CONFIRMATION OF FORWARD STOCK SALE TRANSACTIONS



 Exhibit 10.2 
 

 
  
 Confirmation of Forward Stock Sale Transaction

  
  
 October 13, 2004 
  
 ML
Ref:[            ] 
  

			
	To:	 	The Pantry, Inc.
	  	 	P.O. Box 1410
	 	 	1801 Douglas Drive
	 	 	Sanford, NC 27330
		
	From:	 	Merrill Lynch International
	 	 	Merrill Lynch Financial Centre
	 	 	2 King Edward Street
	 	 	London EC1A 1HQ
	 	 	England
		
	From:	 	Merrill Lynch Pierce Fenner & Smith Incorporated,
	 	 	Solely as Agent 
	 	 	tel: (212) 449-3149
	 	 	fax: (212) 449-2697

  
  
 Dear Sirs, 
  
 The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the transaction entered into between us on the Trade Date specified below (the “Transaction”).
This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. 
  

	1.	 	The definitions and provisions contained in the 2000 ISDA Definitions (the “2000 Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “2002
Definitions” and, together with the 2000 Definitions, the “Definitions”), each as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency
between the 2002 Definitions and the 2000 Definitions, the 2002 Definitions will govern. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern. 

  

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 This Confirmation evidences a complete and binding agreement between Party A and Party B as to the terms
of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if Party A and Party B had
executed an agreement in such form with a Schedule thereto having the elections and variables set forth in Part 5 of this Confirmation. In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation
will prevail for the purpose of the Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement. 
  
 Party A and Party B each represents to the other that it has entered into
this Transaction in reliance upon such tax, accounting, regulatory, legal, and financial advice as it deems necessary and not upon any view expressed by the other. 
  

	2.	 	The terms of the particular Transaction to which this Confirmation relates are as follows: 

  
 General Terms: 
  

			
		
	 Party A:
	  	Merrill Lynch International.
		
	 Party B:
	  	The Pantry, Inc.
		
	 Trade Date:
	  	October 13, 2004
		
	 Effective Date:
	  	October 19, 2004
		
	 Base Amount:
	  	1,500,000 Shares. On each Settlement Date, the Base Amount shall be reduced by the number of Settlement Shares for such Settlement Date.
		
	 Maturity Date:
	  	October 19, 2005 (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day); subject to extension if a Settlement Date on such date is deferred as provided
below in clauses (ii) or (iii) of the proviso to the definition of Settlement Date; provided that if the Maturity Date is a Disrupted Day, then the Maturity Date shall be the first succeeding Scheduled Trading Day that is not a Disrupted
Day.
		
	 Forward Price:
	  	On the Effective Date, the Initial Forward Price, and on any other day, the Forward Price as of the immediately preceding calendar day multiplied by the sum of (i) 1 plus (ii) the
Daily Rate for such day.

  

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	 Initial Forward Price:
	  	USD $21.8694 per Share.
		
	 Daily Rate:
	  	For any day, (i)(A) USD-Federal Funds Rate for such day minus (B) the Spread divided by (ii) 360.
		
	 USD-Federal Funds Rate:
	  	For any day, the rate set forth for such day opposite the caption “Federal funds”, as such rate is displayed on the page “FedsOpen <Index> <GO>“ on the
BLOOMBERG Professional Service, or any successor page; provided that if no rate appears on any day on such page, the rate for the immediately preceding day on which a rate appears shall be used for such day.
		
	 Spread:
	  	1.00 %
		
	 Shares:
	  	Common Stock, $0.01 par value per share, of The Pantry, Inc. (the “Issuer”) (Exchange identifier: “PTRY”).
		
	 Exchange:
	  	NASDAQ.
		
	 Related Exchange(s):
	  	All Exchanges.
		
	 Clearance System:
	  	DTC.
		
	 Calculation Agent:
	  	Merrill Lynch International.
		
	 Determining Party:
	  	Merrill Lynch International.
		
	Settlement Terms:	  	 
		
	 Settlement Date:
	  	Any Scheduled Trading Day following the Effective Date and up to and including the Maturity Date, as designated by Party B in a written notice (a “Settlement Notice”) which
satisfies the Settlement Notice Requirements and which (a) if related to any Cash Settlement or Net Stock Settlement, is delivered to Party A at least 5 Scheduled Trading Days prior to such Settlement Date (the period from the giving of any such
notice to the Settlement Date

  

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	 	  	being the “Cash/Net Stock Notice Period”) and (b) if related to Physical Settlement may be delivered at
any time and settlement will be completed as promptly as
practicable thereafter; provided that (i) subject
to clauses (ii) and (iii) below, the Maturity Date shall be a Settlement Date if on such date the Base
Amount is greater than zero; (ii) if Cash Settlement or Net Stock Settlement
applies, any Settlement
Date, including a Settlement Date on the scheduled Maturity Date, shall be deferred until the date on
which Party A is able to completely unwind its hedge if Party A is unable to completely unwind its
hedge during
the Unwind Period due to (A) the restrictions of Rule 10b-18 under the Exchange Act, (B)
the existence of any Suspension Day or Disrupted Day, or (C) if Party A is otherwise unable to unwind
its hedge during the Unwind Period, (iii) if the
conditions requiring designation of an Additional
Settlement Date have been satisfied as set forth in “Limit on Beneficial Ownership” in Section 4 of this
Confirmation, settlement will take place on the Partial Settlement Date and
the related Additional
Settlement Date and (iv) no more than three Settlement Dates other than the Maturity Date and the
Additional Settlement Dates may be designated by Party B; provided further that if Party A shall fully
unwind
its hedge during an Unwind Period by a date that is more than three Scheduled Trading Days
prior to a Settlement Date specified above, Party A may, by written notice to Party B, specify any
Scheduled Trading Day prior to such original
Settlement Date as the Settlement Date; provided further
that if any Settlement Date specified above is not an Scheduled Trading Day, the Settlement Date shall
instead be the next Scheduled Trading Day.
		
