Filed Pursuant to Rule 424(b)(3)

Registration Number 333-131413

PROSPECTUS SUPPLEMENT NO. 1

to Prospectus dated

July 22, 2008

(Registration No. 333-131413)

UNIFIED GROCERS, INC.

This Prospectus Supplement No. 1 supplements our Prospectus dated July 22, 2008. The securities that are the subject of the Prospectus have been registered to permit their sale by us.

This Prospectus Supplement includes the attached Quarterly Report on Form 10-Q for the period ended June 28, 2008 of Unified Grocers, Inc., as filed by us with the Securities and Exchange Commission.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus Supplement is August 14, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 28, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM             TO             

Commission file number: 0-10815

UNIFIED GROCERS, INC.

(Exact name of registrant as specified in its charter)

California	95-0615250
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5200 Sheila Street, Commerce, CA 90040

(Address of principal executive offices) (Zip Code)

(323) 264-5200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  [X]    No  [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  [    ]	Accelerated filer  [    ]
Non-accelerated filer  [X]	Smaller reporting company  [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  [    ]    No  [X]

The number of shares outstanding of each of the registrant’s classes of common stock, as of July 26, 2008, were as follows:

Class A: 159,600 shares; Class B: 458,059 shares; Class C: 15 shares; Class E: 205,330 shares

Table of Contents

Item		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Earnings and Comprehensive Earnings	4
	Consolidated Condensed Statements of Cash Flows	5
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4T.	Controls and Procedures	39
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Submission of Matters to a Vote of Security Holders	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Unified Grocers, Inc. and Subsidiaries

Consolidated Condensed Balance Sheets – Unaudited

(dollars in thousands)

	June 28, 2008			September 29, 2007
Assets
Current assets:
Cash and cash equivalents	$	13,308		$	19,719
Accounts and notes receivable, net of allowances of $2,008 and $1,728 at June 28, 2008 and September 29, 2007, respectively		198,914			148,243
Inventories		254,367			204,994
Prepaid expenses		7,855			6,565
Deferred income taxes		10,046			10,531
Total current assets		484,490			390,052
Properties, net		207,292			196,276
Investments		80,741			78,178
Notes receivable, net of allowances of $112 and $389 at June 28, 2008 and September 29, 2007, respectively		12,999			10,239
Goodwill		37,105			27,982
Other assets, net		58,378			48,461
Total Assets	$	881,005		$	751,188
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	202,686		$	171,429
Accrued liabilities		78,755			63,127
Current portion of notes payable		1,367			6,038
Subordinated patronage dividend certificates		—			3,141
Members’ excess deposits and estimated patronage dividends		22,707			17,456
Total current liabilities		305,515			261,191
Notes payable, less current portion		249,003			170,010
Long-term liabilities, other		123,050			124,775
Required deposits		9,293			6,948
Commitments and contingencies
Shareholders’ equity:
Class A Shares: 500,000 shares authorized, 159,600 and 168,300 shares outstanding at June 28, 2008 and September 29, 2007, respectively		27,538			28,886
Class B Shares: 2,000,000 shares authorized, 458,059 and 480,172 shares outstanding at June 28, 2008 and September 29, 2007, respectively		76,583			80,116
Class E Shares: 2,000,000 shares authorized, 205,330 shares outstanding at June 28, 2008 and September 29, 2007		20,533			20,533
Retained earnings after elimination of accumulated deficit of $26,976 effective September 28, 2002		61,063			50,385
Receivable from sale of Class A Shares to members		(733	)		(876	)
Accumulated other comprehensive earnings		9,160			9,220
Total shareholders’ equity		194,144			188,264
Total Liabilities and Shareholders’ Equity	$	881,005		$	751,188

The accompanying notes are an integral part of these statements.

3

Unified Grocers, Inc. and Subsidiaries

Consolidated Condensed Statements of Earnings

and Comprehensive Earnings – Unaudited

(dollars in thousands)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	June 28, 2008			June 30, 2007			June 28, 2008			June 30, 2007
Net sales	$	1,017,055		$	790,596		$	3,061,507		$	2,325,595
Cost of sales		914,870			713,884			2,765,579			2,097,370
Distribution, selling and administrative expenses		83,026			62,611			245,373			184,368
Operating income		19,159			14,101			50,555			43,857
Interest expense		(3,696	)		(3,720	)		(12,132	)		(11,208	)
Earnings before estimated patronage dividends and income taxes		15,463			10,381			38,423			32,649
Estimated patronage dividends		(6,976	)		(4,034	)		(17,135	)		(14,121	)
Earnings before income taxes		8,487			6,347			21,288			18,528
Income taxes		(3,697	)		(2,032	)		(9,069	)		(7,181	)
Net earnings		4,790			4,315			12,219			11,347
Other comprehensive earnings, net of income taxes:
Unrealized holding loss on investments		(1,214	)		(769	)		(60	)		(672	)
Comprehensive earnings	$	3,576		$	3,546		$	12,159		$	10,675

The accompanying notes are an integral part of these statements.

4

Unified Grocers, Inc. and Subsidiaries

Consolidated Condensed Statements of Cash Flows – Unaudited

(dollars in thousands)

	Thirty-Nine Weeks Ended
	June 28, 2008			June 30, 2007
Cash flows from operating activities:
Net earnings	$	12,219		$	11,347
Adjustments to reconcile net earnings to net cash (utilized) provided by operating activities:
Depreciation and amortization		16,801			14,570
Provision for doubtful accounts		189			(219	)
Gain on sale of properties		(10	)		(228	)
Purchases of trading securities		—			(5,371	)
Proceeds from maturities or sales of trading securities		—			3,063
(Increase) decrease in assets:
Accounts receivable		(49,404	)		(2,712	)
Inventories		(1,981	)		21,134
Prepaid expenses		570			(1,382	)
Pension plan assets		(5,033	)		(2,178	)
Increase (decrease) in liabilities:
Accounts payable		(3,169	)		(362	)
Accrued liabilities		2,928			(6,620	)
Long-term liabilities, other		3,309			1,661
Net cash (utilized) provided by operating activities		(23,581	)		32,703
Cash flows from investing activities:
Purchases of properties		(19,192	)		(27,900	)
Purchases of securities and other investments		(19,759	)		(7,014	)
Proceeds from maturities or sales of securities and other investments		22,121			8,868
Increase in notes receivable		(295	)		(254	)
Proceeds from sales of properties		19			228
Decrease (increase) in other assets		2,198			(10,438	)
Acquisition of net assets from Associated Grocers, Incorporated		(39,973	)		—
Net cash utilized by investing activities		(54,881	)		(36,510	)
Cash flows from financing activities:
Additions to long-term notes payable		79,718			22,636
Reduction of short-term notes payable		(5,843	)		(7,945	)
Payment of deferred financing fees		—			(564	)
Increase in members’ excess deposits and estimated patronage dividends		5,251			8,145
Redemption of patronage dividend certificates		(3,141	)		—
Class E Share cash dividend		—			(928	)
Increase (decrease) in members’ required deposits		2,317			(1,682	)
Decrease in receivable from sale of Class A Shares to members		143			228
Repurchase of shares from members		(7,082	)		(6,572	)
Issuance of shares to members		688			534
Net cash provided by financing activities		72,051			13,852
Net (decrease) increase in cash and cash equivalents		(6,411	)		10,045
Cash and cash equivalents at beginning of period		19,719			11,150
Cash and cash equivalents at end of period	$	13,308		$	21,195

The accompanying notes are an integral part of these statements.

5

Unified Grocers, Inc. and Subsidiaries

Consolidated Condensed Statements of Cash Flows – Unaudited – Continued

(dollars in thousands)

	Thirty-Nine Weeks Ended
	June 28, 2008			June 30, 2007
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	12,212		$	10,862
Income taxes	$	5,644		$	7,808
Supplemental disclosure of non-cash investing and financing items:
Conversion of Class B Shares to Class A Shares	$	55		$	51
New capital leases entered into in fiscal 2008	$	517		$	—
Acquisition of net assets from Associated Grocers, Incorporated
Working capital	$	11,929		$	—
Properties		5,024			—
Goodwill		9,123			—
Other assets		17,265			—
Long-term liabilities, other		(3,368	)		—
Acquisition of net assets from Associated Grocers, Incorporated	$	39,973		$	—

The accompanying notes are an integral part of these statements.

6

Unified Grocers, Inc. and Subsidiaries

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.    BASIS OF PRESENTATION

The consolidated condensed financial statements include the accounts of Unified Grocers, Inc. and all its subsidiaries (the “Company” or “Unified”). Inter-company transactions and accounts with subsidiaries have been eliminated. The interim financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to SEC rules and regulations; nevertheless, management believes that the disclosures are adequate to make the information presented not misleading. These consolidated condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended September 29, 2007 filed with the SEC. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

The accompanying consolidated condensed financial statements reflect all adjustments that, in the opinion of management, are both of a normal and recurring nature and necessary for the fair presentation of the results for the interim periods presented. The preparation of the consolidated condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes. As a result, actual results could differ from those estimates.

The Company’s banking arrangements allow the Company to fund outstanding checks when presented for payment to the financial institutions utilized by the Company for disbursements. This cash management practice frequently results in total issued checks exceeding the available cash balance at a single financial institution. The Company’s policy is to record its cash disbursement accounts with a cash book overdraft in accounts payable. At June 28, 2008 and September 29, 2007, the Company had book overdrafts of $50.5 million and $41.5 million, respectively, classified in accounts payable.

Reclassifications – Based on the Company’s review of expected payments for workers’ compensation claims occurring beyond twelve months from the balance sheet date, the Company reclassified $41.4 million of insurance claims loss reserves from accrued liabilities to long-term liabilities, other on its consolidated condensed balance sheet as of September 29, 2007 and $1.6 million on its consolidated condensed statements of cash flows for the thirty-nine weeks ending June 30, 2007, to conform to the current period’s presentation.

2.    ACQUISITION AND PURCHASE ACCOUNTING

On September 30, 2007, the Company completed the purchase of certain assets, including inventory, prepaid expenses, notes receivable, certain fixed assets, and other long-term intangible assets (including trademarks, customer relationships and assembled workforce), and assumed certain liabilities and obligations, including accounts payable, non-union employee pension plan and warehouse leases related to the operation of Associated Grocers, Incorporated and its subsidiaries (the “Seattle Operations”) of Seattle, Washington (the “Acquisition”). The Seattle Operations provide food, nonfood, general merchandise and retail services to stores from its office and leased distribution facilities in Seattle and Renton, Washington. The total purchase price was $39.8 million, which was financed through the Company’s revolving credit line. Additionally, the Company did not purchase trade accounts receivable in the transaction, but financed the initial accounts receivable generated by the Seattle Operations subsequent to the acquisition date from additional borrowings. This initial build-up of trade accounts receivable is reflected as a use of operating cash in the Company’s consolidated condensed statements of cash flows for the thirty-nine weeks ending June 28, 2008. This transaction is expected to increase Unified’s sales to approximately $4 billion annually, thus providing the independent retailers served by Unified an increased profile with the vendor community, improved retail market share in the Pacific Northwest and the benefit of distributing fixed costs and the cost of capital and overhead over a larger sales base.

7

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

The Company has accounted for the Acquisition under the purchase method in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS No. 141”), “Business Combinations.” The following illustrates the preliminary allocation of the purchase price and assumption of certain liabilities based on valuations and internal analyses:

	Allocated Fair Value (amounts in 000’s)
Assets Acquired (Liabilities Assumed)	December 29, 2007			Adjustments		June 28, 2008
Current assets (primarily inventory and prepaid expenses)	$	49,211		$    —		$	49,211
Property, plant and equipment		4,871		153			5,024
Investments (a non-marketable equity security)		4,924		94			5,018
Notes receivable		2,235		—			2,235
Intangible assets
Goodwill (including assembled workforce)		9,398		(275	)		9,123
Customer relationships (finite lived)		7,200		—			7,200
Trademarks (indefinite lived)		2,700		—			2,700
Deferred tax assets		1,319		28			1,347
Other long-term assets		1,000		—			1,000
Current liabilities (primarily accounts payable and accrued liabilities)		(39,517	)	—			(39,517	)
Long-term liability – defined benefit pension plan		(3,368	)	—			(3,368	)
Total – net assets acquired		$39,973		$      0			$39,973

The total allocated fair value of approximately $40.0 million was based on the $39.8 million purchase price, less $3.9 million in cash on hand retained by Associated Grocers, Incorporated, plus third party transaction costs of $4.1 million paid by the Company. In valuing acquired assets and liabilities assumed, fair values were based on, but not limited to, expected discounted cash flows for the customer relationships, replacement cost for fixed assets, relief from royalty for trademarks, and comparable market rates for contractual obligations.

A portion of the acquisition price has been allocated to finite and indefinite-lived intangible assets, consisting of customer relationships and trademarks, respectively. The finite-lived intangible assets will be amortized, utilizing an accelerated method, over their weighted-average useful life of approximately twenty years based on the Company’s historical retention experience of similar customer relationships associated with these assets. The indefinite-lived intangible assets are non-amortizing for financial statement purposes and will be evaluated at least annually for impairment.

The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been allocated to goodwill in the amount of $9.1 million, including $7.0 million for assembled workforce. Goodwill is non-amortizing for financial statement purposes and is evaluated annually for impairment in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 142 requires the Company to test its goodwill for impairment each year, or sooner if impairment indicators are present. The majority of the goodwill is expected to be deductible for income tax purposes over a period not exceeding fifteen years.

The preliminary values of certain exit related costs are subject to adjustment for up to one year after the close of the transaction as additional information is obtained, and those adjustments could be material. Upon the completion date of the Acquisition, the Company began to assess and formulate a plan to restructure certain activities related to facilities acquired as a part of the Seattle Operations. The Company is currently in the process of determining any related liability pursuant to Emerging Issues Task Force (“EITF”) No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The Company expects to finalize its plan within one year of the date of the Acquisition and will record any additional liability as a result of its plan as an increase to goodwill.

The results of the Seattle Operations are included in the results of operations for the full three and nine months ended June 28, 2008.

8

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

3.    VARIABLE INTEREST ENTITY

In fiscal 2004, the Company signed a purchase and sale agreement with an unrelated business property developer to transfer and assign the leasehold and sub-leasehold interests and certain assets relating to eleven closed store locations.

At June 28, 2008, the Company remains contingently liable for the lease payments on three of these store locations until such time as the leases expire or the Company is released from all liabilities and obligations under the respective leases. The net present value of the Company’s currently estimated obligation for the remaining leasehold and sub-leasehold interests for the three stores totals approximately $0.3 million at June 28, 2008, with the last lease expiring in 2014. During the Company’s second fiscal quarter of 2008, Unified and the unrelated business property developer finalized an agreement whereby the Company’s obligation with respect to two of the properties was settled by Unified’s cash payments totaling $3.8 million, which approximated combined lease reserves previously recorded by the variable interest entity and the Company. As a result of this agreement, the Company’s maximum loss exposure related to the remaining leases has been reduced to $2.3 million.

The FASB issued in January 2003 and revised in December 2003 FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities – an Interpretation of Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements.” Although the Company has no ownership interest in the unrelated third party that assumed the leasehold and sub-leasehold interests from the Company, that third party is considered a variable interest entity pursuant to FIN 46R. Because the primary investor in the variable interest entity currently does not have sufficient equity at risk, the Company is considered the primary beneficiary. Accordingly, the Company is required to consolidate the assets, liabilities and non-controlling interests of the variable interest entity, as well as the results of operations.

At June 28, 2008 and September 29, 2007, the Company consolidated the variable interest entity’s accounts, including total assets of $0.5 and $0.9 million, respectively, comprised primarily of $0.1 million and $0.3 million in properties, respectively, and $0.4 million and $0.6 million in other assets, respectively. The Company also consolidated the variable interest entity’s lease reserves of approximately $0.3 million and $2.4 million, respectively.

4.    SEGMENT INFORMATION

Unified is a retailer-owned, grocery wholesale cooperative serving supermarket, specialty and convenience store operators located primarily in the western United States and in the South Pacific. The Company’s customers range in size from single store operators to multiple store chains. The Company sells a wide variety of products typically found in supermarkets. The Company’s customers include its owners (“Members”) and non-owners (“non-members”). The Company sells products through Unified or through its specialty food subsidiary (Market Centre) and international sales subsidiary (Unified International, Inc.). The Company reports all product sales in its Wholesale Distribution segment. The Company also provides support services to its customers through the Wholesale Distribution segment, including retail technology, and through separate subsidiaries, including financing and insurance. Insurance activities are reported in Unified’s Insurance segment while finance activities are grouped within Unified’s All Other business activities. The availability of specific products and services may vary by geographic region.

Management identifies segments based on the information monitored by the Company’s chief operating decision-makers to manage the business and, accordingly, has identified the following two reportable segments:

· The Wholesale Distribution segment includes the results of operations from the sale of groceries and general merchandise products to both Members and non-members, including a broad range of branded and corporate brand products in nearly all the categories found in a typical supermarket, including dry grocery, frozen food, deli, meat, dairy, eggs, produce, bakery, ethnic, gourmet, specialty foods and general merchandise products. The Wholesale Distribution segment includes operating results relative to the Seattle Operations subsequent to September 30, 2007 (see Note 2 of “Notes to Consolidated Condensed Financial Statements”). The Seattle Operations primarily serve retailers throughout Washington, Oregon, Alaska and the South Pacific. As of and for the thirty-nine weeks ended June 28, 2008, the Wholesale Distribution segment represents approximately 99% of the Company’s total sales and 88% of total assets.

9

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

· The Insurance segment includes the results of operations for the Company’s three insurance subsidiaries (Unified Grocers Insurance Services formerly Grocers and Merchants Insurance Service, Inc., Springfield Insurance Company and Springfield Insurance Company, Ltd.). These subsidiaries provide insurance and insurance-related products, including workers’ compensation and liability insurance policies, to both the Company and its Members primarily located in California. As of and for the thirty-nine weeks ended June 28, 2008, the Company’s Insurance segment collectively accounts for approximately 1% of the Company’s total sales and 10% of total assets.

The “All Other” category includes the results of operations for the Company’s other support businesses, including its finance subsidiary, whose services are provided to a common customer base, none of which individually meets the quantitative thresholds of a reportable segment. As of and for the thirty-nine weeks ended June 28, 2008, the “All Other” category collectively accounts for less than 1% of the Company’s total sales and 2% of total assets.

Information about the Company’s operating segments is summarized below.

(dollars in thousands)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	June 28, 2008			June 30, 2007			June 28, 2008			June 30, 2007
Net sales
Wholesale distribution	$	1,013,515		$	786,436		$	3,051,036		$	2,314,084
Insurance		7,758			7,229			21,795			19,714
All other		355			997			1,288			2,156
Inter-segment eliminations		(4,573	)		(4,066	)		(12,612	)		(10,359	)
Total net sales	$	1,017,055		$	790,596		$	3,061,507		$	2,325,595
Operating income
Wholesale distribution	$	17,317		$	12,512		$	47,550		$	40,253
Insurance		1,744			1,186			2,951			3,775
All other		98			403			54			(171	)
Total operating income		19,159			14,101			50,555			43,857
Interest expense		(3,696	)		(3,720	)		(12,132	)		(11,208	)
Estimated patronage dividends		(6,976	)		(4,034	)		(17,135	)		(14,121	)
Income taxes		(3,697	)		(2,032	)		(9,069	)		(7,181	)
Net earnings	$	4,790		$	4,315		$	12,219		$	11,347
Depreciation and amortization
Wholesale distribution	$	5,674		$	4,795		$	16,657		$	14,421
Insurance		44			32			139			121
All other		2			12			5			28
Total depreciation and amortization	$	5,720		$	4,839		$	16,801		$	14,570
Capital expenditures
Wholesale distribution	$	7,005		$	9,730		$	19,192		$	27,274
Insurance		—			—			—			—
All other		—			—			—			626
Total capital expenditures	$	7,005		$	9,730		$	19,192		$	27,900
Identifiable assets
Wholesale distribution	$	776,954		$	632,051		$	776,954		$	632,051
Insurance		86,012			85,389			86,012			85,389
All other		18,039			17,506			18,039			17,506
Total identifiable assets	$	881,005		$	734,946		$	881,005		$	734,946

10

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

5.    SHAREHOLDERS’ EQUITY

During the thirty-nine week period ended June 28, 2008, the Company issued 2,800 Class A Shares with an issue value of $0.7 million and redeemed 11,850 Class A Shares with a redemption value of $2.9 million. The Company also redeemed 21,648 Class B Shares with a redemption value of $4.2 million. In addition, 350 Class A Shares were converted from Class B Shares at a value of $0.1 million.

6.    CONTINGENCIES

The Company is a party to various litigation, claims and disputes, some of which are for substantial amounts, arising in the ordinary course of business. While the ultimate effect of such actions cannot be predicted with certainty, the Company believes the outcome of these matters will not result in a material adverse effect on its financial condition or results of operations.

7.    PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors a cash balance plan (“Unified Cash Balance Plan”). The Unified Cash Balance Plan is a noncontributory defined benefit pension plan covering substantially all employees of the Company who are not subject to a collective bargaining agreement. Benefits under the Unified Cash Balance Plan are provided through a trust and also through annuity contracts.

In association with the Acquisition, the Company assumed the Cash Balance Retirement Plan for Employees of Associated Grocers, Incorporated (“AG Cash Balance Plan”), which is a noncontributory defined benefit pension plan covering eligible employees of Associated Grocers, Incorporated who were not subject to a collective bargaining agreement. Benefits under the AG Cash Balance Plan are provided through a trust and also through annuity contracts. As of September 30, 2007, the projected benefit obligation of the AG Cash Balance Plan was $35.3 million, the fair value of plan assets was $31.9 million, and the resulting net unfunded obligation of $3.4 million was recorded in conjunction with the purchase price allocation and included in Long-term liabilities, other on the Company’s consolidated condensed balance sheet for the first fiscal quarter ended December 29, 2007 (see Note 2 of “Notes to Consolidated Condensed Financial Statements”).

