Document:

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. 

  

 10 

	 	(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 

  

 12 

 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. 

  

 15 

	 	(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, 2004Amended and Restated Employment Agreement

 Exhibit 10.1 
  
 AMENDED AND RESTATED 
 EMPLOYMENT AGREEMENT 
  
 This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), executed this 1st day
of September, 2004, effective as of May 1, 2004 (the “Effective Date”), is made by and among CellStar Ltd., a Texas limited partnership (the “Employer”), CellStar Corporation, a Delaware corporation and parent
company of Employer (“Parent”), and Terry S. Parker (the “Employee”). 
  
 R E C I T A L S 
  
 WHEREAS, Employer, Employee and Parent are parties to that certain Employment Agreement, dated July 5, 2001 (the “Old Employment Agreement”), whereby Employer has obtained the benefit of the services
of Employee as an employee of Employer for the period of time and subject to the terms and conditions provided therein; 
  
 WHEREAS, Employer, Employee and Parent wish to amend and restate the provisions of the Old Employment Agreement in their entirety by means of this
Agreement, with the intent that (i) the provisions of this Agreement shall supercede and replace the provisions of the Old Employment Agreement in their entirety and (ii) that Employee’s employment with Employer shall be governed by this
Agreement effective as of the Effective Date; 
  
 WHEREAS,
Employer desires that Employee participate in Parent’s equity and incentive compensation plans and other benefits as provided herein; and 
  
 WHEREAS, the Board of Directors of Parent deems it advisable and in the best interests of Parent and Employer to enter into this Agreement with Employee;

  
 A G R E E M E N T 
  
 NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows: 
  
 ARTICLE I 
  
 Employment 
  
 1.1 Employment. Employee currently serves as an employee of Employer.
Effective as of the Effective Date, Employee’s employment shall be governed by, and shall be continued under, the terms and conditions contained in this Agreement. 

 1.2 Term. Subject to the provisions of the next sentence, the term of this Agreement shall
commence on the Effective Date and shall end on the two (2) year anniversary of the Effective Date (the “Original Term”), unless earlier terminated as provided herein (the period from the Effective Date to the date of the
termination of this Agreement is hereinafter referred to as the “Term”). At the expiration of the Original Term, this Agreement shall automatically be renewed for one (1) additional year (the “Renewal Term”) unless
(i) notice of any decision not to renew this Agreement is given by Employer or Employee at least one hundred eighty (180) days prior to the expiration of the Original Term or (ii) this Agreement is earlier terminated as provided herein. At the end
of the Renewal Term, the Term shall terminate, unless Employee and Employer agree in writing to extend the Term for an additional period. 
  
 1.3 Position and Duties. 
  
 (a) Position. During the Term, Employee shall serve as the chief executive officer with the title of Executive Chairman of Employer
and Parent, with authority, duties and responsibilities consistent with such position, and shall perform such other services for Employer, Parent and their affiliated entities consistent with such position as may be reasonably assigned to him from
time to time by the board of directors of the general partner of Employer or the Board of Directors of Parent. During the Term, Employee shall, if reasonably requested to do so and if so elected or appointed, also accept election or appointment, and
serve, as an officer and/or director of Employer or any of its affiliated entities and perform the duties appropriate thereto, without additional compensation other than as set forth herein. Employee’s actions hereunder shall at all times be
subject to the direction of the board of directors of the general partner of Employer or the Board of Directors of Parent. 
  
 (b) Commitment. During the Term, Employee shall devote substantially all of his business time, energy, skill and best efforts to
the performance of his duties hereunder in a manner that will faithfully and diligently further the business and interests of Employer, Parent and their affiliated entities. Subject to the foregoing, Employee may serve in any capacity with any
civic, educational or charitable organization; provided that such activities and services do not interfere or conflict with the performance of his duties hereunder. Employee shall comply with policies, standards and regulations established from time
to time by the board of directors of the general partner of Employer or the Board of Directors of Parent. 
  
 1.4 Compensation. 
  
 (a) Base Salary. Subject to Section 1.4(c) below, beginning on the Effective Date, Employer shall pay Employee as compensation an
aggregate salary (“Base Salary”) of five hundred thousand dollars ($500,000) per year during the Term, or such greater amount as shall be approved in accordance with the policies of Employer and/or Parent, as applicable. The Base
Salary for each year shall be paid by Employer in accordance with the regular payroll practices of Employer. 
  

 2 

 (b) Annual Incentive Payment. Employee shall be eligible to participate in an
annual incentive plan approved by the Board of Directors of Parent. 
  
 (c) Withholding. With respect to any compensation received by Employee with respect to Employee’s services for Employer or any of its affiliates, Employer will deduct such withholding and other payroll
taxes as are required to be withheld by Employer under applicable law. 
  
 (d) Equity Incentive Awards. Employee shall be entitled to annual consideration for future grants of stock options and other forms of equity incentive awards in amounts (if any) and on terms and conditions to
be determined by the Board of Directors of Parent. 
  
 (e) Payment and Reimbursement of Expenses. During the Term, Employer shall pay or reimburse Employee for all reasonable travel and other expenses incurred by Employee in performing his obligations under this Agreement in accordance
with the policies and procedures of Employer or Parent, provided that Employee properly accounts therefor in accordance with the regular policies of Employer or Parent, as applicable. 
  
