10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

x	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 29, 2008.
	OR
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________.

Commission File Number: 000-31127

SPARTAN STORES, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan (State or Other Jurisdiction) of Incorporation or Organization)	38-0593940 (I.R.S. Employer Identification No.)
850 76th Street, S.W. P.O. Box 8700 Grand Rapids, Michigan (Address of Principal Executive Offices)	49518-8700 (Zip Code)

Registrant's telephone number, including area code: (616) 878-2000

Securities registered pursuant to Section 12(b) of the Securities Exchange Act
Title of Class Common Stock, no par value	Name of Exchange on which Registered NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Securities Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes        No   X  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes       No   X  

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X   No        

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.         

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act).

Large accelerated filer ___ Accelerated filer   X   Non-accelerated filer ____ Smaller reporting company ____

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No   X 

The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates based on the last sales price of such stock on the NASDAQ Global Select Market on September 14, 2007 (which was the last trading day of the registrant's second quarter in the fiscal year ended March 29, 2008) was $462,258,770.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, no par value, outstanding as of May 12, 2008: 21,876,748 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Part III, Items 10, 11,
12, 13 and 14 Proxy Statement for Annual Meeting to be held August 13, 2008

Forward-Looking Statements

          The matters discussed in this Annual Report on Form 10-K include "forward-looking statements" about the plans, strategies, objectives, goals or expectations of Spartan Stores, Inc. (together with its subsidiaries, "Spartan Stores"). These forward-looking statements are identifiable by words or phrases indicating that Spartan Stores or management "expects," "anticipates," "plans," "believes," "estimates," "intends," is "optimistic" or "confident" that a particular occurrence or event "will," "may," "could," "should" or "will likely" result or occur or "continue" in the future, that the "outlook" or "trend" is toward a particular result or occurrence, that a development is a "priority" or "strategy" or similarly stated expectations. Accounting estimates, such as those described under the heading "Critical Accounting Estimates" in Item 7 of this Annual Report on Form 10-K, are inherently forward-looking. Our asset impairment and exit cost provisions are estimates and actual costs may be more or less than these estimates and differences may be material. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

          In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, there are many important factors that could cause actual results to differ materially. Our ability to maintain and strengthen our retail-store performance; assimilate acquired stores; maintain or grow sales; respond successfully to competitors; maintain or increase gross margin; anticipate and successfully respond to openings of competitors; maintain and improve customer and supplier relationships; realize expected benefits of new relationships; realize growth opportunities; expand our customer base; reduce operating costs; sell on favorable terms assets classified as held for sale; generate cash; continue to meet the terms of our debt covenants; continue to pay dividends, and implement the other programs, plans, priorities, strategies, objectives , goals or expectations described in this Annual Report, our other reports, our press releases and our public comments will be affected by changes in economic conditions generally or in the markets and geographic areas that we serve, adverse effects of the changing food and distribution industries and other factors including, but not limited to, those discussed in the "Risk Factors" discussion in Item 1A of this Annual Report.

          This section and the discussions contained in Item 1A, "Risk Factors," of this report and in Item 7, subheading "Critical Accounting Policies" in this report, both of which are incorporated here by reference, are intended to provide meaningful cautionary statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to Spartan Stores or that Spartan Stores currently believes are immaterial also may impair its business, operations, liquidity, financial condition and prospects. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information obtained after the date of this Annual Report.

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PART I

Item 1. Business

Overview

          Spartan Stores is a leading regional grocery distributor and grocery retailer, operating principally in Michigan and Indiana. We operate two business segments: Distribution and Retail. We estimate that we are the tenth largest wholesale distributor to supermarkets in the United States and the largest wholesale distributor to supermarkets in Michigan. According to Trade Dimensions Market Scope, our distribution and retail operations hold a combined #1 or #2 market share in many of the key Michigan markets we serve. For the fiscal year ended March 29, 2008 ("fiscal 2008"), we generated net sales of $2.5 billion.

          Established in 1917 as a cooperative grocery distributor, Spartan Stores converted to a for-profit business corporation in 1973. In January 1999, we began to acquire retail supermarkets in our focused geographic regions. In August 2000, our common stock became listed on the NASDAQ Stock Market under the symbol "SPTN." With approximately 8,100 associates, Spartan Stores distributes a wide variety of products to nearly 400 independent grocery stores and operates 84 conventional supermarkets.

          Spartan Stores has established four key management priorities that focus on the longer-term strategy of the Company, including establishing a well-differentiated market offering for our Distribution and Retail segments, and additional strategies designed to create value for our shareholders, retailers and customers. These priorities are:

• Retail sales growth: Leverage investments in fuel centers and pharmacy operations to drive related supermarket comparable sales, continue to focus on category management initiatives, specifically focusing on perishables offerings and continue with our capital plan focusing on remodels, replacement stores, adjacent acquisitions, expansions and new stores to fill in existing markets.

• Distribution sales growth: Focus on increased penetration of existing customers, attract new in-market customers and adjacent-state customers, continue to share "best retail practices" with customers, provide a superior value-added relationship and pursue acquisitions.

• Margin enhancement: Continued focus on retail shrink improvement, increased penetration of private label programs, improved offerings in our perishables department and continued focus on improving the cost of merchandise through vendor partnerships.

• Selling, general and administrative ("SG&A") expense cost containment: Continue to focus on improving efficiency and general cost containment in all areas to help offset inflationary pressures on total SG&A expenses.

          We believe significant progress has been made towards achieving these long-term priorities in recent years and we will continue to focus on these priorities.

Distribution Segment

          Our Distribution segment provides a selection of approximately 45,000 stock-keeping units (SKU's), including dry groceries, produce, dairy products, meat, deli, bakery, frozen food, seafood, floral products, general merchandise, pharmacy and health and beauty care items to nearly 400 independent grocery stores and our 84 corporate-owned stores. Also included are approximately 3,000 private label grocery and general merchandise items. Total revenues from our Distribution segment, including shipments to our corporate-owned stores which are eliminated in the consolidated financial statements, were $1.9 billion for fiscal 2008.

          Customers. Our Distribution segment supplies a diverse group of independent grocery store operators that range from a single store to supermarket chains with as many as 20 stores and our corporate-owned stores. Pricing to our customers is generally based upon a "cost plus" model for grocery, frozen, dairy, pharmacy and health and beauty care items and a "variable mark-up" model for meat, deli, bakery, produce, seafood, floral and general merchandise products.

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          On April 24, 2007, we reached an agreement to significantly expand our distribution supply relationship with Martin's Super Markets, an independent supermarket retailer with locations in southwest Michigan and north central Indiana. Our existing supply relationship expanded to include dry groceries, dairy and frozen products and our portfolio of corporate private label brands in addition to the existing health and beauty care products, general merchandise and pharmacy products. The expanded relationship includes all 20 locations of Martin's Super Markets. We expect annual distribution sales to increase by approximately $100 million after we have fully transitioned the customer, which occurred during September 2007. This relationship, our first major move to distribute to independent retailers outside the state of Michigan, significantly increases our distribution presence in Indiana and demonstrates a successful beginning to fulfill our stated business strategy of growin g our distribution customer base to contiguous midwestern states.

          Our Distribution customer base is very diverse, with no single customer exceeding 12% of Distribution net sales, excluding corporate-owned stores. Our five largest Distribution customers (excluding corporate-owned stores) accounted for approximately 30% of our fiscal 2008 Distribution net sales. In addition, approximately 62% of Distribution net sales, including corporate-owned stores, are covered under supply agreements with our Distribution customers or are directly controlled by Spartan Stores.

          Distribution Functions. Our Distribution business utilizes approximately 1.8 million square feet of warehouse, distribution and office space. We supply our independent Distribution customers and our corporate-owned stores from our distribution centers located in Grand Rapids and Plymouth, Michigan. We believe that our distribution facilities are strategically located to efficiently serve our customers. We are continually evaluating our inventory movement and assigning SKU's to appropriate facilities within our distribution centers to reduce the time required to pick products.

          During fiscal 2008, we successfully implemented a product slotting optimization software tool that enables us to locate product in our distribution centers more efficiently, which leads to increased productivity by reducing travel time expended during our inbound and outbound processing of merchandise. In fiscal 2009, our goal is to implement a comprehensive inventory management strategy that will result in accelerated improvement in inventory turnover. We are committed to ensuring that we have the warehouse capacity that will support distribution growth, and to improving our distribution cost structure through productivity initiatives and technology, such as re-racking portions of our facilities that allows for optimized cube utilization as well as increasing warehouse square footage for commodities in which we are aggressively growing.

          We continue to reap benefits from our voice-activated selection technology in our warehouse job functions used in all of our warehouse facilities. Having completed implementation in fiscal 2007, the voice selection technology has proven to be a valuable investment through a substantial reduction in warehouse selection errors and significant improvement in inventory accuracy. We will continue to rely on this tool to realize continued service improvements.

          To supply our Distribution customers, we operate a fleet of approximately 90 tractors, 200 conventional trailers and 175 refrigerated trailers, substantially all of which are leased. In fiscal 2008, we replaced 42 conventional trailers and four tractors and refurbished 66 refrigerated trailers as we continue to place emphasis on investing, updating and developing the fleet as our wholesale distribution business expands. We have developed an equipment replacement strategy whereby we continually evaluate the optimum equipment life cycle in order to capitalize on reduced vehicle maintenance costs and the most favorable equipment residual value. We have also introduced power equipment with new emission level requirements to support the clean cities "Green" initiative and to assess the operational impact to the company. This investment also ensures that our fleet has a world-class appearance on the road and, as we continue to add new units with more Spartan private lab el logo visibility, we take pride in our "rolling billboards". For fiscal 2009, we will focus on increased cube utilization of our trailers that should allow us to improve our sales dollars delivered per mile, resulting in a reduction in our cost to deliver products.

          We have developed a safe and participative work environment and continue to see fewer workplace accidents, resulting in a considerable reduction of worker compensation claims at our distribution centers. Critical success factors include coordination of the Health and Safety and Distribution departments to develop and execute safety and sanitation audit processes.

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          Additional Services. We also offer and provide many of our independent Distribution customers with value-added services, including:

•	Site identification and market analyses	•	Coupon redemption
•	Store planning and development	•	Product reclamation
•	Marketing, promotion and advertising	•	Printing
•	Technology and information services	•	Merchandising
•	Accounting and tax preparation	•	Real estate services
•	Human resource services	•	Construction management services

Retail Segment

          According to Trade Dimensions Market Scope, our retail supermarkets maintain a #1 or #2 market share position in most of the Michigan markets they serve. We believe that our strong market share positions result from our distinct "neighborhood market" focus and the favorable name recognition of our banners. Our neighborhood market strategy distinguishes our stores from supercenters and limited assortment stores by emphasizing convenient locations, demographically targeted merchandise selections, strong perishables offerings, customer service, value pricing and community involvement.

          On June 15, 2007, we acquired certain assets and assumed certain liabilities related to 20 retail grocery stores, two fuel centers and three convenience stores from G&R Felpausch Company and affiliated companies ("Felpausch"), a privately-held retail grocery operator serving south and central Michigan. The retail stores include the operations of nine in-store pharmacies. The transaction represents another step in the component of our business strategy focused on growing our business through opportunistic acquisitions of other grocery operators that are adjacent to or in markets where we operate today. The Felpausch stores serve many communities where we previously had no retail presence. They also provide a geographic fit with our current retail store footprint, while providing expansion into central Michigan. Our Retail segment now operates 84 retail supermarkets predominantly in midsize metropolitan, tourist and lake communities of Michigan. Our retail supermarkets are operated under the banners Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets and Felpausch Food Centers.

          Our 84 retail supermarkets typically offer dry groceries, produce, dairy products, meat, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care products, delicatessen items and bakery goods. Fifty-one of our supermarkets also offer pharmacy services. In addition to nationally advertised products, the stores carry private label items, including our Spartan brand, Aroma Street Bakery and three private label brands that result from our strategic relationship with Topco Associates LLC: Top Care, a health and beauty care brand label, Valu Time, a value brand label, and Full Circle, a natural and organic brand label. These private label items provide above-average retail margins and we believe they help generate increased customer loyalty. See "Merchandising and Marketing - Corporate Brands." Our retail supermarkets range in size from approximately 13,100 to 62,100 total square f eet and average approximately 40,000 total square feet per store.

          During fiscal 2008, we added six fuel centers in Michigan operating under the banners Family Fare Quick Stop, Glen's Quick Stop and Felpausch Quick Stop. The additional fuel centers consisted of four new openings and two acquired fuel centers. We now operate a total of 16 fuel centers. These fuel centers offer refueling facilities and in the adjacent convenience store, a limited variety of immediately consumable products. Our prototypical Quick Stop stores are approximately 1,100 square feet in size and are typically located adjacent to our supermarkets. We expect that the location of the fuel center along with cross-merchandising initiatives will attract customers to the adjacent supermarket, resulting in increased supermarket sales. We are planning to continue to open several additional fuel centers each year over the next few years.

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          We acquired our stores as a result of eight acquisitions from January 1999 to June 2007. The following chart details the changes in the number of our retail stores over the last five fiscal years:

Fiscal Year	Number of Stores at Beginning of Fiscal Year	Stores Acquired or Added During Fiscal Year	Stores Closed or Sold During Fiscal Year		Number of Stores at End of Fiscal Year
2004	102	-	27	*	75
2005	75	-	-		75
2006	75	-	2		73
2007	73	16	2		87
2008	87	20	8		99	**

* Represents closure/sale of Foodtown stores.
** Includes 14 The Pharm stores intended to be sold and one Felpausch store to be closed in the first quarter of Fiscal 2009.

          During fiscal 2008, we completed five major remodels of our stores in addition to many other limited remodels and store resets. Two of those stores were grand re-openings of remodeled Felpausch Food Centers stores. We also replaced one existing store with a newly constructed store that nearly doubles the square footage of the former store. The new store is the prototype for future Family Fare Supermarkets stores and offers a much larger selection of products, new services including a drive-thru pharmacy and a fuel center. The store also is environmentally friendly, with energy efficient lighting, heating and other equipment and has received the Energy Star certification.

          We are finalizing details of a five-year plan for new stores, remodels and fuel centers, and we have significantly increased our capital commitment to support the growth phase of our business strategy. During fiscal 2009, we plan to complete major remodels on seven stores, and begin construction on one new store and up to two replacement stores and approximately five new fuel centers. We are eagerly anticipating the planned development of a new D&W Fresh Markets store that, by design and product offer, will become a prototype model for future D&W offerings. The D&W Fresh Market of the future is currently in design development with final plans to begin construction as soon as is feasible.

          We evaluate proposed retail projects based on demographics and competition within each market, and prioritize projects based on their expected returns on investment. Approval of proposed capital projects requires a projected internal rate of return that meets or exceeds our policy; however, we may undertake projects that do not meet this standard to the extent they represent required maintenance or necessary infrastructure improvements. We believe that focusing on such measures provides us with an appropriate level of discipline in our capital expenditures process.

Reporting Segment Financial Data

          More detailed information about our reporting segments may be found in Note 13 to the consolidated financial statements included in Item 8, which is herein incorporated by reference. All of our sales and substantially all of our assets are in the United States of America.

Discontinued Operations

          Our former insurance operations and certain of our retail, distribution and real estate operations have been recorded as discontinued operations in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, for all years presented, all Consolidated Statements of Earnings information in this Annual Report on Form 10-K has been adjusted and the discontinued operations information is excluded, unless otherwise noted.

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Insurance Operations

          At March 29, 2008, we had approximately $0.8 million in insurance reserves for open claims liabilities related to policies that were not ceded (transferred) to an unrelated third party. We will remain obligated under these policies until all claims are closed. We have retained an independent third party administrator to manage these claims.

Retail Operations

          Discontinued retail operations consist of 79 stores, including all former Food Town and The Pharm stores.

Distribution Operations

          Discontinued Distribution operations consist of our Maumee, Ohio and Toledo, Ohio distribution centers that were consolidated into our Michigan facilities during the fourth quarter of fiscal 2003.

Real Estate Operations

          Discontinued real estate operations include properties either held for sale or previously sold.

Marketing and Merchandising

          General. Our Distribution and Retail segments use combined marketing and merchandising departments to effectively leverage the use of category management principles. Our Distribution segment pursues incremental sales to existing and prospective customers by partnering with them to satisfy their consumers' needs. Our Retail segment's marketing and merchandising strategies are consumer driven programs in keeping with the implementation of improved category management practices.

          With the efficiencies created from combining each of these functions and by partnering with our vendors to develop more robust category management, we have been able to more effectively develop and roll out our merchandising programs, which has aided our ability to increase our sales and earnings. We have and will look to expand these offerings and partner with our independent customers over time to continue to realize incremental benefits.

          As we expand our service offerings, we believe that we differentiate ourselves from our competitors by offering a full set of services, from our specialty warehouse in our Distribution segment to the addition of fuel centers and Starbucks Coffee shops and Seattle's Best Coffee cafes in our "neighborhood market" retail stores. During fiscal 2008, our D&W Fresh Markets began sharing a passion for food with a new Culinary Classroom program. Through this program, consumers are invited to attend chef presentations and hands-on cooking classes covering a wide variety of class topics. A variety of highly qualified chefs and food experts are enlisted to teach the D&W Fresh Markets Culinary Classroom.

          In 2007, we embarked on a pharmacy initiative with a healthy living emphasis. As noted above, the total number of our supermarkets that offer pharmacy services is 51. We believe the pharmacy service offering is an important part of the consumer experience, and we have continued this initiative in 2008 to link our pharmacies with our center store product offerings in order to promote wellness and healthy living, and improve overall customer service.

          At Spartan Stores, we are committed to being a consumer driven retailer. Beginning in fiscal 2009, we will be implementing a new customer satisfaction program that asks customers to give us feedback every day in every store. Our retail customers will be randomly selected via point-of-sale receipts and invited to give us feedback by taking an online survey. With this improved process, we will be better able to assess overall customer satisfaction and perform even more insightful analysis of how well we are executing on key drivers of customer satisfaction and loyalty. We believe this program will better enable us to strive for consistency and excellence in the overall consumer experience.

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          Corporate Brands. We currently market and distribute approximately 3,000 private label brand items including our Spartan brand, Aroma Street Bakery and three private label brands that result from our strategic relationship with Topco Associates LLC: Top Care, a health and beauty care brand label, Valu Time, a value brand label, and Full Circle, a natural and organic brand label. We believe that our private label offerings have been well received by consumers and that these brands are part of our most valuable strategic assets of the Company, demonstrated through customer loyalty and profitability.

          Since fiscal 2004, we have re-energized our Spartan brand and rolled out an award-winning redesigned label and many new product categories, and have fully converted to the redesigned label on all of our private label products. Two of our new private label products were recently recognized for excellence. Spartan Black Forest Deli Ham won the Salute to Excellence Award in the ready-to-eat category presented by the Private Label Manufacturers Association, an award that represents the industry's appreciation for outstanding products. Also, Private Label Buyer magazine gave Spartan Stores a 2007 award for packaging of Spartan Photo Paper and Inkjet Cartridges. This award underscores Spartan Stores' commitment to quality packaging as well as excellent products.

          With our Spartan brand, we expect to leverage our investment in our fresh food initiative going forward by pursuing opportunity in fresh department consumer offerings with Spartan fresh products. We began this objective this year by introducing Spartan brand frozen seafood and Spartan brand fresh baby carrots, and plan to expand our Spartan fresh product offerings in the future.

Competition

          Our Distribution and Retail segments operate in highly competitive markets, which typically result in low profit margins for the industry as a whole. Our Distribution and Retail segments compete with, among others, regional and national grocery distributors, independently owned retail grocery stores, large chain stores that have integrated wholesale and retail operations, mass merchandisers, limited assortment stores and wholesale membership clubs, some of whom have greater resources than we do. The principal competitive factors in the retail grocery business include the location and image of the store; the price, quality and variety of the perishable products; and the quality and consistency of service.

          We believe we have developed and implemented strategies and processes that allow us to remain competitive in our Retail segment. We monitor planned store openings by our competitors and have established proactive strategies to respond to new competition both before and after the competitive store opening. Strategies to combat competition vary based on many factors, such as the competitor's format, strengths, weaknesses, pricing and sales focus. During the past three fiscal years, 12 competitor supercenters opened in markets in which we operate corporate-owned stores. Two additional openings are expected to occur during fiscal 2009 against our corporate-owned stores. As a result of these openings we believe the majority of our supermarkets compete with at least one supercenter.

          The primary competitive factors in the distribution business include price, product quality, variety and service. We believe our overall service level, defined as actual units shipped divided by actual units ordered, is among industry leading performance.

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Seasonality

          Our sales and operating performance vary with seasonality. Our first and fourth quarters are typically our lowest sales quarters and therefore operating results are generally lower during these two quarters. Additionally, these two quarters can be affected by the timing of the Easter holiday, which results in stronger sales. Many northern Michigan stores are dependent on tourism and therefore, are most affected by seasons and weather patterns, including, but not limited to, the amount and timing of snowfall during the winter months and the range of temperature during the summer months. All quarters are 12 weeks, except for our third quarter, which is 16 weeks and includes the Thanksgiving and Christmas holidays. Fiscal 2007 contained 53 weeks; therefore, the fourth quarter of fiscal 2007 consisted of 13 weeks rather than 12 weeks.

Suppliers

          We purchase products from a large number of national, regional and local suppliers of name brand and private label merchandise. We have not encountered any material difficulty in procuring or maintaining an adequate level of products to serve our customers. No single supplier accounts for more than 12% of our purchases. We continue to develop strategic relationships with key suppliers. We believe this will prove valuable in the development of enhanced promotional programs and consumer value perceptions.

Intellectual Property

          We own valuable intellectual property, including trademarks and other proprietary information, some of which are of material importance to our business.

Technology

          We invest in technology as a means of maximizing the efficiency of our operations and improving service to our customers. Our focus has been to continue to refine and enhance our reporting, business processes and data integrity to provide a base for continuous improvement and seamless information flow.

          Supply Chain. During fiscal 2008, we installed a new warehouse product slotting and layout optimization system. We also implemented the first phase of a comprehensive distribution metric reporting system, and began the implementation of a new transportation management system during the last quarter of the fiscal year. We continued to enhance our web site in support of vendor and customer communications and processes.

          Retail Systems. During fiscal 2008, we expanded our computer-assisted ordering and perpetual inventory pilot from two to four of our corporate-owned stores for the grocery, frozen, dairy, general merchandise and HBC departments. We also deployed a new promotion planning and Ad layout system for use by our Marketing and Merchandising departments.

          Financial Systems. During fiscal 2008, we enhanced our budgeting and forecasting system. We also continued to increase the number of automated interfaces with our business partners to our financial systems. We deployed associate self-service support for our benefits and human resource management system, and we enhanced our capabilities for organization management and change tracking in our human resource system.

          Information Technology. We upgraded and expanded our storage infrastructure at our production and backup data centers. We continued to enhance the processing infrastructure at our back up data center.

Subsidiaries

          Our Distribution segment consists primarily of our wholly-owned subsidiary, Spartan Stores Distribution, LLC. We operate our Retail segment through our wholly-owned subsidiary, Seaway Food Town, Inc. and its respective subsidiaries.

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Associates

          We currently employ approximately 8,100 associates, 4,300 of which are full-time and 3,800 of which are part-time.

          Unions represent approximately 11% of our associates. A contract covering 180 distribution center and transportation associates expires in April 2010. Contracts covering approximately 660 distribution center and transportation associates expire in October 2011.

          We consider our relations with our union and non-union associates to be good and have not had any material work stoppages in over twenty years.

Regulation

          We are subject to federal, state and local laws and regulations covering the purchase, handling, sale and transportation of our products. Several of our products are subject to federal Food and Drug Administration regulation. We believe that we are in substantial compliance with Food and Drug Administration and other federal, state and local laws and regulations governing our businesses.

Forward-Looking Statements

          The matters discussed in this Item 1 include forward-looking statements. See "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K.

Available Information

          The address of our web site is www.spartanstores.com. The inclusion of our website address in this Form 10-K does not include or incorporate by reference the information on or accessible through our website, and you should not consider information contained on or accessible through those websites as part of this Form 10-K. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports (and amendments to those reports) filed or furnished pursuant to Section 13(a) of the Securities Exchange Act available on our web site as soon as reasonably practicable after we electronically file or furnish such materials with the Securities and Exchange Commission. Interested persons can view such materials without charge by clicking on "Investor Information" and then "SEC Filings" on our web site. Spartan Stores is an "accelerated filer" within the meaning of Rule 12b-2 under the Securities Exchange Act.

Item 1A. Risk Factors

          Our business faces many risks. These risks include those described below and may include additional risks and uncertainties not presently known to us or risks that we currently deem immaterial or unlikely. If any of the events or circumstances described in the following risk factors occurs, our financial condition or results of operations may suffer, and the trading price of our common stock could decline. This discussion of risk factors should be read in conjunction with the other information in this Annual Report on Form 10-K. All of our forward-looking statements are affected by the risk factors discussed in this item and this discussion of risk factors should be read in conjunction with the discussion of forward-looking statements which appears at the beginning of this report.

We operate in an extremely competitive industry. Many of our competitors are much larger than we are and may be able to compete more effectively.

          Our Distribution and Retail segments compete with, among others, regional and national grocery distributors, independently owned retail grocery stores, large chain stores that have integrated wholesale and retail operations, mass merchandisers, limited assortment stores and wholesale membership clubs, some of whom have greater resources than we do.

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          This competition may result in reduced profit margins and other harmful effects on us and the independent retail grocery stores that we supply. Ongoing industry consolidation could result in our loss of customers that we currently supply and could confront our retail operations with competition from larger and better-capitalized chains in existing or new markets. We may not be able to compete successfully in this environment.

Government regulation could harm our business.

          Our business is subject to extensive governmental laws and regulations including, but not limited to, employment and wage laws and regulations, regulations governing the sale of alcohol and tobacco, minimum wage requirements, working condition requirements, public accessibility requirements, citizenship requirements and other laws and regulations. A violation or change of these laws could have a material effect on our business, financial condition and results of operations.

          Like other companies that sell food, our stores are subject to various federal, state, local, and foreign laws, regulations, and administrative practices affecting our business. We must comply with numerous provisions regulating health and sanitation standards, facilities inspection, food labeling, and licensing for the sale of food, drugs, and alcoholic beverages.

          We cannot predict the nature of future laws, regulations, interpretations, or applications, or determine what effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state, local, and foreign regulatory requirements would have on our future business. They could, however, require that we recall or discontinue sale of certain products, make substantial changes to our facilities or operations, or otherwise result in substantial increases in operating expense. Any or all of such requirements could have an adverse effect on our results of operations and financial condition.

We are subject to state and federal environmental regulations.

          Under various federal, state and local laws, ordinances and regulations, we may, as the owner or operator of our locations, be liable for the costs of removal or remediation of contamination at these or our former locations, whether or not we knew of, or were responsible for, the presences of such contamination. The failure to properly remediate such contamination may subject us to liability to third parties and may adversely affect our ability to sell or lease such property or to borrow money using such property as collateral.

          Compliance with existing and future environmental laws regulating underground storeage tanks may require significant capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial.

          In the future, we may incur substantial expenditures for remediation of contamination that has not been discovered at existing or acquired locations. We cannot assure you that we have identified all environmental liabilities at all of our current and former locations; that material environmental conditions not known to us do not exist; that future laws, ordinances or regulations will not impose material environmental liability on us; or that a material environmental condition does not otherwise exist as to any one or more of our locations. In addition, failure to comply with any environmental laws, ordinances or regulations or an increase in regulations could adversely affect our operating results and financial condition.

Safety concerns regarding our products could harm our business.

          Concerns regarding the safety of food products sold by us could cause shoppers to avoid purchasing certain products from us, or to seek alternative sources of supply for some or all of their food needs, even if the basis for concern is outside of our control. Any loss of confidence on the part of our customers would be difficult and costly to re-establish. Any real or perceived issue regarding the safety of any food items sold by us, regardless of the cause, could have a substantial and adverse effect on our business.

- -12-

We may not be able to implement our strategy of growth through acquisitions.

          Part of our growth strategy involves selected acquisitions of additional retail grocery stores or grocery store chains. We may not be able to implement this part of our growth strategy or ultimately be successful. We may not be able to identify suitable acquisition candidates in the future, complete acquisitions or obtain the necessary financing.

          Because we operate in the Distribution business, future acquisitions of retail grocery stores could result in us competing with our independent grocery store customers and could have adverse effects on existing business relationships with our distribution customers.

          The success of our retail store acquisitions will depend, in part, on whether we obtain the business synergies and related cost savings that we anticipated in connection with these transactions and any future acquisitions. Accordingly, we may not achieve forecasted results and long-term business goals.

The sales of The Pharm stores are subject to certain closing conditions that, if not satisfied or waived, will result in the transactions not being completed.

          The pending sales of The Pharm stores have not closed at this time. If we do not complete the transactions, the market price of our common stock may fluctuate to the extent that the current market price reflects a market assumption that the transactions will be completed. We will also be obligated to pay certain professional fees and related expenses in connection with the transactions, whether or not the transactions are completed.

Our business is subject to risks from regional economic conditions and other factors in our markets.

          Our business is dependent upon the sale of groceries and related products to our customers. Most of our sales are to customers located in Michigan, Ohio and Indiana. Adverse economic conditions or reduction in the populations of or the loss of purchasing power by residents in those areas could reduce the amount of groceries purchased, which could adversely affect our revenues and profitability. Further adverse developments in the automotive and auto supply industries in Michigan and Indiana could have an additional adverse affect on purchasing power of our customers and prospective customers in some markets served by our retail stores and those of our distribution customers.

          Many of our retail grocery stores, as well as stores operated by our independent grocery store customers, are located in areas of northern Michigan that are heavily dependent upon tourism. Unseasonable weather conditions and higher fuel costs in these areas could result in decreased sales by our retail grocery stores and decreased sales to our distribution customers, adversely affecting our business.

We may be unable to retain our key management personnel.

          Our success depends to a significant degree upon the continued contributions of senior management. The loss of any key member of our management team may prevent us from implementing our business plans in a timely manner. We cannot assure you that successors of comparable ability will be identified and appointed and that our business will not be adversely affected.

A number of our associates are covered by collective bargaining agreements.

          Certain of our associates in our distribution business segment are covered by collective bargaining agreements, most of which expire at various times over the course of the next four years. In future negotiations with labor unions, we expect that rising health care, pension and employee benefit costs, among other issues, will continue to be important topics of negotiation. Upon the expiration of our collective bargaining agreements, work stoppages by the affected workers could occur if we are unable to negotiate acceptable contracts with labor unions. This could significantly disrupt our operations. Further, if we are unable to control health care and pension costs provided for in the collective bargaining agreements, we may experience increased operating costs and an adverse impact on future results of operations.

- -13-

Postretirement obligations could increase future expenses.

          We contribute to several multi-employer pension plans based on obligations arising under collective bargaining agreements. These plans are not administered by or in any way controlled by us and we have relatively little control over the level of contributions we are required to make to these plans. We believe a number of these multi-employer plans are underfunded. As a result, contributions are scheduled to increase and we expect that contributions to these plans may be subject to further increases. Additionally, the benefit levels and related issues will continue to create collective bargaining challenges. The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plans, governmental regulations, the actual return on assets held in the plan, the continued viability and contributions of other employers which contribute to the pla n, and the potential payment of a withdrawal liability if we choose to exit a market, among other factors.

          Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan's underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. Withrawal liabilities may be incurred under a variety of circumstances, including selling, closing or substantially reducing employment at a facility. Withdrawal liabilities could be material, and potential exposure to withdrawal liabilities may influence business decisions and could cause the company to forgo business opportunities.

          We maintain defined benefit retirement plans for substantially all of our employees that do not participate in multi-employer pension plans. Expenses associated with the defined benefit plans may significantly increase with changes to actuarial assumptions or investment returns on plan assets that are less favorable than projected.

Risks associated with insurance plan claims could increase future expenses.

          We use a combination of insurance and self-insurance to provide for potential liabilities for workers' compensation, automobile and general liability, property insurance, director and officers' liability insurance, and employee health care benefits. The liabilities that have been recorded for these claims represent our best estimate, using generally accepted actuarial reserving methods, of the ultimate obligations for reported claims plus those incurred but not reported for all claims incurred through March 29, 2008. Any actuarial projection of losses is subject to a high degree of variability. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, and changes in discount rates could all affect the level of reserves required and could cause material future expense to maintain reserves at appropriate levels.

Changes in vendor promotions or allowances, including the way vendors target their promotional spending, and our ability to effectively manage these programs could significantly impact our margins and profitability.

          We cooperatively engage in a variety of promotional programs with our vendors. As the parties assess the results of specific promotions and plan for future promotions, the nature of these programs and the allocation of dollars among them change over time. We carefully manage these programs in order to maintain or improve margins while at the same time increasing sales for us and for the vendors. A reduction in overall promotional spending or a shift in promotional spending away from certain types of promotions that we and our distribution customers have historically utilized could have a significant impact on profitability.

Unavailability of our information systems could harm our business.

          We have large, complex information technology systems that are important to our business operations. Although we have installed security programs and disaster recovery facilities and procedures, security could be compromised and systems disruptions could occur. This could result in a loss of sales or profits or cause us to incur significant costs to reimburse third parties for damages.

- -14-

Damage to our facilities could harm our business.

          A majority of the product we supply to our retail stores and distribution customers flows through our two distribution centers. While we believe we have adopted commercially reasonable precautions, insurance programs, and contingency plans, destruction of, or substantial damage to either of these facilities due to natural disaster, accident, terrorism, or other causes could substantially compromise our ability to distribute products to our retail stores and distribution customers. This could result in a substantial loss of sales, profits and asset value.

We are subject to restrictive covenants imposed by our credit facility.

          Our ability to borrow additional funds is governed by the terms of our credit facilities. The credit facilities contain financial and other covenants that, among other things, limit the Company's ability to draw down the full amount of facility, incur additional debt outside of the credit facility, create new liens on property, make acquisitions, or pay dividends. These covenants may affect our operating flexibility and may require us to seek the consent of the lenders to certain transactions that we may wish to carry out. We believe that cash generated from operating activities and available borrowings under our credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, and debt service obligations for the foreseeable future. However, there can be no assurance that our business will continue to generate cash flow at or above current levels or that we will maintain our ability to borrow under our credit facility.

Item 1B. Unresolved Staff Comments

          None.

- -15-

Item 2. Properties

Distribution Segment Real Estate

          The following table lists the location, approximate size and ownership of the facilities used in our Distribution segment:

Facilities	Location		Total Square Feet	Ownership
Dry grocery		Grand Rapids, MI	585,492	Owned
Fresh (refrigerated)		Grand Rapids, MI	306,522	Owned
General merchandise		Grand Rapids, MI	232,700	Owned
General office (including print shop)		Grand Rapids, MI	127,323	Owned
Transportation and salvage		Grand Rapids, MI	78,760	Owned
Warehouse and office		Grand Rapids, MI	66,626	Leased
Dry grocery		Plymouth, MI	414,700	Leased
Total			1,812,123

          The Company believes that its distribution facilities are generally well maintained, are generally in good operating condition, have sufficient capacity and are suitable and adequate to carry on the Company's distribution business.

Retail Segment Real Estate

          The following table lists the retail banner, number of stores, geographic region, approximate total square footage under the banner, average store size (in square feet) and ownership of our retail supermarkets:

Retail Banner	Number of Stores	Geographic Region	Total Square Feet	Average Store Size	Ownership
Family Fare Supermarkets	27	Western Michigan	1,203,619	44,578	Leased
Glen's Markets	34	Northern and Central Michigan	1,216,716	35,786	Leased
D&W Fresh Markets	10	Western Michigan	476,339	47,634	Leased
Felpausch Food Centers	13	Western and Central Michigan	466,656	35,897	Leased
Total	84		3,363,330	40,040

- -16-

          The following table lists the retail banner, number of stores, geographic region, approximate total square footage under the banner, average store size (in square feet) and ownership of our fuel centers:

Retail Banner	Number of Stores	Geographic Region	Total Square Feet	Average Store Size	Ownership
Family Fare Quick Stop	7	Western Michigan	8,340	1,191	Leased
Family Fare Quick Stop	2	Western Michigan	5,093	2,547	Owned
D&W Fresh Markets Quick Stop	2	Western Michigan	2,110	1,055	Leased
Glen's Quick Stop	4	Northern Michigan	5,634	1,409	Leased
Felpausch Quick Stop	1	Central Michigan	2,700	2,700	Leased
Total	16		23,877	1,492

Item 3. Legal Proceedings

          Various lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against Spartan Stores and its subsidiaries. While the ultimate effect of such lawsuits and claims cannot be predicted with certainty, management believes that their outcome will not result in a material adverse effect on the consolidated financial position, operating results or liquidity of Spartan Stores.

Item 4. Submission of Matters to a Vote of Security Holders

          No matters were submitted to a vote of Spartan Stores' shareholders during the fourth quarter of fiscal 2008 through the solicitation of proxies or otherwise.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

          Spartan Stores common stock is traded on the NASDAQ Global Select Market under the trading symbol "SPTN."

          Stock sale prices are based on transactions reported on the NASDAQ Global Select Market. Information on quarterly high and low sales prices for Spartan Stores' common stock appears in Note 14 to the consolidated financial statements and is incorporated here by reference. At May 13, 2008 there were approximately 552 shareholders of record of Spartan Stores common stock.

          The Company paid a quarterly cash dividend of $0.05 per common share in the fiscal 2006 fourth quarter, and in each quarter of fiscal 2007 and 2008. Under its senior revolving credit facility, the Company is generally permitted to pay dividends in any fiscal year up to an amount such that all cash dividends, together with any cash distributions or share repurchases, do not exceed $15.0 million. Although we expect to continue to pay a quarterly cash dividend, adoption of a dividend policy does not commit the board of directors to declare future dividends. Each future dividend will be considered and declared by the board of directors at its discretion. The ability of the board of directors to continue to declare dividends will depend on a number of factors, including our future financial condition and profitability and compliance with the terms of our credit facilities.

          See Item 12 for information regarding the Spartan Stores' equity compensation plans.

          There were no transactions regarding the Company's purchases of its own common stock during the fourth quarter. The Company has no public stock repurchase plans or programs.

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Item 6. Selected Financial Data

          The following table provides selected historical consolidated financial information of Spartan Stores. The historical information was derived from our audited consolidated financial statements as of and for each of the five fiscal years ended March 27, 2004 through March 29, 2008. As noted elsewhere in this Form 10-K, for all years presented, Consolidated Statements of Earnings information in this Form 10-K has been adjusted for the reclassification of discontinued operations information, unless otherwise noted. See Note 4 to the consolidated financial statements in Item 8 for additional information on discontinued operations. Fiscal 2007 consisted of fifty-three weeks. All other years presented consisted of fifty-two weeks.