The Company also sponsors an Executive Salary Protection Plan (“ESPP”) that provides supplemental post-termination retirement income based on each participant’s final salary and years of service as an officer of the Company. Funds are held in a rabbi trust for the ESPP consisting primarily of life insurance policies reported at cash surrender value and mutual fund investments consisting of various publicly-traded mutual funds reported at estimated fair value based on quoted market prices. The cash surrender value of such life insurance policies aggregated $16.4 million and $18.8 million at June 28, 2008 and September 29, 2007, respectively, and are included in other assets in the Company’s consolidated condensed balance sheets. Mutual funds reported at their estimated fair value of $1.5 million at June 28, 2008 were purchased during the third quarter ended June 28, 2008 and are included in other assets in the Company’s consolidated condensed balance sheets. The related accrued benefit cost (representing the Company’s benefit obligation to participants) of $20.0 million and $18.4 million at June 28, 2008 and September 29, 2007, respectively, is recorded in long-term liabilities, other on the Company’s consolidated condensed balance sheets. Trust assets are excluded from ESPP plan assets as they do not qualify as plan assets under Statement of Financial Accounting Standards (“SFAS”) No. 87, “Employers’ Accounting for Pensions” (“SFAS 87”). The assets held in the rabbi trust are not available for general corporate purposes. The rabbi trust is subject to creditor claims in the event of insolvency.

The Company sponsors other postretirement benefit plans that cover both non-union and union employees. Those plans are not funded.

The Company’s funding policy is to make contributions to the Unified Cash Balance Plan and the AG Cash Balance Plan in amounts that are at least sufficient to meet the minimum funding requirements of applicable laws and regulations, but no more than amounts deductible for federal income tax purposes. The Company expects to make estimated contributions to the Unified Cash Balance Plan totaling $10.7 million during fiscal 2008, which is comprised of $4.7 million for the 2008 plan year and $6.0 million for the 2007 plan year. In addition, the Company expects to make estimated contributions to the AG Cash Balance Plan totaling $2.5 million in fiscal 2008, which is

11

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

comprised of $1.2 million for the 2008 plan year and $1.3 million for the 2007 plan year. At its discretion, the Company may contribute in excess of these amounts. Additional contributions for the 2007 plan year, if any, will be due by September 15, 2008, while contributions for the 2008 plan year will be due by September 15, 2009. To date, the Company contributed $2.4 million and $1.1 million to the Unified Cash Balance Plan and $0.6 million and $0.9 million to the AG Cash Balance Plan during the thirty-nine weeks ended June 28, 2008 for the 2008 and 2007 plan years, respectively.

Additionally, at the beginning of fiscal 2008, the Company expected to contribute $1.3 million to the ESPP to fund projected benefit payments to participants for the 2008 plan year. The Company contributed $0.6 million to the ESPP during the thirty-nine weeks ended June 28, 2008 to fund projected benefit payments to participants for the 2008 plan year. Amounts contributed to fund benefit payments to participants for the 2008 plan year were less than anticipated because certain retirement assumptions upon which the original estimates were based did not occur.

8.    RELATED PARTY TRANSACTIONS

Members and non-members affiliated with directors of the Company make purchases of merchandise from the Company and also may receive benefits and services that are of the type generally offered by the Company to its similarly situated eligible Members and non-members. Management believes such transactions are on terms that are generally consistent with terms available to other Members and non-members similarly situated.

During the course of its business, the Company enters into individually negotiated supply agreements with Member and non-member customers of the Company. These agreements require the Member or non-member to purchase certain agreed amounts of its merchandise requirements from the Company and obligate the Company to supply such merchandise under agreed terms and conditions relating to such matters as pricing and delivery. During the first quarter of fiscal 2008, in connection with the Acquisition, the Company executed supply agreements with non-member customers affiliated with Company directors Terry H. Halverson, Paul Kapioski and Michael S. Trask. Each of these agreements expires on September 30, 2012.

As of the date of this report, other than noted above, there have been no material changes to the related party transactions disclosed in Note 17 to Notes to Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007.

9.    NEW ACCOUNTING PRONOUNCEMENTS

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3 (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). FSP 142-3 was issued to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations,” and other U.S. GAAP. When determining the useful life of a recognized intangible asset, paragraph 11(d) of SFAS No. 142 precluded an entity from using its own assumptions about renewal or extension of an arrangement where there is likely to be substantial cost or material modifications. FSP 142-3 specifies that when entities develop assumptions about renewal or extension, an entity shall consider its own historical experience in renewing or extending similar arrangements; however, these assumptions should be adjusted for the entity-specific factors in paragraph 11 of SFAS No. 142. In the absence of that experience, an entity shall consider the assumptions that market participants would use about renewal or extension (consistent with the highest and best use of the asset by market participants), adjusted for the entity-specific factors in paragraph 11 of SFAS No. 142.

FSP 142-3 requires entities to disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. FSP 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. FSP 142-3 is required to be applied prospectively to intangible assets acquired after the effective date. Accordingly, FSP 142-3 will be adopted

12

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

commencing in the first quarter for the Company’s fiscal year-end 2010. The Company is currently assessing the impact this standard may have on its consolidated financial statements.

In December 2007, the FASB issued Statements of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations,” and No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 141(R)” and “SFAS No. 160”). SFAS No. 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries in the same manner – as equity in the consolidated financial statements and also requires transactions between an entity and noncontrolling interests to be treated as equity transactions. SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated (as of the date the parent ceases to have a controlling financial interest in the subsidiary). Both statements are effective for fiscal years beginning on or after December 15, 2008. Early adoption of both statements is not permitted. Accordingly, SFAS No. 141(R) and SFAS No. 160 will be adopted commencing in the first quarter for the Company’s fiscal year-end 2010. The Company is currently assessing the impact these standards may have on its consolidated financial statements.

In September 2006, the FASB ratified EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefits Associated with Endorsement Split-Dollar Life Insurance Arrangements” (“EITF No. 06-4”) and in March 2007, the FASB ratified EITF Issue No. 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“EITF No. 06-10”). EITF No. 06-4 requires deferred compensation or postretirement benefit aspects of an endorsement-type split-dollar life insurance arrangement to be recognized as a liability by the employer and states the obligation is not effectively settled by the purchase of a life insurance policy. The liability for future benefits should be recognized based on the substantive agreement with the employee, which may be either to provide a future death benefit or to pay for the future cost of the life insurance. EITF No. 06-10 provides recognition guidance for postretirement benefit liabilities related to collateral assignment split-dollar life insurance arrangements, as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment split-dollar life insurance arrangement. EITF No.’s 06-4 and 06-10 are effective for fiscal years beginning after December 15, 2007. Accordingly, EITF No.’s 06-4 and 06-10 will be adopted commencing in the first quarter for the Company’s fiscal year-end 2009. The Company is currently assessing the impact these standards may have on its consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 provides companies with an option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 is expected to expand the use of fair value measurement consistent with the Board’s long-term objectives for financial instruments. A company that adopts SFAS No. 159 will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Accordingly, SFAS No. 159 will be adopted commencing in the first quarter for the Company’s fiscal year-end 2009. The Company is currently assessing the impact this standard may have on its consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”). SFAS No. 158 requires that employers recognize on a prospective basis the funded status of an entity’s defined benefit pension and postretirement plans as an asset or liability in the financial statements, requires the measurement of defined benefit pension and postretirement plan assets and obligations as of the end of the employer’s fiscal year, and requires recognition of the funded status of defined benefit pension and postretirement plans. Accordingly, the Company adopted SFAS No. 158 in the fourth quarter of its fiscal year ending September 29, 2007 (see Notes 1,

13

Unified Grocers, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

11 and 12 to Notes to Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007). The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position shall be effective for fiscal years ending after December 15, 2008. Accordingly, the Company will adopt this requirement effective with its fiscal year-end 2009. The Company is currently assessing the impact that adoption of this portion of the standard will have on its consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 establishes a fair value hierarchy that prioritizes the information used to develop the assumptions that market participants would use when pricing the asset or liability. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. In addition, SFAS No. 157 requires that fair value measurements be separately disclosed by level within the fair value hierarchy. SFAS No. 157 does not require new fair value measurements. In November 2007, the FASB reaffirmed that (1) companies will be required to implement SFAS No. 157 for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in the financial statements; and (2) SFAS No. 157 remains effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. In February 2008, the FASB issued FSP Nos. FAS 157-1 and FAS 157-2 (“FSP 157-1” and “FSP 157-2”), which partially deferred the effective date of SFAS No. 157 for one year for certain non-financial assets and liabilities and removed certain leasing transactions from its scope. Accordingly, SFAS No. 157, as modified above, will be adopted commencing in the first quarter for the Company’s fiscal year-end 2009. The portion of SFAS No. 157 impacted by FSP 157-2 will be adopted commencing in the first quarter for the Company’s fiscal year-end 2010. The Company is currently assessing the impact this standard may have on its consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Accordingly, FIN 48 was adopted commencing in the first quarter of the Company’s fiscal year-end 2008. The adoption of FIN 48 did not have a material impact on the Company’s financial condition and results of operations. At June 28, 2008, the Company had no unrecognized tax benefits that, if recognized, would materially affect the Company’s effective income tax rate in future periods. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its recognized tax positions. Effective upon adoption of FIN 48, the Company continues to recognize interest and penalties accrued related to unrecognized tax benefits and penalties within its provision for income taxes. The Company had no material interest and penalties accrued at June 28, 2008. Prior to its adoption of FIN 48, the Company recognized such interest and penalties, which were immaterial in prior periods, within its provision for income taxes.

The Company recently completed federal income tax examinations for its fiscal years 2004 and 2005, resulting in no adjustments to its tax returns. With limited exceptions, the Company is no longer subject to federal income tax examinations for fiscal years prior to 2006. As of June 28, 2008, the Company is subject to income tax examinations for its U.S. federal income taxes for fiscal year 2006 and for state and local income taxes for fiscal years 2003 through 2006.

In May 2007, the FASB issued FASB Staff Position No. FIN 48-1 (“FSP 48-1”), “Definition of Settlement in FASB Interpretation No. 48.” FSP 48-1 amended FIN 48 to provide guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP 48-1 required application upon the initial adoption of FIN 48. The adoption of FSP 48-1 had no material impact on the Company’s consolidated condensed financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, or (c) embody assumptions that may prove to have been inaccurate. These forward-looking statements involve risks, uncertainties and assumptions. When the Company uses words such as “believes,” “expects,” “anticipates” or similar expressions, the Company is making forward-looking statements. Although Unified believes that the expectations reflected in such forward-looking statements are reasonable, the Company cannot give readers any assurance that such expectations will prove correct. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond the Company’s control. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the factors discussed in the sections entitled “Risk Factors” and “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements attributable to Unified are expressly qualified in their entirety by the factors that may cause actual results to differ materially from anticipated results. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date hereof. The Company undertakes no duty or obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in this document as well as in other documents the Company files from time to time with the Securities and Exchange Commission.

COMPANY OVERVIEW

General

A California corporation organized in 1922 and incorporated in 1925, Unified Grocers, Inc. (referred to in this Form 10-Q as “Unified,” “the Company,” “our” or “we”) is a retailer-owned, grocery wholesale cooperative serving supermarket, specialty and convenience store operators located primarily in the western United States and the South Pacific. Our customers range in size from single store operators to multiple store chains. The Company operates its business in two reportable business segments: (1) Wholesale Distribution and (2) Insurance. All remaining business activities are grouped into “All Other” (see Note 4 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements”).

We sell a wide variety of products typically found in supermarkets. We report all product sales in our Wholesale Distribution segment, which represents approximately 99% of our total sales. Our customers include our owners (“Members”) and non-owners (“non-members”). We also provide support services to our customers, including insurance and financing. Support services, including promotional planning, retail technology, equipment purchasing services and real estate services, are reported in our Wholesale Distribution segment. Insurance activities account for approximately 1% of total sales and are reported in our Insurance segment, while finance activities are grouped with our All Other business activities. The availability of specific products and services may vary by geographic region. We have three separate geographical and marketing regions. The regions are Southern California, Northern California and the Pacific Northwest.

Over the past few years, we have focused on an initiative to strengthen our corporate brand and image in the marketplace. During 2006, we changed the name of our specialty grocery subsidiary to “Market Centre” to better reflect the Company’s broad range of product offerings and unique services that are offered to our retail customers. In addition, we recently have begun to do business as “Unified Grocers” for nearly all purposes, and effected a legal name change on February 20, 2008. We also changed the name of our Insurance subsidiary to “Unified Grocers Insurance Service” and effected a legal name change on May 9, 2008.

The Company’s strategic focus is to promote the success of independent retailers. A significant milestone was achieved in early fiscal 2008, when we purchased certain assets and assumed certain liabilities of Associated Grocers, Incorporated and its subsidiaries (the “Seattle Operations”), a grocery cooperative headquartered in Seattle, Washington (the “Acquisition”). The Seattle Operations primarily serve retailers throughout Washington,

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Oregon, Alaska and the South Pacific. This transaction is expected to increase Unified’s sales to approximately $4 billion annually, thus providing the independent retailers served by Unified an increased profile with the vendor community, improved retail market share in the Pacific Northwest and the benefit of reduced cost burdens of capital and overhead.

Unified does business primarily with those customers that have been accepted as Members. Members are required to meet minimum purchase requirements and specific capitalization requirements, which include capital stock ownership in the Company and may include required cash deposits. See “Member Investments and Patronage Dividends” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information. Additionally, see “DESCRIPTION OF DEPOSIT ACCOUNTS” in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on July 3, 2008, with respect to the Company’s offering of Partially Subordinated Patrons’ Deposit Accounts for further information. The membership requirements, including minimum purchase and capitalization requirements, may be modified at any time at the discretion of the Company’s Board of Directors (the “Board”).

We distribute the earnings from activities conducted with our Members, excluding subsidiaries (collectively “patronage business”), in the form of patronage dividends. The Company conducts business with Members and non-members within the patronage business. Our patronage earnings are based on the combined results of the Company’s three patronage earnings divisions: the Southern California Dairy Division, the Pacific Northwest Dairy Division and the Cooperative Division. The Company conducts business on a non-patronage basis in the Wholesale Distribution segment through its Cooperative Division, specialty food subsidiary (Market Centre) and international sales subsidiary (Unified International, Inc). These businesses sell products to both Members and non-members. An entity that does not meet Member purchase requirements or does not desire to become a Member may conduct business with Unified as a non-member customer on a non-patronage basis. The Company does business through its subsidiaries on a non-patronage basis. Earnings from the Company’s subsidiaries and from business conducted with non-members (collectively “non-patronage business”) are retained by the Company. Customers served by the Seattle Operations are generally not being offered membership during the year following the Acquisition, and accordingly, business conducted with those customers is occurring on a non-patronage basis. Thereafter, membership is being offered on the terms and conditions available to all new Members except those customers who were formerly members of Associated Grocers, Incorporated may elect to satisfy their Class B Share investment requirement only with respect to stores owned at the time of admission as a Member solely from the issuance of Class B Shares as part of the patronage dividends to be distributed for fiscal years following their first year of membership.

In April 2008, the Board approved changes to our membership requirements. The principal change was that in order for customers to be accepted as Members of Unified, minimum required annual purchase volume was generally established at $1 million. Persons who were Members on the date of this change, or who were formerly shareholders and customers of Associated Grocers, Incorporated on the date of the Acquisition, are not subject to this change. Additionally, membership is generally required for those purchasing in excess of $3 million annually. See “DESCRIPTION OF DEPOSIT ACCOUNTS – General” in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on July 3, 2008, with respect to the Company’s offering of Partially Subordinated Patrons’ Deposit Accounts for additional information.

Facilities and Transportation

We operate various warehouse and office facilities that are located in Commerce, Los Angeles, Santa Fe Springs, Stockton, Livermore and Fresno, California, Milwaukie, Oregon and Seattle and Renton, Washington. During fiscal 2006, we began a major renovation of our Stockton, California facility to add additional square footage, new racking, and to install mechanized conveyor systems. We anticipate these conveyor systems will allow us to more effectively merge product at the facility with products sourced from our other facilities and vendors. This will result in expanded product availability for our Member and non-member customers without the need to warehouse these products in our Stockton facility. The additional square footage and primary conveyor system were completed and began operating during the first fiscal quarter of 2008. We have also been installing new racking and reconfiguring the Stockton facility in order to accommodate the current and projected growth in our Market Centre business. We anticipate the new racking and additional conveyor system to be completed during the remainder of fiscal 2008. The renovation also provided sufficient additional capacity to allow us to close our Hayward facility, which consisted solely of our Market Centre business, in March 2008 and consolidate its operations into our Stockton facility. We

16

anticipate this will help us lower costs and better support our customers and new sales growth. This effort is projected to continue through fiscal 2008. We also operate a bakery manufacturing facility and a milk, water and juice processing plant in Los Angeles, which primarily serve the Southern California region.

Customers may choose either of two delivery options for the distribution of our products. Customers may either elect to have the Company deliver orders to their stores or warehouse locations or may choose to pick their orders up from our distribution centers. For delivered orders, we utilize either the Company-operated fleet of tractors and trailers or third party carriers.

Industry Overview and the Company’s Operating Environment

Competition

Unified competes in the wholesale grocery industry with regional and national food wholesalers such as C&S Wholesale, and Supervalu Inc., as well as other local wholesalers that provide a broad range of products and services to their customers. Unified was a direct competitor of Associated Grocers, Incorporated prior to the Acquisition. We also compete with many local and regional meat, produce, grocery, specialty, general food, bakery and dairy wholesalers and distributors. Unified’s customers compete directly with vertically integrated regional and national chains. The growth or loss in market share of our customers will also impact the Company’s sales and earnings. For more information about the competition Unified faces, please refer to “Risk Factors.”

The marketplace in which we operate continues to evolve and present challenges both to our customers and us. The continued expansion of alternative grocery and food store formats into our marketplace may present challenges for some of the retail grocery stores owned by our customers. In addition, non-traditional formats such as warehouse, supercenters, discount, drug, natural and organic, and convenience stores continue to expand their offering of products that are a core part of the conventional grocery store offering, thereby creating additional competition for our customers. Demographic changes have created more ethnic diversity in our marketplace. To effectively compete with these changes, many of our successful customers have focused on, among other things, differentiation strategies in specialty products and items on the perimeter of the store such as produce, service deli, service bakery and meat categories.

To further enhance our strategy to help our customers differentiate themselves from the competition, we offer specialty grocery products through our Market Centre subsidiary in four categories: gourmet specialties, ethnic foods, natural/organic products and confections. In addition to supplying these products, Market Centre offers a wide range of retail support services, including category development and category management, merchandising services, marketing programs and promotional strategies.

We also support growth by offering promotions on fast-moving products and by supporting and sponsoring major events that help promote sales at the retail level.

Economic Factors

We are impacted by changes in the overall economic environment. In recent periods, the Company has experienced significant volatility in certain expenses, commodities and a general increase in the cost of ingredients for our manufactured breads and processed fluid milk and the cost of packaged goods purchased from other manufacturers. The Company’s pricing programs are designed to pass these costs on to our customers; however, the Company may not always be able to pass such increases to customers on a timely basis. Accordingly, any such delay may result in a less than full recovery of price increases.

Costs associated with our workers’ compensation coverage in California have significantly improved after several years of cost increases.

The majority of Unified’s investments (approximately 82.3%) are held primarily by two of our insurance subsidiaries, and include U.S. government agency mortgage-backed securities, high quality investment grade corporate bonds, and U.S. government treasury securities. These investments have readily determinable market values based on actively traded securities in the marketplace, and they have experienced a decrease in market value since the beginning of our fiscal year. Life insurance investments tied to the equity markets have performed well in recent years, although they have been negatively impacted by the market decline that took place during the thirty-nine weeks ended June 28, 2008.

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External factors continue to drive increases in costs associated with fuel and employee health care benefits. Diesel fuel costs have increased significantly during the thirty-nine weeks ended June 28, 2008. Our pricing includes a fuel surcharge on product shipments to recover excess fuel costs over a specified index. Historically, the surcharge has been reviewed and adjusted when indications suggested that a change in the cost of fuel was other than temporary. Commencing in April 2008, in response to the sustained increase in fuel costs during the current fiscal year, we have begun to review and adjust our fuel surcharge on a monthly basis to more timely reflect changes in fuel costs not previously passed through to customers as they were incurred.

Additionally, wage increases occur as a result of negotiated labor contracts and adjustments for non-represented employees. We continually focus attention on initiatives aimed at improving business processes and managing costs. We have also been upgrading our warehouse management system as discussed below in “Technology.” The implementation of these initiatives has resulted in significant improvements throughout the Company, most notably in our distribution system, which has led to improved warehouse and transportation efficiencies.

Technology

Technological improvements have been an important part of Unified’s strategy to improve service to our customers and lower costs. Unified’s customers benefit from our substantial investment in supply-chain technology, including improvements in our vendor management activities through new item introductions, promotions management and payment support activities.

Technological improvements in Unified’s distribution systems have been a strategic priority for the Company. Over the past four years, we have upgraded our warehouse and enterprise reporting systems to improve efficiencies, order fulfillment accuracy and internal management reporting capabilities. As a result, five of our main facilities have been upgraded. This process has been instrumental in helping drive the efficiencies described above under “Economic Factors.” We expect to see additional warehouse improvements and order fulfillment accuracy as each facility fully realizes the benefits of the upgrade.

We began an upgrade of our on-board tractor tracking and control system during fiscal 2007 and anticipate completing the upgrade during fiscal 2008. The upgrade will provide better tracking of the fleet to assist in dynamic routing and create more operational efficiencies.

Additionally, we continue to make improvements to better support our interactions with vendors and customers. We provide network connectivity, data exchange, and a portfolio of applications to our customers. Improving these tools allows independent retailers with varying formats and needs to benefit from standardization while making use of business applications best suited to their unique needs. Our retail support efforts centered most recently on offering a new Interactive Ordering System (“IOS”) hand-held device that allows for multiple applications to operate on one device. We have also helped our retailers upgrade their electronic payment terminals to be compliant with Payment Card Industry regulations.

Sales Activities and Recent Developments

We experienced an overall sales increase of $735.9 million, or 31.6%, for the thirty-nine weeks ended June 28, 2008 (the “2008 Period”) as compared to the thirty-nine week period ended June 30, 2007 (the “2007 Period”). The following table illustrates the major factors that contributed to the $736.9 million increase in net sales in our Wholesale Distribution segment during the 2008 Period compared to the 2007 Period:

Wholesale Distribution Sales Activity	Amount (dollars in 000’s)
Sales gained from acquisition of the Seattle Operations	$	617,278
Continuing customer growth		104,795
Sales gained from other new customers		16,456
Sales decrease from lost customers		(1,577	)
Total Wholesale Distribution segment net sales growth	$	736,952

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Sales in our Insurance segment decreased $0.4 million in the 2008 Period versus the 2007 Period due to the insurance climate becoming more competitive and premium rates declining over the prior year. In addition, due to the competitive climate, we experienced a decline in our policy renewals compared to the prior year. Sales in our All Other business activities decreased $0.6 million in the 2008 Period versus the 2007 Period.