 (f) Fringe Benefits and Perquisites. During the Term, Employee shall be entitled to participate in or
receive benefits under any stock purchase, profit-sharing, pension, retirement, paid time off, life, medical, dental, disability or other plan or arrangement made generally available by Employer or Parent to employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans and arrangements. Employee shall be credited with the greater of 10 years or his actual years of service with Employer as of the Effective Date for purposes of
determining eligibility and vesting for paid time off and short-term disability benefits. Without limiting the generality of the foregoing, Employer shall maintain long-term disability insurance for Employee that provides for annual disability
payments equal to the lesser of (i) sixty percent (60%) of Employee’s Base Salary, after giving effect to all other disability benefits that would be payable to Employee by Parent, Employer or government agencies, or (ii) such lesser amount
that may be payable under insurance policies that Employer can purchase in accordance with normal insurance underwriting standards. 
  
 1.5 Termination by Employer. 
  
 (a) Disability. Employer may terminate this Agreement for Disability. “Disability” shall exist if, because of ill
health or physical or mental disability, Employee shall have been unable to perform the essential functions of his position under this Agreement, after reasonable accommodation by Employer, as determined in good faith by Parent’s Board of
Directors or a committee thereof, for a period of one hundred eighty (180) consecutive days, or if, in any 12-month period, Employee shall have been unable or shall have failed to perform his duties for a period of one hundred thirty (130) or more
business days, irrespective of whether or not such days are consecutive days. 
  

 3 

 (b) Cause. Employer may terminate Employee’s employment for Cause.
Termination for “Cause” shall mean termination because of Employee’s (i) gross incompetence, (ii) willful misconduct that causes or is likely to cause material economic harm to Employer, Parent or their affiliated entities or
that brings or is likely to bring material discredit to the reputation of Employer, Parent or any of their affiliated entities, as determined by the Board of Directors of Parent in good faith, (iii) failure to substantially follow directions of the
board of directors of the general partner of Employer or the Board of Directors of Parent that are consistent with his duties under this Agreement, provided, that no act, or failure to act, on Employee’s part shall be deemed to
constitute Cause unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that Employee’s act, or failure to act, was in or not opposed to the best interest of Employer, (iv) conviction of, or entry of a
pleading of guilty or nolo contendere to, any crime involving moral turpitude or entry of an order duly issued by any federal or state regulatory agency having jurisdiction in the matter permanently prohibiting Employee from participating in the
conduct of the affairs of Employer, Parent or their affiliated entities, or (v) any other material breach of any provision of this Agreement. Items (i), (ii), (iii) and (v) of this Section shall not constitute Cause unless Employer or Parent
notified Employee thereof in writing, specifying in reasonable detail the basis therefor and stating that it is grounds for Cause. Furthermore, if Employee’s actions are curable, items (i), (ii), (iii) and (v) of this Section shall not
constitute Cause unless Employee fails to cure such matter within thirty (30) days after such notice is sent or given under this Agreement. Notwithstanding the previous sentence, if Employer has given notice to Employee of the same action covered by
item (i), (ii), (iii), or (iv) on three separate occasions, Cause shall exist for terminating Employee upon the giving of the third notice, and Employee shall not have the right to cure such matter covered by the third notice. It is understood that
“Cause” shall not include a failure to perform due to a Disability. 
  
 (c) Without Cause. Employer may, at any time, terminate Employee’s employment Without Cause. Termination “Without
Cause” shall mean termination of Employee’s employment by Employer other than termination for Cause or for Disability. 
  
 (d) Employer Explanation of Termination. Upon termination of this Agreement by Employer, Employer shall give prompt written notice
(the “Employer Termination Notice”) to Employee advising Employee of such termination. The Employer Termination Notice shall state in reasonable detail the basis for such termination and shall indicate whether the termination is
being made for Cause, Without Cause or for Disability. 
  
 (e) Definition of Date of Termination. “Date of Termination” shall mean the last day of Employee’s employment. 
  
 (f) Payments upon Termination by Employer. After termination by Employer, Employer shall provide the following payments to
Employee: 
  

 4 

 (i) If Employer terminates Employee’s employment for Disability, Employer’s
obligation to pay salary and benefits pursuant to Section 1.4 (Compensation) shall terminate, except that Employer shall pay Employee accrued but unpaid salary and benefits pursuant to Section 1.4 (Compensation) through the Date of Termination,
after giving effect to all disability benefits received by Employee under the terms of any applicable disability policy. 
  
 (ii) If Employer terminates Employee’s employment for Cause, then Employer’s obligation to make payments and provide benefits
pursuant to Section 1.4 (Compensation) shall terminate, except that Employer shall pay Employee his accrued but unpaid Base Salary and benefits pursuant to Section 1.4 (Compensation) through the Date of Termination; provided, however,
that Employee shall not be entitled to any payment pursuant to Section 1.4(b) (Annual Incentive Payment) for the fiscal year of Parent in which such termination occurs. 
  
 (iii) Subject to Section 1.7(b) (Termination Following a Change in Control), if Employer terminates
Employee’s employment Without Cause, then Employer shall pay to Employee, as severance pay in a lump sum on the thirtieth (30th) day following the Date of Termination, the following amounts: 
  
 (1) his accrued but unpaid Base Salary through the Date of Termination at the rate in effect as of the Date of Termination; and

  
 (2) in lieu of any further Base Salary,
annual incentive payments or other forms of compensation for periods subsequent to the Date of Termination, an amount equal to the result obtained from the following equation: 
  
   [(S + B) ÷ 365] x D 
  
 where 
  

	 	S  =	 	Employee’s Base Salary at the rate in effect as of the Date of Termination. 

