EXHIBIT 10.28
SECOND AMENDMENT TO DISTRIBUTION SERVICE AGREEMENT
THIS SECOND AMENDMENT TO DISTRIBUTION SERVICE AGREEMENT (the "Amendment")
is made and entered into effective as of the 1st day of November, 1998, by and
between The Pantry, Inc., a Delaware corporation ("Pantry"), Lil' Champ Food
Stores, Inc., a Florida corporation ("Lil' Champ") (Pantry and Lil' Champ being
hereinafter sometimes referred to collectively as the "Company") and XxXxxx
Company, Inc., a Texas corporation ("McLane").
RECITALS
WHEREAS, the Company and McLane entered into a Distribution Service
Agreement effective as of March 29, 1998 (the "Service Agreement"); and
WHEREAS, the Company and McLane entered into a First Amendment to the
Service Agreement effective as of July 6, 1993 (the "First Amendment"); and
WHEREAS, the Company has acquired additional convenience food stores that
it desires to make subject to the Service Agreement, such additional stores
being more particularly described on Exhibit A attached hereto and incorporated
herein for all purposes (the "Additional Stores");
NOW, THEREFORE, for and in consideration of the promises, covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and McLane
do hereby agree as follows:
1. Additional Stores to be Subject to Service Agreement. The Company and
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McLane hereby agree that the Additional Stores shall, effective as of November
1, 1998, be subject to and governed by all terms and conditions of the Service
Agreement, except as specifically modified by this Amendment, and shall be
considered "stores" for all purposes of the Service Agreement.
2. Service Allowance. *****The Service Allowance for the Additional
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Stores shall be amortized over the remaining term of the Service Agreement using
the straight line method of amortization in accordance with generally accepted
accounting principles.
3. Sale or Closure of Additional Stores. In the event the Company should
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sell, close or otherwise cease operation of any of the Additional Stores, the
Company shall pay to McLane within ten (10) business days after such sale,
closure or cessation of operation, the remaining unamortized portion of the
Service Allowance attributable to such stores.
* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
4. Volume Incentive. *****
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5. Section 3.2 Note Applicable. Section 3.2 of the Service Agreement
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shall not be applicable to the Additional Stores.
6. No Other Modifications. Except as specifically modified by this
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Amendment, all terms and conditions of the Service Agreement shall be fully
applicable to the Additional Stores. No terms or conditions of this Amendment
have any applicability to any stores already subject to the Service Agreement
and all terms and conditions of the Service Agreement continue to remain in full
force and effect with respect to such stores.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.
LIL' CHAMP FOOD STORES, INC.
By: /s/ Xxxxxxx X. Xxxx
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Printed Name: Xxxxxxx X. Xxxx
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Title: Executive Vice President
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THE PANTRY, INC.
By: /s/ Xxxxxxx X. Xxxx
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Printed Name: Xxxxxxx X. Xxxx
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Title: Senior Vice President
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XxXXXX COMPANY, INC.
By: /s/ Xxxxxxx Xxxxx Xxxxxx
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Xxxxxxx Xxxxx Xxxxxx
President and CEO
* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
DISTRIBUTION SERVICE AGREEMENT
This Distribution Service Agreement (the "Agreement") is made and entered
into and is effective as of the 29th day of March 1998, by and between The
Pantry, Inc., a Delaware corporation ("Pantry") and Lil' Champ Food Stores Inc.,
a Florida corporation ("Lil' Champ") (Pantry and Lil' Champ are hereinafter
sometimes referred to collectively as the "Company") and XxXXXX COMPANY, INC., a
Texas corporation (hereinafter referred to as "McLane").
RECITALS
WHEREAS, Company is in the business of operating retail convenience food
stores; and
WHEREAS, McLane is in the business of wholesale distribution of food and
non-food/ general products throughout the United States of America;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
SCOPE OF AGREEMENT
1.1 Company Stores. For purposes of this Agreement, the term "stores"
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means the owned or managed convenience food stores of Company. Should Company
build new or otherwise acquire additional stores after the date of this
Agreement, such additional stores shall be included within the definition of
stores.
1.2 Franchisees and Licensees. During the term of this Agreement, Company
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agrees to recommend McLane as the supplier to any franchisees and licensees of
Company, if any.
