote or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only shareholders of record at the close of business on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California General Corporation Law.

If the board of directors does not so fix a record date:

(a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.

Section 2.12 PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder’s name is placed on the proxy, whether by manual signature, typewriting, telegraphic transmission, or otherwise, by the shareholder or the shareholder’s attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Corporations Code of California.

Section 2.13 INSPECTORS OF ELECTION. Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1)

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or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder’s proxy shall, appoint a person to fill that vacancy.

These inspectors shall:

(a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

(b) Receive votes, ballots, or consents;

(c) Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

Section 2.14 SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a subsidiary shall not be entitled to vote on any matter. A subsidiary for these purposes is defined as a corporation, the shares of which possessing more than twenty-five percent (25%) of the total combined voting power of all classes of shares entitled to vote, are owned directly or indirectly through one or more subsidiaries.

ARTICLE III

DIRECTORS

Section 3.01 POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

Without prejudice to these general powers, and subject to the same limitations, the directors shall have the power to:

(a) Select and remove all officers, agents, and employees of the corporation; prescribe any powers and duties for them that are consistent with law, with the articles of

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incorporation, and with these bylaws; fix their compensation; and require from them security for faithful service.

(b) Change the principal executive office or the principal business office in the State of California from one location to another; cause the corporation to be qualified to do business in any other state, territory, dependency, or country and conduct business within or without the State of California; and designate any place within or without the State of California for the holding of any shareholders’ meeting, or meetings, including annual meetings.

(c) Adopt, make, and use a corporate seal; prescribe the forms of certificates of stock; and alter the form of the seal and certificates.

(d) Authorize the issuance of shares of stock of the corporation on any lawful terms, in consideration of money paid, labor done, services actually rendered, debts or securities canceled, or tangible or intangible property actually received.

(e) Borrow money and incur indebtedness on behalf of the corporation, and cause to be executed and delivered for the corporation’s purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, and other evidences of debt and securities.

(f) Dismiss any employee (whether regular or temporary) and terminate his employment, regardless of the period of employment, whether express or implied, without liability to the corporation, other than for compensation for services actually performed to the time of dismissal and prorated, if that be necessary, at the rates provided for in the contract, or otherwise agreed upon or payable; and, regardless of whether so stated in the contract or at the time of hiring, the power of the board of directors to dismiss an employee as herein provided, shall be deemed a part of every employment and every contract of employment, whether such contract of employment be written or oral; and no officer, superintendent, or other representative of the corporation shall have any authority to employ any person other than upon and subject to the right of the board to terminate the employment at any time, without liability resulting therefrom; provided, further, the board shall have power to waive such right of dismissal in any hiring for a period of not in excess of one year, when the contract is in writing and shall have been expressly authorized by resolution of the board.

(g) Delegate to any superintendent or other employee or agent of the corporation the enforcement of the rules and regulations of the corporation, and the determination of all matters of a ministerial nature.

Section 3.02 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of directors shall be four (4) until changed by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote. A director need not be a shareholder of the corporation, a citizen of the United States, or a resident of the State of California.

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Section 3.03 ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

Section 3.04 VACANCIES. Vacancies in the board of directors may be filled by a majority of the remaining directors though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled by the shareholders only in a manner specified in the California General Corporation Law. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.

A vacancy or vacancies in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting.

The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors in the manner provided for elsewhere in these bylaws.

Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary, or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.

No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

Section 3.05 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at any place designated in the notice of the meeting or, if there is no notice, at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting.

Section 3.06 ANNUAL MEETING. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required.

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Section 3.07 OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice.

Section 3.08 SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board or the president or any vice president or the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first class mail, mailgram, or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone, mailgram, or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation.

Section 3.09 QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.11. Every act or decision done or made by a majority of the directors present shall be regarded as the act of the board of directors at the time of the adjournment.

Section 3.10 WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or whenever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting, or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice to that director.

Section 3.11 ADJOURNMENT. A majority of the directors present whether or not constituting a quorum may adjourn any meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 3.08, to the directors who were not present at the time of the adjournment.

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Section 3.12 ACTION WITHOUT MEETING. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board.

Section 3.13 FEES AND COMPENSATION OF DIRECTORS. Directors and members of the committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services.

Section 3.14 MANIFESTATION OF DISSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation promptly after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 3.15 REMOVAL OF DIRECTORS. The entire board of directors or any individual director may be removed from office without cause by approval of the holders of at least a majority of the shares, provided that unless the entire board is removed, an individual director shall not be removed when the votes cast against such removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election of directors at which the same total number of votes were cast, or, if such action is taken by written consent, in lieu of a meeting, all shares entitled to vote were voted, and the entire number of directors authorized at the time of the director’s most recent election were then being elected. If any or all directors are so removed, new directors may be elected at the same meeting or by such written consent. The board of directors may declare vacant the office of any director who has been declared of unsound mind by an order of court or convicted of a felony.

ARTICLE IV

COMMITTEES

Section 4.01 COMMITTEES OF DIRECTORS. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:

(a) the approval of any action which, under the General Corporation Law of California, also requires shareholders’ approval or approval of the outstanding shares;

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(b) the filling of vacancies on the board of directors or in any committee;

(c) the fixing of compensation of the directors for serving on the board or on any committee;

(d) the amendment or repeal of bylaws or the adoption of new bylaws;

(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amenable or repealable;

(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or

(g) the appointment of any other committees of the board of directors or the members of these committees.

Section 4.02 MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.05 regarding place of meetings, Section 3.07 regarding regular meetings, Section 3.08, regarding special meetings and notice, Section 3.09 regarding quorum, Section 3.10 regarding waiver of notice, Section 3.11 regarding adjournment, Section 3.11 regarding notice of adjournment, and Section 3.12 regarding action without meeting, with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members being implied, except that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee. Special meetings of committees may also be called by resolution of the board of directors, and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

Section 5.01 OFFICERS. The officers of the corporation shall be chairman of the board or a president or both, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.03. Any number of offices may be held by the same person.

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Section 5.02 ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.03 or 5.05, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any written contract of employment.

Section 5.03 SUBORDINATE OFFICERS. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine.

Section 5.04 REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any written contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

Section 5.05 VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.

Section 5.06 CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.07.

Section 5.07 PRESIDENT. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws.

Section 5.08 VICE PRESIDENTS. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all duties of the president, and when so

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acting shall have all the powers of and be subject to all the restrictions upon the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, the bylaws, the president, and the chairman of the board.

Section 5.09 SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, the notice given, whether regular or special, and, if special, how authorized, the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at shareholders’ meetings, and the proceedings.

The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, as determined by the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by law or by the bylaws to be given, and the secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by the bylaws.

Section 5.10 CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS,

EMPLOYEES, AND OTHER AGENTS

Section 6.01 AGENTS, PROCEEDINGS, AND EXPENSES. For the purpose of this Article, “agent” means any person who is or was a director, officer, employee, or other agent of this

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corporation, or is or was serving at the request of this corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation which was a predecessor corporation of this corporation or of another enterprise at the request of such predecessor corporation; “proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative, or investigative; and “expenses” includes, without limitation, attorneys’ fees and any expenses of establishing a right to indemnification under Section 6.04 or 6.05(c).

Section 6.02 ACTIONS OTHER THAN BY THE CORPORATION. This corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding, other than an action by or in the right of this corporation to procure judgment in its favor, by reason of the fact that such person is or was an agent of this corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with such proceeding if that person acted in good faith and in a manner that person reasonably believed to be in the best interests of this corporation and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of this corporation or that the person had reasonable cause to believe that his conduct was unlawful.

Section 6.03 ACTIONS BY THE CORPORATION. This corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action by or in the right of this corporation to procure a judgment in its favor by reason of the fact that that person is or was an agent of this corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of that action if that person acted in good faith, in a manner that person believed to be in the best interests of this corporation and its shareholders. No indemnification shall be made under this Section 6.03 for any of the following:

(a) In respect of any claim, issue or matter as to which that person shall have been adjudged to be liable to this corporation in the performance of that person’s duty to this corporation and its shareholders, unless and only to the extent that the court in which such proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses, and in such case only to the extent that the court shall determine;

(b) Of amounts paid in settling or otherwise disposing of a pending action without court approval; or

(c) Of expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval.

Section 6.04 SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this corporation has been successful on the merits in defense of any proceeding referred to in Sections 6.02 or 6.03, or in defense of any claim, issue, or matter therein, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith.

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Section 6.05 REQUIRED APPROVAL. Except as provided in Section 6.04, any indemnification under this Article shall be made by this corporation only if authorized in the specific case on a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 6.02 or 6.03, by any of the following:

(a) A majority vote of a quorum consisting of directors who are not parties to the proceeding;

(b) If such a quorum of directors is not obtainable, by independent legal counsel in a written opinion;

(c) Approval by the affirmative vote of a majority of the shares of this corporation entitled to vote represented at a duly held meeting at which a quorum is present or by the written consent of holders of a majority of the outstanding shares entitled to vote. For this purpose, the shares owned by the person to be indemnified shall not be entitled to vote thereon; or

(d) The court in which the proceeding is or was pending, on application made by this corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney, or other person is opposed by this corporation.

Section 6.06 ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by this corporation before the final disposition of the proceeding on receipt of an undertaking by or on behalf of the agent to repay the amount of the advance unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article.

Section 6.07 OTHER RIGHTS. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent such additional rights to indemnification are authorized in the articles of this corporation. The rights to indemnify hereunder shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person. Nothing contained in this Article shall affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise.

Section 6.08 LIMITATIONS. No indemnification or advance shall be made under this Article, except as provided in Section 6.04 or 6.05(c), in any circumstance where it appears:

(a) That it would be inconsistent with a provision of the articles, these bylaws, a resolution of the shareholders, or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

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(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

Section 6.09 INSURANCE. Upon and in the event of a determination by the board of directors of this corporation to purchase such insurance, this corporation shall purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent’s status as such whether or not this corporation would have the power to indemnify the agent against that liability under the provisions of this Article. The fact that this corporation owns all or a portion of the shares of the company issuing a policy of insurance shall not render this section inapplicable if either the following conditions are satisfied:

(a) If the insurance is authorized by the Articles of Incorporation of this corporation, such policy does not exceed the limitations, if any, contained in such provision of the Articles; or

(b) (i) The company issuing the insurance policy is organized, licensed and operated in a manner that complies with the insurance laws and regulations applicable to the jurisdiction in which such company is organized; (ii) the company issuing the insurance policy provides procedures for processing claims that do not permit that company to be subject to the direct control of this corporation; and (iii) the policy issued provides for some manner of risk sharing between the issuer and this corporation, on one hand, and some unaffiliated person or persons on the other, such as by providing for more than one unaffiliated owner of the company issuing the policy or by providing that a portion of the coverage furnished will be obtained from some unaffiliated insurer or reinsurer.

Section 6.10 FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. Except as provided in this section, this Article does not apply to any proceeding against any trustee, investment manager, or other fiduciary of an employee benefit plan or trust in that person’s capacity as such, even though that person may also be an agent of the corporation as defined in Section 6.01. Upon and in the event of a determination by the board of directors of this corporation to so indemnify, this corporation shall indemnify such a trustee, investment manager, or other fiduciary to the maximum extent permitted by law. Nothing contained in this Article shall limit any right to indemnification to which such a trustee, investment manager, or other fiduciary may be entitled by contract or otherwise, which shall be enforceable to the extent permitted by applicable law other than this Article.

Upon and in the event of a determination by the board of directors of this corporation to purchase such insurance, this corporation shall purchase and maintain insurance on behalf of any trustee, investment manager, or other fiduciary of an employee benefit plan or trust in that person’s capacity as such, against any liability asserted against or incurred by the trustee, investment manager, or other fiduciary in such capacity or arising out of the trustee, investment advisor, or other fiduciary’s status as such, whether or not this corporation would have the power to indemnify such fiduciary against that liability under the provisions of this section.

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ARTICLE VII

RECORDS AND REPORTS - STATUTORY AGENT

Section 7.01 MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder.

A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders’ names and addresses and shareholdings during usual business hours on five (5) days prior written demand on the corporation, and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent’s usual charges for such list, a list of the names and addresses of shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate at any time during usual business hours for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 7.01 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.

Section 7.02 MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws, as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date.

Section 7.03 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders, the board of directors, and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation.

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Section 7.04 INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents.

Section 7.05 ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501(a) of the Corporations Code of California is expressly dispensed with so long as the corporation has less than 100 holders of record of its shares, but nothing herein shall be interpreted as prohibiting the board of directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate.

If no annual report for the last fiscal year has been sent to shareholders, the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request within thirty (30) days thereafter the financial statements otherwise required by Section 1501(a) of that Code for such year.

Section 7.06 FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year and any accompanying balance sheet of the corporation as of the end of each such period that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months, and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder.

If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ending more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the chief financial officer shall cause the statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders an annual report for the last fiscal year, financial statements of the character described in Section 1501(a) of the Corporations Code of California shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the same have been requested.

The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation, or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.

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Section 7.07 ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation shall, during the applicable filing period specified by statutes file with the Secretary of State of the State of California on the prescribed form a statement setting forth the authorized number of directors, the names and complete business or residence addresses of all incumbent directors, the names and complete business or residence addresses of the chief executive officer, secretary, and chief financial officer, the street address of its principal executive office or principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the Corporations Code of California.

ARTICLE VIII

GENERAL CORPORATE MATTERS

Section 8.01 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, other than action by shareholders by written consent without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California General Corporation Law.

If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.

Section 8.02 CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness issued in the name of or payable to the corporation shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by resolution of the board of directors.

Section 8.03 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors, or unless it be within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement, to pledge its credit, or to render it liable for any purpose or for any amount.

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Section 8.04 CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue.

Section 8.05 LOST CERTIFICATES. Except as provided in this section, no new certificate for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate.

Section 8.06 SHARE TRANSFERS. Upon compliance with any provisions of the General Corporation Law and/or the Corporate Securities Law of 1968 which may restrict the transferability of shares, transfers of shares of the corporation shall be made only on the record of shareholders of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes, if any, due thereon.

Section 8.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the board of directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers.

Section 8.08 CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, the term

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“person” includes both a corporation and a natural person and the use of any gender, be it masculine, feminine or neuter, shall include all the genders.

ARTICLE IX

AMENDMENTS

Section 9.01 AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation.

Section 9.02 AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 9.01, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors, may be adopted, amended, or repealed by the board of directors.

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CERTIFICATE OF ADOPTION OF BYLAWS

I certify as follows:

I am the duly elected, qualified and acting Secretary of Stater Bros. Markets, a California corporation, and the following is a true copy of the Bylaws of the corporation, as adopted by the Board of Directors on September 14, 1994.

IN WITNESS WHEREOF, I have set my hand and affixed the corporate seal this September 14, 1994.

/s/    BRUCE D. VARNER        

Bruce D. Varner, Secretary

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EX-3.5

Exhibit 3.5

ARTICLES OF INCORPORATION

OF

STATER BROS. DEVELOPMENT, INC.

The undersigned, desiring to form a corporation under the laws of the State of California, declare:

FIRST: The name of this corporation is:

    STATER BROS. DEVELOPMENT, INC.

SECOND: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code.

THIRD: The name and address in this State of the corporation’s initial agent for service of process is:

MARK A. RESNIK

8575 Higuera Street

Culver City, CA 90230

FOURTH: The corporation is authorized to issue 7,500 shares, all of one class, to be designated “Common Shares.”

IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation this 28th day of April, 1983, at Culver City, California.

/s/    MARK A. RESNIK        

MARK A. RESNIK

I, MARK A. RESNIK, do hereby declare that I am the person who executed the foregoing Articles of Incorporation of STATER BROS. DEVELOPMENT, INC., and that said Articles of Incorporation are my own act and deed.

Executed at Culver City, California this 24th of April, 1983.

/s/    MARK A. RESNIK        

MARK A. RESNIK

EX-3.6

Exhibit 3.6

BY-LAWS OF

STATER BROS. DEVELOPMENT, INC.

(A California Corporation)

ARTICLE I

SHAREHOLDERS’ MEETINGS

Section 1. TIME. An annual meeting for the election of directors and for the transaction of any other proper business and any special meeting shall be held on the date and at the time as the Board of Directors shall from time to time fix.

Time of Meeting: 9 o’clock A.M.                         Date of Meeting: The 10th day of September

Section 2. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of California, as the Directors may, from time to time, fix. Whenever the Directors shall fail to fix such place, the meetings shall be held at the principal executive office of the corporation.

Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman of the Board, if any, Vice Chairman of the Board, if any, the President, if any, the Secretary, or by any officer instructed by the Directors to call the meeting. Special meetings may be called in like manner and by the holders of shares entitled to cast not less than ten percent of the votes at the meeting being called.

Section 4. NOTICE. Written notice stating the place, day and hour of each meeting, and, in the case of a special meeting, the general nature of the business to be transacted or, in the case of an Annual Meeting, those matters which the Board of Directors, at the time of mailing of the notice, intends to present for action by the shareholders, shall be given not less than ten days (or not less than any such other minimum period of days as may be prescribed by the General Corporation Law) or more than sixty days (or more than any such maximum period of days as may be prescribed by the General Corporation Law) before the date of the meeting, by mail, personally, or by other means of written communication, charges prepaid by or at the direction of the Directors, the President, if any, the Secretary or the officer or persons calling the meeting, addressed to each shareholder at his address appearing on the books of the corporation or given by him to the corporation for the purpose of notice, or, if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the said principal executive office is located. Such notice shall be deemed to be delivered when deposited in the United States mail with first class postage therein prepaid, or sent by other means of written communication addressed to the shareholder at his address as it appears on the stock transfer books of the corporation. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of notice to be presented by management for

election. At an annual meeting of shareholders, any matter relating to the affairs of the corporation, whether or not stated in the notice of the meeting, may be brought up for action except matters which the General Corporation Law requires to be stated in the notice of the meeting. The notice of any annual or special meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. When a meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken; provided that, if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.

Section 5. CONSENT. The transaction of any meeting, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the shareholders or his proxy signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting constitutes a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting shall not constitute a waiver of any right to object to the consideration of matters required by the General Corporation Law to be included in the notice if such objection is expressly made at the meeting. Except as otherwise provided in subdivision (f) of Section 601 of the General Corporation Law, neither the business to be transacted at nor the purpose of any regular or special meeting need be specified in any written waiver of notice.

Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by one of the following officers in the order of seniority and if present and acting—- the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, if any, a Vice President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the shareholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but, if neither the Secretary nor an Assistant Secretary is present, the Chairman of the meeting shall appoint a secretary of the meeting.

Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act as his proxy at a meeting or by written action. No proxy shall be valid after the expiration of eleven months from the date of its execution unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the person executing it prior to the vote or written action pursuant thereto, except as otherwise provided by the General Corporation Law. As used herein, a “proxy” shall be deemed to mean a written authorization signed by a shareholder or a shareholder’s attorney in fact giving another person or persons power to vote or consent in writing with respect to the shares of such shareholder, and “Signed” as used herein shall be deemed to mean the placing of such shareholder’s name on the proxy, whether by manual signature, typewriting, telegraphic transmission or otherwise by such shareholder or such shareholder’s attorney in fact. Where applicable, the form of any proxy shall comply with the provisions of Section 604 of the General Corporation Law.

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Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of Directors may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or, if any persons so appointed fail to appear or refuse to act, the Chairman of any meeting of shareholders may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election, or persons to replace any of those who so fail or refuse, at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented shall determine whether one or three inspectors are to be appointed.

The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes, ballots, if any, or consents, hear and determine all challenges and questions in any way_. arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. If there are three inspectors of election, the decision, act, or certificate of a majority shall be effective in all respects as the decision, act, or certificate of all.

Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a subsidiary shall not be entitled to vote on any matter. A subsidiary for these purposes is defined as a corporation, the shares of which possessing more than 25% of the total combined voting power of all classes of shares entitled to vote, are owned directly or indirectly through one or more subsidiaries.

Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the voting shares shall constitute a quorum at a meeting of shareholders for the transaction of any business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum if any action taken, other than adjournment, is approved by at least a majority of the shares required to constitute a quorum. In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares represented thereat, but no other business may be transacted except as hereinbefore provided.

In the election of directors, a plurality of the votes cast shall elect. No shareholder shall be entitled to exercise the right of cumulative voting at a meeting for the election of directors unless the candidate’s name or the candidates’ names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the shareholder’s intention to cumulate the shareholder’s votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for such candidates in nomination.

Except as otherwise provided by the General Corporation Law, the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at a meeting at which a quorum is present shall be authorized by the affirmative vote of a majority of the shares represented at the meeting.

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Except in the election of directors by written consent in lieu of a meeting, and except as may otherwise be provided by the General Corporation Law, the Articles of Incorporation or these By-Laws, any action which may be taken at any annual or special meeting may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by holders of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of directors. Notice of any shareholder approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less than unanimous written consent shall be given at least ten days before the consummation of the action authorized by such approval, and prompt notice shall be given of the taking of any other corporate action approved by shareholders without a meeting by less than unanimous written consent to those shareholders entitled to vote who have not consented in writing.

Section 11. BALLOT. Elections of directors at a meeting need not be by ballot unless a shareholder demands election by ballot at the election and before the voting begins. In all other matters, voting need not be by ballot.

Section 12. SHAREHOLDERS’ AGREEMENTS. Notwithstanding the above provisions in the event this corporation elects to become a close corporation, an agreement between two or more shareholders thereof, if in writing and signed by the parties thereof, may provide that in exercising any voting rights the shares held by them shall be voted as provided therein or in Section 706, and may otherwise modify these provisions as to shareholders’ meetings and actions.

ARTICLE II

BOARD OF DIRECTORS

Section 1. FUNCTIONS. The business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of its Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the corporation to a management company or other person, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board of Directors. The Board of Directors shall have authority to fix the compensation of directors for services in any lawful capacity.

Each director shall exercise such powers and otherwise perform such duties in good faith, in the manner such director believes to be in the best interests of the corporation, and with care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances. (Section 309).

Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of Section 1, in the event that this corporation shall elect to become a close corporation as defined in Section 158, its shareholders may enter into a Shareholders’ Agreement as provided in Section 300 (b). Said Agreement may provide for the exercise of corporate powers and the management of the business and affairs of this corporation by the shareholders, provided however such agreement shall, to the extent and so long as the discretion or the powers of the

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Board, in its management of corporate affairs is controlled by such agreement, impose upon each shareholder who is a party thereof, liability for managerial acts performed or omitted by such person pursuant thereto otherwise imposed upon Directors as provided in Section 300 (d).

Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of the corporation, a citizen of the United States, or a resident of the State of California. The authorized number of directors constituting the Board of Directors until further changed shall be 5. Thereafter, the authorized number of directors constituting the Board shall be at least three provided that, whenever the corporation shall have only two shareholders, the number of directors may be at least two, and, whenever the corporation shall have only one shareholder, the number of directors may be at least one. Subject to the foregoing provisions, the number of directors may be changed from time to time by an amendment of these By-Laws adopted by the shareholders. Any such amendment reducing the number of directors to fewer than five cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in writing in the case of action by written consent are equal to more than sixteen and two-thirds percent of the outstanding shares. No decrease in the authorized number of directors shall have the effect of shortening the term of any incumbent director.

Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of the persons elected at the meeting of the incorporator, all of whom shall hold office until the first annual meeting of shareholders and until their successors have been elected and qualified, or until their earlier resignation or removal from office. Thereafter, directors who are elected to replace any or all of the members of the initial Board of Directors or who are elected at an annual meeting of shareholders, and directors who are elected in the interim to fill vacancies, shall hold office until the next annual meeting of shareholders and until their successors have been elected and qualified, or until their earlier resignation, removal from office, or death. In the interim between annual meetings of shareholders or of special meetings of shareholders called for the election of directors, any vacancies in the Board of Directors, including vacancies resulting from an increase in the authorized number of directors which have not been filled by the shareholders, including any other vacancies which the General Corporation Law authorizes directors to fill, and including vacancies resulting from the removal of directors which are not filled at the meeting of shareholders at which any such removal has been effected, if the Articles of Incorporation or a By-Law adopted by the shareholders so provides, may be filled by the vote of a majority of the directors then in office or of the sole remaining director, although less than a quorum exists. Any director may resign effective upon giving written notice to the Chairman of the Board, if any, the President, the Secretary or the Board of Directors, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to the office when the resignation becomes effective.

The shareholders may elect a director at any time to fill any vacancy which the directors are entitled to fill, but which they have not filled. Any such election by written consent shall require the consent of a majority of the shares.

Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The corporation may indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as are specified in Section 317. In any event, the corporation shall have the right to purchase and maintain insurance on behalf of any such

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persons whether or not the corporation would have the power to indemnify such person against the liability insured against.

Section 6. MEETINGS.

TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble.

PLACE. Meetings may be held at any place, within or without the State of California, which has been designated in any notice of the meeting, or, if not stated in said notice, or, if there is no notice given, at the place designated by resolution of the Board of Directors.

CALL. Meetings may be called by the Chairman of the Board, if any and acting, by the Vice Chairman of the Board, if any, by the President, if any, by any Vice President or Secretary, or by any two directors.

NOTICE AND WAIVER THEREOF. No notice shall be required for regular meetings for which the time and place have been fixed by the Board of Directors. Special meetings shall be held upon at least four days’ notice by mail or upon at least forty-eight hours’ notice delivered personally or by telephone or telegraph. Notice of a meeting need not be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. A notice or waiver of notice need not specify the purpose of any regular or special meeting of the Board of Directors.

Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event only one director is required by the By-Laws or Articles of Incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the directors shall be deemed to refer to such notice, waiver, etc., by such sole director, who shall have all the rights and duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described as given to a Board of Directors.

Section 8. QUORUM AND ACTION. A majority of the authorized number of directors shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided such majority shall constitute at least either one-third of the authorized number of directors or at least two directors, whichever is larger, or unless the authorized number of directors is only one. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place: If the meeting is adjourned for more than twenty-four hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors, if any, who were not present at the time of the adjournment. Except as the Articles of Incorporation, these By-Laws and the General Corporation Law may otherwise provide, the act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be the act of the Board of Directors. Members of the Board of Directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one

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another, and participation by such use shall be deemed to constitute presence in person at any such meeting.

A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, provided that any action which may be taken is approved by at least a majority of the required quorum for such meeting.

Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present and acting, the Vice Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the President, if any and present and acting, or any director chosen by the Board, shall preside.

Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any individual director may be removed from office without cause by approval of the holders of at least a majority of the shares provided, that unless the entire Board is removed, an individual director shall not be removed when the votes cast against such removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election of directors at which the same total number of votes were cast, or, if such action is taken by written consent, in lieu of a meeting, all shares entitled to vote were voted, and the entire number of directors authorized at the time of the director’s most recent election were then being elected. If any or all directors are so removed, new directors may be elected at the same meeting or by such written consent. The Board of Directors may declare vacant the office of any director who has been declared of unsound mind by an order of court or convicted of a felony.

Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a majority of the authorized number of directors, may designate one or more committees, each consisting of two or more directors to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent member at any meeting of such committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have all the authority of the Board of Directors except such authority as may not be delegated by the provisions of the General Corporation Law.

Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be taken without a meeting if all of the members of the Board of Directors shall individually or collectively consent in writing to such action. Any such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors.

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ARTICLE III

OFFICERS

Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the Board or a President or both, a Secretary and a Chief Financial Officer. The corporation may also have, at the discretion of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold two or more offices.

Section 2. ELECTION. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article shall be chosen annually by the Board of Directors, and each shall hold his office until he shall resign or shall be removed or otherwise. disqualified to serve, or his successor shall be elected and qualified.

Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the By-Laws or as the Board of Directors may from time to time determine.

Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

Any officer may resign at any time by giving written notice to the Board of Directors, or to the President, or to the Secretary of the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 5. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the By-Laws for regular appointments to such office.

Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the By-Laws.

Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders and in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be ex officio a member of all the standing committees, including the Executive Committee, if any, and shall have the general powers and duties of management usually vested in the office of

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President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws.

Section 8. VICE PRESIDENT. In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to, all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the By-Laws.

Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of Directors and Shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors’ meetings, the number of shares present or represented at Shareholders’ meetings and the proceedings thereof.

The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation’s transfer agent, a share register, or duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the By-Laws or by law to be given, and he shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the By-Laws.

Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or cause to be kept and maintained in accordance with generally accepted accounting principles, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, earnings (or surplus) and shares. The books of account shall at all reasonable times be open to inspection by any director.

This officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all his transactions and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws.

ARTICLE IV

CERTIFICATES AND TRANSFERS OF SHARES

Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the corporation shall set forth therein the name of the record holder of the shares represented thereby, the number of shares and the class or series of shares owned by said holder, the par value, if any, of the shares

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represented thereby, and such other statements, as applicable, prescribed by Sections 416 - 419, inclusive, and other relevant Sections of the General Corporation Law of the State of California (the “General Corporation Law”) and such other statements, as applicable, which may be prescribed by the Corporate Securities Law of the State of California and any other applicable provision of the law. Each such certificate issued shall be signed in the name of the corporation by the Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of Directors, if any, the President, if any, or a Vice President, if any, and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all of the signatures on a certificate for shares may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate for shares shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

In the event that the corporation shall issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor, any such certificate for shares shall set forth thereon the statements prescribed by Section 409 of the General Corporation Law.

Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue a new certificate for shares or for any other security in the place of any other certificate theretofore issued by it, which is alleged to have been lost, stolen or destroyed. As a condition to such issuance, the corporation may require any such owner of the allegedly lost, stolen or destroyed certificate or any such owner’s legal representative to give the corporation a bond, or other adequate security, sufficient to indemnify it against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General Corporation Law and/or the Corporate Securities Law of 1968 which may restrict the transferability of shares, transfers of shares of the corporation shall be made only on the record of shareholders of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes, if any, due thereon.

Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or be entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board of Directors may fix, in advance a record date, which shall not be more than sixty days or fewer than ten days prior to the date of such meeting or more than sixty days prior to any other action.

If the Board of Directors shall not have fixed a record date as aforesaid, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which

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the meeting is held; the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the sixtieth day prior to the day of such other action, whichever is later.

A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board of Directors shall fix a new record date if the meeting is adjourned for more than forty-five days from the date set for the original meeting.

Except as may be otherwise provided by the General Corporation Law, shareholders on the record date shall be entitled to notice and to vote or to receive any dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.

Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other corporations standing in the name of this corporation may be voted or represented and all incidents thereto may be exercised on behalf of the corporation by the Chairman of the Board, the President or any Vice President or any other person authorized by resolution of the Board of Directors.

Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the right to notice of a meeting of shareholders or a waiver thereof or to participate or vote thereat or to assent or consent or dissent in writing in lieu of a meeting, as the case may be, the term “share” or “shares” or “shareholder” or “shareholders” refers to an outstanding share or shares and to a holder or holders of record or outstanding shares when the corporation is authorized to issue only one class of shares, and said reference is also intended to include any outstanding share or shares and any holder or holders of record of outstanding shares of any class upon which or upon whom the Articles of Incorporation confer such rights where there are two or more classes or series of shares or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the Articles of Incorporation may provide for more than one class or series of shares, one or more of which are limited or denied such rights thereunder.

Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares of this corporation, in the event it shall elect to become a close corporation, shall contain the legend required by Section 418 (c).

ARTICLE V

EFFECT OF SHAREHOLDERS’ AGREEMENT-CLOSE CORPORATION

Any Shareholders’ Agreement authorized by Section 300 (b) shall only be effective to modify the terms of these By-Laws if this corporation elects to become a close corporation with appropriate filing of or amendment to its Articles as required by Section 202 and shall terminate when this corporation ceases to be a close corporation. Such an agreement cannot waive or alter

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Sections 158 (defining close corporations), 202 (requirements of Articles of Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e) (reorganization) or Chapters 15 (Records and Reports), 16 (Rights of Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any other provisions of the Code or these By-Laws may be altered or waived thereby, but to the extent they are not so altered or waived, these By-Laws shall be applicable.

ARTICLE VI

CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED

The Board of Directors, except as in the By-Laws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or agreement, or to pledge its credit, or to render it liable for any purposes or any amount, except as provided in Section 313 of the Corporations Code.

ARTICLE VII

CONTROL OVER BY-LAWS

After the initial By-Laws of the corporation shall have been adopted by the incorporator or incorporators of the corporation, the By-Laws may be amended or repealed or new By-Laws may be adopted by the shareholders entitled to exercise a majority of the voting power or by the Board of Directors; provided, however, that the Board of Directors shall have no control over any By-Law which fixes or changes the authorized number of directors of the corporation; provided, further, than any control over the By-Laws herein vested in the Board of Directors shall be subject to the authority of the aforesaid shareholders to amend or repeal the By-Laws or to adopt new By-Laws; and provided further that any By-Law amendment or new By-Law which changes the minimum number of directors to fewer than five shall require authorization by the greater proportion of voting power of the shareholders as hereinbefore set forth.

ARTICLE VIII

BOOKS AND RECORDS- STATUTORY AGENT

Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its principal executive office in the State of California, or, if its principal executive office is not in the State of California, the original or a copy of the By-Laws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California, and, if the corporation has no principal business office in the State of California, it shall upon request of any shareholder furnish a copy of the By-Laws as amended to date.

The corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its shareholders, Board of Directors and committees, if any, of the Board of Directors. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each. Such minutes

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shall be in written form. Such other books and records shall be kept_ either in written form or in any other form capable of being converted into written form.

Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board of Directors.

Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one hundred shareholders, the Board of Directors shall not be required to cause to be sent to the shareholders of the corporation the annual report prescribed by Section 1501 of the General Corporation Law unless it shall determine that a useful purpose would be served by causing the same to be sent or unless the Department of Corporations, pursuant to the provisions of the Corporate Securities Law of 1968, shall direct the sending of the same.

Section 4. AGENT FOR SERVICE. The name of the agent for service of process within the State of California is Bruce D. Varner, 3750 University Avenue, Suite 610, Riverside, California 92501.

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CERTIFICATE OF ADOPTION OF BY-LAWS

ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).

The undersigned person(s) appointed in the Articles of Incorporation to act as the Incorporator(s) or First Director(s) of the above-named corporation hereby adopt the same as the By-Laws of said corporation.

Executed this 19th day of May, 1983.

	/s/    MARK A. RESNIK
Name	Mark A. Resnik

THIS IS TO CERTIFY:

That I am the duly-elected, qualified and acting Secretary of the above-named corporation; that the foregoing By-Laws were adopted as the By-Laws of said corporation on the date set forth above by the person(s) appointed in the Articles of Incorporation to act as the Incorporator (s) or First Director(s) of said corporation

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal this 19th day of May, 1983.

/s/    MARK A. RESNIK        

Secretary Mark A. Resnik

(SEAL)

CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS’ VOTE.

THIS IS TO CERTIFY:

That I am the duly-elected, qualified and acting Secretary of the above-named corporation and that the above and foregoing Code of By-Laws was submitted to the shareholders at their first meeting held on the date set forth in the By-Laws and recorded in the minutes thereof, was ratified by the vote of shareholders entitled to exercise the majority of the voting power of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand this     day of                     , 19    

Secretary

EX-3.7

Exhibit 3.7

ARTICLES OF INCORPORATION

OF

SANTEE DAIRIES, INC.

I

The name of this corporation is SANTEE DAIRIES, INC.

II

The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

III

The name and address in the State of California of this corporation’s initial agent for service of process is:

Allan P. Brennan

2716 San Fernando Road

Los Angeles, California 90065

IV

The corporation is authorized to issue two (2) classes of shares, designated respectively “Common Stock” and “Preferred Stock”. The number of shares of Common Stock authorized is thirty thousand (30,000), and the number of shares of Preferred Stock authorized is twenty thousand (20,000) shares. The Common Stock shall have voting rights. The Preferred Stock shall have no vote. Except as to the voting rights exclusively belonging to the Common Stock,

the Board of Directors may determine the rights, preferences, privileges, and restrictions of the Preferred Stock.

V

Each Common Stock shareholder of the corporation shall be entitled to full preemptive or preferential rights, as such rights are defined by law, to subscribe for or purchase his proportional part of any Common Stock which may be issued at any time or from time to time by the corporation.

DATED: October 5, 1986.

/s/    ALLAN P. BRENNAN        

ALLAN P. BRENNAN

I hereby declare that I am the person who executed the foregoing Articles of Incorporation, which execution is my act and deed.

/s/    ALLAN P. BRENNAN        

ALLAN P. BRENNAN

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EX-3.8

Exhibit 3.8

SANTEE DAIRIES, INC.

BY-LAWS

INDEX

Article		Page
I	Offices	1
II	Meeting of Shareholders	1
III	Directors	6
IV	Committees	9
V	Officers	10
VI	Indemnification	12
VII	Records and Reports	14
VIII	General Corporate Matters	16
IX	Amendments	18
X	Preemptive Rights	18

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BY-LAWS

OF

SANTEE DAIRIES, INC.

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICES. The board of directors shall fix the location of the principal executive office of the corporation at any place within the State of California.

Section 2. OTHER OFFICES. The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. PLACE OF MEETING. Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders’ meetings shall be held at the principal executive office of the corporation.

Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. At each annual meeting directors shall be elected, and any other proper business may be transacted.

Section 3. SPECIAL MEETING. A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing

contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.

Section 4. NOTICE OF SHAREHOLDERS’ MEETINGS. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the corporations Code of California, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the corporation, pursuant to Section 120 of that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal.

Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address, of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears an the corporation’s books or is given, notice shall be deemed to have been given if sent to that shareholder by first-class mail or telegraphic or other written communication to the corporation’s principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice of any shareholders’ meeting shall be executed by the secretary, assistant secretary, or any transfer agent of the corporation, giving the notice, and shall be filed and maintained in the minute book of the corporation.

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Section 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 7. ADJOURNED MEETING; NOTICE. Any shareholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II.

When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.

Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders’ vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun on any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by California General Corporation Law or by the articles of incorporation.

At a shareholders’ meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder’s shares) unless the candidates’ names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder’s intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder’s shares are

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entitled, or distribute the shareholder’s votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected.

Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after, regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of the proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at or prior to the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the cons consideration of matters not included in the notice of meeting if that objection is expressly made at the meeting.

Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy on the board of directors that has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder’s proxy holders, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.

If the consents of all shareholders entitled to vote have not been solicited in writing, and if the unanimous written consent of all such shareholders shall not have been received, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a direct or has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) indemnification of agents of the corporation, pursuant to Section 317 of that Code, (iii) a

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reorganization of the corporation, pursuant to Section 1201 of that Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.

Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California General Corporation Law.

If the board of directors does not so fix a record date:

(a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the board has been taken, shall at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.

Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder’s attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Corporations Code of California.

Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of

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election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder’s proxy shall, appoint a person to fill that vacancy.

These inspectors shall:

(a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

(b) Receive votes, ballots, or consents;

(c) Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the result; and

(g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

ARTICLE III

DIRECTORS

Section 1. POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of Directors of the corporation shall be five (5).

Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

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Section 4. VACANCIES. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or, written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.

A vacancy or vacancies in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting.

The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote.

Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary, or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.

No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting.

Section 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required.

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Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice.

Section 8. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board or the president or any vice president or the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation.

Section 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees), and Section 317(e) of that Code (as to indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

Section 10. WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice to that director.

Section 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meetings to another time and place.

Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four hours, in which case notice of the time and place shall be given before the time of the adjourned

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meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment.

Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board.

Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation for those services.

ARTICLE IV

COMMITTEES

Section 1. COMMITTEES OF DIRECTORS. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:

(a) the approval of any action which, under the General Corporation Law of California, also requires shareholders’ approval or approval of the outstanding shares;

(b) the filling of vacancies on the board of directors or in any committee;

(c) the fixing of compensation of the directors for serving on the board or on any committee;

(d) the amendment or repeal of bylaws or the adoption of new bylaws;

(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;

(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or

(g) the appointment of any other committees of the board of directors or the members of these committees.

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Section 2. MEETING AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Sections 5 (place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee; special meetings of committees may also be called by resolution of the board of directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

Section 1. OFFICERS. The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment.

Section 3. SUBORDINATE OFFICERS. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine.

Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

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Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.

Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, or upon such designation by the Board, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V.

Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president, shall be the chief executive officer or chief operations officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws.

Section 8. VICE PRESIDENTS. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or the bylaws, and the president, or the chairman of the board.

Section 9. SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at shareholders’ meetings, and the proceedings.

The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by the bylaws.

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Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, and account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND

OTHER AGENTS

6.1 INDEMNIFICATION RE THIRD PARTY ACTIONS.

The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or pending or action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the company) by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contenders or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

6.2 INDEMNIFICATION RE CORPORATE ACTIONS.

The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or

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other enterprise, against expanses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless and only to the extent that the Superior Court of the State of California or such other court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court shall deem proper.

6.3 INDEMNIFICATION RE COSTS OF SUCCESSFUL DEFENSE.

To the extent that a director, officer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 6.1 or Section 6.2 of these Bylaws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

6.4 DETERMINATION OF PROPRIETY OF INDEMNIFICATION.

Any indemnification under Sections 6.1 or 6.2 of these Bylaws (unless ordered by a Court) shall be made by the Company only upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in said Sections 6.1 and 6.2. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, (ii) by a quorum of disinterested directors so directed by independent legal counsel in a written opinion, or (iii) by the stockholders.

6.5 PAYMENT OF EXPENSES.

Expenses incurred by any person who may have a right of indemnification under this Article 6 in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of such person, to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Company pursuant to this Article.

6.6 RIGHT NOT EXCLUSIVE.

The indemnification provided by this Article shall not be deemed exclusive of any other rights to which any person may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to

13

be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

6.7 INSURANCE.

The Company may purchase, and maintain insurance on behalf of any person who is or was a director, officer, employee or agent, of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Article 6 or of the General Corporation Law of the State of California.

6.8 EXTENT OF INDEMNIFICATION.

The Company shall, to the fullest extent permitted by applicable law from, time to time in effect, indemnify any and all persons whom it shall have the power to indemnify under said law from and against any and all of the expenses, liabilities or other matters referred to in or covered by said law.

ARTICLE VII

RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation, shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder.

A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders’ names and addresses and shareholdings during usual business hours on five days prior written demand on the corporation, and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent’s usual charges for such list, a list of the shareholder’s names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list of to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be

14

made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.

Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date.

Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection, shall extend to the records of each subsidiary corporation of the corporation.

Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books; records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents.

Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501 of the California General Corporation Law is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the board of directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate.

Section 6. FINANCIAL STATEMENTS. A copy of any annual financial statements and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation of twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder.

15

If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.

The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period.

The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.

Section 7. ANNUAL STATEMENTS OF GENERAL INFORMATION. The corporation shall during the period commencing on February 1 and ending on July 31 in each year, file with the Secretary of State of the State of California, on the prescribed form, a statement setting forth the authorized number of directors, the names and complete business or residence addresses of all incumbent directors, the names and complete business or residence addresses of the chief executive officer, secretary, and chief financial officer, the street address of its principal executive office or principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the Corporations Code of California.

ARTICLE VIII

GENERAL CORPORATE MATTERS

Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution, or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California General Corporation Law.

16

If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.

Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person, or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors.

Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agents, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue.

Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new Certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate.

Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or an other person authorized by resolution of the board of directors or by any of the foregoing designated officers, is authorized

17

to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers.

Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definition in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE IX

AMENDMENTS

Section 1. AMENDMENT BY SHAREHOLDERS. New by-laws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation.

Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors, may be adopted, amended, or repealed by the board of directors.

ARTICLE X

PREEMPTIVE RIGHTS

Each holder of stock has full preemptive or preferential rights, as defined by law, to subscribe for or purchase that holder’s proportional part of any such shares that may be issued at any time by the corporation.

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CERTIFICATION

The undersigned, being the Chairman and Secretary of the corporation known as SANTEE DAIRIES, INC., do hereby certify that the above and foregoing By-Laws of said corporation were duly adopted as the new By-Laws of said corporation on the 14th day of October, 1986, and that the same do now constitute the By-Laws of said corporation.

/S/    FRED MCLAREN        

Chairman

/S/    ALLAN P. BRENNAN        

Secretary

AMENDMENT OF BY-LAWS

CERTIFICATION

The undersigned, being the Chairman of the Board and the Secretary of the corporation known as SANTEE DAIRIES, INC., do hereby certify that at the Annual Meeting of the stockholders on March 26, 1987, by resolution duly passed, ARTICLE III “DIRECTORS”, Section 2 of the By-Laws of said corporation was amended to read as follows:

“Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of Directors of the corporation shall be seven (7).”

/S/    FRED MCLAREN        

Chairman of the Board

/S/    ALLAN P. BRENNAN        

Secretary

EX-4.1

Exhibit 4.1

EXECUTION COPY

STATER BROS. HOLDINGS INC.

the Issuer

STATER BROS. MARKETS

STATER BROS. DEVELOPMENT, INC.

