Document:

Exhibit 10.4†

 

Execution Copy

 

TOPS MARKETS, LLC

 

SUPPLY AGREEMENT

 

THIS
SUPPLY AGREEMENT (the “Agreement”) is made as of November 12, 2009 (the “Effective
Date”) between TOPS MARKETS, LLC, a New York limited liability company with
principal offices located at 6363 Main Street, Williamsville, NY 14221-5898
(together with its successors and assigns, “Tops”) and C&S WHOLESALE
GROCERS, INC., a Vermont corporation with principal offices located at 7
Corporate Drive, Keene, New Hampshire 03431 (“C&S”) and, for purposes of
Sections 9.2(b), 9.2(d), 9.4 and 10.3 of this Agreement, Erie Logistics, LLC (“Erie”).  Each of C&S and Tops, individually, is a “Party”
and together, they are “Parties” and Erie is a “Party” for purposes of the
Sections listed above.  Capitalized terms
set forth herein shall have the meanings ascribed to them in Section 10.18
of this Agreement.

 

W I T N E S S E T H :

 

WHEREAS, C&S operates warehouse and distribution centers, performs
procurement and wholesale supply services, and provides related operational
services to its retail grocery customers;

 

WHEREAS, Tops engaged C&S to provide Tops with certain warehousing,
distribution and procurement services related to the supply of supermarket
products to Tops pursuant to the terms and conditions set forth in the Amended and Restated Supply Agreement by and
among Tops, C&S and certain Affiliates of C&S, dated as of June 15,
2007, together with any and all amendments thereto (the “Prior Agreement”);
and

 

WHEREAS, the Parties wish to materially change their contracting
relationship as it exists under the Prior Agreement in accordance with the
terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the Parties hereto, intending to be legally
bound, hereby agree as follows:

 

ARTICLE 1

 

PRELIMINARY
MATTERS

 

1.1                   Preliminary
Statement.  The Parties
wish to establish, as of the Effective Date, a * with respect to * related to Services
(defined below) provided to Tops by C&S pursuant to this Agreement in
connection with the sale to Tops of supermarket products for resale at the Tops
Stores.  The Parties further desire to
collaborate with respect to the exploration, evaluation and implementation of
opportunities to reduce Tops’ supply chain costs and allow the Parties to
benefit from such opportunities as they may arise, subject to the terms of this
Agreement.

 

1.2                   Services.  During the Term (as defined in Section 9.1),
C&S shall provide to Tops warehousing, transportation, procurement,
purchasing and related services on the terms and conditions set forth in this
Agreement.  Collectively, the Warehousing
Services, the Transportation Services, the Procurement and Purchasing Services,
and the Additional Services (each as more specifically defined and described in
this Agreement) shall be referred to as the “Services”).

 

† Confidential portions of
this agreement have been omitted and filed separately with the Securities and
Exchange Commission under a request for confidential treatment. The portions of
this agreement that have been omitted and filed separately with the Securities
and Exchange Commission are denoted by the use of an asterisk in this
agreement.

 

* Confidential treatment has been
requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

1

 

1.3                   Services Commencement Date; Term.  The “Services Commencement Date” shall be the
date on which C&S will begin providing the Services to Tops pursuant to the
terms of this Agreement, which date shall be November 22, 2009.  The Term of this Agreement
is as set forth in Section 9.1 hereof. 
The schedule of Contract Years during the Term is set forth on Exhibit 1.3
attached hereto.

 

1.4                   Prior Agreement. Subject to the
terms set forth in this Section 1.4, the Prior Agreement shall remain in
force and effect until the Services Commencement Date.  On the Services Commencement Date, this
Agreement shall in all respects replace and supersede the Prior Agreement,
which shall be terminated and no longer in effect as of the Services
Commencement Date (except the relevant provisions of the Prior Agreement may
survive for the limited purposes set forth in this Section 1.4); provided, however, with respect to any claim or cause of
action that becomes known subsequent to the Services Commencement Date (and
could not have been known, through ordinary diligence, prior to the Services
Commencement Date) and arises from or is related to any set of facts or
circumstances which arose or existed prior to the Services Commencement Date,
the terms and conditions of the Prior Agreement (including those related to
dispute resolution) shall control. 
However, all claims that were known to a complaining Party, or through
ordinary diligence could have been known by such Party, prior to the Services
Commencement Date shall be deemed waived and the complaining Party shall be
forever barred from raising such claims as against the other Party, except with
respect to such amounts as have been billed before the Services Commencement
Date but not paid as of the Services Commencement Date and any amounts subject
to any claims related to deducted amounts disputed by a third party or amounts
charged back by any third party against C&S with respect to Tops
business.  For the avoidance of doubt, no
Affiliate of either Party (other than Erie) is or shall be deemed to be a Party
to this Agreement.  Notwithstanding
anything above in this Section 1.4, each Party represents and warrants to
the other Party that, as of the Effective Date, such Party does not know of any
claims it or any of its Affiliates may possess against such other Party or any
of its Affiliates under the Prior Agreement (other than possible claims
relating to any amounts billed and outstanding as of the Effective Date).  *

 

1.5                   Operating
Budget.   Commencing
with the Services Commencement Date, the Parties shall operate in accordance
with the budgeted costs and income items set forth in the applicable Approved
Budget (each such budget subject to the approval and adjustment provisions set
forth Article 4).  Exhibits
1.5(a)-(d) to this Agreement and referred to below comprise the C&S
budget for its 2009 fiscal year (i.e., beginning September 27, 2008 and
ending September 26, 2009) (collectively, the “2009 Budget”).  Such Exhibits are attached to this Agreement
strictly for the purpose of reflecting the basis for the components of the
Baseline Budget (which Baseline Budget, attached as Exhibit 4.7(a) hereto,
is hereby agreed to by the Parties and, subject to adjustment of the Baseline
Budget as set forth herein, is binding on the Parties, including without
limitation, in connection with the calculation of the Gainshare in accordance
with Section 4.7) and for illustrating an example of a future Approved
Budget.  The 2009 Budget reflects the
budgeted costs and income items applicable to C&S’s 2009 fiscal year as
follows:

 

(a)                                  For services
provided by C&S with respect to all Merchandise other than the GM/HBC
Merchandise (for purposes hereof, the “Mainline Operations”):

 

·  Exhibit 1.5(a) — (1) (Summary
of Budgeted Costs — Mainline Operations)

·  Exhibit 1.5(b) — (1) (Total
Warehousing Costs — Mainline Operations)

·  Exhibit 1.5(c) — (1) (Total
Transportation Costs — Mainline Operations)

 

(b)                                 For services
provided by C&S with respect to the GM/HBC Merchandise only (the “GM/HBC
Operations”):

 

·  Exhibit 1.5(a) — (2) (Summary
of Budgeted Costs — GM/HBC)

·  Exhibit 1.5(b) — (2) (Total
Warehousing Costs — GM/HBC (under the heading “Tops Allocation”) )

·  Exhibit 1.5(c) — (2) (Total
Transportation Costs — GM/HBC)

 

(c)                                  For procurement
and purchasing services with respect to all Merchandise including GM/HBC):

 

·  Exhibit 1.5(d)* — for all categories of
Merchandise * including GM/HBC Merchandise).

 

The Parties shall use the Baseline Budget for the purpose of computing
whether and to what extent a Cost Savings Gainshare Incentive Fee is payable to
C&S, as described in Section 4.7(d) hereof.  All future Approved Budgets will comport
substantially with the form of the 2009 Budget, and will similarly include a
“Summary of Budgeted Costs” and categories of expenses and revenues, subject to
modifications mutually agreed to by the Parties.  The Parties agree that the 2009 Budget does,
and each subsequent Approved Budget shall, cover periods corresponding to
C&S’s fiscal year, which is each 52-week period (or 53-week period every
five to six years) terminating on the last Saturday in September of each
year.  The Parties will make any
prorations (for example, to the Baseline Budget and the Services Fees)
necessary to account for any 53-week Contract Year.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

2

 

1.6                   Performance
Standards.  C&S covenants and agrees to perform the
Services and the Other Services, subject to the terms and conditions contained
in this Agreement, and to maintain and operate the Facilities (including the
cleanliness thereof) with the degree of care, skill and diligence consistent
with an experienced, reputable entity operating a warehouse and distribution
center; provided however, that with respect to the maintenance and operation of
any Tops owned Facility, C&S’s obligations under this Agreement will not
exceed its obligations agreed to by C&S under the applicable lease with
respect to such Facility.  C&S
covenants and agrees that it shall use commercially reasonable efforts to
identify for Tops all necessary and desirable steps and measures to permit
C&S to comply with its obligations under this Agreement and to reflect the
same in the applicable Approved Budget or Flex Budget.  In addition to any of its other obligations
as set forth in this Agreement, C&S covenants and agrees that during the
Term, it will:

 

(a)                                  take all
necessary and reasonable steps and precautions to protect Merchandise from
weather, water, theft, vandalism and all other reasonably foreseeable hazards
and damages;

 

(b)                                 comply with all
material federal, state and local Laws, rules, regulations, by-laws, zoning
legislation, guidelines, ordinances, orders and any other restrictions,
covenants and other limitations (including, without limitation, those in
respect of environmental and health and safety matters) applicable to the
occupation and operation of the Facilities, the providing of the Services and
Other Services and to otherwise comply with the terms and conditions of this
Agreement.  C&S shall keep in full
force and effect all licenses, registrations and other qualifications imposed
by any applicable governmental authorities necessary to occupy and operate the
Facilities, and to provide the Services and Other Services and to otherwise
fulfill the terms and conditions of this Agreement;

 

(c)                                  except as
otherwise instructed by Tops in writing, not place any Merchandise in proximity
to any other products or any material that is or may be noxious, flammable,
hazardous or whose characteristics may adversely affect the quality, fitness or
intended purpose, merchantability and other characteristics of the Merchandise
or otherwise cause in any manner whatsoever Merchandise to be adulterated or
deteriorate;

 

(d)                                 deliver
Merchandise that meets Tops’ reasonable quality standards as set forth in Exhibit 1.6(d) attached
hereto, and that is materially free from damage including, 

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

3

 

but not limited to, temperature damage, and materially free from
evidence of rodents or insects; and

 

(e)                                  maintain all of
the Fixed Assets in good working order and promptly (or as soon as practicable
in the case of refrigeration equipment) repair and/or replace any Fixed Assets
that may prevent or hinder C&S’s ability to provide the Services and/or
Other Services in accordance with the terms and conditions of this
Agreement.  C&S covenants and agrees
that it shall use commercially reasonable efforts to identify all necessary and
desirable maintenance and repair requirements outlined in this clause (e) to
Tops and to reflect the same in the applicable Approved Budget or Flex Budget,
as the case may be.

 

ARTICLE 2

 

WAREHOUSING AND TRANSPORTATION SERVICES; FACILITIES; FIXED ASSETS

 

2.1                   Warehousing
and Transportation Services Generally.  As of the Services Commencement Date, C&S
shall perform the Warehousing Services and Transportation Services (each as
defined below) from the Facilities in accordance with and subject to the terms
and conditions set forth in this Agreement. 
C&S will charge Tops for all Costs related to providing the
Warehousing and Transportation Services, on an actual cost, pass-through basis,
as more specifically described in Article 4 of this Agreement.  For clarification, the amount of Costs
payable by Tops in respect of the Warehousing Services and Transportation
Services for any Contract Year will not exceed the Costs actually incurred by C&S
in connection with such Warehousing Services and Transportation Services for
such Contract Year.

 

2.2                   Warehousing
Services.  During the
Term, C&S shall provide to Tops warehousing services related to the supply
of Merchandise on the terms and conditions set forth in this Agreement
(collectively, the “Warehousing Services”). 
Such Warehousing Services will include, but are not limited to: the
daily operation and maintenance of the Facilities; handling and confirming
receipt of inbound orders; loading and unloading; cross-docking; storage;
selection; pallet building; case labeling (where applicable); cardboard baling
(for pick-up and disposal by Tops); monitoring vendor compliance; tracking
warehouse income, where applicable; processing claims for recovery of lost or
damaged Merchandise, as applicable; banana ripening; employing personnel for
the provision of the Warehousing Services whose training and skill are
consistent with industry standards; and interfacing with Tops personnel, as
appropriate.

 

2.3                   Transportation
Services.

 

(a)                                  General.  C&S shall be responsible for inbound
transportation of Merchandise from Tops’ vendors to the Facilities and for the
routing and overall management of outbound transportation and the delivery of
Merchandise from the Facilities to Tops Stores. 
C&S’s management of the inbound and outbound transportation of
Merchandise, including undertaking to arrange for delivery by third party
contract carriers, shall be referred to as the “Transportation Services”.

 

(i)                                     Inbound
Transportation.  As part of the
Transportation Services, C&S shall manage inbound delivery of Merchandise
as it is shipped from vendors thereof to the Facilities.

 

(ii)                                  Outbound
Transportation.  As part of
the Transportation Services, C&S shall manage the design, development and
implementation of outbound Transportation Services, including, but not limited
to, transportation network configuration and routing and the overall management
of such Transportation Services supporting the Tops Stores.  C&S shall arrange for the diligent, professional
and reasonably expeditious transport of such Merchandise to the Tops Stores,
which may be through the hiring of reputable contract carriers on a
sub-contracted basis.  C&S
acknowledges and agrees that it will be responsible for the management of any
such contract carriers in connection with the performance of the Transportation
Services, and the costs related thereto will be incorporated into the Approved
Budget and/or any Flex Budget as applicable. 
Notwithstanding the foregoing, at any time Tops may, at its option and
cost, elect to pick up all Merchandise (rather than continue to receive
deliveries from C&S) from each applicable Facility from and after the date
specified in Tops’ notice of such election, so long as Tops provides to C&S
reasonable advance 

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

4

 

notice
of such election to commence the pick up of Merchandise.  In connection with the pick up of Merchandise
by Tops, the Parties will develop mutually agreed timelines and
procedures.  Tops will remain responsible
for any and all Costs of C&S related to the pick up of Merchandise and for
any and all Costs related to Transportation Services reflecting actual costs
incurred by C&S * For clarification, none of the Services Fees payable by
Tops to C&S will be reduced in connection with the pick up of Merchandise
by Tops.

 

(b)                                 Costs and Other
Matters.  All costs associated with the
Transportation Services to Tops, which shall be part of the overall Costs
payable by Tops, shall be incorporated by C&S into and made a part of each
Approved Budget or Flex Budget, as the case may be; * related to the use of any
C&S driver or contract comer for the benefit of any third Parties.  For clarification, title to Merchandise shall
remain with C&S until (i) such time as the trailer containing
Merchandise exits the loading dock of the applicable Facility, in the case of
Merchandise that is picked up from the Facility by a Tops driver or contract
carrier arranged for by Tops; or (ii) such time as the trailer containing
Merchandise is received at the destination Tops Store, in the case of
Merchandise that is transported by a C&S driver or otherwise picked up from
the Facility by a contract carrier arranged for by C&S; provided, that for
clarification, any costs associated with theft or damage to Merchandise and/or
Fixed Assets shall constitute Costs for which Tops is responsible.  Store polling and deliveries will be made in
accordance with a polling and delivery schedule that the Parties will jointly
establish and may subsequently modify from time to time. To the extent C&S
receives backhaul income during the term with respect to Transportation
Services provided to Tops, C&S * provided that the amount of such *

 

(c)                                  Cooperation in Developing
Network Efficiencies.  The Parties
shall, from time to time, mutually discuss and use commercially reasonable
efforts to explore opportunities to achieve efficiencies in the distribution
network for Tops with respect to the delivery of Merchandise to Tops Stores,
which may include seeking efficiencies through reduced or alternative shipping
points, reduced or alternative delivery frequencies, increased full truckload
deliveries and modifications to delivery schedules.  If the Parties determine to jointly pursue
any opportunities, the Parties will cooperate in the development and
implementation of initiatives designed to take advantage of such opportunities.

 

(d)                                 Recalls.  As part of the Services, if any Merchandise
supplied to Tops Stores is recalled or withdrawn as part of formal recall
procedures (the “Recalled Merchandise”),
at Tops’ request C&S will arrange for the pick up of any such Recalled
Merchandise from Tops Stores for disposal or return to the applicable vendor,
so long as such request is not inconsistent with any Laws or procedures C&S
is subject to in connection with such recall. 
Tops will prepare the Recalled Merchandise for shipment and clearly
identify such product as “Recalled Merchandise” prior to pick up by
C&S.  Notwithstanding anything herein
to the contrary, Tops will remain responsible for its compliance with any Laws
and recall procedures applicable to any such Recalled Merchandise, including
the removal of any such Recalled Merchandise from Tops’ Store shelves and
preparation for pick up.   C&S will
replenish Tops Stores with replacement Merchandise purchased by Tops, to the
extent comparable replacement Merchandise is available. * from the applicable
vendor * For clarification, no product credits will be issuable to Tops in
connection with any product supplied to Tops by DSD vendors or otherwise not
supplied by C&S.

 

2.4                   Facilities;
Facility Decisions.

 

(a)                                  The Parties acknowledge and
agree that as of the Effective Date, the Lancaster Facilities are utilized to
support the Tops Stores; provided, however, that nothing herein shall prohibit
or restrict C&S from performing any services or activities of any sort
whatsoever from any Facility on behalf of its other customers or for its own
account.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

5

 

(b)                                 During the Term, if C&S
wishes to undertake a closure of any Facility and/or a relocation of the
Services so as to be provided from any Replacement Facility, or otherwise
automate all or any portion of the labor function at any such Facility (a
“Facility Decision”), then C&S will so notify Tops, including written
notice whether such Facility Decision is reasonably expected to result in a
partial or complete withdrawal from a multiemployer pension plan and a good
faith estimate of any expected withdrawal liability, and the Parties will
review and discuss in good faith the details of such a Facility Decision,
including the * anticipated as a result of such Facility Decision.  In connection with any Facility Decision
which Tops has consented to in writing and which would result in a partial or
complete withdrawal from a Multiemployer Plan, then (i) Tops will indemnify
C&S for * and (ii) Tops shall *.  In
connection with any Facility Decision for which Tops does not consent in
writing and such Facility Decision results in a partial or complete withdrawal
from a Multiemployer Plan, then (x) Tops will indemnify C&S for an amount *
and (z) C&S shall be entitled to receive * Any other costs directly related
to any such Facility Decision, including * and cost of money and return on
investment assumptions related to any capital expenditures in connection with
any such Facility Decision, will be considered by the Parties and addressed
consistent with the foregoing.  If the
Parties * then C&S may not thereafter undertake any Facility Decision
without the written consent of Tops with respect to any Facility from which Services
are provided by personnel employed directly by Tops on whose behalf Tops then
has an obligation to make contributions to any multiemployer pension plan.

 

2.5                   Fixed
Assets.  Tops recognizes, understands and agrees that
C&S may be required to purchase, lease or license equipment or systems
specifically dedicated to support the Services and necessary to meet C&S’s
obligations to Tops under this Agreement. 
C&S shall not purchase, lease, license or otherwise acquire any new
Fixed Assets, or change the financing terms of any current Fixed Asset
financing arrangements, which would give rise to or increase Costs in any
Fiscal Accounting Period in excess of what is set forth in an Approved Budget
or Flex Budget without first obtaining the written consent of Tops, which
consent shall not be unreasonably withheld, delayed or conditioned.  Any and all Fixed Assets which give rise to
or increase Costs chargeable to Tops hereunder shall be depreciated in
accordance with C&S’s depreciation schedule for such Fixed Assets as set
forth on Exhibit 2.5.

 

ARTICLE 3

 

PROCUREMENT AND PURCHASING SERVICES; NET COST

 

3.1                   Merchandise.  Subject to the terms and conditions set forth
in this Agreement, Tops shall purchase from C&S, and C&S shall sell to
Tops, for use or resale at the Tops Stores (defined below), Tops’ entire
requirements of merchandise in the following categories (collectively, “Merchandise”):  grocery, dry bakery, candy, spices, store
supplies, dried produce, packaged meat, fresh meat, fresh deli, fresh seafood,
produce, dairy, floral, frozen (mainline), frozen bakery, ice, ice cream,
frozen commodity meat, frozen seafood, frozen deli, tobacco and GM/HBC
(excluding cosmetics, panty hose and toys merchandise), but excluding the
products set forth in the last sentence of this Section, for use or resale at
the Tops Stores.  In connection with the
foregoing Merchandise, C&S will provide the Procurement and Purchasing
Services, subject to the terms and conditions set forth in this Article 3.  In addition to the specifically excluded
GM/HBC items, Merchandise does not include products that are available for
purchase by Tops through direct store delivery (“DSD”) vendors or cross dock
vendors and designated as DSD or cross dock by the Parties from time to time.

 

3.2                   Tops
Stores.  The term
“Tops Stores” or “Stores” means all supermarket stores owned and operated by
Tops or any of its subsidiaries as set forth on Exhibit 3.2,
attached hereto.  In addition, the
Parties intend that the term “Tops Stores” or “Stores” shall include any
replacement store and any new supermarket store or supermarket store hereafter
acquired by Tops or any of its subsidiaries, to the extent that * With respect
to the inclusion of any such replacement, new or acquired store as a Tops
Store, any time there is a net increase in the number of Tops Stores from the
then current level of Tops Stores the Parties will *, and the Parties will make
such other adjustments or modifications to this Agreement as may be
appropriate.  Furthermore, C&S will
make such adjustments to the then applicable Approved Budget (or Flex Budget,
as applicable), as are necessary and appropriate to reflect * all of the Tops
Stores, including such new stores.  With
respect to any store or group of stores acquired by Tops *: (a) if such
store or stores remain subject to a pre-existing agreement for the provision of
logistics, procurement and/or purchasing services (a “Pre-existing Agreement”)
with a provider other than C&S, Tops will not permit the renewal of such
Pre-existing Agreement beyond its then-current term and, subject to the
Parties’ agreement on any proposed modifications to this Agreement, this
Agreement will apply with respect to such store or stores upon the expiration
or termination (as appropriate) of such Pre-existing Agreement; and (b) *

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

6

 

3.3                   Procurement
and Purchasing Services.

 

(a)                                  During the Term, C&S
will procure and purchase all Merchandise intended for use or resale at the
Tops Stores, and manage all inventory of such Merchandise (collectively, the “Procurement
and Purchasing Services”), subject to Section 3.3(b) below.  Tops may assume certain functions with
respect to the procurement of the Merchandise, subject to any necessary
modifications to this Agreement and the applicable Approved Budget (or Flex
Budget, as applicable), * and provided that none of the Services Fees payable
to C&S under this Agreement shall be reduced.  For purposes of this Agreement, to “procure”
shall mean to negotiate directly or indirectly with the applicable vendor with
respect to all terms of the purchase of goods including, but not limited to,
price, specifications, quantity, freight * (the “Purchase Terms”).  For the purposes of this Agreement, to “purchase”
shall mean to:  (i) perform the
physical act of purchasing goods through the execution and tender of purchase
orders to an applicable vendor; (ii) to pay for such goods; and (iii) to
own such goods for the period immediately preceding their resale to Tops.  The Procurement and Purchasing Services may
include * in accordance with Section 3.11 hereof For clarification, Tops will
be responsible for the procurement and purchase of any goods that are excluded
from “Merchandise” to be supplied by C&S as set forth in Section 3.1
above.

