Document:

THIRD AMENDMENT-DISTRIBUTION AGREEMENT

 Exhibit 10.39 
  
 THIRD AMENDMENT TO DISTRIBUTION SERVICE AGREEMENT 
  
 THIS THIRD AMENDMENT TO
DISTRIBUTION SERVICE AGREEMENT (the “Amendment”) is made and entered into effective as of the 5th day of October, 2002 (the “Effective Date”), by and between The Pantry, Inc., a Delaware corporation (“Pantry”),
Lil’ Champ Food Stores, Inc., a Florida corporation (“Lil Champ”) (Pantry and Lil’ Champ being hereinafter sometimes referred to collectively as the “Company”) and McLane Company, Inc., a Texas corporation
(“McLane”). 
  
 RECITALS 
  
 WHEREAS, the Company and McLane entered into (i) a Distribution Service Agreement effective as of October 10, 1999, (ii) a First Amendment to Distribution Service Agreement
effective as of June 28, 2001, and (iii) a Second Amendment to Distribution Service Agreement effective as of September 8, 2001 (the October 10, 1999 Distribution Service Agreement, together with the June 28, 2001 First Amendment and September 8,
2001 Second Amendment are hereinafter referred to collectively as the “Service Agreement”); and; 
  
 WHEREAS, the Company and McLane desire to further amend the Service Agreement; 
  
 NOW, THEREFORE,
for and in consideration of the promises, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and McLane do hereby agree as follows:

  

	 	1.
	 
	Deletion of Sections 3.1 and 3.2. Sections 3.1 and 3.2 of the Service Agreement are deleted in their entirety. 
 

 

	 	2.
	 
	Amendment of Section 3.3. The percentage rate of “*%” in Section 3.3 of the Service Agreement is hereby changed to the percentage rate of
“*%”. 
 

  
 In consideration of such increase the Company shall move all smokeless tobacco
Products from the limited service GMP Billing Plan to the grocery self-service Billing Plan within thirty (30) days after the Effective Date, and shall move all OTP Products (Other Tobacco Products) from the limited service GMP Billing Plan to the
self-service grocery Billing Plan within six (6) months after the Effective Date. 
  

	 	3.
	 
	Amendment of Section 3.4. The following paragraph is hereby added as the last paragraph of Section 3.4 of the Service Agreement: 

  
 “The Company shall be entitled to an early payment discount of (a) *% for statements paid within * (*)
days of statement date (i.e. the * following statement date), or (b) *% for statements paid within * (*) days of statement date (i.e. the * following statement date).” 
  

	 	4.
	 
	Extension of Service Agreement. The first sentence of Section 4.1 of the Service Agreement is hereby amended to read in its entirety as follows:

 

  

	*
	 
	Selected portions have been deleted as confidential pursuant to Rule 24b-2. Complete copies of the entire exhibit have been filed with the Securities and
Exchange Commission and marked “CONFIDENTIAL TREATMENT.” 
 

 “This Agreement shall commence and become effective on the Effective Date hereof and, unless earlier terminated in
accordance with the terns of this Agreement, will continue thereafter until October 10, 2007.” 
  

	 	5.
	 
	Critical Vendor Status. The following clause is hereby added as Section 6.14 of the Service Agreement: 
 

  
 6.14.    Critical Vendor Status.    The Company hereby agrees that in the event the
Company files for protection from its creditors under the United States Bankruptcy Code, the Company shall use best efforts to obtain a final order from the bankruptcy court designating McLane a “critical vendor” and/or assume this
Agreement pursuant to l 1 U.S.C. § 365 so that McLane receives payment in full of all pre-petition and post-petition liabilities and obligations under this Agreement. McLane shall have no liability or obligation whatsoever to deliver Products
to the Company until the Company has complied in full with the terms and conditions of the preceding sentence and such designation and/or assumption has been confirmed. 
  

	 	6.
	 
	Adjustment of Service Charge. The Service Charge of $* per store/per week provided for on Exhibit “A” of the Service Agreement is reduced to $*
per store/per week. 
 

  

	 	7.
	 
	Cigarette Rebate Adjustment. The Company shall be entitled, in addition to the rebates provided for in the Service Agreement and on Exhibit A of the
Service Agreement, to an additional rebate of $* (* and *) for each carton of * or * cigarettes purchased by the Company from McLane after the Effective Date for stores located *. The rebate for * cigarettes (including *) shall be $* (*) less than
the rebate for * cigarettes in the applicable state. 
 

