8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 11, 2005

THE PANTRY, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-25813	56-1574463
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

1801 Douglas Drive Sanford, North Carolina	27330-1410
(Address of principal executive officer)	(Zip Code)

(919) 774-6700

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On November 11, 2005, The Pantry, Inc. (the “Company”) entered into the Third Amendment to its Amended and Restated Credit Agreement, dated as of November 11, 2005 (the “Third Amendment”), by and among the Company, as borrower, R&H Maxxon, Inc., Kangaroo, Inc. and D. & D. Oil Co., Inc. (“D. & D.”), subsidiaries of the Company, as guarantors (collectively, the “Guarantors”), Wachovia Bank, National Association, as administrative agent (the “Administrative Agent”) and the lenders party thereto. The Third Amendment amends certain provisions of the Amended and Restated Credit Agreement, dated March 12, 2004, as amended, among the Company, the Guarantors, the Administrative Agent and the lenders party thereto (as so amended, the “Credit Agreement”).

The material terms of the Third Amendment include:

• An increase in the amount of unsecured subordinated indebtedness the Company may incur from $75 million to $250 million, subject to certain conditions;

• Permitting the Company to make certain restricted payments with proceeds of the issuance of permitted subordinated indebtedness or the issuance of permitted equity in replacement of other permitted subordinated indebtedness, so long as the Administrative Agent shall have approved the terms of such subordinated indebtedness or equity and the Company shall remain in compliance with the financial covenants under the Credit Agreement both before and after the making of the restricted payments;

• Permitting the Company to exclude as guarantors under the Credit Agreement any domestic subsidiaries with assets less than $100,000 and current annualized revenues less than $100,000; and

• Releasing D. & D. of its obligations as a guarantor under the Credit Agreement.

The foregoing description of the Third Amendment is qualified in its entirety by reference to the full terms and provisions of that agreement as set forth therein. The full text of the Third Amendment is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Item 2.02. Results of Operations and Financial Condition.

On November 14, 2005, the Company reported that based on preliminary, unaudited data, it expects EBITDA for the fiscal year ended September 29, 2005 to be in the range of $213.0 million to $214.5 million.

EBITDA is defined by the Company as net income before interest expense, loss on extinguishment of debt, income taxes, depreciation and amortization. EBITDA is not a measure of operating performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net income, cash flows from operating activities and other income or cash flow statement data. The Company is providing information concerning EBITDA as one measure of its cash flow and historical ability to service debt and because it believes investors find this information useful as it reflects the resources available for strategic opportunities including, among others, to invest in the business, make strategic acquisitions and to service debt. EBITDA as defined by the Company may not be comparable to similarly titled measures reported by other companies.

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The Pantry, Inc.

Reconciliation of Non-GAAP Measure

(In thousands)

	Fiscal Year, 2005 Preliminary Estimate
EBITDA	$	213,000		$	214,500
Interest Expense		(56,000	)		(56,000	)
Adjustments to reconcile EBITDA to net cash provided by operating activities (other than depreciation and amortization, and income taxes)		10,400			10,400
Changes in operating assets and liabilities, net		(18,300	)		(18,300	)
Net cash provided by operating activities	$	149,100		$	150,600

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in Item 2.02 of this report is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the information in Item 2.02 of this report shall not be deemed to be incorporated by reference into the Company’s filings under the Securities Act of 1933, as amended.

Item 8.01. Other Events.

On November 14, 2005, the Company announced its intention to offer, subject to market and other conditions, $130 million aggregate principal amount of senior subordinated convertible notes due 2012 in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. The Company’s press release dated November 14, 2005 is attached hereto as Exhibit 99.1 and incorporated herein by reference.

In addition, the Company is also pursuing a refinancing of its existing senior credit facility, subject to market and other conditions. The new senior credit facility is expected to provide for aggregate borrowings by the Company of up to $330.0 million and will consist of a six-year $125.0 million revolving credit facility and a six-year $205.0 million term loan. The Company believes that the refinanced credit facility will provide increased financial flexibility and lower interest rates. The final terms of the facility will be determined by market and other conditions.

In connection with the proposed private offering of senior subordinated convertible notes, the Company has attached hereto as Exhibit 99.2 certain risk factors, which risk factors are incorporated herein by reference. Exhibit 99.2 is intended to update the risk factors contained in the Company’s periodic filings with the Securities and Exchange Commission (the “SEC”), and includes, among other things, information about risks faced by the Company in connection with its ongoing evaluation and testing activities under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and risks faced by the Company in connection with its compliance with a request from the SEC for certain information in connection with the Company’s recent restatement of certain historical financial statements to reflect a change in the accounting for certain sale-leaseback transactions.

As described in Exhibit 99.2, based on preliminary results from its Section 404 evaluation and testing activities, the Company has identified two material weaknesses in the effectiveness of its internal control over financial reporting relating to: (1) controls within certain aspects of the Company’s accounting and financial information systems over user access, segregation of duties and monitoring of changes to its vendor database; and (2) controls over the posting of journal entries to the Company’s general ledger, which could result in incorrect entries being posted. As a result of the identified material weaknesses, the Company expects management to state in its assessment of the Company’s internal control over financial reporting, which will be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2005, that the Company did not maintain effective internal control over financial reporting as of September 29, 2005. Additionally, the Company expects that its independent registered public accounting firm’s report will conclude that the Company did not maintain effective internal control over financial reporting as of September 29, 2005.

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As described in Exhibit 99.2, the Company has taken a number of steps to remediate these material weaknesses, which steps are expected to be completed by the end of December 2005. The Company is in the process of completing its Section 404 evaluation and testing activities, which it expects to complete prior to the filing of its Annual Report on Form 10-K for the fiscal year ended September 29, 2005. The Company cannot be certain at this time that it will be able to successfully complete the procedures, certification and attestation requirements of Section 404 or that it will not have to report additional material weaknesses in connection with the presentation of its financial statements.

