Document:

ex10-5.htm

    Exhibit
10.5

     

    AMENDED
and RESTATED

     

    CHANGE IN
CONTROL SEVERANCE AGREEMENT

     

    

    THIS
AGREEMENT is entered into as of the 1st day of
August, 2008
(the “Effective Date”) by and between CONMED Corporation, a New York
corporation (the “Company”), and Luke A. Pomilio, residing at 8668 Teugega
Point, Rome, New York  13440

     

    W I T N E
S S E T H

     

    WHEREAS,
the Company considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of the
Company and its stockholders; and

     

    WHEREAS,
the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that such
possibility may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and

     

    WHEREAS, the Company and Executive have previously
entered into a Change in Control Severance Agreement, dated as of May 2, 2000,
which is hereby amended and restated; and

     

    WHEREAS,
the Board (as defined in Section 1) has determined that it is in the best
interests of the Company and its stockholders to secure Executive’s continued services and to
ensure Executive’s
continued dedication to his duties in the event of any threat or occurrence of a
Change in Control (as defined in Section 1) of the Company; and

     

    WHEREAS, the Company wishes Executive to enter into a
confidentiality agreement, which Executive is willing to do, as a condition of
entering into this Agreement; and

     

    WHEREAS,
the Board has authorized the Company to enter into this Agreement.

     

    NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants and
agreements herein contained, the Company and Executive hereby agree as
follows:

     

    1.         
 Definitions.  As
used in this Agreement, the following terms shall have the respective meanings
set forth below:

     

    (a)         “Board” means the Board of Directors
of the Company.

     

    (b)         “Bonus Amount” means the highest annual
incentive bonus earned by Executive from the Company (or its affiliates) during
the last three (3) completed fiscal years of the Company immediately preceding
Executive’s Date of
Termination (annualized in the event Executive was not employed by the Company
(or its affiliates) for the whole of any such fiscal year).

     

    
      
         

      

      
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    (c)         “Cause” means (i) the willful and
continued failure of Executive to perform substantially his duties with the
Company (other than any such failure resulting from Executive’s incapacity due to physical
or mental illness or any such failure subsequent to Executive being delivered a
Notice of Termination without Cause by the Company or delivering a Notice of
Termination for Good Reason to the Company) after a written demand for
substantial performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that Executive
has not substantially performed Executive’s duties, or (ii) the willful
engaging by Executive in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company or its
affiliates.  For purpose of this paragraph (b), no act or failure to
act by Executive shall be considered “willful” unless done or omitted to be
done by Executive in bad faith and without reasonable belief that Executive’s action or omission was in
the best interests of the Company or its affiliates.  Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board, based upon the advice of counsel for the Company or upon the
instructions of the Company’s chief executive officer or
another senior officer of the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best interests of
the Company.  Cause shall not exist unless and until the Company has
delivered to Executive a copy of a resolution duly adopted by three-quarters
(3/4) of the entire Board (excluding Executive if Executive is a Board member)
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
an event set forth in clauses (i) or (ii) has occurred and specifying the
particulars thereof in detail.

     

    (d)         “Change in Control” means the occurrence of any
one of the following events:

     

    (i)           individuals
who, as of the Effective Date, constitute
the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the Effective Date,
whose election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;

     

    (ii)           any
“person” (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act),

     

    
      
         

      

      
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    directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities
eligible to vote for the election of the Board (the “Company Voting
Securities”); provided,
however, that the event described in this paragraph (ii) shall not be deemed to
be a Change in Control by virtue of any of the following
acquisitions:  (A) by the Company or any Subsidiary, (B) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying
Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition
by Executive or any group of persons including Executive (or any entity
controlled by Executive or any group of persons including
Executive);

     

    (iii)           the
consummation of a merger, consolidation, statutory share exchange or similar
form of corporate transaction involving the Company or any of its Subsidiaries
that requires the approval of the Company’s stockholders, whether for
such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately
following such Business Combination:  (A) more than 50% of the total
voting power of (x) the corporation resulting from such Business Combination
(the “Surviving
Corporation”), or (y) if
applicable, the ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company
Voting Securities that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the same
proportion as the voting power of such Company Voting Securities among the
holders thereof immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan (or related trust) sponsored or maintained
by the Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 25% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business Combination
were Incumbent Directors at the time of the Board’s approval of the execution
of the initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and (C)
above shall be deemed to be a “Non-Qualifying
Transaction”);
or

     

    (iv)           the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or a sale of all or substantially all of the
Company’s
assets.

     

    Notwithstanding
the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial

     

    
      
         

      

      
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    ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

     

    (e)         “Date of Termination” means (1) the effective date
on which Executive’s
employment by the Company terminates as specified in a prior written notice by
the Company or Executive, as the case may be, to the other, delivered pursuant
to Section 10 or (2) if Executive’s employment by the Company
terminates by reason of death, the date of death of Executive.

     

    (f)         “Disability” means termination of
Executive’s employment
by the Company due to Executive’s absence from Executive’s duties with the Company on
a full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive’s
incapacity due to physical or mental illness.

     

    (g)         “Good Reason” means, without
Executive’s express
written consent, the occurrence of any of the following events after a Change in
Control:

     

    (i)           (A) any change in the duties
or responsibilities (including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive’s position(s), duties,
responsibilities or status with the Company immediately prior to such Change in
Control (including any material and adverse diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be deemed to
occur upon a change in duties or responsibilities (other than reporting
responsibilities) that is solely and directly a result of the Company no longer
being a publicly traded entity and does not involve any other event set forth in
this paragraph (g) or (B) a material and adverse change in Executive’s titles or offices with the
Company as in effect immediately prior to such Change in Control;

     

    (ii)           a
material reduction by the Company
in Executive’s rate of
annual base salary or annual target bonus opportunity (including any material
and adverse change in the formula for such annual bonus target), as in effect
immediately prior to such Change in Control or as the same may be increased from
time to time thereafter;

     

    (iii)           any
requirement of the Company that Executive (A) be based anywhere more than fifty
(50) miles from the office where Executive is located at the time of the Change
in Control or (B) travel on Company business to an extent substantially greater
than the travel obligations of Executive immediately prior to such Change in
Control;

     

    (iv)           the
failure of the Company to continue in effect any material employee benefit
compensation welfare benefit or fringe benefit plan in which Executive is
eligible to participate in immediately prior to such Change in Control or the
taking of any action by the Company which would materially adversely
affect

     

    
      
         

      

      
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    Executive’s contribution level or
ability to participate in or materially reduce Executive’s benefits under any such
plan, unless Executive is permitted to participate in other plans providing
Executive with substantially equivalent benefits in the aggregate (at
substantially equivalent Executive contribution  with respect to
welfare benefit plans) or

     

    (v)           the
failure of the Company to obtain the assumption of
this Agreement from any successor as contemplated in Section
9(b).

     

    An
isolated, insubstantial and inadvertent action taken in good faith and which is
remedied by the Company within ten (10) days after receipt of notice thereof
given by Executive shall not constitute Good Reason.  Executive’s right to terminate
employment for Good Reason shall not be affected by Executive’s incapacities due to mental
or physical illness and Executive’s continued employment shall
not constitute consent to, or a waiver of rights with respect to, any event or
condition constituting Good Reason; provided, however, that such event shall not constitute Good Reason under this
Agreement unless (i) Executive provides notice to the Company within the ninety
(90) days following the initial
existence of an event constituting Good Reason, (ii) the Company does not remedy such event (if
remediation is possible) within thirty (30) days following the Company’s receipt
of notice of such event, and (iii) Executive separates from service with the
Company within two (2) years following the initial existence of such an event
constituting Good Reason.

     

    (h)         “Qualifying Termination” means a termination of
Executive’s employment
(i) by the Company other than for Cause or (ii) by Executive for Good
Reason.  Termination of Executive’s employment on account of
death, Disability or Retirement shall not be treated as a Qualifying
Termination.

     

    (i)         “Retirement” means Executive’s mandatory retirement (not
including any mandatory early retirement) in accordance with the Company’s retirement policy generally
applicable to its salaried employees, as in effect immediately prior to the
Change in Control, or in accordance with any retirement arrangement established
with respect to Executive with Executive’s written
consent.

     

    (j)         “Subsidiary” means any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities or interests of such corporation or other entity entitled to vote
generally in the election of directors or in which the Company has the right to
receive 50% or more of the distribution of profits or 50% of the assets or
liquidation or dissolution.

     

    (k)         “Termination Period” means the period of time
beginning with a Change in Control and ending two (2) years and six (6) months
following such Change in Control.  Notwithstanding anything in this
Agreement to the contrary, if (i) Executive’s employment is terminated
prior to a Change in Control for reasons that would have constituted a
Qualifying Termination if they had occurred following a Change in Control; (ii)
Executive reasonably demonstrates that such termination (or Good Reason event)
was at the request of a third party who had indicated an intention or taken
steps reasonably

     

    
      
         

      

      
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    calculated
to effect a Change in Control; and (iii) a Change in Control involving such
third party (or a party competing with such third party to effectuate a Change
in Control) does occur, then for purposes of this Agreement, the date
immediately prior to the date of such termination of employment or event
constituting Good Reason shall be treated as a Change in Control.  For
purposes of determining the timing of payments and benefits to Executive under
Section 4, the date of the actual Change in Control shall be treated as
Executive’s Date of
Termination under Section 1(e).

