EXHIBIT 10.1

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into by THE PANTRY,
INC., a Delaware corporation (the “Corporation”) and B. Clyde Preslar (the
“Employee”) and shall be effective as of February 7, 2013 (the “Effective
Date”).

The Corporation desires to employ Employee and Employee desires to accept such
employment on the terms set forth below.

In consideration of the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the Corporation and Employee agree as follows:

1.        EMPLOYMENT.  The Corporation employs Employee and Employee accepts
employment on the terms and conditions set forth in this Agreement.  Employee
shall serve as Senior Vice President and Chief Financial Officer, and have such
responsibilities and authority as the Corporation may assign from time to
time.  Employee, at the Corporation’s discretion, may be reassigned or
transferred to different units or locations; provided, however, that Employee
shall not be required to be based more than fifty (50) miles from his assigned
Corporate office on his initial date of employment.

1.1                  Employee shall perform all duties and exercise all
authority in accordance with, and otherwise comply with, all Corporation
policies, procedures, practices and directions.

1.2                  Employee shall devote all working time and best efforts to
successfully perform his duties and advance the Corporation’s interests.  During
his employment, Employee shall not engage in any other business activities of
any nature whatsoever (including board memberships) for which he receives
compensation without the Corporation’s prior consent; provided, however, this
provision does not prohibit him from personally owning and trading in stocks,
bonds, securities, real estate, commodities or other investment properties for
his own benefit which do not create actual or potential conflicts of interest
with the Corporation. Notwithstanding the foregoing: (i) nothing herein shall
preclude Employee from participating or serving on the Board of Directors or
similar governing body of one public company insofar as it does not present a
conflict of interest and is not otherwise contrary to the best interest of the
Company as reasonably determined by the Governance Committee; and (ii) the
Corporation hereby consents to Employee’s service on the board of the company
identified in Schedule A. 

2.        COMPENSATION.

2.1                  Base Salary.  Employee’s annual salary for all services
rendered shall be Four Hundred Thousand Dollars and Zero Cents ($400,000.00),
less any applicable taxes and withholdings, payable in accordance with the
Corporation’s policies, procedures and practices as they may exist from time to
time.  Employee’s salary periodically may be subject to annual increases in the
Corporation’s discretion in accordance with its policies, procedures and
practices as they may exist from time to time. 

 

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2.2                  Bonus Programs.  Employee may participate in any incentive
program which may be made available from time to time to Corporation’s employees
at Employee’s level; provided, however, that Employee’s participation is subject
to the applicable terms, conditions and eligibility requirements of the program,
as they may exist from time to time. 

2.3                  Benefits.  Employee may participate in all medical, dental,
disability, insurance, 401(k), pension, vacation and other employee benefit
plans and programs which may be made available from time to time to Corporation
employees at Employee’s level; provided, however, that Employee’s participation
is subject to the applicable terms, conditions and eligibility requirements of
these plans and programs, some of which are within the plan administrator’s
discretion, as they may exist from time to time.  Notwithstanding the foregoing,
Employee shall be entitled to a minimum of four (4) weeks of annual
vacation.  Subject to applicable state law, accrued, unused vacation may not be
carried over from year to year.

2.4                  Relocation Expenses.  The Corporation will assist Employee
in relocating to North Carolina by providing relocation assistance under the
Corporation’s regular relocation practices and policies at a type and level
currently offered to employees with a similar position and title.  Provided,
however, no such relocation expenses shall be paid later than March 15 of the
year following the year in which the expense was incurred.

2.5                  Benefit Plans Subject to Amendment.  Nothing in this
Agreement shall require the Corporation to create, continue or refrain from
amending, modifying, revising or revoking any of the plans, programs or benefits
set forth in Sections 2.2, 2.3 and 2.4.  Employee acknowledges that the
Corporation, in its sole discretion, may amend, modify, revise or revoke any
such plans, programs or benefits.  Any amendments, modifications, revisions and
revocations of these plans, programs and benefits shall apply to
Employee.  Nothing in this Agreement shall afford Employee any greater rights or
benefits with regard to these plans, programs and benefits than are afforded to
him under their applicable terms, conditions and eligibility requirements, some
of which are within the plan administrator’s discretion, as they may exist from
time to time.