(In thousands, except per share data)

	Year Ended
	March 29, 2008 (D)			March 31, 2007 (D)			March 25, 2006			March 26, 2005			March 27, 2004
Statements of Operations Data:
Net sales	$	2,476,822		$	2,206,270		$	1,872,854		$	1,861,111		$	1,861,864
Cost of sales		1,981,854			1,774,816			1,527,736			1,514,118			1,524,763
Gross margin		494,968			431,454			345,118			346,993			337,101
Selling, general and administrative    expenses		433,346			378,324			310,013			311,535			322,357
Provision for asset impairments and    exit costs (A)		- -			4,464			985			- -			715
Operating earnings		61,622			48,666			34,120			35,458			14,029
Interest expense		11,133			12,132			7,138			8,557			12,223
Debt extinguishment (B)		-			-			-			561			8,798
Other, net		(287	)		(647	)		(1,317	)		(898	)		(316	)
Earnings (loss) before income taxes and    discontinued operations		50,776			37,181			28,299			27,238			(6,676	)
Income taxes		18,265			13,013			9,650			8,316			(2,336	)
Earnings (loss) from continuing    operations		32,511			24,168			18,649			18,922			(4,340	)
Earnings (loss) from discontinued    operations, net of taxes (C)		1,795			992			(477	)		(96	)		(2,358	)
Net earnings (loss)	$	34,306		$	25,160		$	18,172		$	18,826		$	(6,698	)
Basic weighted average shares    outstanding		21,275			20,913			20,796			20,439			20,016
Diluted weighted average shares    outstanding		21,668			21,408			21,174			20,743			20,016
Basic earnings (loss) from continuing    operations per share	$	1.53		$	1.15		$	0.89		$	0.92		$	(0.22	)
Diluted earnings (loss) from continuing    operations per share		1.50			1.13			0.88			0.91			(0.22	)
Basic earnings (loss) per share		1.61			1.20			0.87			0.92			(0.33	)
Diluted earnings (loss) per share		1.58			1.18			0.86			0.91			(0.33	)
Cash dividends declared per share		0.20			0.20			0.05			-			-
Balance Sheet Data:
Total assets	$	610,137		$	487,499		$	378,597		$	384,457		$	392,864
Property and equipment, net		183,185			143,213			115,178			108,879			108,437
Working capital		20,499			27,213			20,736			30,258			38,125
Long-term obligations		143,574			106,341			64,015			91,946			124,616
Shareholders' equity		206,646			172,741			145,417			125,410			105,667

(A) See Note 5 to Consolidated Financial Statements

-19-

(B)	We recorded non-cash pre-tax charges of $0.6 million and $8.8 million during fiscal 2005 and fiscal 2004, respectively, for the write-off of unamortized financing fees as a result of refinancing activities.
(C)	See Note 4 to Consolidated Financial Statements
(D)	For information regarding the Felpausch and D&W acquisitions, refer to Note 2 to the consolidated financial statements set forth in Part II, Item 8 of this report.

-20-

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

          Spartan Stores is a leading regional grocery distributor and grocery retailer, operating principally in Michigan and Indiana.

          We currently operate two reportable business segments: Distribution and Retail. Our Distribution segment provides a full line of grocery, general merchandise, health and beauty care, frozen and perishable items to nearly 400 independently owned grocery stores and our 84 corporate owned stores. Our Retail segment operates 84 retail supermarkets in Michigan under the banners Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, and Felpausch Food Centers and 16 fuel centers/convenience stores under the banners Family Fare Quick Stop, Glen's Quick Stop, D&W Fresh Markets Quick Stop and Felpausch Quick Stop which are typically located adjacent to one of our supermarkets. Our retail supermarkets have a "neighborhood market" focus to distinguish them from supercenters and limited assortment stores.

          Our sales and operating performance vary with seasonality. Our first and fourth quarters are typically our lowest sales quarters and therefore operating results are generally lower during these two quarters. Additionally, these two quarters can be affected by the timing of the Easter holiday, which results in a strong sales week. Many northern Michigan stores are dependent on tourism, and therefore, are most affected by seasons and weather patterns, including, but not limited to, the amount and timing of snowfall during the winter months and the range of temperature during the summer months. All quarters are 12 weeks, except for our third quarter, which is 16 weeks and includes the Thanksgiving and Christmas holidays. Fiscal 2007 contained 53 weeks; therefore, the fourth quarter of fiscal 2007 consisted of 13 weeks rather than 12 weeks.

          On April 24, 2007, we reached an agreement to significantly expand our distribution supply relationship with Martin's Super Markets, an independent supermarket retailer with locations in southwest Michigan and north central Indiana. Our existing supply relationship expanded to include dry groceries, dairy and frozen products and our portfolio of corporate private label brands in addition to the existing health and beauty care products, general merchandise and pharmacy products. The expanded relationship includes all 20 locations of Martin's Super Markets. We expect annual distribution sales to increase by approximately $100 million after we have fully transitioned the customer, which occurred during September 2007. This relationship, our first major move to distribute to independent retailers outside the state of Michigan, significantly increases our distribution presence in Indiana and demonstrates a successful beginning to fulfill our stated business strategy of growin g our distribution customer base to contiguous midwestern states.

          On June 15, 2007, we acquired certain assets and assumed certain liabilities related to 20 retail grocery stores, two fuel centers and three convenience stores from G&R Felpausch Company and affiliated companies ("Felpausch"), a privately-held retail grocery operator serving south and central Michigan. The retail stores include the operations of nine in-store pharmacies. The transaction represents another step in the component of our business strategy focused on growing our business through opportunistic acquisitions of other grocery operators that are adjacent to or in markets where we operate today. The Felpausch stores serve many communities where we previously had no retail presence. They also provide a geographic fit with our current retail store footprint, while providing expansion into central Michigan.

          The Felpausch transaction is expected to increase annual retail segment sales by approximately $200 million, but annual consolidated sales are expected to increase by approximately $100 million as Felpausch was an existing distribution customer. The Company expects to realize many operational synergies from the transaction, however, the gains are initially expected to be more than offset by transition expenditures of approximately $5.0 million to $6.0 million. These transitional expenses are for marketing and promotional activities associated with merchandising, product and branding initiatives, as well as initial employee training and other costs associated with integrating the acquired operations and are expected to be primarily incurred over the first 15 to 21 months of operation.

- -21-

          We also operated 14 deep-discount food and drug stores under the banner The Pharm. We have entered into agreements to sell certain assets of 13 of the 14 stores. We are in negotiations to sell certain assets of the one remaining store. Divesting these stores will allow us to concentrate efforts and resources on business opportunities with the best long-term growth potential and focus more on core distribution and conventional supermarket operations. The Pharm has been included in discontinued operations in the accompanying consolidated financial statements for all years presented.

          The matters discussed in this Item 7 include forward-looking statements. See "Forward-Looking Statements" at the beginning and "Risk Factors" in Item 1A of this Annual Report on Form 10-K.

- -22-

Results of Operations

          The following table sets forth items from our Consolidated Statements of Earnings as a percentage of net sales and the year-to-year percentage change in dollar amounts:

	Percentage of Net Sales				Percentage Change
	March 29, 2008	March 31, 2007	March 25, 2006		2008/2007		2007/2006
Net sales	100.0	100.0	100.0		12.3		17.8
Gross margin	20.0	19.6	18.4		14.7		25.0
Selling, general and administrative    expenses	17.5	17.2	16.5		14.5		22.0
Provision for asset impairments and exit    costs	- -	0.2	0.1		(100.0	)	*
Operating earnings	2.5	2.2	1.8		26.6		42.6
Other income and expenses	0.5	0.5	0.3		(5.6	)	97.3
Earnings before income taxes and    discontinued operations	2.0	1.7	1.5		36.6		31.4
Income taxes	0.7	0.6	0.5		40.4		34.8
Earnings from continuing operations	1.3	1.1	1.0		34.5		29.6
Earnings (loss) from discontinued    operations, net of taxes	0.1	0.0	(0.0	)	80.9		*
Net earnings	1.4	1.1	1.0		36.4		38.5
* Percentage change is not meaningful

          Results of Continuing Operations for the Fiscal Year Ended March 29, 2008 Compared to the Fiscal Year Ended March 31, 2007

          Net Sales. Net sales increased $270.6 million, or 12.3%, from $2,206.3 million in fiscal 2007 to $2,476.8 million in fiscal 2008. The sales increase was primarily due to incremental sales from the Felpausch acquisition, new distribution customer business, higher fuel center sales, comparable store sales growth in our supermarkets, increased sales to existing distribution customers and incremental sales from the acquired PrairieStone pharmacies. The sales increase was partially offset by the absence of an extra week of sales included in the prior year fourth quarter, lost sales associated with the ending of two customer relationships during the prior year, and lost sales from two corporate-owned stores closed near the end of the first quarter of fiscal 2007.

          Net sales in our Distribution segment, after intercompany eliminations, increased $46.2 million, or 3.7%, from $1,238.1 million to $1,284.3 million primarily due to addition of new distribution customers of $159.0 million and an increase in sales to existing customers of $19.5 million primarily as a result of a retail competitor exiting the eastern Michigan market, partially offset by the elimination of sales to Felpausch stores of $101.7 million (due to the acquisition), an extra week of sales in fiscal 2007 of $22.9 million and lost sales of $7.7 million as a result of terminated customer relationships in fiscal 2007. In April of 2007, we reached an agreement to significantly expand our supply relationship with Martin's Super Markets. As a result, we expect annual distribution sales to increase by approximately $100 million after we have fully transitioned the customer, which occurred during September 2007. Fiscal 2008 incremental sales to Martin's Super Markets were a pproximately $87.0 million.

          Net sales in our Retail segment increased $224.3 million, or 23.2%, from $968.2 million to $1,192.5 million. The sales increase was primarily due to incremental sales from the recently acquired Felpausch retail stores of $160.4 million, increases in fuel center sales of $40.4 million, supermarket comparable sales growth of $31.5 million, and incremental sales resulting from the acquisition of the PrairieStone pharmacies of $11.5 million, partially offset by lost sales relating to the previously disclosed closing of two retail stores near the end of the prior year first quarter of $3.1 million and an extra week of sales included in the prior year of $16.4 million. Total retail comparable store sales increased 6.1 percent in fiscal 2008 due to our ongoing capital investment program, including

- -23-

store remodels, the opening of additional fuel centers and the PrairieStone Pharmacy acquisition. Excluding sales from fuel centers, the PrairieStone Pharmacy acquisition and the impact of the extra week of sales in the prior year, comparable store sales increased 3.4 percent. We define a retail store as comparable when it is in operation for 14 accounting periods (a period equals four weeks), and we include remodeled, expanded and relocated stores in comparable stores.

          During the past three fiscal years, 12 competitor supercenters opened in markets where we operate corporate-owned stores. Two additional openings are expected in our owned store markets during fiscal 2009. The new competitor supercenter openings are expansions of existing discount stores or are in markets already served by a supercenter; therefore, we believe that our operating practices will allow us to sustain our growth.

          Cost of Sales and Gross Margin. Gross margin represents net sales less cost of sales, which include purchase costs and promotional allowances. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs, such as setting up warehouse infrastructure. Vendor allowances associated with product cost are recognized as a reduction in cost of sales when the product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.

          Gross margin increased by $63.5 million, or 14.7%, from $431.5 million to $495.0 million. As a percent of net sales, gross margin increased from 19.6% to 20.0%. The gross margin rate improvement was primarily due to a larger concentration of higher margin retail sales as a percentage of consolidated sales and an improvement in distribution segment gross margin primarily due to the elimination of sales to our Felpausch stores, partially offset by an increase in LIFO expense of $2.3 million due to higher product costs, growth in lower margin fuel and pharmacy sales and additional promotional activity during grand re-openings of five remodeled stores and one replacement store which have resulted in increased sales and market share. We expect to continue to add supermarket fuel centers, which generate lower profit margins but allow us to increase sales in the adjacent supermarket, as well as offer the consumer a convenience alternative.

          Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancy costs, utilities, equipment rental, depreciation and other administrative costs.

          SG&A expenses increased $55.0 million, or 14.5%, from $378.3 million to $433.3 million, and were 17.5% of net sales compared to 17.2% last year. The net increase in SG&A is due primarily to the following:

• Incremental operating costs associated with the acquired retail stores of $42.0 million, including approximately $0.6 million of training and other start-up related costs, and also including $1.3 million of costs for grand re-openings of five remodeled stores and one relocated store

• Increases in other compensation and benefits of $6.2 million due to increased sales volume and the absence of a $1.3 million insurance reserve adjustment recorded in the prior year

• Increased store labor of $2.9 million primarily due to increases in volume, including costs associated with grand re-openings of five remodeled stores and one replacement store

• The cost of operating additional fuel centers of $2.5 million

• Increased transportation fuel costs of $1.1 million

• Increased depreciation and amortization of $0.9 million

          The increased SG&A expenses were partially offset by reduced operating costs due to the closure of two supermarkets near the end of the prior year first quarter of $1.1 million.

          Interest Expense. Interest expense decreased $1.0 million, or 8.2%, from $12.1 million to $11.1 million, and was 0.4% of net sales compared to 0.5% last year. The decrease in interest expense is primarily due to the amendment of our existing revolving credit facility and the issuance of convertible senior notes, the proceeds of which were used to pay down amounts owed under our revolving credit facility, which has a higher interest rate. The effect of the lower rates was partially offset by an increase in outstanding debt due to the Felpausch acquisition. See

- -24-

the Liquidity and Capital Resources section for additional information on the issuance of convertible senior notes. Total average borrowings increased $36.0 million from $122.0 million in the prior year to $158.0 million.

          In accordance with Emerging Issues Task Force ("EITF") Issue No. 87-24, "Allocation of Interest to Discontinued Operations," interest was allocated to discontinued operations based on the principal amount of debt that could be paid with the proceeds from the sale of such operations, and is allocated based on the ratio of net assets to be sold or discontinued to the sum of total net assets of the consolidated entity plus consolidated debt other than (a) debt of the discontinued operation that will be assumed by the buyer, (b) debt that is required to be paid as a result of the disposal transaction, and (c) debt that can be directly attributed to other operations. Interest expense of $0.2 million and $0.6 million was allocated to, and is included in, earnings from discontinued operations in the Consolidated Statements of Earnings for fiscal 2008 and fiscal 2007, respectively. Interest expense allocated to discontinued operations decreased in fiscal 2008 due to the decrease in consolidated interest expense and a decrease in the net assets ratio.

          The weighted average interest rate, including financing fee amortization, decreased to 6.71% for fiscal 2008 from 9.73% for fiscal 2007.

          Other, net. Other, net decreased $0.3 million, from $0.6 million to $0.3 million. Fiscal 2008 includes a gain on the disposal of businesses of $0.1 million. Fiscal 2007 includes a gain on the sale of land and a building facility not used in operations of $0.5 million.

          Income Taxes. The effective tax rate is 36.0% and 35.0% for fiscal 2008 and fiscal 2007, respectively. The difference from the statutory rate in fiscal 2008 is primarily due to State of Michigan income taxes. On January 1, 2008 a new income tax for the State of Michigan became effective which replaced the Michigan Single Business Tax ("MSBT"). The MSBT was not considered an income tax and was included in SG&A expenses. MSBT expense, net of Federal income tax benefit, was $0.8 million and $0.7 million for fiscal 2008 and fiscal 2007, respectively. The new state income tax is expected to be a larger burden on our net earnings than the former MSBT.

Results of Continuing Operations for the Fiscal Year Ended March 31, 2007 Compared to the Fiscal Year Ended March 25, 2006

          Net Sales. Net sales increased $333.4 million, or 17.8%, from $1,872.9 million in fiscal 2006 to $2,206.3 million in fiscal 2007. The sales increase was due primarily to incremental sales from the D&W acquisition, new distribution customer business, increased sales to existing distribution customers, an extra week in fiscal 2007 (a 53 week year), higher fuel center sales, incremental sales from the acquired PrairieStone pharmacies and comparable store sales growth in our supermarkets. The sales increase was partially offset by lost sales associated with the ending of two customer relationships in the third quarter and lost sales from two corporate-owned stores closed near the end of the first quarter.

          Net sales in our Distribution segment, after intercompany eliminations, increased $82.2 million, or 7.1%, from $1,155.9 million to $1,238.1 million primarily due to new distribution customer business of $46.4 million, increased sales to existing customers of $24.8 million and additional sales from the extra week in fiscal 2007 totaling $22.9 million, partially offset by lost sales associated with the ending of relationships with two unprofitable customers totaling $11.9 million. Annual net sales to these two customers for fiscal 2006 totaled approximately $19 million, or less than two percent of annual distribution net sales.

          Net sales in our Retail segment increased $251.2 million, or 35.0%, from $717.0 million to $968.2 million. The sales increase was due primarily to incremental sales from the acquired D&W retail stores of $200.5 million, higher fuel center sales of $26.2 million, additional sales from the extra week in fiscal 2007 totaling $19.4 million, incremental sales from the acquired PrairieStone pharmacies of $9.3 million, and comparable supermarket stores sales growth. Partially offsetting the sales increase were lost sales of $12.5 million from two stores closed near the end of the first quarter as part of our store base rationalization effort. Total retail comparable store sales increased 7.4 percent in fiscal 2007. Excluding sales from fuel centers and the extra week, comparable store sales increased 2.3 percent.

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          Cost of Sales and Gross Margin. Gross margin represents net sales less cost of sales, which include purchase costs and promotional allowances. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs, such as setting up warehouse infrastructure. Vendor allowances associated with product cost are recognized as a reduction in cost of sales when the product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.

          Gross margin increased by $86.3 million, or 25.0%, from $345.1 million to $431.5 million. As a percent of net sales, gross margin increased from 18.4% to 19.6%. The gross margin rate increase was primarily due to a higher concentration of higher-margin retail sales in fiscal 2007, partially offset by an increase in lower-margin pharmacy and fuel sales. We expect to continue to add supermarket fuel centers, which generate lower profit margins but allow us to increase sales in the adjacent supermarket, as well as, offer the consumer a convenience alternative.

          Selling, General and Administrative Expenses. SG&A expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancy costs, utilities, equipment rental, depreciation and other administrative costs.

          SG&A expenses increased $68.3 million, or 22.0%, from $310.0 million to $378.3 million, and were 17.2% of net sales in fiscal 2007 compared to 16.5% in fiscal 2006. The net increase in SG&A is due primarily to the following:

• Incremental expenses associated with the acquired stores of $56.4 million, including $1.1 million of training and other start-up related costs related to the D&W acquisition in the first quarter

• Increased compensation and benefits of $14.5 million, including increases driven by increased sales volume and inflation, incentive compensation, stock compensation and a union contract signing bonus

• Incremental expenses associated with the extra week in fiscal 2007 of $2.1 million

• The costs of operating additional fuel centers of $1.4 million

• Increased fuel costs of $0.7 million

• A contract termination fee received in the prior year of $0.6 million

          The increased SG&A expenses were partially offset by a reduction in expenses due to the closure of two stores in the first quarter of fiscal 2007 totaling $3.4 million and a reduction in legal and professional fees associated with the conclusion of the review of strategic alternatives and a contract dispute resolution in fiscal 2006 of $1.4 million.

          Provision for Asset Impairments and Exit Costs. In the first quarter of fiscal 2007, the Retail segment recognized charges of $4.5 million for asset impairment and lease and related ancillary costs related to the closure of two Family Fare Supermarkets stores and moving the central bakery operation into individual retail stores. The store base rationalization and associated charge was incurred due to the proximity of acquired stores to our existing store base. This limited reduction of our store network was based on an evaluation of stores that were best positioned to provide customers with the highest quality overall shopping experience. The central bakery decision was based on the desire to move the production of bakery products closer to the consumer, and the economics of the central bakery operation.

          Asset impairments and exit costs were $1.0 million in fiscal 2006. In fiscal 2006, an asset impairment charge of $0.3 million was incurred related to banana ripening equipment that was replaced, an asset impairment charge of $0.2 million was incurred related to a store closure and the exit cost reserve was increased $0.5 million due to changes in real estate market conditions and resulting estimated sublease income.

          Interest Expense. Interest expense increased $5.0 million, or 70.0%, from $7.1 million to $12.1 million, and was 0.5% of net sales in fiscal 2007 compared to 0.4% in fiscal 2006. Interest expense increased principally due to an increase in total average borrowings as a result of acquisitions and multiple rate increases. Total average borrowings increased $40.9 million from $81.1 million in the prior year to $122.0 million.

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          Interest expense of $0.6 million and $0.5 million was allocated to, and is included in, earnings (loss) on discontinued operations in the Consolidated Statements of Earnings for fiscal 2007 and fiscal 2006, respectively. Allocated interest expense increased in fiscal 2007 due to the increase in consolidated total average borrowings.

          The weighted average interest rate, including financing fee amortization, increased to 9.73% for fiscal 2007 from 8.65% for fiscal 2006.

          Other, net. Other, net decreased $0.7 million, from $1.3 million to $0.6 million. Fiscal 2007 includes a gain on the sale of land and a building facility not used in operations of $0.5 million. Fiscal 2006 included a gain on the sale of land not used in operations of $1.4 million.

          Income Taxes. The effective tax rate was 35.0% and 34.1% for fiscal 2007 and fiscal 2006, respectively. The difference from the statutory rate in fiscal 2006 was due to tax credits of $0.3 million.

Discontinued Operations

          Our former convenience distribution operations, insurance operations and certain of our retail, grocery distribution and real estate operations have been recorded as discontinued operations. Results of the discontinued operations are excluded from the accompanying notes to the condensed consolidated financial statements for all periods presented, unless otherwise noted.

          During the second quarter of fiscal year 2008, Spartan Stores decided to close five The Pharm stores and one Felpausch Xpressmart. The decision to close the stores was based on a comprehensive evaluation of the stores' performance trends, long-term growth prospects, on-going capital requirements and lease expiration dates. As Spartan Stores will have no continuing interest in the operations of these stores, they have been classified as discontinued operations for all years presented. Prescription lists and pharmacy inventories were sold for $4.7 million, and asset impairment charges of $0.9 million were recognized. The stores were closed early in the third quarter of fiscal 2008.

          During the fourth quarter of fiscal year 2008, we approved a plan to sell the remaining 14 The Pharm stores. In April 2008, we entered into agreements to sell certain assets of 13 of the 14 stores and we are in negotiations to sell certain assets of the one remaining store. Divesting these stores will allow us to concentrate efforts and resources on business opportunities with the best long-term growth potential and focus more on core distribution and conventional supermarket operations. As a result of the plan to dispose of these stores, the results of operations of these stores have been classified as discontinued operations in the consolidated financial statements. Proceeds from the transactions are expected to approximate $20 million. A minor gain on the disposal is currently anticipated dependent on the final negotiations of the one remaining store.

Critical Accounting Policies

          This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, assets held for sale, long-lived assets, income taxes, self-insurance reserves, exit costs, retirement benefits, stock-based compensation and contingencies and litigation. We base our estimates on historical experience and on various other assumptions and factors that we believe to be reasonable under the circumstances. Based on our ongoing review, we make adjustments we consider appropriate under the facts and circumstances. We have discussed the development, selection and disclosure of these policies with the Audit Committee.

          We believe that the following represent the more critical estimates and assumptions used in the preparation of our consolidated financial statements.

          Inventories. Inventories are valued at the lower of cost or market using the last-in, first-out ("LIFO") method. If replacement cost had been used, inventories would have been $45.4 million and $42.6 million higher at March 29, 2008 and March 31, 2007, respectively. We use the retail inventory method ("RIM") and replacement

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cost method to determine the cost of our inventory. Under the RIM method, inventory is stated at cost with cost of sales and gross margin calculated by applying a cost ratio to the retail value of inventories. The replacement cost method utilizes the most current unit purchase cost to calculate the value of inventories. We evaluate inventory shortages throughout the year based on actual physical counts in our facilities. We record allowances for inventory shortages based on the results of recent physical counts to provide for estimated shortages from the last physical count to the financial statement date.

          Vendor Funds. We receive funds from many of the vendors whose products we buy for resale in our corporate-owned stores and to our independent retail customers. Given the highly promotional nature of the retail supermarket industry, vendor allowances are generally intended to defray the costs of promotion, advertising and selling the vendor's products. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs such as setting up warehouse infrastructure. The proper recognition and timing of accounting for these items are significant to the reporting of the results of our operations. In accordance with EITF Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor," vendor allowances are rec ognized as a reduction in cost of sales when the related product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.

          Goodwill. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," goodwill is reviewed for impairment on an annual basis. Fair value is determined based on the discounted cash flows and comparable market values of the segment. Determining market values using a discounted cash flow method requires that we make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Our judgments are based on historical experience, current market trends and other information. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different assumptions could result in different outcomes. In estimating future cash flows, we rely on internally generated five-year forecasts for sales and operating profits, including capital expenditures and a 3% long-term assumed growth rate of cash flows for periods after the five-year forecast. We generally develop these forecasts based on recent sales data for existing operations and other factors. Based on our annual review during fiscal years 2008, 2007 and 2006, no goodwill impairment charge was required to be recorded. No goodwill impairment charge would be required even if the current estimate of future discounted cash flows was 10% lower.

          Impairment of Long-Lived Assets Other Than Goodwill. Long-lived assets to be held and used are evaluated for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable. When the undiscounted future cash flows are not sufficient to recover an asset's carrying amount, the fair value is compared to the carrying value to determine the impairment loss to be recorded. No material impairments for long-lived assets to be held and used were determined to exist for fiscal years 2008, 2007 and 2006.

          Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less costs to sell. Fair values are determined by independent appraisals, quotes or expected sales prices developed by internal real estate professionals. Estimates of expected sales prices are judgments based upon our experience, knowledge of market conditions and current offers received. Changes in market conditions, the economic environment and other factors can significantly impact these estimates. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, different assumptions could result in a different outcome.

          Insurance Reserves. We are primarily self-insured for costs related to workers' compensation, health insurance and general liability claims. We record our self-insurance liabilities based on claims filed and estimates of claims incurred but not yet reported, discounted at a risk-free interest rate. Any projection of losses concerning workers' compensation, health care and general liability is subject to a considerable degree of variability. Among the causes of variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although our estimates of liabilities incurred do not anticipate significant changes in historical trends for these variables, such changes could have a material impact on future claim costs and currently recorded liabilities. We had reserves of $7.0 million and $8.1 million as of March 29, 2008 and March 31, 200 7, respectively.

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          Exit Costs. We record exit costs for closed stores that are subject to long-term lease commitments based upon the future minimum lease payments and related ancillary costs from the date of closure to the end of the remaining lease term, net of estimated sublease rentals that could be reasonably expected to be obtained for the property. Future cash flows are based on contractual lease terms and knowledge of the market in which the closed store is located. These estimates are subject to multiple factors, including inflation, ability to sublease the property and other economic conditions. Internally developed estimates of sublease rentals are based upon the market in which the property is located, the results of previous efforts to sublease similar property and the current economic environment. Reserves may be adjusted in the future based upon the actual resolution of each of these factors. At March 29, 2008 exit costs of $36.1 million are recorded net of appr oximately $0.6 million of estimated sublease rentals. The following table provides the activity of exit costs for fiscal years 2008, 2007 and 2006:

(In thousands)	Lease and Ancillary Costs
Balance at March 27, 2005	$	15,520
Provision for lease and related ancillary costs, net of estimated sublease recoveries		2,719
Provision for pension withdrawal liability		1,654
Payments, net of interest accretion		(4,576	)
Balance at March 25, 2006		15,317
Exit costs assumed in acquisition of D&W (see Note 2 to the consolidated financial    statements)		19,231
Exit costs assumed in Carter's acquisition (see Note 2 to the consolidated financial statements)		552
Provision for lease and related ancillary costs, net of estimated sublease recoveries		4,050
Payments, net of interest accretion		(6,447	)
Balance at March 31, 2007		32,703
Exit costs assumed in Felpausch acquisition (see Note 2 to the consolidated financial    statements)		11,305
Changes in estimates		(1,868	)
Payments, net of interest accretion		(6,013	)
Balance at March 29, 2008	$	36,127

          Pension. Accounting for defined benefit cash balance pension plans involves estimating the cost of benefits to be provided in the future, based on vested years of service, and attributing those costs over the time period each employee works. The significant factors affecting our pension costs are the fair value of plan assets and the selection of management's key assumptions, including the expected return on plan assets, rate of compensation increases and discount rate used by our actuary to calculate our liability. We consider current market conditions, including changes in interest rates and investment returns, in selecting these assumptions. Our discount rate is based on current investment yields on high quality fixed-income investments and projected cash flow obligations. The discount rate used to determine fiscal 2008 pension expense was 6.25%. Expected return on plan assets is based on historical experience of the plan's portfolio and the review of pr ojected returns by asset class on broad, publicly traded equity and fixed-income indices, as well as target asset allocation. Our target allocation mix is designed to meet our long-term pension requirements. For fiscal 2008, our assumed rate of return was 8.50%. Over the ten-year period ended March 29, 2008, the average actual return was approximately 7.3%. We maintained our rate of increases in compensation at 4.00%. While we believe the assumptions selected are reasonable, significant differences in our actual experience, plan amendments or significant changes in the fair value of our plan assets may materially affect our pension obligations and our future expense. A one point increase or decrease in the discount rate would have decreased/increased fiscal 2008 pension expense by less than $0.1 million. A one point increase/decrease in the expected return on plan assets would have decreased/increased fiscal 2008 pension expense by $0.4 million.

          In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements Nos. 87, 88, 106 and 132(R)" (SFAS 158). SFAS 158 required that we recognize the funded status of defined benefit postretirement plans as an asset or liability in the consolidated balance sheet and to recognize changes in funded status through comprehensive income as of March 31, 2007. SFAS 158 also requires that employers measure plan assets and obligations as of the date of their

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year-end financial statements beginning with our fiscal year ending March 28, 2009. We are currently evaluating the impact of changing the measurement date on the consolidated financial statements.

          The funded (unfunded) status of our defined benefit plans was $0.1 million and ($2.5) million for 2008 and 2007, respectively. The increase in the funded balance during fiscal 2008 is a result of actual return on plan assets of 6.4% and Company contributions exceeding service and interest costs by $4.5 million, offset by an actuarial loss of $1.9 million. Plan assets increased by 12.2% primarily due to market gains on assets and company contributions of $7.8 million partially offset by benefit payments during the year of $5.1 million. Pension expense was $2.2 million and $2.0 million in fiscal 2008 and fiscal 2007, respectively.

Liquidity and Capital Resources

          The following table summarizes our consolidated statements of cash flows for fiscal years 2008, 2007 and 2006:

(In thousands)

	March 29, 2008			March 31, 2007			March 25, 2006
Net cash provided by operating activities	$	67,777		$	58,594		$	49,814
Net cash used in investing activities		(87,946	)		(77,639	)		(27,178	)
Net cash provided by (used in) financing activities		21,940			20,370			(29,437	)
Net cash provided by (used in) discontinued operations		6,033			3,083			(424	)
Net increase (decrease) in cash and cash equivalents		7,804			4,408			(7,225	)
Cash and cash equivalents at beginning of year		12,063			7,655			14,880
Cash and cash equivalents at end of year	$	19,867		$	12,063		$	7,655

          Net cash provided by operating activities increased during fiscal 2008 primarily due to an increase in net earnings and favorable changes in working capital, partially offset by a pension plan funding contribution. The increase during fiscal 2007 was primarily due to an increase in net earnings and favorable changes in working capital related to certain operating assets and the timing of benefit accruals.

          During fiscal 2008, our Federal income tax net operating loss carryforward was fully utilized. As a result, we paid $2.1 million of Federal income taxes in fiscal 2008, compared to $0.6 million and $0.2 million in Alternative Minimum Tax in fiscal years 2007 and 2006, respectively.

          Net cash used in investing activities increased in fiscal 2008 and fiscal 2007 due to acquisitions and increased capital expenditure activity. We paid a total cash purchase price of $49.1 million and $53.8 million for acquisitions in fiscal 2008 and fiscal 2007, respectively. Excluding the acquisitions, our Distribution and Retail segments utilized 21.0% and 79.0%, respectively, of our capital expenditure dollars for fiscal 2008. Expenditures were used for store replacements, remodels and refurbishments, new fuel centers and new equipment and software. Under the terms of our senior secured revolving credit facility, should our available borrowings fall below certain levels, our capital expenditures would be restricted each fiscal year. Our current available borrowings are over $156 million above these limits as of March 29, 2008 and we do not expect to fall below these levels. We expect capital expenditures to range from $60 million to $65 million for fiscal 2009. Our pl anned capital expenditures for fiscal 2009 include new stores and store remodels, fuel centers, new equipment and software.

          Net cash provided by (used in) financing activities includes cash paid and received related to our long-term borrowings, dividends paid and proceeds from the issuance of common stock. The increase in cash provided from financing activities in fiscal 2008 was due to proceeds from the issuance of $110 million of convertible senior notes that were used to reduce borrowings on the senior secured revolving credit facility, to pay related financing fees and to partially fund the Felpausch acquisition, partially offset by dividend payments of $4.4 million and other debt repayments. The increase in cash provided from financing activites in fiscal 2007 was due to borrowings on our revolving credit facility that were used to finance acquisitions and common stock proceeds, partially offset by dividend payments of $4.3 million and other debt repayments. Although we currently expect to continue to pay a quarterly cash dividend, adoption of a dividend policy does not commit the board of directors to declare future

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dividends. Each future dividend will be considered and declared by the board of directors in its discretion. Whether the board of directors continues to declare dividends depends on a number of factors, including our future financial condition and profitability and compliance with the terms of our credit facilities. Our current maturities of long-term debt and capital lease obligations at March 29, 2008 are $10.9 million. Our ability to borrow additional funds is governed by the terms of our credit facilities.

          Net cash provided by (used in) discontinued operations contains the net cash flows of our discontinued operations and consists primarily of the payment of store exit cost reserves, insurance run-off claims and other liabilities and proceeds from the sale of assets. Included in fiscal 2008 and 2007 cash flows from discontinued operations are proceeds on the disposal of assets of $3.6 million and $3.1 million, respectively. We expect the cash provided by our discontinued operations will be approximately $2.0 million to $5.0 million in fiscal 2009 depending on the final closings of The Pharm disposition transactions.

          Our principal sources of liquidity are cash flows generated from operations, proceeds from the issuance of convertible senior notes and our senior secured revolving credit facility. Interest on our convertible senior notes is payable on May 15 and November 15 of each year, beginning on November 15, 2007. The revolving credit facility matures December 2012, and is secured by substantially all of our assets. As of March 29, 2008, our revolving credit facility had no outstanding borrowings, available borrowings of $176.3 million and maximum availability of $186.3 million, which exceeds the minimum excess availability levels, as defined in the credit agreement.

          Prior to amending our credit facility in the first quarter of fiscal 2008, we had a $225.0 million senior secured revolving credit facility maturing December 2010. The amended credit facility extended the maturity by two years, and, at our option, we may increase the maximum amount available under the credit facility up to $275.0 million through increased commitments from lenders. Additional borrowing would be subject to existing asset levels. On August 17, 2007, Spartan Stores entered into an agreement to increase the maximum credit available under its existing senior secured credit facility from $225.0 million to $255.0 million.

          Available borrowings under the credit facility are based on stipulated advance rates on eligible assets, as defined in the credit agreement. The credit facility contains covenants that include a minimum fixed charge coverage ratio and maximum capital expenditures, as defined in the credit agreement. These covenants are not effective as long as we maintain minimum excess availability levels, as defined in the credit agreement. The credit facility provides for the issuance of letters of credit of which $4.3 million were outstanding and unused as of March 29, 2008. Borrowings under the revolving credit portion of the facility bear interest at the London InterBank Offered Rate ("LIBOR") plus 1.25%, adjusted based upon availability levels, or the prime rate (weighted average interest rate of 6.00% at March 29, 2008).

          Our current ratio decreased slightly to 1.11:1.00 at March 29, 2008 from 1.17:1.00 at March 31, 2007 and our investment in working capital was $20.5 million at March 29, 2008 versus $27.2 million at March 31, 2007. Our debt to total capital ratio at March 29, 2008 was 0.43:1.00 versus 0.39:1.00 at March 31, 2007. The change in these ratios was primarily due to obligations assumed related to the Felpausch acquisition and the timing and mix of payables and other liabilities.

          Our total capital structure includes borrowings under our credit facility, convertible senior notes, various other debt instruments, leases and shareholders' equity. Historically, we have financed our capital needs through a combination of internal and external sources. Management believes that cash generated from operating activities and available borrowings under the credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, dividend payments, and debt service obligations for the foreseeable future. However, there can be no assurance that our business will continue to generate cash flow at or above current levels or that we will maintain our ability to borrow under our credit facility.

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          The table below presents our significant contractual obligations as of March 29, 2008 ⁽¹⁾:

(In thousands)	Payment Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt	$	118,633	$	7,854	$	405	$	114	$	110,260
Estimated interest on long-    term debt (2)		72,855		4,004		7,489		7,469		53,893
Capital leases (3)		35,815		3,020		6,272		6,503		20,020
Interest on capital leases		19,866		2,977		5,218		4,148		7,523
Operating leases (3)		144,941		28,925		47,898		29,921		38,197
Lease and ancillary costs    of closed stores,    including imputed interest		40,716		9,460		15,732		8,101		7,423
Purchase obligations    (merchandise) (4)		922,130		213,691		416,097		280,600		11,742
FIN 48 unrecognized tax    liability		618		592		20		6		- -
Self-insurance liability		6,979		4,808		1,522		516		133
Total	$	1,362,553	$	275,331	$	500,653	$	337,378	$	249,191

(1) Excludes funding of pension and other postretirement benefit obligations, which totaled approximately $8.5 million in fiscal 2008. No payments are required to be made in fiscal 2009 to meet minimum funding requirements. However, Spartan Stores currently expects to contribute approximately $1.5 million to its defined benefit pension plan in fiscal 2009. Also excludes contributions under various multi-employer pension plans, which totaled $7.1 million in fiscal 2008. For additional information, refer to Note 9 to the consolidated financial statements.
(2) The interest on long-term debt for periods subsequent to fiscal 2013 reflects our convertible subordinated debt accreted interest for fiscal 2014 through 2028, should the convertible debt remain outstanding until maturity. Interest payments assume debt is held to maturity.
(3) Operating and capital lease obligations do not include common area maintenance, insurance or tax payments for which the Company is also obligated. In fiscal 2008, these charges totaled approximately $9.1 million.
(4) The majority of our purchases involve supply orders to purchase products for resale in the ordinary course of business. These contracts are typically cancelable and therefore no amounts have been included in the table above. Also excluded are contracts that do not contain minimum annual purchase commitments but include other standard contractual considerations that must be fulfilled in order to earn $4.6 million in advanced contract monies that has been received where recognition has been deferred on the Consolidated Balance Sheet. The purchase obligations shown in this table represent the amount of product we are contractually obligated to purchase to earn $7.3 million in advanced contract monies that are receivable under the contracts. At March 29, 2008, $3.2 million in advanced contract monies has been received under these contracts where recognition has been deferred on the Consolidated Balance Sheet. If we do not fulfill these purchase obligations, we would only be obligated to repay the unearned up front contract monies.