     

    2. 
         Obligation of Executive.  In
the event of a tender or exchange offer, proxy contest, or the execution of any
agreement which, if consummated, would constitute a Change in Control, Executive
agrees not to voluntarily leave the employ of the Company, other than as a
result of Disability, retirement or an event which would constitute Good Reason
if a Change in Control had occurred, until the Change in Control occurs or, if
earlier, such tender or exchange offer, proxy contest, or agreement is
terminated or abandoned.

     

    3. 
         Term of Agreement.  This
Agreement shall be effective on the date hereof and shall continue in effect
until the Company shall have given three (3) years’ written notice of
cancellation; provided, that, notwithstanding the delivery of any such notice,
this Agreement shall continue in effect for a period of two (2) years after a
Change in Control, if such Change in Control shall have occurred during the term
of this Agreement.  Notwithstanding anything in this Section to the
contrary, this Agreement shall terminate if Executive or the Company terminates
Executive’s employment
prior to a Change in Control except as provided in Section 1(k).

     

    4. 
         Payments Upon Termination of
Employment.

     

    (a)         Qualifying
Termination.  If during the Termination Period the employment of
Executive shall terminate pursuant to a Qualifying Termination, then the Company
shall provide to Executive:

     

    (i)           within
ten (10) days following the Date of Termination a lump-sum cash amount equal to
the sum of (A) Executive’s base salary through the
Date of Termination and any bonus amounts which have become payable, to the
extent not theretofore paid or deferred, (B) a pro rata portion of
Executive’s annual bonus
for the fiscal year in which Executive’s Date of Termination occurs
in an amount at least equal to (1) Executive’s Bonus Amount, multiplied by
(2) a fraction, the numerator of which is the number of days in the fiscal year
in which the Date of Termination occurs through the Date of Termination and the
denominator of which is three hundred sixty-five (365), and reduced by (3) any
amounts paid from the Company’s annual incentive plan for
the fiscal year in which Executive’s Date of Termination occurs
and (C), any compensation previously deferred by Executive other than pursuant
to a tax-qualified plan (together with any interest and earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore paid;
plus

     

    (ii)           within
ten (10) days following the Date of Termination, a lump-sum cash amount equal to
(i) three (3) times Executive’s highest annual rate of base
salary during the 12-month period immediately prior to Executive’s Date of Termination, plus
(ii) three (3) times Executive’s Bonus Amount.

     

    

     

    
      
         

      

      
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    (b)         If
during the Termination Period the employment of Executive shall terminate
pursuant to a Qualifying Termination, the Company shall continue to offer, for a
period of (3) years following Executive’s Date of Termination,
Executive (and Executive’s dependents, if applicable)
with the same level of medical, dental, accident, disability, long-term care and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive’s Date of Termination (or, if
more favorable to Executive, as such benefits and terms and conditions existed
immediately prior to the Change in Control); such
medical and dental insurance benefits shall be provided in the form of continued
group health coverage under COBRA for the 18 months following Executive’s
termination of employment, and thereafter, at the Company’s sole discretion,
either (i) under a fully insured Company health benefit plan, (ii) as
reimbursement (on an after tax basis) of the premium expense Executive incurs to
purchase comparable health coverage or (iii) as reimbursement (on an after tax
basis) of the actual out-of-pocket health expenses Executive incurs, and such
accident, disability, long-term care and life insurance benefits shall be
provided as a reimbursement (on an after tax basis) of the premium expense
Executive incurs to purchase such accident, disability, long-term care and life
insurance benefits.  Notwithstanding the foregoing, in the
event Executive becomes reemployed with another employer and becomes eligible to
receive welfare benefits from such employer, the welfare benefits described
herein shall be secondary to such benefits during the period of Executive’s eligibility, but only to
the extent that the Company reimburses Executive for any increased cost and
provides any additional benefits necessary to give Executive the benefits
provided hereunder.

     

    In
addition, the Company shall continue to make payments to or on behalf of the
Executive with respect to the expenses set forth on Exhibit A for a period of
three (3) years from such Date of Termination.

     

    (c)         If
during the Termination Period the employment of Executive shall terminate other
than by reason of a Qualifying Termination, then the Company shall pay to
Executive within thirty (30) days following the Date of Termination, a lump-sum
cash amount equal to the sum of (1) Executive’s base salary through the
Date of Termination and any bonus amounts which have become payable, to the
extent not theretofore paid or deferred, and (2) any accrued vacation pay to the
extent not theretofore paid.  The Company may make such additional
payments, and provide such additional benefits, to Executive as the Company and
Executive may agree in writing.

     

    5. 
         Certain Additional Payments by the
Company.

     

    (a)         Anything
in this Agreement to the contrary, in the event it shall be determined that any
payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated
entities) or any entity which effectuates a Change in Control (or any of its
affiliated entities) to or for the benefit of Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (the “Payments”) would be subject to the
excise tax (the “Excise

     

    
      
         

      

      
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    Tax”) under Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Company shall pay
to Executive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product
of any deductions disallowed because of the inclusion of the Gross-up Payment in
Executive’s adjusted
gross income and the highest applicable marginal rate of federal income taxation
for the calendar year in which the Gross-up Payment is to be
made.  For purposes of determining the amount of the Gross-up Payment,
the Executive shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-up Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes and
(iii) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of the
Gross-up Payment in the Executive’s adjusted gross
income.  Notwithstanding the foregoing provisions of this Section
5(a), if it shall be determined that Executive is entitled to a Gross-Up
Payment, but that the Payments would not be subject to the Excise Tax if the
Payments were reduced by an amount that is less than 10% of the portion of the
Payments that would be treated as “parachute payments” under Section 280G of the
Code, then the amounts payable to Executive under this Agreement shall be
reduced (but not below zero) to the maximum amount that could be paid to
Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no Gross-Up Payment
shall be made to Executive.  The reduction of the amounts payable
hereunder, if applicable, shall be made by first reducing payments under Section 4(a)(ii), second
reducing the
payments under Section 4(a)(i) and last reducing
benefits under Section 4(b)(iii).  For purposes of
reducing the Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced.  If the reduction
of the amounts payable hereunder would not result in a reduction of the Payments
to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced
pursuant to this provision.

     

    (b)         Subject
to the provisions of Section 5(a), all determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required, the
amount of such Gross-Up Payment, the reduction of the Payments to the Safe
Harbor Cap and the assumptions to be utilized in arriving at such
determinations, shall be made by the public accounting firm that is retained by
the Company as of the date immediately prior to the Change in Control (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and Executive within
fifteen (15) business days of the receipt of notice from the Company or the
Executive that there has been a Payment, or such earlier time as is requested by
the Company (collectively, the “Determination”).  In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be

     

    
      
         

      

      
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    referred
to as the Accounting Firm hereunder).  All fees and expenses of the
Accounting Firm shall be borne solely by the Company and the Company shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of the services hereunder.  The Gross-up Payment under
this Section 5 with respect to any Payments shall be made no later than thirty
(30) days following such Payment.  If the Accounting Firm determines
that no Excise Tax is payable by Executive, it shall furnish Executive with a
written opinion to such effect, and to the effect that failure to report the
Excise Tax, if any, on Executive’s applicable federal income
tax return will not result in the imposition of a negligence or similar
penalty.  In the event the Accounting Firm determines that the
Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive
with a written opinion to such effect.  The Determination by the
Accounting Firm shall be binding upon the Company and Executive.  As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (“Underpayment”) or Gross-up Payments are
made by the Company which should not have been made (“Overpayment”), consistent with the
calculations required to be made hereunder.  In the event that the
Executive thereafter is required to make payment of any Excise Tax or additional
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for the benefit of Executive.  In the event the amount
of the Gross-up Payment exceeds the amount necessary to reimburse the Executive
for his Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by Executive (to the extent he has received a refund if the applicable Excise
Tax has been paid to the Internal Revenue Service) to or for the benefit of the
Company.  Executive shall cooperate, to the extent his expenses are
reimbursed by the Company, with any reasonable requests by the Company in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.

     

    6. 
         Withholding Taxes.  The
Company may withhold from all payments due to Executive (or his beneficiary or
estate) hereunder all taxes which, by applicable federal, state, local or other
law, the Company is required to withhold therefrom.

     

    7. 
         Reimbursement of
Expenses.  If any contest or dispute shall arise under this
Agreement involving termination of Executive’s employment with the Company
or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the prime rate of Chase
Manhattan Bank, N.A. from time to time in effect, but in no event higher than
the maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive’s statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive’s claim is
upheld by a court of competent jurisdiction.

     

    
      
         

      

      
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    8. 
         Scope of Agreement.  Nothing
in this Agreement shall be deemed to entitle Executive to continued employment
with the Company or its Subsidiaries, and if Executive’s employment with the Company
shall terminate prior to a Change in Control, Executive shall have no further
rights under this Agreement (except as otherwise provided hereunder); provided,
however, that any termination of Executive’s employment during the
Termination Period shall be subject to all of the provisions of this
Agreement.

     

    9. 
         Successors; Binding
Agreement.

     

    (a)         This
Agreement shall not be terminated by any Business Combination.  In the
event of any Business Combination, the provisions of this Agreement shall be
binding upon the Surviving Corporation, and such Surviving Corporation shall be
treated as the Company hereunder.

     

    (b)         The
Company agrees that in connection with any Business Combination, it will cause
any successor entity to the Company unconditionally to assume (and for any
Parent Corporation in such Business Combination to guarantee), by written
instrument delivered to Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder.  Failure of the Company to
obtain such assumption and guarantee prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive’s employment were terminated
following a Change in Control by reason of a Qualifying
Termination.  For purposes of implementing the foregoing, the date on
which any such Business Combination becomes effective shall be deemed the date
Good Reason occurs, and shall be the Date of Termination if requested by
Executive.