 

(b)                                 Notwithstanding
clause (a) above, Tops may from time to time, * otherwise to be procured
by C&S hereunder, provided that none of the Services Fees payable to
C&S under this Agreement shall be reduced. 
If *, C&S will issue the purchase order to the vendor, arrange for
transportation (with respect to produce), confirm on receipt that the shipment
meets Tops’ quality and receiving standards, as set forth on Exhibit 3.3(b),
and receive the shipment at the applicable Facility. Tops shall be responsible
for the spoilage of all * consistent with Section 4.3(a)(x).  Furthermore, Tops will * with the vendor and
C&S will purchase such product for further shipment to Tops Stores
consistent with current practice.

 

(c)                                  Each Party
shall, with respect to the Merchandise it procures hereunder (i) procure
such Merchandise, and otherwise operate, in accordance with all applicable Law
and with prudent and ethical business practices; and (ii) in all cases use
commercially reasonable efforts to negotiate for the most competitive price
available with respect to the Merchandise that it procures.

 

3.4                   Collaboration
with respect to Vendors.  Tops and C&S may collaborate, as jointly
determined, in the procurement process. 
For example, Tops and C&S may determine specifications applicable to
the purchase by C&S of fresh produce and designate vendor(s) from whom
specific fresh produce items shall be purchased.  Except as otherwise contemplated by Section 3.3(b),
C&S will negotiate with vendors on all Purchase Terms for Merchandise,
including but not limited to, cost and quantity, delivery date and * applicable
to Merchandise intended for use or resale at Tops Stores; provided, however,
that Tops will assist C&S with any such negotiations as requested by
C&S.  Tops understands that C&S
may also negotiate inbound freight contracts with respect to Merchandise and
assess logistics-related charges and penalties to vendors that do not meet
inbound delivery standards.  At C&S’s
request, Tops will assist C&S with any disputes that arise in connection
with such assessments.  Furthermore, the
Parties will *

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

7

 

3.5                   *
Generally.  In performing the Procurement and Purchasing
Services described hereunder, neither C&S nor any of its Affiliates *
rather, C&S * with the intended result being * Tops understands and
acknowledges that C&S’s * and that C&S * In connection with the
procurement of Merchandise by C&S for Tops, Tops will work together with
C&S * they relate to the volume of other C&S customers.

 

3.6                   Retailer
Performance Funds. 
Notwithstanding anything herein to the contrary, Retailer Performance
Funds will be * and C&S will not be responsible for * Tops may request
C&S to assist Tops with the collection of such funds, as Tops’ agents
subject to the terms set forth in Section 6.3 thereof.

 

If and to the extent * C&S will * under this Agreement, and subject
to * with respect to any such *  If Tops
has any * with respect to any such Retailer Performance Funds * Tops will
resolve such *, and C&S will * with respect to such *

 

3.7                   Promotional
Purchases.  Unless Tops
and C&S jointly determine otherwise, C&S shall book and purchase *
promotional or other high-velocity Merchandise intended for use or resale at
the Tops Stores, based upon Tops’ advance estimates of promotional volumes,
product specifications, vendor designations, purchase quantities, delivery
dates, store specific volume allocations, and other projections and information
provided by Tops to C&S.

 

3.8                   Leftover
Ad. For the purposes of this Agreement, “Leftover Ad Volume” shall mean
the volume of any Merchandise originally comprising a promotional order that remains
unshipped to Tops Stores as of the date upon which the applicable promotion
concluded.  C&S will work together
with Tops to * with respect to the *

 

3.9                   Inventory
Control; Product Allocation.

 

(a)                                  C&S will
utilize appropriate inventory control procedures (e.g., physical inventories
and cycle counts, as applicable) for regulating inventory levels (including
investment buy formulas, taking into account the cost of money, and allocations
of responsibility for inventory level overages or shortfalls) and handling
short-coded or excess product.  In
connection with the foregoing, with respect to any Shared Facilities, Tops will
cooperate with C&S in regulating inventory levels as necessary to minimize
any adverse impact on C&S’s business with its other customers.

 

(b)                                 Any Merchandise
located in any of the Shared Facilities which is available to C&S in
limited quantities that are insufficient to support the demands of C&S’s
customers being serviced from any such Facilities shall be allocated among Tops
and such other customers during such period of limited supply based upon the *
In addition, if a vendor makes product available in limited quantities and the
product has not been delivered to C&S, C&S shall use commercially
reasonable efforts to allocate any such Merchandise among all of its facilities
(including the Facilities) based upon * For the avoidance of doubt, all costs
associated with inter-facility transfers of Merchandise that are necessary in
order for C&S to satisfy the foregoing obligation to Tops constitute Costs
chargeable to Tops consistent with Article 4.

 

3.10            Procurement
Service Levels.  With
respect to the procurement service level applicable to the supply of
Merchandise, the Parties agree as follows:

 

(a)                                  Required
Service Level.  The Parties’
mutual objective is to maintain: (i) a * service level on the Merchandise *
(in each case, the “Required Service Level”).

 

(b)                                 Calculation of Service Level.     C&S will provide Tops a * “Service
Level Reconciliation Report” showing, with respect to all orders processed for
the given period, * In computing service level percentages, the service level
percentage for * from all other Merchandise, and * the number of cases (or
shipping units, in the case of GM/HBC Merchandise) invoiced, * denominator
shall be *

 

The term “ad overpull” means any promotional Merchandise volume in
excess of the volume projections timely provided by Tops.  The term “manufacturer’s out-of-stock” refers
to cases or shipping units (as the case may be) that: (i) were

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

8

 

subject to a product recall; (ii) C&S provides within* after
shipment to the Tops Stores written proof of out-of-stock status (e.g., a
letter from the manufacturer indicating the quantity of the item that was
unavailable from the manufacturer for the period in question, or a received
purchase order issued within proper lead time indicating the quantity of the
item that was cut by the manufacturer); or (iii) the manufacturer has
refused to ship product due to a dispute over an Accounts Receivables * and
C&S provides such evidence as described in clause (ii) of this
paragraph.  C&S’s Service Level
Reconciliation Report will be used to establish whether the Required Service
Level has been attained, which service level report shall set forth service
levels with and without *

 

(c)                                  Service Level
Default.  A “Service Level Default”
shall be deemed to have occurred if, for any reason (except to the extent
caused by a default by Tops under this Agreement or an event of Force Majeure),
C&S fails to maintain the applicable Required Service Level during * Each
period * shall be a “Measurement Period.”

 

(d)                                 Cure of Service
Level Default.  Should Tops
believe that a Service Level Default has occurred, Tops shall notify C&S
and C&S shall use its best efforts to immediately restore the applicable
Required Service Level.  If during or
prior to the * following the occurrence of a Service Level Default the
applicable Required Service Level is achieved, then the Service Level Default
shall be cured and new Measurement Periods shall begin.  Failure to achieve the applicable Required
Service Level during or prior to the end of such * shall constitute a Service
Level Default by C&S and Tops will be entitled to a penalty payment (the “Penalty
Payment”) to the extent that the actual service level is below the applicable
Required Service Level during such week until the Required Service Level is
restored (“Penalty Period”).  The amount
of the Penalty Payment shall be equal to: * and * The Penalty Payment shall be
paid within * In addition, during any Penalty Period, Tops *

 

To the extent that the average actual service level percentage for any
week is above (x) * and (y) *, C&S shall be given a credit equal to * (A) *
(B) * C&S shall use the aggregate of any Service Level Credits to set-off
against any Penalty Payment that it may owe for service levels below the applicable
Required Service Level but above *

 

Example of Penalty Payment.  If a Penalty Period lasted for one week, the
average actual service level during such Penalty Period was *, the number of
cases of * delivered during such Penalty Period was * and the Service Level
Credit was *, then the Penalty Payment would be equal to *

 

(e)                                  Holiday Service
Default.  The holiday
seasons, i.e. * Easter, Memorial Day, July 4th, Thanksgiving, Christmas and New Year’s Eve, are
critical to Tops.  If C&S fails to
meet the applicable Required Service Levels for any such * period, then C&S
shall pay a Penalty Payment as set forth in Section 3.10(d), above, with *
with respect to * in each case, with respect to such * period, and with no
reduction for Service Level Credit.

 

(f)                                    Escalation;
Service Level Termination.  A
member of C&S’s senior level management will be made available to discuss
any service level concerns of Tops related to Service Level Defaults as Tops
may request.  If the average actual
service level percentage is below * for *, and Tops has provided C&S with
Timely Notice of Termination, then Tops may terminate this Agreement within *
following the end of the last applicable Measurement Period.  “Timely Notice of Termination” means
(a) in the case of Section 3.10(f)(i), within * following the end of
the * Measurement Period, Tops has provided C&S with written notice 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

9

 

that it intends to terminate this Agreement if the actual service level
is below (x) *, or (y) * in each case, for *, and (b) in the case of Section 3.10(f)(ii),
within * following the end of the * Measurement Period, Tops has provided
C&S with written notice that it intends to terminate this Agreement if the
actual service level is below (x) * or (y) *, in each case, *

 

3.11            Cost
of Merchandise and *  The Merchandise
will be charged to Tops * as defined herein. 
The * of Merchandise shall mean the * (as defined and set forth below)
of such Merchandise * and * all as more fully set forth below.

 

(a)                                  * for Merchandise *.  The * to be charged to Tops for any Merchandise
shall be as follows:

 

(i)                                     For purposes hereof:

 

(A)                              * is hereby
defined as:

 

(x)                                   for Merchandise
with a published list price, the manufacturer’s published list price * provided
that *;

 

(y)                                 for Merchandise
without a published list price *; and

 

(z)                                   for tobacco Merchandise,
the applicable state minimum price.

 

(B)                                * for purposes
of this Agreement, means *

 

(C)                                *, for purposes
of this Agreement, means * provided that * 
The Parties understand and agree *

 

(ii)                                  C&S shall
invoice Tops for * The * Tops acknowledges that C&S, * Tops further acknowledges
that *

 

(iii)                               Any and all *
in accordance with * but in no event *. 
Accordingly, C&S may * for any * or other * and to the extent * C&S
will be entitled to * in accordance with and to the extent *

 

(iv)                              The Parties will * set forth
in items (A), (B) and (C) of this clause 3.11(a)(iv) so long as the Parties
continue to * from such * in the *

 

(A)                              *  In * C&S will * the * and * Exhibit
3.11(a)(iv)(A) *

 

(B)                                *  C&S will invoice Tops * from * and * set
forth on Exhibit 3.11(a)(iv)(A).

 

(C)                                *  notice * manufacturer provides * otherwise, C&S
will *

 

Accordingly, the * of the applicable items of Merchandise procured by
C&S will reflect the foregoing practices. 
As and when agreed to by * from the * set forth in items (A), (B) and
(C) of this clause 3.11(a)(iv) then such * will be * for such Merchandise as
set forth in Section 3.11(a)(i)(A)(x) without any further reference to this
clause 3.11(a)(iv).

 

(b)                                 * of *.  * will * except * with respect to *.  For clarification, * (defined below).  * will *

 

(c)                                  *.  The * as and * in accordance * will * (for
purposes hereof, *). * will *.  For
clarification, * that the* for any * during * without * from the * for such *
as set forth *  as the *.

 

(d)                                 Weekly Price * The Parties
shall continue the weekly * whereby * on a weekly basis and * It is the intent
of * that the * of such *.  To the extent
* seeks pursuant to any audit under Section 10.2 to review * which are
subject to an agreement of confidentiality * and to the extent C&S
reasonably determines that such a review is permissible under any such

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

10

 

agreement of confidentiality, Tops will comply with C&S’s
reasonable requests as necessary in connection with such confidentiality
obligations, including entering into separate confidentiality agreements, and
comply with the provisions of paragraph (e) below where applicable.

 

(e)           Restricted Information.  Tops understands and agrees that information
related to * (“Restricted Information”) is highly sensitive and shall be
subject to a heightened level of confidentiality and restricted access.  Accordingly, in order for C&S to agree to
provide such Restricted Information, Tops agrees that it will abide by such
procedures and requirements and enter into such additional agreements or
instruments, as requested by C&S, which C&S determines are reasonably
necessary to protect such information.  
Such procedures and requirements may include, for example, permitting
limited access to such Restricted Information (which may consist of making such
information available for viewing only, including redacted versions of documents
containing such information, and prohibiting copies or other reproductions
thereof) only to (x) a third party independent auditing firm engaged by
Tops with the understanding that such firm may disclose the overall results of
its audit to Tops so long as it does not disclose any Restricted Information to
Tops, or (y), if expressly permitted by C&S, to only those limited,
specifically designated officers, directors, employees representatives,
counsel, advisors and other agents of Tops who have a need to know such
Restricted Information in connection with Tops’ confirmation of * (the “Permitted
Use”), who have been reasonably approved of by C&S, and who will each
individually be required to execute affirmations of the confidentiality
obligations stated herein (“Permitted Individuals”).  In any such case, Tops agrees that, to the
extent any Restricted Information is disclosed to Tops (by C&S or
otherwise), then Tops shall not disclose such information to any other person
or party, other than the Permitted Individuals. 
All such Restricted Information may not be copied or reproduced by Tops
or its independent auditors, as the case may be, in any form, and may only be
used for the Permitted Use.

 

(f)            *  For the
avoidance of doubt, the * will * to acquire such *

 

3.12    * and *.

 

(a)           *  The  * as part of the * sets forth, based on * with respect to *
in the * (such * for * only, the *).  For
the Contract Year * and *, and for each subsequent Contract Year, a * as part
of the * for such *, substantially * to be * by * for such *. The * across * or
the * as the *, for any Contract Year, * of * from * in the * set forth *,
shall be for purposes hereof, the *.

 

(b)           *. For each *,
if at the *, the * for the * from the *the * set forth * for such * (without *
except for the * pursuant to which * for such * to a * the * between * or *,
then the * the * such * such *, with respect to * from * for such *. * the *
the *, then * of any *, as * from * for the * through such * will be * for the
* for such *, and then * such * for such * from *. For the * through * for the
same * for the * and the * for the *.

 

In
connection with the quarter end reconciliations contemplated by Section 4.5.2,
and year-end reconciliations contemplated by Section 4.5.3, Tops and
C&S shall determine whether any amounts are due and owing to C&S
pursuant to this Section 3.12(b) for the applicable cumulative
period.  Any * through * to the extent *

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

11

 

be
* in accordance *, and * be billed on *. If * of the * that *, the * for such *
does not * for such *, then * of * that was * as part of *.

 

For
example * as reflected therein * with respect to the * shall be * and will *

 

3.13    Additional
*.  The * to * for
Tops with respect to * and*.  To the
extent Tops * within the * the * that may *.

 

3.14    Credit
Policy.  The Parties agree to the terms and conditions
of the Credit Policy attached hereto as Exhibit 3.14.

 

ARTICLE 4

 

PREPARATION OF ANNUAL BUDGETS;
SHARED SAVINGS

 

4.1      Costs; Budget and Remuneration
Procedures Generally.    Tops shall be responsible for any and all
costs and expenses directly relating to the performance of the Services during
the Term (collectively, the “Costs”) and, accordingly and subject to the terms
of this Agreement, Tops will pay C&S for all Costs incurred by C&S,
together with other remuneration due under this Agreement, in the time and manner
set forth in Article 7.  Annual
budgets applicable to each Contract Year, reflecting projected annual costs
with respect to the Warehousing Services and Transportation Services, shall be
prepared, reviewed and approved in accordance with the terms and conditions set
forth in this Article 4, and shall become the Approved Budgets for
purposes of this Agreement.  This
Article 4 also sets forth certain procedures for the Parties to establish
Flex Budgets.

 

4.2      Annual Approved Budgets.  The 2009 Budget, attached as Exhibits
1.5(a)-(d), sets forth C&S’s annual budget applicable to the Tops
Volume for its fiscal year ended September 26, 2009.  For each Contract Year during the Term,
beginning with the Contract Year September 27, 2009 through
September 25, 2010, an annual budget will be prepared in accordance with
the 2009 Budget format (each such annual budget, as approved by the Parties, an
“Approved Budget”), and substantially consistent with the format of the 2009
Budget, shall be comprised of the separate budgets for the Costs of C&S for
the applicable Contract Year with respect to each of the Mainline Operations
(the “Mainline Operating Costs”) and the GM/HBC Operations (the “GM/HBC
Operating Costs”), with each such budget reflecting separately the Total Warehousing
Costs and Total Transportation Costs for such portion of C&S’s operations,
respectively, *.  For the purposes of
this Agreement, all calculations related to the Approved Budget and any other
matters in connection with the terms of this Agreement shall be calculated
consistent with GAAP.

 

4.3      Budgeted Costs.  The Approved Budgets shall set forth Costs
reasonably anticipated by the Parties to be incurred for the applicable
Contract Year in connection with the performance of the Services, the operation
of the Facilities by C&S, and purchases and other investments in Fixed
Assets in the applicable Contract Year.

 

(a)           Costs will include costs and
expenses reasonably incurred in connection with the performance of the Services
and the operation of the Facilities during the Term. Without limiting any of
the foregoing, the term “Costs” shall include, but not be limited to, the
following categories of costs and expenses:

 

(i)            “occupancy
costs” for all Facilities, which shall be comprised of:

 

(A)          With
respect to leased Facilities - all rent, additional rent, leasehold
improvements, rental subsidies, and other costs, liabilities and obligations
relating to any leases or subleases of the Facilities;

 

(B)          With
respect to owned Facilities — all imputed rental amounts and depreciation
expense for each applicable Facility; and

 

(C)          all
real estate carrying costs including, but not limited to, common area
maintenance, real estate, personal property and business taxes, utilities,
insurance and customary maintenance and repair expenses (including the cost of
supplies);

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

12

 

(ii)           all imputed rental amount and depreciation expense for
all Fixed Assets owned by C&S;

 

(iii)          all amounts in respect of equipment maintenance,
repair and rentals and all charges under any leases of equipment assumed by
C&S or entered into by C&S in accordance with the terms of this
Agreement (including without limitation, leases which constitute capital leases
under GAAP) and relating to the provision of the Services;

 

(iv)          all reasonable and necessary transportation, freight
and other costs relating to the provision of the Transportation Services,
including but not limited to, fuel, tolls, insurance, lease and rental
payments, repair and maintenance costs, payments made to contract carriers for
freight services, and costs associated with inter-facility transfers of
Merchandise and assets in connection with the provision of the Services;

 

(v)           all warehouse related operational costs relating to the provision of the
Services, including any cost related to outside storage;

 

(vi)          all * related to
the provision of Services;

 

(vii)         all amounts charged by and payable to third party
contractors and service providers (which may include any Affiliate of a Party,
including ES3) engaged in connection with the provision of the Services or the
performance of this Agreement;

 

(viii)        all reasonable pay in lieu of notice, reasonable
termination and severance payments and like amounts (without limiting the
obligations set forth in Article 9 of this Agreement), and all related
costs and expenses in accordance with C&S’s procedures and policies,
relating to the termination of employment of any one or more employees employed
in connection with the provision of the Services;

 

(ix)          all premiums
payable with respect to all policies of insurance obtained in connection with
providing the Services, including the insurance referred to in
Section 8.1(d)(i) of this Agreement, together with all deductibles,
retentions, expenses and out-of-pocket settlements paid by C&S from time to
time with respect to any of such policies of insurance;

 

(x)           all product shrink, and out of code, damaged or
unsalable Merchandise, as well as carrying and interest costs related to
Leftover Ad Volume;

 

(xi)          all reasonable and necessary costs with respect to any
information processing and related communications devices, equipment, systems,
information, data, or software used in connection with the Services, including
an appropriate allocation of corporate depreciation expense related to capital
expenditures that are intended for the benefit of Tops as relating to the provision
of the Services;

 

(xii)         all printing and postage costs;

 

(xiii)        all costs of compliance with applicable Law in
connection with the provision of the Services, and any remedial costs in
connection therewith, and all costs and expenses related to claims of any third
party related to or arising from the performance of the Services and this
Agreement (other than claims arising out of 

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and Exchange
Commission.

 

13

 

or resulting from the gross
negligence or intentional misconduct of C&S, to the extent such gross
negligence or intentional misconduct is judicially determined or expressly
agreed to by C&S);

 

(xiv)        all overhead costs to
the extent such overhead costs are incurred by C&S as the result of any
specific request by Tops, including overhead costs hereinafter required by
C&S to be incurred in connection with the provision of any expanded Services
that are not provided to Tops as of the Effective Date but are requested by
Tops;

 

(xv)         all
taxes, surcharges, assessments and the like (other than income taxes) that may
be imposed in connection with the provision of the Services by any federal, state
or local government or municipality, or any other governmental or
quasi-governmental entity or authority; and

 

(xvi)        all other costs
reasonably incurred by C&S directly related to the provision of the
Services or the performance of this Agreement.

 

(b)           Allocation of Costs for
Facilities.  Tops will
be allocated 100% of Costs in connection with the operation of, and the
performance of any Services from, any Dedicated Facility.  Costs in connection with any Shared Facility
during a Fiscal Accounting Period shall be allocated to Tops according to a
ratio equal to (x) Tops’ actual shipped case (or shipping units, in the
case of GM/HBC Merchandise) volume for such Shared Facility for such Fiscal
Accounting Period, divided by (y) the total case (or shipping units, in
the case of GM/HBC Merchandise) volume shipped from such Shared Facility,
expressed as a percentage for that same Fiscal Accounting Period (the
“Allocation Ratio”); *.  The Credit
Policy attached hereto as Exhibit 3.14 reflects *.  Notwithstanding anything in this Agreement to
the contrary, the Parties acknowledge that any cost, expense, or other charge
which is incurred or expended by C&S that is allocable between Tops and one
or more clients or customers of C&S, shall be so allocated according to the
Allocation Ratio.

 

4.4  Flex Budgets, Fuel.

 

4.4.1       Flexing an Approved Budget.  Any Approved Budget or Flex Budget will be
adjusted at any time for any of the following factors (any such budget as
adjusted hereby, a “Flex Budget”):

 

(i)            changes in regulatory
requirements, compliance with GAAP, and compliance with Laws (provided such
adjustment is not required to correct C&S’s non-compliance for any prior
Fiscal Accounting Period),

 

(ii)           market fluctuations in
C&S’s actual cost of fuel, or any other uncontrollable costs,

 

(iii)          changes in Facilities’ case
volumes and other volume fluctuations, including changes related to startup or
shutdown activities,

 

(iv)          changes to the product mix,

 

(v)           * between the Parties pursuant to Section 3.3 *

 

(vi)          the implementation of any
project intended to result in cost savings or other benefits in connection with
the performance of the Services to Tops,

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

14

 

(vii)         the occurrence of any events
(planned or otherwise) affecting C&S’s operations with respect to the
performance of the Services to Tops, or any other material changes affecting
such operations, and

 

(viii)        any other such similar
factors as may be appropriate as mutually agreed to by the Parties.

 

Each Flex Budget prepared and delivered by C&S to Tops will be
deemed to be approved by Tops * will thereafter be and is deemed by the Parties
hereby to be, the Flex Budget to be used by the Parties for all purposes
requiring the use of an Approved Budget or Flex Budget under this Agreement,
until the next Approved Budget or Flex Budget as the case may be.  For clarification, during any Contract Year,
each Flex Budget shall supersede and replace in its entirety the immediately
preceding Approved Budget or Flex Budget, until the next Approved Budget or the
Flex Budget, as the case may be.

