EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by THE PANTRY, INC., a Delaware corporation (the “Corporation”) and TERRANCE M. MARKS (“Executive”) as of August 24, 2009, with his employment commencing on September 15, 2009 (the “Start Date”).

The Corporation desires to employ Executive and Executive desires to accept such employment on the terms set forth below.

In consideration of the mutual promises set forth below and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the Corporation and Executive agree as follows:

The Corporation hereby employs Executive and Executive hereby accepts employment, commencing on the Start Date, on the terms and conditions set forth in this Agreement and shall perform such duties and responsibilities as Executive shall be assigned by the Board of Directors of the Corporation (the “Board”). Effective as of September 25, 2009 (the “Effective Date”), Executive shall serve as President and Chief Executive Officer of the Corporation and have such duties and responsibilities as are appropriate for the chief executive officer of a corporation of the nature and size of the Corporation, as the Board shall determine from time to time. Executive shall at all times report to the Board.

1.1       Effective the Effective Date, the Corporation shall appoint Executive to serve as a member of the Board. Thereafter during his employment as Chief Executive Officer, Executive shall be re-nominated by the Board for re-election by the shareholders to serve, without interruption, as a member of the Board. Any such Board service (and any committees thereof) shall be without additional compensation.

1.2       Executive shall perform all duties and exercise all authority in accordance with, and otherwise comply with, all Corporation policies, procedures, practices and directions.

1.3       Executive shall devote all working time and best efforts to successfully perform his duties and advance the Corporation’s interests. During his employment, Executive shall not, without Board consent, engage in any other business activities of any nature whatsoever (including board memberships) for which he receives compensation without the Corporation’s prior consent, other than those listed on Exhibit A; provided , however , this provision does not prohibit him from participating in charitable, civic, educational, professional, community or industry affairs or from personally owning and trading in stocks, bonds, securities, real estate, commodities or other investment properties for his own benefit, so long as, in the

aggregate, such activities do not materially interfere with the performance of his duties hereunder and do not create actual or potential conflicts of interest with the Corporation.

2.1        Base Salary . During the Term (as defined below), Executive’s annual salary for all services rendered shall be at the annual rate of $750,000 (less applicable taxes and required withholdings), payable in regular installments in accordance with the Corporation’s usual policies, procedures and practices as they may exist from time to time (the “Base Salary”). The Base Salary may periodically be subject to such increases, if any (but not subject to decrease, other than as it relates to any across the board reduction of salaries for all senior executives) in the Board’s discretion in accordance with the Board’s policies, procedures and practices as they may exist from time to time. Any such increase (or decrease) shall thereafter be Executive’s “Base Salary” for all purposes hereunder.

2.2        Bonus Programs . During the Term, Executive shall be eligible to earn an annual cash bonus in respect of each fiscal year (each, a “Fiscal Year”) during the Term, pursuant to the terms of the Corporation’s bonus plan applicable to its senior executives, as may be amended from time to time (the “Bonus Plan”, such annual bonus the “Annual Bonus”), with a target bonus of 75% of Base Salary (the “Target Bonus”) and a maximum bonus of 150% of Base Salary, in each case based on the achievement of performance criteria established by the Board (or a committee thereof) pursuant to the Bonus Plan. The Annual Bonus, to the extent becoming earned and payable, will be paid in cash within seventy-five (75) days following the end of the applicable Fiscal Year.

2.3        Equity and Other Long-Term Incentive Grants . During the Term, Executive shall be eligible for annual and other equity and long-term incentive grants; provided , however , the Corporation shall not be bound to make any equity or other long-term incentive award grants to Executive other than as set forth in this Agreement, prior to the awards in 2010. However, the Corporation may consider, but shall be under no obligation to make, a grant in November 2009, when it again makes grants to other executives. To the extent awards are granted by the Corporation, Executive’s target level and form and mix of awards shall be commensurate with his position and Corporation’s performance relative to annual awards to other senior executives. On the Start Date, the Corporation shall grant Executive:

