Exhibit 10.2

 

                       Pantry Store No.   

 

                         

 

                         

 

LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is made and entered into as of this         
day of                 , 200  , by and between NATIONAL RETAIL PROPERTIES, LP, a
Delaware limited partnership (the “Landlord”), and THE PANTRY, INC., a Delaware
corporation with offices in Sanford, North Carolina (the “Tenant”).

Landlord and Tenant covenant and agree as follows:

1. PREMISES. In consideration of the rents, terms, covenants, and agreements set
forth in this Lease to be paid, kept, and performed, Landlord grants, demises,
and lets to Tenant, and Tenant hereby takes, rents, and leases from Landlord, on
the terms, covenants, provisions, and agreements provided in this Lease, the
Premises (as hereinafter defined).

Landlord is seized and possessed of a fee simple title to a certain tract of
land (the “Land”) in the City of                 ,                         
County,                         , described as follows:

See Exhibit A attached hereto and incorporated herein by reference.

The Land as described on Exhibit A includes or will include all existing parking
spaces, septic tanks and fields (if applicable), structures housing car washes
(if applicable), buildings and building overhangs (if applicable), signs, and
curb cuts required in connection with the use of the Premises (as hereinafter
defined) as a convenience store selling petroleum products, but excludes the
following: (i) all of the Petroleum Equipment (as defined in Section 5),
(ii) all of Tenant’s Personal Property (as defined in Section 6), and
(iii) built-in refrigeration equipment and walk-in coolers. The Land, together
with all improvements thereon or to be constructed thereon (the “Improvements”),
but excluding the property described in clauses (i), (ii), and (iii) at the end
of the preceding sentence, are hereinafter collectively referred to as the
“Premises.”

2. TERM. The term of this Lease (the “Base Term”) shall commence on the date
Landlord acquires fee simple title to the Premises (the “Effective Date”) and
shall expire on the day that is fifteen (15) years thereafter, provided,
however, if the Effective Date is not the first day of a calendar month, the
Base Term shall expire on the last day of the month in which the expiration of
the Base Term occurs. The Base Term, together with any properly exercised
Renewal Term (as defined herein) shall be collectively referred to as the
“Term.” A “Lease Year” shall be a period of twelve (12) consecutive calendar
months beginning on the Effective Date and each anniversary thereof; provided,
however, the first Lease Year shall include the period from the Effective Date
to the first day of the next following calendar month after the Effective Date.
Landlord and Tenant agree to execute and deliver to the other a date agreement
memorializing the Effective Date, the expiration date of the Base Term, and the
commencement and expiration dates of the Renewal Terms.

 

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The six (6) five (5) year periods following the Base Term for which Tenant will
have an option to renew this Lease as provided in Section 3 shall be hereinafter
referred to individually as a “Renewal Term” or collectively as the “Renewal
Terms.”

3. RENEWAL OPTION. Provided and upon the condition that Tenant shall not then be
in default under the terms of this Lease beyond any applicable grace or cure
period, this Lease shall be automatically renewed for six (6) additional five
(5) year periods without action on the part of either party hereto. In the event
Tenant does not desire to renew this Lease for any of the six (6) five (5) year
Renewal Terms, Tenant shall notify Landlord of its intention not to renew this
Lease at least one hundred eighty (180) days prior to the termination of the
then current Lease period, and in the event such notification is not given by
Tenant, this Lease shall be automatically extended as above provided. References
to the Term of this Lease shall include extensions, if any. Except as otherwise
expressly stated herein, the terms and conditions of this Lease shall remain in
effect during any extension of the Term of this Lease.

4. RENTAL. Tenant shall pay Rent (sometimes “rent”) to Landlord as set forth
below. Rent shall be calculated on an annual basis and shall be payable in
advance in equal monthly installments on or before the first day of each month.
Rent shall be paid via electronic transfer of funds (via ACH transfer or wire
transfer), or at Landlord’s option (upon thirty (30) days advance written notice
to Tenant), by check sent by ordinary first class mail to Landlord at 450 S.
Orange Avenue, Suite 900, Orlando, Florida 32801 or at such other address as
Landlord may designate in writing from time to time.

(a) Base Term. The annual Rent during the Base Term shall be calculated as
follows:

(i) Commencing on the Effective Date, the annual rent during the first five
(5) Lease Years of the Base Term shall be $                     payable in
monthly installments of $                    .

(ii) For Lease Years six (6) through ten (10), the annual rent shall be
increased by (but in no event shall the rent decrease) the lesser of (A) an
amount equal to the annual rent payable in the fifth (5th) Lease Year multiplied
by 0.065 (i.e., increased by 6.5%), or (B) an amount equal to the annual rent
payable in the fifth (5th) Lease Year multiplied by the percentage increase in
the Consumer Price Index, all items, all groups, (1982 – 1984 = 100), published
by the United States Department of Labor (“CPI”) from the period beginning on
the date which is three (3) months prior to the Effective Date and ending three
(3) months prior to the end of the fifth (5th) Lease Year.1

 

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1

For purposes of clarification, an example of calculating “percentage increase,”
is as follows: For any given adjustment period, assume that the CPI in effect on
the earlier date is 150 and the CPI in effect on the later date is 160. In such
case, the “percentage increase” would be 6.67% [i.e., (160 – 150) ÷ 150 = 0.0667
(or 6.67%)].

 

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(iii) For Lease Years eleven (11) through fifteen (15), the annual rent shall be
increased by (but in no event shall the rent decrease) the lesser of (A) an
amount equal to the annual rent payable in the tenth (10th) Lease Year
multiplied by 0.065 (i.e., increased by 6.5%), or (B) an amount equal to the
annual rent payable in the tenth (10th) Lease Year multiplied by the percentage
increase in the CPI from the period beginning on the date which is three
(3) months prior to the first day of the sixth (6th) Lease Year and ending three
(3) months prior to the end of the tenth (10th) Lease Year.

(b) Renewal Terms. The Annual Rent during the Renewal Term shall be calculated
as follows:

(i) The annual rent during the first (1st) Renewal Term, which comprises Lease
Years sixteen (16) through twenty (20), shall be increased by (but in no event
shall the rent decrease) the lesser of (A) an amount equal to the annual rent
payable in the fifteenth (15th) Lease Year multiplied by 0.065 (i.e., increased
by 6.5%), or (B) an amount equal to the annual rent payable in the fifteenth
(15th) Lease Year multiplied by the percentage increase in the CPI from the
period beginning on the date which is three (3) months prior to the first day of
the eleventh (11th) Lease Year and ending three (3) months prior to the end of
the fifteenth (15th) Lease Year.

(ii) The annual rent during the second (2nd) Renewal Term, which comprises Lease
Years twenty-one (21) through twenty-five (25), shall be increased by (but in no
event shall the rent decrease) the lesser of (A) an amount equal to the annual
rent payable in the twentieth (20th) Lease Year multiplied by 0.065 (i.e.,
increased by 6.5%), or (B) an amount equal to the annual rent payable in the
twentieth (20th) Lease Year multiplied by the percentage increase in the CPI
from the period beginning on the date which is three (3) months prior to the
first day of the sixteenth (16th) Lease Year and ending three (3) months prior
to the end of the twentieth (20th) Lease Year.

(iii) The annual rent during the third (3rd) Renewal Term, which comprises Lease
Years twenty-six (26) through thirty (30), shall be increased by (but in no
event shall the rent decrease) the lesser of (A) an amount equal to the annual
rent payable in the twenty-fifth (25th) Lease Year multiplied by 0.065 (i.e.,
increased by 6.5%), or (B) an amount equal to the annual rent payable in the
twenty-fifth (25th) Lease Year multiplied by the percentage increase in the CPI
from the period beginning on the date which is three (3) months prior to the
first day of the twenty-first (21st) Lease Year and ending three (3) months
prior to the end of the twenty-fifth (25th) Lease Year.

(iv) The annual rent during the fourth (4th) Renewal Term, which comprises Lease
Years thirty-one (31) through thirty-five (35), shall be increased by (but in no
event shall the rent decrease) the lesser of (A) an amount equal to the annual
rent payable in the thirtieth (30th) Lease Year multiplied by 0.065 (i.e.,
increased by 6.5%), or (B) an amount equal to the annual rent payable in the

 

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thirtieth (30th) Lease Year multiplied by the percentage increase in the CPI
from the period beginning on the date which is three (3) months prior to the
first day of the twenty-sixth (26th) Lease Year and ending three (3) months
prior to the end of the thirtieth (30th) Lease Year.

(v) The annual rent during the fifth (5th) Renewal Term, which comprises Lease
Years thirty-six (36) through forty (40), shall be increased by (but in no event
shall the rent decrease) the lesser of (A) an amount equal to the annual rent
payable in the thirty-fifth (35th) Lease Year multiplied by 0.065 (i.e.,
increased by 6.5%), or (B) an amount equal to the annual rent payable in the
thirty-fifth (35th) Lease Year multiplied by the percentage increase in the CPI
from the period beginning on the date which is three (3) months prior to the
first day of the thirty-first (31st) Lease Year and ending three (3) months
prior to the end of the thirty-fifth (35th) Lease Year.

(vi) The annual rent during the sixth (6th) Renewal Term, which comprises Lease
Years forty-one (41) through forty-five (45), shall be increased by (but in no
event shall the rent decrease) the lesser of (A) an amount equal to the annual
rent payable in the fortieth (40th) Lease Year multiplied by 0.065 (i.e.,
increased by 6.5%), or (B) an amount equal to the annual rent payable in the
fortieth (40th) Lease Year multiplied by the percentage increase in the CPI from
the period beginning on the date which is three (3) months prior to the first
day of the thirty-sixth (36th) Lease Year and ending three (3) months prior to
the end of the fortieth (40th) Lease Year.

(c) Net Lease. Tenant acknowledges and agrees that it is intended that this
Lease will be, except as otherwise expressly stated herein, a completely “net
lease” to Landlord, and that Landlord is not responsible for any costs, charges,
expenses, and outlays of any nature whatsoever arising from or relating to the
Premises, whether arising or accruing prior to or during the Term of this Lease,
including, without limitation, the Improvements, or the use and occupancy
thereof, or the contents thereof or the business carried on therein, except as
may be otherwise expressly stated herein. Tenant shall pay all charges,
impositions, costs, and expenses of every nature and kind relating to the
Premises arising or accruing prior to or during the Term of this Lease, except
as herein expressly provided to the contrary. Tenant covenants and agrees that
the Rent to be paid hereunder shall be, except as otherwise expressly provided
herein or permitted by law, paid without off-set or deduction. Landlord shall
have the right to accept all Rent and other payments, whether full or partial,
and to negotiate checks and payments thereof without any waiver of rights,
irrespective of any conditions to the contrary sought to be imposed by Tenant.
The Rent for any partial month shall be prorated based upon the number of days
in said month. Notwithstanding the foregoing, Tenant shall not be responsible
for any costs, charges, or expenses pertaining to Landlord’s organizational
overhead, the financing or refinancing of the Premises by Landlord.

(d) At such time as the annual rent is adjusted in accordance with subparagraphs
(a) and (b) above (i.e., every five (5) years), Landlord shall provide Tenant
with at least thirty (30) days prior written notice of the amount of the new
Rent and shall provide Tenant with Landlord’s calculation of the new Rent (which
shall be made in accordance with the

 

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provisions of subparagraphs (a) and (b) above). The annual rent payable during
the Base Term and Renewal Terms as so calculated shall be payable in monthly
installments equal to one-twelfth (1/12) of such amount. If the manner in which
the CPI is determined by the Department of Labor shall be substantially revised,
an adjustment shall be made by Landlord and Tenant, acting cooperatively with
each other, for the purposes of making adjustments in annual rent as above
provided so as to produce results equivalent as nearly as possible to those that
would have resulted if the CPI had not been so revised. If the CPI shall become
unavailable to the public because publication is discontinued, or otherwise,
Landlord and Tenant shall agree to a substitution therefor with a comparable
index based upon changes in the cost of living or purchasing power of the
consumer dollar published by a governmental agency, or, if no such index shall
then be available, a comparable index published by a major bank or other
financial institution, a university, or a financial publication of multi-state
or national circulation mutually acceptable to Landlord and Tenant.

5. ENVIRONMENTAL; PETROLEUM EQUIPMENT.

(a) Tenant is and shall remain and be the owner and operator of all Petroleum
Equipment (as defined below) on the Premises, and, accordingly, is further
deemed to be such for purposes of compliance with and liabilities arising from
all Environmental Laws (as hereinafter defined). At any time during the Term of
this Lease, Tenant shall have the right to install or cause to be installed and
to maintain, replace, relocate, repair, upgrade and operate petroleum marketing
equipment, including, but not limited to, underground or above ground storage
tanks and their associated underground or above ground and/or connected piping,
and related lines, pumps, dispensers, mechanical, control and detectional
equipment, environmental assessment and remediation equipment related thereto
(collectively, “Petroleum Equipment”). Upon reasonable written request from
Landlord, Tenant shall provide Landlord with a copy of any permit required by
any applicable Environmental Laws for the Premises.