Statements made by the Company in this report relating to future plans, events, or financial performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company’s current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements. Any number of factors could affect actual results and events, including, without limitation: final results of management’s report on internal control over financial reporting and the related auditor assessment; the risk that the Company’s efforts to remediate the identified material weaknesses will not be successfully implemented on a sustained basis; the risk that the Company will not be able to successfully complete the procedures, certification and attestation requirements of Section 404 or that the Company will have to report additional material weaknesses in connection with the presentation of its financial statements; the risks associated with the pending informal investigation by the SEC; the Company’s ability to enter into a new senior credit facility on commercially reasonable terms, or at all; fluctuations in domestic and global petroleum and gasoline markets; realizing benefits of the Company’s fuel supply agreements; the risk that the Company’s ability to finance future transactions could be adversely affected due to its recent restatement of certain of its financial statements; the Company’s ability to take advantage of expected synergies in connection with acquisitions; the actual operating results of stores acquired; changes in the competitive landscape of the convenience store industry, including gasoline stations and other non-traditional retailers located in the Company’s markets; the effect of national and regional economic conditions on the convenience store industry and the Company’s markets; the effect of regional weather conditions on customer traffic; financial difficulties of suppliers, including the Company’s principal suppliers of gas and merchandise and their ability to continue to supply the Company’s stores; environmental risks associated with selling petroleum products; governmental regulations, including those regulating the environment; and acts of war or terrorist activity. These and other risk factors are discussed in the Company’s Annual Report on Form 10-K as amended, and in its other filings with the SEC. In addition, the forward-looking statements included in this report are based on the Company’s estimates and plans as of November 14, 2005. While the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description of Document
10.1	Third Amendment to Amended and Restated Credit Agreement dated November 11, 2005 by and among the Company, as borrower, R&H Maxxon, Inc., Kangaroo, Inc. and D. & D. Oil Co., Inc, subsidiaries of the Company, as guarantors, Wachovia Bank, National Association, as administrative agent, and the lenders party thereto
99.1	Press Release dated November 14, 2005
99.2	Risk Factors

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE PANTRY, INC.
By:	/s/    Daniel J. Kelly
	Daniel J. Kelly Vice President, Chief Financial Officer and Secretary (Authorized Officer and Principal Financial Officer)

Date: November 14, 2005

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EXHIBIT INDEX

Exhibit No.	Description of Document
10.1	Third Amendment to Amended and Restated Credit Agreement dated November 11, 2005 by and among the Company, as borrower, R&H Maxxon, Inc., Kangaroo, Inc. and D. & D. Oil Co., Inc, subsidiaries of the Company, as guarantors, Wachovia Bank, National Association, as administrative agent, and the lenders party thereto
99.1	Press Release dated November 14, 2005
99.2	Risk Factors

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EX-10.1

Exhibit 10.1

THIRD AMENDMENT TO AMENDED AND RESTATED

CREDIT AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of November 11, 2005, is by and among THE PANTRY, INC., a Delaware corporation, (the “Borrower”), those Domestic Subsidiaries of the Borrower identified as a “Guarantor” on the signature pages hereto (individually a “Guarantor” and collectively the “Guarantors”), the Lenders party hereto, and WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Borrower, the Guarantors, the several banks and other financial institutions as may from time to time become parties thereto, and the Administrative Agent have entered into that certain Amended and Restated Credit Agreement dated as of March 12, 2004 (as previously amended, modified or supplemented and as further amended, modified, supplemented, restated or amended and restated from time to time, the “Credit Agreement”; capitalized terms used but not otherwise defined herein shall have the meaning ascribed thereto in the Credit Agreement);

WHEREAS, the Borrower has requested an amendment to the Credit Agreement as more fully set forth herein;

WHEREAS, the Required Lenders have agreed to such amendment, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

AMENDMENT TO CREDIT AGREEMENT

1.1 Section 1.1. The definition of “Subordinated Indebtedness” in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Subordinated Indebtedness” shall mean (a) the Indebtedness of the Borrower evidenced by the Senior Subordinated Notes and any subordinated indebtedness issued in compliance with Section 6.1(f) and 6.1(g) and (b) any other Indebtedness of the Borrower subordinated in right of payment to the Credit Party Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Administrative Agent.

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1.2 Section 2.8(b)(iii). Section 2.8(b)(iii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(iii) Issuances. Immediately upon receipt by any Credit Party of proceeds from (A) any Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to (1) if such Debt Issuance is made pursuant to Section 6.1(g), fifty percent (50%) of the Net Cash Proceeds of such Debt Issuance; provided that if such Debt Issuance is made in replacement of, or exchange for, Subordinated Indebtedness permitted under Section 6.1(g), then no prepayment shall be required, and (2) if such Debt Issuance is any other Debt Issuance, one hundred percent (100%) of the Net Cash Proceeds of such Debt Issuance (each such prepayment to be applied as set forth in clause (vi) below), or (B) any Equity Issuance, the Borrower shall prepay the Loans and/or cash collateralize the LOC Obligations in an aggregate amount equal to fifty percent (50%) of the Net Cash Proceeds of such Equity Issuance (such prepayment to be applied as set forth in clause (vi) below; provided that if such Equity Issuance is made in replacement of, or exchange for, Subordinated Indebtedness permitted under Section 6.1(g), then no prepayment shall be required.

1.3 Section 5.9. The first sentence of Section 5.9 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

The Credit Parties will cause each of their Domestic Subsidiaries with assets in excess of $100,000 or current annualized revenues in excess of $100,000, whether newly formed, after acquired or otherwise existing, to promptly (and in any event within 30 days (or such longer period of time as agreed to by the Administrative Agent) after its formation or acquisition) become a Guarantor hereunder by way of execution of a Joinder Agreement.

