Document:

Spartan Stores Exhibit 10.2 to Form 10-K - 05/18/07

EXHIBIT 10.2

[Execution]

AMENDMENT NO. 2 TO

LOAN AND SECURITY AGREEMENT

          AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT, dated as of December 22, 2004, by and among Spartan Stores, Inc., a Michigan corporation ("Lead Borrower"), Spartan Stores Distribution, LLC, a Michigan limited liability company ("Stores Distribution"), UWG Company, formerly known as United Wholesale Grocery Company, a Michigan corporation ("United"), Market Development Corporation, a Michigan corporation ("MDC"), Spartan Stores Associates, LLC, a Michigan limited liability company ("Associates"), Family Fare, LLC, a Michigan limited liability company ("Family Fare"), MSFC, LLC, a Michigan limited liability company ("MSFC"), Seaway Food Town, Inc., a Michigan corporation ("Seaway"), The Pharm of Michigan, Inc. ("Pharm"), a Michigan corporation, Valley Farm Distributing Co., an Ohio corporation ("Valley Farm"), Gruber's Food Town, Inc., a Michigan corporation ("Gruber Food Town"), Gruber's Real Estate, LLC, a Michigan limited liability company ("Gruber RE"), Prevo's Family Markets, Inc., a Michigan corporation ("Prevo"), Custer Pharmacy, Inc., a Michigan corporation ("Custer"), Buckeye Real Estate Management Co., an Ohio corporation ("Buckeye"), Spartan Stores Fuel, LLC, a Michigan limited liability company (together with Lead Borrower, Stores Distribution, United, MDC, Associates, Family Fare, MSFC, Seaway, Pharm, Valley Farm, Gruber Food Town, Gruber RE, Prevo, Custer and Buckeye, each individually a "Borrower" and collectively, "Borrowers"), Spartan Stores Holding, Inc., a Michigan corporation ("Holding"), SI Insurance Agency, Inc., a Michigan corporation ("SI"), JFW Distributing Company, a Michigan corporation ("JFW"), LLJ Distributing Company, a Michigan corporation (together with Holding, SI and JFW, each individually a "Guarantor" and collectively, "Guarantors"), the parties to the Loan Agreement (as hereinafter defined) from time to time as lenders (each individually, a "Lender" and collectively, "Lenders") and Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent for Lenders (in such capacity, "Agent").

W I T N E S S E T H :

          WHEREAS, Borrowers and Guarantors have entered into financing arrangements with Agent and Lenders pursuant to which Lenders (or Agent on behalf of Lenders) have made and may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Loan and Security Agreement, dated December 23, 2003, by and among Borrowers, Guarantors, Agent and Lenders, as amended and supplemented by Amendment No. 1 to Loan and Security Agreement, dated as of July 29, 2004 (as the same now exists and is amended and supplemented pursuant hereto and may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and the other Financing Agreements (as defined therein); and

          WHEREAS, Lead Borrower has requested Agent and Lenders consent to the prepayment in full of the Supplemental Loan Debt and agree to certain amendments to the Loan Agreement, and Agent and Lenders are willing to provide such consent and agree to such amendments, subject to the terms and conditions herein; and

          WHEREAS, by this Amendment No. 2, Borrowers, Guarantors, Agent and Lenders desire and intend to evidence such consents and amendments;

          NOW THEREFORE, in consideration of the foregoing, the mutual agreements and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

          1.   Definitions.

                    1.1   Additional Definitions. As used herein, the following terms shall have the meanings given to them below, and the Loan Agreement and the other Financing Agreements are hereby amended to include, in addition and not in limitation, the following definitions:

                              (a)   "Amendment No. 2" shall mean this Amendment No. 2 to Loan and Security Agreement by and among Borrowers, Guarantors, Agent and Lenders, as it now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

                              (b)   "Eligible Leased Property" shall mean, as to any of the Real Property listed on Exhibit A hereto, the leasehold interest of the applicable Borrower in such Real Property upon written confirmation from Agent to Parent that each of the conditions set forth below as to such leasehold interest in such Real Property have been satisfied. The leasehold interest of a Borrower in any of the Real Property listed on Exhibit A hereto shall not constitute Eligible Leased Property unless and until Agent shall have received each of the following, in form and substance satisfactory to Agent, as to such leasehold interest: evidence that Agent has a valid and perfected first priority collateral assignment of the leasehold interest of a Borrower in such Real Property in form and substance similar to the Collateral Assignment of Leases given by Family Fare to Agent; evidence that the lease or a memorandum of lease with respect to the leasehold interest of a Borrower in such Real Property has been properly filed and is of record in the correct governmental office, and Agent shall have received evidence thereof; fixture filings naming Agent, as secured party and the applicable Borrowers and Guarantors, as debtor have been filed with respect to such Real Property; a current appraisal as to the leasehold interest of a Borrower in such Real Property by an appraiser acceptable to Agent, in form, scope and methodology acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; consent of the landlord to the collateral assignment of such leasehold interest; and a flood insurance certificate certified to Agent indicating whether or not each parcel of such Real Property is situated in an area designated as having special flood hazards and evidence of flood insurance if the improvements located on any such Real Property are determined to be situated in an area designated as having special flood hazards.

