THIS
EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST.  REDACTED MATERIAL IS MARKED WITH “*” AND BRACKETS AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION

    

     

     

    AMENDED
AND RESTATED PENN TRAFFIC COMPANY SUPPLY AGREEMENT

    


    THIS
AGREEMENT, made as of the 10th day of
September, 2008 (this “Agreement”), is by and between The Penn Traffic Company
("Penn Traffic") and C&S Wholesale Grocers, Inc. ("C&S").

    


    Preliminary
Statement.  C&S and Penn
Traffic entered into a supply agreement, dated as of January 29, 2008 (the
"Original Agreement"), whereby C&S agreed to procure and to sell, and Penn
Traffic agreed to purchase from C&S, except as otherwise specifically set
forth therein, Penn Traffic's entire requirements of produce for the Penn
Traffic Stores (as defined therein), pursuant to the terms and subject to the
conditions set forth in the Original Agreement.

    


    The
parties desire to continue and expand their relationship by C&S procuring
and selling, and Penn Traffic purchasing, all other categories of merchandise
(with the exception of the products set forth in Section 1.3 and subject to the
terms and conditions of Section 3.12 and 3.15).

    


    The
parties desire to make certain other modifications to the business terms
included in the Original Agreement.

    


    In order
to set forth the terms and conditions regarding the additional categories of
merchandise, and to modify the terms and conditions regarding certain provisions
of the Original Agreement, the parties now desire to amend and restate the
Original Agreement as of the Effective Date (as defined herein).

    


    Agreement.  In
consideration of the premises and of the mutual covenants and agreements
hereinafter set forth, the parties, intending to be legally bound, agree as
follows:

    


    SECTION 1.   OVERVIEW;
AGREEMENT TO PURCHASE.

    


    1.1            Overview.  Pursuant
to this Agreement, C&S will procure Merchandise (as defined below) for Penn
Traffic to be shipped to Penn Traffic's facilities in Dubois, Pennsylvania and
Syracuse, New York (each, a "Facility," and together, the "Facilities"), and
Penn Traffic will purchase all Merchandise from C&S, except as otherwise set
forth herein.  Penn Traffic will retain responsibility for all
employees, Facility or other leases or real property, material handling and
transportation equipment, contracts and all other liabilities associated with
the Facilities.  C&S will not operate the Facilities, nor shall it
have any liability related to any warehouse, maintenance, support, distribution,
storage (including outside storage) or inbound and outbound transportation
related matters.  Penn Traffic will select orders, load and seal
trucks, route and deliver orders to the Penn Traffic Stores (as defined
herein).  Penn Traffic shall be responsible for inbound inspection of
Merchandise and any and all other quality control.

     

    
       

    

    
      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    1.2            Agreement to
Purchase.  Penn Traffic agrees to purchase, except as otherwise
specifically set forth herein and except with respect to any products C&S
already supplies to Penn Traffic pursuant to the GM/HBC Agreement (as defined
herein), from C&S, and C&S agrees to procure and to sell to Penn
Traffic, Penn Traffic’s entire requirements of  grocery, bakery,
candy, spices, store supplies, fresh meat, deli, seafood, produce, dairy,
floral, frozen (mainline), frozen bakery, ice cream, frozen meat, frozen
seafood, ice and certain other merchandise in the product categories carried by
C&S ("Merchandise") for all Penn Traffic Stores.  Notwithstanding
the preceding, the terms and conditions regarding the procurement of fresh meat,
ice, store supplies and floral and frozen turkeys and shrimp will be as set
forth in Sections 3.12 and 3.15 below.  For purposes of this
Agreement, to “procure” shall mean to negotiate directly or indirectly with the
applicable vendor with respect to all terms of the purchase of goods including,
but not limited to (as applicable), price, specifications, quantity, freight and
trade funding.  For the purposes of this Agreement, to “purchase”
(where C&S is the purchaser)  shall mean to:  (a)
perform the physical act of purchasing goods through the execution and tender of
purchase orders to an applicable vendor;  (b) to pay for such goods;
and (c) to own such goods until such time the load containing the goods is
sealed at the Facility in preparation for shipment to the Penn Traffic Stores
and is in transit to the Penn Traffic Stores.

    


    1.3            Merchandise
Exclusions.

    


    (a)            DSD and
Cross-Dock.  Merchandise does not include products that, as of
the date hereof, are supplied by direct store delivery (“DSD”) vendors or
cross-dock vendors, subject to Section 1.4 below.  Penn Traffic will
promptly provide C&S with a list of such products.  Nothing in
this Agreement shall prohibit or otherwise limit Penn Traffic’s ability to
purchase either now or in the future any item that is available DSD or
cross-docked only and not available through C&S.  Penn Traffic
shall have the option to convert a warehouse item to DSD or cross-dock for a
special distribution or promotion. [*]  Penn Traffic agrees to provide
C&S with its past levels of promotional DSD or cross-dock, to keep C&S
apprised with to its anticipated activity (in part to coordinate buying activity
and to ensure proper service levels and inventories) and to report to C&S on
a periodic basis its actual level of activity. [*]

    


    (b)            Seasonal GM or Specialty
Products.  Merchandise does not include seasonal GM and
specialty products, which may include natural, organic and private label
products, which are procured and purchased by Penn Traffic from specialty
suppliers who at the time of this Agreement are, or in the future may become,
authorized by Penn Traffic in Penn Traffic’s sole discretion to supply such
product to Penn Traffic.  Penn Traffic will promptly provide C&S
with a current list of such products.

    


    (c)            Pharmacy.  Penn
Traffic will continue to procure, handle and distribute pharmacy products for
the Penn Traffic Stores.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

    

    
      
        
        

      

      
        - 2
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    (d)            Tobacco.  Penn
Traffic will continue to procure, purchase, stamp, handle and distribute
cigarettes and other tobacco products for the Penn Traffic
Stores.  [*]

    


    1.4            Merchandise
Additions.  If C&S elects to procure any item excluded from
the definition of Merchandise (as set forth in 1.3 above), then Penn Traffic
will support C&S and will purchase its requirements of such item from
C&S if C&S's pricing on such item is cost-competitive, as determined by
Penn Traffic in its reasonable discretion, taking into account the costs
associated with [*] with and any special services provided by the vendor of such
product.

    


    1.5            Penn Traffic
Stores.  Penn Traffic Stores shall mean all stores
owned,  operated or licensed by Penn Traffic or any subsidiary or
affiliate of Penn Traffic (excluding any such stores closed by or disposed of by
Penn Traffic subsequent to the date hereof) and any independent stores to which
Penn Traffic or any subsidiary or affiliate of Penn Traffic provides
Merchandise, in all instances above, at any time during the Term (as defined
herein) hereof.

    


    
      SECTION 2.  IMPLEMENTATION
SCHEDULE AND TERM.

    

    


    2.1            Schedule.  C&S
will commence the supply of all Merchandise to Penn Traffic for the Facilities
on October 12, 2008 (the "Effective Date").  Penn Traffic will, except
as otherwise specifically set forth herein, purchase from C&S and accept
delivery of its entire requirements of Merchandise to the Facilities on the
Effective Date.  Notwithstanding anything herein to the contrary,
between the date hereof and the Effective Date, C&S will continue to
procure, and Penn Traffic will continue to purchase, Penn Traffic's entire
requirements of produce, pursuant to the terms and subject to the conditions set
forth in the Original Agreement.

    


    2.2            Term.  The
“Term” of this Agreement shall commence on the Effective Date and will end on
October 8, 2016 ("Termination Date").  The parties agree that all
targets, thresholds, commitments, amounts due and other obligations under this
Agreement shall be measured in Contract Years and Contract Quarters, as
applicable.  Each Contract Year is a period consisting of four (4)
consecutive Contract Quarters and each Contract Quarter is a period consisting
of thirteen (13) (or fourteen (14)) consecutive weeks, each commencing on a
Sunday and ending on the following Saturday.  The first Contract Year
and first Contract Quarter shall each commence on the Effective Date, which
shall be a Sunday.  Attached hereto as Schedule 2.2 is the list of
Contract Year commencement and termination dates during the Term.  All
targets, thresholds, commitments, amounts due and other obligations under this
Agreement shall be time-prorated accordingly for any 14- week Contract Quarter
or 53-week Contract year, or any shortened Contract Year due to a termination of
the Agreement.  

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

    

    
      
        
        

      

      
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    SECTION 3.  PRICE,
REBATE, FEES AND OTHER TERMS.

    


    3.1            [*]

    


    (a)           [*]

    


    (b)           [*]

    


    (c)           [*]

    


    (d)           [*]

    


    (e)           [*]  C&S
is in the process of implementing a [*] to, among other things,
[*].  At the time C&S tests and commercially deploys [*], C&S
will commence billing Penn Traffic through utilization of [*]

    


    (f)           Penn Traffic
Inventory.  C&S currently owns all produce inventory at the
Facilities. On October 12, 2008, C&S shall purchase the other categories of
Penn Traffic’s inventory existing at the Facilities on such date, except any
damaged, distressed, off-condition, out-of-code, short-coded, dead inventory,
DSD or cross-dock items.  The terms and conditions governing the
inventory purchase shall be set forth in the Inventory Agreement attached hereto
as Schedule 3.1(f).