2.6                  Offset for Disability Payments.  If at any time during
which Employee is receiving salary or post-termination payments from the
Corporation, he receives payments on account of mental or physical disability
from any Corporation-provided plan, then the Corporation, in its discretion, may
reduce his salary or post-termination payments by the amount of such disability
payments.

 

 

 

 

 

 

 

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2.7                  Clawback Provision.    It is the Corporation’s Policy that,
consistent with Section 954 of the Dodd-Frank Act, in the event that the
Corporation is required to prepare an accounting restatement due to the material
noncompliance of the Corporation with any financial reporting requirement under
the securities laws, the Corporation will seek to recover from any current or
former executive officer of the Corporation who received incentive-based
compensation (including stock options and performance shares awarded as
compensation) during the 3-year period preceding the date on which the
Corporation is required to prepare the accounting restatement, the amount, based
on the erroneous data, in excess of what would have been paid to the executive
officer under the accounting restatement.  The Corporation will implement this
Policy in accordance with the rules of the Securities Exchange Commission, as
they are promulgated.  Pursuant to this agreement, Employee agrees to promptly
return to the Corporation any and all amounts received pursuant to this
Agreement to the extent the Corporation is entitled or required to recover such
amounts by the terms of (i) the Corporation’s Executive Compensation Recoupment
Policy or other clawback or recoupment policy, as adopted, amended, implemented,
and interpreted by the Corporation from time to time, and/or (ii) Section 954 of
the Dodd-Frank Act (as may be amended) and any applicable rules or regulations
promulgated by the Securities Exchange Commission.

3.      TERM OF EMPLOYMENT AND TERMINATION.  The original term of employment
under this Agreement shall be two (2) years after the Effective Date listed
above and subject to the following provisions:

3.1                  Automatic Renewal.  Upon the expiration of the original
term or any renewal term of employment, Employee’s employment shall be
automatically renewed for a one (1) year period unless, at least sixty (60) days
prior to the renewal date, either party gives the other party written notice of
its intent not to continue the employment relationship.  During any renewal term
of employment, the terms, conditions and provisions set forth in this Agreement
shall remain in effect unless modified in accordance with Section 8.

3.2                  Without Cause.  During the original or any renewal term,
this Agreement and the employment relationship hereunder shall be terminated
without cause thirty (30) days after either the Corporation or Employee gives
notice of such termination to the other party.

3.3                  With Cause.  The Corporation may terminate this Agreement
and Employee’s employment hereunder immediately without notice at any time for
the following reasons which shall constitute “Cause”: (i) gross negligence or
willful misconduct in the performance of the Employee’s duties; (ii) Employee’s
insubordination in responding to any specific, reasonable instructions from
either the Corporation’s Chief Executive Officer or Board of Directors; (iii)
conduct by Employee which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise; or (iv) the conviction of Employee of, or
the entry of a plea of guilty or nolo contendere by Employee to, any crime
involving moral turpitude or any felony.  Prior to a termination pursuant to
Section 3.3(i), Employee shall be given written notice of the manner in which he
has failed to perform and a thirty (30) day opportunity to cure such failure.

3.4                  Death or Disability.  The Corporation may terminate
Employee’s employment without notice in the event of Employee’s death or
“Disability” which shall mean Employee’s physical or mental inability to perform
the essential functions of his duties with or without reasonable accommodation
for a period of 180 consecutive days or 180 days in total within a 365-day
period as determined by the Corporation in its reasonable discretion and in
accordance with applicable law.

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3.5                  Survival.  Section 4 (Compensation Upon Termination),
Section 5 (Competitive Business Activities, Trade Secrets, Confidential
Information and Corporation Property), and Section 6 (Change in Control) shall
survive the expiration or termination of this Agreement, regardless of the
reasons for such expiration or termination, until the obligations set forth
therein have been satisfied.

4.        COMPENSATION UPON TERMINATION.

4.1                  By Corporation For Cause or By Employee Without Cause or By
Notice of Non-Renewal.  If Employee’s employment is terminated by the
Corporation for Cause or by Employee without cause or by notice of non-renewal,
the Corporation’s obligation to compensate Employee ceases on the effective
termination date except as to amounts due at that time.

