Questions about expenses have dogged Marsh before

Don Marsh lashed back last month after the owner of Marsh Supermarkets Inc. filed a lawsuit accusing him of billing the
company for millions of dollars in personal expenses.

He said in a statement that "it is clear the out-of-state, venture capitalist group ownership
is looking for someone to blame for their own poor business practices, which have severely impacted the
company I once proudly led."

But company records reviewed by IBJ show Florida-based Sun Capital Partners—which bought the grocery chain
in October 2006 for $88 million in cash and the assumption of $237 million in debt—isn’t the first
to question whether Marsh improperly used company coffers to bankroll a lavish, globetrotting lifestyle.

Months before the sale, the records show, members
of the board were becoming concerned over expenses charged to the company by both CEO Don Marsh and his
son David, who served as the company’s president.

Those concerns were fanned by John Elbin, who served as chief financial officer of the company
from July 2005 until quitting four months later because of disagreements with other senior executives.
On his way out the door, the records say, he encouraged the board to look into Don’s and David’s expenses.

Until then, the board’s compensation committee
had been unaware that the pair charged expenses to the company using a special executive voucher system
outside the normal expense-reimbursement process, former committee Chairman Stephen Huse said in a signed
statement.

That statement
and other internal documents were made public last year in a legal battle between Marsh Supermarkets and David,
who sued the company alleging he was shortchanged on severance.

The company fired back, saying David had used the business as his "personal checkbook"—the
same language it used in the lawsuit it filed against Don Marsh March 25. The company and David settled
in August 2007, but the terms were kept confidential.

Huse this month declined to comment beyond issuing a statement highlighting Don Marsh’s significant
contributions to the community, and to the less fortunate, during his four-decade span as CEO of the
company.

But company records
show Huse and other members of the compensation committee were disturbed to learn about the existence
of the "evoucher" system and feared it could jeopardize efforts to sell the struggling public company.

"When the members of the compensation committee
and I discovered that this ‘evoucher’ system existed, we were irate," Huse said in the signed statement
submitted in the David Marsh litigation. "I considered leaving the board. But I was concerned about
the interests of shareholders at what was a critical time, and therefore decided to continue on the board."

In a May 2006 letter to Don Marsh, Huse questioned
the CEO’s spending more than $279,000 of company money on estate-planning costs for himself and other
family members, noting that the limit in his contract was $10,000 annually.

He also alerted Don Marsh to a new company policy requiring compensation-committee approval for
all expenses of the top four executives before repayment. The committee also required receipts documenting
any expense over $50.

"Anything other than proper practice will put the Sun Capital deal in jeopardy as well as question the reputation you
have worked so hard to build in your 41 years as leader of Marsh Supermarkets," wrote Huse, whose
daughter Kimberly is married to Don’s son Arthur.

Don Marsh, 71, declined to comment beyond the statement. In his lawsuit, David Marsh—who’s
now the president of the Crystal Flash convenience store chain—denied there was anything secret
about the evoucher system.

"No one ever raised a question to [David] Marsh regarding the appropriateness of Marsh Supermarkets’ use of that system,
and in all the years that he used the system, no one ever told him that doing so was inappropriate,"
a letter from his attorney said.

Elbin, the former CFO who raised questions about executive expenses before quitting in December
2005, declined to comment to IBJ. Douglas Dougherty, who preceded Elbin as CFO and returned
to the post after Elbin quit, also declined to comment.

In a signed statement made public in the David Marsh litigation, Dougherty said that "while
the [evoucher] system itself was not inherently improper, how David Marsh used the system was improper,
in that there was no apparent business purpose for many of the expenditures, and there was no documentation
of the business purpose."

"On several occasions," Dougherty continued in his statement, "I encouraged and recommended to Don Marsh that
he have his and other executive expenses be reviewed by the board or an appropriate committee of the
board. This obviously never happened."