Document:

Spartan Stores Exhibit 10.3 to Form 8-K - 12/24/08

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

                    THIS EMPLOYMENT AGREEMENT (the "Agreement") is made by SPARTAN STORES, INC., a Michigan corporation (the "Company"), and CRAIG C. STURKEN ("Executive"). The parties agree as follows:

          1.          Effective Date and Term. This Agreement will take effect as of October 15, 2008 ("Effective Date"), and will remain in effect for successive one-year terms (each a "Term"), renewing on each anniversary of the Effective Date. Either party may elect to terminate this Agreement as of the end of any one-year Term by giving the other party written notice, not later than thirty (30) days before expiration of the then-current Term, of that party's intention to terminate this Agreement at the end of the then-current Term. If such notice is given, Executive's employment will terminate at the end of the then-current Term. Those provisions of this Agreement that expressly state that they will remain in effect after termination of Executive's employment will remain in effect as provided therein. 

          2.          Employment. Executive will serve as an executive management-associate as Executive Chairman of the Company's Board of Directors and on the boards of directors of such of the Company's Affiliates as the Company may request (the "Employment"). Executive will perform the duties assigned from time to time to Executive's position. The Employment will be part-time, with the understanding that Executive will devote the time necessary to fulfill the functions of Executive's position. Executive agrees to comply with Company policies, including but not limited to any applicable Company policy requiring Executive to own shares of common stock in the Company. As used in this Agreement, the term "Affiliate" includes any organization controlling, controlled by or under common control with the Company.

          Not later than sixty (60) days before each anniversary of the Effective Date, Executive shall tender his written resignation ("Contingent Resignation") from the boards of directors of the Company and any Affiliates to the Nominating and Corporate Governance Committee of the Company's Board of Directors ("Committee"), with such resignations to take effect as of the upcoming anniversary of the Effective Date, but to become effective only if the Committee determines to accept the resignations and so notifies Executive in writing not later than thirty (30) days before the upcoming anniversary of the Effective Date. If the Committee accepts the Contingent Resignation, the Employment and Executive's service on the boards of directors of the Company and any Affiliates will terminate on the anniversary of the Effective Date. If the Committee does not accept the resignations as provided above they shall be deemed to have been withdrawn.

          In addition, if the Board of Directors terminates the Employment at any time, Executive shall promptly tender his resignation from the boards of directors of the Company and any Affiliates. In that event, the Committee will notify the Executive in writing within thirty days whether Executive's resignation is accepted or declined.

          3.          Compensation. Executive will be compensated during the Employment as follows:

          (a)          Salary. The Executive's salary as of the Effective Date is $300,000 per year (or a pro-rated weekly amount for any partial year), subject to normal payroll deductions and payable in accordance with the Company's normal payroll practices. Executive's salary will be reviewed annually by the Company and subject to the limitations in Section 4(b)(i) may be adjusted to reflect Company determinations of Executive's performance, Company performance, or business or economic conditions. 

          (b)          Bonus. Executive will be eligible to participate in any bonus programs designated by the Company from time to time for senior Company executives, in accordance with the terms of such programs, which are subject to change from time to time in the Company's discretion. 

          (c)          Benefits. Executive will be eligible to participate in the Company's healthcare, retirement and other fringe benefit programs covering the Company's salaried employees as a group, and in any programs applicable under Company policy to senior Company executives, to the extent that Executive is eligible for such benefit programs based on the level of services Executive provides to the Company. The terms of applicable insurance policies and benefit plans in effect from time to time will govern with regard to specific issues of coverage and benefit eligibility. All benefit programs are subject to change from time to time in the Company's discretion.

          The Company will reimburse Executive for the COBRA continuation coverage premiums incurred and paid by Executive to continue Executive's employee and dependent health, dental, and prescription drug coverage for the twelve month period beginning November 1, 2008, provided that (A) Executive elects and remains eligible for COBRA continuation coverage, (B) Executive continues to pay the normal employee contribution for such coverage, and (C) that the Company's obligation to provide coverage will end if Executive becomes eligible for coverage under the Company's plans or for comparable coverage from a new employer. Reimbursement for each monthly premium paid by Executive will be made not later than thirty (30) days after Executive requests reimbursement, but in no event later than the end of the second year after the Employment begins.

          (d)          Business Expenses. The Company will reimburse Executive for reasonable ordinary and necessary business expenses that are specifically authorized or authorized by Company policy, subject to Executive's prompt submission of proper documentation for tax and accounting purposes. Such expenses shall be reimbursed within thirty (30) days after Executive requests reimbursement, but in no event later than two and one-half (2 1⁄2) months after the end of the year in which the expense is incurred.

4.          Termination of Employment.

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          (a)          Termination Without Severance Pay. Executive shall not be entitled to any further compensation from the Company or any Affiliate after termination of the Employment as permitted by this Section 4(a), except (A) unpaid salary installments through the end of the week in which the Employment terminates, and (B) any vested benefits accrued before the termination of Employment under the terms of any written Company policy or benefit program.

          (i)          Death. The Employment will terminate automatically upon Executive's death.

          (ii)          Disability. If Executive is unable to perform Executive's duties under this Agreement due to physical or mental disability for a continuous period of one hundred eighty (180) days or longer and Executive is eligible for benefits under the Company's long-term disability insurance policy ("long-term disability benefits"), the Company may terminate the Employment under this Section 4(a)(ii). If the Company terminates the Employment as the result of Executive's inability to perform Executive's duties for less than one hundred eighty (180) days due to a disability, the termination of Employment will be deemed to be pursuant to Section 4(b)(ii) below.

          (iii)          Termination by Company for Cause. The Company may terminate the Employment for "Cause," defined as Executive's: (A) breach of any provision of Sections 6, 7, or 8 of this Agreement; (B) willful continued failure to perform or willful poor performance of duties (other than due to disability) after warning and reasonable opportunity to meet reasonable required performance standards; (C) gross negligence causing or placing the Company at risk of significant damage or harm; (D) misappropriation of or intentional damage to Company property; (E) conviction of a felony (other than negligent vehicular homicide); or (F) intentional act or omission that Executive knows or should know is significantly detrimental to the interests of the Company. 

If the Company becomes aware after termination of the Employment other than for Cause that Executive engaged before the termination of Employment in willful misconduct constituting Cause, the Company may recharacterize Executive's termination as having been for Cause.

          (iv)          Discretionary Termination by Executive. Executive may terminate the Employment at will, with at least thirty (30) days advance written notice. If Executive gives such notice of termination, the Company may (but need not) relieve Executive of some or all of Executive's responsibilities for part or all of such notice period, provided that Executive's pay and benefits are continued for the lesser of thirty (30) days or the remaining period of the Employment. Termination of Executive's Employment because Executive declines nomination for or election to the Company's Board of Directors will be considered a termination under this Section 4(a)(iv). Termination of the Executive's employment due to acceptance of the Contingent Resignation (as

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provided in Section 2) will not be considered a termination under this Section 4(a)(iv).