(b) Tenant shall comply with all laws, including Environmental Laws, relating to
the use, storage, transportation, dispensing, sale or release of Hazardous
Material (as hereinafter defined) at the Premises. Without limiting the
foregoing, Tenant shall comply with all laws, including Environmental Laws,
relating to the Petroleum Equipment, including, without limitation,
installation, operation, maintenance, calibration and alarm systems,
registration, financial assurances, and (subject to Section 5(d) below) closure,
and promptly shall implement any and all upgrade requirements promulgated by any
government agency having jurisdiction as soon as practicable, but in no event
later than any applicable deadline announced or promulgated by the government
agency unless Tenant shall have received an extension of the deadline for
compliance from such government agency. Tenant shall not use, store, transport,
dispense or sell Hazardous Material at the Premises, or surrounding areas,
except as reasonably necessary for the permitted use of the Premises, including
the retail sale of gasoline and/or kerosene and/or propane gas in compliance
with applicable Environmental Laws. Except as contemplated by the preceding
sentence, Tenant shall not release, nor shall Tenant permit any employee,
contractor, agent or invitee to release, any Hazardous Material on the Premises,
into the air or the surrounding land, surface water or ground water except as
expressly permitted by law, including Environmental Laws, and approved in
writing by Landlord in its sole discretion. Tenant shall obtain and maintain all
necessary permits, approvals, registrations, certificates, and authorizations
(“Permits”) required under Environmental Laws for the Premises and Petroleum

 

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Equipment, and Tenant shall be responsible for all related costs, fees, and
charges. Where cooperation of Landlord is necessary to obtain any such Permits,
Landlord shall provide such cooperation but shall not be compelled to become a
permittee or co-permittee unless required by Environmental Laws, and all costs,
fees and charges shall be reimbursed by Tenant within thirty (30) days of
presentation of Landlord’s statement of same. Upon request by Landlord, Tenant
shall provide Landlord with copies of all reports, studies, complaints, claims,
directives, citations, demands, inquiries, notices of violation, or orders
relating to Hazardous Material at or emanating from or to the Premises, at any
time, or any alleged non-compliance with Environmental Laws at the Premises,
reasonably promptly (and in no event later than thirty (30) days) after such
documents are provided to or generated by Tenant. To the extent Tenant is
required under applicable Environmental Laws or by governmental authorities
having jurisdiction to report a release of Hazardous Material at, on, under or
from the Premises, Tenant also shall promptly notify Landlord of any release of
Hazardous Material at, on, under or from the Premises and promptly shall abate
and remove any such releases as required by applicable Environmental Laws and
government authorities having jurisdiction. Tenant shall not be in violation of
this paragraph in connection with the use, storage, transportation, dispensing
or sale of petroleum products or natural gas so long as such use, storage,
transportation, dispensing or sale complies with applicable Environmental Laws
and governmental authorities having jurisdiction, and the normal dispensing of
petroleum products and/or kerosene and/or bottled propane gas in connection with
Tenant’s customary and lawful operation of the convenience store at the Premises
shall not constitute a release.

(c) Except as otherwise provided in this Section 5, as between Landlord and
Tenant, all reporting, investigation and/or remediation requirements under any
applicable Environmental Laws with respect to any and all releases of Hazardous
Material at, on, from or near the Premises are the responsibility of Tenant, and
Tenant shall be solely responsible for all costs incurred in connection with any
investigation, monitoring or any cleanup, remediation, removal, or restoration
work required of Landlord or Tenant by applicable law and any federal, state, or
local governmental agency or political subdivision having jurisdiction over the
Premises because of Hazardous Material present in the soil or ground water on,
under or emanating from the Premises, including, without limitation, that
(i) caused or permitted by Tenant, (ii) known to Tenant prior to the Effective
Date, (iii) present on the Premises as of the Effective Date and for which
Landlord or Tenant becomes liable due to a change in law which makes Landlord or
Tenant liable for Hazardous Material present on the Premises as of the Effective
Date and for which Landlord and Tenant are not responsible under current law as
of the Effective Date, (iv) as a result of any leaking, overfilling, discharge,
dumping, or spilling (whether accidental or otherwise) on the Premises by Tenant
or any subtenant of the Premises from Tenant or their agents, employees, or
contractors, customers, or other invitees; provided that Tenant shall not be
responsible for (A) Hazardous Material migrating onto the Premises from off the
Premises through no acts, omissions or fault of Tenant (“Off-Premise Third Party
Contamination”), (B) the exacerbation of any existing Hazardous Material
contamination on the Premises by Landlord, its agents, employees, contractors or
lenders, or (C) Hazardous Material brought onto the Premises by Landlord, its
agents, employees, contractors, or lenders in violation of Environmental Laws
(together, the “Exclusions”). Accordingly, Landlord and Tenant agree that the
cost of complying with Environmental Laws relating to Hazardous Material on the
Premises for which Landlord is legally liable (except for the Exclusions) and to
the extent Tenant is responsible as provided above shall be the sole
responsibility of Tenant and shall be paid by Tenant or by the applicable

 

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trust fund or insurance company (excluding insurance coverage maintained by
Landlord), from which Tenant shall have sole responsibility to seek
reimbursement or payment. To the extent the Premises is currently contaminated,
Tenant agrees to perform or cause to be performed any and all necessary
remediation on the Premises to the extent required by applicable Environmental
Laws and governmental authorities having jurisdiction. Landlord shall have no
right, claim or interest in or to any such expenses relating to Hazardous
Material that are subsequently recovered or reimbursed through insurance (other
than insurance maintained by Landlord), or recovery from responsible third
parties, or other action. Upon execution of a mutually acceptable access
agreement, Tenant agrees to cooperate in permitting reasonable access to the
Premises by any party who is responsible for assessment or remediation of
contamination on the Premises.

(d) Not sooner than the later of (i) sixty (60) days prior to the expiration of
the Term of this Lease (including the Renewal Terms, if exercised) or (ii) ten
(10) days after receipt by Landlord of written notice from Tenant to Landlord
reminding Landlord of Landlord’s election requirement as herein set forth,
Landlord shall provide written notice to Tenant of Landlord’s election to
(i) require Tenant to remove all Petroleum Equipment located on the Premises and
return and restore the Premises to its condition prior to the installation of
the Petroleum Equipment to the extent practicable, ordinary wear and tear
excepted or (ii) purchase the Petroleum Equipment located on the Premises from
Tenant at a price equal to the value of such Petroleum Equipment as carried on
Tenant’s books, unless Landlord’s assessment shows the Petroleum Equipment or
portions thereof to be failing or to have failed (and not to have been properly
corrected and repaired), in which case the Petroleum Equipment shall be removed
by Tenant as set forth below at Tenant’s expense and no purchase price shall be
owed. If Landlord fails timely to provide such notice (or Landlord does not
provide such notice by the expiration of the Term of this Lease notwithstanding
Tenant’s failure to notify Landlord of Landlord’s election requirement), then
Landlord shall be deemed to have elected to purchase all of the Petroleum
Equipment. If Tenant is required to remove the Petroleum Equipment, then Tenant
shall have sixty (60) days to do so even if such sixty (60) day period continues
beyond the expiration of the Term of this Lease. If Landlord chooses to purchase
the Petroleum Equipment, Landlord shall conduct, in its sole discretion and at
its expense, such assessments and testing of the Petroleum Equipment in order to
establish the operating condition of the Petroleum Equipment and whether a
release of Hazardous Material has occurred for which Tenant would be
responsible. Landlord’s purchase option may be assigned at Landlord’s discretion
if Tenant has no continuing liability with respect to the Petroleum Equipment;
if Tenant does have continuing liability with respect to the Petroleum
Equipment, the assignee must be reasonably acceptable to Tenant. In either
event, prior to the expiration of this Lease, Tenant shall, to the extent
required by applicable Environmental Laws or governmental authorities having
jurisdiction, remove or remediate (or continue remediation of) all Hazardous
Material present at, on, under or emanating from the Premises for which
remediation is ongoing or which is associated with Tenant’s operations of the
Premises and provide Landlord with written evidence and assurances that the
Premises, and ongoing remediation, and the Petroleum Equipment if left on the
Premises comply with applicable Environmental Laws. If Landlord demands that any
Petroleum Equipment be removed by Tenant, and Tenant fails to do so, Landlord
shall be entitled to remove such Petroleum Equipment, assess whether there is
any Hazardous Material contamination related to such Petroleum Equipment,
remediate any such contamination to the extent required by applicable
Environmental Laws and governmental authorities having

 

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jurisdiction, and obtain closure from the appropriate regulatory agency, all at
Tenant’s expense. In no event shall Tenant be required to remediate or pay for a
remediation of the Premises to an extent or condition beyond that required by
applicable Environmental Laws and governmental authorities having jurisdiction.

(e) Except as limited by the next sentence, the provisions of this Section shall
survive termination of the tenancy. Notwithstanding the foregoing, and except as
to subsections 5(g) and 5(h), the provisions of this Section shall terminate
upon the expiration of the Term of this Lease provided that Tenant vacates the
Premises and provides Landlord, at Tenant’s sole cost and expense, a current
environmental report in accordance with current ASTM guidelines (“Environmental
Report”), which includes soil and groundwater testing, prepared by an
environmental consultant reasonably approved by Landlord, which states either
(i) Hazardous Material (A) is not present on or has not emanated from the
Premises and for which the remediation or monitoring is required under
applicable Environmental Laws or governmental authorities having jurisdiction;
or (B) if there is Hazardous Material on the Premises requiring such remediation
or monitoring, there is in place such remediation or monitoring plans and/or
equipment as may be required under applicable Environmental Laws or by
governmental authorities having jurisdiction, the cost of which is fully funded
by other than Landlord and which shall be pursued to completion; and (ii) there
are no pending or anticipated assessment, remediation, reporting, notification,
compliance or permitting obligations applicable to the Premises under applicable
Environmental Laws or otherwise required by governmental authorities having
jurisdiction and, with respect to any scheduled exceptions in the Environmental
Report, the continuing actions required of Tenant to resolve any non-compliance
with applicable Environmental Laws.

(f) Tenant shall comply with all applicable laws, regulations and local codes in
maintaining the Premises, including, without limitation, obtaining any permits
for any abatement of asbestos-containing materials and proper disposal thereof.

(g) In the event this Lease expires and is not renewed, or this Lease is
terminated and any further investigation, remediation or monitoring is required
that is the responsibility of Tenant hereunder, Landlord and its lessees,
successors and assigns: (i) shall permit, without charge, cost, fee or
assessment, Tenant and its agents and representatives reasonable access to the
Premises for completing such investigation, remediation, and monitoring and
(ii) shall not materially damage, disturb or remove or otherwise unreasonably
impede or interfere with such investigation, remediation or monitoring or the
associated equipment, installations or facilities. Tenant shall not be liable or
responsible for any disruption of business or other liabilities, costs or
expenses incurred by Landlord or its lessees, successors or assigns that may be
caused by Tenant’s investigation, remediation or monitoring activities provided
that Tenant has acted reasonably in conducting such activities. Landlord shall
obtain from all lessees, successors and assigns of the Premises written
agreement to the provisions in this paragraph.

(h) Tenant shall indemnify, defend, and hold Landlord harmless from any and all
claims, judgments, damages, penalties, fines, costs, liabilities, liens or
losses (including, without limitation, diminution in value of the Premises as a
convenience food store selling gasoline and other petroleum products or other
then current use, damages for the loss or

 

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restriction on use of rentable or usable space or of any amenity of the
Premises, damages arising from any adverse impact on marketing of space of the
Premises, and sums paid in settlement of claims, and reasonable attorneys’ fees,
consultation fees, and expert fees) (i) in connection with the environmental
condition of the Premises prior to the Effective Date (notwithstanding anything
contained in this Lease to the contrary); and/or (ii) which arise during or
after the Term of this Lease as a result of Tenant’s noncompliance with
Environmental Laws or any Hazardous Material not addressed by the Environmental
Report, but solely with respect to Tenant’s operation of Tenant’s business in
and about the Premises, Tenant having no obligation to indemnify Landlord from
any of the preceding matters if caused by Landlord, its agents, employees,
contractors, lenders, or any business invitee of Landlord, nor shall Tenant be
liable to indemnify Landlord from any claim, judgment, damage, penalty, fine,
costs, liability, or loss attributable to such person’s negligence or
intentional misconduct. This indemnification of Landlord by Tenant includes,
without limitation, costs incurred in connection with any investigation or site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state, or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground water on or under or
emanating from the Premises and all costs, fines, settlements and charges
resulting from any violation of law, including Environmental Laws, by Tenant
related to Tenant’s operation of Tenant’s business or the activities of any
customer or invitee of Tenant. Without limiting the foregoing, if the presence
of any Hazardous Material on the Premises results in any contamination of the
Premises, Tenant shall promptly take all actions at its sole expense as are
reasonably necessary to return the Premises to the condition existing prior to
the introduction of any such Hazardous Material to the Premises, but Tenant
shall have no obligation to reduce the level of Hazardous Material on the
Premises below the threshold for remediation required under applicable
Environmental Laws or by government authorities having jurisdiction; provided
that Landlord’s approval of such actions shall first be obtained, which approval
shall not be unreasonably withheld or delayed and so long as such actions would
not potentially have any material adverse long-term or short-term effect on the
Premises. This indemnification shall survive the expiration or earlier
termination of this Lease.

