EXHIBIT 10.5

FIRST AMENDMENT TO CREDIT AGREEMENT

This FIRST AMENDMENT, dated as of December 26, 2006 (this “Amendment”), to the
Credit Agreement referred to below is by and among (a) THE PENN TRAFFIC COMPANY,
a Delaware corporation, PENNY CURTISS BAKING COMPANY, INC., a New York
corporation, and BIG M SUPERMARKETS, INC., a New York corporation (collectively
referred to herein as “Borrowers” and individually as “Borrower”); (b) the other
Credit Parties signatory hereto; (c) GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (in its individual capacity, “GE Capital”), for itself, as
Lender, and as Agent for Lenders; (d) JPMORGAN CHASE BANK, N.A., a national
banking association, for itself, as Lender, and as Syndication Agent for
Lenders; (e) THE CIT GROUP/BUSINESS CREDIT, for itself as Lender, and as
Documentation Agent for Lenders; and (f) the other Lenders signatory hereto from
time to time (collectively, the “Lenders”).

W I T N E S S E T H

WHEREAS, the Borrowers, Agent, and Lenders are parties to that certain Credit
Agreement, dated as of April 13, 2005 (including all annexes, exhibits and
schedules thereto, and as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”); and

WHEREAS, the Agent and Lenders have agreed to amend the Credit Agreement, in the
manner, and on the terms and conditions, provided for herein.

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

1.            Definitions. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement or Annex A thereto.

2.            Amendment to Section 1.9(c) of the Credit Agreement. Section
1.9(c) of the Credit Agreement is hereby amended as of the First Amendment
Effective Date (as hereinafter defined) by deleting such section in its entirety
and replacing it with the following:

“(c)        If Borrowers pay after acceleration or prepay all or any portion of
the Term Loan, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations, or if the Term Loan Commitment is otherwise
terminated, in any case prior to January 13, 2008, subject to the proviso in
Section 1.3(c), Borrowers shall pay to Agent, for the benefit of Term Lenders,
as liquidated damages and compensation for the costs of being prepared to make
funds available hereunder, an amount equal to the Applicable Percentage (as
defined below) multiplied by the sum of the principal amount of the Term Loan
paid after acceleration or prepaid; provided, however, that the Requisite Term
Lenders may elect, by written notice to Agent prior to the date of any mandatory
prepayment of the Term Loan, to decline such mandatory prepayment of the Term
Loan. As used

 

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herein, the term “Applicable Percentage” shall mean (x) one and one-half percent
(1.50%), in the case of any such payment or prepayment made on or prior to April
13, 2007, and (y) one percent (1.00%), in the case of any such payment or
prepayment made after April 13, 2007 but prior to January 13, 2008. The Credit
Parties agree that the Applicable Percentages are a reasonable calculation of
Lenders’ lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early termination of the Term Loan
Commitments.”

3.            Amendment to Section 6.8(e) of the Credit Agreement. Section
6.8(e) of the Credit Agreement is hereby amended as of the First Amendment
Effective Date by adding the following proviso at the end thereof:

“provided, further, that Borrowers may sell and transfer or otherwise dispose of
assets in connection with the closing and sale of those stores listed on
Schedule 1 to the First Amendment, so long as such sale or other disposition
otherwise complies with each of the conditions set forth in clauses (iii), (iv)
and (vi) – (xi) of this Section 6.8(e) as reasonably determined by Agent, and
such store closures shall not be included in clause (i) of this Section 6.8(e)
for any purpose.”

 

4.

Amendments to Annex A of the Credit Agreement.

(a)          Annex A of the Credit Agreement is hereby amended by inserting the
following new definition in alphabetical order therein:

“First Amendment” means the First Amendment to Credit Agreement, dated as of
December 26, 2006, among Agent, Lenders and Borrowers, and acknowledged and
agreed to by each of the other Credit Parties.

“First Amendment Effective Date” means the date on which the conditions
precedent to the effectiveness of the First Amendment are satisfied, which date
is December 26, 2006.

(b)          Annex A of the Credit Agreement is hereby amended as of the First
Amendment Effective Date by amending and restating the definition of “Covenant
Testing Event” in its entirety to read as follows:

“‘Covenant Testing Event” means (a) from the First Amendment Effective Date to
and including February 15, 2007, any time Excess Availability is less than (i)
$30,000,000 for four (4) consecutive days or (ii) $25,000,000 on any day; and
(b) after February 15, 2007, any time Excess Availability is less than (i)
$35,000,000 for four (4) consecutive days or (ii) $30,000,000 on any day.”