          (b)          Termination With Severance Pay. Executive shall not be entitled to any further compensation from the Company or any Affiliate after termination of the Employment as permitted by this Section 4(b), except (A) unpaid salary installments through the end of the week in which the Employment terminates, (B) any vested benefits accrued before the termination of Employment under the terms of any written Company policy or benefit program, and (C) any Severance Pay to which Executive is entitled under Section 5.

          (i)          Termination by Executive for Good Reason. Executive may terminate the Employment for "Good Reason" if and only if the Company materially breaches the Company's obligations to Executive under this Agreement, or materially reduces Executive's salary other than an economic or business motivated reduction accompanied by proportionate reductions in the salaries of all senior Company executives. Executive may not resign for Good Reason unless (A) Executive notifies the Company's Chief Executive Officer in writing, within thirty (30) days after the act or omission in question, asserting that the act or omission in question constitutes Good Reason and explaining why, (B) the Company fails, within thirty (30) days after the notification, to take all reasonable steps to cure the breach, and (C) Executive resigns by written notice within thirty (30) days after expiration of the thirty (30) day period under Section 4(b)(i)(B). If Executive terminates the Employment for Good Reason, Executive will be entitled to Severance Pay as provided in and subject to Section 5. Executive's failure to object to a material breach as provided above will not waive Executive's right to resign with Good Reason after following the above procedure with regard to any subsequent material breach.

          (ii)          Discretionary Termination by Company. The Company may terminate the Employment at will, but if the Company does so Executive will be entitled to Severance Pay as provided in and subject to Section 5. Any termination of Executive's Employment by the Company under Section 4(a) that is found not to meet the standards of such Section will be considered to have been a termination under Section 4(b)(ii). Termination of Executive's Employment because Executive is not nominated for or elected to the Company's Board of Directors, or termination at the end of any one-year Term of this Agreement due to notice of termination by the Company pursuant to Section 1, or termination of the Employment due to acceptance of the Contingent Resignation as provided in Section 2, will be considered a termination under this Section 4(b)(ii).

          5.          Severance Pay. The Company will pay and provide Executive with the payments and benefit continuation provided in this Section 5 ("Severance Pay") if Executive's Employment is terminated as provided in Section 4(b) and Executive contemporaneously experiences a "separation from service" as that term is defined by Section 409A of the Internal Revenue Code (the "Code"). For purposes of this Agreement, a separation from service will be

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presumed if Executive's level of bona fide services reduces by more than 50% from the level of bona fide services Executive performed over the preceding 36-month period. 

          (a)          Amount and Duration of Severance Pay. Subject to the other provisions of this Section, Severance Pay will consist of a lump sum cash payment equal to the sum of (i) and (ii) as follows:

          (i)          if Executive's separation from service occurs before November 1, 2009, the amount the Company would have been required to reimburse Executive for COBRA continuation coverage under the second paragraph of Section 3(c) if the Employment had continued until November 1, 2009 and all the conditions of Section 3(c) were satisfied; and

          (ii)          fifty-two weeks of Executive's normal weekly salary installments, payable as provided in Section 5(b), except that if the separation from service occurs during 2008 payment will be made by (A) continuing Executive's then-current salary installments (in accordance with the Company's normal pay practice) through December 31, 2008, and (B) payment to Executive as provided in Section 5(b) of a lump sum cash payment in an amount equal to the remaining balance of the payment due under this Section 5(a). The lump sum cash payment will be considered wages allocated equally to each of the weeks covered by the payment for purposes of any applicable unemployment compensation or workers compensation laws, and any applicable disability insurance program, but will not be considered to extend Executive's employment beyond the date of Executive's separation from service under any Company qualified retirement plan or other Company benefit plan or program. 

          (b)          Payment Terms. Any salary continuation payments for 2008 under Section 5(a) will be made on the Company's normal pay date for each payment. The lump sum cash payment under Section 5(a) will be made on the Company's first normal pay date after the release provided for in Section 5(c)(iii) becomes effective and after any 2008 salary continuation payments have been made, or earlier if required by this Section 5(b). In any event, no payments will be made under this Section until the Company's first regular pay date after Executive has signed the release provided for in Section 5(c)(iii) and any revocation period provided for in the release has expired. In no event will the latest date for (A) signing of the release, and (B) expiration of any revocation period in the release, and (C) the completion of payments under Section 5(a)(i), be deferred beyond the fifteenth (15th) day of the third (3rd) month after the end of the calendar year in which the Executive's separation from service occurs.

Example: If Executive were terminated on November 1, 2008, salary continuation payments would be made for the balance of 2008, and the balance of Executive's salary installments through the end of the then-current Term would be paid in a lump sum on the first payroll date in 2009, provided that no payments would be made until the release is signed and becomes effective, and provided further that all payments must be made at latest by March 15, 2009.

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The Executive will receive the payments called for by Section 5(a) notwithstanding any other earnings that Executive may have, and subject to offset only as provided in Section 5(d). If Executive dies before all payments have been made as provided by this Section 5, any 2008 salary continuation under Section 5(a) will continue for the remainder of 2008 and such payments and any lump sum cash payment will be paid to Executive's designated beneficiary (or Executive's estate if Executive fails to designate a beneficiary). If Executive becomes eligible for long-term disability benefits, no further payments will be made under Section 5(a)(ii) after the date that Executive is eligible to begin receiving such disability benefits.

          (c)          Conditions to Severance Pay. To be eligible for Severance Pay, Executive must meet the following conditions: (i) Executive must comply with Executive's obligations under this Agreement that continue after termination of the Employment; (ii) Executive must not claim unemployment compensation for any week for which Executive receives payment under Section 5(a)(ii); (iii) Executive must promptly sign and continue to honor a release, in form acceptable to the Company, of any and all claims arising out of or relating to Executive's Employment or its termination and that Executive might otherwise have against the Company, the Company's Affiliates, any of their officers, directors, employees and agents, provided that the release will not waive Executive's right to any payments due under this Section or Section 4, or any right of Executive to liability insurance coverage under any liability insurance policy or to indemnification under the Company's Articles of Incorporation or Bylaws or any written indemnification agreement; (iv) Executive must reaffirm in writing upon request by Company Executive's obligations under Sections 6, 7 and 8 of this Agreement; (v) Executive must resign upon written request by Company from all positions with or representing the Company or any Affiliate, including but not limited to membership on boards of directors; and (vi) Executive must provide the Company for a period of ninety (90) days after the Employment termination date with consulting services regarding matters within the scope of Executive's former duties, upon request by the Company's Chief Executive Officer; Executive will only be required to provide those services by telephone at Executive's reasonable convenience and without substantial interference with Executive's other activities or commitments.