4.2                  By Corporation by Non-Renewal or Without Cause.  If the
Corporation terminates Employee’s employment by notice of non-renewal or without
Cause, then Employee shall be entitled to receive:

(A)                               amounts due on the effective termination date;

(B)                              a prorated bonus for the fiscal year in which
the effective termination date occurs.  The amount of the pro-rata bonus paid
will be determined based on actual results of the Employee and Corporation and
days worked by Employee during the year.  The bonus will be paid at the same
time as bonuses are paid to other employees with a similar position and title;

(C)                              if the termination is by the Corporation
without Cause in the first two years of employment under this Agreement, an
amount equal to the greater of Employee’s then current monthly salary for the
then remaining months in the original term of this Agreement or for twelve (12)
months, less any applicable taxes and withholdings and payable, subject to
section 4.2(D) below, in substantially equal installments on the last business
day of each applicable month and, if the termination is after the first two
years of employment hereunder, an amount (less any applicable taxes and
withholdings) equal to Employee’s then current monthly salary for twelve (12)
months, payable in substantially equal installments on the last business day of
each applicable month (“Severance Payments”). Such Severance Payments shall
commence in the month immediately following the month in which the release of
claims required by Section 4.4 becomes effective.  During the period in which
Employee is receiving the Severance Payments, if Employee accepts employment or
a consultancy with another entity or becomes self-employed, other than serving
as a member of the board of directors of public companies, then he must notify
the Corporation before such employment or consultancy begins and the payments
made pursuant to Section 4.2(C) shall be reduced by the amount of compensation
to be paid to him in connection with such employment, consultancy or
self-employment, other than board of director fees.  If Employee does not notify
the Corporation in accordance with this provision, then its obligation to make
payments or further payments pursuant to Section 4.2(C) shall cease;

                                    

(D)                              In order to ensure compliance with Section 409A
and notwithstanding Sections B and C above, all severance payments will paid to
the Employee prior to March 15 of the year following the calendar year of
termination.  If the payments would otherwise extend beyond such date,  prior to
the applicable March 15, the remaining balance of the severance amounts will be
paid to the Employee in a lump sum; and 

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(E)                              unless Employee obtains comparable group health
insurance coverage from a subsequent employer, then, for the twelve (12) months
following the termination of Employee’s employment, Employee may elect to
continue participation in the Corporation’s group health insurance plan in which
Employee participated upon termination of employment by electing continuation
coverage under the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”).  For the twelve (12) month continuation period, the Corporation shall
reimburse Employee for that portion of the COBRA premiums in excess of the
amount Employee paid for group health plan coverage immediately prior to
termination from employment.  In the event Employee prefers to obtain coverage
under an individual health insurance policy that is less expensive than COBRA
coverage rather than electing COBRA continuation coverage, the Corporation
shall, for twelve (12) months, reimburse Employee for that portion of the
premium payments that are in excess of the amount Employee paid for group health
plan coverage immediately prior to termination of employment.  All such
reimbursements required pursuant to this Section 4.2(E) shall be paid as soon as
reasonably practicable following employee’s submission of proof of timely
premium payments to the Corporation, subject to the following: (i) all such
claims for reimbursement shall be submitted by Employee and paid by the
Corporation no later than fifteen (15) months following Employee’s termination
of employment, (ii) any claims for reimbursements shall be paid no later than
the end of the calendar year after the calendar year in which the reimbursable
expense is incurred, (iii) reimbursements in one calendar year shall not affect
those payable in any later calendar year, and (iv) no benefit provided under
this Section 4.2(E) may be cashed out or exchanged for other benefits.

 

4.3                  Death or Disability.  If Employee’s employment is
terminated because of Employee’s death either before or after a Change in
Control (as hereinafter defined), then the Corporation shall pay to the estate
of Employee an amount (less any applicable taxes and withholdings) equal to
Employee’s then current monthly salary for six (6) months.  If Employee’s
employment is terminated because of Disability either before or after a Change
in Control, then the Corporation shall pay Employee his then current monthly
salary (less any applicable taxes and withholdings) for a period equal to the
shorter of:  (i) six (6) months from the date of termination; or, (ii) the time
period from the date of termination through the date on which Employee begins
receiving long term disability insurance benefits in accordance with the
Corporation’s long term disability plan.    Any payments paid to Employee or his
estate pursuant to this Section shall be paid in periodic, substantially equal
installments; provided, however, that all such amounts payable shall be paid no
later than two and one-half (2½) months following the end of the calendar year
in which Employee’s employment terminated.