(i) The term “Hazardous Material” means any substance, material, or waste which
is toxic, ignitable, reactive, or corrosive and which is or becomes regulated by
local or state governmental authority or by the United States Government. The
term “Hazardous Material” includes without limitation, any material or substance
which is (i) defined as a “hazardous waste,” “extremely hazardous waste,”
“restricted hazardous waste,” “hazardous substance,” or “hazardous material” by
any local or state law, (ii) oil and petroleum products and their by-products,
(iii) asbestos-containing materials, (iv) designated as a “hazardous substance”
pursuant to the Federal Water Pollution Control Act, (v) defined as a “hazardous
waste” pursuant to the Federal Resource Conservation and Recovery Act, or
(vi) defined as a “hazardous substance” pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act. Hazardous Material does
not include cleaning agents used in connection with operation of Tenant’s
business on the Premises provided such agents are contained and used in
accordance with applicable Environmental Laws and manufacturer’s requirements.

(j) The term “Environmental Laws” shall mean any law, statute, regulation,
order, or rule now or hereafter promulgated by any governmental entity, whether
local, state, or federal, relating to air pollution, water pollution, and/or
transporting, storing, handling,

 

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discharge of or disposal of Hazardous Material, including, without limitation,
the following: the Clean Air Act: the Resource Conservation and Recovery Act, as
amended by the Hazardous Waste and Solid Waste Amendments of 1984; the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of 1986; the Toxic
Substances Control Act; the Federal Insecticide and Rodenticide Act, as amended;
the Safe Drinking Water Act; the Occupational Safety and Health Act; the
Hazardous Materials Transportation Act; and the National Environmental Policy
Act, as the same may be amended from time to time.

6. TRADE FIXTURES AND EQUIPMENT. All Petroleum Equipment, furniture, trade
fixtures, all signage and supporting structures, and equipment of Tenant
(including gasoline canopy and structure, equipment located within structures
housing a car wash, built-in refrigeration equipment, and walk-in coolers, which
refrigeration equipment and coolers are deemed to be personal property
notwithstanding their attachment to the Premises), and every other item of
personal property not permanently attached to the Premises (collectively,
“Tenant’s Personal Property”) are to remain and be the property of Tenant and
Tenant is to have the right and privilege of removing any and all such property
and equipment at any time during the continuance of this Lease or any extension
hereof. Except with respect to Petroleum Equipment, in the event any of Tenant’s
Personal Property is not removed by Tenant prior to the expiration or earlier
termination of this Lease, title thereto shall automatically pass to and vest in
Landlord, and Tenant shall thereafter be relieved of any and all responsibility
in connection with said equipment. If Tenant’s Personal Property is removed,
Tenant promptly shall restore the Premises to their condition immediately prior
to the removal of such property to the extent commercially practicable. If
Tenant’s Petroleum Equipment is removed, Tenant promptly shall restore the
Premises in accordance with Section 5 of this Lease. It is further understood
and agreed that the buildings and structures erected on the Premises, including
heat and air conditioning equipment, may not be removed by Tenant at the
expiration or termination of this Lease.

7. TENANT’S RIGHT TO ALTER AND IMPROVE. Except as provided in Sections 5 and 6
hereof, Tenant shall not make any additions, alterations, or improvements in or
to the Premises without Landlord’s prior written consent, which consent shall
not be unreasonably withheld, conditioned, or delayed. This prohibition shall
not apply to interior or exterior remodeling or alteration which does not affect
the structural integrity of buildings or which would not impair the use of the
Premises as a convenience food store, and shall not apply to Tenant’s repainting
of the interior or exterior of the buildings or structures on the Premises nor
to changes in Tenant’s signage or “trade dress.” Except as otherwise provided
herein, all additions, alterations, and improvements made in or to the Premises
by either Landlord or Tenant shall become the property of Landlord and be
surrendered with the Premises at the termination of this Lease. All alterations,
additions, or improvements (including, without limitation, interior or exterior
remodeling and repainting and changes in Tenant’s signage or “trade dress” as
set forth above), shall be accomplished by Tenant in a good and workmanlike
manner, shall be authorized by any governmental authority having jurisdiction
over the Premises to the extent required by applicable law, and shall be in
conformity with applicable laws and regulations. Upon completion of any such
work, Tenant shall provide to Landlord “as-built” plans. Tenant shall pay when
due (subject to matters contested by Tenant in good faith) all claims for such
labor and materials and shall give Landlord at least ten (10) days prior written
notice of the commencement of any such work to the extent any such work is
anticipated to cost in excess of

 

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Fifteen Thousand Dollars ($15,000.00) in the aggregate for the project. Landlord
may enter upon the Premises, in such case, for the purpose of posting
appropriate notices, including, but not limited to, notices of
non-responsibility. Notwithstanding anything contained herein, in the event that
the Premises is used for any use other than a convenience food store or gas
station, Tenant shall obtain Landlord’s prior written consent and approval for
any structural additions, alterations, or improvements in or to the Premises,
which may be withheld by Landlord in its sole and absolute discretion.

8. USE OF PREMISES; LAWFUL PURPOSES. Tenant covenants that the Premises shall be
used for a convenience food store and for the sale of gasoline and other
petroleum products or such other business as Tenant may desire (“Use”) so long
as the Use is lawful and does not violate any applicable federal, state, county,
or municipal ordinances and laws that are in force and does not violate any
restrictions applicable to Landlord with respect to the Premises or other
property owned or leased by Landlord in the vicinity of the Premises so long as
any such restrictions are disclosed by Landlord to Tenant in writing and do not
prohibit, restrict or impair Tenant’s use of the Premises for a convenience food
store or gas station. In the event that the Premises is used for any use other
than a convenience food store or gas station, Tenant shall obtain Landlord’s
prior written consent and approval for any structural alterations as set forth
in Section 7 hereof. Tenant has satisfied itself, and represents to Landlord,
that such Use is lawful and conforms to all applicable zoning and other use
restrictions and regulations applicable to the Premises. In the event of the
occurrence of a violation of law, Tenant shall not be in default under this
Lease if applicable law does not require Tenant to take any action to correct
the alleged violation. In the event of the occurrence of a violation of law, if
applicable law requires Tenant to take certain action, Tenant shall not be in
default under this Lease so long as Tenant proceeds to take all action required
by applicable law and by any federal, state, county, or municipal authority
having jurisdiction, provided Tenant pursues such required action in a timely
manner and in conformity with the regulations of the governmental authority
having jurisdiction.

Tenant, at Tenant’s sole expense, promptly shall comply with all applicable
statutes, ordinances, rules, regulations, orders, covenants and restrictions of
record, and requirements in effect during the Term, regulating the use by Tenant
of the Premises, including, without limitation, the obligation at Tenant’s cost,
to alter, maintain, or restore the Premises in compliance and conformity with
all laws relating to the condition, use or occupancy of the Premises during the
Term (including, without limitation, any and all requirements as set forth in
The Americans with Disabilities Act) (collectively, “Legal Requirements”) and
regardless of (i) whether such laws require structural or non-structural
improvements, (ii) whether the improvements were foreseen or unforeseen, and
(iii) the period of time remaining in the Term. During the Term, Tenant, at its
expense, shall comply with all restrictive covenants or other title exceptions
affecting the Premises and perform all of the obligations set forth therein,
including any payment obligations, regardless of whether such payment
obligations occur during, or prior to, the Term.

Tenant shall have the right, after prior written notice to Landlord, to contest
by appropriate legal proceedings, diligently conducted in good faith, in the
name of Tenant or Landlord or both, the validity or application of any Legal
Requirement subject to the following: (i) if by the terms of any such Legal
Requirement, compliance therewith pending the prosecution

 

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of any such proceeding may legally be delayed without the incurrence of any
lien, charge or liability of any kind against the Premises or any part thereof
and without subjecting Tenant or Landlord to any liability, civil or criminal,
for failure so to comply therewith, Tenant may delay compliance therewith until
the final determination of any such proceeding; (ii) if any lien, charge or
civil liability would be incurred by reason of any such delay, Tenant
nevertheless may contest as aforesaid and delay as aforesaid, provided that such
delay would not subject Landlord to criminal liability and Tenant (A) furnishes
to Landlord security reasonably satisfactory to Landlord as to form and amount
against any loss or injury by reason of such contest or delay and (B) prosecutes
the contest with due diligence; and (iii) in any case where the consent of any
Landlord’s mortgagee is required for any of the contests mentioned above, Tenant
shall secure such consent prior to commencing such contest. Landlord, on written
request from Tenant, shall execute and deliver any appropriate papers which may
be necessary or proper to permit Tenant so to contest the validity or
application of any such Legal Requirement. Tenant covenants that Landlord shall
not suffer or sustain any costs, expenses or liabilities by reason of any act or
thing done or omitted to be done pursuant to this paragraph. The provisions set
forth in this paragraph shall not apply to Environmental Laws, which are
governed by Section 5.

Notwithstanding anything contained herein to the contrary, Tenant may cease
business operations at the Premises (“go dark”) provided Tenant continues to pay
Rent and all other monetary obligations in this Lease, to perform the other
terms and conditions of this Lease expressly including insuring the Premises,
and takes all reasonable steps to protect the Premises against vandalism.

9. NUISANCE. Tenant agrees not to create or, subject to conditions caused by
others, allow any nuisance to exist on the Premises, and to abate any nuisance
that may arise, promptly and free of expense to Landlord. This Section 9 shall
not apply to releases of petroleum products, which are governed by Section 5.

10. TAXES.

(a) Tenant’s Required Payments. Tenant shall pay before delinquency and as
additional rent, all taxes, assessments (which shall include all taxes due for
2007), license fees, costs incurred pursuant to covenants and restrictions
affecting the Premises, and other charges, (collectively referred to as
“Taxes”) levied or assessed against all merchandise, personal property, real
property, buildings and improvements, and any other obligations which are or may
become a lien or levied against the Premises. Tenant shall provide Landlord with
evidence of payment of Taxes promptly upon request. If, at any time during the
Term, the state in which the Premises are located or any political subdivision
of the state, including any county, city, county and city, public corporation,
district, or any other political entity or public corporation of that state,
levies or assesses against Landlord a tax, fee or excise on (i) rents,
including, if applicable, property taxes, insurance, maintenance, and other
costs incurred by Tenant by which Landlord may benefit; (ii) on the square
footage of the Premises; (iii) on the act of entering into this Lease; or
(iv) on the occupancy of Tenant, or levies or assesses against Landlord any
other tax, fee, or excise, however described, including, without limitation, a
so-called value added tax, as a direct substitution in whole or in part for, or
in addition to, any real property taxes, Tenant shall reimburse to Landlord or
directly pay before delinquency that tax, fee, or excise. It is the intention of
Tenant and Landlord that all new and increased assessments, taxes, fees, levies,
and

 

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charges, and all similar assessments, taxes, fees, levies, and charges be
included within the definition of Taxes for the purpose of this Lease. If, at
any time during the Term, the laws concerning the methods of real property
taxation prevailing at the commencement of the Term are changed so that a tax or
excise on rents or any other tax, however described, is levied or assessed
against Landlord as a substitution in whole or in part for any real property
taxes, then Taxes shall include, but not be limited to, any such assessment,
tax, fee, levy, or charge allocable to or measured by the area of the Premises
or the rent payable hereunder, including, without limitation, any gross income
tax with respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operating, management, maintenance, alteration, repair,
use, or occupancy by Tenant of the Premises, or any portion thereof.

(b) Payments Not Required by Tenant. Tenant shall not be required to pay any
municipal, county, state, or federal income or franchise taxes of Landlord, or
any inheritance or transfer taxes of Landlord or annual reporting or other fees
in connection with maintaining Landlord’s organizational existence under the
laws of the State of its formation or creation.

(c) Assessments. If any assessment for a capital improvement made by any public
or governmental authority shall be levied or assessed against the Premises, and
the assessment is payable either in a lump sum or on an installment basis, then
Tenant shall have the right to elect the basis of payment. If Tenant shall elect
to pay the assessment on the installment basis, then Tenant shall pay only those
installments which shall become due and payable during the Term.

(d) Utility Payments. Tenant shall promptly pay when due all charges for water,
gas, electricity, and all other utilities furnished to or used upon the
Premises, including all charges for installation, termination, and relocations
of such services.