RESULTS OF OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the consolidated condensed financial statements and notes to the consolidated condensed financial statements, specifically Note 4 to “Notes to Consolidated Condensed Financial Statements,” “Segment Information,” included elsewhere in this report. Certain statements in the following discussion are not historical in nature and should be considered to be forward-looking statements that are inherently uncertain.

The following table sets forth selected consolidated financial data of Unified expressed as a percentage of net sales for the periods indicated and the percentage increase or decrease in such items over the prior period.

	Thirteen Weeks Ended				% Change Thirteen Weeks		Thirty-Nine Weeks Ended				% Change Thirty-Nine Weeks
Fiscal Period Ended	June 28, 2008		June 30, 2007				June 28, 2008		June 30, 2007
Net sales	100.0	%	100.0	%	28.6	%	100.0	%	100.0	%	31.6	%
Cost of sales	90.0		90.3		28.2		90.3		90.2		31.9
Distribution, selling and administrative expenses	8.2		7.9		32.6		8.0		7.9		33.1
Operating income	1.8		1.8		35.9		1.7		1.9		15.3
Interest expense	(0.3	)	(0.5	)	(0.6	)	(0.4	)	(0.5	)	8.2
Estimated patronage dividends	(0.6	)	(0.5	)	72.9		(0.6	)	(0.6	)	21.3
Income taxes	(0.4	)	(0.3	)	81.9		(0.3	)	(0.3	)	26.3
Net earnings	0.5	%	0.5	%	11.0	%	0.4	%	0.5	%	7.7	%

THIRTEEN WEEK PERIOD ENDED JUNE 28, 2008 (“2008 PERIOD”) COMPARED TO THE THIRTEEN WEEK PERIOD ENDED JUNE 30, 2007 (“2007 PERIOD”)

Overview of the 2008 Period.    Our consolidated operating income increased $5.1 million to $19.2 million in the 2008 Period compared to $14.1 million in the 2007 Period.

The 2008 Period included a combination of offsetting factors that contributed to the change in operating income. Items contributing to increased operating income included growth in our base business and growth resulting from the inclusion of our newly acquired Seattle Operations. Offsetting these amounts were operating expenses related to closing our rented warehouse facility in Hayward, California, and the consolidation of its Market Centre business into our recently expanded Stockton warehouse, which is owned and also located in Northern California. This facility consolidation was undertaken, in part, to reduce costs in the long-term and allow for the expansion of certain product availability to both California and the Pacific Northwest, including the market area served from our new Seattle Operations (see “Facilities and Transportation” for additional discussion). The 2008 Period was also negatively impacted by a decrease in the cash surrender value of our life insurance policy investments as a result of the general decline in underlying market conditions. Finally, operating income increased in our Insurance segment due primarily to reductions in loss reserves related to improved claims loss experience for earlier periods.

The overall increase in operating income is summarized in our operating segments and other business activities as follows:

· Wholesale Distribution Segment:    The Wholesale Distribution segment’s operating income increased $4.8 million to $17.3 million in the 2008 Period compared to $12.5 million in the 2007 Period. The increase in operating income was due, in large part, to the 2008 Period activity related to the Seattle Operations acquired, growth in sales to our existing customer base and an increase in inventory holding gains related to vendor price increases recognized upon sale of product. The increase in operating income was partially offset by decreased earnings in certain investments associated with life insurance contracts

19

tied to the equity markets, and costs incurred related to closing our Hayward facility and consolidating its operations into our Stockton facility during the 2008 Period. We have also been reconfiguring the Stockton facility to accommodate the installation of new racking, the transfer of the Hayward Market Centre inventory and to better support our customers and new sales growth.

· Insurance Segment:    Operating income increased $0.6 million in our Insurance segment to $1.8 million in the 2008 Period compared to $1.2 million in the 2007 Period. The improvement in the 2008 Period resulted primarily from lowering loss reserves based on improved claims loss experience for earlier periods.

· All Other:    All Other business activities primarily consist of our finance subsidiary and the consolidation of a variable interest entity as discussed in Note 3 of “Notes to the Consolidated Condensed Financial Statements” in Item 1 “Financial Statements.” Operating income was $0.1 million for the 2008 Period and $0.4 million for the 2007 Period.

The following tables summarize the performance of each business segment for the 2008 and 2007 Periods.

Wholesale Distribution Segment

(dollars in thousands)

	Thirteen Weeks Ended June 28, 2008			Thirteen Weeks Ended June 30, 2007
	Amounts in 000’s		Percent to Net Sales	Amounts in 000’s		Percent to Net Sales	Difference
Gross sales	$	1,013,515	—	$	786,436	—	$	227,079
Inter-segment eliminations		—	—		—	—		—
Net sales		1,013,515	100.0		786,436	100.0		227,079
Cost of sales		914,968	90.3		713,093	90.7		201,875
Distribution, selling and administrative expenses		81,230	8.0		60,831	7.7		20,399
Operating income	$	17,317	1.7	$	12,512	1.6	$	4,805

Insurance Segment

(dollars in thousands)

	Thirteen Weeks Ended June 28, 2008					Thirteen Weeks Ended June 30, 2007
	Amounts in 000’s			Percent to Net Sales		Amounts in 000’s			Percent to Net Sales	Difference
Gross sales – premiums earned	$	7,758		—		$	7,229		—	$	529
Inter-segment eliminations		(4,376	)	—			(3,742	)	—		(634	)
Net sales – premiums earned		3,382		100.0			3,487		100.0		(105	)
Cost of sales – underwriting expenses		(98	)	(2.9	)		791		22.7		(889	)
Selling and administrative expenses		1,736		51.3			1,510		43.3		226
Operating income	$	1,744		51.6		$	1,186		34.0	$	558

All Other

(dollars in thousands)

	Thirteen Weeks Ended June 28, 2008				Thirteen Weeks Ended June 30, 2007
	Amounts in 000’s			Percent to Net Sales	Amounts in 000’s			Percent to Net Sales	Difference
Gross sales	$	355		—	$	997		—	$	(642	)
Inter-segment eliminations		(197	)	—		(324	)	—		127
Net sales		158		100.0		673		100.0		(515	)
Selling and administrative expenses		60		38.0		270		40.1		(210	)
Operating income	$	98		62.0	$	403		59.9	$	(305	)

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Net sales.    Consolidated net sales increased $226.5 million, or 28.6%, to $1,017.1 million in the 2008 Period compared to $790.6 million for the 2007 Period.

· Wholesale Distribution Segment:    Net Wholesale Distribution sales increased $227.1 million to $1,013.5 million in the 2008 Period compared to $786.4 million for the 2007 Period. In addition to the Seattle Operations acquired, we continued to experience sales growth through new store openings by our customers and growth in sales of products that help our customers differentiate their stores from the competition.

Seattle Operations

· Sales increased $194.5 million in the 2008 Period as a result of including the Seattle Operations in our operating results since its acquisition at the beginning of fiscal 2008.

Continuing Customer Sales Growth

· Primarily driven by our customers’ continued growth to new store locations, distribution volume at existing locations, as well as inflationary effects, sales increased by approximately $25.7 million. The growth includes a $2.8 million increase in our perishables product offerings such as meat, produce, service deli and service bakery, a $5.5 million increase in center store sales, and a $14.2 million increase in our Market Centre specialty foods subsidiary.

Customer Changes

· During the 2008 Period, we began supplying customers (other than those served by the Seattle Operations) that were previously served by competitors, resulting in a $7.3 million increase in sales.

· Sales to customers in the 2007 Period that discontinued business with us and began purchasing their products from competitors were $0.4 million.

· Insurance Segment:    Net sales, consisting principally of premium revenues, decreased $0.1 million to $3.4 million in the 2008 Period compared to $3.5 million for the 2007 Period. The insurance climate has become more competitive and premium rates have declined over the prior year. In addition, due to the competitive climate, we experienced a decline in our policy renewals compared to the prior year. The decline in our California workers’ compensation policy activity was partially offset by growth in policy commissions related to the recently acquired Seattle Operations.

· All Other:    Net sales decreased $0.5 million to $0.2 million in the 2008 Period compared to $0.7 million in the 2007 Period.

Cost of sales (including underwriting expenses).    Consolidated cost of sales was $914.9 million for the 2008 Period and $713.9 million for the 2007 Period and comprised 90.0% and 90.3% of consolidated net sales for the 2008 and 2007 Periods, respectively.

· Wholesale Distribution Segment:    Cost of sales increased by $201.9 million to $915.0 million in the 2008 Period compared to $713.1 million in the 2007 Period. As a percentage of net wholesale sales, cost of sales was 90.3% and 90.7% for the 2008 and 2007 Periods, respectively.

· The change in product and customer sales mix associated with the Seattle Operations, acquired in early fiscal 2008, contributed to a 0.3% increase in cost of sales as a percent of net wholesale sales.

· Exclusive of the recently acquired Seattle Operations, a 0.2% decrease in cost of sales as a percent of net wholesale sales is attributed to an increase in fuel surcharges to compensate for increased fuel costs that were not previously recovered from charges to customers.

· Vendor related activity contributed to a 0.5% decrease in cost of sales as a percent of net wholesale sales. The change is primarily driven by an increase in inventory holding gains from vendor price increases. Our vendors and brokers are continually evaluating their go-to-market strategies to effectively promote their products. Changes in their strategies could have a favorable or unfavorable impact on our financial performance. See “Critical Accounting Policies and Estimates – Vendor Funds” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007.

21

· Insurance Segment:    Cost of sales (including underwriting expenses), primarily consisting of claims loss and loss adjustment expenses, underwriting expenses, commissions, premium taxes and regulatory fees, decreased $0.9 million from $0.8 million in the 2007 Period to a credit of $0.1 million in the 2008 Period. The decline in cost of sales in the 2008 Period resulted primarily from lowering loss reserves in the 2008 Period based on improved claims loss experience for earlier periods. Additionally, the cost of insurance and the sufficiency of loss reserves are also impacted by actuarial estimates based on a detailed analysis of health care cost trends, mortality rates, claims history, demographics and industry trends. As a result, the amount of loss reserves and future expenses is significantly affected by these variables and may significantly change, depending on the cost of providing benefits and the results of further legislative action. See additional discussion related to insurance reserves under “Risk Factors” – “Our insurance reserves may be inadequate if unexpected losses occur.”

Distribution, selling and administrative expenses.    Consolidated distribution, selling and administrative expenses were $83.0 million in the 2008 Period compared to $62.6 million in the 2007 Period, and comprised 8.2% and 7.9% of net sales for the 2008 and 2007 Periods, respectively.

· Wholesale Distribution Segment:    Distribution, selling and administrative expenses were $81.2 million in the 2008 Period compared to $60.8 million in the 2007 Period, and comprised 8.0% and 7.7% of net wholesale sales for the 2008 and 2007 Periods, respectively. As discussed in further detail below, expenses related to the recently acquired Seattle Operations, insurance, fuel, wages and other expenses increased costs $21.4 million, or 0.3% as a percent of net wholesale sales (due to the leveraging effect of the increased sales – see “Net Sales – Wholesale Distribution segment”).

· Seattle Operations:    Expenses resulting from increased volume related to the Seattle Operations acquired in early fiscal 2008 were $14.0 million for the 2008 Period. The change in expenses as a percent of net wholesale sales resulting from the new Seattle Operations was a decrease of 0.2% as a percent of net wholesale sales.

· Insurance Expense (other than Workers’ Compensation):    During the 2008 Period, we experienced insurance expense increases of $0.8 million, or 0.1% as a percent of net wholesale sales. This increase is primarily due to a decrease in the cash surrender value of our life insurance policy investments as a result of a decline in the fair value of the underlying securities (reflecting the general decline in market conditions), which are highly concentrated in U.S. equity markets and priced based on readily determinable market values.

· Fuel Expense:    During the 2008 Period, we experienced diesel fuel expense increases of $1.2 million, or 0.2% as a percent of net wholesale sales. This increase is primarily due to the rising cost of oil.

· Wages, Salaries and Pension Expense:    During the 2008 Period, we experienced increases in wages, salaries and pension costs of $5.4 million, or 0.2% as a percent of net wholesale sales. The increase as a percent to net wholesale sales is primarily due to expenses incurred during the closing of our Hayward distribution facility and the consolidation of the Hayward operations into our existing Stockton facility. Although costs associated with activities related to the installation of new racking have been capitalized, we continue to incur additional wage costs from reconfiguring our Stockton facility to accommodate the new racking and the additional volume transferred from Hayward as well as new sales growth.

· Other Expense Changes:    General expenses decreased $1.0 million, but were consistent as a percent of net wholesale sales.

· Insurance Segment:    Selling and administrative expenses for the Insurance segment increased $0.2 million from $1.5 million in the 2007 Period to $1.7 million in the 2008 Period. The increase is due primarily to higher wages and benefits expenses to support our growth in Washington, an increase in the accounts receivable allowance, and higher consulting costs.

· All Other:    Selling and administrative expenses for our All Other business activities decreased $0.2 million from $0.3 million in the 2007 Period to $0.1 million in the 2008 Period.

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Interest.    Interest expense was $3.7 million in the 2008 and 2007 Periods and comprised 0.3% and 0.5% of consolidated net sales for the 2008 and 2007 Periods, respectively. Factors impacting interest expense are as follows:

· Interest expense on our primary debt instruments (as described below) was $3.4 million and $3.0 million for the 2008 and 2007 Periods, respectively.

· Weighted Average Borrowings:    Interest expense increased $1.6 million from the 2007 Period due to an increase in our weighted average borrowings. Weighted average borrowings increased by $85.9 million due to amounts needed to fund the purchase of certain assets and assumption of certain liabilities of the Seattle Operations (see Note 2 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements”), finance the trade accounts receivable arising from the Seattle Operations that were not part of the purchase price, and finance the general cost increase in products purchased for resale.

· Interest Rates:    Interest expense decreased $1.2 million from the 2007 Period due to a decrease in our effective borrowing rate. Our effective borrowing rate for the combined primary debt, made up of the revolving line of credit and senior secured notes, was 5.3% and 7.1% for the 2008 and 2007 Periods, respectively. Consistent with the overall market interest rate change, the base borrowing rate on the revolving line of credit decreased over the 2007 Period.

Borrowings on our revolving credit agreement are subject to market rate fluctuations. A 25 basis point change in the market rate of interest over the period would have resulted in a $0.1 million increase or decrease in corresponding interest expense.

· Interest expense on our other debt instruments was $0.3 million in the 2008 Period, a decrease of $0.4 million compared to $0.7 million in the 2007 Period. The decrease is primarily due to lower interest on member excess deposits as the prime rate decreased, the principal payoff of the subordinated patronage dividend certificates (December 2007) and real estate lease settlements paid in the 2008 Period (see Note 3 of “Notes to the Consolidated Condensed Financial Statements” in Item 1 “Financial Statements”). See Notes 6 and 9 to “Notes to Consolidated Financial Statements” in Part II, Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 regarding the Company’s Capital Investment Notes and subordinated patronage dividend certificates, respectively.

Estimated patronage dividends.    Estimated patronage dividends for the 2008 Period were $7.0 million, compared to $4.0 million in the 2007 Period, an increase of 72.9%. Patronage dividends for the 2008 and 2007 Periods consisted of the patronage earnings from the Company’s three patronage earnings divisions: the Southern California Dairy Division, the Pacific Northwest Dairy Division and the Cooperative Division. For the 2008 and 2007 Periods, respectively, the Company had patronage earnings of $2.5 million and $2.6 million in the Southern California Dairy Division, $0.2 million and $0.1 million in the Pacific Northwest Dairy Division and $4.3 million and $1.3 million in the Cooperative Division. Our growth in patronage earnings was primarily due to growth in our existing Members’ business and lower cost of sales related to an increase in inventory holding gains from vendor price increases recognized upon sale of product, partially offset by additional costs incurred to close our Hayward facility and consolidate its operations into our Stockton facility.

Income taxes.    The Company’s effective income tax rate was 43.6% for the 2008 Period compared to 32.0% for the 2007 Period. The higher rate for the 2008 Period is due to permanent non-deductible losses related to the Company’s corporate-owned life insurance policies. These losses are reflected as a reduction of book income. As discussed in Note 9 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements,” the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” commencing in the first quarter of the Company’s fiscal year 2008. The adoption of FIN 48 did not have a material impact on the Company’s financial condition and results of operations.

THIRTY-NINE WEEK PERIOD ENDED JUNE 28, 2008 (“2008 PERIOD”) COMPARED TO THE THIRTY-NINE WEEK PERIOD ENDED JUNE 30, 2007 (“2007 PERIOD”)

Overview of the 2008 Period.    Our consolidated operating income was $50.5 million in the 2008 Period compared to $43.8 million in the 2007 Period.

23

The increase in operating income during the 2008 Period included growth in our base business and growth resulting from our newly acquired Seattle Operations. These amounts were partially offset by operating expenses related to closing our rented warehouse facility in Hayward, California and the consolidation of its Market Centre business into our recently expanded Stockton warehouse as discussed in “Facilities and Transportation” and the “Overview of the 2008 Period” for the Thirteen-Week Period Ended June 28, 2008. A significant rise in fuel costs in excess of fuel surcharge recoveries during the 2008 Period partially offset the increase in operating income for the Wholesale Distribution segment. The 2008 Period was also negatively impacted by a decrease in the cash surrender value of our life insurance policy investments as a result of the general decline in underlying market conditions. Finally, operating income declined in our Insurance segment due to changing conditions in the insurance marketplace. Despite the impact of these additional expenses, our operating income increased $6.7 million as compared to the 2007 Period.

The overall increase in operating income is summarized in our operating segments and other business activities as follows:

· Wholesale Distribution Segment:    The Wholesale Distribution segment’s operating income was $47.5 million in the 2008 Period compared to $40.2 million in the 2007 Period. The increase in operating income was primarily due to the increase in net sales as a result of the Seattle Operations acquired, growth in sales to our existing customer base, an increase in inventory holding gains from vendor price increases recognized upon sale of product, and a reduction in workers’ compensation claims loss reserves. The increase in operating income was partially offset by increased costs of diesel fuel in excess of fuel surcharge recoveries, decreased earnings in certain investments associated with life insurance contracts tied to the equity markets, and costs incurred related to closing our Hayward facility and consolidating its operations into our Stockton facility during the 2008 Period. We have also been reconfiguring the Stockton facility to accommodate the installation of new racking, the transfer of the Hayward Market Centre inventory and to better support our customers and new sales growth.

· Insurance Segment:    Operating income declined $0.8 million in our Insurance segment to $3.0 million in the 2008 Period compared to $3.8 million in the 2007 Period, due primarily to decreased premium rates and a decline in policy renewals related to workers’ compensation in California, partially offset by reductions in loss reserves based on improved claims loss experience for earlier periods.

· All Other:    All Other business activities primarily consist of our finance subsidiary and the consolidation of a variable interest entity as discussed in Note 3 of “Notes to Consolidated Condensed Financial Statements” in Item 1”Financial Statements.” Operating income increased $0.2 million to marginal income for the 2008 Period compared to a loss of $0.2 million in the 2007 Period and consisted of $0.2 million in operating income from our finance subsidiary offset by $0.2 million in operating expense associated with our variable interest entity.

The following tables summarize the performance of each business segment for the 2008 and 2007 Periods.

Wholesale Distribution Segment

(dollars in thousands)

	Thirty-Nine Weeks Ended June 28, 2008			Thirty-Nine Weeks Ended June 30, 2007
	Amounts in 000’s		Percent to Net Sales	Amounts in 000’s		Percent to Net Sales	Difference
Gross sales	$	3,051,036	—	$	2,314,084	—	$	736,952
Inter-segment eliminations		—	—		—	—		—
Net sales		3,051,036	100.0		2,314,084	100.0		736,952
Cost of sales		2,763,934	90.6		2,095,457	90.6		668,477
Distribution, selling and administrative expenses		239,552	7.9		178,374	7.7		61,178
Operating income	$	47,550	1.5	$	40,253	1.7	$	7,297

24

Insurance Segment

(dollars in thousands)

	Thirty-Nine Weeks Ended June 28, 2008				Thirty-Nine Weeks Ended June 30, 2007
	Amounts in 000’s			Percent to Net Sales	Amounts in 000’s			Percent to Net Sales	Difference
Gross sales – premiums earned	$	21,795		—	$	19,714		—	$	2,081
Inter-segment eliminations		(11,957	)			(9,462	)			(2,495	)
Net sales – premiums earned		9,838		100.0		10,252		100.0		(414	)
Cost of sales – underwriting expenses		1,645		16.7		1,913		18.7		(268	)
Selling and administrative expenses		5,242		53.3		4,564		44.5		678
Operating income	$	2,951		30.0	$	3,775		36.8	$	(824	)

All Other

(dollars in thousands)

	Thirty-Nine Weeks Ended June 28, 2008				Thirty-Nine Weeks Ended June 30, 2007
	Amounts in 000’s			Percent to Net Sales	Amounts in 000’s			Percent to Net Sales		Difference
Gross sales	$	1,288		—	$	2,156		—		$	(868	)
Inter-segment eliminations		(655	)			(897	)				242
Net sales		633		100.0		1,259		100.0			(626	)
Selling and administrative expenses		579		91.5		1,430		113.6			(851	)
Operating income (loss)	$	54		8.5	$	(171	)	(13.6	)	$	225

Net sales.    Consolidated net sales increased $735.9 million, or 31.6%, to $3.1 billion in the 2008 Period compared to $2.3 billion in the 2007 Period.

· Wholesale Distribution Segment:    Net Wholesale Distribution sales increased $736.9 million, or 31.8%, to $3.1 billion in the 2008 Period compared to $2.3 billion for the 2007 Period. In addition to sales related to the recently acquired Seattle Operations, we continued to experience sales growth through new store openings by our customers and growth in sales of Market Centre products.

Seattle Operations

· Sales increased $617.3 million in the 2008 Period as a result of including the Seattle Operations in our operating results since its acquisition at the beginning of fiscal 2008.