  

	 	B  =	 	the greater of (i) the amount of the annual incentive payment made (or to be made) to Employee pursuant to Section 1.4(b) (Annual Incentive Payment) for the fiscal year of Parent
immediately preceding the fiscal year that includes the Date of Termination or (ii) the average of the annual incentive payments made (or to be made) to Employee for each of the last three fiscal years of Parent immediately preceding the fiscal year
that includes the Date of Termination  

  

	 	D  =	 	the number of days from the Date of Termination to the last day of the Original Term (or, if such termination occurs within one hundred eighty (180) days of the expiration of the
Original Term and neither Employee nor Employer has given prior notice of their decision to not renew this 

  

 5 

 Agreement, the last day of the Renewal Term), provided, in no event shall the number of days
determined under this item be less than three hundred sixty-five (365) days. 
  
 In addition, Employee will be entitled to (A) a prorated portion of any annual incentive payment earned for the fiscal year in which his employment is terminated, if earned in accordance with the terms of its grant
and (B) the services of an outplacement consultant who is selected by Employer and reasonably acceptable to Employee and whose fees are paid by Employer. 
  
 (g) Waiver of Other Rights upon Employer Termination. Employee hereby acknowledges and agrees that the payments by Employer under
Section 1.5(f) ( Payments upon Termination by Employer) shall be the sole and exclusive remedy of Employee for termination of Employee’s employment by Employer and Employee hereby waives any and all other remedies under law or in equity.

  
 1.6 Termination by Employee. 
  
 (a) Company Breach. Employee may terminate his
employment hereunder for Company Breach. For purposes of this Agreement, a “Company Breach” shall be deemed to occur in the event of a material breach of this Agreement by Employer or Parent; provided, however, that
Employee shall not be entitled to terminate for Company Breach unless Employee notifies Employer thereof in writing, specifying in reasonable detail the basis therefor and stating that it is grounds for Company Breach, and unless Employer fails to
cure such Company Breach within thirty (30) days after such notice is sent or given under this Agreement. For purposes of this Agreement, a material breach by Employer or Parent shall include, without limitation, (i) the reduction in Employee’s
Base Salary as in effect on the Effective Date, (ii) a change in Employee’s duties or responsibilities with Employer or Parent that (A) represents a substantial reduction of the duties or responsibilities of Employee as in effect immediately
prior thereto and (B) Employee does not expressly consent to in writing, or (iii) if Employee’s eligibility for a bonus in any fiscal year (provided that all performance standards established for him have been achieved) shall be, in terms of a
percentage of base salary, any amount less than the percentage of base salary established for the President and Chief Executive Officer of Parent for such fiscal year. 
  
 (b) Voluntary Resignation. During the Term, Employee may voluntarily terminate his employment upon
thirty (30) days prior written notice to Employer, which notice may be waived by Employer in Employer’s discretion. “Voluntary Resignation” shall mean termination of Employee’s employment by Employee other than termination
for Company Breach. 
  
 (c) Employee
Explanation of Termination. Upon termination of this Agreement by Employee, Employee shall give prompt written notice (the “Employee Termination Notice”) to Employer of such termination. The Employee Termination Notice shall
state in reasonable detail the basis for such termination and shall indicate 
  

 6 

 whether the termination is being made for Company Breach or if the termination is due to Voluntary
Resignation. 
  
 (d) Payments upon Termination
by Employee. Employer shall provide the following payments to Employee upon Employee’s termination of this Agreement: 
  
 (i) If Employee’s termination is due to Voluntary Resignation, then Employer’s obligation to make payments and provide benefits
pursuant to Section 1.4 (Compensation) shall terminate, except that Employer shall pay Employee his accrued but unpaid Base Salary and benefits pursuant to Section 1.4 (Compensation) through the Date of Termination; provided, however,
that Employee shall not be entitled to any payment pursuant to Section 1.4(b) (Annual Incentive Payment) for the fiscal year of Parent in which such termination occurs. 
  
 (ii) Subject to Section 1.7(b) (Termination Following a Change in Control), if Employee terminates his
employment for Company Breach, then Employee shall be entitled to the payments specified in Section 1.5(f)(iii) as if Employee were terminated by Employer Without Cause; provided, that if the termination for Company Breach is based upon a
material reduction by Employer of Employee’s Base Salary, then for the purposes of the calculations set forth in Section 1.5(f)(iii), Employee’s Base Salary as of the Date of Termination shall be deemed to be Employee’s Base Salary
immediately prior to the reduction that Employee claims as grounds for Company Breach. 
  
 (e) Waiver of Other Rights upon Employee Termination. Employee hereby acknowledges and agrees that the payments by Employer under
Section 1.6(d) (Payments upon Termination by Employee) shall be the sole and exclusive remedy of Employee for termination of Employee’s employment by Employee, and Employee hereby waives any and all other remedies under law or in equity.

