AGREEMENT

 

<PAGE>

 

                                                                 EXHIBIT 10 (ar)

 

                                    AGREEMENT

 

            This agreement, dated as of the 24th day of October, 2005 (the

"Agreement"), is by and between Marsh Supermarkets, Inc., an Indiana corporation

(the "Corporation"), and Mark A. Varner (the "Executive").

 

            WHEREAS, the Compensation Committee (the "Committee") of the Board

of Directors (the "Board") of the Corporation has determined that it is in the

best interests of the Corporation and its shareholders to assure that the

Corporation will have the continued dedication of the Executive and to encourage

the Executive's full and undivided attention and dedication to the Corporation;

and

 

            WHEREAS, the Committee has determined that entering into this

Agreement will promote the foregoing objectives;

 

            NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, THE PARTIES AGREE AS

FOLLOWS:

 

            SECTION 1. EMPLOYMENT PERIOD. The Corporation hereby agrees to

continue the Executive in its employ, subject to the terms and conditions of

this Agreement, for the period commencing on the Effective Date and ending on

the expiration of the Change of Control Period (the "Employment Period"). The

Employment Period shall terminate upon the termination of Executive's employment

for any reason.

 

            SECTION 2. TERMS OF EMPLOYMENT. (a) Position and Duties. (1) During

the Employment Period, (A) the Executive's position (including status, offices,

titles and reporting requirements), authority, duties and responsibilities shall

be at least commensurate in all material respects with the most significant of

those held, exercised and assigned at any time during the 120-day period

immediately preceding the Effective Date and (B) the Executive's services shall

be performed at the office where the Executive was employed immediately

preceding the Effective Date or at any other location less than 35 miles from

such office.

 

            (2) During the Employment Period, and excluding any periods of

vacation and sick leave to which the Executive is entitled, the Executive agrees

to devote his full time and attention during normal business hours to the

business and affairs of the Corporation and, to the extent necessary to

discharge the responsibilities assigned to the Executive hereunder, and to use

the Executive's reasonable best efforts to perform faithfully and efficiently

such responsibilities. During the Employment Period, it shall not be a violation

of this Agreement for the Executive to (A) serve on non-public corporate, civic

or charitable boards or committees, (B) deliver lectures, fulfill speaking

engagements or teach at educational institutions and (C) manage personal

investments or attend to family matters, so long as such activities do not

significantly interfere with the performance of the Executive's responsibilities

as an employee of the Corporation in accordance with this Agreement. It is

expressly understood and agreed that, to the extent that any such activities

have been conducted by the Executive prior to the Effective Date and disclosed

to the Board or the Committee, the continued conduct of such activities (or the

conduct of activities similar in nature and scope thereto) subsequent to the

Effective Date shall not thereafter be deemed to interfere with the performance

of the Executive's responsibilities to the Corporation.

 

<PAGE>

 

            (b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the

Executive shall receive an annual base salary (the "Annual Base Salary") at an

annual rate at least equal to 12 times the highest monthly base salary paid or

payable, including any base salary that has been earned but deferred, to the

Executive by the Corporation in respect of the 12-month period immediately

preceding the month in which the Effective Date occurs. The Annual Base Salary

shall be paid at such intervals as the Corporation pays executive salaries

generally. During the Employment Period, the Annual Base Salary shall be

reviewed at least annually, beginning no more than 12 months after the last

salary increase awarded to the Executive prior to the Effective Date. Any

increase in the Annual Base Salary shall not serve to limit or reduce any other

obligation to the Executive under this Agreement. The Annual Base Salary shall

not be reduced after any such increase and the term "Annual Base Salary" shall

refer to the Annual Base Salary as so increased.

 

            (2) ANNUAL BONUS. In addition to the Annual Base Salary, the

Executive shall be eligible to receive, for each fiscal year ending during the

Employment Period, an annual bonus (the "Annual Bonus") in cash up to the

Executive's target bonus (which shall not be less than the current target bonus

of 35% of Annual Base Salary) most recently established before the Effective

Date under the Corporation's Management Incentive Plan, or under any successor

plan (the "Target Bonus"). Each such Annual Bonus shall be paid no later than

the end of the third month of the fiscal year next following the fiscal year for

which the Annual Bonus is awarded, unless the Executive shall elect to defer the

receipt of such Annual Bonus.

 

            (3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment

Period, the Executive shall be entitled to participate in all cash incentive,

equity incentive, savings and retirement plans, practices, policies, and

programs applicable generally to other peer executives of the Corporation, but

in no event shall such plans, practices, policies and programs provide the

Executive with incentive opportunities (measured with respect to both regular

and special incentive opportunities, to the extent, if any, that such

distinction is applicable), savings opportunities and retirement benefit

opportunities, in each case, less favorable, in the aggregate, than the most

favorable of those provided by the Corporation for the Executive under such

plans, practices, policies and programs as in effect at any time during the

90-day period immediately preceding the Effective Date.