(A)       Option . An option to purchase 70,000 shares of authorized shares or outstanding treasury shares of the Corporation’s common stock (“Common Stock”), in accordance with the Pantry, Inc. 2007 Omnibus Plan (the “2007 Omnibus Plan”), at an exercise price equal to the Fair Market Value (as such term is defined in the 2007 Omnibus Plan) of the Common Stock on the date of the grant (the “Option”), having a term of seven (7) years and vesting and becoming exercisable in three installments of 23,333, 23,333, and 23,334 shares on the first, second, and third anniversaries of the Start Date, so long as he is employed hereunder on such respective anniversary for such respective shares to so vest (except as otherwise provided herein).

(B)       Restricted Stock . (i) A grant of 15,000 shares of restricted Common Stock pursuant to the 2007 Omnibus Plan (the “Time Restricted Stock”), which Time

Restricted Stock shall vest in equal annual installments on the first, second, and third anniversary of the Start Date subject to Executive’s continued employment with the Corporation on such respective anniversary for such respective shares to so vest (except as otherwise provided herein); and (ii) a grant of 15,000 shares of restricted Common Stock pursuant to the 2007 Omnibus Plan (the “Performance Restricted Stock”), which Performance Restricted Stock shall vest in equal annual installments of 5,000 shares of Performance Restricted Stock on the first, second, and third anniversaries of the Start Date so long as he is employed hereunder on such respective anniversary for such respective shares to so vest (except as otherwise provided herein), so long as with respect to the Fiscal Year coincident with or immediately following the Effective Date, he achieves the annual “Performance Measures” (as defined in Section 12 of the 2007 Omnibus Plan), as established for such Fiscal Year, and such annual installment of 5,000 shares of Performance Restricted Stock shall be forfeited if such annual Performance Measures are not met.

All unvested restricted Common Stock shall be forfeited upon Executive’s termination of employment with the Corporation, except as otherwise provided herein or as the Corporation and Executive otherwise agree in writing.

(C)      The foregoing equity grants shall be governed by the terms and conditions of certain documents, including a Stock Option Agreement and Restricted Stock Award Agreement, in the forms attached hereto as Exhibits B and C (collectively, the “ Equity Documents ”). Terms not defined herein shall be as defined in the Equity Documents or the 2007 Omnibus Plan.

2.4        Benefits . During the Term, Executive may participate in all medical, dental, disability, insurance, 401(k), pension, vacation and other employee benefit plans and programs which may be made available from time to time on a basis consistent with other senior executives of the Corporation, commensurate with his position; provided , however , that Executive’s participation is subject to the applicable terms, conditions and eligibility requirements of these plans and programs, some of which are within the plan administrator’s discretion, as they may exist from time to time. Notwithstanding the foregoing, Executive shall be entitled to a minimum of three (3) weeks of annual vacation and, subject to applicable state law, accrued, unused vacation may not be carried over from year to year.

2.5        Benefit Plans Subject to Amendment . Nothing in this Agreement shall require the Corporation to create, continue or refrain from amending, modifying, revising or revoking any of the plans, programs or benefits set forth in Section 2.4. Executive acknowledges that the Corporation, in its sole discretion, may amend, modify, revise or revoke any such plans, programs or benefits. Executive further acknowledges that the airplane, executive medical reimbursement, and automobile policies of the Corporation are subject to revision and that no reduction, alteration, or termination pursuant to such revision will constitute grounds for Constructive Termination (as defined below). Any amendments, modifications, revisions and revocations of these plans, programs and benefits shall apply to Executive. Nothing in this Agreement shall afford Executive any greater rights or benefits with regard to these plans, programs and benefits than are afforded to him under their applicable terms, conditions and eligibility requirements, some of which are within the plan administrator’s discretion, as they may exist from time to time. Nothing in this Agreement shall require the Corporation to

continue or refrain from amending, modifying, revising or revoking the Bonus Plan; provided , however , that any such amendment, modification, revision or revocation shall only have prospective effect (to the extent it may adversely affect Executive) and Executive shall continue to be entitled to an annual cash incentive opportunity under the Bonus Plan or a successor plan or program for all periods thereafter consistent with the provisions of Section 2.2.