                              (c)   "Leasehold Availability" shall mean, at any time, the lesser of $5,000,000 and seventy-five (75%) percent of the fair market value of the then Eligible Leased Property, provided, that, (A) there shall be no Leasehold Availability unless and until such time as the aggregate amount of the appraised fair market value of the leasehold interests of Borrowers constituting Eligible Leased Property as provided in the definition thereof is equal to or greater than $1,000,000, (B) at such time as there is Leasehold Availability as provided in clause (A) of this definition, the amount thereof as of the last day of the month in which there is such initial Leasehold Availability, shall be reduced automatically and without further action by the parties

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effective as of the first day of the immediately following month and as of the first day of each month thereafter, by an amount equal to such initial Leasehold Availability divided by eighty-four (84), (C) if after the last day of the month in which there is the initial Leasehold Availability as provided in clause (A) of this definition, any leasehold interests of Borrowers listed on Exhibit A hereto not previously constituting Eligible Leased Property shall become Eligible Leased Property as provided in the definition thereof, the Leasehold Availability shall not be increased unless and until such time as the aggregate amount of the appraised fair market value of such leasehold interests of Borrowers that come to constitute Eligible Leased Property as provided in the definition thereof is equal to or greater than $500,000, (D) at any time as the Leasehold Availability is increased as described in clause (C) of this definition, the amount of such increase as of the last day of the month in which such increase becomes effective shall be reduced automatically and without further action by the parties effective as of the first day of the immediately following month and as of the first day of each month thereafter, by an amount equal to such increase in the Leasehold Availability divided by eighty-four (84).

                    1.2   Amendments to Definitions.

                              (a)   The definition of the term "Applicable Margin" in the Loan Agreement is hereby amended to delete the table therein and replace it with the following:

	
 
	

Tier
	

Monthly Average

Excess Availability
	
Applicable

Prime

Rate Margin
	
Applicable

Eurodollar

Rate Margin
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
1
	
$50,000,000 or more
	
0%
	
1 3/4 %
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
2
	
Greater than or equal

to $25,000,000 and

less than $50,000,000
	
1/4%
	
2%
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
3
	
Less than $25,000,000
	
1/2%
	
2 1/4 %
	
 

                              (b)   The definition of the term "Borrowing Base" in the Loan Agreement is hereby amended to: delete Section 1.10(a)(i)(B) thereof in its entirety and replace it with the following: "(B) ninety (90%) percent of Eligible Credit Card Receivables", delete at the end of Section 1.10(a)(i)(G) the word "or" and insert in its place the word "plus", and add at the end of Section 1.10(a)(i) a new Section 1.10(a)(i)(H) as follows: "plus (H) Leasehold Availability; or".

                              (c)   The definition of the term "Commitment" in the Loan Agreement is hereby amended in its entirety to read as follows: "Commitment" shall mean, at any time, as to each Lender, the principal amount set forth on Exhibit B hereto for each Lender or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which any person that becomes a Lender hereunder after the date hereof in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as "Commitments".

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                              (d)   The definition of the term "Fixed Asset Availability" in the Loan Agreement is hereby amended in its entirety to read as follows: "Fixed Asset Availability" shall mean the amount equal to the lesser of:

             (i)   the Fixed Asset Availability Limit; or

             (ii)   the sum of:

          (A)   seventy (70%) percent of the fair market value of Eligible Real Property as set forth in the most recent acceptable appraisal (or acceptable updates of existing appraisals) of such Real Property received by Agent in accordance with Section 7.4 hereof, plus

          (B)   eighty-five (85%) percent of the forced liquidation value of the Eligible Equipment as set forth in the most recent acceptable appraisal (or acceptable updates of existing appraisals) of such Equipment received by Agent in accordance with Section 7.4 hereof;

Provided, that, the Fixed Asset Availability shall be reduced as of the first day of each month, commencing on January 1, 2005, by an amount equal to the initial Fixed Asset Availability divided by eighty-four (84).

                              (e)   The definition of the term "Fixed Asset Availability Limit" in the Loan Agreement is hereby amended to delete the reference to "$40,000,000" contained therein and replace it with the following: "$52,000,000".

                              (f)   The definition of the term "Maximum Credit" in the Loan Agreement is hereby amended to delete the reference to "$170,000,000" and replace it with the following: "$215,000,000".

                    1.3   Interpretation. For purposes of this Amendment No. 2, unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings assigned to such terms in the Loan Agreement.

          2.   Letter of Credit Accommodations. Section 2.2(b) of the Loan Agreement is hereby amended to delete the table therein and replace it with the following:

	
 
	

Tier
	
Monthly Average

Excess Availability
	
Applicable Letter of

Credit Fee Margin
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
1
	
$50,000,000 or more
	
1 3/4%
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
2
	
Greater than or equal to

$25,000,000 and less

than $50,000,000
	
2%
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
3
	
Less than $25,000,000
	
2 1/4%
	
 

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          3.   Fees. Section 3.2(a) is hereby amended to add, after the words "Fixed Asset Availability", the words "and Leasehold Availability".