 

 

 

 

 

 

 

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4.4               Severance Pursuant to Agreement.

The Corporation’s obligation to provide the payments under Sections 4.2, 4.3
(except in the event of termination because of Employee’s death) and Section 6.3
is conditioned upon Employee’s execution of an enforceable release of all claims
and his compliance with Section 5 hereof (specifically including the return of
all Corporation property, including but not limited to documents and electronic
information).  The required release shall contain a non-disparagement clause,
confidentiality agreement and agreement to cooperate and shall be provided to
Employee within seven (7) days following the date of his separation from
service.  Employee must execute the release within the time period specified in
the release (which shall not be longer than forty-five (45) days from the date
of Employee’s receipt of the release).  Such release shall not be effective
until any applicable revocation period, which shall be no more than seven (7)
days, has expired.  If Employee chooses not to execute such a release or fails
to comply with Section 5 of this Agreement, then the Corporation’s obligation to
compensate him ceases on the effective termination date except as to amounts due
at that time.

Employee is not entitled to receive any compensation or benefits upon his
termination except as: (i) set forth in this Agreement; (ii) otherwise required
by law; or (iii) otherwise required by any employee benefit plan in which he
participates; provided, however, that the terms and conditions afforded Employee
under this Agreement are in lieu of any severance benefits to which he otherwise
might be entitled pursuant to a severance plan, policy or practice.  Nothing in
this Agreement, however, is intended to waive or supplant any death, disability,
retirement, 401(k) or pension benefits to which Employee may be entitled under
employee benefit plans in which Employee participates.

5.       COMPETITIVE BUSINESS ACTIVITIES, TRADE SECRETS, CONFIDENTIAL
INFORMATION AND CORPORATION PROPERTY.  Employee acknowledges that by virtue of
Employee’s employment and position with the Corporation, Employee (i) has or
will have access to trade secrets and Confidential Information (as defined in
Section 5.2(B)) of the Corporation including valuable information about its
business operations and entities with whom it does business in various
locations, and (ii) has developed or will develop relationships with parties
with whom it does business in various locations.  Employee also acknowledges
that the trade secrets, Confidential Information and Competitive Business
Activities provisions set forth in this Agreement are reasonably necessary to
protect the Corporation’s legitimate business interests, are reasonable as to
the time, territory and scope of activities which are restricted, do not
interfere with public policy or public interest and are described with
sufficient accuracy and definiteness to enable him to understand the scope of
the restrictions imposed on him.

5.1                  Competitive Business Activities.  Without the Corporation’s
prior written approval, during Employee’s employment and for twelve (12) months
following termination of employment regardless of the reason for such
termination:

(A)                              Employee shall not, either individually or on
behalf of another, directly or indirectly, as employer, employee, owner,
partner, stockholder, independent contractor, agent, or otherwise enter into or
in any manner participate in the convenience store business in North Carolina,
South Carolina, Florida, or any other state in which the Corporation owns or
operates ten (10) or more convenience stores upon the date of termination of
employment.  Notwithstanding the foregoing, Employee’s ownership, directly or
indirectly, of not more than one percent of the issued and outstanding stock of
a corporation the shares of which are regularly traded on a national securities
exchange or in the over-the-counter market shall not violate Section 5.1(A).

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(B)                              Employee will not directly or indirectly,
request or induce any other employee of the Corporation to: (i) terminate
employment with the Corporation, or (ii) accept employment with another business
entity, or (iii) become engaged in the convenience store business in competition
with the Corporation.

5.2                  Trade Secrets; Confidential Information.

(A)                              Employee hereby covenants and agrees not to use
or disclose any Confidential Information (as hereinafter defined) or trade
secrets except to authorized representatives of the Corporation or except as
required by any governmental or judicial authority; provided, however, that the
foregoing restrictions shall not apply to items that, through no fault of
Employee’s, have entered the public domain.