SANTEE DAIRIES, INC.

the Guarantors

8 ¹/8% SENIOR NOTES DUE 2012

FLOATING RATE SENIOR NOTES DUE 2010

INDENTURE

Dated as of June 17, 2004

THE BANK OF NEW YORK

the Trustee

CROSS-REFERENCE TABLE*

Act Section	Indenture Section
310 (a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	7.10
(b)	7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312 (a)	2.05
(b)	11.03
(c)	11.03
313(a)	7.06
(b)(2)	7.07
(c)	7.06;
	11.02
(d)	7.06
314(a)	4.03;
	11.02
(c)(1)	11.04
(c)(2)	11.04
(c)(3)	N.A.
(e)	11.05
(f)	N.A.
315 (a)	7.01
(b)	7.05,
	11.02
(c)	7.01
(d)	7.01
(e)	6.11
316 (a)(last sentence)	2.09
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	N.A.
(b)	6.07
(c)	2.12
317 (a)(1)	6.08
(a)(2)	6.09
(b)	2.04
318 (a)	11.01
(b)	N.A.
(c)	11.01

N.A. means not applicable.

* This Cross-Reference Table is not part of this Indenture.

TABLE OF CONTENTS

		Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.01.	Definitions	1
Section 1.02.	Other Definitions	19
Section 1.03.	Trust Indenture Act Definitions	19
Section 1.04.	Rules of Construction	20
ARTICLE 2. THE NOTES		20
Section 2.01.	Form and Dating	20
Section 2.02.	Execution and Authentication	21
Section 2.03.	Registrar, Paying Agent and Calculation Agent	22
Section 2.04.	Paying Agent to Hold Money in Trust	23
Section 2.05.	Holder Lists	23
Section 2.06.	Transfer and Exchange	23
Section 2.07.	Replacement Notes	34
Section 2.08.	Outstanding Notes	34
Section 2.09.	Treasury Notes	35
Section 2.10.	Temporary Notes	35
Section 2.11.	Cancellation	35
Section 2.12.	Defaulted Interest	36
Section 2.13.	CUSIP Numbers	36
ARTICLE 3. REDEMPTION AND PREPAYMENT		36
Section 3.01.	Notices to Trustee	36
Section 3.02.	Selection of Notes to Be Redeemed	36
Section 3.03.	Notice of Redemption	37
Section 3.04.	Effect of Notice of Redemption	37
Section 3.05.	Deposit of Redemption Price	37
Section 3.06.	Notes Redeemed in Part	38
Section 3.07.	Optional Redemption	38
Section 3.08.	Mandatory Redemption	39
Section 3.09.	Offer to Purchase by Application of Excess Proceeds	39
ARTICLE 4. COVENANTS		41
Section 4.01.	Payment of Notes	41
Section 4.02.	Maintenance of Office or Agency	41
Section 4.03.	Reports	42
Section 4.04.	Compliance Certificate	42
Section 4.05.	Taxes	43
Section 4.06.	Stay, Extension and Usury Laws	43
Section 4.07.	Restricted Payments	44

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Section 4.08.	Dividend and Other Payment Restrictions Affecting Subsidiaries	47
Section 4.09.	Incurrence of Indebtedness and Issuance of Preferred Stock	48
Section 4.10.	Asset Sales	51
Section 4.11.	Transactions with Affiliates	52
Section 4.12.	Liens	53
Section 4.13.	Corporate Existence	53
Section 4.14.	Offer to Repurchase Upon Change of Control	53
Section 4.15.	Limitation On Issuances And Sales Of Equity Interests In Wholly-Owned Subsidiaries (Other Than An Unrestricted Subsidiary)	54
Section 4.16.	Advances To Restricted Subsidiaries	55
Section 4.17.	Designation of Restricted and Unrestricted Subsidiaries	55
Section 4.18.	Payments For Consent	56
Section 4.19.	Subsidiary Guarantees	56
ARTICLE 5. SUCCESSORS		56
Section 5.01.	Merger, Consolidation, or Sale of Assets	56
Section 5.02.	Successor Corporation Substituted	58
ARTICLE 6. DEFAULTS AND REMEDIES		58
Section 6.01.	Events of Default	58
Section 6.02.	Acceleration	59
Section 6.03.	Other Remedies	59
Section 6.04.	Waiver of Past Defaults	60
Section 6.05.	Control by Majority	60
Section 6.06.	Limitation on Suits	60
Section 6.07.	Rights of Holders of Notes to Receive Payment	60
Section 6.08.	Collection Suit by Trustee	61
Section 6.09.	Trustee May File Proofs of Claim	61
Section 6.10.	Priorities	61
Section 6.11.	Undertaking for Costs	62
ARTICLE 7. TRUSTEE		62
Section 7.01.	Duties of Trustee	62
Section 7.02.	Rights of Trustee	63
Section 7.03.	Individual Rights of Trustee	64
Section 7.04.	Trustee’s Disclaimer	64
Section 7.05.	Notice of Defaults	65
Section 7.06.	Reports by Trustee to Holders of the Notes	65
Section 7.07.	Compensation and Indemnity	65
Section 7.08.	Replacement of Trustee	66
Section 7.09.	Successor Trustee by Merger, etc.	67
Section 7.10.	Eligibility; Disqualification	67
Section 7.11.	Preferential Collection of Claims Against Stater Bros.	67
Section 7.12.	Trustee Risk	67

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Section 7.13.	Appointment Of Co-Trustee	68
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE		69
Section 8.01.	Option to Effect Legal Defeasance or Covenant Defeasance	69
Section 8.02.	Legal Defeasance and Discharge	69
Section 8.03.	Covenant Defeasance	69
Section 8.04.	Conditions to Legal or Covenant Defeasance	70
Section 8.05.	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions	71
Section 8.06.	Repayment to Stater Bros	71
Section 8.07.	Reinstatement	72
ARTICLE 9. SUBSIDIARY GUARANTEES		72
Section 9.01.	Subsidiary Guarantees	72
Section 9.02.	Limitation on Liability; Release of Guarantee	74
Section 9.03.	Successors and Assigns	75
Section 9.04.	No Waiver	75
Section 9.05.	Modification	75
Section 9.06.	Execution of Supplemental Indenture for Future Guarantors	75
Section 9.07.	Non-Impairment	75
ARTICLE 10. AMENDMENT, SUPPLEMENT AND WAIVER		76
Section 10.01.	Without Consent of Holders of Notes	76
Section 10.02.	With Consent of Holders of Notes	76
Section 10.03.	Compliance with Trust Indenture Act	77
Section 10.04.	Revocation and Effect of Consents	78
Section 10.05.	Notation on or Exchange of Notes	78
Section 10.06.	Trustee to Sign Amendments, etc.	78
ARTICLE 11. MISCELLANEOUS		78
Section 11.01.	Trust Indenture Act Controls	78
Section 11.02.	Notices	78
Section 11.03.	Communication by Holders of Notes with Other Holders of Notes	80
Section 11.04.	Certificate and Opinion as to Conditions Precedent	80
Section 11.05.	Statements Required in Certificate or Opinion	80
Section 11.06.	Rules by Trustee and Agents	80
Section 11.07.	No Personal Liability of Directors, Officers, Employees and Stockholders	81
Section 11.08.	Governing Law	81
Section 11.09.	No Adverse Interpretation of Other Agreements	81
Section 11.10.	Successors	81
Section 11.11.	Severability	81
Section 11.12.	Counterpart Originals	81
Section 11.13.	Table of Contents, Headings, etc.	81

iii

EXHIBITS

EXHIBIT A-1	FORM OF INITIAL FIXED RATE NOTE
EXHIBIT A-2	FORM OF EXCHANGE FIXED RATE NOTE
EXHIBIT B-1	FORM OF INITIAL FLOATING RATE NOTE
EXHIBIT B-2	FORM OF EXCHANGE FLOATING RATE NOTE
EXHIBIT C	FORM OF CERTIFICATE OF TRANSFER
EXHIBIT D	FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT E	FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
EXHIBIT F	FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS

iv

INDENTURE dated as of June 17, 2004 among Stater Bros. Holdings Inc., a Delaware corporation (“Stater Bros.”), Stater Bros. Markets (“Markets”), Stater Bros. Development Inc. (“Development”) and Santee Dairies Inc. (“Santee,” collectively with Markets and Development, the “Guarantors”) and The Bank of New York, as trustee (the “Trustee”).

Stater Bros. and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of Stater Bros.’ 8  ¹/8% Fixed Rate Senior Notes due 2012 (the “Fixed Rate Notes”) and Stater Bros.’ Floating Rate Senior Notes due 2010 (the “Floating Rate Notes” and together with the Fixed Rate Notes, the “Notes”):

ARTICLE 1.

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. DEFINITIONS.

“144A Global Note” means a global note substantially in the form of Exhibit A-1 or Exhibit B-1, as applicable, hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into, became a Subsidiary of, or substantially all of its business and assets were acquired by, such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, becoming a Subsidiary of, or substantially all of its business and assets being acquired by, such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Notes” means Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 5% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” shall have correlative meanings.

“Agent” means any Registrar, Paying Agent or co-registrar.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Asset Sale” means: (1) the sale, lease, conveyance or other disposition of any assets or rights (including but not limited to sale and leaseback transactions), other than any such sale or other disposition in the ordinary course of business; provided that the sale, conveyance or other disposition of all or substantially all of the assets of Stater Bros. and its Subsidiaries taken as a whole shall be governed by the provisions of Section 4.14 hereof and/or the provisions of Article 5 hereof and not by the provisions of Sections 3.09 and 4.10 hereof; and (2) the issuance of Equity Interests by any of the Restricted Subsidiaries or the sale of Equity Interests by Stater Bros. or any of the Restricted Subsidiaries in any of their respective Subsidiaries.

Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $5.0 million; (2) a transfer of assets between or among Stater Bros. and its Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary); (3) an issuance of Equity Interests by a Restricted Subsidiary to Stater Bros. or to another Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros.; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) a Restricted Payment or Permitted Investment that is permitted by Section 4.07 hereof; and (7) any transaction, or series of transactions, that results in the payment to Stater Bros., or one of its Subsidiaries, for the construction of a new supermarket built by Stater Bros., or one of its Subsidiaries, and leased by Stater Bros., or one of its Subsidiaries, whether or not the lessor requires documentation confirming the lessor’s ownership in the supermarket building.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as such term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time or upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.

“Board of Directors” means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means any day other than a Legal Holiday.

2

“Calculation Agent” means the Person specified in Section 2.03 as the Calculation Agent, until a successor shall have been appointed and becomes such pursuant to the applicable provisions of this Indenture, and thereafter, “Calculation Agent” shall mean or include such successor.

“Calculation Date” has the meaning specified in the definition of “Fixed Charge Coverage Ratio.”

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

“Capital Stock” means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, provided, however, that no payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan shall be Capital Stock under this Indenture.

“Cash Equivalents” means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided, that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better; (4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and in each case maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

“Change of Control” means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Stater Bros. and its Restricted Subsidiaries taken as a whole to any “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act) other than either La Cadena Investments or any La Cadena Successor; (2) the adoption of a plan relating to the liquidation or dissolution of Stater Bros.; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as defined above), other than La Cadena Investments or any La Cadena Successor, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting

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Stock of Stater Bros., measured by voting power rather than number of shares; (4) the first day on which a majority of the members of the Board of Directors of Stater Bros. are not Continuing Directors; (5) Stater Bros. consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, Stater Bros., in any such event pursuant to a transaction in which any of the outstanding Voting Stock of Stater Bros. or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where all or a portion of the Voting Stock of Stater Bros. outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); or (6) at any time prior to the date that a La Cadena Successor is the Beneficial Owner of more than 50% of the Voting Stock of Stater Bros., Permitted Holders shall cease to (A) have the power to vote the majority of the Capital Stock of La Cadena Investments, (B) be the Beneficial Owner of at least 35% of the Equity Interests in La Cadena Investments, or (C) be the Beneficial Owner of a higher percentage of the Equity Interests in La Cadena Investments than any other “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act).

“Clearstream” means Clearstream Banking, S.A.

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus the amount of any net loss realized by such Person or any of its Consolidated Subsidiaries in connection with (A) an Asset Sale, or (B) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries, in each case to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Consolidated Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Consolidated Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period other than accruals or reserves made with respect to obligations of Stater Bros. under the Phantom Stock Plan which accruals or reserves made with respect to obligations of Stater Bros. under the Phantom Stock Plan shall be included in non-cash expenses added to Consolidated Net Income for purposes of this clause (4)) of such Person and its Consolidated Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in

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computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP.

Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Consolidated Subsidiary of Stater Bros. shall be added to Consolidated Net Income to compute Consolidated Cash Flow of Stater Bros. only to the extent that a corresponding amount would be permitted at the date of determination to be distributed to Stater Bros. by such Consolidated Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Consolidated Subsidiary or its stockholders.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Consolidated Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Consolidated Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Consolidated Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Consolidated Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement (other than the Revolving Credit Facility, the Santee Credit Facility and Permitted Santee Indebtedness), instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; and (4) the cumulative effect of a change in accounting principles shall be excluded.

“Consolidated Subsidiary” of any Person means a subsidiary which for financial reporting purposes is or, in accordance with GAAP, should be, accounted for by such Person as a consolidated subsidiary; provided, however, that the Unrestricted Subsidiaries of Stater Bros. shall not be included as Consolidated Subsidiaries of Stater Bros. for purposes of this Indenture, regardless of whether such Unrestricted Subsidiaries are or, in accordance with GAAP, should be accounted for as consolidated subsidiaries; provided, further, that any Person that is not a Subsidiary (as such term is defined herein) of a Person shall not be included as a Consolidated Subsidiary of such Person, regardless of whether such Person is, or in accordance with GAAP, should be accounted for as a consolidated subsidiary.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of Stater Bros. who: (1) was a member of such Board of Directors on the date of this Indenture; or (2) was nominated for election or elected to such Board of Directors

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with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 11.02 hereof or such other address as to which the Trustee may give notice to Stater Bros.

“Credit Facilities” means one or more debt facilities (including, without limitation, the Revolving Credit Facility) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special-purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part (whether by revolving or other long-term Indebtedness) from time to time.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1, A-2, B-1 or B-2 hereto, as applicable, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require Stater Bros. to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that Stater Bros. may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof.

“DTC” means The Depository Trust Company, a New York corporation.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable

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for, Capital Stock and excluding any payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan).

“Euroclear” means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Notes” means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof.

“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Existing Indebtedness” means up to $11.2 million in aggregate principal amount of Indebtedness of Stater Bros. and its Restricted Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in existence on the date of this Indenture, until such amounts are repaid.

“Existing Notes” means the 10 ¾% Senior Notes due 2006 of Stater Bros.

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as

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determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Consolidated Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and excluding (A) the amortization of any debt issuance costs and (B) the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Consolidated Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Consolidated Subsidiaries or secured by a Lien on assets of such Person or one of its Consolidated Subsidiaries, whether or not such guarantee or Lien is called upon; plus (4) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Consolidated Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of Stater Bros. (other than Disqualified Stock) or to Stater Bros. or a Consolidated Subsidiary of Stater Bros.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A-1, A-2, B-1 or B-2 hereto, as applicable, issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.

“Global Note Legend” means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture.

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for payment of which guarantee or obligations the full faith and credit of the United States is pledged.

“guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

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“Guarantees” means the guarantees of the Guarantors with respect to the Obligations of Stater Bros. under the Notes and the Indenture.

“Guarantors” means Stater Bros. Markets, Stater Bros. Development, Inc., Santee and each other Person that is required to become a Guarantor by the terms hereof after the Issue Date, in each case until such Person is released from its Guarantee pursuant to the terms hereof.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates.

“Holder” means each holder of the Notes.

“IAI Global Note” means the global Note substantially in the form of Exhibit A-1 or Exhibit B-1 hereto, as applicable, bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.

“Indebtedness” means, with respect to any specified Person and without duplication, any liability of such Person, whether or not contingent: (1) for borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker’s acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations; if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person, but does not include any payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan.

The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

For the avoidance of doubt, (x) obligations pursuant to contracts for the refurbishment or construction of existing or new distribution or supermarket facilities of Stater Bros. or of Restricted Subsidiaries shall not constitute Indebtedness and (y) reclassification of operating leases existing on the Issue Date into Capital Lease Obligations in accordance with GAAP and required as a result of changes to GAAP occurring following the Issue Date shall not constitute an incurrence of Indebtedness.

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“Indenture” means this Indenture, as amended or supplemented from time to time.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Initial Notes” means the first $175 million in aggregate principal amount of Floating Rate Notes and $525 million in aggregate principal amount of Fixed Rate Notes issued under this Indenture.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Stater Bros. or any Restricted Subsidiary of Stater Bros. sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Stater Bros. such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Stater Bros., then Stater Bros. shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of pursuant to such sale or disposition in an amount determined as provided in the final paragraph of Section 4.07 hereof. If Stater Bros. or any Restricted Subsidiary of Stater Bros. designates a Restricted Subsidiary to be an Unrestricted Subsidiary pursuant to the provisions of this Indenture, then Stater Bros. shall be deemed to have made an Investment on the date of such designation equal to the fair market value of the Equity Interests of such Subsidiary in an amount determined as provided in the final paragraph of Section 4.07 hereof. The acquisition by Stater Bros. or any Restricted Subsidiary of Stater Bros. of a Person that holds an Investment in any third Person shall be deemed to be an Investment by Stater Bros. or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.07. For the avoidance of doubt, Investments shall not include any transaction, or series of transactions, that results in the payment to Stater Bros., or one of its Subsidiaries, for the construction of a new supermarket built by Stater Bros., or one of its Subsidiaries, and leased by Stater Bros., or one of its Subsidiaries, whether or not the lessor requires documentation confirming the lessor’s ownership in the supermarket building.

“Issue Date” means the first date on which the Fixed Rate Notes and the Floating Rate Notes are issued.

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“La Cadena Investments” means La Cadena Investments, a California general partnership.

“La Cadena Successor” means a partnership or limited liability company (other than La Cadena Investments) with respect to which (a) a Permitted Holder is a general partner or managing member, (b) Permitted Holders have the power to vote the majority of the Capital Stock, (c) Permitted Holders are the Beneficial Owners of at least 35% of the Equity Interests therein and (d) Permitted Holders are the Beneficial Owners of a higher percentage of the Equity Interests therein than any other “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act).

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.

“Letter of Transmittal” means the letter of transmittal to be prepared by Stater Bros. and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any duly authorized filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Liquidated Damages” means all liquidated damages then owing pursuant to the applicable Registration Rights Agreement.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) (A) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with any Asset Sale; or (B) any gain or loss, together with any related provision for such gain or loss, realized in connection with the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

“Net Proceeds” means the aggregate cash proceeds received by Stater Bros. or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result

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thereof, taxes paid or payable as a result thereof, in each case after taking into account any available tax credits or deductions and any tax sharing arrangements and amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under the Revolving Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

“Officers’ Certificate” means a certificate signed on behalf of Stater Bros. by two Officers of Stater Bros., one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of Stater Bros., that meets the requirements of Section 11.05 hereof.

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to Stater Bros., any Subsidiary of Stater Bros. or the Trustee.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream).

“Participating Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.

“Payment Default” means a default caused by the failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default; provided, however, that in the case of the Revolving Credit Facility, such a default shall only constitute a Payment Default if it consists of the failure to pay principal of, or interest or premium, if any, on the Indebtedness incurred pursuant to the Revolving Credit Facility as of the final Maturity Date (as defined in such Revolving Credit Facility).

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“Permitted Construction Indebtedness” means Indebtedness of Stater Bros. or any Restricted Subsidiary representing the deferred purchase price, or the net proceeds of which are used solely to finance the purchase price, of any new or existing distribution or supermarket facilities (including any fixtures therein) operated or to be operated by Stater Bros. or Stater Bros. Markets.

“Permitted Holders” means: (1) Jack H. Brown and his spouse and immediate family members, (2) any trust, corporation, partnership or other entity, the beneficial interests of which are owned exclusively by the Persons referred to in clause (1), and (3) any trustee, executor or receiver appointed to manage or administer the assets of any Person referred to in clause (1) following the death or incapacity of such Person and the heirs of any such Person referred to in clause (1).

“Permitted Investments” means: (1) any Investment in Stater Bros. or in a Guarantor (including any Person who becomes a Guarantor as a result of any Investment, provided that any Indebtedness evidencing such Investment in a Guarantor is not subordinated to any Indebtedness or other obligation of such Guarantor); (2) the making of Investments in Stater Bros. by any Subsidiary (provided that any Indebtedness evidencing such Investment is subordinated and junior to the Notes); (3) any Investment in Cash Equivalents; (4) any Investment by Stater Bros. or any Restricted Subsidiary in a Person, if as a result of such Investment: (A) such Person becomes a Guarantor; or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Stater Bros. or a Guarantor; (5) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Sections 3.09 and 4.10; (6) any acquisition of assets or any Investment in any Person solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Stater Bros.; (7) the extensions of trade credit and advances to customers and suppliers to the extent in the ordinary course of business and made in accordance with customary industry practice; and (8) Hedging Obligations.

“Permitted Liens” means: (1) Liens of Stater Bros. and any Restricted Subsidiary securing Indebtedness and other Obligations (A) under the Revolving Credit Facility and (B) under other Credit Facilities that, in each case, were permitted by the terms of this Indenture to be incurred; (2) Liens in favor of Stater Bros. or any Restricted Subsidiary; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Stater Bros. or any Restricted Subsidiary; provided, that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Stater Bros. or the Restricted Subsidiary; (4) Liens on property existing at the time of acquisition thereof by Stater Bros. or any Restricted Subsidiary, provided, that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any assets other than such acquired property, and Liens incurred in the ordinary course of business to secure the payment of all or a portion of the purchase price of goods held for sale, provided, that such Liens do not extend to any assets other than such goods; (5) Liens or deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure

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Indebtedness (including Capital Lease Obligations and Permitted Construction Indebtedness) permitted by clauses (b), (d), (g), (j), (k) and (l) of the second paragraph of Section 4.09 covering only the assets acquired with or improved with the proceeds of such Indebtedness; (7) Liens securing the Notes; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (9) Liens incurred in the ordinary course of business of Stater Bros. or any Restricted Subsidiary with respect to obligations that do not exceed $5.0 million at any one time outstanding; (10) Liens existing on the date of this Indenture and renewals, extensions and replacements thereof, provided, that such renewals, extensions or replacements will not apply to any property or assets not previously subject to such Liens or increase the principal amount of obligations secured thereby; (11) Liens on deposits made in the ordinary course of business; (12) Liens in favor of collecting banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of Stater Bros. or any Restricted Subsidiary on deposit with or in possession of such banks; (13) Liens in respect of Permitted Refinancing Indebtedness; provided, that the terms of such liens in respect of such Permitted Refinancing Indebtedness are not less favorable to the Holders of the Notes than the terms of the Liens securing the indebtedness being refinanced and do not extend to any assets not securing such indebtedness; (14) carriers’, warehousemen’s, mechanics’ materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business and not overdue for a period of more than 90 days or which are being contested in good faith by appropriate proceedings; (15) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation; (16) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary course of business of Stater Bros. or its Subsidiaries, as the case may be, and any exceptions to title set forth in any title policies; (17) any attachment or judgment Lien so long as the execution or other enforcement thereof is effectively stayed, the claims secured thereby are being contested in good faith by appropriate proceedings, adequate reserves have been established with respect to such claims in accordance with GAAP and no Default or Event of Default would result thereby; (18) any Liens relating solely to property leased by Stater Bros. or any Subsidiary and arising solely out of the lease for such property; (19) Liens securing Capital Lease Obligations incurred pursuant to the first paragraph of Section 4.09; and (20) Liens securing the Santee Note or Permitted Santee Indebtedness.

“Permitted Refinancing Indebtedness” means any Indebtedness of Stater Bros. or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Stater Bros. or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided, that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of,

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and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of the Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by Stater Bros. or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

“Permitted Santee Indebtedness” means Indebtedness of Santee in an aggregate principal amount not to exceed $55.0 million, the proceeds of which are used solely to repay the Santee Note; provided, that so long as at least $35.0 million in principal amount of the Santee Note remains outstanding, the Santee Note shall remain secured on a first priority basis in accordance with its terms as in effect on the Issue Date.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Phantom Stock Plan” means, collectively, the Stater Bros. Holdings Inc. Phantom Stock Plan effective as of June 27, 2000 and any related documents or instruments executed or to be executed in connection therewith (including, without limitation, any Phantom Stock Award Agreement thereunder), in each case as amended, modified, renewed, or replaced from time to time, with the exception of any amendment, modification, renewal or replacement that would expand the definition of “Eligible Employee” thereunder to include any shareholder of Stater Bros. or any partner in La Cadena Investments.

“Private Placement Legend” means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Qualified Santee Sale” means: (1) a sale by Stater Bros. Markets of a portion of the Equity Interests of Santee to a third party that is not an Affiliate of Stater Bros., (2) the issuance by Santee of additional Equity Interests to a third party that is not an Affiliate of Stater Bros. or (3) a combination of related transactions described in (1) and (2) above.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of June 17, 2004, by and among Stater Bros. and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between Stater Bros. and the other parties thereto, as such agreement(s) may be amended, modified or

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supplemented from time to time, relating to rights given by Stater Bros. to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate.

“Regulation S Permanent Global Note” means a permanent Global Note in the form of Exhibit A-1 or Exhibit B-1 hereto, as applicable, bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period, representing a series of Notes that do not bear the Regulation S Temporary Global Note Legend.

“Regulation S Temporary Global Note” means a temporary Global Note in the form of Exhibit A-1 or Exhibit B-1 hereto, as applicable, bearing the Private Placement Legend and the Regulation S Temporary Global Note Legend, and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.

“Regulation S Temporary Global Note Legend” means the legend set forth in Section 2.06(g)(iii).

“Responsible Officer” means, when used with respect to the Trustee, any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Period” means the 40-day distribution compliance period as defined in Regulation S.

“Restricted Subsidiary” means any Subsidiary of Stater Bros. that is not an Unrestricted Subsidiary.

“Revolving Credit Facility” means the credit facility governed by that certain Credit Agreement, dated on or about August 6, 1999, and amended by that certain First

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Amendment, dated as of September 15, 2000, that certain Second Amendment, dated as of December 13, 2001, that certain Third Amendment, dated as of January 18, 2002, and that certain Fourth Amendment, dated as of February 4, 2003, by and among Stater Bros. Markets, Stater Bros., the Lenders from time to time parties thereto, and Bank of America, N.A., as agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing facility that alters the maturity thereof.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“Santee” means Santee Dairies, Inc., a California corporation, a wholly-owned Subsidiary of Stater Bros. Markets.

“Santee Credit Facility” means the credit facility governed by that certain Credit Agreement, dated on or about December 22, 1999, by and among Santee and Bank of America, N.A., as agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing facility that alters the maturity thereof.

“Santee Note” means that certain 5¹/₄% note due March 31, 2009 in an aggregate principal amount of $55.0 million owed by Santee to Stater Bros. Markets, as in effect on the Issue Date.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Registration Statement” means the Shelf Registration Statement as defined in the Registration Rights Agreement.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Stater Bros. Markets” means Stater Bros. Markets, a California corporation.

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“Subsidiary” means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

“Total Assets” means, with respect to any Person, the aggregate of all assets of such Person and its subsidiaries as would be shown on the balance sheet of such Person prepared in accordance with GAAP.

“Trustee” means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Definitive Note” means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a permanent global Note in the form of Exhibit A-2 or Exhibit B-2, as applicable, attached hereto that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend.

“Unrestricted Subsidiary” means: (1) any Subsidiary of Stater Bros. that is designated by the Board of Directors of Stater Bros. as an Unrestricted Subsidiary pursuant to a Board resolution in accordance with the terms hereof, and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Person” means a U.S. person as defined in Rule 902(o) under the Securities Act.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date

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and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Subsidiary” of any specified Person means any Subsidiary of such Person all the outstanding shares of Capital Stock (other than directors’ qualifying shares, if applicable) of which are owned directly by such Person or another Wholly-Owned Subsidiary of such Person.

SECTION 1.02. OTHER DEFINITIONS.

Term	Defined in Section
“Acceleration Notice”	6.02
“Affiliate Transaction”	4.11
“Asset Sale Offer”	4.10
“Authentication Order”	2.02
“Change of Control Offer”	4.14
“Change of Control Payment”	4.14
“Change of Control Payment Date”	4.14
“Consummation Date”	4.10
“Covenant Defeasance”	8.03
“Event of Default”	6.01
“Excess Proceeds”	4.10
“incur”	4.09
“Legal Defeasance”	8.02
“Offer Amount”	3.09
“Offer Period”	3.09
“Paying Agent”	2.03
“Payment Default”	6.01
“Permitted Debt”	4.09
“Purchase Date”	3.09
“Redemption Date”	3.07
“Registrar”	2.03
“Restricted Payments”	4.07

SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Notes;

“indenture security Holder” means a Holder of a Note;

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“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Notes means Stater Bros. and any successor.

All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.

SECTION 1.04. RULES OF CONSTRUCTION.

Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) “or” is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

ARTICLE 2.

THE NOTES

SECTION 2.01. FORM AND DATING.

(a) General.

The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A-1, A-2, B-1 or B-2 hereto, as applicable. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be issued on the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof.

The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and Stater Bros., each Guarantor and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b) Global Notes.

Notes issued in global form shall be substantially in the form of Exhibits A-1, A-2, B-1 or B-2 attached hereto, as applicable (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1, A-2, B-1 or B-2 attached hereto, as applicable (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall

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represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c) Temporary Global Notes.

Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by Stater Bros. and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers’ Certificate from Stater Bros. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.

(d) Euroclear and Clearstream Procedures Applicable.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream” and “Customer Handbook” of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by Participants through Euroclear or Clearstream.

SECTION 2.02. EXECUTION AND AUTHENTICATION.

Two Officers shall sign the Notes for Stater Bros. by manual or facsimile signature.

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If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee shall authenticate and make available for delivery upon a written order of Stater Bros. signed by two of its Officers (an “Authentication Order”), (1) Initial Notes with respect to the Fixed Rate Notes for original issue on the date hereof in an aggregate principal amount of $525,000,000; (2) Initial Notes with respect to the Floating Rate Notes for original issue on the date hereof in an aggregate principal amount of $175,000,000; (3) Additional Notes in an unlimited aggregate principal amount subject to compliance with Section 4.06; (4) Exchange Notes for issue only in a registered Exchange Offer pursuant to the Registration Rights Agreement and for a like principal amount of Initial Notes of the same maturity exchanged pursuant thereto. Such order shall specify the amount of Notes of each maturity to be authenticated, the date on which the original issue of Notes of each maturity is to be authenticated and whether the Notes of each maturity are to be Initial Notes, Additional Notes or Exchange Notes and whether such Notes are to be Fixed Rate Notes or Floating Rate Notes; and (5) Notes issued pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement.

The Trustee may appoint an authenticating agent acceptable to Stater Bros. to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with Holders or an Affiliate of Stater Bros.

SECTION 2.03. REGISTRAR, PAYING AGENT AND CALCULATION AGENT.

Stater Bros. shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange. Stater Bros. may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. Stater Bros. may change any Paying Agent or Registrar without notice to the Holders of the Notes. Stater Bros. shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If Stater Bros. fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. Stater Bros. or any of its Subsidiaries may act as Paying Agent or Registrar. In addition, Stater Bros. shall appoint a Calculation Agent to determine the interest rate on the Floating Rate Notes as provided in paragraph 1 of Exhibit B-1 and Exhibit B-2. Neither Stater Bros. nor any of its Affiliates may serve as Calculation Agent.

Stater Bros. initially appoints DTC to act as Depositary with respect to the Global Notes.

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Stater Bros. initially appoints the Trustee to act as the Registrar, Paying Agent and Calculation Agent and to act as Custodian with respect to the Global Notes.

SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.

Stater Bros. shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by Stater Bros. in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. Stater Bros. at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than Stater Bros. or a Subsidiary) shall have no further liability for the money. If Stater Bros. or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to Stater Bros., the Trustee shall serve as Paying Agent for the Notes.

SECTION 2.05. HOLDER LISTS.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, Stater Bros. shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and Stater Bros. shall otherwise comply with TIA § 312(a).

SECTION 2.06. TRANSFER AND EXCHANGE.

(a) Transfer and Exchange of Global Notes.

A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by Stater Bros. for Definitive Notes if (i) Stater Bros. delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by Stater Bros. within 120 days after the date of such notice from the Depositary, (ii) Stater Bros. in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee or (iii) there has occurred and is continuing a Default or Event of Default with respect to the Notes; provided, that in no event shall the Regulation S Temporary Global Note be exchanged by Stater Bros. for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities

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Act. Upon the occurrence of either of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes.

The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).

(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above;

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provided, that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by Stater Bros. in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of Stater Bros.; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to

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a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof, and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, Stater Bros. shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.

(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to Stater Bros. or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the

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Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and Stater Bros. shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(ii) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.

(iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of Stater Bros.; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit D hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities

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Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and Stater Bros. shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to Stater Bros. or any of its Subsidiaries, a certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a

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certificate to the effect set forth in Exhibit C hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (c) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.

(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of Stater Bros.; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, Stater Bros. shall issue and, upon receipt of an

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Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes.

Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit C hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of Stater Bros.; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit D hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably

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acceptable to Stater Bros. to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f) Exchange Offer.

Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, Stater Bros. shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of Stater Bros., and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and Stater Bros. shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount.

(g) Legends.

The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION

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FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT:

(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY

(i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN “INSTITUTIONAL ACCREDITED INVESTOR”)) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS),

(ii) TO THE ISSUER, OR

(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND

(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.”

(B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.

(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:

“This Global Note is held by the Depositary (as defined in the Indenture governing this Note) or its nominee in custody for the benefit of the beneficial owners hereof, and is not transferable to any person under any circumstances except that (i) the Trustee may make such notations hereon as may be required pursuant to Section 2.07 of the Indenture, (ii) this Global Note may be exchanged in whole but not in part pursuant to Section 2.06(a) of the Indenture, (iii) this Global Note may be delivered to the Trustee for cancellation pursuant to Section 2.11 of the Indenture, and (iv) this Global Note may be transferred to a successor depositary with the prior written consent of Stater Bros.”

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(iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form:

“The rights attaching to this Regulation S Temporary Global Note, and the conditions and procedures governing its exchange for Certificated Notes, are as specified in the Indenture (as defined herein). Neither the Holder nor the Beneficial Owners of this Regulation S Temporary Global Note shall be entitled to receive payment of interest hereon.”

(h) Cancellation and/or Adjustment of Global Notes.

At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(i) General Provisions Relating to Transfers and Exchanges.

(i) To permit registrations of transfers and exchanges, Stater Bros. shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon Stater Bros.’ order or at the Registrar’s request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but Stater Bros. may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global

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Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of Stater Bros., evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) Stater Bros. shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and Stater Bros. may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or Stater Bros. shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

SECTION 2.07. REPLACEMENT NOTES.

If any mutilated Note is surrendered to the Trustee or Stater Bros. and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, Stater Bros. shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee or Stater Bros., an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and Stater Bros. to protect Stater Bros., the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. Stater Bros. may charge for its expenses in replacing a Note.

Every replacement Note is an additional obligation of Stater Bros. and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

SECTION 2.08. OUTSTANDING NOTES.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because Stater Bros. or an Affiliate of Stater Bros. holds the Note; however, Notes held by Stater Bros. or a Subsidiary of Stater Bros. shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof.

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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than Stater Bros., a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

SECTION 2.09. TREASURY NOTES.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by Stater Bros., or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with Stater Bros., shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded.

SECTION 2.10. TEMPORARY NOTES.

Until certificates representing Notes are ready for delivery, Stater Bros. may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that Stater Bros. considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, Stater Bros. shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.

Holders of temporary Notes shall be entitled to all of the benefits of this Indenture.

SECTION 2.11. CANCELLATION.

Stater Bros. at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to Stater Bros. Stater Bros. may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

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SECTION 2.12. DEFAULTED INTEREST.

If Stater Bros. defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. Stater Bros. shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. Stater Bros. shall fix or cause to be fixed each such special record date and payment date; provided, that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, Stater Bros. (or, upon the written request of Stater Bros., the Trustee in the name and at the expense of Stater Bros.) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

SECTION 2.13. CUSIP NUMBERS.

Stater Bros. in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or the omission of such numbers. Stater Bros. shall promptly notify the Trustee of any change in the CUSIP numbers.

ARTICLE 3.

REDEMPTION AND PREPAYMENT

SECTION 3.01. NOTICES TO TRUSTEE.

If Stater Bros. elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers’ Certificate setting forth (i) the clause of this Indenture or the Notes pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price.

SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.

If less than all of the Notes are to be redeemed at any time, the Trustee shall select Notes for redemption as follows: (a) if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (b) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption.

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The Trustee shall promptly notify Stater Bros. in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

SECTION 3.03. NOTICE OF REDEMPTION.

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, Stater Bros. shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address.

The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless Stater Bros. defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

At Stater Bros.’ request, the Trustee shall give the notice of redemption in Stater Bros.’ name and at its expense; provided, however, that Stater Bros. shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers’ Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional.

SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.

One Business Day prior to the redemption date, Stater Bros. shall deposit with the Trustee or with the Paying Agent, in immediately available funds, money sufficient to pay the redemption price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to Stater Bros. any

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money deposited with the Trustee or the Paying Agent by Stater Bros. in excess of the amounts necessary to pay the redemption price of, and accrued interest and Liquidated Damages, if any, on, all Notes to be redeemed.

If Stater Bros. complies with the provisions of the preceding paragraph, on and after the redemption date, interest and Liquidated Damages, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of Stater Bros. to comply with the preceding paragraph, interest and Liquidated Damages, if any, shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest and Liquidated Damages, if any, not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

SECTION 3.06. NOTES REDEEMED IN PART.

Upon surrender of a Note that is redeemed in part, Stater Bros. shall issue and, upon Stater Bros.’ written request, the Trustee shall authenticate for the Holder at the expense of Stater Bros., a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

SECTION 3.07. OPTIONAL REDEMPTION.

(a) Fixed Rate Notes.

(i) Prior to June 15, 2007, Stater Bros. may redeem up to 35% of the aggregate principal amount of the Fixed Rate Notes issued under this Indenture at a redemption price of 108.125% of the principal amount thereof, together with accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of one or more sales of Capital Stock of Stater Bros. resulting, for each sale, in net cash proceeds to Stater Bros. in excess of $25.0 million; provided, that: (i) at least 65% in aggregate of the originally issued principal amount of the Fixed Rate Notes remains outstanding immediately after the occurrence of such redemption (excluding Notes held by Stater Bros. and its Subsidiaries); and (ii) the redemption must occur within 45 days of the date of the closing of the sale.

(ii) Except pursuant to the preceding paragraph, the Fixed Rate Notes will not be redeemable at Stater Bros.’ option prior to June 15, 2008.

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After June 15, 2008, Stater Bros. may redeem all or a part of the Fixed Rate Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

Year	Percentage
2008	104.063	%
2009	102.031	%
2010 and thereafter	100.000	%

(b) Floating Rate Notes.

Except as set forth below, the Floating Rate Notes may not be redeemed prior to June 15, 2006. After June 15, 2006, Stater Bros. may redeem all or a part of the Floating Rate Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

Year	Percentage
2006	102.000	%
2007	101.000	%
2008 and thereafter	100.000	%

(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof.

SECTION 3.08. MANDATORY REDEMPTION.

Stater Bros. shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.

In the event that, pursuant to Section 4.10 hereof, Stater Bros. shall be required to commence an Asset Sale Offer (as defined in Section 4.10 hereof), it shall follow the procedures specified below.

The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “Offer Period”). No later than five Business Days after the termination of the Offer Period (the “Purchase Date”), Stater Bros. shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the “Offer Amount”) or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in

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whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

Upon the commencement of an Asset Sale Offer, Stater Bros. shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest and Liquidated Damages, if any; (d) that, unless Stater Bros. defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest and Liquidated Damages, if any, after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer the Note by book-entry transfer, to Stater Bros., a depositary, if appointed by Stater Bros., or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if Stater Bros., the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, Stater Bros. shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by Stater Bros. so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

On or before the Purchase Date, Stater Bros. shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers’ Certificate stating that such Notes or portions thereof were accepted for payment by Stater Bros. in accordance with the terms of this Section 3.09. Stater Bros., the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by Stater Bros. for purchase, and Stater Bros. shall promptly issue a new Note, and the Trustee, upon written request from Stater Bros., shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by Stater

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Bros. to the Holder thereof. Stater Bros. shall publicly announce the results of the Asset Sale Offer on the Purchase Date.

Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

ARTICLE 4.

COVENANTS

SECTION 4.01. PAYMENT OF NOTES.

Stater Bros. shall pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any, shall be considered paid on the date due if the Paying Agent, if other than Stater Bros. or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by Stater Bros. in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest and Liquidated Damages, if any, then due. Except as otherwise provided in this Indenture or the Notes, Stater Bros. shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement, without duplication.

Stater Bros. shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful.

SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.

Stater Bros. shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon Stater Bros. in respect of the Notes and this Indenture may be served. Stater Bros. shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time Stater Bros. shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

Stater Bros. may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve Stater Bros. of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. Stater Bros. shall

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give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

Stater Bros. hereby designates the Corporate Trust Office of the Trustee as one such office or agency of Stater Bros. in accordance with Section 2.03.

SECTION 4.03. REPORTS.

Whether or not required by the SEC, so long as any Notes are outstanding, Stater Bros. shall furnish to the Holders of Notes, within the time periods specified in the SEC’s rules and regulations:

(a) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if Stater Bros. were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by Stater Bros.’ certified independent accountants; and

(b) all current reports that would be required to be filed with the SEC on Form 8-K if Stater Bros. were required to file such reports.

In addition, whether or not required by the SEC, Stater Bros. shall file a copy of all of the information and reports referred to in clauses (a) and (b) above with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. Moreover, Stater Bros. agrees that, for so long as any Notes remain outstanding, in the event that it ceases to be subject to Section 13 or 15(d) of the Exchange Act, it shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

SECTION 4.04. COMPLIANCE CERTIFICATE.

(a) Stater Bros. shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers’ Certificate stating that a review of the activities of Stater Bros. and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether Stater Bros. has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge Stater Bros. has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action Stater Bros. is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event

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and what action Stater Bros. is taking or proposes to take with respect thereto. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, at the time the Officers’ Certificate required by Section 4.03(a) is delivered, Stater Bros. shall cause to be delivered to the Trustee a letter or statement of Stater Bros.’ independent accountants who shall have certified the financial statements of Stater Bros. for its preceding fiscal year in connection with the annual report of Stater Bros. to its stockholders for such year to the effect that, in making the examination necessary for certification of such financial statements, nothing came to their attention that caused them to believe that Stater Bros. was not in compliance with any of the terms or conditions contained in Sections 4.01, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.15, 4.16, 4.18 and Article 5 of this Indenture, which Default remains uncured at the date of such letter or statement or, if they shall have obtained knowledge of any such uncured Default, specifying in such letter or statement such Default or Defaults and the nature thereof, it being understood that such accountants shall not be liable directly or indirectly for failure to obtain knowledge of any such Default or Defaults and that their examinations was not directed primarily toward obtaining knowledge of such noncompliance.

(c) Stater Bros. shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action Stater Bros. is taking or proposes to take with respect thereto.

SECTION 4.05. TAXES.

Stater Bros. shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

SECTION 4.06. STAY, EXTENSION AND USURY LAWS.

Stater Bros. covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and Stater Bros. (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

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SECTION 4.07. RESTRICTED PAYMENTS.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(a) declare or pay any dividend or make any other payment or distribution on account of Stater Bros.’ or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any such payment in connection with any merger or consolidation involving Stater Bros. or any of its Restricted Subsidiaries) or to the direct or indirect holders of Stater Bros.’ or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Stater Bros. or payable to Stater Bros. or a Restricted Subsidiary of Stater Bros.);

(b) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Stater Bros.) any Equity Interests of Stater Bros. or any direct or indirect parent or Affiliate of Stater Bros.;

(c) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at the Stated Maturity thereof; or

(d) make any Restricted Investment (all such payments and other actions set forth in clauses (a) through (d) above being collectively referred to as “Restricted Payments”);

unless such Restricted Payment occurs on or after June 28, 2004 and, at the time of and after giving effect to such Restricted Payment:

(i) no Default or Event of Default shall have occurred or be continuing or would occur as a consequence thereof; and

(ii) Stater Bros. would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and

(iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Stater Bros. and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) of the next succeeding paragraph), is less than the sum, without duplication, of:

(A) 50% of the Consolidated Net Income of Stater Bros. for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of Stater Bros.’ most recently ended fiscal quarter for which internal financial statements are

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available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

(B) 100% of the aggregate net cash proceeds received by Stater Bros. since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of Stater Bros. (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of Stater Bros. that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary); plus

(C) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (I) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (II) the initial amount of such Restricted Investment; plus

(D) an amount equal to the fair market value of the Equity Interests of each Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary pursuant to Section 4.17; provided, that such amount shall not in any case exceed the amount of Restricted Investments previously made by Stater Bros. or any Restricted Subsidiary in such Person.