1.4 Section 6.1(g). Section 6.1(g) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(g) the Borrower may become and remain liable with respect to unsecured Subordinated Indebtedness in an amount not to exceed $250,000,000 at any time outstanding and refinancings, exchanges, extensions and renewals thereof, subject to Section 2.8(b)(iii), provided that (i) the terms and conditions of such Subordinated Indebtedness shall be the same or substantially the same as those of the Senior Subordinated Notes or as is otherwise approved by the Administrative Agent, (ii) after giving effect to the incurrence of such Indebtedness and the application of the proceeds thereof, the Consolidated Pro Forma Leverage Ratio shall be less than or equal to the ratio that is 0.25 lower than the Consolidated Pro Forma Leverage Ratio then applicable as set forth in Section 6.6(a) and (iii) after giving effect to the incurrence of such Indebtedness and the application of the proceeds thereof, the Borrower is in pro forma compliance with Section 6.6 and no Event of Default has occurred and is continuing or would otherwise arise as a result of the incurrence of the Indebtedness;

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1.5 Section 6.1(h). Section 6.1(h) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(h) the Borrower may become and remain liable with respect to unsecured Subordinated Indebtedness incurred or assumed in connection with Permitted Acquisitions, provided that (i) the terms and conditions of such Subordinated Indebtedness shall be the same as those of the Senior Subordinated Notes or as is otherwise approved by the Administrative Agent and (ii) after giving effect to the incurrence of such Indebtedness and the application of the proceeds thereof, the Borrower is in pro forma compliance with Section 6.6 and no Event of Default has occurred and is continuing or would otherwise arise as a result of the incurrence of the Indebtedness; and

1.6 Section 6.4(f). Section 6.4(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(f) Guarantors may become and remain liable with respect to Contingent Obligations arising under (1) guarantees of the Senior Subordinated Notes as set forth in and to the extent required under the Senior Subordinated Note Indenture as in effect on the Closing Date and (2) guarantees of Subordinated Indebtedness to the extent such Subordinated Indebtedness is issued pursuant to and in accordance with the terms of Section 6.1(g) hereof;

1.7 Section 6.5. Section 6.5 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 6.5 Restricted Junior Payments.

The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that (a) the Borrower may make regularly scheduled payments of interest in respect of the Senior Subordinated Notes and of any Subordinated Indebtedness issued in accordance with Sections 6.1(g) and (h) hereof in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Senior Subordinated Indenture or the indenture pursuant to which such other Subordinated Indebtedness is issued, as the case may be, in each case, as such indenture may be amended from time to time to the extent permitted under Section 6.13(b), (b) the Borrower may make Restricted Junior Payments pursuant to and in accordance with stock option plans, stock purchase plans or other benefit plans for management or employees of the Borrower or any Subsidiary including the redemption or purchase of shares of common stock of the Borrower held by former employees of the Borrower or any Subsidiary following the termination of their employment, in an amount not to exceed $500,000 (plus any amounts received by the Borrower after the Closing Date and prior to making such Restricted Junior Payment from the issuance of additional shares of its common stock to members of management or employees of the Borrower and its Subsidiaries), (c) the Borrower may make cash dividends and repurchase Capital

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Stock of the Borrower in an aggregate amount not to exceed $10,000,000 per Fiscal Year so long as the Consolidated Pro Forma Leverage Ratio shall not exceed 3.00 to 1.0 both before and after giving pro forma effect to each such Restricted Junior Payment, and (d) the Borrower may make Restricted Junior Payments with proceeds from an Equity Issuance or from the issuance of Subordinated Indebtedness, in each case, in replacement of, or exchange for, Subordinated Indebtedness permitted under Section 6.1(g) to the extent such Equity Issuance or Subordinated Indebtedness is issued on terms reasonably satisfactory to the Administrative Agent; provided that in each case (i) the Borrower shall be in pro forma compliance with Section 6.6 both before and after giving pro forma effect to each such Restricted Junior Payment and (ii) no Event of Default shall have occurred and be continuing or would otherwise arise as a result of any such Restricted Junior Payment.

ARTICLE II

CONDITIONS TO EFFECTIVENESS

2.1 Closing Conditions.

This Amendment shall become effective as of the date first above written upon satisfaction of the following conditions (in form and substance reasonably acceptable to the Administrative Agent):

(a) Executed Amendment. Receipt by the Administrative Agent of a copy of this Amendment duly executed by each of the Credit Parties and the Required Lenders.

(b) Fees. Receipt by the Administrative Agent of all fees and expenses of the Administrative Agent in connection with the arrangement, preparation, execution and delivery of this Amendment, including, without limitation, the fees and expenses of Moore & Van Allen PLLC.

ARTICLE III

MISCELLANEOUS

3.1 Amended Terms. All references to the Credit Agreement in each of the Credit Documents shall hereafter mean the Credit Agreement as amended by this Amendment. Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms. The amendments to the Credit Agreement set forth in this Amendment shall be effective from and after the date of this Amendment and shall not be applied retroactively.

3.2 Representations and Warranties of Credit Parties. Each of the Credit Parties represents and warrants as follows:

(a) It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.

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(b) This Amendment has been duly executed and delivered by such Person and constitutes such Person’s legal, valid and binding obligations, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(c) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by such Person of this Amendment.

(d) The representations and warranties set forth in Article III of the Credit Agreement are true and correct as of the date hereof (except for those which expressly relate to an earlier date).

(e) No Default or Event of Default exists before or after giving effect to this Amendment.

3.3 Acknowledgment of Guarantors. The Guarantors acknowledge and consent to all of the terms and conditions of this Amendment and agree that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge the Guarantors’ obligations under the Credit Documents.