 

4.4.2       Fuel Cost Adjustment.  The Parties intend that Tops will pay the
actual delivered cost of fuel, exclusive of any financial hedging that C&S
may undertake for its own account.  Each
Approved Budget will reflect a budgeted fuel cost based on the best information
available to the Parties with respect to the then applicable rates and
consumption estimates.  The Parties will
then update and/or adjust the fuel cost from such Approved Budget as necessary
pursuant to the Flex Budget process.

 

4.5  Reporting of Variances.

 

4.5.1       Monthly Reconciliations.  Within twenty
(20) days of the end of each Fiscal Accounting Period, C&S shall provide to
Tops a detailed report (the “Monthly P&L”) containing a comparison of
variances between (i) Costs actually incurred by C&S in performing the
Services (the “Actual Costs”) and (ii) Costs set forth in the Approved
Budget for the applicable Contract Year or the Flex Budget for the immediately
preceding period, if applicable.  Tops
will either (a) receive a credit on its next * Statement equal to the
amount by which C&S’s Actual Costs set forth on the Monthly P&L for
such Fiscal Accounting Period were less than the amount of Costs set forth on
the Approved Budget (or Flex Budget, as applicable) paid by Tops for such
Fiscal Accounting Period or (b) pay C&S, in connection with the next *
Statement, any amount by which C&S’s Actual Costs set forth on the Monthly
P&L for such Fiscal Accounting Period were greater than the Costs set forth
on the Approved Budget (or Flex Budget as applicable) which were paid by Tops
for such Fiscal Accounting Period.

 

4.5.2       Quarterly Reconciliations.  Within forty-five (45) days of the end of
each Contract Quarter, C&S will reconcile the Monthly P&Ls for such
Contract Quarter and either (i) provide to Tops a credit on Tops’ next *
Statement equal to the amount by which C&S’s Actual Costs set forth on the
Monthly P&Ls for such Contract Quarter were less than the amount of Costs
set forth on the Approved Budget (or Flex Budget as applicable) for such
Contract Quarter paid by Tops or (ii) Tops will pay C&S the amount by
which C&S’s Actual Costs set forth on the Monthly P&Ls for such
Contract Quarter were in excess of the Costs set forth on the Approved Budget
(or Flex Budget, as applicable) for such Contract Quarter and paid by Tops for
such Contract Quarter, in either case of (i) or (ii) taking into
account any amounts credited to or paid by Tops in connection with the monthly
reconciliations.  Quarterly
reconciliations will be completed in conjunction with the closing of the
accounts for the C&S fiscal quarter in which such Contract Quarter
concludes.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

15

 

4.5.3       Year-End Reconciliations.  Within ninety (90) days of the end of each
Contract Year, C&S will reconcile the final Contract Quarter for such
Contract Year and either (i) provide to Tops a credit on Tops’ next *
Statement equal to the amount by which C&S’s Actual Costs for such Contract
Year were less than the amount of Costs set forth on the Approved Budget (or
Flex Budget, as applicable)  for such
Contract Year paid by Tops, or (ii) Tops will pay C&S the amount by
which C&S’s Actual Costs for such Contract Year were in excess of the Costs
set forth on the Approved Budget (or Flex Budget as applicable) for such
Contract Year and paid by Tops for such Contract Year, in either case of
(i) or (ii) taking into account any amounts credited to or paid by
Tops in connection with the monthly and quarterly reconciliations.  The year-end reconciliations will be
completed in conjunction with the closing of the accounts for the C&S
fiscal year, which is coterminous with the Contract Year.

 

4.5.4       Review of Reconciliations.  Within * after the receipt of each of the
monthly and quarterly reconciliation reports or within * after the receipt of
the yearly reconciliation report, representatives of the Parties shall meet to
review the report.  Tops shall have
access to C&S internal accounting records to verify Costs incurred by
C&S and presented to Tops are accurate. 
C&S will bring to each meeting sufficient authentic documentation of
costs incurred (e.g., general ledger to verify depreciation taken on equipment,
invoices to verify any material/equipment purchased, etc.) to support and
permit analysis of all reconciliations.

 

4.5.5       Effect of Reconciliations.  Consistent with this Article 4, in all
instances the amount of Actual Costs will supersede the amount of Costs set
forth in any Approved Budget and/or Flex Budget.

 

4.6      Preparation of Approved Budgets.

 

(a)           At least * prior to the end of each Contract Year
during the Term (or such other reasonable period agreed to by the Parties),
Tops and C&S will begin to meet to review the Approved Budget prepared by
C&S for the upcoming Contract Year. 
The Parties shall use their commercially reasonable efforts to complete
the approval process within the * period immediately prior to the commencement
of the upcoming Contract Year (such commencement date, “Budget Approval
Deadline”, unless the Budget Approval Deadline is some other date agreed upon
by the Parties hereafter).  Upon the
issuance of the initial draft Approved Budget by C&S, such Approved Budget
will be subject to revision as necessary by the Parties, upon each Party’s good
faith request for adjustments or modifications, until the Budget Approval
Deadline.  Prior to the * period
preceding the Budget Approval Deadline, C&S will make a final presentation
of the Approved Budget.  If such Approved
Budget is approved by Tops or if Tops does not object in good faith during the *
period preceding the Budget Approval Deadline, such presented budget will be as
of the Budget Deadline Approval Date, and is deemed by the Parties hereby to
be, the Approved Budget to be utilized by the Parties for the upcoming Contract
Year.  The Parties understand and agree
that timely completion of the Approved Budget is a critical component of the
transparent relationship between the Parties, and that if there is a delay in
the budgeting process the Parties will dedicate whatever executive-level
resources are necessary to ensure timely completion.  Until such subsequent Approved Budget is
determined as set forth above, the Approved Budget for the immediately preceding
Contract Year shall remain in full force and effect.  For clarification, each Approved Budget, once
determined, shall supersede and replace in its entirety the immediately
preceding Approved Budget or Flex Budget until the next Approved Budget or Flex
Budget, as the case may be.  For the
Contract Year beginning *, the Parties shall cooperate and make commercially
reasonable efforts to review and approve the 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

16

 

Approved
Budget for such Contract Year prior to the Services Commencement Date.  Attached as Exhibit 4.6, entitled
* is the * for the year beginning * (with all references to * and related
information therein, being included for *.

 

(b)           Tops hereby agrees that from
time to time in future Approved Budgets, certain items of revenue and/or
expense may be reclassified from an existing cost aggregation grouping into
different cost aggregation grouping, as required by GAAP.  For example *.  Any such reclassification will also be made
to the Baseline Budget for consistency, however, such reclassification will not
impact the total budgeted amount of costs reflected in the Baseline Budget or
the calculation of any Gainshare.

 

4.7      Shared Savings; Cost Savings
Gainshare Incentive Fee.

 

(a)           Baseline Budget.  For purposes of determining the eligibility
for Gainshare (defined below) for each Contract Year, the Parties will use the
“Baseline Budget”, attached to this Agreement as Exhibit 4.7(a),
which is comprised of the following components from the 2009 Budget:  (x) “Total Mainline Operating Costs”
reflecting budgeted Costs (other than occupancy-related Costs) for C&S’s
fiscal year ended September 26, 2009 related to Mainline Operations
relative to Tops, (y) “Total Occupancy Costs” reflecting budgeted
occupancy-related Costs for C&S’s fiscal year ended September 26, 2009
related to Mainline Operations relative to Tops, and (z) “Total GM/HBC
Operating Costs” reflecting budgeted Costs for C&S’s fiscal year ended
September 26, 2009 related only to GM/HBC Operations relative to
Tops.  The Baseline Budget is subject to
adjustment and modification only as specifically set forth in this
Agreement.  The Baseline Budget will be
used for each Contract Year to calculate the total Cost Savings Gainshare
Incentive Fee (“Gainshare”), if any, payable to C&S for cost savings for
the applicable Contract Year compared against the costs reflected in the
Baseline Budget, as calculated in accordance with this Section 4.7.  For clarification, * provided however, that
this sentence shall not modify nor limit Tops’ indemnification obligations as
set forth in Sections 2.4 and 10.3 of this Agreement.  Without limiting the foregoing sentence,
withdrawal liability that arises in connection with a Facility Decision is
addressed in Section 2.4.

 

(b)           Baseline Costs.  The Baseline Budget will express costs as
follows (for purposes hereof, the “Baseline Costs”):  (I) for the Total Mainline Operating
Costs portion of the Baseline Budget, budgeted Costs are expressed as a cost
per case; (II) for the Total Occupancy Costs portion of the Baseline
Budget, budgeted Costs are expressed as absolute dollars; and (III) for
the Total GM/HBC Operating Costs portion of Baseline Budget, budgeted Costs are
expressed as a percentage of sales.  The
applicable Baseline Cost measure shall be utilized in calculating the Shared
Savings and the resulting Gainshare payable to C&S, if any, for each
Contract Year in accordance with sub-section (c) below.  For any applicable measurement period, the
Parties will determine the actual Costs (expressed as a cost per case, absolute
dollars or percentage of sales as applicable for the categories of Baseline
Costs as set forth in this paragraph (b)) for such period for the Mainline
Operations (with the occupancy-related Costs calculated separately) and the
GM/HBC Operations, respectively, based on the actual Costs incurred by C&S
and calculated on a similar basis as reflected in the applicable Baseline
Budget (such actual Costs, for purposes of this Section 4.7, the “Actual
Gainshare Costs”).

 

(c)           Adjustments to Baseline
Budget.  The Baseline Budget will be
adjusted annually as follows (the “Adjusted Baseline Budget”):

 

(i)            All costs comprising the
Total Mainline Operating Costs and Total Occupancy Costs portions of the
Baseline Budget will be adjusted annually (at the conclusion of each Contract
Year) based on increases in the Index (as defined in Section 5.4 below)
calculated and applied in the same manner as set forth in Section 5.4;
provided, however, that: * (i.e., * will be adjusted * will be adjusted * will
be adjusted * will be adjusted * of this sub-paragraph 4.7(c)(i). * attachment
to Exhibit 4.7(d) *

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

17

 

The Baseline Budget, as adjusted as set forth above at the conclusion
of each Contract Year, and as otherwise adjusted pursuant to this
Section 4, will be applied accordingly in determining the Gainshare for
such year.

 

(ii)           If there is any material
change in Tops’ Services requirements that increases C&S’s costs to provide
Services to Tops, the Parties will meet in good faith and revise the Baseline
Budget.

 

(iii)          For any fifty-three (53)
week Contract Year, the Total Occupancy Costs portion of the Baseline Budget
will be adjusted for the additional Costs applicable to the additional week of
operation.

 

(iv)          If there is case or unit
volume deviation of more than * from the volume reflected in the Baseline
Budget, up or down, the Parties will examine the fixed and variable cost
components within the Baseline Budget and make any necessary adjustments to the
Baseline Budget to allow an appropriate comparison of the Actual Gainshare
Costs reflecting costs incurred in the applicable Contract Year to the Baseline
Costs reflecting the costs set forth in the Baseline Budget.

 

(v)           If there is any other matter
or development that prevents a legitimate and meaningful comparison of the
Baseline Costs to the Actual Gainshare Costs, then the Parties shall meet and
in good faith adjust such Baseline Budget to permit such a meaningful
comparison.

 

(vi)          The Baseline Costs set forth
in the Baseline Budget shall be re-calculated following any adjustment to the
Baseline Budget, and any adjustments or modifications to the Baseline Budget
will be reflected in a revised Baseline Budget prepared and delivered by
C&S to Tops, which will supersede and replace in its entirety the
immediately preceding Baseline Budget for all purposes that the Baseline Budget
is utilized under this Agreement.

 

(d)           Calculation of Shared
Savings and Cost Savings Gainshare Incentive Fee.  For each Contract Year, the amount of “Shared
Savings”, if any, to be allocated between Tops and C&S * (subject to the
terms of this Agreement), shall be calculated utilizing the Actual Gainshare
Costs determined (as set forth in Section 4.7(b)) based on the actual
Costs incurred by C&S and charged to Tops for each of the Mainline
Operations (less occupancy Costs), the occupancy Costs related to the Mainline
Operations, and the GM/HBC Operations, and the Baseline Costs reflected in the
Baseline Budget or the Adjusted Baseline Budget (as applicable) for such year,
as more specifically set forth in sub-sections 4.7(d)(i)-(iv) below:

 

(i)            Mainline Operating Cost
Savings (excluding Occupancy Costs).  Total Mainline Operating Cost savings shall
be calculated by multiplying: A) the positive difference between (x) the
Baseline Costs for Total Mainline Operating Costs as reflected in the Baseline
Budget or the Adjusted Baseline Budget (as applicable) and (y) the Actual Gainshare
Cost based on the actual total Costs incurred by C&S and charged to Tops in
connection with the Mainline Operations for the 

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

18

 

applicable Contract Year for which the Gainshare is being determined; and
B) the number of Mainline cases for the applicable Contract Year for which the
Gainshare is being determined.

 

(ii)           Mainline Operating Occupancy
Cost Savings.  Total
Occupancy Cost savings shall be calculated by determining the positive
difference in absolute dollars between (x) the Baseline Costs for Total
Occupancy Costs as reflected in the Baseline Budget or the Adjusted Baseline
Budget (as applicable) and (y) the Actual Gainshare Costs based on the
actual total Costs incurred by C&S and charged to Tops in connection with
the occupancy costs related to the Mainline Operations for the applicable
Contract Year for which the Gainshare is being determined.

 

(iii)          GM/HBC Operating Cost
Savings.   Total GM/HBC Operating Cost
savings shall be calculated by multiplying: A) the positive difference between
(x) the Baseline Costs for the Total GM/HBC Operating Costs as reflected
in the Baseline Budget or the Adjusted Baseline Budget (as applicable) and
(y) the Actual Gainshare Costs based on the actual total Costs incurred by
C&S and charged to Tops in connection with the GM/HBC Operations for
applicable Contract Year for which the Gainshare is being determined; and
B) the total GM/HBC sales (in dollars) for the Contract Year for which the
Gainshare is being determined.

 

(iv)          Total Shared Savings.  The total Shared Savings, for each Contract
Year, shall be determined by adding the amounts calculated pursuant to (i),
(ii) and (iii) above, except
that, for the *, the * will * from * the * for such * to the * in the * for the
*.  Any favorable difference will
be applied, consistent with clauses (i), (ii) and (iii) above, to the
total sales (in cases or dollars, as applicable) during such period. 

 

                An illustrative example * is annexed here to as Exhibit
4.7(d). 

 

(e)           Payment of Cost Savings
Gainshare Incentive Fee.

 

(i)            C&S and Tops shall
reconcile the Gainshare in connection with each year-end reconciliation (as set
forth in Section 4.5.3 hereof).  To
the extent any portion of the Cost Savings Gainshare Incentive Fee is disputed,
Tops shall nonetheless pay to C&S the undisputed portion of such Fee on the
next applicable * Statement.

 

(ii)           Payment of the Cost Savings
Gainshare Incentive Fee shall be made to C&S in accordance with the terms
and conditions set forth in this Section 4.7 and Article 7 hereof.

 

(f)            Other Savings.  Notwithstanding the foregoing, if savings
result from the assumption by Tops of the performance of any of the Services
(as contemplated or expressly permitted by this Agreement) or Tops effects a
change that reduces its occupancy costs or other direct expenses, the Parties
will account for such savings in calculating the Gainshare and take all
necessary steps in connection therewith. 
For example, Tops may elect to assume, as permitted by
Section 2.3(c), the delivery of Merchandise to Tops Stores by picking-up
Merchandise at the applicable Facility. 
If such activity results in a reduction in 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

19

 

Costs, such savings will be
reflected in the calculation of the Gainshare for the applicable period.

 

4.8      GM/HBC Start-Up Costs.   All costs incurred by C&S in connection
with the start-up of the supply of the GM/HBC Merchandise to Tops will be
charged to, and paid by, Tops as of the Services Commencement Date.

 

4.9      Pension Fund Assessments.   Tops will indemnify C&S for any and all
Pension Fund Assessments; provided, however, that, * any such * will not *

 

4.10   Costs
for WorkForce Reductions Not Consented to by Tops.  Following * C&S shall not * in connection
with * then C&S will * and Tops will continue to *.

 

ARTICLE 5

 

SERVICES FEES

 

5.1.     General.  In addition to any other amounts payable
hereunder, as consideration for performing the obligations under this
Agreement, Tops shall pay to C&S the Services Fees, as set forth and
defined below.  In addition to the Base
Management Fee, Tops shall also pay to C&S the Cost Savings Gainshare
Incentive Fee * certain conditions are satisfied, as described below.  For purposes of this Agreement, the Base
Management Fee, the Cost Savings Gainshare Incentive Fee * shall be referred to
herein as the “Services Fees.”  Services
Fees shall also include any fees later agreed to by the Parties, including fees
for Additional Services.

 

5.2    Base Management Fee.  The “Base Management Fee”
will be * per Contract Year, will be adjusted annually pursuant to
Section 5.4 hereof and will be payable on a * basis, * (subject to
Section 7.1(c)(i)(A)(I)), commencing on the Services Commencement Date.  Such amount is based on a 52-week Contract
Year and, accordingly, will be increased proportionally for any 53-week
Contract Year.  The Base Management Fee
shall be payable to C&S in accordance with the terms and conditions set
forth in Article 7 hereof.

 

5.3      Incentive Compensation Fees.  In addition to the Base
Management Fee, C&S will be entitled to receive the following fees:

 

(a)           Cost Savings Gainshare
Incentive Fee.  For each
Contract Year, C&S will be eligible to receive a “Cost Savings Gainshare
Incentive Fee”, as described and calculated in accordance with Section 4.7
hereof, for such Contract Year.

 

(b)           *.  For each Contract
Year, C&S will be eligible to receive *.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

20

 

5.4      Adjustments
to Certain Services Fees. 
The then applicable Base Management Fee shall be adjusted at the start
of each Contract Year commencing with the Contract Year beginning
September 26, 2010, * The Parties shall *. For purposes of illustration, *
assume that the * (The above * references and calculated amounts are not actual
and are referenced herein for illustrative purposes only.)

 

As
set forth in Section 4.7(c), the * set forth in the Baseline Budget are
also subject to an annual Index adjustment substantially consistent with this
Section 5.4, except that the Baseline Budget will be adjusted at the
conclusion of the applicable Contract Year as set forth therein.

 

5.5      Additional Services.  From time to time, Tops may request the
provision of additional services that are outside of the scope of both the then
current Services and the Other Services. 
In such event, Tops and C&S shall negotiate in good faith to mutually
agree upon a description of such additional services, including an adjustment
of the then applicable Approved Budget (as determined or adjusted in accordance
with Article 4), and the appropriate adjustment to the Base Management Fee
to reflect any additional expense to C&S and C&S’s profit expectation
for such additional services.  To the
extent the Parties mutually agree, any of the foregoing requested additional
services (the “Additional Services”) may form part of the Services hereunder
for the purposes of this Agreement, and the Parties will make such
modifications to this Agreement, and to each of the Baseline Budget and
Approved Budget (or Flex Budget, as applicable), as appropriate and necessary
to reflect the agreed upon Additional Services and budgeted Costs related
thereto.

 

ARTICLE 6

 

OTHER SERVICES

 

6.1      General.  C&S shall perform
certain services (the “Other Services”) on Tops’ behalf that are incidental or
in addition to the Services, as specified in this Article 6.  The Parties agree that the costs incurred by
C&S in connection with the rendering of the Other Services shall not
constitute Costs payable by Tops but shall remain the sole responsibility of
C&S, are excluded from the calculation of the 2009 Budget and shall not be incorporated
into or made a part of any Approved Budgets, and accordingly, C&S will
retain all income earned in connection therewith.

 

6.2      Coupon Processing Services.    During the Term, C&S will perform coupon
processing services (the “Coupon Processing Services”) with respect to all of
the Tops Stores, in accordance with, and subject to, the terms and conditions
set forth in Exhibit 6.2, which are incorporated hereby and made a
part of this Agreement.

 

6.3      Accounts Receivables *.  From time to time, Tops may
ask C&S to act as its agent to * amounts that are due from manufacturers to
Tops (such amounts * by C&S being Accounts Receivable *.  C&S has the right, in its discretion, to
refuse to honor any * request that Tops may make; provided that C&S *. Tops
will provide C&S with all documentation in support of each requested
Accounts Receivable *.  If C&S * and the
* made by C&S, Tops shall indemnify, defend and hold C&S harmless from
any claim * related to such *.  If after
* of such * any such * Tops will, upon notice from C&S, *, either by* or by
C&S * to Tops’ next * Statement. 
Tops will use commercially reasonable efforts to insure that the supply
of Merchandise from manufacturers to C&S is not adversely affected by any
Accounts Receivables *.  The Required
Service Level shall not be adversely affected by an interruption in the supply
of Merchandise from a manufacturer to C&S if the interruption is caused by
the refusal of the manufacturer to ship product to C&S and such refusal is
attributable (in whole or in part) to * that C&S * C&S will *.

 

6.4      Reclamation; Swell Allowance.  During the Term, C&S will perform
services with respect to all damaged, discontinued or unsalable Merchandise
located at the Tops Stores (the “Reclamation Services”).  All non-perishable qualifying product will be
accumulated at each store in banana boxes, and will be picked up by C&S
after Tops notifies C&S that there is a full pallet (typically twenty
cases, but at least five cases) of banana boxes.  C&S will scan items at its reclamation center
and create a scan file.  Each week Tops
will provide C&S 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

21

 

with a scan file of all perishable qualifying
product.  *  Private label product shall be excluded from
the reclamation program, unless the vendor of any such product is an authorized
vendor allowing C&S to deduct reclamation amounts from such vendor.  * from the applicable *.  To the extent a manufacturer pays or
institutes a swell allowance on Merchandise, then C&S shall receive the
full amount of such allowance.  *.

 

ARTICLE 7

 

REMUNERATION AND PAYMENT OF OPERATING COSTS AND SERVICES FEES

 

7.1      Payment
of Costs and Services Fees.  Tops will pay to C&S * all Services Fees,
and will * under this Agreement in accordance with the terms hereof, as
follows:

 

(a)           * Statements.  On * during the Term, C&S will
electronically transmit to Tops files (such files shall be referred to
collectively as the “* Statement”) setting forth all amounts actually due to
C&S (including* for * (such amounts, for the applicable *, the “* Statement
Amount”).  The * Statement will include:
a shipment file with all Merchandise charged to the Tops Stores * and an
expense/charge file reflecting all * and the Services Fees payable by Tops
which will be billed * on such * Statement in the amount which has been
budgeted by C&S for the applicable Fiscal Accounting Period on the then
applicable Approved Budget or Flex Budget, as the case may be, allocated on a
per * basis.  The
* Statement will also periodically reflect a * (which will be part of the *
Statement Amount), consistent with the reconciliation process set forth in
Section 4.5, * with respect to the *. 
The * will be budgeted in the Approved Budget (or the Flex Budget, if
applicable) for each Contract Year and trued up in connection with the year-end
reconciliation.  Each *, the * Statement
will reflect, and Tops will pay in accordance with
Section 7.1(b) below, the budgeted amount of the * budgeted for the
preceding *.  Upon the year-end
reconciliation (as set forth in Section 4.5.3), any previously unpaid
portion of the * for the applicable Contract Year will be reflected as a charge
on the next applicable * Statement payable by Tops.