The preceding paragraph shall not prohibit:

(a) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture;

(b) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of Stater Bros. or of any Equity Interests of Stater Bros. in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of, Equity Interests of Stater Bros. (other than Disqualified Stock); provided, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (iii)(B) of the preceding paragraph;

(c) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of Stater Bros. with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(d) the payment of any dividend by a Restricted Subsidiary of Stater Bros. to the holders of its Equity Interests on a pro rata basis;

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(e) the payment to La Cadena Investments of a dividend in an amount not to exceed $45.0 million substantially concurrently with the issuance of the Notes;

(f) the payment of any costs and expenses (including any related premium) in connection with the offering of the Notes and the tender offer and consent solicitation for the Existing Notes and the redemption of any and all of the Existing Notes remaining outstanding following the consummation of such tender offer;

(g) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (g) since the date of this Indenture not to exceed $25.0 million;

(h) if no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Stater Bros. held by any key employee of Stater Bros. or its Restricted Subsidiaries (other than any key employee that is a partner of or otherwise holds any Equity Interest in La Cadena Investments or any La Cadena Successor) upon any such person’s death, disability or termination of employment and pursuant to any management equity subscription agreement, stock option agreement or other incentive compensation plan or agreement entered into in the ordinary course of business; provided, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million, which aggregate amount shall increase by $1.0 million on each anniversary of the date of this Indenture;

(i) Restricted Payments that, when taken with all other Restricted Payments made pursuant to this clause (i) since the date of the Indenture, do not exceed $25.0 million;

(j) the payment substantially concurrently with the issuance of the Notes of principal and interest on that certain 5% subordinated note due 2007 owed by Stater Bros. to a retired executive of La Cadena Investments in an aggregate amount not to exceed $20.3 million; and

(k) Investments in the Equity Interests of Santee resulting exclusively from the sale of a majority of the Equity Interests of Santee.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by Stater Bros. or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by a majority of Stater Bros.’ directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment (other than Restricted Payments permitted pursuant to clauses (a), (d), (e), (f), (g) and (j) of the preceding paragraph), Stater Bros. shall deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed.

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SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction of any kind: (i) on the ability of any Restricted Subsidiary to: (A) pay dividends or make any other distributions on its Capital Stock to Stater Bros. or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Stater Bros. or any of its Restricted Subsidiaries; (B) make loans or advances to Stater Bros. or any of its Restricted Subsidiaries; or (C) transfer any of their respective properties or assets to Stater Bros. or any of its Restricted Subsidiaries; (ii) on the ability of Stater Bros. or any of its Restricted Subsidiaries to receive or retain any such: (A) dividends, payments or distributions, (B) loans or advances, or (C) transfer of property (any such restriction being referred to herein as a “Payment Restriction”).

However, the restrictions in the preceding paragraph shall not apply to encumbrances or restrictions existing under or by reason of: (i) agreements in effect as of the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof (provided, that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the date of this Indenture) or any provisions of any articles of incorporation or certificate of incorporation with respect to Stater Bros. or any Restricted Subsidiary (including, without limitation, the rights, preferences and privileges of any class or series of preferred stock included therein) in effect as of the date of this Indenture or as amended thereafter in accordance with the terms of this Indenture; (ii) this Indenture and the Notes; (iii) applicable law; (iv) any instrument governing Indebtedness or Capital Stock of a Person acquired by Stater Bros. or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided, that in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (v) customary non-assignment provisions in leases and other contracts entered into in the ordinary course of business; (vi) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clauses (i)(C) and (ii)(C) of the preceding paragraph; (vii) Permitted Refinancing Indebtedness, provided, that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (viii) the Revolving Credit Facility and the Santee Credit Facility; (ix) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; (x) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (xi) Permitted Santee Indebtedness.

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SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and Stater Bros. shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock other than the issuance by Santee in a Qualified Santee Sale of Capital Stock that is not Disqualified Stock; provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of such Indebtedness, Stater Bros. or any Guarantor may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock if the Fixed Charge Coverage Ratio for Stater Bros.’ most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.

The first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(a) the incurrence by Stater Bros. or its Restricted Subsidiaries of Indebtedness in an aggregate principal amount not to exceed $100.0 million at any time outstanding under any Credit Facilities or any replacement facility thereof;

(b) the incurrence by Stater Bros. and its Restricted Subsidiaries of the Existing Indebtedness;

(c) the incurrence by Stater Bros. and the Guarantors of Indebtedness represented by the Initial Notes and the Guarantees thereof and the Exchange Notes and the Guarantees thereof to be issued pursuant to the Registration Rights Agreement;

(d) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations or Permitted Construction Indebtedness in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (d), not to exceed $25.0 million at any time outstanding;

(e) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section 4.09 or clauses (a), (b) or (c) of this paragraph;

(f) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of intercompany Indebtedness owing to Stater Bros. or any Restricted Subsidiary; provided,

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however, that: (i) if Stater Bros. is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes; and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Stater Bros. or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either Stater Bros. or a Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by Stater Bros. or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (f);

(g) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding;

(h) the guarantee by Stater Bros. of Indebtedness of Stater Bros. or a Restricted Subsidiary that was permitted to be incurred by another provision of this Section 4.09;

(i) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of Stater Bros. as accrued;

(j) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of Indebtedness to secure workers’ compensation and other insurance coverages, not to exceed the minimum amount required by Stater Bros.’ or any of its Restricted Subsidiaries’ insurance carriers or applicable regulatory agencies (which may be Indebtedness under Credit Facilities in addition to that permitted under clause (a));

(k) the incurrence of Indebtedness arising from agreements of Stater Bros. or any Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of Stater Bros. or any Restricted Subsidiary pursuant to such agreements, incurred or assumed in connection with the disposition of any business, assets or Subsidiary of Stater Bros. or any Restricted Subsidiary, other than guarantees or similar credit support by Stater Bros. or such Restricted Subsidiary of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; provided, that the maximum aggregate liability in respect of all such Indebtedness described in this clause (k) shall not exceed the net proceeds actually received in connection with any such disposition;

(l) the incurrence by Stater Bros. or any of the Guarantors of other Indebtedness not to exceed $50.0 million (which may be Indebtedness under Credit Facilities in addition to that permitted by clause (a));

(m) the incurrence by Santee of Permitted Santee Indebtedness;

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(n) the incurrence by Santee of Indebtedness in an aggregate principal amount not to exceed $5.0 million at any time outstanding under the Santee Credit Facility; and

(o) the Existing Notes.

Stater Bros. shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of Stater Bros. unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of Stater Bros. shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of Stater Bros. solely by virtue of being unsecured.

For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (a) through (o) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, Stater Bros. shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09.

Indebtedness under the Revolving Credit Facility outstanding on the date on which the Notes are first issued and authenticated under this Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (a) of the definition of Permitted Debt above.

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SECTION 4.10. ASSET SALES

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (a) Stater Bros. (or such Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (b) such fair market value is evidenced by (i) for any Asset Sale resulting in Net Proceeds less than or equal to $2.5 million, an Officers’ Certificate delivered to the Trustee or (ii) for any Asset Sale resulting in Net Proceeds in excess of $2.5 million, a resolution of Stater Bros.’ Board of Directors set forth in an Officers’ Certificate delivered to the Trustee; and (c) at least 75% of the consideration therefor received by Stater Bros. or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (i) any liabilities (as shown on Stater Bros.’ or such Restricted Subsidiary’s most recent balance sheet) of Stater Bros. or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Stater Bros. or such Restricted Subsidiary from further liability; and (ii) any securities, notes or other obligations received by Stater Bros. or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by Stater Bros. or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion); provided, that any non-cash consideration that becomes Net Proceeds shall thereafter be subject to the provisions of the second paragraph of this Section 4.10.

Within twelve (12) months of the date of consummation (each such date, a “Consummation Date”) by Stater Bros. or any Restricted Subsidiary of (x) any Asset Sale, other than a Qualified Santee Sale, which, taken individually or together with all such Asset Sales other than one or more Qualified Santee Sales, since the date of this Indenture or (y) any Qualified Santee Sale which, taken individually or together with all such Qualified Santee Sales, results, in the case of (x) or (y) in the receipt of Net Proceeds in excess of $25.0 million, such Net Proceeds and all Net Proceeds from all such Asset Sales or Qualified Santee Sales, as applicable, consummated concurrently therewith or consummated thereafter will be applied by Stater Bros. or a Restricted Subsidiary to: (a) investments in assets or businesses in the same line of business as Stater Bros. or such Restricted Subsidiary (including, without limitation, the payment of a dividend or other distribution on account of the Equity Interests of any Wholly-Owned Subsidiary of Stater Bros. to the holder of its Equity Interests on a pro rata basis; provided, that the proceeds of such dividend or other distribution are used by such holder for investments as contemplated in this clause (a)); (b) the permanent repayment of (and permanent reduction of commitments, if any, under) any Indebtedness (i) that is secured by or incurred to construct such assets or (ii) of a Restricted Subsidiary; or (c) a combination of payment and investment permitted by the foregoing clauses (a) and (b); provided, that pending the final application of any such Net Proceeds, such Net Proceeds may be applied to the temporary reduction of revolving credit borrowings or other investment of such Net Proceeds in any manner that is not prohibited by this Indenture; provided, further, that, Net Proceeds resulting from a Qualified Santee Sale or Qualified Santee Sales consisting of the issuance by Santee of Equity Interests in Santee that, individually or collectively, result in Santee no longer being a Subsidiary of Stater Bros., or an amount equal thereto, will be applied first to permanently repay all or a portion, as applicable, of

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the outstanding Indebtedness represented by the Santee Note, and thereafter as set forth in clauses (a), (b) or (c) above.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in clauses (a), (b) or (c) of the preceding paragraph, or applied to repay all or a portion of the Indebtedness represented by the Santee Note, shall constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $25.0 million, Stater Bros. shall make an offer in accordance with Section 3.09 to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of such Excess Proceeds (an “Asset Sale Offer”). The offer price in any Asset Sale Offer will be equal to 100% of the principal amount of such Notes or other Indebtedness plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, Stater Bros. or its Restricted Subsidiaries may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of such Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

Stater Bros. shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, Stater Bros. shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict.

SECTION 4.11. TRANSACTIONS WITH AFFILIATES.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an “Affiliate Transaction”), unless: (a) such Affiliate Transaction is on terms that are consistent with industry practice and no less favorable to Stater Bros. or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Stater Bros. or such Restricted Subsidiary with an unrelated Person; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, Stater Bros. delivers to the Trustee a resolution of the Board of Directors set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the members of the Board of Directors.

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The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph: (a) transactions, to the extent not otherwise prohibited under this Indenture, between or among Stater Bros. and/or its Wholly-Owned Subsidiaries; (b) payment of reasonable directors fees to directors of Stater Bros.; (c) sales of Equity Interests (other than Disqualified Stock) to Affiliates of Stater Bros.; (d) payment to La Cadena Investments of a dividend in an amount not to exceed $45.0 million substantially concurrently with the issuance of the Notes; and (e) Restricted Payments that are permitted by the provisions of Section 4.07 hereof.

SECTION 4.12. LIENS.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens.

SECTION 4.13. CORPORATE EXISTENCE.

Subject to Article 5 hereof, Stater Bros. shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of Stater Bros. or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of Stater Bros. and its Subsidiaries; provided, however, that Stater Bros. shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors of Stater Bros. shall determine that the preservation thereof is no longer desirable in the conduct of the business of Stater Bros. and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes.

SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.

If a Change of Control occurs, each Holder of Notes will have the right to require Stater Bros. to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder’s Notes pursuant to a Change of Control Offer. In the Change of Control Offer, Stater Bros. shall offer a payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase (the “Change of Control Payment”). Within 30 days following any Change of Control, Stater Bros. shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice (the “Change of Control Payment Date”), which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by this Indenture and described in such notice. Stater Bros. shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.14, Stater Bros. will

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comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.14 by virtue of such conflict.

On the Change of Control Payment Date, Stater Bros. shall, to the extent lawful: (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by Stater Bros.

The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof.

Prior to complying with any of the provisions of this Section 4.14, but in any event within 90 days following a Change of Control, Stater Bros. shall either (i) cause each of its Restricted Subsidiaries to obtain the requisite consents, if any, under all agreements governing outstanding Indebtedness of such Restricted Subsidiary to permit the repurchase of Notes required by this Section 4.14 or (ii) if any of such requisite consents cannot be obtained, cause the applicable Restricted Subsidiary or Restricted Subsidiaries to repay the Indebtedness pursuant to which such consent is required.

Stater Bros. shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

Stater Bros. shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.14 and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

SECTION 4.15. LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY-OWNED SUBSIDIARIES (OTHER THAN AN UNRESTRICTED SUBSIDIARY).

Stater Bros. shall not, and shall not permit any of its Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary) to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests in any Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to any Person (other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros.), unless: (a) such transfer, conveyance, sale, lease or other disposition is of all the Equity Interests in such Restricted Subsidiary; and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Sections 3.09 and 4.10. In addition, Stater Bros. shall not permit any Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock

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constituting directors’ qualifying shares) to any Person other than to Stater Bros. or a Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros; provided that Santee may issue Equity Interests to a Person other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros. so long as the cash Net Proceeds of such issuance are applied in accordance with Section 4.10.

Notwithstanding the foregoing, Stater Bros. or its Wholly-Owned Subsidiary may transfer, convey, sell, lease or otherwise dispose of Equity Interests of Santee or Santee may issue Equity Interests in a Qualified Santee Sale, in each case so long as (x) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 and (y) to the extent that such transaction results in the disposition of a majority of the Equity Interests of Santee, all Indebtedness remaining outstanding following such transaction and owed by Santee to Stater Bros. or any Restricted Subsidiary would be permitted pursuant to Section 4.07.

SECTION 4.16. ADVANCES TO RESTRICTED SUBSIDIARIES.

All advances made by Stater Bros. or any Guarantor following the Issue Date to Restricted Subsidiaries that are not Guarantors shall be evidenced by an intercompany note that shall evidence senior Indebtedness, which, in all cases other than Indebtedness owed by Santee, shall bear interest at the then current fair market interest rate as of the date of issuance of such intercompany note.

SECTION 4.17. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.

The Board of Directors of Stater Bros. may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of any Wholly-Owned Subsidiary of Stater Bros. other than a Wholly-Owned Subsidiary of such Subsidiary; provided, that Stater Bros. shall have provided the Trustee with an Officers’ Certificate accompanied by a resolution of the Board of Directors of Stater Bros. stating that (x) such designation complies with Section 4.07 hereof and (y) such designation shall not otherwise result in any Default or Event of Default. The Board of Directors of Stater Bros. may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, Stater Bros. is able to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) in compliance with Section 4.09 hereof and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors of Stater Bros. shall be evidenced to the Trustee by promptly providing the Trustee a copy of the Board resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with this Section 4.17.

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SECTION 4.18. PAYMENTS FOR CONSENT.

Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

SECTION 4.19. SUBSIDIARY GUARANTEES.

If Stater Bros. or any of its Restricted Subsidiaries acquires or creates a Subsidiary that is organized and existing under the laws of any state in the United States or the District of Columbia after the date of this Indenture, then the newly acquired or created Subsidiary shall (i) execute a supplemental indenture setting forth its Guarantee substantially in the form of Exhibit F and (ii) deliver an Opinion of Counsel relating to the enforceability and authorization of that Guarantee pursuant to which that Restricted Subsidiary shall become a Guarantor, and shall guarantee on a senior unsecured basis, the payment obligations of Stater Bros. under the Notes and this Indenture; provided, that this covenant will not apply to any Subsidiary during a period when that Subsidiary (i) has been properly designated as an Unrestricted Subsidiary in accordance with this Indenture for so long as it continues to constitute an Unrestricted Subsidiary or (ii) has Total Assets of less than $10.0 million and Stater Bros. has provided the Trustee with written notice requesting such release and an Officers’ Certificate certifying the amount of such Total Assets.

ARTICLE 5.

SUCCESSORS

SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.

(a) Stater Bros. shall not, directly or indirectly: (x) consolidate or merge with or into another Person (whether or not Stater Bros. is the surviving corporation); or (y) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Stater Bros. and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless:

(i) either: (A) Stater Bros. would be the surviving corporation; or (B) the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made would be a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia;

(ii) the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of

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Stater Bros. under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

(iii) immediately after giving effect to such transaction (including giving effect to any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction) no Default or Event of Default would exist or be continuing; and

(iv) Stater Bros. or the Person formed by or surviving any such consolidation or merger (if other than Stater Bros.), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and

(v) Stater Bros. or such Person shall have delivered to the Trustee (A) an Officers’ Certificate of Stater Bros. and an Opinion of Counsel (which counsel may not be in-house counsel of Stater Bros.), each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Section 5.01 and that all conditions precedent in this Indenture relating to such transaction have been satisfied and (B) a certificate from Stater Bros.’ independent certified public accountants stating that Stater Bros. has made the calculations required by clause (d) above in accordance with the terms of this Indenture.

In addition, Stater Bros. shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.

Notwithstanding the foregoing, this Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Stater Bros. and any of its Restricted Subsidiaries.

(b) Each Guarantor (other than any Guarantor the Guarantee of which is to be released in accordance with the terms of such Guarantee and this Indenture) will not, and Stater Bros. will not cause or permit any Guarantor to, consolidate or merge with or into (whether or not such Guarantor is the surviving entity), or sell, assign, transfer, lease, convey, or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person other than Stater Bros. or a Guarantor unless:

(i) the Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Guarantor), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made, is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia;

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(ii) the Person formed by or surviving any such consolidation or merger (if other than the Guarantor), or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made, assumes all the Obligations of the Guarantor under this Indenture and the Notes issued hereunder pursuant to a supplemental indenture to this Indenture in form reasonably satisfactory to the Trustee and substantially in the form of Exhibit F; and

(iii) immediately after such transaction, no Default or Event of Default exists.

SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of Stater Bros. or a Guarantor in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which Stater Bros. or such Guarantor, as applicable, is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to “Stater Bros.” or a Guarantor shall refer instead to the successor corporation and not to Stater Bros. or such Guarantor), and may exercise every right and power of Stater Bros. or such Guarantor under this Indenture with the same effect as if such successor Person had been named as Stater Bros. or such Guarantor herein; provided, however, that Stater Bros. or Guarantor shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the assets of Stater Bros. or such Guarantor, as applicable, that meets the requirements of Section 5.01 hereof.

ARTICLE 6.

DEFAULTS AND REMEDIES

SECTION 6.01. EVENTS OF DEFAULT.

Each of the following shall constitute an “Event of Default”: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of, or premium, if any, on the Notes; (iii) failure by Stater Bros. or any of its Restricted Subsidiaries to comply with Sections 3.09, 4.10, 4.14 or 5.01; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in this Indenture or the Notes (other than a default set forth in clauses (i), (ii) or (iii) above); (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Stater Bros. or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a Payment Default; or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates

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$10.0 million or more; (vi) failure by Stater Bros. or any of its Restricted Subsidiaries to pay final judgments to the extent not covered by insurance underwritten by third parties aggregating in excess of $10.0 million, which judgments shall not have been paid, discharged or stayed for a period of 60 days; (vii) Stater Bros. or any of its Restricted Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (A) commencing a voluntary case for relief from its creditors; (B) consenting to the entry of an order for relief against it in an involuntary case for relief from its creditors; (C) consenting to the appointment of a custodian of it or for all or substantially all of its property; (D) making a general assignment for the benefit of its creditors; or (E) admitting in writing its inability generally to pay its debts as they become due; (viii) a court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (A) is for relief against Stater Bros. or any of its Restricted Subsidiaries in an involuntary case; (B) appoints a custodian of Stater Bros. or any of its Restricted Subsidiaries or for all or substantially all of the property of Stater Bros. or any of its Restricted Subsidiaries; or (C) orders the liquidation of Stater Bros. or any of its Restricted Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) any Guarantee shall be held in a judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee.

SECTION 6.02. ACCELERATION.

If any Event of Default other than an Event of Default described in clauses (vii) or (viii) above occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued interest and Liquidated Damages, if any, on all the Notes to be due and payable immediately by notice in writing to Stater Bros. and the Trustee specifying the respective Event of Default and that such notice is a “notice of acceleration” (the “Acceleration Notice”), and the same shall become immediately and automatically due and payable. Notwithstanding the foregoing, if an Event of Default specified in clause (vii) or (viii) of Section 6.01 hereof occurs with respect to Stater Bros., all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or Liquidated Damages that has become due solely because of the acceleration) have been cured or waived.

SECTION 6.03. OTHER REMEDIES.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

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The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

SECTION 6.04. WAIVER OF PAST DEFAULTS.

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

SECTION 6.05. CONTROL BY MAJORITY.

Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability.

SECTION 6.06. LIMITATION ON SUITS.

A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.

SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with

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an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. COLLECTION SUIT BY TRUSTEE.

If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against Stater Bros. for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to Stater Bros. (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 6.10. PRIORITIES.

If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

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Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and

Third: to Stater Bros. or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

SECTION 6.11. UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

ARTICLE 7.

TRUSTEE

SECTION 7.01. DUTIES OF TRUSTEE.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of its own affairs.

(b) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering, or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers’ Certificate.

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

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(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section.

(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, costs, liabilities and/or expenses that might be incurred by it in connection with such request or direction.

(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with Stater Bros. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

SECTION 7.02. RIGHTS OF TRUSTEE.

(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from Stater Bros. shall be sufficient if signed by an Officer of Stater Bros.

(f) The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against any loss, costs, liabilities and/or expenses that might be incurred by it in connection with such request or direction.

(g) The Trustee will not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into

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such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it will be entitled to examine the books, records, and premises of Stater Bros., personally or by agent or attorney at the sole cost of Stater Bros. and, subject to Section 7.07, shall incur no liability or additional liability of any kind by reason or such inquiry or investigation.

(h) In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(i) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

(j) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

(k) The Trustee may request that Stater Bros. deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with Stater Bros. or any Affiliate of Stater Bros. with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest as described in the TIA as then in effect, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

SECTION 7.04. TRUSTEE’S DISCLAIMER.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for Stater Bros.’ use of the proceeds from the Notes or any money paid to Stater Bros. or upon Stater Bros.’ direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other

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document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

SECTION 7.05. NOTICE OF DEFAULTS.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest or Liquidated Damages, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.

SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.

Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to Stater Bros. and, if such report is prepared after the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective by the SEC, filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). Stater Bros. shall promptly notify the Trustee when the Notes are listed on any stock exchange.

SECTION 7.07. COMPENSATION AND INDEMNITY.

Stater Bros. shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. Stater Bros. shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

Stater Bros. shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against Stater Bros. (including this Section 7.07) and defending itself against any claim (whether asserted by Stater Bros. or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify Stater Bros. promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify Stater Bros. shall not relieve Stater Bros. of its obligations hereunder. Stater

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Bros. shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and Stater Bros. shall pay the reasonable fees and expenses of such counsel. Stater Bros. need not pay for any settlement made without its consent, which consent shall not be unreasonably delayed or withheld.

The obligations of Stater Bros. under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

To secure Stater Bros.’ payment obligations in this Section, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such lien shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vii) or (viii) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent applicable.

Stater Bros.’ obligations under this Section 7.07 and any claim arising hereunder shall survive the resignation or removal of any Trustee, the discharge of Stater Bros.’ obligations pursuant to Article 8 hereof and any rejection or termination under any Bankruptcy Law.

SECTION 7.08. REPLACEMENT OF TRUSTEE.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section.

The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying Stater Bros. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and Stater Bros. in writing. Stater Bros. may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, Stater Bros. shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by Stater Bros.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, Stater Bros., or the Holders of Notes of at least 10%

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in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to Stater Bros. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided, that all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, Stater Bros.’ obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.

There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition.

This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b).

SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST STATER BROS.

The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

SECTION 7.12. TRUSTEE RISK.

None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it.

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Whether or not expressly provided herein, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to Section 7.01 hereof and the requirements of the TIA as then in effect.

SECTION 7.13. APPOINTMENT OF CO-TRUSTEE.

It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture, and in particular in case of the enforcement of any such document on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee (the “Co-Trustee”). The following provisions of this Section 7.13 are adopted to these ends.

The Trustee shall, upon the prior written consent of Stater Bros., which shall not be unreasonably delayed or withheld, appoint an additional individual or institution as a Co-Trustee. The Co-Trustee shall deliver a written acceptance of its appointment to Stater Bros. Thereupon, the Co-Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The Trustee shall mail a notice of the appointment of the Co-Trustee to Holders of the Notes.

In the event that the Trustee appoints a Co-Trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vested in such Co-Trustee but only to the extent necessary to enable such Co-Trustee to exercise such powers, rights, and remedies, and every covenant and obligation necessary to the exercise thereof by such Co-Trustee shall run to and be enforceable by either of them.

Should any instrument in writing be required by the separate Co-Trustee so appointed by the Trustee for fuller and more certain vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by Stater Bros. In case any separate Co-Trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such Co-Trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such Co-Trustee.

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ARTICLE 8.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.

Stater Bros. may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers’ Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.

Upon Stater Bros.’ exercise under Section 8.01 hereof of the option applicable to this Section 8.02, Stater Bros. shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that Stater Bros. shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of Stater Bros., shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) Stater Bros.’ obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and Stater Bros.’ obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, Stater Bros. may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

SECTION 8.03. COVENANT DEFEASANCE.

Upon Stater Bros.’ exercise under Section 8.01 hereof of the option applicable to this Section 8.03, Stater Bros. shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.18 hereof and clauses (c) and (d) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, Stater Bros. may omit to comply with and shall have no liability in respect of any term, condition or

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limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon Stater Bros.’ exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 5.01(c) and 5.01(d) and Sections 6.01(iii) through 6.01(vi) hereof shall not constitute Events of Default.

SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.

The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) Stater Bros. must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be and Stater Bros. must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, Stater Bros. shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) Stater Bros. has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, Stater Bros. shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(vii) or 6.01(viii) hereof is concerned, at any time in the period ending on the 91^st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than this Indenture) to which Stater Bros. or any of its Subsidiaries is a party or by which Stater Bros. or any of its Subsidiaries is bound; (f) Stater Bros. shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by Stater Bros. with the intent of preferring the Holders over any other creditors of Stater Bros. or with the intent of defeating, hindering, delaying or defrauding any other creditors of

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Stater Bros. or others; and (g) Stater Bros. shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Defeasance of the Notes will result in the termination of the obligations of the Guarantors under their respective Guarantees.

SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.

Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including Stater Bros. acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

Stater Bros. shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to Stater Bros. from time to time upon the request of Stater Bros. any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.06. REPAYMENT TO STATER BROS.

Any money deposited with the Trustee or any Paying Agent, or then held by Stater Bros., in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to Stater Bros. on its request or (if then held by Stater Bros.) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to Stater Bros. for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of Stater Bros. as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of Stater Bros. cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be

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less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to Stater Bros.

SECTION 8.07. REINSTATEMENT.

If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then Stater Bros.’ obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if Stater Bros. makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, Stater Bros. shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9.

SUBSIDIARY GUARANTEES

SECTION 9.01. SUBSIDIARY GUARANTEES.

(a) Each Guarantor hereby jointly and severally irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all Obligations of Stater Bros. under this Indenture (including Obligations to the Trustee) and the Notes, whether for payment of principal of, interest on or additional interest, if any, in respect of the Notes and all other monetary Obligations of Stater Bros. under this Indenture and the Notes and (ii) the full and punctual performance within applicable grace periods of all other Obligations of Stater Bros. whether for fees, expenses, indemnification or otherwise under this Indenture and the Notes (all the foregoing being hereinafter collectively called the “Guaranteed Obligations”). Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article 9 notwithstanding any extension or renewal of any Guaranteed Obligation.

(b) Each Guarantor waives presentation to, demand of payment from and protest to Stater Bros. of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against Stater Bros. or any other Person under this Indenture, the Notes or any other agreement or otherwise; (ii) any extension or renewal thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (iv) the release of any security held by any Holder or the Trustee for the Guaranteed

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Obligations or any of them; (v) the failure of any Holder or Trustee to exercise any right or remedy against any other Guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of such Guarantor, except as provided in Section 9.02(b).

(c) Each Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Guarantors, such that such Guarantor’s obligations would be less than the full amount claimed. Each Guarantor hereby waives any right to which it may be entitled to have the assets of Stater Bros. first be used and depleted as payment of Stater Bros.’ or such Guarantor’s obligations hereunder prior to any amounts being claimed from or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to which it may be entitled to require that Stater Bros. be sued prior to an action being initiated against such Guarantor.

(d) Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any holder or the Trustee to any security held for payment of the Guaranteed Obligations.

(e) Except as expressly set forth in Sections 4.19, 8.02, 8.03, 9.02 and 9.06, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

(f) To the extent not previously released pursuant to Section 9.02(b), each Guarantor agrees that its Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest or additional interest, if any, on any Guaranteed Obligation is rescinded or must otherwise be restored by any holder or the Trustee upon the bankruptcy or reorganization of either of Stater Bros. or otherwise.

(g) In furtherance of the foregoing and not in limitation of any other right which any holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of Stater Bros. to pay the principal of or interest or additional interest, if any, on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the

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Trustee, forthwith pay, or cause to be paid, in cash, to the holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary obligations of Stater Bros. to the holders and the Trustee.

(h) Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee or any holder in enforcing any rights under this Section 9.01.

(i) Upon request of the Trustee, each Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 9.02. LIMITATION ON LIABILITY; RELEASE OF GUARANTEE.

(a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

(b) To the extent not previously released pursuant to Section 9.01(f), a Guarantee as to any Guarantor shall terminate and be of no further force or effect and such Guarantor shall be deemed to be released from all obligations under this Article 9 upon (i) any sale or other disposition by Stater Bros. or any Subsidiary of Stater Bros. (or any pledgee of Stater Bros.) of the Capital Stock, or substantially all of the assets of such Guarantor (including by way of merger, consolidation or otherwise) to a Person or a group of Persons that is not (either before or after giving effect to such transaction ) a Restricted Subsidiary of Stater Bros.; provided, however, that each such merger, consolidation or sale (or, in the case of a sale by such a pledgee, the disposition of the proceeds of such sale) shall comply with Section 4.10 and Section 5.01; (ii) the Board of Directors of Stater Bros. designating such Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with Section 4.17; (iii) the dissolution or liquidation of such Guarantor in accordance with the provisions of this Indenture; (iv) such Guarantor, other than Markets, Development Inc. and Santee, having Total Assets of less than $10.0 million and Stater Bros. providing written notice to the Trustee requesting such release and an Officers’ Certificate certifying the amount of such Total Assets pursuant to Section 4.19; or (v) in the case of Santee, the consummation of a Qualified Santee Sale and the receipt by the Trustee from Stater Bros. of written notice of the election of Stater Bros. with respect to such release.

At the request of Stater Bros., the Trustee shall execute and deliver an appropriate instrument evidencing such release (in the form provided by Stater Bros.).

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SECTION 9.03. SUCCESSORS AND ASSIGNS.

This Article 9 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the holders and, in the event of any transfer or assignment of rights by any holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

SECTION 9.04. NO WAIVER.

Neither a failure nor a delay on the part of either the Trustee or the holders in exercising any right, power or privilege under this Article 9 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 9 at law, in equity, by statute or otherwise.

SECTION 9.05. MODIFICATION.

No modification, amendment or waiver of any provision of this Article 9, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

SECTION 9.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE GUARANTORS.

Each Subsidiary which is required to become a Guarantor pursuant to Section 4.19 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit F hereto pursuant to which such Subsidiary shall become a Guarantor under this Article 9 and shall guarantee the Guaranteed Obligations. Concurrently with the execution and delivery of such supplemental indenture, Stater Bros. shall deliver to the Trustee an Opinion of Counsel and an Officers’ Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors’ rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Guarantee of such Guarantor is a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms and or to such other matters as the Trustee may reasonably request.

SECTION 9.07. NON-IMPAIRMENT.

The failure to endorse a Subsidiary guarantee on any Note shall not affect or impair the validity thereof.

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ARTICLE 10.

AMENDMENT, SUPPLEMENT AND WAIVER

SECTION 10.01. WITHOUT CONSENT OF HOLDERS OF NOTES.

Notwithstanding Section 10.02 of this Indenture, Stater Bros. and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of Stater Bros.’ obligations to the Holders of the Notes by a successor to Stater Bros. pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (g) to cause an additional Subsidiary to become a Guarantor under this Indenture in accordance with Section 4.19.

Upon the request of Stater Bros. accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with Stater Bros. in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

SECTION 10.02. WITH CONSENT OF HOLDERS OF NOTES.

Except as provided below in this Section 10.02, Stater Bros. and the Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.14 hereof), and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Without the consent of at least 75% in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, such Notes), no waiver or amendment to this Indenture may make any change in the provisions of Article 10 hereof that adversely affects the

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rights of any Holder of Notes. Section 2.08 hereof shall determine which Notes are considered to be “outstanding” for purposes of this Section 10.02.

Upon the request of Stater Bros. accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with Stater Bros. in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.

It shall not be necessary for the consent of the Holders of Notes under this Section 10.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section becomes effective, Stater Bros. shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of Stater Bros. to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by Stater Bros. with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 10.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes, other than provisions relating to Section 3.09, 4.10 or 4.14 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note, other than a payment required by Section 3.09, 4.10 or 4.14 hereof; or (h) make any change in Section 6.04 or 6.07 hereof or in the preceding amendment and waiver provisions.

SECTION 10.03. COMPLIANCE WITH TRUST INDENTURE ACT.

Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect.

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SECTION 10.04. REVOCATION AND EFFECT OF CONSENTS.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

SECTION 10.05. NOTATION ON OR EXCHANGE OF NOTES.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. Stater Bros. in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

SECTION 10.06. TRUSTEE TO SIGN AMENDMENTS, ETC.

The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. Stater Bros. may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 11.

MISCELLANEOUS

SECTION 11.01. TRUST INDENTURE ACT CONTROLS.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA § 318(c), the imposed duties shall control.

SECTION 11.02. NOTICES.

Any notice or communication by Stater Bros. or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others’ address.

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If to Stater Bros.:

Stater Bros. Holdings Inc.

21700 Barton Road

Colton, California 92324

Attention: Phillip Smith

Chief Financial Officer

with copies to:

Varner, Saleson & Brandt LLP

3750 University Avenue, Suite 610

Riverside, California 92501

Attention: Bruce D. Varner, Esq.

and

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue, Suite 4800

Los Angeles, California 90071-3197

Attention: Andrew E. Bogen, Esq.

If to the Trustee:

The Bank of New York

101 Barclay Street

Floor 8 West

New York, New York 10286

Telecopier No.: (212) 815-5704

Attention: Corporate Trust Administration

Stater Bros. or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

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If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If Stater Bros. mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.

Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. Stater Bros., the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

Upon any request or application by Stater Bros. to the Trustee to take any action under this Indenture, Stater Bros. shall furnish to the Trustee: (a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied.

SECTION 11.06. RULES BY TRUSTEE AND AGENTS.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

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SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.

No past, present or future director, officer, employee, incorporator or stockholder of Stater Bros., as such, shall have any liability for any obligations of Stater Bros. under the Notes, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

SECTION 11.08. GOVERNING LAW.

THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of Stater Bros. or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 11.10. SUCCESSORS.

All agreements of Stater Bros. in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 11.11. SEVERABILITY.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 11.12. COUNTERPART ORIGINALS.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

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IN WITNESS WHEREOF, we have set our hands on this Indenture as of the 17th day of June, 2004.

STATER BROS. HOLDINGS INC.
By:	/s/    JACK H. BROWN
	Jack H. Brown Chairman of the Board, President and Chief Executive Officer
By:	/s/    BRUCE D. VARNER
	Bruce D. Varner Secretary

GUARANTORS:
STATER BROS. MARKETS
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
STATER BROS. DEVELOPMENT INC.
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
SANTEE DAIRIES, INC.
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
THE BANK OF NEW YORK, AS TRUSTEE
By:	/s/ Stacey B. Poindexter
	Name: Stacey B. Poindexter
	Title:   Assistant Vice President

EX-4.2

Exhibit 4.2

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

dated as of June 17, 2004

between

STATER BROS. HOLDINGS INC.,

as Issuer

STATER BROS. MARKETS,

STATER BROS. DEVELOPMENT, INC.,

SANTEE DAIRIES, INC.,

as Guarantors

and

BANC OF AMERICA SECURITIES LLC,

as Initial Purchaser

TABLE OF CONTENTS

1.	Definitions	1
2.	Exchange Offer	4
3.	Shelf Registration	7
4.	Liquidated Damages	8
5.	Registration Procedures	9
6.	Registration Expenses	17
7.	Indemnification	18
8.	Rules 144 and 144A	21
9.	Underwritten Registrations	21
10.	Miscellaneous	22

This Registration Rights Agreement (the “Agreement”) is dated as of June 17, 2004, by and among Stater Bros. Holdings Inc., a Delaware corporation, as the issuer (“Stater Bros.”), Stater Bros. Markets (“Markets”), Stater Bros. Development, Inc. (“Development”), Santee Dairies, Inc. (“Santee”, and together with Markets and Development, the “Guarantors”) and Banc of America Securities LLC, as the initial purchaser (the “Initial Purchaser”).

This Agreement is entered into in connection with the Purchase Agreement, dated as of June 9, 2004, between Stater Bros., the Guarantors and the Initial Purchaser (the “Purchase Agreement”) relating to the sale by Stater Bros. to the Initial Purchaser of an aggregate of (i) $525,000,000 8 ¹/8% Senior Notes due 2012 (the “Fixed Rate Notes”) and (ii) $175,000,000 Floating Rate Senior Notes due 2010 (the “Floating Rate Notes”, and together with the Fixed Rate Notes, the “Notes”), which are guaranteed by the Guarantors. In order to induce the Initial Purchaser to enter into the Purchase Agreement, Stater Bros. and the Guarantors have agreed to provide the registration rights set forth in this Agreement for the equal benefit of the Initial Purchaser and its respective direct and indirect transferees. The execution and delivery of this Agreement is a condition to the Initial Purchaser’s obligation to purchase the Notes under the Purchase Agreement.

The parties hereby agree as follows:

1. DEFINITIONS

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

“Advice”: See Section 5.

“Applicable Period”: See Section 2.

“Closing Date”: The closing of the offering of the Notes to the Initial Purchaser.

“Commission”: The Securities and Exchange Commission.

“Effectiveness Date”: The 180th day after the Closing Date.

“Effectiveness Target Date”: See Section 4.

“Effectiveness Period”: See Section 3.

“Event Date”: See Section 4.

“Exchange Act”: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Exchange Deadline”: See Section 2.

“Exchange Notes”: See Section 2.

“Exchange Offer”: See Section 2.

“Exchange Offer Registration Statement”: See Section 2.

“Filing Date”: The 90th day after the Closing Date.

“Guarantee”: The full and unconditional joint and several guarantee of the payment of principal of, premium and Liquidated Damages, if any, and interest on the Notes on a senior unsecured basis by the Guarantors and each other Person that is required to become a guarantor under the terms of the Indenture after the Closing Date, in each case until such Person is released from its Guarantee pursuant to the Indenture.

“Guarantors”: See the introductory paragraph to this Agreement.

“Holder”: Any holder of Transfer Restricted Securities.

“Holders Counsel”: See Section 5.

“Indenture”: The Indenture, dated as of June 17, 2004, among Stater Bros., the Guarantors and The Bank of New York, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof.

“Initial Purchaser”: See the introductory paragraph to this Agreement.

“Initial Shelf Registration Statement”: See Section 3.

“Inspectors”: See Section 5.

“Liquidated Damages”: See Section 4.

“NASD”: See Section 5.

“Notes”: See the introductory paragraphs to this Agreement.

“Participant”: See Section 7.

“Participating Broker-Dealer”: See Section 2.

“Person”: An individual, trustee, corporation, partnership, joint stock company, limited liability company, trust, unincorporated association, union, business association, firm or other legal entity.

“Private Exchange”: See Section 2.

“Private Exchange Notes”: See Section 2.

“Prospectus”: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any

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information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Transfer Restricted Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Records”: See Section 5.

“Registration Default”: See Section 4.

“Registration Statement”: Any registration statement of Stater Bros. and the Guarantors, including, but not limited to, the Exchange Offer Registration Statement, that covers any of the Transfer Restricted Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 144”: Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.

“Rule 144A”: Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act.

“Rule 415”: Rule 415 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

“Securities Act”: The Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Selling Holders”: See Section 5.

“Shelf Notice”: See Section 2.

“Shelf Registration Statement”: See Section 3.

“Stater Bros.”: See the introductory paragraph to this Agreement.

“Subsequent Shelf Registration Statement”: See Section 3.

“TIA”: The Trust Indenture Act of 1939, as amended.

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“Transfer Restricted Security”: Each Note until:

(i) the date on which such Note has been exchanged by a Person other than a broker-dealer for an Exchange Note in the Exchange Offer;

(ii) following the exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement;

(iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; or

(iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act.

“Trustee”: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any).

“Underwritten registration or underwritten offering”: A registration in which securities of Stater Bros. and the Guarantors are sold to an underwriter for reoffering to the public.

2. EXCHANGE OFFER

(a) Stater Bros. and the Guarantors agree to file with the Commission as soon as practicable after the Closing Date, but in no event later than the Filing Date, an offer to exchange (the “Exchange Offer”) any and all of the Transfer Restricted Securities for a like aggregate principal amount of debt securities of Stater Bros., the terms of which are substantially identical to the Notes (the “Exchange Notes”) (and which are entitled to the benefits of the Indenture or a trust indenture which is identical to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) in all material respects and which, in either case, has been qualified under the TIA), except that the Exchange Notes shall have been registered pursuant to an effective Registration Statement under the Securities Act. The Exchange Offer will be registered under the Securities Act on the appropriate form (the “Exchange Offer Registration Statement”) and will comply with all applicable tender offer rules and regulations under the Exchange Act. Unless the Exchange Offer would not be permitted by applicable law or Commission policy, Stater Bros. and the Guarantors will commence the Exchange Offer and use their best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) issue, on or prior to the later of (1) the 30th business day following the date on which the Exchange Offer Registration Statement was declared effective by the Commission, and (2) the earliest possible date following such 30^th business day if a longer period is required by federal securities

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laws (such later date being the “Exchange Deadline”), Exchange Notes in exchange for all Notes tendered prior thereto in the Exchange Offer. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes, and that such Holder is not an affiliate of Stater Bros. or the Guarantors within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Transfer Restricted Securities that are Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and Stater Bros. and the Guarantors shall have no further obligation to register Transfer Restricted Securities (other than Private Exchange Notes) pursuant to Section 3 of this Agreement.

(b) Stater Bros. and the Guarantors shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled “Plan of Distribution” reasonably acceptable to the Initial Purchaser, which shall contain a summary statement of the positions taken or policies made by the Staff of the Commission with respect to the potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a “Participating Broker-Dealer”), whether such positions or policies have been publicly disseminated by the Staff of the Commission or such positions or policies, in the judgment of the Initial Purchaser, represent the prevailing views of the Staff of the Commission. Such “Plan of Distribution” section shall also allow the use of the Prospectus by all persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes.

Stater Bros. and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes, provided that such period shall not exceed 180 days (or such longer period if extended pursuant to the last paragraph of Section 5) (the “Applicable Period”).

If, prior to the commencement or consummation of the Exchange Offer, the Initial Purchaser holds any Notes acquired by it and having the status as an unsold allotment in the initial distribution, Stater Bros. and the Guarantors, upon the request of the Initial Purchaser, shall issue and deliver to the Initial Purchaser, in exchange (the “Private Exchange”) for such Notes held by the Initial Purchaser, a like principal amount of debt securities of Stater Bros. that are identical to the Exchange Notes (the “Private Exchange Notes”) (and which are issued pursuant to the same indenture as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and Private Exchange Notes will accrue from the last interest payment date on which interest was paid to the Initial Purchaser on

5

the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the date of original issue.

In connection with the Exchange Offer, Stater Bros. and the Guarantors shall:

(i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

(ii) utilize the services of a Depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; and

(iii) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open.

As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, Stater Bros. and the Guarantors shall:

(1) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange;

(2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and

(3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange.

The Exchange Notes and the Private Exchange Notes may be issued under (A) the Indenture or (B) an indenture substantially identical to the Indenture, which in either event will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes will vote and consent together on all matters as one class and that neither the Exchange Notes, the Private Exchange Notes nor the Notes will have the right to vote or consent as a separate class on any matter.

(c) If (i) the Exchange Offer is not permitted by applicable law or Commission policy, (ii) any Holder of Transfer Restricted Securities notifies Stater Bros. and the Guarantors prior to the 20^th day following the Exchange Offer that (A) such Holder is prohibited by law or Commission policy from participating in the Exchange Offer; (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is neither appropriate nor available for such resales; or (C) it is a broker-dealer and owns Notes acquired directly from Stater Bros. or the Guarantors or an affiliate of Stater Bros. or the Guarantors or (iii) the Exchange Offer is commenced and not consummated within 210 days after the Closing Date for any reason, then Stater Bros. and the Guarantors shall promptly deliver to the Holders

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and the Trustee written notice thereof (the “Shelf Notice”) and shall file an Initial Shelf Registration Statement pursuant to Section 3. Following the delivery of a Shelf Notice to the Holders of Transfer Restricted Securities (only in the circumstances contemplated by clause (i) of the preceding sentence and only if Stater Bros. and the Guarantors shall have satisfied their obligations, if any, pursuant to Section 5(w) below), Stater Bros. and the Guarantors shall not have any further obligation to conduct the Exchange Offer or the Private Exchange under this Section 2.