(B)                              Confidential Information.  For purposes of this
Agreement, “Confidential Information” means any data or information with respect
to the business conducted by the Corporation, other than trade secrets, that is
material to the Corporation and not generally known by the public.  To the
extent consistent with the foregoing definition, Confidential Information
includes without limitation: (i) reports, pricing, sales manuals and training
manuals, selling and pricing procedures, and financing methods of the
Corporation, together with any techniques utilized by the Corporation in
designing, developing, manufacturing, testing or marketing its products or in
performing services for clients, customers and accounts of the Corporation; and
(ii) the business plans, financial statements, reports and projections of the
Corporation, and the Corporation’s prospective strategic or expansion plans.

(C)                              Corporation Property.  Employee acknowledges
that all trade secrets and Confidential Information are and shall remain the
sole, exclusive and valuable property of the Corporation and that Employee has
and shall acquire no right, title or interest therein.  Any and all printed,
typed, written and other material which Employee may have or obtain with respect
to trade secrets or Confidential Information (including without limitation all
copyrights therein) shall be and remain the exclusive property of the
Corporation, and any and all such material (including any copies) and all other
Corporation property shall, upon request of the Corporation, be promptly
delivered by Employee to the Corporation.

5.3                  Other Agreements.  Nothing in this Agreement shall
terminate, revoke or diminish Employee’s obligations or the Corporation’s rights
and remedies under law or any agreements relating to trade secrets, confidential
information, or non-competition which Employee has executed in the past or may
execute in the future or contemporaneously with this Agreement.

 

 

 

 

 

 

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6.        CHANGE IN CONTROL.

6.1                 Definition of Change in Control.  For purposes of this
Agreement, a “Change in Control” shall mean:

(A)                               any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), other than: (i) the Corporation; (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation;
(iii) a corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation; or (iv) the existing holders of capital stock of the
Corporation as of the date hereof, is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than fifty percent (50%) of the
combined voting power of the Corporation’s then outstanding securities; or

(B)                              the consummation of a merger, share exchange,
consolidation or reorganization involving the Corporation and any other
corporation or other entity as a result of which less than fifty percent (50%)
of the combined voting power of the Corporation or of the surviving or resulting
corporation or entity after such transaction is held in the aggregate by the
holders of the combined voting power of the outstanding securities of the
Corporation immediately prior to such transaction (“Business Combination”),
unless, following such Business Combination, (i) the individuals and entities
who were the beneficial owners of the Corporation prior to the Business
Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or
substantially all of the Corporation’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) , directly or indirectly,  of 20% or more
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such Business combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the Board of Directors of the Corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the board,
providing for such Business Combination; or

(C)                               the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation’s
assets; or

 

 

 

 

 

 

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(D)                              during any period of twelve (12) consecutive
months, the individuals who constitute the Board of Directors of the Corporation
at the beginning of such period (the “Incumbent Directors”) cease for any reason
to constitute a majority of the Board of Directors; provided, however, that a
director who is not a director at the beginning of such period shall be deemed
to be an Incumbent Director if such director is elected or recommended for
election by a majority of the directors who are then Incumbent Directors, but
excluding, for this purpose, any such individual whose initial assumption of the
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board.

6.2                 Termination Following a Change in Control.  After the
occurrence of a Change in Control, Employee shall be entitled to receive
payments and benefits pursuant to this Agreement if Employee’s employment is
terminated within eighteen (18) months following the Change in Control either by
the Corporation by notice of non-renewal, without Cause or by Employee for Good
Reason.  For purposes of this Agreement, “Good Reason” shall exist for Employee
to terminate his employment if Employee resigns within six (6) months of any of
the following conditions having arisen without his consent after having given
the Corporation written notice of the existence of such condition within sixty
(60) days of the initial existence of the condition and providing the
Corporation with thirty (30) days to remedy the condition:

(A)                              a substantial adverse alteration in the nature
or status of his position or responsibilities or the conditions of his
employment from those in effect immediately prior to the Change in Control;

(B)                              a material diminution by the Corporation of
Employee’s annual base salary and target bonus, as such target bonus is
described in the Corporation’s Annual Incentive Plan (“Target Bonus”);

 

(C)                              the Corporation’s requiring Employee to be
based more than fifty (50) miles from the Corporation’s offices at which he was
principally employed immediately prior to the date of the Change in Control;

(D)                              the Corporation’s material failure to pay
Employee any compensation due under this Agreement;

(E)                              the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to perform this
Agreement;

(F)                              any other action or inaction that constitutes a
material breach by the Corporation of this Agreement.