  
 Additionally, within ten (10) business
days after the end of each McLane accounting quarter, McLane will calculate the average number of cigarette cartons per store, per week purchased from McLane for stores located * during such accounting quarter (the “Quarterly Average
CPSW”). In the event the Quarterly Average CPSW for an accounting quarter is: 
  

	 	A.
	 
	*, McLane will pay to the Company an additional rebate of $* (* and *) per carton purchased for such stores in such accounting quarter; 

  

	*
	 
	Selected portions have been deleted as confidential pursuant to Rule 24b-2. Complete copies of the entire exhibit have been filed with the Securities and
Exchange Commission and marked “CONFIDENTIAL TREATMENT.” 
 

 
 2 

  

	 	B.
	 
	* McLane will pay the Company an additional rebate of (i) $* (*) per carton purchased for such stores in such accounting quarter, such rebate level to increase
by $* (* and *) per carton, for each * cartons by which the Quarterly Average CPSW exceeds * (e.g. if the Quarterly Average CPSW is (i) * cartons, the additional rebate is $* (*) per carton, (ii) * cartons, the additional rebate is $* (*) per
carton, (iii) * cartons, the additional rebate is $* (*) per carton, or (iv) * cartons, the additional rebate is $* (*) per carton; or 
 

  

	 	C.
	 
	*, then the next rebate due the Company by McLane shall be reduced by $* (*) per carton for each carton purchased for such stores in such accounting quarter,
such reduction to increase by an additional $* (*) per carton for each * (*) cartons by which the Quarterly Average CPSW is below * (e.g. if the Quarterly Average CPSW is (i) * cartons, the reduction is $* (*) per carton, (ii) * cartons, the
reduction is $* (*) per carton and (iii) * cartons, the reduction is $* (*) per carton). 
 

  
 Furthermore, McLane and the Company shall * received by McLane from * from such manufacturers to McLane. The preceding sentence shall not apply to cigarettes purchased for stores *. Anything to the contrary in the Service Agreement
notwithstanding, in no event shall the Company be entitled to the payment of any rebates on cigarettes purchased for stores *, including, without limitation, *. 
  

	 	8.
	 
	Unamortized Service Allowance. The Company and McLane hereby acknowledge and agree that as of the Effective Date, the unamortized balance of the Service
Allowance previously paid by McLane to the Company pursuant to Section 3.1 of the Service Agreement is $*. Therefore, in the event the Company sells, closes or otherwise ceases operation of any store prior to October 10, 2004, the Company shall pay
to McLane the amount of $* multiplied by the number of months from such sale, closure, or cessation of operations through October 10, 2004. 
 

  

	 	9.
	 
	Quarterly Service Allowance. Provided the Company is in compliance with all terms and conditions of the Service Agreement (as amended by this Amendment) on the
date payment is due, within ten (10) business days after the beginning of each McLane accounting quarter, McLane agrees to pay to the Company a Quarterly Service Allowance of $*. This quarterly amount is based on 1291 stores and shall be adjusted
equitably during the remaining term of the Service Agreement (as amended by this Amendment) to take into account store openings and store sales/closures. 
 

  

	 	10.
	 
	Marketing Allowance. Provided the Company is in compliance with all terms and conditions of the Service Agreement (as amended by this 

  

	*
	 
	Selected portions have been deleted as confidential pursuant to Rule 24b-2. Complete copies of the entire exhibit have been filed with the Securities and
Exchange Commission and marked “CONFIDENTIAL TREATMENT.” 
 

 
 3 

 Amendment) on the date the payment is due, within ten (10) business days after the beginning of each McLane accounting
quarter McLane agrees to pay to the Company $* for each store in operation * at the beginning of such accounting quarter. The amount of the payments provided for in the immediately preceding sentence shall be adjusted semi-annually on an equitable
basis to reflect any reductions in Product purchase volume. 
  

	 	11.
	 
	Effective Date. All terms and conditions of this Amendment shall be effective as of the Effective Date. 
 

  

	 	12.
	 
	Defined Terms. Capitalized terms not specifically defined in this Amendment shall have the meaning ascribed to them in the Service Agreement.

 

  

	 	13.
	 