3. SHELF REGISTRATION

If a Shelf Notice is delivered as contemplated by Section 2(c), then:

(a) Initial Shelf Registration Statement. Stater Bros. and the Guarantors shall carefully prepare and file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Transfer Restricted Securities (the “Initial Shelf Registration Statement”). Stater Bros. and the Guarantors shall use their best efforts to file such Initial Shelf Registration Statement with the Commission as promptly as practicable after such obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 120 days after such obligation arises. The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Transfer Restricted Securities for resale by such Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). Stater Bros. and the Guarantors shall not permit any securities other than the Transfer Restricted Securities to be included in the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to Stater Bros. and the Guarantors in writing, within 15 business days after receipt of a request therefor, such information as Stater Bros. and the Guarantors may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 4 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to Stater Bros. and the Guarantors all information to be disclosed in order to make the information previously furnished to Stater Bros. and the Guarantors by such Holder not materially misleading. Stater Bros. and the Guarantors shall use their best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration Statement continuously effective under the Securities Act until the date which is 24 months from the Effectiveness Date (subject to extension pursuant to the last paragraph of Section 5 hereof) (the “Effectiveness Period”), or such shorter period ending when (i) all Transfer Restricted Securities covered by the Initial Shelf Registration Statement have been sold in the manner set forth and as contemplated in the Initial Shelf Registration Statement, (ii) a Subsequent Shelf Registration Statement covering all of the Transfer Restricted Securities has been declared effective under the Securities Act or (iii) during any period in which all Transfer Restricted Securities may be sold pursuant to Rule 144(k) under the Securities Act.

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(b) Subsequent Shelf Registration Statements. If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), Stater Bros. and the Guarantors shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Registration Statement pursuant to Rule 415 covering all of the Transfer Restricted Securities (a “Subsequent Shelf Registration Statement”). If a Subsequent Shelf Registration Statement is filed, Stater Bros. and the Guarantors shall use their best efforts to cause the Subsequent Shelf Registration Statement to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement was previously continuously effective. As used herein, the term “Shelf Registration Statement” means the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statement.

(c) Supplements and Amendments. Stater Bros. and the Guarantors shall promptly supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement, if required by the Securities Act, or if requested by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities covered by such Registration Statement or by any underwriter of such Transfer Restricted Securities.

4. LIQUIDATED DAMAGES

(a) If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable filing deadline specified for such filing, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the date specified herein for such effectiveness (the “Effectiveness Target Date”), (iii) the Exchange Offer has not been consummated within 30 days of the Effectiveness Target Date with respect to such Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iv), a “Registration Default”), then Stater Bros. and the Guarantors hereby agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages (the “Liquidated Damages”) in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the Liquidated Damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities; provided that Stater Bros. and the Guarantors shall in no event be required to pay Liquidated Damages for more

8

than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the Liquidated Damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.

(b) Stater Bros. and the Guarantors shall notify the Trustee within one business day after each and every date on which an event occurs in respect of which Liquidated Damages are required to be paid (an “Event Date”). Liquidated Damages shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders thereof, on or before the applicable interest payment date, immediately available funds in sums sufficient to pay the Liquidated Damages then due to Holders of Notes with respect to which the Trustee serves. The Liquidated Damages due shall be payable on each interest payment date to the record Holder of Notes entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to accrue on the applicable Event Date. The amount of Liquidated Damages will be determined by multiplying the applicable Liquidated Damages rate by the principal amount of the Notes, multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

5. REGISTRATION PROCEDURES

In connection with the registration of any Transfer Restricted Securities or Private Exchange Notes pursuant to Sections 2 or 3 hereof, Stater Bros. and the Guarantors shall effect such registrations to permit the sale of such Transfer Restricted Securities or Private Exchange Notes in accordance with the intended method or methods of disposition thereof, and, pursuant thereto, Stater Bros. and the Guarantors shall:

(a) Prepare and file with the Commission, as soon as practicable after the date hereof but in any event prior to the Filing Date, a Registration Statement or Registration Statements as prescribed by Section 2 or 3, and use their best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, Stater Bros. and the Guarantors shall, if requested, furnish to and afford the Holders of the Transfer Restricted Securities and each such Participating Broker-Dealer (the “Selling Holders”), as the case may be, covered by such Registration Statement, one special counsel for the Selling Holders (the “Holders Counsel”) and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be

9

incorporated by reference therein and all exhibits thereto) proposed to be filed (at least 5 business days prior to such filing). Stater Bros. and the Guarantors shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities covered by such Registration Statement, or such Participating Broker-Dealer, as the case may be, the Holders Counsel, or the managing underwriters, if any, shall reasonably object.

(b) Use their best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 2 or 3 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, Stater Bros. and the Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their best efforts to cause such amendment to be declared effective as soon as practicable.

(c) Prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. Stater Bros. and the Guarantors shall be deemed not to have used their best efforts to keep a Registration Statement effective during the Applicable Period if they voluntarily take any action that would result in Selling Holders of the Transfer Restricted Securities covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Transfer Restricted Securities or such Exchange Notes during that period unless such action is required by applicable law.

(d) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, Stater Bros. and the Guarantors shall notify the selling Holders of Transfer Restricted Securities, or each such Participating Broker-Dealer, as the case may be, the Holders Counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without

10

charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Transfer Restricted Securities the representations and warranties of Stater Bros. and the Guarantors contained in any agreement (including any underwriting agreement) contemplated by Section 5(o) below cease to be true and correct, (iv) of the receipt by Stater Bros. or the Guarantors of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Transfer Restricted Securities or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of Stater Bros.’ and the Guarantors’ reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

(e) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Transfer Restricted Securities or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use their best efforts to obtain the withdrawal of any such order at the earliest possible moment.

(f) If a Shelf Registration Statement is filed pursuant to Section 3 and if requested by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such Holders or counsel reasonably request to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after Stater Bros. and the Guarantors have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement.

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(g) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Transfer Restricted Securities and to each such Participating Broker-Dealer who so requests and to the Holders Counsel and each managing underwriter, if any, without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits.

(h) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Transfer Restricted Securities or each such Participating Broker-Dealer, as the case may be, their counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, Stater Bros. and the Guarantors hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Transfer Restricted Securities covered by or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to such Prospectus and any amendment or supplement thereto.

(i) Prior to any public offering of Transfer Restricted Securities or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, to use their best efforts to register or qualify, and to cooperate with the selling Holders of Transfer Restricted Securities or each such Participating Broker-Dealer, as the case may be, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Transfer Restricted Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriters reasonably request in writing; provided, that where Exchange Notes held by Participating Broker-Dealers or Transfer Restricted Securities are offered other than through an underwritten offering, Stater Bros. and the Guarantors agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(i); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Transfer Restricted Securities covered by the applicable Registration Statement; provided, further, that Stater Bros. and the Guarantors shall not be required to (A) qualify generally to do business in any jurisdiction where they are not then so qualified, (B) take any action that would subject them to general service of process in any such

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jurisdiction where it is not then so subject or (C) subject themselves to taxation in excess of a nominal dollar amount in any such jurisdiction.

(j) If a Shelf Registration Statement is filed pursuant to Section 3, cooperate with the selling Holders of Transfer Restricted Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the managing underwriters, if any, or Holders may reasonably request.

(k) Use their best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Transfer Restricted Securities, except as may be required solely as a consequence of the nature of such selling Holder’s business, in which case Stater Bros. and the Guarantors will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals.

(l) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(d)(v) or 5(d)(vi) above, as promptly as practicable prepare and (subject to Section 5(a) above) file with the Commission, at the expense of Stater Bros. and the Guarantors, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Transfer Restricted Securities being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(m) Use their best efforts to cause the Transfer Restricted Securities covered by a Registration Statement or the Exchange Notes, as the case may be, to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Transfer Restricted Securities covered by such Registration Statement or the Exchange Notes, as the case may be, or the managing underwriters, if any.

(n) Prior to the effective date of the first Registration Statement relating to the Transfer Restricted Securities, (i) provide the Trustee with printed certificates for the Transfer Restricted Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Transfer Restricted Securities.

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(o) In the event of an underwritten offering of Transfer Restricted Securities pursuant to a Shelf Registration Statement, enter into an underwriting agreement as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriters in order to expedite or facilitate the registration or the disposition of such Transfer Restricted Securities, and in such connection, (i) make such representations and warranties to the underwriters, with respect to the business of Stater Bros., the Guarantors and their subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to Stater Bros. and the Guarantors and updates thereof in form and substance reasonably satisfactory to the managing underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by underwriters; (iii) obtain “cold comfort” letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of Stater Bros. and the Guarantors (and, if necessary, any other independent certified public accountants of any subsidiary of Stater Bros. or the Guarantors or of any business acquired by Stater Bros. or the Guarantors for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings and such other matters as reasonably requested by underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Transfer Restricted Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder.

(p) If (1) a Shelf Registration Statement is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Transfer Restricted Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Transfer Restricted Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the “Inspectors”), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of Stater Bros., the Guarantors and their subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of Stater Bros., the Guarantors and their subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which Stater Bros. and the Guarantors determine, in good faith, to be confidential and any Records which they notify the Inspectors are confidential shall not be

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disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public. Each selling Holder of such Transfer Restricted Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of Stater Bros. and the Guarantors unless and until such is made generally available to the public. Each selling Holder of such Transfer Restricted Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to Stater Bros. and the Guarantors and allow Stater Bros. and the Guarantors to undertake appropriate action to prevent disclosure of the Records deemed confidential at their expense.

(q) Provide an indenture trustee for the Transfer Restricted Securities or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a), as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Transfer Restricted Securities; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Transfer Restricted Securities, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner.

(r) Comply with all applicable rules and regulations of the Commission and make generally available to their security holders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of Stater Bros. after the effective date of a Registration Statement, which statements shall cover said 12-month periods.

(s) Upon consummation of an Exchange Offer or a Private Exchange, obtain one or more opinions of counsel to Stater Bros. and the Guarantors addressed to the Trustee for the benefit of all Holders of Transfer Restricted Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) Stater Bros. and the Guarantors have duly authorized, executed and delivered the Exchange Notes and Private Exchange Notes and the related indenture, and (ii) each of the Exchange Notes or the Private Exchange Notes, as the case may be, and the related indenture constitute a legal, valid and binding obligation of Stater Bros. and the Guarantors, enforceable against Stater Bros. and the Guarantors in accordance with its respective terms (with customary exceptions).

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(t) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Transfer Restricted Securities by Holders to Stater Bros. and the Guarantors (or to such other Person as directed by Stater Bros. or the Guarantors) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, Stater Bros. and the Guarantors shall mark, or cause to be marked, on such Transfer Restricted Securities that such Transfer Restricted Securities are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Transfer Restricted Securities be marked as paid or otherwise satisfied.

(u) Cooperate with each seller of Transfer Restricted Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Transfer Restricted Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the “NASD”).

(v) Use their best efforts to take all other steps necessary to effect the registration of the Transfer Restricted Securities covered by a Registration Statement contemplated hereby.

(w) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to Stater Bros. and the Guarantors raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, seek a no-action letter or other favorable decision from the Commission allowing Stater Bros. and the Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. Stater Bros. and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, Stater Bros. and the Guarantors hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to Stater Bros. and the Guarantors setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff.

Stater Bros. and the Guarantors may require each seller of Transfer Restricted Securities or Participating Broker-Dealer as to which any registration is being effected to furnish to Stater Bros. and the Guarantors such information regarding such seller or Participating Broker-Dealer and the distribution of such Transfer Restricted Securities or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, as Stater Bros. and the Guarantors may, from time to time, reasonably request including, without limitation, a written representation to Stater Bros. and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement or Shelf Registration Statement, as applicable) stating that (A) it is not an affiliate of Stater Bros. or the Guarantors, (B) the amount of Transfer Restricted Securities held by such Holder prior to the Exchange Offer, (C) the amount of Transfer Restricted Securities owned by such Holder to be exchanged in the Exchange Offer and representing that such Holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange

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Notes to be issued and (D) it is acquiring the Exchange Notes in its ordinary course of business. Stater Bros. and the Guarantors may exclude from such registration the Transfer Restricted Securities of any seller or Participating Broker-Dealer who unreasonably fails to furnish such information within a reasonable time after receiving such request.

Each Holder of Transfer Restricted Securities and each Participating Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from Stater Bros. and the Guarantors of the happening of any event of the kind described in Section 5(d)(ii), 5(d)(iv), 5(d)(v), or 5(d)(vi), such Holder will forthwith discontinue disposition of such Transfer Restricted Securities covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(l), or until it is advised in writing (the “Advice”) by Stater Bros. and the Guarantors that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event Stater Bros. and the Guarantors shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(l) or (y) the Advice.

6. REGISTRATION EXPENSES

(a) All fees and expenses incident to the performance of or compliance with this Agreement by Stater Bros. and the Guarantors shall be borne by Stater Bros. and the Guarantors, whether or not the Exchange Offer or a Shelf Registration Statement is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of its counsel in connection with Blue Sky qualifications of the Transfer Restricted Securities or Exchange Notes and determination of the eligibility of the Transfer Restricted Securities or Exchange Notes for investment under the laws of such jurisdictions (x) where the Holders of Transfer Restricted Securities are located, in the case of the Exchange Notes, or (y) as provided in Section 5(i), in the case of Transfer Restricted Securities or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses (including, without limitation, expenses (A) of printing certificates for the Notes in a form eligible for deposit with The Depository Trust Company and (B) of printing prospectuses if the printing of prospectuses is requested by (I) the managing underwriters, if any, or, (II) in respect of Notes to be sold by any Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate principal amount of the Notes included in any Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for Stater Bros. and the Guarantors and fees and disbursements of the Holders Counsel (subject to the provisions of Section 6(b)), (v) fees and all independent certified public accountants referred to in

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Section 5(o)(iii) (including, without limitation, the expenses of any special audit and “cold comfort” letters required by or incident to such performance), (vi) the fees and expenses of any “qualified independent underwriter” or other independent appraiser participating in an offering pursuant to the rules and regulations of the NASD, (vii) rating agency fees, (viii) Securities Act liability insurance, if Stater Bros. and the Guarantors desire such insurance, (ix) fees and expenses of all other Persons retained by Stater Bros. and the Guarantors, (x) internal expenses of Stater Bros. and the Guarantors (including, without limitation, all salaries and expenses of officers and employees of Stater Bros. and the Guarantors performing legal or accounting duties), (xi) the expense of any annual or special audit, (xii) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange and (xiii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement.

(b) In connection with any Shelf Registration Statement hereunder, Stater Bros. and the Guarantors shall reimburse the Holders of the Transfer Restricted Securities being registered in such registration for the fees and disbursements of the Holders’ Counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities to be included in such Registration Statement and other out-of-pocket expenses of the Holders of Transfer Restricted Securities incurred in connection with the registration of the Transfer Restricted Securities.

7. INDEMNIFICATION

(a) Stater Bros. and the Guarantors will indemnify and hold harmless each Holder of Transfer Restricted Securities and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the directors, officers, employees and agents of each person, and each person, if any, who controls any such person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each a “Participant”) from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or any amendment or supplement thereto or any preliminary prospectus or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading; provided, that a Participant will not be entitled to any such indemnification hereunder to the extent that such loss, claim, liability, expense or damage arises from and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to such Participant furnished in writing to Stater Bros. or the Guarantors by such Participant expressly for inclusion therein or in the case of a Participating Broker-Dealer, if the person asserting any such loss, claim, liability, expense or damage purchased the Exchange Notes from such Participating Broker-Dealer but was not sent or given a copy of the Prospectus at or prior to the written confirmation of the sale of Exchange

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Notes to such person and such untrue statement or omission or alleged untrue statement or omission was cured in the Prospectus.

(b) Each Participant will indemnify and hold harmless Stater Bros. and the Guarantors, each person, if any, who controls Stater Bros. or the Guarantors, respectively, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each of their respective directors and officers to the same extent as the foregoing indemnity from Stater Bros. and the Guarantors to each Participant, but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to such Participant furnished in writing to Stater Bros. or the Guarantors by such Participant expressly for use in any Registration Statement or Prospectus or any amendment or supplement thereto or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Transfer Restricted Securities giving rise to such obligations.

(c) Any party that proposes to assert the right to be indemnified under this Section 7 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 7, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provisions of this Section 7 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same

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jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld).

(d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 7 is applicable in accordance with its terms but for any reason is held to be unavailable from Stater Bros., the Guarantors or any Participant, then Stater Bros., the Guarantors and each Participant will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by Stater Bros. or the Guarantors from persons other than a Participant, such as persons who control Stater Bros. or the Guarantors within the meaning of the Securities Act, and their respective officers and directors, who also may be liable for contribution) to which Stater Bros., the Guarantors and each Participant may be subject in such proportion as is appropriate to reflect the relative benefits received by Stater Bros. and the Guarantors on the one hand and each Participant on the other. The relative benefits received by Stater Bros. and the Guarantors on the one hand and each Participant on the other shall be deemed to be equal to (i) with respect to Stater Bros. and the Guarantors, the total net proceeds from the initial offering (before deducting expenses) received by Stater Bros. and the Guarantors, (ii) with respect to the initial purchaser in such offering, the total purchase discount and commissions, (iii) with respect to any other Holder of Transfer Restricted Securities, the value of such Notes and (iv) with respect to any underwriter, the total underwriting discounts and commissions with respect to such underwriting, in each case of clauses (i), (ii) or (iv), as set forth on the cover page of the applicable offering memorandum or prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of Stater Bros. and the Guarantors on the one hand and each Participant on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by Stater Bros., the Guarantors or a Participant, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. Stater Bros., the Guarantors and each Participant shall agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 7(d) shall be deemed to include, for purpose of this Section 7(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any

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such action or claim. Notwithstanding the provisions of this Section 7(d), a Participant shall not be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Transfer Restricted Securities exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7(d), any person who controls a party to this Agreement within the meaning of the Securities Act will have the same rights to contribution as that party, and each officer of Stater Bros. and the Guarantors, respectively, will have the same rights to contribution as Stater Bros. and the Guarantors, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 7(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 7(d). No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld).

(e) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the indemnifying persons may otherwise have to the indemnified persons referred to above.

8. RULES 144 AND 144A

Stater Bros. and the Guarantors covenant that they will file the reports required to be filed by them under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner and, if at any time Stater Bros. and the Guarantors are not required to file such reports, they will, upon the request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act. Stater Bros. and the Guarantors further covenant that they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission.

9. UNDERWRITTEN REGISTRATIONS

If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering and reasonably acceptable to Stater Bros. and the Guarantors.

21

No Holder of Transfer Restricted Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

10. MISCELLANEOUS

(a) Remedies. In the event of a breach by Stater Bros. or the Guarantors of any of their obligations under this Agreement, each Holder of Transfer Restricted Securities, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Stater Bros. and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, they shall waive the defense that a remedy at law would be adequate.

(b) No Inconsistent Agreements. Stater Bros. and the Guarantors have not, as of the date hereof, and Stater Bros. and the Guarantors shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. Stater Bros. and the Guarantors have not entered or will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back rights with respect to a Registration Statement.

(c) Adjustments Affecting Transfer Restricted Securities. Stater Bros. and the Guarantors shall not, directly or indirectly, take any action with respect to the Transfer Restricted Securities as a class that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities in a registration undertaken pursuant to this Agreement.

(d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless Stater Bros. and the Guarantors have obtained the written consent of Holders of at least a majority of the then outstanding aggregate principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Transfer Restricted Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Transfer Restricted Securities may be given by Holders of at least a majority in aggregate principal amount of the Transfer Restricted Securities being sold by such Holders pursuant to such Registration Statement; provided, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence.

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(e) Notices. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier.

(i) if to a Holder of Transfer Restricted Securities, at the most current address given by the Trustee to Stater Bros. and the Guarantors; and

(ii) if to Stater Bros. or the Guarantors, at:

Stater Bros. Holdings Inc.

21700 Barton Road

Colton, California 92324

Telecopy No.: (909) 783-5098

Attention: Chief Executive Officer

with copies to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071-3197

Telecopy No.: (213) 229-7520

Attention: Andrew E. Bogen, Esq.

and

Varner, Saleson & Brandt LLP

3750 University Avenue Suite 610

Riverside, California 92501

Telecopy No.: (909) 274-7777

Attention: Bruce D. Varner, Esq.

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if telecopied.

Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the trustee under the Indenture at the address specified in such Indenture.

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, that with respect to the indemnity and contribution agreements in Section 7, each Holder of Transfer Restricted Securities subsequent to the Initial Purchasers shall be bound by the

23

terms thereof if (i) such Holder elects to include Transfer Restricted Securities in a Shelf Registration Statement and (ii) such Holder is advised expressly by Stater Bros. and the Guarantors of the provisions contained in Section 7 and that such Holder’s election to include Transfer Restricted Securities in a Shelf Registration Statement shall be deemed such Holder’s agreement to be bound by such provisions.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

(j) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(k) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.

(l) Notes Held by Stater Bros., the Guarantors or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by Stater Bros., the Guarantors and other obligors on the Notes or the affiliates (as such term is defined in Rule 405 under the Securities Act) of the Company or the Guarantors shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

STATER BROS. HOLDINGS INC.
By:	/s/    JACK H. BROWN
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
By:	/s/    BRUCE D. VARNER
	Bruce D. Varner
	Secretary

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GUARANTORS:
STATER BROS. MARKETS
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
STATER BROS. DEVELOPMENT, INC.
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer
SANTEE DAIRIES, INC.
By:	/s/ Jack H. Brown
	Jack H. Brown
	Chairman of the Board, President and Chief Executive Officer

26

BANC OF AMERICA SECURITIES LLC
By:	/s/     BRUCE R. THOMPSON
	Bruce R. Thompson
	Managing Director

27

EX-4.3

Exhibit 4.3

CUSIP [                    ]

[                    ]

8¹/₈% Senior Notes due 2012

No. $[                    ]

STATER BROS. HOLDINGS INC.

promises to pay to CEDE & CO., or registered assigns, the principal sum of [                    ] Dollars ($[                    ]) (or so much thereof as shall not have been prepaid) on June 15, 2012.

Interest Payment Dates: June 15 and December 15, commencing December 15, 2004.

Record Dates: June 1 and December 1.

Dated:
STATER BROS. HOLDINGS INC.
By:
	Jack H. Brown Chairman of the Board, President and Chief Executive Officer
By:
	Bruce D. Varner Secretary

This is one of the

Notes referred to in the

within-mentioned Indenture:

THE BANK OF NEW YORK
By:
	Authorized Signatory
	Dated:                     ,

(Back of Note)

8 ¹/₈% Fixed Rate Senior Notes due 2012

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO STATER BROS. OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNED HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE, AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF STATER BROS.

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. INTEREST. Stater Bros. Holdings Inc., a Delaware corporation (“Stater Bros.”), promises to pay interest on the principal amount of this Note at 8 ¹/₈% per annum from December 15, 2004 until maturity. Stater Bros. shall pay interest semi-annually on June 15 and December 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 2004. Stater Bros. shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. METHOD OF PAYMENT. Stater Bros. will pay interest on the Fixed Rate Notes (except defaulted interest), if any, to the Persons who are registered Holders of Notes at the close of business on the June 1 or December 1 immediately preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as

2

provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire transfer instructions to Stater Bros., Stater Bros. will pay all principal, interest and premium on that Holder’s Notes in accordance with those instructions in immediately available funds. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless Stater Bros. elects to make payments of interest by check mailed to the Holders at their addresses set forth in the register of Holders. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3. PAYING AGENT, CALCULATION AGENT AND REGISTRAR. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent, Calculation Agent and Registrar. Stater Bros. may change any Paying Agent, Calculation Agent or Registrar without notice to any Holder. Stater Bros. or any of its Subsidiaries may act as Paying Agent or Registrar but may not act as Calculation Agent.

4. INDENTURE. Stater Bros. issued the Notes under an Indenture, dated as of June 17, 2004 (the “Indenture”), among Stater Bros., the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The aggregate principal amount of Notes that may be issued under the Indenture shall be unlimited.

5. OPTIONAL REDEMPTION.

(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Fixed Rate Notes will not be redeemable at Stater Bros.’ option prior to June 15, 2008. Thereafter, the Fixed Rate Notes will be subject to redemption at any time at the option of Stater Bros., in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

Year	Percentage
2008	104.063	%
2009	102.031	%
2010 and thereafter	100.000	%

(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, prior to June 15, 2007, Stater Bros. may on any one or more occasions redeem up to 35% of the aggregate principal amount of Fixed Rate Notes originally issued under the Indenture at a redemption price of 108.125% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more sales of Capital Stock of Stater Bros. resulting, for each such sale, in net cash proceeds to Stater Bros. in excess of $25.0 million; provided that: (i) at least 65% of the aggregate principal amount of Fixed Rate Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Fixed Rate Notes held by Stater Bros.

3

and its Subsidiaries); and (ii) the redemption shall occur within 45 days of the date of the closing of any such sale.

6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, Stater Bros. shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

7. REPURCHASE AT OPTION OF HOLDER.

(a) If a Change of Control occurs, each Holder of Notes will have the right to require Stater Bros. to make an offer (a “Change of Control Offer”) to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes pursuant to a Change of Control Offer at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the “Change of Control Payment”). Within 30 days following any Change of Control, Stater Bros. shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice.

(b) When the aggregate amount of Excess Proceeds exceeds $25.0 million, Stater Bros. will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, Stater Bros. may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from Stater Bros. prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes.

8. NOTICE OF REDEMPTION. Notice of redemption will be mailed, by first class mail, at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and Stater Bros. may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. Stater Bros. need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, Stater Bros. need not issue, exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

4

10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.

11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class, and, except for any Default or Event of Default in the payment of the principal of, premium or interest on, the Notes (including in connection with an offer to purchase), any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 of the Indenture (including the related definitions) in a manner that does not materially adversely affect any Holder, to provide for the assumption of Stater Bros.’ obligations to Holders of the Notes in case of a merger, consolidation, or sale of assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture or to cause an additional Subsidiary to become a Guarantor under the Indenture in accordance with Section 4.19 of the Indenture.

12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of the principal of, or premium, if any, on the Notes; (iii) failure by Stater Bros. or any of its Restricted Subsidiaries to comply with Sections 3.09, 4.10, 4.14 or 5.01 of the Indenture; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Indenture or the Notes (other than a default set forth in clauses (i), (ii) or (iii) above); (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Stater Bros. or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, if that default: (A) is caused by a Payment Default; or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (vi) failure by Stater Bros. or any of its Restricted Subsidiaries to pay final judgments to the extent not covered by insurance underwritten by third parties aggregating in excess of $10.0 million, which judgments shall not have been paid, discharged or stayed for a period of 60 days; (vii) Stater Bros. or any of its Restricted Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (A) commencing a voluntary case for relief from its creditors; (B) consenting to the entry of an order for relief against it in an involuntary case for relief from its creditors; (C) consenting to the appointment of a custodian of it or for all or substantially all of its property; (D) making a general assignment for the benefit of its creditors; or (E) admitting in writing its inability generally to pay its debts as they become due; (viii) a court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (A) is for relief against Stater Bros. or any of its Restricted Subsidiaries in an involuntary case; (B) appoints a custodian of Stater Bros. or any of its Restricted Subsidiaries or for all or substantially all of the property of Stater Bros. or any of its Restricted Subsidiaries; or (C) orders the liquidation of Stater Bros. or any of its Restricted Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) any Guarantee of the Notes shall be held in a judicial proceeding to be unenforceable or invalid or shall cease for any reason to

5

be in full force and effect, or any Guarantor of the Notes, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee of the Notes. If any Event of Default other than an Event of Default described in clauses (vii) or (viii) above occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable immediately by notice in writing to Stater Bros. and the Trustee specifying the respective Event of Default and that such notice is a “notice of acceleration” (the “Acceleration Notice”), and the same shall become immediately and automatically due and payable. Notwithstanding the foregoing, if an Event of Default specified in clauses (vii) or (viii) above occurs, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal of, premium or interest on any Note) if and so long as a committee of its Responsible Officers in good faith determines that withholding notice is in the interests of the Holders of the Notes. The Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of the principal of, premium or interest on, the Notes. Stater Bros. is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and Stater Bros. is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

13. TRUSTEE DEALINGS WITH STATER BROS. The Trustee in its individual or any other capacity may become the owner or Pledgee of Notes and may otherwise deal with Stater Bros. or any Affiliate of Stater Bros. with the same rights it would have if it were not Trustee.

14. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of Stater Bros., as such, shall have any liability for any obligations of Stater Bros. under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, Stater Bros. has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

19. GUARANTEE. This Note is guaranteed by the Guarantors pursuant to Article 9 of the Indenture.

6

Stater Bros. will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Stater Bros. Holdings Inc.

21700 Barton Road

P.O. Box 150

Colton, California 92324

Telephone No.: (909) 783-5000

Attention: Corporate Secretary

7

ASSIGNMENT FORM

To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to:

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                                                                                                                    

to transfer this Note on the books of Stater Bros The agent may substitute another to act for him.

Date:                     

Your Signature:                                                             

(Sign exactly as your name appears on the face of

this Note)

Tax Identification No:                                                   

SIGNATURE GUARANTEE:

Signatures must be guaranteed by an “eligible

guarantor institution” meeting the requirements of

the Registrar, which requirements include

membership or participation in the Security Transfer

Agent Medallion Program (“STAMP”) or such other

“signature guarantee program” as may be determined

by the Registrar in addition to, or in substitution for,

STAMP, all in accordance with the Securities

Exchange Act of 1934, as amended.

8

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by Stater Bros. pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:

¨ Section 4.10        ¨ Section 4.14

If you want to elect to have only part of the Note purchased by Stater Bros. pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $            

Date:                     

Your Signature:                                                             

(Sign exactly as your name appears on the face of

this Note)

Tax Identification No:                                                   

SIGNATURE GUARANTEE:

Signatures must be guaranteed by an “eligible

guarantor institution” meeting the requirements of

the Registrar, which requirements include

membership or participation in the Security Transfer

Agent Medallion Program (“STAMP”) or such other

“signature guarantee program” as may be determined

by the Registrar in addition to, or in substitution for,

STAMP, all in accordance with the Securities

Exchange Act of 1934, as amended.

9

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of decrease in
Principal Amount of this
Global Note Amount of increase in
Principal Amount of this
Global Note Principal Amount of this
Global Note following
such decrease (or
increase) Signature of authorized
officer of Trustee or Note
Custodian

10

EX-4.4

Exhibit 4.4

CUSIP [                            ]

ISIN [                            ]

Floating Rate Senior Notes due 2010

No. [                    ]

STATER BROS. HOLDINGS INC.

promises to pay to CEDE & CO., or registered assigns, the principal sum of ONE HUNDRED SEVENTY-TWO MILLION FIVE HUNDRED NINETY THOUSAND Dollars ($172,590,000) (or so much thereof as shall not have been prepaid) on June 15, 2010.

Interest Payment Dates: March 15, June 15, September 15 and December 15, commencing December 15, 2004.

Record Dates: March 1, June 1, September 1 and December 1.

Dated:
STATER BROS. HOLDINGS INC.
By:
	Jack H. Brown Chairman of the Board, President and Chief Executive Officer
By:
	Bruce D. Varner Secretary

This is one of the

Notes referred to in the

within-mentioned Indenture:

THE BANK OF NEW YORK
By:
	Authorized Signatory
	Dated:                         ,

(Back of Note)

Floating Rate Senior Notes due 2010

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO STATER BROS. OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNED HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE, AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF STATER BROS.

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

Set forth below is a summary of certain of the defined terms relating solely to the Floating Rate Notes.

“Determination Date,” with respect to an Interest Period, will be the second London Banking Day preceding the first day of such Interest Period.

“Interest Period” means the period commencing on and including an interest payment date and ending on and including the day immediately preceding the next succeeding interest payment date, with the exception that the first Interest Period shall commence on and include the Issue Date with respect to the Floating Rate Notes and end on and include December 14, 2004.

“LIBOR,” with respect to an Interest Period, will be the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period beginning on the second London Banking Day after the Determination Date that appears on Telerate Page 3750 as of 11:00 a.m., London time, on the Determination Date. If Telerate Page 3750 does not include such a rate or is unavailable on a Determination Date, the Calculation Agent will request the principal London office of each of four major banks in the London interbank market, as selected by the Calculation Agent, to provide such bank’s offered quotation (expressed as a percentage per annum), as of approximately 11:00 a.m., London time, on such Determination Date, to prime banks in the London interbank market for deposits in a Representative Amount in U. S. dollars for a three-month period beginning on the second London

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Banking Day after the Determination Date. If at least two such offered quotations are so provided, the rate for the Interest Period will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, the Calculation Agent will request each of three major banks in New York City, as selected by the Calculation Agent, to provide such bank’s rate (expressed as a percentage per annum), as of approximately 11:00 a.m., New York City time, on such Determination Date, for loans in a Representative Amount in U.S. dollars to leading European banks for a three-month period beginning on the second London Banking Day after the Determination Date. If at least two such rates are so provided, the rate for the Interest Period will be the arithmetic mean of such rates. If fewer than two such rates are so provided, then the rate for the Interest Period will be the rate in effect with respect to the immediately preceding Interest Period.

“London Banking Day” is any day on which dealings in U.S. dollars are transacted or, with respect to any future date, are expected to be transacted in the London interbank market.

“Representative Amount” means a principal amount of not less than $1,000,000 for a single transaction in the relevant market at the relevant time.

“Telerate Page 3750” means the display designated as “Page 3750” on the Moneyline Telerate service (or such other page as may replace Page 3750 on that service).

1. INTEREST. Stater Bros. Holdings Inc., a Delaware corporation (“Stater Bros.”), promises to pay interest at a rate per annum, reset quarterly, equal to the LIBOR plus 3.50% as determined by the Calculation Agent. Stater Bros. shall pay interest quarterly on March 15, June 15, September 15 and December 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided, that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be December 15, 2004. Stater Bros. shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

The amount of interest for each day that the Floating Rate Notes are outstanding (the “Daily Interest Amount”) will be calculated by dividing the interest rate in effect for such day by 360 and multiplying the result by the principal amount of the Floating Rate Notes. The amount of interest to be paid on the Floating Rate Notes for each Interest Period will be calculated by adding the Daily Interest Amounts for each day in the Interest Period.

All percentages resulting from any of the above calculations will be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one-millionths of a percentage point being rounded upwards (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent being rounded upwards).

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The interest rate on the Floating Rate Notes will in no event be higher than the maximum rate permitted by New York law as the same may be modified by United States law of general application.

The Calculation Agent will, upon the request of the holder of any Floating Rate Note, provide the interest rate then in effect with respect to the Floating Rate Notes. All calculations made by the Calculation Agent in the absence of manifest error will be conclusive for all purposes and binding on Stater Bros., the Guarantors and the Holders of the Floating Rate Notes.

2. METHOD OF PAYMENT. Stater Bros. will pay interest on the Floating Rate Notes (except defaulted interest) if any, to the Persons who are registered Holders of Notes at the close of business on the March 1, June 1, September 1 or December 1 immediately preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire transfer instructions to Stater Bros., Stater Bros. will pay all principal, interest and premium on that Holder’s Notes in accordance with those instructions in immediately available funds. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless Stater Bros. elects to make payments of interest by check mailed to the Holders at their addresses set forth in the register of Holders. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3. PAYING AGENT, CALCULATION AGENT AND REGISTRAR. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent, Calculation Agent and Registrar. Stater Bros. may change any Paying Agent, Calculation Agent or Registrar without notice to any Holder. Stater Bros. or any of its Subsidiaries may act as Paying Agent or Registrar but may not act as Calculation Agent.

4. INDENTURE. Stater Bros. issued the Notes under an Indenture, dated as of June 17, 2004 (the “Indenture”), among Stater Bros., the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb). The Notes are subject to all such terms and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The aggregate principal amount of Notes that may be issued under the Indenture shall be unlimited.

5. OPTIONAL REDEMPTION.

(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Floating Rate Notes will not be redeemable at Stater Bros.’s option prior to June 15, 2006. Thereafter, the Floating Rate Notes will be subject to redemption at any time at the option of Stater Bros., in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

Year	Percentage
2006	102.000	%
2007	101.000	%
2008 and thereafter	100.000	%

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6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, Stater Bros. shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

7. REPURCHASE AT OPTION OF HOLDER.

(a) If a Change of Control occurs, each Holder of Notes will have the right to require Stater Bros. to make an offer (a “Change of Control Offer”) to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes pursuant to a Change of Control Offer at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (the “Change of Control Payment”). Within 30 days following any Change of Control, Stater Bros. shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice.

(b) When the aggregate amount of Excess Proceeds exceeds $25.0 million, Stater Bros. will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, Stater Bros. may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from Stater Bros. prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes.

8. NOTICE OF REDEMPTION. Notice of redemption will be mailed, by first class mail, at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and Stater Bros. may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. Stater Bros. need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, Stater Bros. need not issue, exchange or register the transfer of any Notes for a period of 15 days before a

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selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.

11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class, and, except for any Default or Event of Default in the payment of the principal of, premium or interest on the Notes (including in connection with an offer to purchase), any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 of the Indenture (including the related definitions) in a manner that does not materially adversely affect any Holder, to provide for the assumption of Stater Bros.’ obligations to Holders of the Notes in case of a merger, consolidation, or sale of assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, or to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture.

12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of the principal of, or premium, if any, on the Notes; (iii) failure by Stater Bros. or any of its Restricted Subsidiaries to comply with Sections 3.09, 4.10, 4.14 or 5.01 of the Indenture; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Indenture or the Notes (other than a default set forth in clauses (i), (ii) or (iii) above); (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Stater Bros. or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, if that default: (A) is caused by a Payment Default; or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (vi) failure by Stater Bros. or any of its Restricted Subsidiaries to pay final judgments to the extent not covered by insurance underwritten by third parties aggregating in excess of $10.0 million, which judgments shall not have been paid, discharged or stayed for a period of 60 days; (vii) Stater Bros. or any of its Restricted Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (A) commencing a voluntary case for relief from its creditors; (B) consenting to the entry of an order for relief against it in an involuntary case for relief from its creditors; (C) consenting to the appointment of a custodian of it or for all or substantially all of its property; (D) making a general assignment for the benefit of its creditors; or (E) admitting in writing its inability generally to pay its debts as they become due; (viii) a court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (A) is for relief against Stater Bros. or any of its Restricted Subsidiaries in an involuntary case; (B) appoints a custodian of Stater Bros. or any of its Restricted Subsidiaries or for all or substantially all of the property of Stater Bros. or any of its Restricted Subsidiaries; or (C) orders the liquidation of Stater Bros. or any of its Restricted Subsidiaries; and the

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order or decree remains unstayed and in effect for 60 consecutive days; or (ix) any Guarantee of the Notes shall be held in a judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect, or any Guarantor of the Notes, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee of the Notes. If any Event of Default other than an Event of Default described in clauses (vii) or (viii) above occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable immediately by notice in writing to Stater Bros. and the Trustee specifying the respective Event of Default and that such notice is a “notice of acceleration” (the “Acceleration Notice”), and the same shall become immediately and automatically due and payable. Notwithstanding the foregoing, if an Event of Default specified in clauses (vii) or (viii) above occurs, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal of, premium or interest on any Note) if and so long as a committee of its Responsible Officers in good faith determines that withholding notice is in the interests of the Holders of the Notes. The Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of the principal of, premium or interest on the Notes. Stater Bros. is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and Stater Bros. is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

13. TRUSTEE DEALINGS WITH STATER BROS. The Trustee in its individual or any other capacity may become the owner or Pledgee of Notes and may otherwise deal with Stater Bros. or any Affiliate of Stater Bros. with the same rights it would have if it were not Trustee.

14. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder of Stater Bros., as such, shall have any liability for any obligations of Stater Bros. under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, Stater Bros. has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

18. GUARANTEE. This Note is guaranteed by the Guarantors pursuant to Article 9 of the Indenture.

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Stater Bros. will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

Stater Bros. Holdings Inc.

21700 Barton Road

P.O. Box 150

Colton, California 92324

Telephone No.: (909) 783-5000

Attention: Corporate Secretary

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ASSIGNMENT FORM

To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to:

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                                                                                                                                                                                                         

to transfer this Note on the books of Stater Bros. The agent may substitute another to act for him.

Date:                                 

Your Signature:                                                                     

(Sign exactly as your name appears on the face of this Note)

Tax Identification No:                                                       

SIGNATURE GUARANTEE:

___________________________________

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by Stater Bros. pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:

¨ Section 4.10             ¨ Section 4.14

If you want to elect to have only part of the Note purchased by Stater Bros. pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $                    

Date:                            

Your Signature:                                                                     

(Sign exactly as your name appears on the face of this Note)

Tax Identification No:                                                           

SIGNATURE GUARANTEE:

___________________________________

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of decrease in
Principal Amount of this
Global Note Amount of increase in
Principal Amount of this
Global Note Principal Amount of this
Global Note following
such decrease (or
increase)
Signature of authorized
officer of Trustee or Note
Custodian

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EX-4.5

Exhibit 4.5

FIRST SUPPLEMENTAL INDENTURE

FIRST SUPPLEMENTAL INDENTURE dated as of January 11, 2002, between Stater Bros. Holdings Inc., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), and The Bank of New York, a banking corporation duly organized and existing under the laws of the State of New York (as successor to IBJ Whitehall Bank & Trust Company), as Trustee (the “Trustee”).

WHEREAS Stater Bros. and the Trustee have heretofore executed and delivered an Indenture dated as of August 6, 1999 (the “Indenture”), providing for the issuance from time to time of its 10 ³/4% Notes due 2006 (the “Notes”);

WHEREAS Section 9.02 of the Indenture provides that Stater Bros. and the Trustee may amend the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes voting as a single class (such term and each other capitalized term used in this First Supplemental Indenture and not defined herein having the meanings assigned thereto in the Indenture);

WHEREAS Stater Bros. desires to amend the Indenture, as set forth in Article I hereof;

WHEREAS the Holders of at a majority in aggregate principal amount of the Notes outstanding have consented to the amendments effected by this First Supplemental Indenture; and

WHEREAS this First Supplemental Indenture has been duly authorized by all necessary corporate action on the part of Stater Bros.

NOW, THEREFORE, Stater Bros. and the Trustee agree as follows for the equal and ratable benefit of the Holders of the Notes:

ARTICLE I

Amendments

SECTION 1.01. Amendment to Section 1.01. Section 1.01 of the Indenture is hereby amended by adding a new definition of the term “Subordinated Debt” following the definition of “Stater Bros. Markets” and reading as follows:

“Subordinated Debt” means Indebtedness evidenced by one or more negotiable subordinated notes containing terms and provisions, and in all material respects in the form, set forth in Annex I hereto, and as described in the Consent Solicitation Statement dated December 19, 2001.

SECTION 1.02. Amendment to Section 4.07. Section 4.07 of the Indenture is amended by the addition of the following language as a new paragraph immediately following the last paragraph of Section 4.07:

(l) distribution and payment, on or before March 31, 2002, of cash in the amount of $25 million and the Subordinated Debt in the aggregate principal amount of $20 million.

SECTION 1.03. Amendment to Section 4.09. The definition of Permitted Debt in Section 4.09 is amended by adding the following text as a new subparagraph (p), immediately following subparagraph (o):

(p) the incurrence by Stater Bros. of Subordinated Debt in an aggregate principal amount not in excess of $20 million pursuant to a distribution and payment made on or before March 31, 2002.

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ARTICLE II

Miscellaneous

SECTION 2.01. Interpretation; Severability; Headings. Upon the execution and delivery of this First Supplemental Indenture, the Indenture shall be modified and amended in accordance with this First Supplemental Indenture, and all the terms and conditions of both shall be read together as though they constitute one instrument, except that, in case of conflict, the provisions of this First Supplemental Indenture will control. The Indenture, as modified and amended by this First Supplemental Indenture, is hereby ratified and confirmed in all respects and shall bind every Holder of Notes. In case of conflict between the terms and conditions contained in the Notes and those contained in the Indenture, as modified and amended by this First Supplemental Indenture, the provisions of the Indenture, as modified and amended by this First Supplemental Indenture, shall control. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. The Article and Section headings of this First Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 2.02. Conflict with Trust Indenture Act. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act that is required under the Trust Indenture Act to be part of and govern any provision of this First Supplemental Indenture, the provision of the Trust Indenture Act shall control. If any provision of this First Supplemental Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of the Trust Indenture Act shall be deemed to apply to the Indenture as so modified or to be excluded by this First Supplemental Indenture, as the case may be.

SECTION 2.03. Successors; Benefits of First Supplemental Indenture, etc. All agreements of Stater Bros. in this First Supplemental Indenture shall bind its successors. All agreements of the Trustee in this First Supplemental Indenture shall bind its successors. Nothing in this First Supplemental Indenture or the Notes, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder and thereunder and the Holders of the Notes, any benefit of any legal or equitable right, remedy or claim under the Indenture, this First Supplemental Indenture or the Notes.

SECTION 2.04. Certain Duties and Responsibilities of the Trustee; Trustee Not Responsible for Recitals. In entering into this First Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not elsewhere herein so provided. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by Stater Bros.