	Settlement Shares:	  	With respect to any Settlement Date, a number of Shares, not to exceed the Base Amount, designated as such by Party B in the related Settlement Notice; provided that, on the Maturity
Date the number of Settlement Shares shall be equal to the Base Amount on such date; provided further that if a Settlement Date has been specified for a number of Shares equal to the Base Amount on or prior to the

  

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	 	  	Maturity Date and such Settlement Date has been deferred as described above until a date later
than the Maturity Date, the number of Settlement Shares on the Maturity Date shall be
zero.
		
	Settlement:	  	Physical, Cash, or Net Stock, at the election of Party B as set forth in a Settlement Notice that satisfies the Settlement Notice Requirements; provided that Physical Settlement shall
apply (i) if no Settlement Method is selected, (ii) if a Suspension Day exists during the Cash/Net Stock Notice Period, but only to the extent that Party A has been unable as a result thereof to purchase Shares in an amount equal to the Settlement
Shares prior to the Settlement Date and has provided notice to such an effect to Party B or (iii) if an Acceleration Event set forth in paragraphs (a) through (c) of the definition thereof has occurred (except to the extent Net Stock Settlement
applies as set forth in “Termination Settlement” in Section 3 of this Confirmation). Notwithstanding the foregoing, if an Acceleration Event set forth in paragraphs (d) through (f) of the definition thereof has occurred, Cash Settlement
shall not apply.
		
	Settlement Notice Requirements:	  	Notwithstanding any other provisions hereof, a Settlement Notice delivered by Party B will not be effective to establish a Settlement Date unless Party B represents in such Settlement Notice
that it has complied with the agreement set forth in clause (c) under “Additional Representations, Warranties and Agreements of Party B” in Section 3 of this Confirmation.
		
	 	  	Notwithstanding any other provisions hereof, a Settlement Notice delivered by Party B that specifies Cash Settlement or Net Stock Settlement will not be effective to establish a Settlement
Date or require Cash Settlement or Net Stock Settlement (as applicable) unless Party B delivers to Party A with such Settlement Notice a representation signed by Party B substantially in the following form: “as of the date of this Settlement
Notice, The Pantry, Inc. is not aware of any material nonpublic information concerning itself or the Shares, and is

  

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	 	  	designating the date contained herein as a Settlement Date in good faith and not as part of a plan
or scheme to evade compliance with the federal securities
laws.”
		
	Unwind Period:	  	The period from and including the first Scheduled Trading Day following the date Party B elects Cash Settlement or Net Stock Settlement in respect of a Settlement Date through the third
Scheduled Trading Day preceding such Settlement Date (as such date may be changed by Party A as described in the second proviso to the definition of Settlement Date above); provided that if an Acceleration Event occurs during an Unwind
Period, the Acceleration Event provisions shall apply with respect to the number of Settlement Shares to be subject to Termination Settlement following such Acceleration Event, and if after application of the Acceleration Event provisions there are
no more Settlement Shares with respect to such Unwind Period for which Party A has not yet unwound its hedge, such Unwind Period shall terminate and the Settlement Date for the number of Shares as to which Party A has unwound its hedge shall occur
on the applicable Termination Settlement Date.
		
	Unwind Daily Share Amount:	  	On each Scheduled Trading Day during the Unwind Period, other than a Suspension Day or a Disrupted Day, Party A will, in accordance with the principles of best execution, purchase a number of
Shares equal to the lesser of (i) 100% of the applicable volume limitation of Rule 10b-18 for the Shares on such Scheduled Trading Day, without reference to any block purchases, (ii) 25% of the average daily trading volume for the Shares on the
Exchange on such Scheduled Trading Day, or (iii) the number of Shares necessary to complete the purchases required to calculate the Cash Settlement Amount or the Net Stock Settlement Shares, as the case may be.
		
	Exchange Act:	  	The Securities Exchange Act of 1934, as amended from time to time.

  

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	 Physical Settlement:
	  	On any Settlement Date in respect of which Physical Settlement applies, Party B shall deliver to Party A a number of Shares equal to the Settlement Shares for such Settlement Date, and Party
A shall deliver to Party B, by wire transfer of immediately available funds to an account designated by Party B, an amount in cash equal to the Physical Settlement Amount for such Settlement Date, on a delivery versus payment basis.
		
	 Physical Settlement Amount:
	  	For any Settlement Date in respect of which Physical Settlement applies, an amount in cash equal to the product of the Forward Price on such Settlement Date and the number of Settlement
Shares for such Settlement Date.
		
	 Cash Settlement:
	  	On any Settlement Date in respect of which Cash Settlement applies, if the Cash Settlement Amount is a positive number, Party A will pay the Cash Settlement Amount to Party B. If the Cash
Settlement Amount is a negative number, Party B will pay the absolute value of the Cash Settlement Amount to Party A. Such amounts shall be paid on the Settlement Date.
		
	 Cash Settlement Amount:
	  	An amount determined by the Calculation Agent equal to: (i)(A) the Forward Price as of the first day of the applicable Unwind Period minus (B) the weighted average price at which Party
A is able to purchase Shares during the Unwind Period to unwind its hedge in compliance with Rule 10b-18 under the Exchange Act as if it applied to Party A during the Unwind Period multiplied by (ii) the Settlement Shares.
		
	 Net Stock Settlement:
	  	On any Settlement Date in respect of which Net Stock Settlement applies, if the number of Net Stock Settlement Shares is a (i) positive number, Party A shall deliver a number of Shares to
Party B equal to the Net Stock Settlement Shares, and (ii) negative number, Party B shall deliver a number of Shares to Party A equal to the Net Stock Settlement Shares; provided that if Party A determines in its good faith judgment that it
would be required to deliver Net Stock Settlement Shares to Party B.

  

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	 	  	Party A may elect to deliver a portion of such Net Stock Settlement Shares on one or more dates prior to the applicable Settlement Date.
		
	 Net Stock Settlement
 Shares:
	  	For any Settlement Date for which Net Stock Settlement applies, a number of Shares equal to the quotient of (a)(i) the Cash Settlement Amount for such Settlement Date, minus (ii) if
Party B elects to pay the Net Stock Settlement Fee in Shares, the Net Stock Settlement Fee for such Settlement Date; divided by (b) the weighted average price at which Party A is able to purchase Shares during the Unwind Period to unwind its
hedge in compliance with Rule 10b-18 under the Exchange Act as if it applied to Party A during the Unwind Period.
		