          (d)          Offsets to Severance Pay. The Severance Pay due to Executive under Section 5(a) will be reduced (but not below 0) by the following: (i) any disability benefits to which Executive will be entitled for the remainder of the then-current Term under any disability insurance policy or program of the Company or any Affiliate (including but not limited to worker's disability compensation); (ii) any severance pay payable to Executive under any other agreement or Company policy; (iii) any payment due to Executive under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; (iv) in the event that Executive continues to be a member of the Company's Board of Directors after termination of the Employment, the Board fees to which Executive will be entitled during the fifty-two (52) week period covered by the payments under Section 5(a)(ii); and (v) any amount owing by Executive to the Company that the Company is legally entitled to set off against the Severance Pay under applicable law.

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          (e)          Delay in Payment to a Specified Employee. Notwithstanding any other timing provision in this Agreement, if, at the time that payments would commence under this Section 5, Executive is a "Specified Employee" as defined by Section 409A of the Internal Revenue Code, then no payment under this Section 5, or under Section 13, may be paid to Executive before the date that is six (6) months after Executive's separation from service. Payments to which Executive would otherwise have been entitled during that six (6) months will be accumulated and paid on the first day after six (6) months following the date of Executive's separation from service. All payments that would otherwise be made more than six (6) months following Executive's separation from service will be made in accordance with the general timing provisions described above.

          6.          Loyalty and Confidentiality; Certain Property and Information.

          (a)          Loyalty and Confidentiality. Executive will be loyal to the Company during the Employment and will forever hold in strictest confidence, and not use or disclose, any information regarding techniques, processes, developmental or experimental work, trade secrets, customer or prospect names or information, or proprietary or confidential information relating to the current or planned products, services, sales, pricing, costs, employees or business of the Company or any Affiliate, except as disclosure or use may be required in connection with Executive's work for the Company or any Affiliate or as may be compelled pursuant to court order or subpoena. Executive will also keep the terms of this Agreement confidential. The Executive's commitment not to use or disclose information does not apply to information that becomes publicly known without any breach of this Agreement by Executive. 

          (b)          Certain Property and Information. Upon termination of the Employment, Executive will deliver to the Company any and all property owned or leased by the Company or any Affiliate and any and all materials and information (in whatever form) relating to the business of the Company or any Affiliate, including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and other Company-provided equipment. All Company property will be returned promptly and in good condition except for normal wear.

Executive's commitments in this Section will continue in effect after termination of the Employment and this Agreement. The parties agree that any breach of Executive's covenants in this Section would cause the Company irreparable harm, and that injunctive relief would be appropriate.

          7.          Ideas, Concepts, Inventions and Other Intellectual Property. All business ideas and concepts and all inventions, improvements, developments and other intellectual property made or conceived by Executive, either solely or in collaboration with others, during the Employment, whether or not during working hours, and relating to the business or any aspect of the business of the Company or any Affiliate or to any business or product the Company or any Affiliate is actively planning to enter or develop, shall become and remain the exclusive property of the Company, and the Company's successors and assigns. Executive shall disclose

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promptly in writing to the Company all such inventions, improvements, developments and other intellectual property, and will cooperate in confirming, protecting, and obtaining legal protection of the Company's ownership rights. Executive's commitments in this Section will continue in effect after termination of the Employment and this Agreement as to ideas, concepts, inventions, improvements and developments and other intellectual property made or conceived in whole or in part before the date the Employment terminates. The parties agree that any breach of Executive's covenants in this Section would cause the Company irreparable harm, and that injunctive relief would be appropriate.

Executive represents and warrants that there are no ideas, concepts, inventions, improvements, developments or other intellectual property that Executive invented or conceived before becoming employed by the Company to which Executive, or any assignee of Executive, now claims title, and that would be covered by this Section if made or conceived by Employee during the Employment.

          8.          Covenant Not to Compete. 

          (a)          Executive's Commitments. During the Employment Executive will not do or prepare to do, and for twelve (12) months after any termination of the Employment Executive will not do, any of the following: 

          (i)          directly or indirectly compete with the Company or any Affiliate; or 

          (ii)           be employed by, perform services for, advise or assist, own any interest in or loan or otherwise provide funds to, any other business that is engaged (or seeking Executive's services with a view to becoming engaged) in any Competitive Business (as defined below); or 

          (iii)          solicit or suggest, or provide assistance to anyone else seeking to solicit or suggest, that any person having or contemplating a Covered Relationship (as defined below) with the Company or an Affiliate refrain from entering into or terminate the Covered Relationship, or enter into any similar relationship with anyone else instead of the Company or the Affiliate.

This Section 8 does not prohibit Executive from owning not more than two percent (2%) of any class of securities of a publicly traded entity, provided that Executive does not engage in other activity prohibited by this Section 8.

Executive's commitments in this Section will continue in effect after termination of the Employment (whether during or upon termination of this Agreement) for the twelve (12) month period set forth above. The parties agree that any breach of Executive's commitments in this Section would cause the Company irreparable harm, and that injunctive relief would be appropriate. 

          (b)          Definitions. As used in this Section 8:

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          (i)          "Competitive Business" means a business that

          (A)          owns, or

          (B)          operates, or 

          (C)          sells or supplies products similar to or that substitute for products supplied by the Company to, 

any Covered Operation (as defined below) that is located in any state of the United States in which the Company owns, operates, sells or supplies products to, any Covered Operation; and

          (ii)          "Covered Operation" means any grocery store, grocery superstore, mass merchandiser, wholesale club, supermarket, limited assortment store, convenience store, drug store, pharmacy or any other store that offers grocery or food products separate or in combination with pharmaceutical products, general merchandise or other nonfood products, or any grocery or convenience store product distribution facility; and

          (iii)          "Covered Relationship" means a customer relationship, a vendor relationship, an employment relationship, or any other contractual or independent contractor relationship.

          9.          Amendment and Waiver. No provisions of this Agreement may be amended, modified, waived or discharged unless the waiver, modification, or discharge is authorized by the Company's Board of Directors, or a committee of the Board of Directors, and is agreed to in a writing signed by Executive and by the Chief Executive Officer of the Company. No waiver by either party at any time of any breach or non-performance of this Agreement by the other party shall be deemed a waiver of any prior or subsequent breach or non-performance.

          10.          Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect. If a court of competent jurisdiction ever determines that any provision of this Agreement (including, but not limited to, all or any part of the non-competition covenant in this Agreement) is unenforceable as written, the parties intend that the provision shall be deemed narrowed or revised in that jurisdiction (as to geographic scope, duration, or any other matter) to the extent necessary to allow enforcement of the provision. The revision shall thereafter govern in that jurisdiction, subject only to any allowable appeals of that court decision.