SECTION 2.05. Governing Law. This First Supplemental Indenture shall be construed in accordance with the laws of the State of New York without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

SECTION 2.06. Duplicate Originals. All parties may sign any number of copies or counterparts of this First Supplemental Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement.

SECTION 2.07. Amendment of Subordination Provisions. Stater Bros. shall not amend any of the subordination provisions of Subordinated Debt in any manner adverse to the interests of the Holders of the Notes.

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IN WITNESS WHEREOF, each party hereto has caused this First Supplemental Indenture to be signed by its officer thereunto duly authorized as of the date first written above.

STATER BROS. HOLDINGS INC.,
	by	/S/    BRUCE D. VARNER
		Name:	Bruce D. Varner
		Title:	Secretary
THE BANK OF NEW YORK, as Trustee,
	by	/S/    AUTHORIZED SIGNATORY

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EX-10.14

Exhibit 10.14

EXECUTION COPY

Amended and Restated Credit Agreement

among

STATER BROS. MARKETS,

STATER BROS. HOLDINGS INC.

and

Bank of America, N.A.

as Administrative Agent,

and

Letter of Credit Issuing Lender

and

The Other Financial

Institutions Party Hereto

Amended as of June 17, 2004

Banc of America Securities LLC,

as

Sole Arranger and Sole Book Manager

TABLE OF CONTENTS

		Page
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS		1
1.01.	Defined Terms	1
1.02.	Use of Certain Terms	21
1.03.	Accounting Terms	21
1.04.	Rounding	22
1.05.	Exhibits and Schedules	22
1.06.	References to Agreements, Exhibits and Laws	22
SECTION 2. THE COMMITMENTS AND EXTENSIONS OF CREDIT		23
2.01.	Loans	23
2.02.	Borrowings, Conversions and Continuations of Loans	24
2.03.	Letters of Credit	24
2.04.	Prepayments	29
2.05.	Reduction or Termination of Commitments	29
2.06.	Principal and Interest	30
2.07.	Fees	30
2.08.	Computation of Interest and Fees	31
2.09.	Making Payments	31
2.10.	Funding Sources	32
2.11.	Increases to the Combined Commitments	32
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY		34
3.01.	Taxes	34
3.02.	Illegality	34
3.03.	Inability to Determine Rates	35
3.04.	Increased Cost and Reduced Return; Capital Adequacy	35
3.05.	Breakfunding Costs	36
3.06.	Matters Applicable to all Requests for Compensation	36
3.07.	Survival	36
3.08.	Replacement of a Lender	37
SECTION 4. CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT		38
4.01.	Conditions of Initial Extension of Credit	38
4.02.	Conditions to all Extensions of Credit	40
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER AND HOLDINGS		42
5.01.	Existence and Qualification; Power; Compliance with Laws	42
5.02.	Power; Authorization; Enforceable Obligations	42
5.03.	No Legal Bar	42
5.04.	Financial Statements; No Material Adverse Effect	43
5.05.	Litigation	43

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5.06.	No Default	43
5.07.	Ownership of Property; Liens	43
5.08.	Taxes	43
5.09.	Margin Regulations; Investment Company Act; Public Utility Holding Company Act	43
5.10.	ERISA Compliance	44
5.11.	Intangible Assets	44
5.12.	Compliance With Laws	45
5.13.	Environmental Compliance	45
5.14.	Insurance	45
5.15.	Stockholders Agreements	45
5.16.	Disclosure	45
SECTION 6. AFFIRMATIVE COVENANTS OF BORROWER		46
6.01.	Financial Statements	46
6.02.	Certificates, Notices and Other Information	47
6.03.	Payment of Taxes	49
6.04.	Preservation of Existence	49
6.05.	Maintenance of Properties	49
6.06.	Maintenance of Insurance	49
6.07.	Compliance With Laws	49
6.08.	Inspection Rights	49
6.09.	Keeping of Records and Books of Account	49
6.10.	Compliance with ERISA	49
6.11.	Compliance With Agreements	50
6.12.	Use of Proceeds	50
6.13.	Further Assurances	50
6.14.	Execution of Guaranty by Future Material Subsidiaries	50
SECTION 7. NEGATIVE COVENANTS OF BORROWER		51
7.01.	Indebtedness	51
7.02.	Liens and Negative Pledges	52
7.03.	Fundamental Changes	53
7.04.	Dispositions	53
7.05.	Investments	54
7.06.	Lease Obligations	54
7.07.	Restricted Payments	54
7.08.	ERISA	54
7.09.	Change in Nature of Business	55
7.10.	Transactions with Affiliates	55
7.11.	Hostile Acquisitions	55
7.12.	Financial Covenants	55
7.13.	Change in Auditors	55
7.14.	Amendments or Waivers of Senior Note Documents	55
7.15.	Use of Capital Contributions	55

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SECTION 8. HOLDINGS COVENANTS		56
8.01.	Indebtedness	56
8.02.	Restricted Payments	56
8.03.	Change in Nature of Business; Ownership of Assets	57
8.04.	Transactions with Affiliates	57
8.05.	Amendments or Waivers of Senior Note Documents and Existing Holdings Indenture	57
SECTION 9. EVENTS OF DEFAULT AND REMEDIES		59
9.01.	Events of Default	59
9.02.	Remedies Upon Event of Default	60
SECTION 10. ADMINISTRATIVE AGENT		62
10.01.	Appointment and Authorization of Administrative Agent	62
10.02.	Delegation of Duties	62
10.03.	Liability of Administrative Agent	62
10.04.	Reliance by Administrative Agent	63
10.05.	Notice of Default	63
10.06.	Credit Decision; Disclosure of Information by Administrative Agent	64
10.07.	Indemnification of Administrative Agent	64
10.08.	Administrative Agent in Individual Capacity	65
10.09.	Successor Administrative Agent	65
SECTION 11. MISCELLANEOUS		66
11.01.	Amendments; Consents	66
11.02.	Transmission and Effectiveness of Notices and Signatures	67
11.03.	Attorney Costs, Expenses and Taxes	67
11.04.	Binding Effect; Assignment	68
11.05.	Set-off	69
11.06.	Sharing of Payments	70
11.07.	No Waiver; Cumulative Remedies	70
11.08.	Usury	71
11.09.	Counterparts	71
11.10.	Integration	71
11.11.	Nature of Lenders’ Obligations	71
11.12.	Survival of Representations and Warranties	71
11.13.	Indemnity by Borrower	72
11.14.	Nonliability of Lenders	72
11.15.	No Third Parties Benefited	73
11.16.	Severability	73
11.17.	Confidentiality	73
11.18.	Further Assurances	74
11.19.	Headings	74
11.20.	Time of the Essence	74
11.21.	Foreign Lenders and Participants	74
11.22.	Governing Law	75

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11.23.	Waiver of Right to Trial by Jury	75
11.24.	ENTIRE AGREEMENT	75
EXHIBITS
Form of
A	Compliance Certificate
B	Note
C	Notice of Assignment and Acceptance
D	Request for Extension of Credit
SCHEDULES
2.01	Commitments and Pro Rata Shares
7.01	Existing Indebtedness, Liens and Negative Pledges
11.02	Offshore and Domestic Lending Offices, Addresses for Notices

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AMENDED AND RESTATED CREDIT AGREEMENT

This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of June 17, 2004 by and among STATER BROS. MARKETS, a California corporation (“Borrower”), STATER BROS. HOLDINGS INC., a Delaware corporation (“Holdings”), each lender from time to time party hereto (collectively, “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent and Issuing Lender.

RECITALS

WHEREAS, the parties have heretofore entered into a Credit Agreement dated as of August 9, 1999 (as heretofore amended, the “Credit Agreement”);

WHEREAS, Holdings has heretofore commenced a tender offer for all of the outstanding Existing Senior Notes and approximately 90% of the Existing Senior Notes have been tendered to Holdings; and

WHEREAS, concurrently with the Closing Date, Holdings shall issue and sell the Senior Notes referred to below in the aggregate principal amount of $700,000,000 and use the proceeds thereof, inter alia, for (i) the repayment in full of the Subordinated Note referred to below, including accrued interest thereon, (ii) the redemption or purchase of all of the Existing Senior Notes, including the payment of accrued interest thereon; (iii) the payment of the Special Distribution, (iv) the Closing Equity Contribution, and (v) the payment of certain transactional expenses; and

WHEREAS, the parties desire to amend and restate the Credit Agreement in its entirety by this Agreement;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Holdings, Borrower, Lenders and Administrative Agent agree as follows:

SECTION 1.

DEFINITIONS AND ACCOUNTING TERMS

1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

“Administrative Agent” means Bank of America, N.A., in its capacity as Administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Agent’s Office” means Administrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02, or such other address or account as Administrative Agent hereafter may designate by written notice to Borrower and Lenders.

“Administrative Agent-Related Persons” means Administrative Agent (including any successor agent), together with its Affiliates (including, in the case of Administrative Agent, the

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Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

“Affiliate” means any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, Borrower. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Agreement” means this Amended and Restated Credit Agreement, as amended, restated, extended, supplemented or otherwise modified in writing from time to time.

“Applicable Amount” means a per annum rate equal to:

(a) with respect to Base Rate Loans, 1.00 percent;

(b) with respect to Offshore Rate Loans, 1.75 percent;

(c) with respect to the Commitment fee, 0.25 percent; and

(d) with respect to standby Letters of Credit, 1.25 percent.

“Arranger” means Banc of America Securities LLC, in its capacity as sole arranger and sole book manager.

“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel.

“Audited Financial Statements” means the audited consolidated balance sheet of Borrower and its Subsidiaries for the fiscal year ended September 28, 2003 and the related consolidated statements of income and cash flows for such fiscal year of Borrower.

“Bank of America” means Bank of America, N.A.

“Base Rate” means a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime” or “reference rate.” Such rate is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specific in the public announcement of such change.

“Base Rate Loan” means a Loan which bears interest based on the Base Rate.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular

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“person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time or upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.

“Borrower” has the meaning set forth in the introductory paragraph hereto.

“Borrower Party” means, (a) upon the Closing Date, Holdings, Borrower, Development, and Santee, and (b) thereafter, such Persons and each other current or future Guarantor, and each other Person other than Lenders and any Affiliates of Lenders, Administrative Agent, and Issuing Lender from time to time party to a Loan Document, provided that (i) following the Disposition of any Subsidiary of the Borrower in a transaction not prohibited by this Agreement, such Subsidiary shall no longer be considered to be a Borrower Party, and (ii) following any Qualified Santee Sale, Santee shall no longer be considered to be a Borrower Party.

“Borrowing” and “Borrow” each mean, a borrowing hereunder consisting of Loans of the same type made on the same day and, other than in the case of Base Rate Loans, having the same Interest Period.

“Borrowing Date” means the date that a Loan is made, which shall be a Business Day.

“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the State of California and, if such day relates to any Offshore Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the offshore Dollar interbank market.

“Change of Control” means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Holdings and its Subsidiaries taken as a whole to any “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act) other than either La Cadena Investments or any La Cadena Successor;

(2) the adoption of a plan relating to the liquidation or dissolution of Holdings;

(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as defined above), other than either La Cadena Investments or any La Cadena Successor, becomes the Beneficial Owner, directly or indirectly, or more than 50% of the Voting Stock of Holdings, measured by voting power rather than number of shares;

(4) the first day on which a majority of the members of the Board of Directors of Holdings are not Continuing Directors;

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(5) Holdings consolidates with, merges with or into, any Person, or any Person consolidates with, or merges with or into, Holdings, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of Holdings or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where all or a portion of the Voting Stock of Holdings outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); or

(6) at any time prior to the date that a La Cadena Successor is the Beneficial Owner of more than 50% of the Voting Stock of Holdings, Permitted Holders shall cease to (A) have the power to vote the majority of the Capital Stock of La Cadena Investments, (B) be the Beneficial Owner of at least 35% of the equity interests in La Cadena Investments, or (C) be the Beneficial Owner of a higher percentage of the equity interests in La Cadena Investments than any other “person” or “group” of persons (as such terms are used in Section 13(d)(3) of the Exchange Act); or

(7) Holdings at any time ceases to own 100% of the outstanding Voting Stock in Borrower.

“Closing Date” means the date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01.

“Closing Equity Contribution” means the contribution by Holdings to Borrower on the Closing Date of $135,000,000 from the net proceeds of the issuance of the Senior Notes as additional equity capital.

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

“Combined Commitments” has the meaning set forth in the definition of “Commitment.”

“Commitment” means, for each Lender, the obligation of such Lender to make Loans and to participate in the issuance of Letters of Credit issued by the Issuing Lender, in each case in an aggregate principal amount not exceeding the amount set forth opposite such Lender’s name on Schedule 2.01 as such Lender’s Commitment at any one time outstanding, as such amount may be reduced or adjusted from time to time in accordance with this Agreement (collectively, the “Combined Commitments”). The principal amount of the Combined Commitments may hereafter be increased in accordance with the provisions of Section 2.11.

“Compliance Certificate” means a certificate in the form of Exhibit A, properly completed and signed by a Responsible Officer of Borrower.

“Consolidated EBITDA” means, for any period, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, plus (b) Consolidated Interest Charges deducted in determining such Consolidated Net Income plus (c) the amount of taxes, based on or measured by income (including without limitation, any

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Permitted Tax Distributions made during the relevant period in respect of the tax attributes of Borrower and its Subsidiaries), used or included in the determination of such Consolidated Net Income, plus (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, and excluding, to the extent not excluded in clauses (a) – (d) above, any extraordinary gains that were included in Consolidated Net Income.

“Consolidated Interest Charges” means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses payable by Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP and (b) the portion of rent payable by Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP.

“Consolidated Net Income” means, for any period, for Borrower and its Subsidiaries on a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period.

“Consolidated Net Worth” means, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, Shareholders’ Equity of Borrower and its Subsidiaries on that date.

“Continuation” and “Continue” mean, with respect to any Offshore Rate Loan, the continuation of such Offshore Rate Loan as an Offshore Rate Loan on the last day of the Interest Period for such Loan.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of Holdings who:

(1) was a member of such Board of Directors on the Closing Date; or

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound.

“Conversion” and “Convert” mean, with respect to any Loan, the conversion of such Loan from or into another type of Loan.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect affecting the rights of creditors generally.

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“Default” means any event that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate equal to the Base Rate plus the Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to the fullest extent permitted by applicable Laws; provided, however, that with respect to an Offshore Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Amount) otherwise applicable to such Loan plus 2% per annum.

“Designated Deposit Account” means a deposit account to be maintained by Borrower with Bank of America, as from time to time designated by Borrower by written notification to Administrative Agent.

“Development” means Stater Bros. Development, Inc., a California corporation that is a Wholly-Owned Subsidiary of Holdings.

“Disposition” or “Dispose” means the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal with or without recourse of any notes or accounts receivable or any rights and claims associated therewith. For the avoidance of doubt, the issuance by Borrower, its Subsidiaries or Development of a quit-claim deed, bill of sale or other documentation confirming the prime-lessor’s ownership of a supermarket building upon completion of construction thereof shall not be considered to be a “Disposition.”

“Dollar” and “$” means lawful money of the United States of America.

“Domestic Subsidiary” means, with respect to any Person, any Subsidiary of such Person incorporated in a jurisdiction of the United States of America.

“Eligible Assignee” means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; and (d) another Lender.

“Environmental Laws” means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters applicable to any property.

“ERISA” means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto, as amended from time to time.

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“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with Borrower within the meaning of Sections 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”). The Offshore Rate for each outstanding Offshore Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.

“Event of Default” means any of the events specified in Section 9.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

“Existing Credit Agreement” has the meaning set forth in the recitals to this Agreement.

“Existing Letter of Credit” means each Letter of Credit (as defined in the Existing Credit Agreement) outstanding on the Closing Date that has not expired or been cancelled as of the Closing Date.

“Existing Senior Notes” means the 10¾% Senior Notes due 2006 issued by Holdings the aggregate principal amount of which is approximately $449,750,000 immediately prior to the Closing.

“Extension of Credit” means (a) the Borrowing of Loans, (b) the Conversion or Continuation of any Loans, (c) the issuance of any Letter of Credit, or (d) any Letter of Credit Action which has the effect of increasing the amount of any Letter of Credit, extending the maturity of any Letter of Credit or making any material modification to any Letter of Credit or the reimbursement of drawings thereunder (collectively, the “Extensions of Credit”).

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“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by Administrative Agent.

“Financial Plan” has the meaning set forth in Section 6.01(d).

“GAAP” means, as of any date of determination, generally accepted accounting principles and practices in effect as of such date in respect of a business conducting a business the same as or similar to that of Borrower, including, without limitation, those set forth in applicable bulletins, opinions, pronouncements, statements and interpretations issued by the Accounting Principles Board, the American Institute of Certified Public Accountants and the Financial Accounting Standard Board, consistently applied.

“Governmental Authority” means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility.

“Guaranties” means, collectively, the Guaranties of the Obligations executed on the Closing Date by Holdings, Development, and Santee, and each other Guaranty of the Obligations which is hereafter executed by any Material Subsidiary of Holdings or the Borrower pursuant to Section 6.14.

“Guarantor” means, (a) on the Closing Date, Holdings, Development, Santee, and each of the other Subsidiaries of Holdings and Borrower, and (b) each other Material Subsidiary of Holdings or Borrower that hereafter becomes a party to a Guaranty pursuant to Section 6.14; in each of cases (a) and (b), until such Person is released from its Guaranty pursuant to the terms of this Agreement.

“Guaranty Obligation” means, as to any Person, without duplication, any (a) guaranty by that Person of Indebtedness of, or other obligation payable or performable by, any other Person or (b) assurance, agreement, letter of responsibility, letter of awareness, undertaking or arrangement given by that Person to an obligee of any other Person with respect to the payment or performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any “keep-well” or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in

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the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such Guaranty Obligation, without duplication, or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith.

“Holdings” means Stater Bros. Holdings Inc., a Delaware corporation.

“Holdings Consolidated Net Income” means, for any period, for Holdings and its Subsidiaries on a consolidated basis, the net income of Holdings and its Subsidiaries from continuing operations after extraordinary items for that period.

“Indebtedness” means as to any Person at a particular time:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker’s acceptances, bank guaranties, surety bonds and similar instruments;

(c) net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such Swap Contract;

(d) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse, but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms, and which are not overdue for a period of more than 60 days;

(e) lease obligations under capital leases or Synthetic Lease Obligations; and

(f) all Guaranty Obligations of such Person, without duplication, in respect of any of the foregoing;

provided, however, that the “Indebtedness” of Holdings and its Subsidiaries shall not include (1) any payment, account, credit, award or other obligation pursuant to the Phantom Stock Plan, or (2) payables incurred in connection with the Borrower’s new distribution facilities in San Bernardino, California as described in the final offering memorandum dated June 9, 2004 relating to the Senior Notes.

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For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person except for customary exceptions acceptable to the Requisite Lenders.

“Indemnified Liabilities” has the meaning set forth in Section 11.13.

“Interest Payment Date” means, (a) as to any Base Rate Loan, the first Business Day of each calendar month; (b) as to any Offshore Rate Loan, the first Business Day of each calendar month, the last day of the relevant Interest Period and any date that such Loan is prepaid in whole or in part; and (c) as to all Loans, the Maturity Date or any earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement; provided, further, that interest accruing at the Default Rate shall be payable from time to time at any time upon demand of Administrative Agent.

“Interest Period” means, for each Offshore Rate Loan, (a) initially, the period commencing on the date such Offshore Rate Loan is disbursed, Continued as, or Converted into, an Offshore Rate Loan and (b) thereafter, the period commencing on the last day of the preceding Interest Period, and ending, in each case, on the earlier of (y) one, two, three or six months thereafter or (z) the Maturity Date, as requested by Borrower; provided that:

(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(ii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iii) unless Administrative Agent otherwise consents, there may not be more than five Interest Periods in effect at any time.

“Investment” means, as to any Person, any acquisition or any investment by such Person, whether by means of the purchase or other acquisition of stock or other securities of any other Person or by means of a loan, creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership and joint venture interests in such other Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. For the avoidance of doubt, the issuance by Borrower, its Subsidiaries or Development of a quit-claim deed, bill of sale or other documentation confirming the prime-lessor’s ownership of a supermarket building upon completion of construction thereof shall not be considered to be an “Investment.”

“IRS” means the Internal Revenue Service.

“Issuing Lender” means Bank of America, or any successor issuing lender hereunder.

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“La Cadena” means La Cadena Investments, a California general partnership.

“La Cadena Successor” means a partnership or limited liability company other than La Cadena with respect to which (a) a Permitted Holder is a general partner or managing member, (b) Permitted Holders have the power to vote the majority of the equity interests, (c) Permitted Holders are the Beneficial Owners of at least 35% of the equity interests therein, and (d) Permitted Holders are the Beneficial Owners of a higher percentage of the equity interests than any other “person” or “group of persons” (as such terms are used in Section 13(d) of the Exchange Act).

“Laws” or “Law” means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including without limitation the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, in each case whether or not having the force of law.

“Lender” means each lender from time to time party hereto and Issuing Lender.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such on Schedule 11.02, or such other office or offices as such Lender may from time to time notify Borrower and Administrative Agent.

“Letters of Credit” means any letters of credit issued or outstanding hereunder.

“Letter of Credit Action” means the issuance, supplement, amendment, renewal, extension, modification or other action relating to a Letter of Credit.

“Letter of Credit Application” means an application for a Letter of Credit Action as shall at any time be in use by Issuing Lender.

“Letter of Credit Cash Collateral Account” means a blocked deposit account at Bank of America with respect to which Borrower hereby grants a security interest in such account to Administrative Agent for and on behalf of Lenders as security for Letter of Credit Usage and with respect to which Borrower agrees to execute and deliver from time to time such documentation as Administrative Agent may reasonably request to further assure and confirm such security interest.

“Letter of Credit Usage” means, as at any date of determination, the aggregate undrawn face amount of outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Issuing Lender and not reimbursed to Issuing Lender by Borrower or converted into Loans.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the

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same economic effect as any of the foregoing), including the interest of a purchaser of accounts receivable.

“Loan” means any advance made by any Lender to Borrower as provided in Section 2 (collectively, the “Loans”).

“Loan Documents” means this Agreement, the Guaranties, and any Note, certificate, fee letter, and other instrument, document or agreement from time to time delivered in connection with this Agreement.

“Material Adverse Effect” means any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business, assets, operations or prospects of Holdings, the Borrower, or the Borrower Parties, taken as a whole, or (c) materially impairs or could reasonably be expected to materially impair the ability of any Borrower Party to perform the Obligations.

“Material Subsidiary” means each Subsidiary of the Holdings or Borrower which at any time has assets having an aggregate fair market value, as reasonably determined by Holdings or Borrower, which is in excess of $10,000,000.

“Maturity Date” means May 31, 2007.

“Minimum Amount” means, with respect to each of the following actions, the minimum amount and any multiples in excess thereof set forth opposite such action:

Type of Action	Minimum Amount		Multiples in excess thereof
Borrowing of, prepayment of, or Conversion into, Base Rate Loans	$	100,000	$	500,000
Borrowing of, prepayment of, Continuation of, or Conversion into, Offshore Rate Loans	$	5,000,000	$	1,000,000
Reduction in Commitments and Letter of Credit Sublimit	$	1,000,000	$	500,000
Assignments	$	1,000,000		N.A.

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA.

“Negative Pledge” means a Contractual Obligation that restricts Liens on property.

“Note” means a promissory note made by Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit B.

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“Notice of Assignment and Acceptance” means a Notice of Assignment and Acceptance substantially in the form of Exhibit C.

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Borrower Party arising under any Loan Document, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrues after the commencement of any proceeding under any Debtor Relief Laws by or against any Borrower Party or any Subsidiary of any Borrower Party .

“Offshore Base Rate” has the meaning set forth in the definition of Offshore Rate.

“Offshore Rate” means for any Interest Period with respect to any Offshore Rate Loan, a rate per annum determined by Administrative Agent pursuant to the following formula:

Offshore Rate =                     Offshore Base Rate                                           

1.00 - Eurodollar Reserve Percentage

Where,

“Offshore Base Rate” means, for such Interest Period:                                

(a) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3750) for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

(b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

(c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Administrative Agent as the rate of interest at which dollar deposits (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the applicable Offshore Rate Loan and with a term equivalent to such Interest Period would be offered by its London Branch to major banks in the offshore dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

“Offshore Rate Loan” means a Loan bearing interest based on the Offshore Rate.

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“Ordinary Course Dispositions” means:

(a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

(b) Dispositions of cash, cash equivalents, inventory and other property in the ordinary course of business, other than stores and any inventory or other property Disposed of in connection with the Disposition of any stores; and

(c) Dispositions of assets or property by any Subsidiary of Borrower to Borrower or another Wholly-Owned Subsidiary of Borrower;

provided, however, that no such Disposition shall be for less than the fair market value of the property being disposed of.

“Ordinary Course Indebtedness” means:

(a) Indebtedness under the Loan Documents;

(b) intercompany Guaranty Obligations of Borrower or any of its Subsidiaries guarantying Indebtedness otherwise permitted hereunder of Borrower or any Wholly-Owned Subsidiary of Borrower; and

(c) Indebtedness arising from the honoring of a check, draft or similar instrument against insufficient funds.

“Ordinary Course Investments” means:

(a) Investments consisting of cash and cash equivalents;

(b) Investments of Borrower in any of its Subsidiaries and Investments of any Subsidiary of Borrower in Borrower or another Subsidiary of Borrower;

(c) Investments consisting of or evidencing the extension of credit to customers or suppliers of Borrower and its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof; and

(d) Investments consisting of Guaranty Obligations permitted by Section 7.01.

“Ordinary Course Liens” means:

(a) Liens pursuant to any Loan Document;

(b) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than

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30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

(d) pledges or deposits in connection with worker’s compensation, unemployment insurance and other social security legislation;

(e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(f) Liens on deposits made in the ordinary course of business; Liens in favor of collecting banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of Borrower or any Subsidiary on deposit with or in possession of such banks;

(g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of any Person;

(h) Liens arising from filing UCC financing statements relating solely to leases permitted by this Agreement; and

(i) attachment, judgment or other similar Liens arising in connection with litigation or other legal proceedings (and not otherwise a Default hereunder) in the ordinary course of business that is currently being contested in good faith by appropriate proceedings, adequate reserves have been set aside and no material Property is subject to a material risk of loss or forfeiture and the claims in respect of such Liens are fully covered by insurance (subject to ordinary and customary deductibles).

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the articles of formation and operating agreement; and (c) with respect to any partnership, joint venture or other form of business entity, the partnership agreement and any agreement, filing or notice with respect thereto filed with the secretary of state of the state of its formation, in each case as amended from time to time.

“Outstanding Obligations” means, as of any date, and giving effect to making any Extensions of Credit requested on such date and all payments, repayments and prepayments made on such date, the sum of (a) the aggregate outstanding principal amount of all Loans, and (b) all Letter of Credit Usage.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto established under ERISA.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA Affiliates or to which Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple

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employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years.

“Permitted Tax Distributions” means, for or in respect of any fiscal year or other tax period of the Borrower (each a “Tax Period”), a distribution by the Borrower to Holdings, in an amount equal to the product of (x) the amount of taxable income or gain of Borrower for such Tax Period multiplied by (y) the Tax Rate with respect to each such amount.

“Permitted Workers Compensation Letters of Credit” means standby Letters of Credit issued to secure workers’ compensation and other insurance coverages for Borrower and its Subsidiaries not to exceed the minimum amount required by Holdings’, Borrowers’, or any of Borrower’s Subsidiaries’ insurance carriers or applicable regulatory agencies.

“Person” means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, Governmental Authority, or otherwise.

“Phantom Stock Plan” means, collectively, the Stater Bros. Holdings Inc. Phantom Stock Plan effective as of June 27, 2000 and any related documents or instruments executed or to be executed in connection therewith (including, without limitation, any Phantom Stock Award Agreement thereunder), in each case as amended, modified, renewed, or replaced from time with the exception of any amendment, modification, renewal or replacement that would expand the definition of “Eligible Employee” thereunder to include any shareholder of Holdings or any partner in La Cadena.

“Plan” means any employee benefit plan maintained or contributed to by a Borrower Party or by any trade or business (whether or not incorporated) under common control with a Borrower Party as defined in Section 4001(b) of ERISA and insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA.

“Pro Rata Share” means, with respect to each Lender, the percentage of the combined Commitments set forth opposite the name of that Lender on Schedule 2.01.

“Qualified Santee Sale” means (a) the sale by Borrower of not less than 20% of the equity securities in Santee to a Person that is not an Affiliate of Holdings, (b) the issuance by Santee of additional equity securities to a Person that is not an Affiliate of Holdings which constitute not less than 20% of the outstanding equity securities of Santee, or (c) a combination of related transactions described in (a) and (b) above which results in a Person that is not an Affiliate of Holdings owning 20% or more of the outstanding equity securities of Santee.

“Quarterly Payment Date” means the last Business Day of each March, June, September and December and the Maturity Date.

“Reportable Event” means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of operations described in Section 4062(e) of ERISA.

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“Request for Extension of Credit” means a written request substantially in the form of Exhibit D duly completed and signed by a Responsible Officer, or a telephonic request followed by such a written request, in each case delivered to Administrative Agent by Requisite Notice. In the case of a request for a new or amended Letter of Credit, the written Letter of Credit Application shall be deemed to be the Request for Extension of Credit.

“Requisite Lenders” means (a) as of any date of determination if the Commitments are then in effect, Lenders having in the aggregate 66 2/3% or more of the combined Commitments then in effect and (b) as of any date of determination if the Commitments have then been terminated and there are Loans and/or Letter of Credit Usage outstanding, Lenders holding Loans and Letter of Credit Usage aggregating 66 2/3% or more of the aggregate outstanding principal amount of the Loans and Letter of Credit Usage.

“Requisite Notice” means, unless otherwise provided herein, (a) irrevocable written notice to the intended recipient or (b) except with respect to Letter of Credit actions (which must be in writing), irrevocable telephonic notice to the intended recipient, promptly followed by a written notice to such recipient. Such notices shall be (i) delivered to such recipient at the address or telephone number specified on Schedule 11.02 or as otherwise designated by such recipient by Requisite Notice to each other party hereto, and (ii) if made by any Borrower Party, given or made by a Responsible Officer of such Borrower Party. Any written notice delivered in connection with any Loan Document shall be in the form, if any, prescribed in the applicable Section hereof or thereof and may be delivered as provided in Section 11.02. Any notice sent by other than hardcopy shall be promptly confirmed by a telephone call to the recipient and, if requested by Administrative Agent, by a manually-signed hardcopy thereof.

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“Requisite Time” means, with respect to any of the actions listed below, the time and date set forth below opposite such action (all times are local time (standard or daylight) as observed in the State of California):

Type of Action	Time	Date of Action
Delivery of Request for Extension of Credit for, or notice for:
•      Borrowing of, prepayment of, or Conversion into, Base Rate Loans	8:30 a.m.	Same date as such Borrowing, prepayment or Conversion
•      Borrowing of, prepayment of, Continuation of, or Conversion into, Offshore Rate Loans	10:00 a.m.	3 Business Days prior to such Borrowing, prepayment or Conversion
•      Letter of Credit action	10:00 a.m.	5 Business Days prior to such action
•      Voluntary reduction in or termination of Commitments	10:00 a.m.	2 Business Days prior to such reduction or termination
Payments by Lenders or Borrower to Administrative Agent	11:00 a.m.	On date payment is due

“Responsible Officer” means the president, chief financial officer, secretary, treasurer or assistant treasurer of a Borrower Party. Any document or certificate hereunder that is signed by a Responsible Officer of a Borrower Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Borrower Party.

“Restricted Payment” means:

(a) the declaration or payment of any dividend or distribution by Holdings or any of its Subsidiaries, either in cash or property, on any shares of the capital stock of any class of Holdings or any of its Subsidiaries (except dividends or other distributions payable solely in shares of capital stock of Holdings or any of its Subsidiaries and dividends or other distributions payable (including dividends payable in cash) by a Subsidiary to Holdings or another Wholly-Owned Subsidiary of Holdings that is a Domestic Subsidiary);

(b) the purchase, redemption or retirement by Holdings or any of its Subsidiaries of any shares of any class of the capital stock of Holdings or any of its Subsidiaries of any class or any warrants, rights or options to purchase or acquire any shares of any class of the capital stock of Holdings or any of its Subsidiaries whether directly or indirectly;

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(c) any other payment or distribution by Holdings or any of its Subsidiaries in respect of any class of capital stock of Holdings or any of its Subsidiaries, either directly or indirectly (except dividends or other distributions payable solely in shares of capital stock of Holdings or any of its Subsidiaries and dividends or other distributions payable (including dividends payable in cash) by a Subsidiary to Holdings or another Wholly-Owned Subsidiary of Holdings that is a Domestic Subsidiary);

(d) any Investment other than an Investment otherwise permitted under any Loan Document; and

(e) the prepayment, repayment, redemption, defeasance or other acquisition or retirement for value prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment of any of the Senior Notes;

provided however that any payment, account, credit, award or other obligations pursuant to the Phantom Stock Plan shall not be considered to be a “Restricted Payment.”

“Santee” means Santee Dairies, Inc., a California corporation.

“Santee Credit Facility” means the credit facility governed by that certain Credit Agreement, dated on or about December 22, 1999 by and among Santee and Bank of America, N.A., as agent including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any such amendment, restatement, modification, renewal, refunding, replacement, or refinancing facility that alters the maturity thereof.

“Santee Note” means that certain 5 1/4% note due March 31, 1999 in an aggregate principal amount of $55,000,000 owed by Santee to Borrower.

“Senior Note Indenture” means the indenture pursuant to which the Senior Notes are issued, as such indenture may be amended from time to time to the extent permitted under Section 8.05(a).

“Senior Note Documents” means, collectively, (a) the Senior Note Indenture and (b) each guarantee thereof executed by any Subsidiary of Holdings.

“Senior Notes” means, collectively, Holdings’ $525,000,000 aggregate principal amount of 8.125% fixed rate Senior Notes due 2012 and Holdings’ $175,000,000 aggregate principal amount of Floating Rate Notes due 2010.

“Shareholders’ Equity” means, as of any date of determination for Borrower and its Subsidiaries on a consolidated basis, shareholders’ equity as of that date determined in accordance with GAAP.

“Special Distribution” means a dividend made by Holdings to La Cadena from the proceeds of the Senior Notes, substantially concurrently with the issuance of the Senior Notes, in an amount not to exceed $45,000,000.

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“Subordinated Note” means the $20,000,000 subordinated note dated January 22, 2002 due March 31, 2007 issued by Holdings to H. Harrison Lightfoot.

“Subsidiary” means, with respect to any Person, a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

“Swap Agreement” means (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement (any such master agreement, together with any related schedules, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, a “Master Agreement”), including but not limited to any such obligations or liabilities under any Master Agreement.

“Synthetic Lease Obligations” means all monetary obligations of a Person under any agreement for the use or possession of property creating obligations which are considered indebtedness for borrowed money for tax purposes, but are classified as an operating lease under GAAP; but in any case excluding any obligations that are liabilities of such Person as lessee under any operating lease so long as the terms of such operating lease do not require (a) any payment by or on behalf of such Person at termination of such operating lease pursuant to a required purchase by or on behalf of such Person of the property or assets subject to such operating lease, or (b) any arrangement pursuant to which such Person guarantees or otherwise assures any other Person of the value of the property or assets subject to such operating lease.

“Tax Rate” means, for or in respect of any Tax Period (as defined in the definition of “Permitted Tax Distribution”) and any item of income the combined United States federal and California state income tax rate applicable during such Tax Period to such item of income if included as taxable income by a corporation doing business in California.

“Total Assets” means, with respect to any Person, the aggregate of all assets of such Person and its Subsidiaries as would be shown on the balance sheet of such Person prepared in accordance with GAAP.

“to the best knowledge of” means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by such Person (or, in the case of a Person other than a natural Person, known by any officer of such Person) making

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the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by such Person (or, in the case of a Person other than a natural Person, would have been known by an officer of such Person).

“Transaction Costs” means the fees, costs and expenses payable by Holdings and the Borrower in connection with the transactions contemplated by the Loan Documents and the Senior Note Documents.

“type”, when used with respect to any Loan, means the designation of whether such Loan is a Base Rate Loan or an Offshore Rate Loan.

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

“Voting Stock” of any Person as of any date means the capital stock or other equity interests of such Person that is at the time entitled to vote in the election of the Board of Directors or other similar management body of such Person.

“Wholly-Owned Subsidiary” of any specified Person means any Subsidiary of such Person all the outstanding shares of capital stock (other than directors’ qualifying shares, if applicable) of which are owned directly by such Person or another Wholly-Owned Subsidiary of such Person, and with respect to Holdings, shall include Borrower so long as Holdings owns all of the outstanding shares of Voting Stock of Borrower.

1.02. Use of Certain Terms. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto or thereto, unless otherwise defined therein.

(a) As used herein, unless the context requires otherwise, the masculine, feminine and neuter genders and the singular and plural include one another.

(b) The words “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “including” when used herein is not intended to be exclusive and means “including, without limitation.” References herein to a Section, subsection or clause shall refer to the appropriate Section, subsection or clause in this Agreement.

(c) The term “or” is disjunctive; the term “and” is conjunctive. The term “shall” is mandatory; the term “may” is permissive. Masculine terms also apply to females; feminine terms also apply to males. The term “including” is by way of example and not limitation.

1.03. Accounting Terms. Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Borrower to Lenders pursuant to Section 6.01 shall be prepared in accordance with GAAP as in

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effect at the time of such preparation. Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with GAAP as in effect at the time of the preparation of the financial statement on which such calculations are based. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in this Agreement, and either Borrower or Requisite Lenders shall so request, Administrative Agent, Requisite Lenders and Borrower shall negotiate in good faith to amend such ratio or requirement to reflect such change in GAAP (subject to the approval of Requisite Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) Borrower shall provide to Administrative Agent and Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

1.04. Rounding. Any financial ratios required to be maintained by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement.

1.05. Exhibits and Schedules. All exhibits and schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. A matter disclosed on any Schedule shall be deemed disclosed on all Schedules.

1.06. References to Agreements, Exhibits and Laws. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall include all amendments and other modifications thereto (unless prohibited by any Loan Document), and (b) references to any statute or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

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SECTION 2.

THE COMMITMENTS AND EXTENSIONS OF CREDIT

2.01. Loans.

(a) Subject to the terms and conditions set forth in this Agreement, including without limitation clause (d) of this Section, each Lender severally agrees to make, Convert and Continue Loans until the Maturity Date (or any earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement) as Borrower may from time to time request; provided, however, that (i) the aggregate outstanding principal amount of all Loans of such Lender plus such Lenders’ Pro Rata Share of the Letter of Credit Usage shall not exceed such Lender’s Commitment, and (ii) the aggregate outstanding principal amount of all Loans of all Lenders plus the Letter of Credit Usage shall not exceed the Combined Commitments at any time. Subject to the foregoing and the other terms and conditions hereof, Borrower may borrow, Convert, Continue, prepay and reborrow Loans as set forth herein without premium or penalty.

(b) Loans made by each Lender shall be evidenced by one or more loan accounts or records maintained by such Lender in the ordinary course of business. Upon the request of any Lender made through Administrative Agent, such Lender’s Loans may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. Such loan accounts, records or Notes shall be conclusive absent manifest error of the amount of such Loans and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower to pay any amount owing with respect to the Loans.

(c) Borrower may use proceeds of Loans for any working capital or general corporate purpose of Borrower not prohibited by this Agreement or the other Loan Documents.

(d) Anything contained in this Agreement to the contrary notwithstanding, the Loans and the Combined Commitments shall be subject to the following limitations:

(i) for ten consecutive days during the period of (x) July 1, 2004 through December 31, 2004, (y) January 1, 2005 through June 30, 2005, and (z) each successive six month period thereafter, there shall be no Loans outstanding (although Letters of Credit may continue to be outstanding during such periods); and

(ii) all of the Outstanding Obligations on the last day of each fiscal month (whether for Loans or Letters of Credit) shall not exceed an amount equal to 45% (or, if the Combined Commitments are then equal to $100,000,000, 50%) of the aggregate book value of the inventory of Borrower and its Subsidiaries on such day, measured on a consolidated basis, using the first-in, first out method, in accordance with GAAP.

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2.02. Borrowings, Conversions and Continuations of Loans.

(a) Borrower may irrevocably request a Borrowing, Conversion or Continuation of Loans in a Minimum Amount therefor by delivering a Request for Extension of Credit therefor by Requisite Notice to Administrative Agent not later than the Requisite Time therefor. All Borrowings, Conversions and Continuations shall constitute Base Rate Loans unless properly and timely otherwise designated as set forth in the prior sentence.

(b) Following receipt of a Request for Extension of Credit, Administrative Agent shall promptly notify each Lender of its Pro Rata Share thereof by Requisite Notice. In the case of a Borrowing of Loans, each Lender shall make the funds for its Loan available to Administrative Agent at Administrative Agent’s Office not later than the Requisite Time therefor on the Business Day specified in such Request for Extension of Credit. Upon satisfaction of the applicable conditions set forth in Section 4, all funds so received shall be made available to Borrower in like funds received.

(c) Administrative Agent shall promptly notify Borrower and Lenders of the interest rate applicable to any Loan other than a Base Rate Loan upon determination of same.

(d) Except as otherwise provided herein, an Offshore Rate Loan may be Continued or Converted only on the last day of the Interest Period for such Offshore Rate Loan. No Loans may be requested as, Converted into or Continued as Offshore Rate Loans during the existence of a Default or Event of Default. During the existence of a Default or Event of Default, the Requisite Lenders may demand that any or all of the then outstanding Offshore Rate Loans be Converted immediately into Base Rate Loans. Such Conversion shall be effective upon notice to Borrower and shall continue so long as such Default or Event of Default continues to exist.

(e) If a Loan is to be made on the same date that another Loan is due and payable, Borrower or Lenders, as the case may be, shall make available to Administrative Agent the net amount of funds giving effect to both such Loans and the effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect to each such Loan.

(f) The failure of any Lender to make any Loan on any date shall not relieve any other Lender of any obligation to make a Loan on such date, but no Lender shall be responsible for the failure of any other Lender to so make its Loan.

2.03. Letters of Credit.

(a) Letters of Credit. Subject to the terms and conditions hereof, at any time and from time to time from the Closing Date through the Maturity Date (or such earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement), the Issuing Lender shall take such Letter of Credit Actions as Borrower may request; provided, however, that the Issuing Lender shall not be obligated to take any Letter of Credit Action with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit if as of the date of such Letter of Credit Action, the aggregate outstanding principal amount of all Loans plus the Letter of Credit Usage would exceed the Combined Commitments or if the requested Letter of Credit would result in a violation of the limitations expressed in Section 2.01(c)(ii). Each Letter of Credit Action shall be in a form acceptable to Issuing Lender and shall not violate any policies of Issuing Lender. Standby Letters of Credit shall be issued only for the purpose of (i) securing workers’ compensation and other insurance

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coverages for Borrower and its Subsidiaries in an amount not at any time to exceed the minimum amount required by Holdings’, Borrower’s, or any of Borrower’s Subsidiaries’ insurance carriers or applicable regulatory agencies and (ii) supporting obligations of Borrower and its Subsidiaries incurred in the construction of distribution centers, stores and related shopping centers (including without limitation a proposed $11,000,000 standby letter of credit supporting construction of Borrower’s proposed distribution center). Commercial Letters of Credit shall only be issued for the purpose of supporting the purchase of inventory by Borrower and its Subsidiaries. The obligation of the Issuing Lender to take any Letter of Credit Action and the obligation of the Lenders to participate in the Letter of Credit subject to such Letter of Credit Action shall be subject to the following limitations:

(i) The Letter of Credit Usage in respect of standby Letters of Credit issued to support obligations of Borrower and its Subsidiaries incurred in the construction of stores and related shopping centers shall not exceed $2,000,000;

(ii) The Letter of Credit Usage in respect of all Letters of Credit other than Permitted Workers Compensation Letters of Credit shall not exceed $16,000,000; and

(iii) No standby Letter of Credit shall expire more than 12 months after the issuance thereof. No commercial Letter of Credit shall expire more than 180 days after the issuance thereof. If any Letter of Credit Usage remains outstanding after the Maturity Date or any earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement, Borrower shall immediately deposit cash in an amount equal to such Letter of Credit Usage in a Letter of Credit Cash Collateral Account.

(b) Requesting Letter of Credit Actions. Borrower may irrevocably request a Letter of Credit Action by delivering a Letter of Credit Application therefor to Issuing Lender, with a copy to Administrative Agent (who shall notify Lenders), by Requisite Notice not later than the Requisite Time therefor. Unless Administrative Agent notifies Issuing Lender that such Letter of Credit Action is not permitted hereunder or Issuing Lender determines that such Letter of Credit Action is contrary to any Laws or policies of Issuing Lender or does not otherwise conform to the requirements of this Agreement, Issuing Lender shall effect such Letter of Credit Action. This Agreement shall control in the event of any conflict with any Letter of Credit Application. Upon the issuance of a Letter of Credit, each Lender shall be deemed to have purchased a pro rata participation in such Letter of Credit from Issuing Lender in an amount equal to that Lender’s Pro Rata Share.