Continuing Customer Sales Growth

· Primarily driven by our customers’ continued growth to new store locations, distribution volume at existing locations, as well as inflationary effects, sales increased by approximately $104.8 million. This growth includes a $24.6 million increase in our Perishables product offerings such as meat, produce, service deli and service bakery, a $16.1 million increase in center store sales, and a $48.6 million increase in our Market Centre specialty foods subsidiary.

Customer Changes

· During the 2008 Period, we began supplying customers (other than those served by the Seattle Operations) that were previously served by competitors, resulting in a $16.4 million increase in sales.

· Sales to customers in the 2007 Period that discontinued business with us and began purchasing their products from competitors were $1.6 million.

25

· Insurance Segment:    Net sales, consisting principally of premium revenues, decreased $0.4 million, or 4.0%, to $9.8 million in the 2008 Period compared to $10.2 million for the 2007 Period. The insurance climate has become more competitive and premium rates have declined over the prior year. In addition, due to the competitive climate, we experienced a decline in our policy renewals compared to the prior year. The decline in our California workers’ compensation policy activity was partially offset by growth in policy commissions related to the recently acquired Seattle Operations.

· All Other:    Net sales decreased $0.6 million to $0.6 million in the 2008 Period compared to $1.2 million for the 2007 Period.

Cost of sales.    Consolidated cost of sales was $2.8 billion for the 2008 Period compared to $2.1 billion for the 2007 Period and comprised 90.3% and 90.2% of consolidated net sales for the 2008 and 2007 Periods, respectively.

· Wholesale Distribution Segment (including underwriting expenses):    Cost of sales increased by $668.5 million to $2.8 billion in the 2008 Period compared to $2.1 billion in the 2007 Period. As a percentage of net wholesale sales, cost of sales was 90.6% for both the 2008 and 2007 Periods.

· The change in product and customer sales mix associated with the Seattle Operations acquired in early fiscal 2008 contributed to a 0.1% increase in cost of sales as a percent of net wholesale sales.

· A change in product and customer sales mix relative to customers exclusive of the recently acquired Seattle Operations contributed to a 0.1% increase in cost of sales as a percent of net wholesale sales. Our growth was primarily in products that carry a higher cost of sales as a percent of net sales compared to the 2007 Period product mix average. In addition, our larger customers have driven the sales growth in new store openings. These customers typically pick up their orders from our facilities and their larger order sizes allow for higher operational efficiencies but result in lower margins. As a result, the margin on these customers is lower than average and increases the cost of sales as a percent of net wholesale sales.

· Exclusive of the recently acquired Seattle Operations, a 0.1% decrease in cost of sales as a percent of net wholesale sales is attributed to an increase in fuel surcharges to compensate for increased fuel costs that were not previously recovered from charges to customers.

· Vendor related activity contributed to a 0.1% decrease in cost of sales as a percent of net wholesale sales. The change is primarily driven by an increase in inventory holding gains from vendor price increases recognized upon sale of product. Our vendors and brokers are continually evaluating their go-to-market strategies to effectively promote their products. Changes in their strategies could have a favorable or unfavorable impact on our financial performance. See “Critical Accounting Policies and Estimates – Vendor Funds” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007.

· Insurance Segment:    Cost of sales (including underwriting expenses), primarily consisting of claims loss and loss adjustment expenses, underwriting expenses, commissions, premium taxes and regulatory fees, decreased $0.3 million to $1.6 million in the 2008 Period compared to $1.9 million in the 2007 Period. The decline in cost of sales in the 2008 Period resulted primarily from lowering loss reserves in the 2008 Period based on improved claims loss experience for earlier periods. This decrease was partially offset by increased cost of sales due to certain customers converting from deductible policies in the 2007 Period to fully insured policies in the 2008 Period, which affects expenses incurred. Additionally, the cost of insurance and the sufficiency of loss reserves are also impacted by actuarial estimates based on a detailed analysis of health care cost trends, mortality rates, claims history, demographics and industry trends. As a result, the amount of loss reserves and future expenses is significantly affected by these variables and may significantly change, depending on the cost of providing benefits and the results of further legislative action. See additional discussion related to insurance reserves under “Risk Factors” – “Our insurance reserves may be inadequate if unexpected losses occur.”

26

Distribution, selling and administrative expenses.    Consolidated distribution, selling and administrative expenses were $245.4 million in the 2008 Period compared to $184.4 million in the 2007 Period, and comprised 8.0% and 7.9% of net sales for the 2008 and 2007 Periods, respectively.

· Wholesale Distribution Segment:    Distribution, selling and administrative expenses were $239.6 million in the 2008 Period compared to $178.4 million in the 2007 Period, and comprised 7.9% and 7.7% of net wholesale sales for the 2008 and 2007 Periods, respectively. As discussed in further detail below, expenses related to the recently acquired Seattle Operations, insurance, fuel, wages expenses increased costs $65.5 million, or 0.3% as a percent of net wholesale sales (due to the leveraging effect of the increased sales – see “Net Sales – Wholesale Distribution Segment”). This increase in the amount of costs was offset by decreased costs for workers’ compensation and other expenses of $4.3 million, or 0.1% as a percent of net wholesale sales.

· Seattle Operations:    Expenses resulting from increased volume related to the Seattle Operations acquired in early fiscal 2008 were $44.8 million for the 2008 Period. The change in expenses as a percent of net wholesale sales resulting from the new Seattle Operations was a decrease of 0.1% as a percent of net wholesale sales.

· Insurance Expense (other than Workers’ Compensation):    During the 2008 Period, we experienced insurance expense increases of $3.3 million, or 0.1% as a percent of net wholesale sales. This increase is primarily due to a decrease in the cash surrender value of our life insurance policy investments as a result of a decline in the fair value of the underlying securities (reflecting the general decline in market conditions), which are highly concentrated in U.S. equity markets and priced based on readily determinable market values.

· Fuel Expense:    During the 2008 Period, we experienced diesel fuel expense increases of $2.7 million, or 0.1% as a percent of net wholesale sales. This increase is primarily due to the rising cost of oil.

· Wages, Salaries and Pension Expense:    During the 2008 Period, we experienced increases in wages, salaries and pension costs of $14.7 million, or 0.2% as a percent of net wholesale sales. The increase as a percent to net wholesale sales is primarily due to expenses incurred during the closing of our Hayward distribution facility and the consolidation of the Hayward operations into our existing Stockton facility. Although costs associated with activities related to the installation of new racking have been capitalized, we continue to incur additional wage costs from reconfiguring our Stockton facility to accommodate the new racking and the additional volume transferred from Hayward as well as new sales growth.

The following expenses decreased in the 2008 Period compared to the 2007 Period, partially offsetting the increases in distribution, selling and administrative expenses that were discussed above:

· Workers’ Compensation Expense:    From October 1, 2001 through December 31, 2006, the Company’s Wholesale Distribution segment was self-insured up to $300,000 per incident with a stop loss coverage provided by our Insurance segment up to $1.0 million and third party coverage over that amount. After December 31, 2006, the Wholesale Distribution segment is fully insured up to $1.0 million with stop loss coverage provided by our Insurance segment and third party coverage over that amount. Loss accruals up to the stop loss coverage are made based on actuarially developed loss estimates. Our workers’ compensation expenses decreased by $2.4 million, or 0.1% as a percent of net wholesale sales, primarily due to reduction in our actuarially developed loss estimates. Future expenses may significantly change depending on the cost of providing health care and the results of legislative action.

· Other Expenses:    General expenses decreased $1.9 million, but were consistent as a percent of net wholesale sales.

· Insurance Segment:    Selling and administrative expenses for the Insurance segment increased $0.6 million from $4.6 million in the 2007 Period to $5.2 million in the 2008 Period. The increase is due primarily to higher wages and benefits expenses to support our growth in Washington, an increase in the accounts receivable allowance, and higher consulting costs.

· All Other:    Selling and administrative expenses for our All Other business activities decreased $0.8 million to $0.6 million for the 2008 Period compared to $1.4 million for the 2007 Period. The decrease is a result of reduced operating expenses in our variable interest entity.

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Interest.    Interest expense was $12.1 million in the 2008 Period compared to $11.2 million in the 2007 Period and comprised 0.4% and 0.5% of consolidated net sales for the 2008 and 2007 Periods, respectively. Factors contributing to the increase in interest expense are as follows:

· Interest expense on our primary debt instruments (as described below) was $11.0 million and $9.0 million for the 2008 and 2007 Periods, respectively.

· Weighted Average Borrowings:    Interest expense increased $4.8 million from the 2007 Period due to an increase in our weighted average borrowings. Weighted average borrowings increased by $82.2 million due to amounts needed to fund the purchase of certain assets and assumption of certain liabilities of the Seattle Operations (see Note 2 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements”), finance the trade accounts receivable arising from the Seattle Operations that were not part of the purchase price, fund the redemption of subordinated patronage dividend certificates, fund the payment of real estate lease settlements and finance the general cost increase in products purchased for resale.

· Interest Rates:    Interest expense declined $2.8 million from the 2007 Period due to a decrease in our effective borrowing rate. Our effective borrowing rate for the combined primary debt, made up of the revolving line of credit and senior secured notes, was 5.9% and 7.3% for the 2008 and 2007 Periods, respectively. Two primary factors contributed to the decrease in interest rates. First, we signed an agreement on December 5, 2006 to amend and restate our revolving credit facility and realized a reduction in our interest rate margin over the base borrowing rate on the revolving line of credit (see “Outstanding Debt and Other Financing Arrangements” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information). In addition, we were able to lower the fees associated with the financing, which had the impact of lowering our overall borrowing costs. Second, consistent with the overall market interest rate change, the base borrowing rate on the revolving line of credit decreased over the 2007 Period.

Borrowings on our revolving credit agreement are subject to market rate fluctuations. A 25 basis point change in the market rate of interest over the period would have resulted in a $0.3 million increase or decrease in corresponding interest expense.

· Interest expense on our other debt instruments was $1.1 million in the 2008 Period, a decrease of $1.1 million compared to $2.2 million in the 2007 Period. The decrease is primarily due to the principal payoff of the subordinated patronage dividend certificates (December 2007), Capital Investment Notes (September 2007) and real estate lease settlements paid in the 2008 Period (see Note 3 of “Notes to the Consolidated Condensed Financial Statements” in Item 1 “Financial Statements”). See Notes 6 and 9 to “Notes to Consolidated Financial Statements” in Part II, Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 regarding the Company’s Capital Investment Notes and subordinated patronage dividend certificates, respectively.

Estimated patronage dividends.    Estimated patronage dividends for the 2008 Period were $17.1 million, compared to $14.1 million in the 2007 Period, an increase of 21.3%. Patronage dividends for the 2008 and 2007 Periods consisted of the patronage earnings from the Company’s three patronage earnings divisions: the Southern California Dairy Division, the Pacific Northwest Dairy Division and the Cooperative Division. For the 2008 and 2007 Periods, respectively, the Company had patronage earnings of $7.6 million and $8.0 million in the Southern California Dairy Division, $0.5 million and $0.4 million in the Pacific Northwest Dairy Division and $9.0 million and $5.7 million in the Cooperative Division. Our growth in patronage earnings was primarily due to growth in our existing Members’ business, a decrease in workers’ compensation expenses, and lower cost of sales related to an increase in inventory holding gains from vendor price increases recognized upon sale of product, partially offset by additional costs incurred to close our Hayward facility and consolidate its operations into our Stockton facility and the continued increase in diesel fuel expense in excess of fuel surcharge recoveries.

Income taxes.    The Company’s effective income tax rate was 42.6% for the 2008 Period compared to 38.8% for the 2007 Period. The higher rate for the 2008 Period is due to permanent non-deductible losses related to the Company’s corporate-owned life insurance policies. These losses are reflected as a reduction of book income. As discussed in Note 9 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements,” the Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,”

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commencing in the first quarter of the Company’s fiscal year 2008. The adoption of FIN 48 did not have a material impact on the Company’s financial condition and results of operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its capital needs through a combination of internal and external sources. These sources include cash from operations, Member investments, bank borrowings, various types of long-term debt and lease financing. The Company believes that the combination of cash flows from operations, current cash balances, and available lines of credit will be sufficient to service its debt, redeem Members’ capital shares, make income tax payments and meet its anticipated needs for working capital and capital expenditures (including facility expansion and renovation projects discussed in “Facilities and Transportation”) through at least the next five fiscal years.

CASH FLOW

On September 30, 2007, the Company completed the Acquisition of the Seattle Operations. The Company’s cash flow from operations during the thirty-nine week 2008 Period includes the impact of the new Seattle Operations, most notably the increased accounts receivable activity. Cash from financing operations was used for operating and investing activities. The Company also reinvested proceeds from maturing investments.

As a result of these activities, net cash, consisting of cash and cash equivalents, decreased by $6.4 million to $13.3 million for the thirty-nine week 2008 Period ended June 28, 2008 compared to $19.7 million as of the fiscal year ended September 29, 2007.

The following table summarizes the impact of operating, investing and financing activities on the Company’s cash flows for the thirty-nine week 2008 and 2007 Periods:

(dollars in thousands)

Summary of Net (Decrease) Increase in Total Cash Flows	2008			2007			Difference
Cash (utilized) provided by operating activities	$	(23,581	)	$	32,703		$	(56,284	)
Cash utilized by investing activities		(54,881	)		(36,510	)		(18,371	)
Cash provided by financing activities		72,051			13,852			58,199
Total (decrease) increase in cash flows	$	(6,411	)	$	10,045		$	(16,456	)

Net cash from operating, investing and financing activities decreased by $16.4 million to a decrease of $6.4 million for the 2008 Period compared to an increase of $10.0 million for the 2007 Period. The decrease in net cash for the 2008 Period consisted of cash used in operating activities of $23.5 million and investing activities of $54.9 million offset by amounts provided from financing activities of $72.0 million. The primary factors contributing to the changes in cash flow are discussed below. At June 28, 2008 and September 29, 2007, working capital was $179.0 million and $128.9 million, respectively, and the current ratio was 1.6 and 1.5, respectively.

Operating Activities:    Net cash used in operating activities increased by $56.2 million to $23.5 million used in the 2008 Period compared to $32.7 million provided in the 2007 Period. The increase in cash used by operating activities compared to the 2007 Period was attributable primarily to increased accounts receivable between the periods of $46.7 million, an increase in cash used for the purchase of inventories and payment of prepaid expenses of $21.2 million, and an increase in cash used to fund pension plan assets of $2.8 million. As contemplated in the structure of the original purchase transaction, operating cash flow funded receivables arising from customers gained as a result of the Acquisition. If this initial build-up in receivables had not occurred, cash provided from operations would have been relatively consistent with the comparable period in the prior year. The foregoing increases of $70.7 million in cash used were partially offset by cash provided as a result of decreases between the periods in cash used to pay accounts payable and accrued liabilities of $6.8 million and increased growth between the periods in long-term liabilities ($1.7 million). In addition, net cash of $6.0 million was provided by other operating activities.

Investing Activities:    Net cash used in investing activities increased by $18.4 million to $54.9 million for the 2008 Period compared to $36.5 million utilized in the 2007 Period. The increase in cash used for investing activities during the 2008 Period as compared to the 2007 Period was due mainly to the Acquisition of the Seattle Operations of $40.0 million. This $40.0 million increase was offset by (1) decreases in other assets of $12.4 million, primarily comprised of investments in officers’ life insurance and ESPP mutual funds ($4.2 million),

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workers’ compensation premium deposits ($5.3 million) and deferred compensation investments ($1.5 million), (2) decreases in capital expenditures of $8.7 million, as the 2007 Period included expenditures for a building renovation and purchases of warehouse and computer equipment, and (3) changes in net investments of $0.5 million by the Company’s insurance subsidiaries, consisting of the purchase and sale of securities to replace maturing investments in their portfolios. Spending on investing activities is expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

Financing Activities:    Net cash provided by financing activities was approximately $72.0 million for the 2008 Period compared to $13.8 million for the 2007 Period. The net increase of $58.2 million in cash provided by financing activities for the 2008 Period as compared to the 2007 Period was due primarily to changes in the Company’s long-term and short-term notes payable and deferred financing fees, an increase of $59.7 million resulting from higher borrowings primarily associated with the Acquisition of the Seattle Operations ($39.8 million), the redemption of Class A and Class B Shares ($7.1 million), the redemption of subordinated patronage dividend certificates ($3.1 million), and a scheduled payment of $4.5 million to reduce the amount outstanding in senior secured notes (see “Outstanding Debt and Other Financing Arrangements”). In addition, the Company’s cash provided from Member investment and share activity decreased by $1.5 million. Future cash used by financing activities to meet capital spending requirements is expected to be funded by the Company’s continuing operating cash flow.

Credit Facilities

The Company has a $225 million revolving credit agreement, expiring on January 31, 2012. The revolving credit agreement contains an option to expand to $300 million in the future. See “Outstanding Debt and Other financing Arrangements” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information. The Company had outstanding borrowings of $157.0 million under the facility as of June 28, 2008, with access to a sufficient amount of capital available under this facility (based on the amounts indicated above) to fund the Company’s continuing operations and capital spending requirements.

Off-Balance Sheet Arrangements

As of the date of this report, with the exception of the transaction disclosed in Note 3 of “Notes to Consolidated Condensed Financial Statements” in Item 1 “Financial Statements,” the Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Subsequent to the Acquisition, the Company has expanded service to the Pacific Northwest region through the addition of leased facilities in Seattle, Washington that include both dry and refrigerated warehouse space. The Company also assumed certain operating leases for office space and various service buildings related to the Seattle Operations. One facility is leased under a two-year term that includes two additional one-year renewal options. The Company is expected to make payments totaling approximately $13.9 million over the remaining term of the lease, including the two one-year renewal options. A second facility has a five-year term with one additional five-year renewal option. The Company is expected to make payments totaling approximately $2.8 million over the remainder of the original five-year term.

In connection with the Acquisition, the Company also assumed operating leases for certain transportation and office equipment. These leases require monthly payments over terms with expiration dates ranging from fiscal 2008 through fiscal 2014. The total amount due under these lease agreements is approximately $2.1 million.

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The Company’s contractual obligations related to the assumed operating leases of the Seattle Operations at June 28, 2008 are summarized as follows:

(dollars in thousands)

	Payments due by period
Contractual Obligations – Operating Leases – Seattle Operations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Operating lease obligations	$	18,784	$	5,135	$	12,401	$	1,104	$	144
Total contractual cash obligations	$	18,784	$	5,135	$	12,401	$	1,104	$	144

Other than the foregoing items, there have been no material changes in the Company’s contractual obligations and commercial commitments outside the ordinary course of the Company’s business during the thirty-nine week period ending June 28, 2008. See “Contractual Obligations and Commercial Commitments” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information.

OUTSTANDING DEBT AND OTHER FINANCING ARRANGEMENTS

At June 28, 2008 and September 29, 2007, respectively, the Company had a total of $90.7 million and $95.6 million outstanding in senior secured notes to certain insurance companies and pension funds (referred to collectively as John Hancock Life Insurance Company, or “Hancock”) under a note purchase agreement dated September 29, 1999 (as amended, the “Senior Note Agreement”) as amended and restated effective January 6, 2006.

The Company’s borrowings under its revolving credit facility increased to $157.0 million at June 28, 2008 from $77.0 million at September 29, 2007. The $80.0 million increase was due primarily to the Acquisition of the Seattle Operations ($39.8 million), the redemption of Class A and Class B Shares ($7.1 million), the redemption of subordinated patronage dividend certificates ($3.1 million), and a scheduled payment of $4.5 million to reduce the amount outstanding on the Hancock notes. In addition, the build-up of accounts receivable associated with customers gained as a result of the Acquisition increased borrowings by approximately $19.0 million.

Other than the foregoing discussion, there have been no material changes in the Company’s outstanding debt and other financing arrangements outside the ordinary course of the Company’s business during the thirty-nine week period ending June 28, 2008. See “Outstanding Debt and Other financing Arrangements” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information.

MEMBER INVESTMENTS AND PATRONAGE DIVIDENDS

Members are required to meet minimum purchase requirements and specific capitalization requirements, which include capital stock ownership in the Company and may include required cash deposits (“Required Deposits”). Members may also maintain deposits with Unified in excess of such Required Deposit amounts (“Excess Deposits”). See “Member Investments and Patronage Dividends” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information. Additionally, see “DESCRIPTION OF DEPOSIT ACCOUNTS – General”, “DESCRIPTION OF DEPOSIT ACCOUNTS – Patronage Dividends and Tax Matters” and “DESCRIPTION OF DEPOSIT ACCOUNTS – Subordination” in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on July 3, 2008, with respect to the Company’s offering of Partially Subordinated Patrons’ Deposit Accounts for further information.

In April 2008, the Board approved changes to our membership requirements. The principal change was that in order for customers to be accepted as Members of Unified, minimum required annual purchase volume was generally established at $1 million. Persons who were Members on the date of this change, or who were formerly shareholders and customers of Associated Grocers, Incorporated on the date of the Acquisition, are not subject to this change. Additionally, membership is generally required for those purchasing in excess of $3 million annually. See “DESCRIPTION OF DEPOSIT ACCOUNTS – General” in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on July 3, 2008, with respect to the Company’s offering of Partially Subordinated Patrons’ Deposit Accounts for additional information.

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Members’ Required Deposits and all patronage dividend certificates are contractually subordinated and subject to the prior payment in full of senior indebtedness of the Company. See “DESCRIPTION OF DEPOSIT ACCOUNTS – Subordination” in Amendment No. 4 to the Company’s Registration Statement on Form S-1 filed on July 3, 2008, with respect to the Company’s offering of Partially Subordinated Patrons’ Deposit Accounts for additional information. Unified’s obligation to repay Members’ Required Deposit accounts on termination of Member status (once the Member’s obligations to Unified have been satisfied) is reported as a long-term liability on Unified’s consolidated condensed balance sheets. Excess Deposits are not subordinated to Unified’s other obligations and are reported as short-term liabilities on Unified’s consolidated condensed balance sheets. At June 28, 2008 and September 29, 2007, Unified had $9.3 million and $7.0 million, respectively, in “Required deposits” and $22.7 million and $17.4 million, respectively, in “Members’ excess deposits and estimated patronage dividends” (of which $14.7 million and $15.0 million, respectively, represented Excess Deposits).

