EXHIBIT 10.12
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 23rd day of February,
1999 (the "Effective Date"), by and between SPARTAN STORES, INC. a Michigan
corporation ("Company"), and XXXXX X. XXXXX ("Executive").
W I T N E S S E T H:
WHEREAS, Executive currently serves as a key employee of the
Company and/or its subsidiaries 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, the Company 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 the Company 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 the Company, 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 the Company and/or its
subsidiaries, the Board has authorized the Company 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 the Company.
(b) "Cause" means (1) the willful and continued failure by
Executive to substantially perform his duties with 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 his or her 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 the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding securities of
the Company 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
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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 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 the
Company subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, 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 the Company 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 the Company 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 the Company 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
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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 the Company of
(i) a plan of complete liquidation or dissolution of the
Company or (ii) the sale or other disposition of all or
substantially all of the assets of the Company 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 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%
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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 the Company,
$2.00 par value per share.
(f) "Company" means Spartan Stores, Inc., a Michigan
corporation, and any corporation or other entity in which Spartan
Stores, Inc. has a direct or indirect ownership interest of 50%
or more of the total combined voting power of the then
outstanding securities of such corporation or other entity
entitled to vote generally in the election of directors.
(g) "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. Notwithstanding the previous sentence, (i) if the
Executive's employment is terminated for Disability, as defined
in Section 1(h), 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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(h) "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.
(i) "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
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;
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(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 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 the Company to obtain any
assumption agreement contemplated in Section 9(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 Company 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; provided, however, 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(i) which occurs prior to a
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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 of Directors in
writing, within 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;
(ii) the Company fails, within 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
30 days after expiration of the 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.
(j) "Nonqualifying Termination" means a termination of
Executive's employment (1) by the Company for Cause, (2) by
Executive for any reason 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 after
such Disability 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 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,
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(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
termination date. 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) "Retirement" means termination of employment by either
the Executive or the Company on or after the Executive's normal
retirement date under the terms of retirement plans of the
Company, but not earlier than the age of 65.
(m) "SERP" means the Spartan Stores, Inc. Supplemental
Executive Retirement Plans, as amended from time to time.
(n) "Target Amount" means the amount set forth in Column 1
of the Table to Appendix C of the SERP for the "Date of
Termination of Employment with Eligibility for Plan Benefit" as
designated in the Table that applies to the Employee for his
termination of employment as of the Date of Termination, as the
Table may be amended from time to time.
(o) "Termination Period" means the period of time beginning
with a Change in Control and ending 3 years following such Change
in Control.
2. TERM OF AGREEMENT. This Agreement shall commence on the Effective
Date and shall continue in effect until the Company 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, 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. Within five (5) days 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
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both the cash and stock components) and bonus payments which
pursuant to the terms of any plans have been earned or
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) A bonus will be paid under the Long Term Incentive
Plan or any successor Plan ("Long Term Plan"), in an amount
equal to the payment called for under the Long Term Plan (as
in effect on the date of this Agreement) upon termination of
Executive's employment without Cause during a year.
(4) An amount equal to the number of years
remaining in the Termination Period (counting each full
or partial month as 1/12th of a year, and rounded to
the nearest 1/100th of a year) 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 the (A) payment to Executive
under Section 3(a)(2) above adjusted to be an
annualized bonus or (B) the bonus awarded to the
Executive under the Annual Plan for the fiscal year
immediately preceding the Change in Control.
(b) BENEFITS. Except for any retirement plans covered by
Section 4 below, the Company shall maintain in full force and
effect for the benefit of Executive and his spouse and covered
dependents all employee benefit plans, programs and arrangements
that the Executive and his spouse and covered dependents were
entitled to participate in immediately prior to the Date of
Termination until the earlier of the end of the Termination
Period or (as to any particular benefit) the date upon which the
Executive receives a substantially equal benefit from a new
employer. If the participation of the Executive and his spouse
and covered dependents in any such plans or programs is not
permitted by the terms of any such plans or programs, or would
cause the Executive to experience adverse tax consequences, the
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Company shall provide comparable benefits eliminating the adverse
tax consequences but providing substantially the same after-tax
benefit levels as the Executive, spouse and covered dependents
previously received under such plans and programs.
(c) AUTOMOBILE. The Company shall cause the title to
Executive's Company-provided automobile to be transferred to
Executive, free and clear of all liens or encumbrances.
(d) CERTAIN REDUCTIONS DISREGARDED. In computing the
payments under sections (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.