(c) Reimbursement of Payments Under Letters of Credit. Borrower shall reimburse Issuing Lender through Administrative Agent for any payment that Issuing Lender makes under a Letter of Credit on or before the date of such payment; provided, however, that if the conditions precedent set forth in Section 4 can be satisfied, Borrower may request a Borrowing of Loans to reimburse Issuing Lender for such payment on or before the date thereof by complying with Section 2.02, or Borrower may allow a deemed Borrowing of Loans which are Base Rate Loans to take place on such payment date pursuant to subsection (e) below.

(d) Funding by Lenders When Issuing Lender Not Reimbursed. If Borrower fails to timely make the payment required pursuant to subsection (c) above, Issuing Lender shall

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notify Administrative Agent of such fact and the amount of such unreimbursed payment. Administrative Agent shall promptly notify each Lender of its Pro Rata Share of such amount by Requisite Notice. Each Lender shall make funds in an amount equal its Pro Rata Share of such amount available to Administrative Agent at Administrative Agent’s Office not later than the Requisite Time on the Business Day specified by Administrative Agent. The obligation of each Lender to so reimburse Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of Borrower to reimburse Issuing Lender for the amount of any payment made by Issuing Lender under any Letter of Credit, together with interest as provided herein.

(e) Nature of Lenders’ Funding. If the conditions precedent set forth in Section 4 can be satisfied (except for the giving of a Request for Extension of Credit) on the date Borrower is obligated to make, but fails to make, a reimbursement of a payment under a Letter of Credit, the funding by Lenders pursuant to subsection (d) above shall be deemed to be part of a Borrowing of Loans which are Base Rate Loans (without regard to the Minimum Amount therefor) requested by Borrower. If the conditions precedent set forth in Section 4 cannot be satisfied on the date Borrower is obligated to make, but fails to make, a reimbursement of a payment under a Letter of Credit, the funding by Lenders pursuant to subsection (d) above shall be deemed to be a funding by each Lender of its participation in such Letter of Credit, and such funds shall be payable by Borrower upon demand and shall bear interest at the Default Rate, and each Lender making such funding shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of Issuing Lender against Borrower in respect of such payment and shall share, in accordance with that pro rata participation, in any payment made by Borrower with respect to such claim. If Administrative Agent or Issuing Lender is required at any time to return to Borrower, or to a trustee, receiver, liquidator, custodian, or any official under any proceeding under Debtor Relief Laws, any portion of the payments made by Borrower to Administrative Agent for the account of Issuing Lender pursuant to this subsection in reimbursement of a payment made under a Letter of Credit or interest or fee thereon, each Lender shall, on demand of Administrative Agent, forthwith return to Administrative Agent or Issuing Lender the amount of its Pro Rata Share of any amounts so returned by Administrative Agent or Issuing Lender plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to Administrative Agent or Issuing Lender, at a rate per annum equal to the daily Federal Funds Rate.

(f) Special Provisions Relating to Evergreen Letters of Credit. Borrower may request Letters of Credit that have automatic extension or renewal provisions (“evergreen” Letters of Credit) so long as Issuing Lender has the right to not permit any such extension or renewal at least annually within a notice period of not more than 60 days before the expiration of such Letter of Credit. Once an evergreen Letter of Credit is issued, unless Administrative Agent has notified Issuing Lender that all Lenders have elected not to permit such extension or renewal, the Borrower Parties, Administrative Agent and Lenders authorize (but may not require) Issuing Lender to, in its sole discretion, permit the renewal of such evergreen Letter of Credit at any time to a date not later than the Maturity Date, and, unless directed by Issuing Lender, Borrower shall not be required to request such extension or renewal. Notwithstanding the foregoing, Issuing Lender may, in its sole discretion elect not to permit an evergreen Letter of Credit to be extended or renewed at any time.

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(g) Obligations Absolute. The obligation of Borrower to pay to Issuing Lender the amount of any payment made by Issuing Lender under any Letter of Credit shall be absolute, unconditional, and irrevocable. Without limiting the foregoing, Borrower’s obligation shall not be affected by any of the following circumstances:

(i) any lack of validity or enforceability of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(ii) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(iii) the existence of any claim, setoff, defense, or other rights which Borrower may have at any time against Issuing Lender, Administrative Agent or any Lender, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions;

(iv) any demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit;

(v) payment by Issuing Lender in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; or any payment made by Issuing Lender under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Laws;

(vi) the existence, character, quality, quantity, condition, packing, value or delivery of any Property purported to be represented by documents presented in connection with any Letter of Credit or for any difference between any such Property and the character, quality, quantity, condition, or value of such Property as described in such documents;

(vii) the time, place, manner, order or contents of shipments or deliveries of Property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto;

(viii) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit;

(ix) any failure or delay in notice of shipments or arrival of any Property;

(x) any error in the transmission of any message relating to a Letter of Credit not caused by Issuing Lender, or any delay or interruption in any such message;

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(xi) any error, neglect or default of any correspondent of Issuing Lender in connection with a Letter of Credit;

(xii) any consequence arising from acts of God, wars, insurrections, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of Issuing Lender;

(xiii) so long as Issuing Lender in good faith determines that the document appears to comply with the terms of the Letter of Credit, the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to Issuing Lender in connection with a Letter of Credit; and

(xiv) where Issuing Lender has acted in good faith and any other circumstances whatsoever.

In addition, Borrower will promptly examine a copy of each Letter of Credit and amendments thereto delivered to it and, in the event of any claim of noncompliance with Borrower’s instructions or other irregularity, Borrower will immediately notify Issuing Lender in writing. Borrower shall be conclusively deemed to have waived any such claim against Issuing Lender and its correspondents unless such notice is given as aforesaid.

(h) Role of Issuing Lender. Each Lender and Borrower Party agree that, in paying any drawing under a Letter of Credit, Issuing Lender shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. No Administrative Agent-Related Person nor any of the respective correspondents, participants or assignees of Issuing Lender shall be liable to any Lender for any action taken or omitted in connection herewith at the request or with the approval of Lenders or the Requisite Lenders, as applicable; any action taken or omitted in the absence of gross negligence or willful misconduct; or the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit. Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Administrative Agent-Related Person, nor any of the respective correspondents, participants or assignees of Issuing Lender, shall be liable or responsible for any of the matters described in subsection (g) above. In furtherance and not in limitation of the foregoing, Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and Issuing Lender shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(i) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the Issuing Lender and Borrower when a Letter of Credit is issued, performance under Letters of Credit by the Issuing Lender, its correspondents, and beneficiaries will be governed by (i) with respect to standby Letters of Credit, the rules of the “International Standby Practices 1998”

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(ISP98) or such later revision as may be published by the International Chamber of Commerce (the “ICC”), and (ii) with respect to commercial Letters of Credit, the rules of the Uniform Customs and Practice for Documentary Credits, as published in its most recent version by the ICC on the date any commercial Letter of Credit is issued, and including the ICC decision published by the Commission on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro).

(j) Standby Letter of Credit Fee. On each Quarterly Payment Date and on the Maturity Date (or on any earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement), Borrower shall pay to Administrative Agent in arrears, for the account of each Lender in accordance with its Pro Rata Share, a Letter of Credit fee equal to the Applicable Amount for Letters of Credit times the actual daily maximum amount available to be drawn under each standby Letter of Credit since the later of the Closing Date and the previous Quarterly Payment Date.

(k) Issuance Fee and Documentary and Processing Charges Payable to Issuing Lender. Concurrently with the issuance of each Letter of Credit, Borrower shall pay a letter of credit issuance fee to Issuing Lender, for the sole account of Issuing Lender, in an amount set forth in a letter agreement between Borrower and Issuing Lender and, in the case of each commercial Letter of Credit, a fee based on Issuing Lender’s standard schedule of fees for the issuance of commercial letters of credit as then in effect. In addition, Borrower shall pay directly to Issuing Lender for its sole account its customary documentary and processing charges in accordance with its standard schedule, as from time to time in effect, for any amendment, transfer, or other occurrence relating to a Letter of Credit. Such fee and charges are nonrefundable.

(l) Existing Letters of Credit. Each Existing Letter of Credit outstanding on the Closing Date shall be deemed to be a Letter of Credit hereunder and all unpaid reimbursement obligations owed in respect of amounts drawn on Existing Letters of Credit shall be reimbursement obligations hereunder.

2.04. Prepayments.

(a) Upon Requisite Notice to Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and from time to time voluntarily prepay Loans in part in the Minimum Amount therefor or in full without premium or penalty. Administrative Agent will promptly notify each Lender thereof and of such Lender’s Pro Rata Share of such prepayment. Any prepayment of an Offshore Rate Loan shall be accompanied by all accrued interest thereon, together with the costs set forth in Section 3.05.

(b) If for any reason the aggregate outstanding principal amount of all Loans plus Letter of Credit Usage exceeds the Combined Commitments as in effect or as reduced, or to give effect to the limitations in Section 2.01(d) or because of any other limitation set forth in this Agreement or otherwise, Borrower shall immediately prepay Loans (and/or cash collateralize the Letters of Credit) in an aggregate amount equal to such excess.

2.05. Reduction or Termination of Commitments. Upon Requisite Notice to Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and

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from time to time, without premium or penalty, permanently and irrevocably (a) reduce the Combined Commitments in a Minimum Amount therefor to an amount not less than the Outstanding Obligations, or (b) terminate the Commitments. Any such reduction or termination shall be accompanied by payment of all accrued and unpaid commitment fees with respect to the portion of the Combined Commitments being reduced or terminated. Administrative Agent shall promptly notify Lenders of any such request for reduction or termination of the Combined Commitments. Each Lender’s Commitment shall be reduced by an amount equal to such Lender’s Pro Rata Share times the amount of such reduction.

2.06. Principal and Interest.

(a) If not sooner paid, Borrower agrees to pay the outstanding principal amount of each Loan on the Maturity Date or upon any earlier date upon which the Combined Commitments are terminated in accordance with the terms of this Agreement.

(b) Subject to subsection (c) below, Borrower shall pay interest on the unpaid principal amount of each Loan (before and after default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Laws) from the date borrowed until paid in full (whether by acceleration or otherwise) on each applicable Interest Payment Date at a rate per annum equal to the interest rate determined in accordance with the definition of such type of Loan, plus, to the extent applicable in each case, the Applicable Amount.

(c) If any amount payable by any Borrower Party under any Loan Document is not paid when due (without regard to any applicable grace periods), it shall thereafter bear interest (after as well as before entry of judgment thereon to the extent permitted by law) at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including, without limitation, interest on past due interest) shall be payable upon demand.

2.07. Fees.

(a) Commitment Fee. Borrower shall pay to Administrative Agent for the account of each Lender pro rata according to its Pro Rata Share, a Commitment fee equal to the Applicable Amount times the actual daily amount by which the Combined Commitments exceed the sum of the aggregate principal amount of outstanding Loans plus the Letter of Credit Usage in respect of standby Letters of Credit. The commitment fee shall accrue at all times from the Closing Date until the Maturity Date and shall be payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date. The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Amount during any quarter, the average daily amount shall be computed and multiplied by the Applicable Amount separately for each period during such quarter that such Applicable Amount was in effect.

(b) Other Fees. On the dates set forth therein, Borrower shall pay to Administrative Agent certain administrative agency and letter of credit fees described in a fee letter of even date herewith between the Borrower and the Administrative Agent.

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2.08. Computation of Interest and Fees. Computation of interest on Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” or “reference rate” shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to Lenders than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day.

2.09. Making Payments.

(a) Except as otherwise provided herein, all payments by Borrower or any Lender shall be made to Administrative Agent at Administrative Agent’s Office not later than the Requisite Time for such type of payment. All payments received after such Requisite Time shall be deemed received on the next succeeding Business Day. All payments shall be made in immediately available funds in lawful money of the United States of America. All payments by Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.

(b) Upon satisfaction of any applicable terms and conditions set forth herein, Administrative Agent shall promptly make any amounts received in accordance with the prior subsection available in like funds received as follows: (i) if payable to Borrower, by crediting the Designated Deposit Account, and (ii) if payable to any Lender, by wire transfer to such Lender at the address specified in Schedule 11.02.

(c) Subject to the definition of “Interest Period,” if any payment to be made by any Borrower Party shall come due on a day other than a Business Day, payment shall instead be considered due on the next succeeding Business Day, and such extension of time shall be reflected in computing interest and fees.

(d) Except as otherwise provided in Section 2.04(c) with respect to Borrower reimbursing drawings under Letters of Credit, unless Borrower or any Lender has notified Administrative Agent prior to the date any payment to be made by it is due, that it does not intend to remit such payment, Administrative Agent may, in its discretion, assume that Borrower or Lender, as the case may be, has timely remitted such payment and may, in its discretion and in reliance thereon, make available such payment to the Person entitled thereto. If such payment was not in fact remitted to Administrative Agent in immediately available funds, then:

(i) if Borrower failed to make such payment, each Lender shall forthwith on demand repay to Administrative Agent the amount of such assumed payment made available to such Lender, together with interest thereon in respect of each day from and including the date such amount was made available by Administrative Agent to such Lender to the date such amount is repaid to Administrative Agent at the Federal Funds Rate; and

(ii) if any Lender failed to make such payment, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such

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Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent promptly shall notify Borrower, and Borrower shall pay such corresponding amount to Administrative Agent. Administrative Agent also shall be entitled to recover interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by Administrative Agent to Borrower to the date such corresponding amount is recovered by Administrative Agent, (a) from such Lender at a rate per annum equal to the daily Federal Funds Rate. and (b) from Borrower, at a rate per annum equal to the interest rate applicable to such Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitments or to prejudice any rights which Administrative Agent or Borrower may have against any Lender as a result of any default by such Lender hereunder.

2.10. Funding Sources. Nothing in this Agreement shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

2.11. Increases to the Combined Commitments.

(a) Provided there exists no Default or Event of Default, upon notice to Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time request an increase in the Combined Commitments by an amount (for all such requests) not exceeding $25,000,000; provided that any such request for an increase shall be in a minimum amount of $5,000,000. At the time of sending such notice, the Borrower (in consultation with Administrative Agent) shall specify:

(i) the amount of any upfront fees payable in connection with such increased Commitments (which fees may be variable depending on the amount of the Commitment offered by a prospective Lender);

(ii) the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

(b) Each Lender shall notify Administrative Agent within the specified time period whether or not it agrees to assume a portion of the proposed increase. Any Lender not responding within such time period shall be deemed to have declined to assume a portion of the increase, and no Lender shall be obligated to subscribe for any increase to its Commitment.

(c) Administrative Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder. If the existing Lenders do not subscribe to the full amount of the requested increase, to achieve the full amount of a requested increase and subject to the approval of Administrative Agent and the Issuing Lender (which approvals shall not be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to Administrative Agent and its counsel.

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(d) If the Combined Commitments are increased in accordance with this Section, Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase and the Increase Effective Date.

(e) As a condition precedent to such increase, the Borrower shall:

(i) deliver to Administrative Agent a certificate of Borrower and each Guarantor dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer thereof (A) certifying and attaching the resolutions adopted by such party approving or consenting to such increase, and (B) in the case of the Borrower, certifying that, before and after giving effect to such increase, (1) the representations and warranties contained in the Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (2) no Default or Event of Default exists;

(ii) if at the time of any increase to the Combined Commitments more than one Lender is a party to this Agreement, prepay any Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Loans ratable with any revised Pro Rata Shares of the Lenders arising from any nonratable increase in the Commitments of the Lenders under this Section;

(iii) deliver such amendments to the Loan Documents and favorable opinions of counsel reasonably requested by Administrative Agent; and

(iv) such other assurances, certificates, documents, consents or opinions as Administrative Agent, the L/C Issuer, the Swing Line Lender or the Requisite Lenders reasonably may require.

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SECTION 3.

TAXES, YIELD PROTECTION AND ILLEGALITY

3.01. Taxes.

(a) Any and all payments by Borrower to or for the account of Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of Administrative Agent and any Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the Laws of which Administrative Agent or such Lender is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “Taxes”). If Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) Borrower shall furnish to Administrative Agent (who shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof.

(b) In addition, Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution or delivery of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

(c) Borrower agrees to indemnify Administrative Agent and each Lender for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by Administrative Agent and such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto.

3.02. Illegality. If any Lender determines that any change in Law occurring after the Closing Date has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Offshore Rate Loans, or materially restricts the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the applicable offshore Dollar market, or to determine or charge interest rates based upon the Offshore Rate, then, on notice thereof by Lender to Borrower through Administrative Agent, any obligation of that Lender to make Offshore Rate Loans shall be suspended until Lender notifies Administrative Agent and Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, Borrower shall, upon demand from such Lender (with a copy to Administrative Agent), prepay or Convert all Offshore Rate Loans of that Lender, either on the last day of the Interest Period thereof, if Lender may lawfully continue to maintain such Offshore Rate Loans to such day, or

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immediately, if Lender may not lawfully continue to maintain such Offshore Rate Loans. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

3.03. Inability to Determine Rates. If, in connection with any Extension of Credit involving any Offshore Rate Loan, Administrative Agent determines that (a) Dollar deposits are not being offered to banks in the applicable offshore dollar market for the applicable amount and Interest Period of the requested Offshore Rate Loan, (b) adequate and reasonable means do not exist for determining the underlying interest rate for such Offshore Rate Loan, or (c) such underlying interest rate does not adequately and fairly reflect the cost to Lender of funding such Offshore Rate Loan, Administrative Agent will promptly notify Borrower and all Lenders. Thereafter, the obligation of all Lenders to make or maintain such Offshore Rate Loan shall be suspended until Administrative Agent revokes such notice. Upon receipt of such notice, Borrower may revoke any pending request for a Borrowing of Offshore Rate Loans or, failing that, be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

3.04. Increased Cost and Reduced Return; Capital Adequacy.

(a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law occurring after the Closing Date, such change:

(i) shall subject such Lender to any Tax, duty, or other charge with respect to any Offshore Rate Loans or its obligation to make Offshore Rate Loans, or change the basis on which taxes are imposed on any amounts payable to such Lender under this Agreement in respect of any Offshore Rate Loans;

(ii) shall impose or modify any reserve, special deposit, or similar requirement (other than the reserve requirement utilized in the determination of the Offshore Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (including its Commitments); or

(iii) shall impose on such Lender or on the offshore Dollar interbank market any other condition affecting this Agreement or any of such extensions of credit or liabilities or commitments;

and the result of any of the foregoing is to increase the cost to such Lender of making, Converting into, Continuing, or maintaining any Offshore Rate Loans or to reduce any sum received or receivable by such Lender under this Agreement with respect to any Offshore Rate Loans, then from time to time upon demand of Lender (with a copy of such demand to Administrative Agent), Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.

(b) If any Lender determines that any change in or the interpretation of any Laws have the effect of reducing the rate of return on the capital of such Lender or compliance by such Lender (or its Lending Office) or any corporation controlling such Lender as a consequence of such Lender’s obligations hereunder (taking into consideration its policies with respect to capital

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adequacy and such Lender’s desired return on capital), then from time to time upon demand of such Lender (with a copy to Administrative Agent), Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction.

(c) Promptly after receipt of knowledge of any change in law or other event that will entitle any Lender to compensation under this Section 3.04, the Lender shall give notice thereof to the Borrower (with a copy to the Administrative Agent) certifying the basis for such request for compensation in accordance with Section 3.06(a) and designate a different lending office if such designation will avoid, or reduce, the amount of compensation payable under this Section 3.04 and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. Notwithstanding anything in Sections 3.04(a) or 3.04(b) to the contrary, the Borrower shall not be obligated to compensate any Lender for any amount arising or accruing before the earlier of (i) 180 days prior to the date on which such Lender gave notice to the Borrower under this Section 3.04(c) or (ii) the date such amount arose or began accruing (and such Lender did not know such amount was arising or accruing) as a result of the retroactive application of any change in Law or other event giving rise the claim for compensation.

3.05. Breakfunding Costs. Upon demand of any Lender (with a copy to Administrative Agent) from time to time, Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

(a) any Continuation, Conversion, payment or prepayment of any Offshore Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

(b) any failure by Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Offshore Rate Loan on the date or in the amount notified by Borrower;

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Offshore Rate Loan or from fees payable to terminate the deposits from which such funds were obtained. Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

3.06. Matters Applicable to all Requests for Compensation.

(a) A certificate of Administrative Agent claiming compensation under this Section 3 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of clearly demonstrable error. In determining such amount, Administrative Agent may use any reasonable averaging and attribution methods. For purposes of this Section 3, a Lender shall be deemed to have funded each Offshore Rate Loan at the Offshore Base Rate used in determining the Offshore Rate for such Loan by a matching deposit or other borrowing in the offshore Dollar interbank market, whether or not such Offshore Rate Loan was in fact so funded.

3.07. Survival. All of Borrower’s obligations under this Section 3 shall survive termination of the Commitments and payment in full of all Obligations.

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3.08. Replacement of a Lender. Provided that no Default or Event of Default exists, Borrower shall have the right to remove any Lender as a party to this Agreement in the event that such Lender requests compensation under this Section 3 which is not requested by all other Lenders; provided, that if Borrower elects to remove any Lender making such a request, it shall remove all Lenders making substantially similar requests. Upon notice from Borrower, which must be submitted by Borrower within 30 days following the request for compensation, the Lender being removed shall assign its Commitments and the related Outstanding Obligations (without recourse, representation or warranty of any kind other than as to its ownership of the related obligations and its authority to assign the same) to one or more of the existing Lenders or other Persons designated by Borrower (and reasonably acceptable to the Administrative Agent), subject to payment of a purchase price by such assignee equal to all principal and accrued interest, fees and other amounts payable to such Lender under this Agreement through the date of assignments. No Lender will be required to accept any such assignment.

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SECTION 4.

CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT

4.01. Conditions of Initial Extension of Credit. The obligation of each Lender to make the initial Extension of Credit is subject to satisfaction of the following conditions precedent:

(a) Borrower Party Loan Documents and Corporate Documents. Unless waived by all Lenders (or by Administrative Agent with respect to immaterial matters, or items specified in subsections (v) or (vi) below, that the Borrower has given assurances satisfactory to Administrative Agent that they will be delivered promptly following the Closing Date), Administrative Agent’s receipt of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Officer, each dated on or about the Closing Date and each in form and substance satisfactory to Administrative Agent and its legal counsel:

(i) counterparts of this Agreement, sufficient in number for distribution to Administrative Agent, Lenders and Borrower, executed by Borrower and Holdings;

(ii) Notes executed by Borrower in favor of each Lender requesting a Note, each in a maximum principal amount equal to that Lender’s Pro Rata Share;

(iii) Guaranties executed by Holdings, Development, and Santee;

(iv) resolutions of the Board of Directors of each Borrower Party approving and authorizing the execution, delivery and performance of the Loan Documents and Senior Note Documents to which it is a party, certified as of the Closing Date by the corporate secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment;

(v) such certificates of incumbency and/or other certificates of Responsible Officers of each Borrower Party as Administrative Agent may require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer thereof;

(vi) such evidence as Administrative Agent may reasonably require to verify that each Borrower Party is duly organized or formed, validly existing, in good standing and qualified to engage in business in each jurisdiction in which it is required to be qualified to engage in business, including, without limitation, certified copies of each Borrower Party’s Organization Documents, certificates of good standing and/or qualification to engage in business, tax clearance certificates, and the like;

(vii) such other assurances, certificates, documents, consents or opinions as Administrative Agent, Issuing Lender or the Requisite Lenders reasonably may require.

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(b) Closing Certificate. Administrative Agent shall have received a certificate signed by a Responsible Officer of Borrower, dated as of the Closing Date, stating that the conditions specified in Sections 4.01(c), 4.01(d) and 4.01(n) have been satisfied.

(c) Representations and Warranties. The representations and warranties made by Borrower and Holdings herein, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be correct on and as of the Closing Date.

(d) No Default or Event of Default. Each Borrower Party shall be in compliance with all the terms and provisions of the Loan Documents to which it is a party, and no Default or Event of Default shall have occurred and be continuing.

(e) No Material Adverse Effect. Since the last day of Borrower’s Fiscal Year ending September, 2003, no Material Adverse Effect (in the sole opinion of Administrative Agent) shall have occurred.

(f) Senior Notes. Concurrently with the Closing Date, Holdings shall have issued the Senior Notes.

(g) Existing Senior Notes and Subordinated Notes. Concurrently with the Closing Date, Holdings shall have redeemed Existing Senior Notes in the aggregate principal amount of not less than $397,000,000 and shall have repaid the Subordinated Note in its entirety.

(h) Senior Note Documents.

(i) Form of Senior Note Indenture. The Senior Note Indenture shall have been executed in substantially the form described in that certain Preliminary Offering Memorandum relating to the Senior Notes dated May 28, 2003, with such changes thereto, if any, that have been approved by Administrative Agent.

(ii) Senior Note Documents in Full Force and Effect. Administrative Agent shall have received a fully executed or conformed copy of each Senior Note Document and any documents executed in connection therewith, and each Senior Note Document shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Administrative Agent to be material, in each case without the consent of Administrative Agent and Requisite Lenders.

(i) Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc. Borrower shall have obtained all consents from all Governmental Authorities and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the Senior Note Documents, and each of the foregoing shall be in full force and effect, in each case other than those the failure to obtain or maintain which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

(j) Lien Searches and UCC Termination Statements. Administrative Agent shall have received (a) the results of a recent search, by a Person satisfactory to Administrative Agent,

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of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of Borrower and Development, together with copies of all such filings disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement).

(k) Opinions. Administrative Agent and Lenders shall have received an opinion of Varner, Saleson and Brandt LLP, general counsel to Holdings, Borrower, Santee and Development.

(l) Santee Credit Facility. The Santee Credit Facility shall have been amended in a manner which permits the transactions contemplated by this Agreement and the Senior Notes (including without limitation the issuance of guarantees thereof by Santee) and otherwise in a manner acceptable to the Administrative Agent.

(m) Payment of Attorney Costs. Unless waived by Administrative Agent, Borrower shall have paid all Attorney Costs of Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between Borrower and Administrative Agent).

(n) Closing Equity Contribution. Concurrently with the receipt of the proceeds of the Senior Notes, the Closing Equity Contribution shall be made.

4.02. Conditions to all Extensions of Credit. In addition to any applicable conditions precedent set forth in Section 2, the obligation of each Lender to make any Extension of Credit is subject to the following conditions precedent:

(a) the representations and warranties of Borrower contained in Section 5, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be correct on and as of the date of such Extension of Credit, except to the extent that such representations and warranties specifically refer to any earlier date.

(b) no Default or Event of Default exists, or would result from such proposed Extension of Credit.

(c) Administrative Agent shall have timely received a Request for Extension of Credit by Requisite Notice by the Requisite Time therefor.

(d) Administrative Agent shall have received, in form and substance satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as Administrative Agent or Requisite Lenders reasonably may require.

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Each request for an Extension of Credit by Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and 4.02(b) have been satisfied and on and as of the date of such Extension of Credit.

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SECTION 5.

REPRESENTATIONS AND WARRANTIES OF BORROWER AND HOLDINGS

As of the Closing Date each of Holdings and Borrower represents and warrants to Administrative Agent and Lenders and, as of the date of the making of each subsequent request for any Extension of Credit, Borrower represents and warrants to Administrative Agent and Lenders that:

5.01. Existence and Qualification; Power; Compliance with Laws. Each Borrower Party is a corporation duly organized or formed, validly existing and in good standing under the Laws of the state of its incorporation or organization, has the power and authority and the legal right to own and operate its properties, to lease the properties it operates and to conduct its business, is duly qualified and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, and is in compliance with all Laws except to the extent that noncompliance does not have a Material Adverse Effect.

5.02. Power; Authorization; Enforceable Obligations. Each Borrower Party has the power and authority and the legal right to make, deliver and perform each Loan Document and Senior Note Document to which it is a party and Borrower has power and authority to borrow hereunder and has taken all necessary action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of this Agreement and the other Loan Documents and Senior Note Documents to which it is a party. No consent or authorization of, filing with, or other act by or in respect of any Governmental Authority, is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the other Loan Documents or the Senior Note Documents. The Loan Documents and Senior Note Documents have been duly executed and delivered by each applicable Borrower Party, and constitute a legal, valid and binding obligation of each applicable Borrower Party, enforceable against each such applicable Borrower Party in accordance with their respective terms.

5.03. No Legal Bar.

The execution, delivery, and performance by each Borrower Party of the Loan Documents and Senior Note Documents to which it is a party and compliance with the provisions thereof have been duly authorized by all requisite action on the part of such Borrower Party and do not and will not (a) violate or conflict with, or result in a breach of, or require any consent under (i) any Organization Documents of such Borrower Party or any of its Subsidiaries, (ii) any applicable Laws, rules, or regulations or any order, writ, injunction, or decree of any Governmental Authority or arbitrator, or (iii) any Contractual Obligation of such Borrower Party or any of its Subsidiaries or by which any of them or any of their property is bound or subject, (b) constitute a default under any such agreement or instrument, or (c) result in, or require, the creation or imposition of any Lien on any of the properties of such Borrower Party or any of its Subsidiaries. The Senior Notes, when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom.

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5.04. Financial Statements; No Material Adverse Effect.

(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness in accordance with GAAP consistently applied throughout the period covered thereby.

(b) Since the last day of Borrower’s fiscal year ended September 28, 2003, there has been no event or circumstance which has a Material Adverse Effect.

5.05. Litigation. No litigation, investigation or proceeding of or before an arbitrator or Governmental Authority is pending or, to the knowledge of Borrower after due and diligent investigation, threatened by or against any Borrower Party or any of its Subsidiaries or against any of their properties or revenues which, if determined adversely, could have a Material Adverse Effect.

5.06. No Default. Neither any Borrower Party nor any of their respective Subsidiaries are in default under or with respect to any Contractual Obligation which could have a Material Adverse Effect, and no Default or Event of Default has occurred and is continuing or will result from the consummation of this Agreement or any of the other Loan Documents, or the making of the Extensions of Credit hereunder.

5.07. Ownership of Property; Liens. Each Borrower Party and its Subsidiaries have valid fee or leasehold interests in all real property which they use in their respective businesses, and each Borrower Party and their respective Subsidiaries have good and marketable title to all their other property, and none of such property is subject to any Lien, except as permitted in Section 7.02.

5.08. Taxes. Each Borrower Party and its Subsidiaries have filed all tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, property or transactions covered by said returns, or pursuant to any assessment received by such Borrower Party or its respective Subsidiaries, except (a) such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained, and (b) immaterial taxes; provided, however, that in each case no material item or portion of property of any Borrower Party or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited.

5.09. Margin Regulations; Investment Company Act; Public Utility Holding Company Act.

(a) No Borrower Party is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” “margin stock” within the respective meanings of each of the quoted terms under

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Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of any Extensions of Credit hereunder will be used for “purchasing” or “carrying” “margin stock” as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of Regulations U or X of such Board of Governors.

(b) No Borrower Party or any of its Subsidiaries (i) is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.10. ERISA Compliance.

(a) Borrower, each of its Subsidiaries, and each of their respective ERISA Affiliates are in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws, and have performed all their obligations under each Plan. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that has a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

5.11. Intangible Assets. Each Borrower Party and its Subsidiaries own, or possess the right to use, all trademarks, trade names, copyrights, patents, patent rights, franchises, licenses and other intangible assets that are used in the conduct of their respective businesses as now operated, and none of such items, to the best knowledge of Borrower, conflicts with the valid trademark, trade name, copyright, patent, patent right or intangible asset of any other Person to the extent that such conflict has a Material Adverse Effect.

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5.12. Compliance With Laws. Each Borrower Party and its Subsidiaries are in compliance with all Laws that are applicable to it, noncompliance with which has a Material Adverse Effect.

5.13. Environmental Compliance. Each Borrower Party and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof Borrower has reasonably concluded that such Environmental Laws and claims do not, individually or in the aggregate, have a Material Adverse Effect.

5.14. Insurance. The properties of each Borrower Party and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where Borrower or such Subsidiary operates.

5.15. Stockholders Agreements. As of the Closing Date, there are no stockholder agreements with respect to stock of Holdings or Borrower to which Holdings, Borrower or any members of their senior management are parties.

5.16. Disclosure. No statement, information, report, representation, or warranty made by any Borrower Party in any Loan Document or Senior Note Document or furnished to Administrative Agent or any Lender in connection with any Loan Document contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading.

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SECTION 6.

AFFIRMATIVE COVENANTS OF BORROWER

So long as any Extension of Credit remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitments remains outstanding, Borrower shall, and shall (except in the case of Borrower’s reporting covenants), cause each of its Subsidiaries, to:

6.01. Financial Statements. Deliver to Administrative Agent in form and detail satisfactory to Administrative Agent and the Requisite Lenders, with sufficient copies for each Lender:

(a) (i) as soon as available, but in any event within 120 days after the end of each fiscal year of Holdings, a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and the figures from the projections delivered to Lenders on or prior to the Closing Date or from the Financial Plan, as applicable, for the fiscal year covered by such financial statements, all in reasonable detail, which consolidated balance sheet and financial statements (excluding the comparisons to the projections) shall be audited and accompanied by a report and opinion of a “Big 4” public accounting firm, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions not reasonably acceptable to the Requisite Lenders; and (ii) as soon as available, but in any event within 120 days after the end of each fiscal year of Borrower, a consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and the figures from the projections delivered to Lenders on or prior to the Closing Date or from the Financial Plan, as applicable, for the fiscal year covered by such financial statements, all in reasonable detail, which consolidated balance sheet and financial statements (excluding the comparisons to the projections) shall be audited and accompanied by a report and opinion of a “Big 4” public accounting firm, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions not reasonably acceptable to the Requisite Lenders;

(b) (i) as soon as available, but in any event within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Holdings, a consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income and cash flows for such fiscal quarter and for the portion of Holding’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year and the figures from the projections delivered to Lenders on or prior to the Closing Date or from the Financial Plan, as applicable, for the fiscal quarter and portion of Holdings’ fiscal year then ended covered by such financial statements, all in reasonable detail

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and certified by a Responsible Officer of Holdings as fairly presenting the financial condition, results of operations and cash flows of Holdings and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and (ii) as soon as available, but in any event within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Borrower, a consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income and cash flows for such fiscal quarter and for the portion of Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year and the figures from the projections delivered to Lenders on or prior to the Closing Date or from the Financial Plan, as applicable, for the fiscal quarter and portion of Borrower’s fiscal year then ended covered by such financial statements, all in reasonable detail and certified by a Responsible Officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

(c) as soon as available, but in any event within 60 days after the end of each fiscal month of Borrower, a consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal month, and the related consolidated statements of income and cash flows for such fiscal month and for the portion of Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal month of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes; and

(d) as soon as practicable and in any event no later than 60 days after the end of each fiscal year, a consolidated and consolidating plan and financial forecast for such Fiscal Year and the next two succeeding fiscal years (the “Financial Plan” for such Fiscal Years), including without limitation (i) forecasted consolidated and consolidating balance sheets and forecasted consolidated and consolidating statements of income and cash flows of Borrower and its Subsidiaries for each quarter of the first such fiscal year and for each of the next two fiscal years, and projected capital expenditures for such fiscal year, together with pro forma Compliance Certificates for each such fiscal year and an explanation of the assumptions on which such forecasts are based, and (ii) such other information and projections as any Lender may reasonably request.

6.02. Certificates, Notices and Other Information. Deliver to Administrative Agent in form and detail satisfactory to Administrative Agent and the Requisite Lenders, with sufficient copies for each Lender:

(a) concurrently with the delivery of the financial statements referred to in Section 6.01(a)(ii), a certificate of its independent certified public accountants certifying such financial statement and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default hereunder or, if any such Default or Event of Default shall exist, stating the nature and status of such event;

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(b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a)(ii) and (b)(ii), a duly completed Compliance Certificate signed by a Responsible Officer of Borrower and a reconciliation of intercompany transactions between Holdings and Borrower and Borrower’s Subsidiaries;

(c) not more than 30 days after the end of each fiscal month of Borrower, a duly completed Compliance Certificate, covering Part IV of Schedule 2 thereto only, signed by a Responsible Officer of Borrower;

(d) promptly after request by Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Borrower by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them;

(e) promptly after request by Administrative Agent or any Lender, copies of any annual, regular, periodic and special reports and registration statements which Holdings may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Exchange Act;

(f) promptly after the occurrence thereof, notice of any Default or Event of Default;

(g) notice of any material change in accounting policies or financial reporting practices by Borrower or any of its Subsidiaries;

(h) promptly after the commencement thereof, notice of any litigation, investigation or proceeding affecting any Borrower Party where the amount involved exceeds $1,000,000, or in which injunctive relief or similar relief is sought, which relief, if granted, has a Material Adverse Effect;

(i) promptly after the occurrence thereof, notice of any Reportable Event with respect to any Plan or the intent to terminate any Plan, or the institution of proceedings or the taking or expected taking of any other action to terminate any Plan or withdraw from any Plan;

(j) promptly after the occurrence thereof, notice of any Material Adverse Effect;

(k) promptly after the execution thereof, copies of all amendments, waivers and supplemental indentures made with respect to the Senior Note Indenture or the Senior Notes;

(l) promptly after the receipt by Borrower or any of its Subsidiaries thereof, notice of claim or notice to the effect that Borrower of any of its Subsidiaries is in default under any of its leases of real property; and

(m) promptly, such other data and information as from time to time may be reasonably requested by Administrative Agent, or, through Administrative Agent or any Lender.

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Each notice pursuant to this Section 6.02 shall be accompanied by a statement of a Responsible Officer of Borrower setting forth details of the occurrence referred to therein and stating what action Borrower has taken and proposes to take with respect thereto.

6.03. Payment of Taxes. Pay and discharge when due all taxes, assessments, and governmental charges, Ordinary Course Liens or levies imposed on any Borrower Party or its Subsidiaries or on its income or profits or any of its property, except for any such tax, assessment, charge, or levy which is an Ordinary Course Lien under subsection (b) of the definition of such term, provided that the failure to pay any such taxes, assessments, governmental charges, Ordinary Course Liens or levies shall not be deemed to violate this covenant if the amount involved is less than $1,000,000.

6.04. Preservation of Existence. Preserve and maintain its existence, licenses, permits, rights, franchises and privileges necessary or desirable in the normal conduct of its business, except where failure to do so does not have a Material Adverse Effect.

6.05. Maintenance of Properties. Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of its properties.

6.06. Maintenance of Insurance. Maintain liability and casualty insurance with financially sound and reputable insurance companies which are not affiliated with the Borrower in such amounts and against such risks as is customary for similarly situated businesses.

6.07. Compliance With Laws.

(a) Comply with the requirements of all applicable Laws and orders of any Governmental Authority, noncompliance with which has a Material Adverse Effect.

(b) Conduct its operations and keep and maintain its property in material compliance with all Environmental Laws.

6.08. Inspection Rights. At any time during regular business hours and as often as reasonably requested, permit Administrative Agent or any Lender, or any employee, agent or representative thereof, to examine, audit and make copies and abstracts from the Borrower Parties’ records and books of account and to visit and inspect their properties and to discuss their affairs, finances and accounts with any of their officers and key employees, and, upon request, furnish promptly to Administrative Agent or any Lender true copies of all financial information and internal management reports made available to their senior management.

6.09. Keeping of Records and Books of Account. Keep adequate records and books of account reflecting all financial transactions in conformity with GAAP, consistently applied, and in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over Borrower or any of its Subsidiaries.

6.10. Compliance with ERISA. Cause, and cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of

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ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code.

6.11. Compliance With Agreements. Promptly and fully comply with all Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, except for any such Contractual Obligations (a) the performance of which would cause a Default, (b) then being contested by any of them in good faith by appropriate proceedings, or (c) if the failure to comply therewith does not have a Material Adverse Effect.

6.12. Use of Proceeds. Use the proceeds of Extensions of Credit for lawful working capital and general corporate purposes of Borrower and its Subsidiaries not otherwise in contravention of this Agreement, including the making of Restricted Payments which are expressly permitted hereby.

6.13. Further Assurances. Execute and file all such further instruments, and perform such other acts, as Administrative Agent or Requisite Lenders may determine are reasonably necessary to effectuate the intent of the Loan Documents.

6.14. Execution of Guaranty by Future Material Subsidiaries

(a) Execution of Guaranty. In the event that any Person becomes a Material Subsidiary of Holdings or Borrower after the date hereof, Borrower will promptly notify Administrative Agent of that fact and cause such Subsidiary to execute and deliver to Administrative Agent a Guaranty of the Obligations.

(b) Subsidiary Charter Documents, Legal Opinions, Etc. Borrower shall deliver to Administrative Agent, together with such Guaranty, (i) certified copies of such Subsidiary’s Certificate or Articles of Incorporation, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and each other state in which such Person is qualified as a foreign corporation to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a copy of such Subsidiary’s Bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to Administrative Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Subsidiary approving and authorizing the execution, delivery and performance of such Guaranty are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Guaranty, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Administrative Agent and its counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Guaranty, (c) the enforceability of such Guaranty against such Subsidiary, (d) such other matters as Administrative Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Administrative Agent and its counsel.

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SECTION 7.

NEGATIVE COVENANTS OF BORROWER

So long as any Extension of Credit remains unpaid, or any other Obligations remain unpaid or unperformed, or any portion of the Commitments remains outstanding, Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly:

7.01. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness hereunder and under the other Loan Documents;

(b) Guaranty Obligations issued in respect of the Senior Notes by Borrower and by the Subsidiaries of Borrower which have issued Guaranty Obligations in respect of the Obligations under this Agreement and the other Loan Documents;

(c) Indebtedness of Santee in respect of the Santee Credit Facility in a principal amount not to exceed $5,000,000, and any refinancings thereof which do not result in an increase in the principal amount of such Indebtedness;

(d) Obligations in respect of Ordinary Course Indebtedness;

(e) Indebtedness outstanding on the date hereof and listed on Schedule 7.01; and any refinancings, refundings, renewals or extensions thereof (in whole or in part), provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing and by an amount equal to any utilized commitments thereunder;

(f) Indebtedness owed by Borrower or any of its Subsidiaries under or in respect of (i) capital leases or (ii) Indebtedness incurred for the acquisition, construction or refinance of real property constructed or acquired within the 12 month period preceding the incurrence of such Indebtedness, and (iii) any refinancings, refundings, renewals or extensions of any Indebtedness permitted under this clause (d), provided that the amount of any such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing and by an amount equal to any utilized commitments thereunder; and provided further that the aggregate principal amount of all Indebtedness permitted under this clause (d) shall not at any time exceed $15,000,000;

(g) Indebtedness owed under Swap Agreements entered into for the purpose of hedging against fluctuations in interest rates payable in respect of the Obligations owed hereunder;

(h) Indebtedness owed to Borrower or any Wholly-Owned Subsidiary of Borrower; provided, that such Wholly-Owned Subsidiary is a Guarantor; and

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(i) other unsecured Indebtedness not exceeding $5,000,000 in the aggregate at any time.

7.02. Liens and Negative Pledges. Incur, assume or suffer to exist, any Lien or Negative Pledge upon any of its property, assets or revenues, whether now owned or hereafter acquired, except:

(a) Liens and Negative Pledges in favor of the Administrative Agent and the Lenders under this agreement and the Loan Documents;

(b) The Negative Pledge set forth in the Indenture for the Senior Notes as of the Closing Date, provided that the same shall not prohibit the granting of Liens to the Administrative Agent and the Lenders to secure the Obligations;

(c) Liens and Negative Pledges existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof; provided that the obligations secured or benefited thereby or the property covered thereby are not increased, except as permitted by Section 7.01(e);

(d) Ordinary Course Liens;

(e) Liens on the assets of Santee securing the Indebtedness permitted by Section 7.01(c);

(f) Liens securing the Indebtedness permitted under Section 7.01(f); provided that (i) any Liens securing Indebtedness permitted under clause (i) of Section 7.01(f) shall only extend to the property subject to the capital lease under which such Indebtedness is owed, (ii) any Liens securing Indebtedness permitted under clause (ii) of Section 7.01(f) shall only extend to the real property constructed, acquired or refinanced during the 12 month period preceding the incurrence of such Indebtedness; and (iii) any Liens securing Indebtedness permitted under clause (iii) of Section 7.01(f) shall only extend to the property securing the Indebtedness being refinanced, refunded, renewed or extended;

(g) Negative Pledges set forth in the agreements or instruments governing the Indebtedness permitted under Section 7.01(f); (i) any such Negative Pledge with respect to Indebtedness permitted under clause (i) of Section 7.01(f) shall only extend to the property subject to the capital lease under which such Indebtedness is owed, (ii) any such Negative Pledge with respect to Indebtedness permitted under clause (ii) of Section 7.01(f) shall only extend to the real property constructed, acquired or refinanced during the 12 month period preceding the incurrence of such Indebtedness; and (iii) any such Negative Pledge with respect to Indebtedness permitted under clause (iii) of Section 7.01(f) shall only extend to the property securing the Indebtedness being refinanced, refunded, renewed or extended;

(h) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Borrower or any Subsidiary of Borrower; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Borrower or the applicable Subsidiary of Borrower;

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(i) Liens on property existing at the time of acquisition thereof by Borrower or any Subsidiary of Borrower; provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any assets other than such acquired property; and Liens incurred in the ordinary course of business to secure the payment of all or a portion of the purchase price of goods held for sale; provided that such Liens do not extend to any assets other than such goods;

(j) Liens and Negative Pledges in favor of Borrower or any Subsidiary of Borrower; and

(k) other Liens securing, and Negative Pledges relating to, Indebtedness, in each case in an aggregate principal amount not to exceed $500,000 at any time.