     

    (c)         This
Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.  If Executive shall die while any amounts would
be payable to Executive hereunder had Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by
Executive to receive such amounts or, if no person is so appointed, to
Executive’s
estate.

     

    10.         Notice.  (a)  For purposes of
this Agreement, all notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered or five (5) days after deposit in the United States mail, certified
and return receipt requested, postage prepaid, addressed as
follows:

     

    If to the
Executive:

     

    Luke A.
Pomilio

    8668
Teugega Point

    Rome, New
York 13440

    
      
         

      

      
        E-66

        
          

        

      

      
         

      

    

    If to the
Company:

    

    CONMED
Corporation

    525
French Road

    Utica,
New York 13502

    

    Attention:  President

    

    With a
copy to:  General Counsel

    

    

    or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

     

    (b)         A
written notice of Executive’s Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive’s employment under the
provision so indicated and (iii) specify the termination date (which date shall
be not less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such
notice).  The failure by Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of Executive or the Company hereunder or
preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive’s or
the Company’s rights
hereunder.

     

    11.         Full Settlement; Prior Agreement;
Resolution of Disputes.  The Company’s obligation to make any
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall be in lieu and in full settlement of all other severance
payments to Executive under any other severance or employment agreement between
Executive and the Company, and any severance plan of the Company (including, for the avoidance of doubt, the Change in
Control Severance Agreement between the Company and Executive dated as of May 2,
2000, which is hereby amended and restated in its entirety by this
Agreement).  The Company’s obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others.  In
no event shall Executive be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and, except as provided in Section 4(b), such
amounts shall not be reduced whether or not Executive obtains other
employment.

     

    12.         Employment with
Subsidiaries.  Employment with the Company for purposes of this
Agreement shall include employment with any Subsidiary.

     

    13.         Survival.  The respective
obligations and benefits afforded to the Company and Executive as provided in
Sections 4 (to the extent that payments or benefits are owed as a result of a
termination of employment that occurs during the term of this Agreement), 5 (to
the extent that Payments are made to Executive as a result of a Change in
Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall
survive the termination of this Agreement.

     

    
      
         

      

      
        E-67

        
          

        

      

      
         

      

    

    

     

    14.         GOVERNING LAW;
VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE
OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.

     

    15.         Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed to be
an original and all of which together shall constitute one and the same
instrument.

     

    16.         Miscellaneous.  No provision
of this Agreement may be modified or waived unless such modification or waiver
is agreed to in writing and signed by Executive and by a duly authorized officer
of the Company.  No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.  Failure by Executive or the Company to
insist upon strict compliance with any provision of this Agreement or to assert
any right Executive or the Company may have hereunder, including without
limitation, the right of Executive to terminate employment for Good Reason,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.  Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.

     

    17.         Compliance with
Section 409A of the Code.  It is the parties’ intent that the
payments and benefits provided under this Agreement be exempt from the
definition of “non-qualified deferred compensation” within the meaning of
Section 409A of the Code, and the Agreement shall be interpreted
accordingly.  In this regard each payment under this Agreement shall
be treated as a separate payment for purposes of Section 409A of the
Code.  To the extent that any payment or benefit under this Agreement
constitutes “non-qualified deferred compensation” then this Agreement is
intended to comply with Section 409A of the Code and the Agreement shall be
interpreted accordingly.  If and to the extent that any payment or
benefit is determined by the Company (a) to constitute “non-qualified deferred
compensation” subject to Section 409A of the Code, (b) such payment or benefit
is provided to Executive and Executive is a “specified employee” (within the
meaning of Section 409A of the Code and as determined pursuant to procedures
established by the Company) and (c) such payment or benefit must be delayed for
six months from Executive’s Date of Termination (or an earlier date) in order to
comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to
incur any additional tax under Section 409A of the Code, then the Company will
delay making any such payment or providing such benefit until the expiration of
such six month period (or, if earlier, Executive’s death, “disability” or a
“change in control event”, as such

     

    
      
         

      

      
        E-68

        
          

        

      

      
         

      

    

    terms are defined in Section 1.409A-3(i)(4) and (5) of
the Code).  In addition, any expense reimbursements provided under
this Agreement, including but not limited to those reimbursements provided
pursuant to Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as
soon as practicable, but in any event no later than the end of Executive’s
taxable year following the taxable year in which Executive incurs such
reimbursable expense or remits in reimbursable tax payment, as
appropriate.

     

    

    IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly
authorized officer of the Company and Executive has executed this Agreement as
of the day and year first above written.

     

    
      

      
        	 
      	 
      	 
      	
                CONMED
      Corporation

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                By:

              	/s/ Andrew W.
      Beakman  
	
                Witness:

              	/s/ Heather L.
      Cohen  	 
      	
                Name:

              	Andrew W.
      Beakman  
	 
      	 
      	 
      	
                Title:

              	Assistant General
      Counsel - Assistant Secretary  
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                Executive

              
	 
      	 
      	 
      	
                By:

              	/s/
      Luke
      A. Pomilio
	
                Witness:

              	/s/ Daniel S.
      Jonas	 
      	
                Name:

              	
                
                  Luke
      A. Pomilio

                

              
	 
      	 
      	 
      	
                Title:

              	
                
                  V.P.
      – Corporate Controller

                

              

      

      

      

      

      

    

    

    

    
      
         

      

      
        E-69

        
          

        

      

      
         

      

    

    

    

    Executive

    Change in
Control Severance Agreement

    Exhibit
A

    

    

    
      	
               
      

            	
              1.

            	
              AICPA
      dues, NYSSCPA dues and professional
fees

            

    

    
      	
               
      

            	
              2.

            	
              Car
      Allowance

            

    

    
      	
               
      

            	
              3.

            	
              Airline
      Club Membership

            

    

    
      	
               
      

            	
              4.

            	
              Club
      Memberships

            

    

    
      	
               
      

            	
              5.

            	
              Cellular
      phone and internet on-line service
reimbursement

            

    

     

     

    E-70Exhibit 10.8

 

AMENDED AND RESTATED DISTRIBUTION SERVICE AGREEMENT

This Amended and Restated Distribution Service Agreement is entered into effective as of August 1, 2008 (the “Restated Effective Date”) between The Pantry, Inc., a Delaware corporation (“The Pantry”) and McLane Company, Inc., a Texas corporation (“McLane”). The Pantry and McLane have entered into that certain Distribution Service Agreement dated as of October 10, 1999. The Pantry and McLane now desire to amend and fully restate that agreement in its entirety as set forth herein, effective as of the date first set forth above.

ARTICLE 1

SCOPE OF AGREEMENT

1.1       Exclusive  Purchase and Supply. The Pantry Entities shall purchase from McLane, and McLane shall sell to The Pantry Entities and deliver to the Stores, all of the Stores’ requirements of products within the Contracted Categories during the term of this agreement. However, the preceding sentence will not prohibit or limit The Pantry from purchasing from sources other than McLane (i) any goods for which McLane is not an approved supplier, (ii) branded fast-food operations, (iii) traditional direct store delivery (DSD) products from DSD vendors, and (iv) all types of products being purchased from third parties other than full-line convenience wholesalers  (it being understood that McLane may at any time propose for additional business by mutual agreement between the parties on
terms competitive with such third parties’ prices and other terms). For purposes of this agreement:

	
             
 	
            (a)
 	
            “The Pantry Entities” means, collectively, The Pantry and all its Affiliates.
 

 (b)       “Affiliate” means, with respect to any entity, any other entity directly or indirectly controlling, controlled by, or under common control with that entity. Without limiting the generality of the preceding sentence, an entity will be deemed to control another if it owns or has the power to vote, directly or indirectly, more than 50 percent of the voting rights of that other entity.

(c)       “Store” means any convenience food store owned, operated or managed by any The Pantry Entity.

(d)       “Contracted Categories” means all categories of food products offered by McLane as of the Restated Effective Date and customarily supplied by convenience food wholesalers, as well as all categories of non-food general merchandise products (including cigarettes and tobacco products) as of the Restated Effective Date offered by McLane and customarily supplied by convenience food wholesalers. Contracted Categories include, but are not limited to, each of the product categories set forth on Exhibits A and B to this agreement.

1.2       Franchisees, Licensees and Other Third Party Stores. During the term of this agreement, The Pantry shall recommend McLane as the preferred supplier to any franchisees or licensees of The Pantry. However, nothing in this Section 1.2 is to be construed as a covenant by or obligation of The Pantry to require or otherwise cause any franchisee or licensee to purchase from McLane.

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

1.3       Other Business of McLane. Nothing in this agreement will prohibit McLane from supplying and delivering products or services to any other customer or person. Nothing in this agreement will require McLane to pass to The Pantry, as a reduction in product cost or otherwise, the benefit of any backhaul income it generates at its own expense using its own or another authorized carrier.

1.4       New Stores. If any The Pantry Entity builds, acquires or otherwise commences operating or managing any Store (including any chain of Stores) during the term of this agreement that is not subject to a then-existing service agreement, that Store will be, upon such commencement of its operation or management by an The Pantry Entity, included within the definition of Stores and subject to the terms and conditions of this agreement. If the Store or chain of Stores is subject to a then-existing service agreement, the Store will be subject to this agreement upon the expiration or termination of such other agreement. However, The Pantry may renegotiate with the incumbent supplier as that other service agreement expires, provided that The Pantry shall provide McLane the opportunity to match the terms offered
by such incumbent supplier for such acquired Stores. All Stores added to this agreement pursuant to this Section 1.4 will receive service allowances in accordance with Article 3 unless otherwise agreed between The Pantry and McLane. 