(a) The Executive is a Participant in the SERP. If the
employment of Executive with the Company shall terminate at any
time after a Change in Control other than by reason of a
Nonqualifying Termination, then Executive shall receive (as a
lump sum, to be paid within five (5) days after the Date of
Termination) an amount equal to the Target Amount for the date of
termination designated under the SERP, as the Target Amount is
adjusted by Exhibit A to this Agreement, to the extent the Target
Amount is not paid under the Spartan Stores, Inc. Cash Balance
Pension Plan and any successor plan ("Pension Plan") and the SERP
(assuming election by Executive of the lump sum payment options
under the Pension Plan and SERP).
(b) If the employment of Executive with the Company shall
terminate at any time after a Change in Control for any reason
(including but not limited to a Nonqualifying Termination), then
Executive shall receive (as a lump sum, to be paid within five
(5) days after the Date of Termination) an amount equal to the
Target Amount for the date of termination designated under the
SERP that applies to the Date of Termination to the extent the
Target Amount is not paid under the terms of the Pension Plan and
any successor plan and the SERP on the Date of Termination
(assuming election by Executive of the lump sum payment options
under the Pension Plan and SERP) or under Subsection 4(a) above.
(c) 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.
5. ACCELERATION OF VESTING UPON CHANGE IN CONTROL. Effective at the time
of a Change in Control, all unvested stock options and stock
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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. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, 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 6(c), all
determinations required to be made under this Section 6,
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 affecting 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
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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 6, shall be
paid by the Company to Executive within five (5) days of the
receipt of the Determination. If the Accounting Firm determines
that no Excise Taxes are payable by Executive, it shall furnish
Executive with a written opinion that failure to 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 6(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
6, 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 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,
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(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 bear and pay directly
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
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 6(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 xxx 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 xxx 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 6, 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 6) 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
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receipt by Executive of an amount advanced by the Company
pursuant to Section 6, 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.
7. 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.
8. 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 legal fees and expenses, if any, incurred by Executive in
connection with such contest or dispute regardless of the result
thereof.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company 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 the Company. 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) The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to in this
Section 9, 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 the Company 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
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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.
10. 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:
Xxxxx X. Xxxxx
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
If to the Company:
Spartan Stores, Inc.
000 00xx Xxxxxx, X.X.
P. X. Xxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000
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.
11. 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
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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;
provided, however, that the Company shall not be required to pay
any disputed amounts pursuant to this Section 11 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; provided, however, that
Executive shall be entitled to seek specific performance of his
right to be paid pursuant to Section 11(b) during a dispute.
Judgment may be entered on the arbitration award in any court
having jurisdiction. The Company shall bear all costs and
expenses arising in connection with any arbitration proceeding
pursuant to this Section 11(c).
12. 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.
13. ESTABLISHMENT OF TRUST. Immediately prior to a Change in Control, the
Company shall establish and maintain a Trust in the form attached as
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Exhibit B. Upon the occurrence of a Change in Control, the Company
shall pay into the Trust the amounts called for under Exhibit B, and
shall thereafter make such additional payments as called for under
Exhibit B. No payment to the Trust by the Company shall reduce the
Company's obligations to make payments to Executive under this
Agreement.
14. 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.
15. 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.
16. EMPLOYMENT AGREEMENT. This Agreement shall not affect the Employment
Agreement dated August 14, 1996 between Executive and the Company,
except that (a) only the terms of this Agreement shall control in
determining whether Executive is entitled to the payments, benefits
and protections of this Agreement; and (b) if Executive receives the
severance benefits provided under Section 3 of this Agreement the
Executive will not be entitled to the severance benefits that would
otherwise be due under Section 7(a)(i), (ii), (iii), (iv) and (vi) of
the Employment Agreement; and (c) if Executive receives the payments
provided under Section 4 of this Agreement but is not entitled to the
payments provided under Section 3 of this Agreement the Executive will
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not be entitled to the benefits that would otherwise be due under
Section 7(a)(v) of the Employment Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company. Executive has
executed this Agreement as of the day and year written below.
SPARTAN STORES, INC.
By:/S/XXXXXXX X. XXX XXXXXX, XX.
Xxxxxxx X. Xxx Xxxxxx, Xx.
Its: Chairman of the Board
"Company"
/S/XXXXX X. XXXXX
Xxxxx X. Xxxxx
"Executive"
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EXHIBIT A
If, after a Change in Control, The following years shall be added
the Date of Termination to the "Date of Termination of
occurs within the following year: Employment with Eligibility for
Plan Benefit" in the Table to
Appendix C of the SERP:
Year 1999 5 years
Year 2000 4 years
Year 2001 3 years
Year 2002 and
each year thereafter
until Year 2009 2 years
Year 2010 1 year
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EXHIBIT B
SPARTAN STORES, INC.
EXECUTIVE SEVERANCE AGREEMENT AND SERP TRUST
[Omitted.]
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