(e) Tenant’s Right to Contest Utility Charges, Contest Taxes and Seek Reduction
in Assessed Valuation of the Premises. Tenant, at its cost, shall have the
right, at any time, to seek a reduction in the assessed valuation of the
Premises or to contest any Taxes or utility charges that are to be paid by
Tenant. If Tenant seeks a reduction or contests any Taxes or utility charges,
the failure on Tenant’s part to pay the Taxes or utility charges shall not
constitute a default as long as Tenant complies with the provisions of this
Section 10. Tenant may use any means allowed by statute to protest property tax
assessments or utility charges as defined in this Section 10 as long as Tenant
remains current as to all other terms and conditions of this Lease. If, during
the protest period, any lease defaults occur and the protested Taxes or
assessments have not been paid, then Tenant shall furnish to Landlord a surety
bond issued by an insurance company qualified to do business in the state where
the Premises are located. The amount of the bond shall equal one hundred ten
percent (110%) of the total amount of Taxes in dispute. The bond shall hold
Landlord and the Premises harmless from any damage arising out of the proceeding
or contest and shall insure the payment of any judgment that may be rendered.

(f) Landlord Not Required to Join in Proceedings or Contest Brought by Tenant.
Landlord shall not be required to join in any proceeding or contest brought by
Tenant unless applicable law requires that the proceeding or contest be brought
by or in the name of Landlord or the owner of the Premises. In that case,
Landlord shall join in the proceeding or contest or permit it to be brought in
Landlord’s name as long as Landlord is not required to bear

 

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any cost. Tenant, on final determination of the proceeding or contest, shall
immediately pay or discharge any decision or judgment rendered, together with
all costs, charges, interest, and penalties incidental to the decision or
judgment.

11. INSURANCE.

(a) Tenant shall keep the buildings located upon the Premises insured against
loss or damage by fire or other casualty and extended coverage, vandalism,
malicious mischief and special extended perils in an amount equal to the
replacement cost of the Improvements on the Premises and all contents located on
or within the Premises. The insurance required to be maintained by this
Section 11(a) shall provide that payments for losses be made jointly to Landlord
or Landlord’s mortgagee and Tenant; provided, however, neither Landlord,
Landlord’s lender, nor any other person other than Tenant shall be entitled to
any insurance proceeds applicable to the Petroleum Equipment, Tenant’s Personal
Property, inventory, or business interruption, except in the event that Landlord
exercises or will exercise its option to purchase the Petroleum Equipment
pursuant to Section 5(d), whereupon Tenant shall assign or pay over to Landlord
any insurance proceeds and the amount of any deductibles, applicable to the
Petroleum Equipment. If the Premises are located in a one hundred year flood
zone or in an area recognized as having a risk of damage by earthquake, Tenant
shall, at Tenant’s expense, obtain and keep in force during the Term a policy or
policies of insurance covering loss or damage due to perils caused by earthquake
and/or flood. Such insurance policies may contain commercially reasonable
exclusions, retention and deductible amounts.

Landlord acknowledges and agrees that as of the Effective Date, Tenant’s current
program of insurance affords coverage for perils of flood for real property
located in FEMA Flood Zones A and V with deductibles of five percent (5%) of the
insured value subject to a cap of $1,000,000.00 and two percent (2%) of the
insured value subject to a cap of $500,000.00, respectively. Should Tenant’s
insurance program in the future not afford coverage for perils of flood for real
property located in the FEMA Flood Zone A or V, then, with respect to such risk,
Tenant has the right to maintain a self-insurance program with respect to risks
associated with FEMA Flood Zones A and V so long as (i) the tenant under this
Lease is The Pantry, Inc., a Delaware corporation (“The Pantry”), or any
successor (“Successor”) to The Pantry has a creditworthiness equal to or greater
than the creditworthiness of The Pantry on the date hereof, all as reasonably
determined by Landlord; and (ii) there is no material adverse change in The
Pantry’s or Successor’s financial condition. In the event (a) The Pantry or
Successor is no longer the tenant under this Lease; (b) there is a material
adverse change in The Pantry’s or Successor’s financial condition; or (c) flood
insurance becomes available at commercially reasonable rates for the Premises,
Tenant shall be required to procure and thereafter maintain a policy of flood
insurance as otherwise required hereunder promptly following receipt of written
notice from Landlord.

(b) Tenant shall obtain and maintain business interruption insurance for one
year and worker’s compensation in statutorily required amounts.

(c) During the Term, or any extension thereof, Tenant shall maintain in force a
policy of insurance insuring Landlord and Tenant against liability for accidents
on the Premises with limits of coverage not less than $5,000,000.00 combined
single limit for property damage

 

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loss and bodily injury to any person arising from any one occurrence. This limit
may be provided in either a primary policy of insurance or a combination of
primary and umbrella excess coverage.

(d) The policies of insurance that Tenant is required to obtain and maintain
hereunder shall name Landlord as an additional insured and loss payee to the
extent of Landlord’s interest in this Lease and the Premises. A certificate of
liability insurance and evidence of property insurance shall be delivered to
Landlord evidencing Tenant’s compliance with this Section 11. Such policy shall
be in such form and with such insurance company as shall be reasonably
satisfactory to Landlord with provisions for at least thirty (30) days notice to
Landlord of cancellation. Tenant shall not cancel such policy without thirty
(30) days’ prior notice to Landlord. Prior to the expiration or cancellation of
any such policy, Tenant shall supply Landlord with a substitute therefor or with
evidence of payment of premiums therefor. Within thirty (30) days of any
cancellation of any such policy by the carrier, Tenant shall replace such
cancelled policy with another of commercially available equivalent coverage and
terms at Tenant’s sole expense.

(e) If Tenant shall at any time fail to maintain any insurance required
hereunder, Landlord may effect or maintain such insurance and any money expended
for that purpose shall be repayable by Tenant on demand.

(f) Without limiting the generality of Section 39 below, Tenant further agrees
to indemnify and hold Landlord harmless from all claims for personal injuries,
death, and property damage which occur as a result of the operation of the
business in and about the Premises, or which result from any work done in and
about the Premises by Tenant or any contractors selected by or for Tenant, but
excluding claims arising from the gross negligence or willful misconduct of
Landlord or Landlord’s contractors or agents or those with whom Landlord has a
written contractual relationship after the Effective Date, it being understood
that Tenant, and not Landlord, shall be responsible for any and all claims
arising or accruing prior to the Effective Date. This subsection (c) does not
apply to matters involving Hazardous Materials and/or Environmental Laws, which
are the subject of Section 5 hereof.

(g) During such time as no uncured event of default by Tenant is outstanding
hereunder, Tenant may elect to self-insure all or any portion of the required
coverage referred to in Subsection (c) above pursuant to a commercially
reasonable self-insurance program. Tenant shall not be deemed a self-insurer
merely by maintaining commercially reasonable deductibles. In the event that
Tenant becomes a self-insurer with respect to the insurance coverage required
under Subsection (c) above, Tenant shall be required to secure Landlord’s
approval of such self-insurance. Such approval, which shall not be unreasonably
withheld, conditioned, or delayed, shall be based upon Tenant’s creation of a
reasonable reserve or replacement fund which is reflected on Tenant’s audited
financial statements. Except with respect to flood insurance as set forth in
Subsection (a) above, Tenant may not self-insure the required coverages referred
to in Subsections (a) or (b) above without first obtaining the written consent
of Landlord, which consent may be withheld in Landlord’s reasonable business
discretion. In the event Tenant becomes a self-insurer, Tenant agrees to be
responsible for the full replacement, restoration or remediation costs of the
Premises not covered by applicable insurance.

 

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(h) Tenant shall ensure that all Contractors (as defined below) performing work
on or about the Premises have in place a commercially reasonable policy of
general liability insurance, and that Landlord is named as an additional insured
under such policy. In the event Landlord is to be named as an additional insured
under such a policy pursuant to the provisions hereof, Tenant shall cause a
certificate of liability insurance to promptly be delivered to Landlord in
connection with any such policies. As used herein, the term “Contractors” shall
mean contractors or third parties who are performing work on or about the
Premises either (i) in connection with work that was approved by Landlord
pursuant to Section 7, or (ii) in connection with the Petroleum Equipment.

12. REPLACEMENT OF IMPROVEMENTS; APPLICATION OF INSURANCE PROCEEDS THERETO.

(a) Destruction or Damage to the Premises. In the event any part or all of the
Premises shall at any time during the Term be damaged or destroyed, regardless
of cause, Tenant shall give prompt notice to Landlord. Subject to Tenant’s
receipt of proceeds available from insurance policies maintained by Tenant under
this Lease, Tenant shall repair and restore the Premises to substantially their
original condition, including the Petroleum Equipment and buildings and all
other Improvements on the Premises, as soon as circumstances permit. Tenant
shall hold Landlord free and harmless from any and all liability of any nature
whatsoever resulting from such damage or destruction, and such repairs and
restoration. Tenant, and not Landlord, shall be responsible for paying for any
cost of repairs and restoration in excess of the proceeds available from
insurance policies procured by Tenant. Tenant is not entitled to any rent
abatement during or resulting from any disturbance relating to a partial or
total destruction of the Premises.

(b) Destruction or Damage of the Premises During the Last Thirty-Six (36) Months
of the Term. Notwithstanding anything to the contrary herein contained, provided
no Event of Default has occurred, in the event the Premises shall be damaged or
destroyed in excess of thirty percent (30%) of the full replacement cost of the
Premises during the last thirty-six (36) months of the Term, Landlord or Tenant
may elect to terminate this Lease by providing the other party written notice of
its election in writing within forty-five (45) days of receipt by Landlord of
notice of such casualty by Tenant. This Lease shall terminate upon the other
party’s receipt of said notice; provided, however, that within fifteen (15) days
after receipt by Tenant of Landlord’s election to terminate this Lease, Tenant
may elect to confirm to Landlord that Tenant will not exercise its right not to
extend the Term as provided in Section 3 by providing written notice to Landlord
within said fifteen (15) day period of such election not to exercise its right
not to extend. If Tenant makes this election, this Lease shall remain in full
force and effect during the remainder of the Term and the next succeeding
Renewal Term and Tenant shall restore the Premises as provided in Section 12. In
the event of termination hereunder, Landlord shall have all rights and claims to
any insurance proceeds (i) as to the Premises, and (ii) as to the Petroleum
Equipment, if Landlord exercises or will exercise its option to purchase the
Petroleum Equipment pursuant to Section 5(d). Tenant covenants and agrees to
timely file an appropriate claim with its insurance carrier (in the event of an
insured casualty) in connection with such damage or destruction, and if Tenant
or Landlord should elect to terminate this Lease, thereafter promptly assign or
pay over to Landlord the entirety of insurance proceeds payable in connection
with the loss, the amount of any deductibles, plus a sum equal to the entirety
of the self-insured retention [i.e., total cost to repair and restore the
Premises (including, without limitation, all hard costs, soft costs and related
costs, but excluding Tenant’s Personal Property)].

 

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13. INTENTIONALLY OMITTED.

14. REPAIR AND MAINTENANCE.

(a) Obligation to Maintain the Premises. During the Term, Tenant shall, at its
own expense, keep and maintain the entire Premises in good order and repair,
including, but not limited to, the interior, exterior, foundations, floors,
walls, roof, and structure of the building; and the sidewalks, curbs, walls,
trash enclosures, landscaping with sprinkler system (if installed), light
standards, and parking areas which are a part of the Premises. Tenant shall make
such repairs and replacements as may be necessary, regardless of whether the
benefit of such repair or replacement extends beyond the Term. The Premises
shall be returned to Landlord at the termination or expiration of this Lease in
good condition, except for ordinary wear and tear and insured casualty, provided
Tenant has assigned or paid over to Landlord the entirety of the insurance
proceeds payable and the amount of any deductibles in connection with such
insured casualty plus a sum equal to the entirety of the self-insured retention
as set forth in Section 12(b). For as long as Tenant is not in default of any of
the terms and conditions of this Lease, Landlord hereby assigns to Tenant all
building contractor, subcontractor, and manufacturer’s warranties and guarantees
applicable to the Premises; and Landlord shall cooperate with Tenant at Tenant’s
request in any action to enforce such warranties and guarantees. In the event of
destruction of the Premises by fire or casualty, the condition of the Premises
upon termination of this Lease shall be governed by Section 12.

(b) Obligation to Keep the Premises Clear. Tenant shall keep the Premises,
including sidewalks adjacent to the Premises and loading area allocated for use
of Tenant, clean and reasonably free from rubbish and debris at all times.
Tenant shall store all trash and garbage within the Premises and arrange for
regular pickup and cartage of such trash and garbage at Tenant’s expense. All
waste to be disposed of shall be properly characterized and, if such waste is
determined to be special or hazardous waste under Environmental Laws, Tenant
shall be the generator and arranger for the transportation and disposal of any
such waste and shall comply with all applicable legal and regulatory
requirements for the management of such wastes.