	No Other Modifications. Except as specifically modified by this Amendment, all terms and conditions of the Service Agreement shall remain fully
applicable and in full force and effect. 
 

  

	*
	 
	Selected portions have been deleted as confidential pursuant to Rule 24b-2. Complete copies of the entire exhibit have been filed with the Securities and
Exchange Commission and marked “CONFIDENTIAL TREATMENT.” 
 

 
 4 

 IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the date first written above. 

 
 
	 LIL’ CHAMP FOOD STORES, INC.
 
	 
	 By:
 	 	 /s/    STEVEN J.
FERREIRA        
 
	 	
	

	  	 	 Printed Name: Steven J. Ferreira
 Title: Vice President
 

 
  
 
	 THE PANTRY, INC.
 
	 
	 By:
 	 	 /s/    DAVID M.
ZABORSKY        
 
	 	
	

	  	 	 Printed Name: David M. Zaborsky
 Title: Vice President
 

 
  
 
	 McLANE COMPANY, INC.
 
	 
	 By:
 	 	 /s/    DAVID
TESTROET        
 
	 	
	

	  	 	 David Testroet
 Division
President McLane/Carolina
 

 

 
 5Management & Administrative Incentive Plan

 Exhibit 10.44 
  
 
	 
 
 The Pantry,
Inc.
  
  
  
 Fiscal Year 2002
 MANAGEMENT & ADMINISTRATIVE INCENTIVE PLAN
  
  
 

 

 The Pantry, Inc. 
  
 Fiscal Year 2002 
 MANAGEMENT & ADMINISTRATIVE INCENTIVE PLAN 
  
 
 
 PURPOSE 
  
 The purpose of the incentive plan is to foster outstanding Company financial performance, to direct participants’ efforts toward performance that supports
the Company’s business plan and to reward key participants for these accomplishments with an annual cash bonus. 
  
 ADMINISTRATION 
  
 The Incentive Committee has the authority to make all necessary determinations in
administration and interpretation of the Plan. All requests for an exception to the Plan or interpretations should be fully researched, documented and made in writing to the Senior Vice President, Administration. Requests must have approval of the
functional area’s Vice President. All decisions made by the Incentive Committee are final and binding. 
  
 DETERMINATION OF INCENTIVE PAYOUT 
  
 The Incentive Committee will determine prior to or during the fiscal
year a minimum, midpoint and maximum E.B.I.T.D.A. target. These targets represent the points at which plan participants will receive an incentive award. 
  

	1.
	 
	Sr. Executive Staff Member or Officer: The incentive award is 100% discretionary based on the financial results of all companies comprising The Pantry,
Inc. 
 

	2.
	 
	Executive Staff or Region Executive: The incentive award is 50% discretionary & 50% based on the financial results of the employing Company or the
individual’s own region, as applicable. 
 

	3.
	 
	Executive Staff or Region Manager: The incentive award is 50% discretionary & 50% based on the financial results of the employing Company or the
individual’s own region, as applicable. 
 

	4.
	 
	Director or Division Director: The incentive award is 50% discretionary and 50% based on the financial results of the employing Company or the
individual’s own division, as applicable. 
 

	5.
	 
	Director: The incentive award is 50% discretionary and 50% based on the financial results of the employing Company, as applicable. 

	6.
	 
	Manager or Professional Staff: The incentive award is 50% discretionary and 50% based on the financial results of the employing Company, as applicable.

 

	7.
	 
	Supervisor, Technical or Support Staff: The incentive award is 50% discretionary and 50% based on the financial results of the employing Company, as
applicable. 
 

	8.
	 
	Administrative, Clerical or Support Staff: Discretionary Christmas Bonus. 
 

  
 SELECTION OF PARTICIPANTS 
  
 Each year, the Incentive
Committee will review and approve a list of employees, whose efforts can materially affect the performances of the Company. On review and approval, these employees become participants for the fiscal year. The Incentive Committee, with the approval
of the Board’s Compensation Committee, will establish and assign participants to incentive award categories. 
  
 An employee who has
been selected as a plan participant will be notified that s/he is eligible to participate and informed of his/her category of participation and incentive award potential. Employees designated in Category 8 (Administrative/Clerical Staff) may receive
an incentive award in the form of a Christmas Bonus at the discretion of the Company. Therefore, notification is informal and made at the time of payment. 
  