Indebtedness and Liabilities of Subsidiaries

          On May 30, 2007, the Company sold $110 million aggregate principal amount of 3.375% Convertible Senior Notes due 2027 (the "Notes") in an offering exempt from registration under the Securities Act of 1933. In connection with the closing of the sale of the notes, we entered into a registration rights agreement with the initial purchasers of the notes, pursuant to which we filed with the Securities and Exchange Commission (SEC) a shelf registration statement covering resale by security holders of the notes and the shares of our common stock issuable upon conversion of the notes. The registration statement was declared effective by the SEC on September 27, 2007.

          The Notes are general unsecured obligations and rank equally in right of payment with all of the Company's other existing and future obligations that are unsecured and unsubordinated.

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          Because the Notes are unsecured, they are structurally subordinated to our subsidiaries' existing and future indebtedness and other liabilities and any preferred equity issued by our subsidiaries. We rely in part on distributions and advances from our subsidiaries in order to meet our payment obligations under the notes and our other obligations. The Notes are not guaranteed by our subsidiaries. Many of our subsidiaries serve as guarantors with respect to our existing credit facility. Creditors of each of our subsidiaries, including trade creditors, and preferred equity holders, generally have priority with respect to the assets and earnings of the subsidiary over the claims of our creditors, including holders of the Notes. The Notes, therefore, are effectively subordinated to the claims of creditors, including trade creditors, judgment creditors and preferred equity holders of our subsidiaries. In addition, our rights and the rights of our creditors, including the holde rs of the notes, to participate in the assets of a subsidiary during its liquidation or reorganization are effectively subordinated to all existing and future liabilities and preferred equity of that subsidiary. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing such indebtedness and to existing and future indebtedness and other liabilities of our subsidiaries (including subsidiary guarantees of our senior credit facility).

          The following table shows the indebtedness and other liabilities of our subsidiaries as of March 29, 2008:

Spartan Stores Subsidiaries Only
(In thousands)

	March 29, 2008
Current Liabilities
Accounts payable	$	112,475
Accrued payroll and benefits		33,139
Other accrued expenses		22,276
Current portion of exit costs		9,280
Current maturities of long-term debt and capital lease obligations		10,874
Total current liabilities		188,044
Long-term Liabilities
Postretirement benefits		7,481
Other long-term liabilities		15,202
Exit costs		26,847
Long-term debt and capital lease obligations		33,568
Total long-term liabilities		83,098
Total Subsidiary Liabilities		271,142
Operating Leases		139,077
Total Subsidiary Liabilities and Operating Leases	$	410,219

Ratio of Earnings to Fixed Charges

          Our ratio of earnings to fixed charges was 3.38:1.00 and 2.76:1.00 for fiscal 2008 and fiscal 2007, respectively. For purposes of calculating the ratio of earnings to fixed charges, earnings consist of pretax earnings from continuing operations plus fixed charges (excluding capitalized interest). Fixed charges consist of interest costs, whether expensed or capitalized, the interest component of rental expense and amortization of debt issue costs, whether expensed or capitalized.

Off-Balance Sheet Arrangements

          We had letters of credit of $4.3 million outstanding and unused at March 29, 2008. The letters of credit are maintained primarily to support payment or deposit obligations. We pay a commission of approximately 2% on the face amount of the letters of credit.

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New Accounting Standards

          In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Further, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are to be applied prospectively. FIN 48 became effective at the beginning of our fiscal year 2008, and the adoption of FIN 48 increased retained earnings by approximately $1.0 million as of the beginning of fiscal year 2008. The adoption of FIN 48 and its effects are more fully described in Note 10 to the consolidated financial statements.

          In June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force (EITF) Issue No. 06-03, "How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross Versus Net Presentation)" (EITF 06-03). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 was effective at the beginning of our fiscal 2008 first quarter. An entity is not required to reevaluate its existing policies related to taxes assessed by a governmental authority as a result of this consensus. Amounts collected from members, which under common trade practices are referred to as sales taxes, are and have been recorded on a net basis. We have no intention of modifying this accounting policy; therefore, the adoption of EITF 06-03 did not have any effect on our financial position or results of operations.

          In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but applies under other accounting pronouncements that require or permit fair value measurements. SFAS 157 will become effective at the beginning of our fiscal year 2009, except as provided in FASB Staff Position (FSP) No. FAS 157-2. The provisions of the Statement are to be applied prospectively, except for limited retrospective application permitted for certain items. We are currently evaluating the impact, if any, that SFAS 157 will have on the consolidated financial statements. In February 2007, the FASB issued FSP No. FAS 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

          In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements Nos. 87, 88, 106 and 132(R)" (SFAS 158). SFAS 158 required that we recognize the funded status of defined benefit postretirement plans as an asset or liability in the consolidated balance sheet and to recognize changes in funded status through comprehensive income as of March 31, 2007. Effective March 31, 2007, we adopted these provisions of SFAS No. 158. The impact of adopting SFAS No. 158 on our financial condition at March 31, 2007 has been included in the accompanying consolidated financial statements. Adoption of SFAS No. 158 resulted in an increase of $0.3 million to Shareholders' Equity. SFAS 158 also requires that employers measure plan assets and obligations as of the date of their year-end financial statements beginning with our fiscal year ending March 28, 2009. We are currently evaluating the impac t of changing the measurement date on the consolidated financial statements.

          In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB No. 115" (SFAS 159). Under SFAS 159, entities may irrevocably elect to measure many financial instruments and certain other items at fair value on an instrument-by-instrument basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We do not expect to elect the optional provisions of SFAS 159, as allowed.

          In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations" (SFAS 141R), which replaces SFAS No. 141. SFAS 141R establishes principles and requirements for the reporting entity

- -34-

in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS 141R will become effective at the beginning of our fiscal year 2010, and must be applied prospectively to business combinations for which the acquisition date is on or after the beginning of fiscal year 2010. We are currently evaluating the impact that SFAS 141R will have on our future consolidated financial statements.

          In May 2008, the FASB issued FSP No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)," that changes the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP No. APB 14-1 will require us to recognize non-cash interest expense on our $110 million convertible senior notes based on the market rate for similar debt instruments without the conversion feature. FSP No. APB 14-1 will be effective at the beginning of fiscal year 2010 and must be applied on a retrospective basis. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

          We are exposed to industry related price changes on several commodities, such as dairy, meat and produce that we buy and sell in both our Distribution and Retail segments. These products are purchased for and sold from inventory in the ordinary course of business. We are also exposed to other general commodity price changes such as utilities, insurance and fuel costs.

          We are currently exposed to interest rate risk on our outstanding debt. The senior secured revolving credit facility currently bears interest at the LIBOR plus 1.25% or the prime rate (weighted average interest rate of 6.00% at March 29, 2008) on the revolving credit portion of the facility. An additional $0.4 million of our long-term debt is subject to fluctuations in the prime rate. The weighted average interest rates including loan fee amortization for fiscal years 2008, 2007 and 2006 were 6.71%, 9.73% and 8.65%, respectively. We do not use financial instruments or derivatives for any trading or other speculative purposes.

          The estimated fair value of our long-term debt, including current maturities, was lower than book value by approximately $23.5 million at March 29, 2008. The estimated fair value of our long-term debt, including current maturities, was higher than book value by approximately $0.2 million at March 31, 2007. The estimated fair values were based on market quotes for similar instruments.

          The following table sets forth the principal cash flows of our debt outstanding and related weighted average interest rates by year of maturity as of March 29, 2008:

(In thousands, except rates)

	March 29, 2008			Aggregate Payments by Fiscal Year
	Fair Value		Total	2009	2010	2011	2012	2013	Thereafter
Fixed rate debt
Principal payable	$	130,528	154,011	10,776	3,133	3,205	3,409	3,208	130,280
Average interest rate			4.77%	4.70%	4.58%	4.49%	4.40%	4.29%	4.13%
Variable rate debt
Principal payable	$	437	437	98	339	-	-	-	-
Average interest rate			6.00%	6.00%	6.00%

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Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Spartan Stores, Inc. and subsidiaries
Grand Rapids, Michigan

We have audited the accompanying consolidated balance sheets of Spartan Stores, Inc. and subsidiaries (the "Company") as of March 29, 2008 and March 31, 2007, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended March 29, 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Spartan Stores, Inc. and subsidiaries as of March 29, 2008 and March 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended March 29, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company changed its methods of accounting for income taxes as a result of adopting Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, in 2008.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of March 29, 2008, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 9, 2008 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
May 9, 2008

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CONSOLIDATED BALANCE SHEETS

Spartan Stores, Inc. and Subsidiaries
(In thousands)

Assets	March 29, 2008		March 31, 2007
Current assets
Cash and cash equivalents	$	19,867	$	12,063
Accounts receivable, net		59,885		45,347
Inventories, net		113,078		106,854
Prepaid expenses and other current assets		9,252		7,122
Deferred taxes on income		7,792		10,214
Property and equipment held for sale		2,404		3,595
Total current assets		212,278		185,195
Other assets
Goodwill		186,531		142,888
Other, net		28,143		16,203
Total other assets		214,674		159,091
Property and equipment
Land and improvements		12,393		12,677
Buildings and improvements		169,761		140,092
Equipment		266,424		239,884
Total property and equipment		448,578		392,653
Less accumulated depreciation and amortization		265,393		249,440
Property and equipment, net		183,185		143,213
Total assets	$	610,137	$	487,499

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS (continued)

Spartan Stores, Inc. and Subsidiaries
(In thousands)

Liabilities and Shareholders' Equity	March 29, 2008				March 31, 2007
Current liabilities
Accounts payable	$	112,899		$	93,729
Accrued payroll and benefits		35,723			33,367
Other accrued expenses		23,003			19,503
Current portion of exit costs		9,280			8,889
Current maturities of long-term debt and capital lease obligations		10,874			2,494
Total current liabilities		191,779			157,982
Long-term liabilities
Deferred income taxes		17,730			5,623
Postretirement benefits		8,127			9,208
Other long-term liabilities		15,434			11,790
Exit costs		26,847			23,814
Long-term debt and capital lease obligations		143,574			106,341
Total long-term liabilities		211,712			156,776
Commitments and contingencies (Note 7)
Shareholders' equity
Common stock, voting, no par value; 50,000 shares        authorized; 21,909 and 21,658 shares outstanding		130,718			126,447
Preferred stock, no par value, 10,000        shares authorized; no shares outstanding		- -			- -
Accumulated other comprehensive (loss) income		(1,142	)		126
Retained earnings		77,070			46,168
Total shareholders' equity		206,646			172,741
Total liabilities and shareholders' equity	$	610,137		$	487,499

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF EARNINGS

Spartan Stores, Inc. and Subsidiaries
(In thousands, except per share data)

	Year Ended
	March 29, 2008			March 31, 2007			March 25, 2006
Net sales	$	2,476,822		$	2,206,270		$	1,872,854
Cost of sales		1,981,854			1,774,816			1,527,736
Gross margin		494,968			431,454			345,118
Operating expenses
Selling, general and administrative		433,346			378,324			310,013
Provision for asset impairments and exit costs		-			4,464			985
Total operating expenses		433,346			382,788			310,998
Operating earnings		61,622			48,666			34,120
Other income and expenses
Interest expense		11,133			12,132			7,138
Other, net		(287	)		(647	)		(1,317	)
Total other income and expenses		10,846			11,485			5,821
Earnings before income taxes and     discontinued operations		50,776			37,181			28,299
Income taxes		18,265			13,013			9,650
Earnings from continuing operations		32,511			24,168			18,649
Earnings (loss) from discontinued operations, net of    taxes		1,795			992			(477	)
Net earnings	$	34,306		$	25,160		$	18,172
Basic earnings per share:
Earnings from continuing operations	$	1.53		$	1.15		$	0.89
Earnings (loss) from discontinued operations		0.08			0.05			(0.02	)
Net earnings	$	1.61		$	1.20		$	0.87
Diluted earnings per share:
Earnings from continuing operations	$	1.50		$	1.13		$	0.88
Earnings (loss) from discontinued operations		0.08			0.05			(0.02	)
Net earnings	$	1.58		$	1.18		$	0.86
Weighted average shares outstanding:
Basic		21,275			20,913			20,796
Diluted		21,668			21,408			21,174

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Spartan Stores, Inc. and Subsidiaries
(In thousands)

		Shares Outstanding		Common Stock		Deferred Stock-Based Compensation		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance - March 27, 2005		20,524		$  118,144		$          (719	)	$            (203	)	$     8,188		$  125,410
Comprehensive income, net of tax:
	Net earnings	-		-		-		-		18,172		18,172
	Minimum pension liability adjustment,    net of taxes of $39	- -		- -		- -		(73	)	- -		(73	)
	Total comprehensive income	-		-		-		-		-		18,099
	Dividends - $.05 per share	-		-		-		-		(1,050	)	(1,050	)
	Issuances of common stock and related    tax benefit on stock option exercises	294		1,703		- -		- -		- -		1,703
	Issuances of restricted stock and related    income tax benefits	252		3,616		(3,121	)	- -		- -		495
	Cancellations of restricted stock	(47	)	(207	)	126		-		-		(81	)
	Amortization of restricted stock	-		-		841		-		-		841
Balance - March 25, 2006		21,023		123,256		(2,873	)	(276	)	25,310		145,417
	Reclassification of deferred stock-    based compensation upon adoption    of SFAS 123(R)	- -		(2,873	)	2,873		- -		- -		- -
Comprehensive income, net of tax:
	Net earnings	-		-		-		-		25,160		25,160
	Minimum pension liability adjustment,    net of taxes of $78	- -		- -		- -		89		- -		89
	Total comprehensive income	-		-		-		-		-		25,249
	Adjustment to initially apply SFAS    No. 158, net of taxes of $169	- -		- -		- -		313		- -		313
	Dividends - $.20 per share	-		-		-		-		(4,302	)	(4,302	)
	Stock-based employee compensation	-		1,918		-		-		-		1,918
	Issuances of common stock and related    tax benefit on stock option exercises	430		4,110		- -		- -		- -		4,110
	Issuances of restricted stock and related    income tax benefits	268		415		- -		- -		- -		415
	Cancellations of restricted stock	(63	)	(379	)	-		-		-		(379	)
Balance - March 31, 2007		21,658		126,447		-		126		46,168		172,741
	Adjustment to initially apply FIN 48	-		-		-		-		967		967

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Comprehensive income, net of tax:
	Net earnings	-		-		-	-		34,306		34,306
	Pension liability adjustment, net of taxes    of $770	- -		- -		- -	(1,268	)	- -		(1,268	)
	Total comprehensive income	-		-		-	-		-		33,038
	Dividends - $.20 per share	-		-		-	-		(4,371	)	(4,371	)
	Stock-based employee compensation	-		3,018		-	-		-		3,018
	Issuances of common stock and related    tax benefit on stock option exercises	118		1,573		- -	- -		- -		1,573
	Issuances of restricted stock and related    income tax benefits	178		783		- -	- -		- -		783
	Cancellations of restricted stock	(45	)	(1,103	)	-	-		-		(1,103	)
Balance - March 29, 2008		21,909		$  130,718		$               -	$           (1,142	)	$    77,070		$  206,646

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Spartan Stores, Inc. and Subsidiaries
(In thousands)

	Year Ended
	March 29, 2008			March 31, 2007			March 25, 2006
Cash flows from operating activities
Net earnings	$	34,306		$	25,160		$	18,172
(Earnings) loss from discontinued operations		(1,795	)		(992	)		477
Earnings from continuing operations		32,511			24,168			18,649
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for asset impairments and exit costs		-			4,464			985
Depreciation and amortization		24,421			21,166			20,125
Postretirement benefits expense		2,195			2,260			2,458
Deferred taxes on income		18,227			12,774			9,677
Stock-based compensation expense		3,013			1,906			760
(Gain) loss on disposal of assets		15			(257	)		(1,147	)
Change in operating assets and liabilities:
Accounts receivable		(16,866	)		(1,510	)		(1,674	)
Inventories		(117	)		(5,479	)		(826	)
Prepaid expenses and other assets		(4,376	)		(571	)		669
Accounts payable		13,917			(305	)		5,400
Accrued payroll and benefits		1,603			5,115			(588	)
Postretirement benefits payments		(7,339	)		(3,695	)		(3,246	)
Other accrued expenses and other liabilities		573			(1,442	)		(1,428	)
Net cash provided by operating activities		67,777			58,594			49,814
Cash flows from investing activities
Purchases of property and equipment		(40,076	)		(26,734	)		(28,657	)
Net proceeds from the sale of assets		58			2,573			2,360
Acquisitions, net of cash acquired		(49,145	)		(53,773	)		-
Proceeds from business divestitures		1,266			-			-
Other		(49	)		295			(881	)
Net cash used in investing activities		(87,946	)		(77,639	)		(27,178	)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Spartan Stores, Inc. and Subsidiaries
(In thousands)

	Year Ended
	March 29, 2008			March 31, 2007			March 25, 2006
Cash flows from financing activities
Net (payments) proceeds from revolving credit facility	$	(76,819	)	$	23,884		$	(26,498	)
Proceeds from long-term borrowings		110,000			-			-
Repayment of long-term debt		(3,830	)		(2,330	)		(2,324	)
Financing fees paid		(3,775	)		(90	)		(447	)
Proceeds from sale of common stock		735			3,208			882
Dividends paid		(4,371	)		(4,302	)		(1,050	)
Net cash provided by (used in) financing activities		21,940			20,370			(29,437	)
Cash flows from discontinued operations
Net cash provided by operating activities		3,287			1,576			529
Net cash provided by (used in) investing activities		2,746			1,507			(444	)
Net cash used in financing activities		-			-			(509	)
Net cash provided by (used in) discontinued operations		6,033			3,083			(424	)
Net increase (decrease) in cash and cash equivalents		7,804			4,408			(7,225	)
Cash and cash equivalents at beginning of year		12,063			7,655			14,880
Cash and cash equivalents at end of year	$	19,867		$	12,063		$	7,655
Supplemental Cash Flow Information:
Cash paid for interest	$	9,765		$	12,259		$	7,740
Cash paid for income taxes	$	2,100		$	595		$	215

See notes to consolidated financial statements.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1
Summary of Significant Accounting Policies and Basis of Presentation

Principles of Consolidation: The consolidated financial statements include the accounts of Spartan Stores, Inc. and its subsidiaries ("Spartan Stores"). All significant intercompany accounts and transactions have been eliminated.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods might differ from those estimates.

Fiscal Year: Spartan Stores' fiscal year ends on the last Saturday of March. The fiscal years ended March 29, 2008, and March 25, 2006 consisted of 52 weeks. The fiscal year ended March 31, 2007 consisted of 53 weeks.

Revenue Recognition: The Retail segment recognizes revenues from the sale of products at the point of sale. Sales and excise taxes are excluded from revenue. The Distribution segment recognizes revenues when products are delivered or ancillary services are provided.

Cost of Sales: Cost of sales includes purchase costs, freight, physical inventory adjustments, markdowns and promotional allowances. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs such as setting up warehouse infrastructure. Vendor allowances are recognized as a reduction in cost of sales when the related product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.

Fair Value Disclosures of Financial Instruments: Financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts and notes receivable, and accounts payable approximate fair value at March 29, 2008 and March 31, 2007 because of the short-term nature of these financial instruments. The estimated fair value of long-term debt, including current maturities, was lower than book value by approximately $23.5 million at March 29, 2008. The estimated fair value of long-term debt, including current maturities, was higher than book value by approximately $0.2 million at March 31, 2007. The estimated fair values were based on market quotes for similar instruments.

Cash and Cash Equivalents: Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase.

Accounts Receivable: Accounts receivable are shown net of allowances for credit losses of $2.6 million in fiscal 2008 and $3.0 million in fiscal 2007. Spartan Stores evaluates the adequacy of its allowances by analyzing the aging of receivables, customer financial condition, historical collection experience, the value of collateral and other economic and industry factors. Operating results include bad debt expense of $0.1 million, $0.2 million, and $0.2 million for fiscal years 2008, 2007 and 2006, respectively.

Inventory Valuation: Inventories are stated at the lower of cost or market using the last-in, first-out ("LIFO") method. If replacement cost had been used, inventories would have been $45.4 million and $42.6 million higher at March 29, 2008 and March 31, 2007, respectively. During fiscal years 2008, 2007 and 2006, certain inventory quantities were reduced. The reductions resulted in liquidation of LIFO inventory carried at lower costs prevailing in prior years, the effect of which decreased the LIFO provision in fiscal years 2008, 2007 and 2006 by $1.3 million, $2.0 million and $0.9 million, respectively. Spartan Stores utilizes the retail inventory method to value inventory for the Retail segment. Under the retail inventory method, inventory is stated at cost with cost of sales and gross margin calculated by applying a cost ratio to the retail value of inventories.

- -44-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Long-Lived Assets Other than Goodwill: Spartan Stores reviews and evaluates long-lived assets for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable. When the undiscounted future cash flows are not sufficient to recover an asset's carrying amount, the fair value is compared to the carrying value to determine the impairment loss to be recorded. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less the cost to sell. Fair values are determined by independent appraisals or expected sales prices developed by internal licensed real estate professionals. Estimates of future cash flows and expected sales prices are judgments based upon Spartan Stores' experience and knowledge of operations. These estimates project cash flows several years into the future and are affected by changes in the economy, real estate market conditions and inflation.

Property and Equipment Held for Sale: Property and equipment held for sale consists of land, buildings and equipment that Spartan Stores expects to sell within 12 months. The assets are included in the following segments:

(In thousands)

	2008		2007
Distribution	$	-	$	154
Retail		36		3,053
Discontinued operations		2,368		388
Total	$	2,404	$	3,595

The fiscal 2008 balance consists primarily of assets of The Pharm stores planned to be sold. (See Note 4). The fiscal 2007 balance consisted primarily of a building that is no longer expected to be sold within 12 months.

Goodwill: Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in business combinations after amounts have been allocated to intangible assets. Goodwill is not amortized, but is reviewed at least annually for impairment using a discounted cash flow model and comparable market values of each reporting segment.

Other Assets: Included in Other assets are intangibles and debt issuance costs. Intangible assets primarily consist of favorable lease agreements, prescription lists, non-compete agreements, and franchise fees. Favorable leases are amortized on a straight-line basis over the lease terms of 2 to 19 years. Prescription lists are amortized on a straight-line basis over 7 to 15 years. Non-compete agreements are amortized on a straight-line basis over the length of the agreement of 4 to 15 years. Franchise fees are amortized on a straight-line basis over the term of the franchise agreement of 2 to 10 years. Debt issuance costs are amortized over the term of the related financing agreement.

Property and Equipment: Property and equipment are recorded at cost and depreciated over the shorter of the estimated useful lives or lease periods of the assets. Expenditures for normal repairs and maintenance are charged to operations as incurred. Depreciation is computed using the straight-line method as follows:

Land improvements	15 years
Buildings and improvements	15 to 40 years
Equipment	3 to 15 years

Software development costs are generally capitalized and amortized between 3 and 7 year periods commencing as each system is implemented.

Gains and (losses) on the disposal of property and equipment totaled $(0.1) million, $0.3 million and $1.1 million in fiscal years 2008, 2007 and 2006, respectively. Gains and losses on the disposal of property and equipment is included in "Selling, general and administrative expenses" and "Other, net" in the Consolidated Statements of Earnings.

Accounts Payable: Accounts payable also include checks that have been issued and have not cleared Spartan Stores' controlled disbursement bank accounts.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Insurance Reserves: Insurance reserves include provisions for workers' compensation, health and property insurance for which Spartan Stores is self-insured. Losses are recorded when reported and consist of individual case estimates. Incurred but not reported losses are actuarially estimated based on available historical information. Also included is a provision for losses related to reinsurance policies that insure the run-off of retained risk associated with the discontinued Insurance segment.

A summary of changes in Spartan Stores' self-insurance liability is as follows:

(In thousands)	March 29, 2008			March 31, 2007			March 25, 2006
Beginning balance	$	8,082		$	8,782		$	11,252
Expense		2,187			2,290			2,450
Claim payments		(3,290	)		(2,990	)		(4,920	)
Ending balance		6,979			8,082			8,782
Less current portion		4,808			4,583			5,024
Long-term portion	$	2,171		$	3,499		$	3,758

The current portion of the self-insurance liability is included in "Other accrued expenses" and the long-term portion is included in "Other long-term liabilities" in the Consolidated Balance Sheets.

Income Taxes: Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Earnings per share: Basic earnings per share ("EPS") excludes dilution and is computed by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by increasing the weighted average number of common shares outstanding by the dilutive effect of nonvested restricted stock shares outstanding and issuance of common stock for options outstanding under Spartan Stores' stock incentive plans.

Weighted average shares issuable upon the exercise of stock options that were not included in the earnings per share calculations because they were antidilutive were 84,824 in fiscal 2008, 7,058 in fiscal 2007, and 618,593 in fiscal 2006.

Stock-Based Compensation: Effective March 26, 2006, Spartan Stores adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment," using the modified prospective transition method. SFAS No. 123(R) requires all share-based payments to employees, including grants of stock options, to be recognized in the financial statements as compensation cost based on the fair value on the date of grant. We determine the fair value of such awards using the Black-Scholes option-pricing model, which incorporates certain assumptions - such as risk-free interest rate, expected volatility, expected dividend yield and expected life of options - in order to arrive at a fair value estimate, as described in Note 11.

Shareholders' Equity: Spartan Stores' restated articles of incorporation provide that the board of directors may at any time, and from time to time, provide for the issuance of up to 10 million shares of preferred stock in one or more series, each with such designations as determined by the board of directors. At March 29, 2008, there were no shares of preferred stock outstanding.

Advertising Costs: Spartan Stores' advertising costs are expensed as incurred and are included in selling, general and administrative expenses. Advertising expenses were $10.6 million in fiscal 2008, $9.2 million in fiscal 2007 and $6.9 million in fiscal 2006.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Recently Issued Accounting Standards: In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Further, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are to be applied prospectively. FIN 48 became effective at the beginning of Spartan Stores' fiscal year 2008, and the effect of adoption of FIN 48 increased retained earnings by $1.0 million as of the beginning of fiscal year 200 8. The adoption of FIN 48 and its effects are more fully described in Note 10.

In June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force (EITF) Issue No. 06-03, "How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross Versus Net Presentation)" (EITF 06-03). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 was effective at the beginning of Spartan Stores' fiscal 2008 first quarter. An entity is not required to reevaluate its existing policies related to taxes assessed by a governmental authority as a result of this consensus. Amounts collected from customers, which under common trade practices are referred to as sales taxes, are and have been recorded on a net basis. Spartan Stores has no intention of modifying this accounting policy; therefore, the adoption of EITF 06-03 did not have any effect on Spartan Stores' financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 will become effective for Spartan Stores at the beginning of fiscal year 2009, except as provided in FASB Staff Position (FSP) No. 157-2. The provisions of the Statement are to be applied prospectively, except for limited retrospective application permitted for certain items. Spartan Stores is currently evaluating the impact, if any, that SFAS 157 will have on the consolidated financial statements. In February 2007, the FASB issued FSP No. 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of SFAS 157 for nonfinancial assets and nonfinanc ial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements Nos. 87, 88, 106 and 132(R)" (SFAS 158). SFAS 158 required Spartan Stores to recognize the funded status of defined benefit postretirement plans as an asset or liability in the consolidated balance sheet and to recognize changes in funded status through comprehensive income as of March 31, 2007. SFAS 158 also requires that employers measure plan assets and obligations as of the date of their year-end financial statements beginning with Spartan Stores' fiscal year ending March 28, 2009. Spartan Stores is currently evaluating the impact of changing the measurement date on the consolidated financial statements. See Note 9 for further discussion of the effect of adopting SFAS No. 158 on Spartan Stores' consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB No. 115" (SFAS 159). Under SFAS 159, entities may irrevocably elect to measure many financial instruments and certain other items at fair value on an instrument-by-instrument basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Spartan Stores does not expect to elect the optional provisions of SFAS 159, as allowed.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations" (SFAS 141R), which revises SFAS No. 141. SFAS 141R establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS 141R will become effective for Spartan Stores at the beginning of fiscal year 2010, and must be applied prospectively to business combinations for which the acquisition date is on or after the beginning of fiscal

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

year 2010. Spartan Stores is currently evaluating the impact that SFAS 141R will have on future consolidated financial statements.

In May 2008, the FASB issued FSP No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)," that changes the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP No. APB 14-1 will require Spartan Stores to recognize non-cash interest expense on its $110 million convertible senior notes based on the market rate for similar debt instruments without the conversion feature. FSP No. APB 14-1 will be effective at the beginning of fiscal year 2010 and must be applied on a retrospective basis. Spartan Stores is currently evaluating the impact that this standard will have on its consolidated financial statements.

Note 2
Acquisitions of Assets

G&R Felpausch Company

On June 15, 2007, Spartan Stores acquired certain assets and assumed certain liabilities related to 20 retail grocery stores, two fuel centers and three convenience stores from G&R Felpausch Company and affiliated companies ("Felpausch"), a privately-held retail grocery operator and customer of its Distribution segment. The Felpausch supermarkets included the operations of ten in-store pharmacies. The cash purchase price paid to Felpausch was $38.0 million plus $12.7 million for inventories. Spartan Stores acquired the store locations and operations of Felpausch in an effort to increase its leading market share position in West Michigan and expand its market presence in central Michigan. The purchased assets included leasehold improvements, fixtures, tangible personal property, equipment, intangible property and inventories. Spartan Stores assumed Felpausch's lease obligations for the 20 stores, two fuel centers and three convenience stores.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

(In thousands)	June 15, 2007
Current assets	$	12,336
Goodwill		41,268
Favorable leases		2,228
Customer lists		2,953
Other intangible assets		723
Property and equipment		10,014
Total assets acquired		69,522
Current liabilities		1,915
Capital lease obligations, less current portion		4,285
Exit cost reserves, less current portion		10,866
Other long-term liabilities		1,749
Total liabilities assumed		18,815
Net assets acquired	$	50,707

Goodwill of $27.9 million and $13.4 million was assigned to the Retail and Distribution segments, respectively, based upon the expected benefits to be derived from the business combination. Additionally, $1.8 million in costs directly related to the acquisition have been included in goodwill, of which $1.2 million and $0.6 million were assigned to the Retail and Distribution segments, respectively. Goodwill of $43.1 million is expected to be deductible for tax purposes.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Amortizable intangible assets acquired consisted of favorable leases and customer lists and amounted to $2.2 million and $3.0 million, respectively. The weighted average amortization period is 10.2 years for favorable leases and seven years for customer lists. Other intangible assets acquired include $0.7 million of licenses for the sale of alcoholic beverages. The licenses have an indefinite life and therefore are not amortized.

D&W Food Centers, Inc.

On March 27, 2006, Spartan Stores acquired certain operating assets of D&W Food Centers, Inc. and D&W Associate Resources, LLC (together "D&W"), a privately-held Grand Rapids, Michigan-based retail grocery operator with retail stores located in West Michigan. The acquisition was made to obtain the store locations and operations of D&W, to diversify our retail offering with a more perishable oriented operation, to solidify and grow market share and to realize numerous synergies. The purchased assets included leasehold improvements, fixtures, tangible personal property, equipment, trademarks, trade names, intangible property and inventories. Spartan Stores paid a total cash purchase price of $47.9 million for these operations. Spartan Stores assumed D&W's lease obligations for the 20 stores and the central commissary as well as specified contracts. Spartan Stores continues to operate 16 of the former D&W stores and the commissary. The funds used for the transaction were drawn under Spartan Stores' existing bank credit facilities.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

(In thousands)	March 27, 2006
Current assets	$	5,035
Goodwill		67,914
Favorable leases		1,365
Other intangible assets		1,211
Property and equipment, net		21,280
Total assets acquired		96,805
Current liabilities		2,744
Capital lease obligations, less current portion		21,377
Exit cost reserves, less current portion		17,488
Unfavorable leases		7,274
Total liabilities assumed		48,883
Net assets acquired	$	47,922

Goodwill of $45.0 million and $22.9 million was assigned to the Retail and Distribution segments, respectively, based upon the expected benefits to be derived from the business combination. Additionally, $1.1 million in costs directly related to the acquisition have been included in goodwill. Goodwill of $69.0 million is expected to be deductible for tax purposes.

Amortizable intangible assets acquired consisted of favorable leases and amounted to $1.4 million. The weighted average amortization period is 7.4 years. Other intangible assets acquired include $1.2 million of licenses for the sale of alcoholic beverages. The licenses have an indefinite life and therefore are not amortized.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Unaudited Pro Forma Condensed Combined Financial Information

The following tables provide unaudited pro forma condensed combined financial information for Spartan Stores after giving effect to the acquisition described above and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. This information is based on adjustments to the historical consolidated financial statements of Spartan Stores, as adjusted for discontinued operations (see Note 4), and D&W using the purchase method of accounting for business combinations. The pro forma adjustments do not include any of the cost savings and other synergies anticipated to result from the acquisition. These pro forma results are based on assumptions considered appropriate by management and include all material adjustments as considered necessary. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of results that would have actually been reported as of the date or for the year pre sented had the acquisition taken place on such date or at the beginning of the year indicated, or to project Spartan Stores' financial position or results of operations which may be reported in the future.

(In thousands, except per share amounts)	Year Ended March 25, 2006
Pro forma net sales	$	2,076,762
Pro forma operating earnings		45,761
Pro forma earnings before income taxes and    discontinued operations		34,352
Pro forma earnings from continuing operations		20,970
Pro forma basic earnings per share from    continuing operations		1.01
Pro forma diluted earnings per share from    continuing operations		0.99

Combined results for Spartan Stores and D&W for the year ended March 25, 2006 were adjusted for the following in order to create the pro forma results in the table above:

• Adjustments were made to eliminate certain business operations of D&W not acquired.

• Transactions between Spartan Stores and D&W were eliminated.

• Rent expense was adjusted to reflect the fair valuation of leases assumed.

• Depreciation expense was adjusted to reflect changes resulting from the fair valuation of property and equipment acquired.

• Interest expense was adjusted for additional borrowings incurred in connection with the acquisition and to eliminate interest expense related to D&W debt not assumed.

• Adjustments were made to reflect incremental gross profit and selling, general and administrative expenses to the Distribution segment due to increased volume resulting from the acquisition.

• Adjustments were made for federal income taxes as a "C" corporation based on D&W's historical results as D&W was a Subchapter S corporation.

In the first quarter of fiscal 2007, Spartan Stores incurred approximately $1.1 million, $0.7 million after-tax, in start-up costs related to training, remerchandising and rebranding the stores. These charges are included in "Selling, general and administrative expenses".

Other

During the fourth quarter of fiscal 2008, Spartan Stores acquired certain assets and assumed certain liabilities of two retail stores in separate transactions for a total purchase price of $2.6 million. The stores were closed upon acquisition. One store will be razed and a new store constructed. The other store will be expanded and re-opened in late fiscal 2009. The acquisitions were made to increase market share. Goodwill of $2.3 million and $0.6 million

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

was assigned to the Retail segment and Distribution segment, respectively, all of which is expected to be deductible for tax purposes.

During the third quarter of fiscal 2007, Spartan Stores acquired certain equipment at five closed grocery stores from Carter's, Inc. in a Chapter 7 federal bankruptcy liquidation proceeding. Store lease obligations were assumed for two of the store locations. The stores will remain closed. The acquisition was made to increase market share of existing retail stores. Spartan Stores also acquired certain operating assets and assumed certain liabilities of a subsidiary of PrairieStone Pharmacy, LLC that were used in the operations of in-store pharmacies in 12 of Spartan Stores' retail supermarkets. The acquisition was made to allow Spartan Stores to better coordinate in-store operations and improve our overall customer service at these locations. For the two acquisitions, Spartan Stores paid a cash purchase price of $5.4 million. The funds used for the transaction were drawn under Spartan Stores' existing bank credit facilities. The estimated fair value of assets acquired consisted of $1.6 million for invento ry, $0.9 million for equipment, $2.9 million for customer lists and $1.1 million for goodwill and liabilities assumed consisted of $0.3 million for capital lease obligations, $0.6 million for closed store lease obligations and $0.2 million for accrued expenses. Goodwill of $1.0 million and $0.1 million was assigned to the Retail and Distribution segments, respectively, based upon the expected benefits to be derived from the business combination. Goodwill of $1.1 million is expected to be deductible for tax purposes. Additionally, $0.2 million in costs directly related to the acquisitions have been included in goodwill.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 3
Goodwill and Other Intangible Assets

SFAS No. 142, "Goodwill and Other Intangible Assets," provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives not be amortized, but tested at least annually for impairment. Any impairment loss incurred subsequent to initial adoption of SFAS No. 142 is recorded as a charge to current period earnings. SFAS No. 142 also requires that goodwill be assigned to reporting units based upon the expected benefits to be derived from synergies resulting from the business combination.

Changes in the carrying amount of goodwill were as follows:

(In thousands)	Retail			Distribution		Total
Balance at March 26, 2006	$	42,209		$	30,346	$	72,555
D&W acquisition (Note 2)		45,772			23,224		68,996
Carter's, Inc. and PrairieStone Pharmacy, LLC    acquisitions (Note 2)		1,125			137		1,262
Other		75			-		75
Balance at March 31, 2007		89,181			53,707		142,888
Felpausch acquisition (Note 2)		29,057			13,987		43,044
Other acquisitions		2,313			582		2,895
Store sales		(428	)		-		(428	)
Other (Note 5)		(1,868	)		-		(1,868	)
Balance at March 29, 2008	$	118,255		$	68,276	$	186,531

The following table reflects the components of amortized intangible assets, included in "Other, net" on the Consolidated Balance Sheets:

(In thousands)	March 29, 2008				March 31, 2007
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-compete agreements	$	3,749	$	1,574	$	3,234	$	2,096
Favorable leases		6,217		2,234		4,025		1,655
Customer lists		6,439		1,024		3,293		239
Franchise fees and other		475		72		1,201		347
Total	$	16,880	$	4,904	$	11,753	$	4,337

The weighted average amortization period for amortizable intangible assets is as follows:

Non-compete agreements	9.5 years
Favorable leases	10.8 years
Customer lists	7.2 years
Franchise fees and other	13.0 years
Total	8.9 years

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Amortization expense for intangible assets was $1.8 million, $0.9 million and $0.7 million for fiscal years 2008, 2007 and 2006, respectively. Estimated amortization expense for each of the five succeeding fiscal years is as follows:

(In thousands)	Fiscal Year		Amortization Expense
	2009	$	1,884
	2010		1,724
	2011		1,684
	2012		1,553
	2013		1,542

Indefinite-lived intangible assets that are not amortized consist primarily of licenses for the sale of alcoholic beverages and amounted to $2.3 million and $1.5 million as of March 29, 2008 and March 31, 2007.