          11.          Entire Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to Executive's Employment with the Company or any of the subjects covered by this Agreement have been made by either party that are not set forth expressly in this Agreement and the Executive Severance Agreement between Executive and the Company ("Executive Severance Agreement"), and this Agreement supersedes any pre-existing

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employment agreements and any other agreements on the subjects covered by this Agreement, except the Executive Severance Agreement.

          12.          Non-Contravention. Executive represents and warrants that:

          (a)          No Restrictive Agreement. Executive is not a party to or bound by any agreement that purports to prevent or restrict Executive from: (A) engaging in the Employment that Executive has been offered by the Company; (B) inducing any person to become an employee of the Company; (C) using any information and expertise that Executive possesses (other than information constituting a trade secret of another person under applicable law) for the benefit of the Company; or (D) performing any obligation under this Agreement.

          (b)          No Abuse of Confidential Information or Trade Secrets. Executive will not use in the course of Executive's Employment with the Company, or disclose to the Company or its personnel, any information belonging to any other person that is subject to any confidentiality agreement with or constitutes a trade secret of another person.

          13.          Dispute Resolution.

          (a)          Arbitration. The Company and Executive agree that except as provided in Section 13(b) the sole and exclusive method for resolving any dispute between them arising out of or relating to this Agreement shall be arbitration under the procedures set forth in this Section, except that nothing in this Section prohibits a party from seeking preliminary or permanent judicial injunctive relief, or from seeking judicial enforcement of the arbitration award. The arbitrator shall be selected pursuant to the Rules for Commercial Arbitration of the American Arbitration Association. The arbitrator shall hold a hearing at which both parties may appear, with or without counsel, and present evidence and argument. Pre-hearing discovery shall be allowed in the discretion of and to the extent deemed appropriate by the arbitrator, and the arbitrator shall have subpoena power. The procedural rules for an arbitration hearing under this Section shall be the rules of the American Arbitration Association for Commercial Arbitration hearings and any rules as the arbitrator may determine. The hearing shall be completed within ninety (90) days after the arbitrator has been selected and the arbitrator shall issue a written decision within sixty (60) days after the close of the hearing. The hearing shall be held in Grand Rapids, Michigan. The award of the arbitrator shall be final and binding and may be enforced by and certified as a judgment of the Circuit Court for Kent County, Michigan or any other court of competent jurisdiction. One-half of the fees and expenses of the arbitrator shall be paid by the Company and one-half by Executive. The attorney fees and expenses incurred by the parties shall be paid by each party. Notwithstanding the foregoing, however, the Company will reimburse the Executive for Executive's portion of the arbitrator's fees and expenses, and the Executive's reasonable attorney fees and expenses incurred in connection with the arbitration proceeding, if the Executive substantially prevails in the arbitration proceeding or, if the Executive prevails in part, then the Company will reimburse a proportionate part of such fees and expenses , with such proportion to represent the approximate portion of such fees and expenses relating

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to the issues on which the Executive prevailed. The decision as to whether the Executive has substantially prevailed, or prevailed in part, and on the amount to be reimbursed to the Executive under the standards in this Section, will be made by the arbitrator. Reimbursement of attorney fees and expenses called for by this Section must be made within sixty (60) days after receipt by the Company of the arbitrator's award, but in no event after the last day of the year following that in which the expense being reimbursed was incurred.

          (b)          Section 13(a) shall be inapplicable to a dispute arising out of or relating to Sections 6, 7 or 8 of this Agreement. 

          14.          Assignability. This Agreement contemplates personal services by Executive, and Executive may not transfer or assign Executive's rights or obligations under this Agreement, except that Executive may designate beneficiaries for Severance Pay in the event of Executive's death, and may designate beneficiaries for benefits as allowed by the Company's benefit programs. This Agreement may be assigned by the Company to any subsidiary or parent corporation or a division of that corporation, but the Company shall remain liable for any Severance Pay due under this Agreement and not paid by any assignee. The Company is not required to assign this Agreement but if the Agreement is assigned as provided above, Executive will be given notice and this Agreement will continue in effect.

          15.          Notices. Notices to a party under this Agreement must be personally delivered or sent by certified mail (return receipt requested) and will be deemed given upon post office delivery or attempted delivery to the recipient's last known address. Notices to the Company must be sent to the attention of the Company's Chief Executive Officer.

          16.          Governing Law. The validity, interpretation, and construction of this Agreement are to be governed by Michigan laws, without regard to choice of law rules. The parties agree that any judicial action involving a dispute arising under this Agreement will be filed, heard and decided in either Kent County Circuit Court or the U.S. District Court for the Western District of Michigan. The parties agree that they will subject themselves to the personal jurisdiction and venue of either court, regardless of where Executive or the Company may be located at the time any action may be commenced. The parties agree that Kent County is a mutually convenient forum and that each of the parties conducts business in Kent County.

          17.          Counterparts. This Agreement may be signed in original or by fax in counterparts, each of which shall be deemed an original, and together the counterparts shall constitute one complete document.

          18.          Sarbanes-Oxley Act Compliance. If obligated to reimburse the Company under Section 304(a) of the Sarbanes-Oxley Act of 2002, Executive will promptly reimburse the Company for any profit, any bonus or other incentive-based or equity-based compensation, or any other sums as required by Section 304(a), within thirty (30) days of the earlier of becoming aware of such obligation or receiving written notice of such obligation from the Company.

          19.          Coordination of This Agreement With Executive Severance Agreement.

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          (a)          Circumstances Under Which Section 8 of This Agreement Will Lapse. If there is a termination of Executive's Employment entitling Executive to Severance Benefits under Section 3 of the Executive Severance Agreement, then Section 8 of this Agreement ("Covenant Not to Compete") will lapse and become void and of no further effect on the date of such termination of Employment. 

          (b)          Coordination of Severance Pay Under This Agreement and Severance Benefits Under Executive Severance Agreement. If Executive receives Severance Benefits under Section 3 of the Executive Severance Agreement, Executive will not be entitled to Severance Pay under this Agreement. If Executive becomes entitled to receive Severance Benefits under Section 3 of the Executive Severance Agreement after receiving Severance Pay under this Agreement, the amount of Severance Benefits to which Executive is entitled under Section 3 of the Executive Severance Agreement will be reduced by the amount of Severance Pay received by Executive under this Agreement. 

The parties have signed this Employment Agreement as of the Effective Date in Section 1.