REDEMPTION OF CAPITAL STOCK

On October 5, 2007, the Board authorized the repurchase on October 11, 2007 of 900 shares of the Company’s Class A Shares that had been tendered and were pending redemption. The Company paid approximately $0.2 million to redeem the shares. On December 12, 2007, the Board authorized the repurchase on or before December 28, 2007 of 2,200 shares of the Company’s Class A Shares with an approximate redemption value of $0.5 million and 22,055 Class B Shares with an approximate redemption value of $4.3 million. On December 14, 2007 and December 26, 2007, respectively, the Company redeemed 2,200 of the Company’s Class A Shares and 21,648 of the Company’s Class B Shares with approximate redemption values of $0.5 million and $4.2 million, respectively.

On February 12, 2008, the Board authorized the repurchase on February 15, 2008 of 1,750 shares of the Company’s Class A Shares that had been tendered and were pending redemption. The Company paid approximately $0.5 million to redeem the shares.

On April 16, 2008 the Board authorized the repurchase on April 17, 2008 of 2,450 shares of the Company’s Class A Shares that had been tendered and were pending redemption. The Company paid approximately $0.6 million to redeem the shares. On June 17, 2008, the Board authorized the repurchase on June 20, 2008 of 4,550 shares of the Company’s Class A shares that had been tendered and were pending redemption. The Company paid approximately $1.1 million to redeem the shares.

See “Redemption of Capital Stock” discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 29, 2007 for additional information.

PENSION AND POSTRETIREMENT BENEFIT PLANS

The Company sponsors a cash balance plan (“Unified Cash Balance Plan”). The Company’s funding policy is to make contributions to the Unified Cash Balance Plan in amounts that are at least sufficient to meet the minimum funding requirements of applicable laws and regulations, but no more than amounts deductible for federal income tax purposes. The Company also sponsors an Executive Salary Protection Plan II (“ESPP”) that provides supplemental post-termination retirement income based on each participant’s final salary and years of service as an officer of the Company. Funds are held in a rabbi trust for the ESPP consisting primarily of life insurance policies tied to underlying investments in the equity market and reported at cash surrender value and mutual fund investments consisting of various publicly-traded mutual funds reported at estimated fair value based on quoted market prices.

In connection with its Acquisition of the Seattle Operations, the Company assumed the Cash Balance Retirement Plan for Employees of Associated Grocers, Incorporated (“AG Cash Balance Plan”), which is a noncontributory defined benefit pension plan covering eligible employees of Associated Grocers, Incorporated who were not subject to a collective bargaining agreement (see Note 7 to “Notes to Consolidated Condensed Financial Statements” in Part I, Item 1 “Financial Statements” for additional information).

The Company’s net periodic benefit cost for its combined pension and other postretirement benefits was approximately $6.2 million for the thirty-nine week period ended June 28, 2008 compared to $6.3 million for the thirty-nine week period ended June 30, 2007.

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The Company expects to make estimated contributions to the Unified Cash Balance Plan totaling $10.7 million in fiscal 2008, which is comprised of $4.7 million for the 2008 plan year and $6.0 million for the 2007 plan year. In addition, the Company expects to make estimated contributions to the AG Cash Balance Plan totaling $2.5 million in fiscal 2008, which is comprised of $1.2 million for the 2008 plan year and $1.3 million for the 2007 plan year. At its discretion, the Company may contribute in excess of these amounts. Additional contributions for the 2007 plan year, if any, will be due by September 15, 2008, while contributions for the 2008 plan year will be due by September 15, 2009. To date, the Company contributed $2.4 million and $1.1 million to the Unified Cash Balance Plan and $0.6 million and $0.9 million to the AG Cash Balance Plan during the thirty-nine weeks ended June 28, 2008 for the 2008 plan year and 2007 plan year, respectively.

Additionally, at the beginning of fiscal 2008, the Company expected to contribute $1.3 million to the ESPP to fund projected benefit payments to participants for the 2008 plan year. The Company contributed $0.6 million to the ESPP during the thirty-nine weeks ended June 28, 2008 to fund projected benefit payments to participants for the 2008 plan year. Amounts contributed to fund benefit payments to participants for the 2008 plan year were less than anticipated because certain retirement assumptions upon which the original estimates were based did not occur.

RISK FACTORS

The risks and uncertainties described below are not the only ones the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial also may impair the Company’s business operations. If any of the following risks occur, the Company’s business, prospects, financial condition, operating results and cash flows could be adversely affected in amounts that could be material.

Unified’s management deals with many risks and uncertainties in the normal course of business. Readers should be aware that the occurrence of the risks, uncertainties and events described in the risk factors below and elsewhere in this Form 10-Q could have an adverse effect on the Company’s business, results of operations and financial position.

The markets in which we operate are highly competitive, characterized by high volume and low profit margins, customer incentives, including pricing, variety, and delivery, and industry consolidation.    The shifting of market share among competitors is typical of the wholesale food business as competitors attempt to increase sales in various markets. A significant portion of the Company’s sales are made at prices based on the cost of products it sells plus a markup. As a result, the Company’s profit levels may be negatively impacted if it is forced to respond to competitive pressure by reducing prices.

Increased competition has caused the industry to undergo changes as participants seek to lower costs, further increasing pressure on the industry’s already low profit margins. In addition to price competition, food wholesalers also compete with regard to quality, variety and availability of products offered, strength of corporate label brands offered, schedules and reliability of deliveries and the range and quality of services provided.

Continued consolidation in the industry, heightened competition among the Company’s suppliers, new entrants and trends toward vertical integration could create additional competitive pressures that reduce margins and adversely affect the Company’s business, financial condition and results of operations.

The Company may experience reduced sales if Members lose market share to fully integrated chain stores, warehouse stores and supercenters that have gained increased market share. This trend is expected to continue.    These supercenters have benefited from concentrated buying power and low-cost distribution technology, and have increasingly gained market share at the expense of traditional supermarket operators, including some independent operators, many of whom are the Company’s customers. The market share of such alternative format stores is expected to grow in the future, potentially resulting in a loss of sales volume for the Company. A loss of sales volume could potentially cause patronage dividends to be reduced and/or the Exchange Value Per Share of the Company’s shares to decrease, thereby reducing the value of the Members’ Class A and Class B Shares.

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We will continue to be subject to the risk of loss of Member and non-member customer volume.    The Company’s operating results are highly dependent upon either maintaining or growing its distribution volume to its customers. The Company’s ten largest Member and non-member customers constituted approximately 41.1% of total sales for the thirty-nine week period ended June 28, 2008. No single Member or non-member customer accounted for ten percent or more of total sales for the thirty-nine week period ended June 28, 2008. A significant loss in membership or volume could adversely affect the Company’s operating results. We will continue to be subject to the risks associated with consolidation within the grocery industry. When independent retailers are acquired by large chains with self-distribution capacity, are driven from business by larger grocery chains, or become large enough to develop their own self-distribution system, we will lose distribution volume. Members may also select other wholesale providers. Reduced volume is normally injurious to profitable operations since fixed costs must be spread over a lower sales volume if the volume cannot be replaced.

The Company may experience reduced sales if Members purchase directly from manufacturers.    Increased industry competitive pressure is causing some of the Company’s Members that can qualify to purchase directly from manufacturers to increase their level of direct purchases from manufacturers and expand their self-distribution activities. The Company’s operating results could be adversely affected if a significant reduction in distribution volume occurred in the future.

We are vulnerable to changes in general economic conditions.    The Company is affected by certain economic factors that are beyond its control including inflation. An inflationary economic period could impact the Company’s operating expenses in a variety of areas, including, but not limited to, employee wages, benefits and workers’ compensation insurance, as well as energy and fuel costs. A portion of the risk related to wages and benefits is mitigated by bargaining agreements that contractually determine the amount of such increases. General economic conditions also impact our pension plan liabilities, as the assets funding or supporting these liabilities are invested in securities that are subject to interest rate and stock market fluctuations. A portion of the Company’s debt is at floating interest rates and an inflationary economic cycle typically results in higher interest costs. The Company operates in a highly competitive marketplace and passing on such cost increases to customers could be difficult. To the extent the Company is unable to mitigate increasing costs, patronage dividends may be reduced and/or the Exchange Value Per Share of the Company’s shares may decrease, thereby reducing the value of the Members’ Class A and Class B Shares.

Changes in the economic environment could adversely affect Unified’s customers’ ability to meet certain obligations to the Company or leave the Company exposed for obligations the Company has guaranteed. Loans to Members, trade receivables and lease guarantees could be at risk in a sustained inflationary environment. The Company establishes reserves for notes receivable, trade receivables, and lease commitments for which the Company may be at risk for default. Under certain circumstances, the Company would be required to foreclose on assets provided as collateral or assume payments for leased locations for which the Company has guaranteed payment. Although the Company believes its reserves to be adequate, the Company’s operating results could be adversely affected in the event that actual losses exceed available reserves.

The Company may on occasion hold investments in the common and/or preferred stock of Members and suppliers. These investments are generally held at cost or the equity method and are periodically evaluated for impairment. As a result, changes in the economic environment that adversely affect the business of these Members and suppliers could result in the write-down of these investments. This risk is unique to a cooperative form of business in that investments are made to support Members’ businesses, and those economic conditions that adversely affect the Members can also reduce the value of the Company’s investment, and hence the Exchange Value Per Share of the underlying capital shares.

Litigation could lead to unexpected losses.    During the normal course of carrying out its business, the Company may become involved in litigation. In the event that management determines that the probability of an adverse judgment in a pending litigation is likely and that the exposure can be reasonably estimated, appropriate reserves are recorded at that time pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies.” The final outcome of any litigation could adversely affect operating results if the actual settlement amount exceeds established reserves and insurance coverage.

We are subject to environmental laws and regulations.    The Company owns and operates various facilities for the manufacture, warehousing and distribution of products to its customers. Accordingly, the Company is subject to

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increasingly stringent federal, state and local laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for solid and hazardous wastes and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous materials. In particular, under applicable environmental laws, the Company may be responsible for remediation of environmental conditions and may be subject to associated liabilities (including liabilities resulting from lawsuits brought by private litigants) relating to its facilities and the land on which the Company facilities are situated, regardless of whether the Company leases or owns the facilities or land in question and regardless of whether such environmental conditions were created by it or by a prior owner or tenant.

We are exposed to potential product liability claims and potential negative publicity surrounding any assertion that the Company’s products caused illness or injury.    The packaging, marketing and distribution of food products purchased from others involve an inherent risk of product liability, product recall and adverse publicity. Such products may contain contaminants that may be inadvertently redistributed by the Company. These contaminants may result in illness, injury or death if such contaminants are not eliminated. Accordingly, the Company maintains stringent quality standards on the products it purchases from suppliers, as well as products manufactured by the Company itself. The Company generally seeks contractual indemnification and insurance coverage from parties supplying its products and rigorously tests its corporate brands and manufactured products to ensure the Company’s quality standards are met. Product liability claims in excess of insurance coverage, as well as the negative publicity surrounding any assertion that the Company’s products caused illness or injury could have a material adverse effect on its reputation and on the Company’s business, financial condition and results of operations.

Our insurance reserves may be inadequate if unexpected losses occur.    The Company’s insurance subsidiaries are regulated by the State of California and are subject to the rules and regulations promulgated by the appropriate regulatory agencies. In addition, the Company is self-insured for workers’ compensation up to $1,000,000 per incident and maintains appropriate reserves to cover anticipated payments. Insurance reserves are recorded based on estimates made by management and validated by third party actuaries to ensure such estimates are within acceptable ranges. Actuarial estimates are based on detailed analyses of health care cost trends, mortality rates, claims history, demographics, industry trends and federal and state law. As a result, the amount of reserve and related expense is significantly affected by the outcome of these studies. Significant and adverse changes in the experience of claims settlement and other underlying assumptions could negatively impact operating results.

We may not have adequate resources to fund our operations.    The Company relies primarily upon cash flow from its operations and Member investments to fund its operating activities. In the event that these sources of cash are not sufficient to meet the Company’s requirements, additional sources of cash are expected to be obtained from the Company’s credit facilities to fund its daily operating activities. Our revolving credit agreement, which expires on January 31, 2012, requires compliance with certain financial covenants, including minimum tangible net worth, fixed charge coverage ratio and total funded debt to earnings before interest, taxes, depreciation, amortization and patronage dividends (“EBITDAP”). While the Company is currently in compliance with all required covenants and expects to remain in compliance, this does not guarantee the Company will remain in compliance in future periods.

As of June 28, 2008, the Company believes it has sufficient cash flow from operations and availability under the revolving credit agreement to meet operating needs, capital spending requirements and required debt repayments through fiscal 2012. However, if access to operating cash or to the revolving credit agreement becomes restricted, the Company may be compelled to seek alternate sources of cash. The Company cannot assure that alternate sources will provide cash on terms favorable to the Company. Consequently, the inability to access alternate sources of cash on terms similar to its existing agreement could adversely affect the Company’s operations.

The value of our benefit plan assets and liabilities is based on estimates and assumptions, which may prove inaccurate.    The Company’s employees participate in Company sponsored defined-benefit pension and postretirement benefit plans. Officers of the Company also participate in a Company sponsored Executive Salary Protection Plan II (“ESPP”), which provides additional post-termination retirement income based on each participant’s final salary and years of service as an officer of the Company. The postretirement benefit plans provide medical benefits for retired non-union employees, life insurance benefits for retired non-union employees for which active non-union employees are no longer eligible, and lump-sum payouts for unused sick days covering certain eligible union and non-union employees. Liabilities for the ESPP and postretirement plans are not funded.

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The Company accounts for these benefit plans in accordance with SFAS No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and SFAS No. 112 “Employers’ Accounting for Postemployment Benefits,” which require the Company to make actuarial assumptions that are used to calculate the carrying value of the related assets, where applicable, and liabilities and the amount of expenses to be recorded in the Company’s consolidated financial statements. Assumptions include the expected return on plan assets, discount rates, health care cost trend rate, projected life expectancies of plan participants and anticipated salary increases. While we believe the underlying assumptions are appropriate, the carrying value of the related assets and liabilities and the amount of expenses recorded in the consolidated financial statements could differ if other assumptions are used.

Additionally, new accounting pronouncements that require adjustments to shareholders’ equity, such as SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” have the potential to impact companies whose equity securities are issued and redeemed at book value (“book value companies”) disproportionately more than companies whose share values are market-based (“publicly traded”). While valuations of publicly traded companies are primarily driven by their income statement and cash flows, the traded value of the shares of book value companies, however, may be immediately impacted by adjustments affecting shareholders’ equity upon implementation. Therefore, such pronouncements may require companies to redefine the method used to value their shares. As such, the Company modified its Exchange Value Per Share calculation as of September 30, 2006 to exclude accumulated other comprehensive earnings (loss) from Book Value (see Item 1, “Business – Capital Shares”), thereby excluding the potentially volatile impact that the adoption of SFAS No. 158 would have on shareholders’ equity and Exchange Value Per Share.

A system failure or breach of system or network security could delay or interrupt services to our customers or subject us to significant liability.    The Company has implemented security measures such as firewalls, virus protection, intrusion detection and access controls to address the risk of computer viruses and unauthorized access. A business continuity plan has been developed focusing on the offsite restoration of computer hardware and software applications. Business resumption plans are currently being developed which include procedures to ensure the continuation of business operations in response to the risk of damage from energy blackouts, natural disasters, terrorism, war and telecommunication failures. In addition, change management procedures and quality assurance controls have been implemented to ensure that new or upgraded business management systems operate as intended. However, there is still a possibility that a system failure, accident or security breach could result in a material disruption to the Company’s business. In addition, substantial costs may be incurred to remedy the damages caused by these disruptions.

Our success depends on our retention of our executive officers, senior management and our ability to hire and retain additional key personnel.    The Company’s success depends on the skills, experience and performance of its executive officers, senior management and other key personnel. The loss of service of one or more of its executive officers, senior management or other key employees could have a material adverse effect on the Company’s business, prospects, financial condition, operating results and cash flows. The Company’s future success also depends on its continuing ability to attract and retain highly qualified technical, sales and managerial personnel. Competition for these personnel is intense, and there can be no assurance that the Company can retain our key employees or that it can attract, assimilate or retain other highly qualified technical, sales and managerial personnel in the future.

The successful operation of our business depends upon the supply of products, including raw materials, and marketing relationships from other companies, including those supplying our corporate brand products.    The Company depends upon third parties for supply of products, including corporate brand products, and raw materials. Any disruption in the services provided by any of these suppliers, or any failure by them to handle current or higher volumes of activity, could have a material adverse effect on the Company’s business, prospects, financial condition, operating results and cash flows.

The Company participates in various marketing and promotional programs to increase sales volume and reduce merchandise costs. Failure to continue these relationships on terms that are acceptable to Unified, or to obtain adequate marketing relationships, could have a material adverse effect on the Company’s business, prospects, financial condition, operating results and cash flows.

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Increased energy, diesel fuel and gasoline costs could reduce our profitability.    The Company’s operations require and are dependent upon the continued availability of substantial amounts of electricity, diesel fuel and gasoline to manufacture, store and transport products. The Company’s trucking operations are extensive and diesel fuel storage capacity represents approximately two weeks average usage. The prices of electricity, diesel fuel and gasoline fluctuate significantly over time. Given the competitive nature of the grocery industry, we may not be able to pass on increased costs of production, storage and transportation to our customers. As a result, either a shortage or significant increase in the cost of electricity, diesel fuel or gasoline could disrupt distribution activities and negatively impact our business and results of operations.

Strike or work stoppage by our union employees could disrupt our business. The inability to negotiate acceptable contracts with the unions could result in a strike or work stoppage and increased operating costs resulting from higher wages or benefits paid to union members or replacement workers.    Such outcome could have a material negative impact on the Company’s operations and financial results. Approximately 60% of Unified’s employees are covered by collective bargaining agreements that have various expiration dates ranging through 2011.

If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our financial results accurately, which could harm our business and we could be subject to regulatory scrutiny.     Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), Unified will be required, beginning in its fiscal year 2008, to perform an evaluation of the Company’s internal controls over financial reporting, and beginning in fiscal year 2010, Unified’s independent registered public accounting firm will have to test and evaluate the design and operating effectiveness of such controls and publicly attest to such evaluation. The Company has prepared an internal plan of action for compliance with the requirements of Section 404, which includes a timeline and scheduled activities, although as of the date of this filing the Company has not yet completed its effectiveness evaluation. Although the Company believes its internal controls are operating effectively, the Company cannot guarantee that it will not have any material weaknesses. Compliance with the requirements of Section 404 is expected to be expensive and time-consuming. If the Company fails to complete this evaluation in a timely manner, the Company could be subject to regulatory scrutiny and a loss of lender and shareholder confidence in our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause the Company to fail to meet its reporting obligations.

A loss of our cooperative tax status could increase tax liability.    Subchapter T of the Internal Revenue Code sets forth rules for the tax treatment of cooperatives. As a cooperative, we are allowed to offset patronage income with patronage dividends that are paid in cash or qualified written notices of allocation. However, we are taxed as a typical corporation on the remainder of our earnings from our Member business and on earnings from non-member business. If the Company were not entitled to be taxed as a cooperative under Subchapter T, or if a significant portion of its revenues were from non-member business, its revenues would be taxed when earned by the Company and the Members would be taxed when dividends were distributed. The Internal Revenue Service can challenge the tax status of cooperatives. The Internal Revenue Service has not challenged the Company’s tax status, and the Company would vigorously defend any such challenge. However, if we were not entitled to be taxed as a cooperative, taxation at both the Company and the Member level could have a material, adverse impact on the Company.

A failure to successfully integrate the Seattle Operations could reduce our profitability.    A failure to successfully integrate the Acquisition into our existing operations may cause the Company’s results to not meet anticipated levels. The Company structured the Acquisition to minimize financial risk by purchasing only certain assets and assuming only certain liabilities. However, if the value of those assets were to decrease, the Company may experience reduced profitability. Additionally, the Company has commenced integrating the Seattle Operations into our information technology systems and management processes. If we are unsuccessful in integrating the Acquisition, the Company may not achieve projected operating results, management may have to divert valuable resources to oversee and manage the integration, and the Company may have to make additional investments in the acquired operations.

Each method used to meet the Class B Share requirement has its own tax consequences.    Class B Shares required to be held by a new Member may be purchased directly at the time of admission as a Member or may be

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acquired over the five consecutive fiscal years commencing with the first year after admission as a Member at the rate of 20% per year. In addition, certain Members, including former shareholders of United Grocers, Inc. or Associated Grocers, Incorporated, may elect to satisfy their Class B Share requirement only with respect to stores owned at the time of admission as a Member solely from their patronage dividend distributions. Each of these purchase alternatives may have tax consequences which are different from those applicable to other purchase alternatives. Members and prospective Members are urged to consult their tax advisers with respect to the application of U.S. federal income, state or local tax rules to the purchase method selected.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates, assumptions and judgments that affect the amount of assets and liabilities reported in the consolidated condensed financial statements, the disclosure of contingent assets and liabilities as of the date of the consolidated condensed financial statements and reported amounts of revenues and expenses during the year. The Company believes its estimates and assumptions are reasonable; however, future results could differ from those estimates under different assumptions or conditions.

The Company’s discussion and analysis of its financial condition and results of operations is based upon its consolidated condensed financial statements. On an ongoing basis, we evaluate our estimates, including those related to allowances for doubtful accounts, lease loss reserves, inventories, investments, goodwill and intangible assets, long-lived assets, income taxes, insurance reserves, pension and postretirement benefits and contingencies and litigation. We base our estimates on historical experience and on various other assumptions and factors that we believe to be reasonable under the circumstances. Based on our ongoing review, we make adjustments we consider appropriate under the facts and circumstances. We have discussed the development, selection and disclosure of these estimates with the Audit Committee. The accompanying consolidated condensed financial statements are prepared using the same critical accounting policies and estimates discussed in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2007.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Refer to Note 9 to Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for management’s discussion of recently issued accounting pronouncements and their expected impact, if any, on the Company’s consolidated condensed financial statements.

AVAILABILITY OF SEC FILINGS

Unified makes available, free of charge, through its website (http://www.unifiedgrocers.com) its Forms 10-K, 10-Q and 8-K, as well as its registration and proxy statements, as soon as reasonably practicable after those reports are electronically filed with the Securities and Exchange Commission (the “SEC”). A copy of any of the reports filed with the SEC can be obtained from the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. A copy may also be obtained by calling the SEC at 1-800-SEC-0330. All reports filed electronically with the SEC are available on the SEC’s web site at http://www.sec.gov.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of the market risks the Company faces contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those discussed in the forward-looking statements.