    


    (g)           C&S
Facilities.  [*]

    


    3.2           [*]

     

     3.3            [*]

    


    3.4            [*] 

    


    3.5           [*]

    


    3.6           Product
Specifications.

     

    (a)           Produce.  With
respect to produce Merchandise, the parties agree to observe Penn Traffic's
product specifications delivered by Penn Traffic to C&S as of January 29,
2008 (the "Specifications"), except as expressly set forth herein, and the
Perishable Agricultural Commodities Act guidelines ("PACA
Guidelines").  Penn Traffic may update the Specifications from time to
time, subject to C&S's reasonable approval, and so long as any changes to
the Specifications are provided to C&S in writing with reasonable advance
notice, so C&S has adequate time to order produce Merchandise under the new
Specifications.  If the Penn Traffic inspector properly rejects
produce Merchandise at the time of its inbound receiving, due to a documented
failure to conform to the Specifications or PACA Guidelines (verified by an FDA
or USDA inspection, if requested by C&S), C&S agrees to assume full
responsibility for the applicable Merchandise.  [*] If the Penn
Traffic inspector rejects the produce Merchandise at any time after such
Merchandise has been received, Penn Traffic agrees to assume full responsibility
for such Merchandise.  C&S agrees to use its good faith efforts to
work with the vendor to pick up the product or otherwise minimize Penn Traffic's
damages, but in no event shall C&S be held financially liable for any
produce Merchandise rejected after receiving.   Penn Traffic is
responsible for all costs associated with FDA or USDA inspections, which C&S
may require as necessary.  Notwithstanding anything to the contrary
set forth herein, if C&S procures produce Merchandise in a terminal or open
market buy in order to meet Penn Traffic's needs (except where C&S procures
such produce in order to replace produce rejected by Penn Traffic pursuant to
this Section 3.6(a)), Penn Traffic agrees that any such Merchandise is not
required to conform to its Specifications, and Penn Traffic agrees to accept any
such Merchandise and to assume full responsibility for such
Merchandise.  The parties agree that terminal or open market buys are
not to be used as the primary mechanism for procuring produce Merchandise, and
should be used only in certain instances as determined by C&S in its
reasonable discretion, including, but not limited to, a fluctuation in Penn
Traffic's volume.  C&S agrees to inform Penn Traffic of any
terminal or open market buy in advance, unless doing so is not reasonably
practicable, in which case, C&S will inform Penn Traffic as soon as
reasonably practicable.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 4
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    (b)           Perishables and other
Merchandise.  C&S will procure all Merchandise for Penn
Traffic in accordance with Penn Traffic’s then current guidelines for product
specifications, which shall be provided in writing to C&S from time to time
and subject to C&S's reasonable approval.  C&S will work
together with Penn Traffic in approaching the vendor community in order to
negotiate with multiple vendors to achieve a competitive product cost for
quality perishable items.

     

    3.7            Ad
Bookings/Forecasts.  Penn Traffic shall provide promotional
bookings, ad bookings and forecasts to C&S with reasonable advance
notice.  C&S and Penn Traffic will work together to minimize
leftover ad product that is in the Facilities, including canceling shipments and
having vendors pick-up leftover ad product.  Penn Traffic will
remerchandise items where possible.  Items that are removed from the
promotion by Penn Traffic beyond such time that C&S is able to cancel
inbound delivery shall be considered leftover ad product.  C&S and
Penn Traffic will work together to buy turn Merchandise in quantities consistent
with the weekly forecasts and Penn Traffic's needs.  Penn Traffic will
ultimately be held fully responsible for leftover ad product and any issues
resulting from forecasting and ad quantities.

     

    3.8           Procurement
Fee.  C&S will charge a Procurement Fee equal to
[*]

    


    3.9           [*]

    


    3.10            New
Items.  C&S will work with vendors to make new items
available for shipment to Penn Traffic at the earliest shipment
date.  If Penn Traffic provides C&S at least [*]’ notice of any
new item, C&S will procure such new product, in the case of non-strategic
products, within [*] of vendor’s first available ship date, and in the case of
strategic products, on the vendor's first available ship date, in each case,
subject to availability of the product from the vendor.  It is Penn
Traffic's responsibility to identify to C&S in such notice whether it
reasonably considers such new item to be a "strategic" product.

    


    3.11            [*]

    


    3.12            Fresh Meat, Ice, Floral and
Store Supplies.  C&S will quote to Penn Traffic a
[*]

    


    3.13            Coupons.  Penn
Traffic and C&S hereby agree that Penn Traffic shall redeem all its coupons
through the C&S coupon program commencing no later than sixty (60) days
after the Effective Date.  [*]

     

    3.14           Backhaul.  [*]  Penn
Traffic shall retain ultimate control over both its inbound and outbound
freight.  If Penn Traffic overrules a C&S decision with respect to
backhauls or if Penn Traffic mismanages its inbound freight, and C&S can
demonstrate that that decision or mismanagement impairs Service Level, then the
parties will adjust such Service Level calculation to the extent that Penn
Traffic’s decision had a negative effect.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

      
        
          
          

        

        
          - 5
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    3.15           Frozen Turkeys and
Shrimp. [*]

    


    SECTION
4.  INFORMATION TECHNOLOGY AND
RELATED ISSUES.

    


    4.1           Equipment and
Software.  All existing IT equipment and software that the
parties currently employ will remain in place at the Penn Traffic Facilities and
in C&S's facilities.  Each party shall be responsible for its own
administration, support, maintenance, software licensing and disaster recovery
with respect to its systems.  C&S shall provide any IT equipment
or software, and any administration, support, maintenance, software licensing or
disaster recovery with respect thereto, required by any C&S personnel to
perform C&S's obligations under this Agreement (including with respect to
any produce buyers that were hired by C&S as described in Section 11
hereof).  Penn Traffic shall provide any IT equipment or software, and
any administration, support, maintenance, software licensing or disaster
recovery with respect thereto, required by any Penn Traffic personnel to perform
Penn Traffic's obligations under this Agreement.  Penn Traffic shall
be responsible for developing the necessary interfaces and links so that its IT
equipment and software can interface with C&S's current
systems.  C&S will develop the necessary interfaces and build
links so that C&S's inventory and billing systems are synchronized with Penn
Traffic's inventory and billing systems so that Penn Traffic can transmit and
receive data consistent with C&S's master inventory file.

    


    4.2           Receivings.  Penn
Traffic will receive all Merchandise on its loading docks consistent with Penn
Traffic's past practices.  C&S will create and send POs to Penn
Traffic.  Penn Traffic will enter receivings into its warehouse
management system.  Penn Traffic will adjust the POs to reflect what
was received versus what was ordered and will send the adjusted POs back to
C&S.   The parties agree to review receivings on at least a
weekly basis.

    


    4.3            Vendor
Compliance.  [*]

    


    4.4            Store
Orders.  Penn Traffic will transmit to C&S store orders,
volume forecasts and any additional information necessary to assist C&S in
its procurement of Penn Traffic's Merchandise requirements.  Penn
Traffic will be responsible for polling and will generate store selection
orders.  Penn Traffic personnel will select orders, load and seal
trucks, route and deliver the orders to the Penn Traffic Stores, all in the
ordinary course of its business.  Penn Traffic will take ownership of
the Merchandise and C&S will invoice Penn Traffic for such Merchandise at
the time the load containing such Merchandise is sealed at the Facility and is
in transit to the Penn Traffic Stores, subject to Section 4.7
below.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 6
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    4.5            Billing.  C&S
will issue the Weekly Statement to Penn Traffic each Sunday (as set forth
below).  Penn Traffic will generate customer manifests and store
invoices and Penn Traffic will handle all billing and credits to the Penn
Traffic Stores.

    


    4.6            Inventory
Responsibility.  Penn Traffic will maintain inventory, price
maintenance and set-up maintenance, and handle all labeling, adjustments and
substitutions.

    


    4.7           Risk of
Loss.  [*]

    


    4.8           PACA.  The
parties will work together to add any necessary language to the Penn Traffic
Weekly Statement (as defined herein), account statements, purchase orders,
invoices or other documents and to take any other actions necessary to ensure
that both parties are in compliance with PACA and that, with respect to PACA
regulated commodities sold hereunder, C&S can preserve its rights to the
PACA trust.

    


    SECTION 5.  BILLING
AND PAYMENT.

    


    5.1            Weekly
Statements.  Each Sunday, C&S shall electronically transmit
to Penn Traffic a statement (the “Weekly Statement”) for all billing amounts
(which includes purchases, Procurement Fees, [*], other fees and credits) for
the immediately preceding seven days (collectively, the “Weekly Statement
Amount”).

    


    5.2           Payment.  [*]  If
the relevant banks are not open for business on the due date of Penn Traffic
payment, then such due date shall be accelerated to the previous day that the
relevant banks are legally open. [*]

    


    5.3            Miscellaneous Billing and
Payment Matters.  Time is of the essence.

    If any
payment is in default, C&S shall have the right (which rights shall be
nonexclusive, cumulative of and additional to all other remedies) to defer
further shipments until all payments in default have been made or to terminate
this Agreement as provided in Section 14.1(a) hereof.  Further,
without limiting any other rights and remedies set forth herein,
[*]  Penn Traffic or C&S shall give notice to the other party of
any billing adjustments it believes should be made, and the parties shall
attempt to reach agreement on any adjustments within seven (7)
days.  Notwithstanding the above, C&S will not have the right to
defer shipments unless the payment default cumulatively exceeds [*], and for any
cumulative payment default greater than [*] but less than [*], C&S shall be
required to provide at least 1 business day (when banks in New York are legally
open) notice before deferring any shipments or exercising its right of
termination under Section 14.  C&S may immediately exercise any of
its rights under this Section 5.3 and otherwise in the event of any payment
default equal to or greater than [*], or if any payment default has not been
cured by the next immediate Weekly Statement.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 7
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    5.4            [*]

    


    5.5            Third Party
Deductions.  From time to time, Penn Traffic may ask C&S to
act as its agent to deduct amounts that are due from manufacturers, vendors or
other third parties ("Vendors") to Penn Traffic.  C&S has the
right, in its reasonable discretion, to refuse to honor any third party
deduction request that Penn Traffic may make.  [*]

    


    SECTION
6.  PRICE
VERIFICATION AND AUDIT.