  
 1.7 Change in Control. 
  
 (a) Definition of Change in Control. For the purposes
of this Agreement, a “Change in Control” shall mean any of the following: 
  
 (i) any consolidation or merger of Parent in which Parent is not the continuing or surviving corporation or pursuant to which shares of
Parent’s common stock would be converted into cash, securities or other property, other than a merger of Parent in which the holders of Parent common stock immediately prior to the merger have the same proportionate ownership of common stock of
the surviving corporation immediately after the merger (subject to adjustment for rounding or fractional interests resulting therefrom); 
  
 (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of
the assets of Parent; 
  

 7 

 (iii) any approval by the stockholders of Parent of any plan or proposal for the
liquidation or dissolution of Parent; 
  
 (iv)
the cessation of control (by virtue of their not constituting a majority of directors) of Parent’s Board of Directors by the individuals (the “Continuing Directors”) who (x) at the date of this Agreement were directors or (y)
become directors after the date of this Agreement and whose election or nomination for election by Parent’s stockholders, was approved by a vote of at least two-thirds of the directors then in office who were directors at the date of this
Agreement (or whose election or nomination for election was previously so approved); 
  
 (v) (A) the acquisition of beneficial ownership (“Beneficial Ownership”), within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), of an aggregate of fifteen percent (15%) or more of the voting power of Parent’s outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the Exchange Act) who Beneficially Owned less than ten percent (10%) of the voting power of Parent’s outstanding voting securities on the Effective Date of this Agreement, (B) the acquisition of Beneficial Ownership of an
additional five percent (5%) of the voting power of Parent’s outstanding voting securities by a person or group who Beneficially Owned at least ten percent (10%) of the voting power of Parent’s outstanding voting securities on the
Effective Date of this Agreement, or (C) the execution by Parent and a stockholder of a contract that by its terms grants such stockholder (in its, his or her capacity as a stockholder) or such stockholder’s Affiliate (as defined in Rule 405
promulgated under the Securities Act of 1933 (an “Affiliate”)) including, without limitation, such stockholder’s nominee to Parent’s Board of Directors (in its, his or her capacity as an Affiliate of such stockholder), the
right to veto or block decisions or actions of Parent’s Board of Directors; provided, however, that notwithstanding the foregoing, the events described in items (A), (B) or (C) above shall not constitute a Change in Control
hereunder if the acquiror is (1) a trustee or other fiduciary holding securities under an employee benefit plan of Employer, Parent or one of their affiliated entities and acting in such capacity, (2) a corporation owned, directly or indirectly, by
the stockholders of Parent in substantially the same proportions as their ownership of voting securities of Parent, (3) a person or group meeting the requirements of clauses (i) and (ii) of Rule 13d-1(b)(1) under the Exchange Act or (4) in the case
of an acquisition described in items (A) or (B) above (but not in the case of an acquisition described in item (C) above), any other person whose ownership or acquisition of shares of voting securities is approved by a majority of the Continuing
Directors; provided further, that none of the following shall constitute a Change in Control: (aa) the right of the holders of any voting securities of Parent to vote as a class on any matter or (bb) any vote required of disinterested or
unaffiliated directors or stockholders including, without limitation, pursuant to Section 144 of the Delaware General Corporation Law or Rule 16b-3 promulgated pursuant to the Exchange Act; or 
  

 8 

 (vi) subject to applicable law, in a Chapter 11 bankruptcy proceeding, the appointment of
a trustee or the conversion of a case involving Parent to a case under Chapter 7. 
  
 (b) Termination Following a Change in Control. Notwithstanding the provisions of Section 1.5 (Termination by Employer) or Section
1.6 (Termination by Employee) hereof, if, during the twenty-four (24) month period after a Change in Control, Employee terminates his employment for Company Breach or Forced Relocation (as defined below), or if Employer or Parent terminates Employee
Without Cause during such period, then in lieu of any payments that Employee would be otherwise entitled to receive pursuant to Section 1.5(f)(iii) or Section 1.6(d)(ii) of this Agreement, Employer shall pay to Employee as severance pay and as
liquidated damages (because actual damages are difficult to ascertain), in a lump sum, in cash, within thirty (30) days after termination, an amount which is equal to three (3) times the sum of (A) Employee’s Base Salary as of the Date of
Termination (or such greater amount of Base Salary that was paid to Employee prior to any material salary reduction that serves as the basis for termination by Employee upon Company Breach) plus (B) the greater of (x) the amount of the annual
incentive payment that Employee received (or will receive) pursuant to Section 1.4(b) (Annual Incentive Payment) for the fiscal year of Parent immediately preceding the fiscal year of the Date of Termination or (y) the average of the annual
incentive payments made (or to be made) to Employee for each of the last three fiscal years of Parent immediately preceding the fiscal year that includes the Date of Termination; provided, however, that if such payment, either alone or
together with other payments or benefits, either cash or non-cash, that Employee has the right to receive from Employer, including, but not limited to, accelerated vesting or payment of any deferred compensation, options, stock appreciation rights
or any benefits payable to Employee under any plan for the benefit of employees, would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986), then such payment or other benefit shall be
reduced to the largest amount that will not result in receipt by Employee of a parachute payment. The determination of the amount of the payment described in this Section shall be made by Parent’s independent auditors. 
  