(c) Capital Expenditure in Last Two Years. Notwithstanding the foregoing, in the
event Tenant makes a capital expenditure pursuant to its repair and maintenance
obligations under this Section 14 within the last two (2) years of the Term or
any renewal thereof (providing no uncured Event of Default exists under this
Lease), Tenant shall receive a credit upon the expiration of this Lease, which
credit shall be calculated by: (i) dividing the remaining useful life of the
capital improvement upon Lease expiration by the total useful life of the
capital improvement and then (ii) multiplying the result obtained in (i) above
by the reasonable cost of the capital expenditure. “Capital expenditure” as used
herein shall mean those expenditures incurred in connection with the roof,
parking lot or HVAC equipment located on the Premises, the reasonable and actual
cost of which exceeds Ten Thousand Dollars ($10,000.00). Any credit due Tenant
pursuant to the terms hereof shall be paid by Landlord to Tenant within thirty
(30) days of the expiration of this Lease. In no event shall the provisions of
this Section 14(c) be applicable if the capital expenditure was necessitated as
a result of Tenant’s failure to maintain the item or items at issue in good
order and repair throughout the Term as required pursuant to the terms of
Section 14.

 

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15. LANDLORD’S USE OF PREMISES. In the event Landlord owns real estate adjacent
to the Premises that is not necessary for the operation of a convenience food
store by Tenant, Landlord reserves the right further to develop such property
and lease the same to other parties; provided, however, that Landlord must first
obtain approval of such development and lease from Tenant, which approval will
not be unreasonably withheld, conditioned, or delayed.

16. NO COMPETITION. So long as this Lease is in effect and Tenant is not in
default beyond any applicable grace or cure period, Landlord agrees that neither
it nor any “related party” will in the future construct and lease, as landlord,
another commercial parcel within a one (1) mile radius of the Premises for use
primarily as a convenience store and/or for retail gasoline sales. However,
nothing in this Section shall prohibit or limit Landlord’s ability to acquire or
lease competing convenience stores and/or retail gasoline stores within a one
(1) mile radius of the Premises during the Term of this Lease so long as
Landlord as part of such transaction does not initially construct the stores for
such tenants. As used herein, “related party” shall mean (i) any parent or
sister corporation of Landlord and their subsidiaries, and (ii) any and all
subsidiaries of Landlord, but shall not mean any officers, directors, or
shareholders of any of those companies. Further, as used herein, “gasoline
sales” shall mean the sale of any other energy source for motor vehicles as may
then be used in conjunction with or as an alternative to gasoline.

17. QUIET POSSESSION. It is a further condition of this Lease that Landlord has
a good and marketable title to the Premises free and clear of all liens and
encumbrances; that Landlord has the right to lease the same; that the Premises
have unencumbered access to public rights of way over existing curb cuts on the
Premises or over unencumbered private easements; that Landlord warrants and will
defend the Premises unto Tenant against the lawful claims of all persons
whomsoever; that so long as the rents are paid in the manner herein provided and
the covenants, conditions, and agreements are all and singularly kept,
fulfilled, and performed by Tenant, Tenant shall lawfully, peacefully, and
quietly hold, occupy, and enjoy the Premises during the Term herein granted
without any let, hindrance, ejection, or molestation by Landlord or any person
claiming under Landlord.

Notwithstanding the foregoing, Landlord leases to Tenant and Tenant leases from
Landlord the Premises subject to (i) all encumbrances, covenants, conditions,
restrictions, easements, rights of way, and all other matters of record
affecting the Premises; and (ii) all matters known to Tenant as of the Effective
Date, including, without limitation, all those certain matters disclosed by a
survey of the Premises (“Survey”). Tenant acknowledges and agrees that: (a) no
representations or warranties whatsoever have been or are made, or
responsibility assumed by Landlord, with respect to the Premises or their
operation, or the condition or repair of the Premises, or as to any fact,
circumstance, thing or condition which may affect or relate to the Premises,
except as specifically set forth in this Lease; and (b) the Premises are leased
in their “AS IS, WHERE IS, WITH ALL FAULTS” condition as of the Effective Date.

18. RIGHT OF ENTRY. Landlord reserves the right during the Term of this Lease to
enter the Premises at reasonable hours upon prior reasonable notice (except in
the event of

 

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emergency, meaning imminent threat of injury to person or damage to property, in
which event no prior notice shall be necessary) to show the same or inspect the
same, but has no obligation to make an inspection of the Premises.

19. SUBLETTING AND ASSIGNMENT. Tenant may sublet the Premises or assign this
Lease with the prior written consent of Landlord, such consent not to be
unreasonably withheld, conditioned, or delayed.

Consent by Landlord to one assignment, subletting, occupation, or use by another
person or party shall not be deemed to be a consent to any subsequent
assignment, subletting, occupation, or use by another person or party except for
a re-assignment to Tenant, which shall not require Landlord’s consent. Consent
to an assignment and acceptance of rent from an assignee shall not release
Tenant from liability for the continued performance of the terms and conditions
on the part of Tenant to be kept and performed, unless Landlord specifically
releases Tenant from said liability.

Any assignee or sub-tenant, by an instrument in writing in recordable form,
shall assume and agree to keep, observe, and perform all of the agreements,
conditions, covenants, and terms of this Lease on the part of Tenant to be kept,
observed, and performed. This shall include a leasehold mortgagee in the event a
leasehold mortgagee or its Nominee (as hereinafter defined) comes into
possession of the Premises. “Nominee” means an entity designated by a leasehold
mortgagee to become the tenant under this Lease in place of Tenant as a result
of the exercise by a leasehold mortgagee of its rights and remedies under any
leasehold mortgage or under this Lease pursuant to the terms of this Lease.

Notwithstanding anything hereinabove contained to the contrary, provided there
is no uncured Event of Default (as hereinafter defined) under this Lease, Tenant
may, without Landlord’s consent, (a) assign, transfer, or sublet its leasehold
interest to a corporation, partnership, limited liability company, or other
entity more than fifty percent (50%) of the ownership of which is owned by
Tenant, or to a corporation, partnership, limited liability company, or other
entity which owns more than fifty percent (50%) of the ownership interest in
Tenant, (b) assign its interest in this Lease as collateral in connection with
financing of equipment, fixtures, appliances, machinery, or furnishings to be
used in connection with its business on the Premises, (c) assign or mortgage
this Lease or interest therein as collateral in connection with any of Tenant’s
financing or refinancing, or (d) assign its leasehold interest or sublet the
Premises in connection with a sale of all or substantially all of the assets of
Tenant. Moreover, the sale, pledge, or other transfer or conveyance of Tenant’s
capital stock shall not be construed as an assignment by Tenant of its interest
in this Lease. Tenant shall notify Landlord in writing of the occurrence of any
of the foregoing events, and shall provide a true and correct copy of the
sublease or assignment and assumption agreement, together with such other
documentation supporting or evidencing said event as may be reasonably requested
by Landlord.

Landlord may at any time during the Term hereof assign its interest in this
Lease without the consent of Tenant. Landlord shall promptly notify Tenant in
writing of the identity and address of the assignee and Landlord shall cause the
assignee to notify Tenant in writing of the address for payment of rent.

 

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Landlord shall execute and deliver to Tenant, within thirty (30) days after
receipt of Tenant’s request, an estoppel certificate or other statement to be
furnished to any prospective assignee, sublessee, or lender of Tenant. Such
estoppel certificate or statement shall acknowledge and certify each of the
following matters, to the extent each may be true: (a) whether there have been
any amendments, modifications, or supplements of any kind to the Lease; (b) that
this Lease is in full force and effect; (c) that Tenant is not in violation of
or in default under this Lease beyond any applicable grace or cure period and
that Landlord has no claims against Tenant thereunder; (d) the commencement and
expiration dates (including all renewals and extensions) of the Term of this
Lease; (e) the date through which Rent has been paid; (f) that Landlord consents
to such assignment or subletting; and (g) such other matters as Tenant or its
assignee, sublessee, or mortgagee may reasonably request.

20. SURRENDER UPON TERMINATION OF LEASE. Subject to the provisions of Sections 5
and 6 hereof, Tenant shall, on the expiration or the sooner termination of the
Term of this Lease, surrender to Landlord the Premises, including all buildings,
replacements, changes, additions, and Improvements constructed or placed by
Tenant thereon, except for all moveable trade fixtures, equipment, and personal
property belonging to Tenant, broom-clean, free of subtenancies, and in good
condition and repair, reasonable wear and tear and insured casualty excepted.
Any equipment, trade fixtures, or personal property belonging to Tenant or any
sub-tenant, if not removed upon such expiration or termination, shall
automatically become the property of Landlord without any payment or offset
therefor and Tenant shall thereafter be relieved of any and all responsibility
in connection with said equipment. If said equipment is removed, Tenant promptly
shall restore the Premises to their condition immediately prior to the removal
of such property to the extent commercially practicable.

At or prior to expiration or termination of the Term of this Lease, Tenant shall
have the right, but not the obligation, to remove any exterior signage or
architectural design which is a trademark, logo, or identifying feature of “The
Pantry,” “Kangaroo,” “Golden Gallon” or any other trademark, logo, or
identifying feature owned by Tenant or any of its affiliates or subsidiaries. If
said signage or architectural designs are removed, Tenant, at its own expense,
promptly shall repair and restore the Premises to its condition immediately
prior to the removal of such signage or architectural designs to the extent
commercially practicable.

21. DEFAULT.

(a) Event of Default. The occurrence of any of the following events (each an
“Event of Default” after expiration of any applicable cure period) shall
constitute a default by Tenant:

(i) Failure by Tenant to pay rent when due. Notwithstanding the foregoing, or
any other provision in this Lease to the contrary, for not more than two
(2) occasions during any calendar year of the Term, if any rental is not
received when due, Landlord shall notify Tenant, in writing, and Tenant shall
have five (5) days from the date of receipt of Landlord’s notice to cure any
such failure to pay rental. If such rental is not received by Landlord within
the five (5) day period after Tenant’s receipt of Landlord’s notice, then Tenant
shall be in default.

 

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(ii) Failure by Tenant to perform or comply with any provision of this Lease
(other than as set forth above) if failure is not cured within thirty (30) days
after receipt of notice from Landlord to Tenant describing such failure. If,
however, the failure cannot reasonably be cured within such cure period, Tenant
shall not be in default of this Lease if Tenant commences to cure the failure
within such cure period and diligently and in good faith continues to cure the
failure. In addition, if the only mechanism by which a failure could be cured
would be the filing of a claim under Landlord’s policy of title insurance, then
Landlord and Tenant shall work in concert in the filing of such a claim, and
Tenant shall not be in default of this Lease if such a claim is actually filed
and ultimately paid or otherwise settled by the insurer (to the reasonable
satisfaction of Landlord) and Landlord is thus made whole.

(iii) To the extent permitted by applicable law, a general assignment by Tenant
or any guarantor of this Lease for the benefit of creditors, or the filing by or
against Tenant or any guarantor of any proceeding under any insolvency or
bankruptcy law, unless in the case of a proceeding filed against Tenant or any
guarantor the same is dismissed within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant’s assets located upon
the Premises or of Tenant’s interest in this Lease, unless such seizure is
discharged within thirty (30) days.

(b) Landlord’s Remedies. Landlord shall have any one or more of the following
remedies after the occurrence of an Event of Default by Tenant. These remedies
are not exclusive; they are cumulative in addition to any remedies now or later
allowed by law, in equity, or otherwise.

(i) Terminate this Lease by giving written notice of termination to Tenant, in
which event Tenant immediately shall surrender the Premises to Landlord. If
Tenant fails to so surrender the Premises, then Landlord, without prejudice to
any other remedy it has for possession of the Premises or arrearages in rent or
other damages, may re-enter and take possession of the Premises and expel or
remove Tenant and any other person or entity occupying the Premises or any part
thereof, without being liable for any damages unless caused by the gross
negligence or intentional misconduct of Landlord, its employees, agents,
representatives, or contractors.

(ii) No act by Landlord other than giving notice of termination to Tenant shall
terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the
appointment of a receiver on Landlord’s initiative to protect Landlord’s
interest under this Lease shall not constitute a termination of this Lease. On
termination of the Lease, Landlord shall have the right to recover from Tenant:

A. The worth at the time of the award of the unpaid rent that had been earned at
the time of termination of this Lease; and

 

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B. The worth at the time of the award of the amount by which the unpaid rent
that would have been earned after the date of termination of this Lease until
the time of award exceeds the fair market rental value of the Premises; and

C. The worth at the time of the award of the amount by which the unpaid rent for
the balance of the Term (excluding future Renewal Terms) after the time of award
exceeds the fair market rental value of the Premises; and

D. Any other amount, including, without limitation, reasonable attorneys’ fees
actually incurred at customary hourly rates and court costs, necessary to
compensate Landlord for all damages proximately caused by Tenant’s default.

The phrase “worth at the time of the award” as used in clauses (A) and (B) above
is to be computed by allowing interest at the rate of twelve percent (12%) per
annum, but not to exceed the then legal rate of interest. The same phrase as
used in clause (C) above is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of Richmond at the time of the award,
plus one percent (1%).