          4.   Collection of Accounts.

                    4.1   Section 6.3(a)(iv)(B) of the Loan Agreement is hereby deleted in its entirety and replaced with the following: "(B) at any time Excess Availability is less than $20,000,000."

                    4.2   The sixth sentence of Section 6.3(a)(iv) of the Loan Agreement is hereby amended to delete the words "for any month ending on or before December 31, 2004 or $30,000,000 for any month ending thereafter."

          5.   Loans, Investments, Etc. Section 9.10(i)(xiii) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(xiii)          in no event shall any Accounts, Inventory, Equipment, Real Property or Prescription Files so acquired by any Borrower pursuant to such acquisition be deemed Eligible Accounts, Eligible Inventory, Eligible Equipment, Eligible Real Property, Eligible Leased Property or Eligible Prescription Files, respectively, unless and until Agent shall have conducted a field examination with respect thereto (and at Agent's option, at Borrowers' expense, obtained an appraisal of such Inventory, Equipment, Real Property or Prescription Files by an appraiser reasonably acceptable to Agent and in form, scope and methodology reasonably acceptable to Agent and addressed to Agent and upon which Agent is expressly permitted to rely, which appraisal shall be in addition to any appraisals which Agent may obtain pursuant to its rights under Sections 7.3 or 7.4 hereof) and then only to the extent the criteria for Eligible Accounts, Eligible Inventory, Eligible Equipment, Eligible Real Property, Eligible Leased Property or Eligible Prescription Files set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in accordance with this Agreement), and upon the request of Agent, the Accounts, Inventory, Equipment, Real Property or Prescription Files acquired by such Borrower or Guarantor pursuant to such acquisition shall at all times after such acquisition be separately identified and reported to Agent in a manner satisfactory to Agent;"

          6.   Minimum EBITDA. Section 9.18 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"9.18          Minimum EBITDA. At any time that Excess Availability is less than $30,000,000, the EBITDA of Parent and its Subsidiaries for the twelve (12) or thirteen (13), as applicable, consecutive fiscal four (4) week periods (treated as a single accounting period and with each fiscal four (4) week period determined in accordance with the current accounting practices of Borrowers and Guarantors as in effect on the date hereof) ending on the last day of the most recent fiscal four (4) week period for which financial statements of Parent and its Subsidiaries are

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available or have been received by Agent shall be not less than $40,000,000 with respect to such period."

          7.   Capital Expenditures. Schedule 9.19 to the Loan Agreement is hereby deleted in its entirety and replaced with the revised Schedule 9.19 attached as Exhibit C hereto.

          8.   Amendments and Waivers. Section 11.3(d) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(d)          The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Accounts, Eligible Inventory, Eligible Credit Card Receivables, Eligible Equipment, Eligible Prescription Files, Eligible Real Property or Eligible Leased Property shall not be deemed an amendment to the advance rates provided for in this Section 11.3."

          9.   Term. Section 13.1(a) of the Loan Agreement is hereby amended by deleting the reference therein to "FOUR (4) YEARS" from the first sentence thereof and replacing it with "FIVE (5) YEARS".

          10.   Consent. Subject to the terms and conditions contained herein, to the extent such consent is or may be required under the Loan Agreement, Agent and Lenders hereby consent to the repayment by Borrowers and Guarantors of all Indebtedness of Lead Borrower to the Supplemental Loan Agent and Supplemental Loan Lenders evidenced by or arising under the Supplemental Loan Agreement and the other Supplemental Loan Lender Agreements, provided, that, as to such repayment each of the following conditions shall have been satisfied:

                    10.1   the total amount of such payment shall not exceed $14,000,000 in principal, plus accrued interest, fees and other amounts payable under the Supplemental Loan Lender Agreements; 

                    10.2   such payment shall satisfy all obligations of Borrowers and Guarantors under the Supplemental Loan Agreement and the other Supplemental Loan Lender Agreements, and Borrowers and Guarantors shall have no other or further obligations or liabilities thereunder other than such contingent indemnification obligations (but not any interests in assets to secure such obligations) which by the terms of the Supplemental Loan Agreement and the other Supplemental Loan Lender Agreements expressly survive such payment;

                    10.3   immediately upon any such payment, Supplemental Loan Agent and Supplemental Loan Lenders shall not have any interests in the assets of any Borrower or Guarantor under or pursuant to the Supplemental Loan Agreement or any of the other Supplemental Loan Lender Agreements;

                    10.4   Agent shall have received the agreement of the Supplemental Loan Agent, in form and substance satisfactory to Agent, that the Supplemental Loan Intercreditor Agreement is

6

terminated and of no further force and effect, as duly authorized, executed and delivered by the Supplemental Loan Agent, Borrowers and Guarantors;

