ex10-4.htm


    U.S. Department of
Justice

    United States Attorneys
Office

    Northern District of New
York

    P.O. Box 7198

    100 South Clinton Street

    Syracuse, NY 13261-7198

    315-448-0672

    315-448-0689 (fax)

    


    


    October
23, 2008

    


    William
J. Schwartz, Esq.

    Cooley
Godward Kronish LLP

    1114
Avenue of the Americas

    New York,
NY 10036-7796

    


    RE:           The Penn Traffic
Company

    


    Dear Mr.
Schwartz:

    


    This letter sets forth the agreement
between the United States Attorney’s Office for the Northern District of New
York (the “USAO”), and The Penn Traffic Company (“Penn Traffic”).

    


    Introduction

    


    
      	
               
      

            	
              1.

            	
              The
      USAO, in conjunction with the Federal Bureau of Investigation (“FBI”), is
      conducting a criminal investigation (the “Investigation”) into matters
      relating to Penn Traffic’s fiscal year 2002 and 2003 disclosures to the
      Securities and Exchanges Commission (“SEC”) and investors, including its
      financial filings, reports and statements, press releases, investor
      conference calls and related accounting practices, activities and policies
      concerning promotional allowances (“Investigated
      Disclosures”).  During the course of the Investigation, the USAO
      notified Penn Traffic and its Audit Committee of its belief that one or
      more Penn Traffic employees or former employees violated federal criminal
      law in connection with the Investigated Disclosures during the course of
      their employment beginning in 2001 and continuing through 2004 (the
      “relevant time period”).

            


    

    


    
      	
               
      

            	
              2.

            	
              Penn
      Traffic acknowledges that the USAO has developed evidence that one or more
      Penn Traffic employees or former employees violated federal criminal law
      in connection with the Investigated Disclosure during the relevant time
      period.  Penn Traffic accepts responsibility for the conduct of
      these employees during the relevant time period.  Penn Traffic
      does not endorse, ratify or condone criminal conduct and, as set forth
      below, has taken steps to prevent such conduct from occurring in the
      future.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    Agreement

    


    
      	
               
      

            	
              3.

            	
              Conditioned
      upon Penn Traffic’s acceptance of responsibility in the preceding
      paragraph and paragraph 7 below, its adoption of the remedial measures set
      forth in paragraph 8 and 9 below, its implementation and auditing of such
      remedial measures and its continued cooperation with the USAO in its
      investigation and prosecutions of Penn Traffic employees or former
      employees as set forth in paragraphs 4 and 6 below, the USAO agrees that
      it will not prosecute Penn Traffic for any crimes committed by its
      employees during the relevant time period relating to the Investigated
      Disclosures.  Penn Traffic understands and agrees that if it
      violates this Agreement, the USAO will no longer be bound by this
      Agreement and it will be free to prosecute Penn Traffic for any crimes
      committed by its employees relating to the Investigated
      Disclosures.  This Agreement does not provide any protection to
      any individual or any entity other than Penn Traffic and its successors,
      and, in particular, this Agreement does not limit in any way the USAO’s
      ability to prosecute any individual or entity other than Penn Traffic and
      its successors for any crime.

            


    

    


    
      	
               
      

            	
              4.

            	
              Penn
      Traffic agrees that it and its successors shall truthfully disclose to the
      USAO all information with respect to the activities of Penn Traffic, its
      officers and employees concerning all matters about which the USAO shall
      inquire, and shall fully cooperate with the USAO throughout its
      investigation and through the conclusion of any and all criminal trials
      concerning the Investigated Disclosures.  This obligation of
      truthful disclosure and cooperation includes an obligation upon Penn
      Traffic and its successors to provide to the USAO, on request, any
      document, record or other tangible evidence about which the USAO shall
      inquire of Penn Traffic and any successor including any document, record
      or tangible evidence created, found or otherwise developed by any
      attorneys, consultants and agents for or on behalf of Penn Traffic, its
      Board of Directors or the Audit Committee of its Board of Directors,
      subject to any existing attorney-client, work product or other applicable
      privilege recognized under federal law.  This obligation of
      truthful disclosure and cooperation includes an obligation to provide to
      the USAO and the FBI access to Penn Traffic facilities, documents,
      employees, and to third party contractors and vendors and includes
      directing its attorneys, consultants and agents, including Cooley Godward
      Kronish LLP, Schulte Roth & Zabel LLP, Paul, Weiss, Rifkind, Wharton
      & Garrison LLP and Alix Partners to provide assistance in connection
      with the Investigation, trials or other legal proceedings concerning the
      Investigated Disclosures, subject to any existing attorney-client, work
      product or other applicable privilege recognized under federal
      law.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              5.