 

            (4) WELFARE BENEFIT PLANS. During the Employment Period, the

Executive and/or the Executive's family, as the case may be, shall be eligible

for participation in and shall receive all benefits under welfare benefit plans,

practices, policies and programs provided by the Corporation (including, without

limitation, medical, prescription, dental, disability, vision, group life plans

and programs) to the extent applicable generally to other peer executives of the

Corporation, but in no event shall such plans, practices, policies and programs

provide the Executive with benefits that are less favorable, in the aggregate,

than the most favorable of such plans, practices, policies and programs in

effect for the Executive at any time during the 90-day period immediately

preceding the Effective Date.

 

            (5) EXPENSES. During the Employment Period, the Executive shall be

entitled to receive prompt reimbursement for all reasonable expenses incurred by

the Executive in accordance with the most favorable policies, practices and

procedures of the Corporation in effect for the Executive at any time during the

90-day period immediately preceding the Effective Date.

 

            (6) FRINGE BENEFITS. During the Employment Period, the Executive

shall be entitled to fringe benefits, including, without limitation, in

accordance with the most favorable plans, practices, programs and policies of

the Corporation in effect for the Executive at any time during the 90-day period

immediately preceding the Effective Date.

 

                                      -2 -

<PAGE>

 

            (7) OFFICE AND SUPPORT STAFF. During the Employment Period, the

Executive shall be entitled to an office or offices of a size and with

furnishings and other appointments, and to personal secretarial and other

assistance, at least equal to the most favorable of the foregoing provided to

the Executive by the Corporation at any time during the 90-day period

immediately preceding the Effective Date.

 

            (8) VACATION. During the Employment Period, the Executive shall be

entitled to paid vacation in accordance with the most favorable plans, policies,

programs and practices of the Corporation as in effect for the Executive at any

time during the 90-day period immediately preceding the Effective Date

 

            SECTION 3. TERMINATION OF EMPLOYMENT. (a) Death or Disability. The

Executive's employment shall terminate automatically if the Executive dies

during the Employment Period. If the Corporation determines in good faith that

the Disability (as defined herein) of the Executive has occurred during the

Employment Period (pursuant to the definition of "Disability"), it may give to

the Executive written notice in accordance with Section 11(b) of its intention

to terminate the Executive's employment. In such event, the Executive's

employment with the Corporation shall terminate effective on the 30th day after

receipt of such notice by the Executive (the "Disability Effective Date"),

provided that, within the 30 days after such receipt, the Executive shall not

have returned to full-time performance of the Executive's duties. "Disability"

means the absence of the Executive from the Executive's duties with the

Corporation on a full-time basis for 180 consecutive days as a result of

incapacity due to mental or physical illness that is determined to be total and

permanent by a physician selected by the Corporation or its insurers and

acceptable to the Executive or the Executive's legal representative.

 

            (b) CAUSE. The Corporation may terminate the Executive's employment

during the Employment Period for Cause. "Cause" means:

 

            (1) the willful and continued failure of the Executive to perform

      substantially the Executive's obligations hereunder, including his duties

      (as contemplated by Section 2(a)(1)(A)) with the Corporation (other than

      any such failure resulting from incapacity due to physical or mental

      illness or following the Executive's delivery of a Notice of Termination

      for Good Reason), after a written demand for substantial performance is

      delivered to the Executive by the Board or the Chief Executive Officer of

      the Corporation that specifically identifies the manner in which the Board

      or the Chief Executive Officer of the Corporation believes that the

      Executive has not substantially performed the Executive's duties, or

 

            (2) the willful engaging by the Executive in illegal conduct or

      gross misconduct that is materially and demonstrably injurious to the

      Corporation.

 

For purposes of this Section 3(b), no act, or failure to act, on the part of the

Executive shall be considered "willful" unless it is done, or omitted to be

done, by the Executive in bad faith or without reasonable belief that the

Executive's action or omission was in the best interests of the Corporation. Any

act, or failure to act, based upon authority given pursuant to a resolution duly

adopted by the Board or upon the written instructions of the Chief Executive

Officer of the Corporation or a senior officer of the Corporation or based upon

the advice of counsel for the Corporation shall be conclusively presumed to be

done, or omitted to be done, by the Executive in good faith and in the best

interests of the Corporation. The cessation of employment of the Executive shall

not be deemed to be for Cause unless and until there shall have been delivered

to the Executive a copy of a resolution duly adopted by the affirmative vote of

a majority of both the entire membership of the Board and the non-employee

members of the Board, at a

 

                                      -3 -

<PAGE>

 

meeting of the Board called and held for such purpose (after reasonable notice

is provided to the Executive and the Executive is given an opportunity, together

with counsel for the Executive, to be heard before the Board), finding that, in

the good faith opinion of the Board, the Executive is guilty of the conduct

described in Section 3(b)(1) or 3(b)(2), and specifying the particulars thereof

in detail.