                    10.5   Agent shall have received a payoff letter from the Supplemental Loan Agent, in form and substance satisfactory to Agent in good faith, in which the Supplemental Loan Agent states the amount required to be paid to satisfy all of Borrowers' and Guarantors' obligations under the Supplemental Loan Lender Agreement and agrees to provide, immediately following receipt of such amount, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by Supplemental Loan Agent and Supplemental Loan Lenders of their respective financing arrangements with Borrowers and Guarantors and the termination and release by it or them, as the case may be, of any interest in and to any assets and properties of each Borrower and Guarantor, duly authorized, executed (to the extent execution is required) and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and any Borrower or Guarantor, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower or Guarantor in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority; 

                    10.6   such payment shall be made by, and all of the conditions set forth in this Section 9 shall have been satisfied by, no later than January 31, 2005; and

                    10.7   as of the date of such payment and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing.

          11.   Amendment Fee. In addition to all other fees, charges, interest and expenses payable by any Borrower or Guarantor to Agent or Lenders under the Loan Agreement and the other Financing Agreements, Borrowers and Guarantors shall pay to Agent for the account of Lenders (in such manner as Agent may agree), contemporaneously with the effectiveness of this Amendment No. 2, an amendment fee in the amount of $350,000, which fee shall be fully earned and nonrefundable as of the date hereof and may be charged to any loan account of Borrowers.

          12.   Representations and Warranties. Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Amendment No. 2), the truth and accuracy of which are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers:

                    12.1   This Amendment No. 2 and each other agreement or instrument to be executed and delivered by the Borrowers and Guarantors pursuant hereto have been duly authorized, executed and delivered by all necessary action on the part of each of the Borrowers and Guarantors which is a party hereto and thereto and, if necessary, their respective stockholders and is in full force and effect as of the date hereof, as the case may be, and the agreements and obligations of each of the Borrowers and Guarantors, as the case may be, contained herein and therein, constitute the legal, valid and binding obligations of each of the Borrowers and Guarantors, respectively, enforceable against them in accordance with their terms, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that

7

availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

                    12.2   The execution, delivery and performance of this Amendment No. 2 are all within each Borrower's and Guarantor's corporate or limited liability company powers and are not in contravention of law or the terms of any Borrower's or Guarantor's certificate or articles of incorporation, by laws, or other organizational documentation, or any indenture, agreement or undertaking to which any Borrower or Guarantor is a party or by which any Borrower or Guarantor or its property are bound.

                    12.3   No Default or Event of Default exists or has occurred and is continuing.

          13.   Condition Precedent. The effectiveness of the consent and amendments contained herein shall only be effective upon the following:

                    13.1   Agent shall have received an original of this Amendment No. 2, duly authorized, executed and delivered by Borrowers and Guarantors; 

                    13.2   Agent shall have received an original of this Amendment No. 2 as executed by all Lenders required for the consent and amendments provided for herein;

                    13.3   each of the conditions set forth above shall have occurred by no later than January 31, 2005.

          14.   Effect of this Amendment. Except as expressly amended pursuant hereto and except for the consent expressly granted herein, no other changes or modifications to the Financing Agreements are intended or implied, and, in all other respects, the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent that any provision of the Loan Agreement or any of the other Financing Agreements are inconsistent with the provisions of this Amendment No. 2, the provisions of this Amendment No. 2 shall control.

          15.   Further Assurances. Borrowers and Guarantors shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes of this Amendment No. 2.

          16.   Governing Law. The validity, interpretation and enforcement of this Amendment No. 2 and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

          17.   Binding Effect. This Amendment No. 2 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

          18.   Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment No. 2.

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          19.   Counterparts. This Amendment No. 2 may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment No. 2 by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Amendment No. 2. Any party delivering an executed counterpart of this Amendment No. 2 by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered by their authorized officers as of the day and year first above written.

	
AGENT
	
 
	
BORROWERS

	
 
	
 
	
 

	
CONGRESS FINANCIAL CORPORATION

     (CENTRAL), as Agent
	
 
	
SPARTAN STORES, INC.

	
 
	
 
	
 

	
By:
	
 

	
 
	
By:
	
 

	
 
	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
Title:
	
 

	
 
	
 
	
 

	
 
	
 
	
SPARTAN STORES DISTRIBUTION, LLC

UWG COMPANY (F/K/A UNITED WHOLESALE GROCERY COMPANY)

MARKET DEVELOPMENT CORPORATION

SPARTAN STORES ASSOCIATES, LLC

FAMILY FARE, LLC

MSFC, LLC

SEAWAY FOOD TOWN, INC.

THE PHARM OF MICHIGAN, INC.

VALLEY FARM DISTRIBUTING CO.

GRUBER'S FOOD TOWN, INC.

GRUBER'S REAL ESTATE LLC

PREVO'S FAMILY MARKETS, INC.

CUSTER PHARMACY, INC.

BUCKEYE REAL ESTATE

MANAGEMENT CO.