6.3                 Severance Pay and Benefits.  If Employee’s employment with
the Corporation terminates under circumstances as described in Section 6.2
above, Employee shall be entitled to receive all of the following:

(A)                              all accrued compensation through the
termination date;

 

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(B)                              a severance payment equal to Employee’s then
current monthly salary for twenty-four (24) months plus an amount equal to two
(2) times the value of Employee’s Target Bonus for the year in which the
termination occurs (less any applicable taxes and withholdings), payable in a
lump sum within thirty (30) calendar days after the date on which the release of
claims required by Section 4.4 becomes effective; and

(C)                             unless Employee obtains comparable medical
insurance coverage from a subsequent employer, then, for twenty-four (24) months
following the termination of Employee’s employment, the Corporation shall
continue to pay for Employee’s health insurance coverage as described in this
Section 6.3(C).  Employee may elect to continue coverage under the Corporation’s
group health insurance plan in which he participated on the effective date of
the termination of employment by election of continuation coverage under COBRA,
subject to the terms of the group health plan and applicable law.  The
Corporation shall pay Employee’s premiums directly to the COBRA administrator
for the same health insurance coverage for the same group health insurance plan
in which Employee participated on the effective date of the termination of
employment.   At the end of the maximum COBRA continuation period, the
Corporation shall reimburse Employee for that portion of health insurance
premiums under a fully-insured, individual health insurance policy that are in
excess of the amount Employee paid for coverage under the Corporation’s group
health plan immediately prior to termination of employment.  Such individual
health insurance policy reimbursements shall continue for no longer than the
remainder, if any, of the twenty-four (24) month health insurance continuation
period following expiration of the maximum COBRA continuation
period.  Notwithstanding the foregoing, in the event Employee prefers to
initially obtain health insurance coverage under a fully-insured, individual
health insurance policy that is less expensive than COBRA coverage, the
Corporation shall reimburse Employee for premiums that are in excess of the
amount Employee paid for health insurance under the Corporation’s group health
plan immediately prior to termination through the earlier to occur of:  (i)
twenty-four (24) months following termination of employment, or (ii) the date
Employee obtains comparable group health insurance coverage from a subsequent
employer.  All such reimbursements required pursuant to this Section 6.3(C)
shall be paid as soon as reasonably practicable following employee’s submission
of proof of timely premium payments to the Corporation, subject to the
following: (i) all such claims for reimbursement shall be submitted by Employee
and paid by the Corporation no later than twenty-seven (27) months following
Employee’s termination of employment, (ii) any claims for reimbursements shall
be paid no later than the end of the calendar year after the calendar year in
which the reimbursable expense is incurred, (iii) reimbursements in one calendar
year shall not affect those payable in any later calendar year, and (iv) no
benefit provided under this Section 6.3(C) may be cashed out or exchanged for
other benefits.

            

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6.4            Parachute Payments.  Payments shall be reduced to the extent, if
any, determined in accordance with the following provisions:

                                       (A)                        For purposes
of this Section 6.4:  (i) a "Payment" shall mean any payment or distribution in
the nature of compensation to or for the benefit of the Executive, whether paid
or payable pursuant to this Agreement or otherwise, that is treated as a
parachute payment under the provisions of Code Section 280G(b)(2) ; (ii)
"Agreement Payment" shall mean a Payment paid or payable pursuant to this
Agreement (disregarding this Section); (iii) "Reduced Amount" shall mean the
amount of Payments that has a Present Value that is equal to 2.99 times the
Executive’s “base amount,” as that term is defined under Code Section
280G(b)(3); (iv) "Present Value" shall mean such value determined in accordance
with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of Code; and (v) “Code” shall
mean the Internal Revenue Code of 1986, as amended.