	 Net Stock Settlement Fee:
	  	For any Settlement Date in respect of which Party B has elected Net Stock Settlement, Party B shall pay to Party A on such Settlement Date a fee of $0.02 multiplied by the number of
Settlement Shares, payable in cash or Shares at the option of Party B.
		
	 Settlement Currency:
	  	USD.
		
	 Failure to Deliver:
	  	Applicable.
		
	 Suspension of Cash or Net
 Stock Settlement:
  
	  	 
	 Suspension Day:
	  	Any day on which Party A determines based on the advice of counsel that Cash or Net Stock Settlement may violate applicable securities laws. Party A shall notify Party B if it receives such
advice from its counsel. Notwithstanding any provision in this Agreement to the contrary, Physical Settlement shall apply if a Suspension Day exists during the Cash/Net Stock Notice Period, but only to the extent that Party A has been unable as a
result thereof to purchase Shares in the amount equal to the Settlement Shares prior to the Settlement Date and has provided notice to such effect to Party B.

  

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 Adjustments: 
  

			
	Method of Adjustment:	  	                Calculation Agent Adjustment.

  
 Extraordinary
Events: 
  

			
	Consequences of Merger Events:	  	 
		
	    Share-for-Share:	  	Cancellation and Payment.
		
	    Share-for-Other:	  	Cancellation and Payment.
		
	    Share-for-Combined:	  	Cancellation and Payment.
	
	Determination of the Settlement Method following an occurrence of a Merger Event is subject to “Share Settlement upon Certain Events” in Section 4 of this Confirmation. The
parties hereto acknowledge that it would be commercially reasonable for Merrill Lynch, as Determining Party, to take into account the considerations set forth in Section 12.8(e) in the 2002 Definitions.
	
	Settlement Following other Extraordinary Events:
	
	As provided hereinafter under “Termination Settlement”, for purposes of the Extraordinary Events constituting Acceleration Events set forth in paragraph (f) of the
definition thereof, Party B shall elect whether payment of the Settlement Amount is to be effected by Physical Settlement or Net Stock Settlement within one Scheduled Trading Day of the designation of the related Settlement Date; provided,
that if Party B fails to do so, Physical Settlement shall apply.

  
 Account
Details: 
  

			
	     Payments to Party A:
	  	    To be advised under separate cover or telephone confirmed prior to each Settlement Date.
		
	     Payments to Party B:
	  	    To be advised under separate cover or telephone confirmed prior to each Settlement Date.
		
	     Delivery of Shares to Party A:
	  	    To be advised.
		
	     Delivery of Shares to Party B:
	  	    To be advised.

  

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	3.	 	Other Provisions: 

  
 Conditions to Effectiveness: 
  
 The effectiveness of this Confirmation on the Effective Date shall be subject to (i) the condition that the representations and warranties of Party B
contained in the Purchase Agreement dated the date hereof among Party B, Merrill Lynch, Pierce, Fenner & Smith Incorporated, the Selling Stockholders named therein and the other underwriters named therein (the “Purchase Agreement”) and
any certificate delivered pursuant thereto by Party B be true and correct on the Effective Date as if made as of the Effective Date, (ii) the condition that Party B have performed all of the obligations required to be performed by it under the
Purchase Agreement on or prior to the Effective Date, (iii) the satisfaction of all of the conditions set forth in Section 5 of the Purchase Agreement, and (iv) the condition that none of the following has occurred: (A) Party A is unable to borrow
and deliver for sale a number of Shares equal to the Base Amount or (B) Party A would incur a stock loan cost of more than 50 basis points per annum to do so (in which event this Confirmation shall be effective but the Base Amount for this
Transaction shall be the number of Shares Party A is required to deliver in accordance with Section 2(a)(ii) of the Purchase Agreement); provided that if the circumstances set forth in clause (B) above occur, Party B may, within three Scheduled
Trading Days, refer Party A to a lending party reasonably acceptable to Party A that will lend Party A Shares at a stock loan cost of no more than 50 basis points per annum (a “Referral Lending Party”) in order to satisfy the conditions to
effectiveness. 
  
 Additional Representations, Warranties and
Agreements of Party B: Party B hereby represents and warrants to, and agrees with, Party A as of the date hereof that: 
  

	 	(a)	 	Any Shares, when issued and delivered in accordance with the terms of the Transaction, will be duly authorized and validly issued, fully paid and nonassessable, and the issuance
thereof will not be subject to any preemptive or similar rights. 

  

	 	(b)	 	Party B has reserved and will keep available, free from preemptive rights, out of its authorized but unissued Shares, solely for the purpose of issuance upon settlement of the
Transaction as herein provided, the full number of Shares as shall then be issuable upon settlement of the Transaction. All Shares so issuable shall, upon such issuance, be accepted for listing or quotation on the Exchange. 


 

	 	(c)	 	Prior to any Settlement Date, the Settlement Shares with respect to that Settlement Date shall have been approved for listing or quotation on the Exchange, subject to official
notice of issuance, and such Settlement Shares shall have been registered under the Securities Act. 

  

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	 	(d)	 	The execution, delivery and performance by Party B of this Confirmation (including, without limitation, the issuance and delivery of Shares on any Settlement Date) and compliance by
Party B with its obligations hereunder has been duly authorized by all necessary corporate action and does not and will not result in any violation of the provisions of the charter or by-laws of Party B or any subsidiary or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any government instrumentality or court, domestic or foreign, having jurisdiction over Party B or any subsidiary or any of their assets, properties or operations.


  

	 	(e)	 	No filing with, or authorization, approval, consent, license, order registration, qualification or decree of, any court or governmental authority or agency is necessary or required
for the execution, delivery and performance by Party B of this Confirmation and the consummation of the Transaction (including, without limitation, the issuance and delivery of Shares on any Settlement Date) except (i) such as have been obtained
under the Securities Act and (ii) as may be required to be obtained under state securities laws. 

  

	 	(f)	 	Party B agrees not to repurchase any Shares if, immediately following such repurchase, the Base Amount would be equal to or greater than 9.5% of the number of then-outstanding
Shares. 