Unified is subject to interest rate changes on its notes payable under the Company’s credit agreements that may affect the fair value of the notes payable, as well as cash flow and earnings. Based on the notes payable outstanding at June 28, 2008 and the current market condition, a one percent change in the applicable interest rates would impact the Company’s annual cash flow and pretax earnings by approximately $1.6 million.

The Company is exposed to credit risk on accounts receivable through the ordinary course of business and the Company performs ongoing credit evaluations. Concentration of credit risk with respect to accounts receivables are limited due to the nature of our customer base (i.e., primarily Members). The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks.

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The majority of the Company’s investments are held primarily by two of its insurance subsidiaries, and include U.S. government agency mortgage-backed securities, high quality investment grade corporate bonds, and U.S. government treasury securities. These investments have readily determinable market values based on actively traded securities in the marketplace, and they have experienced a decrease in market value since the beginning of the Company’s fiscal year. Life insurance investments tied to the equity markets have been negatively impacted by the market decline that took place during the thirty-nine weeks ended June 28, 2008, although such impact is deemed by management to be temporary in nature.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure controls and procedures.    Disclosure controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, as appropriate, to allow timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving an entity’s disclosure objectives. The likelihood of achieving such objectives is affected by limitations inherent in disclosure controls and procedures. These include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures such as simple errors, mistakes or intentional circumvention of the established processes.

At the end of the period covered by this report, Unified’s management, with the participation of our CEO and CFO, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our CEO and CFO concluded that these disclosure controls and procedures were effective at the reasonable assurance level described above as of the end of the period covered in this report.

Changes in internal controls over financial reporting.    Management, with the participation of the CEO and CFO of the Company, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter. Based on that evaluation, management, the CEO and the CFO of the Company have concluded that no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended June 28, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company is a non-accelerated filer and is required to comply with the internal control reporting and disclosure requirements of Section 404 of the Sarbanes-Oxley Act for fiscal years ending on or after December 15, 2007. Accordingly, the Company will be required, beginning in our 2008 fiscal year, to perform an evaluation of our internal control over financial reporting, and beginning in our 2010 fiscal year, our independent registered public accounting firm will have to test and evaluate the design and operating effectiveness of such controls and attest to the effectiveness of the Company’s internal controls over financial reporting. The Company is currently in the documentation and testing phases of its Section 404 compliance and will be required to comply with these disclosure requirements in its Annual Report on Form 10-K for its fiscal year ending September 27, 2008.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to various litigation, claims and disputes, some of which are for substantial amounts, arising in the ordinary course of business. While the ultimate effect of such actions cannot be predicted with certainty, the Company believes the outcome of these matters will not result in a material adverse effect on its financial condition or results of operations.

ITEM 1A. RISK FACTORS

There are no material changes from risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 29, 2007, filed on December 13, 2007 (File No. 000-10815). Refer to “Risk Factors” in Part I, Item 2 of this Quarterly Report on Form 10-Q for discussion of the Company’s risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

COMPANY PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased	Average Price Paid Per Share
March 30, 2008 – April 26, 2008	2,450 Shares	$	245.79
April 27, 2008 – May 24, 2008	—  Shares		—
May 25, 2008 – June 28, 2008	4,550 Shares	$	245.79
Total	7,000 Shares	$	245.79

Refer to “Redemption of Capital Stock” in Part I, Item 2 of this Quarterly Report on Form 10-Q for discussion of the Company’s share redemptions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a)		Exhibits
3.1		Amended and Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended on March 29, 2008, filed on May 13, 2008).
3.2		Bylaws of the Registrant, as amended (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 29, 2007, filed on December 14, 2007).
4.41.1	*	Form of Pledge and Security Agreement (effective July, 2008).
4.42.1	*	Form of Member Subordination (effective July, 2008).
4.43.1	*	Form of Continuing Guaranty (effective July, 2008).
10.56.3	*,**	Amendment No. 3 to the Cash Balance Retirement Plan for Employees of Associated Grocers, Inc. amended as of June 17, 2008.
31.1*		Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herein.

** Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

UNIFIED GROCERS, INC.
By	/s/    ALFRED A. PLAMANN
	Alfred A. Plamann President and Chief Executive Officer (Principal Executive Officer)
By	/s/    RICHARD J. MARTIN
	Richard J. Martin Executive Vice President, Finance & Administration and Chief Financial Officer (Principal Financial and Accounting Officer)
By	/s/    RANDALL G. SCOVILLE
	Randall G. Scoville Vice President, Accounting and Chief Accounting Officer

Dated: August 12, 2008

Exhibit 4.41.1

Pledge and Security Agreement

This PLEDGE AND SECURITY AGREEMENT (this “Agreement”) is made by                                          (“Member”) in favor of Unified Grocers, Inc., (“Unified”) for the benefit of the Secured Parties (Unified, in its capacity as agent for the Secured Parties, is hereinafter referred to as “Collateral Agent”) with reference to the following facts:

Recitals

1)     Member has applied for membership in Unified by completing a membership application (the “Membership Application”), and certain other documents referred to therein or executed in connection therewith (the “Membership Documents”). Acceptance for membership is subject to approval by the Board of Directors of Unified.

2)     If approved for membership in Unified, Member will, pursuant to the terms and conditions set forth in the Membership Documents and Unified’s Bylaws, from time to time purchase or otherwise acquire Class A Shares, Class B Shares and Class E Shares of Unified and such other classes of Unified’s shares as Unified may issue to Member from time to time (all Class A, Class B, Class E or other shares at any time owned by Member are collectively referred to herein as the “Pledged Shares”). Pursuant to the terms of Unified’s bylaws, the Pledged Shares may not be transferred without the prior consent of Unified, which consent will not generally be granted.

3)     In addition to purchasing Pledged Shares, Member is required to maintain Required Deposits (as defined below) and may also be required to maintain Credit Deposits (as defined below) from time to time and may also maintain or otherwise have credited to its account other Deposits (as defined below) from time to time. The Deposits may be commingled with deposits of other members of Unified, and Unified may use such deposits, including the Deposits, for working capital or other purposes.

Agreement

NOW, THEREFORE, in order to induce Unified to approve Member’s application for membership in Unified which will permit Member to invest in the Pledged Shares and to induce Unified and the other Secured Parties to sell goods and services to Member and to extend credit to Member (but without obligating Unified or the other Secured Parties to do so), and for other good and valuable

Pledge and Security Agreement

consideration, the receipt and adequacy of which hereby are acknowledged, Member represents, warrants, covenants, agrees, and pledges as follows:

1)     Definitions. Terms defined in the Membership Application and not otherwise defined in this Agreement shall have the meanings given those terms in the Membership Application as though set forth herein in full. The following terms shall have the meanings respectively set forth after each:

a)     “Affiliate” means, as to any person or entity, any other person or entity which has common ownership, or, in the determination of the Board of Directors of Unified, is sufficiently related to such person or entity to be classified as an affiliate of such person or entity.

b)     “Credit Deposits” means any Deposits that are required to be maintained by Member in accordance with levels established by the credit office of Unified from time to time in excess of the amount of required deposits set by the Board of Directors of Unified.

c)     “Collateral” means the Pledged Collateral and the Deposit Collateral.

d)     “Deposits” is a collective reference to all security deposits, deposits, deposit accounts, patronage or other similar amounts or accounts made or maintained from time to time by the Member with Unified, any amounts which Member is credited on the books of Unified from time to time; and any money deposited with Unified by or on behalf of Member from time to time; provided, however, that Deposits do not include any Class A Shares, Class B Shares, Class E Shares or any other classes of Unified’s shares or any Patronage Dividend Certificates.

e)     “Deposit Collateral” means all Deposits now or hereafter owned by Member (including all Required Deposits, Credit Deposits and Excess Deposits) and all proceeds or products of any of any Deposits.

f)     “Distributions” means dividends, distributions, redemption payments, liquidation payments, and all rights to any of the foregoing, including, without limitation all Patronage Dividend Certificates.

g)     “Master Collateral Agency Agreement” means the Master Collateral Agency Agreement, dated as of September 1, 2008, as the same may be amended, restated, modified or replaced from time to time among Collateral Agent and the Secured Parties.

h)     “Patronage Dividend Certificates” means all notes, revolving fund certificates, retain certificates, certificates of indebtedness, patronage dividend certificates or any other written evidences of indebtedness of the Unified to the Member issued from time to time by Unified on account of distributions on Unified’s Class B shares.

i)     “Pledged Collateral” means the Pledged Securities, any and all Distributions (including, without limitation, all Patronage Dividend Certificates) with respect to any Pledged Securities and all proceeds and products of any of the foregoing.

j)     “Pledged Securities” means (i) the Pledged Shares now or hereafter owned by Member, (ii) any and all shares now or hereafter issued in substitution, exchange or replacement therefore, or with respect thereto, (iii) any and all warrants, options or other rights to subscribe to or acquire any additional Pledged Shares, (iv) any and all other shares, now or hereafter obtained by Member in Unified, and (v) any written

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Pledge and Security Agreement

evidence representing any of the foregoing and any interests of Member in the entries on the books of any financial intermediary pertaining thereto.

k)     “Required Deposits” means any Deposits that are required to be maintained by Member in accordance with levels established by the Board of Directors of Unified from time to time; provided, however, Required Deposits does not include Credit Deposits.

l)     “Secured Obligations” means any and all present and future indebtedness, liabilities and obligations of the Member to any of the Secured Parties, whenever and however incurred or arising, whether due or not due, absolute or contingent, liquidated or unliquidated.

m)     “Secured Parties” means Unified and each direct or indirect, present or future subsidiary of Unified who has, or may hereafter, become a party to the Master Collateral Agency Agreement.

n)     “Uniform Commercial Code” means the uniform commercial code in effect in the state of California, as the same may be amended from time to time.

2)     Representations, Warranties and Covenants. Member hereby represents and warrants to Collateral Agent for the benefit of the Secured Parties as follows:

a)     Member is and will continue to be a (choose one);

¨  corporation

¨  limited liability company

¨  limited partnership

¨  general partnership, or

¨  natural person

and (unless Member is a natural person) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (i.e., State of                              ) and the jurisdiction in which its chief executive office is located (i.e., State of                              ), with all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Membership Documents, and if a natural person, his or her principal residence is in the State of                              ;

b)     The execution, delivery and performance by Member of this Agreement and the other Membership Documents to which it is a party do not and will not constitute:

i)     a violation of any applicable law or Member’s applicable articles or certificate of incorporation or bylaws, articles or certificate of organization or formation or operating or limited liability company agreement or partnership agreement; or

ii)     a material breach of any other document, agreement or instrument to which Member is a party or by which Member is bound;

c)     Member has the right and power to pledge and grant a security interest in the Collateral owned by Member to Collateral Agent on behalf of Secured Parties without the consent, approval or authorization of, or notice to, any person or entity (other than such consents, approvals, authorization or notices which have been obtained or given prior to the date hereof) and such pledge and grant constitute the valid, binding and enforceable obligation of Member, enforceable against Member in

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Pledge and Security Agreement

accordance with the terms hereof, except as enforcement may be limited by bankruptcy or other insolvency proceedings or equitable principles;

d)     All Pledged Securities are purchased by Member as a medium for investment;

e)     All Pledged Securities are “securities” as such term is used in Section 8-102(15) and 8-103(a) of the Uniform Commercial Code;

f)     The Recitals to this Agreement are true and correct in all material respects;

g)     Pursuant to the Bylaws, Unified or its nominee shall have an exclusive right to purchase the Pledged Shares upon or at any time after termination of my membership at a purchase price equal to the redemption or repurchase price for such shares as may be set forth in Unified’s Articles of Incorporation or its Bylaws; and

h)     Upon possession of the Collateral, control of the Collateral or the filing of appropriate financing statements describing the Collateral which names Collateral Agent as secured party and Member as Debtor, Collateral Agent will have a perfected security interest in the Collateral to secure the Secured Obligations.

3)     Creation of Security Interest. Member hereby pledges to Collateral Agent for the benefit of Secured Parties, pledges to Secured Parties, grants to Collateral Agent for the benefit of Secured Parties, and grants to Secured Parties a security interest in and to all Collateral, together with all products, proceeds, Distributions and any and all rights, titles, interests, privileges, benefits and preferences pertaining to the Pledged Collateral to secure the prompt payment and full performance of the Secured Obligations, to secure Unified’s right to repurchase, purchase or redeem the Pledged Securities and to secure the prohibition on transfer of the Collateral. The security interest and pledge created by this Section 3 shall continue in effect so long as any Secured Obligation is owed to Collateral Agent or any Secured Party or any commitment to extend credit to the Member by the Collateral Agent or any Secured Party remains outstanding.

4)     Further Assurances. Member agrees that at any time, and from time to time, at its own expense Member will promptly execute, deliver and file (or authorize Collateral Agent to file) or record all further financing statements, instruments and documents, and will take all further actions that may be necessary or desirable, or that Collateral Agent reasonably may request, in order to perfect and protect any pledge or security interest granted hereby or to enable Collateral Agent on behalf of the Secured Parties to exercise and enforce its rights and remedies hereunder with respect to any Collateral and to preserve, protect and maintain the Collateral and the value thereof, including, without limitation, payment of all taxes, assessments and other charges imposed on or relating to the Collateral, except those being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided. Subject to the prior indefeasible payment in full of the amounts owed upon and discharge of the Secured Obligations, Member hereby (a) irrevocably directs Unified, as the issuer of the Pledged Collateral, to accept the provisions of this Agreement as conclusive evidence of the right of Collateral Agent on behalf of the Secured Parties to effect any transfer or exercise any right hereunder or with respect to any such Pledged Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by Member or any other person or entity; and (b) covenants and agrees to transfer or reinvest any such Pledged Collateral, immediately upon Collateral

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Pledge and Security Agreement

Agent’s request, in such manner as may be deemed necessary or desirable by Collateral Agent to create and perfect, and to continue and preserve, a perfected security interest in such Pledged Collateral in favor of Collateral Agent on behalf of Secured Parties, or the priority, control and exclusivity thereof, free of all other liens, encumbrances and claims. Unified hereby agrees to comply with instructions originated by the Collateral Agent or any Secured Party without further consent by Member.

5)     Voting and Distribution Rights.

a)     So long as no Event of Default (defined below) occurs and remains continuing:

i)     Voting Rights. Member shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral, or any part thereof, for any purpose not inconsistent with the terms of this Agreement;

ii)     Interest and Distribution Rights. Member shall be entitled to receive and to retain and use any and all interest, premiums or Distributions paid in respect of the Pledged Collateral; provided, however, that any and all such Distributions received in the form of stock shall be Pledged Collateral.

b)     When an Event of Default has occurred and is continuing, at the option of Collateral Agent on behalf of the Secured Parties, all rights of Member to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (a)(i) above, and to receive the interest, premiums and Distributions which it would otherwise be authorized to receive and retain pursuant to clause (a)(ii) above, shall cease and all voting rights and rights to receive Distributions shall be vested with Collateral Agent.

6)     Transfers and Other Liens. Member agrees that, without the express consent of the board of directors of Unified (which will not generally be given), Member can not and will not (i) sell, assign, exchange, transfer or otherwise dispose of, or contract to sell, assign, exchange, transfer or otherwise dispose of, or grant any option with respect to, any of the Collateral, (ii) create or permit to exist any lien or encumbrance upon or with respect to any of the Collateral, other than the security interest created by this Agreement, or (iii) take any action with respect to the Collateral which is inconsistent with the provisions or purposes of this Agreement, any of the Membership Document or Unified’s bylaws.

7)     Collateral Agent Appointed Attorney-in-Fact. Member hereby irrevocably appoints Collateral Agent for the benefit of Secured Parties as Member’s attorney-in-fact, with full authority in the place and stead of Member, and in the name of such Grantor, or otherwise, from time to time, in Collateral Agent’s sole and absolute discretion to do any of the following acts or things: (a) to do all acts and things and to execute all documents necessary or advisable to perfect and continue perfected the security interests created by this Agreement and to preserve, maintain and protect the Collateral; (b) to do any and every act which Member is obligated to do under this Agreement; (c) to prepare, sign, file and record, in Member’s name, any financing statement covering the Collateral; and (d) to endorse and transfer the Collateral upon foreclosure by Collateral Agent on behalf of the Secured Parties; provided, however, that Collateral Agent shall be under no obligation whatsoever to take any of the foregoing actions, and neither Collateral Agent nor any Secured Party shall have any

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Pledge and Security Agreement

liability or responsibility for any act (other than Collateral Agent’s or such Secured Party’s own gross negligence or willful misconduct) or omission taken with respect thereto. The foregoing power of attorney is coupled with an interest and is irrevocable. Member hereby agrees to repay immediately upon demand all reasonable costs and expenses incurred or expended by Collateral Agent on behalf of the Secured Parties in exercising any right or taking any action under this Agreement.

8)     Collateral Agent May Perform Obligations. If Member fails to perform any obligation contained herein, Collateral Agent for the benefit of Secured Parties may, but without any obligation to do so and without notice to or demand upon Member, perform the same and take such other action as Collateral Agent may deem necessary or desirable to protect the Collateral or Secured Parties’ security interests therein. Member hereby agrees to repay immediately upon demand all sums so expended by Collateral Agent or any Secured Party, together with interest from the date of expenditure at the legal rate of interest in effect in the state of California. Neither Collateral Agent nor any Secured Party shall be under any duty or obligation to preserve, maintain or protect the Pledged Collateral or any rights or interests of Member therein.

9)     Reasonable Care. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially similar to that which Collateral Agent accords its own property.

10)     Events of Default. The occurrence of any of the following events or circumstances shall constitute an “Event of Default” hereunder:

a)     any failure by Member to timely pay or perform any of the Secured Obligations when due;

b)     any representation or warranty made or deemed made by Member or any Affiliate of Member in this Agreement, any Membership Document, or any certificate or financial statement delivered to Collateral Agent or any Secured Party shall prove to be untrue in any material respect as of the date on which made, deemed made or furnished;

c)     any breach by Member or any Affiliate of Member of any covenant or agreement with Collateral Agent or any Secured Party,

d)     any breach by Member or any Affiliate of Member of Unified’s Bylaws or any rules

e)     Member’s membership in Unified is suspended or terminated or Member otherwise ceases to be a member in good standing of Unified;

f)     Member purports to transfer any Pledged Shares without the express approval of Unified’s Board of Directors (which consent will not normally be granted);

g)     Member, any Affiliate of Member or any guarantor of any of the Secured Obligations (“Guarantor”) shall (i) file a voluntary petition in bankruptcy or otherwise commence any action or proceeding seeking reorganization, arrangement or readjustment of its debts, or consent to or acquiesce in any such petition, action or proceeding; (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, custodian, trustee or similar officer for it or for all or any part of its property; (iii) make an

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assignment for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;

h)     an involuntary petition shall be filed or an action or proceeding otherwise commenced seeking relief under the bankruptcy code or seeking any reorganization, arrangement, consolidation or readjustment of the debts of Member, any Affiliate of Member or any Guarantor under any other bankruptcy or insolvency law;

i)     a receiver, assignee, liquidator, custodian, trustee or similar officer shall be appointed for Member, any Affiliate of Member or any Guarantor or for all or any part of its property or a warrant of attachment, execution or similar process shall be issued against any part of the property of Member, any Affiliate of Member or any Guarantor;

j)     Member, any Affiliate of Member or any Guarantor shall file a certificate of dissolution or shall be liquidated, dissolved or wound-up or shall commence or have commenced against it any action or proceeding for dissolution, winding-up or liquidation, or shall take any action in furtherance thereof, or if Member, any Affiliate of Member or any Guarantor dies or is otherwise incapacitated or declared incompetent;

k)     one or more judgments, orders, decrees or arbitration awards is entered against Member, any Affiliate of Member or any Guarantor involving in the aggregate liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) of $                 or more;

l)     the filing or commencement of any attachment, sequestration, garnishment, execution or other lien, encumbrance or action against or with respect to any Collateral and such attachment, sequestration, garnishment, lien, encumbrance or action has not been removed, discharged or rescinded within ten (10) days;

m)     any Membership Document ceases to be in full force and effect; or

n)     Collateral Agent, for the benefit of the Secured Parties, ceases to have a first-priority perfected security interest in the Collateral.

11)     Remedies.

a)     Rights upon Event of Default. Upon the occurrence and during the continuance of an Event of Default, Member shall be in default hereunder, and Collateral Agent on behalf of the Secured Parties shall have in any jurisdiction where enforcement is sought, all rights and remedies that Collateral Agent on behalf of the Secured Parties may have as a secured party under the Uniform Commercial Code as enacted in any such jurisdiction, and other applicable law.

b)     Direct Notification. Upon the occurrence and during the continuance of an Event of Default, Collateral agent may notify Unified to make any payments with respect to the Collateral (including, without limitation, payment of regular dividends, proceeds of redemption of Pledged Collateral or return of Deposits) directly to Collateral Agent pursuant to Section 9607 of the Uniform Commercial Code. Member agrees that if any Pledged Collateral is redeemed by Unified for an amount determined in accordance with the redemption policy in effect from time to time as set forth in Unified’s bylaws, that Member shall not be entitled to a credit against the Secured Obligations in an amount in excess of such redemption price, and neither Collateral

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Agent nor any Secured Party shall incur any liability or responsibility to Member in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale or private sale of the Pledged Collateral.

c)     Private Sales. If and only if the Board of Directors of Unified consents to the transfer of any Pledged Shares (which consent may be granted or withheld in their sole and absolute discretion), upon the occurrence and during the continuance of an Event of Default, whether or not any of the Pledged Collateral has been effectively registered under the Securities Act of 1933, as amended, or other applicable Laws, Collateral Agent may, in its sole and absolute discretion, subject to compliance with applicable laws, sell all or any part of the Pledged Collateral at private sale in such manner and under such circumstances as Collateral Agent may deem necessary or advisable in order that the sale may be lawfully conducted. Without limiting the foregoing, Collateral Agent may (i) approach and negotiate with a limited number of potential purchasers, and (ii) restrict the prospective bidders or purchasers to persons or entities who have been approved in advance by the Board of Directors of Unified (in its sole and absolute discretion) as being eligible to become Members of Unified and who will represent and agree that they are purchasing the Pledged Collateral for their own account for investment and not with a view to the distribution or resale thereof. In the event that any of the Pledged Collateral is sold at private sale, Member agrees that if the Pledged Collateral is sold for a price which Collateral Agent in good faith believes to be reasonable, then, (A) the sale shall be deemed to be commercially reasonable in all respects, (B) Member shall not be entitled to a credit against the Secured Obligations in an amount in excess of the purchase price, and (C) neither Collateral Agent nor any Secured Party shall incur any liability or responsibility to Member in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale.

d)     Disposition of Proceeds of Sale. The net cash proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the reasonable costs and expenses (including reasonable attorneys’ fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; second, to the satisfaction of all Secured Obligations, with application as to any particular Secured Obligation to be in the order set forth in the Master Collateral Agency Agreement, in effect from time to time; and, third, to all other indebtedness secured hereby in such order and manner as Collateral Agent in its sole and absolute discretion may determine.