 In addition, Employee will be entitled to (X) the services
of an outplacement consultant who is selected by Employer and reasonably acceptable to Employee and whose fees are paid by Employer and (Y) reimbursement from Employer for all reasonable costs and expenses (including without limitation,
attorneys’ fees) incurred by Employee in enforcing the provisions of this Section 1.7(b) or Section 1.8 (Employee Benefits after Termination) against Employer or Parent. 
  
 For the purposes of this Section 1.7(b), after a Change in Control, “Forced Relocation” shall mean
Parent or Employer requiring Employee to be based at any place outside a fifty (50) mile radius of Parent’s Carrollton, Texas headquarters as in use on the date of this Agreement, except for reasonable travel on behalf of Employer or Parent.

  

 9 

 Employee hereby acknowledges and agrees that the payments by Employer under this Section
1.7(b) shall be the sole and exclusive remedy of Employee for termination of Employee’s employment Without Cause or by reason of a Company Breach or Forced Relocation within the twenty-four (24) month period following a Change in Control, and
Employee hereby waives any and all other remedies under law or in equity. 
  
 1.8 Employee Benefits after Termination. Employer shall maintain in full force and effect (to the extent consistent with past practice), for the continued benefit of Employee and, if applicable, his spouse and
children, the employee benefits set forth in subsections 1.4(f) (Fringe Benefits and Perquisites) through the Date of Termination (subject to the provisions of Section 1.5(f)(i)); provided, that his continued participation or, if applicable,
the participation of his spouse and children, is possible under the general terms and conditions of such plans and programs. Following the Date of Termination, Employee and his eligible dependents shall be eligible for continued health coverage in
accordance with the terms of applicable law. Notwithstanding the foregoing, if Employee is terminated Without Cause or resigns upon a Company Breach, or resigns as a result of a Forced Relocation within the twenty-four (24) month period following a
Change in Control, then Employer shall maintain health and life insurance coverage for the benefit of Employee and, if applicable, his spouse and children, for a period of time equal to (i) if the Date of Termination is not within the twenty-four
(24) month period after a Change in Control, the lesser of (A) five hundred forty five (545) days and (B) the number of days utilized in the formula specified in Section 1.5(f)(iii) above, or (ii) if the Date of Termination is within the twenty-four
(24) month period after a Change in Control, three (3) years; provided, however, that Employer’s obligation to provide such health and life insurance coverage shall be reduced to the extent that Employer is not able to obtain such
coverage in accordance with normal insurance underwriting standards. Such insurance shall be maintained in substantially the same manner (including without limitation, coverage amounts, deductibles and level of premium contributions required by
Employee) as it was maintained immediately prior to the Date of Termination. 
  
 1.9 Death of Employee. Notwithstanding any other provision of this Agreement to the contrary, if Employee dies prior to the expiration of this Agreement, Employee’s employment and other obligations under
this Agreement shall automatically terminate and all compensation to which Employee is or would have been entitled hereunder (including without limitation under Sections 1.4(a) (Base Salary) and 1.4(b) (Annual Incentive Payment)) shall terminate as
of the end of the month in which Employee’s death occurs; provided, however, that (i) Employer shall pay to Employee’s estate, as soon as practicable, a prorated amount of the annual incentive payment specified in Section
1.4(b) for the fiscal year of Parent in which Employee’s death occurs, if earned in accordance with Parent’s annual incentive plan; and (ii) for the balance of the month in which Employee’s death occurs, Employee’s spouse and
children shall be entitled to receive their benefits under Employer’s group hospitalization, medical and dental plans (if any), to the extent permitted under the terms of such plans, and thereafter Employee’s dependents shall have a right
to continued health coverage in accordance with the terms of applicable law. 
  

 10 

 ARTICLE 2 
  

Non-Competition and Confidentiality 
  
 2.1 Training/Confidential Information. For purposes of this Article 2 (Non-Competition and Confidentiality), the term “the
Company” shall be construed to include Employer, Parent and any and all Affiliates of Employer and Parent. 
  
 The Company shall provide Employee with specialized knowledge and training regarding the business in which the Company is involved, and will provide
Employee with initial and ongoing confidential information and trade secrets of the Company (hereinafter referred to as “Confidential Information”). For purposes of this Agreement, Confidential Information includes, but is not
limited to: 
  
 (a) Customer lists and prospect
lists developed by the Company; 
  
 (b)
Information regarding the Company’s customers which Employee acquired as a result of his employment with Employer, including but not limited to, customer contracts, work performed for customers, customer contacts, customer requirements and
needs, data used by the Company to formulate customer bids, customer financial information and other information regarding the customer’s business; 
  
 (c) Information regarding the Company’s vendors which Employee acquired as a result of his employment with Employer, including but
not limited to, product and service information and other information regarding the business activities of such vendors; 
  
 (d) Information related to the Company’s business, including but not limited to marketing strategies and plans, sales procedures,
operating policies and procedures, pricing and pricing strategies, business plans, sales, profits, and other business and financial information of the Company; 
  

(e) Training materials developed by and utilized by the Company; 
  
 (f) Any other information which Employee acquired as a result of his employment with Employer and which
Employee has a reasonable basis to believe the Company would not want disclosed to a business competitor or to the general public; and 
  
 (g) Information which: 
  
 (i) is proprietary to, about or created by the Company; 
  
 (ii) gives the Company some competitive advantage, the opportunity of obtaining such advantage or the
disclosure of which could be detrimental to the interests of the Company; 
  

 11 

 (iii) is not typically disclosed to non-employees by the Company, or otherwise is treated
as confidential by the Company; or 
  
 (iv) is
designated as Confidential Information by the Company or from all the relevant circumstances should reasonably be assumed by Employee to be confidential to the Company. 
  