  

	 	(g)	 	Party B agrees not to declare any distribution, issue or dividend consisting of cash to existing holders of the Shares with a record date on or prior to the final Settlement Date
under this Confirmation. 

  

	 	(h)	 	Party B is not insolvent, nor will Party B be rendered insolvent as a result of this Transaction. 

  

	 	(i)	 	Neither Party B nor any of its officers or directors shall take, and Party B shall not cause any of its affiliates to take, any action that would cause any purchases of Shares by
Party A in connection with any Cash Settlement or Net Stock Settlement of this Transaction not to comply with Rule 10b-18 under the Exchange Act. 

  


	 	(j)	 	Party B will not engage in any “distribution” (as defined in Regulation M under the Exchange Act) during any Unwind Period. 

  

	 	(k)	 	Party B is an “eligible contract participant” (as such term is defined in Section 1(a)(12) of the Commodity Exchange Act, as amended). 

  

	 	(l)	 	In addition to any other requirements set forth herein, Party B agrees not to elect Cash Settlement or Net Stock Settlement if such settlement would result in a violation of the
U.S. federal securities laws or any other federal or state law or regulation applicable to Party B. 

  

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 Covenant of Party B: 
  
 The parties acknowledge and agree that any Shares delivered by Party B to Party A on any Settlement Date will be newly
issued Shares and when delivered by Party A (or an affiliate of Party A) to securities lenders from whom Party A (or an affiliate of Party A) borrowed Shares in connection with hedging its exposure to the Transaction will be freely saleable without
further registration or other restrictions under the Securities Act of 1933, as amended, in the hands of those securities lenders, irrespective of whether such stock loan is effected by Party A or an affiliate of Party A to hedge Party A’s
exposure under the Transaction. Accordingly, Party B agrees that the Settlement Shares that it delivers to Party A on each Settlement Date will not bear a restrictive legend and that such Settlement Shares will be deposited in, and the delivery
thereof shall be effected through the facilities of, the Clearance System. 
  
 Covenants of Party A: 
  

	 	(a)	 	Party A shall use any Settlement Shares delivered by Party B to Party A to return to securities lenders to close out borrowings created by Party A in connection with its hedging
activities related to exposure under this Transaction.  

  

	 	(b)	 	In connection with bids and purchases of Shares in connection with any Cash Settlement or Net Stock Settlement of this Transaction, Party A shall use its best efforts to comply, or
cause compliance, with the provisions of Rule 10b-18 under the Exchange Act, as if such provisions were applicable to such purchases. 

  

	 	(c)	 	Party A shall use its reasonable efforts to maintain its hedge of its exposure to the Transaction by borrowing sufficient Shares from lenders at a stock loan cost not to exceed 50
basis points per annum. 

  
 Acceleration
Events: An Acceleration Event shall occur if: 
  

	 	(a)	 	Stock Borrow Events. Notwithstanding any other provision hereof, if in its judgment Party A is unable to hedge Party A’s exposure to the Transaction (a “Stock
Borrow Event”) because (i) of the lack of sufficient Shares being made available for Share borrowing by lenders, or (ii) it would incur a stock loan cost of more than 50 basis points per annum, then Party A shall have the right to designate any
Scheduled Trading Day to be a Settlement Date for which Physical Settlement shall apply on at least two Scheduled Trading Days’ notice, and to select the number of Settlement Shares for such Settlement Date; provided that (x) prior to
the designation of a Stock Borrow Event under this Paragraph (a), Party B may, within three Scheduled Trading Days, refer 

  

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 Party A to a Referral Lending Party and (y) the number of Settlement Shares for any Settlement Date so
designated by Party A shall not exceed the number of Shares as to which such inability to borrow exists; or 
  

	 	(b)	 	Share Price Reduction. Notwithstanding any other provision hereof, if the average of the closing bid and offer prices or, if available, the closing sale price per Share on
the Exchange for the regular trading session on any Scheduled Trading Day occurring after the Trade Date is less than or equal to $7.00, Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for which Physical
Settlement shall apply on at least ten Scheduled Trading Days’ notice, and to select the number of Settlement Shares for such Settlement Date; or 

  

	 	(c)	 	Dividends and Other Distributions. Notwithstanding any other provision hereof, if on any day occurring after the Trade Date Party B declares a distribution, issue or dividend
to existing holders of the Shares of (i) cash or (ii) securities or share capital of another issuer acquired or owned (directly or indirectly) by Party B as a result of a spin-off or other similar transaction or (iii) any other type of securities
(other than Shares, which may constitute a Potential Adjustment Event), rights or warrants or other assets, in any case for payment (cash or other consideration), which distribution, issue or dividend has an ex-dividend date prior to the Maturity
Date, then Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for which Physical Settlement shall apply on at least three Scheduled Trading Day’s notice, and to select the number of Shares for such
Settlement Date. 

  

	 	(d)	 	ISDA Early Termination Date. Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if either Party A or Party B has the right to designate
an Early Termination Date pursuant to Section 6 of the Agreement, such party shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice. Upon
the designation of such Settlement Date, Party B shall notify Party A within one Scheduled Trading Day whether Physical Settlement or Net Stock Settlement applies; provided, that if Party B fails to do so, Physical Settlement shall apply; or


  

	 	(e)	 	Board Approval of Merger. Notwithstanding any other provision hereof, if on any day occurring after the Trade Date the board of directors of Party B votes to approve any
action that, if consummated, would constitute a Merger Event (as defined in the 2002 Definitions), Party B shall notify Party A of any such vote within one Scheduled Trading Day. Party A shall have the right to designate any Scheduled Trading Day to
be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice. Upon the designation of such Settlement Date, Party B shall notify Party A within one 

  

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 Scheduled Trading Day whether Physical Settlement or Net Stock Settlement applies; provided, that
if Party B fails to do so, Physical Settlement shall apply; or 
  

	 	(f)	 	Other ISDA Events. Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if a Nationalization, Insolvency, Insolvency Filing, Delisting or
Change in Law occurs, Party A shall have the right to designate any Scheduled Trading Day to be a Settlement Date for the entire Transaction on at least three Scheduled Trading Days’ notice and Party A shall be the Determining Party. Upon the
designation of such Settlement Date, Party B shall notify Party A of the settlement method within one Scheduled Trading Day whether Physical Settlement or Net Stock Settlement applies; provided, that if Party B fails to do so, Physical
Settlement shall apply. 