 

(b)           Payment.  Tops will pay C&S by wire transfer or ACH
payment in the full amount of the * Statement Amount for settlement and receipt
by C&S by *.  If the relevant banks
are not open for business on the date payment is due, then the due date shall
be accelerated to the previous day that the relevant banks may be legally open
(payment being due by * on such day). 
Tops hereby acknowledges that it has C&S’s current payment
instructions, and C&S will provide Tops with advance notice of any change
in the same.  If Tops disputes any
portion of the * Statement, absent manifest error, Tops shall nonetheless pay
the full amount of the * Statement Amount by the payment due date, without any
deductions or offsets.  In the event of
such manifest error (i.e., the * Statement reflects an indisputable error in
the mathematical calculation thereof), then such amount that is the subject of
such claimed manifest error, if mutually agreed to by the Parties, may be deducted
from the * Statement Amount then payable by Tops.  Similarly, if C&S disputes any portion of
a statement for goods that Tops sends to C&S, C&S shall nonetheless pay
the full amount of the statement by the payment due date, without any
deductions or offsets. Tops or C&S shall give notice to the other Party of
any billing adjustments it believes should be made, and the Parties shall
attempt to reach agreement on any adjustments within *.  If an agreement cannot be reached on disputed
adjustments within said *, the Parties will settle the dispute in accordance
with the dispute resolution procedures set forth in Section 10.1
hereof.  Further, without 

 

* Confidential treatment has been requested
and the redacted material has been filed separately with the Securities and
Exchange Commission.

 

22

 

limiting any rights and remedies set forth herein and otherwise
available to C&S, and subject to Section 7.1(d), any payment not
received pursuant to this Section 7.1(b) (or pursuant to
Section 7.1(c)(i)(A)* (II) following a Triggering Event) will be
immediately subject to a variable late fee equal to * calculated on a daily
basis from the date any such payment is overdue.

 

(c)           Miscellaneous Billing and
Payment Matters.  Time is of
the essence with respect to any payment obligation of Tops under this
Agreement.

 

(i)            The following provisions describe Triggering Events
(as defined below) and the effects of the occurrence thereof:

 

(A)          Immediately upon the
occurrence of any Triggering Event, each of the following shall apply (and the
same shall apply independently for each subsequent Triggering Event as it
occurs), automatically and without further action by any person or entity:

 

(I)            The * payment set forth in
Section 7.1(b) *, and with respect to any *, Tops will be required * and
C&S will receive * together with all other *.  The amount of the * will be the amount designated
by C&S * based on the * or such other * C&S and Tops will *.  C&S may elect not to ship any Merchandise
ordered by Tops in excess of *.  C&S
may, in its sole discretion, elect to accept a standby, irrevocable letter of
credit in amount, form, scope and substance, and from a U.S. financial
institution, satisfactory to C&S, or some other adequate security
satisfactory to C&S in respect of payments to be made hereunder.

 

(II)          Tops will be obligated to pay, and will promptly pay
to C&S, all outstanding and unpaid amounts (including all amounts whether
or not previously billed to Tops in a * Statement) incurred by Tops in
connection with the supply of Merchandise (including * of Tops’ purchases of Merchandise,
Services Fees *).

 

(III)        C&S shall have the right to elect any of the
following:

 

(x)           C&S may continue to
deliver Merchandise (* the * set forth in Section 7.1(c)(i)(A)(I) above);

 

(y)           C&S may defer any
subsequent delivery of Merchandise; provided, that:

 

(aa)         if such Triggering Event is
due to the failure by Tops to satisfy the Reporting Requirement (as defined
below) set forth in Section 7.1(c)(iii)(D) relating to a Financial
Covenant Default (as defined below), C&S may not defer any delivery of
Merchandise unless and until the applicable lender exercises a remedy available
to it under the applicable Senior Debt Agreement following the applicable
Financial Covenant Default, constituting a Triggering Event under
Section 7.1(c)(ii)(C)(II); and further, provided, that

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

23

 

(bb)         if such Triggering Event is,
under Section 7.1(c)(ii)(B), due to C&S not having timely received any
* amount payable pursuant to Section 7.1(c)(i)(A)(2), C&S may defer any
subsequent delivery of Merchandise unless and until Tops has paid to C&S
within the * period following the occurrence of such Triggering Event all
unpaid amounts * corresponding to the next applicable day’s (or days’, as the
case may be) deliveries pursuant to Section 7.1(c)(i)(A)(2), in which case
C&S shall resume the delivery of Merchandise on the day following receipt
of such payment; provided, that if Tops has not
paid such amounts to C&S within the * period following the occurrence of
such Triggering Event, then C&S may terminate this Agreement pursuant to
Section 9.2(a), and defer any subsequent delivery of Merchandise, subject
to Section 7.1(c)(i)(C) below, provided that in such case, the * (as
defined below) shall begin on the day following the expiration of such *
period; provided, however that, notwithstanding the foregoing, C&S’s
receipt of any * amount from Tops shall not affect C&S’s right to defer any
subsequent delivery of Merchandise pursuant to Section 7.1(c)(i)(A)(III)(y) in
connection with any prior Triggering Event or subsequent Triggering Event; and

 

(z)           if C&S has elected to
defer any subsequent delivery of Merchandise pursuant to clause (y) above,
then C&S may, during the * Period (as defined below), subsequently elect to
resume the delivery of Merchandise *.

 

(B)          If any Triggering Event occurs and, in connection
with the event or occurrence constituting such Triggering Event, C&S has
the right to terminate this Agreement pursuant to Section 9.2(a), C&S
may (but has no obligation to) exercise that right by delivering written notice
to Tops not later than the later to expire of (x) the * period following
the date on which such Triggering Event occurs or (y) the * period
following the date on which the right to terminate under
Section 9.2(a) arises (the applicable * period, the “* Period”).  If C&S fails to notify Tops in writing
prior to the expiration of the * Period that it elects to terminate this
Agreement, C&S will be deemed to have waived its right to terminate this
Agreement in connection with the event or occurrence constituting such
Triggering Event.  If C&S
(i) elects to waive (or is deemed to have waived) its right to terminate
this Agreement in accordance with the foregoing, and (ii) has previously elected
to defer delivery of Merchandise pursuant to Section 7.1(c)(i)(A)(III)(y) as
a result of such Triggering Event, then immediately following the expiration of
the * Period, C&S shall resume delivering Merchandise in accordance with
the

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

24

 

terms of this Agreement (on the * set forth in Section 7.1(c)(A)(I)
above) subject to any subsequent Triggering Event. 

 

(C)                               If at any time C&S is
permitted and has elected to defer deliveries of Merchandise in accordance with
Section 7.1(c)(i)(A)(III)(y), and if C&S then has the right to
terminate this Agreement pursuant to Section 9.2(a) (or if such right
subsequently arises in connection with the applicable Triggering Event during
the period C&S is deferring any such deliveries), and if Tops has paid
C&S all amounts contemplated by Section 7.1(c)(i)(A)(I) and/or Section 7.1(c)(i)(A)(II),
then upon reasonable prior written notice to C&S of its intent to do so,
Tops may purchase Merchandise from an alternate supply source but only to the
extent and only until the earlier to occur of: (i) C&S’s election
during the * Period (applicable to such Triggering Event) to thereafter deliver
Merchandise to Tops (which shall be on the * set forth in Section
7.1(c)(i)(A)(I) above), (ii) the expiration of the * Period (applicable to
such Triggering Event) to the extent C&S has elected to waive (or is deemed
to have waived) its right to terminate this Agreement during such * Period, or (iii) if
C&S has the right to terminate this Agreement simultaneously in connection
with more than one Triggering Event, then the expiration of the last applicable
* Period.  If at any time following a
Triggering Event C&S does not have the right to terminate this Agreement
pursuant to Section 9.2(a) as a result thereof and/or Tops has not paid
to C&S all amounts payable pursuant to Section 7.1(c)(i)(A)(I) and/or Section 7.1(c)(i)(A)(II),
Tops may not purchase any Merchandise from an alternate supply source following
any election by C&S to defer deliveries.

 

(D)                               In the event of a Triggering
Event as contemplated by Section 7.1(c)(ii)(D) resulting from the
failure of Tops to comply with Section 7.1(c)(iii)(A) or Section 7.1(c)(iii)(D),
if Tops cures such failure to comply within * of the occurrence of such
Triggering Event, and no other Triggering Event occurs during * period
immediately following the date of such Triggering Event pursuant to Section 7.1(c)(ii)(D),
* set forth in Section 7.1(c)(i)(A)(I) * set forth in Section 7.1(b) shall
apply until any subsequent Triggering Event.

 

(ii)                                  Each of the
following is a “Triggering Event”:

 

(A)                               An Event of
Bankruptcy involving Tops.

 

(B)                               Any * Statement
Amount is not received by C&S in accordance with Section 7.1(b) (subject
to any agreed upon deduction for manifest error in accordance with Section 7.1(b));
and/or following any Triggering Event, any amount payable pursuant to Section 7.1(c)(i)(A)(I)
and/or Section 7.1(c)(i)(A)(II) is not received by C&S.

 

(C)                         (I)                                         The occurrence
of any default in the payment of any amount due with respect to any Senior Debt
after giving effect to all applicable cure periods set forth in the Senior Debt
Agreement corresponding to such Senior Debt.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

25

 

(II)                              The exercise by
any lender of any remedy available to it under the applicable Senior Debt
Agreement following any violation or breach of, or failure to comply with, any
Financial Covenant (defined in Section 7.1(e) below) (any such
violation, breach or failure to comply, a “Financial Covenant Default”),*;
provided, that if, prior to the exercise of any such remedy by a lender, Tops (x) provides
evidence that the lender thereunder has waived such Financial Covenant Default,
and *, then no Triggering Event shall be deemed to have occurred.  *

 

(D)                               Any failure by
Tops to fulfill any Reporting Requirement, * set forth in the last paragraph of
Section 7.1(c)(iii).

 

(iii)                               Each of the following
is a “Reporting Requirement”:

 

(A)                               Tops will
provide C&S with copies of any periodic financial reports at such times as
required pursuant to Section 10.2(b), together with any and all
certificates and other information that is required to be provided under the
applicable Senior Debt Agreement, in the same manner and, in any event, within
the same time periods as required under such Senior Debt Agreement; provided
however that, if at any time Tops is unable to timely deliver to C&S
audited financial statements when due under Section 10.2(b) because
Tops’ financial auditing firm withholds any certification or similar
documentation that would result in such financial statements not being
qualified as “audited”, and such withholding would directly prevent Tops from
delivering to C&S audited financial statements as required pursuant to Section 10.2(b),
then the failure of Tops to deliver audited financial statements as required
pursuant to Section 10.2(b) shall not be deemed to constitute a
breach of this Agreement or a failure to satisfy the Reporting Requirement set
forth in this Section 7.1(c)(iii)(A) if, within * of the date such
financials are due under Section 10.2(b), Tops notifies C&S of such
circumstance and Tops provides to C&S: (1) a letter executed on behalf
of the auditor, addressed to C&S, indicating that such auditor is unable to
deliver its audit report on Tops’ financial statements; (2) copies of the
unaudited financial statements of Tops for the same period that is the subject
of the applicable audit; and (3) the audited financial statements for the
applicable period promptly following the date on which the same are certified
by the auditor.

 

(B)                               Within * of the
date which is the end of each Contract Quarter, the senior financial officer of
Tops shall (x) certify to C&S the amount of availability under each
Senior Debt Agreement and (y) certify to C&S that, other than with
respect to any Triggering Event (if any) with respect to which Tops has
previously provided notice to C&S, no Triggering Event has occurred through
the date of the delivery of such certification to C&S; and with respect to
any Financial Covenant Default, such certificate shall provide C&S with the
calculations used to support such determination.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

26

 

(C)                               Tops will
promptly * provide notice to C&S at the notice address provided in this Agreement
at any time that there is any default with respect to any payment due in
respect of any Senior Debt and the period, if any, as set forth in the
corresponding Senior Debt Agreement during which such default may be cured has
expired.

 

(D)                               Tops will promptly
* provide notice to C&S at the notice address provided in this Agreement at
any time that there has been a Financial Covenant Default, and the period, if
any, set forth in the corresponding Senior Debt Agreement during which such
Financial Covenant Default may be cured has expired.

 

(E)                          (I)                                         With respect to
any notice Tops has provided relating to a Financial Covenant Default, Tops
will thereafter notify C&S promptly * of any waiver by the lender of such
Financial Covenant Default and will specify in such notice any and all
consideration or any other accommodations made in connection with the grant of
such waiver.  Such notice shall also
indicate the amount then outstanding under the applicable Senior Debt.  Tops will also notify C&S promptly * if
the lender has elected to exercise any remedy available to it under the
applicable Senior Debt Agreement following any Financial Covenant Default.

 

(II)                                   In the event of
any of the following: any change in any then applicable Financial Covenant with
respect to any Senior Debt, whether by amendment to the applicable Senior Debt
Agreement, refinancing and entering into a new or replacement Senior Debt
Agreement or otherwise; or if any new or additional Senior Debt undertaken or
otherwise incurred; then Tops will promptly * notify C&S of such event
including the nature of such change or the new or additional Senior Debt, and
of any new or modified Financial Covenants (as applicable) in connection
therewith, the senior financial officer of Tops will describe and certify in
full to C&S the Financial Covenants following any such amendment,
refinancing or entering into a new or replacement Senior Debt Agreement or new
or additional Senior Debt undertaking or otherwise being incurred, including
any new or modified Financial Covenant(s) (as applicable), and Tops will
promptly * provide C&S with copies of all Financial Covenants then
applicable to the corresponding Senior Debt, together with any documentation
(including each Senior Debt Agreement) reasonably requested by C&S in
connection with such change in any Financial Covenant, subject to any
applicable confidentiality obligations, provided that Tops will use
commercially reasonable efforts to obtain all consents that are necessary in
order for Tops to disclose and make available to C&S such Financial
Covenants, copies of each then applicable Senior Debt Agreement and any other
documentation for purposes of this Section 7.1(c).

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

27

 

(F)                                 Tops will
promptly * provide notice to C&S at the notice address provided in this
Agreement that an Event of Bankruptcy involving Tops has commenced.

 

* (A) - (F) of this Clause 7.1(c)(iii), * immediately following * as
required above.

 

(iv)                              Each of the rights and
remedies set forth in Section 7.1(c)(i)(A)-(D) above is nonexclusive,
cumulative of and in addition to each other right and remedy and any and all
rights and remedies available to C&S, hereunder or otherwise, including
without limitation, C&S’s right to terminate this Agreement in accordance
with Section 9.2(a) hereof.  It
is expressly agreed that C&S’s election or waiver of any such right(s) or
remedy(ies) does not constitute a waiver of any other right or remedy available
to C&S, and any or all such rights and remedies may be exercised by C&S
in the future.  Consistent with Section 10.15
hereof, no act or omission by C&S or course of dealing of the Parties shall
be construed to constitute a waiver of any rights or remedies of C&S in
connection with any Triggering Event * set forth in Section 7.1(b) * set forth
in Section 7.1(c)(i)(A)(I) * unless such waiver is set forth in writing.  The effects, as set forth in this Section 7.1(c),
of any Triggering Event that occurs following any prior Triggering Event will
not in any way supersede or otherwise adversely impact any of the effects of
any such prior Triggering Event.

 

(d)                                 Inadvertent
Non-compliance with Section 7.1(b).  In the event Tops does not comply with Section
7.1(b) and Tops promptly and reasonably demonstrates to C&S (x) that
any such non-compliance is the result of an inadvertent act or omission on the
part of Tops or its personnel, (y) it is solvent and financially capable
of satisfying its future payment obligations under this Agreement, and (z) that
such occurrence is not part of a series of similar such occurrences, and Tops
promptly makes payment to C&S of all outstanding * Statement Amounts, then
C&S will waive in such instance its available remedies related to such
non-compliance with Section 7.1(b), and notwithstanding that a Triggering
Event has occurred and the requirement that Tops must * with respect to any
subsequent sale of any Merchandise to Tops, in accordance with Section
7.1(c)(i)(A)(I), is automatically effective, * set forth in Section 7.1(b) and
the same shall apply until any future Triggering Event.

 

(e)                                  Financial
Covenants.  “Financial
Covenant” means, with respect to any Senior Debt, any obligation in the Senior
Debt Agreement corresponding to such Senior Debt that requires Tops to meet any
specified financial ratio or satisfy any another specified financial test.  The Financial Covenants in effect as of the
Effective Date are set forth in Exhibit 7.1(e).  The Parties understand that such Financial
Covenants are subject to change from time to time during the Term, as
contemplated by Section 7.1(c)(iii)(E)(II).  Tops has provided C&S with a true,
correct and complete copy of each Senior Debt Agreement in effect as of the
Effective Date of this Agreement.

 

7.2.                Taxes.  All amounts payable by Tops
under this Agreement shall be paid together with any applicable taxes and
duties including any sales taxes and any other miscellaneous taxes related to
the provision of Services hereunder which are assessed against C&S or its
Affiliates, other than income taxes.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

28

 

ARTICLE 8

 

INDEMNIFICATION, CERTAIN OTHER REMEDIES AND INSURANCE; FORCE MAJEURE

 

8.1                   Indemnification.

 

(a)                                 C&S.  C&S shall defend, indemnify and hold
harmless Tops and its Affiliates, and their respective owners, directors,
officers, employees, servants, agents, independent contractors, successors and
assigns (collectively, “Tops Indemnitees”) from any and all losses, damages, demands, claims,
judgments, fines, penalties, liabilities, causes of action, amounts paid in
settlement, charges, costs and expenses, including but not limited to
reasonable legal fees and expenses (whether incurred as the result of a third
party claim or a claim to enforce this provision) or costs of settlement
(collectively, “Losses”) arising out of, resulting from or related to any
dispute, demand, claim, lawsuit, action or proceeding brought or initiated by
any third party (each, a “Third Party Claim”) against any of the Tops
Indemnitees to the extent that such Third Party Claim arises out of, is in
connection with or results from: (i) acts or omissions of C&S in any
manner related to the handling, storage, use or transportation of the
Merchandise supplied to Tops pursuant to the terms of this Agreement; (ii) the
willful misconduct or negligent acts of C&S, its employees or
subcontractors related to its performance of the Services or its other
obligations under this Agreement; or (iii) a breach of any representation
or warranty made by C&S in this Agreement; provided, however, this
indemnification and hold harmless with respect to sub-sections
(i)-(iii) shall not apply to the extent of any Losses arising out of or
relating to any Third Party Claim in connection with or resulting from
resulting from the negligence or willful misconduct of Tops, its Affiliates or
their respective employees, representatives or agents.  Whenever Tops receives notice of any Third
Party Claim against any Tops Indemnitee that would be covered by this
provision, Tops shall in turn provide C&S with prompt written notice of
such Third Party Claim; provided, that the failure to so notify C&S will
not relieve C&S of any liability that it may have hereunder, except to the
extent C&S demonstrates that the defense of such action is prejudiced by
Tops’ failure to give such notice. 
Notwithstanding anything to the contrary set forth herein, nothing in
this Section 8.1(a) shall be interpreted to excuse Tops from its
obligation to reimburse C&S for Costs as set forth in Article 4.

 

(b)                                 Tops.  Tops shall defend, indemnify and hold
harmless C&S and its Affiliates, and their respective owners, directors,
officers, employees, servants, agents, successors and assigns (collectively,
the “C&S Indemnitees”) from any and all Losses arising out of or related to
any Third Party Claim against any of the C&S Indemnitees to the extent that
such Third Party Claim arises out of, is in connection with or results from: (i) acts  or omissions of Tops in any manner related to
the handling, storage, use or transportation of the Merchandise supplied to
Tops pursuant to the terms of this Agreement; (ii) the willful misconduct
or negligent acts of Tops, its employees or subcontractors related to its
performance of the Services or its other obligations under this Agreement; or (iii) a
breach of any representation or warranty made by Tops in this Agreement;
provided, however, this indemnification and hold harmless with respect to
sub-sections (i)-(iii) shall not apply to the extent of any Losses arising
out of or relating to any Third Party Claim in connection with or resulting
from the negligence or willful misconduct of C&S, its Affiliates or their
respective employees, representatives or agents.  Whenever C&S receives notice of a Third
Party Claim against any C&S Indemnitee that would be covered by this
provision, C&S shall in turn provide Tops with prompt written notice of
such Third Party Claim; provided, that the failure to so notify Tops will not
relieve Tops of any 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

29

 

liability that it may have
hereunder, except to the extent that Tops demonstrates that the defense of such
action is prejudiced by C&S’s failure to give such notice.

 

(c)                                  Product
Liability - Infringement.  Each
Party shall use its commercially reasonable efforts to seek indemnity from the
manufacturer of any Merchandise with respect to any and all Losses arising out
of, or relating to any Third Party Claim in connection with or resulting from (i) actual
or alleged product liability or the handling, possession, storage, use or any
other dealing by any person of any Merchandise, or (ii) any actual or
alleged infringement of any trademark, patent, copyright or other intellectual
property right.  To the extent C&S
has exhausted its efforts to seek indemnity from the manufacturer as set forth
in this Section 8.1(c), but was unable to secure such indemnity, Tops
shall indemnify C&S solely with respect to Losses to the extent (a) such
Losses are related to private label or Tops unique items or any items acquired
and supplied at the direction of Tops, and (b) such Losses do not arise
from or are not related to the actual or alleged negligence or willful
misconduct of C&S.  To the extent
Tops has exhausted its efforts to seek indemnity from the manufacturer as set
forth in this Section 8.1(c), but was unable to secure such indemnity,
C&S shall indemnify Tops solely with respect to any Losses arising out of
or relating Third Party Claim as described in clause (i) or (ii) of
this paragraph (c) related to C&S’s handling, possession, storage or
use of Merchandise, to the extent such Losses do not arise from or are not
related to any actual or alleged negligence or willful misconduct of Tops.

 

(d)                                 Insurance.

 

(i)                                     By C&S.   During the Term of this Agreement, C&S
shall carry and maintain the following policies of insurance issued by
recognized, reputable insurers reasonably acceptable to Tops, in forms
satisfactory to Tops acting reasonably, and naming Tops as an additional
insured on all policies except the Workers’ Compensation policy of insurance:

 

(A)                               Comprehensive
General Liability Insurance with limits of liability for each occurrence of no
less than * Such policy shall include blanket contractual liability coverage
and products/completed operations liability coverage. Products/completed
operations coverage shall remain in effect for not less than two (2) years
after expiration or earlier termination of this Agreement.

 

(B)                               Automobile
liability insurance in a combined value of * for bodily injury, personal injury
and property damage to any person, or persons.

 

(C)                               Workers’
Compensation as required by state statute and Employers’ Liability coverage in
a minimum amount of * per accident/disease.

 

Within * following a request, C&S shall provide to Tops
certificates evidencing the insurance coverages required of C&S under this Section 8.1(d)(i),
stating that all policies of insurance evidenced therein may not be terminated,
cancelled or modified except upon no less than thirty (30) days prior written
notice to Tops, and reflecting Tops Markets LLC, 6363 Main Street,
Williamsville, NY 14221-5898 as the certificate holder and additional insured.  In addition, within * of a request, C&S
shall

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

30

 

deliver renewal certificates to Tops, and C&S will provide evidence
that such coverage did not lapse.