	
SPARTAN STORES, INC.
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
Dennis Eidson
	
 
	
Craig C. Sturken

	
Its:
	
President and
	
 
	
"Executive"

	
 
	
Chief Executive Officer
	
 
	
 

	
 
	
"Company"
	
 
	
 

- 12 -Spartan Stores Exhibit 10.4 to Form 8-K - 12/24/08

EXHIBIT 10.4

EXECUTIVE SEVERANCE AGREEMENT

                    THIS AGREEMENT is entered into as of the 15th day of October, 2008 (the "Effective Date"), by and between SPARTAN STORES, INC., a Michigan corporation ("Spartan Stores"), and CRAIG C. STURKEN ("Executive").

W I T N E S S E T H:

                    WHEREAS, Executive currently serves as a key employee of Spartan Stores and/or its subsidiaries (the "Company") and his services and knowledge are valuable to the Company in connection with the management of one or more of the Company's principal operating facilities, divisions, or subsidiaries; and

                    WHEREAS, Spartan Stores considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and

                    WHEREAS, the Board has determined that it is in the best interests of Spartan Stores and its shareholders to secure Executive's continued services and to ensure Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as hereafter defined) of Spartan Stores, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive's full attention and dedication to Spartan Stores and/or its subsidiaries, the Board has authorized Spartan Stores to enter into this Agreement.

                    NOW, THEREFORE, COMPANY AND EXECUTIVE AGREE AS FOLLOWS:

	
1.
	
Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:

          (a)          "Board" means the Board of Directors of Spartan Stores.

          (b)          "Cause" means (1) the willful and continued failure by Executive to substantially perform his duties with the Company (other than any such failure resulting from Executive's incapacity due to physical or mental injury or illness, or any such actual or anticipated failure resulting from Executive's termination for Good Reason) after a demand for substantial performance is delivered to Executive by the Board (which demand shall specifically identify the manner in which the Board believes that Executive has not substantially performed Executive's duties); or (2) the willful engaging by Executive in gross misconduct materially and demonstrably injurious to the Company. For purposes of this Section, no act or failure to act on the part of Executive shall be considered "willful" unless done or omitted to be done by Executive not in good faith and

without reasonable belief that his action(s) or omission(s) was in the best interests of the Company. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until the Company provides Executive with a copy of a resolution adopted by an affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, with counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive has been guilty of conduct set forth in subsections (1) or (2) above, setting forth the particulars in detail. A determination for Cause by the Board shall not be binding upon or entitled to deference by any finder of fact in the event of a dispute, it being the intent of the parties that such finder of fact shall make an independent determination of whether the termination was for "Cause" as defined in (1) or (2) above.

          (c)          "Change in Control" means:

          (1)          the acquisition by any individual, entity, or group (a "Person"), including any "person" within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 20% or more of either (i) the then outstanding shares of common stock of Spartan Stores (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding securities of Spartan Stores entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Person controlled by the Company, (C) any acquisition by any corporation pursuant to a reorganization, merger, or consolidation involving the Company, if, immediately after such reorganization, merger, or consolidation, each of the conditions described in clauses (i), (ii), and (iii) of subsection (c)(3) shall be satisfied, or (D) any acquisition by the Executive or any group of persons including the Executive; and provided further that, for purposes of clause (A), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 20% or more of the Outstanding Company Common Stock or 20% or more of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities, such additional beneficial ownership shall constitute a Change in Control;

          (2)          individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of Spartan Stores subsequent to the date hereof whose election, or nomination for election by

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the shareholders of Spartan Stores, was approved by the vote of at least two-thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of Spartan Stores in which such person is named as a nominee for director, without objection to such nomination) shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of Spartan Stores as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board, shall be deemed to have been a member of the Incumbent Board;

          (3)          approval by the shareholders of Spartan Stores of a reorganization, merger, or consolidation unless, in any such case, immediately after such reorganization, merger, or consolidation, (i) more than 50% of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger, or consolidation and more than 50% of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger, or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger, or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than (A) the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or the corporation resulting from such reorganization, merger, or consolidation (or any corporation controlled by the Company), or (B) any Person which beneficially owned, immediately prior to such reorganization, merger, or consolidation, directly or indirectly, 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of such corporation or 20% or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger, or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger, or consolidation; or

          (4)          approval by the shareholders of Spartan Stores of (i) a plan of complete liquidation or dissolution of Spartan Stores or (ii) the sale or other disposition of all or substantially all of the assets of Spartan Stores other than to a corporation with respect to which, immediately after such sale or other disposition, (A) more than 50% of the then outstanding shares of common stock

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thereof and more than 50% of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or such corporation (or any corporation controlled by the Company), or any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock thereof or 20% or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition.

          Notwithstanding anything contained in this Agreement to the contrary, if Executive's employment is terminated prior to a Change in Control and Executive reasonably demonstrates that such termination was at the request of or in response to a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control (a "Third Party"), and who subsequently effectuates a Change in Control, then for all purposes of this Agreement, the date of a Change in Control shall mean the date immediately prior to the date of such termination of Executive's employment.

          (d)          "Code" means the Internal Revenue Code of 1986, as amended.

          (e)          "Common Stock" means the common stock of Spartan Stores, no par value per share.

          (f)          "Date of Termination" means the effective date on which Executive's employment by the Company terminates as specified in a Notice of Termination by the Company or Executive, as the case may be, in a manner that constitutes a "separation from service" as that term is defined by Section 409A of the Code. Notwithstanding the previous sentence, (i) if the Executive's employment is terminated for Disability, as defined in Section 1(g), then such Date of Termination shall be no earlier than thirty (30) days following the date on which a Notice of Termination is received, and (ii) if the Executive's employment is terminated by the Company other than for Cause, then such Date of Termination shall be no earlier than thirty (30) days following the date on which a Notice of Termination is received.

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          (g)          "Disability" means Executive's failure to be available to substantially perform his duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive's incapacity due to mental or physical illness. 

          (h)          "Good Reason" means, without Executive's express written consent, the occurrence of any of the following events after or in connection with a Change in Control:

          (1)          (i) the assignment to Executive of any duties inconsistent in any material adverse respect with Executive's position(s), duties, responsibilities, or status with the Company immediately prior to such Change in Control, (ii) a material adverse change in Executive's positions, reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control, (iii) any removal or involuntary termination of Executive by the Company otherwise than as expressly permitted by this Agreement (including any purported termination of employment which is not effected by a Notice of Termination), or (iv) any failure to re-elect Executive to any position with the Company held by Executive immediately prior to such Change in Control;

          (2)          a reduction by the Company in Executive's rate of annual base salary as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;

          (3)          any requirement of the Company that Executive (i) be based anywhere other than the facility where Executive is located at the time of the Change in Control or reasonably equivalent facilities within Kent County, Michigan or (ii) engage in business travel to an extent substantially more burdensome than the travel obligations of Executive immediately prior to such Change in Control;