    


    6.1            Prospective Review and Price
Verification Procedures.

    


    (a)            Merchandise with a
[*].  The parties agree to work to develop a weekly price
prospective review process, whereby C&S will transmit to Penn Traffic all
cost information for Merchandise with a [*] on a weekly basis and Penn Traffic
shall review and comment on such information.  It is the intent of the
parties that the weekly data transmittal and Penn Traffic's review of such
information shall be the primary mechanism to ensure pricing accuracy before
such Merchandise is procured.  [*]  Penn Traffic shall
commence such review promptly upon receipt of such information after the
applicable quarter end and shall complete such review within fifteen (15) days
of the receipt of such information.  Any review hereunder shall be
conducted by individuals knowledgeable regarding industry standards and customs,
and such persons shall keep all such information strictly
confidential.

    


    (b)            Merchandise with
[*].   [*]  Penn Traffic shall commence such
review promptly upon receipt of such information after the applicable quarter
and shall complete such review within fifteen (15) days of the receipt of such
information.  Any review hereunder shall be conducted by individuals
knowledgeable regarding industry standards and customs, and such persons shall
keep all such information strictly confidential. [*]

    


    (c)            Reimbursement and Agreement
with Cost Information.   C&S will reimburse Penn
Traffic for any actual findings pursuant to Section 6.1(a) and (b) above that
C&S overbilled Penn Traffic, and correspondingly Penn Traffic will pay
C&S for any actual findings that C&S underbilled Penn
Traffic [*].  If during the review process specified in Section
6.1(a) and (b) a pervasive error in billings is discovered, the transactions
resulting in the error should be evaluated for the current period under review
as well as the previous six months with the total overbillings / underbillings
being reimbursed to the respective party.  Notwithstanding anything
herein to the contrary, failure by either party to dispute any [*] information
within [*] of the applicable billing date with respect to all Merchandise shall
be deemed to be such party's agreement with respect to such cost information,
and such party shall thereafter waive any claim or right to adjust such
amount.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 8
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    6.2            [*].

    


    (a)            Penn
Traffic may audit, at its expense, C&S's records in order to confirm the [*]
is issued in accordance with the terms and conditions of this
Agreement.  [*]

    


    (b)            The
[*], as defined in this Agreement, will be provided to Penn Traffic by C&S
on a weekly basis and supported by a Weekly Statement, detailing the calculation
of the [*] by department, as further discussed in Sections 3.2 and
3.3.

    


    (c)            Any
such audit will be conducted at C&S's premises by a nationally or regionally
recognized third party auditing firm acceptable to C&S in its reasonable
discretion and any review hereunder shall be conducted by individuals
knowledgeable regarding industry standards and customs, and such persons shall
keep all such information strictly confidential.  Penn Traffic shall
have the right to have a representative, to be mutually agreed upon by the
parties, present and participating as necessary during such
audit.  Upon C&S's request, prior to commencement of the audit,
Penn Traffic agrees to require such third party auditing firm to execute any
reasonable confidentiality agreement provided by C&S.

    


    (d)           Penn
Traffic will be limited to [*]audits during each Contract Year and each audit
will be limited to information related to the [*] period immediately preceding
the audit.  Notwithstanding the preceding sentence, in the event that
a discrepancy is discovered by an audit during the [*] covered by such audit,
then the audit may include prior periods (up to a total of [*] years) but only
to verify that the same discrepancy had not occurred during such prior
periods.  If the same error is found in the [*] prior years then Penn
Traffic is authorized to recoup the monies due because of the error, as well as
reasonable associated expanded audit fees for additional transaction testing by
the third party audit firm.  Unless any significant discrepancies are
found, each such audit shall be completed within fifteen working
days.  The parties' mutual objective is to identify and resolve any
errors promptly after they occur rather than to rely upon the audit procedure to
identify errors. [*]

    


    (e)           [*]

    


    (f)           C&S
shall maintain complete and detailed records, data, information and statements
in auditable form and quality in respect of all activities related to the
provision of services on behalf of Penn Traffic and to all of C&S’s other
obligations under this Agreement, as information fully integrated into the
overall financial statements maintained by C&S in the ordinary course of
business.  C&S shall prepare and maintain for a period of not less
than [*] following the end of each fiscal year, adequate books and records with
respect to:  (i) C&S’s performance of services under this
Agreement, (ii)  all amounts charged or credited by C&S to Penn
Traffic under this Agreement, (iii) all costs arising under this Agreement and
(iv) such other records, data or information as may be set forth under this
Agreement or by Penn Traffic from time to time.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 9
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    (g)           The
books and records shall be maintained consistent with GAAP, consistently
applied, and shall be in a form suitable for audit, review and copying and shall
be made available as reports produced from C&S’s overall financial
statements maintained by C&S for its entire operations in the ordinary
course of business.  All books and records shall be maintained in
accordance with C&S’s document retention policy.

    


    (h)           Penn
Traffic will be provided access to, and the right to audit, upon reasonable
notice and cooperation from Penn Traffic, any information Penn Traffic
determines it needs in order to verify any of the items listed in (a) through
(g) above, provided however, Penn Traffic will not be provided access to data or
information relating to other customers of C&S or information unrelated to
the performance of services under this agreement, except as may be necessary to
verify cost allocations.  Further, notwithstanding the preceding, Penn
Traffic will not be entitled to certain proprietary, confidential or sensitive
information, [*], as further described in Section 18.9(b).

    


    SECTION 7.  SERVICE
LEVEL.  C&S agrees that it shall provide the Merchandise
pursuant to this Agreement in a manner such that Service Level (as defined
below) is at least [*]% (the "Required Service Level").

    


    7.1            Calculation of Service
Level.  C&S will provide Penn Traffic a weekly Service
Level Reconciliation Report showing, with respect to each invoice, the number of
cases ordered, shipped, out of stock, discontinued and
unauthorized.  [*]

    


    7.2            Service Level
Violation.  The parties agree that C&S shall be in
violation of this Agreement if, for any reason other than a default by Penn
Traffic under this Agreement, an event of force majeure or other factor outside
the control of C&S (including, but not limited to, as set forth in Section
7.1 above), C&S fails to maintain the Required Service Level during any
Measurement Period (as defined herein), provided however that this section shall
not apply during the first Contract Quarter following the Effective
Date.  [*], will be a “Measurement Period.”  Such failure
shall be a "Service Level Violation."

    


    7.3            Cure of Service Level
Violation.  Should a Service Level Violation occur, Penn
Traffic shall give notice to C&S and C&S shall use its best efforts to
immediately restore the Required Service Level.  If, in the
Measurement Period following the occurrence of a Service Level Violation the
Required Service Level is achieved for such Measurement Period, then the Service
Level Violation shall be cured and new measurement periods shall
begin.  Failure to achieve the Required Service Level in the
subsequent Measurement Period shall entitle Penn Traffic to receive a penalty
payment (the “Penalty Payment”) to the extent that the Service Level is below
[*]% during such subsequent Measurement Period and each subsequent Measurement
Period until the Required Service Level is restored (“Penalty
Period”).  The Penalty Payment shall be equal to: [*]

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 10
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    7.4            [*]

    


    7.5           Service Level
Termination.  If the Service Level is below [*]% (the
“Termination Level”) for any [*] Periods, Penn Traffic may issue written notice
to C&S of its intent to terminate the Agreement within 3 business days of
the expiration of the Measurement Periods for which the Service Level was below
the Termination Level.  If, after receipt of such notice, C&S does
not achieve a Service Level equaling at least the Termination Level in the
Measurement Period immediately subsequent to such [*] Periods, Penn Traffic will
have the right to terminate the Agreement following the end of such succeeding
Measurement Period by providing C&S written notice thereof.

    


    7.6           Reporting
System.  The parties agree that the intent of this Agreement is
to provide Penn Traffic with service equal to, if not better, than what it
enjoyed prior to the commencement of the Agreement. Penn Traffic currently has a
reporting and service level system that prioritizes service by item
importance.  The parties will work together to develop a reporting system
that mirrors Penn Traffic’s current system and to work to ensure that Penn
Traffic receives a level of service by priority of category that is equal to, if
not better, than what it enjoyed prior to the commencement of the
Agreement.  Notwithstanding the preceding, the terms and conditions
(including the definitions, levels and
thresholds and calculations) regarding Required Service Level, Service
Level Calculation, Service Level Violation, Cure of Service Level Violation,
Penalty Payment and Service Level Termination as set forth in this Section 7
shall remain in full force and effect and shall not be altered or amended, even
after the reporting system described above is implemented.

    


    SECTION 8.  RECLAMATION
PROGRAM. Penn
Traffic and C&S hereby agree that Penn Traffic shall utilize C&S as and
C&S shall be Penn Traffic’s reclamation provider for all Penn Traffic Stores
commencing not later than sixty (60) days after the Effective
Date.  [*]

     

    SECTION 9.  FACILITIES.  The parties agree
that beginning on the Effective Date, the Merchandise will be procured to and
shipped from Penn Traffic's Facilities operated by Penn Traffic
employees.  To the extent that Penn Traffic elects to close or change
the location of either or both Facilities or add additional facilities, Penn
Traffic will give C&S reasonable notice of such and the parties agree to
meet and discuss any modifications necessary to this Agreement.  Penn
Traffic will arrange and be responsible for any reasonable outside storage and
related transportation expenses, including, but not limited to, outside storage
required due to the procurement of Merchandise [*].  The parties agree
to consult with each other with respect to forward buy activity and Facility
capacity, particularly where additional forward buy activity may result in
warehouse inefficiencies and/or outside storage expenses.  C&S
acknowledges that this may result in a decreased level of forward buy activity
on account of the Penn Traffic Stores, [*].