 

            (c) GOOD REASON. During the Employment Period, the Executive's

employment may be terminated by the Executive for Good Reason or by the

Executive voluntarily without Good Reason. "Good Reason" means:

 

            (1) the assignment to the Executive of any duties inconsistent in

      any respect with the Executive's position (including status, offices,

      titles and reporting requirements), authority, duties or responsibilities

      as contemplated by Section 2(a), or any other diminution in such position,

      authority, duties or responsibilities (whether or not occurring solely as

      a result of the Corporation's ceasing to be a publicly traded entity),

      excluding for this purpose an isolated, insubstantial and inadvertent

      action not taken in bad faith and that is remedied by the Corporation

      promptly after receipt of notice thereof given by the Executive;

 

            (2) any failure by the Corporation to comply with any of the

      provisions of Section 2(b), other than an isolated, insubstantial and

      inadvertent failure not occurring in bad faith and that is remedied by the

      Corporation promptly after receipt of notice thereof given by the

      Executive;

 

            (3) the Corporation's requiring the Executive to be based at any

      office or location other than as provided in Section 2(a)(1)(B);

 

            (4) any purported termination by the Corporation of the Executive's

      employment otherwise than as expressly permitted by this Agreement; or

 

            (5) any failure by the Corporation to comply with and satisfy

      Section 9(c).

 

For purposes of this Section 3(c), any good faith determination of Good Reason

made by the Executive with respect to termination of employment during the

Employment Period shall be conclusive. The Executive's mental or physical

incapacity following the occurrence of an event described above in clauses (1)

through (5) shall not affect the Executive's ability to terminate employment for

Good Reason.

 

            (d) NOTICE OF TERMINATION. Any termination by the Corporation for

Cause, or by the Executive for Good Reason, shall be communicated by Notice of

Termination to the other party hereto given in accordance with Section 11(b).

"Notice of Termination" means a written notice that (1) indicates the specific

termination provision in this Agreement relied upon, (2) to the extent

applicable, sets forth in reasonable detail the facts and circumstances claimed

to provide a basis for termination of the Executive's employment under the

provision so indicated, and (3) if the Date of Termination (as defined herein)

is other than the date of receipt of such notice, specifies the Date of

Termination (which Date of Termination shall be not more than 30 days after the

giving of such notice). The failure by the Executive or the Corporation to set

forth in the Notice of Termination any fact or circumstance that contributes to

a showing of Good Reason or Cause shall not waive any right of the Executive or

the Corporation, respectively, hereunder or preclude the Executive or the

Corporation, respectively, from asserting such fact or circumstance in enforcing

the Executive's or the Corporation's respective rights hereunder.

 

            (e) DATE OF TERMINATION. "Date of Termination" means (1) if the

Executive's employment is terminated by the Corporation for Cause, or by the

Executive for Good Reason, the date of

 

                                      -4 -

<PAGE>

 

receipt of the Notice of Termination or any later date specified in the Notice

of Termination, (which date shall not be more than 30 days after the giving of

such notice), as the case may be, (2) if the Executive's employment is

terminated by the Corporation other than for Cause or Disability, the Date of

Termination shall be the date on which the Corporation notifies the Executive of

such termination, and (3) if the Executive's employment is terminated by reason

of death or Disability, the Date of Termination shall be the date of death of

the Executive or the Disability Effective Date, as the case may be.

 

            SECTION 4. OBLIGATIONS OF THE CORPORATION UPON TERMINATION. (a)

OTHER THAN FOR CAUSE, DEATH OR DISABILITY, OR GOOD REASON. If, during the

Employment Period, the Corporation terminates the Executive's employment other

than for Cause or Disability or the Executive terminates employment for Good

Reason:

 

            (1) the Corporation shall pay to the Executive, in a lump sum in

      cash within 30 days after the Date of Termination, the aggregate of the

      following amounts:

 

                  (A) the sum of (i) the Executive's Annual Base Salary through

            the Date of Termination to the extent not theretofore paid, (ii) the

            product of (x) any earned Annual Bonus for the current fiscal year

            and (y) a fraction, the numerator of which is the number of days in

            the current fiscal year through the Date of Termination and the