          (4)          the failure of the Company to continue the Company's executive incentive plans or bonus plans in which Executive is participating immediately prior to such Change in Control or a reduction of the Executive's target incentive award opportunity under any such bonus plan, unless Executive is permitted to participate in other plans providing Executive with substantially comparable benefits or receives compensation as a substitute for such plans providing Executive with a substantially equivalent economic benefit;

          (5)          the failure of the Company to (i) continue in effect any employee benefit plan or compensation plan in which Executive is participating immediately prior to such Change in Control, unless Executive is permitted to participate in other plans providing Executive with substantially comparable benefits or receives compensation as a substitute for such plans providing Executive with a substantially equivalent after-tax economic benefit, or the taking of any action by

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the Company which would adversely affect Executive's participation in or materially reduce Executive's benefits under any such plan, (ii) provide Executive and Executive's dependents with welfare benefits (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) in accordance with the most favorable plans, practices, programs, and policies of the Company in effect for Executive immediately prior to such Change in Control, (iii) provide other fringe benefits in accordance with the most favorable plans, practices, programs, and policies of the Company in effect for Executive immediately prior to such Change in Control, or (iv) provide Executive with paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company as in effect for Executive immediately prior to such Change in Control;

          (6)          the failure of the Company to pay any amounts owed Executive as salary, bonus, deferred compensation or other compensation;

          (7)          the failure of Spartan Stores to obtain any assumption agreement contemplated in Section 10(b); 

          (8)          any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination which satisfies the requirements of a Notice of Termination; or

          (9)          any other material breach by Spartan Stores of its obligations under this Agreement.

          For purposes of this Agreement, any good faith determination of Good Reason made by Executive shall be conclusive on the parties; except that an isolated and insubstantial action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason. Any event or condition described in this Section 1(h) which occurs prior to a Change in Control, but which Executive reasonably demonstrates was at the request of or in response to a Third Party who effectuates a Change in Control or who has indicated an intention or taken steps reasonably calculated to effect a Change in Control, shall constitute Good Reason following a Change in Control for purposes of this Agreement notwithstanding that it occurred prior to the Change in Control.

          Executive may not terminate the employment for Good Reason unless:

          (i)          Executive notifies the Board in writing, within sixty (60) days after Executive becomes aware of the act or omission constituting Good Reason that the act or omission in question constitutes Good Reason and explaining why the Executive considers it to constitute Good Reason;

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          (ii)          the Company fails, within ten (10) days after notice from Executive under (i) above, to revoke the action or correct the omission and make the Executive whole; and 

          (iii)          Executive gives notice of termination within thirty (30) days after expiration of the ten (10) day period under (ii) above.

          Executive's failure to give notice as provided in (i) above will not waive Executive's right to resign with Good Reason, provided that he follows the above procedure, with regard to any subsequent act or omission constituting Good Reason.

          Executive need not fulfill the above conditions a second time if the Company repeats the act or omission constituting Good Reason.

          (i)          "Mandatory Retirement" means Executive's involuntary retirement as required by a lawful Company policy requiring Executive to retire at or after age sixty-five (65), but only if such policy is adopted by the Company before a Change in Control and only if such policy was not adopted by the Company at the request of or in response to a Third Party who subsequently effectuates a Change in Control.

          (j)          "Nonqualifying Termination" means a termination of Executive's employment (1) by the Company for Cause, (2) by Executive for any reason (including a voluntary retirement) other than for Good Reason with Notice of Termination, (3) as a result of Executive's death, (4) by the Company due to Executive's Disability, unless within thirty (30) days after Notice of Termination is provided to Executive, Executive shall have returned (or offered to return, if not permitted by the Company to do so) to substantial performance of Executive's duties on a full-time basis, or (5) as a result of Executive's Mandatory Retirement.

          (k)          "Notice of Termination" means a written notice by the Company or Executive, as the case may be, to the other, which (1) indicates the specific reason for Executive's termination, (2) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment, and (3) specifies the Date of Termination. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. 

          (l)          "SERP" means the Spartan Stores, Inc. Supplemental Executive Retirement Plan, as amended from time to time.

          (m)          "Termination Period" means the period of time beginning with a Change in Control and ending two (2) years following the later of (i) the Change in Control or (ii) consummation of the transaction for which shareholder approval triggered the Change in Control.

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2.
	
Term of Agreement. This Agreement shall commence on the Effective Date and shall continue in effect until Spartan Stores has fulfilled all of its obligations under this Agreement following any termination of Executive's employment with the Company.

	
 
	
 

	
3.
	
Severance Benefits. If the employment of Executive with the Company shall terminate during the Termination Period in a manner that constitutes a "separation from service" as that term is defined by Section 409A of the Code, other than by reason of a Nonqualifying Termination, then Executive shall receive the following severance benefits as compensation for services rendered:

          (a)          Lump Sum Cash Payment. On the tenth (10th) business day after the Date of Termination, Executive shall receive a lump sum cash payment in an amount equal to the sum of the following: 

          (1)          Executive's unpaid base salary from the Company through the Date of Termination at the rate in effect (without taking into account any reduction of base salary constituting Good Reason), just prior to the time a Notice of Termination is given plus any benefit awards (including both the cash and stock components) and bonus payments which pursuant to the terms of any plans have been earned and become payable, to the extent not theretofore paid.

          (2)          A bonus will be paid under the Company's Annual Incentive Plan or any successor plan ("Annual Plan") for the time Executive was employed by the Company in the fiscal year of termination, in an amount equal to the product of (i) the number of days Executive was employed by the Company prior to the Date of Termination in the year of termination divided by the number of days in the year, multiplied by (ii) 100% of the Executive's current year target bonus (with such calculations to be made as though the target level has been achieved for each Performance Goal (as defined in the Annual Plan)).

          (3)          An amount equal to two (2) times the sum of (i) the higher of the Executive's annual rate of base salary from the Company in effect on the Date of Termination or in effect on the day before the Change in Control; and (ii) the higher of (A) the Executive's current year target bonus under the Annual Plan (with such calculations to be made as though the target level has been achieved for each performance goal (as defined in the Annual Plan)), or (B) the current-year forecasted bonus under the Annual Plan as of the Date of Termination.

          (b)          Benefits. The Company shall provide Executive with the benefits, payments and reimbursements set forth in subsections (1) to (3) below.

          (1)          If the Date of Termination occurs before November 1, 2009, an amount equal to the COBRA continuation cost that the Company would have paid to Executive under Section 5(a)(i) of the Employment Agreement between

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Executive and the Company. Reimbursement under this Section 3(b)(1) will be made no later than thirty (30) days after Executive requests reimbursement, but in no event after the year following that in which the Executive incurs such expense. 