 

5.

Financial Statements.

(a)          The Borrowers have informed Agent that, due to certain continuing
ongoing governmental investigations, Eisner LLP has been unable to complete its
annual audit of the Borrowers for the 2005 Fiscal Year and therefore the
Borrowers will be unable to deliver their audited consolidated balance sheets as
of January 29, 2005 and the

 

 

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related deliveries within the time frame required by Section 5.12 of the Credit
Agreement, as such time frame was extended pursuant to those certain Limited
Waivers to the Credit Agreement, dated as of June 30, 2005, December 5, 2005,
March 28, 2006, June 29, 2006 August 4, 2006, and have requested that Agent and
Requisite Lenders extend the date for such delivery to June 30, 2007. Effective
as of the First Amendment Effective Date, Agent and Requisite Lenders hereby
permanently waive the requirement that the Borrowers deliver audited
consolidated balance sheets as of January 29, 2005 and related deliveries which
otherwise are required pursuant to Section 5.12 of the Credit Agreement.

(b)          The Borrowers have informed Agent that, due to certain continuing
ongoing governmental investigations, Eisner LLP has been unable to complete its
annual audit of the Borrowers for the 2006 Fiscal Year and therefore the
Borrowers will be unable to deliver their audited consolidated balance sheets as
of January 28, 2006 and the related deliveries within the time frame required by
Section 4.1(a) and Section (d) of Annex E of the Credit Agreement, as such time
frame was extended pursuant to those certain Limited Waivers to the Credit
Agreement, dated as of June 29, 2006 and as of August 4, 2006, and have
requested that Agent and Requisite Lenders extend the date for such delivery to
June 30, 2007. Effective as of the First Amendment Effective Date, Agent and
Requisite Lenders hereby consent to extend the date by which the Borrowers’
audited consolidated balance sheets as of January 28, 2006 and related
deliveries shall be delivered to Agent and Lenders under Section 4.1(a) and
Section (d) of Annex E to June 30, 2007; provided, that such audited
consolidated balance sheets shall not be required to include results for the
period commencing with the first day of the 2005 Fiscal Year up to the Effective
Date.

(c)          The Borrowers have informed Agent that, due to certain continuing
ongoing governmental investigations, Eisner LLP will be unable to complete its
annual audit of the Borrowers for the 2007 Fiscal Year in a timely manner and
therefore the Borrowers will be unable to deliver their audited consolidated
balance sheets as of February 3, 2007 and the related deliveries within the time
frame required by Section 4.1(a) and Section (d) of Annex E of the Credit
Agreement, and have requested that Agent and Requisite Lenders extend the date
for such delivery to June 30, 2007. Effective as of the First Amendment
Effective Date, Agent and Requisite Lenders hereby consent to extend the date by
which the Borrowers’ audited consolidated balance sheets as of February 3, 2007
and related deliveries shall be delivered to Agent and Lenders under Section
4.1(a) and Section (d) of Annex E to June 30, 2007.

6.            Representations and Warranties. To induce Agent and Lenders to
enter into this Amendment, each of the Credit Parties, jointly and severally,
makes the following representations and warranties to Agent and Lenders:

(a)          The execution, delivery and performance of this Amendment and the
performance of the Credit Agreement by such Credit Party: (i) are within such
Person’s corporate, limited liability company or limited partnership power, as
applicable; (ii) have been duly authorized by all necessary corporate, limited
liability company or limited partnership action; (iii) do not contravene any
provision of such Person’s charter, bylaws or partnership or operating agreement
as applicable; (iv) do not violate any law or regulation, or any order or decree
of any court or Governmental Authority by which such Person or its assets are
bound; (v) do not conflict with or result in the breach or termination of,
constitute a default under or accelerate or permit the acceleration of any
performance required by, any indenture, mortgage, deed of trust, material lease,
material agreement or other material instrument to which such Person is a party
or by which such Person or any of its property is

 

 

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bound; (vi) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (vii) do not require the
consent or approval of any Governmental Authority or any other Person.

(b)          This Amendment has been duly executed and delivered by or on behalf
of such Credit Party.

(c)          This Amendment constitutes a legal, valid and binding obligation of
such Credit Party, enforceable against such Credit Party in accordance with its
terms.

(d)          No Default or Event of Default has occurred and is continuing after
giving effect to this Amendment.