SPARTAN STORES FUEL, LLC

	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
Title:
	
 

	
 
	
 
	
 

	
 
	
 
	
GUARANTORS

JFW DISTRIBUTING COMPANY

LLJ DISTRIBUTING COMPANY

SPARTAN STORES HOLDING, INC.

SI INSURANCE AGENCY, INC.

	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
Title:
	
 

	
LENDERS
	
 
	
 

	
 
	
 
	
 

	
CONGRESS FINANCIAL CORPORATION

     (CENTRAL)
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
 

	
 
	
 
	
 

	
KEY BANK NATIONAL ASSOCIATION
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
 

	
 
	
 
	
 

	
FLEET CAPITAL CORPORATION
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
 

	
 
	
 
	
 

	
NATIONAL CITY BUSINESS CREDIT
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
 

	
 
	
 
	
 

	
GENERAL ELECTRIC CAPITAL

CORPORATION
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 

	
 
	
 

	
 
	
 
	
 

	
FIFTH THIRD BANK
	
 
	
 

	
 
	
 
	
 

	
By:
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
Title:Spartan Stores Exhibit 10.16 to Form 10-K - 05/18/07

EXHIBIT 10.16

SPARTAN STORES, INC.

2000 ANNUAL INCENTIVE PLAN

Preamble

                    This SPARTAN STORES, INC. 2000 ANNUAL INCENTIVE PLAN (the "Plan") is a program for measuring the financial performance of Spartan Stores, Inc. and its subsidiaries and affiliates and providing Participants with incentive compensation based upon corporate and individual results. The objectives of the Plan are to motivate Participants to achieve the Company's annual financial and business objectives; to allow Participants to share appropriately in the financial success of the Company; to provide a highly competitive incentive compensation opportunity; to create a linkage between Participant contribution and the Company's business and financial objectives; and to assist in the attraction, retention and motivation of Associates. The Plan provides annual incentive compensation for Participants who are in a position to make substantial contributions toward achievement of the goals established pursuant to the Plan.

SECTION 1

ESTABLISHMENT AND PURPOSES OF PLAN

          1.1          Establishment of Plan. Spartan Stores, Inc., a Michigan corporation, hereby establishes its 2000 Annual Incentive Plan for its Company and Subsidiary officers, employee directors and other key Associates. The Plan permits the award of incentive compensation in the form of performance-based incentive awards.

          1.2          Purposes of Plan. The purposes of the Plan are to motivate Participants to achieve the Company's annual financial and business objectives; to allow Participants to share appropriately in the financial success of the Company; to provide a highly competitive incentive compensation opportunity; to create a linkage between Participant contribution and the Company's business and financial objectives; and to assist in the attraction, retention and motivation of Associates. The Plan is further intended to provide flexibility to the Company in structuring incentive compensation to best promote the foregoing objectives.

          1.3          Plan Document. This instrument, as amended from time to time, constitutes the governing document of the Plan.

          1.4          Effective Date. The Plan is effective as of April 1, 2000. The Plan shall remain in effect until terminated by the Board. Unless earlier terminated by the Board, the Plan shall terminate as of the end of the Company's Fiscal Year ending in the year 2010. 

          1.5          Incentive Compensation Plan. The Plan is an annual incentive compensation program for Participants. Because the Plan does not provide welfare benefits and does not provide for the deferral of compensation until termination of employment, it is established with the intent and understanding that it is not an employee benefit plan within the meaning of the federal Employee Retirement Income Security Act of 1974, as amended.

SECTION 2

DEFINITIONS

                    The following terms shall have the definitions stated, unless the context requires a different meaning. Other defined terms shall have the meanings ascribed to them herein.

          2.1          Annual Base Salary. "Annual Base Salary" means a Participant's annual salary rate in effect at the end of a Fiscal Year without regard to incentive compensation or bonuses or awards under this Plan or other benefits or incentive compensation plans maintained or provided by the Company. 

          2.2          Associate. "Associate" means an employee of the Company or any Subsidiary. 

          2.3          Beneficiary. "Beneficiary" means the individual, trust or other entity designated by the Participant to receive any incentive award payable with respect to the Participant under the Plan after the Participant's death. A Participant may designate or change a Beneficiary by filing a signed designation with the Committee in a form approved by the Committee. A Participant's will or other estate planning document is not effective for this purpose. If a designation has not been completed properly and filed with the Committee or is ineffective for any other reason, the Beneficiary shall be the Participant's Surviving Spouse. If there is no effective designation and the Participant does not have a Surviving Spouse, the remaining incentive award under this Plan, if any, shall be paid to the Participant's estate.

          2.4          Board. "Board" means the Board of Directors of the Company.

          2.5          Business Unit. "Business Unit" means any Subsidiary, department, division or other operational unit of the Company or any Subsidiary as to which the Committee shall establish a Goal under the Plan applicable in a Fiscal Year.