ARTICLE 2

PRODUCT MIX, ORDERING AND SUPPLY

2.1       Core Item Mix. The Pantry shall develop a product mix for the Stores using the then-currently existing items in each applicable McLane division’s inventory mix, including store use items, together with The Pantry’s proprietary and other specialty or exclusive items (such proprietary and specialty items, “Pantry Items”), which items McLane hereby agrees to carry, provided the manufacturers of all such items (i) enter into, and remain in substantial compliance with, McLane’s standard vendor agreement and any other standard terms imposed by McLane from time to time for the applicable category (including any distribution fees or minimum wholesale program terms), and (ii) satisfy, and remain in substantial compliance with, McLane’s credit requirements. 

2.2       Slow-Moving Items. The Pantry shall review the Stores’ product mix at least quarterly and shall replace each slow-moving item with an item reflecting greater unit sales within each applicable McLane division. A slow-moving item is any item which, with respect to the applicable McLane division, does not meet a minimum of [***] per week, with a [***] comprising the [***] of [***] in the [***]. If the slow-moving item is a Pantry Item, or if any Pantry Item is discontinued for any reason, The Pantry shall purchase from McLane all of McLane’s on-hand inventory of that Pantry Item within [***] days after the end of the month in which that item should be replaced at a price equal to the cost McLane paid for those items [***] any mutually agreed [***] and [***]. Furthermore, upon expiration or
termination of this agreement, The Pantry shall purchase from McLane all of McLane’s on-hand inventory of Pantry Items at a price determined in accordance with the preceding sentence.

	
             
 	
            2.3
 	
            Product Ordering and Delivery.
 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

(a)       Each Store shall order once per week from McLane, and McLane shall supply and deliver to that Store once per week. However, The Pantry may designate up to [***] of Stores to receive twice-weekly deliveries at no additional charge. The Pantry may request an additional number of Stores (but not to exceed [***] of all Stores) to receive twice-weekly deliveries, subject to payment of a delivery fee of [***] per week for each such Store above the [***] level and less than the [***] level. 

(b)       All Stores shall accept each delivery by McLane, and shall be available for those deliveries on a 24-hours-a-day, 7-days-a-week flexibility schedule, except where the Store’s hours of business or applicable local government ordinances restrict such unlimited availability, in which case The Pantry shall grant McLane the most flexible delivery window reasonably possible under the circumstances. McLane may park its delivery vehicles other either side of a Store in a manner to permit the trailer ramp to touch down on the Store’s sidewalk. McLane shall not block the Store’s entry or gas pumps at any time, nor shall McLane conduct its deliveries in a manner that unreasonably hinders customer parking at the Stores.

(c)       All transactions hereunder will be provided under McLane’s Self-Service Program, to which The Pantry transitioned (from Full-Service) as of May 30, 2008.

2.4       Service Level Commitments. Each four-week McLane accounting period (“Period”) during the term of this agreement, McLane shall measure its performance according to both of the criteria set forth in Sections 2.4(a), (b) and (c) below (the “Service Levels”). 

(a)       “Delivery Service Rate” means an amount, expressed as a percentage, calculated by dividing the total dollar value of all products delivered by McLane for the applicable Period by the total dollar value of all Products ordered by The Pantry for that Period. McLane shall maintain a Delivery Service Rate of at least [***] McLane shall include in this measurement any undelivered products resulting from manufacturer outs.

(b)       “Order Quality” means an amount, expressed as a percentage, calculated by dividing the total dollar value of all products invoiced by McLane for the applicable Period by the total dollar value of all Products ordered by The Pantry for that Period. McLane shall maintain a Delivery Service Rate of at least [***]. McLane shall include in this measurement any undelivered products resulting from manufacturer outs.

(c)        “On-Time Delivery Rate” means an amount, expressed as a percentage, calculated by dividing the number of deliveries made by McLane within the Accepted Delivery Window(s) by the total number of deliveries made by McLane. “Accepted Delivery Window” means the period of time commencing two hours before the applicable Appointment Time and ending two hours after the applicable Appointment Time, and “Appointment Time” means the time of day that McLane is scheduled to deliver product to the Store, as scheduled in advance by McLane. McLane shall maintain a total On-Time Delivery Rate of at least [***].

The parties shall conduct joint reviews every four weeks to analyze McLane’s Service Level performance. If McLane fails to meet one or more of the foregoing Service Levels set forth in subsections (a), (b) and (c) above in any period, The Pantry may notify McLane in writing setting forth the details of any such failure. If McLane fails to bring the required Service Level back into 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

compliance during the immediately succeeding eight-week period, The Pantry may require all deliveries to be made in delivery windows of [***], as of McLane’s next reroute date. In no event shall McLane be penalized or otherwise accountable for any non-performance due to force majeure, manufacturer outs or other production failures, Store mis-orders, or The Pantry new-item forecasting errors.

	
             
 	
            2.5
 	
            Account Management. [***].
 

2.6       Item Maintenance and Store Traits. The Pantry shall perform store- and item- maintenance, using either the Licensed Technology (as defined below) or an alternative technology that is compatible with the McLane system and which has been approved by McLane, whose approval will not be unreasonably withheld.  During the term of the Agreement, McLane shall make available to The Pantry at no charge from McLane the most current versions of the following software products (“Licensed Technology”): Quasar, M-Pulse and Document Direct software, or any other applications McLane may make available in the future.

2.7       Reclamation. Commencing September 1, 2008, The Pantry may return out-of-date non-tobacco merchandise purchased hereunder to McLane provided the Manufacturer participates in the McLane reclamation program and guarantees the return [***] to McLane. [***], with the [***], [***] and the [***]. As of the Restated Effective Date, such [***] imposed by the [***] and [***] under this Section 2.7 on [***]; McLane shall give The Pantry prior notice of any change in [***]. McLane shall assist The Pantry in training its Store managers, excluding Stores in Virginia, in the reclamation process and procedures.

2.8       Smart Handheld Devices. McLane shall make Smart Handheld units available to The Pantry under McLane’s Electronic Order System unit user agreements at a charge of [***] per Store per week for the [***]. The Pantry will be entitled to purchase an [***] license to use McLane’s premium-level software product for such devices, including the most current enhancements or replacements thereto, on an enterprise-wide (i.e., all Stores) basis for the duration of this agreement for an [***] license fee of $[***], [***] for the duration of this agreement ([***]).

ARTICLE 3

PRICING AND PAYMENT TERMS

3.1       Product Pricing. Unless a higher price is required by the Manufacturer under a written resale price maintenance policy (in which case that higher price will apply and McLane will provide The Pantry with as much prior written notice thereof as reasonably possible under the circumstances), the applicable price for Products will be determined in accordance with this Section 3.1.

(a)       Products Other than Cigarettes. The applicable price for any Product (as defined below) other than cigarettes, is the amount calculated in accordance with the following:  (i) Cost (as defined below), plus (ii) the percentage markup for the applicable UIN department or category as set forth on the billing plan attached as Exhibit A, minus (iii) the amount of any promotional deals and allowances granted by a Manufacturer (as defined below) specifically to 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

retailers for the time period provided by the Manufacturer, [***] by the Manufacturer and [***] by the Manufacturer. For purposes of this agreement:

(1)       “Cost” means List Price based on the buying bracket in which McLane normally buys that product for the McLane division or subsidiary servicing the applicable Store, plus (A) the gross amount of any Wholesale Taxes paid or payable by McLane, and (B) any applicable freight charges from the Manufacturer’s shipping point to the applicable McLane division or subsidiary (including unloading and sort-and-segregation charges).

(2)       “Product” means any product supplied under this agreement to any Store, whether or not such product is within the Contracted Categories.

(3)       “List Price” means, except as set forth in the following sentence, the higher of (A) the applicable Manufacturer’s then-current published or publicly-quoted delivered list price, or (B) if McLane purchases the Product from a source other than the Manufacturer, such seller’s then-current delivered list price, in either case at date of delivery of Products to that Store without regard to any cash discounts, volume discounts or rebates the Manufacturer or seller may provide to McLane.

(4)       “Manufacturer” means the person that manufactures or causes others to manufacture products that are marketed under brands or labels controlled by that person, or any Affiliate of that person.

(5)       “Wholesale Tax” means any tax, assessment, or charge imposed or collected at any time by any governmental entity or political subdivision thereof on a product or its sale or distribution, whether designated as a sales tax, excise tax, gross receipts tax, occupational or privilege tax, value-added tax, or similar imposition, but does not include any tax based on McLane’s personal property or net income.

(b)       Cigarettes. The price charged by McLane and to be paid by The Pantry for cigarettes shall be the [***] (as defined below); plus, any applicable [***] (as defined below); plus, all applicable [***] (including all [***] and any per-carton or per-pack [***] on cigarettes); plus any applicable [***] (as defined below). If applicable and to the extent allowed by law, McLane shall pay The Pantry the rebates (if any) set forth in Exhibit B. For purposes of this Agreement:

(1)       [***] means the applicable Manufacturer’s [***] to McLane at date of delivery of Products to the applicable Store, less all then-current and applicable [***] that are required by the Manufacturer to be passed to The Pantry.