3.4 Release of D. & D. Oil Co., Inc. Each of the parties hereto agree that D.& D. Oil Co., Inc. (“D&D”) is hereby released from its obligations as a Guarantor under the Credit Agreement and the Joinder Agreement dated as of September 2, 2005, by and among D&D, the Borrower, the Guarantors party thereto, and the Administrative Agent, is hereby terminated; provided, that the Credit Parties shall cause D&D to become a Guarantor, to execute a new Joinder Agreement and otherwise comply with the requirements of Section 5.9 of the Credit Agreement (as amended hereby) at such time and to the extent required by Section 5.9 of the Credit Agreement (as amended hereby).

3.5 Credit Document. This Amendment shall constitute a Credit Document under the terms of the Credit Agreement.

3.6 Entirety. This Amendment and the other Credit Documents embody the entire agreement between the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

3.7 Counterparts; Telecopy. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopy shall be effective as an original and shall constitute a representation that an original will be delivered.

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3.8 Survival. Except as expressly modified and amended in this Amendment, all of the terms and provisions and conditions of each of the Credit Documents shall remain unchanged.

3.9 Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

3.10 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. EACH OF THE CREDIT PARTIES AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

3.11 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The jurisdiction, services of process and waiver of jury trial provisions set forth in Sections 9.14 and 9.17 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.

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IN WITNESS WHEREOF the Borrower, the Guarantors and the Required Lenders have caused this Amendment to be duly executed on the date first above written.

BORROWER:	THE PANTRY, INC.,
	a Delaware corporation
	By:	/s/ Daniel J. Kelly
	Name:	Daniel J. Kelly
	Title:	Chief Financial Officer, Vice President–Finance and Secretary
GUARANTORS:	R & H MAXXON, INC.,
	a South Carolina corporation
	By:	/s/ Daniel J. Kelly
	Name:	Daniel J. Kelly
	Title:	Executive Vice President and
		Assistant Secretary
	KANGAROO, INC.,
	a Georgia corporation
	By:	/s/ Daniel J. Kelly
	Name:	Daniel J. Kelly
	Title:	Executive Vice President and
		Assistant Secretary
	D. & D. OIL CO., INC.,
	a Georgia corporation
	By:	/s/ Daniel J. Kelly
	Name:	Daniel J. Kelly
	Title:	Executive Vice President and
		Assistant Secretary

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ADMINISTRATIVE AGENT

AND LENDERS:

WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent and as a Lender
By:	/s/ Scott Joyce
Name:  Scott Joyce
Title:    Vice President

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LENDERS (continued):

LANDMARK CDO LTD
By Aladdin Capital Management LLC, as Manager
By:	/s/ Angela Bozorgmir
Name:	Angela Bozorgmir
Title:	Director

15

LENDERS (continued):

ANTARES CAPITAL CORPORATION
By:	/s/ Renee M. Rempee
Name:	Renee M. Rempe
Title:	Senior Vice President

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LENDERS (continued):

ANTARES FUNDING, L.P.
JPMorgan Chase Bank, N.A. as trustee of the Antares
Funding Trust created under the Trust Agreement dated as of November 30, 1999.
By:	/s/ Baris Akkaya
Name:	Baris Akkaya
Title:	Assistant Treasurer

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LENDERS (continued):

MARINER CDO 2002, LTD.
By:	Antares Asset Management Inc., as Collateral
	Manager
By:	/s/ David Schmuck
Name:	David Schmuck
Title:
NAVIGATOR CDO 2003, LTD.
By:	Antares Asset Management Inc., as Collateral
	Manager
By:	/s/ David Schmuck
Name:	David Schmuck
Title:

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LENDERS (continued):

CPL CBNA LOAN FUNDING LLC FOR ITSELF
OR AS AGENT FOR CPL CFPI FUNDING LLC
By:	/s/ Mikus Kins
Name:	Mikus Kins
Title:	Attorney-in-Fact

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LENDERS (continued):

SIERRA CLO I, LTD
By:	/s/ John M. Casparian
Name:	John M. Casparian
Title:	Chief Operating Officer
	Centre Pacific LLC (Manager)

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LENDERS (continued):

Crédit Industriel et Commercial
By:	/s/ Anthony Rock	/s/ Sean Mounier
Name:	Anthony Rock	Sean Mounier
Title:	Vice President	First Vice President

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LENDERS (continued):

Credit Suisse, Cayman Islands Branch
By:	/s/ Vanessa Gomez
Name:	Vanessa Gomez
Title:	Vice President
By:	/s/ Nupur Kumar
Name:	Nupur Kumar
Title:	Associate

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LENDERS (continued):

Franklin CLO I, Limited
By:	/s/ David Ardini
Name:	David Ardini
Title:	Vice President

23

LENDERS (continued):

Franklin CLO II, Limited
By:	/s/ David Ardini
Name:	David Ardini
Title:	Vice President

24

LENDERS (continued):

Franklin CLO III, Limited
By:	/s/ David Ardini
Name:	David Ardini
Title:	Vice President

25

LENDERS (continued):

FRANKLIN CLO IV, LIMITED
By:	/s/ David Ardini
Name:	David Ardini
Title:	Vice President

26

LENDERS (continued):

GSC PARTNERS GEMINI FUND LIMITED
By:	GSCP (NJ), L.P., as Collateral Monitor
By:	GSCP (NJ), INC., its General Partner
By:	/s/ Seth Katzenstein
Name:	Seth Katzenstein
Title:	Authorized Signatory
	GSC Partners

27

LENDERS (continued):

GUARANTY BANK
By:	/s/ Michael Ansolabehere
Name:	Michael Ansolabehere
Title:	Vice President

28

LENDERS (continued):

INDOSUEZ CAPITAL FUNDING VI LIMITED
By:	Lyon Capital Management LLC
	As Collateral Manager
By:	/s/ Alexander B. Kenna
Name:	Lyon Capital Management LLC
	Alexander B. Kenna
Title:	Portfolio Manager

29

LENDERS (continued):

Premium Loan Trust I, Ltd.
By:	/s/ Timothy S. Van Kirk
Name:	Timothy S. Van Kirk
Title:	Managing Director