7.03. Fundamental Changes. Merge or consolidate with or into any Person or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution, except, that so long as no Default or Event of Default exists or would result therefrom, any Subsidiary of Borrower may merge with (i) Borrower provided that Borrower shall be the continuing or surviving corporation, (ii) with any one or more Subsidiaries of Borrower, and (iii) with any joint ventures, partnerships and other Persons, so long as such joint ventures, partnerships and other Persons will, as a result of making such merger and all other contemporaneous related transactions, become a Subsidiary of Borrower; provided that when any Wholly-Owned Subsidiary of Borrower is merging into another Subsidiary of Borrower, the Wholly-Owned Subsidiary of Borrower shall be the continuing or surviving Person.

7.04. Dispositions. Make any Dispositions, except:

(a) Ordinary Course Dispositions;

(b) Dispositions permitted by Section 7.03;

(c) any Subsidiary of Borrower may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to Borrower or any of its Subsidiaries; provided that when any Wholly-Owned Subsidiary of Borrower is selling all or substantially all of its assets to another Subsidiary of Borrower, the Subsidiary acquiring such assets shall be a Wholly-Owned Subsidiary of Borrower;

(d) provided that no Default or Event of Default then exists or would result therefrom, Borrower and its Subsidiaries may Dispose of all or any portion of their interest in Santee in a Qualified Santee Sale; and

(e) Borrower and its Subsidiaries may make Dispositions in the ordinary course of business (including, without limitation, Dispositions in the ordinary course of business of stores, the inventory located therein and other property used in connection therewith) after the Closing Date of assets having an aggregate fair market value of not more than $25,000,000 in each four consecutive fiscal quarter period.

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7.05. Investments. Make any Investments, except:

(a) Investments existing on the date hereof;

(b) Ordinary Course Investments;

(c) Investments consisting of advances to officers, directors and employees of Borrower and its Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes not exceeding $500,000 in the aggregate;

(d) Investments permitted by Section 7.03; and

(e) other Investments not exceeding $5,000,000 in the aggregate.

7.06. Lease Obligations. Create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except:

(a) leases in existence on the date hereof and any renewal, extension or refinancing thereof to the extent such renewal, extension or refinancing is not prohibited by Section 7.01;

(b) leases (other than capital leases) entered into or assumed by Borrower or any of its Subsidiaries after the date hereof in the ordinary course of business; and

(c) capital leases to the extent the Indebtedness thereunder is not prohibited by Section 7.01.

7.07. Restricted Payments. Make any Restricted Payments, except:

(a) Borrower may make distributions to Holdings in an amount sufficient to make regularly scheduled payments of interest on the Senior Notes as and when the same become due;

(b) Borrower may make other distributions to Holdings in the amounts required to pay for Holdings’ corporate overhead and similar expenses, not to exceed $1,000,000 in the aggregate in any fiscal year;

(c) Borrower may make Permitted Tax Distributions to Holdings, provided that not less than two Business Days prior to the making thereof, Borrower shall provide the Administrative Agent with a certificate of its chief financial officer calculating the amount thereof; and

(d) Provided that (i) after giving effect thereto no Default or Event of Default has occurred and is continuing, and (ii) after giving pro forma effect to the making of any such distributions as of the last day of the then most recently ending fiscal quarter, Borrower remains in pro forma compliance with Sections 7.12, Borrower may make other distributions to Holdings which are in an aggregate amount not to exceed, as of any date of determination, an amount equal to the sum of $25,000,000, plus 50% of Holdings Consolidated Net Income for the period then ending following June 27, 2004.

7.08. ERISA. At any time engage in a transaction which could be subject to Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (a) engage in any non-exempt “prohibited transaction” (as defined in Section 4975 of the Code); (b) fail to comply with ERISA

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or any other applicable Laws; or (c) incur any material “accumulated funding deficiency” (as defined in Section 302 of ERISA), which, with respect to each event listed above, has a Material Adverse Effect.

7.09. Change in Nature of Business. Make any material change in the nature of the business of any Borrower Party as conducted and as proposed to be conducted as of the date hereof.

7.10. Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of Borrower other than arm’s-length transactions with Affiliates that are not otherwise prohibited hereunder; provided that the foregoing restriction shall not apply to transactions between Borrower and any of its Wholly-Owned Subsidiaries or between any of Borrower’s Wholly-Owned Subsidiaries.

7.11. Hostile Acquisitions. Use the proceeds of any Extension of Credit in connection with the acquisition of a voting interest of five percent or more in any Person if such acquisition is opposed by the board of directors or management of such Person unless (a) Borrower has given Administrative Agent (who shall promptly notify each Lender) five Business Days’ prior notice thereof and (b) no Lender shall have, within that period, notified Administrative Agent (who shall promptly notify Borrower) not consented to the use of the proceeds of such Extension of Credit for that purpose.

7.12. Financial Covenants.

(a) Adjusted Consolidated Net Worth. Permit Consolidated Net Worth, as of the last day of any fiscal quarter of the Borrower (the “Test Date”), to be less than the sum of (i) $285,000,000 plus (ii) 90% of the cumulative amount of Holdings Consolidated Net Income for the fiscal quarter ending June 30, 2004 and each subsequent fiscal quarter which has then occurred as of the Test Date (with no deduction for a net loss in any such fiscal quarter) plus (iii) 100% the gross proceeds to Holdings and its Subsidiaries of from any issuance of their equity securities following the Closing Date.

(b) Consolidated EBITDA. Permit Consolidated EBITDA for the period of four consecutive fiscal quarters ending on the last day of any fiscal quarter of Borrower to be less than $135,000,000.

7.13. Change in Auditors. Change the certified public accountants auditing the books of Borrower without the consent of Requisite Lenders, other than any change to another “Big 4” accounting firm.

7.14. Amendments or Waivers of Senior Note Documents. Agree to any material amendment to, or waive any of its material rights under, any Senior Note Document to which it is a party after the Closing Date without in each case obtaining the prior written consent of Requisite Lenders, to such amendment or waiver.

7.15. Use of Capital Contributions. Use any cash contributions to Borrower’s capital made by Holdings for any purpose other than general corporate purposes, including working capital and short term financing of capital expenditures (including without limitation the proposed construction of a new distribution center by Borrower).

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SECTION 8.

HOLDINGS COVENANTS

So long as any Extension of Credit remains unpaid, or any other Obligation remains unpaid or unperformed, or any portion of the Commitments remains outstanding:

8.01. Indebtedness. Holdings shall not create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Indebtedness, except:

(a) Indebtedness owed under the Senior Notes in an aggregate principal amount not to exceed $700,000,000, and Guaranty Obligations issued in respect thereof by Borrower and by other Subsidiaries of Holdings which have issued Guaranties in respect of the Obligations under this Agreement and the other Loan Documents;

(b) Until August 31, 2004, Indebtedness of Holdings in respect of the Existing Senior Notes in an aggregate principal amount not to exceed $42,000,000;

(c) Indebtedness incurred by or owed to Borrower or any Subsidiary of Borrower (but only to the extent that the Borrower or its Subsidiaries are permitted to incur such Indebtedness under Section 7), and Indebtedness owed to Development or any Subsidiary of Development;

(d) The Guaranty by Development and Holdings of the Obligations under the Loan Documents;

(e) Indebtedness of Development associated with the development of stores in an amount not to exceed $4,000,000 per store, or $12,000,000 in the aggregate at any one time outstanding; and

(f) Indebtedness of Borrower and its Subsidiaries which is permitted by Section 7.01.

8.02. Restricted Payments. Holdings shall not make any Restricted Payments, except that:

(a) Holdings may distribute to La Cadena or any La Cadena Successor any distributions made to Holdings pursuant to Sections 7.07(c) and 7.07(d);

(b) Holdings may make Restricted Payments to purchase, prepay, redeem or otherwise acquire for value the Senior Notes from the proceeds of any distributions made to Holdings pursuant to Section 7.07(d); and

(c) Holdings may repurchase, redeem, acquire or retire for value any capital stock of Holdings held by any key employee of Holdings or its Subsidiaries (other than any employee that is a partner of or otherwise holds any equity interest in La Cadena Investments or any La Cadena Successor) upon any such person’s death, disability or termination of employment and pursuant to any management equity subscription agreement, stock option agreement or other

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incentive compensation plan or agreement entered into in the ordinary course of business; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired capital stock shall not exceed $1,000,000, which aggregate amount shall increase by $1,000,000 on each anniversary of the Closing Date.

8.03. Change in Nature of Business; Ownership of Assets . Holdings shall not:

(a) engage in any business other than entering into and performing its obligations under and in accordance with the Loan Documents and Senior Note Documents to which it is a party and other contracts or agreements to which it is a party on the Closing Date;

(b) own any assets other than (i) the capital stock of Borrower and Development, (ii) cash and cash equivalents, and (iii) promissory notes payable by Borrower to Holdings that are otherwise permitted to be issued by Borrower hereunder;

(c) permit Development to engage in substantial business other than construction management services and the development and construction of new stores and distribution centers (including the ownership of prospective sites for new stores and activities ancillary thereto), or in any event permit Development to engage in the wholesale or retail grocery business.

8.04. Transactions with Affiliates. Holdings shall not enter into any transaction of any kind with any Affiliate of Holdings other than arm’s-length transactions with Affiliates that are not otherwise prohibited hereunder; and provided further that the foregoing restriction shall not apply to transactions between Holdings and any of its Wholly-Owned Subsidiaries or between any of Holdings’ Wholly-Owned Subsidiaries.

8.05. Amendments or Waivers of Senior Note Documents and Existing Holdings Indenture.

Holdings shall not amend or otherwise change the terms of the Senior Notes, the Senior Note Indenture, the Existing Senior Notes, or the Existing Holdings Indenture, if the effect of such amendment or change is to:

(a) increase the interest rate on Senior Notes or Existing Senior Notes;

(b) change (to earlier dates) any dates upon which payments of principal or interest are due thereon;

(c) change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto);

(d) change the redemption, prepayment or defeasance provisions thereof;

(e) change or permit any of its Subsidiaries to change any collateral therefor (other than to release such collateral);

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(f) add any Negative Pledge thereto or modify any Negative Pledge therein that would in either case restrict the ability of any Borrower Party to grant liens to secure the Obligations of such Borrower Party; or

(g) when together with all other amendments or changes made, materially increase the obligations of the obligor thereunder or confer any additional rights on the holders of such Senior Notes (or a trustee or other representative on their behalf) which would be adverse to Holdings or Lenders.

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SECTION 9.

EVENTS OF DEFAULT AND REMEDIES

9.01. Events of Default. Any one or more of the following events shall constitute an Event of Default:

(a) Borrower fails to pay any principal on any Extension of Credit as and on the date when due; or

(b) Borrower fails to pay any interest on any Extension of Credit, or any commitment fees due hereunder within three days after the date when due; or fails to pay any other fees or amount payable to Administrative Agent or any Lender under any Loan Document within five days after the date due; or

(c) Any default occurs in the observance or performance of any agreement contained in Sections 6.01, 6.02, 7 or 8; or

(d) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any other Loan Document; or any Borrower Party fails to perform or observe any other covenant or agreement (not specified above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days after the earlier of (i) the date upon which a Responsible Officer has knowledge of such failure and (ii) the date the Administrative Agent provides notice of such failure to the Borrower; or

(e) Any representation or warranty in any Loan Document or in any certificate, agreement, instrument or other document made or delivered by any Borrower Party pursuant to or in connection with any Loan Document proves to have been incorrect when made or deemed made; or

(f) Any Borrower Party (i) defaults in any payment when due of principal of or interest on any Indebtedness (other than Indebtedness hereunder) or (ii) defaults in the observance or performance of any other agreement or condition relating to any Indebtedness (other than Indebtedness hereunder) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, Indebtedness having an aggregate principal amount in excess of $5,000,000 to be demanded or become due (automatically or otherwise) prior to its stated maturity, or any Guaranty Obligation in such amount to become payable, or any Borrower Party is unable or admits in writing its inability to pay its debts as they mature; or

(g) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Borrower Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or

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(h) A final judgment against any Borrower Party is entered for the payment of money in excess of $5,000,000, or any non-monetary final judgment is entered against any Borrower Party which has a Material Adverse Effect and, in each case if such judgment remains unsatisfied without procurement of a stay of execution within 30 calendar days after the date of entry of judgment or, if earlier, five days prior to the date of any proposed sale, or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the Property of any such Person and is not released, vacated or fully bonded within 30 calendar days after its issue or levy; or

(i) Any Borrower Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under Debtor Relief Laws, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under Debtor Relief Laws relating to any such Person or to all or any part of its property is instituted without the consent of that Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

(j) (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $3,250,000; or (iii) Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $1,000,000;

(k) Any event occurs which has a Material Adverse Effect;

(l) Any Change of Control occurs.

9.02. Remedies Upon Event of Default. Without limiting any other rights or remedies of Administrative Agent or Lenders provided for elsewhere in this Agreement, or the other Loan Documents, or by applicable Law, or in equity, or otherwise:

(a) the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 9.01(i):

(i) the Requisite Lenders may request Administrative Agent to, and Administrative Agent thereupon shall, terminate the Commitments and/or declare all or any part of the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be immediately due and payable, whereupon the same shall become and be immediately due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower; and

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(ii) Issuing Lender may, with the approval of Administrative Agent on behalf of the Requisite Lenders, demand immediate payment by Borrower of an amount equal to the aggregate amount of all outstanding Letters of Credit Usage to be held in a Letter of Credit Cash Collateral Account.

(b) Upon the occurrence of any Event of Default described in Section 9.01(i):

(i) the Commitments and all other obligations of Administrative Agent or Lenders shall automatically terminate without notice to or demand upon Borrower, which are expressly waived by Borrower;

(ii) the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be immediately due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower; and

(iii) an amount equal to the aggregate amount of all outstanding Letters of Credit Usage shall be immediately due and payable to Issuing Lender without notice to or demand upon Borrower, which are expressly waived by Borrower, to be held in a Letter of Credit Cash Collateral Account.

(c) Upon the occurrence of any Event of Default, Lenders and Administrative Agent, or any of them, without notice to (except as expressly provided for in any Loan Document) or demand upon Borrower, which are expressly waived by Borrower (except as to notices expressly provided for in any Loan Document), may proceed to (but only with the consent of the Requisite Lenders) protect, exercise and enforce their rights and remedies under the Loan Documents against any Borrower Party and such other rights and remedies as are provided by Law or equity.

(d) Except as permitted by Section 11.05, no Lender may exercise any rights or remedies with respect to the Obligations without the consent of the Requisite Lenders in their sole discretion. The order and manner in which Administrative Agent’s and Lenders’ rights and remedies are to be exercised shall be determined by the Requisite Lenders in their sole discretion. Regardless of how a Lender may treat payments for the purpose of its own accounting, for the purpose of computing the Obligations hereunder, payments shall be applied first, to costs and expenses (including Attorney Costs) incurred by Administrative Agent and each Lender, second, to the payment of accrued and unpaid interest on the Loans to and including the date of such application, third, to the payment of the unpaid principal of the Loans, and fourth, to the payment of all other amounts (including fees) then owing to Administrative Agent and Lenders under the Loan Documents, in each case paid pro rata to each Lender in the same proportions that the aggregate Obligations owed to each Lender under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all Lenders, without priority or preference among Lenders. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of Administrative Agent and Lenders hereunder or thereunder or at Law or in equity.

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SECTION 10.

ADMINISTRATIVE AGENT

10.01. Appointment and Authorization of Administrative Agent.

(a) Each Lender hereby irrevocably (subject to Section 10.09) appoints, designates and authorizes Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

(b) Issuing Lender shall act on behalf of Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as Administrative Agent may agree at the request of the Requisite Lenders to act for such Issuing Lender with respect thereto; provided, however, that Issuing Lender shall have all of the benefits and immunities (i) provided to Administrative Agent in this Section 10 with respect to any acts taken or omissions suffered by Issuing Lender in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term “Administrative Agent” as used in this Section 10 included Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to Issuing Lender.

10.02. Delegation of Duties. Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

10.03. Liability of Administrative Agent. None of Administrative Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of Lenders for any recital, statement, representation or warranty made by Borrower or any Subsidiary or Affiliate of Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Administrative Agent under or in

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connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any of Borrower’s Subsidiaries or Affiliates.

10.04. Reliance by Administrative Agent.

(a) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by Administrative Agent. Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Requisite Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Requisite Lenders or all Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of Lenders.

(b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender.

10.05. Notice of Default. Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to Administrative Agent for the account of Lenders, unless Administrative Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. Administrative Agent will notify Lenders of its receipt of any such notice. Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Requisite Lenders in accordance with Section 9; provided, however, that unless and until Administrative Agent has received any such request, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of Lenders.

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10.06. Credit Decision; Disclosure of Information by Administrative Agent. Each Lender acknowledges that none of Administrative Agent-Related Persons has made any representation or warranty to it, and that no act by Administrative Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Lender as to any matter, including without limitation, whether Administrative Agent-Related Persons have disclosed material information in their possession. Each Lender, including any Lender by assignment, represents to Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly herein required to be furnished to Lenders by Administrative Agent herein, Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower or any of its Subsidiaries which may come into the possession of any of Administrative Agent-Related Persons.

10.07. Indemnification of Administrative Agent. Whether or not the transactions contemplated hereby are consummated, Lenders shall indemnify upon demand each Administrative Agent-Related Person (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), pro rata, and hold harmless each Administrative Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Administrative Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Person’s gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Requisite Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Administrative Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Administrative Agent.

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10.08. Administrative Agent in Individual Capacity. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrower and its Subsidiaries and Affiliates as though Bank of America were not Administrative Agent or Issuing Lender hereunder and without notice to or consent of Lenders. Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of Borrower or such Affiliate) and acknowledge that Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not Administrative Agent or Issuing Lender.

10.09. Successor Administrative Agent. Administrative Agent may, and at the request of the Requisite Lenders shall, resign as Administrative Agent upon 30 days’ notice to Lenders. If Administrative Agent resigns under this Agreement, the Requisite Lenders shall appoint from among Lenders a successor administrative agent for Lenders which successor administrative agent shall be approved by Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of Administrative Agent, Administrative Agent may appoint, after consulting with Lenders and Borrower, a successor administrative agent from among Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Section 10 and Sections 11.03, 11.11 and 11.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Administrative Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor agent as provided for above. Notwithstanding the foregoing, however, Bank of America may not be removed as Administrative Agent at the request of the Requisite Lenders unless Bank of America shall also simultaneously be replaced as “Issuing Lender” hereunder pursuant to documentation in form and substance reasonably satisfactory to Bank of America.

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SECTION 11.

MISCELLANEOUS

11.01. Amendments; Consents. No amendment, modification, supplement, extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, and no consent to any departure by any Borrower Party therefrom shall be effective unless in writing signed by Administrative Agent and Requisite Lenders, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise expressly provided herein, without the approval in writing of Administrative Agent and all Lenders, no amendment, modification, supplement, termination, waiver or consent may be effective:

(a) To reduce the amount of principal, principal prepayments or the rate of interest payable on, any Loan, or the amount of any fee or other amount payable to any Lender under the Loan Documents (unless such modification is consented to by each Lender entitled to receive such fee ) or to waive an Event of Default consisting of the failure of Borrower to pay when due principal, interest or any commitment fee;

(b) To postpone any date fixed for any payment of principal of, prepayment of principal of, or any installment of interest on, any Loan or any installment of any commitment fee, to extend the term of, or increase the amount of, any Lender’s Commitments (it being understood that a waiver of an Event of Default shall not constitute an extension or increase in any Commitment of any Lender) or modify the Pro Rata Share of any Lender;

(c) To amend the provisions of the definition of “Requisite Lenders”, Sections 4 or 9 or this Section 11.01;

(d) To release the any guarantor from its obligations under any Guaranty, provided that (i) in connection with any permitted Disposition of any Subsidiary of the Borrower or of Holdings, that Subsidiary shall be concurrently released from the Guaranty, and (ii) in connection with any Qualified Santee Sale, Santee shall be concurrently released from the Guaranty (and, in each case, the Administrative Agent shall be entitled to deliver any confirmations reasonably requested by Holdings, the Borrower or such Subsidiary in connection therewith);

(e) To amend any provision of this Agreement that expressly requires the consent or approval of all Lenders.

provided, however, that (i) no amendment, waiver or consent shall, unless in writing and signed by Issuing Lender in addition to the Requisite Lenders or all Lenders, as the case may be, affect the rights or duties of Issuing Lender under any Loan Document relating to Letters of Credit and (ii) any fee letters may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section shall apply equally to, and shall be binding upon, all Lenders and Administrative Agent.

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11.02. Transmission and Effectiveness of Notices and Signatures.

(a) Modes of Delivery. Except as otherwise provided in any Loan Document, notices, requests, demands, directions, agreements and documents delivered in connection with the Loan Documents (collectively, “communications”) shall be transmitted by Requisite Notice to the number and address set forth on Schedule 11.02, may be delivered by the following modes of delivery, and shall be effective as follows:

Mode of Delivery	Effective on earlier of actual receipt and:
Courier	Scheduled delivery date
Facsimile	When transmission in legible form complete
Mail	Fourth Business Day after deposit in U.S. mail first class postage pre-paid
Personal delivery	When received
Telephone	When conversation completed

provided, however, that communications delivered to Administrative Agent pursuant to Section 2 shall not be effective until actually received by Administrative Agent.

(b) Reliance by Administrative Agent and Lenders. Administrative Agent and Lenders shall be entitled to rely and act on any communications purportedly given by or on behalf of any Borrower Party even if such communications (i) were not made in a manner specified herein, (ii) were incomplete, (iii) were not preceded or followed by any other notice specified herein, or (d) the terms thereof, as understood by the recipient, varied from any subsequent related communications provided for herein. Borrower shall indemnify Administrative Agent and Lenders from any loss, cost, expense or liability as a result of relying on any communications permitted herein.

(c) Effectiveness of Facsimile Signatures. Signatures on communications may be transmitted by facsimile only with the consent of Administrative Agent in its sole discretion in each instance. The effectiveness of any such signatures accepted by Administrative Agent shall, subject to applicable Law, have the same force and effect as manual signatures and shall be binding on all Borrower Parties and Administrative Agent and Lenders. Administrative Agent may also require that any such signature be confirmed by a manually-signed hardcopy thereof.

11.03. Attorney Costs, Expenses and Taxes. Borrower agrees (a) to pay or reimburse Administrative Agent for all costs and expenses incurred in connection with the development, preparation, negotiation and execution of the Loan Documents, and the development, preparation, negotiation and execution of any amendment, waiver, consent, supplement or modification to, any Loan Documents, whether or not they become effective, and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without

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limitation, all reasonable Attorney Costs, and (b) to pay or reimburse Administrative Agent and each Lender for all costs and expenses incurred in connection with any refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement, or preservation of any rights under any Loan Documents, and any other documents prepared in connection herewith or therewith, or in connection with any refinancing, or restructuring of any such documents in the nature of a “workout” or of any insolvency or bankruptcy proceeding, including, without limitation, Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by Administrative Agent and the cost of independent public accountants and other outside experts retained by Administrative Agent or any Lender. Such costs and expenses shall also include Administrative costs of Administrative Agent reasonably attributable to the administration of the Loan Documents. Any amount payable by Borrower under this Section shall bear interest from the second Business Day following the date of demand for payment at the Default Rate, unless waived by Administrative Agent. The agreements in this Section shall survive repayment of all Obligations.

11.04. Binding Effect; Assignment.

(a) This Agreement and the other Loan Documents to which Borrower is a party will be binding upon and inure to the benefit of Borrower, Administrative Agent, Lenders and their respective successors and assigns, except that, Borrower may not assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all Lenders and any such attempted assignment shall be void. Any Lender may at any time pledge its Note or any other instrument evidencing its rights as a Lender under this Agreement to a Federal Reserve Lender, but no such pledge shall release that Lender from its obligations hereunder or grant to such Federal Reserve Lender the rights of a Lender hereunder absent foreclosure of such pledge.

(b) From time to time following the Closing Date, each Lender may assign to one or more Eligible Assignees all or any portion of its Commitments and its Pro Rata Share of the Extensions of Credit; provided that (i) such assignment, if not to a Lender or an Affiliate of the assigning Lender, shall be consented to by Borrower at all times other than during the existence of a Default or Event of Default and Administrative Agent and Issuing Lender (which approval of Borrower shall not be unreasonably withheld or delayed), (ii) a copy of a duly signed and completed Notice of Assignment and Acceptance shall be delivered to Administrative Agent, (iii) except in the case of an assignment to an Affiliate of the assigning Lender, to another Lender or of the entire remaining Commitments of the assigning Lender, the assignment shall not assign a Pro Rata Share equivalent to less than the Minimum Amount therefor, and (iv) the effective date of any such assignment shall be as specified in the Notice of Assignment and Acceptance, but not earlier than the date which is five Business Days after the date Administrative Agent has received the Notice of Assignment and Acceptance. Upon acceptance by Administrative Agent of such Notice Assignment and Acceptance and consent thereto by Administrative Agent and Issuing Lender and payment of the requisite fee described below, the Eligible Assignee named therein shall be a Lender for all purposes of this Agreement, with the Pro Rata Share therein set forth and, to the extent of such Pro Rata Share, the assigning Lender shall be released from its further obligations under this Agreement. Borrower agrees that it shall execute and deliver upon request (against delivery by the assigning Lender to Borrower of any Note) to such assignee

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Lender, one or more Notes evidencing that assignee Lender’s Pro Rata Share, and to the assigning Lender if requested, one or more Notes evidencing the remaining balance Pro Rata Share retained by the assigning Lender. Administrative Agent’s consent to and acceptance of any assignment shall not be deemed to constitute any representation or warranty by any Administrative Agent-Related Person as to any matter.

(c) After receipt of a completed Notice of Assignment and Acceptance, and receipt of an assignment fee of $3,500 from such Eligible Assignee (including Affiliates of assigning Lenders), Administrative Agent shall, promptly following the effective date thereof, provide to Borrower and Lenders a revised Schedule 11.02 giving effect thereto.

(d) Each Lender may from time to time grant participations to one or more banks or other financial institutions (including another Lender) all or any portion of its Commitments and its Pro Rata Share of the Extensions of Credit; provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Lender hereunder for any purpose except, if the participation agreement so provides, for the purposes of Section 3 (but only to the extent that the cost of such benefits to Borrower does not exceed the cost which Borrower would have incurred in respect of such Lender absent the participation) and subject to Sections 10.05 and 10.06, (iv) Borrower, Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, (v) the participation shall not restrict an increase in the Commitments or in granting Lender’s Pro Rata Share, so long as the amount of the participation interest is not affected thereby, and (vi) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents; provided, however, that the assigning Lender may, in any agreement with a participant, give such participant the right to consent to any matter which (a) extends the Maturity Date as to such participant or any other date upon which any payment of money is due to such participant, (b) reduces the rate of interest owing to such participant, any fee or any other monetary amount owing to such participant, or (c) reduces the amount of any installment of principal owing to such participant.

11.05. Set-off. In addition to any rights and remedies of Administrative Agent and Lenders or any assignee or participant of Lenders or any Affiliates thereof (each, a “Proceeding Party”) provided by law, upon the occurrence and during the continuance of any Event of Default, each Proceeding Party is authorized at any time and from time to time, without prior notice to Borrower, any such notice being waived by Borrower to the fullest extent permitted by law, to proceed directly, by right of set-off, banker’s lien, or otherwise, against any assets of the Borrower Parties which may be in the hands of such Proceeding Party (including all general or special, time or demand, provisional or other deposits and other indebtedness owing by such Proceeding Party to or for the credit or the account of Borrower) and apply such assets against the Obligations, irrespective of whether such Proceeding Party shall have made any demand therefor and although such Obligations may be unmatured. Each Lender agrees promptly to notify Borrower and Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

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11.06. Sharing of Payments. Each Lender severally agrees that if it, through the exercise of any right of setoff, banker’s lien or counterclaim against Borrower, or otherwise, receives payment of the Obligations held by it that is ratably more than any other Lender, through any means, receives in payment of the Obligations held by that Lender, then, subject to applicable Laws: (a) Lender exercising the right of setoff, banker’s lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Lender a participation in the Obligations held by the other Lender and shall pay to the other Lender a purchase price in an amount so that the share of the Obligations held by each Lender after the exercise of the right of setoff, banker’s lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker’s lien or counterclaim or receipt of payment; and (b) such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of Lenders share any payment obtained in respect of the Obligations ratably in accordance with each Lender’s share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker’s lien, counterclaim or otherwise is thereafter recovered from the purchasing Lender by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Lender that purchases a participation in the Obligations pursuant to this Section shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in an Obligation so purchased may exercise any and all rights of setoff, banker’s lien or counterclaim with respect to the participation as fully as if Lender were the original owner of the Obligation purchased.

11.07. No Waiver; Cumulative Remedies.

(a) No failure by any Lender or Administrative Agent to exercise, and no delay by any Lender or Administrative Agent in exercising, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

(b) The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law. Any decision by Administrative Agent or any Lender not to require payment of any interest (including Default Interest), fee, cost or other amount payable under any Loan Document or to calculate any amount payable by a particular method on any occasion shall in no way limit or be deemed a waiver of Administrative Agent’s or such Lender’s right to require full payment thereof, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion.

(c) The terms and conditions of Section 10 are inserted for the sole benefit of Administrative Agent and Lenders; the same may be waived in whole or in part, with or without

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terms or conditions, in respect of any Extension of Credit without prejudicing Administrative Agent’s or Lenders’ rights to assert them in whole or in part in respect of any other Loan.

11.08. Usury. Notwithstanding anything to the contrary contained in any Loan Document, the interest and fees paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If Administrative Agent or any Lender shall receive interest or a fee in an amount that exceeds the Maximum Rate, the excessive interest or fee shall be applied to the principal of the Outstanding Obligations or, if it exceeds the unpaid principal, refunded to Borrower. In determining whether the interest or a fee contracted for, charged, or received by Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations.

11.09. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.10. Integration. This Agreement, together with the other Loan Documents and any letter agreements referred to herein, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental rights or remedies in favor of Administrative Agent or Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

11.11. Nature of Lenders’ Obligations. The obligations of Lenders hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by Administrative Agent or Lenders or any of them pursuant hereto or thereto may, or may be deemed to, make Lenders a partnership, an association, a joint venture or other entity, either among themselves or with Borrower or any Affiliate of Borrower. Each Lender’s obligation to make any Loan pursuant hereto is several and not joint or joint and several, and in the case of the initial Loan only is conditioned upon the performance by all other Lenders of their obligations to make initial Loans. A default by any Lender will not increase the Pro Rata Share attributable to any other Lender.

11.12. Survival of Representations and Warranties. All representations and warranties made hereunder and in any Loan Document, certificate or statement delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery thereof but shall terminate the later of (a) when the Commitments are terminated and (b) when no Obligations remain outstanding under any Loan Document. Such representations and warranties have been or will be relied upon by Administrative Agent and each Lender,

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notwithstanding any investigation made by Administrative Agent or any Lender or on their behalf.

11.13. Indemnity by Borrower. Borrower agrees to indemnify, save and hold harmless each Administrative Agent-Related Person and each Lender and their respective Affiliates, directors, officers, agents, attorneys and employees (collectively the “Indemnitees”) from and against: (a) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any Person (other than Administrative Agent or any Lender) relating directly or indirectly to a claim, demand, action or cause of action that such Person asserts or may assert against any Borrower Party, any of their Affiliates or any of their officers or directors; (b) any and all claims, demands, actions or causes of action arising out of or relating to, the Loan Documents, any predecessor loan documents, the Commitments, the use or contemplated use of the proceeds of any Loan, or the relationship of any Borrower Party, Administrative Agent and Lenders under this Agreement; (c) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim, demand, action or cause of action described in subsection (a) or (b) above; and (d) any and all liabilities, losses, costs or expenses (including Attorney Costs) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of action or proceeding, or as a result of the preparation of any defense in connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases, whether or not an Indemnitee is a party to such claim, demand, action, cause of action or proceeding, including those liabilities caused by an Indemnitee’s own negligence (all the foregoing, collectively, the “Indemnified Liabilities”); provided that no Indemnitee shall be entitled to indemnification for any loss caused by its own gross negligence or willful misconduct or for any loss asserted against it by another Indemnitee.

11.14. Nonliability of Lenders. Borrower acknowledges and agrees that:

(a) Any inspections of any property of Borrower made by or through Administrative Agent or Lenders are for purposes of administration of the Loan Documents only, and Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of Borrower);

(b) By accepting or approving anything required to be observed, performed, fulfilled or given to Administrative Agent or Lenders pursuant to the Loan Documents, neither Administrative Agent nor Lenders shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by Administrative Agent or Lenders;

(c) The relationship between Borrower and Administrative Agent and Lenders is, and shall at all times remain, solely that of borrowers and lenders; neither Administrative Agent nor Lenders shall under any circumstance be construed to be partners or joint venturers of Borrower or their Affiliates; neither Administrative Agent nor Lenders shall under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary relationship with Borrower or their Affiliates, or to owe any fiduciary duty to Borrower or their Affiliates; neither Administrative Agent nor Lenders undertake or assume any responsibility or duty to Borrower or their Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrower or

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their Affiliates of any matter in connection with their Property or the operations of Borrower or their Affiliates; Borrower and their Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by Administrative Agent or Lenders in connection with such matters is solely for the protection of Administrative Agent and Lenders and neither Borrower nor any other Person is entitled to rely thereon; and

(d) Administrative Agent and Lenders shall not be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to Property caused by the actions, inaction or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and holds Administrative Agent and Lenders harmless from any such loss, damage, liability or claim.

11.15. No Third Parties Benefited. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of Borrower, Administrative Agent and Lenders in connection with the Loans, and is made for the sole benefit of Borrower, Administrative Agent and Lenders, and Administrative Agent’s and Lenders’ successors and assigns. Except as provided in Sections 10.04 and 10.08, no other Person shall have any rights of any nature hereunder or by reason hereof.

11.16. Severability. Any provision of the Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

11.17. Confidentiality. Administrative Agent and each Lender shall use any confidential non-public information concerning the Borrower Parties and their Subsidiaries that is furnished to Administrative Agent or such Lender by or on behalf of the Borrower Parties and their Subsidiaries in connection with the Loan Documents (collectively, “Confidential Information”) solely for the purpose of evaluating and providing products and services to them and administering and enforcing the Loan Documents, and it will hold the Confidential Information in confidence. Notwithstanding the foregoing, Administrative Agent and each Lender may disclose Confidential Information to (a) any governmental agency or regulatory body having or claiming to have authority to regulate or oversee any aspect of Administrative Agent’s or such Lender’s business or that of their affiliates or any of their or their affiliates’ directors, officers, employees, advisors, or representatives (collectively, the “Representatives”) in connection with the exercise of such authority or claimed authority; (b) the extent necessary or appropriate to effect or preserve Administrative Agent’s or such Lender’s or any of their Affiliates’ security (if any) for any Obligation or to enforce any right or remedy or in connection with any claims asserted by or against Administrative Agent or such Lender or any of their Representatives; (c) Representatives whom it determines need to know such information for the purposes set forth in this Section; and (d) any bank or financial institution or other entity to which such Lender has assigned or desires to assign an interest or participation in the Loan Documents or the Obligations, provided that any such recipient of such Confidential Information agrees to keep such Confidential Information confidential as specified herein. For purposes hereof, the term “Confidential Information” shall not include information that (x) is in

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Administrative Agent’s or a Lender’s possession prior to its being provided by or on behalf of the Borrower Parties, provided that such information is not known by Administrative Agent or such Lender to be subject to another confidentiality agreement with, or other legal or contractual obligation of confidentiality to, a Borrower Party, (y) is or becomes publicly available (other than through a breach hereof by Administrative Agent or such Lender), or (z) becomes available to Administrative Agent or such Lender on a nonconfidential basis, provided that the source of such information was not known by Administrative Agent or such Lender to be bound by a confidentiality agreement or other legal or contractual obligation of confidentiality with respect to such information.

11.18. Further Assurances. Borrower and its Subsidiaries shall, at their expense and without expense to Lenders or Administrative Agent, do, execute and deliver such further acts and documents as any Lender or Administrative Agent from time to time reasonably requires for the assuring and confirming unto Lenders or Administrative Agent of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document.

11.19. Headings. Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose.

11.20. Time of the Essence. Time is of the essence of the Loan Documents.

11.21. Foreign Lenders and Participants. Each Lender, and each holder of a participation interest herein, that is a “foreign corporation, partnership or trust” within the meaning of the Code shall deliver to Administrative Agent, within 20 days after the Closing Date (or after accepting an assignment or receiving a participation interest herein) two duly signed completed copies of either Form W-8BEN (relating to such Person and entitling it to a complete exemption from withholding on all payments to be made to such Person by Borrower pursuant to this Agreement) or Form W-8ECI (relating to all payments to be made to such Person by Borrower pursuant to this Agreement) of the United States Internal Revenue Service or such other evidence satisfactory to Borrower and Administrative Agent that no withholding under the federal income tax laws is required with respect to such Person. Thereafter and from time to time, each such Person shall (a) promptly submit to Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to Borrower and Administrative Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Person by Borrower pursuant to this Agreement and (b) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office, if any) to avoid any requirement of applicable Laws that Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Persons fails to deliver the above forms or other documentation, then Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. If any Governmental Authority asserts that Administrative Agent did not properly withhold any tax or

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other amount from payments made in respect of such Person, such Person shall indemnify Administrative Agent therefor, including all penalties and interest and costs and expenses (including Attorney Costs) of Administrative Agent. The obligation of Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Administrative Agent.

11.22. Governing Law.

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER PARTY, ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER PARTY, ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED HERETO. EACH BORROWER PARTY, ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF THE STATE OF CALIFORNIA.

11.23. Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

11.24. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

STATER BROS. MARKETS
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer

STATER BROS. HOLDINGS, INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer

BANK OF AMERICA, N.A., as Administrative Agent
By:	/S/    KEN PURO
Name:	Ken Puro
Title:	Vice President

BANK OF AMERICA, N.A., as Issuing Lender and a Lender
By:	/S/    J. FREEMAN
Name:	Jamie Freeman
Title:	Vice President

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SCHEDULE 2.01

Lender	Commitment		Pro Rata Share
BANK OF AMERICA, N.A.
Total	$	75,000,000.00	100.000000000	%

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EX-10.37

Exhibit 10.37

SUBSIDIARY GUARANTY

This GUARANTY is entered into as of June 17, 2004 by the undersigned (each a “Guarantor”, and together with any future Material Subsidiaries executing this Guaranty, being collectively referred to herein as the “Guarantors”), in favor of and for the benefit of BANK OF AMERICA, N.A., as agent for and representative of (in such capacity herein called “Guarantied Party”) the financial institutions (“Lenders”) party to the Credit Agreement referred to below and Swap Counterparties (as hereinafter defined), and for the benefit of the other Beneficiaries (as hereinafter defined).

RECITALS

A. Stater Bros. Markets, a California corporation (“Borrower”), and Stater Bros. Holdings Inc., a Delaware corporation (“Holdings”), have entered into that certain Amended and Restated Credit Agreement dated as of June 17, 2004 with Lenders and Guarantied Party, as Administrative Agent for Lenders (said Amended and Restated Credit Agreement, as it may hereafter be amended, supplemented or otherwise modified from time to time, being the “Credit Agreement”; capitalized terms defined therein and not otherwise defined herein being used herein as therein defined).

B. Borrower may from time to time enter, or may from time to time have entered, into one or more Swap Agreements (collectively, the “Lender Swap Agreements”) with one or more Persons that are Lenders or Affiliates of Lenders at the time such Swap Agreements are entered into (in such capacity, collectively, the “Swap Counterparties”) in accordance with the terms of the Credit Agreement, and it is desired that the obligations of Borrower under the Lender Swap Agreements, including without limitation the obligation of Borrower to make payments thereunder in the event of early termination thereof, together with all obligations of Borrower under the Credit Agreement and the other Loan Documents, be guarantied hereunder.

C. Guarantied Party, Lenders and each Swap Counterparty for which Guarantied Party has received the notice required by Section 18 hereof are sometimes referred to herein as “Beneficiaries”.

D. The terms of the Credit Agreement require that each Material Subsidiary of the Borrower guaranty the Guarantied Obligations.

NOW, THEREFORE, based upon the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lenders and Guarantied Party to enter into the Credit Agreement and to make Loans and other extensions of credit thereunder and to induce the Swap Counterparties to enter into the Lender Swap Agreements, Guarantors hereby agree as follows:

1. Guaranty. (a) In order to induce Lenders to extend credit to Borrower pursuant to the Credit Agreement and the entry by Swap Counterparties into the Lender Swap Agreements, Guarantors jointly and severally irrevocably and unconditionally guaranty, as primary obligors and not merely as sureties, the due and punctual payment in full of all Guarantied Obligations (as hereinafter defined) when the same shall become due, whether at

stated maturity, by acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)). The term “Guarantied Obligations” is used herein in its most comprehensive sense and includes any and all Obligations of Borrower and all obligations of Borrower under Lender Swap Agreements, now or hereafter made, incurred or created, whether absolute or contingent, liquidated or unliquidated, whether due or not due, and however arising under or in connection with the Credit Agreement, the Lender Swap Agreements, this Guaranty and the other Loan Documents, including those arising under successive borrowing transactions under the Credit Agreement which shall either continue such obligations of Borrower or from time to time renew them after they have been satisfied.

Each Guarantor acknowledges that a portion of the Guarantied Obligations are being incurred for and will inure to its benefit.

Any interest on any portion of the Guarantied Obligations that accrues after the commencement of any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Borrower (or, if interest on any portion of the Guarantied Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Guarantied Obligations if said proceeding had not been commenced) shall be included in the Guarantied Obligations because it is the intention of each Guarantor and Guarantied Party that the Guarantied Obligations should be determined without regard to any rule of law or order that may relieve Borrower of any portion of such Guarantied Obligations.

In the event that all or any portion of the Guarantied Obligations is paid by Borrower, the obligations of each Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) is rescinded or recovered directly or indirectly from Guarantied Party or any other Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments that are so rescinded or recovered shall constitute Guarantied Obligations.

Subject to the other provisions of this Section 1, upon the failure of Borrower to pay any of the Guarantied Obligations when and as the same shall become due, each Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to the aggregate of the unpaid Guarantied Obligations.

(b) Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor under this Guaranty shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Guarantor (x) in respect of intercompany indebtedness to Borrower or other affiliates of Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder and (y) under any guaranty of Subordinated Indebtedness which guaranty contains a limitation as to

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maximum amount similar to that set forth in this Section 1(b), pursuant to which the liability of such Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms of any agreement.

(c) Each Guarantor under this Guaranty, and each guarantor under other guaranties, if any, relating to the Credit Agreement (the “Related Guaranties”) that contain a contribution provision similar to that set forth in this Section 1(c), together desire to allocate among themselves (collectively, the “Contributing Guarantors”), in a fair and equitable manner, their obligations arising under this Guaranty and the Related Guaranties. Accordingly, in the event any payment or distribution is made on any date by a Guarantor under this Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such other guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in the maximum amount permitted by law so as to maximize the aggregate amount of the Guarantied Obligations paid to Beneficiaries.

2. Guaranty Absolute; Continuing Guaranty. The obligations of each Guarantor hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guarantied Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty of payment when due and not of collectibility; (b) Guarantied Party may enforce this Guaranty upon the occurrence of an Event of Default under the Credit Agreement or the occurrence of an early termination date or similar event under any Lender Swap Agreements notwithstanding the existence of any dispute between Borrower and any Beneficiary with respect to the existence of such event; (c) the obligations of each Guarantor hereunder are independent of the obligations of Borrower under the Loan Documents or the Lender Swap Agreements and the obligations of any other Guarantor and a separate action or actions may be brought and prosecuted against each Guarantor whether or not any action is brought against Borrower or any of such other Guarantors and whether or not Borrower is joined in any such action or actions; and (d) a payment of a portion, but not all, of the Guarantied Obligations by one or more Guarantors shall in no way limit, affect, modify or abridge the liability of such or any other Guarantor for any portion of the Guarantied Obligations that has not been paid. This Guaranty is a continuing guaranty and shall be binding upon each Guarantor and its successors and assigns, and each Guarantor irrevocably waives any right (including without limitation any such right arising under California Civil Code Section 2815) to revoke this Guaranty as to future transactions giving rise to any Guarantied Obligations.

3. Actions by Beneficiaries. Any Beneficiary may from time to time, without notice or demand and without affecting the validity or enforceability of this Guaranty or giving rise to any limitation, impairment or discharge of any Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Guarantied Obligations, (b) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guarantied Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any

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other obligations, (c) request and accept other guaranties of the Guarantied Obligations and take and hold security for the payment of this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise, subordinate or modify, with or without consideration, any security for payment of the Guarantied Obligations, any other guaranties of the Guarantied Obligations, or any other obligation of any Person with respect to the Guarantied Obligations, (e) enforce and apply any security now or hereafter held by or for the benefit of any Beneficiary in respect of this Guaranty or the Guarantied Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy. that Guarantied Party or the other Beneficiaries, or any of them, may have against any such security, as Guarantied Party in its discretion may determine consistent with the Credit Agreement, the Lender Swap Agreements and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (f) exercise any other rights available to Guarantied Party or the other Beneficiaries, or any of them, under the Loan Documents or the Lender Swap Agreements.