(2)       [***] means the then-applicable per-carton [***] (if any) assessed by McLane which amounts, as of the Effective Date, are as set forth in Exhibit B to this agreement. However, in the event of any post-Effective Date increase or decrease in the [***] to McLane, or [***] to McLane (or both), from a cigarette Manufacturer related to the purchase of cigarettes from such Manufacturer by McLane, then McLane may [***], as applicable, the [***] on affected brands by an amount equal to the per-carton change in such Manufacturer’s terms.

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

(3)       [***] means, with respect to any jurisdiction having a minimum-price law applicable to cigarette wholesale transactions, an amount calculated by multiplying (A) the applicable product’s [***] (or similar defined term) as defined by such applicable law by (B) the statutory [***] prescribed by such applicable law. 

(c)       [***] shall provide [***] with [***] provided to [***] on [***] in [***] occurring during the term of this agreement.

(d)       McLane may impute cash discounts of up to two percent, or more if a higher discount is standard for that category of product, or any portion thereof that is not allowed by the Manufacturer to McLane, and to do so based upon Cost or Manufacturer’s List, as applicable.

3.2       Additional Fees. In addition to the item markups described in the first sentence of Section 3.1(a), the fees and charges described in Exhibit C will apply to the respective services, if applicable, utilized by The Pantry.

3.3       Tote and Canister Charges. McLane shall charge The Pantry $[***] for each net tote delivered to each Store (and credit The Pantry $[***] for each net tote picked up from each Store). McLane shall charge The Pantry $[***] for each net CO2 canister delivered to each Store (and credit The Pantry $[***] for each CO2 canister picked up from each Store). McLane shall charge or credit, as applicable, all balances on each invoice in accordance with McLane’s standard tote and canister exchange policies. The parties acknowledge and agree that, as of December 19, 2007, The [***] maintained [***], which amount [***] as of such date.

3.4       [***]. The parties acknowledge and agree that, as of December 19, 2007, [***] commenced [***] to the [***] hereunder. [***] has [***], and shall continue to [***], [***], once [***], as well as the [***] (as defined below), to [***] as a [***] through April 21, 2010. For purposes of this Section 3.4, [***] means the [***] and [***] to the applicable [***] set forth in [***] by the amount of [***] by [***] described in the [***] of this Section 3.4 Following April 21, 2010, [***] shall [***] to [***] an [***].

3.5       Payment Terms. For all Products purchased and services received by the Stores, The Pantry shall cause payment to be made by ACH Credit (or ACH Debit if approved by McLane) or wire transfer to McLane not later than 12:00 Noon, Central Time, [***] days from statement date. For purposes of this agreement, statement date is [***] for all Products delivered from the [***] through such [***]. Each payment shall be in the full amount of the statement to which they relate. Any amounts not paid when due will bear interest at the lesser of (a) 18 percent per annum, or (b) the maximum rate allowed by applicable law. McLane may offset any or all rebates or other amounts due The Pantry against any amounts due and owing McLane pursuant to this agreement, including any interest accrued thereon. 

ARTICLE 4

FINANCIAL CONSIDERATIONS

	
             
 	
            4.1
 	
            Service Allowances.
 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            (a)
 	
            [***].
 

 (1)       Within 10 days after the end of each McLane accounting quarter (“Quarter”) ending prior to [***], McLane shall pay The Pantry an amount of $[***] per Store for each of the 66 Stores acquired by The Pantry from Petro Express Inc. in 2007 (the “Petro Express Stores”), provided each such Store remains owned and operated by The Pantry as of such Quarterly payment date. The service allowance amounts described in Section 4.1(a)(2) shall not apply to such Stores.

(2)       As to all Stores other than (i) those described in Section 4.1(a)(i), and (ii) any Store for which a prepaid and unamortized balance existed as of the Restated Effective Date as set forth in Section 4.5, McLane shall pay The Pantry a [***] within 10 days after the beginning of [***] ending prior to [***] an amount of $[***] per Store, based on the number of Stores in operation and subject to this agreement as of the last day of the preceding [***]. 

(b)       On and After [***].  Within 10 days after the beginning of each [***] ending after on or after [***], McLane shall pay The Pantry an amount of $[***] per Store for each Store in operation and subject to this agreement as of the last day of the preceding [***].

(c)       Additional Quarterly Lump-Sum Amounts. In addition to the amounts set forth in Sections 4.1(a) or 4.1(b), as applicable, McLane shall pay The Pantry the Quarterly lump-sum service allowance amount set forth in the third column of the attached Exhibit D.

4.2       Renewal Incentive. In consideration for The Pantry’s renewal and extension of the term of this agreement as set forth in Section 6.1, McLane shall pay The Pantry the following amounts:

(a)       Within 10 days after the beginning of each Quarter, McLane shall pay The Pantry the applicable amount set forth in the fourth column on the attached Exhibit D; and

(b)       On or before [***] and each [***] thereof, McLane shall pay The Pantry a year-end allowance payment of $[***].

4.3       Marketing Allowance. McLane shall pay The Pantry a marketing allowance in the amount of $[***] per Store at the beginning of each McLane accounting quarter for each Store in operation as of such quarter commencement date.

4.4       Volume Incentive Rebate on Certain Purchases. The Pantry shall earn and McLane shall pay a volume incentive rebate of [***] of the Stores’ [***] (as defined below) during the term of this Agreement. For purposes of this Section, (i) [***] means the [***], by the Stores from McLane during the particular McLane accounting period of [***], and (ii) [***] means, for any particular item, [***] as set forth in Section 3.1(a) or 3.1(b), as applicable, [***]. McLane shall pay or credit all amounts payable under this Section within 10 days after the beginning of each McLane accounting period.

	
             
 	
            4.5
 	
            Unamortized Service Allowances.
 

 

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[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

(a)       The parties acknowledge and agree that, as of the Restated Effective Date, The Pantry has an unamortized service allowance (based on prior prepayments) of $[***], as follows:

	
            Original Payment Date
 	
            Original Prepayment Amount
 	
            Unamortized Balance at Restated Effective Date
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 

 

(b)       If The Pantry sells, closes or otherwise ceases to operate any Store as to which an amount paid and unamortized balance applies, [***] such unamortized amount [***] within 10 days after the end of the Quarter in which such sale, closure or cessation of operation occurs. [***] such amounts [***] any [***] until all such amounts [***]. Further, In the event of any termination of this agreement [***] under Section 6.2, [***] all of the then-remaining unamortized portions of all service allowances provided under this Article 4.

4.6       Favored Customer. McLane warrants that the net price of Products based on a market-basket approach, inclusive of all allowances, discounts, and rebates, paid by The Pantry for Products purchased and delivered under this agreement will be at least equal to the net prices paid by any other customer of McLane in the same geographic location and in the same class of trade and similar volumes.

ARTICLE 5

RENEGOTIATION

Either party may send a notice requesting renegotiation of this agreement (a “Renegotiation Notice”) in the event of a change in circumstances that affect product or delivery cost, or if 

 

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[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

McLane’s Products and services or prices to The Pantry are not competitive based on a total market-basket approach with respect to the Products and services to be provided by McLane to The Pantry pursuant to this agreement. In addition, any comparison of prices and services shall only be with a full-line distributor competitor of McLane. This agreement will continue unchanged until the parties agree on any change(s) to be made, unless terminated pursuant to the following terms and provisions of this Article 5. If the parties do not agree to any change(s) within 60 days after a Renegotiation Notice is sent, the party sending the Renegotiation Notice shall have the right to terminate this agreement by sending a notice of termination to the other party within 3 days after the expiration of such 60 day renegotiation period, and in such event the termination will become effective 60 days after the date of the
other party’s receipt of the notice of termination. Neither party may send more than one Renegotiation Notice within any calendar year. Upon any termination of this agreement pursuant to this Article 5, The Pantry shall pay to McLane [***] of the unamortized portion of the service allowance(s) on the effective date of termination.

ARTICLE 6

TERM AND TERMINATION

6.1       Term.  Unless earlier terminated in accordance with this Article 6, the term of this agreement will continue until December 31, 2014.

6.2       Termination by McLane Due to Payment Default. If The Pantry fails to make payments for any Products or services purchased by the Stores from McLane at the time payment is required to be made by this agreement (“Payment Default”), McLane may immediately suspend performance of its obligations under this agreement until the time the Payment Default is cured. If a Payment Default is not cured within 48 hours after The Pantry receives notice of the default from McLane, then McLane may terminate this agreement at any time while the Payment Default continues. However, nothing in this agreement will constitute a waiver of McLane’s remedies under applicable law.

6.3       Termination by The Pantry. The Pantry may terminate this agreement (a) immediately upon written notice if McLane defaults in the payment of any undisputed amounts owed to The Pantry under this agreement, which default has remained uncured for five days following McLane’s receipt of written notice of such default from The Pantry; (b) upon 60 days written notice if McLane breaches Section 2.4; or (c) [***]. If The Pantry terminates this agreement under this Section, then no fee or other amount will be due and payable by The Pantry to McLane in connection with such termination. [***]

	
             
 	
            6.4
 	
            Termination Remedies to Both Parties.
 

 (a)       Either party may immediately terminate this agreement or suspend its performance under this agreement at that party’s sole discretion without notice upon: (1) the institution of insolvency, bankruptcy or similar proceedings by or against the other party; (2) any assignment or attempted assignment for the benefit of creditors by the other party; (3) any appointment, or application for that appointment, of a receiver for the other party; (4) the other party becoming insolvent or unable to pay its debts as they come due; (5) an involuntary lien being filed or levied against, or foreclosure or seizure of materially all or a significant portion of, 

 

-9-

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

the other party’s assets, including inventory, by a creditor, lienholder, lessor, governmental authority or other person, which has not been removed within 10 days; (6) the other party’s material falsification of any records or reports required hereunder. 