                                       (B)                        Anything in
the Agreement to the contrary notwithstanding, in the event Deloitte & Touche
LLP or such other accounting firm as shall be designated by the Company (the
"Accounting Firm") shall determine that receipt of all Payments would subject
the Executive to tax under Section 4999 of the Code, the Accounting Firm shall
determine whether the Net After-Tax Reduced Amount exceeds that of the Net
After-Tax Payments.  For these purposes, the Net After-Tax Reduced Amount and
the Net After-Tax Payments refer to the Reduced Amount and Payments,
respectively, received by the Executive net of all taxes imposed on the
Executive with respect thereto under Sections 1 and 4999 of the Code and under
applicable state and local laws, determined by applying the highest marginal
rate under Section 1 of the Code and under state and local laws which applied to
the Executive’s taxable income for the immediately preceding taxable year, or
such other rate(s) as the Executive shall certify, in the Executive’s sole
discretion, as likely to apply to the Executive in the relevant tax year(s).  If
the Accounting Firm determines that the Net After-Tax Reduced Amount exceeds
that of the Net After-Tax Payments, then the aggregate Agreement Payments shall
be reduced to the Reduced Amount.

                                       (C)                        If the
Accounting Firm determines that aggregate Agreement Payments should be reduced
to the Reduced Amount, the Company shall promptly give the Executive notice to
that effect and a copy of the detailed calculation thereof. For purposes of
reducing the aggregate Agreement Payments to the Reduced Amount, only amounts
payable under this Agreement (and no other Payments) shall be reduced.   The
reduction of the aggregate Agreement Payments to the Reduced Amount, if
applicable, shall be made by reducing the amounts payable to the Executive
pursuant to Section 6.3 (as modified by Section 6.4) of this Agreement.  All
determinations made by the Accounting Firm under this Section shall be binding
upon the Company and the Executive and shall be made within 60 days of a
termination of employment of the Executive.  As promptly as practicable
following such determination, the Company shall pay to or distribute for the
benefit of the Executive such Agreement Payments as are then due to the
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such Agreement Payments as become due to
the Executive under this Agreement.

                                       (D)                        As a result of
the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
amounts will have been paid or distributed by the Company to or for the benefit
of the Executive pursuant to this Agreement which should not have been so paid
or distributed ("Overpayment") or that additional amounts which will have not
been paid or distributed by the Company to or for the benefit of the Executive
pursuant to this Agreement could have been so

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paid or distributed ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder.  In the event that the Accounting
Firm, based upon the assertion of a deficiency by the Internal Revenue Service
against either the Company or the Executive which the Accounting Firm believes
has a high probability of success determines that an Overpayment has been made,
any such Overpayment paid or distributed by the Company to or for the benefit of
the Executive shall be repaid to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such amount shall be payable by the Executive to the
Company if and to the extent such  payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and Section 4999 of the
Code or generate a refund of such taxes.  In the event that the Accounting Firm,
based upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.

(E)                              All fees and expenses of the Accounting Firm in
implementing the provisions of this Section 6.4 shall be borne by the Company.

7.        WAIVER OF BREACH.  The Corporation’s waiver of any breach of a
provision of this Agreement shall not waive any subsequent breach by the
Corporation.

8.        ENTIRE AGREEMENT.  Except as expressly provided in this Agreement,
this Agreement:  (i) supersedes all other understandings and agreements, oral or
written, between the parties with respect to the subject matter of this
Agreement; and (ii) constitutes the sole agreement between the parties with
respect to this subject matter.  Each party acknowledges that: (i) no
representations, inducements, promises or agreements, oral or written, have been
made by any party or by anyone acting on behalf of any party, which are not
embodied in this Agreement; and (ii) no agreement, statement or promise not
contained in this Agreement shall be valid.  No change or modification of this
Agreement shall be valid or binding upon the parties unless such change or
modification is in writing and is signed by the parties.