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 11
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    SECTION 10.    [INTENTIONALLY
OMITTED.]

    


    SECTION 11.  NO JOINT
EMPLOYER.  Penn
Traffic and C&S are independent contractors.  Neither party has
the right or power, express or implied, to do any act or thing that would bind
the other party, except as expressly set forth herein.  All employees
at or related to the Facilities or relating to the Dubois or Syracuse divisions
or the Penn Traffic Stores or company ("Penn Traffic Employees") are and will
continue to be the employees solely of Penn Traffic, unless otherwise agreed by
the parties.  Nothing in this Agreement shall alter the status of the
Penn Traffic Employees, and the Penn Traffic Employees shall not be considered
or deemed in any way to be employees of C&S, provided, however, that C&S
hired the two (2) produce turn buyers that were formerly employed by Penn
Traffic.  The parties agree to keep the produce turn buying function
in the Syracuse Facility, unless otherwise mutually agreed to by the parties.
The buying function, except with respect to produce, will be handled from
C&S facilities. Penn Traffic agrees to reasonably consider any request by
C&S to transfer the produce buying function to a C&S
facility.  C&S shall not exercise any authority over the Penn
Traffic Employees, including, but not limited to, selecting, engaging, fixing
the compensation of, discharging and otherwise managing, supervising and
controlling the Penn Traffic Employees and no joint employer relationship shall
exist.  Penn Traffic shall not exercise any authority over the produce
turn buyers.

    


    SECTION 12.  INVENTORY
POLICY.   Penn
Traffic will continue to manage and issue store credits to the Penn Traffic
Stores, handle all call-ins and handle customer service issues.  Penn
Traffic is responsible for inventory control and any and all shortages or gains
in the Facilities.  Further, Penn Traffic is fully responsible for the
cost and disposition of leftover ad product, out-of-code, dead, excess or
discontinued inventory.  The above is pursuant to and further
described on Schedule 12(a) attached hereto.  Amounts due by Penn
Traffic or credited to Penn Traffic pursuant to this Section 12 will be
estimated weekly and trued up at the close of each C&S fiscal period,
provided, however, that all Merchandise governed by PACA will be paid for within
thirty (30) days as set forth in Section 5.2 above.  The inventory
procedures for the Facilities will be Penn Traffic's current procedures attached
hereto as Schedule 12(b).  Penn Traffic agrees to observe a
warehouseman’s duty of care under applicable New York and Pennsylvania law with
respect to the Merchandise. Penn Traffic agrees, upon C&S's request, to
allow C&S access to the Facilities to inspect its inventory, and to confirm
that Penn Traffic is following the attached procedures and otherwise accurately
accounting for the inventory under GAAP principles.

    


    SECTION 13.  INDEMNITY
AND INSURANCE.

    


    13.1            Indemnification.
Without limiting any indemnification obligations set forth elsewhere in this
Agreement, the parties agree as follows:

     

    
       

      
        
          
          

        

        
          - 12
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     (a)           C&S.  C&S
shall defend, indemnify and hold harmless Penn Traffic and its subsidiaries and
affiliates, and its and their directors, officers, employees, servants, agents,
successors and assigns from any and all third party losses,
claims, charges and expenses including reasonable attorneys’ fees and costs of
settlement ("Losses") which are incurred by virtue of or result from (x) the
inaccuracy in or breach of any representation or warranty made by C&S in
this Agreement and any other agreement delivered in connection with this
Agreement; (y) the non-fulfillment of any covenant, provision or agreement to be
performed by C&S under this Agreement and any other agreement delivered in
conjunction with this Agreement during the Term; or (z) any claims for injury to
person or damage to property arising out of or resulting from (i) acts or
omissions of C&S, its employees, and agents in any manner relating to the
procurement or delivery to the Facilities (but only where C&S actually made
such delivery itself) of the Merchandise purchased for Penn Traffic pursuant to
the terms of this Agreement or (ii) the willful misconduct or negligent acts of
C&S or its employees or agents; provided, however, this indemnification and
hold harmless shall not apply to the extent of any claims arising from or as a
result of the omission, willful misconduct or negligent acts of Penn Traffic,
its employees or agents.  Whenever Penn Traffic receives notice of a
claim or demand that would be covered by this provision, Penn Traffic shall in
turn provide C&S with prompt written notice of such claim or demand and
shall tender the defense and handling of such claim to C&S.

     

    (b)           Penn
Traffic.  Penn Traffic shall defend, indemnify and hold
harmless C&S and its subsidiaries and affiliates, and its and their
directors, officers, employees, servants, agents, successors and assigns from
any and all third party Losses which are incurred by virtue of or result from
(v) claims of entitlement to liens and/or ownership of C&S's inventory in
the Penn Traffic Facilities; provided that this shall only apply to instances
where C&S can demonstrate that such Losses resulted from Penn Traffic
failing to fulfill an affirmative obligation to C&S; (w) Penn Traffic's
business or other operations, incurring or accruing at any time, including, but
not limited to, those relating to (i) the Facilities, any replacement or other
Penn Traffic facilities, outside storage and any real estate leases; (ii)
environmental matters; (iii) material handling and transportation equipment;
(iv) contractual obligations (other than this Agreement or any other agreement
between Penn Traffic and C&S, except as set forth herein); (v) Penn Traffic
Employees (including pension withdrawal liability); and (vi) Penn Traffic's
retail and wholesale stores; (x) the inaccuracy in or breach of any
representation or warranty made by Penn Traffic in this Agreement and any other
agreement delivered in connection with this Agreement; (y) the non-fulfillment
of any covenant, provision or agreement to be performed by Penn Traffic under
this Agreement and under any other agreement delivered in connection with this
Agreement during the Term; or (z) any claims for injury to person or damage to
property arising out of or resulting from (i) acts or omissions of Penn Traffic,
its employees, and agents in any manner relating to the procurement of (as
applicable), handling, storage, transportation or delivery (except as otherwise
set forth herein) or use of the Merchandise procured or purchased for Penn
Traffic pursuant to the terms of this Agreement and any other agreement
delivered in connection with this Agreement or (ii) the willful misconduct or
negligent acts of Penn Traffic, or its employees or agents; provided, however,
this indemnification and hold harmless shall not apply to the extent of any
claims arising from or as a result of the omission, willful misconduct or
negligent acts of C&S, its employees or agents.  Whenever C&S
receives notice of a claim or demand that would be covered by this provision or
any other indemnification obligation herein, C&S shall in turn provide Penn
Traffic with prompt written notice of such claim or demand and shall tender the
defense and handling of such claim to Penn Traffic.

     

    
       

      
        
          
          

        

        
          - 13
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    (c)           Product Liability;
Infringement.  Notwithstanding any provision to the contrary
contained herein, with respect to product liability claims or claims arising in
connection with any product acquired for, or supplied to Penn Traffic by C&S
pursuant to this Agreement (including liability for or claims of Infringement
arising in connection with such products), the parties shall look to the
manufacturer and/or vendor (or broker) of such product for any and all defense,
indemnity or hold harmless claims.  If the manufacturer and/or vendor
(or broker) is unable to provide such defense, indemnification or hold harmless,
then Penn Traffic agrees to defend, indemnify and hold harmless C&S and its
subsidiaries and affiliates, and its and their directors, officers, employees,
servants, agents, successors and assigns from, against, and in respect of, any
such claims, absent the gross negligence or willful misconduct of
C&S.  For purposes of this Section, "Infringement" shall mean
alleged or real infringement, of any trademark, patent, copyright or other
intellectual property right.

    


    13.2            C&S Insurance.
C&S agrees to procure and maintain, at its sole cost and expense,
Comprehensive General Liability Insurance with limits of liability for each
occurrence of no less than $[*] (with umbrella coverage above such $[*] of no
less than $[*] per occurrence) and automobile liability insurance in a combined
value of $[*] for property damage and injury to or death of any person, or
persons, with an insurance company or companies satisfactory to Penn
Traffic.  C&S shall name Penn Traffic and its subsidiaries and
affiliates, and its and their directors, officers, employees, servants, agents,
successors and assigns as additional insureds and the policies shall provide
that C&S cannot cancel any such insurance without providing Penn Traffic
with thirty (30) days prior notice.  Such policies of insurance and
certificates of insurance demonstrating the foregoing shall be delivered to Penn
Traffic within fifteen (15) days from the date of this Agreement, and renewals
thereof, as required, shall be delivered at least thirty (30) days prior to the
expiration of the policy term.

    


    13.3            Penn Traffic
Insurance.  Penn Traffic agrees to procure and maintain, at its
sole cost and expense, Comprehensive General Liability Insurance, including
products liability and contractual liability coverage, with limits of liability
for each occurrence of no less than $[*] (with umbrella coverage above such $[*]
of no less than $[*] per occurrence) and automobile liability insurance on all
owned, non-owned and hired vehicles in a combined value of $[*] for property
damage and injury to or death of any person, or persons, with an insurance
company or companies satisfactory to C&S.  Further, Penn Traffic
agrees to procure and maintain, at its sole cost and expense, (i) property and
casualty insurance providing all risk coverage in an amount not less than [*] of
the replacement cost of the Facilities (and any replacement facilities), the
material handling and other equipment and all Merchandise held or to be held in
its Facilities or otherwise by Penn Traffic (including the Existing Inventory
and the produce inventory); and (ii) workers' compensation insurance and
employer's liability insurance in the amounts required by law.  Penn
Traffic shall name C&S and its subsidiaries and affiliates, and its and
their directors, officers, employees, servants, agents, successors and assigns
as additional insureds (except with respect to workers' compensation and
employer's liability policies) and the policies shall provide that Penn Traffic
cannot cancel any such insurance without providing C&S with thirty (30) days
prior notice.  Such policies of insurance and certificates of
insurance demonstrating the foregoing shall be delivered to C&S within
fifteen (15) days from the date of this Agreement, and renewals thereof, as
required, shall be delivered at least thirty (30) days prior to the expiration
of the policy term.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 14
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    SECTION
14.  TERMINATION.