(b)       Either party may terminate this agreement immediately upon written notice if the other party breaches, or fails to comply with, any material term of this agreement and that breach or failure has continued for 60 days after that party received written notice of that breach or failure from the other party. This Section 6.2(b) does not apply to a Payment Default. 

6.5       Effect of Termination. Any termination made in accordance with this agreement will have no effect on, nor diminish, alter, or affect (a) any rights or obligations of the parties that accrued or arose on or before the date of such termination, (b) any indemnification or confidentiality obligations under this agreement occurring before such termination, or (c) any provisions which by their express terms contemplate performance upon or following such termination.

ARTICLE 7

MISCELLANEOUS

7.1       Termination of Prior Agreement. This agreement succeeds, replaces and supersedes the Distribution Service Agreement between the parties dated October 10, 1999, including all amendments thereto.

7.2       Reporting. Upon request, The Pantry shall furnish McLane with The Pantry’s then-most recent quarterly financial statements prepared in accordance with generally accepted accounting principles, and any other financial information as McLane deems necessary. Additionally, within 120 days after the end of The Pantry’s fiscal accounting year, The Pantry shall provide McLane with its annual audited financial statements. Those financial statements will be furnished to: Credit Department, McLane Company, Inc., P.O. Box 6115, Temple, Texas 76503-6115. 

7.3       Entitlement to Financial Benefits. The Pantry shall not be entitled to any allowance, rebate, discount, incentive, price protection or other payment or financial benefit under this agreement (including any such financial benefits set forth in Article 4 or Exhibit B) (collectively, “Financial Benefits”) and McLane shall not be obligated to pay any such Financial Benefit to The Pantry unless, as of the date the Financial Benefit otherwise would accrue or be payable: (a) The Pantry is in compliance with all terms and conditions of this agreement (including the payment terms set forth in Article 3), (b) The Pantry is in compliance with all written terms and conditions required by applicable Manufacturers (including any requirements to supply data to Management Science Associates, Inc. or
other designee of one or more cigarette Manufacturers), and (c) all Product purchases to which the Financial Benefit relates have been indefeasibly paid for in full by The Pantry to McLane.

7.4       Critical Vendor. The Pantry shall take all steps necessary or required (including, without limitation, including McLane in first-day notices and motions) to have McLane designated as a “critical vendor” entitled to payment in full for all prepetition deliveries of Products in any bankruptcy proceedings in which any The Pantry Entity is the debtor. McLane shall have no liability 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

or obligation to deliver Products to The Pantry until The Pantry has complied in full with all terms and conditions of this Section and such designation has been confirmed.

7.5       Notices. Any notice, request, consent, waiver or other communication required or permitted hereunder will be effective only if it is in writing and delivered personally or sent by facsimile transmission, a nationally recognized overnight delivery service, or registered or certified mail, postage prepaid, to the other party at the address set forth on the signature block below (or to any other address as the parties will provide to the other in writing). All such notices, requests, consents, waivers or other communications will be deemed to have been given and received on the date of delivery if sent by personal delivery, facsimile transmission, or overnight delivery; or on the third business day after mailing it in accordance with this Section.

7.6       Confidentiality. Each party shall maintain in strict confidence all information communicated to that party by the other or any Affiliate, will use it only for purposes of this agreement, and will not disclose it, or any of the provisions of this agreement, without the prior written consent of the other party, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of the recipient party. However, in accordance with the preceding sentence The Pantry hereby authorizes McLane to submit store- and item-level product purchase data to the product Manufacturers, including disclosure to Manufacturers of cigarette Products (including such Manufacturers’ agents or representatives) the volume of purchases of such Manufacturer’s cigarette
Products by The Pantry from McLane hereunder, and all other information related thereto as McLane desires to disclose. Each party shall be responsible for ensuring its Affiliates’ compliance with the provisions of this Section.  This Section will survive any expiration or termination of this agreement. Neither party shall issue or make, or cause or permit to be issued or made, any media release or announcement concerning this agreement or the transactions contemplated by this agreement without the prior approval of the other party, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of that party.

7.7       Audits. During normal business hours and upon at least 14 days’ notice, The Pantry’s authorized representative may examine only those records applicable to The Pantry’s account in order to verify Cost and the cost-plus charges described in Section 3.1. If such examination discloses an overstatement of Cost or the cost-plus charges, McLane shall reimburse The Pantry for the overcharge. If such examination discloses an understatement of Cost or the cost-plus charges, The Pantry shall reimburse McLane for the undercharge. If the examination discloses a pattern of overcharge, then The Pantry may terminate this agreement upon written notice within 60 days of the conclusion of the audit. For purposes of this Section, a pattern of overcharge means conclusive proof that during any period of 12
consecutive months, the overcharges exceed the undercharges by more than 5% of the total amount of The Pantry’s purchases from McLane during that period.

7.8       Authority to Bind. Each person executing this agreement represents that he or she has full and legal authority to execute this agreement for and on behalf of the respective party for which he or she is executing this agreement and to bind that party.

7.9       Waiver. No waiver of any provision of this agreement will be effective unless in writing and signed by an authorized representative of the party or parties bound thereby. The 

 

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[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

failure of either party to enforce any provision of this agreement or exercise any right granted hereby is not to be construed to be a waiver of that provision or right, nor to affect the validity of this agreement or any part of it, nor to limit in any way the right of either party subsequently to enforce any provision or exercise any right in accordance with its terms.

7.10    Assignment. This agreement will be binding upon, and inure to the benefit of, the parties and their respective successors and permitted assigns, but neither party may assign this agreement unless the other consents in writing. McLane may delegate performance of any of its obligations hereunder to one or more wholly-owned subsidiaries.

7.11     Manufacturers’ Warranties. McLane shall pass to The Pantry any warranties, indemnifications or other protections made available by the applicable Manufacturer or vendor to the full extent McLane is authorized to pass those benefits. In the event of any claims arising out of or related to any Product, The Pantry shall look solely to the Manufacturer or vendor of such Product for defense, indemnification or other applicable relief, and not to McLane. EXCEPT AS OTHERWISE PROVIDED UNDER THIS SECTION, ALL PRODUCTS SOLD OR OTHERWISE DISTRIBUTED UNDER THIS AGREEMENT ARE SOLD BY MCLANE "AS IS" AND WITHOUT ANY WARRANTIES BY MCLANE OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

7.12     LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR (A) ANY ACTS OR OMISSIONS OF THE PANTRY, OR (B) ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES, (INCLUDING ANY DAMAGES MEASURED BY, OR PREMISED ON, LOST PROFITS, REVENUES, SAVINGS OR LOST BUSINESS OPPORTUNITY, LOSS OF USE OF ANY PRODUCT, EQUIPMENT OR OTHER PROPERTY OR ASSET, COST OF CAPITAL, COST OF ANY SUBSTITUTED EQUIPMENT, PRODUCT OR SERVICE, DOWNTIME, INJURY TO PROPERTY, REPUTATION OR RELATIONSHIPS WITH EXISTING OR PROSPECTIVE CLIENTS), EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES, AND WHETHER BASED UPON CONTRACT, NEGLIGENCE, STRICT TORT, STATUTE, OR ANY OTHER LEGAL THEORY. 

7.13    Force Majeure. Neither party will be liable to the other for any failure or delay in performance of its obligations under this agreement (other than obligations to pay money when due) because of circumstances beyond its control, including acts of God, flood, fire, riot, accident, strikes, or work stoppages for any reason, embargo, inability to obtain phone lines, government action (including enactment of any statute, regulation, rule, ordinance or other law of the United States or any state or local government or any subdivision or agency thereof (“Law”)  that restricts or prohibits the performance contemplated by this agreement) and other causes beyond its control, whether or not of the same class or kind as specifically named above. If either party is unable to perform any obligation (other than an
obligation by The Pantry to pay amounts under Section 3.2 when due) for any of these reasons, and that party gives a written notice, within 5 business days after the occurrence of the event, describing (i) its inability to so perform, (ii) the steps it plans to take to rectify or mitigate that inability, and (iii) the anticipated length of that inability, then the obligations of that party will be suspended for the duration, and only to the extent of, that event. Without limiting the foregoing, if for any reason 

 

-12-

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

McLane is unable to supply the total demand for a product, it may allocate its available supply among itself and its customers as McLane determines to be fair and practical, without liability for any failure of performance that may result.

7.14    Indemnification. McLane shall indemnify, defend (with counsel reasonably acceptable to The Pantry), and protect The Pantry and its subsidiaries, officers, directors, employees and agents, and hold them harmless from any and all claims, penalties, demands, suits, causes of action, loss, damages, expenses, and liabilities (including, without limitation, court costs and reasonable attorneys’ fees actually incurred at customary hourly rates) to the extent arising out of or related to the negligence, gross negligence or intentional misconduct of McLane or its employees, agents, representatives, and contractors in McLane’s performance under this agreement from and after the Restated Effective Date. The provisions of this section shall survive the expiration or sooner termination of this agreement with respect to
any claims or liability occurring prior to such expiration or termination, and shall not be limited by reason of any insurance carried by McLane and The Pantry. If The Pantry determines that it is entitled to indemnification under this section, The Pantry shall notify McLane promptly and in writing of the claim brought against The Pantry, but in no event more than 30 days after The Pantry has received notice of such claim absent any unforeseen delay. The selection of counsel, the conduct of the defense of any lawsuit, arbitration, or other proceeding, and any settlement shall be within the McLane’s control, provided that The Pantry shall have the right to participate in the defense of such claim using counsel of its choice, at its expense. McLane shall not enter into any settlement that would impose any costs or expense upon The Pantry without The Pantry’s prior express written consent.