          2.7          Code. "Code" means the Internal Revenue Code of 1986, as amended.

          2.8          Committee. "Committee" means the Compensation Committee of the Board or such other committee as the Board designates to administer this Plan. The Committee shall consist of at least two persons, all of whom shall be "non-employee directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and "outside directors" as defined in Section 162(m) of the Code.

          2.9          Common Stock. "Common Stock means the Company's common stock, no par value.

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          2.10          Company. "Company" means Spartan Stores, Inc., a Michigan corporation, and its Subsidiaries.

          2.11          Fiscal Year. "Fiscal Year" means the financial reporting and taxable year of the Company. 

          2.12          Goal. "Goal" means the goal established for one or more Participants by the Committee under Section 5 of this Plan for one or more of the Company and any Business Unit to achieve over a designated fiscal period. Goals may be based on the net earnings or other financial performance or results or improvements in operations of the Company or any Business Unit, or any other criteria that the Committee may determine from time to time.

          2.13          Normal Retirement Date. "Normal Retirement Date" means the date a Participant attains age 65.

          2.14          Officer. "Officer" means a Participant serving in one or more of the following positions with Spartan Stores, Inc.: Chief Executive Officer, President, any Executive or other Vice President, Secretary and Treasurer.

          2.15          Participant. "Participant" means an Associate designated by the Committee to participate in this Plan for a Plan Year pursuant to Section 4 of this Plan.

          2.16          Plan Year. "Plan Year" means the annual period that constitutes the Fiscal Year of the Company. 

          2.17          Retirement. "Retirement" means termination of employment on or after the Participant's Normal Retirement Date.

          2.18          Subsidiary. "Subsidiary" means any corporation or other entity of which fifty percent (50%) or more of the outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled by the Company or by one or more Subsidiaries of the Company, except that for purposes of this Plan, the term "Subsidiary" does not include Spartan Insurance Company Ltd. or SI Insurance Agency, Inc.

          2.19          Surviving Spouse. "Surviving Spouse" means the husband or wife of the Participant at the time of the Participant's death who survives the Participant. If the Participant and the spouse die under circumstances that make the order of their deaths uncertain, it shall be presumed for purposes of this Plan that the Participant survived the spouse.

          2.20          Total Disability. "Total Disability" or "Disability" means a total and permanent inability of the Participant to engage in any substantial gainful activity as a result of a physical or mental condition of the Participant. The existence of a total disability shall be established by the certification of a physician or physicians selected by the Committee, unless the Committee determines that an examination is unnecessary.

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SECTION 3

ADMINISTRATION OF PLAN

          3.1          Plan Administration.

                    (a)          Power and Authority. The Committee shall have full power and authority to interpret the provisions of the Plan and shall have full power and authority to supervise the administration of the Plan. All determinations, interpretations and selections made by the Committee regarding the Plan shall be final and conclusive on all parties. To the extent it deems necessary or appropriate, the Committee may adopt rules, policies and forms for the administration, interpretation and implementation of the Plan.

                    (b)          Delegation of Authority. The Committee may delegate administrative authority and responsibility from time to time to and among one or more officers of the Company, but all actions taken pursuant to delegated authority and responsibility shall be subject to review, change and approval by the Committee. 

          3.2          Grants or Awards to Participants. In accordance with and subject to the provisions of the Plan, the Committee shall have the authority to determine all matters as the Committee may deem necessary or desirable and as are consistent with the terms of the Plan, including, without limitation, the following: (a) the persons who shall be selected as Participants and (b) the nature and extent of the incentive awards granted to each Participant.

          3.3          Indemnification. A member of the Committee or any other individual or group to whom authority is delegated shall not be personally liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the administration and implementation of the Plan. The Company shall hold harmless and indemnify each member of the Committee, and any other individual or group exercising delegated authority or responsibility with respect to the Plan, from any and all liabilities and costs arising from any act or omission related to the performance of duties or the exercise of discretion and judgment with respect to the Plan. This Section 3.3 shall not be construed as limiting the Company's or any Subsidiary's ability to terminate or otherwise alter the terms and conditions of the employment of individual or group exercising delegated authority or responsibility with respect to the Plan, or to discipline any such person.

SECTION 4

ELIGIBILITY

          4.1          Participation. An associate shall be a Participant in the Plan for a Plan Year upon his or her designation as a Participant for that Plan Year by the Committee. When deemed appropriate by the Committee, the Committee may determine an effective date for the commencement of participation by a Participant that is subsequent to the first day of the Plan Year. Participants shall be notified in writing and provided a written summary of the Plan.

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          4.2          No Continuing Participation. An Associate's designation as a Participant for a Plan Year will not continue in effect for the subsequent Plan Year unless and until the Committee designates the Associate as a Participant in the subsequent Plan Year. The Committee may terminate participation by any Participant at any time with or without cause.

SECTION 5

ESTABLISHMENT OF GOALS AND POTENTIAL INCENTIVE AWARDS

          5.1          Performance Criteria. The Plan shall be administered so that the incentive compensation provided to Participants under the Plan for each Plan Year is based on whether the Goals that are applicable to the Participant for a Plan Year are achieved for that Plan Year. 