  
 Termination
Settlement: 
  
 If a Settlement Date is specified following
an Acceleration Event (a “Termination Settlement Date”), Physical Settlement or Net Stock Settlement shall apply with respect to such Termination Settlement Date as set forth above; provided, that if, Physical Settlement with
respect to any Termination Settlement Date would result in Merrill Lynch & Co., Inc. (“ML & Co.”), directly or indirectly beneficially owning (as such term is delivered for purposes of Section 13(d) of the Exchange Act) at any time
in excess of 9.5% of the Outstanding Shares, then, at the option of Party B, either (i) Net Stock Settlement shall apply with respect to such Termination Settlement Date to the extent (but only to the extent) necessary to maintain such ownership of
Shares by ML & Co. at 9.5% of the Outstanding Shares, and Physical Settlement shall apply to the remainder of the Settlement Shares with respect to such Termination Settlement Date, or (ii) Physical Settlement shall apply, subject to the
provisions of “Limit on Beneficial Ownership” below. 
  
 Rule 10b5-1: 
  
 It is the intent of Party A and
Party B that the purchase of Shares by Party A during any Unwind Period comply with the requirements of Rule 10b5-1(c)(i)(B) of the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).

  
 Party B acknowledges that, except as otherwise provided
herein, (i) during any Unwind Period Party B does not have, and shall not attempt to exercise, any influence over how, when or whether to effect purchases of Shares by Party A (or its agent or affiliate) in connection with this Confirmation and (ii)
Party B is entering into the Agreement and this Confirmation in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act. 

 

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 Party B hereby agrees with Party A that during any Unwind Period Party B shall not communicate, directly
or indirectly, any material non-public information (within the meaning of any applicable securities laws) to any ML Personnel (as defined below). For purposes of this Transaction, “ML Personnel” means any marketers, traders or other front
office employees engaged in Corporate Equity Derivatives of Party A or any of its Affiliates. 
  
 Maximum Share Delivery: 
  
 Notwithstanding any other provision of this Confirmation, in no event will Party B be required to deliver on any Settlement Date, whether pursuant to Physical Settlement or Net Stock Settlement, more than the Base Amount of Shares to Party
A. 
  
 Assignment: 
  
 Party A may assign or transfer any of its rights or delegate any of its
duties hereunder to any affiliate of Party A or any entity organized or sponsored by Party A without the prior written consent of Party B; provided, however, that such assignee’s obligations shall be guaranteed by ML & Co.
Notwithstanding any other provision of this Confirmation to the contrary requiring or allowing Party A to purchase or receive any Shares from Party B, Party A may designate any of its affiliates to purchase or receive such Shares or otherwise to
perform Party A’s obligations in respect of this Transaction and any such designee may assume such obligations, and Party A shall be discharged of its obligations to Party B to the extent of any such performance. 
  
 Guarantee of Party A: 
  
 ML & Co. shall guarantee all obligations of Party A under this
Confirmation and shall execute a Guarantee in favor of Party B substantially in the form of Annex B hereto. 
  
 Matters Relating to Agent: 
  

	 	(a)	 	As a broker-dealer registered with the U.S. Securities and Exchange Commission, MLPFS in its capacity as Agent, will be responsible for (i) effecting the Transaction, (ii) issuing
all required confirmations and statements to Party A and Party B and (iii) maintaining books and records relating to the Transaction. 

  

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	 	(b)	 	MLPFS shall act as “agent” for Party A and Party B within the meaning of Rule 15a-6 under the Securities Exchange Act of 1934 in connection with the Transaction.


  

	 	(c)	 	The Agent, in its capacity as such, shall have no responsibility or liability (including, without limitation, by way of guarantee, endorsement or otherwise) to Party A or Party B or
otherwise in respect of the Transaction, including, without limitation, in respect of the failure of Party A or Party B to pay or perform under this Confirmation, except for its gross negligence or willful misconduct in performing its duties as
Agent hereunder. 

  

	 	(d)	 	Each of Party A and Party B agree to proceed solely against the other to collect or recover any securities or monies owing to Party A or Party B, as the case may be, in connection
with or as a result of the Transaction. 

  

	 	(e)	 	The Agent will be Party A’s agent for service of process for the purpose of Section 13(c) of the Agreement. 

  
 Indemnity 
  
 Party B agrees to indemnify Party A and its affiliates and their respective
directors, officers, agents and controlling parties (Party A and each such affiliate or person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, to which such Indemnified
Party may become subject under, in connection with, relating to, or arising out of, this Agreement or Transaction with respect to any applicable securities laws or Delaware corporate law and will reimburse any Indemnified Party for all reasonable
expenses (including reasonable legal fees and reasonable expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party thereto. Party B will not be liable under this Indemnity paragraph to the extent that any loss, claim, damage, liability or expense is found in a final nonappealable judgment by a court of competent jurisdiction
to have resulted from Party A’s gross negligence, fraud, bad faith and/or willful misconduct. 
  
 Miscellaneous 
  

			
	Non-Reliance:	  	Applicable
		
	Additional Acknowledgements:	  	Applicable
		
	 Agreements and Acknowledgments
 Regarding Hedging
Activities:
	  	Applicable

  

 16 









	4.	 	The Agreement is further supplemented by the following provisions: 

  
 Share Settlement upon Certain Events: 
  
 Notwithstanding anything to the contrary herein, in the Agreement or in the Definitions, if at any time (i) an Early Termination Date occurs and Party B
would be required to make a payment pursuant to Sections 6(d) and 6(e) of the Agreement, or (ii) a Merger Event occurs and Party B would be required to make a payment pursuant to Sections 12.2 and 12.7 of the 2002 Definitions, then in lieu of any
such payment, Party B at its election, may deliver to Party A, at the time such payment would have been due and in the manner provided under “Physical Settlement” in the 2002 Definitions, a number of Shares (or, in the case of a Merger
Event, common equity securities of the surviving entity) equal to the quotient obtained by dividing (A) the amount that would have been so payable by (B) the fair market value per Share (or per unit of such common equity security) of the Shares (or
units) so delivered at the time of such delivery, as determined by the Calculation Agent (which fair market value shall take into account whether the Shares so delivered are freely tradeable). Upon Party B’s election to deliver Shares, the
Transaction will not be considered for purposes of determining an Early Termination Amount under Section 6(e) of the Agreement. 
  