	
             
 	
            7.15
 	
            Insurance.
 

 (a)       McLane shall procure and maintain continuously from and after the Restated Effective Date through the remainder of the term of this agreement (including any extension hereof), at its sole cost and expense, the following types of liability coverage: (i) commercial general liability insurance, insuring against liability for accidents or other events which could give rise to expenses or claims against The Pantry, with limits of coverage not less than $1,000,000 combined single limit for third-party property damage loss and bodily injury to any person (including injuries resulting in death) arising from any one occurrence, and $2,000,000 general aggregate; (ii)  Umbrella Liability with limits of $4,000,000 per Occurrence/General Aggregate/Products-Completed Operations Aggregate including additional insured and waiver of subrogation wording
following the General Liability policy.  The General Liability and Umbrella limits may be structured differently as long as there is a total per Occurrence limit of $5,000,000; and (iii) auto liability insurance, insuring against liability for accidents or other events which could give rise to expenses or claims against Company, with limits of coverage not less than $1,000,000 combined single limit for property damage loss and bodily injury to any person (including injuries resulting in death) arising from any one occurrence (the “Auto Policy”).  

(b)       McLane shall also procure and maintain continuously during the Term of this Agreement or any extension hereof, at its sole cost and expense, the minimum amount, as required by the applicable governmental statutes and regulations, of Worker’s Compensation and employer’s liability with $1,000,000 coverage insurance covering all employees and all 

 

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_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

contracted employees of Vendor for any claims arising under any applicable Worker’s Compensation and Occupational Disease Acts (the “Worker’s Compensation Policy”).  

(c)       The policies of insurance McLane is required to obtain and maintain hereunder may contain deductibles, shall name The Pantry as an additional insured and, at The Pantry’s request, a certificate of the evidence of such insurance shall be delivered to The Pantry.  Such policy shall be obtained from insurance companies with an A.M. Best Rating of "A-" or better and shall be in such form as shall be reasonably satisfactory to The Pantry with provisions for at least ten (10) days notice to The Pantry of cancellation.  Before the expiration of any such policy, McLane shall supply The Pantry with a substitute therefor or with evidence of payment of premiums therefor.  

7.16    Governing Law. The laws of the state of North Carolina, other than its choice-of-law rules, govern this agreement and all transactions under it.

7.17     Rules of Construction. In the interpretation of this agreement, unless the context otherwise expressly requires: (a) The term “including” means “including, without limitation”; (b) The term “person” means any individual, corporation, business enterprise or other legal entity, public or private, and any legal successor, representative, agent or agency of that individual, corporation, business enterprise, or legal entity; (c) Any reference to any Law includes all statutory and administrative provisions consolidating, amending or replacing such Law, and includes all rules and regulations promulgated thereunder; and (d) Any reference to a Section or Exhibit is to the Section or Exhibit of this agreement.

7.18     Illegality; Severability. If a court of competent jurisdiction declares any provision of this agreement to violate any applicable Law, then the parties shall negotiate in good faith to modify that provision to the extent necessary to make it legal and enforceable and to achieve a similar economic effect. If the parties cannot agree on such a modification, the provision will be deemed stricken with respect to the jurisdiction in question, and the remainder of this agreement will remain in full force and effect.

7.19     Counterparts. This agreement may be signed in two or more counterparts, each of which is to be deemed an original but all of which together are to be considered one and the same agreement. All parties need not sign the same counterpart. This agreement will become effective when counterparts have been signed by each party and delivered to the other party, including by facsimile.

7.20     Entire Agreement; Modifications. This agreement constitutes the entire agreement of the parties with regard to its subject matter and supersedes all previous written or oral agreements and understandings between the parties with regard to that subject matter. No modification of or amendment to this agreement will be effective unless made in writing and signed by both parties.

 

-14-

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

The parties are signing this agreement on the dates reflected below, although the agreement will be effective as of the date stated in the introductory clause. 

	
            THE PANTRY, INC.

 

 

BY:                  /s/   Peter J. Sodini   

PRINTED NAME:  Peter J. Sodini  

TITLE:            Chairman and CEO

DATE:                                08/4/08

 

 

 

Send Notices to:

 

The Pantry, Inc.

1801 Douglas Drive

Sanford, North Carolina 27330

Fax: 919-774-3329

 
 	
            McLANE COMPANY, INC.

 

 

BY:                 /s/   Mike Youngblood

PRINTED NAME: Mike Youngblood  

TITLE:                               President

DATE:                                  08/4/08

 

 

 

Send Notices to:

 

President

McLane Grocery Distribution

P.O. Box 6115

Temple, Texas 76503-6115

Fax:  254-771-7509

With a copy to:

 

General Counsel

McLane Company, Inc. 

4747 McLane Parkway

Temple, Texas 76504

Fax:  254-771-7515
 

 

 

 

-15-

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

 

 

	
            EXHIBIT A
 
	
            UIN DEPARTMENT MARKUP SCHEDULE
 

 

 

 

	
            Grocery
 	
            Default
 	
            [***]
 	
             
 	
            21652
 	
            Ice Cream Take Home
 	
            [***]
 	
             
 
	
            20601
 	
            Grocery
 	
            [***]
 	
             
 	
            21653
 	
            Frozen Novelties Retail
 	
            [***]
 	
             
 
	
            20602
 	
            Soft/Sports Drinks
 	
            [***]
 	
             
 	
            21757
 	
            Refrigerated
 	
            [***]
 	
             
 
	
            20603
 	
            Fountain Syrups Figal/BIB
 	
            [***]
 	
             
 	
            21758
 	
            Refrigerated Juice/Shakes
 	
            [***]
 	
             
 
	
            20604
 	
            Juices
 	
            [***]
 	
             
 	
            21759
 	
            Cheese Packaged
 	
            [***]
 	
             
 
	
            20605
 	
            Drink Powder/Liq Fountain
 	
            [***]
 	
             
 	
            21760
 	
            Bakery Cooler
 	
            [***]
 	
             
 
	
            20606
 	
            Cookies/Crackers
 	
            [***]
 	
             
 	
            21761
 	
            Eggs
 	
            [***]
 	
             
 
	
            20608
 	
            Nuts/Snacks
 	
            [***]
 	
             
 	
            21762
 	
            Produce
 	
            [***]
 	
             
 
	
            20610
 	
            Automotive/Motor Oil
 	
            [***]
 	
             
 	
            21865
 	
            Frozen Beef
 	
            [***]
 	
             
 
	
            20611
 	
            Nacho Chips
 	
            [***]
 	
             
 	
            21866
 	
            Processed Meats 
 	
            [***]
 	
             
 
	
            20612
 	
            Coffee Vend
 	
            [***]
 	
             
 	
            21867
 	
            Wafer Meats
 	
            [***]
 	
             
 
	
            20614
 	
            Bulk Popcorn/Supplies
 	
            [***]
 	
             
 	
            21869
 	
            Fresh Poultry
 	
            [***]
 	
             
 
	
            20618
 	
            Grocery (Normal GMP)
 	
            [***]
 	
             
 	
            21871
 	
            Deli Meat/Bulk/Ppk/Cooler
 	
            [***]
 	
             
 
	
            20620
 	
            Disposable Lighters
 	
            [***]
 	
             
 	
            21872
 	
            Deli Cheese Bulk/P. Pack
 	
            [***]
 	
             
 
	
            20721
 	
            Cups & Lids
 	
            [***]
 	
             
 	
            21873
 	
            Deli Salads Bulk/P. Pack
 	
            [***]
 	
             
 
	
            20722
 	
            Store Supplies/Racks
 	
            [***]
 	
             
 	
            21874
 	
            Frozen Potatoes
 	
            [***]
 	
             
 
	
            20723
 	
            Bags/Paper/Plastic
 	
            [***]
 	
             
 	
            21875
 	
            Frozen Poultry
 	
            [***]
 	
             
 
	
            20925
 	
            Candy/Full Case, Vend
 	
            [***]
 	
             
 	
            21876
 	
            Frozen  Pork
 	
            [***]
 	
             
 
	
            20926
 	
            Candy/Bag
 	
            [***]
 	
             
 	
            21877
 	
            Fresh Salads
 	
            [***]
 	
             
 
	
            21030
 	
            Candy/Count Good
 	
            [***]
 	
             
 	
            21879
 	
            Fresh Bulk Fruits
 	
            [***]
 	
             
 
	
            21235
 	
            Tobacco Smokeless
 	
            [***]
 	
             
 	
            21880
 	
            Produce Prepackaged
 	
            [***]
 	
             
 
	
            21338
 	
            Tobacco Chewing/Smoking
 	
            [***]
 	
             
 	
            21881
 	
            Frozen Seafood
 	
            [***]
 	
             
 
	
            21339
 	
            Cigarette Papers/Smoking Accss
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            21442
 	
            Tobacco Cigars
 	
            [***]
 	
             
 	
             
 	
            Catchweight
 	
            [***]
 	
             
 
	
            21545
 	
            Frozen Food Retail
 	
            [***]
 	
             
 	
             
 	
            Single-Sell
 	
            [***]
 	
             
 
	
            21546
 	
            Frozen Food Bulk/P. Pack
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            21547
 	
            Deli Meat/Bulk/PPK Frozen
 	
            [***]
 	
             
 	