 

(ii)                                  By Tops.  During the Term of this Agreement, Tops shall
carry and maintain, at its sole cost and expense, the following policies of
insurance issued by recognized, reputable insurers reasonably acceptable to
C&S, in forms satisfactory to C&S acting reasonably, and naming C&S
as an additional insured on all policies except the Workers’ Compensation
policy of insurance:

 

(A)                               Comprehensive
General Liability Insurance with limits of liability for each occurrence of no
less than *. Such policy shall include blanket contractual liability coverage
and products/completed operations liability coverage. Products/completed
operations coverage shall remain in effect for not less than two (2) years
after expiration or earlier termination of this Agreement.

 

(B)                               Automobile
liability insurance in a combined value of * for bodily injury, personal injury
and property damage to any person, or persons,

 

                                (C)                          Workers’ Compensation as required
by state statute and Employers’ Liability coverage in a minimum amount of * per
accident/disease.

 

Within 10 days following a request, Tops shall provide to C&S
certificates evidencing the insurance coverages required of Tops under this
Section 8.1(d)(ii), stating that that all policies of insurance evidenced
therein may not be terminated, cancelled or modified except upon no less than
thirty (30) days prior written notice to C&S, and reflecting C&S
Wholesale Grocers, Inc., 7 Corporate Drive, Keene, NH 03462 as the certificate
holder and additional insured.  In
addition, within 10 days of a request, Tops shall deliver renewal certificates
to C&S, and Tops will provide evidence that such coverage did not lapse.

 

(e)                                  The limitation on a Party’s
liability to the other Party set forth in Section 8.2(b) to proven or
actual direct damages (including Damages) made or suffered or incurred by the
other Party, will not apply with respect to claims under this Section 8.1
for indemnification of Losses incurred by a Party as the result of Third Party
Claims.

 

8. 2                Other Remedies.

 

(a)                                 Notwithstanding anything set forth in this Agreement to the contrary, if
Tops believes in good faith that (A) C&S (i) has breached or
otherwise failed to perform or comply with any of C&S’s covenants,
obligations or agreements under this Agreement, including, without limitation,
the provisions of Section 1.6 hereof, (ii) has breached any of its
representations or warranties set forth in this Agreement or (iii) has
engaged in any action (or failed to engage in any action) constituting willful
misconduct or gross negligence in the performance of any Services or Other
Services hereunder (each of the actions contemplated in clauses (i),
(ii) and (iii) above, a “Breach”), and (B) any such Breach has
resulted in any losses, damages, liabilities, charges, costs or expenses
(collectively, “Damages”) to Tops, then Tops shall give written notice thereof
to C&S, which

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

31

 

notice will reasonably specify the nature of
the Breach (and will cite the relevant provision(s) of this Agreement, if
applicable) and the amount of Damages Tops alleges has resulted from such
Breach.  C&S shall respond to Tops in
writing within 30 days after the date on which C&S receives Tops’ written
notice (or such other reasonable time period as agreed to by the Parties in
writing, provided such writing expressly sets forth an intention to modify such
30-day period).  If C&S fails to
respond to Tops in writing within such 30-day period, or if C&S does not
dispute the matters set forth in Tops’ written notice in its written response,
then the amount of Damages alleged in Tops’ written notice will be conclusively
deemed to be an obligation of C&S, and C&S shall pay, in cash, to Tops,
within fifteen days after the expiration of such 30-day period, the amount
specified in Tops’ written notice.  If
C&S delivers a written response to Tops within such 30-day period
indicating that it disputes one or more of the matters identified in Tops’
written notice, the dispute shall be resolved in accordance with Section 10.1;
provided, that if such resolution results in a determination that
(x) C&S has committed a Breach and (y) such Breach has resulted
in Damages to Tops, then C&S shall be responsible for the amount of any and
all such Damages and Tops may pursue all legal remedies against C&S in
respect thereof.  The remedies provided
in this Section 8.2(a) will not be exclusive of or limit any other
remedies that may be available to Tops in law or equity, subject to
Section 10.1.  The Parties
hereto agree that the prevailing party shall be entitled to recover in addition
to any other appropriate amounts, from the other Party, upon final resolution
of any dispute hereunder, reasonable attorneys’ fees and expenses.  In
the event C&S has a claim for Damages to C&S resulting from (x) a
breach or failure to perform or comply by Tops with any of Tops’ covenants,
obligations or agreements under this Agreement, including, without limitation,
the provisions of Section 7.1(c) hereof, (y) Tops’ breach of any
of its representations or warranties set forth in this Agreement or
(z) Tops’ engagement in any action (or failure to engage in any action)
constituting willful misconduct or gross negligence in the performance of any
of its obligations hereunder (each of the actions contemplated in clauses (x),
(y) and (z) above, a “Tops Breach”), C&S may initiate the dispute
resolution process in the same manner as set forth above and the term “Breach”
shall be replaced with the term “Tops Breach” for purposes hereof.  This Section 8.2 in no way limits the
right of either Party to pursue all legal remedies against the other Party for
any Damages resulting to the Party pursuing such remedies from a Breach or Tops
Breach, as the case may be.

 

(b)                                 Notwithstanding anything
herein to the contrary (but subject to Section 8.1(e)), no Party shall be liable to the other Party for
any damages (including without limitation, Damages) other than any
proven or actual direct damages
(including without limitation Damages) made
against or suffered or incurred by the other Party; provided that “direct
damages” is hereby deemed to include the Termination Fee.

 

(c)                                  Consistent with
Section 2.3(b)(ii), Tops shall be responsible for costs associated with
theft or damage to Merchandise and/or Fixed Assets; provided, however that to
the extent any of such costs are determined to be Damages, in accordance with
Sections 8.2(a) and 10.1, that have resulted from a Breach by C&S,
such costs shall be recoverable by Tops. 
Consistent with Section 4.3(a)(x), Tops shall be responsible for
costs associated with product shrink or out of code, damaged or unsalable
Merchandise; provided, however, that to the extent that any of such costs are
determined to be Damages, in accordance with Sections 8.2(a) and 10.1, to
have resulted from a Breach by C&S, such costs shall be recoverable by
Tops.  Nothing set forth herein this
Section 8.2 shall limit the responsibility of Tops for Costs as set forth
in this Agreement.

 

(d)                                 Notwithstanding Tops’
responsibility to indemnify and/or reimburse C&S for the Transition
Liabilities (as defined below), Tops shall not be responsible for, and shall
not be obligated to indemnify and/or reimburse C&S for, the Transition
Liabilities to the extent any portion thereof is determined to be Damages, in
accordance with Sections 8.2(a) and 10.1, that have resulted from a Breach
by C&S of its obligation to cooperate in good faith to transition the
Services referred

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

32

 

to in Section 10.3(b) to Tops or Tops’ designee during the 60
day period referred to in Section 10.3(b) (it being understood that
it is not a Breach by C&S if C&S has cooperated in good faith to
transition such Services, notwithstanding the actual timing of the completion
of such transition).

 

8.3                   Force
Majeure.

 

(a)                                 To the extent a Party is
rendered unable at any time to perform or comply with any of its obligations
under this Agreement, other than obligations regarding the payment of money, by
reason of act of God, force of nature, fire, or other casualty, eminent domain,
war-like activity, utility failure, insurrection, or civil commotion, shortage
of raw materials or supplies, any Law, or any other cause beyond its reasonable
control, or beyond the control of any person directly or indirectly engaged by
it (any such event being referred to as a “Force Majeure”), the obligations of
such Party  shall be suspended for the duration of
the Force Majeure, but only to the extent such event of Force Majeure impairs
the Party’s ability to perform its obligations under this Agreement.

 

(b)                                 As soon as the Party whose
performance is affected by a Force Majeure (the “Affected Party”) becomes aware
that an event of Force Majeure has occurred or is likely to occur, such
Affected Party  will notify the other Party.  Upon receipt of such notice by the other
Party,  representatives of the Parties shall
meet to establish plans and procedures to overcome or mitigate the effects of
the Force Majeure and the Affected Party  shall use
commercially reasonable efforts to minimize any adverse effects on the other
Party.  Tops shall pay all reasonable
costs and expenses incurred by C&S in overcoming or mitigating the effects
of the Force Majeure and shall continue to pay to C&S all Costs and Services
Fees  otherwise payable under this
Agreement.

 

(c)                                  The foregoing
notwithstanding, if the Force Majeure causes C&S to be unable to render
material performance of its obligations under this Agreement, which inability
causes (or in Tops’ reasonable business judgment after discussion and review
with C&S, may cause) material damage to Tops, and C&S and Tops are
unable to mutually agree on an alternative course of action which would permit
C&S to continue to provide the Services to Tops, Tops  can
either render such performance itself or obtain such performance from a third
party until C&S is able to resume the performance of the Services.  To the extent C&S is able to perform any
Services for Tops under the circumstances reflected in this clause (c), Tops
will continue to pay to C&S such Costs and Services Fees commensurate with
the Services C&S is able to provide.

 

(d)                                 If an event of Force Majeure
affects C&S’s ability to supply Tops Stores from any Facility but does not
otherwise affect C&S’s operations, then C&S will use commercially
reasonable efforts to supply Tops Stores from another facility operated by
C&S, provided that Tops pays *.

 

(e)                                  Each Party shall maintain a
disaster and recovery plan that is specific to the performance of its
obligations under this Agreement and to the information systems maintained by
it in connection with this Agreement. 
Each Party shall have the right to audit, test, and review the other
Party’s disaster and recovery plan and may conduct on-site interviews with
relevant officers and employees.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

33

 

ARTICLE 9

 

TERM AND TERMINATION

 

9.1                   Term.  This Agreement will commence
on the Effective Date and shall remain in effect and continue through September 24,
2016 (the “Term”), unless earlier terminated in accordance with this Article 9.  For purposes of this Agreement, the Initial
Contract Year will consist of the period from the Services Commencement Date
until September 25, 2010, as more fully set forth on Exhibit 1.3
hereto.  For clarification, the Term
shall consist of successive 52-week Contract Years (as described in Sections
1.3 and 1.5 and reflected in Exhibit 1.3 hereto) except where a
53-week year is necessary for accounting purposes or to account for the 365 day calendar year.  The Parties shall cooperate in good faith to
ensure that upon the expiration or earlier termination of the Term, the
Services, Other Services and inventory of Merchandise held on Tops’ behalf at
the Facilities is transitioned and transferred to Tops or Tops’ designee (at
Tops’ expense).

 

9.2                   Termination
by C&S.

 

(a)                                 C&S may
terminate this Agreement for cause: (i) if Tops fails to pay any amount to
C&S when due (including without limitation, any amount as contemplated by
the Triggering Event set forth in Section 7.1(c)(ii)(B)) and such failure
continues for seven (7) days after C&S has provided Tops with written
notice of such failure; (ii) if Tops has breached any other material
obligation (other than a payment obligation which is covered under clause (i) above)
under this Agreement, and if such breach is curable, remains uncured after 30
days following written notice of such breach from C&S; (iii) if Tops
is subject to an Event of Bankruptcy and such termination is effected prior to
the approval of the applicable plan of confirmation by the applicable bankruptcy
court with respect to the applicable Event of Bankruptcy; (iv) pursuant to
Section 9.2(d); or (v) upon the occurrence of a Triggering Event
under Section 7.1(c)(ii)(C)(I) or (II) of this Agreement or (y) if
default shall occur under any mortgage for which Tops is an obligor with
respect to any Facility from which any of the Services are provided and, in
each case, Tops has not cured such default within the permitted cure period, if
any.  In the event of termination by
C&S, C&S will reasonably cooperate with the orderly transfer of
operations to another supplier, provided that Tops will reimburse C&S for
any and all reasonable documented out of pocket expenses incurred by C&S in
connection with such transfer and will pay C&S in full for any services, including
any Services, required of C&S in order to effectuate such orderly transfer
or otherwise requested by Tops to be performed by C&S.

 

(b)                                 If C&S
terminates this Agreement pursuant to this Section 9.2 or if Tops
terminates this Agreement pursuant to Section 9.3(b), or in connection
with a termination pursuant to Section 9.6, then, to the extent so
requested by C&S, Tops will immediately:

 

(i)                                     pay C&S all
sums due to C&S under the Agreement through the effective date of
termination;

 

(ii)                                  pay the Termination
Fee set forth in Section 9.5; provided that such Termination Fee shall not
be payable in connection with a termination pursuant to Section 9.6;

 

(iii)                               if requested by
C&S, purchase (A) any or all of the assets employed by C&S in any
Dedicated Facility, including any or all Fixed Assets * and (B)

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

34

 

any and all other assets purchased by C&S with Tops’ knowledge in
connection with the Services provided to Tops from a Shared Facility, in each
case, at each such asset’s respective book value (the “Assets”);

 

(iv)                              purchase at the
* any and all saleable inventory purchased by C&S for delivery to Tops (the
“Inventory”) and pay any costs related to the transfer or disposition thereof;

 

(v)                                 assume by way
of assignment any and all of C&S’s obligations arising out of or related to
the collective bargaining agreements at the Facilities, unless Tops elects to
have C&S terminate the employment of all employees covered by such
collective bargaining agreements with Tops to pay any and all costs related
thereto;

 

(vi)                              reimburse
C&S for any and all severance costs incurred by C&S as a result of
C&S terminating the employment of individuals providing services to Tops
hereunder at any Facility from which C&S is then providing Services,
including, but not limited to any and all WARN costs incurred by C&S except
costs that C&S could reasonably avoid in connection with any termination of
employees related to a termination of this Agreement pursuant to Section
9.3(b); and

 

(vii)                           indemnify,
defend and hold C&S and/or any its Affiliates including Erie, harmless from
and against any and all occupancy costs (including without limitation
maintenance, security, depreciation, property taxes, rent, heat, electricity,
sewer and water, license fees, and insurance) related to or arising out of any
leases with respect to any * Facility, * with regard to the cheektowago, New
York Facility *.

 

C&S will use its commercially reasonable efforts to mitigate the
amounts that Tops is required to pay C&S under this Section 9.2(b).   C&S will communicate its decision as to
whether it wishes for Tops to purchase the Assets and Inventory or undertake
any of the other obligations set forth above within (i) * following the last
day of this Agreement following a termination under Section 9.2(a) (other than
Section 9.2(a)(ii)),  9.2(d) or 9.3(b),
or (ii) * prior to the day this Agreement terminates in the event of a
termination under Section 9.2(a)(ii).

 

(c)                                  The Parties
agree and acknowledge that, in connection with a termination pursuant to
Section 9.2(a), the remedies under this Section 9.2 are nonexclusive and
additional to all other rights or remedies in law or equity of C&S.

 

(d)                                 Nothwithstanding
Section 10.3 * C&S notifies Tops * Section 9.2(d), * Tops shall in good faith
discuss the following alternatives to address pension related liability
concerns (including without limitation, with respect to any and all of Tops’
obligations hereunder related to Multiemployer Plan withdrawal liability);

 

(i)                                     that Tops shall
cause C&S to receive, prior to the end of such * that is * satisfactory to
C&S; or

 

(ii)                                  * and in connection with which Tops would assume any and all of C&S’s
obligations under the Multiemployer Plans (for purposes of this Section 9.2(d)
*); provided, however, that C&S * (subject to, and without limiting, the terms
and conditions of this Agreement), except that C&S * and further provided
that Tops will indemnify C&S in full with respect to any liability that
arises under the terms of any Multiemployer Plan *.

 

If * as set forth above * in their *
determination, then C&S * obligations under Section 9.2(b) * Section 9.2(d)
* provided, however, that * C&S may *
in all material respects, contained in this Agreement * pursuant to the preceding
sentence, then Tops shall * Section 9.2(b) * set forth in Section 9.5 or
otherwise. * the terms of this Section 9.2(d) * as set forth in this Section
9.2(d).

 

9.3                   Termination
by Tops.

 

(a)                                  Tops may
terminate this Agreement for cause: (i) if C&S fails to pay any material
amount to Tops when due and such failure continues for seven (7) days after
Tops has provided C&S written notice of such failure; (ii) if C&S has
breached any other material obligations under this Agreement, and if such
breach is curable, remains 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

35

 

uncured after 30 days following written notice of such breach from
Tops; (iii) if C&S is subject to an Event of Bankruptcy; or (iv) in the
event of a Service Level Default as described under Section 3.10(f)
hereof.  In the event of termination by
Tops hereunder, C&S will reasonably cooperate with the orderly transfer of
operations to another supplier, provided that Tops will reimburse C&S for
any and all reasonable documented out-of-pocket expenses incurred by C&S in
connection with such transfer, and that Tops will pay C&S in full for any
services in connection therewith, including any Services C&S is required to
perform in order to effectuate such orderly transfer or otherwise requested by
Tops to be performed by C&S. 
Termination by Tops under this Section 9.3(a) will not trigger Section
9.4 or Section 9.5.  The remedies under
this Section are nonexclusive and additional to all other rights or remedies in
law or equity of Tops.   Tops will use
its commercially reasonable efforts to mitigate any damages related to a
termination under this Section 9.3.

 

(b)                                 Tops may
terminate this Agreement prior to its expiration at the end of the Term,
without cause, including by way of a rejection of this Agreement in connection
with an Event of Bankruptcy, provided that Tops has notified C&S in writing
of its intent to terminate this Agreement at least twelve (12) months prior to
the effective date of termination (other than in connection with a rejection in
connection with an Event of Bankruptcy). 
If the circumstances relating to such termination relate to a sale of
Tops or substantially all of its assets to any self-distributor, such notice
shall also describe in reasonable detail the circumstances relating to such
termination.  Notwithstanding anything
herein to the contrary, any termination pursuant to this Section 9.3(b) shall
be effective only upon Tops’ performance in full of all of its obligations
under Section 9.2(b) including, but not limited to, payment in full of the
Termination Fee set forth in Section 9.5. 
In the event of termination by Tops hereunder, C&S will reasonably
cooperate with the orderly transfer of operations to another supplier, provided
that Tops will reimburse C&S for any and all reasonable documented
out-of-pocket expenses incurred by C&S in connection with such transfer,
and that Tops will pay C&S in full for any services in connection
therewith, including any Services C&S is required to perform in order to
effectuate such orderly transfer or otherwise requested by Tops to be performed
by C&S.

 

9.4                   Expiration
of Term.  Unless
earlier terminated as provided under Sections 9.2 or 9.3, this Agreement shall
expire at the end of the Term.  Upon the
expiration of the Term, C&S, at its discretion, may seek to sell the
Assets.  If C&S elects to sell the
Assets, then upon such sale, Tops shall pay to C&S * related to such *
provided that the *; provided further that for calculating the * under this
sentence * with respect to such *. C&S will communicate its decision as to
whether it wishes to sell the Assets at least * prior to the last day of the
Term.  In addition, upon the expiration
of the Term and at the request of C&S, Tops will:

 

(a)                                  pay C&S all
sums due to C&S under the Agreement through the effective date of
termination;

 

(b)                                 purchase the
Inventory at the *, and pay any costs related to the transfer or disposition
thereof;

 

(c)                                  assume by way
of assignment any and all of C&S’s obligations arising out of or related to
the collective bargaining agreements at the Facilities, unless Tops elects to
have C&S terminate the employment of all employees covered by such
collective bargaining agreements with Tops to pay any and all costs related
thereto; and

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

36

 

(d)                                 reimburse
C&S for any and all severance costs incurred by C&S as a result of
C&S terminating the employment of individuals providing services to Tops
hereunder at any Facility from which C&S is then providing Services,
including, but not limited to any and all WARN costs incurred by C&S in
terminating  employees; and

 

(e)                                  if Tops has
approved in writing the entry into any lease with respect to any * Facility
having a term in excess of the Term, then Tops will indemnify, defend and hold
C&S and/or any its Affiliates harmless from and against any and all
occupancy costs (including without limitation maintenance, security,
depreciation, property taxes, rent, heat, electricity, sewer and water, license
fees, and insurance) related to or arising out of any leases with respect to
such * Facility.

 

9.5                   Termination
Fee.  Commencing as of the Effective
Date of this Agreement, a  “Termination
Fee”, in the amount set forth below, shall be immediately payable by Tops to
C&S if this Agreement is terminated either: (i) by C&S pursuant to
Section 9.2(a) (as contemplated by Section 9.2(b)); (ii) pursuant to Section
9.2(d) (subject to the terms thereof; or (iii) by Tops pursuant to Section
9.3(b).  The amount of the Termination
Fee payable shall be as follows:

 

	
  If
  the termination, under Section

  9.2(a) or 9.3(b), becomes effective at

  any time:

  	
   

  	
  Amount of

  Termination

  Fee:

  	
   

  
	
  *

  	
   

  	
  *

  	
   

  

 

	
  The termination
  is pursuant

  to Section 9.2(d) (subject to the

  terms thereof):

  	
   

  	
  Amount of

  Termination Fee:

  	
   

  
	
   

  	
   

  	
  *

  	
   

  

 

The Parties acknowledge that it would be difficult and costly to assess
and establish C&S’s losses arising out of a termination of this Agreement
without cause by Tops under Section 9.3(b) and that the Termination Fee set
forth herein, plus the remedies stated under 9.2(b), are the exclusive,
liquidated remedy available to C&S for a termination by Tops under such
provision.  Nonetheless, the Parties
agree that the Termination Fee, together with all other applicable payments and
remedies set forth in Section 9.2(b), are reasonable in light of the costs
C&S will incur to perform its obligations under this Agreement and the
damages C&S will suffer in the event of such termination.  Nothing herein, however, shall act as a
waiver of C&S’s rights to collect amounts properly due and owing under this
Agreement, including but not limited to payments for Merchandise and Service
Fees, any other amounts accrued prior to the termination of this Agreement, and
amounts payable in respect of Tops’ indemnification obligations set forth in
Section 10.3.

 

9.6                   Force Majeure.   Either Party shall have the right to
terminate this Agreement without penalty if due to a Force Majeure event which
has occurred and is continuing, C&S is unable to perform any material
obligation, as and when required, under this Agreement for more than twenty-six
(26) consecutive weeks.

 

ARTICLE 10

 

MISCELLANEOUS

 

10.1    Dispute
Resolution.  The Parties
shall attempt in good faith to resolve any dispute arising out of or relating
to this Agreement promptly by negotiation between executives who have authority
to settle the controversy and who are at a higher level of management than the
persons with direct responsibility for administration of this Agreement. Any
Party may give the other Party written notice of any dispute not resolved in
the normal course of business. Within 15 days after delivery of the notice, the
receiving Party shall submit to the other a written response. The notice and
the response shall include (a) a statement of each Party’s position and a
summary of arguments supporting that position, and (b) the name and title
of the executive who will represent that Party and of any other person who will

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

37

 

accompany
the executive. Within 30 days after delivery of the disputing Party’s notice,
the executives of both Parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to attempt to
resolve the dispute.  All reasonable
requests for information made by one Party to the other will be honored.

 

If the matter has not been resolved within 60 days
of the disputing Party’s notice, or if the Parties fail to meet within 30 days,
either Party may initiate arbitration of the controversy or claim as provided
hereinafter.

 

All negotiations pursuant to this Section 10.1
are confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and state rules of
evidence.