30

LENDERS (continued):

LCM I LIMITED PARTNERSHIP
By:	Lyon Capital Management LLC,
	As Collateral Manager
By:	/s/ Alexander B. Kenna
Name:	Lyon Capital Management LLC
	Alexander B. Kenna
Title:	Portfolio Manager

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LENDERS (continued):

LCM III, Ltd.
By:	Lyon Capital Management LLC,
	As Collateral Manager
By:	/s/ Alexander B. Kenna
Name:	Lyon Capital Management LLC
	Alexander B. Kenna
Title:	Portfolio Manager

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LENDERS (continued):

Venture CDO 2002, Limited
By its investment advisor, MJX Asset
Management LLC
By:	/s/ Martin Davey
Name:	Martin Davey
Title:	Managing Director

33

LENDERS (continued):

Venture II CDO 2002, Limited
By its investment advisor, MJX Asset
Management LLC
By:	/s/ Martin Davey
Name:	Martin Davey
Title:	Managing Director

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LENDERS (continued):

Venture III CDO, Limited
By its investment advisor, MJX Asset
Management LLC
By:	/s/ Martin Davey
Name:	Martin Davey
Title:	Managing Director

35

LENDERS (continued):

Kitty Hawk Trust
By:	Morgan Stanley Investment Management Inc.
	as Investment Manager
By:	/s/ John Hayes
Name:	John Hayes
Title:	Vice President

36

LENDERS (continued):

Morgan Stanley Prime Income Trust
By:	/s/ Elizabeth Bodisch
Name:	Elizabeth Bodisch
Title:	Authorized Signatory

37

LENDERS (continued):

Dryden III - Leveraged Loan CDO 2002
/s/ Stephen J. Collins		SJC
By:	Prudential Investment Management, Inc.
	as Collateral Manager
Name:	Stephen J. Collins
Title:	Vice President

38

LENDERS (continued):

Dryden IV - Leveraged Loan CDO 2003
/s/ Stephen J. Collins		SJC
By:	Prudential Investment Management, Inc.
	as Collateral Manager
Name:	Stephen J. Collins
Title:	Vice President

39

LENDERS (continued):

Dryden Leveraged Loan CDO 2002-II
/s/ Stephen J. Collins		SJC
By:	Prudential Investment Management, Inc.
	as Collateral Manager
Name:	Stephen J. Collins
Title:	Vice President

40

LENDERS (continued):

Loan Funding V, LLC
/s/ Stephen J. Collins		SJC
By:	Prudential Investment Management, Inc.
	as Portfolio Manager
Name:	Stephen J. Collins
Title:	Vice President

41

LENDERS (continued):

Raymond James Bank, FSB
By:	/s/ Thomas F. Macina
Name:	Thomas F. Macina
Title:	Senior Vice President

42

LENDERS (continued):

Ameriprise Certificate Company
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director - Operations

43

LENDERS (continued):

Centurion CDO 10 Limited
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director - Operations

44

LENDERS (continued):

Cent CDO 11, Limited
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director – Operations

45

LENDERS (continued):

Centurion CDO 8, Limited
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director - Operations

46

LENDERS (continued):

Centurion CDO 9, Limited
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director - Operations

47

LENDERS (continued):

Centurion CDO II, Ltd.
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director - Operations

48

LENDERS (continued):

Centurion CDO VI, Ltd.
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director – Operations

49

LENDERS (continued):

Centurion CDO VII, Ltd.
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director – Operations

50

LENDERS (continued):

IDS Life Insurance Company
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director – Operations

51

LENDERS (continued):

Sequils-Centurion V, Ltd.
By:	RiverSource Investments, LLC as
	Collateral Manager
By:	/s/ Vincent P. Pham
Name:	Vincent P. Pham
Title:	Director – Operations

52

LENDERS (continued):

VAN KAMPEN
SENIOR INCOME TRUST
By:	Van Kampen Asset Management
By:	/s/ Christina Jamieson
Name:	Christina Jamieson
Title:	Executive Director

53

LENDERS (continued):

VAN KAMPEN
SENIOR LOAN FUND
By:	Van Kampen Asset Management
By:	/s/ Christina Jamieson
Name:	Christina Jamieson
Title:	Executive Director

54

LENDERS (continued):

WELLS FARGO BANK, N.A.
By:	/s/ S. Michael St. Geme
Name:	S. Michael St. Geme
Title:	Vice President

55

EX-99.1

Exhibit 99.1

For Immediate Release	Contact: Dan Kelly
November 14, 2005	(919) 774-6700

THE PANTRY ANNOUNCES CONVERTIBLE NOTES OFFERING

Sanford, North Carolina, November 14, 2005 - - The Pantry, Inc. (NASDAQ: PTRY) today announced that it intends to offer, subject to market and other conditions, approximately $130 million of seven-year senior subordinated convertible notes (the “Notes”) through an offering within the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Notes will utilize net share settlement, and other terms, including the interest rate, number of shares issuable upon conversion of the Notes and investor conversion rights, are to be determined by negotiations between the Company and the initial purchasers of the Notes. The Company stated that it expects to grant the initial purchasers a 30-day option to purchase up to an additional $20 million of Notes to cover overallotments.

The Company intends to use the majority of the net proceeds from the offering to pay down existing senior debt and for general corporate purposes, including acquisitions. Additionally, the Company intends to use a portion of the net proceeds for the net cost of a convertible bond hedge and separate warrant transaction entered into in connection with the Notes.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

The Notes will not be registered under the Securities Act of 1933 or under any state securities laws, and may not be offered or sold in the United States absent such registration or an exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws.

About The Pantry

Headquartered in Sanford, North Carolina, The Pantry, Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated

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convenience store chains in the country, with net sales for fiscal 2005 of approximately $4.4 billion. As of September 29, 2005, the Company operated 1,400 stores in eleven states under a number of banners including Kangaroo Express(SM), Cowboys(SM) and Golden Gallon(R). The Pantry’s stores offer a broad selection of merchandise, as well as gasoline and other ancillary services designed to appeal to the convenience needs of its customers.

