Early Retirement Agreement

EARLY RETIREMENT AGREEMENT AND RELEASE


The Penn Traffic Company, including all of its divisions (hereinafter
referred to as "Penn Traffic" or the "Company"), and John T. Dixon
("Employee"), of 37 West Lake Road, Skaneateles, New York 13152, hereby
enter into this EARLY RETIREMENT AGREEMENT AND RELEASE ("Agreement"),
effective September 3, 1996, and the Company and Employee each hereby agree
as follows:


1. The Employee will be entitled to all employee benefits,
including, but not limited to pension, for the period through January 17,
1998, which shall be considered his normal retirement date.


2. The Employee's last day of active employment with the Company is
September 30, 1996. The Employee hereby resigns as a Director of the
Company, effective September 3, 1996, and as an Officer of the Company and
all of its subsidiaries and divisions on which he serves, including as a
director, effective September 30, 1996,


3. The terms and conditions of this Agreement have been fully
explained to the Employee.


4. The Employee has been advised that he may take up to twenty-one
(21) days to review and consider entering into this Early Retirement
Agreement and Release and has been advised that he may consult with an
attorney or anyone of his choosing and, by executing same, has decided he
wants to sign it.


5. The Employee is entitled to change his mind and revoke this
Agreement within seven (7) days of signing it. This Agreement will not
become effective until the eighth (8th) day after he signs it.


6. In consideration of the execution by the Employee of this Early
Retirement Agreement and Release and compliance with the promises made
herein, the Company will pay the Employee the following amounts and provide
the following benefits:


(a) Salary Continuation. The Employee shall receive a sum
equal to his weekly salary for the period through January 17, 1998, with
normal payroll deductions being withheld. This sun shall be paid as
follows:


(1) $365,000, with normal payroll deductions being
withheld, within fourteen (14) days of the execution of this
Early Retirement Agreement, and


(2) the balance in weekly payments of $2,622.86 through
January 17, 1998, with normal payroll deductions being withheld.

(b) Insurance Benefits:


(1) The Company will provide coverage for the Employee and
his spouse in the Company Health Care Plan for the period through
November 30, 2004, or until the Employee becomes employed and has
comparable insurance coverage. Such coverage will be subject to
the same terms and conditions that apply to all non-union covered
employees of the Company. After November 30, 2004, the Company
will extend the Company's group health care benefits to Employee
and his spouse, at his cost, but at Company's group rate, as
provided under COBRA, if the Employee does not already have
insurance coverage through a new employer.


(2) The Company will provide group term life insurance in
the amount of $500,000 for the Employee for the period through
November 30, 1999.


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