INTERCREDITOR AND SUBORDINATION AGREEMENT

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (Intercreditor Agreement), dated as of April 13, 2005, is by and among General Electric Capital Corporation, a Delaware corporation, in its capacity as agent pursuant to the Revolving Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, Revolving Loan Agent as hereinafter further defined) and the parties to the Revolving Loan Agreement as lenders (Revolving Loan Lenders as hereinafter further defined) and Kimco Capital Corp., a Delaware corporation, in its capacity as agent pursuant to the Supplemental Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, Supplemental Loan Agent as hereinafter further defined) and the parties to the Supplemental Loan Agreement as lenders (Supplemental Loan Lenders as hereinafter further defined).

WITNESSETH:

WHEREAS, Supplemental Loan Agent and the Supplemental Loan Lenders have entered or are about to enter into financing arrangements with The Penn Traffic Company, a Delaware corporation (Penn Traffic as hereinafter further defined), Penny Curtiss Baking Company, Inc., a New York corporation (Penny Curtiss as hereinafter further defined), Big M Supermarkets, a New York corporation (Big M as hereinafter further defined, and together with Penn Traffic and Penny Curtiss, collectively Borrowers), and certain other direct or indirect subsidiaries of Penn Traffic listed on Exhibit A hereto (the Penn Traffic Subsidiaries as hereinafter further defined, and together with the Borrowers, collectively Debtors), pursuant to which Supplemental Loan Lenders (or Supplemental Loan Agent on their behalf) may, upon certain terms and conditions, make loans to Borrowers secured by substantially all of the assets and properties of Borrowers;

WHEREAS, the Debtors (other than Borrowers) have each guaranteed the obligations of Borrowers to the Supplemental Loan Agent and the Supplemental Loan Lenders arising under the Supplemental Loan Agreement and such obligations are secured by substantially all of the assets and properties of such other Debtors;

WHEREAS, Revolving Loan Agent and Revolving Loan Lenders have entered or are about to enter into financing arrangements with Debtors pursuant to which Revolving Loan Lenders (or Revolving Loan Agent on their behalf) may, upon certain terms and conditions, make loans and provide other financial accommodations to Borrowers secured by substantially all of the assets and properties of such Borrowers;

WHEREAS, the Debtors (other than Borrowers) have each guaranteed the obligations of Borrowers to Revolving Loan Agent and Revolving Loan Lenders arising under the Revolving Loan Agreement and such obligations are secured by substantially all of the assets and properties of such other Debtors; and

WHEREAS, Revolving Loan Lenders and the Supplemental Loan Lenders desire to enter into this Intercreditor Agreement to (i) confirm the relative priority of the security interests and mortgage liens granted to the Revolving Loan Agent, for the benefit of the Revolving Loan

Lenders, and the Supplemental Loan Agent, for the benefit of the Supplemental Loan Lenders, in the assets and properties of Debtors, (ii) provide for the orderly sharing among them, in accordance with such priorities, of proceeds of such assets and properties upon any foreclosure thereon or other disposition thereof, and (iii) agree upon the terms of the subordination of the obligations of Debtors to Supplemental Loan Lenders and related matters.

NOW THEREFORE, in consideration of the mutual benefits accruing to Revolving Loan Agent, Revolving Loan Lenders, Supplemental Loan Agent and Supplemental Loan Lenders hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

1.             DEFINITIONS

As used above and in this Intercreditor Agreement, the following terms shall have the meanings ascribed to them below:

1.1           Agents shall mean, collectively, Revolving Loan Agent and Supplemental Loan Agent; sometimes being referred to herein individually as an Agent.

1.2           Agreements shall mean, collectively, the Revolving Loan Documents and the Supplemental Loan Documents.

1.3           Big M shall mean Big M Supermarkets, a New York corporation, and its successors and assigns, including, without limitation, a receiver, trustee or debtor-in-possession on behalf of such person or on behalf of any such successor or assign.

1.4           Borrowers shall mean, collectively, Penn Traffic, Penny Curtiss and Big M; sometimes being referred to herein individually as a Borrower.

1.5           Collateral shall mean, collectively, the Revolving Loan Priority Collateral and the Supplemental Loan Priority Collateral.

1.6           Debtors shall mean, collectively, Borrowers and the Penn Traffic Subsidiaries; sometimes being referred to herein individually as a Debtor.

1.7           Fixture Collateral shall mean trade fixtures of Debtors that are subject to the valid, enforceable and perfected security interests of Revolving Loan Agent at a retail store location of a Debtor that is leased by such Debtor where the lease of such retail store location constitutes Supplemental Loan Priority Collateral, including without limitation, all shelving and racking equipment, store fixtures, display cases, coolers, checkout stands and equipment, food preparation equipment and refrigeration equipment.

1.8           Insolvency Proceeding shall mean, as to any Debtor, any of the following: (a) any case or proceeding with respect to such Debtor under the U.S. Bankruptcy Code (other than the Chapter 11 Cases (as defined in the Revolving Loan Agreement)), any other Federal, State or provincial bankruptcy, insolvency, reorganization or other law affecting creditors rights generally or any other or similar proceedings of any other jurisdiction or otherwise seeking any stay, reorganization, arrangement, liquidation, dissolution, composition or readjustment of the

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obligations and indebtedness of such Debtor or (b) any proceeding seeking the appointment of any receiver, administrative receiver, receiver and manager, examiner, judicial custodian, trustee, liquidator, official manager, administrator or similar official for any Debtor or any material part of its properties or (c) any proceedings for liquidation, dissolution or other winding up of the business of such Debtor (other than a voluntary dissolution of a Credit Party having no material assets) or (d) any assignment for the benefit of creditors or any marshaling of assets of such Debtor.

1.9           Lenders mean, collectively, Revolving Loan Agent, Revolving Loan Lenders, Supplemental Loan Agent and Supplemental Loan Lenders and their respective successors and assigns; sometimes being referred to herein individually as a Lender.

1.10         Lien shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, encroachment, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code of the State of New York or comparable law of any jurisdiction).

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