          (2)          For the period beginning on the Date of Termination and ending on the earlier of (A) the end of the twelfth (12th) month after the Date of Termination or (B) the date on which Executive receives a substantially equal benefit from a new employer, the Company will continue the Executive's tax and financial planning benefit, with reimbursement of any costs incurred by Executive to obtain such benefits to be made to the Executive within thirty (30) days after Executive requests reimbursement, but in no event after the end of the year following that in which the Executive incurs such costs. 

          (3)          For the period beginning on the Date of Termination and ending on the earlier of (A) the end of the twenty-fourth (24th) month after the Date of Termination or (B) the date on which Executive receives a substantially equal benefit from a new employer, the Company will continue all of the Executive's Company funded life insurance coverage, or, if the Company's life insurance program does not permit such continued coverage, the Company will pay the Executive's cost to replace such coverage, with reimbursement of any costs incurred by Executive to replace such coverage to be made to the Executive within thirty (30) days after Executive requests reimbursement, but in no event after the end of the year following that in which the Executive incurs such costs.

In addition to the payments called for by Section 3(b)(1), (2) and (3) the Company shall make payments to Executive in the amount necessary to eliminate the income tax cost to Executive resulting from any conversion of such benefits from non-taxable employee benefits to taxable benefits, payments or reimbursements. Such additional payments shall be made at the same time that the Company reimburses the Executive under this Section 3(b).

          (c)          Outplacement Services. The Company will provide the Executive with outplacement services through an outplacement services firm selected by the Company with the Executive's approval, which shall not be withheld if the firm selected is reputable, at a cost not to exceed an amount equal to $25,000. The timing of outplacement services to be received shall be determined by the Executive, provided that all costs under this subsection must be incurred, and all applicable payments to the outplacement firm made, not later than the last day of the second year following that in which the Date of Termination occurred.

          (d)          Certain Reductions Disregarded. In computing the payments under subsections (a) through (c) above, any reduction in Executive's base salary, bonus or fringe benefits shall be disregarded if such reduction constituted Good Reason as defined in this Agreement.

	
4.
	
Retirement Benefits.

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          (a)          The Executive is a participant in the SERP. If the employment of Executive with the Company shall terminate during the Termination Period in a manner that constitutes a "separation from service" as that term is defined by Section 409A of the Code, other than by reason of a Nonqualifying Termination, then Executive shall receive (as a lump sum, to be paid on the tenth (10th) business day after the Date of Termination) an amount equal to the difference between (i) the total amounts the Executive is eligible to receive as of the Date of Termination under the Spartan Stores, Inc. Cash Balance Pension Plan and any successor plan (the "Pension Plan") and the SERP (assuming election by Executive of the lump sum payment options under the Pension Plan and SERP); and (ii) the total amounts the Executive would have been eligible to receive under the Pension Plan and SERP if the Executive were fully vested under the Pension Plan and the Executive had received additional age and years of service credits based on continued employment until the end of the twenty-fourth (24th) month following the month in which the Date of Termination occurs.

          (b)          The payments to Executive under this Section 4 shall be in addition to any payments under Section 3 of this Agreement and any payments under the Pension Plan and SERP.

          (c)          In computing the payment under subsection (a) above, any change to the SERP shall be disregarded if such change constituted Good Reason as defined in this Agreement.

	
5.
	
Acceleration of Vesting Upon Change in Control. Effective at the time of a Change in Control, all unvested stock options and stock previously issued to Executive as to which rights of ownership are subject to forfeiture shall immediately vest; all risk of forfeiture of the ownership of stock or stock options and restrictions on the exercise of options shall lapse; and, Executive shall be entitled to exercise any or all options, such that the underlying shares will be considered outstanding at the time of the Change in Control.

	
 
	
 

	
6.
	
Delay in Payment to a Specified Employee. Notwithstanding any other timing provision in this Agreement, if, at the time the payments would commence, Executive is a "Specified Employee" as defined by Section 409A of the Code, then no payment under this Agreement may be paid before the date that is six (6) months after Executive's separation from service, except for payment of current compensation under Section 3(a)(1) and the acceleration of vesting under Section 5. Payments to which Executive would otherwise have been entitled during that six (6) months will be accumulated and paid on the first day after six (6) months following the date of Executive's separation from service. All payments that would otherwise be made more than six (6) months following the date of Executive's separation from service will be made in accordance with the general timing provisions described above.

	
 
	
 

	
7.
	
Certain Additional Payments by the Company. Anything in this Agreement to the contrary notwithstanding, the Company shall make a Gross-Up Payment to Executive as provided in this Section 7 if such a payment is called for by Section 7(a). If application

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of the Excise Tax (as defined in Section 7(a)) can be avoided by reduction of up to ten percent (10%) of the payments otherwise due to Executive under Sections 3 and 4, such reduction shall be made by first reducing the benefit under Section 3(c), then reducing if necessary the benefit under Section 3(b)(2), and finally by reducing if necessary the payment under Section 3(a)(3) and then if necessary to the payment under Section 4. If a reduction of up to ten percent (10%) of the payments otherwise called for by Sections 3 and 4 as provided above is insufficient to avoid the application of the Excise Tax, then there shall be no reduction to the payments otherwise called for by Sections 3 and 4.

          (a)          Except as provided in the preceding paragraph, and notwithstanding any other provisions of this Agreement, if any payments or distributions by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise ("Payments")) trigger application of the excise tax imposed by Section 4999 of the Code, or any successor Code provision (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), or any interest or penalties are incurred by Executive with respect to Excise Tax on such amount, then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and any Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments, it being the intent of this Section that the Executive shall be held harmless from all Excise Tax and interest and penalties on Excise Tax.

          (b)          Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company or Executive (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, Executive shall appoint another nationally recognized public accounting firm to make the Determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to Executive within five (5) days of the receipt of the Determination, but in no case later than the end of the year after that in which Executive remits the Excise Tax, provided that in no event shall such payment be made until six (6) months following Executive's separation from service, if at the time of such separation from service the Executive is a Specified Employee as defined by Section 409A of the Code. If the Accounting Firm determines that no Excise Taxes are payable by Executive, it shall furnish Executive with a written opinion that failure to

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report the Excise Tax on Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and Executive; however, as a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 7(c) and Executive thereafter is required to make payment of any Excise Tax that qualifies for a Gross-Up Payment in accordance with this Section 7, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.

          (c)          Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

          (i)          give the Company any information reasonably requested by the Company relating to such claim;

          (ii)          take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;

          (iii)          cooperate with the Company in good faith in order effectively to contest such claim; and

          (iv)          permit the Company to participate in any proceeding relating to such claim; 

provided, however, that the Company shall reimburse Executive for all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income or employment tax (including interest and penalties with respect thereto) imposed as a result of such contest and payment of costs and expenses. Any reimbursement under this Section 7 must be made within thirty (30) days after Executive requests reimbursement, but in no event after the end of the year following that in which the Executive incurs the expense. Without limitation on the foregoing provisions of this

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Section 7(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a Determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income or employment tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          (d)          If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 7, Executive becomes entitled to receive, and receives, any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 7) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 7, a Determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such Determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

	
8.
	