Note 4
Discontinued Operations

Spartan Stores' former convenience distribution operations, insurance operations and certain of its retail, grocery distribution and real estate operations have been recorded as discontinued operations. Results of the discontinued operations are excluded from the accompanying notes to the consolidated financial statements for all periods presented, unless otherwise noted.

During the second quarter of fiscal year 2008, Spartan Stores decided to close five The Pharm stores and one Felpausch Xpressmart. The decision to close the stores was based on a comprehensive evaluation of the stores' performance trends, long-term growth prospects, on-going capital requirements and lease expiration dates. As Spartan Stores will have no continuing interest in the operations of these stores, they have been classified as discontinued operations for all years presented. Prescription lists and pharmacy inventories were sold for $4.7 million, and asset impairment charges of $0.9 million were recognized. The stores were closed early in the third quarter of fiscal 2008.

During the fourth quarter of fiscal year 2008, Spartan Stores approved a plan to sell the remaining 14 The Pharm stores. In April 2008, Spartan Stores entered into agreements to sell certain assets of 13 of the 14 stores and is in negotiations to sell certain assets of the one remaining store. Divesting these stores will allow Spartan Stores to concentrate efforts and resources on business opportunities with the best long-term growth potential and focus more on core distribution and conventional supermarket operations. As a result of the plan to dispose of these stores, the results of operations of these stores have been classified as discontinued operations in the consolidated financial statements for all years presented. Proceeds from the transactions are expected to approximate $20 million. A minor gain on the disposal is currently anticipated dependent on the final negotiations of the one remaining store.

The following table details the results of discontinued operations reported on the Consolidated Statements of Earnings:

(In thousands)	March 29, 2008 (52 Weeks)			March 31, 2007 (53 Weeks)		March 25, 2006 (52 Weeks)
Earnings (loss) from discontinued operations (net of taxes of ($90),    $444 and ($911))	$	(93	)	$	992	$	(477	)
Gain on disposal of discontinued operations (net of taxes of $1,027)		1,888			-		-
Total earnings (loss) from discontinued operations	$	1,795		$	992	$	(477	)

In accordance with Emerging Issues Task Force (EITF) Issue No. 87-24, "Allocation of Interest to Discontinued Operations," interest was allocated to discontinued operations based on the principal amount of debt that could be

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

paid with the proceeds from the sale of such operations, and is allocated based on the ratio of net assets to be sold or discontinued to the sum of total net assets of the consolidated entity plus consolidated debt other than (a) debt of the discontinued operation that will be assumed by the buyer, (b) debt that is required to be paid as a result of the disposal transaction, and (c) debt that can be directly attributed to other operations. Interest expense of $0.1 million, $0.4 million and $0.3 million, net of tax, was allocated to, and is included in, earnings (loss) from discontinued operations in the Consolidated Statements of Earnings for fiscal 2008, fiscal 2007 and fiscal 2006, respectively.

Spartan Stores monitors specific market conditions for its discontinued operations real estate on a regular basis. During fiscal 2006, Spartan Stores recorded an additional liability of $2.3 million for changes in its estimated sublease income due to revised estimates of such offsets to its closed store lease liabilities.

Sales of discontinued operations for fiscal years 2008, 2007 and 2006 were $139.2 million, $164.2 million and $167.1 million, respectively. Significant assets and liabilities of discontinued operations are as follows:

(In thousands)	March 29, 2008		March 31, 2007
Current assets *	$	18,523	$	22,023
Property, net		6,607		9,633
Other long-term assets		381		79
Current liabilities		14,173		14,659
Long-term liabilities		1,569		3,756

* Includes property and equipment held for sale

Spartan Stores anticipates that it will be subject to a partial withdrawal liability from a multi-employer pension plan related to the 2003 closures of certain of its discontinued Food Town stores when a final determination is made based on the June 30, 2006 financial condition of the plan. Previous estimates provided by the trustees of the multi-employer pension plan indicate that there is an underfunded liability which we believe to have resulted from a change in actuarial assumptions, investment performance, other employers' withdrawals, or a combination of these factors, occurring subsequent to the closure of these stores. Spartan Stores intends to challenge such a determination prior to settling the partial withdrawal liability if, and when, assessed after actuarial work is complete for the June 30, 2006 date. At this time, Spartan Stores does not know when the June 30, 2006 actuarial work will be completed. Spartan Stores has estimated its potential liability based on available preliminary informati on and recorded an after-tax charge of approximately $1.1 million in Discontinued Operations in the third quarter of fiscal 2006.

Note 5
Asset Impairments and Exit Costs

In fiscal 2008, exit costs of $11.3 million were recorded in the purchase price allocation of the Felpausch acquisition (Note 2) for acquired stores that management plans to or has closed. In fiscal 2008, exit costs were reduced by $1.9 million for changes in estimated future sublease recoveries in excess of previous estimates. Goodwill was reduced as a result of this change in estimate as the initial charges were established in the purchase price allocation for previous acquisitions.

The Retail segment recognized charges of $0.4 million for asset impairment costs and $4.1 million for lease and related ancillary costs in the first quarter of fiscal 2007 related to the closure of two Family Fare Supermarkets stores and moving the central bakery operation into individual retail stores. Neither of the closed stores was acquired in the acquisition of D&W. The restructuring was based on Spartan Stores' comprehensive review of retail grocery store capacity in its markets following the completion of the acquisition of 16 D&W supermarkets on March 27, 2006, its desire to move the production of bakery products closer to the consumer, and the economics of its central bakery operation.

In fiscal 2006, the Retail segment recognized charges of $0.6 million for asset impairment, store and office facility exit costs and severance benefits.

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The exit costs include severance benefits and the present value of future minimum lease payments, calculated using a risk-free interest rate, and related ancillary costs from the date of closure to the end of the remaining lease term, net of estimated sublease income.

The following table provides the activity of exit costs for our Retail segment for fiscal years 2008, 2007 and 2006. Exit costs recorded in the Consolidated Balance Sheets are included in "Current portion of exit costs" in Current liabilities and "Exit costs" in Long-term liabilities based on when the obligations are expected to be paid.

(In thousands)	Lease and Ancillary Costs
Balance at March 27, 2005	$	15,520
Provision for lease and related ancillary costs, net of estimated    sublease recoveries		2,719	(a)
Provision for pension withdrawal liability		1,654	(b)
Payments, net of interest accretion		(4,576	)
Balance at March 25, 2006		15,317
Exit costs assumed in acquisition of D&W (see Note 2)		19,231
Exit costs assumed in Carter's acquisition (see Note 2)		552
Provision for lease and related ancillary costs, net of estimated    sublease recoveries		4,050
Payments, net of interest accretion		(6,447	)
Balance at March 31, 2007		32,703
Exit costs assumed in Felpausch acquisition (see Note 2)		11,305
Change in estimates		(1,868	)
Payments, net of interest accretion		(6,013	)
Balance at March 29, 2008	$	36,127

(a)	Includes $2.3 million of charges recorded in discontinued operations.
(b)	Represents pension withdrawal liabilities from multi-employer pension plans affiliated with the former discontinued Food Town supermarkets. The $1.7 million charge in fiscal 2006 was recorded in discontinued operations and is discussed in Note 4.

Note 6
Long-Term Debt

Spartan Stores' long-term debt consists of the following:

(In thousands)	March 29, 2008		March 31, 2007
Senior secured revolving credit facility, due December 2012	$	-	$	78,182
Convertible subordinated notes, 3.375% due May 2027		110,000		-
Capital lease obligations (Note 8)		35,815		26,354
Other, 5.00% - 9.25%, due fiscal 2009 - 2021		8,633		4,299
		154,448		108,835
Less current portion		10,874		2,494
Total long-term debt	$	143,574	$	106,341

- -55-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Effective April 5, 2007, Spartan Stores amended its existing senior secured revolving credit facility. The amendment extended the senior secured revolving credit facility ("credit facility") maturity by two years and now matures in December 2012 rather than December 2010. Spartan Stores amended the credit facility effective May 22, 2007, in part to permit the issuance of the convertible senior notes described below. At Spartan Stores' option, the maximum amount under the credit facility may be increased up to $275.0 million through the increased commitments from lenders, and provided that asset levels are increased sufficient to support the increased borrowings. Interest rates under the amended agreement may be up to 50 basis points lower for London InterBank Offered Rate ("LIBOR") borrowings depending on levels of excess availability under the agreement. The credit facility is secured by substantially all of Spartan Stores' assets. On August 17, 2007, Spartan Stores entered into an agreement to increase the maximum credit available under its existing senior secured credit facility from $225.0 million to $255.0 million.

Available borrowings under the credit facility are based on stipulated advance rates on eligible assets, as defined in the credit agreement. The credit facility contains covenants that include a minimum fixed charge coverage ratio and maximum capital expenditures, as defined in the credit agreement. These covenants are not effective as long as Spartan Stores maintains minimum excess availability levels of $25.0 million with respect to the minimum fixed charge coverage ratio and $20 million with respect to maximum capital expenditures. Spartan Stores had available borrowings of $176.3 million at March 29, 2008 and excess availability of $186.3 million. Payment of dividends and repurchases of outstanding shares are permitted up to a total of $15.0 million per year, provided that excess availability of $20.0 million is maintained. The credit facility provides for the issuance of letters of credit of which $4.3 million were outstanding and unused as of March 29, 2008. Borrowings under the revolving credit por tion of the facility bear interest at LIBOR plus 1.25% or the prime rate (weighted average interest rate of 6.00% at March 29, 2008).

On May 30, 2007, Spartan Stores issued $110 million in aggregate principal amount of unsecured 3.375% convertible senior notes due May 15, 2027. The notes are general unsecured obligations and rank equally in right of payment with all of our other existing and future unsecured and unsubordinated obligations. They are effectively subordinated to our existing and any future secured indebtedness to the extent of the assets securing such indebtedness. The notes are structurally subordinated to our subsidiaries' indebtedness and other liabilities. The Notes are not guaranteed by our subsidiaries. The net proceeds from the sale of the notes after deducting selling discounts of 2.5% and offering expenses of $0.6 million were approximately $106.5 million, and were used to pay down amounts owed under our senior secured revolving credit facility and partially fund the Felpausch stores acquisition.

Interest at an annual rate of 3.375% is payable semi-annually on May 15 and November 15 of each year. Contingent interest will be paid to holders of the notes during the period commencing May 20, 2012 and ending on November 14, 2012 and for any six-month period thereafter, if the average contingent interest trading price per $1,000 principal amount of the notes for the five-consecutive-trading-day-period ending on the third trading day immediately preceding the first day of such interest period equals 120% or more of the principal amount of the notes. Contingent interest payable with respect to any six-month period will equal 0.25% per annum of the average contingent interest trading price of $1,000 principal amount of notes during the five-consecutive-trading-day measurement period described above.

Spartan Stores may redeem the notes for cash in whole or in part, at any time or from time to time, on or after May 15, 2014 at 100% of the principal amount of the notes to be redeemed, and prior to that date on or after May 20, 2012 at a price equal to a specified percentage of the principal amount, plus, in each case, any accrued and unpaid interest. Holders may require Spartan Stores to repurchase their notes, in whole or in part, on May 15, 2014, May 15, 2017 and May 15, 2022 for a cash price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. In addition, upon certain fundamental change transactions, each holder would have the option, subject to certain conditions, to require Spartan Stores to repurchase for cash, in whole or in part, such holder's notes. For the purposes of the notes, a "fundamental change" would include, among other events set forth in the Indenture governing the notes, the acquisition of 50% or more of our common stock by a person o r group, a consolidation, merger, or sale of all or substantially all of our assets, certain changes in our board of directors, or a termination of trading of our common stock.

- -56-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The notes will be convertible at the option of the holder only under certain circumstances summarized as follows:

1.	If the closing sale price per share of Spartan Stores common stock is greater than 130% of the applicable conversion price for a specified period of time,
2.	If the trading price of the notes was less than 98% of the product of the closing sale price per share of Spartan Stores common stock and the conversion rate in effect for the notes for a specified period of time,
3.	If the notes are called for redemption,
4.	At any time on or after February 15, 2027 until the close of business on the business day immediately preceding the maturity date,
5.	Upon the occurrence of specified corporate transactions.

Upon conversion by the holder, the notes convert at an initial conversion rate of 28.0310 shares of Spartan Stores common stock per $1,000 principal amount of notes (equal to an initial conversion price of approximately $35.67 per share), subject to adjustments upon certain events. Upon a surrender of notes for conversion, Spartan Stores will deliver cash equal to the lesser of the aggregate principal amount of notes to be converted and the total conversion obligation, and shares of Spartan Stores common stock in respect of the remainder, if any, of the conversion obligation - unless Spartan Stores has elected to satisfy its obligation under such conversion by delivering only shares of common stock. For the fiscal year ended March 29, 2008, the notes had no impact on diluted earnings per share because the average stock price during the period was below $35.67 per share, and the notes, if converted, would require only cash at settlement.

In connection with the closing of the sale of the notes, Spartan Stores entered into a registration rights agreement with the initial purchasers of the notes, pursuant to which Spartan Stores filed with the Securities and Exchange Commission (SEC) a shelf registration statement covering resale by security holders of the notes and the shares of Spartan Stores common stock issuable upon conversion of the notes. The registration statement was declared effective by the SEC on September 27, 2007.

The weighted average interest rates including loan fee amortization for fiscal 2008, 2007 and fiscal 2006 were 6.71%, 9.73% and 8.65%, respectively.

At March 29, 2008, long-term debt was due as follows:

(In thousands)	Fiscal Year
	2009	$	10,874
	2010		3,472
	2011		3,205
	2012		3,409
	2013		3,208
	Thereafter		130,280
		$	154,448

Note 7
Commitments and Contingencies

Spartan Stores subleases property at certain locations and received rental income of $1.6 million in fiscal 2008. In the event of the customer's default, Spartan would be responsible for fulfilling these lease obligations. The future payment obligations under these leases are disclosed in Note 8.

Unions represent approximately 11% of Spartan Stores' associates. A contract covering 180 distribution center and transportation associates expires in April 2010. Contracts covering an additional 660 distribution center and transportation associates expire in October 2011.

- -57-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Various lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against Spartan Stores. While the ultimate effect of such actions cannot be predicted with certainty, management believes that their outcome will not result in a material adverse effect on the consolidated financial position, operating results or liquidity of Spartan Stores.

Note 8
Leases

Most of the Company's retail stores are operated in leased facilities. The Company also leases certain warehouse facilities, its tractor and trailer fleet and certain other equipment. Most of the property leases contain renewal options of varying terms. Terms of certain leases contain provisions requiring payment of percentage rent based on sales and payment of executory costs such as property taxes, utilities, insurance and maintenance. Terms of certain leases of transportation equipment contain provisions requiring payment of percentage rent based upon miles driven. Portions of certain property are subleased to others.

Rental expense, net of sublease income, under operating leases consisted of the following:

(In thousands)	2008			2007			2006
Minimum rentals	$	29,083		$	25,530		$	22,331
Contingent payments		1,056			870			698
Sublease income		(1,609	)		(1,409	)		(1,335	)
	$	28,530		$	24,991		$	21,694

Total future lease commitments of Spartan Stores under capital and operating leases in effect at March 29, 2008 are as follows:

(In thousands)	Capital			Operating
Fiscal Year	Used in Operations			Used in Operations		Subleased to Others		Total
2009	$	5,997		$	27,830	$	1,095	$	28,925
2010		5,847			24,662		1,004		25,666
2011		5,643			21,395		837		22,232
2012		5,576			16,198		754		16,952
2013		5,075			12,441		528		12,969
Thereafter		27,543			37,414		783		38,197
Total		55,681		$	139,940	$	5,001	$	144,941
Interest		(19,866	)
Present value of minimum    lease obligations		35,815
Current portion		3,020
Long-term obligations	$	32,795

Spartan Stores anticipates a reduction in the above total operating lease obligations of $4.1 million as The Pharm transactions are completed, of which $1.1 million to $2.2 million is expected to be included in the liability for exit costs as the lease obligations of certain stores are not expected to be assumed by the buyers.

Amortization expense for property under capital leases was $2.5 million, $1.7 million and $0.5 million in fiscal years 2008, 2007 and 2006, respectively.

- -58-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Assets held under capital leases consisted of the following:

(In thousands)	March 29, 2008		March 31, 2007
Buildings and improvements	$	28,970	$	20,299
Equipment		4,163		889
		33,133		21,188
Less accumulated depreciation		6,420		4,098
Net property	$	26,713	$	17,090

One of Spartan Stores' subsidiaries leases retail store facilities to non-related entities. Of the stores leased, several are owned and others were obtained through leasing arrangements and are accounted for as operating leases. A majority of the leases provide for minimum and contingent rentals based upon stipulated sales volumes and contain renewal options. Certain of the leases contain escalation clauses.

Owned assets, included in property and equipment, which are leased to others are as follows:

(In thousands)	March 29, 2008		March 31, 2007
Land and improvements	$	1,644	$	1,644
Buildings		5,527		5,527
		7,171		7,171
Less accumulated depreciation		3,220		3,010
Net property	$	3,951	$	4,161

Future minimum rentals to be received under operating leases in effect at March 29, 2008 are as follows:

(In thousands)

Fiscal Year		Owned Property		Leased Property		Total
2009	$	1,417	$	1,571	$	2,988
2010		1,151		1,477		2,628
2011		932		1,277		2,209
2012		566		894		1,460
2013		406		579		985
Thereafter		151		870		1,021
Total	$	4,623	$	6,668	$	11,291

Note 9
Associate Retirement Plans

Spartan Stores' retirement programs include pension plans providing non-contributory benefits and salary reduction defined contribution plans providing contributory benefits. Substantially all of Spartan Stores' associates not covered by collective bargaining agreements are covered by either a non-contributory cash balance pension plan ("Company Plan"), a defined contribution plan or both. Associates covered by collective bargaining agreements are included in multi-employer pension plans.

- -59-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Spartan Stores' Company Plan benefit formula utilizes a cash balance approach. Under the cash balance formula, credits are added annually to a participant's "account" based on a percent of the participant's compensation and years of vested service at the beginning of each calendar year. Transition credits were also added at Spartan Stores' discretion to certain participants' accounts until the year 2007 if certain age and years-of-service requirements were met. At Spartan Stores' discretion, interest credits are also added annually to a participant's account based upon the participant's account balance as of the last day of the immediately preceding calendar year. Annual payments to the pension trust fund are determined in compliance with the Employee Retirement Income Security Act of 1976 ("ERISA"). Company Plan assets consist principally of common stocks and U.S. government and corporate obligations. The Company Plan does not hold any Spartan Stores stock.

Spartan Stores also maintains a Supplemental Executive Retirement Plan ("SERP"), which provides nonqualified deferred compensation benefits to Spartan Stores' officers. Benefits under the SERP are paid from Spartan Stores' general assets, as there is no separate trust established to fund benefits.

Matching contributions made by Spartan Stores to salary reduction defined contribution plans totaled $2.4 million, $2.0 million and $1.8 million in fiscal years 2008, 2007 and 2006, respectively.

In addition to the plans described above, Spartan Stores participates in several multi-employer and other defined contribution plans for substantially all associates covered by collective bargaining agreements. The expense for these plans totaled approximately $7.7 million in fiscal 2008, $6.6 million in fiscal 2007 and $6.3 million in fiscal 2006.

The Multi-Employer Pension Plan Amendments Act of 1980 amended ERISA to establish funding requirements and obligations for employers participating in multi-employer plans, principally related to employer withdrawal from or termination of such plans. Separate actuarial calculations of Spartan Stores' position with respect to the multi-employer plans are not available.

Spartan Stores and certain subsidiaries provide health care benefits to retired associates who have at least 30 years of service or 10 years of service and have attained age 55, and who were not covered by collective bargaining arrangements during their employment ("covered associates"). Qualified covered associates that retired prior to March 31, 1992 receive major medical insurance with deductible and coinsurance provisions until age 65 and Medicare supplemental benefits thereafter. Covered associates retiring after April 1, 1992 are eligible for monthly postretirement health care benefits of $5 multiplied by the associate's years of service. This benefit is in the form of a credit against the monthly insurance premium. The balance of the premium is paid by the retiree.

Effective March 31, 2007, Spartan Stores adopted the recognition and disclosure provisions of SFAS No. 158 which required the Company to recognize the funded status of its pension plan and other postretirement benefits beginning in the March 31, 2007 Consolidated Balance Sheet, with a corresponding adjustment to accumulated other comprehensive income, net of tax.

- -60-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The incremental effect of adopting the provisions of SFAS No. 158 on the March 31, 2007 Consolidated Balance Sheet is presented in the following table. SFAS No. 158 had no effect on the Consolidated Statements of Earnings.

(In thousands)	Prior to Adopting SFAS No. 158			Effect of Adopting SFAS No. 158			As Reported at March 31, 2007
Pension Benefits
Current liabilities	$	(2,258	)	$	2,258		$	-
Noncurrent liabilities		134			(1,524	)		(1,390	)
Accumulated other comprehensive income		-			(734	)		(734	)
SERP Benefits
Current liabilities		-			(61	)		(61	)
Noncurrent liabilities		(349	)		3			(346	)
Accumulated other comprehensive income		187			58			245
Postretirement Benefits
Current liabilities		-			(346	)		(346	)
Noncurrent liabilities		(4,274	)		(17	)		(4,291	)
Accumulated other comprehensive income		-			363			363

- -61-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following tables set forth the change in benefit obligation, change in plan assets, weighted average assumptions used in actuarial calculations and components of net periodic benefit costs for Spartan Stores' pension and postretirement benefit plans. The accrued benefit costs are reported in Postretirement benefits in the Consolidated Balance Sheets. The measurement date was December 31 of each year.

(In thousands, except percentages)	Pension Benefits						SERP Benefits						Postretirement Benefits
	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007
Change in benefit obligation
Benefit obligation at beginning of year	$	49,928		$	46,944		$	643		$	670		$	7,133		$	7,609
Service cost		3,532			3,084			53			45			211			224
Interest cost		2,733			2,438			35			35			401			409
Plan amendments		-			-			-			-			88			-
Actuarial (gain) loss		1,884			1,085			57			(33	)		(941	)		(488	)
Benefits paid		(5,008	)		(3,623	)		(60	)		(74	)		(803	)		(621	)
Benefit obligation at measurement date	$	53,069		$	49,928		$	728		$	643		$	6,089		$	7,133
Change in plan assets
Plan assets at fair value at beginning of year	$	48,058		$	42,164		$	-		$	-		$	-		$	-
Actual return on plan assets		3,182			6,047			-			-						-
Company contributions		7,705			3,470			60			74			803			621
Benefits paid		(5,008	)		(3,623	)		(60	)		(74	)		(803	)		(621	)
Plan assets at fair value at measurement date	$	53,937		$	48,058		$	-		$	-		$	-		$	-
Funded status	$	868		$	(1,870	)	$	(728	)	$	(643	)	$	(6,089	)	$	(7,133	)
Contributions during fourth quarter		625			741			13			17			-			-
Net amount recognized in financial position	$	1,493		$	(1,129	)	$	(715	)	$	(626	)	$	(6,089	)	$	(7,133	)
Components of net amount recognized in financial position:
Noncurrent assets	$	1,493		$	-		$	-		$	-		$	-		$	-
Current liabilities		-			-			(69	)		(61	)		(320	)		(346	)
Noncurrent liabilities		-			(1,129	)		(646	)		(565	)		(5,769	)		(6,787	)
	$	1,493		$	(1,129	)	$	(715	)	$	(626	)	$	(6,089	)	$	(7,133	)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss (gain)	$	8,226		$	6,082		$	422		$	392		$	355		$	1,334
Prior service cost (credit)		(6,521	)		(7,212	)		(14	)		(15	)		(624	)		(776	)
Net transition obligation		-			-			-			-			-			-
	$	1,705		$	(1,130	)	$	408		$	377		$	(269	)	$	558
Weighted average assumptions at
Measurement date
Discount rate		6.25%			5.75%			6.25%			5.75%			6.25%			5.75%
Expected return on plan assets		8.50%			8.50%			N/A			N/A			N/A			N/A
Rate of compensation increase		4.00%			4.00%			4.00%			4.00%			N/A			N/A

Under SFAS No. 158, the benefit obligation for pension plans is measured as the projected benefit obligation; the benefit obligation for postretirement benefit plans is measured as the accumulated benefit obligation. The

- -62-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

accumulated benefit obligation for both of the defined benefit plans was $52.1 million and $49.5 million at December 31, 2007 and 2006, respectively.

Components of net periodic benefit cost

(In thousands)	Pension Benefits									SERP
	March 29, 2008			March 31, 2007			March 25, 2006			March 29, 2008			March 31, 2007			March 25, 2006
Service cost	$	3,532		$	3,084		$	3,011		$	53		$	45		$	16
Interest cost		2,733			2,438			2,307			35			35			31
Expected return on plan assets		(3,732	)		(3,207	)		(2,892	)		-			-			-
Amortization of net transition    obligation		- -			- -			5			- -			- -			- -
Amortization of prior service cost		(690	)		(690	)		(690	)		(1	)		(1	)		(1	)
Recognized actuarial net loss		290			310			295			27			27			17
Net periodic benefit cost	$	2,133		$	1,935		$	2,036		$	114		$	106		$	63

	Postretirement Benefits
	March 29, 2008			March 31, 2007			March 25, 2006
Service cost	$	211		$	224		$	214
Interest cost		401			409			383
Amortization of prior service cost		(64	)		(63	)		(63	)
Recognized actuarial net loss		39			66			43
Net periodic benefit cost	$	587		$	636		$	577

The net actuarial loss, prior service cost and transition obligation included in "Accumulated Other Comprehensive Income" and expected to be recognized in net periodic benefit cost during fiscal year 2009 are as follows:

(In thousands)	Pension Benefits		SERP Benefits			Postretirement Benefits
Net actuarial loss	$	346	$	(690	)	$	-
Prior service credit		36		(1	)		(54	)
	$	382	$	(691	)	$	(54	)

Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses are amortized over the average remaining service life of active participants when the accumulation of such gains and losses exceeds 10% of the greater of the projected benefit obligation and the fair value of plan assets.

Spartan Stores has assumed an average long-term expected return on pension plan assets of 8.50% as of March 29, 2008. The expected return assumption was modeled by third-party investment portfolio managers, based on asset allocations and the expected return and risk components of the various asset classes in the portfolio. The expected return was developed by determining projected stock and bond returns and then applying these returns to the target asset allocations of the plan assets. Equity returns were based primarily on historical returns of the S&P 500 Index. Fixed-income projected returns were based primarily on historical returns for the broad U.S. bond market. This overall return assumption is believed to be reasonable over a longer-term period that is consistent with the liabilities.

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement plan. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.0% for fiscal 2008, 10.50% for fiscal 2007 and 11.00% for fiscal 2006, decreasing .50% per year to 5.00%. A 1% increase in the assumed health care cost trend rate would increase the accumulated postretirement benefit obligation

- -63-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

by 0.98% and the periodic postretirement benefit cost by 0.66%. A 1% decrease in the assumed health care cost trend rate would decrease the accumulated postretirement benefit obligation by 0.90% and periodic postretirement benefit cost by 0.60%.

Plan assets

Plan assets are valued using quoted market prices when available.

Spartan Stores has an investment policy for the pension plan with a long-term asset allocation mix designed to meet the long-term retirement obligations. The asset allocation mix is reviewed annually and, on a regular basis, actual allocations are rebalanced to approximate the prevailing targets. The following table summarizes actual allocations as of December 31, 2007 and December 31, 2006:

			Plan Assets
	Target Range		December 31, 2007		December 31, 2006
Asset Category
Equity securities	60.0 - 75.0	%	62.9	%	67.4	%
Fixed income	25.0 - 40.0		37.1		32.6
Total	100.0	%	100.0	%	100.0	%

The investment policy emphasizes the following key objectives: (1) maintain the purchasing power of the current assets and all future contributions by producing positive real rates of return on plan assets; (2) maximize return within reasonable and prudent levels of risk in order to minimize contributions and (3) control costs of administering the plan and managing the investments.

Spartan Stores made a voluntary contribution of $5.0 million to its defined benefit pension plan in fiscal 2008. The voluntary contribution will eliminate certain Pension Benefits Guaranty Corporation premiums, move the plan to a fully funded status and reduce future pension expense. As a result of this payment, no payments are required to be made in fiscal 2009 to meet the minimum funding requirements. However, Spartan Stores currently expects to contribute approximately $1.5 million to its defined benefit pension plan in fiscal 2009.

The following estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the following fiscal years:

(In thousands)	Pension Benefits and SERP Benefits		Other Benefits
2009	$	4,207	$	320
2010		4,672		336
2011		4,670		346
2012		5,205		359
2013		4,919		373
2014 to 2018		30,103		1,986

- -64-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 10
Taxes on Income

The income tax provision for continuing operations is summarized as follows:

(In thousands)	March 29, 2008		March 31, 2007		March 25, 2006
Currently payable:
Federal	$	3,080	$	463	$	59
State		800		-		-
Deferred
Federal		14,385		12,550		9,591
Total	$	18,265	$	13,013	$	9,650

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:

	2008		2007		2006
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal income tax benefit	1.0		-		-
Tax credits	(0.2	)	(0.3	)	(0.3	)
Other	0.2		0.3		(0.6	)
Effective income tax rate	36.0	%	35.0	%	34.1	%

During the second quarter of fiscal 2008, the Michigan legislature enacted a new business income tax effective January 1, 2008, which replaced the former Michigan Single Business Tax (SBT) that was in effect through December 31, 2007. The new income tax, or Michigan Business Tax, is reported in Income taxes in the accompanying consolidated statements of earnings, whereas the former SBT was included in Selling, general and administrative expenses.

- -65-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Deferred tax assets and liabilities resulting from temporary differences as of March 29, 2008 and March 31, 2007 are as follows:

(In thousands)
	2008			2007
Deferred tax assets:
Employee benefits	$	8,082		$	8,263
Accounts receivable		916			1,072
Net operating loss carryforward		-			2,898
Alternative Minimum Tax credit		1,103			726
Asset impairment and closed store reserves		2,309			4,167
Deferred revenue		893			932
State taxes		790			1,083
All other		2,413			1,783
Total deferred tax assets		16,506			20,924
Deferred tax liabilities:
Depreciation		14,176			10,244
Inventory		3,245			2,403
Goodwill		5,999			2,550
Convertible debt interest		1,599			-
All other		1,425			1,136
Total deferred tax liabilities		26,444			16,333
Net deferred tax (liability) asset	$	(9,938	)	$	4,591

Spartan Stores adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) on April 1, 2007, the first day of fiscal year 2008. Spartan Stores recorded the cumulative effect of adopting FIN 48 by increasing shareholders' equity by $1.0 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)
Balance at April 1, 2007	$	384
Gross increases - tax positions taken in prior years		365
Gross decreases - tax positions taken in prior years		(86	)
Gross increases - tax positions taken in current year		-
Gross decreases - tax positions taken in current year		-
Settlements with taxing authorities		-
Lapse of statute of limitations		(45	)
Balance at March 29, 2008	$	618

- -66-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Spartan Stores anticipates that substantially all of the unrecognized tax benefits will be settled prior to March 28, 2009. Spartan Stores recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Accrued interest and penalties are not material. No amounts of unrecognized tax liabilities, if recognized, would affect the effective tax rate.

Spartan Stores files income tax returns with federal, state and local tax authorities within the United States. With few exceptions, we are no longer subject to U.S. federal or state examinations by tax authorities for fiscal years before 2004, and are no longer subject to local examination by tax authorities for fiscal years before 2003. In February 2005, the Internal Revenue Service (IRS) completed its examination of Spartan Stores' federal income tax returns for fiscal years 2001 through 2003. In October 2007, the IRS began its examination of the fiscal 2006 tax return.

Note 11
Stock-Based Compensation

Spartan Stores has two shareholder-approved stock incentive plans covering 3,200,000 shares of Spartan Stores' common stock, the Spartan Stores, Inc. 2001 Stock Incentive Plan (the "2001 Plan") and the Spartan Stores, Inc. Stock Incentive Plan of 2005 (the "2005 Plan"). The plans provide for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, and other stock-based awards to directors, officers and other key associates. As of March 29, 2008, 175,587 shares remained unissued under the 2001 Plan, and 877,030 shares remained unissued under the 2005 Plan.

Prior to March 26, 2006, Spartan Stores accounted for the plans under the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations, as permitted by SFAS No. 123. No stock-based compensation cost was reflected in the Consolidated Statements of Earnings for stock options as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The fair value of restricted stock was determined based on the average of the highest and lowest sales prices of Spartan Stores' common stock on the date of grant, and deferred stock-based compensation, representing the fair value of the stock at the measurement date of the award, was amortized to compensation expense over the vesting period.

Effective March 26, 2006, Spartan Stores adopted the fair value recognition provisions of SFAS No. 123(R), using the modified-prospective transition method. Under that transition method, compensation cost recognized in fiscal 2007 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of March 26, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to March 26, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Upon adoption of SFAS No. 123(R), Spartan Stores elected to begin recognizing compensation expense using the straight-line amortization method for share-based awards granted on or after March 26, 2006, consistent with restricted stock awards granted prior to adoption. In accordance with the provisions of SFAS No. 123(R), results for prior periods have not been restated.

For share-based awards granted prior to adoption of SFAS No. 123(R), compensation expense was recognized over the stated vesting period, without regard for terms that accelerate vesting upon retirement. Upon adoption of SFAS No. 123(R), compensation expense will continue to be recognized under this method for awards granted prior to adoption. However, for awards granted on or after March 26, 2006, compensation expense will be recognized over the shorter of the vesting period or the period from the date of grant through the date the employee first becomes eligible to retire.

- -67-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table illustrates the effect on net earnings and earnings per share as if share-based compensation expense for fiscal 2006 had been determined based on the fair value recognition provisions of SFAS No. 123(R):

(In thousands, except per share data)	2006
Net earnings, as reported	$	18,172
Deduct: Total stock-based employee compensation expense    determined under fair value based method for all awards, net of    related tax effects		(328	)
Pro forma net earnings	$	17,844
Basic earnings per share - as reported	$	0.87
Basic earnings per share - pro forma		0.86
Diluted earnings per share - as reported	$	0.86
Diluted earnings per share - pro forma		0.84

Stock option awards are generally granted with an exercise price equal to the market value of Spartan Stores common stock at the date of grant, vest and become exercisable in 25 percent increments over a four-year service period and have a maximum contractual term of 10 years. Upon a "Change in Control", as defined by the Plan, all outstanding options vest immediately. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to adoption of SFAS No. 123(R), under the provisions of SFAS No. 123, expected volatility was determined based upon historical volatility of Spartan Stores common stock and the historical volatilities of guideline companies for the period of time that Spartan Stores was not publicly traded. The expected term of options granted was based upon expectations of future exercise behavior derived from vesting and contractual terms. Upon adoption of SFAS No. 123(R), and under the provisions of this statement, expected vola tility was determined based upon a combination of historical volatility of Spartan Stores common stock and the expected volatilities of guideline companies that are comparable to Spartan Stores in most significant respects to reflect management's best estimate of Spartan Stores' future volatility over the option term. The expected term of options granted is determined using the "simplified method" as described in SEC Staff Accounting Bulletin No. 107 that uses the following formula: ((vesting term + original contract term)/2). The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, using U.S. constant maturities with remaining terms equal to the expected term. Expected dividend yield is based on historical dividend payments.

The following weighted average assumptions were used to estimate the fair value of stock options at the date of grant using the Black-Scholes option-pricing model:

	2008	2007	2006
Dividend yield	0.70% - 0.89%	1.00% - 1.46%	0.00%
Expected volatility	32.84% - 34.51%	30.43% - 31.70%	57.73%
Risk-free interest rate	4.27% - 4.76%	4.58% - 5.11%	3.86%
Expected life of option	6.25 years	6.25 years	7 years

- -68-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes stock option activity for the three years ended March 29, 2008:

	Shares Under Options			Weighted Average Exercise Price	Weighted Average Remaining Contractual Life Years		Aggregate Intrinsic Value (In thousands)
Options outstanding at March 27, 2005	1,340,760		$	6.99		7.29	$	6,426
Granted	83,250			11.50
Exercised	(341,455	)		4.79
Cancelled	(73,612	)		8.15
Options outstanding at March 25, 2006	1,008,943		$	8.01		6.41	$	5,323
Granted	187,845			13.95
Exercised	(547,269	)		8.30
Cancelled	(40,122	)		10.68
Options outstanding at March 31, 2007	609,397		$	9.44		6.87	$	10,553
Granted	97,138			28.00
Exercised	(117,620	)		6.24
Cancelled	(8,283	)		9.92
Options outstanding at March 29, 2008	580,632		$	13.16		6.56	$	5,059
Options exercisable at March 25, 2006	696,340		$	8.98		5.85	$	3,220
Options exercisable at March 31, 2007	265,832		$	8.57		5.17	$	4,833
Options exercisable at March 29, 2008	293,321		$	8.85		4.94	$	3,461
Vested and expected to vest in the future at March 29, 2008	565,129		$	12.96		6.50	$	5,003

The weighted average grant-date fair value of stock options granted during fiscal years 2008, 2007 and 2006 was $10.91, $4.85 and $7.05, respectively. The total intrinsic value of stock options exercised during fiscal years 2008, 2007 and 2006 was $2.4 million, $5.0 million and $2.3 million, respectively. Cash received from option exercises was $0.7 million, $3.2 million and $0.9 million during fiscal years 2008, 2007 and 2006, respectively.

- -69-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following tables summarize information concerning options outstanding and options exercisable at March 29, 2008:

Options Outstanding
Exercise Prices		Options Outstanding	Weighted Average Remaining Contractual Life Years	Weighted Average Exercise Price
$	2.29 - 8.00	131,009	4.97	$	3.72
	8.01 - 12.00	139,710	5.32	9.65
	12.01 - 14.00	155,475	8.12	13.70
	14.01 - 28.28	154,438	7.44	23.81
$	2.29 - 28.28	580,632	6.56	$	13.16

Options Exercisable
Exercise Prices		Options Exercisable	Weighted Average Exercise Price
$	2.29 - 8.00	108,648	$	3.82
	8.01 - 12.00	103,897	9.00
	12.01 - 14.00	33,674	13.70
	14.01 - 28.28	47,102	16.61
$	2.29 - 28.28	293,321	$	8.85

Spartan Stores awarded 170,011 shares, 268,677 shares, and 252,173 shares of restricted stock during fiscal years 2008, 2007 and 2006, respectively. Shares awarded to employees vest in 20 percent increments over a five-year service period. Awards granted to directors prior to May 10, 2006 vest 100 percent after three years and awards granted on or after May 10, 2006 vest in one-third increments over a three-year service period. Awards are subject to certain transfer restrictions and forfeiture prior to vesting. All shares fully vest upon a "Change in Control" as defined by the Plan. Compensation expense, representing the fair value of the stock at the measurement date of the award, is recognized over the vesting period.