1.3 Purchase of Products and Services. During the term of this Agreement
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and from the Service Commencement Date (as herein defined), Company will
purchase from McLane and XxXxxx will sell to Company, all of Company's
requirements of wholesale food and non-food/ general merchandise products
customarily supplied by convenience food wholesalers; provided, however, that
the foregoing shall have no effect upon products purchased by Company from other
vendors for whom McLane is not an approved supplier for existing and future
branded fast food operations; and further, provided, that Company may purchase
(i) traditional DSD products from DSD (direct store delivery) vendors, and (ii)
all types of products currently being purchased from other vendors other than
full-time convenience food wholesalers (it being understood that McLane may at
any time propose for additional business). Such products to be purchased from
McLane shall include those standard convenience food store items, including, but
not limited to, the following (the "Products"):
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(a) Groceries, including coffee, tea, cereal, canned meats,
condiments, juice, baby food, canned and dry goods and eggs;
(b) Deli foods, including meats and salads, breakfast foods, nachos
and bulk sausage, xxxxxx, cheese and fish;
(c) Frozen foods, such as fruits, vegetables and juices;
(d) Frozen fast foods, such as burritos, pizza, pizza pieces, frozen
sandwiches and salads;
(e) Candy, snacks and popcorn;
(f) Cigarettes and tobacco products;
(g) Cold packaged meats, lunch meats and cheeses;
(h) Shortening, breading and kitchen supplies;
(i) Private or controlled label soft drinks and beverages;
(j) Post mix products;
(k) Store supply items, i.e., bags, wraps, fast food supplies
(including napkins, individual condiments and cleaners);
(l) Cooler items, i.e., cheese, biscuits, dips, cultured products,
butter and margarine;
(m) Health and beauty aids, hosiery, and film and flash; and,
(n) General items, including motor oil, other automotive products,
housewares, hardware, electrical supplies, baby supplies, sunglasses, lighters.
toys and pet supplies.
McLane, by and through its divisions and/or subsidiaries, shall supply
and deliver those products described hereinabove which are ordered by Company on
a weekly basis according to those prices outlined in the Billing Plans attached
hereto as Exhibit "A" and made a part hereof. The foregoing described product
categories and pricing plan may be adjusted as market conditions change, and
significant changes in fuel prices may also involve additional charges, all in
accordance with Article V hereof.
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XxXxxx'x right to propose coverage of other vendor/supplier sources would
require a competitive offer with the terms offered by vendors.
1.4 Application of Agreement to Acquired Stores. This Agreement shall
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apply to any convenience store or group of convenience stores directly or
indirectly acquired by the Company subsequent to the date of this Agreement
which store(s) are not then covered by an existing supply agreement. Should
said acquired store(s) be covered by an existing supply agreement, this
Agreement shall apply upon the expiration of the then existing supply agreement.
The Company is permitted to renegotiate with an existing supplier as the
existing agreement expires and McLane has the option to match the terms offered
by existing supplier for such acquired stores.
The Company will be paid a service allowance for each acquired store or new
store pursuant to Section 3.2.
1.5 Cost. All merchandise (whether purchased by McLane directly from a
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manufacturer or from another source), other then cigarettes, shall be billed at
XxXxxx'x cost, plus applicable percentage markups for each UIN department as set
forth on the Billing Plan, plus any federal, state or local taxes where
prescribed by law (e.g. state tax on tobacco products). This total is then
reduced by promotional deals and allowances granted by manufacturers
specifically to retailers for the time period provided by the manufacturers
during their buy period. For purposes of this Agreement, XxXxxx'x cost shall
mean the manufacturer's current publicly quoted delivered cost based on the
buying bracket in which McLane normally buys that product for that particular
McLane division or subsidiary. Delivered cost includes freight expense from
manufacturers' shipping point to the appropriate McLane division or subsidiary
and provides sort and segregation of that product. Backhaul income generated by
McLane using its own or another authorized carrier, at XxXxxx'x expense, shall
be retained by McLane. This publicly quoted delivered cost will be without
regard to any cash discount or volume rebates allowed by the manufacturer to
McLane. XxXxxx reserves the right to impute cash discounts of up to two percent
(2%) or any portion thereof which is not allowed by the manufacturer to McLane
and to do so based upon the delivered cost. For purposes of this Agreement the
term "manufacturer" means the person or entity that manufactures or causes
others to manufacture goods or products which are marketed under brands or
labels controlled by such person or entity.