Withholding Taxes. The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local, or other law, the Company is required to withhold therefrom.

	
 
	
 

	
9.
	
Reimbursement of Expenses. If any contest or dispute shall arise under or related to this Agreement involving termination of Executive's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute regardless of the result thereof. The reimbursement of an eligible amount must be made within thirty (30) days after Executive requests reimbursement, but in no event after the end of the year following that in which the Executive incurs such expense.

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10.
	
Successors; Binding Agreement.

          (a)          This Agreement shall not be terminated by any merger or consolidation of Spartan Stores whereby Spartan Stores is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of Spartan Stores. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.

          (b)          Spartan Stores agrees that concurrently with any merger, consolidation or transfer of assets referred to in this Section 10, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. Failure of Spartan Stores to obtain such assumption prior to the effectiveness of any such merger, consolidation, or transfer of assets shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive's employment were terminated following a Change in Control other than by reason of a Nonqualifying Termination. For purposes of implementing the foregoing, the date on which any such merger, consolidation, or transfer becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.

          (c)          This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate.

	
11.
	
Notice. For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or received by facsimile transmission or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:

	
 
	
 

	
 
	
If to the Executive:

	
 
	
 

	
 
	
 
	
Craig C. Sturken

3785 92nd Street SW

Byron Center, Michigan 49315

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If to Spartan Stores:

	
 
	
 

	
 
	
 
	
Spartan Stores, Inc.

850 76th Street, S.W.

P. O. Box 8700

Grand Rapids, Michigan 49518-8700

Attention: President and Chief Executive Officer

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

	
12.
	
Full Settlement; Resolution of Disputes.

          (a)          The Company's obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not Executive obtains other employment.

          (b)          If there shall be any dispute between the Company and Executive in the event of any termination of Executive's employment then, until there is a final, nonappealable, determination pursuant to arbitration declaring that such termination was for Cause, that the determination by Executive of the existence of Good Reason was not made in good faith, or that the Company is not otherwise obligated to pay any amount or provide any benefit to Executive and his dependents or other beneficiaries, as the case may be, under Sections 3 and 4, the Company shall pay all amounts, and provide all benefits, to Executive and his dependents or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Sections 3 and 4 as though such termination were by the Company without Cause or by Executive with Good Reason; except that the Company shall not be required to pay any disputed amounts pursuant to this Section 12 except upon receipt of an undertaking by or on behalf of Executive to repay all such amounts to which Executive is ultimately determined by the arbitrator not to be entitled.

          (c)          Arbitration. Any dispute or controversy under this Agreement shall be settled exclusively by arbitration in Grand Rapids, Michigan, in accordance with the rules of the American Arbitration Association then in effect, except that Executive shall be entitled to seek specific performance of his right to be paid pursuant to Section 12(b) during a dispute. Judgment may be entered on the arbitration award in any court having jurisdiction. The Company shall reimburse Executive for all reasonable costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 12(c). The reimbursement of an eligible amount must be made within thirty (30) days after Executive requests reimbursement, but in no event after the end of the year following that in which the Executive incurred the expense.

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13.
	
Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Michigan without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect.

	
 
	
 

	
14.
	
Establishment of Trust. Upon written request by Executive and except as provided below, immediately prior to a Change in Control, the Company shall establish and maintain a Trust in the form attached as Exhibit A. Upon the occurrence of a Change in Control the Company shall pay into the Trust the amounts called for under Exhibit A, and shall thereafter make such additional payments as called for under Exhibit A. No payment to the Trust by the Company shall reduce the Company's obligations to make payments to Executive under this Agreement. Notwithstanding these general rules, the Company's obligation to establish and make payments to a Trust (but not the Company's obligation to make payment to Executive when called for by this Agreement) is subject to the following:

	
 
	
 

	
 
	
(a)          Covered Employees. The Trust will not be established, maintained or funded for a Covered Employee during a Restricted Period.

	
 
	
 

	
 
	
 
	
(i)          Covered Employee Defined. A Covered Employee is the Chief Executive Officer of Spartan Stores or any member of a controlled group that includes Spartan Stores (or any individual acting in that capacity) during the taxable year, the four highest compensated officers of Spartan Stores for the taxable year (in addition to the Chief Executive Officer), any other individuals subject to Section 16(a) of the Securities Exchange Act of 1934 for the taxable year, and any former employee of Spartan Stores or any member of a controlled group that includes Spartan Stores who was a Covered Employee at the time of termination of employment with Spartan Stores or that controlled group member.

	
 
	
 
	
 

	
 
	
 
	
(ii)          Restricted Period Defined. "Restricted Period" means: (1) any period during which a single-employer defined benefit plan sponsored by the Company is in at-risk status, as defined by Section 430(i) of the Code; (2) any period during which the Company is in bankruptcy; and (3) the twelve (12) month period beginning on the date which is six (6) months before the termination date of a single-employer defined benefit plan sponsored by the Company, if, as of the termination date, that plan is not sufficient for benefit liabilities as determined under Section 4041 of the Employee Retirement Income Security Act of 1974, as amended.

	
 
	
 

	
 
	
(b)          Offshore Trust. The Trust may not be located outside the United States unless substantially all of the services to which the payments under this Agreement relates are performed in such jurisdiction.

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(c)          Employer's Financial Health. The Trust may not be established or funded if such establishment or funding will result in inclusion of trust funds in Executive's taxable income under Internal Revenue Code Section 409A(b)(2) before such funds are paid to Executive.

	
 
	
 

	
15.
	
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

	
 
	
 

	
16.
	
Miscellaneous. No provision of this Agreement may be modified or waived unless such modification is agreed to in writing and signed by Executive and by a duly authorized officer of the Company, or such waiver is signed by the waiving party. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. The rights of, and benefits payable to, Executive, his estate, or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate, or his beneficiaries under any other employee benefit plan or compensation program of the Company, except that no benefits pursuant to any other employee plan or compensation program that become payable or are paid in accordance with this Agreement shall be duplicated by operation of this Agreement. No agreements or representations, oral or otherwise, express or implied, with regard to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

                    IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of Spartan Stores. Executive has executed this Agreement as of the day and year first written above.

	
 
	
SPARTAN STORES, INC.

	
 
	
 

	
 

	
By:
	
 

	
Craig C. Sturken
	
 
	
Dennis Eidson

	
"Executive"
	
 
	
Its President and Chief Executive Officer

	
 
	
 
	
"Company"

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