Safe Harbor Statement

Statements made by the Company in this press release relating to future plans, events, or financial performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company’s current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements. Any number of factors could affect actual results and events, including, without limitation: the Company’s ability to consummate the offering of the Notes; the final negotiated terms of the Notes; fluctuations in domestic and global petroleum and gasoline markets; realizing benefits of the fuel supply agreements; the risk that our ability to finance future transactions could be adversely affected due to our recent restatement of certain of our financial statements; our ability to take advantage of expected synergies in connection with acquisitions; the actual operating results of stores acquired; changes in the competitive landscape of the convenience store industry, including gasoline stations and other non-traditional retailers located in the Company’s markets; the effect of national and regional economic conditions on the convenience store industry and the markets we serve; the effect of regional weather conditions on customer traffic; financial difficulties of suppliers, including our principal suppliers of gas and merchandise and their ability to continue to supply our stores; environmental risks associated with selling petroleum products; governmental regulations, including those regulating the environment; and acts of war or terrorist activity. These and other risk factors are discussed in the Company’s Annual Report on Form 10-K as amended, and in its other filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release are based on the Company’s estimates and plans as of November 14, 2005. While the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.

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EX-99.2

EXHIBIT 99.2

RISK FACTORS

You should carefully consider the risks described below before making a decision to invest in our securities. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, could negatively impact our results of operations or financial condition in the future. If any of such risks actually occur, our business, financial condition or results of operations could be materially adversely affected.

Risks Related to Our Industry

The convenience store industry is highly competitive and impacted by new entrants.

The industry and geographic areas in which we operate are highly competitive and marked by ease of entry and constant change in the number and type of retailers offering the products and services found in our stores. We compete with other convenience store chains, gasoline stations, supermarkets, drugstores, discount stores, club stores and mass merchants. In recent years, several non-traditional retailers, such as supermarkets, club stores and mass merchants, have impacted the convenience store industry by entering the gasoline retail business. These non-traditional gasoline retailers have obtained a significant share of the motor fuels market and their market share is expected to grow. In some of our markets, our competitors have been in existence longer and have greater financial, marketing and other resources than we do. As a result, our competitors may be able to respond better to changes in the economy and new opportunities within the industry. To remain competitive, we must constantly analyze consumer preferences and competitors’ offerings and prices to ensure we offer a selection of convenience products and services consumers demand at competitive prices. We must also maintain and upgrade our customer service levels, facilities and locations to remain competitive and drive customer traffic to our stores. Major competitive factors include, among others, location, ease of access, gasoline brands, pricing, product and service selections, customer service, store appearance, cleanliness and safety.

Volatility of wholesale petroleum costs and availability of supply could impact our operating results.

Over the past three fiscal years, our gasoline revenue accounted for approximately 63.4% of total revenues and our gasoline gross profit accounted for approximately 27.4% of total gross profit. Crude oil and domestic wholesale petroleum markets are marked by significant volatility. General political conditions, acts of war or terrorism, and instability in oil producing regions, particularly in the Middle East and South America, could significantly impact crude oil supplies and wholesale petroleum costs. Significant increases and volatility in wholesale petroleum costs could result in significant increases in the retail price of petroleum products and in lower gasoline gross margin per gallon. Increases in the retail price of petroleum products could impact consumer demand for gasoline. This volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our operating results and financial condition. In addition, the supply of gasoline and our wholesale purchase costs could be adversely impacted in the event of shortage, which could result from, among other things, lack of capacity at United States oil refineries, severe weather conditions including hurricanes or the fact that our gasoline contracts do not guarantee an uninterrupted, unlimited supply of gasoline. These factors could materially impact our gasoline gallon volume, gasoline gross profit and overall customer traffic, which in turn would impact our merchandise sales.

Wholesale cost increases of tobacco products could impact our operating results.

Sales of tobacco products have averaged approximately 10.7% of our total revenue over the past three fiscal years and our tobacco gross profit accounted for approximately 16.3% of total gross profit for the same period. Significant increases in wholesale cigarette costs and tax increases on tobacco products, as well as national and local

1

campaigns to discourage smoking in the United States, may have an adverse effect on unit demand for cigarettes domestically. In general, we attempt to pass price increases on to our customers. However, due to competitive pressures in our markets, we may not be able to do so. These factors could materially impact our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit and overall customer traffic.

Changes in consumer behavior, travel and tourism could impact our business.

In the convenience store industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for automobile and truck traffic and trends in travel, tourism and weather. Changes in economic conditions generally or in the southeastern United States specifically could adversely impact consumer spending patterns and travel and tourism in our markets. Approximately 40% of our stores are located in coastal, resort or tourist destinations. Historically, travel and consumer behavior in such markets is more severely impacted by weak economic conditions. If visitors to resort or tourist locations decline due to economic conditions, changes in consumer preferences, changes in discretionary consumer spending or otherwise, our sales could decline.

Risks Related to Our Business

Unfavorable weather conditions or other trends or developments in the southeastern United States could adversely affect our business.

Substantially all of our stores are located in the southeast region of the United States. Although the southeast region is generally known for its mild weather, the region is susceptible to severe storms including hurricanes, thunderstorms, extended periods of rain, ice storms and heavy snow, all of which we experienced in fiscal 2005. Inclement weather conditions as well as severe storms in the southeast region could damage our facilities or could have a significant impact on consumer behavior, including spending behavior, travel and convenience store traffic patterns as well as our ability to operate our locations. In addition, we typically generate higher revenues and gross margins during warmer weather months in the southeast region, which fall within our third and fourth fiscal quarters. If weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected. We would also be impacted by regional occurrences in the southeastern United States such as energy shortages or increases in energy prices, fires or other natural disasters.