(iii) Landlord may re-enter and take possession of the Premises without
terminating this Lease and without being liable for any damages other than those
caused by the gross negligence or intentional misconduct of Landlord, its
employees, agents, representatives, lenders, or contractors. Landlord may relet
the Premises, or any part of them, to third parties, and shall exercise
reasonable diligence in mitigating any damages caused by Tenant’s default.
Landlord may relet the Premises on whatever terms and conditions Landlord, in
its reasonable discretion, deems advisable. Reletting can be for a period
shorter or longer than the remaining Term of this Lease. Landlord’s action under
this subsection is not considered an acceptance of Tenant’s surrender of the
Premises unless Landlord so notified Tenant in writing. Tenant shall be
immediately liable to Landlord for all costs Landlord incurs in reletting the
Premises, including brokers’ commissions, expenses of remodeling the Premises
required by the reletting, and like costs. Tenant shall pay to Landlord the rent
due under this Lease on the dates the rent is due, less the rent Landlord
receives from any reletting. If Landlord elects to relet the Premises without
terminating this Lease, any rent received will be applied to the account of
Tenant, not to exceed Tenant’s total indebtedness to Landlord; no reletting by
Landlord is considered to be for its own account unless Landlord has notified
Tenant in writing that this Lease has been terminated. If Landlord elects to
relet the Premises, rent that Landlord receives from reletting will be applied
to the payment of: (i) first, any indebtedness from Tenant to Landlord other
than rent due from Tenant; (ii) second, all costs, including

 

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maintenance, incurred by Landlord in reletting; and (iii) third, rent due and
unpaid under this Lease. After deducting the payments referred to in this
Subsection, any sum remaining from the rent Landlord receives from reletting
will be held by Landlord and applied in payment of future rent as rent becomes
due under this Lease. If, on the date rent is due under this Lease, the rent
received from the reletting is less than the rent due on that date, Tenant will
pay to Landlord, in addition to the remaining rent due, all costs, including
maintenance, Landlord incurred in reletting which remain after applying the rent
received from the reletting. Tenant shall have no right to or interest in the
rent or other consideration received by Landlord from reletting to the extent it
exceeds Tenant’s total indebtedness to Landlord.

(iv) Re-enter the Premises without terminating this Lease and without being
liable for any damages, unless caused by the gross negligence or intentional
misconduct of Landlord, its employees, agents, representatives, lenders, or
contractors, and do whatever Tenant is obligated to do under the terms of this
Lease. The expenses incurred by Landlord in affecting compliance with Tenant’s
obligations under this Lease immediately shall become due and payable to
Landlord as additional rent.

In all events, Tenant is liable for all damages of whatever kind or nature,
direct or indirect, suffered by Landlord as a result of the occurrence of an
Event of Default but excluding consequential damages. If Tenant fails to pay
Landlord in a prompt manner for the damages suffered, Landlord may pursue a
monetary recovery from Tenant. Included among these damages are all expenses
incurred by Landlord in repossessing the Premises (including, but not limited
to, increased insurance premiums resulting from Tenant’s vacancy), all expenses
incurred by Landlord in reletting the Premises (including, but not limited to,
those incurred for advertisements, brokerage fees, repairs, remodeling, and
replacements), all concessions granted to a new tenant on a reletting, all
losses incurred by Landlord as a result of Tenant’s default (including, but not
limited to, any unamortized commissions paid in connection with this Lease), a
reasonable allowance for Landlord’s administrative costs attributable to
Tenant’s default, and all reasonable attorneys’ fees at customary hourly rates
actually incurred by Landlord in enforcing any of Landlord’s rights or remedies
against Tenant.

Pursuit of any of the foregoing remedies does not constitute an irrevocable
election of remedies nor preclude pursuit of any other remedy provided elsewhere
in this Lease or by applicable law, and none is exclusive of another unless so
provided in this Lease or by applicable law. Likewise, forbearance by Landlord
to enforce one or more of the remedies available to it on an Event of Default
does not constitute a waiver of that default or of the right to exercise that
remedy later or of any rent, damages, or other amounts due to Landlord
hereunder.

Whether or not Landlord elects to terminate this Lease or Tenant’s right to
possession of the Premises on account of any default by Tenant, Landlord shall
have all rights and remedies at law or in equity, including, but not limited to,
the right to re-enter the Premises and, to the maximum extent provided by law,
Landlord shall have the right to terminate any and all

 

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subleases, licenses, concessions, or other consensual arrangements for
possession entered into by Tenant and affecting the Premises or, in Landlord’s
sole discretion, may succeed to Tenant’s interest in such subleases, licenses,
concessions, or arrangements in the licenses, concessions, or arrangements. In
the event of Landlord’s election to succeed to Tenant’s interest in any such
subleases, licenses, concessions, or arrangements, Tenant shall have no further
right to or interest in the rent or other consideration receivable thereunder as
of the date of notice by Landlord of such election.

(c) Late Charge. If Tenant fails to pay within five (5) days when due any
payment of rent or other charges which Tenant is obligated to pay to Landlord
under this Lease, there shall be a late charge of Seventy-Five Dollars ($75.00).
Landlord and Tenant agree that this sum is reasonable to compensate Landlord for
accounting and administrative expenses incurred by Landlord. In addition to the
late charge, any and all rent or other charges which Tenant is obligated to pay
to Landlord under this Lease which are unpaid shall bear interest at the rate
set forth below from the date said payment was due until paid, said interest to
be payable by Tenant as additional rent upon receipt by Tenant of a written
demand therefor from Landlord. Landlord and Tenant agree that this sum is
reasonable to compensate Landlord for the loss of the use of funds.

(d) Right of Landlord to Re-Enter. In the event of any termination of this
Lease, Landlord shall have the immediate right to enter upon and repossess the
Premises, and any personal property of Tenant may be removed from the Premises
and stored in any public warehouse at the risk and expense of Tenant.

(e) Surrender of Premises. No act or thing done by Landlord or any agent or
employee of Landlord during the Term of this Lease shall be deemed to constitute
an acceptance by Landlord or a surrender of the Premises unless such intent is
specifically acknowledged in a writing signed by Landlord. The delivery of keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord and, notwithstanding
such delivery, Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been terminated
properly. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises. Nothing in this
provision shall be construed to automatically extend the Term beyond the current
term or option of this Lease.

(f) Interest Charges. Any amount not paid by one party to the other within ten
(10) days of when due to the other party will bear interest from the date due at
the lesser of (i) the prime commercial rate being charged by Bank of America,
N.A. in effect on the date due plus two percent (2%) per annum; or (ii) the
maximum rate permitted by law. If Bank of America, N.A. is no longer in
existence, then another comparable bank or financial institution shall be
substituted by Landlord, and Landlord shall send notice of such substitution to
Tenant.

(g) Tenant’s Default. If Tenant is in default under this Lease, then:

(i) For so long as Landlord does not terminate Tenant’s right to possession of
the Premises, if Tenant obtains Landlord’s consent, Tenant will have the right
to assign or sublet its interest in this Lease, but Tenant will not be released
from liability;

 

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(ii) No structural changes to the Improvements at any cost shall be permitted
without the prior written approval of Landlord; and

(iii) All costs to remove Tenant’s names, logos, signs, or other identification
on the Premises shall be paid by Tenant whether or not Landlord terminated this
Lease.

(h) Default by Landlord. Landlord shall be in default if Landlord fails to
perform any provision of this Lease required of it and the failure is not cured
within thirty (30) days after Landlord’s receipt of notice from Tenant
describing such failure. If, however, the failure cannot reasonably be cured
within the cure period, Landlord shall not be in default under this Lease if
Landlord commences to cure the failure within the cure period and diligently and
in good faith continues to cure the failure. Notices given under this Section
shall specify the alleged breach and the applicable Lease provisions. If
Landlord shall at any time be in default beyond the applicable notice and cure
period, Tenant shall have the right to cure such default on Landlord’s behalf.
Any sums expended by Tenant in doing so, and all reasonably necessary incidental
costs and expenses incurred in connection therewith, including reasonable
attorneys’ fees actually incurred at customary hourly rates, shall be payable by
Landlord to Tenant within thirty (30) days following demand therefor by Tenant,
and if Landlord shall not have paid such sums to Tenant within ninety (90) days
after demand therefor, Tenant shall be entitled to deduct or offset such sums
against any rent otherwise payable to Landlord under this Lease.

22. CONDEMNATION.

(a) Condemnation Damages. In the event of the taking or conveyance of the whole
or any part of the Premises by reason of condemnation (“Condemnation”) by any
public authority (including condemnation proceedings or conveyances or
dedications made in settlement of or in lieu of condemnation proceedings),
Landlord shall be entitled to the entirety of the damages award
(“Award”) payable in connection with any Condemnation, provided, however,
Landlord shall not make a claim for any of the following:

(i) A sum attributable to Tenant’s leasehold improvements or alterations made to
the Premises by Tenant in accordance with this Lease, which improvements or
alterations Tenant has the right to remove from the Premises upon the
termination of this Lease pursuant to the provisions of this Lease, but elects
not to remove;

(ii) Any portion of the Award attributable to Tenant’s furniture, fixtures, and
equipment installed in the Premises in accordance with this Lease which are to
remain in the Premises as a result of such taking;

 

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(iii) Any portion of the Award attributable to: (A) removing Tenant’s furniture,
fixtures, equipment and inventory; and (B) moving and relocation expenses; and

(iv) Any portion of the Award attributable to a temporary construction easement
or temporary right of way, i.e., an easement or right of way that will expire
pursuant to its terms upon completion of the Condemnation project.

(b) Net Award; Restoration; Rent Reduction. Landlord and Tenant shall work in
good faith to jointly pursue all damages available in connection with the
Condemnation except as specifically set forth in subsection (a) above
(collectively, “Tenant’s Damages”). As used herein, the term “Net Award” shall
mean the entire award payable in connection with a Condemnation, less (i) that
portion of the Award attributable to Tenant’s Damages; (ii) the actual and
reasonable expenses incurred by Landlord in pursuing and collecting the Award,
such as expert witness fees, appraisals, attorneys fees, surveys, or engineering
studies such as traffic studies; and (iii) that portion of the Award to be paid
over to Tenant in connection with Condemnation Restoration (as defined below) of
the Premises. Tenant shall commence and diligently pursue completion of
restoration of the Premises as the result of a Condemnation (“Condemnation
Restoration”) as nearly as possible to its value, condition and character
immediately prior to the Condemnation. Landlord shall pay over to Tenant an
amount from the Award equal to the actual and reasonable costs of the
Condemnation Restoration of the Premises within ten (10) business days of
receipt of evidence of completion of same from Tenant. The entirety of the Net
Award shall be retained by Landlord; provided, however, effective on the date
when Landlord receives the Award from the condemning authority, Landlord and
Tenant shall enter into an amendment to this Lease setting forth that the annual
rent due under this Lease from and after such date shall be equitably reduced by
an amount equal to the Net Award multiplied by eight percent (8%).

(c) Termination of Lease Due to Condemnation. In the event that the Condemnation
materially adversely affects the Use, Tenant may terminate this Lease by giving
Landlord sixty (60) days’ written notice of its intention to terminate the Lease
after receiving notice of the Condemnation from the condemning authority. The
effective date of the termination shall be the earlier of the actual date of
such taking or Tenant’s removal from the Premises. In the event Tenant exercises
its right to terminate this Lease as set forth herein: (i) notwithstanding
anything contained herein to the contrary, Landlord and Tenant independently
shall seek damages before the condemning body, and each party shall be entitled
to the amount awarded respectively to each; provided, however, Landlord shall
not make a claim in such proceedings in connection with Tenant’s Damages; and
(ii) the rent for the last month of Tenant’s occupancy shall be prorated and
Landlord shall refund to Tenant any rent paid in advance and Tenant shall
thereupon be released from its obligation to pay rent.

23. RIGHT OF FIRST REFUSAL. If Landlord, at any time during the Term of this
Lease or any Renewal Term hereof, receives any bona fide offer from a third
party to purchase the Premises, and any such offer is acceptable to Landlord,
Landlord agrees to notify Tenant in writing, giving the name and address of the
offeror and the price, terms, and conditions of such offer, and Tenant shall
have thirty (30) business days from and after the receipt of such notice from
Landlord in which to elect to purchase the Premises on the terms and conditions
contained

 

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in said bona fide offer. If Tenant does not elect to purchase, and Landlord
sells the Premises to the third party making such offer, then the purchaser
shall take the Premises subject to and burdened with all the terms, provisions,
and conditions of this Lease, and the rights of Tenant under this Lease
(including, without limitation, this right of first refusal) as against the new
owner shall not be lessened or diminished by reason of the change of ownership.
If Tenant purchases the Premises, then contemporaneously with the conveyance of
the property to Tenant this Lease shall, at Tenant’s option, terminate, without
further notice; Tenant shall thereupon be released and discharged from all
future rentals and other obligations on the part of Tenant to be paid, kept, and
performed; and the parties thereafter shall be released from all liabilities and
obligations under this Lease with respect to the Premises, with the exception of
those obligations that survive the expiration or earlier termination of this
Lease.