 

Any dispute arising out of or relating to this
Agreement, directly or indirectly, or the subject matter, breach, termination
or validity hereof, which has not been resolved by a non-binding procedure as
provided herein, shall be settled by arbitration in accordance with the rules of
the American Arbitration Association (“AAA”) with the sole exception of
circumstances involving irreparable injury to the other Party that is not
adequately compensable in damages or at law, in which case the injured Party
shall have the right to bring an action in a court of competent jurisdiction to
seek an appropriate equitable relief, including injunctive relief. The
arbitration shall be conducted by a single independent and impartial arbitrator
having experience in the grocery industry who shall be selected by the Parties
within 20 days after the commencement of the arbitration proceeding; provided,
however, that if the Parties cannot agree on the selection of the arbitrator by
the expiration of such 20 day period, the Party requesting the arbitration may
initiate arbitration and request the AAA to appoint the arbitrator.  The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. § 1- 16, and judgment upon the award
rendered by the arbitrator may be entered by any competent federal or state
court having jurisdiction thereof. The place of arbitration shall be Albany,
New York. The arbitrator’s award shall be duly made in writing within thirty
(30) days after the hearings in the arbitration proceedings are closed, and
such award shall be binding and conclusive on all Parties to this
Agreement.  The arbitrator is empowered
to award damages in excess of compensatory damages, subject to the terms of
this Agreement.

 

Judgment
upon the Award may be sought and entered in any competent federal or state
court located in the United States of America. 
An application may be made to such court for confirmation of the Award
and for any other equitable or legal remedies that may be necessary to
effectuate such Award or otherwise preserve any rights for which no adequate
remedy at law exists.

 

The
Parties understand and agree that they hereby are giving up and waiving any
claim or right to litigate in court or by a jury trial, unless or to the extent
that such rights are specially provided for under this Agreement or cannot be
waived under applicable Law.

 

10.2    Audit and Access Rights.

 

(a)           Books
and Records. C&S shall maintain complete and detailed records, data,
information and statements in auditable form and quality in respect of its
activities related to the provision of the Services and as to all of C&S’s
other obligations under this Agreement, as information integrated into the
overall financial statements maintained by C&S in the ordinary course of
business.  C&S shall maintain such
records consistent with GAAP.  C&S
shall prepare and maintain in for a period of not less than five (5) years
following the end of each of its fiscal years, adequate books and records with
respect to: (i) the

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

38

 

performance
of the Services, and all of its other obligations under this Agreement with
respect to the Services; (ii) all amounts charged or credited by C&S
to Tops hereunder; (iii) all Costs arising under this Agreement, (iv) such
other records, data or information as may be otherwise required under this
Agreement or reasonably requested by Tops from time to time,  and (v) with respect to the Other
Services, such records as are necessary for Tops to verify the amounts received
by Tops pursuant to such Other Services, it being expressly understood that any
records or other information with respect to C&S’s costs and income with
respect to such Services are not subject to the rights set forth in this
Section 10.2 (collectively, the “Books and Records”).  The Books and Records shall be maintained
consistent with GAAP, consistently applied, and shall be in a form suitable for
audit, review and copying and shall be made available as reports produced from
C&S’s overall financial statements maintained by C&S for its entire
operations in the ordinary course of business. 
All Books and Records shall be maintained in accordance with C&S’s
then current document retention policy. 
Tops will be provided access to, and the right to audit, any information
Tops reasonably determines it needs in order to verify any of the items listed
in subsections (i) through (iv) above or any matters to be audited
pursuant to Section 10.2(c), provided, however, that Tops will not be
provided access to data or information relating to the Other Services as
relates to C&S’s costs and income with respect to such Services, or other
customers of C&S or information unrelated to the performance of the
Services and the Other Services, except to such limited extent as may be
necessary to verify cost allocations at a Shared Facility.

 

(b)           Financial
Statements.  Tops shall promptly
deliver to C&S (i) annual financial statements for the operations of Tops
all prepared in accordance with GAAP (such financial statements to include
income statements, balance sheets and cash flow statements) audited and
certified to by an independent registered public accounting firm, after such
financial statements have been issued by such public accounting firm, within 90
days following the end of Tops’ fiscal year, and (ii) internally prepared
quarterly financial statements within 45 days following the end of each of
Tops’ fiscal quarters. C&S will promptly deliver to Tops audited financial
statements for the year-end period, which have been certified to by a
registered public accounting firm, after such financial statements have been
issued by such accounting firm. 

 

(c)           Right
to Audit/Access to Books and Records. 
Subject to clause (d) below and to Section 3.11(e), C&S
shall permit Tops and its officers, directors, representatives, counsel,
advisors and other agents (and subject to each such individual’s agreement to
comply with C&S’s requested policies and procedures as referred to in
Section 3.11(e), if so permitted), upon reasonable notice (which Tops
acknowledges shall in no event be less than two (2) weeks) and during
normal business hours, the inspection of and access to the Facilities and the
Books and Records for the purpose of auditing: 
(i) the performance of the Services and the Other Services (but
with respect to the Other Services, only as necessary for Tops to verify the
amounts received by Tops pursuant to such Other Services, it being expressly
understood that any records or other information with respect to C&S’s
costs and income with respect to such Other Services are not subject to the
rights set forth in this Section 10.2); (ii) the conformity to this
Agreement of charges and calculations of charges for all Costs * to Tops, and
for all other calculations related to this Agreement and the performance of the
Services, including, without limitation (a) *, and (b) the
calculation and administration of any Cost Savings Gainshare Incentive Fee;
(iii) preparation and maintenance of records related to the Services and
Other Services in so far as such records relate to the verification of amounts
received by Tops pursuant to such Other Services; (iv) the Costs and
back-up and other information supporting the calculations for any payments
required to be made by Tops hereunder; (v) Service Level Reconciliation 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

39

 

Reports,
Required Service Levels and actual service levels; and (vi) C&S’s
records in order to confirm that *, and any other amount due to or charged to
Tops are calculated and administered in accordance with the terms and
conditions of this Agreement and (vii) any other matter relating to
amounts that were (or reasonably should have been) charged to, or that were (or
reasonably should have been) *, subject to the limitations set forth in this
Agreement.  The right of access under
this Section 10.2(c) shall, subject to Section 3.11(e), include
the right to discuss such documentation with C&S’s employees,
representatives and, if expressly permitted by C&S in each instance,
outside vendors having knowledge of their contents, and C&S shall instruct
all such employees, representatives or, if applicable, third-party vendors to
fully cooperate with any request for information made by Tops to such employee,
representative or third-party vendor.  To
the extent Tops engages any third party auditing firm in connection with any
audit, upon C&S’s request, prior to commencement of the audit, Tops shall
require such third party auditing firm to execute any reasonable
confidentiality agreement provided by C&S and otherwise adhere to any
policies and procedures which may be required by C&S as contemplated by
Section 3.11(e).

 

(d)           Frequency
and Scope.  Tops will be limited to
no more than one (1) audit during each Contract Year and each audit will
be limited to the review of information related to the * period immediately
preceding the audit, and any remedies or recoupment of monies due as the direct
result of any errors discovered pursuant to any such audit will be limited to
such * period, excluding any months that were covered by an audit in a prior
year.  Any audit will be conducted at
C&S’s premises and shall be completed within 60 days or such other
reasonable time period agreed to by the Parties.  The Parties’ mutual objective is to identify
and resolve any errors promptly after they occur rather than to rely upon the
audit procedure to identify errors.  All
Books and Records subject to audit and review hereunder will be subject to the
confidentiality provisions set forth in Section 10.17.  Notwithstanding anything to the contrary set
forth herein, failure by Tops to challenge the amount of any *, Cost, or the
Services Fee or information related thereto within the * period immediately
following the date such amount is invoiced or rebated to Tops shall be deemed
to be Tops’ agreement and consent to such invoiced or rebated amounts, and Tops
shall thereafter waive any claim or right to adjust, modify or recover any
amounts related thereto.

 

(e)           Deficiencies.  Subject to the foregoing, if an audit or
review reveals that any amounts paid or charged to Tops have been overstated or
understated, then C&S shall issue a charge or credit, as applicable, to
correct such overstatement or understatement. 
The amount of the credit or charge will be subject to a variable late
fee equal to * calculated on a daily basis from the date any payment
constituting the credit or charge, as the case may be, was due.

 

(f)            Confidentiality.  For clarification, any and all information
provided by C&S in connection with an audit to Tops and/or its accounting
firm pursuant to this Section 10.2 including, but not limited to any
audited financial statements and other financial information, will be subject
to Section 3.11(e) and the Confidential Information provisions set
forth in Section 10.17 below and in any separate confidentiality agreement
C&S may require the third party accounting firm to execute.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

40

 

10.3            ERISA

 

(a)                                  Multiemployer Plan Withdrawal Liability. Pursuant to the Asset Purchase Agreement, by and among
Tops and C&S and certain of C&S’s Affiliates, dated as of August 1,
2002 (the “2002 Asset Purchase Agreement”), C&S and Tops elected to
proceed under ERISA Section 4204 and, in connection therewith, C&S
assumed Tops’ obligations under the New York State Teamsters Conference Pension
and Retirement Fund (the “New York Plan”) and the Teamsters Local 400 Pension
Fund (the “Ohio Plan”) (collectively, the “Multiemployer Plans” and
individually, a “Multiemployer Plan”).  In connection with the closure by Tops of its
former northeast Ohio operations, Tops funded the entire union pension
withdrawal liability to the Ohio Plan. Upon
any subsequent withdrawal from a Multiemployer Plan by C&S, Tops hereby
agrees to indemnify C&S (and any of its Affiliates which for purposes of
this Section 10.3, are included within the term “C&S”) as follows:

 

(i)                                     In the event of
any of the following prior to the expiration of this Agreement at the end of
the Term, that results in the withdrawal (whether complete or partial) from a
Multiemployer Plan: (w) default of Tops resulting in termination of this
Agreement under Section 9.2(a); (x) a termination pursuant to Section 9.2(d);
(y) a termination of this Agreement by Tops pursuant to Section 9.3(b);
or (z) a workforce reduction agreed to by Tops in connection with (1) a
Force Majeure or (2) a reduction in Tops Volume; then in each case, Tops
will be liable to C&S for *.  If,
however, C&S does not experience a withdrawal from such Multiemployer Plan
as a result of the events specified in this clause (i) because it has not
ceased to have an obligation to contribute to the Multiemployer Plan under
another collective bargaining agreement or agreements, then, upon any
subsequent complete or partial withdrawal liability assessed against C&S,
Tops will be liable to C&S for *.

 

(ii)                                  If the withdrawal (whether complete or partial) from a Multiemployer
Plan occurs prior to the expiration of this Agreement at the end of the Term and
is not the result of any event described in Section 10.3(a)(i), Tops will
be liable to C&S for * equal to * (x) * or (y) *. If, however C&S does
not experience a withdrawal from such Multiemployer Plan as a result or an
event specified in this clause (ii) because it has not ceased to
have an obligation to contribute to the Multiemployer Plan under another
collective bargaining agreement or agreements, then, upon any subsequent complete or partial withdrawal liability
assessed against C&S, Tops will be liable to C&S for  * equal to * (x) * (y) *.

 

(iii)                               If the
withdrawal from a Multiemployer Plan (whether complete or partial) is the
result of the expiration of this Agreement at the end of the Term, Tops will be
liable to C&S for *. If, however, C&S does not experience a withdrawal
from such Multiemployer Plan as a result of the expiration of this Agreement at
the end of the Term because it has not ceased to have an obligation to
contribute to the Multiemployer Plan under another collective bargaining
agreement or agreements, then, upon any subsequent complete or partial
withdrawal liability assessed against C&S, Tops will be liable to C&S
for *.

 

(iv)                              In the event
of an occurence of partial  withdrawal due to an event specified under clause (i) or (iii) of this
subsection 10.3(a), if C&S incurs a subsequent complete withdrawal from the
Multiemployer Plan, Tops will be liable to C&S for *.

 

(v)                                 In the event of an occurence of a partial withdrawal under
clause (ii) of this subsection 10.3(a), if C&S incurs a subsequent complete
withdrawal from the Multiemployer Plan, Tops will be liable to C&S for *
provided that * under clauses (ii) and (v) of this subsection 10.3(a) *.

 

For purposes of this Subsection 10.3(a) the term * $5,430,299 with
respect to the New York Plan). In the event *. Notwithstanding the preceding sentence, * in effect *.

 

For purposes of this Section 10.3(a) the term * which is attributable *
which do not relate to * under this Agreement. For purposes of *. The amount of
* during the relevant period. *.

 

If related actions occurring as a result of, or in connection with, the
withdrawal by C&S in the circumstances described above can be treated as an
asset sale by C&S to Tops that can qualify for the exception to imposition
of withdrawal liability on C&S under ERISA Section 4204, * or if *
that is satisfactory to C&S in its reasonable discretion. For example, *.
For clarification, * Section 9.2(d) of this Agreement, and the provisions of
9.2(d) *.

 

Any amounts to be paid by Tops to C&S under this Section 10.3(a) will
be paid *. Notwithstanding the foregoing * as determined in accordance with
this Section 10.3(a), using one of the following methods:

 

(A)                              * or 

 

(B)                                * as determined under this
Section 10.3(a) *.

 

(b)                                 Other Pension Fund
Withdrawal Liabilities.  If during
the Term, C&S becomes obligated to make contributions, or becomes aware of
circumstances that are reasonably expected to result in an obligation to make
contributions, to any multiemployer pension plan, other than any Multiemployer
Plan, in connection with the provision of the Services to Tops, C&S shall
promptly notify Tops of such obligation in writing, * the following*

 

(i)                                     The Parties * with respect
to such * specified in Paragraphs (i) through (v) of Section 10.3(a) in
accordance with Section 10.3(a) * Section 10.3(a) * and

 

(ii)                                  The Parties * other than *.

 

If
* in accordance with * (i) above * in accordance with * (ii) above, then * (and
in either case * subject to the following proviso); provided, however that,
notwithstanding *. In the event of any * and each * to the extent *.

 

The
Parties will make all necessary and appropriate modification, as mutually
agreed in good faith, to this Agreement to give effect to the applicable
outcome above.

 

The foregoing shall not apply in the case of the Lancaster, NY
Facility.

 

(c)                                  Tops Acquisition Related
Pension Plan Liability. 
Notwithstanding anything to the contrary set forth in this Agreement, in
no event shall C&S (or any of its Affiliates) be required to become
obligated for, or otherwise be responsible for, any pension plan withdrawal
liability to any defined benefit pension plan, including without limitation,
any multiemployer pension plan other than a Multiemployer Plan in connection
with any acquisition of stores by Tops. 
Notwithstanding anything to the contrary set forth in this Agreement, in
no event will C&S be required to acquire, lease, or otherwise operate or
incur any obligations in connection with, any warehouse facility as the result
of any acquisition of stores by Tops.

 

(d)                                 Other Matters.  Promptly, and in any event within * after
C&S receives any written communication from * subject to the provisions of
this Section 10.3 with respect to which Tops may be obligated to C&S under
this Agreement, C&S * with respect thereto. 
The provisions of this Section 10.3 are solely intended to bind Tops and
C&S and may not be relied on or enforced by any person not a party to this
Agreement * provided that any applicable Affiliate of C&S * may rely on or
enforce such provisions.

 

10.4            Headings. The insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.

 

10.5            Extended
Meanings.     In this Agreement words importing the
singular number only include the plural and vice versa, words importing the
masculine gender include the feminine and neuter genders and vice versa and
words importing persons include 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

41

 

Execution Copy

 

individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations.

 

10.6            Accounting
Principles. Wherever in this Agreement
reference is made to a calculation to be made in accordance with generally
accepted accounting principles consistently applied (“GAAP”), such reference
shall be to generally accepted accounting principles of the United States of
America from time to time recommended by the Financial Accounting Standards
Board (FASB), or any successor, applicable as at the date on which such
calculation is made or required to be made.

 

10.7            Currency.  All references to dollar amounts in this
Agreement are to lawful money of The United States of America.

 

10.8            Applicable
Law of Contract. This Agreement shall be
governed by the laws of the State of New York, without regard to its conflict
of laws provisions, and the laws of The United States of America as applicable
in such State.

 

10.9            Legal
Relationship/Independent Contractor.

 

(a)                                  The legal relationship of
C&S and Tops to each other shall be that of independent contractors, and
neither Party shall be the agent or legal representative of the other for any
purpose.  Neither Party shall have the
right or authority to bind or obligate the other to any third party for any
purpose whatsoever.

 

(b)                                 It is expressly intended by
the Parties, and each Party hereby specifically warrants, represents and agrees
that it (the “Performing Party” for the purposes of this Section) is an
independent contractor having its own respective established place of business
and all persons assisting the Performing Party in the performance of its
obligations under this Agreement are and shall be deemed the employees of the
Performing Party or under contract to the Performing Party for all purposes,
and not of the other Party or any Affiliate of the other Party.  It is further intended and agreed that each
Party shall have sole control of the manner and means of performing its
obligations under this Agreement.  The
specific means of accomplishing the purposes of this Agreement shall be left to
the discretion of the Performing Party. 
Each Party agrees that its officers, managers, or other management or
supervisory personnel employed by them shall effect such management, direction
and control in the sole and complete discretion of such Party.  Furthermore, Tops agrees and acknowledges
that, in connection with the performance of the Services or its obligations
under this Agreement, C&S may at any time enter into a subcontract for
services with a third party contractor, which may include any Affiliate of
C&S.

 

10.10     Notices.   Any demand, notice or other communication to
be given in connection with this Agreement shall be in writing and shall be
given by personal delivery, by overnight courier, by registered mail or by
facsimile or electronic means of communication addressed to the recipient at
the address set forth below or to such other address, individual or electronic
communication number as may be designated by notice given by either Party to
the other.  Any demand, notice or other
communication shall be conclusively deemed to have been given (i) on the day of
actual delivery if given by personal delivery; (ii) on the next business day if
given by overnight courier; (iii) on the third business day following 

 

42

 

deposit
in the mail if given by registered mail; and (iv) on the day of transmittal if
given by facsimile or electronic communication during the normal business hours
of the recipient and on the next following business day if not given during
such hours on any day.

 

If
to C&S:

 

C&S
Wholesale Grocers, Inc.

7
Corporate Drive

Keene,
NH 03431

Attn:
Richard B. Cohen, Chairman and Chief Executive Officer

Phone:
(603) 354-4601

Fax:
(603) 354-4692

 

   with
a copy to:

 

General
Counsel

Phone:
(603) 354-5885

Fax:
(603) 354-4694

 

If
to Tops:

 

Tops Markets, LLC

P.O. Box 1027

Buffalo, NY 14240-1027

Attention:
Frank Curci, Chief Executive Officer

Phone:  (716) 635-5124

Fax:  (716) 635-5102

 

   with
a copy to:

 

Kevin
Darrington, Chief Financial Officer

Phone:  (716) 635-5170

Fax:  (716) 635-5107

 

   with
a copy to:

 

Morgan
Stanley Capital Partners V U.S. Holdco, LLC

1585
Broadway, Floor 29

New
York, New York  10036

Attention:  Gary S. Matthews

Phone:  (212) 761-4737

Fax:  (201) 214-6371

 

10.11     Further
Assurances. Each of C&S and Tops
shall from time to time execute and deliver all such further documents and
instruments and do all acts and things as the other Party may reasonably
require to effectively carry out or better evidence or perfect the full intent
and meaning of this Agreement.

 

10.12     Benefit
of the Agreement. This Agreement shall inure
to the benefit of and be binding upon C&S, Tops and their respective
assigns and successors, including any transferee of substantially all of the
assets of either Party.  Tops further
agrees that any Affiliate of C&S, though it may not be a party to this
Agreement, may be a third party beneficiary of certain of the terms and
conditions set forth in this Agreement, and that in addition to C&S, any 

 

43

 

such
Affiliate may enforce such term or condition directly against Tops as if it
were a party to this Agreement.

 

10.13     Continued
Provisions.  Notwithstanding any expiration or termination
of this Agreement, (i) the indemnification obligation of both Parties as set
forth in Article 8; (ii) the obligations of the both Parties upon
termination of this Agreement as set forth in Article 9; (iii) the
confidentiality and non-solicitation provisions set forth below; (iv) the obligations
to pay any and all amounts payable and outstanding as of the expiration or
termination of this Agreement, including those which may arise as the result of
the expiration and termination of this Agreement, and (v) any other provision
which expressly or by its nature is intended to survive termination of this
Agreement (which will include, without limitation, this Article 10) shall
survive and such expiration or termination, shall continue in full force and
effect, and remain enforceable in accordance with their terms.

 

10.14     Entire
Agreement.  This Agreement together with all Schedules
and Exhibits hereto constitutes the entire agreement between the Parties with
respect to its subject matter and cancels and supersedes any prior
understandings and agreements between the Parties with respect to such subject
matter,*.  There are no representations,
warranties, terms, conditions, undertakings or collateral agreements, express,
implied or statutory, between the Parties other than as expressly set forth in this
Agreement.

 

10.15     Amendments
and Waiver.   No modification of or amendment to this
Agreement shall be valid or binding unless in writing and duly executed by both
of the Parties and no waiver of any breach of any term or provision of this
Agreement shall be effective or binding unless made in writing and signed by
the Party purporting to give the same and, unless otherwise provided, shall be
limited to the specific breach waived.

 

10.16     Authority;
Assignment.

 

(a)                                  Each Party hereby represents
and warrants that it has the full power and authority to enter into this
Agreement and the individual signing this Agreement is authorized to bind such
Party hereby.

 

(b)                                 This Agreement shall be
binding upon the Parties and their respective successors or assigns, including
any transferee of substantially all of the assets of a Party.  Tops may not assign this Agreement without
the prior written consent of C&S which shall not be unreasonably withheld.  C&S shall not assign this Agreement
without first giving notice to Tops of the intention to make such
assignment.  Tops shall then have * in
which to object, and if Tops objects, C&S shall not carry out the
assignment.

 

10.17     Confidentiality. Each Party (a “Receiver”)
shall not, during the Term or at any time thereafter, transmit Confidential
Information of the other Party (a “Discloser”) to any third person either in
whole or in part.  Each Receiver shall
take all reasonable precautions to safeguard the Confidential Information of
the Discloser from unauthorized disclosure and, at a minimum, shall afford such
Confidential Information such precautions and safeguards as the Receiver
affords to its own confidential information of a similar nature.  Tops also agrees to the heightened confidentiality
restrictions requested or imposed by C&S in connection with the disclosure
of Confidential Information, as contemplated by Section 3.11(e). “Confidential
Information” for purposes of this Agreement shall mean all non-public,
confidential or proprietary information of a Discloser and its clients,
suppliers and customers, including but not limited to, Restricted Information,
information regarding costing, merchandising, procurement, incentive programs,
inventory systems, technology, formulations, transportation, warehouse,
administrative and other technical, financial and

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

44

 

economic data and information, received by the
Receiver in the course of the negotiation of, or performance of its obligations
under, this Agreement.  Accordingly, each
Receiver will also indemnify, defend and hold harmless the Discloser from any
and all claims, demands, suits, actions, proceedings, undertakings, judgments,
liabilities, damages, losses, expenses and costs, including without limitation,
attorney’s fees and costs, involving or incurred by such Discloser, or which
such Discloser may incur, with respect to any claims of third Parties arising
with respect to or resulting from any unpermitted disclosure or breach of this Section 10.17
by such Receiver.  The above restrictions
shall not apply to the extent that Confidential Information comes into the
public domain through no fault of the Receiver, is received by the Receiver
from a third party having a bona fide right to disclose such information, is
demonstrably developed or learned by Receiver without reliance on the
Confidential Information (that the presumption being, as hereby agreed to by
the Parties, that such information was developed or learned with reliance on
the Confidential Information once disclosed to the Receiver), is required to be
disclosed by Law (subject to clause (b) below), or required to be
disclosed to enforce any right or obligation under this Agreement (subject to
clause (b) below).

