Exhibit
10.21


FRIENDLY ICE CREAM
CORPORATION

ANNUAL INCENTIVE PLAN

FOR CORPORATE OFFICERS


 


	
  1.

  	
   

  	
  DEFINITIONS:

  	
   

  	
  The following terms shall have
  the meanings set forth in this section:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AIP:

  	
   

  	
  The Annual Incentive Plan.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Board of Directors:

  	
   

  	
  The Board of Directors of
  Friendly Ice Cream Corporation.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bonus Year:

  	
   

  	
  The Bonus Year is the fiscal
  year 2006.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company:

  	
   

  	
  The Company is Friendly Ice
  Cream Corporation.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Eligible Employee:

  	
   

  	
  Eligible Employees are
  Corporate Officers and others of the Company as so designated by the Review
  Committee and must be in good standing and employed in an approved AIP
  position on the bonus payment date. An employee in good standing is that
  which has a current performance rating of at least “Meets Standard”, is not
  currently on probation, and has not received a disciplinary warning notice or
  letter during the current bonus period and up through the bonus payment date.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Corporate Operating EBITDA
  Target:

  	
   

  	
  The Earnings Before Bonus
  Expense, Interest, Taxes, Depreciation, and Amortization Target of the
  Company as identified in the operating plan approved by the Board of
  Directors, or Compensation Committee, if so designated, for the Bonus Year.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participating Officer:

  	
   

  	
  A Participating Officer is an
  Eligible Employee who is also an Officer of the Company approved by the
  Review Committee to participate in the plan.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Qualified Base Salary:

  	
   

  	
  The Qualified Base Salary is
  the base salary earned during the Bonus Year. Generally, this is W-2 earnings
  less executive match, incentive awards, and other non-salary payments.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Review Committee:

  	
   

  	
  The Review Committee consists
  of the CEO and President, the Executive Vice President of Administration and
  CFO, and the Vice President, Human Resources.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  PURPOSE:

  	
   

  	
  To provide additional
  incentive to Eligible Employees that is directly tied to Corporate and
  individual results.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  CORPORATE FINANCIAL
  PERFORMANCE FACTOR:

  	
   

  	
  The Corporate Financial
  Performance Factor is a function of the Corporate Operating EBITDA Target.
  The relationship between levels of achievement and company performance
  results is contained in a schedule developed each year based on the business
  plan approved by the Board of Directors or Compensation Committee, if so
  designated. The schedule identifies the minimum acceptable performance which
  will generate incentive funds and scales upward to a maximum level. There is
  also a maximum level of performance for results over which there would be no
  additional incentive earned.

  



 













 


	
  

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  OFFICER AIP PERFORMANCE
  OBJECTIVE FACTOR:

  	
   

  	
  The Officer AIP Performance
  Objective Factor is a function of the results achieved by the Participating
  Officer against specific, previously set, individual business objectives. In
  order for a bonus to be paid under this factor, the minimum acceptable
  performance level of the Corporate Financial Performance Factor must be met.
  The Participating Officer’s manager is responsible for evaluating performance
  against the individual objectives and determining the percentage of bonus
  earned. There is also a maximum level of performance for results over which
  there would be no additional incentive earned.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  TARGET BONUS PERCENTAGE:

  	
   

  	
  The Review Committee, in its
  sole discretion, approves the Individual Target Bonus Percentage.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  BONUS AWARD FACTOR:

  	
   

  	
  The Bonus Award Factor is
  determined by multiplying the Qualified Base Salary of the Participating
  Officer times the Target Bonus Percentage for such Participating Officer.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  BONUS AMOUNT:

  	
   

  	
  The Bonus Amount is determined
  by multiplying the Bonus Award Factor by the Corporate Financial Performance
  Factor and the Officer AIP Performance Objective Factor. Bonus generated
  based on the Officer AIP Performance Objective Factor will not be earned or
  paid unless the minimum Corporate Operating EBITDA Target is met.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  CONDITIONS PRECEDENT TO ANY
  BONUS TO ANY PARTICIPATING EMPLOYEE:

  	
   

  	
  Approval by the Board of Directors
  or Compensation Committee, if so designated, in its sole and exclusive
  discretion, of the actual Bonus Award for each Officer and the total pool to
  be awarded. If approved, bonuses will generally be paid on or before March
  31, 2007.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  ADMINISTRATION OF AIP:

  	
   

  	
  The Review Committee shall
  administer the AIP. Any and all disputes or disagreements arising under the
  AIP shall be presented to the Review Committee. The decision of the Review
  Committee shall be final.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  MODIFICATION OR TERMINATION OF
  AIP AND PARTICIPATION:

  	
   

  	
  The AIP does not constitute a
  contract of employment or an unconditional promise of payment. Participation
  by an Eligible Employee in any one Bonus Year does not confer an unqualified
  right to participate in succeeding Bonus Years regardless of a modification,
  or absence thereof, in grade, salary, position or responsibility. The AIP is
  subject to modification, termination and annual renewal by the Board of
  Directors or the Compensation Committee, if so designated, in its sole
  discretion, without any notice to Participating Officers or other
  participants.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  DISABILITY, DEATH AND
  RETIREMENT:

  	
   

  	
  Participating Officers who are
  disabled, die or retire during any Bonus Year may receive a pro rata bonus
  for the period during which such Participating Officer was actively employed.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  MISCELLANEOUS:

  	
   

  	
  The Review Committee, the
  Board of Directors, Compensation Committee, the Company, and its officers and
  employees shall not be liable for any action taken in good faith in
  administering and interpreting the AIP.  

  



 



 2
 









 


	
  

  	
   

  	
   

  	
   

  	
  The payment you receive will
  be subject to appropriate statutory wage deductions and such other deductions
  normally made for employees of Friendly’s. In addition, any financial
  obligation you have to Friendly’s can be deducted. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  The Board of Directors or the
  Compensation Committee, if so designated, in its sole discretion, may modify,
  including, but not limited to, increasing or decreasing the Corporate
  Financial Performance Factor Target or the Officer AIP Individual Performance
  Objective Factor at any time during the Bonus Year.

  



 



 3