24. LEASEHOLD MORTGAGES.

(a) Tenant shall have the right to enter into any recordable leasehold mortgage
to the extent the same is solely limited to the leasehold interest of Tenant and
does not increase the rights of the leasehold mortgagee beyond the leasehold
interest of Tenant in the Premises. Notwithstanding the foregoing, except as
otherwise provided herein: (i) it is expressly understood that Landlord’s
consent to the execution and recordation of a leasehold mortgage by Tenant does
not constitute approval by Landlord of any of the provisions of the leasehold
mortgage; and (ii) if there is a conflict between the leasehold mortgage and
this Lease, the terms of this Lease shall control.

(b) If Tenant, or Tenant’s successors or assignees, mortgages or grants to a
leasehold mortgagee or lender a security interest in Tenant’s interest in this
Lease and the Premises, and if the leasehold mortgagee or lender sends to
Landlord a true copy of the leasehold mortgage or security agreement executed in
connection therewith together with a written notice specifying such mortgagee’s
or lender’s name and address, so long as such leasehold mortgage or security
agreement shall remain unsatisfied of record or until written notice of
satisfaction is given by the holder to Landlord, the following provisions shall
apply:

(i) There shall be no cancellation, surrender, acceptance or surrender,
amendment, or modification of this Lease by joint action of Landlord and Tenant,
or by Tenant alone, without in each case, written notice to the holder. Nor
shall any merger result from the acquisition by, or devolution upon, any one
entity of the fee and the leasehold estates of the Premises.

(ii) Landlord shall, upon serving Tenant with any notice or other communication,
whether of default or any other matter, simultaneously serve a copy of such
notice upon the holder. However, Landlord’s failure to deliver such notice to
the holder shall not constitute a default or breach by Landlord under this
Lease. Nevertheless, Landlord may not undertake any action to enforce any of its
rights under this Lease and in connection with the notice given to Tenant unless
and until a copy of the same is served upon the holder.

(iii) In the event of any default by Tenant under this Lease, the holder shall
have, after service of notice of such default upon the holder, the same period

 

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to remedy or cause to be remedied the default complained of as Tenant has under
this Lease, and Landlord shall accept such performance by or at the instigation
of the holder as if the same had been rendered by Tenant. Each notice of default
given by Landlord shall state the amounts of rent and whatever other payments
are being claimed to be in default.

(iv) Landlord agrees that (y) the holder shall have the right, but not the
obligation, to remedy any default by Tenant under this Lease by performing any
applicable term, covenant, condition or agreement of this Lease, and
(z) Landlord shall accept such performance by the holder with the same force and
effect as if furnished by Tenant, subject to and in accordance with the
provisions of this Lease.

(v) Not more than twice during any calendar year, Landlord, within ten business
(10) days after a request in writing by Tenant or the holder, shall furnish a
written statement, duly acknowledged, that this Lease is in full force and
effect and that there are no defaults thereunder by Tenant, or if there are any
defaults, such statement shall specify the defaults Landlord claims to exist,
and that this Lease has not been modified or changed, or if there have been such
modifications or changes, Landlord shall provide a complete copy thereof to the
holder.

(vi) Landlord hereby consents to: (w) holder’s foreclosure of a leasehold
mortgage, (x) any sale of Tenant’s interest in this Lease and the Premises in
connection with a foreclosure, whether by judicial proceedings or by virtue of
any power of sale contained in the leasehold mortgage, (y) any conveyance of
Tenant’s interest in this Lease and the Premises from Tenant to the holder, or
its nominee or designee (“Nominee”), by virtue of or in lieu of foreclosure or
other appropriate proceedings, and (z) if holder, or its Nominee, becomes the
holder of Tenant’s interest in this Lease and the Premises, the conveyance of
such interest by holder, or its Nominee, to: (A) another creditworthy
convenience store operator or other creditworthy operator of the Use that meets
Landlord’s approval, which approval shall not be unreasonably conditioned,
delayed, or denied, and will be based upon Landlord’s customary review and
evaluation of the prospective tenant, or (B) any other conveyance in accordance
with the terms of the assignment provisions of the then lease (which shall be
the same as those contained in this Lease, except that all obligations and
liabilities of the holder, or its Nominee, under such lease shall cease and
terminate upon such assignment).

(c) Anything herein contained notwithstanding, while such leasehold mortgage
remains unsatisfied of record, or until written notice of satisfaction is given
by the holder to Landlord, if any default shall occur which, pursuant to any
provision of this Lease, entitles Landlord to terminate this Lease, and if
before the expiration of ten (10) days after the date of service of notice of
termination upon such leasehold mortgagee, such leasehold mortgagee shall have
notified Landlord of its desire to nullify such notice and shall have paid to
Landlord all rent and other payments herein provided for, and then in default,
and shall have

 

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complied or shall commence the work of complying with all of the other
requirements of this Lease, if any are then in default, and shall prosecute the
same to completion with reasonable diligence, then in such event Landlord shall
not be entitled to terminate this Lease and any notice of termination
theretofore given shall be void and of no effect.

(d) The proceeds from any insurance policies or arising from a condemnation of
Tenant’s interest in the Premises are to be held by any leasehold mortgagee and
distributed pursuant to the provisions of this Lease, but the leasehold
mortgagee may reserve rights to apply to the mortgage debt all, or any part, of
Tenant’s share of such proceeds pursuant to such mortgage.

(e) The leasehold mortgagee shall be given notice of any arbitration proceedings
by the parties hereto, and shall have the right to intervene therein and be made
party to such proceedings, and the parties hereto do hereby consent to such
intervention. In the event that the leasehold mortgagee shall not elect to
intervene or become party to such proceedings, the leasehold mortgagee shall
receive notice of, and a copy of, any award or decision made in said arbitration
proceedings.

(f) The term “mortgage,” whenever used herein, shall include whatever security
instruments are used in the locale of the Premises, such as, without limitation,
deeds to secure debt, deeds of trust, and conditional deeds, as well as
financing statements, security agreements, and other documentation required
pursuant to the Uniform Commercial Code. The term “mortgage”, whenever used
herein, shall also include any instrument required in connection with a
sale-leaseback transaction.

25. SUBORDINATION, ATTORNMENT, AND ESTOPPEL.

(a) Subject to and conditioned upon the full satisfaction of all other
provisions of this Lease, including, without limitation, the requirements of
Sections 11 and 12 hereof, and further subject to the provisions of this
Section 25, this Lease and the leasehold estate created hereby shall be, at the
option and upon written declaration of Landlord, subject, subordinate, and
inferior to the lien and estate of any mortgages and all renewals, extensions,
or replacements thereof, now or hereafter imposed by Landlord upon the Premises;
provided, however, that this Lease shall not be subordinate to any mortgage or
any renewal, extension, or replacement thereof, unless and until Landlord
provides Tenant with an agreement (the “Non-Disturbance Agreement”), signed and
acknowledged by each holder of any such mortgage setting forth that so long as
no Event of Default has occurred, Landlord’s and Tenant’s rights and obligations
hereunder shall remain in force and Tenant’s right to possession shall be
upheld. Tenant shall, promptly following a request by Landlord and after receipt
of the Non-Disturbance Agreement, execute and acknowledge any subordination
agreement or other documents reasonably required to establish of record the
priority of any such encumbrance over this Lease, so long as such agreement does
not otherwise increase Tenant’s obligations or diminish Tenant’s rights
hereunder.

(b) In the event of foreclosure of any mortgage, whether superior or subordinate
to this Lease, then (i) this Lease shall continue in force; (ii) Tenant’s quiet
possession shall not be disturbed so long as no Event of Default has occurred;
(iii) Tenant shall attorn to and

 

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recognize the mortgagee or purchaser at foreclosure sale (the “Successor
Landlord”) as Tenant’s landlord for the remaining Term of this Lease; and
(iv) the Successor Landlord shall not be bound by (a) any payment of rent for
more than one (1) month in advance; (b) any ending of this Lease or any
amendment or modification of this Lease without the Successor Landlord’s consent
after the Successor Landlord’s name is given to Tenant, unless the amendment,
modification, or ending is specifically authorized by the original Lease and
does not require Landlord’s prior agreement or consent; and (c) any liability
for any act or omission of a prior landlord, including Landlord. At the request
of the Successor Landlord, Tenant shall execute a new lease for the Premises,
setting forth all of the provisions of this Lease except that the term of the
new lease shall be for the balance of the Term of this Lease.

(c) Tenant shall execute and deliver to Landlord, within thirty (30) days after
receipt of Landlord’s request, any estoppel certificate or other statement to be
furnished to any prospective purchaser of or any lender against the Premises.
Such estoppel certificate shall acknowledge and certify each of the following
matters, to the extent each may be true: (i) that this Lease is in effect and
not subject to any rental offsets, claims, or defenses to its enforcement;
(ii) the commencement and termination dates of the Term; (iii) that Tenant is
paying rent on a current basis; (iv) that this Lease constitutes the entire
agreement between Tenant and Landlord relating to the Premises; (v) that Tenant
has accepted the Premises and is in possession thereof; (vi) that this Lease has
not been modified, altered, or amended except in specified respects by specified
instruments; (vii) that Tenant has no notice of any prior assignment,
hypothecation, or pledge of rents or this Lease; and (viii) that neither Tenant
nor, to the knowledge of Tenant, Landlord is in default under this Lease beyond
any applicable cure or grace period. Tenant shall also, upon request of
Landlord, certify and agree for the benefit of any lender against the Premises
(“Lender”) that Tenant will not look to such Lender: (a) as being liable for any
act or omission of Landlord; (b) as being obligated to cure any defaults of
Landlord under this Lease which occurred prior to the time Lender, its successor
or assigns, acquired Landlord’s interest in the Premises by foreclosure or
otherwise; (c) as being bound by any payment of rent or additional rent by
Tenant to Landlord for more than one (1) month in advance; or (d) as being bound
by Landlord to any amendment or modification of this Lease without Lender’s
written consent.

26. APPLICATION OF INSURANCE PROCEEDS BY LANDLORD’S MORTGAGEE.

(a) In the event that Landlord mortgages its title to or interest in the
Premises, then Landlord may request that the name of Landlord’s mortgagee be
added in addition to Landlord’s name to any and all policies of insurance
required to be carried by Tenant hereunder.

(b) As a condition precedent to Tenant’s obligations under Sections 12 and 25
hereof, Landlord shall cause Landlord’s mortgagee to endorse, transfer, and
otherwise make over to Tenant the check or negotiable instrument representing
the net amount of all insurance proceeds received by Landlord’s mortgagee for
the purposes specified in Section 12 hereof, and shall further cause Landlord’s
mortgage or collateral document to provide for such endorsement or transfer in a
manner not inconsistent with the provisions of this Lease; provided, however,
that Landlord’s mortgagee may reserve the right to apply to the mortgage debt
any part of such insurance proceeds after all of Tenant’s costs and expenses of
Restoration have been paid.

 

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27. TENANT’S RIGHT OF SUBSTITUTION. At any time following the beginning of the
fifth (5th) Lease Year, then providing there are no material uncured Events of
Default existing under this Lease, Tenant may request that Landlord substitute
for the Premises a property (“substitute property”) that is substantially
similar to and of equal or greater Value (as defined below) to the Premises. In
the event the Value of the Substitute Property exceeds the Value of the
Premises, Landlord shall have no obligation to fund any monies or pay any
consideration in connection with such increased Value.

The term “Value” for purposes of effecting a substitution under this Section
shall mean the fair market value of the Premises and the Substitute Property as
determined by so-called “full, three method” appraisals (“Appraisals”) prepared
by an independent appraiser who is a member in good standing as an MAI
professional appraiser and who is reasonably acceptable to Landlord.

In the event Tenant wishes to substitute a property for the Premises, Tenant
shall so notify Landlord in writing. The notice shall identify the Substitute
Property, and shall include information concerning the Metropolitan Statistical
Area, demographic makeup, traffic counts, nature and quality of the neighboring
properties, age and condition of improvements, useable land area, parking area
and lot configuration. Within thirty (30) days following receipt of such notice,
Landlord shall either consent to, or, in Landlord’s reasonable business
judgment, reject such substitution, for any reason, including, but not limited
to, an adverse impact or effect on Landlord’s tax status, or disapproval by
Landlord’s mortgagee. If Landlord rejects the substitution, Landlord shall
specify in writing to Tenant the reasons therefor. If Landlord consents to the
substitution, the parties shall cooperate with one another to effect a closing
(the “Closing”) of the Substitute Property as soon as practicable.

Landlord shall have a reasonable time within which to conduct its investigation
of the Substitute Property. Tenant, at Tenant’s sole cost and expense, timely
shall provide Landlord with all documents and information reasonably requested
by Landlord in connection with its investigation of the Substitute Property,
including, without limitation, aerial photograph, title commitment and exception
documents, as-built survey to Landlord’s guidelines, and environmental reports
(“Third Party Reports”). Landlord shall have no obligation to take title to the
Substitute Property if Landlord reasonably disapproves any of the material
reports or documents it requests or receives in connection with its
investigation of the Substitute Property.