    


    14.1            Termination by
C&S.

    


    (a)C&S
may terminate this Agreement for cause (i) if Penn Traffic fails to pay any
undisputed amount or amounts cumulatively exceeding $[*] to C&S when due,
under this Agreement, the GM/HBC Agreement (as defined herein)
or   any other agreement between Penn Traffic and C&S or
their respective controlled affiliates or subsidiaries, and such failure
continues for 1 business day (where banks in New York are legally open) after
C&S has provided Penn Traffic written notice of such failure; (ii) if Penn
Traffic has breached any material obligation (other than a payment obligation
which is covered under (i) above) under this Agreement or the Inventory
Agreement, and if such breach is curable, remains uncured after 60 days
following written notice of such breach from C&S; (iii) if Penn Traffic has
filed for bankruptcy protection or a  proceeding shall be instituted
against Penn Traffic seeking to adjudicate it bankrupt or insolvent and such
proceeding shall remain undismissed or unstayed for a period of 60 days,
provided that C&S shall not terminate this Agreement in such an event if
Penn Traffic is otherwise in compliance with the terms of this Agreement and
Penn Traffic provides adequate assurance of future performance under this
Agreement; or (iv) if General Electric Capital Corporation or Kimco Capital
Corp. or any other material credit or lending party has declared that Penn
Traffic has committed an Event of Default as defined under its respective credit
agreement with Penn Traffic and has ceased extending Penn Traffic credit,
provided that C&S shall not terminate this Agreement in such an event if
Penn Traffic is otherwise in compliance with the terms of this Agreement and
Penn Traffic provides adequate assurance of future performance under this
Agreement.

    


    (b)            If
C&S terminates this Agreement pursuant to this Section 14.1, then, Penn
Traffic shall, (i) pay any and all amounts outstanding, charges and fees
incurred through termination; (ii) purchase from C&S any and all unamortized
IT capital expenditures to the extent C&S made such expenditure in order to
fulfill its obligations pursuant to this Agreement; and (iii) purchase at the
[*] (plus delivery fees) any and all inventory purchased by C&S for Penn
Traffic.  Further, in conjunction with such termination, C&S may,
at its election and after providing Penn Traffic with 1 business day (where
banks in New York are legally open and which 1 business day can overlap with and
is not in addition to any notice requirement set forth in 141.(a) above) (and
the opportunity within such 1 business day to pay for the inventory as set forth
in (iii) above), enter onto the Penn Traffic Facilities to remove its
Merchandise at the Facilities, or to arrange for shipment of the Merchandise to
a third party and Penn Traffic agrees to cooperate with C&S in its efforts
to assemble and remove its Merchandise.  In such an instance, Penn
Traffic shall remain liable for any material deficiency resulting from the sale,
liquidation or disposition of the Merchandise as compared to the value of the
Merchandise calculated at [*] (plus delivery fees), and Penn Traffic shall also
pay any and all reasonable costs and expenses in conjunction with C&S's
retrieval of C&S's Merchandise, as well as fulfill all other obligations
stated herein.  C&S agrees to use reasonable efforts to obtain
fair market value for the inventory in any sale, liquidation or disposition of
the Merchandise.  The parties agree and acknowledge that the remedies
under this section are nonexclusive, cumulative of and additional to all other
rights or remedies in law or equity of C&S (including rights or remedies
afforded to C&S under the Uniform Commercial Code (UCC)), including
C&S's right to seek and recover demonstrated lost profits for the remainder
of the Term of the Agreement.  Further, all provisions surviving
termination of this Agreement (such as an indemnification obligation) shall
remain in full force and effect.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 15
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    14.2            Termination by Penn
Traffic.  Penn Traffic may terminate this Agreement for cause
(i) if C&S has breached any material obligations under this Agreement or the
Inventory Agreement and if such breach is curable, remains uncured after 60 days
following written notice of such breach from Penn Traffic; or (ii) if C&S
has filed for bankruptcy protection, or a proceeding shall be instituted against
C&S seeking to adjudicate it bankrupt or insolvent and such proceeding shall
remain undismissed or unstayed for a period of 60 days, provided that Penn
Traffic shall not terminate this Agreement in such an event if C&S is
otherwise in compliance with the terms of this Agreement and C&S provides
adequate assurance of future performance under this Agreement.  Penn
Traffic may further terminate all components of this Agreement, with the
exception of the [*] which will remain in full force and effect, for cause if
C&S fails to pay any undisputed amount or amounts cumulatively exceeding
$[*] to Penn Traffic when due, under this Agreement, the GM/HBC Agreement or any
other agreement between Penn Traffic and C&S or their respective controlled
affiliates or subsidiaries, and such failure continues for 1 business day (where
banks in New York are legally open) after Penn Traffic has provided C&S
written notice of such failure. [*] In the event that Penn Traffic terminates
the Agreement pursuant to this Section 14.2, C&S shall pay any and all
amounts outstanding, rebates, charges and fees incurred through
termination.  The parties agree and acknowledge that the remedies
under this section are nonexclusive, cumulative of and additional to all other
rights or remedies in law or equity of Penn Traffic.  Further, all
provisions surviving termination of this Agreement (such as an indemnification
obligation) shall remain in full force and effect.

    


    14.3           Expiration of
Term.  Unless terminated earlier as provided under Sections
14.1 and 14.2, this Agreement shall expire at the end of the
Term.  Upon the expiration of the Term, Penn Traffic must, subject to
its rights under Section 5.4, fulfill all obligations set forth in Section
14.1(b)(i), (ii) and (iii), and C&S must, subject to its rights under
Section 5.4, fulfill all obligations set forth in Section 14.2.

    


     

    SECTION 15.  FORCE
MAJEURE.  Notwithstanding any other provision of this
Agreement, if producers or manufacturers establish allocations or restrictions
on quantities of supplies available to C&S or if service at the facilities
of either C&S or Penn Traffic is interrupted by reason of riots,
insurrection, war, adverse weather, acts of God, or work stoppage, pickets or
other labor disputes at or regarding the Facilities or C&S facilities,
performance of the affected party shall be excused to the extent, but only to
the extent, it is delayed, hindered or prevented by any such events.
Notwithstanding the foregoing, both parties will work together to mitigate any
effects under this Section 15.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 16
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    SECTION 16.  FINANCIALS.

     

    (a)           Penn
Traffic shall inform C&S of any and all defaults occurring under either a
material credit agreement or any other material lending agreement.

     

    (b)           Penn
Traffic shall provide C&S annual financial statements (including income
statement, balance sheet, profit and loss statement and cash flow statement) for
Penn Traffic and its subsidiaries and affiliates within [*] of the later of
their public filing or completion by an independent certified public accountant
and in no event more than [*] following the end of the fiscal year for Penn
Traffic.  Such financial statements will be accompanied by an opinion
of the independent certified public accountant who prepared such statements as
well as a certificate of the senior officer of Penn Traffic as to the truth and
accuracy of the financial statements and attesting that the financial statements
present fairly and accurately the financial condition and results of operations
of Penn Traffic and its subsidiaries and affiliates for the period then
ended.

     

    SECTION 17.  NOTICES.  All
notices hereunder shall be sent by telephone (confirmed immediately in writing),
and shall be deemed to have been duly given if faxed (with receipt confirmed),
hand-delivered, delivered by overnight courier or mailed by registered or
certified mail, postage prepaid, and addressed or faxed as follows, unless and
until either party notifies the other in accordance with this Agreement of a
change of address or fax number:

    


    
      	
              If
      to C&S:

            	
              C&S
      Wholesale Grocers, Inc.

            


    

    7
Corporate Drive

    Keene, NH
03431

    Attn:
Richard B. Cohen, Chief Executive Officer

    Phone: (603) 354-4601

    Fax: (603) 354-4692

    


    With a
copy to:

    


    General
Counsel

    C&S
Wholesale Grocers, Inc.

    7
Corporate Drive

    Keene, NH
03431

    Phone:
(603) 354-5885

    Fax:
(603) 354-4694

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

       

      
        
          
          

        

        
          - 17
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    If to Penn Traffic:

    


    The Penn
Traffic Company

    1200
State Fair Blvd.

    Syracuse,
NY 13221

    Attn:  Gregory
J. Young, Chief Executive Officer

    Phone:
(315) 461-2382

    Fax:  (315)
461-2474

    


    With a copy to:

    


    General
Counsel

    The Penn
Traffic Company

    1200
State Fair Blvd.

    Syracuse,
NY 13221

    Phone:
(315) 461-2347

    Fax:
(315) 461-2532

    


    SECTION
18.  MISCELLANEOUS.