- -70-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes restricted stock activity for the three years ended March 29, 2008:

	Shares			Weighted Average Grant-Date Fair Value
Outstanding and nonvested at March 27, 2005		369,401		$	3.18
Granted		252,173			11.50
Vested		(146,200	)		2.80
Forfeited		(38,376	)		6.32
Outstanding and nonvested at March 25, 2006		436,998		$	7.83
Granted		268,677			13.96
Vested		(117,790	)		6.92
Forfeited		(41,181	)		10.09
Outstanding and nonvested at March 31, 2007		546,704		$	10.86
Granted		170,011			27.98
Vested		(132,789	)		10.02
Forfeited		(3,836	)		14.91
Outstanding and nonvested at March 29, 2008		580,090		$	16.04

The weighted average grant-date fair value of restricted shares granted during fiscal years 2008, 2007 and 2006 was $27.98, $13.96 and $11.50, respectively. The total fair value of shares vested during fiscal years 2008, 2007 and 2006 was $1.3 million, $0.8 million and $0.4 million, respectively.

Share-based compensation expense recognized and included in "Selling, general and administrative expenses" in the Consolidated Statements of Earnings and related tax benefits were as follows:

(In thousands)	2008			2007			2006
Stock options	$	821		$	493		$	-
Restricted stock		2,192			1,413			760
Tax benefits		(1,094	)		(667	)		(266	)
	$	1,919		$	1,239		$	494

As of March 29, 2008, total unrecognized compensation cost related to nonvested share-based awards granted under the stock incentive plans was $1.2 million for stock options and $7.0 million for restricted stock. The remaining compensation costs not yet recognized are expected to be recognized over a weighted average period of 2.2 years for stock options and 3.4 years for restricted stock.

Spartan Stores realized excess tax benefits of $5.2 million, $6.3 million and $4.2 million related to the exercise of stock options and the vesting of restricted stock during fiscal 2008, fiscal 2007 and fiscal 2006, respectively.

Spartan Stores has a stock bonus plan covering 300,000 shares of Spartan Stores common stock. Under the provisions of this plan, certain officers and key associates of Spartan Stores may elect to receive a portion of their annual bonus in common stock rather than cash and will be granted additional shares of common stock worth 30% of the portion of the bonus they elect to receive in stock. Compensation expense is recorded based upon the market price of the stock as of the measurement date. At March 29, 2008, 172,687 shares remained unissued under the plan.

- -71-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 12
Supplemental Cash Flow Information

Non-cash financing activities include the issuance of restricted stock to employees and directors of $4.8 million, $3.8 million and $3.1 million for fiscal years ended 2008, 2007 and 2006, respectively. Non-cash investing and financing activities include capital leases of $7.6 million, $0.8 million and $0.2 million for fiscal years 2008, 2007 and 2006, respectively. Non-cash investing activities also include capital expenditures included in accounts payable of $7.0 million, $1.2 million and $0.6 million for fiscal years 2008, 2007 and 2006.

Note 13
Reporting Segment Information

Using the management approach as required by SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), Spartan Stores' reporting segments are identified by products sold and customer profile and include the Distribution and Retail segments.

Spartan Stores' Distribution segment supplies independent retail customers and its own retail stores with dry grocery, produce, dairy, meat, delicatessen, bakery, beverages, frozen food, seafood, floral, general merchandise, pharmacy and health and beauty care items. Sales to independent retail customers and inter-segment sales are recorded based upon a "cost plus" model for grocery, frozen, dairy, pharmacy and health and beauty care items and a "variable mark-up" model for meat, deli, bakery, produce, seafood, floral and general merchandise products. To supply its wholesale customers, Spartan Stores operates a fleet of tractors, conventional trailers and refrigerated trailers, substantially all of which are leased by Spartan Stores.

The Retail segment operates supermarkets in Michigan that typically offer dry grocery, produce, frozen, dairy, meat, beverages, floral, seafood, health and beauty care, delicatessen and bakery goods. Approximately 60% of the stores offer pharmacy services and 16 fuel centers were in operation as of March 29, 2008.

Identifiable assets represent total assets directly associated with the reporting segments. Eliminations in assets identified to segments include intercompany receivables, payables and investments.

- -72-

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following tables set forth information by reporting segment:

(In thousands)
	Distribution		Retail		Total
Year Ended March 29, 2008
Net sales	$	1,284,299	$	1,192,523	$	2,476,822
Depreciation and amortization		7,642		16,139		23,781
Operating earnings		34,681		26,941		61,622
Capital expenditures		8,425		31,651		40,076
Year Ended March 31, 2007
Net sales	$	1,238,079	$	968,191	$	2,206,270
Depreciation and amortization		7,837		12,609		20,446
Operating earnings		28,442		20,224		48,666
Capital expenditures		6,284		20,450		26,734
Year Ended March 25, 2006
Net sales	$	1,155,880	$	716,974	$	1,872,854
Depreciation and amortization		8,281		10,474		18,755
Operating earnings		21,983		12,137		34,120
Capital expenditures		11,730		16,927		28,657

(In thousands)
	2008		2007		2006
Total Assets at Year End
Distribution	$	219,962	$	192,176	$	182,813
Retail		364,664		263,588		161,530
Discontinued operations		25,511		31,735		34,254
Total	$	610,137	$	487,499	$	378,597

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SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 14
Quarterly Financial Information (unaudited)

Earnings per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year. Common stock prices are the high and low sales prices for transactions reported on the NASDAQ Global Select Market for each period.

(In thousands, except per share data)
Fiscal 2008	Full Year (52 weeks)		4th Quarter (12 weeks)		3rd Quarter (16 weeks)			2nd Quarter (12 weeks)			1st Quarter (12 weeks)
Net sales	$	2,476,822	$	570,731	$	787,835	(a)	$	598,053	(a)	$	520,203	(a)
Gross margin		494,968		119,444		153,839	(a)		122,415	(a)		99,270	(a)
Earnings from continuing    operations before income taxes		50,776		12,676		11,630	(a)		16,943	(a)		9,527	(a)
Earnings from continuing operations		32,511		7,787		10,266	(a)		8,266	(a)		6,192	(a)
Discontinued operations, net of taxes		1,795		299		336	(a)		836	(a)		324	(a)
Net earnings		34,306		8,086		10,602			9,102			6,516
Earnings from continuing    operations per share:
Basic	$	1.53	$	0.37	$	0.48	(a)	$	0.39	(a)	$	0.29	(a)
Diluted		1.50		0.36		0.47	(a)		0.38	(a)		0.29	(a)
Net earnings per share:
Basic	$	1.61	$	0.38	$	0.50		$	0.43		$	0.31
Diluted		1.58		0.37		0.49			0.42			0.30
Dividends paid	$	4,371	$	1,095	$	1,095		$	1,091		$	1,090
Common stock price - High		34.09		23.09		24.56			34.09			25.41
Common stock price - Low		17.08		17.08		18.85			21.64			32.51

(In thousands, except per share data)
Fiscal 2007	Full Year (53 weeks)		4th Quarter (13 weeks)		3rd Quarter (16 weeks)			2nd Quarter (12 weeks)			1st Quarter (12 weeks)
Net sales	$	2,206,270	$	520,063	$	673,936	(a)	$	522,475	(a)	$	489,796	(a)
Gross margin		431,454		105,546		126,712	(a)		104,221	(a)		94,975	(a)
Earnings from continuing    operations before income taxes		37,181		10,474		9,126	(a)		14,440	(a)		3,141	(a)
Earnings from continuing operations		24,168		6,791		5,949	(a)		9,388	(a)		2,040	(a)
Discontinued operations, net of taxes		992		452		(55	)(a)		(54	)(a)		649	(a)
Net earnings		25,160		7,243		5,894			9,334			2,689
Earnings from continuing    operations per share:
Basic	$	1.15	$	0.32	$	0.28	(a)	$	0.45	(a)	$	0.10	(a)
Diluted		1.13		0.32		0.28	(a)		0.44	(a)		0.09	(a)
Net earnings per share:
Basic	$	1.20	$	0.34	$	0.28		$	0.45		$	0.13
Diluted		1.18		0.34		0.28			0.44			0.12
Dividends paid	$	4,302	$	1,083	$	2,154		$	-		$	1,065
Common stock price - High		27.40		27.40		22.62			18.60			14.73
Common stock price - Low		12.17		19.98		15.61			12.17			12.43

(a) Amounts have been adjusted from the amounts previously reported on Form 10-Q for reclassification of discontinued operations. See Note 4.

- -74-

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

          Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

          An evaluation of the effectiveness of the design and operation of Spartan Stores' disclosure controls and procedures (as currently defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) was performed as of March 29, 2008 (the "Evaluation Date"). This evaluation was performed under the supervision and with the participation of Spartan Stores' management, including its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). As of the Evaluation Date, Spartan Stores' management, including the CEO and CFO, concluded that Spartan Stores' disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and p rocedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial officers as appropriate to allow for timely decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting

          The management of Spartan Stores, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Spartan Stores' internal controls were designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of its financial reporting and the preparation and presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Spartan St ores; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Spartan Stores are being made only in accordance with authorizations of management and directors of Spartan Stores; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Spartan Stores' assets that could have a material effect on the financial statements.

          Management of Spartan Stores conducted an evaluation of the effectiveness of its internal controls over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Through this evaluation, management did not identify any material weakness in the Company's internal control. There are inherent limitations in the effectiveness of any system of internal control over financial reporting. Based on the evaluation, management has concluded that Spartan Stores' internal control over financial reporting was effective as of March 29, 2008.

          The registered public accounting firm that audited the consolidated financial statements included in this Form 10-K Annual Report has issued an attestation report on the effectiveness of the Company's internal control over financial reporting as of March 29, 2008 as stated in their report below.

- -75-

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Spartan Stores, Inc. and subsidiaries
Grand Rapids, Michigan

          We have audited the internal control over financial reporting of Spartan Stores, Inc. and subsidiaries (the "Company") as of March 29, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

          We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

          A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditu res of the company are being made only in accordance with authorizations of management and directors of the company, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

          Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

          In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 29, 2008, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

          We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended March 29, 2008 of the Company and our report dated May 9, 2008, expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company's change in its methods of accounting for income taxes as a result of adopting Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, in 2008.

/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
May 9, 2008

- -76-

Changes in Internal Controls Over Financial Reporting

          During the last fiscal quarter, there was no change in Spartan Stores' internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Spartan Stores' internal control over financial reporting.

Item 9B. Other Information

          None.

- -77-

PART III

Item 10. Directors, Executive Officers and Corporate Governance

          The information required by this item is here incorporated by reference from the sections titled "The Board of Directors," "Spartan Stores' Executive Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," "Code of Conduct and Ethics," and "Board Committees" (through "Audit Committee") in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held in 2008.

Item 11. Executive Compensation

          The information required by this item is here incorporated by reference from the sections entitled "Executive Compensation," "Potential Payments Upon Termination or Change in Control," "Compensation of Directors," "Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held in 2008.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

          The information required by this item is here incorporated by reference from the sections titled "Ownership of Spartan Stores Stock" in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held in 2008.

          The following table provides information about Spartan Stores' equity compensation plans regarding the number of securities to be issued under these plans, the weighted-average exercise prices of options outstanding under these plans and the number of securities available for future issuance as of the end of fiscal 2008.

EQUITY COMPENSATION PLANS

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation    plans approved by    security holders (1)	580,632	$ 13.16	1,225,304
Equity compensation    plans not approved by    security holders	0	Not applicable	0
Total	580,632	$ 13.16	1,225,304

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(1) Consists of the Spartan Stores, Inc. 1991 Stock Option Plan, the Spartan Stores, Inc. 2001 Stock Incentive Plan, the Spartan Stores, Inc. 2001 Stock Bonus Plan, and the Stock Incentive Plan of 2005. Stock options may no longer be issued under the 1991 Stock Option Plan. The numbers of shares reflected in column (c) in the table above with respect to the Stock Incentive Plan of 2005 (877,030 shares), the 2001 Stock Incentive Plan (175,587 shares) and the 2001 Stock Bonus Plan (172,687 shares) represent shares that may be issued other than upon the exercise of an option, warrant or right. Each plan listed above contains customary anti-dilution provisions that are applicable in the event of a stock split or certain other changes in Spartan Stores' capitalization.

Item 13. Certain Relationships and Related Transactions, and Director Independence

          The information required by this item is here incorporated by reference from the section titled "Transactions with Related Persons" and the table captioned "Board of Directors Committee Membership" in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held in 2008.

Item 14. Principal Accountant Fees and Services

          The information required by this item is here incorporated by reference from the section titled "Independent Auditors" in Spartan Stores' definitive proxy statement relating to its annual meeting of shareholders to be held in 2008.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	The following documents are filed as part of this Report:
	1.	Financial Statements.
		A. In Item 8.
		Reports of Independent Registered Public Accounting Firm of Deloitte & Touche LLP dated May 9, 2008
		Consolidated Balance Sheets at March 29, 2008 and March 31, 2007
		Consolidated Statements of Earnings for each of the three years in the period ended March 29, 2008
		Consolidated Statements of Shareholders' Equity for each of the three years in the period ended March 29, 2008
		Consolidated Statements of Cash Flows for each of the three years in the period ended March 29, 2008
		Notes to Consolidated Financial Statements
	2.	Financial Statement Schedules.

Schedules are omitted because the required information is either inapplicable or presented in the consolidated financial statements or related notes.

3. Exhibits.

Exhibit Number	Document
2.1	Asset Purchase Agreement dated December 17, 2005, by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 22, 2005. Here incorporated by reference.
2.2	First Amendment to Asset Purchase Agreement dated March 24, 2006 by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 30, 2006. Here incorporated by reference.
2.3	Asset Purchase Agreement, dated March 19, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., and Felpausch Kalamazoo, LLC as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, as filed March 23, 2007. Here incorporated by reference.

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Exhibit Number	Document
2.4	Third Amendment to the Asset Purchase Agreement, dated June 15, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., Felpausch Kalamazoo, LLC, and Felpausch-Kelly, L.L.C. as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed June 21, 2007. Here incorporated by reference.
2.5	Asset Purchase Agreement dated March 31, 2008 between Rite Aid of Ohio, Inc. and Seaway Food Town, Inc.
3.1	Amended and Restated Articles of Incorporation of Spartan Stores, Inc. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 10, 2005. Here incorporated by reference.
3.2	Amended and Restated Bylaws of Spartan Stores, Inc. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K on August 20, 2007. Here incorporated by reference.
4.1	Indenture by and between Spartan Stores, Inc. and The Bank of New York Trust Company, N.A. as Trustee dated as of May 30, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
4.2	Registration Rights Agreement among Spartan Stores, Inc. and Banc of America Securities LLC and Bear, Stearns & Co., Inc., as representatives of the Initial Purchasers named therein dated as of May 30, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
4.3	Form of 3.375% Convertible Senior Note due 2027. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
10.1	Purchase Agreement by and among Spartan Stores, Inc. and the Initial Purchasers named therein dated as of May 23, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
10.2	Loan and Security Agreement dated December 23, 2003, by and among Spartan Stores, Inc. and certain subsidiaries as borrowers, Congress Financial Corporation (Central) as agent, the lenders named therein as lenders, and joined in by certain subsidiaries of Spartan Stores, Inc. as guarantors. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended January 3, 2004. Here incorporated by reference.
10.3	Amendment No. 2 to Loan and Security Agreement dated December 22, 2004, between Spartan Stores, Inc. and its subsidiaries and Congress Financial Corporation, Key Bank National Association, Fleet Capital Corporation, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the fiscal year ended March 31, 2007. Here incorporated by reference.
10.4	Amendment No. 3 to Loan and Security Agreement dated December 9, 2005 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 12, 2005. Here incorporated by reference.

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Exhibit Number	Document
10.5	Amendment No. 4 to Loan and Security Agreement dated March 17, 2006 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 23, 2006. Here incorporated by reference.
10.6	Amendment No. 5 to Loan and Security Agreement dated April 5, 2007 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed April 11, 2007. Here incorporated by reference.
10.7	Amendment No. 6 to Loan and Security Agreement dated May 22, 2007 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America N.A., National City Business Credit, Inc., General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 22, 2007. Here incorporated by reference.
10.8	Letter Agreement between Spartan Stores, Inc. and Wachovia Capital Finance Corporation (Central) as Agent for the Lenders, dated August 17, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed August 17, 2007. Here incorporated by reference.
10.9	Asset Purchase Agreement dated December 17, 2005, by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 22, 2005. Here incorporated by reference.
10.10	First Amendment to Asset Purchase Agreement dated March 24, 2006 by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 30, 2006. Here incorporated by reference.
10.11	Asset Purchase Agreement, dated March 19, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., and Felpausch Kalamazoo, LLC as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 23, 2007. Here incorporated by reference.
10.12	Third Amendment to the Asset Purchase Agreement, dated June 15, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., Felpausch Kalamazoo, LLC, and Felpausch-Kelly, L.L.C. as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed June 21, 2007. Here incorporated by reference.
10.13	Asset Purchase Agreement dated March 31, 2008 between Rite Aid of Ohio, Inc. and Seaway Food Town, Inc. Disclosed as Exhibit 2.5 to this Annual Report on Form 10-K and here incorporated by reference.
10.14*	Spartan Stores, Inc. Annual Executive Incentive Plan of 2005. Previously filed as Appendix A to Spartan Stores' 2005 Proxy Statement filed on June 24, 2005. Here incorporated by reference.

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Exhibit Number	Document
10.15*	Spartan Stores, Inc. Stock Incentive Plan of 2005. Previously filed as Appendix B to Spartan Stores' 2005 Proxy Statement filed on June 24, 2005. Here incorporated by reference.
10.16*	Spartan Stores, Inc. 1991 Stock Option Plan, as amended. Previously filed as an exhibit to Spartan Stores' Registration Statement on Form S-3 filed January 12, 2001. Here incorporated by reference.
10.17*	Spartan Stores, Inc. Supplemental Executive Retirement Plan. Previously filed as an exhibit to Spartan Stores Annual Report on Form 10-K filed May 23, 2005. Here incorporated by reference.
10.18*	Spartan Stores, Inc. Supplemental Executive Savings Plan. Previously filed as an exhibit to Spartan Stores Form S-8 Registration Statement filed on December 21, 2001. Here incorporated by reference.
10.19*	Spartan Stores, Inc. 2000 Annual Incentive Plan. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
10.20*	Spartan Stores, Inc. 2001 Stock Incentive Plan. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
10.21*	Form of Stock Option Grant to officers, dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.
10.22*	Form of Restricted Stock Award to officers dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.
10.23*	Form of Restricted Stock Award to outside directors dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 21, 2007. Here incorporated by reference.
10.24*	Form of Stock Option Award to outside directors dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.
10.25*	Form of Employment Agreement between Spartan Stores, Inc. and certain executive officers. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 11, 2004. Here incorporated by reference.
10.26*	Form of Executive Severance Agreement between Spartan Stores, Inc. and certain executive officers. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 11, 2004. Here incorporated by reference.
10.27	Amended and Restated Lease, dated as of January 26, 2000, between Plymouth Investors Limited Liability Company and Spartan Stores Distribution, LLC. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
12.1	Computation of Ratio of Earnings to Fixed Charges
21	Subsidiaries of Spartan Stores, Inc.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Exhibit Number	Document
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. § 1350. This exhibit is furnished, not filed, in accordance with SEC Release Number 33-8212.

*          These documents are management contracts or compensation plans or arrangements required to be filed as exhibits to this Form 10-K.

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SIGNATURES

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

		SPARTAN STORES, INC. (Registrant)
Date:	May 15, 2008	By	/s/ Craig C. Sturken
			Craig C. Sturken Chairman and Chief Executive Officer (Principal Executive Officer)

- -85-

                    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Spartan Stores, Inc. and in the capacities and on the dates indicated.

May 15, 2008	By	*/s/ M. Shân Atkins
		M. Shân Atkins Director
May 15, 2008	By		/s/ Dennis Eidson
			Dennis Eidson President, Chief Operating Officer and Director
May 15, 2008	By	*/s/ Dr. Frank M. Gambino
		Dr. Frank M. Gambino Director
May 15, 2008	By	*/s/ Frederick S. Morganthall, II
		Frederick S. Morganthall, II, Director
May 15, 2008	By	*/s/ Elizabeth A. Nickels
		Elizabeth A. Nickels Director
May 15, 2008	By	*/s/ Timothy J. O'Donovan
		Timothy J. O'Donovan Director
May 15, 2008	By	*/s/ Kenneth T. Stevens
		Kenneth T. Stevens Director
May 15, 2008	By	/s/ Craig C. Sturken
		Craig C. Sturken Chairman, Chief Executive Officer and Director (Principal Executive Officer)
May 15, 2008	By	*/s/ James F. Wright
		James F. Wright Director
May 15, 2008	By	/s/ David M. Staples
		David M. Staples Executive Vice President and Chief Financial Officer (Principal Financial Officer and Accounting Officer)
May 15, 2008	*By	/s/ Craig C. Sturken
		Craig C. Sturken Attorney-in-Fact

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EXHIBIT INDEX

Exhibit Number	Document
2.1	Asset Purchase Agreement dated December 17, 2005, by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 22, 2005. Here incorporated by reference.
2.2	First Amendment to Asset Purchase Agreement dated March 24, 2006 by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 30, 2006. Here incorporated by reference.
2.3	Asset Purchase Agreement, dated March 19, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., and Felpausch Kalamazoo, LLC as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, as filed March 23, 2007. Here incorporated by reference.
2.4	Third Amendment to the Asset Purchase Agreement, dated June 15, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., Felpausch Kalamazoo, LLC, and Felpausch-Kelly, L.L.C. as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed June 21, 2007. Here incorporated by reference.
2.5	Asset Purchase Agreement dated March 31, 2008 between Rite Aid of Ohio, Inc. and Seaway Food Town, Inc.
3.1	Amended and Restated Articles of Incorporation of Spartan Stores, Inc. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 10, 2005. Here incorporated by reference.
3.2	Amended and Restated Bylaws of Spartan Stores, Inc. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K on August 20, 2007. Here incorporated by reference.
4.1	Indenture by and between Spartan Stores, Inc. and The Bank of New York Trust Company, N.A. as Trustee dated as of May 30, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
4.2	Registration Rights Agreement among Spartan Stores, Inc. and Banc of America Securities LLC and Bear, Stearns & Co., Inc., as representatives of the Initial Purchasers named therein dated as of May 30, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
4.3	Form of 3.375% Convertible Senior Note due 2027. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.

-i-

Exhibit Number	Document
10.1	Purchase Agreement by and among Spartan Stores, Inc. and the Initial Purchasers named therein dated as of May 23, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 30, 2007. Here incorporated by reference.
10.2	Loan and Security Agreement dated December 23, 2003, by and among Spartan Stores, Inc. and certain subsidiaries as borrowers, Congress Financial Corporation (Central) as agent, the lenders named therein as lenders, and joined in by certain subsidiaries of Spartan Stores, Inc. as guarantors. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended January 3, 2004. Here incorporated by reference.
10.3	Amendment No. 2 to Loan and Security Agreement dated December 22, 2004, between Spartan Stores, Inc. and its subsidiaries and Congress Financial Corporation, Key Bank National Association, Fleet Capital Corporation, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the fiscal year ended March 31, 2007. Here incorporated by reference.
10.4	Amendment No. 3 to Loan and Security Agreement dated December 9, 2005 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 12, 2005. Here incorporated by reference.
10.5	Amendment No. 4 to Loan and Security Agreement dated March 17, 2006 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 23, 2006. Here incorporated by reference.
10.6	Amendment No. 5 to Loan and Security Agreement dated April 5, 2007 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America Leasing & Capital, LLC, National City Business Credit, General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed April 11, 2007. Here incorporated by reference.
10.7	Amendment No. 6 to Loan and Security Agreement dated May 22, 2007 between Spartan Stores, Inc. and its subsidiaries and Wachovia Capital Finance Corporation (Central), Key Bank National Association, Bank of America N.A., National City Business Credit, Inc., General Electric Capital Corporation, and Fifth Third Bank. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 22, 2007. Here incorporated by reference.
10.8	Letter Agreement between Spartan Stores, Inc. and Wachovia Capital Finance Corporation (Central) as Agent for the Lenders, dated August 17, 2007. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed August 17, 2007. Here incorporated by reference.
10.9	Asset Purchase Agreement dated December 17, 2005, by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed December 22, 2005. Here incorporated by reference.

-ii-

Exhibit Number	Document
10.10	First Amendment to Asset Purchase Agreement dated March 24, 2006 by and among Family Fare LLC, Prevo's Family Markets, Inc., D&W Food Centers, Inc., and D&W Associate Resources, LLC. Previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 30, 2006. Here incorporated by reference.
10.11	Asset Purchase Agreement, dated March 19, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., and Felpausch Kalamazoo, LLC as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed March 23, 2007. Here incorporated by reference.
10.12	Third Amendment to the Asset Purchase Agreement, dated June 15, 2007, by and among G&R Felpausch Company, Felpausch Food Centers, LLC, Hastings Catalog Sales, Inc., Felpausch Kalamazoo, LLC, and Felpausch-Kelly, L.L.C. as Seller, and Family Fare, LLC, Prevo's Family Markets, Inc., MSFC, LLC, and Spartan Stores Fuel, LLC as Purchaser, previously filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed June 21, 2007. Here incorporated by reference.
10.13	Asset Purchase Agreement dated March 31, 2008 between Rite Aid of Ohio, Inc. and Seaway Food Town, Inc. Disclosed as Exhibit 2.5 to this Annual Report on Form 10-K and here incorporated by reference.
10.14*	Spartan Stores, Inc. Annual Executive Incentive Plan of 2005. Previously filed as Appendix A to Spartan Stores' 2005 Proxy Statement filed on June 24, 2005. Here incorporated by reference.
10.15*	Spartan Stores, Inc. Stock Incentive Plan of 2005. Previously filed as Appendix B to Spartan Stores' 2005 Proxy Statement filed on June 24, 2005. Here incorporated by reference.
10.16*	Spartan Stores, Inc. 1991 Stock Option Plan, as amended. Previously filed as an exhibit to Spartan Stores' Registration Statement on Form S-3 filed January 12, 2001. Here incorporated by reference.
10.17*	Spartan Stores, Inc. Supplemental Executive Retirement Plan. Previously filed as an exhibit to Spartan Stores Annual Report on Form 10-K filed May 23, 2005. Here incorporated by reference.
10.18*	Spartan Stores, Inc. Supplemental Executive Savings Plan. Previously filed as an exhibit to Spartan Stores Form S-8 Registration Statement filed on December 21, 2001. Here incorporated by reference.
10.19*	Spartan Stores, Inc. 2000 Annual Incentive Plan. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
10.20*	Spartan Stores, Inc. 2001 Stock Incentive Plan. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
10.21*	Form of Stock Option Grant to officers, dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.
10.22*	Form of Restricted Stock Award to officers dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.

-iii-

Exhibit Number	Document
10.23*	Form of Restricted Stock Award to outside directors dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K, filed May 21, 2007. Here incorporated by reference.
10.24*	Form of Stock Option Award to outside directors dated May 18, 2007, filed as an exhibit to Spartan Stores' Current Report on Form 8-K filed May 21, 2007. Here incorporated by reference.
10.25*	Form of Employment Agreement between Spartan Stores, Inc. and certain executive officers. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 11, 2004. Here incorporated by reference.
10.26*	Form of Executive Severance Agreement between Spartan Stores, Inc. and certain executive officers. Previously filed as an exhibit to Spartan Stores' Quarterly Report on Form 10-Q for the quarter ended September 11, 2004. Here incorporated by reference.
10.27	Amended and Restated Lease, dated as of January 26, 2000, between Plymouth Investors Limited Liability Company and Spartan Stores Distribution, LLC. Previously filed as an exhibit to Spartan Stores' Annual Report on Form 10-K for the year ended March 31, 2007. Here incorporated by reference.
12.1	Computation of Ratio of Earnings to Fixed Charges
21	Subsidiaries of Spartan Stores, Inc.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. § 1350. This exhibit is furnished, not filed, in accordance with SEC Release Number 33-8212.

*          These documents are management contracts or compensation plans or arrangements required to be filed as exhibits to this Form 10-K.

- -iv-

EX-2.5

EXHIBIT 2.5

ASSET PURCHASE AGREEMENT

between

RITE AID OF OHIO, INC.

and

SEAWAY FOOD TOWN, INC.

Dated as of: March 31, 2008

TABLE OF CONTENTS

		Page
ARTICLE I	SALE AND PURCHASE OF ASSETS	1

Section 1.01	Assets to be Acquired	1
Section 1.02	Excluded Assets	4
Section 1.03	Assumed Obligations	5
Section 1.04	Nonassumption of Liabilities	5

ARTICLE II PURCHASE PRICE, METHOD OF PAYMENT; INVENTORY 6

Section 2.01	Purchase Price	6
Section 2.02	Prorations	7
Section 2.03	Utilities	8
Section 2.04	Purchase Price Allocation	8
Section 2.05	Estoppels	8

ARTICLE III CLOSING, DOCUMENTS OF CONVEYANCE 9

Section 3.01	Closing	9
Section 3.02	Assignment and Assumption Agreements; New Leases	9
Section 3.03	Other Instruments of Conveyance	10
Section 3.04	Other Deliveries at  Closing	10
Section 3.05	Allocation of Closing Costs	11
Section 3.06	Other Obligations	11
Section 3.07	Transfer of Possession	11
Section 3.08	Termination and Related Employee Matters	11
Section 3.09	Utility Services	12
Section 3.10	Other Actions and Instruments	12

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 12

Section 4.01	Organization and Good Standing	12
Section 4.02	Corporate Power and Authority	12
Section 4.03	Validity of Contemplated Transactions	12
Section 4.04	Regulatory Approvals	13
Section 4.05	Inventory Held for Resale	13
Section 4.06	Brokers	13
Section 4.07	Buyer's Knowledge	13

ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 13

Section 5.01 Organization, Good Standing and Qualification 13

Section 5.02	Corporate Power and Authority	13
Section 5.03	Validity of Contemplated Transactions	14
Section 5.04	Regulatory Approvals	14
Section 5.05	Liabilities and Obligations of Seller	14
Section 5.06	Title to Purchased Assets	14
Section 5.07	Assumed Leases	14
Section 5.08	Taxes	15
Section 5.09	Zoning; Easements	15
Section 5.10	Litigation, Compliance with Laws	15
Section 5.11	Permits and Licenses	16
Section 5.12	All Necessary Assets	16
Section 5.13	Employee Matters; Labor or Employee Disputes	16
Section 5.14	Insurance Coverages	16
Section 5.15	Environmental Matters	17
Section 5.16	Third Party Payors	17
Section 5.17	Financial Statements	17
Section 5.18	Prescriptions	17
Section 5.19	Fixed Assets	18
Section 5.20	Employee Benefits; ERISA	18
Section 5.21	Brokers	18
Section 5.22	AS IS, WHERE IS	19

ARTICLE VI ACTIVITIES PRIOR TO THE EFFECTIVE TIME 19

Section 6.01	Activities Prior to Effective Time for Each Store	19
Section 6.02	Access; Confidentiality Agreement	20
Section 6.03	Seller's Employees	21
Section 6.04	Public Announcements	21
Section 6.05	Record Data; Patient Notification	21
Section 6.06	Matters Related to Prescriptions	22
Section 6.07	Compliance with Law	22
Section 6.08	Restrictive Covenants	22
Section 6.09	Landlords	22
Section 6.10	Prescription Count	23
Section 6.11	Wiring and Equipment Installation	23

ARTICLE VII DUE DILIGENCE; CONDEMNATION; CASUALTY; CONSENTS;
ENVIRONMENTAL
24

Section 7.01	Premises Defects	24
Section 7.02	Lease Amendment	24
Section 7.03	Casualty	24
Section 7.04	Condemnation	26
Section 7.05	Landlord Consents and Two Mandated Lease Amendments	26
Section 7.06	Environmental	27

ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER 27

Section 8.01	Representations and Warranties	27
Section 8.02	Performance of Covenants, Agreements and Obligations	28
Section 8.03	Prohibitions	28
Section 8.04	Authority	28

ARTICLE IX CONDITIONS TO OBLIGATIONS OF SELLER 28

Section 9.01	Representations and Warranties	28
Section 9.02	Performance of Covenants, Agreements and Obligations	28
Section 9.03	Prohibitions	29
Section 9.04	Authority	29

ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
29

Section 10.01	Survival of Warranties	29
Section 10.02	Indemnification by Seller	29
Section 10.03	Indemnification by Buyer	30
Section 10.04	Limitations of Indemnity	31
Section 10.05	Notice	31
Section	Third Party Claims	32

ARTICLE XI CONDUCT OF THE PARTIES AFTER CLOSING 32

Section 11.01	Cooperation	32
Section 11.02	Access to Books and Records	32
Section 11.03	Licenses	33
Section 11.04	Access to Prescription Files	33
Section 11.05	Non-Competition; Non-Solicitation	33
Section 11.06	Signage	35

Section 11.07	Use of Pharmacy Systems	35
Section 11.08	Protected Health Information	36
Section 11.09	HIPAA Privacy Standards	36
Section 11.10	Confidential Information	36
Section 11.11	Further Assurances	36
Section 11.12	Remittance	36
Section 11.13	Taxes	37
Section 11.14	Collective Bargaining Matters	37
Section 11.15	License	37

ARTICLE XII BROKERAGE; EXPENSES 37

Section 12.01	Brokerage	37
Section 12.02	Transactional Expenses	38

ARTICLE XIII TERMINATION 38

Section 13.01	Termination by Mutual Consent	38
Section 13.02	Termination Attributable to Default	38
Section 13.03	Termination by Buyer	38
Section 13.04	Termination Date	38
Section 13.05	Impossibility	38
Section 13.06	Results of Termination	39
Section 13.07	No Termination after Kick-Off Date	39

ARTICLE XIV MISCELLANEOUS 39

Section 14.01	Notices	39
Section 14.02	Assignability and Parties in Interest	40
Section 14.03	Governing Law	40
Section 14.04	Counterparts	40
Section 14.05	Waiver	41
Section 14.06	Publicity	41
Section 14.07	Complete Agreement	41
Section 14.08	Modifications, Amendments and Waivers	41
Section 14.09	Interpretation	41
Section 14.10	Severability	42
Section 14.11	Time of Essence	42
Section 14.12	Gender, Number, Knowledge	42

Section 14.13	Exhibits and Schedules	42
Section 14.14	No Benefit to Others	42

EXHIBITS INDEX

EXHIBIT A	The Stores
EXHIBIT B	Store Inventory Instructions
EXHIBIT C	Form of Assignment and Assumption of Leases
EXHIBIT D	Form of Trademark Assignment
EXHIBIT E	Form of New Leases
EXHIBIT F	Form of Pharmacy Client Letter
EXHIBIT G	Form of DEA Powers of Attorney
EXHIBIT H	Form of Seller Estoppel Certificate

ASSET PURCHASE AGREEMENT

          Asset Purchase Agreement (this "Agreement") made as of this 31st day of March, 2008, by and between Seaway Food Town, Inc., a Michigan corporation  (hereafter "Seller"), and Rite Aid of Ohio, Inc., an Ohio corporation (hereafter "Buyer").  This Agreement is also joined in by Spartan Properties Management, Inc., an Ohio corporation (solely for the purposes of entering into the New Leases (defined below) with Buyer), Spartan Stores, Inc., a Michigan corporation (solely for the purpose of binding itself to the provisions of Section 11.05), Rite Aid Corporation, a Delaware corporation (solely for the purpose of guaranteeing the obligations of Buyer under the New Leases (defined below) at the Effective Time for such Stores), and The Pharm of Michigan, Inc., a Michigan corporation (solely for the purpose of assigning the Marks (defined below) to Buyer). Buyer and Seller are sometimes referred to jointly herein as the "parties" or individually as a "party."

BACKGROUND

On the terms and subject to the conditions hereinafter provided, the parties desire for Buyer or one or more subsidiaries thereof to acquire certain of the operating assets of each retail drug store as set forth on Exhibit A (the "Stores") upon and subject to the terms and conditions hereinafter set forth. 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants, representations, warranties, and agreements contained herein, and intending to be legally bound, Buyer and Seller agree as follows:

ARTICLE I
SALE AND PURCHASE OF ASSETS

          Section 1.01     Assets to be Acquired.  Subject to the terms and conditions set forth herein, at the Effective Time for each Store, Seller shall sell, assign, transfer, convey and deliver or cause to be sold, assigned, transferred, conveyed and delivered, to Buyer, free and clear of all mortgages, deeds of trust, pledges, liens, conditional sales agreements, leases (other than the Leases and Subleases and Licenses), lease-purchase agreements, security interests, charges, claims, rights of first option, rights of first refusal or similar restrictions, rights of way, easements, encroachments, servitudes, restrictions, encumbrances, and options (hereafter collectively referred to as "Encumbrances"), other than Permitted Encumbrances (as hereinafter defined), and Buyer shall purchase, acquire and accept from Seller, all of Seller's right, title and interest in and to the following assets of the Seller used or located exclusively at the Stores , whether real, personal or mixed, and whether tangible or intangible (hereafter collectively referred to as the "Purchased Assets"), but not including the Excluded Assets. For purposes of this Agreement, "Permitted Encumbrances" means (A) any Encumbrances permitted by the Leases or disclosed on Schedule 1.01; (B) taxes levied or imposed on, or assessed with respect to, the Fixed Assets, the Owned Real Property (defined below) or any portion of the real property which comprises the Assumed Lease Stores (the "Leased Real Property"), which taxes, assessments, fees or charges are (1) not due and payable as of or prior to the Effective Time for the Store to which such taxes, assessments, fees or charges apply, or (2) are being contested in

good faith and as to which appropriate reserves have been set up and maintained; (C) zoning codes or ordinances, building codes and other laws, regulations, ordinances, decrees or orders regulating the use or occupancy of any Leased Real Property or Owned Real Property; (D) easements, restrictions, covenants, rights of way, servitude, or conditions affecting the Leased Real Property or the Owned Real Property that are of record or that would be revealed by an accurate ALTA/ACSM Land Title Survey or inspection of the Owned Real Property or Leased Real Property; (E) any Encumbrance that does not materially adversely affect the current use or occupancy of such Leased Real Property or Owned Real Property; (F) any right of a landlord under a Lease or of tenants, subtenants or licensees under any lease, sublease or license disclosed on Schedule 1.01(b) or (k); or (G) any Encumbrances permitted by or accepted or waived by Buyer under this Agreement or shown on any title commitment or survey prov ided to or obtained by Buyer and not objected to by Buyer under this Agreement.  Except as set forth in this Article 1.01,  the "Purchased Assets" shall not include any of Seller's remaining rights, privileges, title or interest in any other assets concerning the Stores:

            (a)        Prescription Files.  Subject to applicable Legal Requirements, all of Seller's prescriptions, prescription files and records, customer lists and patient profiles owned or used by Seller (the "Prescription Files") in connection with the operation of (i) the Assumed Lease Stores (as hereinafter defined), (ii) the Stores listed on Schedule 1.01(a) attached hereto (the "File Buy Stores"), and (iii) the Owned Stores (as hereinafter defined), including but not limited to refill status reports and insurance coverages, co-pay and payment records, any files or records added between the date of this Agreement and the date of transfer and records in whatever medium or form maintained by the Seller.