          5.2          Determination of Possible Incentive Awards. Within a reasonable time prior to or after the commencement of a Plan Year, the Committee shall make the determinations set forth in this Section 5.2. With respect to the first Plan Year, which is the Company's Fiscal Year ending in March 2001, the Committee shall make the determinations set forth in this Section 5.2 within a reasonable time after the adoption of this Plan. 

                    (a)          Participants. The Committee shall determine the Associates who shall be Participants for that Plan Year.

                    (b)          Goals. The Committee shall determine the one or more Goals applicable to each Participant for that Plan year, including any threshold, target or maximum Goals. The Committee may, but is not required to, set Goals for the person or persons serving in a particular position or positions with the Company, rather than individual Participants. Goals may vary among Participants in any manner that the Committee determines. In addition, there is no requirement that any Participant's Goals be similar from Plan Year to Plan Year.

                    (c)          Incentive Award; Allocation of Incentive Award. For each Participant selected for a Plan Year, the Committee shall determine the one or more incentive award levels applicable to a Goal for the Plan Year. 

                    (d)          Determination of Relationships Between Goals. For each Goal established for a Participant, the Committee shall determine whether the Participant's eligibility to receive an incentive award with respect to such Goal is dependent on the achievement of any other Goal applicable to that Participant.

          5.3          Determination of Actual Incentive Awards. 

                    (a)          Determination of Achievement of Goals. Within a reasonable time following the end of a Plan Year, the Committee shall determine whether each Participant's one or more Goals for that Plan Year have been met. The Committee shall make this determination by reference to such information as the Committee determines.

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                    (b)          Determination of Incentive Awards. Following its determinations under Section 5.3(a), the Committee shall determine the portion of each Participant's incentive award that such Participant is entitled to receive for that Plan Year, subject to the provisions of this Section 5. 

          5.4          Adjustments. Adjustments to incentive awards may be made when deemed appropriate by the Committee pursuant to Section 6 below.

SECTION 6

DETERMINATION AND PAYMENT OF INCENTIVE AWARDS

          6.1          Final Plan Year Performance. Company, Business Unit and individual performance, including any necessary or appropriate adjustments required or permitted hereunder, shall be determined for each Participant as soon as administratively feasible following the availability of final performance results for the Plan Year.

          6.2          Determination of Incentive awards. Under rules established by the Committee, the incentive award for each Participant for each Plan Year shall be determined pursuant to Section 5.

          6.3          Payment of Incentive Awards; Form of Payment. The dollar amount of the incentive award for a Plan Year shall be paid to the Participant as soon as feasible following the completion of the incentive award calculations for the Plan Year. Upon completion of such calculations, the Committee shall notify each Participant of the amount of his or her incentive award. Any Participant may elect to receive a portion of his or her incentive award to be paid in cash under this Plan in the form of Common Stock under the Company's 1991 Stock Bonus Plan or any other incentive award plan that the Company may adopt, provided that the Participant is a participant under the other plan with the right to elect to receive shares of Common Stock under the plan. In the event of the death of a Participant, any incentive award payable to the Participant under the Plan will be paid to the Participant's Beneficiary. Before any incentive award shall be paid, the Committee shall certify in writing, whether by appropriate resolution or otherwise, that the relevant Goals were met and that the other material terms of this Plan have been satisfied. 

          6.4          Partial Year Participation and Employment Changes. 

                    (a)          Partial Year Participation. If a person is designated to become a Participant in a Plan Year as of a date other than the first day of the Plan Year, then such Participant shall be entitled to receive a pro rata portion of the incentive awards to which he or she would otherwise be entitled had he or she been a Participant for the entire Plan Year, based on the Participant's time of active employment as a Participant during the Plan Year.

                    (b)          Employment Changes. Goals and incentive awards for a Participant for a Plan Year will be prorated or adjusted as appropriate, as determined by the Committee from time to time, in the event of any change in the Participant's compensation or employment status, or

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any other change that would affect the determination for the Plan Year, in proportion to the duration of each applicable factor during the Plan Year. 

                    (c)          Retirement, Death, or Disability. If a Participant's employment terminates during a Plan Year by reason of Retirement, death, or Total Disability, the Participant's incentive award for the Plan Year, if any, shall be prorated, as determined by the Committee, based on the Participant's time of active employment as a Participant during the Plan Year. 

                    (d)          Other Termination of Employment. Except as otherwise provided in this subsection (d) or pursuant to subsection (e), upon termination of a Participant's employment during a Plan Year for any reason other than Retirement, death, or Total Disability, the Participant shall not be entitled to the payment of any incentive award for the Plan Year. Notwithstanding the preceding sentence, the Committee shall have sole and absolute discretion to determine that payment of a pro-rated amount may be made when termination of a Participant's employment results from job elimination, reduction in work force or other similar company initiative, or is encouraged or induced by incentives offered by the Company or other circumstances determined appropriate by the Committee. Except as provided in Section 6.4(c) or (e), a Participant must be employed by the Company or a Subsidiary at the time that an incentive award is paid to receive such incentive award. 