 Notwithstanding the foregoing, Confidential Information shall not include any information that is or has
become public knowledge, other than by acts by Employee or representatives of Employee in violation of this Agreement. 
  
 2.2 Non-Disclosure. Employee acknowledges, understands and agrees that all Confidential Information, whether developed by the Company or others or
whether developed by Employee while carrying out the terms and provisions of this Agreement (or previously while serving as an officer of the Company), shall be the exclusive and confidential property of the Company and (i) shall not be disclosed to
any person (except as otherwise required by law or legal process) other than employees of the Company and professionals engaged on behalf of the Company, and other than disclosure in the scope of the Company’s business in accordance with the
Company’s policies for disclosing information, (ii) shall be safeguarded and kept from unintentional disclosure and (iii) shall not be used for Employee’s personal benefit. Subject to the terms of the preceding sentence, Employee shall not
use, copy or transfer Confidential Information other than as is necessary in carrying out his duties under this Agreement. 
  
 2.3 Return of Company Property and Information. Upon termination of employment, or at any earlier time as directed by the Company, Employee shall
immediately deliver to the Company any and all Confidential Information in Employee’s possession, any other documents or information which Employee acquired as a result of his employment with Employer, and any copies of such
documents/information. Employee shall not retain any originals or copies of such documents or materials related to the Company’s business which Employee came into possession of or created as a result of his employment at the Company. Employee
acknowledges that such information, documents and materials are the exclusive property of the Company. Upon termination of employment, or at any earlier time as directed by the Company, Employee shall immediately deliver to the Company any property
of the Company in Employee’s possession. Employee agrees that should he fail to return any Company property, the Company shall be entitled to deduct from any sums otherwise due Employee (including, but not necessarily limited to wages and
expense reimbursements) the cost and/or value of any property which Employee fails to return, up to the maximum amount allowed by law. Employee hereby authorizes the Company to deduct and/or withhold any such sums from Employee’s wages and/or
other sums due to Employee. 
  
 2.4 Non-Competition.

  
 (a) Description of Proscribed Actions.
During the Term and for a period thereafter equal to (X) in the event of a termination Without Cause, resignation for Company Breach or resignation for Forced Relocation pursuant to Section 1.7(b) (Termination Following a Change in Control), twelve
(12) months, and (Y) in all other 
  

 12 

 cases, eighteen (18) months, in consideration for the obligations of Employer and Parent hereunder,
including without limitation their disclosure (pursuant to Section 2.1 (Training/Confidential Information) above) of Confidential Information, Employee shall not, unless approved in writing by a duly passed resolution of the Board of Directors of
Parent: 
  
 (i) directly or indirectly, engage or
invest in, own, manage, operate, control or participate in the ownership, management, operation or control of, be employed by, associated or in any manner connected with, or render services or advice to, any Competing Business (defined below);
provided, however, that Employee may invest in the securities of any enterprise (but without otherwise participating in the activities of such enterprise) if (x) such securities are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Exchange Act and (y) Employee is not the Beneficial Owner of more than five percent (5%) of the outstanding capital stock of such enterprise; 
  
 (ii) directly or indirectly, either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor (whether paid or unpaid), stockholder, partner or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other person or entity, solicit, divert or
take away any suppliers, customers or clients of the Company or any of its Affiliates; or 
  
 (iii) directly or indirectly, either as principal, agent, independent contractor, consultant, director, officer, employee, employer,
advisor (whether paid or unpaid), stockholder, partner or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other person or entity, either (A) hire, attempt to hire, contact or
solicit with respect to hiring, any employee of Employer or Parent or any Affiliate thereof, (B) induce or otherwise counsel, advise or encourage any employee of Employer, Parent or any Affiliate thereof to leave the employment of Employer, Parent
or any Affiliate thereof, or (C) induce any representative or agent of Employer, Parent or any Affiliate thereof to terminate or modify its relationship with Employer, Parent or such Affiliate. 
  
 (b) Judicial Modification. Employee agrees that if a
court of competent jurisdiction determines that the length of time or any other restriction, or portion thereof, set forth in this Section 2.4 (Non-Competition) is overly restrictive and unenforceable, the court may reduce or modify such
restrictions to those which it deems reasonable and enforceable under the circumstances, and as so reduced or modified, the parties hereto agree that the restrictions of this Section 2.4 (Non-Competition) shall remain in full force and effect.
Employee further agrees that if a court of competent jurisdiction determines that any provision of this Section 2.4 (Non-Competition) is invalid or against public policy, the remaining provisions of this Section 2.4 (Non-Competition) and the
remainder of this Agreement shall not be affected thereby, and shall remain in full force and effect. 
  