Inability to identify, acquire and integrate new stores could adversely affect our ability to grow our business.

An important part of our historical growth strategy has been to acquire other convenience stores that complement our existing stores or broaden our geographic presence, such as our acquisition of 53 convenience stores operating under the Cowboys^SM banner in April 2005. Since 1996, we have successfully completed and integrated more than 50 acquisitions, growing our store base from 379 to 1,400 stores. We expect to continue to selectively review acquisition opportunities as an element of our growth strategy. Acquisitions involve risks that could cause our actual growth or operating results to differ adversely compared to our expectations or the expectations of securities analysts. For example:

• We may not be able to identify suitable acquisition candidates or acquire additional convenience stores on favorable terms. We compete with others to acquire convenience stores. We believe that this competition may increase and could result in decreased availability or increased prices for suitable acquisition candidates. It may be difficult to anticipate the timing and availability of acquisition candidates.

• During the acquisition process we may fail or be unable to discover some of the liabilities of companies or businesses which we acquire. These liabilities may result from a prior owner’s noncompliance with applicable federal, state or local laws.

2

• We may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions.

• We may fail to successfully integrate or manage acquired convenience stores.

• Acquired convenience stores may not perform as we expect or we may not be able to obtain the cost savings and financial improvements we anticipate.

• We face the risk that our existing systems, financial controls, information systems, management resources and human resources will need to grow to support significant growth.

We are subject to state and federal environmental and other regulations.

Our business is subject to extensive governmental laws and regulations including, but not limited to, environmental regulations, employment laws and regulations, regulations governing the sale of alcohol and tobacco, minimum wage requirements, working condition requirements, public accessibility requirements, citizenship requirements and other laws and regulations. A violation or change of these laws could have a material adverse effect on our business, financial condition and results of operations.

Under various federal, state and local laws, ordinances and regulations, we may, as the owner or operator of our locations, be liable for the costs of removal or remediation of contamination at these or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination. The failure to properly remediate such contamination may subject us to liability to third parties and may adversely affect our ability to sell or rent such property or to borrow money using such property as collateral. Additionally, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at sites where they are located, whether or not such site is owned or operated by such person. Although we do not typically arrange for the treatment or disposal of hazardous substances, we may be deemed to have arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may be liable for removal or remediation costs, as well as other related costs, including governmental fines, and injuries to persons, property and natural resources.

Compliance with existing and future environmental laws regulating underground storage tanks may require significant capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. We pay tank registration fees and other taxes to state trust funds established in our operating areas and maintain private insurance coverage in Florida and Georgia in support of future remediation obligations.

These state trust funds or other responsible third parties including insurers are expected to pay or reimburse us for remediation expenses less a deductible. To the extent third parties do not pay for remediation as we anticipate, we will be obligated to make these payments, which could materially adversely affect our financial condition and results of operations. Reimbursements from state trust funds will be dependent on the maintenance and continued solvency of the various funds.

In the future, we may incur substantial expenditures for remediation of contamination that has not been discovered at existing locations or locations that we may acquire. We cannot assure you that we have identified all environmental liabilities at all of our current and former locations; that material environmental conditions not known to us do not exist; that future laws, ordinances or regulations will not impose material environmental liability on us; or that a material environmental condition does not otherwise exist as to any one or more of our locations. In addition, failure to comply with any environmental laws, ordinances or regulations or an increase in regulations could adversely affect our operating results and financial condition.

State laws regulate the sale of alcohol and tobacco products. A violation or change of these laws could adversely affect our business, financial condition and results of operations because state and local regulatory

3

agencies have the power to approve, revoke, suspend or deny applications for, and renewals of, permits and licenses relating to the sale of these products or to seek other remedies. In addition, certain states regulate relationships, including overlapping ownership, among alcohol manufacturers, wholesalers and retailers and may deny or revoke licensure if relationships in violation of the state laws exist. We are not aware of any alcoholic beverage manufacturers or wholesalers having a prohibited relationship with our company.

Any appreciable increase in the statutory minimum wage rate or income or overtime pay or adoption of mandated healthcare benefits would result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition and results of operations.

From time to time, regulations are proposed which, if adopted, could also have an adverse effect on our business, financial condition or results of operations.

We depend on one principal supplier for the majority of our merchandise.

We purchase over 50% of our general merchandise, including most tobacco products and grocery items, from a single wholesale grocer, McLane Company, Inc., or McLane. We have a contract with McLane until April 2010, but we may not be able to renew the contract upon expiration. A change of suppliers, a disruption in supply or a significant change in our relationship with our principal suppliers could have a material adverse effect on our business, cost of goods, financial condition and results of operations.

We depend on two principal suppliers for the majority of our gasoline.

BP^® and Citgo^® supply approximately 90% of our gasoline purchases. We have contracts with Citgo^® until 2010 and BP^® until 2009, but we may not be able to renew either contract upon expiration. A change of suppliers, a disruption in supply or a significant change in our relationship with our principal suppliers could have a material adverse effect on our business, cost of goods, financial condition and results of operations.

Because we depend on our senior management’s experience and knowledge of our industry, we would be adversely affected if senior management left The Pantry.

We are dependent on the continued efforts of our senior management team, including our President and Chief Executive Officer, Peter J. Sodini. Mr. Sodini’s employment contract terminates in September 2006. If, for any reason, our senior executives do not continue to be active in management, our business, financial condition or results of operations could be adversely affected. We cannot assure you that we will be able to attract and retain additional qualified senior personnel as needed in the future. In addition, we do not maintain key personnel life insurance on our senior executives and other key employees. We also rely on our ability to recruit store managers, regional managers and other store personnel. If we fail to continue to attract these individuals, our operating results may be adversely affected.

Litigation and publicity concerning food quality, health and other issues could result in significant liabilities or litigation costs and cause consumers to avoid our convenience stores.