12)     Setoff and Recoupment Rights. Member hereby agrees that all payments to Collateral Agent and Secured Parties will be made without condition or deduction for any counterclaim, defense, recoupment or setoff and further waives any rights it may have to assert any claim or defense of setoff or recoupment against Collateral Agent or any Secured Party; including, without limitation, any claim or defense arising out of amounts owed by Unified in connection with the repurchase, purchase or redemption of any Pledged Collateral or return of Deposits. The foregoing waiver shall not be deemed to waive any indebtedness or obligations owing by Collateral Agent or Secured Party. Furthermore, nothing in this Agreement shall be deemed to constitute a waiver by Collateral Agent or any Secured Party

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of its setoff or recoupment rights. Collateral Agent and each Secured Party specifically reserve such rights. In addition, Member acknowledges and agrees that the Pledged Collateral and Deposit Collateral are given as security to Collateral Agent and all Secured Parties and that Collateral Agent and all Secured Parties are relying on such security in connection with their extensions of credit to Member. As such, Member acknowledges and agrees that Collateral Agent and all Secured Parties shall be entitled to assert setoff and recoupment rights against Member as if all of Member’s indebtedness or obligations owed to any Secured Party or Collateral Agent were indebtedness or obligations owed to all Secured Parties and Collateral Agent; provided, however, all such setoff and recoupment rights shall be subject to the terms of the Master Collateral Agency Agreement.

13)     Control of Collateral. Collateral Agent, Unified and Member hereby agree that Unified will comply with instructions originated by the Collateral Agent, for the benefit of the Secured Parties, with respect to Collateral without the further consent of Member for the purpose of establishing the Collateral Agent’s and Secured Parties’ control over the Collateral.

14)     Master Collateral Agency Agreement. Member acknowledges and agrees that Collateral Agent and the Secured Parties have entered into a Master Collateral Agency Agreement that provides for, among other things, certain payment priorities among the Collateral Agent and Secured Party. Member acknowledges and agrees that the terms of the Master Collateral Agency Agreement may be amended from time to time without notice to or consent of Member and that Secured Parties and Collateral Agent may agree to payment priorities other than as set forth therein without notice to or consent of Member. Notwithstanding the rights given to Member pursuant to California Civil Code sections 1479 and 2822 (and any amendments or successors thereto), to designate how payments will be applied, Member hereby waive such rights and agrees that Collateral Agent and Secured Parties shall have the right in their sole and absolute discretion to determine the order and method of the application of payments to the Secured Obligations or other amounts owed to Collateral Agent or Secured Parties and to revise such application prospectively or retroactively in their sole and absolute discretion.

15)     Continuing Effect. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Member for liquidation or reorganization, should Member become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Member’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by Collateral Agent or any Secured Party as a “voidable preference,” “fraudulent conveyance” or otherwise (and whether by litigation, settlement, demand or otherwise), all as though such payment or performance had not been made. In the event that any payment or any part thereof is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

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16)     Indemnity. Each Grantor agrees to indemnify and hold harmless Collateral Agent, Secured Parties, and each of them, from and against any and all claims, demands, losses, judgments and liabilities (including without limitation liabilities for penalties) of whatsoever kind or nature, and to reimburse Collateral Agent and Secured Parties for all costs and expenses, including without limitation reasonable attorneys’ fees and expenses and/or costs and expenses associated with, arising out of or in connection with this Agreement, or any waiver, supplementation, extension, renewal or amendment of any term or provision hereof or the exercise by Collateral Agent or Secured Parties of any right or remedy granted to it hereunder or under the Membership Documents (including in connection with any workout, restructuring or bankruptcy, insolvency or other similar proceeding), other than arising from the gross negligence or willful misconduct of Collateral Agent or such Secured Party. In no event shall Collateral Agent or any Secured Party be liable for any matter or thing in connection with this Agreement other than to account for monies actually received by it in accordance with the terms hereof (including, without limitation, any consequential or punitive damages).

17)     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW OR CHOICE OF LAW PROVISIONS THEREOF.

18)     Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same agreement.

19)     No Waiver. Any forbearance, failure, or delay by Collateral Agent in exercising any right, power, or remedy hereunder or otherwise shall not be deemed to be a waiver of such right, power, or remedy, and any single or partial exercise of any right, power, or remedy hereunder or otherwise shall not preclude the further exercise thereof; and every right, power, and remedy of Collateral Agent shall continue in full force and effect until such right, power, or remedy is specifically waived by an instrument in writing executed by Collateral Agent.

20)     Joint and Several Liability. If this Agreement is executed by more than one person, each of the agreements contained herein shall be joint and several obligations of the undersigned.

21)     Receipt of Bylaws. Member acknowledges receipt of a copy of the Bylaws of Unified and hereby consents that the amount of any distributions with respect to the undersigned’s patronage, which are made in written notices of allocation (as defined in 26 United States Code Section 1388) and which are received by the undersigned from Unified, will be taken into account by the undersigned at their stated dollar amounts in the manner provided in 26 United States Code Section 1385(a) in the taxable year in which such written notices of allocation are received by the undersigned. This consent shall remain in effect until revoked in the manner provided in 26 United States Code Section 1388.

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22)     Notices. Any notice, demand or other communication which Collateral Agent is required or desires to give to Member, may be either served personally at or sent by prepaid, first-class mail, or overnight courier to the address set forth below. Any such notice, demand or communication shall be deemed given to the undersigned, and each of them, upon delivery to said address, if personally served; within 48 hours from the time of deposit in the United States mail, if served by mail; or within 24 hours from the time of deposit with overnight delivery service, if sent by overnight courier. The address of the undersigned may be changed only by giving written notice to Collateral Agent at its principal office, but such change shall not be deemed effective until actually received. Any other notice which the undersigned may desire to give shall be given to Collateral Agent at its principal office but shall not be deemed given until actually received.

23)     Severability. If any term or provision of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid, illegal or unenforceable, the remainder of this Agreement or the application of such term or provision to any person or circumstances other than those as to which it is invalid, illegal or enforceable shall not be affected thereby and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

24)     Integration. This Agreement represents the final agreement of the parties with respect to the subject matter hereof 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 with respect to the subject matter of this Agreement. No modification or amendment of or supplement to this Agreement or to any such other written agreement shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced.

25)     Attorney’s Fees. In the event that Collateral Agent or any Secured Party incurs any fees or costs (including attorney’s fees) for the collection of any amounts owing to Collateral Agent or any Secured Party, the undersigned will pay all fees and costs involved including reasonable attorneys’ fees.

26)     Alternative Dispute Resolution. Except as provided below, all disputes arising under this Agreement that cannot be amicably resolved must be resolved through binding arbitration, as described herein. Any arbitration must occur in Los Angeles County, California, and judgment upon any award rendered may be entered in any court of competent jurisdiction. A party demanding arbitration pursuant to this provision must serve a written demand for arbitration on the other party. The arbitration must be conducted under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), as those rules exist on the date of the arbitration demand. Although AAA rules will govern the arbitration, the parties are not required to submit to AAA arbitration. The parties may mutually agree to submit to AAA arbitration or arbitration with any other alternative dispute resolution provider. Absent such mutual agreement, within 20 calendar days after an arbitration demand is served, the parties must jointly select and appoint a single arbitrator. If the parties are unable to agree on an arbitrator, the party demanding arbitration must apply to the Superior Court of

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California for Los Angeles County for appointment of an arbitrator. The cost of the arbitrator, and any related costs of arbitration, must be borne equally by the parties. The arbitrator has authority, and is empowered, by the parties, to hear and resolve all disputes arising under any agreement between the Member and any Secured Party or the Member and Collateral Agent, and the arbitrator has the authority to award money damages (except for punitive damages, which are specifically excluded from the arbitrator’s authority), injunctive relief, specific performance, rescission, restitution, costs, and attorneys’ fees. The arbitrator does not have the authority to amend any agreement between the parties in any respect. Notwithstanding anything to the contrary in the AAA rules, after the appointment of the arbitrator, the parties have the right to conduct discovery, including depositions, regarding the subject matter of the arbitration to the same extent authorized by California law, as if the arbitration were pending before a Superior Court of California. Once the arbitrator is appointed, the arbitration hearing must be scheduled for a date not more than 120 calendar days after such appointment, unless the parties mutually agree to a later date. Nothing in this provision shall be deemed to apply to or limit the right of Collateral Agent or any Secured Party (a) to exercise self help remedies such as (but not limited to) setoff and recoupment or to exercise its right to purchase or redeem any stock, (b) to foreclose judicially or nonjudicially against any real or personal property collateral, or to exercise judicial or nonjudicial power of sale rights, (c) to obtain from a court provisional or ancillary remedies (including, but not limited to, injunctive relief, a writ of possession, prejudgment attachment, a protective order or the appointment of a receiver), or (d) to pursue rights against the undersigned in a third-party proceeding in any action brought against Collateral Agent or any Secured Party (including actions in bankruptcy court).

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IN WITNESS WHEREOF, Member has executed this Agreement as of the date set forth in the preamble.

Date

Legal Name (print or type)

By

Name

Title

Mailing Address (print or type)

City                                                                                                                                                                                                                          State                     Zip Code

Account Number                                                                                                                                                                                                     Telephone Number

(to be completed by Unified if no number has been assigned.)

Accepted and Agreed:

UNIFIED GROCERS, INC., in its capacity as Collateral Agent and as issuer of the Pledged Securities

By

Name (print name)

Title

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Exhibit 4.42.1

Member Subordination Agreement

This Member Subordination Agreement (this “Agreement”) is executed as of the date set forth on the signature pages by the undersigned “Member” (as further defined below) with reference to the following facts:

1)     Unified Grocers, Inc. (the “Company”) is a grocery cooperative and grocery wholesaler. The Member is a member of the Company and is required to maintain certain deposits and other cash balances with the Company. In addition, Company may from time to time issue certain subordinated patronage dividend certificates.

2)     It is in the best interests of the Member and the other members in the Company that the Company obtain financing for its operations, including accounts receivable, inventory and equipment financing, real estate mortgages, capitalized lease financings, interest rate hedging and treasury management services and the like.

3)     In order to induce the Lenders (as defined below) to provide Financing to the Company, the Member is willing to subordinate its rights in respect of its Required Deposits and Patronage Dividend Certificates the Financings in the manner and to the extent set forth herein.

NOW, THEREFORE, in consideration of the foregoing, to induce Lenders to extend Financing to the Company, and for other good and valuable consideration, the Member hereby agrees with the Company and each present and future Lender as follows:

1)     Defined Terms. The following terms set forth in this Agreement are used with the meanings below:

a)     “Credit Deposits” means any Deposits that are required to be maintained by Member in accordance with levels established by the credit office of Company from time to time in excess of the amount of required deposits set by the Board of Directors of Company.

b)     “Deposits” is a collective reference to all security deposits, deposits, deposit accounts or other similar amounts or accounts made or maintained from time to time by the Member with the Company, any amounts which Member is credited on the books of Company from time to time, and any money deposited with the Company by or on behalf of Member from time to time; provided, however, that Deposits do not include any Class A Shares, Class B Shares, Class E Shares or any other classes of Company’s shares or any Patronage Dividend Certificates.

Member Subordination Agreement

c)     “Financing” means all indebtedness, liabilities or obligations of the Company, contingent or otherwise, whether existing on the date of execution of this Subordination Agreement or thereafter incurred:

i)     in respect of borrowed money;

ii)     evidenced by bonds, notes, debentures or other instruments of indebtedness;

iii)     evidenced by letters of credit, bankers’ acceptances or similar credit instruments;

iv)     in respect of leases which are treated as capital leases under generally accepted accounting principles;

v)     in respect of any hedging arrangements evidenced by an ISDA Master Agreement (and in any event all interest rate swap agreements, interest rate collar agreement or other similar agreement or arrangement designed to provide interest rate protection or protection in respect of commodities or currency prices);

vi)     in respect of all indebtedness, liabilities or obligations of others of any of the types referred to in clauses (a) through (e) for which the Company or any of its constituents is responsible or liable as obligor, guarantor or otherwise or in respect of which recourse may be had against any of the property or assets (whether real, personal, tangible or intangible) of the Company;

vii)     if the Company is insolvent, in respect of back wages, tax withholding, benefits and any legally required separation payments;

excluding, however, any indebtedness, liabilities or obligations of the Company, contingent or otherwise, whether existing on the date of execution of this Agreement or thereafter incurred, (i) to trade creditors arising or incurred in the ordinary course of the Company’s business, (ii) in respect of any redemption, repurchase or other payments on capital stock or other equity interests of the Company, (iii) in respect of any indebtedness or other obligations owed to any other members or non-member customers of the Company (including any deposits or deposit accounts, or any patronage dividend certificates, capital retention certificates or other similar instruments issued pursuant to the bylaws of the Company in effect from time to time).

d)     “Financing Default” means any event or circumstance entitling Lenders, with the giving of notice or the passage of time or both, to demand repayment of the outstanding amount of any Financing in an amount which is in excess of $10,000,000.

e)     “Insolvency Proceedings” means any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization, arrangement or other similar proceedings in connection therewith, in respect of the Company, its constituent entities, or their respective properties.

f)     “Lender” means each person or entity to whom Company is obligated on account of a Financing from time to time or any agent or representative thereof.

g)     “Member” means the person or entity signing this Agreement and identified as such on the signature pages hereto, its successors and assigns. Where an individual signs this Agreement, it will be binding upon any corporation, limited liability company or other business entity which is formed by that individual and which becomes a

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member of the Company or which exercises any membership privileges in the Company.

h)     “Patronage Dividend Certificates” means all notes, revolving fund certificates, retain certificates, certificates of indebtedness, patronage dividend certificates or any other written evidences of indebtedness of the Company to the Member issued from time to time by Company on account of distributions on Company’s Class B shares and all obligations, indebtedness and patronage dividend deposit accounts associated therewith.

i)     “Required Deposits” means any Deposits that are required to be maintained by Member in accordance with levels established by the Board of Directors of Company from time to time; provided, however, Required Deposits does not include Credit Deposits.

2)     General. The Member irrevocably agrees that:

a)     The Required Deposits and Patronage Dividend Certificates are hereby subordinated to all Financings in the manner and to the extent set forth in Section 3. This Agreement does not result in the subordination of any Deposits made by the Member in excess of the Required Deposits.

b)     All Required Deposits and Patronage Dividend Certificates shall be non-transferable without the consent of the Company (any attempted assignment or transfer without such consent being void), which consent may be withheld in the Company’s absolute discretion.

c)     The Member specifically agrees that it shall not (and hereby waives it right to) exercise any rights of offset or recoupment in respect of any Required Deposit or any Patronage Dividend Certificate against any amounts owed by it from time to time to the Company or any of its direct or indirect, present or future subsidiaries, including without limitation any trade accounts receivable or other accounts owed by the Member to the Company or any of its direct or indirect, present or future subsidiaries. In addition, Member agrees that it will not fail to make any required payment of its accounts payable to the Company when due by reason of the non-payment of the Required Deposits or Patronage Dividend Certificates.

d)     The Deposits (including the Required Deposits) may be commingled with deposits of other members of the Company and other funds of the Company, and the Company may use such deposits, including the Deposits and Required Deposits, for working capital or other purposes.

3)     Subordination. The Member irrevocably agrees that the Required Deposit and Patronage Dividend Certificates shall be subordinate and junior in right of payment to the Financings in the following respects:

a)     Upon the occurrence of any Financing Default of which the Member has written notice (other than a Financing Default of the type described in Section 3(c)), the right of the Member to receive payments in respect of the Required Deposits shall be subject and subordinate to the payment of the outstanding amount under all Financings in full and in cash (including any interest that accrues following the commencement of any Insolvency Proceeding, whether or not such interest is allowable or enforceable against Company in such Insolvency Proceeding), and the

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Member Subordination Agreement

Member will not assert any right to payment in respect of the Required Deposits unless and until either (a) 180 days have passed following such notice without Lenders in respect of the relevant Financing making demand for payment of the amounts owed to them, provided, that only one such notice shall be given pursuant to this clause (3)(a) in any 12 consecutive months, or (b) the repayment in full of the relevant Financing.

b)     Upon the occurrence of any Financing Default of which the Member has written notice (other than a Financing Default of the type described in Section 3©), the right of the Member to receive payments in respect of Patronage Dividend Certificates shall be subject and subordinate to the payment of the outstanding amount under all Financings in full and in cash (including any interest that accrues following the commencement of any Insolvency Proceeding, whether or not such interest is allowable or enforceable against Company in such Insolvency Proceeding), and the Member will not assert any right to payment in respect of the Patronage Dividend Certificates unless and until the repayment in full of the relevant Financing.

c)     In the event of any default in payment of any amount due under any Financing by Company or the occurrence of any Insolvency Proceedings relative to Company, the Lenders shall be entitled to receive payment in full of the outstanding obligations under all Financings (whether accrued prior or subsequent to the commencement of any Insolvency Proceeding, whether or not such interest is allowable or enforceable against Company in such Insolvency Proceeding) in full and in cash (including any interest that accrues following the commencement of any Insolvency Proceeding) before the Member is entitled to receive any payment with respect to the Required Deposits or Patronage Dividend Certificates.

d)     The Member irrevocably authorizes and empowers each Lender (holding, with other Lenders of the same class of Indebtedness, $10,000,000 or more of Financing) to demand, sue for, collect and receive any such payment or distribution, and to file all such claims and take all such action, in the name of the Member or otherwise, as such holders of the Financings may determine to be necessary or appropriate for the enforcement of these subordination provisions, and the Member will also execute and deliver such instruments confirming such authorizations and such powers of attorney, proofs of claim, assignments of claim and other instruments as may be requested by such holders of the Financings in order to enable such holders to enforce any and all claims upon or in respect of the Required Deposits or Patronage Dividend Certificates.

e)     Upon any such Insolvency Proceedings or other winding up of the Company, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities or by set off or otherwise to which the Member would be entitled, except for the provisions hereof, shall be paid by the Company or for its account to the Lenders as in such order and priority as their interests may appear, to the extent necessary to pay all the Financings in full, after giving effect to any concurrent payment or distribution to the Lenders.

f)     In the event that any payment or other distribution is made to or received by the Member in respect of the Required Deposits or Patronage Dividend Certificates in contravention of this Section, such payment or other distribution shall be held in trust

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by the Member for the benefit of, and shall be paid over and delivered to, Lenders (in such order and priority as their interests shall appear) for application to the payment of the obligations under the Financings.

g)     The Member shall not, following notice of any Financing Default, (i) commence any lawsuit or legal proceeding against the Company to collect the Required Deposit or Patronage Dividend Certificates or attempt to collect, levy upon or foreclose upon any property or assets of the Company in relation thereto, (ii) seek to attach any asset of the Company as security for the Required Deposits or Patronage Dividend Certificates, or (iii) fail to make any required payment of its accounts payable to the Company when due by reason of the non-payment of the Required Deposits or Patronage Dividend Certificates.

h)     The subordination provided herein shall be continuing in nature, and shall not be affected by any Insolvency Proceedings.

4)     Suretyship Waivers. Member agrees that any Lender may at any time and from time to time, without the Member’s consent, and without notice, do any one or more of the following in such Lender’s sole and absolute discretion, and without affecting the subordination provided hereby: (a) renew, accelerate, extend the time for payment of, or increase the amount of the Financing, of any guarantors of the obligations of the Company, or of any other party at any time directly or contingently liable for the payment of any Financing; (b) grant any other indulgence to the Company or any other person in respect of all or any part of the Financing or any other matter; (c) amend, alter or change in any respect whatsoever any term or provision relating to all or any part of the Financing, including the rate of interest thereon or any covenants contained therein; (d) substitute or add, or take any action or omit to take any action which results in the release of any one or more endorsers or guarantors of all or any part of the Financing; (e) apply any sums received from the Company or from the disposition of any collateral to any portion of the indebtedness owed to such Lender by the Company or secured by such collateral in such manner and order as such Lender determines in its sole discretion, and regardless of whether such indebtedness is part of the Financing, is secured, or is due and payable; (f) permit the Company to use proceeds of the collateral for any purpose; (g) make loans or advances or other credit accommodations to the Company secured in whole or in part by collateral or refrain from making any such loans or advances or credit accommodations; (h) accept partial payments of, compromise or settle, refuse to enforce, or release all or any parties to, all or any part of the Financing or any guaranty thereof; (i) settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any part of the Financing or any collateral therefor, or guaranty thereof, in any manner permitted by applicable law; (j) accept, release, waive, surrender, enforce, exchange, modify, impair, or extend the time for the performance, discharge, or payment of, any and all property of any kind securing all or any part of the Financing or any guaranty of all or any part of the Financing, or on which such Lender at any time may have a lien, or refuse to enforce their rights or make any compromise or settlement or agreement therefor in respect of any or all of such property, or (k) fail to perfect, subordinate or terminate any lien securing the Financing or any other indebtedness owed to Lender. The Lenders are not under and shall not hereafter be under any obligation to marshal any assets in favor of the Member, or against or in payment of all or any part of the Financing, and may proceed against any of the Collateral in

Page 5 of 6

Member Subordination Agreement

such order and manner as they elect. Member waives any rights that it may have under California Civil Code sections 2787 through 2855, inclusive, 2899 and 3433.

5)     Conflicts. In the event of any conflict between the terms of this Agreement and the Membership Agreement, the terms of this Agreement shall govern and control.

6)     Lenders are Beneficiaries. This Agreement shall inure to the benefit of each present and future Lender, and shall constitute a continuing offer to the Lenders to induce them to extend Financing to the Company.

7)     Attorneys Fees. In the event that the Company or any Lender is required to institute any action or proceeding to enforce the terms of this Agreement, then the prevailing party shall be entitled to the award of its reasonable attorneys fees and costs, in addition to such other relief as the court or other tribunal may award.

8)     Choice of Law. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of California.