 13 

 (c) Nature of Restrictions. Employee acknowledges that the business of Employer
and Parent and their Affiliates is international in scope and that the restrictions imposed by this Agreement are legitimate, reasonable and necessary to protect Employer’s, Parent’s and their Affiliates’ investment in their
businesses and the goodwill thereof. Employee acknowledges that the scope and duration of the restrictions contained herein are reasonable in light of the time that Employee has been or will be engaged in the business of Employer, Parent and/or
their Affiliates, and Employee’s relationship with the suppliers, customers and clients of Employer, Parent and their Affiliates. Employee further acknowledges that the restrictions contained herein are not burdensome to Employee in light of
the consideration paid therefor and the other opportunities that remain open to Employee. Moreover, Employee acknowledges that he has other means available to him for the pursuit of his livelihood. 
  
 (d) Competing Business. “Competing
Business” shall mean any individual, business, firm, company, partnership, joint venture, organization, or other entity engaged in the wholesale distribution or retail sales of wireless communication equipment in any domestic or
international market area in which Employer, Parent or any of their Affiliates does business at any time during Employee’s employment with Employer or any of its Affiliates. 
  
 2.5 Injunctive Relief. Because of Employee’s experience and reputation in the industries in which Employer,
Parent and their Affiliates operate, and because of the unique nature of the Confidential Information, Employee acknowledges, understands and agrees that Employer and Parent will suffer immediate and irreparable harm if Employee fails to comply with
any of his obligations under Article 2 (Non-Competition and Confidentiality) of this Agreement, and that monetary damages will be inadequate to compensate Employer and Parent for such breach. Accordingly, Employee agrees that Employer and Parent
shall, in addition to any other remedies available to them at law or in equity, be entitled to injunctive relief to enforce the terms of Article 2 (Non-Competition and Confidentiality), without the necessity of proving inadequacy of legal remedies
or irreparable harm. 
  
 ARTICLE 3 
  
 Representations and Warranties by Employee 
  
 Employee hereby represents and warrants, the same being part of the essence
of this Agreement, that, as of the Effective Date, he is not a party to any agreement, contract or understanding, and that no facts or circumstances exist, that would in any way restrict or prohibit his from undertaking or performing any of his
obligations under this Agreement. The foregoing representation and warranty shall remain in effect throughout the Term. 
  

 14 

 ARTICLE 4 
  

Indemnification 
  
 Parent agrees to indemnify, and advance expenses to, Employee to the extent provided in the Certificate of Incorporation and Bylaws of Parent as of the
date of this Agreement. To the extent that a change in the Delaware General Corporation Law or other applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under
Parent’s Certificate of Incorporation and Bylaws and this Agreement, it is the intent of the parties hereto that Employee shall enjoy by this Agreement the greater benefits so afforded by such change. 
  
 ARTICLE 5 
  
 Miscellaneous 
  
 5.1 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. 
  
 5.2
Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. 
  
 5.3 Employee’s Sole Remedy. Employee’s sole remedy shall be against Employer or Parent for any claim, liability or obligation of any nature whatsoever arising out of or relating to this Agreement or an alleged breach of
this Agreement or for any other claim arising out of the termination of Employee’s employment hereunder (collectively, “Employee Claims”). Employee shall have no claim or right of any nature whatsoever against any of
Employer’s or its Affiliates’ directors, former directors, officers, former officers, employees, former employees, stockholders, former stockholders, agents, former agents or the independent counsel in their individual capacities arising
out of or relating to any Employee Claim. Employee hereby releases and covenants not to sue any person other than Employer or Parent over any Employee Claim. The persons described in this Section 5.3 (other than Employer, Parent and Employee) shall
be third-party beneficiaries of this Agreement for purposes of enforcing the terms of this Section 5.3 (Employee’s Sole Remedy) against Employee. 
  
 5.4 Notices. All notices, requests, demands and other communications required or permitted under this Agreement and the transactions contemplated
herein shall be in writing and shall be deemed to have been duly given, made and received when sent by telecopy (with a copy sent by mail) or when personally delivered or one business day after it is sent by overnight service, addressed as set forth
below: 
  

 15 

 If to Employee: 
  
 Terry S. Parker 
 13330 Noel Road #1504 
 Dallas, Texas 75240 
  
 If to Employer or
Parent: 
  
 CellStar Corporation 
 1730 Briercroft Court 
 Carrollton, Texas 75006 
 Attn: General Counsel 
  
 Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity
with the provisions of this Section for the giving of notice, which shall be effective only upon receipt. 
  
 5.5 Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. 
  
 5.6 Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written (including without limitation, the Old Employment Agreement), except as herein contained, which shall be deemed
terminated effective immediately. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement
in writing. 
  
 5.7 Headings; Index. The headings of
paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 
  
 5.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of
Texas, without giving effect to principles of conflict of laws. 
  
 5.9 Dispute Resolution. Subject to Employer’s and Parent’s right to seek injunctive relief in court as provided in Section 2.5 (Injunctive Relief) of this Agreement, any dispute, controversy or claim arising out of or in
relation to or connection to this Agreement, including without limitation any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement, shall be exclusively and finally settled by arbitration, and any
party may submit such dispute, controversy or claim, including a claim for indemnification under this Section 5.9 (Dispute Resolution), to arbitration. 
  