 Agreement Regarding Set-off: 
  
 The last sentence of the first paragraph of Section 6(e) of the Agreement shall not apply with respect to the Transaction to the extent that any of the
events described in Section 5(a)(vii) of the Agreement occurs with respect to Party B. 
  
 Bankruptcy Rights: 
  
 In
the event of Party B’s bankruptcy, Party A acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to this Transaction that are senior to the claims of common stockholders. For the avoidance of doubt,
the parties acknowledge and agree that Party A’s rights with respect to any other claim arising from this Transaction prior to Party B’s bankruptcy shall remain in full force and effect and shall not be otherwise abridged or modified in
connection herewith. 
  
 Limit on Beneficial Ownership:

  
 Notwithstanding any other provisions hereof, Party A shall
not be entitled to receive Shares hereunder (whether in connection with the purchase of Shares on any Settlement Date or otherwise) to the extent (but only to the extent) that such receipt would result in ML & Co. directly or indirectly
beneficially owning (as such term is defined for purposes of Section 13(d) of the Exchange Act) at any time in excess of 9.5% of the outstanding Shares. Any purported delivery hereunder shall be void and have no effect to the extent (but only to the
extent) that such delivery would result in ML & Co. directly or indirectly so beneficially 
  

 17 








 owning in excess of 9.5% of the outstanding Shares. If use of Physical Settlement on any Settlement Date
(other than a Termination Settlement Date) would result in Party A receiving more than 9.5% of the outstanding Shares, then (1) the Physical Settlement on such Settlement Date (the “Partial Settlement Date”) shall be limited to that number
of Shares which would result in Party A receiving no more than 9.5% of the outstanding shares of Common Stock and (2) the Settlement Date for the remaining Shares (the “Additional Settlement Date”) shall be that Scheduled Trading Day which
is 70 calendar days after such Partial Settlement Date. An Additional Settlement Date may be later than the Maturity Date. 
  
 Miscellaneous: 
  

	 	(a)	 	Addresses for Notices. For the purpose of Section 12(a) of the Agreement: 

  
   Address for notices or communications to Party A: 
  

			
	Address:	  	c/o Merrill Lynch, Pierce, Fenner & Smith
	 	  	                            Incorporated
	 	  	Four World Financial Center
	 	  	North Tower, 5th Floor
	 	  	New York, NY 10080
	Attention:	  	Equity-Linked Capital Markets Group
	Telephone No.:	  	(212) 449-6763
	Facsimile No.:	  	(212) 738-1069

  
   Address for notices or communications to Party B: 
  

			
	Address:	  	The Pantry, Inc.
	 	  	P.O. Box 1410
	 	  	1801 Douglas Drive
	 	  	Sanford, NC 27330
	Attention:	  	Corporate Secretary

  

	 	(b)	 	Waiver of Right to Trial by Jury. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or
proceeding relating to this Confirmation or any Credit Support Documentation. Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the
event of such a suit action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into this Confirmation by, among other things, the mutual waivers and certifications in this
Section. 

  

 18 









	5.	 	ISDA Master Agreement 

 With respect to the Agreement, Party A and Party B
each agree as follows: 
  
 Specified Entities: 
  

			
	 (i) in relation to Party A, for the purposes of:

		
	 Section 5(a)(v):
	  	not applicable
	 Section 5(a)(vi):
	  	not applicable
	 Section 5(a)(vii):
	  	not applicable
	 Section 5(b):
	  	not applicable
	
	 and (ii) in relation to Party B, for purposes of:

		
	 Section 5(a)(v):
	  	not applicable
	 Section 5(a)(vi):
	  	not applicable
	 Section 5(a)(vii):
	  	not applicable
	 Section 5(b):
	  	not applicable

  
 “Specified
Transaction” will have the meaning specified in Section 14 of this Agreement. 
  
 The “Cross Default” provisions of Section 5(a)(vi) of the Agreement will not apply to Party A and will not apply to Party B. 
  
 The “Credit Event Upon Merger” provisions of Section 5(b)(v) of the Agreement will not apply to Party A or will not apply to Party B. 
  
 The “Automatic Early Termination” provision of Section 6(a) of the Agreement
will not apply to Party A and will not apply to Party B. 
  
 “Termination
Currency” means USD. 
  
 Additional Termination Event will not apply.

  
 Tax Representations: 
  

	 	(I)	 	For the purpose of Section 3(e) of the Agreement, each party represents to the other party that it is not required by any applicable law, as modified by the practice of any Relevant
Authority to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of the Agreement) to be made by it to the other party under the Agreement. In making this representation,


  

 19 








 each party may rely on (i) the accuracy of any representations made by the other party pursuant to
Section 3(f) of the Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the Agreement except that
it will not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by reason of material prejudice to its legal or commercial
position. 
  

	 	(II)	 	Each party makes the following representations to the other party: 

  

	 	(i)	 	Party A represents that it is a corporation organized under the laws of England and Wales. 

  

	 	(ii)	 	Party B represents that it is a corporation incorporated under the laws of the State of Delaware. 

  
 Agreement to Deliver Documents: For the purpose of Section 4(a)(i) and 4(a)(ii) of the Agreement, each party agrees to deliver the
following document, as applicable: 
  

	 	(I)	 	Tax forms, documents or certificates to be delivered are: 

  
 Each party agrees to complete (accurately and in a manner reasonably satisfactory to the other party), execute, and deliver to the other party, United
States Internal Revenue Service Form W-9 or W-8 BEN, or any successor of such form(s): (i) before the first payment date under this agreement; (ii) promptly upon reasonable demand by the other party; and (iii) promptly upon learning that any such
form(s) previously provided by the other party has become obsolete or incorrect. 
  