 INCENTIVE AWARDS 
  
 The Incentive Committee will determine as early as
practicable after the close of the fiscal year, the financial results verses targets. If the financial results are less than the established E.B.I.T.D.A. minimum target, then no incentive will be paid. Incentive amounts will be paid based on full
achievement of each target. For example, no more than
 

 
 1 

 
the Minimum incentive award will be paid if the MidPoint target is not fully achieved. Payment will be made as soon as practicable after the end of the fiscal year closing. 

 
 The following table shows the incentive awards available based on incentive level groupings and financial results. The incentive award equals a
percentage of the base salary, exclusive of other types of compensation, earned during the fiscal year. 
  
 
	 Category
 
	  	 General Description
 
	  	 Minimum
 
	  	 Midpoint
 
	  	 Maximum
 

	 
	 1
 	  	 Senior Executive Staff & Officers
 	  	 Discretionary
 
	 
	 2
 	  	 Executive Staff or
 Region* Executive
 	  	 50% Discretionary
 	  	 30%
 	  	 35%
 	  	 40%
 
	  	  	  	 50% Company or Region* Results
 	  	  	  	  	  	  
	 
	 3
 	  	 Executive Staff or
 Region* Manager
 	  	 50% Discretionary
 	  	 25%
 	  	 30%
 	  	 35%
 
	  	  	  	 50% Company or Region* Results
 	  	  	  	  	  	  
	 
	 4
 	  	 Director or
 Division* Director
 	  	 50% Discretionary
 	  	 20%
 	  	 25%
 	  	 30%
 
	  	  	  	 50% Company or Division* Results
 	  	  	  	  	  	  
	 
	 5
 	  	 Director or Manager
 	  	 50% Discretionary
 	  	 15%
 	  	 20%
 	  	 25%
 
	  	  	  	 50% Company Results
 	  	  	  	  	  	  
	 
	 6
 	  	 Manager or
 Professional Staff
 	  	 50% Discretionary
 	  	 10%
 	  	 15%
 	  	 20%
 
	  	  	  	 50% Company Results
 	  	  	  	  	  	  
	 
	 7
 	  	 Technical or
 Support Staff
 	  	 50% Discretionary
 	  	 5%
 	  	 10%
 	  	 15%
 
	  	  	  	 50% Company Results
 	  	  	  	  	  	  
	 
	 8
 	  	 Administrative &
 Clerical Staff
 	  	 Discretionary Christmas Bonus
 	  	 1 Week
 	  	 1.5 Weeks
 	  	 2 Weeks
 

 
  
 TERMINATION, DEATH OR DISABILITY 
  
 Terminated employees—voluntary or involuntary—will not be eligible for incentive payments. All participants must be employed at the time of payment in
order to receive payment under the Plan. A disabled or deceased employee will be paid a prorated incentive based on compensation earned during active employment. 
  
 TRANSFER/NEW HIRES 
  
 The Incentive Committee must approve employees newly
hired or transferred into potential incentive-eligible positions. Once approved, the participant will be paid a prorated incentive based on assigned category and base compensation earned from start date of work in the position to the end of the
fiscal year. 
  
 Participants transferred out of incentive-eligible positions for performance reasons will not be eligible for incentive
payments—regardless of length of time in the position. Transfers between incentive-eligible positions will be paid a prorated amount based on the incentive grouping and the compensation earned during the period in each of the incentive-eligible
positions. 
  
 TERMS AND CONDITIONS 
  
 The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company and the Participant. A Participant shall have no rights against the Company except
as may be specifically provided for herein. Moreover, nothing in this Plan shall be deemed to give a participant the right to be retained in the service of the Company. 
  
 The Plan may be terminated, modified, amended, revised or otherwise altered in any part or in its entirety at any time at the discretion of the Incentive Committee. When possible any change in the Plan
will be announced to the participants prior to the period in which the change(s) become effective. 
  

 
 2 

 The Pantry, Inc. 
  
 Fiscal Year 2002 
 MANAGEMENT & ADMINISTRATIVE INCENTIVE PLAN 
  
 
 
  
 ACKNOWLEDGMENT 
  
 I acknowledge receipt of The Pantry, Inc. Management & Administrative
Incentive Plan for Fiscal 2002. 
  
  
 
	 
	 	  	 	 

	   Participant’s Signature
  
 	 	  	 	   Social Security Number
  
 
	 
	 
	 	  	 	 

	   Title
 	 	  	 	   Date

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