 16 

 (a) Arbitrators. The arbitration shall be heard and determined by one arbitrator,
who shall be impartial and who shall be selected by mutual agreement of the parties; provided, however, that if the dispute involves more than $2,000,000, then the arbitration shall be heard and determined by three (3) arbitrators. If three (3)
arbitrators are necessary as provided above, then (i) each side shall appoint an arbitrator of its choice within thirty (30) days of the submission of a notice of arbitration and (ii) the party-appointed arbitrators shall in turn appoint a presiding
arbitrator of the tribunal within thirty (30) days following the appointment of the last party-appointed arbitrator. If (x) the parties cannot agree on the sole arbitrator, (y) one party refuses to appoint its party-appointed arbitrator within said
thirty (30) day period or (z) the party-appointed arbitrators cannot reach agreement on a presiding arbitrator of the tribunal, then the appointing authority for the implementation of such procedure shall be the Senior United States District Judge
for the Northern District of Texas, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. If the Senior United States District Judge for the Northern District of Texas refuses or
fails to act as the appointing authority within ninety (90) days after being requested to do so, then the appointing authority shall be the Chief Executive Officer of the American Arbitration Association, who shall appoint an independent arbitrator
who does not have any financial interest in the dispute, controversy or claim. All decisions and awards by the arbitration tribunal shall be made by majority vote. 
  
 (b) Proceedings. Unless otherwise expressly agreed in writing by the parties to the arbitration
proceedings: 
  
 (i) The arbitration proceedings
shall be held in Dallas, Texas, at a site chosen by mutual agreement of the parties, or if the parties cannot reach agreement on a location within thirty (30) days of the appointment of the last arbitrator, then at a site chosen by the arbitrators;

  
 (ii) The arbitrators shall be and remain at
all times wholly independent and impartial; 
  
 (iii) The arbitration proceedings shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as amended from time to time; 
  
 (iv) Any procedural issues not determined under the arbitral rules selected pursuant to item (iii) above
shall be determined by the law of the place of arbitration, other than those laws which would refer the matter to another jurisdiction; 
  
 (v) Subject to Employee’s right to recover reasonable costs and expenses as set forth in Section 1.7(b) (Termination Following a
Change in Control), the costs of the arbitration proceedings (including attorneys’ fees and costs) shall be borne in the manner determined by the arbitrators; 
  

 17 

 (vi) The decision of the arbitrators shall be reduced to writing; final and binding
without the right of appeal; the sole and exclusive remedy regarding any claims, counterclaims, issues or accounting presented to the arbitrators; made and promptly paid in United States dollars free of any deduction or offset; and any costs or fees
incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement; 
  
 (vii) The award shall include interest from the date of any breach or violation of this Agreement, as determined by the arbitral award,
and from the date of the award until paid in full, at 6% per annum; and 
  
 (viii) Judgment upon the award may be entered in any court having jurisdiction over the person or the assets of the party owing the judgment or application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be. 
  
 5.10
Survival. The covenants and agreements of the parties set forth in Article 2 (Non-Competition and Confidentiality), and Article 5 (Miscellaneous) are of a continuing nature and shall survive the expiration, termination or cancellation of this
Agreement, regardless of the reason therefor. 
  
 5.11
Subrogation. In the event of payment under this Agreement, Employer and Parent shall be subrogated to the extent of such payment to all of the rights of recovery of Employee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such documents necessary to enable Employer or Parent effectively to bring suit to enforce such rights. 
  
 5.12 No Duplication of Payments. Employer and Parent shall not be liable under this Agreement to make any payment in
connection with any claim made against Employee to the extent Employee has otherwise actually received payment (under any insurance policy, bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. 
  
 5.13 Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or
assets of Employer, Parent, spouses, heirs, and personal and legal representatives. Employer and Parent shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or
a substantial part, of their business or assets, by written agreement in form and substance satisfactory to Employee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Employer or Parent would be
required to perform if no such succession had taken place. 
  
 5.14 Contribution. If the indemnity contained in this Agreement is unavailable or insufficient to hold Employee harmless in a claim for an indemnifiable event, then separate from 
  

 18 

 and in addition to the indemnity provided elsewhere herein, Parent shall contribute to expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by or on behalf of Employee in connection with such claim in such proportion as appropriately reflects the relative benefits received by, and fault of, Parent and Employer on the
one hand and Employee on the other in the acts, transactions or matters to which the claim relates and other equitable considerations. 
  
 5.15 Parent Guaranty. Parent guarantees the payment and performance of all obligations of Employer under this Agreement and agrees it will pay or
perform those obligations if for any reason Employer fails to do so. This guarantee is absolute, continuing, irrevocable and not conditional or contingent. Any notice given hereunder to either Employer or Parent will be deemed to be notice to Parent
for purposes of this guaranty. 
  
 ********* 
  
 [Remainder of page intentionally left blank.] 
  

 19 

 IN WITNESS WHEREOF, Employer and Parent have caused this Agreement to be executed by their
officer/general partner thereunto duly authorized, and Employee has signed this Agreement, this 1st day of
September, 2004, effective as of the date first set forth above. 
  

			
	 CELLSTAR LTD

	 By:
	 	 National Auto Center, Inc.

	 General Partner

		
	 By:
	 	 /s/ Elaine Flud Rodriguez

	 	 	 Elaine Flud Rodriguez

	 	 	 Sr. Vice President

	
	 CELLSTAR CORPORATION

		
	 By:
	 	 /s/ Elaine Flud Rodriguez

	 	 	 Elaine Flud Rodriguez

	 	 	 Sr. Vice President

	
	 EMPLOYEE

	
	 /s/ Terry S. Parker

	 Terry S. Parker

  

 20

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