9)     Other Documents. Except as modified hereby, Deposits are and continue to be governed in all respects by the membership documents and pledge and security agreements executed from time to time by Member for the benefit of Company.

IN WITNESS WHEREOF, the parties hereto have caused this Collateral Agency Agreement to be duly executed by their respective officers all as of the day and year first above written.

______________________________________

Date

Legal Name of Member (print or type)

By

Its

Account Number

(to be completed by Unified if no number has been assigned.)

Page 6 of 6

Exhibit 4.43.1

Continuing Guaranty

This guaranty (“this Guaranty”) is made by the undersigned (each a “Guarantor” and collectively, “Guarantors”) to and for the benefit of UNIFIED GROCERS, INC., a California corporation (hereinafter referred to as “Unified”) and for each and every of Unified’s direct or indirect and present or future subsidiaries, whether now or at anytime hereafter existing, including but not limited to Grocers Capital Company, a California corporation, Market Centre, a California corporation, Unified Grocers Insurance Services, Inc., a California corporation, Springfield Insurance Company, a California corporation, and Springfield Insurance Company Limited, a Bermuda corporation and those other direct and indirect and present and future subsidiaries who are or from time to time become parties to the Master Collateral Agency Agreement, dated as of September 1, 2008 (as amended, restated, modified or replaced from time to time, the “Master Collateral Agency Agreement”), as the same may be amended, restated, modified or replaced from time to time. Unified, together with its direct or indirect and present or future subsidiaries, whether now or hereafter existing are referred to collectively herein as “Creditors” and each a “Creditor.” This Guaranty is given to and for the benefit of, and may be enforced by, each and every Creditor, subject to restrictions, if any, set forth in the Master Collateral Agency Agreement.

In consideration of the extensions of credit by any of the Creditors at any time and in any manner and to any extent to                                                                                                                   (hereinafter referred to as “Debtor”) and for other good and valuable consideration, Guarantors jointly and severally agree as follows:

1)     Guaranty of Indebtedness of Debtor. Guarantors jointly and severally unconditionally guarantee to Creditors, and to each of them, the payment or performance, when due, of any and all Indebtedness of Debtor to any Creditor. The word “Indebtedness” is used in its most comprehensive sense and includes any and all advances to and any and all debts, obligations, and liabilities of Debtor or any one or more of them, whenever made, incurred, or created, whether voluntary or involuntary and however arising, whether originating in transactions between any Creditor and Debtor or assigned to any Creditor, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Debtor may be liable individually or jointly with others, or whether recovery may be or become barred by any statute of limitations or otherwise become unenforceable; including, without limitation, interest which would be owed by the Debtor but for the fact that it is unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Debtor.

Continuing Guaranty

2)     Continuing Guaranty. This is a contract of continuing guaranty and shall apply, regardless of the form and without limit as to the amount of the Indebtedness. Any Indebtedness may be created, renewed, extended, modified, or altered, in whole or in part, without notice to the undersigned. This Guaranty is to remain in full force and effect notwithstanding any written notice of its revocation given by any Guarantor. If any Guarantor’s right to terminate is not able to be waived for any reason, then any termination by such Guarantor shall be effective only to the extent that it applies to new Indebtedness incurred subsequent to the actual receipt and the effective date of such notice. Any Indebtedness incurred prior to the effective date of such notice may be renewed, extended, modified or altered after the receipt of such notice without affecting this Guaranty. Such notice must be in writing and shall be effective only if delivered by personal service or by recognized overnight courier or by registered mail, postage prepaid, return receipt requested, addressed to Unified at its principal executive office to the attention of the Corporate Secretary. Notice shall be deemed effective (the “effective date”) on the thirtieth day following receipt of such notice by Unified. No such notice shall release Guarantors from any liability as to any Indebtedness that may be owing to or held by any Creditor or in which any Creditor may have an interest or for which any Creditor may be obligated at the time of the effective date of such notice.

3)     Independent Obligation. The liability of Guarantors under this Guaranty is exclusive and independent of any security for or other guarantee of the Indebtedness, whether executed by Guarantors or any other party and a separate action or actions may be brought and prosecuted against any Guarantor whether action is brought against Debtor or any other guarantor or whether Debtor or any other guarantor be joined in any such action or actions. The liability of Guarantors under this Guaranty is not affected or impaired by:

a)     any Indebtedness exceeding Guarantors’ liability;

b)     any direction of application by Debtor or any other party;

c)     any other continuing or other guaranty, undertaking, or maximum liability of Guarantors or of any other party as to the Indebtedness;

d)     any payment on or in reduction of any other guaranty or undertaking;

e)     any notice of termination of this Guaranty, or the death or termination of, or the revocation or release of any obligations under this Guaranty of any other of the Guarantors, any other guarantor or any other person or entity;

f)     any dissolution, termination, or increase, decrease, or changes of personnel of any of the Guarantors, Debtor or any other person; or

g)     any payment made to any Creditor on the Indebtedness such Creditor repays to Debtor pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium, or other debtor relief proceeding; Guarantors waive any right to the deferral or modification of Guarantor’s obligations by virtue of any such proceeding.

In the event that any payments by any Guarantor to any Creditor is set aside after the making thereof, in whole or in part, or settled without litigation (any such settlement being in such Creditor’s sole and absolute discretion), Guarantors shall be liable for the full amount such Creditor is required to repay (or repays pursuant to any settlement) plus costs, interest, attorneys’ fees and any and all expenses which such Creditor paid or incurred in connection therewith.

Page 2 of 9

Continuing Guaranty

4)     Death, Insolvency, or Bankruptcy of Debtor. Guarantors jointly and severally unconditionally guarantee the payment of any and all Indebtedness, whether or not due or payable by Debtor, upon:

a)     Debtor or any Guarantor dies, institutes a dissolution, insolvency, liquidation, conservatorship, reorganization or bankruptcy proceeding, or consents to any assignment for the benefit of creditors, moratorium, rearrangement, or receivership,

b)     any liquidation, conservatorship, reorganization or bankruptcy proceeding is instituted against Debtor or any Guarantor, or a receiver is appointed with respect to Debtor or any Guarantor; or

c)     the appointment of a receiver for, or the attachment, restraint of, or making or levying of any court order or legal process affecting the property of Debtor or Guarantors,

and jointly and severally unconditionally promise to pay the Indebtedness to Creditors, or order, on demand, in lawful money of the United States.

5)     Joinder of Parties. The obligations of Guarantors are joint and several, and independent of the obligations of Debtor, and a separate action or actions may be brought and prosecuted against any Guarantor, whether action is brought against Debtor or any other guarantor or whether Debtor or any other guarantor be joined in any such action or actions. Guarantors waive, to the fullest extent permitted by law, the benefit of any statute of limitations affecting their liability under this Guaranty or the enforcement of this Guaranty. Any payment by Debtor or other circumstance that operates to toll any statute of limitations as to Debtor shall also operate to toll the statute of limitations as to Guarantors.

6)     Change of Obligations. Guarantors authorize each Creditor, (whether or not after revocation or termination of this guaranty) without notice or demand (except any notice or demand that is required by statute and cannot be waived) and without affecting or impairing their liability, from time to time to:

a)     renew, compromise, extend, accelerate, or otherwise change the time for performance of, or otherwise change the terms of the Indebtedness, including increase or decrease the rate of interest;

b)     take and hold security for the performance of this guaranty or the Indebtedness, and exchange, enforce, waive, and release any security;

c)     apply security and direct the order or manner of sale of security as such Creditor in its discretion may determine; and

d)     release or substitute any one or more of the Guarantors.

       Creditors may without notice assign this Guaranty in whole or in part.

7)     Guaranty to be Absolute. Guarantor agrees that until the Indebtedness has been paid in full and any commitments of any Creditor to provide any additional Indebtedness have been terminated, Guarantors shall not be released by or because of the taking, or failure to take, any action that might in any manner or to any extent vary the risks of Guarantors under this Guaranty or that, but for this paragraph, might discharge or otherwise reduce, limit, or modify any Guarantor’s obligations under this Guaranty. Guarantor waives and surrenders any

Page 3 of 9

Continuing Guaranty

defense to any liability under this Guaranty based upon any such action, including but not limited to any action of any Creditor described in the immediately preceding paragraph of this Guaranty. It is the express intent of Guarantor that Guarantor’s obligations under this Guaranty are and shall be absolute and unconditional.

8)     Capacity and Authority of Debtor. It is not necessary for any Creditor to inquire into the capacity or powers of Debtor or the officers, directors, partners, or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance on the professed exercise of those powers shall be guaranteed under this Guaranty.

9)     Subrogation. Until all the Indebtedness is paid in full, even though the Indebtedness is in excess of Guarantors’ liability under this Guaranty, Guarantors shall have no right of subrogation, reimbursement, exoneration, indemnity or contribution by reason of any payments or acts of performance by Guarantor in compliance with the obligations of Guarantors under this Guaranty, and each Guarantor hereby waives any right to enforce any remedy that any Creditor now has or may later have against Debtor, and waives any benefit of, and any right to, participation in any security now or later held by Debtor.

10)     Subordination. Any indebtedness of Debtor now or later held by Guarantors is subordinated to the Indebtedness, and all indebtedness of Debtor to Guarantors shall be collected, enforced, and received by Guarantors as trustees for Creditors and be paid over to Creditors on account of the Indebtedness, without affecting or impairing in any manner the liability of Guarantors under the other provisions of this Guaranty. In addition to Guarantors’ waiver of any right of subrogation as set forth in this Guaranty with respect to any obligations of Borrower to Guarantors as subrogee of Creditors, Guarantors agree that Guarantors shall not demand, take, or receive from Debtor, by setoff or in any other manner, payment of any other obligations of Debtor to Guarantors until the Indebtedness has been paid in full and any commitments of Creditors to provide Indebtedness have been terminated. If any payments are received by any Guarantor in violation of such waiver or agreement, such payments shall be received by such Guarantor as trustee for Creditors and shall be paid over to Creditors on account of the Indebtedness, but without reducing or affecting in any manner the liability of Guarantors under the other provisions of this Guaranty. Any security interest, lien, or other encumbrance that Guarantors may now or hereafter have on any property of Debtors is hereby subordinated to any security interest, lien, or other encumbrance that any Creditor may have on any such property.

11)     Waiver of Rights and Defenses.

a)     Guarantors waive any right to require any Creditor to (1) proceed against Debtor; (2) proceed against or exhaust any security held from Debtor; or (3) pursue any other remedy in any Creditor’s power whatsoever.

b)     Guarantors waive any defense based on or arising out of any defense of Debtor other than payment in full of the Indebtedness, including without limitation any defense based on or arising out of the disability of Debtor, the unenforceability of the indebtedness from any cause, or the cessation from any cause of the liability of Debtor other than payment in full of the Indebtedness.

Page 4 of 9

Continuing Guaranty

c)     Each Creditor may, at its election, foreclose on any security held by any Creditor by one or more public or private sales, whether or not every aspect of any sale is commercially reasonable, or exercise any other right or remedy any Creditor may have against Debtor, or any security, without affecting or impairing in any way the liability of Guarantors under this Guaranty, except to the extent that the Indebtedness has been paid.

d)     Guarantors waive all rights and defenses that Guarantors may have because the Indebtedness is secured by real property. This means, among other things:

  i) Creditors may collect from Guarantors without first foreclosing on any real or personal property collateral pledged by Debtor.

  ii) If any Creditor forecloses on any real property collateral pledged by Debtor:

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

    (2)   Each Creditor may collect from the Guarantors even if such Creditor, by foreclosing on the real property collateral, has destroyed any right Guarantors may have to collect from Debtor.

This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because the Debtor’s debt is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based on Code of Civil Procedure Sections 580a, 580b, 580d, and 726.

e)     Guarantor waives all rights and defenses arising out of an election of remedies by Creditors, even though that election of remedies, such as nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against the Debtor by operation of Code of Civil Procedure Section 580d or otherwise.

f)     Guarantors waive all presentments, demands for performance, notices of protest, notices of dishonor, notices of acceptances of this guaranty, and notices of the existence, creation, or incurring of new or additional indebtedness.

g)     Guarantors assume all responsibility for keeping themselves informed of Debtor’s financial condition and assets, and of all other circumstances bearing on the risk of nonpayment of the Indebtedness and the nature, scope, and extent of the risks that Guarantors assume and incur under this Guaranty, and agree that Creditors shall have no duty to advise Guarantors of information known to it regarding those circumstances or risks.

h)     Guarantors waive any rights and defenses that are or may become available to Guarantor by reason of Sections 1479, 2822, 2787 to 2855, inclusive, 2899 and 3433 of the California Civil Code.

12)     Information Relating to Debtor. Guarantors acknowledge and agree that they have the sole responsibility for, and have adequate means of, obtaining from Debtor such information concerning Debtor’s financial condition or business operations as Guarantors may require,

Page 5 of 9

Continuing Guaranty

and that Creditors have no duty, and Guarantors are not relying on Creditors, at any time to disclose to Guarantors any information relating to the business operations or financial condition of Debtor.

13)     Successors and Assigns. This Guaranty (a) binds Guarantors and Guarantors’ executors, administrators, heirs, successors, and assigns, provided that Guarantors may not assign their rights or obligations under this Guaranty without the prior written consent of Creditors, and (b) inures to the benefit of Creditors and Creditors’ indorsees, successors, transferees, and assigns. Creditors may, without notice to Guarantors and without affecting Guarantors’ obligations hereunder, sell, assign, grant participations in, or otherwise transfer to any other person, firm, or corporation the Indebtedness and this Guaranty, in whole or in part.

14)     Attorneys’ Fees and Costs. In addition to the amounts guaranteed under this Guaranty, Guarantors jointly and severally agree to pay reasonable attorneys’ fees and all other costs and expenses incurred by any Creditor in enforcing this guaranty and in any action or proceeding arising out of, or relating to, this guaranty.

15)     Nonwaiver of Rights of Creditors. No right or power of any Creditor under this Guaranty shall be deemed to have been waived by any act or conduct on the part of any Creditor, or by any neglect to exercise that right or power, or by any delay in so doing; and every right or power shall continue in full force and effect until specifically waived or released by an instrument in writing executed by Creditors.

16)     Single or Plural Debtors or Guarantors. In all cases where there is but a single Debtor or a single Guarantor, all words used in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Debtor, or when this Guaranty is executed by more than one Guarantor, the word “Debtor” and the word “Guarantors” respectively shall mean all and any one or more of them.

17)     Governing Law. The validity, construction and performance of this Guaranty shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California.

18)     Entire Agreement. This Guaranty embodies the entire agreement and understanding between Creditors and the Guarantors pertaining to the subject matter of this Guaranty, and supersedes all prior or contemporaneous agreements, understandings, negotiations, representations and discussions, whether verbal or written, of such parties, pertaining to that subject matter.

19)     Amendment and Waiver. This Guaranty may not be amended, modified or supplemented except by a writing duly executed by the Guarantor and a duly authorized officer of Unified. No provision of this Guaranty or right of Creditors under this Guaranty can be waived except by a writing duly executed by an authorized officer of Unified. No waiver by Unified of a breach of any provision of this Guaranty shall be construed as a waiver of any subsequent or different breach, and no forbearance by any Creditor to seek a remedy for noncompliance or breach by the Guarantor shall be construed as a waiver of any right or remedy with respect to such noncompliance or breach.

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Continuing Guaranty

20)     Time. Time is of the essence with respect to each provision of this Guaranty.

21)     Severability. The invalidity or unenforceability of any particular provision of this Guaranty shall not affect the other provisions, and this Guaranty shall be construed in all respects as if any invalid or unenforceable provision were omitted.

22)     Headings. The section and other headings contained in this Guaranty are for reference purposes only and shall not affect in any way the meaning or interpretation of this Guaranty.

23)     Joint and Several. If this Guaranty is signed by more than one party, each and all of the agreements and obligations contained herein shall be deemed to be the joint and several agreements and obligations of each party executing this Guaranty.

24)     Dispute Resolution. Except as provided below, all disputes arising under any agreement between the Guarantors and any Creditor that cannot be amicably resolved must be resolved through binding arbitration, as described herein. Any arbitration must occur in Los Angeles County, California, and judgment upon any award rendered may be entered in any court of competent jurisdiction. A party demanding arbitration pursuant to this provision must serve a written demand for arbitration on the other party. The arbitration must be conducted under the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), as those rules exist on the date of the arbitration demand. Although AAA rules will govern the arbitration, the parties are not required to submit to AAA arbitration. The parties may mutually agree to submit to AAA arbitration or arbitration with any other alternative dispute resolution provider. Absent such mutual agreement, within 20 calendar days after an arbitration demand is served, the parties must jointly select and appoint a single arbitrator. If the parties are unable to agree on an arbitrator, the party demanding arbitration must apply to the Superior Court of California for Los Angeles County for appointment of an arbitrator. The cost of the arbitrator, and any related costs of arbitration, must be borne equally by the parties. The arbitrator has authority, and is empowered, by the parties, to hear and resolve all disputes arising under any agreement between the undersigned and Unified or one of its direct or indirect and present or future subsidiaries, and the arbitrator has the authority to award money damages (except for punitive damages, which are specifically excluded from the arbitrator’s authority), injunctive relief, specific performance, rescission, restitution, costs, and attorneys’ fees. The arbitrator does not have the authority to amend any agreement between the parties in any respect. Notwithstanding anything to the contrary in the AAA rules, after the appointment of the arbitrator, the parties have the right to conduct discovery, including depositions, regarding the subject matter of the arbitration to the same extent authorized by California law, as if the arbitration were pending before a Superior Court of California. Once the arbitrator is appointed, the arbitration hearing must be scheduled for a date not more than 120 calendar days after such appointment, unless the parties mutually agree to a later date. Nothing in this provision shall be deemed to apply to or limit the right of any Creditor (a) to exercise self help remedies such as (but not limited to) setoff and

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Continuing Guaranty

recoupment or to exercise its right to purchase or redeem any stock, (b) to foreclose judicially or nonjudicially against any real or personal property collateral, or to exercise judicial or nonjudicial power of sale rights, (c) to obtain from a court provisional or ancillary remedies (including, but not limited to, injunctive relief, a writ of possession, prejudgment attachment, a protective order or the appointment of a receiver), or (d) to pursue rights against Guarantors in a third-party proceeding in any action brought against any Creditor (including actions in bankruptcy court).

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Continuing Guaranty

IN WITNESS WHEREOF, the undersigned Guarantors have executed this Guaranty on this              day of                          , 20         .

Individuals:

Signature

Print Name

Signature

Print Name

Others:

By

Print Name                                                                                                                           Title

Page 9 of 9

Exhibit 10.56.3

AMENDMENT TO THE

CASH BALANCE RETIREMENT PLAN FOR EMPLOYEES OF

ASSOCIATED GROCERS, INC.

Unified Grocers, Inc. (the “Company”), pursuant to its authority as successor sponsor of the Cash Balance Retirement Plan for Employees of Associated Grocers, Inc. (the “Plan”), hereby amends the plan, effective January 1, 2001, to clarify the treatment of credited interest and the definition of “accrued benefit”.

1. Subparagraph (iii) of paragraph (b) of Section 4.1 is amended to read as follows:

(iii) Credited Interest. All Participants will be credited with interest based on a thirty (30) year U.S. Treasury Bond Rate. In the event that subsequent events or regulations make it impermissible to utilize such Bond Rate, the interest rate shall be the annual rate of change of the Consumer Price Index, CPI-U as reported by the Department of Labor, increased by three (3) percentage points. The interest rate shall be determined for November preceding the beginning of the Plan Year. The interest rate so determined shall be applied to a Participant’s beginning of Plan Year Account Balance, but such amount shall not be credited to the Participant’s Account Balance until the last day of the Plan Year. Provided however, in the Plan Year that a Participant terminates and either elects a distribution or is involuntarily cashed out, the Participant’s Pay Credit and interest credit (which shall be prorated based on days of participation in the calendar year over 365) shall be determined and credited to the Participant’s Account Balance as of the date of such termination. The interest rate will be credited for each Plan Year or portion of a Plan Year (pro-rated based on days of participation in the calendar year over 365) until the Participant receives a distribution, whether or not the Participant is still employed by the Employer.

2. The first sentence of Section 4.1 is replaced by the following:

The Accrued Benefit for any Participant shall equal the amount determined under (a) and (b) below, if the Participant’s Annuity Starting Date occurs on or before August 17, 2006 and before the Participant’s Normal Retirement Date, the Accrued Benefit as of the Participant’s Annuity Starting Date for service on or after January 1, 2001 shall equal the Actuarial Equivalent (assuming no mortality prior to the Participant’s Normal Retirement Date) as of the Annuity Starting Date of the amount determined under (b) below for service on or after January 1, 2001, with interest under (b)(iii) projected to the Participant’s Normal Retirement Date at the rate in effect on the Participant’s Annuity Starting Date. The Accrued Benefit shall be

Actuarially Adjusted for the form of payment and Actuarially Adjusted for any prior distribution from the Plan that is not repaid.

3. The first sentence of Section 1.3 is modified by changing the phrase “determined as of November 1^st” to read “determined for November”.

Executed this 17 day of June, 2008

		UNIFIED GROCERS, INC.
By	/S/ ROBERT M. LING, JR.
	Its	ROBERT M. LING, JR.
		EXECUTIVE VICE PRESIDENT
		GENERAL COUNSEL

EXHIBIT 31.1

CERTIFICATION

I, Alfred A. Plamann, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Unified Grocers, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: August 12, 2008

/s/    ALFRED A. PLAMANN        

Alfred A. Plamann

President and Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, Richard J. Martin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Unified Grocers, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: August 12, 2008

/s/    RICHARD J. MARTIN        

Richard J. Martin

Executive Vice President, Finance and Administration and Chief Financial Officer

(Principal Financial and Accounting Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Unified Grocers, Inc. (the “Company”) for the fiscal quarter ended June 28, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alfred A. Plamann, President and Chief Executive Officer of the Company, hereby certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

Date: August 12, 2008

/s/    ALFRED A. PLAMANN        

Alfred A. Plamann

President and Chief Executive Officer

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Quarterly Report on Form 10-Q of Unified Grocers, Inc. (the “Company”) for the fiscal quarter ended June 28, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard J. Martin, Executive Vice President, Finance and Administration and Chief Financial Officer of the Company, hereby certify that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

Date: August 12, 2008

/s/    RICHARD J. MARTIN        

Richard J. Martin

Executive Vice President, Finance and Administration and Chief Financial Officer

(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.