2.6        Relocation Expenses . Executive shall procure housing and be resident in the greater Raleigh, North Carolina metropolitan area as soon as is practicable after the Start Date and remain so resident thereafter during the Term. Executive will participate under the Corporation’s Executive and Senior Officer Relocation Policy, in each benefit as defined in the plan, subject to the following exceptions: (A) the Temporary Housing Benefit will be for ninety (90) days (instead of sixty (60) days); (B) in lieu of (i) the third party buyout of Executive’s current residence, (ii) the Shipment of Household Goods benefit, (iii) the Final Move Expenses benefit, and (iv) the Relocation Allowance benefit, the Corporation will pay Executive a lump sum cash bonus of $125,000 within ten (10) days after the Start Date.

2.7        Legal Fees . The Corporation shall pay all reasonable legal fees incurred for counsel to advise Executive and negotiate and prepare all agreements in connection with negotiating this Agreement, upon presentation of a reasonably documented bill for such services, with such payment not to exceed $25,000.

2.8        Offset for Disability Payments . If at any time during which Executive is receiving salary or post-termination payments from the Corporation, he receives payments on account of mental or physical disability from any Corporation-provided plan, then the Corporation, in its discretion, may reduce his salary or post-termination payments by the amount of such disability payments.

The original term of employment under this Agreement shall be for that period of time commencing on the Start Date and ending on the last day of the Fiscal Year ending on or around September 25, 2012, subject to the following provisions:

3.1        Automatic Renewal . Upon the expiration of the original term or any renewal term of employment, Executive’s term of employment shall be automatically renewed for another Fiscal Year period unless, at least sixty (60) days prior to the renewal date, either party gives the other party written notice of its intent not to continue the employment relationship. The original term of employment, together with each successive renewal of the employment term (if any), is referred to herein as the “Term.” During the Term, the terms, conditions and provisions set forth in this Agreement shall remain in effect unless modified in accordance with Section 8.

3.2        Without Cause . During the Term, the employment relationship hereunder may be terminated by Executive for any reason, and such termination shall occur sixty (60) days after Executive gives notice of such termination to the Corporation. The employment relationship hereunder may be terminated by the Corporation at any time by written notice to Executive.

3.3        With Cause . During the Term, the Corporation may terminate Executive’s employment immediately without notice (other than the notice to cure) at any time for the following reasons which shall constitute “Cause”: (A) the willful and continued failure by Executive to substantially perform his duties with the Corporation after written instruction by the Corporation to do so, (B) the engaging by Executive in conduct which is demonstrably injurious to the Corporation, (C) the conviction of Executive of, or the entry of a pleading of guilty or nolo contendere by Executive to, any crime involving moral turpitude or any felony, (D) material breach by Executive of any of the terms of this Agreement or (E) gross negligence or willful misconduct in the performance of his duties. No act or omission to act shall be “willful” if conducted in good faith with a reasonable belief such conduct was in the best interests of the Corporation. Prior to a termination pursuant to Section 3.3(A), Executive shall be given written notice of the manner in which he has failed to perform and a ten (10) day opportunity to correct such failure.

3.4        Death or Disability . During the Term, the Corporation may terminate Executive’s employment without notice in the event of Executive’s death or “Disability” which shall mean Executive’s physical or mental inability to perform the essential functions of his duties with or without reasonable accommodation for a period of 180 consecutive days or 180 days in total within a 365 day period as determined by the Corporation in its reasonable discretion and in accordance with applicable law.