            (b)        Leases.  All rights and interests of Seller under the real property leases (the "Leases") relating to the Stores listed on Schedule 1.01(b) attached hereto (collectively, the "Assumed Lease Stores").

            (c)        Inventory.   All of Seller's inventory (as defined on Exhibit B hereto) of whatever nature or description located at the Stores at the applicable Effective Time, including but not limited to pharmaceuticals, over-the-counter items, and the like (but not including any Excluded Inventory (as defined on Exhibit B) (collectively the "Inventory").

            (d)        Trademarks and Tradenames.  The name "The Pharm" and all registered and unregistered tradenames, trademarks, servicemarks and applications connected thereto including but not limited to the registered trademarks set forth on Schedule 1.01(d) (the "Marks").

            (e)        Deposits.  All of Seller's lease deposits relating to the Leases and, to the extent transferable, all utility deposits relating to the Assumed Lease Stores and the Owned Stores (the "Deposits").

            (f)         Telephone and Fax Numbers.  The right to use the telephone and fax machine numbers assigned to each of the Stores, as set forth on Schedule 1.01(f).

            (g)        Books and Records.  Copies of  (i) all papers, documents, computerized databases and records of Seller relating to the Purchased Assets that are reasonably necessary for Buyer's operation of the Stores or otherwise required by applicable Legal Requirements, and (ii) the real

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estate files of Seller for the Assumed Lease Stores and the Owned Stores and all original prescriptions for the last two (2) years.

            (h)        Claims Relating to Purchased Assets.  All claims, causes of action, rights of recovery and rights of setoff of every type and kind relating to supplier and manufacturer warranties issued with respect to the Purchased Assets, in each case whether accruing before or after the Effective Time for each Store.

            (i)         Fixed Assets, Personal Property.  All of the fixed assets and personal property (other than inventory which is addressed in Subsection (c) above) located at the Assumed Lease Stores and the Owned Stores and owned and used by Seller exclusively in connection with the operation of the Assumed Lease Stores and the Owned Stores  (the "Fixed Assets"), together with any express or implied warranty by the manufacturer or seller of any item or component thereof and all maintenance records and documents relating thereto.  Set forth on Schedule 1.01(i) is a listing of the Fixed Assets located at the Stores based on the internal records of Seller.  Buyer and Seller acknowledge that certain of the assets listed on Schedule 1.01(i) may not be currently present at the Stores as of the date of this Agreement, and additional assets not listed on Schedule 1.01(i ) may be present at the Stores as of the date of this Agreement and further acknowledge and agree that all such fixed assets and personal property located at a Store on the date hereof, not constituting Excluded Assets shall be Purchased Assets (except that Seller may replace broken equipment with equipment of comparable or greater value).

            (j)         Governmental Authorizations.  All licenses, registrations or permits issued, granted, given or otherwise made available by or under any governments, regulatory authorities, governmental departments, agencies, commissions, bureaus, officials, ministers, courts, bodies, boards, tribunals or dispute settlement panels or other law, rule or regulation-making organizations or entities (including any branch, department or board thereof) ("Governmental Body") or pursuant to any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, rule, code, regulation, ordinance, statute or treaty ("Legal Requirement") exclusively connected or related to the Assumed Lease Stores and the Owned Stores (including but not limited to all lottery, liquor, beer & wine, and tobacco sales licenses, and all certificates of o ccupancy) and all pending applications therefore or renewals thereof, in each case to the extent transferable to Buyer (the "Governmental Authorizations").

            (k)        Leases to Owned Stores.  Leases in the form attached as Exhibit E (the "New Leases") granting Buyer the occupancy rights on the terms and conditions set forth therein for the parcels and tracts of land commonly known as (i) 801 Dixie Highway, Rossford, Ohio  ("Store 6108") and (ii) 410 Wheeling Street, Oregon, Ohio  ("Store 6111" and collectively with Store 6108 the "Owned Stores"), legally described on Schedule 1.01(k), together with any buildings, structures, fixtures and improvements located thereon, and any Appurtenances thereto (collectively the "Owned Real Property") at the annualized rents set forth on Sechedule 1.1(k).  For purposes hereof "Appurtenances" means all privileges, rights, easements, hereditaments and appurtenances belonging to or for the benefit thereof, including all easements appurtenant to and for the benefit thereof (a "Dominant Parcel" ) for, and as the primary means of access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is dependent, and all rights

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existing in and to any streets, alleys, passages and other rights-of-way included thereon or adjacent thereto (before or after vacation thereof) and vaults beneath any such streets.

            (l)         Subleases and Licenses.  All subleases and licenses for any Assumed Lease Stores as shown on Schedule 1.01(b) and all leases or licenses for any Owned Stores as shown on Schedule 1.01(k) (collectively, "Subleases and Licenses").

            Section 1.02     Excluded Assets.  Notwithstanding anything to the contrary contained in Section 1.01 or elsewhere in this Agreement, the following assets of Seller (collectively, the "Excluded Assets") are not part of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of Seller after the Effective Time for each Store:

            (a)        all Excluded Inventory;

            (b)        all cash and cash equivalents (including stamps and activated lottery tickets, but excluding the Deposits), accounts receivable and prepaid expenses not related to the Leases, Subleases or Licenses (which shall be prorated pursuant to Section 2.02);

            (c)        all personnel Records and other Records that Seller is required by Legal Requirements to retain in its possession;

            (d)        all rights of Seller under this Agreement and the other agreements, documents and instruments delivered in connection herewith;

            (e)        any agreement, contract, lease (other than the Leases and the Subleases and Licenses), consensual obligation, promise or undertaking (whether written or oral and whether express or implied), whether or not legally binding (a) under which Seller has or may acquire any rights or benefits; (b) under which Seller has or may become subject to any obligation or liability; or (c) by which Seller or any of the assets owned or used by Seller is or may become bound, in each case with respect to the Purchased Assets (collectively the "Excluded Contracts");

            (f)         except for Prescription Files at File Buy Stores, all of Seller's assets not exclusively located at the Owned Real Property or the Leased Real Property;

            (g)        all of Seller's corporate record books, minute books, accounting records and tax records;

            (h)        vendor merchandising displays or equipment including, but not limited to, ice freezers, refrigerated coolers, water dispensing machines, coin machines, dairy stocking carts, and candy and game vending machines which are standalone and may be plug-in, and are not of the built-in variety;

            (i)         Unicru System and Learning Management System, automatic teller machines (unless subject to a lease, sublease or license disclosed on Schedule 1.01(b) or (k)), employment station kiosks and related equipment, Western Union equipment, and any information technology systems and equipment that are incompatible with Buyer's operations, provided the same can be removed from the Stores without physical damage to the Stores that (i) results in a material

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violation under the applicable Lease or (ii) materially interferes with the normal day-to-day operations of such store;

            (j)         all non-transferable software applications including but not limited to pharmacy software, IBM point of sale software, Chaintrack price management software, Stylus software and Kronos software;

            (k)        all network equipment including but not limited to routers, switches and access points; provided, however, in no case will this include the removal of wiring, conduit and the like;

            (l)         all leased equipment or systems including but not limited to any leased PC's, servers, printers, copy machines, facsimile machines and blood pressure machines;

            (m)       all handheld equipment and related peripherals;

            (n)        ScriptPro robot and Parata Rx Automation;

            (o)        pallet jacks and related unloading equipment;

            (p)        all assets at the Stores owned by any tenants, subtenants or licensees;

            (q)        except for the Marks, all trade names, trademarks and service marks (including Seaway Food Town, or any derivation thereof) that are owned by Seller or Seller's Affiliates;

            (r)        the property and assets expressly designated on Schedule 1.02(r).

            Section 1.03     Assumed Obligations.   In consideration of Buyer's purchase of the Purchased Assets, subject to the terms and conditions set forth herein, as of the Effective Time for each Store, Seller shall assign to Buyer and Buyer shall assume and discharge in a timely fashion all of the liabilities and obligations of Seller under the Leases, the Subleases and Licenses, any Permitted Encumbrances, and any Governmental Authorizations (hereafter referred to as the "Assumed Obligations") arising from and after the Effective Time for such Store.

            Section 1.04     Nonassumption of Liabilities.  It is expressly understood and agreed that, except as expressly provided in Section 1.03 of this Agreement, Buyer shall not, by virtue of this Agreement, the consummation of the transactions contemplated herein, or otherwise, assume or become liable for any liabilities or obligations of Seller or any "Affiliate" or subsidiary of the Seller, or any liability or obligation constituting a lien upon any of the Purchased Assets, regardless of whether such liability is absolute or contingent, liquidated or unliquidated, accrued or unaccrued, known or unknown, arises by operation of law or otherwise, all of which liabilities and obligations of Seller hereby agrees to retain, and timely perform and discharge (hereinafter referred to as the "Excluded Obligations").  Seller shall remain liable for all Excluded Obligations, including any liabilities arising prior to the Effective Time for each Store, any liabilities related to any Excluded Contracts or other Excluded Assets and any liabilities arising under the Leases prior to the Effective Time for each Store.  For purposes of clarity, the foregoing sentence shall not make Seller liable for any liabilities arising under any Permitted

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Encumbrance after the Effective Time for the applicable Store.  Without limiting the generality of the foregoing, in no event shall Buyer assume or otherwise be responsible for or otherwise obligated with respect to (a) any obligations of Seller under HIPAA or other applicable Legal Requirement, including the HIPAA privacy standard requiring accounting of certain disclosures of Protected Health Information (as defined in HIPAA) made by Seller prior to the Effective Time for each Store, (b) any type of successor liability as to Excluded Obligations relating to trade creditors, unemployment, Employees or union  contracts or agreements, income, property, sales or other taxes, or otherwise, or (c) employee benefit plans, practices, programs or arrangements of any type or sort (including the establishment, operation or termination thereof and the notification and provision of COBRA coverage extension) maintained by Seller, it being understood that all such liabilities are Excluded Obligations.  For purposes of this Agreement, "Affiliate" means any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified and with respect to Seller specifically includes Spartan Stores, Inc.  For purposes of this definition, control of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities or ownership interests, by contract or otherwise, and specifically with respect to a corporation, partnership or limited liability company, means direct or indirect ownership of more than 50% of the voting securities in such corporation or of the voting interests in a partnership or limited liability company.

ARTICLE II
PURCHASE PRICE, METHOD OF PAYMENT; INVENTORY

            Section 2.01     Purchase Price.  The purchase price for the Purchased Assets other than Inventory (the "Non-Inventory Purchase Price") shall be $12,846,000  in the aggregate and the purchase price for the Inventory shall be the aggregate of the Inventory Value for each Store as determined in accordance with Section 2.01(a) and Exhibit B (collectively the "Inventory Purchase Price") (the Inventory Purchase Price and the Non-Inventory Purchase Price are collectively referred to as the "Purchase Price").  Buyer shall pay the Inventory Value for each Store plus the amount of the Purchase Price allocated to each Store as set forth on Exhibit A on the business day after the Inventory Date for such Store by wire transfer of immediately available funds to the account or accounts of Seller delivered to Buyer at least 3 calendar days prior to the earliest Effective Time.

            (a)        Inventory.  Seller and Buyer will cause RGIS and/or any other mutually agreed nationally recognized inventory service (the "Inventory Services") to take a physical count and valuation of the Inventory using the methods, standards, procedures and valuation methodology set forth on Exhibit B hereto.  Subject to the satisfaction of the conditions described in Articles VIII and IX hereof, the count of the Inventory for each Store shall be on a date as mutually agreed by the parties (the "Inventory Date"); provided, however, the inventories at all the Stores shall be completed within five business days.  On the Inventory Date for each store, the Store will close for business at approximately 6 p.m. prevailing time at the location of the Store and the inventory will commence immediately upon the Store closing for business (the time of commencement of the inventory at each Store the "Effective Time" as to such Store).   Each party shall have no more than three representatives present during the count of each inventory to resolve any disputed items concerning the inventory.   Buyer and Seller shall then review the

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Inventory Value in order to verify the Inventory Services' calculations and execute an inventory sign-off sheet evidencing each party's agreement to the Inventory Value calculation valued in accordance with Exhibit B hereof (the "Inventory Value").  The sign-off sheet for each Store shall be completed and executed by the parties prior to the departure of the Inventory Service from the applicable Store.  Copies of the sign-off sheets along with the applicable inventory reports shall be delivered to the persons identified in Section 14.01 hereof no later than the day following the Inventory Date.  The expense of the Inventory Services shall be shared equally by Buyer and Seller.  Buyer and Seller shall have fifteen (15) business days after their receipt of the inventory reports in which to examine such accounting, during which time Buyer and Seller shall reasonably cooperate to resolve any computational errors or discrepancies.  If Buyer and Seller are unable to resolve any such errors or discrepancies on mutually agreeable terms, then the matter shall be submitted to a mutually agreed designated accountant for final determination, which determination shall be binding upon Buyer and Seller and not subject to further review. 

            (b)        Operations; Title. 

                        (i)         Subject to the terms and conditions of this Agreement:

                                    (A)       risk of loss to the Purchased Assets will transfer to the Buyer at each Store at the Effective Time with respect to such Store;

                                    (B)       title to the Purchased Assets (including the Inventory) associated with each Store will transfer to the Buyer at the Effective Time for each Store;

                                    (C)       Buyer shall enjoy possession of and the right to use the Assumed Lease Stores, the Owned Stores and the Owned Real Property commencing at the Effective Time with respect to the related Store;

                                    (D)       Seller shall remove (i) all of the Excluded Inventory prior to the Effective Time for such Store; and (ii) the remainder of the Excluded Assets (other than Excluded Assets at the File Buy Stores) prior to the regularly scheduled opening of the applicable store on the day following the Effective Time; and

                                    (E)       All sales at a Store after the Effective Time with respect to such Store shall be for the account of the Buyer.

            (c)        Register Procedures.  Immediately prior to the Effective Time for each Store, the cash and working funds in Seller's cash registers shall be removed and kept by Seller. 

            (d)        Undelivered Prescriptions.  Immediately prior to the Effective Time for each Store, Seller shall reverse and return all filled and undelivered prescriptions at such Store to stock in accordance with applicable governmental regulations, laws and requirements, providing all necessary notice to any third-party payors, and shall provide Buyer with a list of such prescriptions so that Buyer is prepared to fill such prescriptions on or after the Effective Time for such Store. 

            Section 2.02     Prorations.  All current rent (including without limitation percentage rent), real estate taxes, common area charges, utility charges, and other obligations of Seller under the

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Leases or income or obligations of Seller under the Subleases and Licenses, shall be prorated as of the Effective Time with respect to each Assumed Lease Store  in accordance with the payment terms of the Lease applicable thereto (collectively the "Prorated Charges").  Whenever possible, such prorations shall be based on actual, current payments by or income to Seller and to the extent such actual amounts are not available, such prorations shall be estimated as of the Effective Time for the applicable Store based on actual amounts for the most recent comparable billing period and such prorations shall be final (absent manifest error) without further reconciliations.  Notwithstanding anything to the contrary in this Agreement, for any Lease for which a proration is not set forth in a Lease, for the New Leases, and for the Fixed Assets, the property taxes shall be prorated on a "calendar year or lien basis" for any such Assumed Leased Store, Owned Store or Fixed Asset not located in Lucas County , and on a "last tax due date basis" for any such Assumed Leased Store, Owned Store or Fixed Asset located in Lucas County.  Seller shall pay the Buyer a pro rata amount of percentage rent payable by Buyer under a Lease for an Assumed Lease Store for the lease year including the Effective Time for such Lease, not later than ten (10) business days prior to the date that Buyer is obligated to pay such percentage rent.  Seller's prorated share shall be determined by multiplying (A) a fraction, the numerator of which is the amount of Seller's gross annual sales at such Assumed Lease Store from the first day of such lease year to (but not including) the Effective Time for the applicable Store, and the denominator of which is the sum of Buyer's and Seller's gross annual sales at such store for the entire lease year, times (B) the amount of percentage rent actually due under the Lease for such Assumed Lease Store. Seller, upon the request of Buyer, shall promptly provide the Buyer such information as Buye r shall be required to submit to landlords under the Leases in connection with the payment of percentage rent with respect to an Assumed Lease Store. Notwithstanding any of the foregoing, the fixed percentage rent set out in the Fourth Amendment to Lease for Store #6103 of $106,145.40 shall be prorated on a per diem basis as of the Effective Time for the applicable Store based on a lease year commencing July 1, 2007, and ending June 30, 2008.

            Section 2.03     Utilities.  Seller shall pay all utility and other charges applicable to the Assumed Lease Stores and the Owned Stores and billed directly to the tenant in the case of Assumed Lease Stores up through the Effective Time for each Store and Buyer shall be responsible for the same thereafter.

            Section 2.04     Purchase Price Allocation.  The Non-Inventory Purchase Price shall be allocated among the Purchased Assets in the manner set forth on Schedule 2.04 hereto.  Seller and Buyer agree to file all their respective federal, state and local tax returns in accordance with that allocation.

            Section 2.05     Estoppels.  Seller shall send a Landlord Consent and Estoppel Certificate to each of the landlords of the Leases (other than Store #6103 which the parties acknowledge and agree is outside the scope of this Section 2.05 and may be contacted by Buyer immediately after the date hereof) in the form attached hereto as Schedule 2.05 (the "Landlord Consent and Estoppel Certificate") and shall use commercially reasonable efforts to cause each of the landlords of the Leases to complete and execute an estoppel certificate substantially and in all materials respects in the form of the Landlord Consent and Estoppel Certificate and return them to Seller, provided, however, that other than any sums specifically due and payable under the terms of the applicable Lease which shall be the sole responsibility of Seller, Seller shall not be

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obligated to pay any sums of money to obtain such Landlord Consent and Estoppel Certificates.  Seller shall deliver a copy of each signed Landlord Consent and Estoppel Certificate to Buyer's counsel promptly after Seller receives it. 

The process for preparing and sending the Landlord Consent and Estoppel Certificates shall be as follows:

                        (i)         Within three (3) business days after the date of this Agreement, Seller shall send the Landlord Consent and Estoppel Certificates to each of the landlords under the Lease and shall copy Buyer's counsel on all such transmittals.  Seller shall provide prompt written notice to Buyer's counsel of all material written communications between Seller and such landlord and shall provide to Buyer's counsel a copy of any Landlord Consent and Estoppel Certificate promptly after Seller's receipt of same.  The parties hereto acknowledge and agree that Seller shall not object to the deletion by any landlord of the requested release language for the benefit of Seller in paragraph 12 of the form of Landlord's Consent and Estoppel Certificate attached hereto as Schedule 2.05 and Buyer will not object to the deletion by any la ndlord of paragraph 5 of any such Landlord Consent and Estoppel relating to Buyer's right to install a satellite dish;

                        (ii)        Seller shall have ten (10) business days from the date the Landlord Consent and Estoppel Certificates are sent to deal exclusively with such landlords to obtain execution of such Landlord Consent and Estoppel Certificate; and

                        (iii)       After the expiration of such ten (10) business day period, Buyer may contact such landlords to discuss such non-substantive matters (for example, signage) that do not require material amendments to the Leases as may be required or reasonably necessary to affect the transition of the Stores to a Rite Aid store following the Effective Time for such Store.  The foregoing notwithstanding, at all times following the time at which Seller has obtained the landlord's consent required under this Agreement for a Lease, Buyer may contact such landlord to discuss such matters as Buyer may choose with respect to such Lease without restriction.

ARTICLE III
CLOSING, DOCUMENTS OF CONVEYANCE

            Section 3.01     Closing.    Subject to the satisfaction of the conditions set forth in Articles VIII and IX, the purchase and sale of the Purchased Assets with respect to each Store shall be consummated on the business day following each applicable Effective Time (each a "Store Closing") by facsimile of the signed documents required hereunder with respect to each Store, and shall be deemed effective with respect to each Store as of and at the Effective Time for such Store.

            Section 3.02     Assignment and Assumption Agreements; New Leases.  At the Store Closing for each Store, Buyer and Seller shall execute and deliver to each other instruments of assignment and assumption, in form and content reasonably acceptable to counsel for Buyer and Seller (and which shall be substantially in the form of Exhibit C hereto, except that  Exhibit C shall be modified as necessary based upon a landlord's reasonable comments) pursuant to which Seller shall assign the Leases and Buyer shall assume all obligations thereunder arising from and after the Effective Time for the applicable Store.  The instruments of assignment and assumption

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are hereafter collectively referred to as the "Assignment and Assumption Agreements."  At the Store Closing with respect to the Owned Stores,  Spartan Properties Management, Inc. shall enter into the New Leases for the applicable Owned Store with Buyer as "tenant", and all of the obligations of Buyer under each such New Lease shall be completely and fully guaranteed by Rite Aid Corporation, in each case in the form attached hereto as Exhibit E. 

            Section 3.03     Other Instruments of Conveyance.  Seller shall execute and deliver to Buyer the following instruments of conveyance, each in form and content reasonably acceptable to counsel for the Buyer and the Seller (hereafter referred to as the "Other Instruments of Conveyance"):

            (a)        at the Store Closing for each Store, a bill of sale conveying the Purchased Assets for such Store;           

            (b)        at the last Store Closing hereunder, a Trademark Assignment Agreement providing for the assignment by The Pharm of Michigan, Inc. in form and content reasonably acceptable to counsel for Buyer and Seller (which shall be substantially in the form of Exhibit D hereto), pursuant to which The Pharm of Michigan, Inc. shall convey the Marks to Buyer;

            (c)        at the Store Closing for each Store, a written release of all Encumbrances on the Purchased Assets other than Permitted Encumbrances;

            (d)        such other instruments as may be reasonably requested by the Buyer to convey the Purchased Assets or any part thereto to the Buyer and any Permits to the Buyer;

            (e)        at the Store Closing for each Store, a closing statement confirming the allocation of the Purchase Price and the prorations of credits applicable to each Store; and

            (f)         at the Store Closing for each Store, a non-foreign persons affidavit.

            Section 3.04     Other Deliveries at  Closing.  At the Store Closing for each Store, in addition to the instruments described in Section 3.03, the following deliveries shall be made:

            (a)        the Seller shall deliver to Buyer: (i) all certificates required by Article VIII except such as may be expressly waived in writing by the Buyer; (ii) completed and executed Assignment and Assumption Agreements, (iii) Subordination, Non-Disturbance and Attornment Agreements ("SNDA's") executed by any of Seller's lender(s) who holds a mortgage or other security interest on an Owned Store, such SNDA to be on such lender's standard form; and (iv) copies of the Landlord Consent and Estoppel Certificates to the extent the Buyer has not waived the requirement for same prior to the Kickoff Date; provided, however, that in the event Seller shall have obtained the consent of the applicable landlord to the assignment of one or more Leases but has not obtained the Landlord Consent and Estoppel Certificate for such Leases (or the landlord has returned the applicable Landlord Consent and Estoppel Certificate with the estoppel provisions thereof stricken or otherwise marked or indicated as not applicable or consented to), Seller shall, for each such Lease, deliver to Buyer a Seller Estoppel Certificate in the form attached hereto as Exhibit H.

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            (b)        the Buyer shall deliver to the Seller (i) all certificates required by Article IX, except such as may be expressly waived in writing by Seller; and (ii) completed and executed Assignment and Assumption Agreements; and

            (c)        such other deliveries as may be required by the provisions of Section 3.10.

            Section 3.05     Allocation of Closing Costs.  Except as specifically provided in Section 2.03, or elsewhere in this Agreement, each party shall be responsible for and bear all of its own transactional costs and charges relating to the purchase and sale contemplated herein.

            Section 3.06     Other Obligations.  Unless otherwise specified in this Agreement:  (a) all operating expenses and liabilities relating to the ownership and operation of the Purchased Assets attributable to the period ending on the Effective Time with respect to each Store which are not Assumed Obligations (including but not limited to the Excluded Obligations) shall be the sole responsibility of and paid by the Seller; and (b)  the operating and other liabilities relating to the ownership and operation of the Purchased Assets attributable to periods commencing on or after the Effective Time with respect to each Store shall be the sole responsibility of the Buyer.

            Section 3.07     Transfer of Possession.   With respect to each Store and subject to the Permitted Encumbrances and the terms of the New Leases (if applicable), simultaneously with the Effective Time for such Store, Seller shall give Buyer full possession and enjoyment of the Purchased Assets.

            Section 3.08     Termination and Related Employee Matters.  Immediately prior to the Effective Time for each Store, Seller shall terminate the employment of all of its employees exclusively employed at the applicable Store (all such employees the "Employees"). Immediately following the Effective Time for each Store, Buyer shall employ such of the Employees as it determines in its sole discretion provided, however, the commencement date of such employment of Employees shall not occur prior to the effective date of Seller's termination of such Employee or such Employee's termination of their employment with Seller. Seller shall be responsible for any liability under the Workers' Adjustment and Retraining Notification Act and any similar state or local law or regulation relating to plant closings and layoffs (collectively "WARN") with respect to Employees who are terminated as of or prior to the Effective Time for the Store that employs such Employees.  Buyer agrees that to the extent Buyer determines, in its sole discretion, to hire or retain any of the Employees, Buyer shall, on the first calendar day of the month following each Effective Time, provide insurance coverage to such Employees who are covered by Seller's health plan immediately prior to the applicable Effective Time and who meet Buyer's eligibility requirements.  Buyer shall be responsible for any liability under WARN with respect to employees of Seller who are terminated by Buyer after the Closing.  To the extent required, Seller shall provide notice to its Employees as mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").  Seller shall be responsible for all wages, severance pay, notice of termination or termination pay and any other compensation or obligation which may be due by statute, contract or common law pursuant to Seller's termination of any of the Employees.  Buyer shall be responsible for all wages, severance pay, notice of termination or termination pay and any other compensation or obligation which may be due by statute, contract or common law pursuant to the employment of the Employees by Buyer at each Store following the Effective Time for each Store.  Seller shall have full responsibility for and

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shall indemnify Buyer against any severance, COBRA or other claims by Employees not hired by Buyer or who decline employment offered by Buyer arising from or relating to their employment with Seller and/or termination by Seller or who terminate employment with Seller. Buyer agrees that it shall allow "years of service credit" (for purposes of vacation time, sick leave time and personal days only) to the Employees who are hired as full time employees by Buyer.   The years of credit allowed shall be based on Buyer's existing policies.

            Section 3.09     Utility Services.  At the Effective Time or as soon thereafter as practicable, Seller and Buyer will cooperate with each other to arrange to disconnect, transfer or obtain final readings with respect to all electricity, water, telephone, and other utilities serving the Assumed Lease Stores and the Owned Stores and to have such services reconnected in or otherwise transferred to Buyer's name immediately thereafter.

            Section 3.10     Other Actions and Instruments.  Buyer and Seller shall take such other actions and shall execute and deliver such other instruments, documents and certificates at the Store Closing for each Store as are required by the terms of this Agreement or as may be reasonably requested by the Buyer or the Seller in connection with the closing of the transactions contemplated by this Agreement including receipts relating to the payment of the Purchase Price.  In addition, the parties agree that the term Store Closing with respect to each Store shall be interpreted for the purposes of the closing to include each of the parties taking all reasonable actions (including, but not limited to, their respective obligations under Article III) necessary to transfer the Purchased Assets at the Effective Time with respect to each Store to the Buyer.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

            Section 4.01     Organization and Good Standing.  Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio. 

            Section 4.02     Corporate Power and Authority.  Buyer has the requisite corporate power and authority to execute, deliver and perform its obligations under and pursuant to this Agreement, including without limitation, the requisite corporate power and authority to acquire and operate the Purchased Assets and assume the Assumed Obligations upon the terms and conditions set forth herein.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer.  This Agreement has been duly executed and is a legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity.

            Section 4.03     Validity of Contemplated Transactions.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by Buyer do not and will not (i) contravene any provisions of the Articles of Incorporation or Bylaws of Buyer, (ii) violate, be in conflict with, constitute a default under, result in the termination of, cause the acceleration of any payments pursuant to, or otherwise impair the good

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standing, validity, and effectiveness of any material agreement, contract, commitment, indenture, lease or mortgage applicable to Buyer, or (iii) violate any Legal Requirement, including without limitation, all applicable securities laws, rules, regulations, orders, permits, licenses, authorizations or approvals to which Buyer is subject, or (iv) violate any judgment, order, writ, prohibition, injunction or decree of any court, governmental body or arbitrator by which Buyer is bound.

            Section 4.04     Regulatory Approvals.  Except for any Governmental Authorizations from the DEA, State Boards of Pharmacy, Ohio Liquor Commission or other similar Governmental Bodies, all material consents, waivers, approvals, authorization or exemptions from Governmental Bodies and other third parties and other material requirements prescribed by any Legal Requirement which must be obtained or satisfied by Buyer in order to permit the consummation of the transactions contemplated by this Agreement have been obtained.  Buyer has given, or prior to the Effective Time for each Store will give, all required notices to the DEA and State Boards of Pharmacy and Ohio Liquor Commission that are required to be given by Buyer in connection with the transactions contemplated by this Agreement.

            Section 4.05     Inventory Held for Resale.  Buyer intends to hold the Inventory for resale to customers and for no other purpose.

            Section 4.06     Brokers.  Buyer does not have any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated

            Section 4.07     Buyer's Knowledge.  Buyer is not aware of any fact or circumstance as of the date of this Agreement which would make, or which would be reasonably expected to render, inaccurate any of the representations or warranties made by Seller in this Agreement.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows:

            Section 5.01     Organization, Good Standing and Qualification.  Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Michigan.  Seller is duly qualified to do business and is in good standing in each and every jurisdiction where the failure to qualify or to be in good standing would have a material adverse effect upon the conduct of its business or the ownership of the Purchased Assets.

            Section 5.02     Corporate Power and Authority.  Seller has the requisite corporate power and authority to execute, deliver and perform its obligations under and pursuant to this Agreement.  Seller has the requisite corporate power and authority to sell, transfer, assign, convey and deliver to Buyer at Closing, the Purchased Assets as provided herein and, subject to obtaining all requisite third party consents thereto, to assign the Leases to Buyer at the Effective Time for the applicable Store.  Seller has the requisite corporate power and authority to carry on its business operations as they are now being conducted and to own and operate the Purchased Assets.  The execution and delivery of this Agreement and the consummation of the transactions

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contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller.  This Agreement has been duly executed and is a legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the enforcement of creditors' rights generally and by general principles of equity.

            Section 5.03     Validity of Contemplated Transactions.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene any provision of the Articles of Incorporation or Bylaws of the Seller, (ii) violate, be in conflict with, or constitute a default under, result in the termination of, cause the acceleration of any payments pursuant to, or otherwise impair the good standing, validity, or effectiveness of any material agreement, contract, commitment, indenture, lease or mortgage, to which Seller is a party or by which it or the Purchased Assets are bound, (iii) violate any provision of any Legal Requirement, including without limitation, all applicable securities laws, rules, regulations, orders, permits, licenses, authorizations or approvals to which Seller is subject or (iv) violate any judgment, order, writ, prohibi tion, injunction or decree of any court or other governmental body of competent jurisdiction or arbitrator by which Seller is bound, except to the extent the consent of third parties may be required in connection with the assignment of the Leases or with the Governmental Authorizations.

            Section 5.04     Regulatory Approvals.  Except for any Governmental Authorizations from the DEA, State Boards of Pharmacy, Ohio Liquor Commission or other similar Governmental Bodies, all material consents, waivers, approvals, authorization or exemptions from Governmental Bodies and other third parties (other than consents from the landlords with respect to the Leases) and other material requirements prescribed by any Legal Requirement which must be obtained or prescribed by any Legal Requirement which must be obtained or satisfied by Buyer in order to permit the consummation of the transactions contemplated by this Agreement have been, or will prior to the Effective Time for each Store be, obtained.  Seller has given, or prior to the Effective Time for each Store will give, all required notices to the DEA and State Boards of Pharmacy that are required to be given by Seller in connection with the transa ctions contemplated by this Agreement.

            Section 5.05     Liabilities and Obligations of Seller.  Seller understands and acknowledges that Buyer is not assuming any liabilities or obligations of Seller other than the Assumed Obligations expressly set forth in Section 1.03.

            Section 5.06     Title to Purchased Assets.  At the Effective Time with respect to each Store, Seller will have good and valid title to all of the Purchased Assets with respect to such Store free and clear of all Encumbrances other than Permitted Encumbrances and no Purchased Asset will be titled in a Person other than Seller (except for the New Leases and the Marks).  Upon delivery to Buyer of the bills of sale, assignments, and other documents of conveyance contemplated by this Agreement, Buyer will receive effective as of the applicable Effective Time with respect to each Store good and valid title to all of the Purchased Assets free and clear of all Encumbrances other than the Permitted Encumbrances. 

            Section 5.07     Assumed Leases.  Subject to receipt of all necessary third party consents, as of the applicable Effective Time, the Buyer will receive and assume Seller's entire

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right, title, interest and obligations in the Leases and Subleases and Licenses free and clear of all Encumbrances other than the Permitted Encumbrances.  Each of the Leases, Subleases and Licenses is valid, binding, in full force and effect, and enforceable by or against Seller in accordance with their respective terms and conditions, and with respect only to Seller's obligations, there is no existing default thereunder or breach thereof or, to Seller's Knowledge, condition which, with the passage of time or notice or both, might constitute such a default by Seller.  There has been no termination or, to Seller's Knowledge, threatened termination or notice of default (not subsequently cured) relating to any such Lease.  To Seller's Knowledge, Seller has provided copies of all documents that are in Seller's real estate files comprising the Leases and Subleases and Licenses.  Buyer acknowledges that such copies of the Leases and Subleases and Licenses may be missing pages, exhibits, or othe r information.

            Section 5.08     Taxes.  To the best of Seller's Knowledge, there are no outstanding special tax assessments against any of Seller's Fixed Assets or Inventory.  Subject to the prorations set forth elsewhere in this Agreement, Seller has, in respect of the Purchased Assets, filed (or will timely file) all tax returns that are required to be filed and has paid or will timely pay all taxes that have become due pursuant to such tax returns or pursuant to any assessment that has become payable or for which Buyer may otherwise have any transferee liability.  To  Seller's Knowledge, there are no outstanding or delinquent real estate tax assessments against any of the Assumed Lease Stores, the Owned Stores or the Owned Real Property.  The Form W-9 delivered to Buyer at the time of execution of this Agreement reflects Seller's correct Employer Identification Number.

            Section 5.09     Zoning; Easements.  To Seller's Knowledge, Seller's existing use of the Assumed Lease Stores, the Owned Stores and the Owned Real Property is permitted under applicable zoning laws and ordinances.  To Seller's Knowledge and except for Permitted Encumbrances: (i) there are no land use laws, rules, regulations or ordinances or modifications to zoning that materially restrict the use of any of the Assumed Lease Stores, the Owned Stores or the Owned Real Property as used by Seller on the date hereof or, to the Knowledge of Seller, proposed, which materially restrict or prevent, or would materially restrict or prevent, the use of any of the Assumed Lease Stores, the Owned Stores or the Owned Real Property for such use, and (ii) there are no existing easements, right-of-way, or restrictions affecting any of the Assumed Lease Stores or the Owned Stores which could reasonably be expected to mat erially adversely affect or prohibit the use of the Assumed Lease Stores, the Owned Stores or the Owned Real Property as presently used by the Seller.

            Section 5.10     Litigation, Compliance with Laws.  Except as set forth on Schedule 5.10 hereto, (a) there is no material suit, action, claim, investigation, arbitration, condemnation, administrative or legal or other proceeding or governmental investigation pending or, to Seller's Knowledge, threatened against or related to the Purchased Assets, (b) to Seller's Knowledge, Seller has not failed to materially comply with any Legal Requirement, including without limitation all material ordinances, requirements, regulations, or orders applicable to Seller's operation of the Purchased Assets, (c) Seller has not violated any material order, writ, injunction, judgment, or decree of any court or federal, state or local department, official, commission, authority, board, bureau, agency, or other instrumentality which was issued against  and delivered to Seller.

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            Section 5.11     Permits and Licenses.  To Seller's Knowledge, all permits (including without limitation environmental permits), licenses, certificates, zoning variances, approvals, repackaging agreements or related licenses, and other authorizations ("Permits") (as well as state pharmacy board and DEA licenses and Medicare, Medicaid and NCPDP numbers) (hereafter referred to as the "Licenses") necessary for the operation of the Seller's business at the Stores as it is presently operated, have been obtained and are in full force and effect.  All Permits and Licenses are presently valid and no revocation, cancellation or withdrawal thereof has been effected or, to Seller's Knowledge, threatened. 

            Section 5.12     All Necessary Assets.  The Purchased Assets constitute all of the material assets, contracts and leases used in the operation of Seller's business at the Assumed Lease Stores and the Owned Stores other than the Excluded Assets.

            Section 5.13     Employee Matters; Labor or Employee Disputes. 

            (a)        Set forth on Schedule 5.13 is a list of all Employees on the date hereof for the Stores, including their full legal name, citizen or immigrant status, date of hire, full or part-time status, position, salary, bonus and other compensation information and, in the case of pharmacists, nurses or other licensed Persons, their relevant license numbers.  Schedule 5.13 also identifies all written and oral employee benefit plans, programs or arrangements maintained by Seller for the benefit of any of the Employees.  Except as set forth on Schedule 5.13, Seller is not bound by any written or oral employment agreement, consulting agreement, or deferred compensation agreement with respect to such Employees.  To the Knowledge of Seller, no Employee is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality or non-competition agreement, that in any way adversely affects or restricts the ability of a  Employee to perform such Employee's duties to Buyer after the Closing, if any.  To Seller's Knowledge, Seller is not and has never been subject to any affirmative action obligations under any Legal Requirement with respect to any current employees, including Executive Order 11246, or is or has been a government contractor for purposes of any Legal Requirement with respect to the terms and conditions of employment of any current or former employees.