 

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At the Closing:

(i) Landlord shall deliver to Tenant a special or limited warranty deed in the
form customarily used in connection with commercial real property transactions
in the state in which the Premises is situated conveying to Tenant title to the
Premises, which shall be subject only to: (i) matters of record; (ii) such
additional matters as specifically consented to by Tenant; and (iii) anything of
record or not of record that in any way affects title to the Premises resulting
from the acts or omissions of Tenant and matters that would be shown by a then
current inspection or survey of the Premises. Landlord shall execute and deliver
such documents as shall be required to deliver good and marketable title to the
Premises (subject to the foregoing matters) to Tenant in form and substance
reasonably satisfactory to the title company, including, without limitation, a
Memorandum of Termination of Lease in connection with the Premises;

(ii) Tenant shall deliver to Landlord a special or limited warranty deed in the
form customarily used in connection with commercial real property transactions
in the state in which the Substitute Property is situated conveying to Landlord
title to the Substitute Property, and Tenant shall execute and deliver such
documents as shall be required to deliver good and marketable title to the
Substitute Property to Landlord in form and substance reasonably satisfactory to
the title company;

(iii) This Lease shall be amended to delete Exhibit A (i.e., the legal
description of the Premises) and replace it with the legal description of the
Substitute Property, and the parties thereafter shall be released from all
liabilities and obligations under this Lease with respect to the Premises, with
the exception of those obligations that survive the expiration or earlier
termination of this Lease. Rent, and any adjustments thereto, payable by Tenant
under this Lease, shall continue uninterrupted and unaltered by the
substitution;

(iv) Landlord and Tenant shall execute a Memorandum of Termination of Lease, in
recordable form, in connection with the Premises. Landlord and Tenant shall
execute a Memorandum of Lease, in recordable form, in connection with the
Substitute Property. Tenant, at Tenant’s expense, shall cause the Memorandum of
Termination of Lease and Memorandum of Lease to be recorded in the respective
counties in which the properties are located. The parties shall cooperate with
one another, fully and in a timely manner, in performing all further acts, and
executing and delivering all further documents or instruments that may be
reasonably necessary or required to accomplish the purposes of this Section; and

(v) All costs, fees and expenses incurred in connection with Tenant’s exercise
of this right of substitution (including, without limitation, the Appraisals,
Third Party Reports, ALTA extended coverage policy of title insurance with
reasonably requested endorsements, deed transfer taxes, title and escrow fees
and charges) shall be borne by Tenant, it being the intention of the parties
that Landlord shall take title to the Substitute Property and deliver title to
the Premises absolutely net of all costs, fees and expenses whatsoever.

 

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Tenant acknowledges and agrees the Premises shall be conveyed by Landlord to
Tenant “AS IS, WHERE IS, WITH ALL FAULTS,” in such condition as the same may be
on the Closing, without any representations or warranties by Landlord except
those specifically addressed above.

28. NOTICES. Any notice or communication to be given under this Lease shall be
in writing and shall be deemed to have been given: (i) when delivered, if
delivered by hand, (ii) three (3) days after being deposited in the United
States Post Office, certified mail, postage prepaid, return receipt requested,
if mailed, or (iii) on the day after deposit with any nationally or regionally
recognized overnight courier service which requires proof of delivery. Notices
shall be addressed as follows:

By Tenant to Landlord:

National Retail Properties, LP

450 S. Orange Avenue

Suite 900

Orlando, Florida 32801

Attention: General Counsel

With a copy at the same address to:

Attention: Vice President - Asset Management

By Landlord to Tenant:

The Pantry, Inc.

1801 Douglas Drive (Zip 27330) Post Office Box 1410

Sanford, North Carolina 27331-1410

Attention: Director of Real Estate

The parties have the right from time to time to change their respective
addresses by giving at least five (5) days written notice to the other party in
accordance with the foregoing procedures for giving notice, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.

All notices and other communications required or permitted under this Lease
which are addressed as provided in this section (i) if delivered personally
against proper receipt or by confirmed facsimile, shall be effective upon
delivery, (ii) if delivered by certified or registered mail, return receipt
requested, with postage prepaid, shall be effective four (4) business days after
deposit in the United States mail, or (iii) by Federal Express or similar
overnight courier service with courier fees paid by the sender, shall be
effective the next business day after deposit with the courier within its
deadline for deposit for next business day delivery, as the case may be.

 

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29. BINDING EFFECT. The provisions of this Lease shall be binding on and inure
to the benefit of the parties hereto, their legal representatives, successors,
and permitted assigns and sublessees.

30. WHOLE AGREEMENT. This Lease contains all of the agreements and
representations between the parties with respect to the subject matter hereof.
None of the terms of this Lease shall be waived or modified to any extent,
except by written instrument signed and delivered by both parties.

31. SEVERABILITY. If any provision of this Lease shall be declared invalid or
unenforceable, the remainder of this Lease shall continue in full force and
effect.

32. DUPLICATE COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute one and the same instrument.

33. RECORDING OF LEASE. This Lease shall not be recorded. At the request of
either party and at Tenant’s expense, the parties hereto shall execute a
Memorandum of Lease, in recordable form, specifying the commencement and
termination dates, a description of the Premises, and any other provisions which
either party may desire to incorporate therein.

34. GOVERNING LAW. This Lease shall be governed by, and construed and enforced
in accordance with, the laws of the State in which the Premises are located.

35. RELATIONSHIP OF THE PARTIES. Nothing herein contained shall be deemed or
construed by the parties hereto, nor by any third party, as creating a
relationship of principal and agent or of partnership or of joint venture
between the parties hereto, it being understood and agreed that neither the
method of computation of rent nor any other provision contained herein, nor any
acts of the parties hereto are other than the relationship of landlord and
tenant. Whenever herein the singular number is used the same shall include the
plural, and the masculine gender shall include the female and neuter genders.
The numerical headings or titles to the paragraphs are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part
hereof.

36. AUTHORITY. The individuals signing this Lease personally warrant that they
have the right and power to enter into this Lease on behalf of Landlord and
Tenant, to grant the rights granted under this Lease, and to undertake the
obligations undertaken in this Lease.

37. INTERPRETATION PRESUMPTION. This Lease has been negotiated by the parties
hereto and by the respective attorneys for each party. The parties represent and
warrant to one another that each has, by counsel or otherwise, actively
participated in the negotiation and preparation of this Lease for execution. In
the event of a dispute concerning the interpretation of this Lease, each party
waives the doctrine that an ambiguity should be interpreted against a party who
drafted the document.

 

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38. TENANT SHALL NOT RENDER PREMISES LIABLE FOR ANY LIEN. Tenant shall have no
right, authority, or power to bind Landlord, or any interest of Landlord in the
Premises, nor to render the Premises liable for any lien or right of lien for
the payment of any claim for labor, material, or for any charge or expense
incurred to maintain, to repair, or to make alterations, additions, and
improvements to the Premises. Tenant shall in no way be considered the agent of
Landlord in the construction, erection, modification, repair, or alteration of
the Premises. Notwithstanding the above, Tenant shall have the right to contest
the legality or validity of any lien or claim filed against the Premises. No
contest shall be carried on or maintained by Tenant after the time limits in the
sale notice of the Premises for any such lien or claim unless Tenant (i) shall
have duly paid the amount involved under protest; (ii) shall have procured and
recorded a lien release bond from a bonding company acceptable to Landlord in an
amount not less than one and one-half (1 1/2) times the amount involved; or
(iii) shall have procured a stay of all proceedings to enforce collection. Upon
a final adverse determination of any contest, Tenant shall pay and discharge the
amount of the lien or claim determined to be due, together with any penalties,
fines, interest, cost, and expense which may have accrued, and shall provide
proof of payment to Landlord.

39. INDEMNIFICATION. Tenant shall indemnify, defend, and protect Landlord, and
hold Landlord harmless from any and all loss, cost, damage, expense, liability
(including, without limitation, court costs and reasonable attorneys’ fees
actually incurred at customary hourly rates) incurred in connection with or
arising at any time and from any cause whatsoever in or about the Premises,
including, without limitation, claims pertaining to Tenant’s business operations
at the Premises, including, without limiting the generality of the foregoing:
(i) any default by Tenant in the observance or performance of any of the terms,
covenants, or conditions of this Lease on Tenant’s part to be observed or
performed; (ii) the use or occupancy of the Premises by Tenant or any person
claiming by, through, or under Tenant, or of the contractors, agents, servants,
employees, visitors, or licensees of Tenant or any such person, in, on, or about
the Premises, either prior to or during the Term of this Lease (including,
without limitation, any holdovers in connection therewith), including, without
limitation, any acts, omissions, or negligence in the making or performance of
any alterations. Tenant’s indemnification of Landlord shall exclude damages
caused by reason of the gross negligence or willful misconduct of Landlord (or
its employees, agents, representatives, and contractors) following the Effective
Date, it being understood that Tenant, and not Landlord, shall be responsible
for any and all claims arising or accruing prior to the Effective Date. The
provisions of this Section shall survive the expiration or sooner termination of
this Lease with respect to any claims or liability occurring prior to such
expiration or termination, and shall not be limited by reason of any insurance
carried by Landlord and Tenant. Tenant’s indemnification with respect to
environmental matters shall be governed by Section 5.

40. TENANT’S FINANCIAL STATEMENTS. During the Term of this Lease, Tenant shall
provide Landlord with a copy of the 10-K and 10-Q reports filed by The Pantry,
Inc. with the Securities and Exchange Commission within thirty (30) days after
such reports are filed. If at any time Tenant is no longer a public company,
upon the request of Landlord directed to Tenant’s Director of Real Estate,
Tenant shall submit to Landlord an annual financial statement within one hundred
twenty (120) days following the close of each fiscal year; provided, however,
that Landlord shall maintain the confidentiality of such financial statements
and the information contained therein.

 

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41. SALES INFORMATION. Upon the request of Landlord directed to Tenant’s
Director of Real Estate, within ninety (90) days after the end of Tenant’s
fiscal year (which currently is the last Thursday of September), Tenant shall
submit to Landlord a summary profit and loss statement pertaining to the retail
sales operations conducted by Tenant on the Premises for the prior fiscal year,
including gross sales data in such form as is maintained by Tenant pertaining to
all sales of merchandise and services and income from all other sources with
respect to the business conducted on or in the Premises. Sales of products such
as lottery products, money order, public pay telephones, amusement machines,
money transfers, and other such products shall consist of the commission payable
to Tenant and not the gross amount received from the sale of any such items.
Landlord acknowledges that such information is for its informational purposes
only, is confidential, and shall not be disclosed to any other party without
Tenant’s prior written consent unless required by applicable law.

42. BROKERAGE INDEMNITY. Tenant and Landlord represent and warrant to each other
that neither has engaged any broker, finder, agent, or any other person
(collectively, the “Broker”) due or entitled to any real estate commission,
finder’s fee, compensation, or other consideration in connection with the sale
of the Premises to Landlord by Tenant or in connection with this Lease. Landlord
and Tenant shall defend, indemnify, and hold harmless the other from and against
the payment of any commission or fees claimed by any Broker resulting from or
arising out of any actions taken or agreements made by them with respect to the
business and real estate transaction reflected in this Lease.

43. LANDLORD LIEN. Landlord hereby waives any lien right Landlord may have with
respect to Tenant’s personal property at the Premises, including, without
limitation, any so-called “landlord’s lien” as may be afforded by the provisions
of statutory law. Although such waiver is self-operative, Landlord agrees to
acknowledge such waiver in writing, for the benefit of Tenant or any lender of
Tenant, as Tenant may form time to time request.”

44. ACQUISITION CONTINGENCY. Landlord and Tenant hereby agree and acknowledge
that this Lease shall be contingent upon the Landlord acquiring fee simple title
to the Premises on or before May 4, 2007; provided, however, nothing herein
shall be deemed to obligate Landlord to acquire fee simple title to the
Premises. In the event that the Landlord does not acquire fee simple title to
the Premises on or before May 4, 2007, either party may terminate this Lease
upon written notice whereafter this Lease shall terminate and become null and
void and all parties hereto shall be relieved of all obligations hereunder.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

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IN TESTIMONY WHEREOF, the parties hereto have caused these presents to be
executed in their respective names by their duly authorized representatives,
executing this instrument in duplicate originals, as of the day and year first
above written.

 

WITNESS:       LANDLORD:         NATIONAL RETAIL PROPERTIES, LP,         a
Delaware limited partnership         By:   NNN GP Corp., a Delaware corporation,
as its general partner

 

      By:  

 

Name:  

 

      Name:  

 

      Title:  

 

 

        Name:  

 

                TENANT:         THE PANTRY, INC., a Delaware corporation

 

      By:  

 

Name:  

 

      Name:  

 

      Title:  

 

 

        Name:  

 

       

 

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EXHIBIT “A”

Legal Description of Land

(to be attached)

 

1