	 	(II)	 	Other Documents to be delivered: 

  

							
	 Party Required to
Deliver Document

	  	 Document Required to be
 Delivered

	  	When Required

	  	 Covered by
 Section 3(d)
 Representation


	 Party A and Party B
	  	Evidence of the authority and true signatures of each official or representative signing this Confirmation	  	Upon or
before
execution
and delivery
of this
Confirmation	  	Yes
				
	 Party B
	  	Certified copy of the resolution of the Board of Directors or equivalent document authorizing the execution and delivery of this Confirmation	  	Upon or
before
execution
and delivery
of this
Confirmation	  	Yes
				
	 Party A
	  	Guarantee of its Credit Support Provider, substantially in the form of Exhibit A attached hereto	  	Upon or
before
execution
and delivery
of this
Confirmation	  	Yes

  

 20 









	(I)	 	Miscellaneous Addresses for Notices: For the purpose of Section 12(a) of the Agreement: 

  

	 	 	Address for notices or communications to Party A: 

  

					
	 	 	 Address:
	  	Merrill Lynch International
	 	 	 	  	c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
	 	 	 	  	Four World Financial Center
	 	 	 	  	North Tower, 5th Floor
	 	 	 	  	New York, NY 10080
	 	 	 Attention:
	  	Equity-Linked Capital Markets Group
	 	 	 Telephone No.:
	  	(212) 449-6763
	 	 	 Facsimile No.:
	  	(212) 738-1069

  

	 	(For	 	all purposes) 

  
 Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as well as any changes to Party B’s address, telephone number or facsimile
number should be sent to: 
  
 GMI Counsel

 Merrill Lynch World Headquarters 
 4 World Financial Center 
 New York, New York 10080 
 Attention: Global Equity Derivatives 
 Facsimile No.: 212 449-6576 Telephone No.: 212 449-6309 
  
 Address for notices or communications to Party B for all purposes: 
  
 The Pantry, Inc. 
 P.O. Box 1410 
 1801 Douglas Drive 
 Sanford, NC 27330 
 Attention: Corporate Secretary 
  

 21 








 Process Agent: For the purpose of Section 13(c) of the Agreement, Party A appoints as its process agent:

  
 Merrill Lynch, Pierce, Fenner & Smith Incorporated

 222 Broadway, 16th Floor 
 New
York, NY 10038 
 Attention: Litigation Department 
  

Party B does not appoint a Process Agent. 
  

	(II)	 	Credit Support Document:  

  
 Party A: Guarantee of ML & Co. in the form attached hereto as Exhibit A. 
  
 Party B: None 
  

	(III)	 	Credit Support Provider: 

  
 With respect to Party A: ML & Co. and with respect to Party B, Not Applicable. 
  

	(IV)	 	Governing Law. This Confirmation will be governed by, and construed in accordance with, the laws of the State of New York. 

  

	(V)	 	Netting of Payments. “Multiple Transaction Payment Netting” will not apply for the purpose of Section 2(c) of this Agreement; provided, however, that with respect
to this Agreement or any other ISDA Master Agreement between the parties, any Share delivery obligations on any day of Party B, on the one hand, and Party A, on the other hand, shall be netted. The resulting Share delivery obligation of a party upon
such netting shall be rounded down to the nearest number of whole Shares, such that neither party shall be required to deliver any fractional Shares. 

  

	(VI)	 	Accuracy of Specified Information. Section 3(d) of the Agreement is hereby amended by adding in the third line thereof after the word “respect” and before the
period the words “or, in the case of audited or unaudited financial statements or balance sheets, a fair presentation of the financial condition of the relevant person.” 

  

	(VII)	 	Amendment of Section 3(a)(iii). Section 3(a)(iii) of the Agreement is modified to read as follows: 

  
 No Violation or Conflict. Such execution, delivery and performance do
not materially violate or conflict with any law known by it to be applicable to it, any provision of its constitutional documents, any order or judgment of any court or agency of government applicable to it or any of its assets or any material
contractual restriction relating to Specified Indebtedness binding on or affecting it or any of its assets. 
  

 22 









	(VIII)	 	Amendment of Section 3(a)(iv). Section 3(a)(iv) of the Agreement is modified by inserting the following at the beginning thereof: 

  
 “To such party’s best knowledge,” 
  

	(IX)	 	Additional Representations will apply for the purpose of Section 3 of the Agreement. The following will constitute Additional Representations: 

  
 Party B Representations. 
  
 Party B is acting for its own account, and it has made its own independent
decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or
oral) of Party A as investment advice or as a recommendation to enter into this Transaction, it being understood that information and explanations related to the terms and conditions of this Transaction will not be considered investment advice or a
recommendation to enter into this Transaction. No communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected results of this Transaction. 
  
 Party B is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepted, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the risks of this Transaction. 
  
 Party A is not acting as a fiduciary for or an adviser to it in respect of
this Transaction. 
  
 Party B is not and has not been the subject
of any civil proceeding of a judicial or administrative body of competent jurisdiction that could reasonably be expected to impair materially Party B’s ability to perform its obligations hereunder. 
  
 Party B will by the next succeeding Business Day notify Party A upon
obtaining knowledge of the occurrence of any event that would constitute an Event of Default, a Potential Event of Default or a Potential Adjustment Event. 
  
 As of the date hereof, Party B is not insolvent. 
  
 Party A Representations. 
  
 FDICIA Representation. Party A represents that it is a “financial institution” for purposes of Section 402 of the Federal Deposit Insurance Corporation
Improvement Act of 1991, as amended (the “Statute”), and the regulations promulgated pursuant thereto because either (A) it is a broker 
  

 23 








 or dealer, a depository institution or a futures commission merchant (as such terms are defined in the Statute) or (B) it
will engage in financial contracts (as so defined) as a counterparty on both sides of one or more financial markets (as so defined) and either (I) had one or more financial contracts of a total gross dollar value of at least $1 billion in notional
principal amount outstanding on any day during the previous 15-month period with counterparties that are not its affiliates or (II) had total gross mark-to-market positions of at least $100,000,000 (aggregated across counterparties) in one or more
financial contracts on any day during the previous 15-month period with counterparties that are not its affiliates. 
  