(e)          The representations and warranties of such Credit Party contained
in the Credit Agreement and each other Loan Document shall be true and correct
on and as of the First Amendment Effective Date with the same effect as if such
representations and warranties had been made on and as of such date, except that
any such representation or warranty which is expressly made only as of a
specified date need be true only as of such date.

7.            No Other Amendments/Waivers. Except as expressly provided herein,
(a) the Credit Agreement and the other Loan Documents shall be unmodified and
shall continue to be in full force and effect in accordance with its terms and
(b) this Amendment shall not be deemed a waiver of any term or condition of any
Loan Document and shall not be deemed to prejudice any right or rights which the
Agent or any Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time.

8.            Waiver of Claims. Each of the Credit Parties hereby waives,
releases, remises and forever discharges Agent, Lenders and each other
Indemnified Person from any and all claims, suits, actions, investigations,
proceedings or demands arising out of or in connection with the Credit Agreement
(collectively, “Claims”), whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law of any kind
or character, known or unknown, which such Credit Party ever had, now has or
might hereafter have against Agent or Lenders which relates, directly or
indirectly, to any acts or omissions of Agent, Lenders or any other Indemnified
Person on or prior to the date hereof; provided that, such Credit Party does not
waive any Claim solely to the extent such Claim relates to the Agent’s or any
Lender’s gross negligence or willful misconduct.

9.            Expenses. Each Borrower hereby reconfirms its respective
obligations pursuant to Section 11.3 of the Credit Agreement to pay and
reimburse Agent, for all reasonable costs and expenses (including, without
limitation, reasonable fees of counsel) incurred in connection with the
negotiation, preparation, execution and delivery of this Amendment and all other
documents and instruments delivered in connection herewith.

10.          Effectiveness. This Amendment shall become effective as of the date
hereof (the “First Amendment Effective Date”) only upon satisfaction in full in
the judgment of Agent of each of the following conditions:

 

 

 

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(a)          Amendment. Agent shall have counterpart signature pages of this
Amendment duly executed and delivered by each of Agent, Requisite Lenders and
the Credit Parties.

(b)          Payment of Fees and Expenses. Borrowers shall have paid to Agent
for the pro rata account of each Lender who executes this Amendment and delivers
such Amendment to Agent on or prior to 4 p.m. New York time, December 28, 2006 a
non-refundable cash amendment fee equal to ten (10) basis points times the
aggregate Commitments of such Lender. Additionally, Borrowers shall have paid to
Agent all costs, fees and expenses invoiced and owing in connection with this
Amendment and the other Loan Documents and due to Agent (including, without
limitation, reasonable legal fees and expenses).

(c)          Amendment to Supplemental Real Estate Facility. Agent shall have
received evidence that Borrowers have received a duly executed amendment to the
Supplemental Real Estate Facility, in form and substance reasonably satisfactory
to Agent.

(d)          Representations and Warranties. The representations and warranties
of the Credit Parties in this Amendment shall be true and correct on and as of
the First Amendment Effective Date and the date hereof, except that any such
representation or warranty which is expressly made only as of a specified date
need be true only as of such date.

11.          GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

12.          Counterparts. This Amendment may be executed by the parties hereto
on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

(SIGNATURE PAGE FOLLOWS)

 

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

 

 

BORROWERS

THE PENN TRAFFIC COMPANY

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

PENNY CURTISS BAKING COMPANY, INC

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

BIG M SUPERMARKETS, INC.

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

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LENDERS

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender

 

 

By: 

/s/

 

 

 

Duly Authorized Signatory

 

 

 

 

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JPMORGAN CHASE BANK, N.A.,
as Syndication Agent and Lender

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

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BANK OF AMERICA, N.A.
as Lender

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

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THE CIT GROUP/BUSINESS CREDIT, INC.
as Documentation Agent and Lender

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

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WACHOVIA CAPITAL CORPORATION (NEW ENGLAND) (f/k/a CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND), as Lender

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

 

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The following Persons are signatories to this Amendment in their capacity as
Credit Parties and not as Borrowers.

 

 

 

SUNRISE PROPERTIES, INC.

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

PENNWAY EXPRESS, INC.

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

COMMANDER FOODS INC.

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

P AND C FOOD MARKETS INC. OF VERMONT

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

P.T. DEVELOPMENT, LLC

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

 

P.T. FAYETTEVILLE/UTICA, LLC

 

 

By: 

/s/

 

 

 

Name:  
Title:   

 

 

 

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