            (b)        Except as set forth on Schedule 5.13 hereto, Seller is not a party to any contract or other agreement with any labor union and is not experiencing or the subject of, or to Seller's Knowledge, threatened by, any union organization campaign or any strike, slowdown, picketing, work stoppage, or other labor disturbance by any labor union or group of employees.   Except as set forth on Schedule 5.13 hereto, there are no, and there have not been any, unfair labor complaints, strikes, walkouts, work stoppages, slow downs, material complaints or material charges of discrimination (including without limitation, based on age, race, gender, marital status, national origin, disability or handicap), other material labor difficulties, or, to Seller's Knowledge, threats of any of the foregoing, affecting Seller or any of its business operations at the Stores.

            Section 5.14     Insurance Coverages.  The Purchased Assets and the Assumed Lease Stores and the Owned Stores are insured pursuant to the same insurance policies that cover Seller's drug stores other than the Stores.  All of such policies with respect to each Store shall be kept in full force and effect until the Effective Time with respect to such Store.  Seller makes no

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representation and warranty with respect to the insurance coverage carried by the landlords under the Leases.

            Section 5.15     Environmental Matters.  Other than in compliance with Legal Requirements, except in the normal course of business,  Seller has not, in connection with Seller's operation of the Assumed Lease Stores, the Owned Stores or the Owned Real Property, at any time, (i) generated, processed, distributed, transported, used, treated, stored, handled, emitted, discharged, released or disposed of (or caused any person or entity to do any of the foregoing or assisted any person or entity in doing any of the foregoing) any oil, gasoline, petroleum-related products, hazardous substances (as defined by the Comprehensive Environmental Response, Compensation and Liability Act "CERCLA"), hazardous waste (as defined by the Resource Conservation and Recovery Act "RCRA"), or pollutants or contaminants (as defined by CERCLA), including, without limitation, asbestos or asbestos containing materials, PCB's and ur ea formaldehyde (but excluding any such items sold in the ordinary course of its retail business, such as nail polish and the like), or (ii) taken any action or failed to take any action which constitutes a violation (or with respect to the Occupational Safety and Health Act, a material violation) of any federal, state or local law, rule, regulation, order or other requirement relating to health, safety or the environment, which in the case of either (i) or (ii) above imposes liability, responsibility or standards of conduct applicable to environmental conditions including, without limitations, CERCLA, the Superfund Amendment and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials Transportation Act, RCRA, the Clean Water Act, the Clean Air Act, the toxic Substances Control Act, the Coastal Area Management Act, any "Superfund" or "Superlien" law, and the Occupational Safety and Health Act (collectively referred to as the "Environmental Laws").  Seller has not received any notices or citations relating to alleged violations of any of the Environmental Laws and does not know of any violations or alleged violations of any of the Environmental Laws at or affecting the Assumed Lease Stores or the Owned Stores whether or not by the Seller and regardless of the time frame in which such violation or alleged violation occurred.

            Section 5.16     Third Party Payors.  Set forth in Schedule 5.16 are the names of the Seller's ten (10) largest payors for the Stores in the aggregate, measured by percentage of revenue for the thirteen fiscal periods ending January 5, 2008.  Also set forth on Schedule 5.16 are each agreement that, to the Seller's Knowledge, provides that Seller is the exclusive supplier of pharmaceutical products and services to any third party payor.

            Section 5.17     Financial Statements.  Schedule 5.17 sets forth separately the prescription and non-pharmacy sales of each Store for Seller's last 13 periods ending March 29, 2008, as compiled from Seller's records (collectively, the "Financial Statements").  The Financial Statements fairly present, in all material respects, the sales of the Stores for the periods indicated therein. 

            Section 5.18     Prescriptions.  Schedule 5.18A sets forth the average weekly prescription count for each of the Stores, and for all Stores collectively, for the thirty (30) week period ending on March 29, 2008.  Schedule 5.18B sets forth, for Seller's Period 10 ending January 5, 2008, the total number of prescription counts and overall percentage of such business (as a portion of the business set forth on Schedule 5.18A for the same period) derived from Non-

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Standard Business and except as set forth on Schedule 5.18B, all prescriptions set forth on Schedule 5.18A for the same time period have arisen from transactions that do not include any "Non-standard Business."  No material increase in the percentage of Non-Standard Business (when compared to the percentage set forth on Schedule 5.18B) has occurred during any period subsequent to Period 10.  As used in this Agreement, "Non-standard Business" means (a) delivering prescriptions by mail, courier, automobile or other delivery system, with a frequency and in amounts outside of the ordinary course of business for retail pharmacies, (b) compounding, including both sterile and non-sterile compounding, other than in the ordinary course of business for retail pharmacies, (c) filling prescriptions that involve any unique, customized or non-standard packaging (except for heat or cold sealed blister packs), including prescriptions filled for patients in independent living, assisted living, nursing home, long-term care or hospice facilities, (d) any business conducted pursuant to Section 340B of the Public Health Service Act, (e) any non-prescription business (including durable medical equipment) done through the pharmacy computer and included in the prescription count, or (f) any other business outside the scope of a customary pharmacy or retail drug-store business.

            Section 5.19     Fixed Assets.  The Fixed Assets are and shall be as of the Effective Time for each Store in the condition actually used in the conduct of the business of the Assumed Lease Stores and the Owned Stores.  Between the date hereof and the Effective Time for each Store, there will not be a material reduction in the Fixed Assets with respect to such Store that would reasonably be expected to result in a material adverse effect to the condition of the Purchased Assets, the Assumed Lease Stores or the Owned Stores, as applicable.     

            Section 5.20     Employee Benefits; ERISA.

            (a)        Except as described in Schedule 5.20, Seller has not entered into any oral or written employment agreement, consulting agreement, or deferred compensation agreement, in each case with respect to any Employee.

            (b)        None of the Purchased Assets is the subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code.

            (c)        To Seller's Knowledge, each employee benefit plan maintained by Seller for the benefit of one or more Employees that is intended to be qualified under Section 401(a) of the Code is so qualified, and Seller agrees to provide such information as may reasonably be requested by Buyer (including, but not limited to, the latest IRS determination letter received by each such tax-qualified plan) for purposes of Buyer's determination whether to accept rollover contributions in its tax-qualified plan or plans attributable to distributions from Seller's plans.  

            Section 5.21     Brokers.  Except for The Food Partners, LLC, Seller has no liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated.  Seller acknowledges and agrees that all such liabilities and obligations to brokers shall be borne exclusively by Seller and Seller shall indemnify and hold Buyer harmless against any and all such liabilities and obligations pursuant to and in accordance with Section 12.01. 

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            Section 5.22     AS IS, WHERE IS.  EXCEPT AS SET FORTH IN THIS AGREEMENT, THE PURCHASED ASSETS ARE BEING TRANSFERRED TO BUYER "AS IS, WHERE IS, AND WITH ALL FAULTS" AND WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE.  Buyer acknowledges and agrees that, except as otherwise expressly stated in this Agreement, Seller has not made, and Seller hereby specifically disclaims any warranty, guaranty or representation, oral or written, past, present or future, including but not limited to any warranty, guaranty or representation concerning the nature and condition of the Purchased Assets or the Stores.  Buyer acknowledges that, having been given the opportunity to inspect the Purchased Assets, Buyer is relying solely on the express provisions of this Agreement and on its own investigation of the Purchased Ass ets.

ARTICLE VI
ACTIVITIES PRIOR TO THE EFFECTIVE TIME

            Section 6.01     Activities Prior to Effective Time for Each Store.  Seller hereby covenants and agrees that from and after the date hereof to the Effective Time for each Store (unless another time period is provided for below), Seller will, in all material respects:

            (a)        Not sell, assign, lease, transfer, or otherwise dispose of any of the Purchased Assets without the prior written consent of Buyer, except in the ordinary course of business;

            (b)        Not waive any material rights or claims of Seller constituting a part of the Purchased Assets;

            (c)        Except for those expiring on their own terms, maintain in full force and effect all material agreements, contracts, leases, Permits, authorizations, and approvals necessary for or related to its business operations at the applicable Store as such operations are now conducted and comply in all material respects with Legal Requirements applicable to Seller's business operations at the applicable Store;

            (d)        From the date of this Agreement until the Kickoff Date, confine its purchases of Inventory to such quantity as is reasonably appropriate to the operation of the Stores as going concerns in the normal course of its business and will not make any material changes or modifications to any pricing policies at the Stores; provided, however, notwithstanding anything to the contrary in this Agreement, Buyer acknowledges that Seller shall have the right to begin to sell-down Excluded Inventory and Capped Products, and cease purchasing additional Excluded Inventory and Capped Products, at any particular Store during the three week period following the Kickoff Date (as hereinafter defined in Section 6.10) (the "Sell-Down Period"); the foregoing notwithstanding, through the Effective Time for each Store, Seller will continue purchasing pharmacy Inventory in such quantities and at such times as is reasonabl y appropriate to the operation of the pharmacy within such Store as going concern in the normal course of its business and will not make any material changes or modifications to any pricing policies with respect to the same.  For purposes of this Agreement, "Capped Products" means the following products:  Paper products, household chemicals and pet products and food;

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            (e)        Maintain in the ordinary course of business the applicable Store's historical pharmacy operating hours (and shall keep the Store operating hours the same as, or longer than, the pharmacy operating hours) and pharmacy staffing levels, subject to normal workplace practices and discipline;

            (f)         From the date of this Agreement until the Kickoff Date, use commercially reasonable efforts to preserve the goodwill of any material pharmacy suppliers, contractors, licensors, employees, customers, payors, payment programs, referral sources, doctor groups, hospitals, distributors and others having business relations with respect to the pharmacy operations of the applicable Store and promptly inform Buyer in the event that Seller has reason to believe that its relationship with any such Person that is material to the pharmacy operation of such Store has been materially reduced or terminated or may be in jeopardy of being so reduced or terminated, provided however, that notwithstanding anything to the contrary contained herein, Seller shall not contact, directly or indirectly, any pharmacy suppliers, contractors, licensors, employees, customers, payors, payment programs, referral sources, doctor groups, hospitals, distributors and others having business relations with respect to the pharmacy operations of the applicable Store to encourage such persons or entities to cease doing or materially decrease their business with Buyer at any applicable Store following the Effective Time for such Store; and

            (g)        Except as expressly contemplated by this Agreement each party shall not: (i) take any action that is intended or may reasonably be expected to result in (1) any of the representations and warranties set forth in this Agreement being or becoming untrue in any material respect, (2) any of the conditions to the closing at the Effective Time with respect to each Store set forth in this Agreement not being satisfied or (3) any violation of any provision of this Agreement, except, in each case, as may be required by applicable Legal Requirements; (ii) other than in the ordinary course of business enter into any contract with respect to, or make any increase in (or commitment to increase) the compensation payable to any of its employees or agents located at or related to the Stores; or (iii) sell, lease, transfer or otherwise dispose of (including any transfers from the Seller to any of its Affiliates ), or impose or suffer to be imposed any Encumbrance (other than a Permitted Encumbrance) on, any of the Purchased Assets, other than inventory sold or otherwise disposed of for fair value in the ordinary course of the Store's business consistent with past practice.

            (h)        Seller shall not, without Buyer's prior written consent, modify or amend any Lease or consent to any assignment or sublease in connection with any Lease.  Seller shall furnish Buyer with a written notice of the proposed action which shall contain the document which Seller proposes to execute. 

            Section 6.02     Access; Confidentiality Agreement.  Between the date hereof and the date that is forty-five (45) days after the date of this Agreement (the "Due Diligence Period"), Seller will give to authorized representatives of Buyer, upon reasonable notice to Matthew Morris of Food Partners, LLC or such other person as Seller may designate in a writing delivered to Buyer in accordance with Section 14.01, reasonable access, during normal business hours, in such manner as not to unduly disrupt normal business activities, to any and all premises, properties, contracts, commitments, books, records and affairs of the Seller associated with the Stores (with respect to the Stores, such access is limited to a review of the books and records).  Buyer's access to, and inspection of, the Stores will be at Buyer's sole risk and expense and Seller

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will have no responsibility therefore.  Buyer will immediately repair any loss or damage to the Stores caused solely by the acts or omissions of Buyer in connection with its survey, inspection or testing of the Stores hereunder.  Buyer will indemnify and hold Seller harmless from and against any Liabilities arising out of, resulting from or in any way connected with the acts or omissions of Buyer, its employees, agents or contractors in connection with Buyer's access to and inspection of the Stores hereunder.  The Confidentiality Letter Agreement previously executed by the parties (the "Confidentiality Agreement") shall survive the execution of this Agreement and the Store Closings hereunder and shall continue in full force and effect in accordance with its terms as such terms are explicitly modified by this Agreement.

            Section 6.03     Seller's Employees.  Buyer and Seller acknowledge and agree that from and after the date hereof:

            (a)        Buyer shall have the right to interview and offer employment in its intended business operations to the Employees;

            (b)        Buyer shall have the right, but not the obligation, to approach any labor union or other Employee representative group or organization to pursue, negotiate, and obtain such agreements as Buyer determines in its sole discretion in connection with the operation of the business by Buyer following the Effective Time with respect to each Store; and

            (c)        Seller shall have the right to offer employment or transfer to other operations of Seller or its Affiliates any regional office employees that oversee the operations of the Stores, but do not work in any given Store on a full-time basis.  A list of such employees is set forth on Schedule 6.03 to this Agreement.

            Section 6.04     Public Announcements.  Except as set forth in Section 14.06 hereof, neither party shall make any public announcements or disclosures regarding the transactions contemplated herein without the prior consent of the other party, including its approval of the content thereof.

            Section 6.05     Record Data; Patient Notification. 

            (a)        The parties agree that Buyer will engage Two Point Conversions, Inc. (the "Data Converter") to convert Seller's electronic records of Prescription Files, patient records and other data (the "Record Data") to a format specified by Buyer.  Seller agrees to provide such access, information and cooperation to the Data Converter as may be required to enable the Data Converter to deliver the Record Data to Buyer at least two (2) business days prior to Effective Time for each Store.  The costs and expenses of the Data Converter will be paid by Buyer.  To the extent such record conversion is not successful at any particular Store, Seller agrees to provide to Buyer, at no cost to Buyer, a computer terminal to provide electronic access to such Record Data until such time as the record conversion is successful, or Buyer is able to operate such Store without the need for such c omputer terminal; provided, Seller's obligation to provide such computer terminal shall in all cases terminate on the date that is six (6) month after the Effective Time for the applicable Store.

            (b)        Seller will retain a complete copy of all Record Data in accordance with applicable record retention Legal Requirements.  In addition, Seller agrees to make electronic

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data included among the Record Data currently used for record keeping purposes available to Buyer for a period of six (6) months from the Effective Time for the applicable Store.  Seller will retain a complete copy of all Record Data in accordance with applicable Legal Requirements regarding retention of records.  Buyer shall reimburse Seller for any incremental license fees or other expenses incurred by Seller exclusively as a result of maintaining such computer software for the period specified herein.

            (c)        If desired by Buyer, Seller agrees that Buyer will be permitted to directly, through one or more of its Affiliates or through the engagement of a third party distributor (the "Third Party Distributor") to notify each customer of any Store who has had a prescription filled or refilled at a Store within the two years prior to the Effective Time for the applicable Store by mailing each of them a letter in the form attached as Exhibit F.  In such event, the parties agree that, promptly after its receipt of the Record Data, the Data Converter will provide the Record Data to the Third Party Distributor in order to enable the Third Party Distributor to assemble and distribute these letters.  

            Section 6.06     Matters Related to Prescriptions.  Prior to the Effective Time for each Store, Seller shall use reasonable efforts to fill and deliver to pharmacy customers any partial-fill prescriptions with a remaining quantity balance ("IOU Prescriptions").  For any IOU Prescriptions remaining at the Effective Time for each Store, Seller shall credit the prescription to the customer or to the third-party payer, as appropriate, as of the Effective Time.  Buyer assumes no liability for IOU Prescriptions.  In addition, prior to the Effective Time for each Store, Seller shall reverse and return to stock any filled prescriptions that have not been picked up, providing all necessary notice to any third-party payors, and shall provide Buyer with a list of such prescriptions so that Buyer is prepared to fill such prescriptions on or after the Effective Time of each Store.

            Section 6.07     Compliance with Law.  The parties agree to comply fully with the provisions of the United States Controlled Substance Act of 1970, as such act may relate to the transfer of the Inventory, and with all applicable Legal Requirements as they may relate to the transfer of the Inventory.  Seller shall notify the appropriate governmental agencies, including the appropriate State Board of Pharmacy or similar office and the regional office of the United States Drug Enforcement Agency ("DEA"), of the transactions contemplated by this Agreement.

            Section 6.08     Restrictive Covenants.  Between the date of this Agreement and twelve (12) months after the last Effective Time for any Store hereunder, neither Seller nor any of its Affiliates shall (i) solicit or recruit any Employee who has been hired by Buyer or (ii) encourage any such Employee to leave the employment of Buyer; provided, that the provisions of this Section 6.08 shall not apply with respect to any Employee who (i) responds to a public advertisement by Seller or (ii) is not hired by Buyer or (iii) is hired by Buyer but subsequently leaves the employ of Buyer. 

            Section 6.09     Landlords.  Prior to the Effective Time for each Store, the Seller will use all commercially reasonable efforts (without any obligation of Seller to pay money for such consent other than such amounts specifically due and payable under the terms of the applicable Lease): (i)  to obtain a Landlord Consent and Estoppel Certificate from each landlord under a Lease for an Assumed Lease Store;  and (ii) to obtain a written modification to the use clauses

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contained within the Leases for Stores #6110 and #6125 so as to permit as an additional permitted use the use of same by Buyer after the Effective Time for each such Store as a "full service retail drug store with licensed pharmacy operation" (collectively the "Two Mandatory Lease Amendments").  Buyer shall not materially adversely interfere with Seller's attempts to obtain the Landlord Consent and Estoppels Certificates, or the Two Mandatory Lease Amendments, and in connection therewith shall comply with the covenants set forth in Section 2.05 of this Agreement.

            Section 6.10     Prescription Count.  Prior to the end of the third business day immediately following the Kickoff Date, Seller shall deliver to Buyer a summary, which shall be certified by Seller as true, correct and complete, of the  average weekly number of prescriptions filled at all Stores in the aggregate during the thirty (30) weeks immediately prior to the Kickoff Date (the "Kickoff Count").  If the Kickoff Count is less than the 18,197 (the average weekly script count for all the Stores in the aggregate provided to Buyer during the evaluation of this transaction in the information memorandum) (the "Evaluation Count") then the following will occur:  (a) if the Kickoff Count is greater than or equal to 90% of the Evaluation Count, then no adjustment will be made to the Non-Inventory Purchase Price; and (b) if the Kickoff Count is less than 90% of the Evaluation Count, then the Non-Inven tory Purchase Price will be reduced by a percentage equal to 90% minus the percent that the Kickoff Count is of the Evaluation Account.  By way of example and for purposes of greater clarity, if the Kickoff Count is 75% of the Evaluation Count, than the Non-Inventory Purchase Price will be reduced by 15%.  For purposes of this Agreement, the "Kickoff Date" is that date on which Buyer (i) has notified Seller that Buyer has waived all its right, if any, to terminate this Agreement pursuant to Article VII except as specifically set forth in Section 13.07; and (ii) has provided to Seller written confirmation that to Buyer's Knowledge, Buyer is not aware of any breaches by Seller of any representations, warranties or covenants under this Agreement as of the such date that would give rise to termination rights on behalf of Buyer.  The Kickoff Date shall in no event be less than twenty one (21) calendar days prior to the first Effective Time.

            Section 6.11     Wiring and Equipment Installation.  The Seller agrees that Buyer may, and Seller will, subject to the applicable Lease, give to authorized representatives of Buyer reasonable access, in such manner as not to unduly disrupt normal business activities, to any and all premises and properties related to the Stores so that Buyer may (i) prior to the Effective Time for a Store, pre-wire the Store to facilitate the installation of its satellite, point-of-sale and pharmacy systems equipment in that Store and (ii) at its own risk, store (and prepare for installation) that equipment in each Store at any time after the execution and delivery of this Agreement; provided, however, that Buyer's activities shall be at Buyer's sole risk and shall not interfere with or disrupt the electrical, telephone, check-out or other systems at the Store or otherwise interfere with normal operations at the Store and sha ll be in compliance with the applicable Lease.  Buyer shall indemnify and hold harmless Seller against any violation or default of any Leased caused by Buyer's actions under this Section 6.11.  Further, if Closing does not occur hereunder, Buyer shall in addition indemnify and hold harmless Seller from any other Liabilities Seller may suffer as a result of Buyer's actions under this Section 6.11. 

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ARTICLE VII
DUE DILIGENCE; CONDEMNATION; CASUALTY; CONSENTS; ENVIRONMENTAL

            Section 7.01     Premises Defects.  If, on or before the expiration of the Due Diligence Period, Buyer notifies Seller of any Premises Defect,  Seller will have thirty (30) days from the date of receipt of any such notice to cause such Premises Defect to be removed, cured or insured over.  If Seller, in its sole discretion, is unwilling or unable to remove, cure or insure over any Premises Defect within such period, Buyer will notify Seller within five (5) days from the expiration of such period to state whether Buyer will:  (a) elect to waive the Premises Defect, release Seller from any obligation or liability for the Premises Defect, and complete the acquisition of the Purchased Assets in accordance with this Agreement, or (b) terminate this Agreement.  For purposes of this Agreement, "Premises Defect" means  any matter shown in any title commitme nt or survey or physical report (other than an environmental report) obtained by Buyer for any Assumed Lease Store or Owned Store that (i) as it relates to the condition of the Store has a material adverse effect on the structural integrity of such Store, or (ii) as it relates to any other matter, in the reasonable commercial judgment of Buyer, would materially and adversely affect the ability of Buyer to operate a full service drug store at such Store.  Buyer shall promptly (but in no case less than 3 business days after Buyer's receipt thereof) provide Seller with a copy of each such title commitment or survey or physical report upon receipt of same by Buyer.

            Section 7.02     Lease Amendment.  In the event that Buyer does not receive from the landlord at Store #6103 (as shown on Exhibit A) a lease term extension of at least 10 years by  the end of the Due Diligence Period, Buyer will notify Seller prior to the expiration of the Due Diligence Period whether Buyer will:  (a) elect to waive such lease extension, release Seller from all liabilities and obligations relating to the absence of such extension, and complete the acquisition of the Purchased Assets in accordance with this Agreement, or (b) refuse to purchase the Purchased Assets at either or both of Stores #6103 and #6106,  and refuse to assume the Lease with respect to such Store #6103  and Buyer shall be entitled to deduct from the Non-Inventory Purchase Price the amount set forth opposite each of such Stores #6103 and #6106 on Exhibit A to which Buyer exercises such right.   If Buyer elects to refuse to purchase either or both of Stores #6103 and #6106, the following shall occur:  (i)  such Stores so excluded shall be deemed Remaining Stores and Licensed Stores (and not an Assumed Lease Store or File Buy Store) under Section 11.15, and Seller shall have the right to use the "Pharm" name at such locations pursuant to Section 11.15; and (ii) Seller shall have the ability to continue to operate such excluded Stores without any restriction imposed hereunder, including any restrictions set forth in Section 11.05 of this Agreement.

            Section 7.03     Casualty.

            (a)        Assumed Lease Store or Owned Store. 

                        (i)         If prior to the Kickoff Date, any material portion (as determined by Buyer in the exercise of its reasonable commercial judgment) of the Store premises and/or Purchased Assets at the applicable Assumed Lease Store or Owned Store is damaged or destroyed by fire or any other casualty (a "Material Casualty"), Seller will promptly give notice of the same to Buyer.  Seller will have thirty (30) days from the date of receipt of any such notice to repair such

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Material Casualty to the condition of such Store prior to such Material Casualty.  If Seller, in its sole discretion, is unwilling or unable to repair such Material Casualty within such period, Buyer will notify Seller within five (5) days from the expiration of such period to state whether Buyer will elect, as its sole remedy, to either:  (a) waive the Material Casualty, release Seller of any obligation or liability with respect to the Material Casualty, and complete the acquisition of the Purchased Assets at such Store in accordance with this Agreement, or (b) terminate this Agreement. 

                        (ii)        If after the Kickoff Date but prior to the Effective Time for an Assumed Lease Store or Owned Store there is a Material Casualty, Seller will promptly give notice of the same to Buyer.  Buyer will notify Seller within five (5) days of such notice by Seller to state whether Buyer will elect, as its sole remedy, to either:  (a) waive the Material Casualty, release Seller of any obligation or liability with respect to the Material Casualty, and complete the acquisition of the Purchased Assets at such Store in accordance with this Agreement, or (b) refuse to purchase the Purchased Assets and assume the Lease (or enter into the New Lease, as the case may be) with respect to such Store that is the subject of the Material Casualty and (i) Buyer shall be entitled to deduct from the Non-Inventory Purchase Price the amount set forth opposite such Store on Exhibit A, (ii) such Stores so excluded shall be deemed Remaining Stores and Licensed Stores (and not an Assumed Lease Store or File Buy Store) under Section 11.15, and Seller shall have the right to use the "Pharm" name at such locations pursuant to Section 11.15; and (iii) Seller shall have the ability to continue to operate such excluded Stores without any restriction imposed hereunder, including any restrictions set forth in Section 11.05 of this Agreement. 

                        (iii)       If Buyer elects to waive the Material Casualty in accordance with this Section 7.03(a), or if less than a material portion (as determined by Buyer in the exercise of its reasonable commercial judgment) of the Purchased Assets are so damaged or destroyed, Buyer will be entitled to the benefits of all insurance proceeds and claims relating to any such fire or casualty loss (except business interruption insurance) and Seller will at or prior to Store Closing with respect to such Store assign to Buyer all such insurance proceeds and claims.  Seller will inform Buyer of any negotiations with respect to insurance claims involving any damaged Purchased Assets, will permit Buyer to take part therein, and will not settle any such claims without Buyer's prior written consent, which consent shall not be unreasonably withheld, conditi oned or delayed, and if there is any deductible or self insurance retention, Buyer shall pay it.

            (b)        File Buy Stores.  If prior to the applicable Effective Time, there is a Material Casualty (as determined by Buyer in the exercise of its reasonable commercial judgment) at a File Buy Store, then Seller will promptly give notice of the same to Buyer and the parties will immediately proceed to close the sale and purchase of the Purchased Assets applicable to such File Buy Store; provided that any such closing shall in no way act as a waiver of any rights or privileges, alter any time periods, or otherwise have any effect whatsoever on the provision of this Agreement with respect to the other Stores and the closing of the contemplated transactions with respect to such other Stores.  Buyer shall not be entitled to any insurance proceeds for such Store.  Notwithstanding the foregoing, Buyer shall not be obligated to close the purchase of the Purchased Asset contained within Sto re 6106 even if a Material Casualty has occurred until it has closed the purchase of the Purchased Assets within Store 6103.

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            Section 7.04     Condemnation.

            (a)        If prior to the Kickoff Date, any authority having the right of eminent domain commences negotiations or commences legal action for the damaging, taking or acquiring of the leased premises or any Appurtenances thereto (as the same is defined in the applicable Lease or New Lease) at any Store or any material portion (as determined by Buyer in the exercise of its reasonable commercial judgment) thereof, by condemnation or by exercise of the right of eminent domain (a "Material Taking"), Seller will promptly give notice of the same to Buyer.  Buyer will notify Seller within five (5) days from the notice by Seller to state whether Buyer will elect, as its sole remedy, to either:  (i) waive the Material Taking, release Seller of any obligation or liability with respect to the Material Taking, and complete the acquisition of the Purchased Assets in accordance with this Agreement, or (i i) or terminate this Agreement. 

            (b)        If after the Kickoff Date but prior to the Effective Time for an Assumed Lease Store or Owned Store there is a Material Taking, Seller will promptly give notice of the same to Buyer.  Buyer will notify Seller within five (5) days of such notice of whether Buyer will elect, as its sole remedy, to either:  (i) waive the Material Taking, release Seller of any obligation or liability with respect to the Material Taking, and complete the acquisition of the Purchased Assets at such Store in accordance with this Agreement, or (ii) refuse to purchase the Purchased Assets and assume the Lease (or enter into the New Lease, as the case may be) with respect to such Store that is the subject of the Material Taking and (x) Buyer shall be entitled to deduct from the Non-Inventory Purchase Price the amount set forth opposite such Store on Exhibit A, (y) such Stores so excluded shall be deemed Remaining Stores and Licensed Stores (and not an Assumed Lease Store or File Buy Store) under Section 11.15, and Seller shall have the right to use the "Pharm" name at such locations pursuant to Section 11.15; and (z) Seller shall have the ability to continue to operate such excluded Stores without any restriction imposed hereunder, including any restrictions set forth in Section 11.05 of this Agreement.

            (c)        If Buyer does not elect to terminate this Agreement pursuant to Section 7.04(a)(ii), does not exclude the applicable Store or Stores pursuant to Section 7.04(b)(ii), or if the taking is not material (as determined by Buyer in the exercise of its reasonable commercial judgment), then upon Effective Time for such Store, Buyer will be entitled to the benefits of all awards, claims, settlement proceeds, and other proceeds payable by reason of any such taking, and Seller will assign to Buyer all awards, claims, settlement proceeds, or other proceeds payable by reason of any such taking.  In the event of any negotiations with respect to any of the Purchased Assets, the Assumed Lease Stores or the Owned Store with any authority regarding settlement on account of any taking, Seller will inform Buyer of all such negotiations, will permit Buyer to take part therein, and will not enter into any settl ements thereof without Buyer's prior written consent.

            Section 7.05     Landlord Consents and Two Mandated Lease Amendments.  If, between the date hereof and the expiration of the Due Diligence Period, Seller does not receive a landlord consent to assignment for an Assumed Lease Store, or Seller has not obtained the Two Mandatory Lease Amendments, Seller shall notify Buyer in writing within two (2) days after the expiration of the Due Diligence Period of such fact and Seller will have an additional five (5) business days from the date of delivery of any such notice to cause such landlord to give such consent and/or obtain such Two Mandatory Lease Amendments (or to have either of the

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foregoing insured over in a commercially reasonable manner acceptable to Buyer).  If Seller, in its sole discretion, is unwilling or unable to obtain such consent or insure over the lack of such consent within such period or obtain the Two Mandatory Lease Amendments or insure over the lack of either Amendment in a commercially reasonable manner acceptable to Buyer, Buyer will notify Seller within five (5) days from the expiration of such period to state whether Buyer will:  (a) elect to waive such requirement, release Seller from all liabilities and obligations relating to the absence of such consent and/or Amendment, and complete the acquisition of the Purchased Assets in accordance with this Agreement, or (b) terminate this Agreement.   

            Section 7.06     Environmental.  Within ten (10) days after the date hereof, Buyer may cause to be commenced a study and report (the "Phase I") to be prepared and completed prior to the Due Diligence Deadline describing the presence, if any, of any toxic or hazardous substances and/or materials including, but not limited to, the existence of any underground storage tanks and/or asbestos located in, under or about each of the Assumed Lease Stores and the Owned Stores by one or more  environmental engineering firms acceptable to Buyer ("Buyer's Environmental Consultant").  Such reports shall conform to American Society for Testing Materials Standard E1527-05 for Phase I.  If recommended by any Phase I, Buyer shall have thirty (30) days following its receipt of the Phase I to cause a Phase II Assessment to be completed (the "Phase II").  If a Phase II is not affirmatively recommended in the Phase I or if Buyer does not cause a Phase II to be completed within the timeframe set forth above, Seller shall have no further obligations to provide access to Buyer in connection with environmental studies and due diligence under this Section 7.06 as to such Assumed Lease Stores or the Owned Stores.  If any toxic or hazardous substance or materials, asbestos, lead containing materials or underground storage tanks is disclosed by any Phase I or Phase II as to which (i) Remediation (defined below) is required by Environmental Law to be performed by Seller (or if the transaction closes, would be required to be performed by Buyer) then Seller shall, within (5) days after receipt of notice from Buyer thereof, inform Buyer if Seller, in its sole discretion, shall commence and diligently pursue the removal, remediation or disposal of any such toxic or hazardous substance or material, asbestos, lead containing materials or underground storage tanks in the manner required by Environmental Law ("Remediation").   If Seller, in its sole discretion, is unwilling or unable to perform such Remediation, Buyer will notify Seller within five (5) days from the expiration of such period to state whether Buyer will:  (a) elect to waive any such environmental condition and the Remediation related thereto, release Seller from any obligation or liability for the environmental condition and the Remediation related thereto, and complete the acquisition of the Purchased Assets in accordance with this Agreement, or (b) terminate this Agreement. 

ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER

The obligations of Buyer to consummate the transactions contemplated hereby will be subject to the satisfaction or the waiver by Buyer, at or prior to the applicable Effective Time, of the following conditions:

            Section 8.01     Representations and Warranties.  The representations and warranties of Seller contained in this Agreement, the Exhibits and Schedules hereto, or in any other document delivered pursuant hereto or in connection herewith, shall have been true and correct

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in all material respects on the date such representations and warranties were made, and at the applicable Effective Time, as though made on and as of the applicable Effective Time; provided, however, that each of the representations and warranties in this Agreement that contains an express materiality qualifier shall have been true and correct in all respects as of the date made and shall be true and correct in all respects as of the applicable Effective Time, and Seller will have delivered to Buyer a certificate to such effect signed by an authorized officer of Seller.

            Section 8.02     Performance of Covenants, Agreements and Obligations.  Each covenant, agreement and obligation of Seller to be performed on or before the applicable Effective Time pursuant to the terms and specific provisions of this Agreement, including but not limited to the delivery of each document or instrument required to be delivered by Seller under the Agreement, will have been duly performed in all material respects on or before the applicable Effective Time, and at the Closing, Seller will have delivered to Buyer a certificate to such effect signed by an authorized officer of Seller; provided, however, the obligation of Seller to deliver any closing document hereunder with respect to any Store shall be completed at the Store Closing for each Store.

            Section 8.03     Prohibitions.  No claim, action, suit, investigation, arbitration or legal or other proceeding or governmental investigation will be pending or threatened before any court or governmental agency which presents a substantial risk of the restraint or prohibition of the transactions contemplated by this Agreement or the obtaining of material damages or other relief in connection therewith.

            Section 8.04     Authority.  All actions required to be taken by, or on the part of Seller, to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby will have been duly and validly taken by the Board of Directors of Seller.

ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER

The obligations of Seller to effect the transactions contemplated hereby will be subject to the satisfaction or the waiver by the Seller, at or prior to the applicable Effective Time, of the following conditions:

            Section 9.01     Representations and Warranties.  The representations and warranties of Buyer contained in this Agreement or in any document delivered by Buyer pursuant hereto shall have been true and correct in all material respects on the date such representations and warranties were made, and at the applicable Effective Time, as though made on and as of the applicable Effective Time; provided, however, that each of the representations and warranties in this Agreement that contains an express materiality qualifier shall have been true and correct in all respects as of the date made and shall be true and correct in all respects as of the applicable Effective Time, and Buyer will have delivered to Seller a certificate to such effect, signed by an authorized officer of Buyer.

            Section 9.02     Performance of Covenants, Agreements and Obligations.  Each covenant, agreement and obligation of Buyer to be performed on or before the applicable Effective Time pursuant to the terms and specific provisions of this Agreement, including but not

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limited to the delivery of each document or instrument required to be delivered by Buyer under the Agreement, will have been duly performed in all material respects on or before the applicable Effective Time and Buyer will have delivered to Seller a certificate to such effect, signed by an authorized officer of Buyer; provided, however, the obligation of Buyer to deliver any closing document hereunder with respect to any Store shall be completed at the Store Closing for each Store.

            Section 9.03     Prohibitions.  No claim, action, suit, investigation, arbitration or legal or other proceeding or governmental investigation will be pending or threatened before any court or governmental agency which presents a substantial risk of the restraint or prohibition of the transactions contemplated by this Agreement or the obtaining of material damages or other relief in connection therewith.

            Section 9.04     Authority.  All actions required to be taken by, or on the part of the Buyer to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby will have been duly and validly taken.

ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

            Section 10.01   Survival of Warranties.  Except as expressly set forth herein, the representations and warranties of the parties hereto contained herein or in any document required to be delivered pursuant hereto for such Purchased Asset at such Store shall survive the Effective Time for such Store until eighteen months after such Effective Time for such Store; provided that (a) the representations and warranties set forth in Sections 5.08 and 5.20 shall survive for a period ending six (6) months after the expiration of the applicable statute of limitations and (b) the representations and warranties set forth in Sections 4.02, 4.06, 5.02, 5.06,  5.15 and 5.21 shall survive indefinitely.  Unless a shorter time period is specified in this Agreement, the covenants and agreements of the parties hereto contained herein shall survive indefinitely.  Notwithstanding the preceding sentence, all claims relating t o Buyer's obligations to satisfy the Assumed Obligations under this Agreement and Seller's obligation to satisfy the Excluded Obligations under this Agreement shall survive until the expiration of all applicable statutes of limitations, as the same may be extended or waived.  Any right of indemnification pursuant to this Article X with respect to a breach or a claimed breach of a covenant, agreement, representation or warranty or otherwise will expire on the applicable date described in the preceding sentences, unless, on or prior to such date, written notice asserting such breach, and setting forth in reasonable detail a description of and (to the extent capable of being calculated or determined) a reasonable estimate of the amount involved in such breach, has been given to the party from whom indemnification is sought in which event such right of indemnification shall continue with respect to, and only with respect to, the claimed breach for which notice was received within the applicable limitat ions period.