1.6 Favored Nations. McLane warrants that the net price of Products based
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on a market basket approach, inclusive of all allowances, discounts and rebates,
paid by Company for Products delivered hereunder will be at least equal to the
net price paid by any other customer of McLane based upon any other respective
customers of McLane in the same geographic location and in the same class of
trade and similar volume.
1.7 Obligations on Default/Termination. In the event this Agreement is
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terminated as a result of a breach of and/or default in the terms and/or
conditions of this Agreement by
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Company or for any other reason, then Company shall pay McLane all of the
remaining unamortized portion of the Service Allowance described in Section 3.1
herein.
ARTICLE II
SUPPLY SERVICES
2.1 Product Delivery. McLane, by and through its divisions and/or
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subsidiaries, shall supply and deliver those Products described hereinabove
which we ordered by Company on a weekly basis except as otherwise agreed to by
the parties. Deliveries will be scheduled on Sunday through Friday during the
hours of 6 a.m. and 9 p.m. for Lil Champ stores. Deliveries will be scheduled
on Sunday through Friday twenty-four (24) hours a day for Pantry stores. Stores
will not be required to accept delivery during hours when such stores are
closed, where city ordinance prohibits or when a delivery would create a major
business disruption. McLane delivery vehicles will be allowed to park on either
side of a Store permitting XxXxxx'x ramp to touch down on Store's sidewalk. At
no time will entry to Store or gas pumps be blocked by McLane delivery vehicles.
Deliveries should be conducted so as not to reasonably hinder parking at stores
but delivery vehicles shall be entitled to park so as to be able to lower the
walkboard onto the sidewalk in front of a store provided space is available when
the delivery vehicle arrives.
McLane will hold reviews every four (4) weeks with Company to analyze
XxXxxx'x order quality (i.e., over, short and damaged products) and on-time
deliveries. McLane agrees that it shall maintain a service level (i.e., the
ratio of products invoiced to products ordered) *****
2.2 *****
2.3 Other Customers of McLane. This Agreement shall in no way act to
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foreclose McLane from supplying and delivering products or services to any other
customers or entity.
2.4 *****
ARTICLE III
COMPENSATION
3.1 Service Allowance. *****
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3.2 Service Allowance Annual Adjustment. *****
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3.3 Volume Incentive. *****
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* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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3.4 Payment Terms for Products Purchased. *****
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3.5 Tote and Canister Charges. *****
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ARTICLE IV
TERM AND TERMINATION
4.1 Term. This Agreement commence and become effective on the date hereof
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and, unless earlier terminated in accordance with terms of this Agreement, will
continue thereafter for a period of five (5) years from the Service Commencement
Date. Upon termination of this Agreement, McLane and Company will each fulfill
their respective obligations hereunder with respect to all orders that have been
placed by Company and/or delivered by McLane prior to the effective date of such
termination.
4.2 Service Commencement Date. The "Service Commencement Date" means
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March 9, 1998, unless changed by mutual agreement of the parties.
4.3 Termination. In the event Company fails to make payments for any
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Products or services purchased from McLane at such time as payment is required
to be made by this Agreement ("Payment Default"), McLane will have the immediate
right to suspend performance of its obligations under this Agreement until such
time as the Payment Default is cured. In the event of a Payment Default, if
such default is not cured within twenty-four (24) hours after Company receives
notice of default from McLane, then this Agreement shall terminate and all
amounts outstanding to McLane, including, but not limited to, the remaining
unamortized portion of the Service Allowance, will be immediately due and
payable. However, nothing in this Agreement shall constitute a waiver of
XxXxxx'x remedies under applicable law.
Additionally, McLane may suspend performance of its obligations and/or
terminate this Agreement in the event of Insolvency of Pantry or Lil' Champ. In
the event of a termination, the Company shall immediately repay the unamortized
portion of the Service Allowance to McLane.