9.        SEVERABILITY.  If a court of competent jurisdiction holds that any
provision or sub-part thereof contained in this Agreement is invalid, illegal or
unenforceable, that invalidity, illegality or unenforceability shall not affect
any other provision in this Agreement.  Additionally, if any of the provisions,
clauses or phrases in the Competitive Business Activities, Trade Secrets,
Confidential Information and Corporation Property provisions set forth in this
Agreement are held unenforceable by a court of competent jurisdiction, then the
parties’ desire is that they be “blue-penciled” or rewritten by the court to the
extent necessary to render them enforceable.

10.      PARTIES BOUND.  The terms, provisions, covenants and agreements
contained in this Agreement shall apply to, be binding upon and inure to the
benefit of the Corporation’s successors and assigns.  The Corporation, at its
discretion, may assign this Agreement.  Employee may not assign this Agreement
without the Corporation’s prior written consent.

11.      REMEDIES.  Employee acknowledges that his breach of this Agreement
would cause the Corporation irreparable harm for which damages would be
difficult, if not impossible, to ascertain and legal remedies would be
inadequate.  Therefore, in addition to any legal or other relief to which the
Corporation may be entitled by virtue of Employee’s breach or threatened breach
of this Agreement, the Corporation may seek equitable relief, including but not
limited to preliminary and injunctive relief, and such other available remedies.

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12.      SECTION 409A OF THE INTERNAL REVENUE CODE.

            12.1        Parties’ Intent. The parties intend that the provisions
of this Agreement comply with Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), and the regulations thereunder (collectively, “Section
409A”) and all provisions of this Agreement shall be construed in a manner
consistent with the requirements for avoiding taxes or penalties under Section
409A. The Company does not guarantee to the Employee or any other person that
any benefit or payment under this Agreement is exempt from Section 409A, nor
will the Corporation indemnify, defend or hold harmless the Employee or any
other person with respect to the tax consequences of a failure of any benefit or
payment under this Agreement to meet an exemption under Section 409A.  If any
provision of this Agreement (or of any award of compensation, including equity
compensation or benefits) would cause Employee to incur any additional tax or
interest under Section 409A, the Corporation shall, upon the specific request of
Employee, use its reasonable business efforts to in good faith reform such
provision to comply with Code Section 409A; provided, that to the maximum extent
practicable, the original intent and economic benefit to Employee and the
Corporation of the applicable provision shall be maintained, and the Corporation
shall have no obligation to make any changes that could create any additional
economic cost or loss of benefit to the Corporation. 

          12.2         Application of Section 409A.   In the event any benefit
or payment under this Agreement becomes subject to the provisions of Section
409A, the provisions of Section 409A of the Code and the regulations issued
thereunder are incorporated herein by reference to the extent necessary for any
benefit or payment that is subject Section 409A to comply therewith.  In such
event, the provisions of this Agreement shall be interpreted in a manner that
satisfies the requirements of Section 409A and the related regulations, and this
Agreement shall be operated accordingly. 

Notwithstanding any other provision of this Agreement, in the event the Employee
is treated as a “specified employee” under Section 409A and any payment or
benefit under this Agreement is treated as a nonqualified deferred compensation
payment under Section 409A, then payment of such amounts shall be delayed for
six months and a day following the Employee’s “separation from service,” as such
term is defined in Section 409A, at which time a lump sum payment shall be made
to the Employee consisting of the sum of the delayed payments.  This provision
shall not apply in the event of a specified employee’s termination of employment
on account of death and, in the event of a specified employee’s death during the
aforementioned six-month and a day period, any such delayed nonqualified
deferred compensation shall be paid within 30 days after such specified
employee’s death.

13.      GOVERNING LAW.  This Agreement and the employment relationship created
by it shall be governed by North Carolina law without giving effect to North
Carolina choice of law provisions

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IN WITNESS WHEREOF, the parties have entered into this Agreement on the day and
year written below.

            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMPLOYEE

 

 

 

/s/ B. Clyde Preslar

 

 

 

1/9/2013

 

Executive

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE PANTRY, INC.

 

 

 

/s/ Dennis G. Hatchell

 

 

 

1/9/2013

 

Dennis Hatchell

 

Date

 

 

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SCHEDULE A – B. CLYDE PRESLAR BOARD MEMBERSHIPS AS OF FEBRUARY 7, 2013

 

Alliance One International, Inc.

 

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