            	
              Penn
      Traffic agrees that upon request of the USAO, with respect to any issue
      relevant to its investigation of Penn Traffic, Penn Traffic and its
      successors shall, upon reasonable notice and without requiring service of
      a subpoena, designate knowledgeable employees, agents or attorneys to
      provide information and/or materials on Penn Traffic’s behalf to the USAO
      and the FBI.  Penn Traffic agrees that it must at all times give
      to the USAO and the FBI complete, truthful and accurate
      information.

            


    

    


    
      	
               
      

            	
              6.

            	
              With
      respect to any information, testimony, document, record or other tangible
      evidence relating to Penn Traffic provided to the USAO or a grand jury,
      Penn Traffic consents to any and all disclosures to Governmental
      investigative, regulatory and enforcement entities of such materials that
      constitute “matters occurring before the grand jury” within the meaning of
      Rule 6(e) of the Federal Rules of Criminal Procedure.  Penn
      Traffic further consents to a) any order sought by the USAO permitting
      such disclosure and b) the USAO’s ex parte or in camera application for
      such orders.

            


    

    


    
      	
               
      

            	
              7.

            	
              Penn
      Traffic agrees that it will not, through its attorneys, Board of
      Directors, agents, officers or employees make any statement in any SEC
      filing or any press release that contradicts Penn Traffic’s acceptance of
      responsibility as set forth in paragraph 2 above.  Any such
      contradictory statement by Penn Traffic, its attorneys, Board of
      Directors, agents, officers or employees shall constitute a breach of this
      Agreement, and Penn Traffic thereafter would be subject to prosecution as
      set forth in paragraph 3 of this Agreement – provided, however, that upon
      the USAO’s notifying Penn Traffic of such a contradictory statement, Penn
      Traffic may avoid a breach of this Agreement by publicly repudiating such
      statement with 72 hours after notification by the USAO.  This
      paragraph is not intended to apply, and does not apply, to any statement
      made by any person who has been charged by the USAO with a crime relating
      to the Investigated Disclosures.

            


    

    


    
      	
               
      

            	
              8.

            	
              The
      USAO acknowledges that Penn Traffic previously has provided the USAO with
      information substantiating certain remedial actions it has taken to ensure
      the integrity of its financial reporting, including an active
      investigation by its Audit Committee, amending its company code of ethics,
      implementation of new policies for proper recognition of revenues and
      expenses, implementation of new policies and procedures for financial
      reporting and disclosure, and development of an education program designed
      to train all employees involved with financial reporting on financial
      reporting matters.

            


    

    


    
      	
               
      

            	
              9.

            	
              Penn
      Traffic agrees that, as of the date of execution of this agreement, it is,
      and thereafter shall remain, in compliance with all SEC rules and
      regulations referenced in the “Final Judgment as to the Penn Traffic
      Company” (the “Final Judgment”), executed and entered in Civil Action No.
      08-Civ.-1035 (FJS) on October 1, 2008.  Penn Traffic further
      agrees that, as a central component of its obligations under this
      Agreement, it and its successors shall fully comply with all requirements
      set forth in Sections V, VI and VII of the Final Judgment (copy
      attached).

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      	
            	
              10.