 Acknowledgements: 
  
 (1) The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as
set forth in this Confirmation. 
  
 (2) The parties hereto intend for: 

 

	 	(a)	 	this Transaction to be a “securities contract” as defined in Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”),
qualifying for the protections under Section 555 of the Bankruptcy Code; 

  

	 	(b)	 	a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party
to constitute a “contractual right” as defined in the Bankruptcy Code; and 

  

	 	(c)	 	all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined
in the Bankruptcy Code. 

  
 Amendment of Section 6(d)(ii).
Section 6(d)(ii) of the Agreement is modified by deleting the words “on the day” in the second line thereof and substituting therefor “on the day that is three Local Business Days after the day”. Section 6(d)(ii) is further
modified by deleting the words “two Local Business Days” in the fourth line thereof and substituting therefor “three Local Business Days.” 
  

Recording of Conversations. Each party (i) consents to the recording of telephone conversations between the trading, marketing and other relevant personnel of
the parties in connection with this Agreement or any potential Transaction, (ii) agrees to obtain any necessary consent of, and give any necessary notice of such recording to, its relevant personnel and (iii) agrees, to the extent permitted by
applicable law, that recordings may be submitted in evidence in any Proceedings. 
  
 Severability. If any term, provision, covenant or condition of this Confirmation, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable in 
  

 24 








 whole or in part for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full
force and effect as if this Confirmation had been executed with the invalid or unenforceable provision eliminated, so long as this Confirmation as so modified continues to express, without material change, the original intentions of the parties as
to the subject matter of this Confirmation and the deletion of such portion of this Confirmation will not substantially impair the respective benefits or expectations of parties to this Agreement; provided, however, that this severability
provision shall not be applicable if any provision of Section 2, 5, 6 or 13 of the Agreement (or any definition or provision in Section 14 to the extent that it relates to, or is used in or in connection with any such Section) shall be so held to be
invalid or unenforceable. 
  
 Affected Parties. For purposes of Section
6(e) of the Agreement, each party shall be deemed to be an Affected Party in connection with Illegality and any Tax Event. 
  
 [Remainder of page intentionally left blank] 
  

 25 








 Please confirm that the foregoing correctly sets forth the terms of our agreement by signing and returning this
Confirmation. 
  

			
	 Yours faithfully,

	
	 MERRILL LYNCH INTERNATIONAL

		
	 By:
	 	 /s/ Brian Carroll


	 Name:
	 	 Brian Carroll

	 Title:
	 	 Authorized Signatory



  
 Confirmed as of the date first
written above: 
  

			
	 THE PANTRY, INC.

		
	 By:
	 	 /s/ Peter J. Sodini


	 Name:
	 	 Peter J. Sodini

	 Title:
	 	 President and Chief Executive Officer


  

			
	 MERRILL LYNCH, PIERCE, FENNER & SMITH
 INCORPORATED

		
	 By:
	 	 /s/ Angelina Lopes


	 Name:
	 	 Angelina Lopes

	 Title:
	 	 Authorized Signatory









 Annex A 
  
 GUARANTEE OF MERRILL LYNCH & CO., INC. 
  
 FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH & CO., INC., a corporation duly organized and existing under the laws of
the State of Delaware (“ML & Co.”), hereby unconditionally guarantees to The Pantry, Inc. (the “Company”), the due and punctual payment of any and all amounts payable by Merrill Lynch International, a company organized under
the laws of England and Wales (“ML”), under the terms of the Confirmation, dated October 13, 2004, between the Company and ML, (the “Agreement”), including, in case of default, interest on any amount due, when and as the
same shall become due and payable, whether on the scheduled payment dates, at maturity, upon declaration of termination or otherwise, according to the terms thereof. In case of the failure of ML punctually to make any such payment, ML & Co.
hereby agrees to make such payment, or cause such payment to be made, promptly upon demand made by the Company to ML & Co.; provided, however that delay by the Company in giving such demand shall in no event affect ML & Co.’s
obligations under this Guarantee. This Guarantee shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment guaranteed hereunder, in whole or in part, is rescinded or must otherwise be returned by
the Company upon the insolvency, bankruptcy or reorganization of ML or otherwise, all as though such payment had not been made. 
  
 ML & Co. hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the
Agreement; the absence of any action to enforce the same; any waiver or consent by the Company concerning any provisions thereof; the rendering of any judgment against ML or any action to enforce the same; or any other circumstances that might
otherwise constitute a legal or equitable discharge of a guarantor or a defense of a guarantor. ML & Co. covenants that this guarantee will not be discharged except by complete payment of the amounts payable under the Agreement. This Guarantee
shall continue to be effective if ML merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist. 
  
 ML & Co. hereby waives diligence; presentment; protest; notice of protest, acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of ML; all demands whatsoever, except as noted in the first paragraph hereof; and any right to require a proceeding first against ML. 
  

ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid obligation of ML & Co. and complies with all applicable laws.

  
 This Guarantee shall be governed by, and construed in
accordance with, the laws of the State of New York. 
  
 This
Guarantee may be terminated at any time by notice by ML & Co. to the Company given in accordance with the notice provisions of the Agreement, effective upon receipt of such notice by the Company or such later date as may be specified in such
notice; provided, however, 

  









 
that this Guarantee shall continue in full force and effect with respect to any obligation of ML under the Agreement entered into prior to the effectiveness
of such notice of termination. 
  
  
  
  
  
  
  
  
  
 [REMAINDER OF PAGE INTENTIONALLY LEFT BANK] 
  
  
  
  
  
  
  
  
  

 2 








 This Guarantee becomes effective concurrent with the effectiveness of the Agreement, according to its
terms. 
  
 IN WITNESS WHEREOF, ML & Co. has caused this
Guarantee to be executed in its corporate name by its duly authorized representative. 
  

			
	 MERRILL LYNCH & CO. INC.

		
	 By:
	 	 /s/ Patricia Kropiewnicki


	 Name:
	 	 Patricia Kropiewnicki

	 Title:
	 	 Designated Signatory



  

	Dated:	 	October 13, 2004