    


    18.1            Entire
Agreement.  This Agreement and the Schedules contained herein
contain the entire understanding of the parties with respect to its subject
matter and may be amended only by written instrument executed by both parties or
their respective successors or assigns. The Original Agreement will be
amended and restated by this Agreement as of the Effective Date.  The
GM/HBC Agreement by and between C&S and Penn Traffic, dated January 24, 2007
("GM/HBC Agreement") is a separate and independent agreement covering volume
separate from the volume covered under this Agreement and the GM/HBC Agreement
shall remain in full force and effect according to its
terms.  [*]

    


    18.2            Waiver;
Remedies.  No claim or right arising out of the breach of this
Agreement can be discharged in whole or in part by waiver or renunciation of a
claim or right unless the waiver or renunciation is supported by consideration
and is in writing and signed by the aggrieved party.  Waiver by either
party of a breach by the other of any provision of this Agreement shall not be
deemed a waiver of any other provision or future compliance with all provisions
hereunder, and all such provisions shall remain in full force and
effect.  Failure of either party to enforce any right hereunder shall
not be deemed a waiver of any subsequent right hereunder.

    


    18.3           Counterparts.  This
Agreement may be executed simultaneously in two or more counterparts, via
facsimile or otherwise as agreed to by the parties hereto, each of which shall
be deemed an original and all of which together shall constitute one and the
same instrument.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 18
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    18.4.         Organization;
Standing.  C&S represents and warrants to Penn Traffic (as
of the date of this Agreement and as of the Effective Date), that it is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Vermont.    Penn Traffic represents and
warrants to C&S (as of the date of this Agreement and as of the Effective
Date), that it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.

    


    18.5           Absence of Conflicting
Agreements.  The parties hereby represent and warrant to each
other (as of the date of this Agreement and as of the Effective Date) that the
execution and delivery by such party of this Agreement does not, and the
perfor­mance by such party of this Agree­ment will not (i) conflict with
or violate the articles of organization or operating agreement, in each case as
currently in effect, of such party, (ii) conflict with or violate any law
applicable to such party or by or to which such party is bound or subject or
(iii) result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would constitute a de­fault) under, or give
to any person or entity any right of termination, amendment, acceleration or
cancellation of, or require payment under any note, bond, mortgage, indenture,
contract, agreement, arrange­ment, commitment, lease, license, permit,
franchise or other instrument or obligation to which such party is a party or by
or to which such party is bound or subject.

    


    18.6           No Consents
Required.  The parties hereby represent and warrant to each
other (as of the date of this Agreement and as of the Effective Date) that no
con­sent, ap­prov­al, waiv­er, li­cense, order,
autho­ri­zation, govern­mental consent or permit of, or
registra­tion, declara­tion, or filing with, or notice to, any
governmen­tal authority or any other person or entity, is re­quired in
connec­tion with the execu­tion, deliv­ery, and perfor­mance by
either party of this Agreement.

    


    18.7           Authority; Binding
Effect.  The parties hereby represent and warrant to each other
(as of the date of this Agreement and as of the Effective Date) that each
individual signing this Agreement hereby represents and warrants that he has the
full power and authority to do so and thereby bind the corporation on whose
behalf the individual has signed the Agreement.  The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of each party.  This Agreement
shall be binding upon the parties and their respective successors or assigns, as
well as any transferee of substantially all of the assets of a party, provided,
however, that neither party may assign this Agreement without the written
consent of the other party. 

    


    18.8           Applicable
Law.  This transaction shall be governed by, and this Agreement
shall be construed and enforced in accordance with, the internal laws of the
state of New York.  If any provision, clause or part, or the
application thereof under certain circumstances, is held invalid, the remainder
of this Agreement or the application of such provision, clause or part shall not
be affected thereby.

     

    
       

      
        
          
          

        

        
          - 19
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    18.9           Confidentiality.

    


    (a) Penn Traffic
Confidentiality.  Penn Traffic acknowledges that disclosure to
third parties of product cost, product specifications, the terms of this
Agreement and wholesale information or other non-public financial information
obtained by Penn Traffic in the course of this Agreement could have a
substantial adverse effect on C&S.  Penn Traffic further
acknowledges that such commercial information obtained by Penn Traffic regarding
C&S (or its affiliates or subsidiaries) wholesale operations is proprietary
to C&S.  Penn Traffic agrees to maintain any such commercial
information in strict confidence.  Penn Traffic agrees to restrict
access to any such commercial information to only those Penn Traffic employees
deemed necessary to fulfill its responsibilities under this Agreement and
further agrees to not disclose any such commercial information except as
otherwise required by law.  If Penn Traffic is required by law to
disclose any confidential information, Penn Traffic shall notify C&S and
cooperate with C&S in its efforts to limit such disclosure or to seek
confidential treatment with respect to all or a portion of such confidential
information or to seek such a protective order or other remedy as may be
available by law.  [*]

    


    (b) Price Verification and
[*]
Audit.  Without limiting the above or any other terms of this
Agreement, the reports, documents, information and materials provided to Penn
Traffic and its auditors  in connection with price verification and
audit procedures pursuant to Sections 6.1 and 6.2 are highly confidential,
non-public information which shall be protected from disclosure pursuant to
Section 18.9(a) above.  In certain cases, notwithstanding the
execution of this Agreement and the confidentiality obligations set forth
herein, due to the sensitive nature of certain information and/or other
confidentiality obligations of C&S, C&S may not disclose certain
information to Penn Traffic in its original format [*].  Further, Penn
Traffic agrees, upon C&S's request, to execute any confidentiality agreement
provided by C&S and shall cause its officers or other employees (or third
party agents) who will have access to confidential information to execute any
individual affirmations of their confidentiality obligations as requested and in
a form provided by C&S.  In addition to the above, Penn Traffic
understands and agrees that information related to [*].  Accordingly,
in order for C&S to agree to provide such confidential information, Penn
Traffic agrees that it will allow access to such confidential information only
to those Penn Traffic employees or third party agents who have a need to know
such confidential information in connection with Penn Traffic's price
verification and [*] audit and who have been approved of by
C&S.  All such confidential information may not be copied or
reproduced by Penn Traffic in any form, and may only be used pursuant to the
uses permitted hereunder.

    


    (c) C&S
Confidentiality.  C&S acknowledges that disclosure to third
parties of product cost, product specifications and retail information or other
non-public financial information obtained by C&S in the course of this
Agreement could have a substantial adverse effect on Penn
Traffic.  C&S further acknowledges that such commercial
information obtained by C&S regarding Penn Traffic retail operations is
proprietary to Penn Traffic.  C&S agrees to maintain any such
commercial information in strict confidence.  C&S agrees to
restrict access to and use of any such commercial information to only those
C&S employees deemed necessary to fulfill its responsibilities under this
Agreement and further agrees to not disclose any such commercial information to
its other customers or its own retail operations except as otherwise required by
law.  If C&S is required by law to disclose any confidential
information, C&S shall notify Penn Traffic and cooperate with Penn Traffic
in its efforts to limit such disclosure or to seek confidential treatment with
respect to all or a portion of such confidential information or to seek such a
protective order or other remedy as may be available by law.

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 20
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    18.10        Compliance With
Law.  Each party hereto shall, at its sole cost and expense,
procure and maintain all licenses and permits required for its business, and
represents and warrants that it shall comply with all applicable federal, state
or local laws, ordinances, and regulations pertaining to its business and its
performance under this Agreement, including those pertaining to the environment,
tobacco, OSHA, food labeling, and bioterrorism.  Penn Traffic agrees
that it shall materially comply with all terms and conditions of the Facility
leases.

    