 

(a)                                  Public Notices.  Neither Party shall make any press release or
public announcement regarding this Agreement or otherwise publicly disclose any
of the terms of this Agreement without the prior written consent of the other
Party,  except where required to do so by
the terms of the indenture constituting a Senior Debt Agreement in existence as
of the date hereof (pursuant to which Tops or its Affiliate is the borrower of
Senior Debt in connection with an offering of publicly traded bonds), by Law or
by the applicable regulations or policies of any Federal, State or other
regulatory agency of competent jurisdiction or any stock exchange but only after
prior consultation with the other Party, and the disclosing Party shall
cooperate with the other Party and use commercially reasonable efforts to
ensure that all Confidential Information and other information that is required
to be disclosed in accordance with the above will be accorded confidential
treatment to the fullest extent allowable.

 

(b)                                 Requirement to Disclose.   Wherever in this
Agreement disclosure is permitted if “required by Law”, such disclosure shall
be permitted only if, as promptly as practicable after determining that
disclosure is required or after receipt of any such order, demand or subpoena,
Receiver shall notify the Discloser of such requirement and the scope of the
proposed disclosure and shall simultaneously deliver to the Discloser a copy of
such order, demand or subpoena or, if there is none, a written opinion of its
counsel describing the legal basis upon which such disclosure is required.  The Receiver shall cooperate with all
reasonable requests of the Discloser  for
assistance in preventing or limiting such disclosure.

 

10.18     Definitions.  Exhibit 10.18
attached hereto, which is hereby incorporated into this Agreement, and made a
part of this Agreement for all respects, sets forth the meanings ascribed to
certain capitalized terms used in this Agreement.

 

10.19  Counterparts.  This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.

 

[Signature page follows]

 

45

 

IN WITNESS WHEREOF, the undersigned have
executed this Agreement as of the date first written above.

 

	
  TOPS
  MARKETS, LLC

  	
   

  	
  C&S
  WHOLESALE GROCERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Frank Curci

  	
   

  	
  By:

  	
  /s/
  Michael F. Newbold

  
	
  Name:

  	
  Frank
  Curci

  	
   

  	
  Name:

  	
  Michael
  F. Newbold

  
	
  Title:

  	
  President
  and CEO

  	
   

  	
  Title:

  	
  EVP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  purposes of Sections 9.2(b), 9.2(d),

  9.4 and 10.3 of this Agreement:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ERIE
  LOGISTICS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  William M. Boyd, III

  
	
   

  	
   

  	
  Name:

  	
  William
  M. Boyd, III

  
	
   

  	
  Title:

  	
  SVP
  and Secretary

  

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

46

 

LIST OF EXHIBITS

 

	
  Exhibit No.

  	
   

  	
  Name

  
	
  Exhibit 1.3

  	
   

  	
  Contract
  Years

  
	
  Exhibit
  1.5(a)

  	
   

  	
  Summary
  of Budgeted Costs

  
	
   

  	
   

  	
      1-Mainline
  (non-GM/HBC Operations)

  
	
   

  	
   

  	
         2-GM/HBC
  Operations

  
	
  Exhibit
  1.5(b)

  	
   

  	
  Total
  Warehousing Costs

  
	
   

  	
   

  	
      1-Mainline
  (non-GM/HBC Operations)

  
	
   

  	
   

  	
         2-GM/HBC
  Operations

  
	
  Exhibit
  1.5(c)

  	
   

  	
  Total
  Transportation Costs

  
	
   

  	
   

  	
      1-Mainline
  (non-GM/HBC Operations)

  
	
   

  	
   

  	
      2-GM/HBC
  Operations

  
	
  Exhibit
  1.5(d)

  	
   

  	
  *

  
	
  Exhibit
  1.6(d)

  	
   

  	
  Quality
  Specifications & Merchandise

  
	
  Exhibit
  2.5

  	
   

  	
  Depreciation
  Schedule for Fixed Assets

  
	
  Exhibit 3.2

  	
   

  	
  Tops
  Stores (as of the Effective Date)

  
	
  Exhibit
  3.3(b)

  	
   

  	
  Tops’
  Quality and Receiving Standards for Direct Bookings

  
	
  Exhibit 3.11(a)(iv)(A)

  	
   

  	
  *

  
	
  Exhibit
  3.14

  	
   

  	
  Credit
  Policy

  
	
  Exhibit
  4.6

  	
   

  	
  Tops
  2010 Budget

  
	
  Exhibit
  4.7(a)

  	
   

  	
  Baseline
  Budget

  
	
   

  	
   

  	
      Total
  Mainline Operating Costs (Less Occupancy)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
      Total
  Occupancy Costs (Mainline Operations)

  
	
   

  	
   

  	
      Total
  GM/HBC Operating Costs

  
	
  Exhibit
  4.7(d)

  	
   

  	
  Example
  of Shared Savings Collection

  
	
  Exhibit 6.2

  	
   

  	
  Coupon
  Processing Agreement

  
	
  Exhibit 7.1(e)

  	
   

  	
  Financial
  Covenants

  
	
  Exhibit 10.18

  	
   

  	
  Definitions

  

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

47

 

Exhibit 1.3

Schedule
of Contract Years

 

	
   

  	
   

  	
  Start Date

  	
   

  	
  End Date

  	
   

  	
  Weeks

  	
   

  
	
  Initial
  Contract Year

  	
   

  	
  11/22/2009

  	
   

  	
  9/25/2010

  	
   

  	
  44

  	
   

  
	
  Contract
  Year 2

  	
   

  	
  9/26/2010

  	
   

  	
  9/24/2011

  	
   

  	
  52

  	
   

  
	
  Contract
  Year 3

  	
   

  	
  9/25/2011

  	
   

  	
  9/29/2012

  	
   

  	
  53

  	
   

  
	
  Contract
  Year 4

  	
   

  	
  9/30/2012

  	
   

  	
  9/28/2013

  	
   

  	
  52

  	
   

  
	
  Contract
  Year 5

  	
   

  	
  9/29/2013

  	
   

  	
  9/27/2014

  	
   

  	
  52

  	
   

  
	
  Contract
  Year 6

  	
   

  	
  9/28/2014

  	
   

  	
  9/26/2015

  	
   

  	
  52

  	
   

  
	
  Contract
  Year 7

  	
   

  	
  9/27/2015

  	
   

  	
  9/24/2016

  	
   

  	
  52

  	
   

  

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

48

 

Exhibit
1.5(a)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Three pages in this
Exhibit omitted pursuant to confidential treatment request.

 

 

49

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

50

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

51

 

Exhibit 1.5(b)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Twenty pages in this
Exhibit omitted pursuant to confidential treatment request.

 

52

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

53

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

54

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

55

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

56

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

57

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

58

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

59

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

60

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

61

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

62

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

63

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

64

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

65

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

66

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

67

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

68

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

69

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

70

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

71

 

Exhibit 1.5(c)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Two pages in this Exhibit
omitted pursuant to confidential treatment request.

 

72

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

73

 

Exhibit 1.5(d)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Two pages omitted
pursuant to confidential treatment request.

 

74

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

75

 

Exhibit
1.6(d)

Quality
Specifications for Merchandise

 

The  quality specifications for Merchandise  *

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

76

 

Exhibit
2.5

Depreciation
Schedule for Fixed Assets

 

The following listing provides a general
outline of C&S’s current depreciation practice.  *

 

	
   

  	
   

  	
  Asset Class

  	
   

  	
  Account

  Category

  	
   

  	
  Standard

  Useful Life

  Months

  	
   

  
	
  1

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  2

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  3

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  4

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  5

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  6

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  7

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  8

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  9

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  10

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  11

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  12

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  13

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  14

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  15

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  16

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  17

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  18

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  19

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  20

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  21

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  22

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  23

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  24

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  25

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  26

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  27

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  28

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  29

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  30

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  31

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  32

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  33

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  34

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  35

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  36

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  37

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  38

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  39

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  40

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  41

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  42

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  43

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  44

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  45

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  46

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  47

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  48

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  49

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  50

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  51

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  52

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  53

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  54

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  55

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  56

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  57

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  58

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  59

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  60

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  61

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  62

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  63

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  64

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  65

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  66

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  67

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  68

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  69

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  70

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  71

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  72

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  73

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  74

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  75

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  76

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  77

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  78

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  79

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  80

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  

 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

77

 

Exhibit 3.2**

Tops
Stores

 

Store      Name      Telephone      Fax No.      Street      City      State      Zip      County      Store
Hours

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Three pages in this
Exhibit omitted pursuant to confidential treatment request.

 

78

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

79

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

80

 

Exhibit
3.3(b) - Tops’ Quality and Receiving Standards for Direct Bookings**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Two pages in this Exhibit
omitted pursuant to confidential treatment request.

 

81

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

82

 

Exhibit
3.11(a)(iv)(A)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** One (1) page in this
Exhibit omitted pursuant to confidential treatment request.

 

83

 

Exhibit 3.14**

 

The
parties shall follow the credit policy and * set forth herein with respect to
all * This credit policy applies to *

 

*

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Five pages in this
Exhibit omitted pursuant to confidential treatment request.

 

84

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

85

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

86

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

87

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

88

 

Exhibit 4.6 Tops 2010 Budget** 

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Thirty-one pages in this
Exhibit omitted pursuant to confidential treatment request.

 

89

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

90

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

91

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

92

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

93

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

94

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

95

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

96

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

97

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

98

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

99

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

100

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

101

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

102

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

103

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

104

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

105

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

106

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

107

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

108

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

109

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

110

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

111

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

112

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

113

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

114

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

115

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

116

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

117

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

118

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

119

 

Exhibit 4.7(a)**

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** One (1) page in this
Exhibit omitted pursuant to confidential treatment request.

 

120

 

Exhibit
4.7(d)**

 

*

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

** Four pages in this
Exhibit omitted pursuant to confidential treatment request.

 

121

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

122

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

123

 

*

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

124

 

EXHIBIT 6.2

 

Coupon Processing Services for Tops Markets

 

C&S
Wholesale Grocers, Inc. (“C&S”), is pleased to provide the following terms
applicable to C&S’s manufacturer coupon processing services program for
Tops Markets, LLC (“Tops”), pursuant to which C&S will process coupons and
collect coupon redemption funds (the “Coupon Services”) for valid manufacturer
coupons (the “Coupons”) that are submitted by Tops for redemption.  The terms and conditions set forth in this Exhibit 6.2
to the Supply Agreement, made as of November 12, 2009 (the “Effective Date”),
among Tops, C&S and, for the purposes set forth therein, Erie Logistics,
LLC (the “Supply Agreement”), are referred collectively as the “Coupon
Processing Agreement”.  Capitalized terms
not defined herein have the meanings set forth in the Supply Agreement.

 

1.                                      C&S*

 

2.                                      Coupons Covered.  This
Coupon Processing Agreement applies to coupon processing for all stores owned
and operated by Tops and its subsidiaries as of the Effective Date of the
Supply Agreement.

 

3.                                      Coupon Processing Procedures.  In connection with the Coupon Services,
C&S will:

 

(a)                                  *, for the *
pick-up of Coupons at Tops’ headquarters located * through an overnight or
less-than-truckload carrier, or as otherwise designated by C&S.

 

(b)                                 *

 

(c)                                  Based on *. 

 

(d)                                 *, sort, count, and validate the Coupons.
Following verification of the Coupon count and face values *, C&S will
reconcile the actual count, face value and *. 

 

(e)                                  Submit Coupons for redemption to each
applicable vendor and invoice such vendor *.

 

4.                                      Duties of Tops.

 

(a)                                  With respect to each submission of Coupons by
Tops, *, Tops will provide to C&S * report which * designates such *
aggregate Coupon submissions *.

 

(b)                                 Tops will cause each submission of Coupons to
be boxed and properly prepared for shipment at its own expense and in
accordance with instructions provided by C&S.

 

(c)                                  Tops and its stores will only submit Coupons
which have been properly credited to its retail customers in accordance with
the manufacturers’ requirements.  Coupons
which appear to be misredeemed * (collectively referred to as “Misredeemed
Coupons”) will not be accepted or credited. * in accordance with *.

 

5.                                      Additional Agreements.

 

(a)                                  To the extent that vendor coupon invoices are
not paid, C&S will attempt to collect unpaid amounts from the applicable
Vendor.  However, Tops will be
responsible for any 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

125

 

and
all uncollectible coupon invoices, and accordingly, Tops will reimburse C&S
for all amounts previously paid to Tops *.

 

(b)                                 The Parties acknowledge and agree that Tops
shall retain whatever title it has to, and ownership of, any coupons (including
Coupons) submitted for processing. 
C&S will acquire no title or interest in any Coupons received from
Tops or its stores.  * related to (i) *
and (ii) * Tops shall indemnify C&S for any Losses to which C&S is or may
be subject, arising out of or related to (i) any Misredeemed Coupons,
(ii) any coupons submitted by Tops which, or the processing of which,
violates or fails to comply with any state, federal or local laws, rules,
regulations or policies or accepted industry guidelines and practices,* and
(iii) the negligence or willful misconduct of Tops in connection with the
Coupon Services, including without limitation, the submission of coupons for
processing hereby.

 

(c)                                  * C&S may * provided that C&S * except
to the extent *.

 

(d)                                 The Parties *. Notwithstanding anything set
forth in this Coupon Processing Agreement, *.

 

6.                                      Effective Date.  This
Coupon Processing Agreement shall be effective as of the Effective Date.

 

7.                                      Term; Termination.  The “Term” of this Agreement will begin on
the Effective Date and continue through and until expiration of the Term as
defined in the Supply Agreement (subject to the earlier termination of the
Supply Agreement as set forth therein or this Coupon Services Agreement).  Notwithstanding *.

 

8.                                      Confidentiality.  Each
Party shall keep the terms of this Coupon Processing Agreement confidential and
neither will disclose the same to any third party except in compliance with
Section 10.17 of the Supply Agreement.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

126

 

Exhibit 7.1(e)

 

Financial Covenants

 

The
only Financial Covenant in effect as of the Effective Date is as follows:

 

Pursuant
to the Senior Debt Agreement, during the continuance of a Covenant Compliance
Event (as defined in the Senior Debt Agreement), Tops may not permit the
Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Debt
Agreement), calculated as of the occurrence of such Covenant Compliance Event
and as of the last day of each Fiscal Period (as defined in the Senior Debt
Agreement) thereafter based upon the most recent Measurement Period (as defined
in the Senior Debt Agreement) to be less than 1.10 to 1.00.

 

127

 

EXHIBIT 10.18

 

DEFINITIONS

 

“* Period” has the
meaning set forth in Section 7.1(c)(i)(B).

 

“2009 Budget” has the
meaning set forth of Section 1.5.

 

* has the meaning
set forth in Section 3.12(a).

 

“Accounts Receivables Deductions” has the
meaning set forth in Section 6.3.

 

“Actual Costs” has the
meaning set forth in Section 4.5.1.

 

“Actual Gainshare Costs” has the
meaning set forth in Section 4.7(b).

 

* has the meaning
set forth in Section 3.12(a).

 

“Additional Services”  has the meaning
set forth in Section 5.5.

 

“Adjusted Baseline Budget” has the meaning
set forth in Section 4.7(c).

 

* has the meaning
set forth in Section 10.3(a).

 

“Affected Party” has the meaning
set forth in Section 8.3(b).

 

“Affiliate”  , with respect to a Party, means any person or entity that, directly or
indirectly, is controlled by, controls or is under common control with such
Party; provided, that neither Morgan Stanley
nor Morgan Stanley Capital Partners V Funding LP nor any of their respective
Affiliates (other than Tops Holding Corporation and its subsidiaries) shall be
deemed to be an “Affiliate” of Tops for any purpose under this Agreement.

 

“Agreement” means this Supply Agreement, including the Schedules and Exhibits to
this Agreement, as it or they may be amended or supplemented from time to time,
and the expressions “hereof”, “herein”, “hereto”, “hereunder” and similar
expressions refer to this Agreement and not to any particular portion or
section of this Agreement.

 

“Allocation Ratio” has the meaning
set forth in Section 4.3(b).

 

“Approved Budget” has the
meaning set forth in Section 4.2.

 

“Asset” has the
meaning set forth in Section 9.2(b)(iii).

 

“Baseline Budget” has the
meaning set forth in Section 4.7(a).

 

“Baseline Costs” has the
meaning set forth in Section 4.7(b).

 

“Base Management Fee” has the
meaning set forth in Section 5.2.

 

* has the meaning
set forth in Section *.

 

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

128

 

“Books and Records” has the
meaning set forth in Section 10.2(a).

 

* has the meaning
set forth in Section *.

 

“C&S” has the
meaning set forth in the introductory paragraph, and unless expressly provided
otherwise in this Agreement, such term does not include any Affiliate of
C&S for any purpose under this Agreement.

 

“Confidential Information” has the meaning set forth in Section 10.17.

 

“Contract Quarter”  means C&S’s
four (4) fiscal quarters, which together comprise C&S’s fiscal year.

 

“Contract Week” means any
period of seven (7) consecutive calendar days commencing on a Sunday and
concluding on a Saturday during any Contract Year.

 

“Contract Year”  means a 52-week
period (or 53-week period every five to six years) that runs through the last
Saturday in September.  Each Contract
Year is comprised of four (4) Contract Quarters.  The schedule of Contract Years for the Term
is set forth on Exhibit 1.3.

 

“Costs” has the
meaning set forth in Section 4.1.

 

“Cost Savings Gainshare
Incentive Fee” has the meaning set forth in Section 5.3(a).

 

“Coupon Processing Services” has the
meaning set forth in Section 6.2.

 

* has the meaning set forth
in 3.3(b).

 

“Dedicated Facility” means any
Facility (or Facilities) utilized for the performance of Services hereunder to
the extent, and for so long, that it is dedicated to the performance of such
Services exclusively to Tops, else it is a Shared Facility.

 

“Effective Date” has the
meaning set forth in the introductory paragraph to this Agreement.

 

“ES3” means ES3, LLC,
an Affiliate of C&S.

 

“Event of Bankruptcy” means, with
respect to a Party, that such Party (i) becomes insolvent; (ii) commits
an act of bankruptcy; (iii) becomes subject to any voluntary or
involuntary bankruptcy proceedings * (iv) makes an assignment for the
benefit of creditors; (v) appoints or submits to the appointment of a
receiver or a receiver manager for all or any of its assets; (vi) admits
in writing its inability to pay its debts as they become due; or
(vii) enters into or becomes subject to any type of voluntary or
involuntary liquidation or dissolution.

 

“Facilities”  means, for
purposes of this Agreement, any facility from which C&S currently provides,
or may in the future provide, Warehousing Services and/or Transportation
Services, or any portion thereof, * any Dedicated Facility, any Shared Facility
or any Replacement Facility.  Any of the
Facilities referred individually is a “Facility”.

 

“Facility Decision” has the
meaning set forth in Section 2.4(b).

 

“Financial Covenants” has the
meaning set forth in Section 7.1(e).

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

129

 

“Fiscal Accounting Period” means periods
of four consecutive Contract Weeks beginning on the Services Commencement
Date.  In a 53-week Contract Year, one
Fiscal Accounting Period will be comprised five (5) consecutive Contract
Weeks.  Thirteen (13) Fiscal Accounting
Periods comprise each Contract Year.

 

“Fixed Assets” means the
existing fixed assets or items of plant, machinery, equipment and leasehold improvements
directly related to the Services, together with any additional items of plant,
machinery, equipment and leasehold improvements acquired by C&S during the
Term and directly related to the provision of Services.

 

“Flex Budget” has the
meaning set forth in Section 4.4.1.

 

“Flex” or “Flexing” shall mean the process of
adjusting an Approved Budget in accordance with the terms and conditions set
forth in Section 4.4 hereto.

 

“Force Majeure” has the meaning
set forth in Section 8.3(a).

 

“GAAP” has the
meaning set forth in Section 10.6.

 

“Gainshare” has the meaning
set forth in Section 4.7(a).

 

“GM/HBC” means general
merchandise/health and beauty care.

 

“GM/HBC Operations” has the
meaning set forth in Section 1.5(b).

 

“GM/HBC Operating Costs” has the meaning
set forth in Section 4.2.

 

“Index” has the
meaning set forth in Section 5.4.

 

“Initial
Contract Quarter” means the period from the
Services Commencement Date through December 26, 2009.

 

“Initial
Contract Year” has the meaning set forth in Section 9.1.

 

* means *.

 

* means * including * but excluding *.

 

“Law” shall be deemed to include
(A) any applicable statute, regulation or policy of The United States of
America or other government, any State or local government or any agency or
authority of any of them having jurisdiction over a Party or its business or
any stock exchange or self-regulatory organization in the securities industry
and (B) any order, demand or subpoena of any such government, agency,
authority, exchange or organization or any court of competent jurisdiction.

 

“Leftover Ad Volume” has the
meaning set forth in Section 3.8.

 

“Losses” has the
meaning set forth in Section 8.1(a).

 

“Mainline Operations” has the
meaning set forth in Section 1.5(a).

 

“Mainline
Operating Costs” has
the meaning set forth in Section 4.2.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

130

 

*  has the meaning set forth in
Section 3.11(a)(i)(c).

 

*  has the meaning set forth in
Section 3.12(b).

 

*  has the meaning set forth in
Section 3.11(a)(c).

 

“Measurement
Period” has the meaning set
forth in Section 3.10(c).

 

“Merchandise”
has the meaning set forth in
Section 3.1.

 

“Monthly
P&L” has the meaning set
forth in Section 4.5.1.

 

*  have the meanings set forth
in Section 10.3(a).

 

* as the meaning set forth in Section 3.11(a).

 

* means *.

 

“Other
Services” has the meaning set
forth in Section 6.1, and specifically means the Coupon Processing
Services, the Accounts Receivables *, and the Reclamation Services.

 

“Party”
and
“Parties” has the meaning set forth in the introductory
paragraph to the Agreement.

 

“Penalty
Payment” has the meaning set
forth in Section 3.10(d).

 

“Penalty
Period” has the meaning set
forth in Section 3.10(d).

 

* means * including * including * but excluding *.

 

“Performing
Party” has the meaning set
forth in Section 10.9(b).

 

“Permitted Individuals” has the
meaning set forth in Section 3.11(e).

 

“Permitted Use” has the
meaning set forth in Section 3.11(e).

 

“Person” means any corporation, trust, partnership, limited
liability company, joint venture, or other enterprise or entity.

 

“Prior
Agreement” has the meaning set
forth in the “Witnesseth” section.

 

“Procurement
and Purchasing Services” has
the meaning set forth in Section 3.3(a).

 

“Purchase Terms” has the
meaning set forth in Section 3.3(a).

 

“Recalled Merchandise”
has the meaning set forth in Section 2.3(d).

 

“Reclamation Services” has the
meaning set forth in Section 6.4.

 

“Replacement Facility” means any new
or alternate facility (which may be a Shared Facility) to which C&S may
elect to transition the Warehousing Services and/or Transportation Services, or
any portion thereof, from any of the Facilities then being utilized for such
services, and any facility which C&S may otherwise elect to deliver
Merchandise from, during the Term, which in any case may include any facility
operated by C&S or any Affiliate of C&S.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

131

 

“Reporting
Requirement” has the meaning set forth in Section 7.1(c)(iii)(A)-(F).