Convenience store businesses and other food service operators can be adversely affected by litigation and complaints from customers or government agencies resulting from food quality, illness, or other health or environmental concerns or operating issues stemming from one or more locations. We are also subject to a variety of other claims arising in the ordinary course of business, including personal injury claims, contract claims, or claims alleging violations of state and federal law regarding workplace and employment matters, discrimination and similar matters. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from purchasing gasoline, merchandise or food

4

service at one or more of our convenience stores. We could also incur significant liabilities if a lawsuit or claim results in a decision against us or litigation costs regardless of results, and may divert time and money away from our operations and hurt our performance.

Pending SEC matters could adversely affect us.

On July 28, 2005, we announced that we would restate earnings for the period from fiscal 2000 to fiscal 2005 arising from sale-leaseback accounting for certain transactions. In connection with our decision to restate, we filed a Form 8-K on July 28, 2005. The SEC issued a comment letter to us in connection with the Form 8-K and we responded to the comments. We recently received from the SEC a request that we voluntarily provide certain information to the SEC Staff in connection with our sale-leaseback accounting and our decision to restate our financial statements with respect to it. The request is part of an informal investigation, which the SEC has said is a fact-finding inquiry that does not mean that the SEC has concluded that we have broken any law or that the SEC has a negative opinion of any person, entity or security. We are cooperating with the SEC’s informal request. We are unable to predict whether this request will continue or result in any adverse action.

Our recently completed restatement could impair our ability to secure future financing.

On August 31, 2005, we completed a restatement of certain of our audited and unaudited financial statements to correct the accounting for certain sale-leaseback transactions entered into by our company. The fact that we have restated certain of our previously issued financial statements may factor into negotiations with lenders on future financings. As a result of the restatement, we may find it more difficult to secure additional financing in the future, on satisfactory terms or at all.

We will be subject to the requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404. If we are unable to timely comply with Section 404, our profitability, results of operations and financial condition, as well as the market value of the notes, could be materially adversely affected. In addition, to date we have determined that we have two material weaknesses in the effectiveness of our internal control over financial reporting, which will be included in our report on internal control over financial reporting. The existence of those two material weaknesses, and the possibility that we may be required to report additional material weaknesses in the effectiveness of our internal control over financial reporting, could cause our profitability, results of operations and financial condition, as well as the market value of the notes, to be materially adversely affected.

In connection with our Annual Report on Form 10-K for the fiscal year ended September 29, 2005, we will be required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, which requires that we document and test our internal controls over financial reporting and certify that we are responsible for maintaining an adequate system of internal control procedures. This section also requires that our independent registered public accounting firm opine on the operating effectiveness of those internal controls and management’s assessment of those controls. We are currently evaluating our existing controls against the criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. During the course of our ongoing evaluation and integration of the internal controls of our business, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review.

Although our testing is not yet complete and will not be completed until December 2005, in the course of our testing to date we have identified the following two material weaknesses in the effectiveness of our internal control over financial reporting. A material weakness (within the meaning of the Public Company Accounting Oversight Board, or PCAOB, Auditing Standard No. 2) is a control deficiency, or aggregation of control deficiencies, that results in more than a remote risk that a material misstatement in our annual or interim financial statements will not be prevented or detected. As a result of the identified material weaknesses, we expect management to state in its assessment of our internal control over financial reporting, which will be included in

5

our Annual Report on Form 10-K for the fiscal year ended September 29, 2005, that we did not maintain effective internal control over financial reporting as of September 29, 2005. Additionally, we expect that our independent registered public accounting firm’s report will conclude that we did not maintain effective internal control over financial reporting as of September 29, 2005.

• Inadequate controls within certain aspects of our accounting system over user access, segregation of duties and monitoring of changes to our vendor database. We identified instances whereby users had access to and authority to initiate transactions within the accounts payable module of our accounting system, as well as the ability to add or modify information to our vendor database. These inappropriate access rights and inappropriate segregation of duties give rise to the potential for unauthorized and undetected activity within our accounting system and results in more than a remote likelihood that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis by employees during the normal course of performing their assigned functions.

• Inadequate controls over the posting of journal entries to our accounting system resulting in potential differences between the journal entries reviewed by management and those recorded in our accounting system. Specifically, our accounting software, which is standard software in our industry, does not enable our accounting personnel to perform a system review of journal entries prior to postings. As a result of these deficiencies, more than a remote likelihood exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis by employees during the normal course of performing their assigned functions.

We have taken the following steps to remediate the material weaknesses identified above:

• With the assistance of our Information Services personnel, we have restricted user access for the identified individuals within our accounting system to more appropriately segregate certain individuals’ authority in a manner consistent with their respective roles and responsibilities. In addition, we have assigned responsibilities for maintenance to the vendor database to individuals independent of the payables and disbursement function. We expect these remediation activities to be completed by the end of December 2005.

• We have customized our accounting system to generate a report of all posted journal entries which will be compared to approved journal entries and related supporting documentation. Discrepancies identified through this monitoring process will be investigated and corrected prior to completion of the financial closing process. We expect these remediation activities to be completed by the end of December 2005.

At the date of this offering memorandum, we have begun the implementation of the foregoing remediation efforts and believe the successful completion of such efforts will adequately remediate the material weaknesses by the end of December 2005. However, there can be no assurance that these efforts will be successfully implemented on a sustained basis.

We cannot be certain at this time that we will be able to successfully complete the procedures, certification and attestation requirements of Section 404 or that we will not have to report additional material weaknesses in connection with the presentation of our financial statements. If we fail to comply with the requirements of Section 404 or if we report such additional material weaknesses, the accuracy and timeliness of the filing of our annual report may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the market value of the notes. If we are unable to complete our assessment under Section 404, our access to additional capital may be negatively impacted. In addition, a material weakness in effectiveness of our internal control over financial reporting could result in an increased chance of fraud, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

6