    18.11        C&S Ownership of
Inventory.  Prior to the time a load is sealed at the Facility
in preparation for shipment to the Penn Traffic Stores, has left such Facility
and is in transit to the Penn Traffic Stores (at which time title shall pass to
Penn Traffic) (the "Date of Transfer"), C&S has and shall retain full
and complete ownership of any inventory supplied by C&S hereunder (except
for the products expressly excluded from Merchandise as set forth in Section 1.3
of this Agreement), and
all rights under the UCC and all other applicable law with respect thereto
including, without limitation, rights of a seller, secured party, bailor and/or
consignor, as applicable.  Penn Traffic agrees that it does not have
any ownership or other interest in such
inventory, regardless of the fact that such inventory is located at its
Facilities.  Penn Traffic will
not represent to any person that it has any such ownership or other interest
(including to its lender(s)), except as set forth herein, nor will Penn Traffic pledge
or grant a security interest in, create or assert a lien on, or otherwise
encumber, C&S's inventory, or purport to do or suffer to exist any of the
foregoing, to secure any debt liability or obligation in connection with any
note, bond, contract, agreement, commitment, lease, license, permit, financial
or other instrument to which Penn Traffic is a party, or
otherwise.  Further, Penn Traffic represents and warrants to C&S
that it has not granted a security interest in (or otherwise encumbered or
permitted any lien to attach to) this inventory in the past, except to its
lenders in conjunction with its working capital financing, which lien shall not be
deemed to attach to such inventory and attachment is hereby agreed to be
postponed until the Date of Transfer. As promptly as practicable after the
Effective Date, Penn Traffic will use commercially reasonable efforts to obtain
and provide C&S with copies of written agreement ("Consents") from General
Electric Capital Corporation, Kimco Capital Corp., and any other Penn Traffic
lender(s) or parties secured by Penn Traffic's inventory that C&S owns all
such inventory and/or has all rights of a seller, secured party, bailor and/or
consignor under the UCC and all other applicable law (as the case may be) and
that neither Penn Traffic nor any such bank, lender or other party has any
security or other interest in this inventory, and such inventory is expressly
excluded from the lender(s) or other third parties blanket or other lien(s), if
any until the Date of Transfer.  The Consents will be in the form
attached hereto as Schedule 18.11.  Penn Traffic agrees to keep
C&S's inventory in the Facilities (holding the same in express trust for C&S)
until such time as the inventory is loaded on the trucks for delivery and in
transit to the Penn Traffic Stores in the ordinary course of its
business.  To the extent Penn Traffic procures inventory from another
source (pursuant to the terms and conditions of this Agreement), or to the
extent any C&S inventory remaining in the Facilities is purchased by Penn
Traffic from C&S (such as leftover ad product, out-of-code, dead, excess or
discontinued inventory), Penn Traffic agrees to use reasonable best efforts to
segregate any such inventory and to notify C&S of such.  Penn
Traffic agrees to allow C&S to post signs in the Facilities stating that all
inventory therein (except the products expressly excluded from the Merchandise
pursuant to Section 1.3) is the property of C&S.  Penn Traffic
agrees to cooperate with C&S and to execute any written agreement,
instrument or statement or do any other acts reasonably necessary to effectuate
this provision in C&S's sole discretion.    Further,
Penn Traffic agrees to use its commercially reasonable efforts to cause its
lender(s), landlord(s) or any other third party in C&S's reasonable
discretion to cooperate with C&S and to execute any reasonable written
agreement, instrument or statement or do any other acts reasonably deemed
necessary to effectuate this provision in C&S's sole discretion (including,
without limitation, obtaining lien waivers from any landlords at the Facilities
in favor of C&S, together with a right of access to the Facilities in the
event that C&S deems such access appropriate or necessary to the inspection
or custody of the inventory).  Notwithstanding the express intent of
the parties that C&S retain ownership of the inventory referred to in this
Section, until the Date of Transfer, if and to the extent the arrangement
described in this paragraph is deemed to create a security interest, bailment or
consignment by virtue of the retention of title by C&S or for any other
reason, and to the extent C&S may (in its discretion and without hereby
creating any obligation to do so) provide purchase money financing of inventory
to or for the benefit of Penn Traffic, this Agreement shall be deemed a security
agreement under the UCC and Penn Traffic hereby grants to C&S a continuing
first and exclusive lien on and security interest in and to all such existing
and future inventory of Penn Traffic procured or purchased from C&S and
maintained at the Facility and any proceeds thereof (as defined under the UCC)
("Proceeds") to secure all sums payable by or on behalf of Penn Traffic to
C&S in accordance with the terms of this Agreement and all other agreements
between C&S and Penn Traffic or any controlled affiliate(s) of Penn
Traffic.  Such lien on and security interest in and to the inventory
and the Proceeds thereof shall attach only until the Date of
Transfer.  To perfect any such precautionary lien, Penn Traffic
authorizes C&S to file such financing statements and continuation
statements, amendments thereto, and such other instruments, documents or
notices, as may be necessary or desirable, in order to perfect and preserve the
security interests granted or purported to be granted hereby, any such filing
being precautionary only.  Upon the occurrence of any default under
this Agreement, C&S shall have all rights, remedies, benefits and security
under the UCC or other applicable law with respect to such inventory pursuant to
the terms and conditions of this Section including the provisions with respect
to status of the inventory after the Date of Transfer.  For purposes
of this Section, Penn Traffic shall mean and include all subsidiaries or
controlled affiliates thereof. Penn Traffic shall immediately give C&S a
copy of any notice from its lenders or landlords declaring a default or breach
under any lease, lending or credit agreement to which Penn Traffic is a party or
by which its properties are bound, or if a lender takes any action to accelerate
the obligations owed under the credit agreement, or of any action to foreclose
or collect on its security interest in any Collateral (as defined in the credit
agreement), including any notice of a sale or other disposition of all or any
part of the Collateral.   Nothing stated herein shall prejudice
any rights or liens otherwise available to C&S under PACA, the UCC or other
applicable law, at any time (including after the Date of Transfer), as a seller
of goods.

     

    
       

      
        
          
          

        

        
          - 21
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    18.12 Dispute
Resolution.  Any controversy, claim, or dispute between the
parties, directly or indirectly, concerning this Agreement or the breach hereof,
or the subject matter hereof, including questions concerning the scope and
applicability of this arbitration clause, shall be finally settled by
arbitration in New York City or another location to be mutually agreed by the
parties pursuant to the rules then applying of the American Arbitration
Association ("AAA"), with the sole exception of circumstances involving
irreparable injury to the other party which is not adequately compensable in
damages or at law, in which case the injured party shall have the right to bring
an action in a court to seek an appropriate equitable remedy, including
injunctive relief.  The parties will mutually agree on a single
arbitrator from a list furnished by the AAA within 20 days after the
commencement of the arbitration proceeding.  The parties agree that
the arbitrator's award ("Award") shall be duly made in writing within thirty
(30) days after the hearings in the arbitration proceedings are
closed.  The arbitrator shall have the right and authority to assess
the cost of the arbitration proceedings and to determine how its decision as to
each issue or matter in dispute may be implemented or enforced.

     

    
      
      

    

    Judgment upon the Award may be sought
and entered in any competent federal or state court located in the United States
of America.  An application may be made to such court for confirmation
of the Award and for any other equitable or legal remedies that may be necessary
to effectuate such Award or otherwise preserve any rights for which no adequate
remedy at law exists.

    


               The
parties understand and agree that they hereby are giving up and waiving any
claim or right to litigate in court or by a jury trial, unless or to the extent
that such rights are specially provided for under this Agreement or cannot be
waived under applicable law.

    


    18.13 Survival. The
termination of this Agreement shall not relieve either party of any of its
obligations accrued up to the time of termination.  Those provisions
which expressly or by their nature are intended to survive termination of this
Agreement shall be deemed to have so survived.  Such provisions which
are intended to survive the termination of this Agreement include, but are not
limited to, the following Sections: 13.1, 13.4, 14.1(b), 14.3,
18.11.

    


    [SIGNATURE
PAGE TO FOLLOW]

     

    
       

      
        
          
          

        

        
          - 22
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    IN
WITNESS WHEREOF, the parties have duly executed this Agreement under seal as of
the date first above written.

    


    


    THE
PENN TRAFFIC COMPANY

    


    


    
      	
               
      

            	
              By:

            	
              _______________________________

            


    

    Name:

    Title:

    


    


    C&S
WHOLESALE GROCERS, INC.

    


    


    
      	
               
      

            	
              By:

            	___________________________	 


    

    Name:

    Title:

    


    
      
        
          
             

          

           


        

        
          - 23
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    LIST
OF SCHEDULES

    


    


    Schedule
2.2                  
Contract Year Commencement & Termination Dates

    


    Schedule
3.1(f)              
Inventory Agreement

    


    Schedule
3.1(g)             
Transportation Costs for Inbound Transfers

    


    Schedule
12(a)              
Shortages/Gains

    


    Schedule
12(b)              
Inventory Procedures

    


    Schedule
18.11              
Form of Consents

     

    
       

      
        
          
          

        

        
          - 24
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    SCHEDULE
2.2

    


    CONTRACT
YEAR COMMENCEMENT &

    TERMINATION
DATES

    


    


    
      
        
          
            
              
                	
                        Effective Date

                      	 
      	
                        10/12/2008

                      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
                        Year Start

                      	
                        Year End

                      	
                        Contract Days

                      	
                        Contract Weeks

                      	
                        Contract Quarters

                      
	 	 	 	 	 	 
	
                        Contract
      Year 1

                      	
                        10/12/2008

                      	
                        10/10/2009

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 2

                      	
                        10/11/2009

                      	
                        10/9/2010

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 3

                      	
                        10/10/2010

                      	
                        10/8/2011

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 4

                      	
                        10/9/2011

                      	
                        10/6/2012

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 5

                      	
                        10/7/2012

                      	
                        10/5/2013

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 6

                      	
                        10/6/2013

                      	
                        10/4/2014

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13 weeks

                      
	
                        Contract
      Year 7

                      	
                        10/5/2014

                      	
                        10/10/2015

                      	
                        371

                      	
                        53

                      	
                        3
      Qtrs @ 13 weeks + Qtr @ 14 weeks

                      
	
                        Contract
      Year 8

                      	
                        10/11/2015

                      	
                        10/8/2016

                      	
                        364

                      	
                        52

                      	
                        4
      Qtrs @ 13
weeks

                      


              

            

          

        

      

    

    


    


    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    SCHEDULE
3.1(f)

    INVENTORY
AGREEMENT

    


    This
Inventory Agreement ("Agreement") is made as of the 10th day of September, 2008,
by and between The Penn Traffic Company, a Delaware corporation ("Penn Traffic")
and C&S Wholesale Grocers, Inc., a Vermont corporation
("C&S").

    


    
      	
               
      

            	
              WITNESSETH

            


    

    


    WHEREAS, pursuant to that certain
Supply Agreement by and between Penn Traffic and C&S dated as of January 29,
2008 (the "Original Agreement"), C&S agreed to procure and to sell and Penn
Traffic agreed to purchase Penn Traffic’s requirements of produce, on the terms
and subject to the conditions set forth in the Original Agreement;

    


    WHEREAS, Penn Traffic and C&S have
now amended and restated the Original Agreement pursuant to that certain Amended
and Restated Penn Traffic Company Supply Agreement dated September 10, 2008 (the
“Amended Supply Agreement”), whereby C&S will procure and sell, and Penn
Traffic will purchase, Penn Traffic’s entire requirements in the categories of
merchandise enumerated in the Amended Supply Agreement (such categories being
defined therein as the “Merchandise”), on the terms and subject to the
conditions set forth in the Amended Supply Agreement;

    


    WHEREAS,
in accordance with the Amended Supply Agreement, the parties contemplate that
the transition ("Transition") to C&S of Penn Traffic’s supply requirements
with respect to the Merchandise (except produce which is currently and will
continue to be supplied) will commence on or about October 12, 2008 (the
“Transition Date”) with respect to both Penn Traffic's Syracuse, New York
facility and Penn Traffic's Dubois, Pennsylvania facility (together, the
"Facilities"); and

    


    WHEREAS, Penn Traffic and C&S wish
to set forth the terms and conditions regarding the Transition, including
without limitation, the acquisition by C&S of Penn Traffic’s Existing
Inventory (as defined herein), in accordance with Section 3.1(f) of the Amended
Supply Agreement;

    


    NOW, THEREFORE, for and in
consideration of the mutual covenants and benefits contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Penn Traffic and C&S, Penn Traffic and C&S agree as
follows:

    


    
      	
              1.  