            	
              Penn
      Traffic agrees that, should the USAO, in its sole discretion, determine
      that Penn Traffic has deliberately given false, incomplete, or misleading
      information under this Agreement, or has hereafter committed any crime, or
      has otherwise knowingly, intentionally and materially violated any
      provision of this Agreement, Penn Traffic shall, in the USAO’s sole
      discretion, thereafter be subject to prosecution for any federal criminal
      violation of which the USAO has knowledge, including any federal criminal
      violation relating to the Investigated Disclosures.  Penn
      Traffic agrees that any such prosecutions may be premised on information
      provided by Penn Traffic, including information provided prior to this
      Agreement.  Moreover, Penn Traffic agrees that any such
      prosecutions that are not time-barred by the applicable statute of
      limitations on the date of this Agreement may be commenced against Penn
      Traffic in accordance with this Agreement, notwithstanding the expiration
      of the statute of limitations after the effective date of this
      Agreement.  By this Agreement, Penn Traffic expressly intends to
      and does waive any rights in this
respect.

            


    

    


    
      	
            	
              11.

            	
              Penn
      Traffic further agrees that in the event that the USAO, in its sole
      discretion, determines that Penn Traffic or any successor has violated any
      provision of this Agreement:  a) all statements made by or on
      behalf of Penn Traffic to the USAO, or any testimony given by Penn Traffic
      before a grand jury, the SEC, or elsewhere, whether prior or subsequent to
      this Agreement, or any leads derived from such statements or testimony,
      shall be admissible in evidence in any and all criminal proceedings
      brought by the USAO against Penn Traffic and b) Penn Traffic shall not
      assert any claims under the United States Constitution, Rule 11(f) of the
      Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of
      Evidence, or any other federal rule, that statements made by or on behalf
      of Penn Traffic prior to or subsequent to this Agreement, or any leads
      therefrom, should be suppressed.

            


    

    


    
      	
            	
              12.

            	
              Penn
      Traffic agrees that the decision whether conduct or statements of any
      individual will be imputed to Penn Traffic for the purpose of determining
      whether Penn Traffic has violated any provision of this Agreement shall be
      in the sole discretion of the USAO.

            


    

    


    
      	
            	
              13.

            	
              The
      USAO and Penn Traffic agree that this Agreement is binding only on the
      USAO and Penn Traffic, and any successor to Penn
  Traffic.

            


    

    


    
      	
            	
              14.

            	
              The
      USAO and Penn Traffic agree that Penn Traffic’s, and its successors’,
      obligations contained in paragraphs 4 and 5 above shall continue until
      such time as the USAO informs Penn Traffic that its Investigation and/or
      related prosecutions are complete.  Should Penn Traffic fail to
      comply with its obligations under paragraphs 4 and 5, after notice of
      noncompliance from the USAO, Penn Traffic and any successor shall be
      liable for all expenses, including attorney’s fees, incurred by the USAO
      to enforce compliance with paragraph 4 and/or 5, as well as liquidated
      damages of $25,000 per day.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      	
            	
              15.

            	
              The
      USAO and Penn Traffic agree that this Agreement constitutes the full and
      complete agreement between them and may not be modified except in a
      writing signed by all the parties.

            


    

    


    
      
        
          
            
              
                
                  
                    	
                            Very
      truly yours,

                          
	 
      
	
                            ANDREW
      T. BAXTER

                          
	
                            Acting
      United States Attorney

                          
	 
      	 
      
	
                            By:

                          	 
      
	 
      	
                            Stephen
      C. Green

                          
	 
      	
                            Assistant
      United States Attorney

                          
	 	 
	
                            Date:  October
      28,
2008

                          


                  

                

              

            

          

        

      

    

    


    
      
        
          
            	
                    THE PENN TRAFFIC COMPANY

                  	 
      	 
      
	 
      	 
      	 
      
	
                    By:

                  	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                    Date:  October
      28, 2008

                  
	
                    Gregory
      J. Young

                  	 
      	 
      
	
                    Chief
      Executive Officer

                  	 
      	 
      
	
                    The
      Penn Traffic Company

                  	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                    Date:  October
      25, 2008

                  
	
                    William J. Schwartz, Esq.

                  	 
      	 
      
	
                    Counsel
      to The Penn Traffic Company