                    (e)          Committee Discretion. Pursuant to the powers conferred in Section 6, the Committee may amend or modify any rule and make any other rule, exception or determination applicable to participation and employment changes relating to any Participant. Notwithstanding any other provision of this Plan, the Committee delegates to the Chief Executive Officer the authority to determine that a Participant's award will be reduced, delayed or withheld if the Chief Executive Officer determines that the reduction, delay or withholding is warranted by the Participant's performance.

SECTION 7

COMMITTEE DISCRETION

                    The Committee shall exercise all of its power and duties as the Committee deems appropriate in its sole and absolute discretion. All decisions of the Committee shall be final and binding on all Participants and their respective heirs, representatives and Beneficiaries. If the Committee determines in its sole and absolute discretion that any factor applicable in the ultimate determination of an incentive award under the Plan for a Plan Year is not appropriate with respect to one or more Participants due to unusual events, circumstances, or other factors that the Committee determines to be appropriate, the applicable factor or the amount of the resulting incentive award may be adjusted or modified in any manner deemed appropriate by the Committee. Without limiting the generality of the foregoing, to reflect significant, unanticipated changes, Goals may be adjusted during a Plan Year by recommendation of the Committee and upon approval of the Board of Directors. Adjustments to Goals are expected to be, but need not be, made on an extraordinary basis only.

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                    Without limiting the generality of the foregoing, for each Plan Year in which incentive awards are awarded, the Committee may, but need not, award incentive awards to persons who were not designated as Participants for that Plan Year in an aggregate amount equal to not more than twenty-five percent (25%) of the aggregate amount of incentive awards awarded to Participants for such Plan Year. The amount and other terms and conditions of such incentive awards to non-Participants, as well as the identities of the persons who are designated to receive such incentive awards, are within the sole and absolute discretion of the Committee.

SECTION 8

TERMINATION AND AMENDMENT

                    The Board may terminate the Plan at any time, or may from time to time amend the Plan as it deems appropriate and in the best interests of the Company.

SECTION 9

GENERAL PROVISIONS

          9.1          Benefits Not Guaranteed; No Rights to Award. Neither the establishment and maintenance of the Plan nor participation in the Plan shall provide any guarantee or other assurance that incentive awards or other compensation will be payable under the Plan. The success of the Company and its Business Units and affiliates, as determined hereunder and adjusted as provided herein and application of the administrative rules and determinations by the Committee, shall determine the extent to which Participants are entitled to receive incentive awards under this Plan. No Participant or other person shall have any claim to be granted any award or benefit under the Plan and there is no obligation of uniformity of treatment of Participants under the Plan. The terms and conditions of any award or benefit of the same type and the determination of the Committee to grant a waiver or modification of any award or benefit and the terms and conditions thereof need not be the same with respect to each Participant.

          9.2          No Right to Participate. Nothing in this Plan shall be deemed or interpreted to provide a Participant or any non-participating Associate with any contractual right to participate in or receive benefits under the Plan. No designation of a person as a Participant for all or any part of a Plan Year shall create a right to any incentive award, compensation or other benefits of the Plan for any other Plan Year.

          9.3          No Employment Right. Participation in this Plan shall not be construed as constituting a commitment, guarantee, agreement, or understanding of any kind that the Company or any Subsidiary will continue to employ any individual and this Plan shall not be construed or applied as any type of employment contract or obligation. Nothing herein shall abridge or diminish the rights of the Company or any Subsidiary to determine the terms and conditions of employment of any Participant or other person or to terminate the employment of any Participant or other person with or without cause at any time.

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          9.4          No Assignment or Transfer. Neither a Participant nor any Beneficiary or other representative of a Participant shall have any right to assign, transfer, attach, or pledge any bonus amount or credit, potential payment, or right to future payments of any bonus amount or credit, or any other benefit provided under this Plan. Payment of any amount due or to become due under this Plan shall not be subject to the claims of creditors of the Participant or to execution by attachment or garnishment or any other legal or equitable proceeding or process, unless otherwise specifically ordered by any court of competent jurisdiction.

          9.5          Withholding and Payroll Taxes. The Company shall deduct from any payment made under this Plan all amounts required by federal, state and local tax laws to be withheld and shall subject any payments made under the Plan to all applicable payroll taxes and assessments.

          9.6          Incompetent Payee. If the Committee determines that a person entitled to a payment hereunder is incompetent, it may cause benefits to be paid to another person for the use or benefit of the Participant or the Participant's Beneficiary at the time or times otherwise payable hereunder, in total discharge of the Plan's obligations to the Participant or Beneficiary.

          9.7          Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable federal law.

          9.8          Construction. The singular includes the plural and the plural includes the singular. Capitalized terms, except those at the beginning of a sentence or part of a heading, have the meaning defined in the Plan.

          9.9          Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

          9.10          No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements, including the grant of stock options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.

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