            G. M. P. 
 	
            Default
 	
            [***]
 	
             
 
	
            21548
 	
            Bakery Frozen
 	
            [***]
 	
             
 	
            32002
 	
            Health Care
 	
            [***]
 	
             
 
	
            21649
 	
            Frozen F. Fd Misc/Desserts
 	
            [***]
 	
             
 	
            32003
 	
            Beauty Care
 	
            [***]
 	
             
 
	
            21650
 	
            Frozen Sandwiches
 	
            [***]
 	
             
 	
            32104
 	
            Hair Accessories
 	
            [***]
 	
             
 
	
            21651
 	
            Frozen F. Fd Pizza/Burrito
 	
            [***]
 	
             
 	
            32105
 	
            Toys/Games/Novelties
 	
            [***]
 	
             
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            A-1
 

 

 

	
            EXHIBIT A
 
	
            UIN DEPARTMENT MARKUP SCHEDULE
 

 

 

 

	
            32106
 	
            School/Office Products
 	
            [***]
 	
             
 	
            32138
 	
            Disposable Lighters
 	
            [***]
 	
             
 
	
            32108
 	
            School Paper/All Types
 	
            [***]
 	
             
 	
            32140
 	
            Logo Lighters
 	
            [***]
 	
             
 
	
            32110
 	
            Caps/Hats
 	
            [***]
 	
             
 	
            32142
 	
            Ice Chests
 	
            [***]
 	
             
 
	
            32112
 	
            Gloves
 	
            [***]
 	
             
 	
            32144
 	
            Store Supplies
 	
            [***]
 	
             
 
	
            32114
 	
            Soft Goods
 	
            [***]
 	
             
 	
            32146
 	
            Candy Gmp
 	
            [***]
 	
             
 
	
            32115
 	
            Baby
 	
            [***]
 	
             
 	
            32148
 	
            Meat Snacks
 	
            [***]
 	
             
 
	
            32116
 	
            Hosiery
 	
            [***]
 	
             
 	
            32149
 	
            Nuts/Snacks
 	
            [***]
 	
             
 
	
            32117
 	
            Shoe Care
 	
            [***]
 	
             
 	
            32150
 	
            Tobacco Smokeless
 	
            [***]
 	
             
 
	
            32118
 	
            Sunglasses
 	
            [***]
 	
             
 	
            32151
 	
            Tobacco Chewing/Smoking
 	
            [***]
 	
             
 
	
            32120
 	
            Misc General Merchandise
 	
            [***]
 	
             
 	
            32152
 	
            Cigarette Papers/Smoking Accss
 	
            [***]
 	
             
 
	
            32122
 	
            Pet Supplies
 	
            [***]
 	
             
 	
            32153
 	
            Tobacco Cigars
 	
            [***]
 	
             
 
	
            32123
 	
            Auto Accessories
 	
            [***]
 	
             
 	
            32154
 	
            Gmp/Gro Product Misc
 	
            [***]
 	
             
 
	
            32124
 	
            Household
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            32125
 	
            Sewing
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            32126
 	
            Hardware
 	
            [***]
 	
             
 	
            Exceptions
 	
             
 	
             
 
	
            32127
 	
            Electrical
 	
            [***]
 	
             
 	
             
 	
            Chips
 	
            [***]
 	
             
 
	
            32128
 	
            Light Bulbs
 	
            [***]
 	
             
 	
             
 	
            Gatorade
 	
            [***]
 	
             
 
	
            32130
 	
            Film/Tapes/Cd’s/Computer
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            32134
 	
            Batteries
 	
            [***]
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

 

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            A-2
 

 

 

EXHIBIT B

CIGARETTE PRICES

 

MARKUPS

For purposes of Section 3.1(b), the applicable per-carton [***] as of the Restated Effective Date are:

	
            Manufacturer 
 	
            Brand
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 
	
            [***]
 	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 
	
            [***]
 	
            [***] and any other similarly priced brands (including certain [***])
 	
            [***]
 
	
            Other [***] brands
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            All other [***] brands
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 
	
            [***]
 	
            All brands
 	
            [***]
 

 

REBATES

1.         Standard Rebate Schedule. McLane shall pay the following per-carton rebates within [***] business days after the end of each Period.

	
            STATE
 	
            BRANDED
 	
            GENERIC
 	
            VALUE
 	
            [***]
 
	
            [***]
 	
            All Other
 
	
            Alabama
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            Florida
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            Georgia
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            Indiana
 	
            [***]
 
	
            Kentucky
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            North Carolina
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            South Carolina
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 
	
            Tennessee
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            B-1
 

 

 

 

	
            Virginia
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 	
            [***]
 

 

	
             
 	
            n.1
 	
            [***] will be [***] on cigarette purchases in those states [***] in effect.
 

2.         Volume-Driven Adjustments to Rebates in Certain Jurisdictions. Within 10 business days after the end of each Quarter, McLane will calculate the average number of net cigarette cartons purchased per Store, per week in states that [***] (the “Quarterly Average CPSW”).

	
            Quarterly Average CPSW
 	
            Rebate Adjustment
 
	
            [***]
 	
            Reduction of [***] per carton, plus an additional reduction of [***] for each [***]carton increment below [***]
 
	
            [***]
 	
            Reduction of [***] per carton
 
	
            [***]
 	
            Reduction of [***] per carton
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            Increase of [***] per carton
 
	
            [***]
 	
            Increase of [***] per carton
 
	
            [***]
 	
            Increase of [***] per carton
 
	
            [***]
 	
            Increase of [***] per carton
 
	
            [***]
 	
            Increase of [***] per carton, plus an additional [***] for each [***]carton increment above [***]
 

 

3.         Rebates Applicable to Certain Stores. McLane shall pay to The Pantry a rebate of [***] per carton on all net purchases of cigarettes by the Petro Express Stores for retail sale in states that [***] in effect. No other per-carton rebates in this Exhibit B or otherwise will apply as to those Stores; however, the carton sales by the Petro Express Stores [***] of this Exhibit for purposes of determining the [***] to be [***]. 

	
             
 	
            4.
 	
            [***]
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            B-2
 

 

 

 

	
            1.    [***]

2.    [***]

3.    [***]

4.    [***]

5.    [***]

6.    [***]
 	
            7.    [***]

8.    [***]

9.    [***]

10.  [***]

11.  [***]
 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            B-3
 

 

 

 

 

EXHIBIT C

ADDITIONAL BILLING COMPONENTS

	
            Service Charge     
 	
            $[***] per Store/per week
 
	
            Selection Fee
 	
            $[***] per Shipping Unit
 
	
            Restocking Fee on Order Errors
 	
            [***]
 
	
            In-date cigarette returns
 	
            Subject to Manufacturer’s return policies, [***] per carton
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            C-1
 

 

 

 

 

Exhibit C-1

[***]

In order to account for changes in [***] during the term of this agreement, each delivery by McLane will be subject to a [***], if applicable, calculated in accordance with this Exhibit. 

	
            1.
 	
            Definitions.
 

 (a)        [***] means, with respect to [***], the amount calculated by averaging the [***] set forth in the [***] on each of the [***] immediately following the end of [***] during that accounting period.

(b)        [***] means the [***] published by [***] on the [***] or otherwise, or another comparable report if the [***] is no longer published.

2.         [***]. If the [***] is [***], then The Pantry shall [***], determined in accordance with the following table, to McLane on each delivery made to The Pantry by McLane during the [***] of time commencing on the [***] following the end of the applicable McLane accounting period and ending [***] thereafter.

	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 
	
            [***]
 	
            [***]
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            C-2
 

 

 

 

 

Exhibit D

Lump-Sum Quarterly Payment Schedule

 

	
            Year
 	
            McLane Accounting Quarter
 	
            Service Allowance Lump-Sum
 	
            Volume Incentive Rebate (Non-Cigarette) Lump-Sum 
 
	
            2008
 	
            3rd
 	
            [***]
 	
            [***]
 
	
            4th
 	
            [***]
 	
            [***]
 
	
            2009
 	
            1st
 	
            [***]
 	
            [***]
 
	
            2nd 
 	
            [***]
 	
            [***]
 
	
            3rd
 	
            [***]
 	
            [***]
 
	
            4th
 	
            [***]
 	
            [***]
 
	
            2010
 	
            1st
 	
            [***]
 	
            [***]
 
	
            2nd 
 	
            [***]
 	
            [***]
 
	
            3rd
 	
            [***]
 	
             
 
	
            4th 
 	
            [***]
 	
             
 
	
            2011
 	
            1st
 	
            [***]
 	
             
 
	
            2nd 
 	
            [***]
 	
             
 
	
            3rd
 	
            [***]
 	
             
 
	
            4th
 	
            [***]
 	
             
 
	
            2012
 	
            1st
 	
            [***]
 	
             
 
	
            2nd 
 	
            [***]
 	
             
 
	
            3rd
 	
            [***]
 	
             
 
	
            4th
 	
            [***]
 	
             
 
	
            2013
 	
            1st
 	
            [***]
 	
             
 
	
            2nd 
 	
            [***]
 	
             
 
	
            3rd
 	
            [***]
 	
             
 
	
            4th
 	
            [***]
 	
             
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            D-1
 

 

 

 

 

 

	
            2014
 	
            1st
 	
            [***]
 	
             
 
	
            2nd 
 	
            [***]
 	
             
 
	
            3rd
 	
            [***]
 	
             
 
	
            4th
 	
            [***]
 	
             
 

 

 

_____________________

[***]         Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

 

	
             
 	
            D-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}]]