The Company may terminate this Agreement (i) immediately on written notice
to McLane following a default by McLane with respect to the payment of any
amounts owed to the Company under the terms of this Agreement, which default has
remained uncured for five (5) days after XxXxxx'x receipt of written notice of
such default from Company, (ii) ***** , (iii) immediately following the
insolvency of McLane, (iv) *****, (v) immediately, following the violation of
Section 6.4 by McLane or (vi) *****
* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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For purposes of this Agreement,
(A) "Insolvency" shall mean that, with respect to an entity, such
entity shall (i) make a general assignment for the benefit of creditors or an
agent authorized to liquidate its assets, (ii) become the subject of an "order
for relief" within the meaning of the United States Bankruptcy Code, and such
order is not stayed within sixty (60) days, (iii) file a petition in bankruptcy
or for reorganization, or effect a plan or other arrangement with creditors,
(iv) file an answer to a creditor's petition, admitting the material allegations
thereof, for involuntary bankruptcy or for reorganization or to effect a plan or
other arrangement with creditor, (v) apply to a court for the appointment of a
receiver or custodian for substantially all of its assets or properties, with or
without consent, and such receiver is not discharged with sixty (60) days after
appointment or (vi) adopt a plan of complete liquidation of its assets; and
(B) *****
4.4 Auditing. Company's authorized representative shall have the right
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during normal business hours upon minimum of fourteen (14) days notice to
examine only those records applicable to Company's specific account in order to
verify cost and the cost plus margin. If such examination discloses an
overstatement of cost or the cost plus margin price, McLane shall reimburse
Company for the overcharge. If such examination discloses an understatement of
cost or the cost plus margin price, Company shall reimburse McLane for the
undercharge. If a pattern of overcharge is established, Company has the right
to terminate this Agreement. In order for a "pattern of overcharge" to be
established, Company must conclusively establish that during any twelve (12)
consecutive month period, the overstatements must be in excess of the
understatements by more than five percent (5%) of the total amount of the
Company's purchases from McLane in such twelve (12) month period.
ARTICLE V
RENEGOTIATION
After the Service Commencement Date, either party hereto shall have the
right to send a notice requesting renegotiation of this Agreement (a
"Renegotiation Notice") in the event of a change in the present circumstances
which affect product or delivery cost or if XxXxxx'x Products and services or
prices to Company are not competitive based on a total market basket approach
with respect to the Products and services to be provided by McLane to Company
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
shall continue unchanged
* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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until the parties agree on any change(s) to be made, unless terminated pursuant
to the following terms and provisions of this Article. If the parties do not
agree to a change or changes within sixty (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 three (3) days after the expiration of such sixty (60) day renegotiation
period, and in such event the termination shall become effective sixty (60) days
after the date of the other party's receipt of the Notice of Termination.
Neither party shall have any right to send more than one Renegotiation Notice
within any calendar year. *****
ARTICLE VI
MISCELLANEOUS
6.1 Organization, Good Standing, Etc. Company hereby represents and
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warrants to McLane that it is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and has
all requisite power and authority, and all material licenses, permits and
certificates to own and operate its properties and assets and to carry on its
business. Company further represents and warrants and it is duly qualified to
do business and is in good standing as a foreign corporation in each other
jurisdiction in which the ownership or operation of its properties or assets or
the nature of its business requires such qualification.
6.2 Assignment. This Agreement shall be binding upon, and inure to the
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benefit of the parties hereto and their respective successors and permitted
assigns, but may not be assigned by any party hereto without the prior written
consent of the other party; provided, however, that McLane shall be entitled to
perform its duties and obligations hereunder using one or more of its
Subsidiaries or divisions.
6.3 Notices. Any notice, request, consent, waiver of other communication
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required or permitted hereunder shall be effective only if it is in writing and
delivered personally, by telecopy or by registered or certified mail, postage
prepaid, to the other party at the following address (or to such other address
as the parties shall provide to the other in writing):
If to Company:
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President Lil' Champ Food Stores, Inc.
X.X. Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
The Pantry, Inc.
0000 Xxxxxxx Xxxxx
* Selected portions have been deleted as confidential pursuant to Rule 406.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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Xxxxxxx, Xxxxx Xxxxxxxx 00000
ATTN: Xx. Xxxxxx X. Xxxxx, Xx.