 

“Required Service Level” has the meaning
set forth in Section 3.10(a).

 

“Restricted Information” has the
meaning set forth in Section 3.11(e).

 

* means *.

 

* means * (i) * or (ii) *

 

(x) *

 

(A) *

 

(B) *

 

(C) *

 

(D) *

 

(E) *

 

*

 

(y) *

 

(A) *

 

(B) *

 

(C) *

 

*

 

“Senior
Debt” means, with respect to Tops and/or any direct parent
(which includes Tops Holding Corporation) or direct or indirect subsidiary of
Tops, such entity’s most senior tranche of debt or extension of credit (and any
other tranche of debt or extension of credit that is not subordinated thereto),
which includes without limitation, any bond issuance by such entity, whether
such bond is issued to any private lender or is publicly traded.

 

“Senior Debt Agreement” means any
agreement or agreements (or indenture or indentures), with respect to any
Senior Debt, which reflects the terms and conditions thereof, and includes any
above-described agreement effective as of the Effective Date of this Agreement,
and any amendment thereto and any replacement or future agreement with respect
to any Senior Debt.

 

“Service Level Credit” has the
meaning set forth in Section 3.10(d).

 

“Service Level Default” has the
meaning set forth in Section 3.10(c).

 

“Service Level
Reconciliation Report” has the meaning set forth
in Section 3.10(b).

 

“Services”  means
Warehousing Services, the Transportation Services, the Procurement and
Purchasing Services and Additional Services, but expressly excludes Other
Services.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

132

 

“Services Commencement
Date” has the meaning set forth in Section 1.3.

 

“Services Fees” has the meaning
set forth in Section 5.1.

 

“Shared Facility(ies)” means a
Facility (or Facilities) from which services are provided to Tops and at least
one other customer.

 

“Shared Savings” has the meaning
set forth in Section 4.7(d).

 

“Term” has the
meaning set forth in Section 9.1.

 

“Tops”  has the meaning
set forth in the introductory paragraph.

 

* has the meaning set forth in Section 10.3(a).

 

“Tops Stores” or “Stores” has the meaning set forth
in Section 3.2.

 

“Tops Volume”  means any
volume of Merchandise intended for use or resale at the Tops Stores or
otherwise procured or purchased on Tops’ behalf, at Tops’ direction or with any
other reference to Tops’ account, business, operations or name.

 

* has the meaning set forth in Section 3.12(a).

 

“Transportation Services” has the
meaning set forth in Section 2.3.

 

* has the meaning
set forth in Section 10.3(b).

 

“Triggering Event” has the meaning
set forth in Section 7.1(c)(ii)(A)-(D).

 

“Warehousing Services”  has the meaning
set forth in Section 2.2.

 

“* Statement” has the
meaning set forth in Section 7.1(a).

 

“* Statement Amount” has the
meaning set forth in Section 7.1(a).

 

* means *
including * For clarification, *.

 

* Confidential treatment has
been requested and the redacted material has been filed separately with the
Securities and Exchange Commission.

 

133EXHIBIT 10.1

                       ENGAGEMENT AGREEMENT BY AND BETWEEN
                    RICHARD FARKAS, ESQ. AND IMAGING3, INC.,
                              DATED JANUARY 2, 2002

<PAGE>

                          AGREEMENT FOR LEGAL SERVICES

         DEAN  JANES,  individually  and on behalf  of  IMAGING  SERVICES,  INC.
(referred to in this  Agreement  as "CLIENT")  and The Law Offices of Richard D.
Farkas,  (hereinafter  "ATTORNEY" or "ATTORNEYS")  make this Agreement for legal
services,  effective  as of January  2, 2002.  This  Agreement  is  confidential
pursuant to California BUSINESS AND PROFESSIONS Code Section 6149.

         CLIENT's address and telephone information is:

                       DEAN JANES / IMAGING SERVICES, INC.
                            3200 West Valhalla Drive
                                Burbank, CA 91505
                      Telephone: 800-900-9729, 818-260-0930

         1. This Agreement addresses the specified legal services ATTORNEYS have
agreed to perform.  These services will be referred to herein as the "MATTER" or
"MATTERS".  Any  additional  services that have or will be requested will be the
subject  of a  separate  written  agreement,  to be  negotiated  and  signed  by
ATTORNEYS and CLIENT. In particular, and without limitation,  CLIENT agrees that
ATTORNEYS  have not been retained to provide,  and will not provide legal advice
or services  concerning  issues in tax,  probate,  estate planning,  securities,
worker's compensation, family, admiralty, criminal, or bankruptcy matters.

         2. MATTERS.  The services  which  ATTORNEYS  have agreed to perform and
which define the MATTER or MATTERS are services to assist  client in  connection
with recovery of unpaid amounts due, general legal consulting, representation in
connection  with pending,  threatened,  or anticipated  litigation,  and related
business matters,  as requested No other matters are included in this Agreement,
and  ATTORNEYS  will  not  perform  other  services  unless a  separate  written
agreement is made between  CLIENT and ATTORNEY.  Any  appellate  level work will
also require a separate written agreement  between CLIENT and ATTORNEY,  as will
any work in which ATTORNEY appears as counsel of record.

         3.  INFORMATION.  ATTORNEYS  will keep CLIENT  informed of  significant
developments in the MATTERS, and will provide to ATTORNEYS all books and records
reasonably  requested  to  assist  with the  MATTERS.  ATTORNEYS  shall  have no
obligation to report to CLIENT on all activities or developments in the MATTERS,
but only those they consider to be important or relevant.  ATTORNEYS will confer
with CLIENT  regarding  the  development  of CLIENT's  position  and will inform
CLIENT of the contents and legal effect of papers that are filed.  ATTORNEYS are
specifically  authorized  to  communicate  with  anyone they deem  necessary  or
appropriate to facilitate their investigative efforts.

<PAGE>

         4.  FEES.  CLIENT  will pay  ATTORNEYS  its fees and  expenses  for the
services ATTORNEYS perform.  For services related to this MATTER,  CLIENT's fees
will be computed on an hourly basis, plus costs, as described below.

         For  all  services  performed,  unless  otherwise  agreed  in  writing,
ATTORNEYS will be paid their currently-prevailing  hourly rates, which presently
are  Three-Hundred  and  Seventy-Five  Dollars  ($375.00)  per hour  for  senior
attorney  time,  Two-Hundred  and Fifty  Dollars  ($250.00)  per hour for junior
attorney  time,  plus  paralegal  and  associate  time  currently  approximating
Eighty-Five Dollars ($85.00).  Concurrent with this Agreement,  CLIENT shall pay
ATTORNEYS an advance retainer in the amount of One-Thousand Dollars ($1,000.00).
This is a "true  retainer,"  because  ATTORNEYS are immediately  foregoing other
legal  matters,  and are providing  immediate  attention to CLIENT on an exigent
basis. As a "true retainer,"  therefore,  the retainer set forth herein shall be
deemed  earned  at  the  time  of  the  signing  of  this   agreement,   and  is
non-refundable.

         CLIENT has been informed,  in accordance with  California  BUSINESS AND
PROFESSIONS  Code Section 6147 that the fee is not set by law, but is negotiable
between  ATTORNEYS  and CLIENT.  With respect to all aspects of this  Agreement,
including fees and waivers of conflicts, CLIENT acknowledges that he has had the
opportunity to consult with independent counsel.

         If CLIENT  recovers an amount that is denominated as "attorneys'  fees"
from any party,  those fees shall be paid to ATTORNEYS,  since it is agreed that
they were awarded for the purpose of compensating ATTORNEYS.

         ATTORNEYS may on occasion  divide fees earned under this Agreement with
lawyers  who are not  members  of The Law  Offices of  Richard  D.  Farkas.  Fee
divisions require client consent, as stated in Rule 2-200 of California RULES OF
PROFESSIONAL  CONDUCT.  CLIENT hereby  consents to such division of fees, in any
amounts and under such terms as may be set within the  discretion  of ATTORNEYS,
with the understanding that the total fees charged by all lawyers to CLIENT will
not be increased by reason of such  division,  and will be  consistent  with the
requirements of Rule 4-200.

         5.  EXPENSES.  CLIENT will pay ATTORNEYS,  as incurred,  their expenses
that are  related  to the  MATTER.  ATTORNEYS  expenses  which are to be paid by
CLIENT include numerous charges such as filing fees, copying, air fare, mileage,
lodging,  telecommunications,  videotaping and editing,  computerized  research,
computerized  spreadsheet  and database  support,  paralegal  charges,  experts,
consultants,   exhibits,   graphics,  imaging,  document  preparation,   exhibit
preparation,  storage,  word  processing,  messenger  charges,  court reporters,
receivers, referees or masters, investigators, translators, overtime charges and
jury research.  The firm uses both outside and employed  personnel to accomplish
the tasks for which expenses are charged.  Employee time is charged on an hourly
basis,  calculated  to tenths of hours.  CLIENT may be  requested to approve any
single expense prior to it being incurred.

Retainer Agreement            Page 2         Imaging Services, Inc., Dean Janes

<PAGE>

         CLIENT  acknowledges  that,  although  ATTORNEYS  may from time to time
provide  estimates  of expenses  that may be  incurred,  ATTORNEYS  have made no
promises  about the total  amount of fees or  expenses  to be incurred by CLIENT
under this Agreement.

         6.  STATEMENTS  AND  PAYMENTS.  ATTORNEYS  will  send  CLIENT  periodic
statements  indicating  expenses incurred and time expended and their basis, any
amounts applied from a deposit,  and any current balance owed. If no expenses or
time are incurred for a particular amount, or if they are minimal, the statement
may be held and combined with that for the following  month. Any time or expense
items not  objected to by CLIENT  within 30 days of mailing  will be  considered
accepted by CLIENT as reasonably incurred. Any balance will be paid by CLIENT in
full within 30 days after the statement is mailed.  When the retainer amount set
forth in paragraph 4 has been  exhausted,  CLIENT will replenish the retainer in
the same amount within 30 days.

         7. LATE FEES. Late fees will accrue on any balance unpaid after 30 days
from the date of the  statement.  The late fees on any unpaid balance will be at
the rate of 10% per annum,  applied to the total  balance  unpaid  after  thirty
days.

         8. ACCOUNTING. At the termination of ATTORNEYS' services in the MATTER,
if CLIENT has faithfully  performed all provisions of this Agreement and has not
breached any terms of the Agreement or any modifications thereto, ATTORNEYS will
prepare a final  accounting of all amounts  received by ATTORNEYS in the MATTER.
If the total of all amounts received exceeds the amount charged by ATTORNEYS for
their fees and expenses, ATTORNEYS will remit any excess to CLIENT.

         9.  FILES.  Regardless  of  any  termination  of  services  under  this
Agreement,  CLIENT agrees to pay storage or disposal expenses for all documents,
evidence or other  materials  that CLIENT leaves with  ATTORNEYS.  CLIENT agrees
that, after 60 days notice, ATTORNEYS may, at ATTORNEYS' discretion, destroy any
or all documents, evidence or other materials that CLIENT does not retrieve from
ATTORNEYS.

         10.  LIEN.  CLIENT  shall grant  ATTORNEYS a lien on the subject of the
MATTERS and any  recovery to secure  payment of amounts  due  ATTORNEYS.  CLIENT
shall, upon request, sign an agreement for lien in a form provided by ATTORNEYS.

         11. NO OTHER LIENS OR  ASSIGNMENTS.  CLIENT  represents  that he is the
sole owner of all claims and causes of action  involved  in the  MATTERS (if the
particular matter relates to an asserted claim or cause of action),  and that he
has not  previously  assigned,  transferred or conveyed any interest or right in
any claim,  cause of action or Recovery  related to the MATTERS.  CLIENT  agrees
that he will not,  without the prior written  consent of ATTORNEYS,  (a) assign,
transfer or convey,  in whole or in part, any right or interest in the MATTER or
in any claim,  cause of action or  Recovery  in the  MATTER;  (b) grant any lien
against the MATTER or in any claim, cause of action or Recovery in the MATTER.

Retainer Agreement            Page 3         Imaging Services, Inc., Dean Janes

<PAGE>

         12.  BREACHES OF THE  AGREEMENT.  In addition to other events which may
constitute a breach of this Agreement,  the parties agree that CLIENT'S  failure
to pay any of ATTORNEYS' fees and expenses when due, CLIENT's  initiation of any
insolvency procedure under State law, or CLIENT's filing of any proceeding under
the United States Bankruptcy law will be a breach of this Agreement.

         13.  RESPONSIBILITIES  OF ATTORNEYS AND CLIENT.  CLIENT  understands he
must  cooperate  with ATTORNEYS in the  development  of any  litigation.  CLIENT
understands  that litigants must be available for  depositions and the taking of
testimony,  must  provide all  documentary  evidence  that is  necessary  to the
litigation  or required by law, and the necessary  actions to locate,  catalogue
and obtain the documentary  evidence must answer written  questions posed by the
other side,  must make such  appearances  as may be  required  at  hearings  and
trials,  and must generally assist ATTORNEYS in understanding and presenting the
fact of the case.  CLIENT  understands  that he must be truthful and cooperative
with  ATTORNEYS,  to the  best of her  knowledge  and  ability,  keep  ATTORNEYS
reasonably   informed  of   developments,   remain   accessible   to  ATTORNEYS,
specifically  keep ATTORNEYS  advised of CLIENT's  current address and telephone
number, and timely make any payments required by this Agreement.  ATTORNEYS will
give  CLIENT  advance  notice  of the need to appear  at  depositions,  or other
proceedings,  the need to produce or review  documents  and other matters in the
litigation that will require the time and attention of CLIENT.

         14. DISCHARGE OF ATTORNEYS.  CLIENT may discharge ATTORNEYS at any time
by written  notice  effective  when received by ATTORNEYS.  Unless  specifically
agreed by ATTORNEYS and CLIENT,  ATTORNEY  will provide no further  services and
advance no further  expenses on MATTER  behalf after  receipt of the notice.  If
ATTORNEYS are  discharged  without  cause,  CLIENT will remain  obligated to pay
ATTORNEYS for all services  provided,  at their  then-current full hourly rates,
and to  reimburse  ATTORNEYS  for all  expenses  up to the  time of  receipt  by
ATTORNEYS of the notice of discharge. For CLIENT's reference, ATTORNEYS' current
hourly rates are listed in paragraph 4 of this  Agreement;  however,  such rates
may be changed from time to time by ATTORNEYS  with or without notice to CLIENT.
Such services  provided  include all  activities  undertaken in providing  legal
services  to CLIENT  under this  Agreement,  including,  but not limited to, the
following:   preparing  for  and  attending   conferences,   court  appearances,
depositions,  and trial;  preparing,  reviewing,  and analyzing  correspondence,
pleadings,  legal  documents,  and  evidence;  legal  research;   investigation;
meetings and telephone conversations.

         15.  WITHDRAWAL  OF  ATTORNEYS.  ATTORNEYS  may withdraw at any time as
permitted  under  the  RULES  OF  PROFESSIONAL  CONDUCT  of  the  State  Bar  of
California.  The  circumstances  under which the Rules either  require or permit
such withdrawal include, but are not limited to, the following: (a) the CLIENT's
conduct  renders  it  unreasonably  difficult  for  ATTORNEYS  to carry  out the
employment  effectively,  or (b) the  CLIENT  fails  to pay  attorney's  fees or
expenses  as required  by her  agreement  with  ATTORNEYS.  Without  limitation,
ATTORNEYS  may withdraw  from  representing  CLIENT at any time,  in  ATTORNEYS'
opinion, that the MATTER does not appear sufficiently  economically promising to
continue  pursuing.  If ATTORNEYS withdraw due to a breach by CLIENT of any term

Retainer Agreement            Page 4         Imaging Services, Inc., Dean Janes

<PAGE>

of this  Agreement,  CLIENT  will  remain  obligated  to pay  ATTORNEYS  for all
services  provided,  at their  then-current  full hourly rates, and to reimburse
ATTORNEYS  for all  expenses  up to the  time of  withdrawal  by  ATTORNEYS,  as
described above.

         16.  DISCLAIMER  OF GUARANTY.  Although  ATTORNEYS may offer an opinion
about possible results regarding the subject matter of this Agreement, ATTORNEYS
cannot guaranty any particular result.  CLIENT  acknowledges that ATTORNEYS have
made no promises about the outcome and that any opinion  offered by ATTORNEYS in
the future will not constitute a guaranty.  ATTORNEYS have not yet been provided
with CLIENT's  existing files,  and are being retained late in this  litigation,
with  proceedings  pending  and  impending  deadlines.  ATTORNEYS  shall  not be
responsible for consequences  resulting from their late hiring,  or inability to
take actions due to lack of time or information.

         17.  ARBITRATION.  CLIENT has been  informed  that all clients have the
right to have fee disputes arbitrated by the Los Angeles County Bar Association.
Whether or not CLIENT elects to have any fee dispute with  ATTORNEYS  arbitrated
by the Los  Angeles  County Bar  Association,  CLIENT and  ATTORNEYS  agree that
should any dispute, claim or controversy arise regarding their relationship, the
terms of this Agreement,  the services  provided under the Agreement  (including
the  competency  of any  services  provided)  or in any  way  arising  out of or
relating to this Agreement or any  modification to this  Agreement,  the dispute
will be finally determined by binding  arbitration before an independent private
judge who has  retired  from the Los  Angeles  Superior  Court or United  States
District Court for the Central District of California.  The independent  private
judge shall follow the  California  State rules of evidence.  Any matter that is
not submitted to or is not resolved by the Los Angeles  County Bar  Association,
and any matter that remains  unresolved  due to any  rejection or vacating of an
award by the Los Angeles  County Bar  Association,  must be  submitted  to final
binding  arbitration  in this matter.  CLIENT and ATTORNEYS  specifically  waive
their rights to a jury trial of any dispute  concerning legal services  provided
by  ATTORNEYS.  All  arbitrator's  fees will be  initially  apportioned  equally
between the parties,  but the arbitrator shall  reapportion  arbitration fees as
part of the award of costs in favor of the prevailing party. All proceedings and
hearings will take place in Los Angeles,  California.  The parties elect to have
the  substantive  law of California  apply to the  arbitration,  but the parties
acknowledge that the activities under this agreement affect interstate  commerce
and the parties  elect to apply the  procedural  law of the Federal  Arbitration
Act. The parties agree that  arbitration  can be compelled by a court located in
Los Angeles County, California, that arbitration cannot be avoided by the filing
of any other lawsuit or proceeding,  and that provisional or ancillary  remedies
can be sought without waiver of arbitration rights.

         CLIENT has had an  opportunity  to discuss this  agreement to arbitrate
with ATTORNEYS,  and with anyone else of CLIENT'S  choosing.  CLIENT understands
that,  if CLIENT has any  questions or concerns,  CLIENT can obtain  advice from
independent  counsel  regarding  the agreement to arbitrate or any other term of
this  Agreement.  CLIENT  understands  that this agreement to arbitrate gives up
CLIENT'S  rights to sue or defend  in Court,  to have a jury or active  judge to
hear  and  determine  the  dispute,  to  conduct  discovery  and to  appeal  any
determination  by the  arbitrator.  Knowing  that this  agreement  to  arbitrate
deprives them of legal rights,  CLIENT and ATTORNEYS  freely and knowingly waive
those rights and enter into this agreement to arbitrate.

Retainer Agreement            Page 5         Imaging Services, Inc., Dean Janes

<PAGE>

         18. NOTICE/JURISDICTION.  The parties agree that notice of any claim or
arbitration,  service of process,  notice,  motion or other  application  may be
served by first class mail,  e-mail,  telegraph or telecopier on either party at
their regular business address.  Furthermore, the parties confer jurisdiction on
the State and Federal  courts in the County of Los  Angeles for the  purposes of
compelling  arbitration  and  enforcing  any  arbitration  award,  as well as to
provide any provisional or ancillary  relief,  and the parties expressly reserve
any removal rights they may have under Federal law.

         19. WAIVER OF CONFLICTS;  INSURANCE COVERAGE.  CLIENT has not disclosed
to ATTORNEYS any matters which, to the parties' knowledge,  constitute potential
or actual  conflicts of interest.  CLIENT has been advised that  ATTORNEYS  have
represented Richard Stellar, who is affiliated with CLIENT, and will continue to
do so.  CLIENT  specifically  and  knowingly  waives  and  actual  or  potential
conflicts that may result from  ATTORNEYS'  representation  of Richard  Stellar,
and  authorize   unfettered   communication   with  Richard  Stellar  concerning
representation of CLIENT in the MATTERS. The California BUSINESS AND PROFESSIONS
Code  requires  ATTORNEYS  to notify  CLIENT as to the  existence  of errors and
omissions  insurance  coverage  applicable  to the  services  to be  rendered to
CLIENT. ATTORNEYS confirm that such coverage is maintained.

         20. NO PRIOR SERVICES OR OPINIONS. CLIENT acknowledges and agrees that,
although  communications  have  taken  place  between  ATTORNEYS  and CLIENT and
individuals  affiliated  with  CLIENT  which  may  relate  to  or  concern  this
Agreement,  or the MATTERS  which are the subject of this  Agreement,  no formal
representation has been undertaken prior to the execution of this Agreement, and
nothing ATTORNEYS have communicated shall be relied upon as statements of advise
or opinion.  Moreover,  no formal representation will be deemed to have occurred
prior to ATTORNEYS receipt of the agreed retainer payment.  CLIENT  acknowledges
that he has not relied  upon or acted  upon any  communications  with  ATTORNEYS
prior to the date of this Agreement.  CLIENT thus specifically  waives the right
to assert that formal  claims  should have been filed by ATTORNEYS  prior to the
expiration of any statute of limitations.

         21.  AUTHORITY  TO ACT;  BINDING  NATURE OF  AGREEMENT.  CLIENT has the
absolute  and  unrestricted  right,  power and  authority  to enter  into and to
perform her  obligations  under this Agreement.  This Agreement  constitutes the
legal,  valid and  binding  obligation  of the CLIENT,  enforceable  against the
CLIENT in accordance with its terms,  subject to (i) laws of general application
relating to bankruptcy,  insolvency and the relief of debtors, and (ii) rules of
law  governing  specific  performance,  injunctive  relief  and other  equitable
remedies.

Retainer Agreement            Page 6         Imaging Services, Inc., Dean Janes

<PAGE>

         22. ENTIRE AGREEMENT.  This written agreement, in addition to any other
concurrently-executed  written  agreement,   constitutes  the  entire  agreement
between the parties as of the date of this Agreement.

         THE FOREGOING AGREEMENT,  INCLUDING THE TERMS REQUIRING  ARBITRATION OF
DISPUTES,  NON-REFUNDABLE  RETAINER,  WAIVERS OF CONFLICTS,  COMMUNICATIONS WITH
DESIGNATED AGENT, AND THE RIGHT TO INDEPENDENT COUNSEL, IS UNDERSTOOD AND AGREED
TO BY THE UNDERSIGNED ATTORNEY AND CLIENT.

         DATED: January 2, 2002             DATED: January 2, 2002

         ATTORNEYS:                         CLIENT:

         LAW OFFICES OF                     DEAN JANES, INDIVIDUALLY, AND
         RICHARD D. FARKAS                  IMAGING SERVICES, INC.

         By /s/Richard D. Farkas            By /s/Dean Janes
         RICHARD D. FARKAS                  DEAN JANES

Retainer Agreement            Page 7         Imaging Services, Inc., Dean Janes

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