|   | 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”). |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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. |
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|   | 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). |
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|  | 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 thisrespect. |
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|  | 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. |
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|  | 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. |
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|  | 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. |
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|  | 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. |
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|  | 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. |
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| 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 |   |                                   |

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