4. No Discharge. This Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Guarantied Obligations), including without limitation the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (a) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Guarantied Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guarantied Obligations, (b) any waiver or modification of, or any consent to departure from, any of the terms or provisions of the Credit Agreement, any of the other Loan Documents, the Lender Swap Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guarantied Obligations, (c) the Guarantied Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (d) the application of payments received from any source to the payment of indebtedness other than the Guarantied Obligations, even though Guarantied Party or the other Beneficiaries, or any of them, might have elected to apply such payment to any part or all of the Guarantied Obligations, (e) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guarantied Obligations, (1) any defenses, set-offs or counterclaims which Borrower may assert against Guarantied Party or any Beneficiary in respect of the Guarantied Obligations, including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (g) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of a Guarantor as an obligor in respect of the Guarantied Obligations.

5. Waivers. Each Guarantor waives, for the benefit of Beneficiaries: (a) any right to require Guarantied Party or the other Beneficiaries, as a condition of payment or performance by such Guarantor, to (i) proceed against Borrower, any other guarantor (including any other Guarantor) of the Guarantied Obligations or any other Person, (ii) proceed against or exhaust any security held from Borrower, any other guarantor of the Guarantied Obligations or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of any Beneficiary in favor of Borrower or any other Person, or (iv) pursue any other

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remedy in the power of any Beneficiary; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Borrower including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Guarantied Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Borrower from any cause other than payment in full of the Guarantied Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon Guarantied Party's or any other Beneficiary's errors or omissions in the administration of the Guarantied Obligations, except behavior that amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, that are or might be in conflict with the terms of this Guaranty and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any Lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance of this Guaranty, notices of default under the Credit Agreement, notices of default or early termination under any Lender Swap Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guarantied Obligations or any agreement related thereto, notices of any extension of credit to Borrower and notices of any of the matters referred to in the preceding paragraph and any right to consent to any thereof; and (g) to the fullest extent permitted by law, any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Guaranty.

As used in this paragraph, any reference to “the principal” includes Borrower, and any reference to “the creditor” includes Guarantied Party and each other Beneficiary. In accordance with Section 2856 of the California Civil Code (a) each Guarantor waives any and all rights and defenses available to it by reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code, including without limitation any and all rights or defenses such Guarantor may have by reason of protection afforded to the principal with respect to any of the Guarantied Obligations, or to any other guarantor of any of the Guarantied Obligations with respect to any of such guarantor's obligations under its guaranty, in either case pursuant to the antideficiency or other laws of the State of California limiting or discharging the principal's indebtedness or such guarantor's obligations, including without limitation Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and (b) each Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guarantied Obligation, has destroyed such Guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise; and even though that election of remedies by the creditor, such as nonjudicial foreclosure with respect to security for an obligation of any other guarantor of any of the Guarantied Obligations, has destroyed such Guarantor's rights of contribution against such other guarantor. No other provision of this Guaranty shall be construed as limiting the generality of any of the covenants and waivers set forth in this paragraph.

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6. Guarantors’ Rights of Subrogation, Contribution, Etc.; Subordination of Other Obligations. Each Guarantor waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Borrower or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute (including without limitation under California Civil Code Section 2847, 2848 or 2849), under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Borrower, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Borrower, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guarantied Obligations shall have been paid in full and the Commitments shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor of any of the Guarantied Obligations. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Borrower or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights Guarantied Party or the other Beneficiaries may have against Borrower, to all right, title and interest Guarantied Party or the other Beneficiaries may have in any such collateral or security, and to any right Guarantied Party or the other Beneficiaries may have against such other guarantor.

Any indebtedness of Borrower now or hereafter held by any Guarantor is subordinated in right of payment to the Guarantied Obligations, and any such indebtedness of Borrower to a Guarantor collected or received by such Guarantor after an Event of Default has occurred and is continuing, and any amount paid to a Guarantor on account of any subrogation, reimbursement, indemnification or contribution rights referred to in the preceding paragraph when all Guarantied Obligations have not been paid in full, shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to be credited and applied against the Guarantied Obligations.

7. Expenses. Guarantors jointly and severally agree to pay, or cause to be paid, on demand, and to save Guarantied Party and the other Beneficiaries harmless against liability for, any and all costs and expenses (including fees and disbursements of counsel and allocated costs of internal counsel) incurred or expended by Guarantied Party or any other Beneficiary in connection with the enforcement of or preservation of any rights under this Guaranty.

8. Financial Condition of Borrower. No Beneficiary shall have any obligation, and each Guarantor waives any duty on the part of any Beneficiary, to disclose or discuss with such Guarantor its assessment, or such Guarantor's assessment, of the financial condition of Borrower or any matter or fact relating to the business, operations or condition of Borrower. Each Guarantor has adequate means to obtain information from Borrower on a continuing basis concerning the financial condition of Borrower and its ability to perform its obligations under the Loan Documents and the Lender Swap Agreements, and each Guarantor assumes the

6

responsibility for being and keeping informed of the financial condition of Borrower and of all circumstances bearing upon the risk of nonpayment of the Guarantied Obligations.

9. Representations and Warranties. Each Guarantor makes, for the benefit of Beneficiaries, each of the representations and warranties made in the Credit Agreement by Borrower as to such Guarantor, its assets, financial condition, operations, organization, legal status, business and any Loan Documents to which it is a party.

10. Covenants. Each Guarantor agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be outstanding, or any Lender shall have any Commitment or any Swap Counterparty shall have any obligation under such Lender Swap Agreement, such Guarantor will, unless Requisite Lenders shall otherwise consent in writing, perform or observe, and cause its Subsidiaries to perform or observe, all of the terms, covenants and agreements that the Loan Documents state that Borrower is to cause a Guarantor and such Subsidiaries to perform or observe.

11. Set Off. In addition to any other rights any Beneficiary may have under law or in equity, if any amount shall at any time be due and owing by a Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized at any time or from time to time, without notice (any such notice being expressly waived), to set off and to appropriate and to apply any and all deposits (general or special, including but not limited to indebtedness evidence by certificates of deposit, whether matured or unmatured) and any other indebtedness of such Beneficiary owing to a Guarantor and any other property of such Guarantor held by a Beneficiary to or for the credit or the account of such Guarantor against and on account of the Guarantied Obligations and liabilities of such Guarantor to any Beneficiary under this Guaranty.

12. Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of a Guarantor or any of its successors in interest under this Guaranty shall be sold or otherwise disposed of (including by merger or consolidation) in a sale not prohibited by the Credit Agreement or otherwise consented to by Requisite Lenders, the obligations of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such sale.

13. Amendments and Waivers. No amendment, modification, termination or waiver of any provision of this Guaranty, and no consent to any departure by any Guarantor therefrom, shall in any event be effective without the written concurrence of Guarantied Party and, in the case of any such amendment or modification, Guarantors. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.

14. Miscellaneous. It is not necessary for Beneficiaries to inquire into the capacity or powers of any Guarantor or Borrower or the officers, directors or any agents acting or purporting to act on behalf of any of them.

The rights, powers and remedies given to Beneficiaries by this Guaranty are cumulative and shall be in addition to and independent of all rights, powers and remedies given to Beneficiaries by virtue of any statute or rule of law or in any of the Loan Documents or Lender

7

Swap Agreements or any agreement between one or more Guarantors and one or more Beneficiaries or between Borrower and one or more Beneficiaries. Any forbearance or failure to exercise, and any delay by any Beneficiary in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy.

In case any provision in or obligation under this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS, GUARANTIED PARTY AND THE OTHER BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

This Guaranty shall inure to the benefit of Beneficiaries and their respective successors and assigns.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY. Each Guarantor agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such Guarantor at its address set forth below its signature hereto, such service being acknowledged by such Guarantor to be sufficient for personal jurisdiction in any action against such Guarantor in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Guarantied Party or any Beneficiary to bring proceedings against such Guarantor in the courts of any other jurisdiction.

EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, GUARANTIED PARTY EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each Guarantor and, by its acceptance of the benefits hereof, Guarantied Party each (i) acknowledges that this waiver is a material inducement for such Guarantor and Guarantied Party to enter into a business relationship, that such Guarantor and

8

Guarantied Party have already relied on this waiver in entering into this Guaranty or accepting the benefits thereof, as the case may be, and that each will continue to rely on this waiver in their related future dealings, and (ii) further warrants and represents that each has reviewed this waiver with its legal counsel and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court.

15. Additional Guarantors. The initial Guarantor(s) hereunder shall be such of the Subsidiaries of Borrower as are signatories hereto on the date hereof. From time to time subsequent to the date hereof, Material Subsidiaries of the Borrower may become parties hereto, as additional Guarantors (each an “Additional Guarantor”), by executing a counterpart of this Guaranty. Upon delivery of any such counterpart to the Administrative Agent, notice of which is hereby waived by the Guarantor, each such Additional Guarantor shall be a Guarantor and shall be as fully a party hereto as if such Additional Guarantor were an original signatory hereof. Each Guarantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Guarantor hereunder, nor by any election of the Administrative Agent not to cause any Subsidiary of the Borrower to become an Additional Guarantor hereunder. This Guaranty shall be fully effective as to any Guarantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Guarantor hereunder.

16. Counterparts; Effectiveness. This Guaranty may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original for all purposes; but all such counterparts together shall constitute but one and the same instrument. This Guaranty shall become effective as to each Guarantor upon the execution of a counterpart hereof by such Guarantor (whether or not a counterpart hereof shall have been executed by any other Guarantor) and receipt by the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

17. Guarantied Party as Agent.

(a) Guarantied Party has been appointed to act as Guarantied Party hereunder by Lenders. Guarantied Party shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take Or refrain from taking any action, solely in accordance with this Guaranty and the Credit Agreement.

(b)Guarantied Party shall at all times be the same Person that is Administrative Agent under the Credit Agreement. Written notice of resignation by Administrative Agent pursuant to subsection 10.9 of the Credit Agreement shall also constitute notice of resignation as Guarantied Party under this Guaranty; removal of Administrative Agent pursuant to subsection 10.9 of the Credit Agreement shall also constitute removal as Guarantied Party under this Guaranty; and appointment of a successor Administrative Agent pursuant to subsection 10.9 of the Credit Agreement shall also constitute appointment of a successor

9

Guarantied Party under this Guaranty. Upon the acceptance of any appointment as Administrative Agent under subsection 10.9 of the Credit Agreement by successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to become vested with all the rights, powers, privileges and duties of the retiring or removed Guarantied party under this Guaranty, and the retiring or removed Guarantied Party under this Guaranty shall promptly (i) transfer to such successor Guarantied Party all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Guarantied Party under this Guaranty, and (ii) take such other actions as may be necessary or appropriate in connection with the assignment to such successor Guarantied Party of the rights created hereunder, whereupon such retiring or removed Guarantied Party shall be discharged from its duties and obligations under this Guaranty. After any retiring or removed Guarantied Party's resignation or removal hereunder as Guarantied Party, the provisions of this Guaranty shall inure to its benefits as to any actions taken or omitted to be taken by it under this Guaranty while it was Guarantied Party hereunder.

18. Release of Guarantors. Each Guarantor shall be deemed released from this Guaranty upon the permitted sale or other disposition of that Guarantor as contemplated by the Credit Agreement (or in the case of Santee, in the event of any Qualified Santee Sale).

[The remainder of this page intentionally left blank.]

10

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first written above.

STATER BROS. HOLDINGS INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
Address:
21700 Barton Road
Colton, CA 92324
Attn:	Chief Financial Officer
FAX:	(909) 783-
STATER BROS. DEVELOPMENT, INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
Address:
21700 Barton Road
Colton, CA 92324
Attn:	Chief Financial Officer
FAX:	(909) 783-
SANTEE DAIRIES, INC.
By:	/S/    JACK H. BROWN
Name:	Jack H. Brown
Title:	Chairman of the Board, President and Chief Executive Officer
Address:
17851 East Railroad St
City Of Industry, CA 91748
Attn:	Chief Financial Officer
FAX:	(626) 923-3038

11

EX-12.1

Exhibit 12.1

STATER BROS. HOLDINGS INC.

Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in thousands)

																Unaudited
	Fiscal Years Ended(1)															39 Weeks Ended
	Sept 26, 1999(5)			Sept 24, 2000(5)			Sept 30, 2001(5)			Sept. 29, 2002(5)			Sept. 28, 2003(5)			June 29, 2003(5)			June 27, 2004(5)(6)
	(in thousands of dollars except per share and store data)
Earnings:
Income (loss ) before income taxes	$	(14,091	)	$	(9,864	)	$	14,431		$	19,097		$	16,554		$	12,945		$	99,449
Amortization of capitalized interest		324			326			338			341			352			264			239
Interest(2),(3),(4)		63,804			53,040			53,846			53,086			52,524			39,588			63,876
Less interest capitalized during the period		(64	)		(35	)		(238	)		(144	)		(144	)		(149	)		(243	)
Net amortization of debt discount and premium and issuance expense		2,771			2,542			2,532			3,158			3,158			2,591			10,085
Interest portion of rental expense		16,031			20,333			21,407			21,848			22,740			18,211			18,211
Earnings as adjusted	$	68,775		$	66,342		$	92,316		$	97,386		$	95,184		$	73,450		$	191,615
Fixed Charges:
Interest	$	63,804		$	53,040		$	53,846		$	53,086		$	52,524		$	39,588		$	63,876
Net amortization of debt discount and premium and issuance expense		2,771			2,542			2,532			3,158			3,158			2,591			10,885
Interest portion of rental expense		16,031			20,333			21,407			21,848			22,740			18,211			18,211
Fixed Charges	$	82,606		$	75,915		$	77,785		$	78,092		$	78,422		$	60,390		$	91,171
Ratio of Earnings to Fixed Charges		0.83			0.87			1.19			1.25			1.21			1.22			2.08

⁽¹⁾ The fiscal year 2001 was a 53-week year, whereas fiscal years 2002 and 2003 were 52-week years.

⁽²⁾ Interest expense for fiscal year 1999 included $18.7 million for tender premium and fees related to the purchase of Stater Bros.’ 11% Senior Notes due 2001 and 9% Senior Subordinated Notes due 2004 and a charge of $9.8 million for the write-off of deferred offering cost related to these Notes.

⁽³⁾ Interest expense for fiscal year 2000 includes a reduction in interest expense related to the gain of $1.9 million for the early retirement of $11 million of 10 ¾% Notes.

⁽⁴⁾ Interest expense for the thirty-nine weeks ended June 27, 2004 included a $16.9 million payment for tender premium and fees on the purchase of $397.8 million principal amount of the 10 ¾% Notes, a make whole payment by Santee of $8.5 million related to Santee’s redemption of all the outstanding Santee Notes and an $8.6 million charge for the write-off of deferred offering cost related to (i) the purchase of the 10 ¾% Notes, (ii) the early retirement of the $20.0 million 5.0% Subordinated Note of Stater Bros. due 2007 and (iii) the redemption of the Santee Notes.

⁽⁵⁾ For the purpose of determining the ratio of earnings to fixed charges, earnings consist of income before income taxes and amortization of previously capitalized interest. Fixed charges consist of interest expense whether expensed or capitalized, amortization of deferred debt expense, and such portion of rental expense as can be deemed by management to be representative of the interest factor in the particular case. Included in earnings and fixed charges is Stater Bros.’ 50% share of Santee.

⁽⁶⁾ For the unaudited 39 weeks ended June 27, 2004, included in earnings and fixed charges is Stater Bros.’ 50% share of fixed charges and earnings of Santee through February 6, 2004. Santee has been consolidated into Stater Bros.’ consolidated results since that date.

EX-21.1

Exhibit 21.1

Subsidiaries of Stater Bros. Holdings Inc.

Name	Jurisdiction	D/B/A
Stater Bros. Markets	California	Stater Bros. Markets
Stater Bros. Development, Inc.	California	Stater Bros. Development, Inc.

EX-21.2

Exhibit 21.2

Subsidiaries of Stater Bros. Markets

Name	Jurisdiction	D/B/A
Santee Dairies, Inc.	California	Santee Dairies, Inc.

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated December 5, 2003, in the Registration Statement (Form S-4) and related Prospectus of Stater Bros. Holdings Inc. for the registration of $525,000,000 8 1/8% Senior Notes Due 2012 and $175,000,000 Floating Rate Senior Notes Due 2010.

/s/ Ernst & Young LLP

Orange County, California

August 20, 2004

EX-25.1

Exhibit 25.1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE

ELIGIBILITY OF A TRUSTEE PURSUANT TO

SECTION 305(b)(2)    ¨

THE BANK OF NEW YORK

(Exact name of trustee as specified in its charter)

New York	13-5160382
(State of incorporation if not a U.S. national bank)	(I.R.S. employer identification no.)
One Wall Street, New York, N.Y.	10286
(Address of principal executive offices)	(Zip code)

Stater Bros. Holdings Inc.

(Exact name of obligor as specified in its charter)

Delaware	33-0350671
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

Stater Bros. Markets

(Exact name of obligor as specified in its charter)

California
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

Stater Bros. Development Inc.

(Exact name of obligor as specified in its charter)

California
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

Santee Dairies, Inc.

(Exact name of obligor as specified in its charter)

California
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

21700 Barton Road Colton, California	92324
(Address of principal executive offices)	(Zip code)

8 ¹/8% Senior Notes due 2012

Floating Rate Senior Notes due 2010

(Title of the indenture securities)

1. General information. Furnish the following information as to the Trustee:

(a) Name and address of each examining or supervising authority to which it is subject.

Name	Address
Superintendent of Banks of the State of New York	2 Rector Street, New York, N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York	33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation	Washington, D.C. 20429
New York Clearing House Association	New York, New York 10005

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

2. Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

16. List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.)

4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)

6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)

7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 13th day of August, 2004.

THE BANK OF NEW YORK
By:	/S/ STACEY POINDEXTER
Name:    STACEY POINDEXTER     Title:      ASSISTANT VICE PRESIDENT

-4-

EXHIBIT 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of One Wall Street, New York, N.Y. 10286

And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business March 31, 2004, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

	Dollar Amounts In Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin	$	2,589,012
Interest-bearing balances		8,872,373
Securities:
Held-to-maturity securities		1,382,393
Available-for-sale securities		21,582,893
Federal funds sold and securities purchased under agreements to resell
Federal funds sold in domestic offices		792,900
Securities purchased under agreements to resell		932,155
Loans and lease financing receivables:
Loans and leases held for sale		555,415
Loans and leases, net of unearned income		36,884,850
LESS: Allowance for loan and lease losses		628,457
Loans and leases, net of unearned income and allowance		36,256,393
Trading Assets		3,654,160
Premises and fixed assets (including capitalized leases)		929,969
Other real estate owned		319
Investments in unconsolidated subsidiaries and associated companies		247,156
Customers’ liability to this bank on acceptances outstanding		215,581
Intangible assets
Goodwill		2,687,623
Other intangible assets		752,283
Other assets		7,905,137
Total assets	$	89,355,762

LIABILITIES
Deposits:
In domestic offices	$	33,940,195
Noninterest-bearing		13,973,047
Interest-bearing		19,967,148
In foreign offices, Edge and Agreement subsidiaries, and IBFs		22,717,175
Noninterest-bearing		447,242
Interest-bearing		22,269,933
Federal funds purchased and securities sold under agreements to repurchase
Federal funds purchased in domestic offices		442,904
Securities sold under agreements to repurchase		671,802
Trading liabilities		2,452,604
Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)		10,779,148
Bank’s liability on acceptances executed and outstanding		217,705
Subordinated notes and debentures		2,390,000
Other liabilities		7,230,967
Total liabilities	$	80,842,500
Minority interest in consolidated subsidiaries		141,523
EQUITY CAPITAL
Perpetual preferred stock and related surplus		0
Common stock		1,135,284
Surplus		2,080,657
Retained earnings		5,021,014
Accumulated other comprehensive income		134,784
Other equity capital components		0
Total equity capital		8,371,739
Total liabilities minority interest and equity capital	$	89,355,762

I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Thomas J. Mastro,                

Senior Vice President and Comptroller                

We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell	Directors
Alan R. Griffith

EX-99.1

Exhibit 99.1

LETTER OF TRANSMITTAL

STATER BROS. HOLDINGS INC.

Exchange Offer

for

$525,000,000 Outstanding 8 ¹/8% Senior Notes due 2012

in Exchange for New 8 ¹/8% Senior Notes due 2012

and

$175,000,000 Floating Rate Senior Notes due 2010

in Exchange for New Floating Rate Senior Notes due 2010

Pursuant to the Prospectus, dated [                    ], 2004

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [                    ], 2004, UNLESS EXTENDED (THE “EXPIRATION DATE”). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

The Exchange Agent for the Exchange Offer is:

THE BANK OF NEW YORK

By mail, hand delivery or overnight courier:

The Bank of New York

101 Barclay Street, Floor 7 East

New York, NY 10286

Attention: David A. Mauer

By facsimile transmission:

(for eligible institutions only)

(212) 298-1915

Confirm by telephone:

(212) 815-2548

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL.

The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated [                    ], 2004 (the “Prospectus”), of Stater Bros. Holdings Inc., a Delaware corporation (the “Issuer”), and Stater Bros. Markets, Stater Bros. Development Inc., and Santee Dairies, Inc., each a California corporation, as guarantors, (collectively the “Guarantors”) and this Letter of Transmittal (the “Letter of Transmittal”), which together constitute the Issuer’s and the Guarantors’ offer (the “Exchange Offer”) to exchange up to $525,000,000 aggregate principal amount of its 8 ¹/8% Senior Notes due 2012 and $175,000,000 aggregate principal amount of its Floating Rate Senior Notes due 2010, both of which have been registered under the Securities Act of 1933, as amended (collectively, the “New Notes”), for up to $525,000,000 aggregate principal amount of the Issuer’s issued and outstanding 8 ¹/8% Senior Notes due 2012 and $175,000,000 aggregate principal amount of the Issuer’s issued and outstanding Floating Rate Senior Notes due 2010 (collectively, the “Old Notes”) from the registered holders thereof who are not “affiliates” of the Issuer, as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note guaranteed by the Guarantors and having a principal amount equal to that of the surrendered Old Note. Interest accrues on the new 8 ¹/8% Senior Notes due 2012 at the rate of 8 ¹/8% per annum and is payable in cash semiannually in arrears on each June 15 and December 15 of each year, commencing on December 15, 2004. No interest is payable on the old 8 ¹/8% Senior Notes due 2012 on the date of the exchange for the New Notes and therefore no interest will be paid thereon to the holders at such time. Interest on the new Floating Rate Senior Notes due 2010 is payable in cash quarterly on March 15, June 15, September 15 and December 15 of each year, commencing on December 15, 2004. Interest is payable on September 15, 2004 on the old Floating Rate Senior Notes due 2010 and therefore the Issuer will pay the interest thereon to the holders at such time. Old Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer.

This Letter of Transmittal is to be completed by a holder of Old Notes either if certificates for such Old Notes are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by The Bank of New York, as Exchange Agent for the Exchange Offer (the “Exchange Agent”), at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in the Prospectus under “The Exchange Offer—Acceptance of Old Notes for Exchange; Delivery of New Notes” and an Agent’s Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent’s Message in lieu of this Letter of Transmittal. The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter of Transmittal and that the Issuer may enforce this Letter of Transmittal against such participant. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent’s account at the Book-Entry Transfer Facility (a “Book-Entry Confirmation”) and all other documents required by this Letter of Transmittal to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.” See Instruction 1.

Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.

The undersigned has completed the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.

2

List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF OLD NOTES
8 1/8% Senior Notes due 2012	1	2	3
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)*	Aggregate Principal Amount of Old Note(s)	Principal Amount Tendered**
	Total
Floating Rate Senior Notes due 2010	1	2	3
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)*	Aggregate Principal Amount of Old Note(s)	Principal Amount Tendered**
	Total

* Need not be completed if Old Notes are being tendered by book-entry transfer.

** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.

¨ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

Name of Tendering Institution                                                                                                                                                    

Account Number                                                                                                                                                                              

Transaction Code Number                                                                                                                                                           

By crediting the Old Notes to the Exchange Agent’s account at the Book-Entry Transfer Facility’s Automated Tender Offer Program (“ATOP”) and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent’s Message in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the Letter of Transmittal, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent.

3

¨ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s)                                                                                                                                               

Window Ticket Number (if any)                                                                                                                                                

Date of Execution of Notice of Guaranteed Delivery                                                                                                         

Name of Institution Which Guaranteed Delivery                                                                                                                 

If Delivered by Book-Entry Transfer, Complete the Following:

Account Number                                                                                                                                                                                  

Transaction Code Number                                                                                                                                                                

Name of Tendering Institution                                                                                                                                                        

¨ CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.

¨ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name                                                                                                                                                                                                   

Address                                                                                                                                                                                               

4

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Old Notes as are being tendered hereby.

The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned’s true and lawful agent and attorney-in-fact with respect to such tendered Old Notes, with full power of substitution, among other things, to cause the Old Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes, and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer.

If the undersigned is not a broker-dealer, the undersigned hereby represents (i) that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, (ii) that neither the holder of such Old Notes nor such other person is engaged in, or intends to engage in, a distribution of such New Notes or has any arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) that neither the holder of such Old Notes nor any such other person is an “affiliate,” as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), of the Issuer.

If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes tendered hereby, the undersigned hereby acknowledges (i) that such Old Notes were acquired by such broker-dealer as a result of market-making or other trading activities and (ii) that it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the Prospectus under “The Exchange Offer—Withdrawal Rights.”

Unless otherwise indicated herein in the box entitled “Special Issuance Instructions” below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled “Special Delivery Instructions” below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled “Description of Old Notes.”

THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED “DESCRIPTION OF OLD NOTES” ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE.

5

SPECIAL ISSUANCE INSTRUCTIONS

(See Instructions 3 and 4)

To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal above, or if Old Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.

Issue New Notes and/or Old Notes to:

Name(s)                                                                                                                                                                                                              

(Please Type or Print)

(Please Type or Print)

Address                                                                                                                                                                                                              

(Zip Code)

(Complete Substitute Form W-9)

Credit unexchanged Old Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below.

(Book-Entry Transfer Facility

Account Number, if applicable)

SPECIAL DELIVERY INSTRUCTIONS

(See Instructions 3 and 4)

To be completed ONLY if certificates for Old Notes not exchanged and/or New Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal above or to such person or persons at an address other than shown in the box entitled “Description of Old Notes” on this Letter of Transmittal above.

Mail New Notes and/or Old Notes to:

Name(s)                                                                                                                                                                                                              

(Please Type or Print)

(Please Type or Print)

Address                                                                                                                                                                                                              

(Zip Code)

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF OR AN AGENT’S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL

CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.

6

(TO BE COMPLETED BY ALL TENDERING HOLDERS)

(Complete Accompanying Substitute Form W-9)

Dated                                                    , 2004
X	, 2004
X	, 2004
Signature(s) of Owner	Date

Area Code and Telephone Number                                                                                                                                                     

This Letter of Transmittal must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes hereby tendered or on a security position listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.

Name(s)
	(Please Type or Print)
Capacity
Address
	(Including Zip Code)

SIGNATURE GUARANTEE

(If required by Instruction 3)

Signature(s) Guaranteed by an Eligible Institution
	(Authorized Signature)
(Title)
(Name and Firm)
Dated                                                     , 2004

7

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF

Exchange Offer

for

$525,000,000 Outstanding 8 ¹/8% Senior Notes due 2012

in Exchange for New 8 ¹/8% Senior Notes due 2012

and

$175,000,000 Floating Rate Senior Notes due 2010

in Exchange for New Floating Rate Senior Notes due 2010

1. Delivery of This Letter of Transmittal and Old Notes; Guaranteed Delivery Procedures.

This Letter of Transmittal is to be completed by holders of Old Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under “The Exchange Offer—Acceptance of Old Notes for Exchange; Delivery of New Notes” and an Agent’s Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent’s Message in lieu of this Letter of Transmittal. The term “Agent’s Message” means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Issuer may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof or Agent’s Message in lieu thereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof.

Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.” Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three (3) New York Stock Exchange (“NYSE”) trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter of Transmittal, are received by the Exchange Agent within five (5) NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. An “eligible institution” is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or otherwise an “eligible guarantor institution” within the meaning of Rule 17Ad- 15 under the Securities Exchange Act of 1934, as amended.

8

The method of delivery of this Letter of Transmittal, the Old Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letters of Transmittal or Old Notes should be sent directly to the Issuer.

See “The Exchange Offer” in the Prospectus.

2. Partial Tenders (Not Applicable to Holders Who Tender by Book-Entry Transfer).

If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled “Description of Old Notes—Principal Amount Tendered.” A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. All of the Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.

3. Signatures on This Letter of Transmittal; Note Powers and Endorsements; Guarantee of Signatures.

If this Letter of Transmittal is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on the Book-Entry Transfer Facility’s security position listing as the holder of such Old Notes without any change whatsoever.

If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal.

If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates.

When this Letter of Transmittal is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or written instrument or instruments of transfer or exchange are required. If, however, the Old Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution.

If this Letter of Transmittal is signed by a person or persons other than the registered holder or holders of Old Notes, such Old Notes must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the Old Notes.

If this Letter of Transmittal or any Old Notes or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted with the Letter of Transmittal.

Endorsements on certificates for Old Notes or signatures on powers of attorneys required by this Instruction 3 must be guaranteed by an Eligible Institution.

Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer,

9

includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on this Letter of Transmittal or (ii) for the account of an Eligible Institution.

4. Special Issuance and Delivery Instructions.

Tendering holders of Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal.

5. Taxpayer Identification Number.

Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Issuer (as payor) with such holder’s correct Taxpayer Identification Number (“TIN”) on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Notes may be subject to backup withholding at a rate of 28% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained.

Exempt holders of Old Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the “W-9 Guidelines”) for additional instructions.

To prevent backup withholding, each tendering holder of Old Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8BEN, Certificate of Foreign Status. If the Old Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write “applied for” in lieu of its TIN. Note: Checking this box and writing “applied for” on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. Checking this box also requires that the holder complete the Certificate of Awaiting Taxpayer Identification Number form attached to the Substitute Form W-9. If such holder does not provide its TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Exchange Agent.

10

The information requested above should be directed to the Exchange Agent at the following address:

The Exchange Agent for the Exchange Offer is:

THE BANK OF NEW YORK

By mail, hand delivery or overnight courier:

The Bank of New York

101 Barclay Street, Floor 7 East

New York, NY 10286

Attention: David A. Mauer

By facsimile transmission:

(for eligible institutions only)

(212) 298-1915

Confirm by telephone:

(212) 815-2548

6. Transfer Taxes.

Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.

Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes specified in this Letter of Transmittal.

7. Waiver of Conditions.

The Issuer reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Note either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer) except that the Issuer will not waive the requirement that the holder seeking to tender Old Notes in the Exchange Offer be a non-“affiliate” of the issuer as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

8. No Conditional Tenders.

No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal or an Agent’s Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Old Notes for exchange.

Neither the Issuer, the Exchange Agent nor any other person shall be obligated to give notice of any defect or irregularity with respect to any tender of Old Notes.

9. Mutilated, Lost, Stolen or Destroyed Old Notes.

Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.

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10. Withdrawal Rights.

Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.

For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must: (i) specify the name of the person having tendered the Old Notes to be withdrawn (the “Depositor”), (ii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes) and (iii) where certificates for Old Notes have been transmitted, specify the name in which such Old Notes are registered, if different from that of the Depositor. If certificates for Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the Depositor must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Depositor is an Eligible Institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer set forth in the Prospectus under “The Exchange Offer—Acceptance of Old Notes for Exchange; Delivery of New Notes,” any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuer, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent’s account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in the Prospectus under “The Exchange Offer—Acceptance of Old Notes for Exchange; Delivery of New Notes,” such Old Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date.

11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.

Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent at the address and telephone number set forth above.

12

TO BE COMPLETED BY ALL TENDERING HOLDERS

(See Instruction 5)

PAYOR’S NAME: THE BANK OF NEW YORK

SUBSTITUTE Form W-9	Part 1—PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.
		TIN                                  Social Security Number or Employer Identification Number
	Part 2—TIN Applied For [    ]
Department of the Treasury Internal Revenue Service Payor’s Request For Taxpayer Identification Number (“TIN”) and Certification	Payor’s Request For Taxpayer Identification Number (“TIN”) and Certification
	CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
	(1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me).
	(2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and
	(3) any other information provided on this form is true and correct.
	Signature                                                                       Date                      , 2004 You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED

THE BOX IN PART 2 OF SUBSTITUTE FORM W-9

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 28% of all reportable payments made to me after the exchange will be withheld until I provide a number.

Signature                                                                                       Date                                                                                          

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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer—Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.

For this type of account		Give the SOCIAL SECURITY number of:	For this type of account		Give the EMPLOYER IDENTIFICATION number of:
1.	An individual’s account	The individual	6.	Sole proprietorship or single-owner LLC account	The owner(3)
2.	Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account(1)	7.	A valid trust, estate, or pension trust	Legal entity(4)
3.	Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)	8.	Corporate account or LLC electing corporate status on Form 8832	The corporation
4.	a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)	9.	Association, club, religious, charitable, educational or other tax-exempt organization account	The organization
	b. So-called trust account that is not a legal or valid trust under State law	The actual owner(1)	10.	Partnership or multi-member LLC account	The partnership
5.	Sole proprietorship or single-owner LLC account	The owner(3)	11.	A broker or registered nominee	The broker or nominee
			12.	Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agricultural program payments	The public entity

(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person’s number must be furnished.

(2) Circle the minor’s name and furnish the minor’s social security number.

(3) You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your social security number or employer identification number.

(4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title).

Note: If no name is circled when there is more than one name listed, the number will be considered to be that of the first name listed.

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How to Obtain a TIN

If you don’t have a taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security Card for individuals, or Form SS-4, Application for Employer Identification Number (for business and other entities), or Form W-7, Application for IRS Individual Taxpayer Identification Number (for certain resident aliens), at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number.

If you return the Substitute Form W-9 with the “Awaiting TIN” box checked in Part 3, you must provide the payer with a Certificate of Awaiting Taxpayer Identification Number and, within 60 days, a TIN. If you do not provide the TIN by the date of payment, 28% of all reportable payments will be withheld. If your certified TIN is received within the 60-day period and you were not subject to backup withholding during that period, the amounts withheld will be refunded to you. If no certified TIN is provided to the payer within 60 days, the amounts withheld will be paid to the IRS.

As soon as you receive your TIN, complete another Substitute Form W-9, include your TIN, sign and date the form, and give it to the payer.

For interest, dividends and broker transactions, you must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to a payer, you must cross out item 2 in the certification before signing the form.

Payees Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments by the Payer include the following:

• A corporation.

• A financial institution.

• An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7) if the account satisfies the requirements of Section 401(f)(2).

• The United States or any agency or instrumentality thereof.

• A state, the District of Columbia, a possession of the United States or any political subdivision or instrumentality thereof.

• A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof.

• An international organization or any agency or instrumentality thereof.

• A registered dealer in securities or commodities registered in the U.S., the District of Columbia or a possession of the U.S.

• A real estate investment trust.

• A common trust fund operated by a bank under section 584(a).

• An entity registered at all times during the tax year under the Investment Company Act of 1940.

• A foreign central bank of issue.

• A futures commission merchant registered with the Commodity Futures Trading Commission.

• A middleman known in the investment community as a nominee or custodian.

• A trust exempt from tax under section 664 or described in section 4947.

Payments of dividends and patronage dividends not generally subject to backup withholding include the following:

• Payments to nonresident aliens subject to withholding under section 1441.

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• Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident alien partner.

• Payments of patronage dividends not paid in money.

• Payments made by certain foreign organizations.

• Section 404(K) payments made by an ESOP.

Payments of interest not generally subject to backup withholding include the following:

• Payments of interest on obligations issued by individuals. Note: You are subject to information reporting if this interest is $600 or more and is paid in the course of the payer’s trade or business and backup withholding if you have not provided your correct TIN to the payer.

• Payments of tax-exempt interest (including exempt interest dividends under section 852).

• Payments described in section 6049(b)(5) to nonresident aliens.

• Payments on tax-free covenant bonds under section 1451.

• Payments made by certain foreign organizations.

• Mortgage or student loan interest paid to you.

Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TIN, WRITE “EXEMPT” ON THE FACE OF THE FORM IN PART 2, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.

Certain payments, other than interest, dividends and patronage dividends that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations thereunder.

Privacy Act Notice.—Section 6109 requires most recipients of dividend, interest or other payments to give their correct TIN to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of tax returns. The IRS also may provide this information to the Department of Justice for civil and criminal litigation and to cities, states and the District of Columbia to carry out their tax laws. The IRS also may disclose this information to other countries under a tax treaty, or to federal and state agencies to enforce federal nontax criminal laws and to combat terrorism. Payers must be given the TIN whether or not recipients are required to file tax returns. Payers generally must withhold 28% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty for Failure to Furnish TIN.—If you fail to furnish your correct TIN to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2) Civil Penalty for False Information With Respect to Withholding.—If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.—Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

(4) Misuse of TINS.—If the payer discloses or uses TINs in violation of federal law, the payer may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.

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EX-99.2

Exhibit 99.2

NOTICE OF GUARANTEED DELIVERY FOR

8 ¹/8% SENIOR NOTES DUE 2012

and

FLOATING RATE SENIOR NOTES DUE 2010

STATER BROS. HOLDINGS INC.

This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Stater Bros. Holdings Inc., a Delaware corporation (the “Issuer”), and Stater Bros. Markets, Stater Bros. Development Inc., and Santee Dairies, Inc., each a California corporation, as guarantors, made pursuant to the Prospectus, dated [                    ], 2004 (the “Prospectus”), if certificates for the Issuer’s outstanding 8 ¹/8% Senior Notes due 2012 and/or Floating Rate Senior Notes due 2010 (collectively, the “Old Notes”) are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Bank of New York, as exchange agent (the “Exchange Agent”), prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. Capitalized terms not defined herein are defined in the Prospectus.

Main Delivery To:

THE BANK OF NEW YORK

By mail, hand delivery or overnight courier:

The Bank of New York

101 Barclay Street, Floor 7 East

New York, NY 10286

Attention: David A. Mauer

By facsimile transmission:

(for eligible institutions only)

(212) 298-1915

Confirm by telephone:

(212) 815-2548

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

Ladies and Gentlemen:

Upon the terms and conditions set forth in the Prospectus, the undersigned hereby tenders to the Issuer the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedure described in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.”

Principal Amount of Old Notes Tendered (must be in denominations of principal amount of $1,000 or any integral multiple thereof:
8 1/8% Senior Notes due 2012
$
Certificate Nos. (if available)
Floating Rate Senior Notes due 2010
$
Certificate Nos. (if available)
Total Principal Amount Represented by Old Notes Certificate(s):	If Old Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number.
$	Account Number

All authority herein conferred or agreed to be conferred shall survive the death of incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

PLEASE SIGN HERE
X	X
X	X
Signature(s) of Owner(s) or Authorized Signatory	Date
Area Code and Telephone Number
Must be signed by the holder(s) of Old Notes as their names(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below.

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Please print name(s) and address(es)

Name(s)                                                                                                                                                                                                         

Capacity                                                                                                                                                                                                       

Address(es)                                                                                                                                                                                                 

3

GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution that is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or otherwise an “eligible guarantor institution” within the meaning of Rule 17Ad- 15 under the Exchange Act of 1934, as amended, hereby guarantees that the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book- Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) with any required signature guarantees and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, within three (3) New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter of Transmittal and the Old Notes tendered hereby to the Exchange Agent within the time period set for the above and that failure to do so could result in a financial loss to the undersigned.
Name of Firm	Authorized Signature
Address	Title
Zip Code	(Please Type or Print)

NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THE FORM. CERTIFICATES FOR OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.

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EX-99.3

Exhibit 99.3

STATER BROS. HOLDINGS INC.

Exchange Offer

for

$525,000,000 Outstanding 8 ¹/8% Senior Notes due 2012

in Exchange for New 8 ¹/8% Senior Notes due 2012

and

$175,000,000 Floating Rate Senior Notes due 2010

in Exchange for New Floating Rate Senior Notes due 2010

To Brokers, Dealers, Commercial Banks,

Trust Companies and Other Nominees:

Stater Bros. Holdings Inc., a Delaware corporation (the “Issuer”), and Stater Bros. Markets, Stater Bros. Development Inc., and Santee Dairies, Inc., each a California corporation, as guarantors, are offering, upon and subject to the terms and conditions set forth in the prospectus dated [                    ], 2004 (the “Prospectus”), and the enclosed letter of transmittal (the “Letter of Transmittal”), to exchange up to $525,000,000 aggregate principal amount of the Issuer’s 8 ¹/8% Senior Notes due 2012 and $175,000,000 aggregate principal amount of the Issuer’s Floating Rate Senior Notes due 2010, both of which have been registered under the Securities Act of 1933, as amended (collectively, the “New Notes”), for up to $525,000,000 aggregate principal amount of the Issuer’s issued and outstanding 8 ¹/8% Senior Notes due 2012, and up to $175,000,000 aggregate principal amount of the Issuer’s issued and outstanding Floating Rate Senior Notes due 2010 (collectively, the “Old Notes”), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer and the guarantors contained in the registration rights agreement in respect of the Old Notes, dated July 17, 2004, by and among the Issuer and the purchasers referred to therein.

We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents:

1. Prospectus dated [                    ], 2004;

2. A Letter of Transmittal relating to the Old Notes for your use and for the information of your clients;

3. A Notice of Guaranteed Delivery relating to the Old Notes which is to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; and

4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Exchange Offer.

Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on [                    ], 2004, unless extended by the Issuer (the “Expiration Date”). Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.

To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal relating to the Old Notes (or facsimile thereof or Agent’s Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes, or a timely confirmation of a book-entry transfer of such Old Notes, should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus.

If a registered holder of Old Notes desires to tender, but such Old Notes are not immediately available, or time will not permit such holder’s Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under “The Exchange Offer—Guaranteed Delivery Procedures.”

The Issuer will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Issuer will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. Holders of Old Notes will not be obligated to pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer.

Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to The Bank of New York, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal.

Very truly yours,

STATER BROS. HOLDINGS INC.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OR THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.

Enclosures

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EX-99.4

Exhibit 99.4

STATER BROS. HOLDINGS INC.

Exchange Offer

for $525,000,000 Outstanding 8 ¹/8% Senior Notes due 2012

in Exchange for New 8 ¹/8% Senior Notes due 2012

and

$175,000,000 Floating Rate Senior Notes due 2010

in Exchange for New Floating Rate Senior Notes due 2010

To Our Clients:

Enclosed for your consideration is a prospectus dated [            ], 2004 ( the “Prospectus”), and the related letter of transmittal (the “Letter of Transmittal”), relating to the offer (the “Exchange Offer”) of Stater Bros. Holdings Inc., a Delaware corporation (the “Issuer”), and Stater Bros. Markets, Stater Bros. Development Inc., and Santee Dairies, Inc., each a California corporation, as guarantors, to exchange up to $525,000,000 aggregate principal amount of the Issuer’s 8 ¹/8% Senior Notes due 2012 and $175,000,000 aggregate principal amount of the Issuer’s Floating Rate Senior Notes due 2010, both of which have been registered under the Securities Act of 1933, as amended (collectively, the “New Notes”), for up to $525,000,000 aggregate principal amount of the Issuer’s issued and outstanding 8 ¹/8% Senior Notes due 2012, and $175,000,000 aggregate principal amount of the Issuer’s issued and outstanding Floating Rate Senior Notes due 2010 (collectively, the “Old Notes”), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer and the guarantors contained in the registration rights agreements in respect of the Old Notes, dated June 17, 2004, by and among the Issuer and the purchasers referred to therein.

This material is being forwarded to you as the beneficial owner of the Old Notes held by us for your account but not registered in your name. A tender of such Old Notes may only be made by us as the holder of record and pursuant to your instructions.

Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.

Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on [            ], 2004 (the “Expiration Date”), unless extended by the Issuer. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.

Your attention is directed to the following:

1. The Exchange Offer is for any and all Old Notes held by record holders who are not “affiliates” of the Issuer, as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended.

2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned “The Exchange Offer—Certain Conditions to the Exchange Offer.”

3. Subject to the terms and conditions in the Prospectus and the Letter of Transmittal, any transfer taxes incident to the transfer of Old Notes from the holder of Old Notes to the Issuer will be paid by the Issuer.

4. The Exchange Offer expires at 5:00 p.m., New York City time, on [            ], 2004, unless extended by the Issuer.

If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Old Notes.

INSTRUCTIONS WITH RESPECT TO

THE EXCHANGE OFFER

The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Stater Bros. Holding Inc. with respect to their Old Notes.

This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal.

The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned.

Please tender the Old Notes held by you for my account as indicated below:

	Aggregate Principal Amount of Old Notes
8 1/8% Senior Notes due 2012	$
Floating Rate Senior Notes due 2010	$
TOTAL	$
[ ] Please do not tender any Old Notes held by you for my account.
Dated:             , 2004
	Signature(s)
	Please print name(s) here
	Address(es)
	Area Code and Telephone Number
	Tax Identification or Social Security No(s).

None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Notes held by us for your account.

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