Telecopier: (000) 000-0000
With a Copy to:
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Xxxxxxx Xxxxxx & Co. Incorporated
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
ATTN: Xx. Xxxxx X. Xxxxxx
If to McLane:
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President and CEO
XxXxxx Company, Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxx 00000-0000
With a Copy to:
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General Counsel
XxXxxx Company, Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any such notice, request, consent, waiver or other communication will be deemed
to have been given and received as of the date personally delivered or
telecopied, or three (3) business days after being mailed as aforesaid.
6.4 Confidentiality. McLane and Company each agree that all information
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communicated to it by the other, whether before or after the Service
Commencement Date, will be and was received in strict confidence, will be used
only for purposes of this Agreement and that no such information, including
without limitation the provisions of this Agreement, will be disclosed by the
recipient party, its agents or employees 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.
The provision of this paragraph will survive termination, for any reason, of
this Agreement. No party shall disclose the terms and conditions of this
Agreement to any third party.
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6.5 Reporting. Company shall furnish McLane its current financial
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statements prepared in accordance with generally accepted accounting principles
along with annual audited financial statements, 120 days from Company's fiscal
year end. Such financial statements shall be furnished annually and shall be
addressed to Credit Department, XxXxxx Company, Inc., X.X. Xxx 0000, Xxxxxx,
Xxxxx 00000-0000. The failure of Company to furnish such financial statements
shall be grounds for termination of this Agreement.
6.6 Publicity. Neither McLane nor Company will issue or make, or cause to
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have issued or made, any media release or public announcement concerning this
Agreement or the transactions contemplated hereby 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 such party.
6.7 Counterparts. This Agreement may be executed in one or more
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counterparts for the convenience of the parties hereto, all of which together
shall constitute one and the same instrument.
6.8 Severability. If any provision of this Agreement is declared or found
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to be illegal, unenforceable or void by a court of competent jurisdiction, then
both parties will be relieved of all obligations arising under such provision,
but only to the extent that such provision is illegal, unenforceable or void, it
being the intent and agreement of the parties that this Agreement will be deemed
amended by modifying such provision to the extent necessary to make it legal and
enforceable. If the remainder of this Agreement is not affected by such
declaration or finding, then each provision not so affected will be enforced to
the extent permitted by law.
6.9 Entire Agreement. Notwithstanding any provision or reference in this
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Agreement to the contrary, this Agreement contains the entire understanding of
the parties relating to the subject matter contained herein and supersedes all
prior agreements and understanding, written or oral, relating to the subject
matter hereof including, without limitation, that one certain Service Agreement
dated March 21, 1996, by and between Lil' Champ and McLane and that one certain
Service Agreement dated December 27, 1995, by and between Pantry and McLane.
This Agreement cannot be modified, amended of terminated except in writing
signed by the party against whom enforcement is sought. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, the waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party against whom an assertion of waiver is made.
6.10 Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of North Carolina.
6.11 Authority to Bind. Each person executing this Agreement warrants that
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he or she has full legal authority to execute this Agreement for and on behalf
of the respective corporations and to bind such corporations.
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6.12 Turn of the Century. Company and McLane represent and warrant that
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they will use all reasonable efforts to ensure software programs interface and
record, store, process, and present calendar dates correctly, including calendar
dates falling on or after January 1, 2000. A party shall not be liable to any
other party for any breach of this Agreement caused in whole or in part by such
other party's reasonable efforts not being successful.
6.13 Limitation of Liability. Notwithstanding any provision or reference
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in this Agreement to the contrary, in no event shall McLane be liable to Company
for any consequential, special, exemplary, incidental or punitive damages,
including lost profits or business opportunities, or, losses attributable to or
arising from overhead allocations or general and administrative costs and
expenses, or for the acts or omissions of Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date first written above.
LIL' CHAMP FOOD STORES, INC.
By: /s/ Xxxxx X. Xxxxxx
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Its:
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THE PANTRY, INC.
By: /s/ Xxxxx X. Xxxxxx
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Its: President and CEO
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XxXXXX COMPANY, INC.
By: /s/ Xxxxxxx Xxxxx Xxxxxx
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XXXXXXX XXXXX XXXXXX
PRESIDENT AND CEO
XxXXXX COMPANY, INC.
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