            Section 10.02   Indemnification by Seller.  Seller, except for any prior knowledge obtained by Buyer as a result of any inspection or investigation on the part of Buyer prior to the date of this Agreement and except as otherwise provided in this Agreement, hereby agrees to indemnify and hold harmless the Buyer against and in respect of any loss, claim, liability, deficiency, obligation, fines, penalties, costs, expenses (including costs of investigation and

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defense and reasonable fees and costs of attorneys) and damages (collectively "Liabilities") arising, directly or indirectly, from or in connection with any of the following:

            (a)        (i) any breach of a representation or warranty in this Agreement on the part of Seller, or (ii) any breach or non-fulfillment of any agreement or covenant in this Agreement on the part of Seller;

            (b)        any Liabilities which may be suffered by or asserted against the Buyer or the Purchased Assets arising at any time in connection with Seller's ownership or operation of the Purchased Assets or the Stores prior to the Effective Time for each Store;

            (c)        all Liabilities of Seller (including but not limited to product liability claims arising out of sales made by Seller prior to the Effective Time for each Store), or claims against Seller or against Buyer (to the extent the same arises out of Seller's performance of, or failure to perform, the transactions contemplated by this Agreement), of every kind and description, regardless of how and when the same may have arisen, including but not limited to the Excluded Obligations, except for the liabilities and obligations which are Assumed Obligations;

            (d)        all claims against, or claims of any interest in, or of a lien upon, any or all of the Purchased Assets to be transferred hereunder by Seller to Buyer, which arise in connection with events, acts, omissions, or circumstances occurring or existing prior to the Effective Time for each Store (other than Permitted Encumbrances); and

            (e)        all actions, suits, proceedings, demands, assessments, judgments, attorneys' fees, costs and expenses incident to the foregoing.

            Section 10.03   Indemnification by Buyer.  Buyer, except for any prior knowledge obtained by Seller as a result of any inspection or investigation on the part of Seller prior to the date of this Agreement or as otherwise provided in this Agreement, hereby agrees to indemnify and hold harmless the Seller against and in respect of any Liabilities arising, directly or indirectly, from or in connection with any of the following:

            (a)        (i) any breach of a representation or warranty in this Agreement on the part of Buyer, or (ii) any breach or non-fulfillment of any agreement or covenant in this Agreement on the part of Buyer;

            (b)        any Liabilities which may be suffered by or asserted against the Seller or the Purchased Assets arising at any time in connection with Buyer's ownership or operation of the Purchased Assets or the Stores following the Effective Time for each Store;

            (c)        any Liabilities which may be suffered by or asserted against Seller arising in connection with Buyer's failure to perform its obligations with respect to the Assumed Obligations; and

            (d)        all actions, suits, proceedings, demands, assessments, judgments, attorneys' fees, costs and expenses incident to the foregoing.

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            Section 10.04   Limitations of Indemnity.  Notwithstanding any provisions herein to the contrary:

            (a)        Time Limitations.  Neither party will be liable to the other party for any claim based on a misrepresentation, breach of warranty or nonfulfillment of any covenant or agreement herein for which it has not received written notice prior to the expiration dates set forth in Section 10.01.  Notwithstanding the foregoing, the limitations set forth in this Section 10.04(a) shall not apply to any breaches of Sections 4.02, 4.06, 5.02, 5.06,  5.15 and 5.21 each of which shall be perpetual.

            (b)        Monetary Limitations.

                        (i)         No claim may be made against Seller for indemnification pursuant to Sections 10.02(a)(i) unless and until the aggregate of all claims for indemnification by Buyer pursuant to Section 10.02(a)(i) shall exceed $100,000 (the "Threshold Amount"), in which event Seller shall be liable for all Liabilities from dollar one; it being understood and agreed that the foregoing Threshold Amount shall not apply to claims for indemnification relating to Excluded Obligations, in each case for which Seller shall be responsible from dollar one, whether or not the Threshold Amount has been reached; 

                        (ii)        Buyer shall have no liability for its indemnification obligations under Section 10.03(a)(i) until the aggregate amount of all Liabilities incurred by the Seller equals or exceeds the Threshold Amount, in which event Buyer shall be liable for all Liabilities from dollar one; it being understood and agreed that the foregoing Threshold Amount shall not apply to claims for indemnification relating to Assumed Liabilities, in each case for which Seller shall be responsible from dollar one, whether or not the Threshold Amount has been reached; 

                        (iii)       For the purposes of this Section 10.04(b), in computing such individual or aggregate amounts of claims, the amount of each claim shall take into account any insurance proceeds or other monetary compensation recovered or recoverable by the indemnified party.  In no event shall any party be liable for indemnification hereunder in an amount exceeding 50% of the Non-Inventory Purchase Price; and

                        (iv)       Notwithstanding the foregoing, the limitations set forth in this Section 10.04(b) shall not apply to (A) any breaches of Sections 4.02, 4.06, 5.02, 5.06 and 5.21, (B) any intentional misrepresentation or gross negligence on the part of an indemnifying party or (C) any claims arising under or governed by Section 12.01.

            (c)        Mitigation of Damages.  The party entitled to indemnification shall take all reasonable steps to mitigate all indemnifiable liabilities and damages upon and after becoming aware of any event which could reasonably be expected to give rise to any liabilities and damages that are indemnifiable hereunder.

            Section 10.05   Notice.  Promptly and in no event later than ten (10) business days after acquiring knowledge of any damage, loss, deficiency, liability, claim, encumbrance, penalty, cost, assessment, audit, judgment, or claim against which Seller has agreed to indemnify Buyer or against which Buyer has agreed to indemnify Seller, Seller or Buyer, as the case may be, will give to the other party written notice thereof in the manner set forth in Section 14.01;

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provided, that the failure by any party to provide such notice shall not impair such party's rights to indemnification hereunder, except to the extent the indemnified party is prejudiced.

            Section 10.06   Third Party Claims.  With respect to each third party claim subject to this Article X (a "Third Party Claim"), the party seeking indemnification (the "Indemnified Party") shall give prompt notice to the indemnifying party (the "Indemnifying Party") of the Third Party Claim in accordance with Section 10.05.  The Indemnifying Party, at its sole cost and expense, may, upon notice to the Indemnified Party within ten (10) days after the Indemnifying Party receives notice of the Third Party Claim, assume the defense of the Third Party Claim.  If it assumes the defense of a Third Party Claim then the Indemnifying Party shall select counsel of its choosing to conduct the defense.  The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any Third Party Claim, (i) unless the settlement or judgment is solely for money damages and/or such equitable rel ief as would not have a material adverse effect on the Indemnified Party or (ii) the Indemnified Party consents thereto, which consent shall not be unreasonably withheld.  The Indemnified Party shall be entitled to participate in the defense of any Third Party Claim, the defense of which is assumed by the Indemnifying Party, with its own counsel and at its own expense.  If the Indemnifying Party does not elect to assume the defense of any Third Party Claim in accordance with the terms of this Section 10.06, then the Indemnified Party shall be entitled to conduct its own defense of the Third Party Claim.  Notwithstanding anything to the contrary, under no circumstances shall the Indemnifying Party be liable to the Indemnified Party for the costs of multiple counsel to the Indemnified Party.  The parties shall cooperate in the defense of any Third Party Claim and the relevant records of each party shall be made available on a timely basis.

ARTICLE XI
CONDUCT OF THE PARTIES AFTER CLOSING

            Section 11.01   Cooperation.  Buyer and Seller will cooperate after the Effective Time for each Store in effecting the orderly transfer of the Purchased Assets at the applicable Store to Buyer.  Without limiting the generality of the foregoing, Seller, at the request of Buyer without additional consideration, will execute and deliver from time to time such further instruments of assignment, conveyance and transfer reasonably requested by Buyer, will sign any documents reasonably necessary to ensure that, pursuant to the terms of this Agreement, all of the right, title and interest in and to the Purchased Assets, the Leases, and the New Leases vests in Buyer, will cooperate to all reasonable extents in the conduct of litigation and the processing and collection of insurance claims, and will take such other actions as may reasonably be required to convey and deliver more effective to Buyer the Purchased Assets and the Leases and the New Leases or to confirm and perfect Buyer's title thereto, as contemplated by this Agreement.  In addition, except as otherwise provided in this Agreement, Seller agrees to take all reasonable action in order to enforce any rights it has against any third parties related to the transactions contemplated by this Agreement.

            Section 11.02   Access to Books and Records.  As long as Buyer retains the books and records of Seller's business acquired by Buyer hereunder, it will provide Seller with reasonable access during customary business hours to such books and records for any non-competitive purpose and as long as Seller retains the books and records of Seller's business retained by Seller hereunder, Seller will provide Buyer with reasonable access during customary

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business hours to such books and records for any non-competitive purpose.  Prior to the disposal of any such books and records by any party hereto, such party shall use commercially reasonable efforts to provide sixty (60) days' prior written notice to the other party and shall relinquish possession of such books and records to such other party upon receipt of a written request therefor within the sixty (60) day time period.

            Section 11.03   Licenses.  Buyer will promptly apply for the appropriate DEA licenses, Board of Pharmacy permits, and Ohio Division of Liquor Control permits and agency contracts, for use at the Assumed Lease Stores and the Owned Stores.  Subject to the approval of the applicable authorities, Seller agrees to: (a)  permit Buyer to operate at the Assumed Lease Stores and the Owned Stores under Seller's DEA license and Board of Pharmacy permits from the Effective Time for such Store until the earlier of (i) twelve weeks after the Effective Time for such Store, or (ii) such time as the licenses and permits have been issued pursuant to Buyer's applications therefore; and (b) if the  alcohol inventory cannot be transferred  as of the Applicable Effective Time and must be delayed until Buyer obtains the requisite permits  and agency agreements, permit Buyer to operate the Assumed Lease Stores and th e Owned Stores under Seller's applicable permits and agency contracts from the Ohio Division of Liquor Control pursuant to management agreements mutually agreeable to the parties; provided, however, that for both (a) and (b) above, Buyer shall indemnify and hold harmless Seller against all liabilities of Seller arising from Buyer's operation under Seller's DEA licenses and Board of Pharmacy permits, the use of any of the powers granted under the Powers of Attorney attached hereto, and Buyer's operation under the Seller's permits and agency contracts from the Ohio Division of Liquor Control.  The foregoing indemnification obligation of the Buyer shall survive the closing of the transactions contemplated by this Agreement until the expiration of all applicable statutes of limitations.  At the Effective Time for each Store, Seller shall provide the Buyer with all applicable Powers of Attorney required to be provided pursuant to applicable DEA regulations in connection with the Buyer's purchase of the Inventory which shall be substantially in the form of Exhibit G attached hereto. Buyer and Seller acknowledge and agree that the limitations of indemnity contained in Section 10.04 shall have no application to the indemnity provided by this Section 11.03.

            Section 11.04   Access to Prescription Files.  In the event Seller must re-file a third party claim for a third party prescription sale reimbursement, or, if for any other noncompetitive business purpose, Seller requires access to the Prescription Files, the Buyer will provide authorized representatives of Seller reasonable access after the Effective Time for the applicable Store, at mutually agreeable times during normal business hours, to such Prescription Files.  Any such review shall be conducted so as not to interfere with Buyer's normal business activities.  

            Section 11.05   Non-Competition; Non-Solicitation.

            (a)        During the Restrictive Period, Seller will not, and shall cause its Affiliates to not, directly or indirectly (including as a member, agent, shareholder or investor of any Person or in any other capacity), either alone or in conjunction with any other Person, (i) in any manner participate or engage in the ownership, management, operation, or control of, form, acquire, invest in, finance, own, operate, manage, join, assist, support, or provide products or services to or for, or provide financial or other assistance to a Restricted Business in the Restricted Territory (as hereinafter defined), (ii) have any direct or indirect ownership interest in

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(other than through the ownership of 10% or less of any class of securities registered on a recognized stock exchange or dealer quotation system provided the applicable Person does not otherwise participate in the activities of such Person) a Person that operates a Restricted Business in the Restricted Territory, (iii) knowingly permit such Seller's or its Affiliate's name, including "The Pharm" or any part, combination or derivation thereof, to be used in connection with or otherwise knowingly lend assistance (financial or otherwise) to any Person, in each case in any Restricted Business in the Restricted Territory or (iv) induce or attempt to induce, or assist anyone else to induce or attempt to induce, any customer  within the Restricted Territory to reduce or discontinue its business or solicit, divert, take away, or attempt to solicit, divert, or take away any trade, clients, customers, business, or goodwill or otherwise compete for accounts or personnel within the Restricted Territory;

            (b)        With respect to each of the File Buy Stores, Seller shall not, and shall ensure that none of its Affiliates shall, enter into any sublease under nor make an assignment of the Lease applicable to a File Buy Store if such sublease or assignment would, or could reasonably be expected to, result in a breach of any of the restrictive covenants set forth in this Section 11.05.

            (c)        For purposes of this Section 11.05:

                        (i)         "Restricted Business" means any retail pharmacy, long term care (including assisted living) or any other business or enterprise that requires a license from the Ohio Board of Pharmacy;

                        (ii)        "Restrictive Period" means the period beginning at the latest Effective Time for any Store hereunder and continuing for a period of five (5) years; and

                        (iii)       "Restricted Territory" means (A) anywhere within a ten (10) mile radius of Stores 6112 and 6123; and (B) anywhere within a five (5) mile radius of any of the other Stores.

            (d)        If any provision contained in this Section 11.05 will for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provisions of this Section 11.05, but this Section 11.05 will be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  It is the intention of the Parties that if any of the restrictions or covenants contained in this Section 11.05 is held to cover a geographic area or to be of a length of time which is not permitted by applicable Legal Requirements, or in any way construed to be too broad or to any extent invalid, such provision will not be construed to be null, void and of no effect.  Instead, the Parties agree that a court of competent jurisdiction will construe, interpret, reform or judicially modify this Section 11.05 to provide for a cove nant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained herein) as will be valid and enforceable under such applicable Legal Requirements.

            (e)        The Seller agrees that a violation of this Section 11.05 will cause irreparable injury to the Buyer, and the Buyer will be entitled, in addition to any other rights and remedies it may have at law or in equity, to apply for an injunction enjoining and restraining the

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Seller or its Affiliates from doing or continuing to do any such act and any other violations or threatened violations of this Section 11.05, and the Seller consents to the entry thereof.  In the event that the Seller or any of its Affiliates is found to have breached any covenant in this Section 11.05 the time period provided for in that covenant shall be tolled (i.e., it shall not run) for so long as the Seller was in violation of that covenant.

            (f)         Notwithstanding the restrictions set forth in this Section 11.05, Seller and its Affiliates shall have the ability to (and such actions shall not constitute a violation of this Section 11.05), during the Restrictive Period: (i) distribute on a wholesale basis grocery, pharmacy, drug and related products to any current or future retail store customer (who is not an Affiliate of Seller) in the Restricted Territory or which subsequently locates in the Restricted Territory (other than, during the Restricted Period, pharmaceutical products to retail store customers that subsequently locate in a File Buy Store); (ii) operate each of the File Buy Stores, without pharmacy operations, for a period not to exceed ninety (90) days after the Effective Time for such Store to allow for the sell-down of the Excluded Inventory; (iii)  if the New Lease for any Owned Store or Owned Real Property h as expired or otherwise been terminated for any reason other than the landlord's default or due to a casualty and/or condemnation under the express terms of such New Lease, lease or sell any such Owned Store and Owned Real Property for any purpose whatsoever or operate any business whatsoever at any such Owned Store or Owned Real Property; (iv) if Buyer's right to occupancy at a Store at which the Buyer has assumed the Lease is terminated such that Seller is held liable by such landlord thereunder for any remaining term, Seller may thereafter lease or sublease such property for any purpose whatsoever or operate any business whatsoever at any such Store, (v) lease or sell, all or part of, the Maumee warehouse complex that Seller and/or its Affiliates currently own for any distribution or warehousing purpose whatsoever; and/or (vi) acquire any Person or the assets of any Person that conducts a Restricted Business within the Restricted Area if in the calendar year prior to the acquisition, the revenues of the a cquired Person or the revenues of the acquired assets of the Person from pharmacy sales do not constitute more than 20% of the total revenues of the acquired Person or the acquired assets of the Person.   The parties acknowledge and agree that if Seller or its Affiliates acquire a Person in compliance with subsection (vi) above, that Seller or such Affiliate may continue to operate any Restricted Business as part of the acquired Person without violating this Section 11.05, but may not (x) start up an in-store Restricted Business in the Restrictive Period with respect to such acquired Person or assets if one did not exist at the time of such acquisition or (y) acquire another pharmacy operation (including the purchase of prescription files only) and move such operations or prescription files to such location.

            Section 11.06   Signage.  Following the Effective Time for each Store, Buyer shall be entitled, at its expense, to remove and dispose of all signage from the interior and the exterior of such Assumed Lease Stores and the Owned Stores. With respect to the File Buy Stores, Seller shall permit Buyer, seven (7) days prior to the Effective Time for such Store to place a sign at each of the following locations advising customers that the prescription files will be transferred to a specified location of Buyer: (i) the front entrance, (ii) drive-thru locations (as applicable), and (iii) within each Store's pharmacy department.

            Section 11.07   Use of Pharmacy Systems.  The Seller and the Buyer shall cooperate in an attempt to complete a file conversion of the Seller's pharmacy records to Buyer's pharmacy

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computer system utilizing an outside service.  The outside service's charges shall be the responsibility of the Buyer. 

            Section 11.08   Protected Health Information.  In the event that the file conversion cannot be reasonably accomplished prior to the Effective Time with respect to a Store or less than all years of pharmacy records that are required to be kept by Legal Requirements are converted prior to the Effective Time with respect to a Store, then as of the applicable Effective Time for such Store, Seller will provide  Buyer with a hard copy printout (or computer disk) of the patients' prescription history for the last two years.  Within two (2) days after the Effective Time with respect to each such Store, Seller shall provide Buyer with a supplemental printout of patient histories for all prescriptions filled from the time of printing the foregoing hard copy printout to the official close of business of each Store.

            Section 11.09   HIPAA Privacy Standards.  After the Effective Time for each Store, Buyer shall use commercially reasonable efforts to make Seller's Prescription Files and records available for access to patients and disclosure to other authorized third parties in accordance with the HIPAA privacy standards (hereinafter "HIPAA Privacy Standards") and other applicable Legal Requirements. The Seller acknowledges and agrees that notwithstanding the foregoing, Buyer shall not assume any legal obligations of the Seller under the HIPAA Privacy Standards relating to uses and disclosures of protected health information made prior to the Effective Time with respect to the applicable Store.  All inquiries relating to patient rights under HIPAA Privacy Standards relating to uses or disclosures of health information made prior to the Effective Time for the applicable Store shall be forwarded to Seller or its designated agent for handling.

            Section 11.10   Confidential Information.  The parties covenant and agree that each shall not and that each shall use reasonable efforts to ensure that its Affiliates do not, divulge to any Person any Confidential Information of the other party, the Purchased Assets and the Stores. For purposes of this Agreement, "Confidential Information" means, with respect to any Person, information regarding such Person that is not previously disclosed to the public or to the trade and includes information regarding, facilities, strategies, methods, trade secrets and other intellectual property, software, systems, procedures, operational policies, manuals, confidential reports, product price lists, pricing and cost policies, customer lists, inventory information, financial information (including revenue, costs or profits of the disclosing party), business plans, prospects, or opportunities; and "Person" means any natural person, c orporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, joint venture, association, whether or not a legal entity, and any Governmental Body.

            Section 11.11   Further Assurances.  The parties agree to take all steps and shall execute and deliver to other party such instruments as the parties may reasonably request or as may be otherwise necessary to more effectively consummate the transactions contemplated by this Agreement.

            Section 11.12   Remittance.  The parties agree that (a) in the event Buyer receives payment from any parties for services rendered by Seller before the Effective Time with respect to the Stores (including payment from Medicare and Medicaid programs), Buyer will remit such payment to Seller as soon as reasonably practicable after receipt thereof promptly, and (b) in the

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event Seller receives payment from any parties for services rendered by Buyer after the Effective Time with respect to the Stores (including payment from Medicare and Medicaid programs), Seller will promptly remit such payment to Buyer as soon as reasonably practicable after receipt thereof. 

            Section 11.13   Taxes.  Subject to any prorations specifically set forth in this Agreement, Seller shall be liable for and shall pay all taxes (whether assessed or unassessed) applicable to the Purchased Assets, in each case attributable to periods (or portions thereof) ending prior to the Effective Time for such Purchased Asset.  Buyer shall be liable for and shall pay all Taxes (whether assessed or unassessed) applicable to the Stores or the Purchased Assets, in each case attributable to periods (or portions thereof) beginning on or after the Effective Time for such Purchased Asset.  Notwithstanding the foregoing, any tax (including a sales tax, use tax, real property transfer or gains tax, or documentary stamp tax) attributable to the sale or transfer of the Purchased Assets shall be paid by Seller. 

            Section 11.14   Collective Bargaining Matters.  Nothing in this Agreement prohibits or restricts Buyer from setting its own initial terms and conditions of employment for any Employee it determines to hire, including work rules, benefits and salary and wage structure, all as permitted by applicable Legal Requirements.  Seller acknowledges and agrees that Buyer is not obligated to assume any Excluded Obligations with respect to any collective bargaining agreements under this Agreement.  Seller shall be solely liable for any severance payments required to made to Employees due to the consummation of the transactions contemplated by this Agreement and any "effects" bargaining legal obligations of Seller and any obligations resulting or arising therefrom.

            Section 11.15   License.  Seller retains, and Buyer hereby grants to Seller, a perpetual (subject to the temporal restrictions contained in this Section 11.05), royalty-free, fully paid-up irrevocable right (subject to the use restrictions contained in this Section 11.05) and license, which Seller may sublicense to its Affiliates, to use the Marks in connection with the operation by Seller and its Affiliates of their other stores located in Adrian, Michigan and Sandusky Ohio (each a "Remaining Store" and collectively the "Remaining Stores") that currently use the Marks and the File Buy Stores (the Remaining Stores collectively with the File Buy Stores, the "Licensed Stores").  Seller acknowledges and agrees that it shall: (a) not use any of the Marks with respect to any stores other than the Licensed Stores; (b) not transfer this license to any unaffiliated third party; and (c) not use the Marks in conn ection with the operation of the File Buy Stores after the expiration of the 90 day period following the Effective Time for such File Buy Stores for the sell-off of Excluded Inventory at such File Buy Stores and further agrees that the license granted to each Remaining Store by this Section 11.15 shall automatically be terminated, revoked, and of no further force or effect upon the sale, transfer or closure of such Remaining Store. 

ARTICLE XII
BROKERAGE; EXPENSES

            Section 12.01   Brokerage.  Seller agrees to hold Buyer harmless with respect to any liability for brokerage fees, commissions, finders' fees, or other such fees claimed by any broker, agent, finder, or consultant engaged by Seller in connection with the transactions contemplated

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herein.  Buyer agrees to hold Seller harmless with respect to any liability for brokerage fees, commissions, finders' fees, or other such fees claimed by any broker, agent, finder, or consultant engaged by Buyer in connection with the transactions contemplated herein.  Buyer and Seller acknowledge and agree that the limitations of indemnity contained in Section 10.04 shall have no application to the indemnity provided by this Section 12.01.

            Section 12.02   Transactional Expenses.  Except as otherwise expressly provided in this Agreement, the parties agree to bear their fees and expenses incident to the negotiation, preparation, execution, delivery and performance hereof including without limitation, the fees and expenses of their counsel, accountants and other experts.

ARTICLE XIII
TERMINATION

            Section 13.01   Termination by Mutual Consent.  On or prior to the Closing, Buyer and Seller may terminate this Agreement by joint execution of an instrument to such effect.  Subject to the provisions of such instrument terminating this Agreement, no party will have any liability to the other party hereunder in the event of any termination of this Agreement pursuant to this Section.

            Section 13.02   Termination Attributable to Default.  If either Buyer, on the one hand, or Seller, on the other hand, breaches any representations or warranties or defaults in the due and timely performance of any covenants or agreements under this Agreement in any material respect that would result in the failure of a condition set forth in Article VIII or IX as applicable, the non-defaulting party may give notice of termination to the defaulting party in the manner provided in Section 14.01.  The notice shall specify with particularity the defaults on which this notice is based.  The termination shall be effective ten (10) business days after service unless the specified defaults have been cured on or before the effective date of termination.  Termination pursuant to this Section shall relieve the non-defaulting party from any obligations under this Agreement but shall not relieve the defaulting party from liability for damages or other available remedies by reason of a knowing or willful breach of this Agreement prior to termination.

            Section 13.03   Termination by Buyer.  Buyer shall have the right to terminate this Agreement in accordance with Article VII of this Agreement.

            Section 13.04   Termination Date.  Either Buyer or Seller may terminate this Agreement if the Closing shall not have occurred  by the Termination Date.  For purposes hereof "Termination Date"  means 11:59 p.m. Eastern Standard Time on that date which is 180 days after the date of this Agreement.

            Section 13.05   Impossibility.  Either Buyer or Seller may terminate this Agreement if the obligations of the other party hereto shall have become incapable of fulfillment and such obligation is not waived by the party to whose benefit such obligation runs; provided, however, that neither party shall have the ability to terminate this Agreement pursuant to this Section 13.05 in the event the applicable obligation cannot be fulfilled as a result of a covenant or agreement of the party seeking to terminate.

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            Section 13.06   Results of Termination.  In the event of termination of this Agreement by either Seller or Buyer as provided in this Article XIII, this Agreement shall forthwith become void and there shall be no liability on the part of any party to any other party under this Agreement, except for the provisions of Article XIV, which shall continue in full force and effect following any termination and except that nothing herein shall relieve any party from liability for any knowing or willful breach of this Agreement prior to such termination.

            Section 13.07   No Termination after Kick-Off Date.  Notwithstanding anything to the contrary contained in this Agreement, Buyer shall not have the right to terminate this Agreement after the Kick-Off Date pursuant to the provisions of Article VII or Section 13.03, or pursuant to any other provision in this Agreement based on the covenants and agreements set forth in Article VII.  The foregoing notwithstanding, Seller acknowledges and agrees that neither the forgoing nor anything else in this Agreement alters, amends or negates Buyers rights and ability to exclude a given Store (including the Purchased Assets located at such Store and, to the extent applicable, the Lease for such Store) from the scope of this Agreement pursuant to and in accordance with the provisions of any or all as the case may be, of Section 7.02, Section 7.03, and Section 7.04.

ARTICLE XIV
MISCELLANEOUS

            Section 14.01   Notices.  All notices, requests, demands and other communications hereunder shall be in writing and will be deemed given if delivered either personally or by sending a copy thereof by fax (facsimile) transmission or by telex or (with answer back received), and confirmed by express mail sent via recognized overnight courier, all charges prepaid, to such party's address (or to such party's telex or fax number).  Notices will be deemed to have been given to the person entitled thereto when received.

If to Seller:

Spartan Stores, Inc.
850 76^th Street, S.W., P.O. Box 8700
Grand Rapids, Michigan 49518

Facsimile No.:  (616) 878-8287
Attn:  Alex DeYonker, Executive Vice President General Counsel

With a copy to:

Warner Norcross & Judd LLP
900 Fifth Third Center
111 Lyon Street
Grand Rapids, Michigan 49503
Facsimile No.:  (616) 222-2425
Attn:  Gregory E. Schmidt

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If to Buyer:

Rite Aid of Ohio, Inc.
P.O. Box 3165
Harrisburg, Pennsylvania 17105
Facsimile No.:  (717) 975-5952
Attn:  I. Lawrence Gelman, Vice President

With a copy to:

Miller, Canfield, Paddock and Stone, PLC
101 North Main St. 7th Floor
Ann Arbor, Michigan 48104
Facsimile No.:  (734) 747-7147
Attn:  Joseph M. Fazio

With a copy to:

Rite Aid of Ohio, Inc.
P.O. Box 3165
Harrisburg, Pennsylvania 17105
Facsimile No.:  (717) 975-5952
Attn:  Lisa M. Winnick, Associate Counsel

With a copy to:

Rite Aid of Ohio, Inc.
5400 Perry Drive
Waterford, Michigan 48329
Facsimile No.:  (248) 674-2687
Attn:  Laura A. Shaw, Vice President Pharmacy Acquisitions

            Section 14.02   Assignability and Parties in Interest.  No party may assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the other party.  This Agreement binds, inures to the benefit of and is enforceable by the respective successors and permitted assigns of the parties and it does not confer any rights on any other persons or entities.

            Section 14.03   Governing Law.  This Agreement will be governed by, and construed and enforced in accordance with the laws of the State of Michigan, without giving effect to its conflicts of laws provisions.

            Section 14.04   Counterparts.  This Agreement may be executed in any number of counterparts and any party hereto may execute any such counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts taken together will constitute but one and the same instrument.  The execution of this Agreement by

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any party hereto will not become effective until counterparts hereof have been executed by all the parties hereto.  It will not be necessary in making proof of this Agreement of any counterpart hereof to produce or account for any of the other counterparts.

            Section 14.05   Waiver.  The failure of any party to insist upon strict performance of any of the terms or conditions of this Agreement will not constitute a waiver of any of its rights hereunder.

            Section 14.06   Publicity.  Buyer and Seller agree that press releases and other public disclosures to be made by either of them with respect to the transactions contemplated hereby may only be made upon the agreement of the parties and the content will be subject to mutual agreement, except as may be required by law upon the advice of counsel; provided however, both parties shall respond promptly and comment on any such press release and other public document so such releases may be made in a prompt manner.  Notwithstanding the foregoing, (a) each of the parties hereto may respond to inquiries relating to this Agreement and the transactions contemplated hereby by the press, employees or customers without any notice to or further consent of the other party with general statements regarding the transaction and (b) Seller or its Affiliates shall be entitled to file or furnish to the Securities Exchange Commission a ny documents or disclosures (including Form 8-K) it reasonably believes to be required by applicable Legal Requirements provided any press release shall nonetheless be subject to the provisions of the first sentence of this Section 14.06.

            Section 14.07   Complete Agreement.  This Agreement, the Confidentiality Agreement, and the Exhibits and Schedules hereto delivered pursuant to this Agreement contain the entire agreement between the parties hereto with respect to the transactions contemplated herein and, except as provided herein, supersede all previous oral and written and all contemporaneous oral negotiations, commitments, writings and understandings relating to the subject matter hereof.  Other than as provided in Section 14.08 hereof, this Agreement may not be amended except by an agreement in writing executed by both parties.

            Section 14.08   Modifications, Amendments and Waivers.  At any time prior to the consummation of the transactions hereunder or termination of this Agreement, Buyer, on the one hand, and Seller, on the other hand, may, by written agreement:

                        (a)        extend the time for the performance of any of the obligations or other acts of the other party hereto;

                        (b)        waive any inaccuracies in the representations and warranties made by the other party contained in this Agreement or in the Exhibits or Schedules hereto or any other document delivered pursuant to this Agreement; and

                        (c)        waive compliance with any of the covenants or agreements of the other party contained in this Agreement.

            Section 14.09   Interpretation.  The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement.

- - 41 -

            Section 14.10   Severability.  If any provision of this Agreement is held illegal, invalid, or unenforceable, such illegality, invalidity, or unenforceability will not affect any other provision hereof.  This Agreement will, in such circumstances, be deemed modified to the extent necessary to render enforceable the provisions hereof.

            Section 14.11   Time of Essence.  The parties to this Agreement acknowledge and agree that, except with respect to immaterial matters that are ministerial in nature, time is of the essence with respect to the consummation of the transactions contemplated by this Agreement.

            Section 14.12   Gender, Number, Knowledge.  Words of gender may be read as masculine, feminine, or neuter, as required by context. Words of number may be read as singular or plural, as required by context.  All terms such as "herein," "hereby" or "hereunder" refer to this Agreement as a whole.  For purposes of this Agreement, "Knowledge" and terms of similar import means: with respect to Seller,  the actual knowledge of the following individuals:  David M. Staples and Alex J. DeYonker; and with respect to Buyer, the actual knowledge of the following individuals:   I. Lawrence Gelman, Esq. and Laura Shaw.

            Section 14.13   Exhibits and Schedules.  Each Exhibit and Schedule referred to herein is incorporated into this Agreement by such reference.

            Section 14.14   No Benefit to Others.  The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and permitted assigns, and they will not be construed as conferring and are not intended to confer any rights on any other persons.

[Signature pages to follow]

- - 42 -

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

"SELLER"	"BUYER"
SEAWAY FOOD TOWN, INC.	RITE AID OF OHIO, INC.
By:	By:
Name:	Name:
Title:	Title:
SPARTAN PROPERTIES MANAGEMENT, INC.	RITE AID CORPORATION
By:	By:
Name:	Name:
Title:	Title:
THE PHARM OF MICHIGAN, INC.	SPARTAN STORES, INC.
By:	By:
Name:	Name:
Title:	Title:

- - 43 -

EX-12.1

Exhibit 12.1

SPARTAN STORES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(In thousands, except ratios)	Fiscal Year Ended
	March 29, 2008			March 31, 2007			March 25, 2006			March 26, 2005			March 27, 2004
Earnings:
Earnings (loss) before    income taxes and    discontinued operations	$	50,776		$	37,181		$	28,299		$	27,238		$	(6,676	)
Fixed charges		21,374			21,134			14,995			16,548			20,353
Amortization of    capitalized interest		260			314			342			294			226
Capitalized interest		(195	)		(202	)		(181	)		(293	)		(385	)
Earnings available for    fixed charges	$	72,215		$	58,427		$	43,455		$	43,787		$	13,518
Fixed charges:
Interest expense	$	11,133		$	12,132		$	7,138		$	8,557		$	12,223
Capitalized interest		195			202			181			293			385
Interest component of    rent expense		10,046			8,800			7,676			7,698			7,745
Total fixed charges	$	21,374		$	21,134		$	14,995		$	16,548		$	20,353
Ratio of earnings to    fixed charges		3.38			2.76			2.90			2.65			N/A

Earnings for the year ended March 27, 2004 were inadequate to cover fixed charges. Additional earnings of $6.8 million would have been necessary to bring the ratio to 1.0.

EX-21

EXHIBIT 21

LIST OF SUBSIDIARIES OF SPARTAN STORES, INC. Direct subsidiaries of Spartan Stores, Inc.:
1.	SPARTAN STORES DISTRIBUTION, LLC Jurisdiction of Formation: Names under which business is conducted:	Michigan Spartan Stores Distribution, LLC
2.	MARKET DEVELOPMENT CORPORATION Jurisdiction of Incorporation: Names under which business is conducted:	Michigan Market Development Corporation Ludington Plaza Ludington Corner Westland of Three Rivers Jefferson Square (in IN) Market Street Plaza (in IN)
3.	SEAWAY FOOD TOWN, INC. (see this entity's subsidiaries below) Jurisdiction of Incorporation: Names under which business is conducted:	Michigan Seaway Food Town, Inc. (in OH) The Pharm (in OH)
4.	SPARTAN STORES ASSOCIATES, LLC Jurisdiction of Formation: Names under which business is conducted:	Michigan Spartan Stores Associates, LLC
5.	SI INSURANCE AGENCY, INC. Jurisdiction of Incorporation: Names under which business is conducted:	Michigan SI Insurance Agency, Inc.
6.	SPARTAN INSURANCE COMPANY LTD. Jurisdiction of Incorporation: Names under which business is conducted:	Bermuda Spartan Insurance Company Ltd.

Indirect subsidiaries of Spartan Stores, Inc.:

Subsidiaries of Seaway Food Town, Inc.

7.	SPARTAN STORES FUEL, LLC Jurisdiction of Formation: Names under which business is conducted:	Michigan Spartan Stores Fuel, LLC Glen's Quick Stop Family Fare Quick Stop
8.	FAMILY FARE, LLC (see this entity's subsidiary below) Jurisdiction of Formation: Names under which business is conducted:	Michigan Family Fare, LLC Family Fare Pharmacy Family Fare Supermarket Glen's Markets Glen's Pharmacy 32nd Street Baking Co. Café Creations Felpausch Food Center D&W Fresh Market D&W Pharmacy

Subsidiary of Family Fare, LLC:

9. PREVO'S FAMILY MARKETS, INC.
(see this entity's subsidiary below)

Jurisdiction of Incorporation:
Names under which business is conducted:


Michigan
Prevo's Family Markets, Inc.
D & W Fresh Market
D & W Pharmacy
Felpausch Food Center

Subsidiary of Prevo's Family Markets, Inc.:

10. MSFC, LLC
(see this entity's subsidiary below)

Jurisdiction of Formation:
Names under which business is conducted:


Michigan
MSFC, LLC
 

Subsidiaries of Seaway Food Town, Inc.:

11.	THE PHARM OF MICHIGAN, INC. Jurisdiction of Incorporation: Names under which business is conducted:	Michigan The Pharm of Michigan, Inc. The Pharm
12.	SPARTAN PROPERTIES MANAGEMENT, INC. Jurisdiction of Incorporation: Names under which business is conducted:	Ohio Spartan Properties Management, Inc.

- -2-

13.	VALLEY FARM DISTRIBUTING CO. Jurisdiction of Incorporation: Names under which business is conducted:	Ohio Valley Farm Distribution Co. VFD (in MI, OH and PA) Valley Farm Foods (in OH)
14.	PORT CLINTON REALTY COMPANY (General partnership owned 32% by Seaway Food Town, Inc.) Jurisdiction of Incorporation: Names under which business is conducted:	Ohio Port Clinton Realty Company
15.	CUSTER PHARMACY, INC. Jurisdiction of Incorporation: Names under which business is conducted:	Michigan Custer Pharmacy, Inc. Food Town Pharmacy
16.	GRUBER'S REAL ESTATE, LLC Jurisdiction of Formation: Names under which business is conducted:	Michigan Gruber's Real Estate, LLC

- -3-

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-110952, 333-110593, 333-65802, 333-66430, 333-72010, 333-75810, 333-100794, 333-145432, 333-96615, 333-71774, 333-49448, 333-129156 on Form S-8, Registration Statement No. 333-53672 and 333-145494 on Form S-3, and Registration Statement No. 333-37050 on Form S-4 of our reports dated May 9, 2008, relating to the financial statements of Spartan Stores, Inc. and subsidiaries (which expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company's change in its method of accounting for income taxes as a result of adopting Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No.109 in 2008), and the effectiveness of Spartan Stores, Inc. and subsidiaries internal control over financial reporting, appearing in this Annual Report on Form 10-K of Spartan Stores, Inc. and subsidiar ies for the year ended March 29, 2008.

/s/ Deloitte & Touche LLP

Grand Rapids, Michigan
May 15, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Craig C. Sturken, certify that:

          1.          I have reviewed this annual report on Form 10-K of Spartan Stores, Inc.;

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

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

          4.          The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

                    b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

                    c)          Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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

Dated:  May 15, 2008	/s/ Craig C. Sturken
	Craig C. Sturken Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, David M. Staples, certify that:

          1.          I have reviewed this annual report on Form 10-K of Spartan Stores, Inc.;

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

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

          4.          The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

                    b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

                    c)          Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

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

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

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

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

Dated:  May 15, 2008	/s/ David M. Staples
	David M. Staples Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION

Solely for the purpose of complying with 18 U.S.C. § 1350, each of the undersigned hereby certifies in his capacity as an officer of Spartan Stores, Inc. (the "Company") that the Annual Report of the Company on Form 10-K for the year ended March 29, 2008 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

/s/ Craig C. Sturken

Craig C. Sturken
Chairman and
Chief Executive Officer

/s/ David M. Staples

David M. Staples
Executive Vice President and
Chief Financial Officer