3.5        Constructive Termination . During the Term, the employment relationship hereunder may be terminated by Executive upon a “Constructive Termination,” which for the purpose of this Agreement shall mean, without Executive’s express written consent, the occurrence on or after a Change in Control (as defined below), of any of the following circumstances: (A) the assignment to Executive, on or after the Effective Date, of any duties materially inconsistent (except in the nature of a promotion) with his position as the chief executive officer of the Corporation, or a substantial adverse alteration after the Effective Date in the nature or status of his position or responsibilities (including reporting responsibilities) or the conditions of his employment from those in effect immediately prior to the Change in Control; provided, however, that no such assignment or substantial adverse alteration shall be deemed to exist merely because of changes in the Executive’s duties, position or responsibilities (or conditions of employment) solely and directly resulting from the Corporation ceasing to be a company with publicly-traded securities or becoming a wholly owned subsidiary of another company so long as Executive continues to be the most senior executive employee at the Corporation with powers and responsibilities typically held by such senior executive employee at a company of similar size and nature as the Corporation exists after the Change in Control; (B) a reduction by the Corporation in Executive’s Base Salary or Target Bonus, other than in connection with an across-the-board reduction of salaries or bonuses paid to all executive officers; (C) the Corporation requiring Executive to be based more than fifty (50) miles from the Corporation’s offices at which he was principally employed immediately prior to the date of the Change in Control; (D) the failure by the Corporation to pay to Executive any portion of his current compensation or compensation under any deferred compensation program of the Corporation within seven (7) days of the date such compensation is due; (E) the failure by the Corporation, after a Change in Control, to continue in effect any material compensation or benefit plan in which Executive participates immediately prior to the Change in Control unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made

with respect to such plan, or the failure by the Corporation to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of his participation relative to other participants, than existed at the time of the Change in Control; provided , however , that the airplane, executive medical reimbursement, and automobile policies of the Corporation are being revised and no reduction, alteration, or termination of those policies will constitute grounds for Constructive Termination; or (F) failure of the Corporation to obtain a satisfactory agreement from any successor or other person who caused the Change in Control to assume and agree to perform this Agreement. Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting a Constructive Termination. However, Executive must give written notice of any condition that is the basis of a claim for his Constructive Termination no later than sixty (60) days after he has knowledge of such event, and the Corporation shall have ten (10) days within which to correct such condition to Executive’s reasonable satisfaction.

3.6        Survival . Section 4 (Compensation Upon Termination), Section 5 (Competitive Business Activities, Trade Secrets, Confidential Information and Corporation Property), and Section 6 (Change in Control) shall survive the expiration or termination of the this Agreement and the termination of Executive’s employment, regardless of the reasons for such expiration or termination, until the obligations set forth therein have been satisfied.

4.1        By the Corporation For Cause or By Executive Without Constructive Termination or By Executive By Notice of Non-Renewal . If Executive’s employment is terminated by the Corporation for Cause, by Executive absent a Constructive Termination, or by notice of non-renewal by Executive, the Corporation’s obligation to compensate Executive ceases on the date of termination, provided , however , that Executive shall be entitled to receive in a lump sum any accrued but unpaid Base Salary, accrued vacation pay, any accrued and earned but unpaid Annual Bonus for any previously completed fiscal year, and any business expenses incurred and substantiated in accordance with the Corporation’s policies through the date of termination (such payment the “Accrued Rights”).

4.2        Due to a Corporation Notice of Non-Renewal or by the Corporation Without Cause Prior to, or More than 12 Months Following, a Change in Control . If at any time prior to, or more than twelve (12) months following, the occurrence of a Change in Control (i) the Corporation terminates Executive’s employment without Cause or (ii) upon the termination of Executive’s employment upon the expiration of the Term pursuant to a Corporation notice not to renew the Term pursuant to Section 3.1 (each such termination a “Qualified Termination”), then subject to the limitations of Section 4.4 of this Agreement, Executive shall be entitled to receive:

(B)      an amount (less any applicable taxes and required withholdings) equal to one and one-half (1.5) times Executive’s Base Salary, payable in equal monthly installments for the 18 months following the date of termination of employment (the “Severance

Period”, each such installment payment a “Severance Payment”). For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), as applicable, each Severance Payment shall be considered a separate payment. Beginning on the first anniversary of the first day of the Severance Period, all Severance Payments payable thereafter are subject to redu