            	
              Definition of Existing
      Inventory.  “Existing Inventory” shall mean that portion
      of Penn Traffic's Merchandise (with the exception of produce inventory at
      the Facilities, which C&S currently owns) that meets all of the terms,
      conditions and restrictions set forth herein present at the Facilities as
      of the Transition Date.  Existing Inventory shall not include
      damaged, distressed, off-condition, out-of-code or short-coded inventory,
      dead inventory, unmatched items, items that are not in full, original
      factory-sealed cases or cross-dock or DSD
items.

            


    

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    


    
      	
              2.  

            	
              Definition of Actual
      Cost.  The “Actual Cost” for each item of Existing
      Inventory shall mean the cost reflected on Penn Traffic's books and
      records maintained in the ordinary course of
      business.  [*].

            


    

     

    
      	
              3.  

            	
              Representations and
      Warranties.  Penn Traffic represents and warrants that
      Existing Inventory shall, as of the Transition Date be:  (i)
      owned by Penn Traffic, free and clear of any and all liens, claims,
      encumbrances and rights of others of any nature, (ii)  not
      subject to recall by the manufacturer or distributor or any governmental
      or regulatory agency and not the subject of any notice not to distribute
      such product, and (iii) in compliance with all applicable laws, rules,
      regulations and ordinances.

            


    

    


    
      	
              4.  

            	
               Inventory
      Maintenance.  From the date hereof until the Transition
      Date, Penn Traffic shall maintain the inventory levels at its Facilities
      consistent with its current or historical levels.  Penn Traffic
      shall segregate any excluded merchandise in the
  Facilities.

            


    

    


    
      	
              5.  

            	
              Transfer of
      Ownership.  C&S will acquire ownership of all
      Existing Inventory as of the Transition Date for the purchase price as
      provided in paragraph 6 hereof.  The Existing Inventory amounts
      will be determined by relying on Penn Traffic's perpetual inventory using
      its current systems and inventory procedures (including daily cycle
      counts).  Such inventory may be inspected by C&S to verify
      conformance with all terms, conditions and restrictions of this
      Agreement.  Penn Traffic shall provide C&S with a bill of
      sale for all Existing Inventory.

            


    

    


    
      	
              6.  

            	
              Purchase Price for
      Existing Inventory.  C&S shall pay Penn Traffic on
      the [*] for the Existing Inventory via
[*]

            


    

     

    
      	
              7.  

            	
              Dead and Excess
      Inventory.  Penn Traffic shall be responsible for the
      cost and disposition of any Existing Inventory consisting of or that
      becomes damaged, distressed, off-condition, out-of-code, short-coded or
      dead inventory items, excess or discontinued Merchandise (collectively,
      "Distressed Inventory"), whether or not owned by Penn Traffic, all
      consistent with the Amended Supply Agreement.  Further, Penn
      Traffic agrees to distro slow moving items to its corporate stores
      consistent with its current policies, except with respect to slow moving
      items unique to the independent wholesale stores.  Penn Traffic
      agrees to provide C&S with a list of such unique items prior to the
      Effective Date, and to provide prompt notice to C&S of any seasonal or
      other changes to this list as such changes occur.  This
      provision 7 shall apply to all Merchandise on a go forward basis,
      including, but not limited to, the Existing
      Inventory.   Notwithstanding anything contained herein or
      in the Amended Supply Agreement to the contrary,
  [*].

            


    

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          - 2
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              8.  

            	
              Indemnification;
      Insurance.  C&S shall indemnify Penn Traffic and
      agrees to defend and hold Penn Traffic harmless from and against any and
      all third party claims, liabilities, losses, costs, damages, judgments,
      settlements and expenses (including reasonable attorney's fees and
      expenses incurred in defending or prosecuting any claim for any such
      liabilities, losses, costs, damages, judgments, settlements or expenses)
      ("Losses") arising out of or resulting from C&S's performance under
      this Agreement.

            


    

     

    Penn
Traffic shall indemnify C&S and its affiliates and agrees to defend and hold
C&S and its affiliates harmless from and against any and all third party
Losses arising out of or resulting from claims relating to (i) Penn Traffic’s
performance under this Agreement or possession, ownership or use of the Existing
Inventory at all times, (ii) inaccuracies in Penn Traffic's perpetual inventory
numbers; (iii) any breach by Penn Traffic of a representation or warranty stated
herein; and (iv) vendor paybacks, product liability or Infringement related to
the Existing Inventory or Penn Traffic’s ownership or operation of
such.  Penn Traffic shall warrant and defend its title to the Existing
Inventory forever against all claims and demands whatsoever.

    


    In
connection with, and during, the Transition, Penn Traffic shall maintain all
insurance described under Section 13.3 of the Amended Supply
Agreement.  Upon execution of this Agreement, Penn Traffic shall
provide C&S with a certificate of insurance evidencing compliance with the
foregoing insurance obligation.

    


    
      	
              9.  

            	
              Amended Supply
      Agreement.  Capitalized terms used herein and not
      otherwise defined shall have the meanings assigned to them in the Amended
      Supply Agreement.  If, for any reason, the Amended Supply
      Agreement is terminated prior to the Effective Date set forth therein,
      this Agreement shall be simultaneously terminated and be of no force or
      effect.  A material failure by either party of its obligation to
      complete the Transition shall constitute a breach of a material obligation
      under the Amended Supply Agreement.  To the extent of any
      conflict in the terms of this Agreement and the Amended Supply Agreement,
      the Amended Supply Agreement shall
govern.

            


    

     

    
      	
              10.  

            	
              Authority.  Each
      individual signing this Agreement hereby represents and warrants that he
      has the full corporate authority to do so and thereby bind the corporation
      on whose behalf the individual has signed the
  Agreement.

            


    

     

    
      	
              11.  

            	
              Binding
      Effect.  This Agreement shall be binding upon the parties
      and their respective successors or assigns, as well as any transferee of
      substantially all of the assets of a party.  Neither party shall
      have the right to assign its rights or obligations hereunder or any
      interest herein without the prior written consent of the other party,
      which consent shall not be unreasonably withheld, conditioned or
      delayed.

            


    

     

     

    
       

      
        
          
          

        

        
          - 3
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              12.  

            	
              Applicable
      Law.  This transaction shall be governed by, and this
      Agreement shall be construed and enforced in accordance with, the internal
      laws of the state of New York.  If any provision, clause or
      part, or the application thereof under certain circumstances, is held
      invalid, the remainder of this Agreement or the application of such
      provision, clause or part shall not be affected
  thereby.

            


    

     

    
      	
              13.  

            	
              Entire
      Agreement.  This Agreement and the Amended Supply
      Agreement (together will all accompanying schedules), contain the entire
      agreement between the parties with respect to the subject matter hereof
      and supersede all prior agreements and understandings between the parties
      in connection therewith.  This Agreement may not be modified or
      amended except by a written agreement signed by the
      parties.  Parties agree to keep the terms and conditions of this
      Agreement strictly confidential.

            


    

     

    
      	
              14.  

            	
              Counterparts.  This
      Agreement may be executed in separate counterparts, each of which shall be
      deemed an original, and all such counterparts together shall constitute
      one and the same instrument.  This document may be executed and
      delivered by facsimile.

            


    

     

    


     [Signature
Page Follows.]

     

    
       

      
        
          
          

        

        
          - 4
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    IN
WITNESS WHEREOF, Penn Traffic and C&S have executed this Inventory Agreement
on the day and year first written above.

     

    


    THE
PENN TRAFFIC COMPANY

    


    


    


    By:________________________________

    Name:

    Title:

    


    


    


    C&S
WHOLESALE GROCERS, INC.

    


    


    


    By:________________________________

    Name:

    Title:

     

    
       

      
        
          
          

        

        
          - 5
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    SCHEDULE
3.1(g)

    


    TRANSPORTATION
COSTS FOR INBOUND TRANSFERS

    


    
      
        
          
            	
                    From

                  	
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                     Round
      Trip Miles

                  	
                     Initial
      Lane

                    Cost
      w/out Fuel

                  	
                     Fuel

                  	
                     Initial
      Lane

                    Rate
      with Fuel

                  
	
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                    Notes:

                  	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    1.
      [*]

                  
	
                    2.
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                    3.
      [*]

                  	 
      	 
      


          

        

      

    

     

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

    

    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    SCHEDULE
12(a)

    


    SHORTAGES/GAINS

    


    Inventory
Gain / (Loss) Measurement

    


    The
calculation of warehouse inventory gain/(loss) will be performed following the
close of each C&S Accounting Period.  The method for calculating
the gain/(loss) will be based on the elements identified below.  The
associated C&S systemic transaction codes are identified in parenthesis for
informational and comparative purposes.

    


    
      
        	
                Item
      #

              	 
      	
                Inventory

                Gain
      / (Loss)

              
	 
      	
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    * Material
omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment under Rule 24b-2 of the
Securities and Exchange Act of 1934, as amended.


    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


    SCHEDULE 12(b)

    INVENTORY
CYCLE COUNT PROCEDURES

    


    [*]

     

     

     

     

     

     

     

     

    
      *
Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities and Exchange Act of 1934, as amended.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    SCHEDULE
18.11

    FORM
OF CONSENTS