Exhibit
10.1


KEY EXECUTIVE STOCK OPTION AWARD AGREEMENT

FRIENDLY ICE CREAM CORPORATION


THIS KEY EXECUTIVE STOCK OPTION AWARD AGREEMENT (the “Agreement”), dated
as of the 8th day of January, 2007 (the “Grant Date”) and entered into by and
between Friendly Ice Cream Corporation (the “Company”) and GEORGE M. CONDOS
(the “Recipient”).


WITNESSETH THAT:


WHEREAS, as an inducement material to the Recipient’s employment as
President and Chief Executive Officer of the Company, the Compensation Committee of the Board of
Directors has awarded the Recipient an option to purchase shares of the Company’s
common stock, par value $0.01 per share (“Stock”), subject to the terms of this
Agreement.


NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Recipient as follows:


1.             Definitions.  In addition to the other definitions
contained herein, the following definitions shall apply:


(a)                                  “Affiliate”
shall have the meaning set forth in Rule 12b-2 of the Exchange Act.


(b)                                 “Board”
means the Board of Directors of the Company.


(c)                                  “Code”
means the Internal Revenue Code of 1986, as amended. A reference to any
provision of the Code shall include reference to any successor provision of the
Code.


(d)                                 “Committee”
means the Compensation Committee of the Board, or such other committee
consisting solely of two or more Independent Directors of the Board appointed
by the Board to administer the Agreement, or if there is no such committee, the
Board.


(e)                                  “Employee”
means any person employed by the Company or an Affiliate.  Service as a director or payment of a
director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.


(f)                                    “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.


(g)                                 “Independent
Director” means a director who is not an Employee and who qualifies as an
Independent Director under the applicable rules of the American













 


Stock Exchange
(and/or the similar rules of any other stock exchange(s) on which the Company’s
securities become publicly traded).


(h)                                 “Retirement”
shall be deemed to occur upon any termination of service from the Company after
the Recipient’s attainment of age 60.


2.             Award and Exercise
Price.  Subject to the terms of this
Agreement, the Recipient is hereby granted an option (the “Option”) to purchase
75,000 shares of Stock (the “Award”). 
The price of each share of Stock subject to the Option shall be $11.80
(the “Exercise Price”).  The Option is
not  intended to constitute an “incentive
stock option” as that term is used in Code Section 422.


3.             Vesting.  Subject to Section 9 hereof, this Option
shall become exercisable in accordance with the following schedule provided the
Recipient is employed by the Company on the respective date:




	
  Vesting Date

  	
   

  	
  Exercisable for the Number of 

  Shares

  
	
  January 8, 2008

  	
   

  	
  33.4% of Award

  
	
  January 8, 2009

  	
   

  	
  33.3% of Award

  
	
  January 8, 2010

  	
   

  	
  33.3% of Award

  






 


Notwithstanding
the foregoing provisions of this paragraph 3, this Option may vest and become
immediately exercisable if the Recipient’s employment with the Company is
terminated by reason of death or disability (as defined in Code Section
22(e)(3) (“Disability”)), as determined by the Committee in its sole
discretion.


4.             Expiration;
Forfeiture.  This Option shall expire
on the earliest to occur of:


(a)                                  the five-year anniversary of the Grant Date;


(b)                                 if the Recipient’s termination of employment with
the Company occurs by reason of death or Disability, the one-year anniversary of
such Date of Termination;


(c)                                  if the Recipient’s termination of employment with
the Company occurs by reason of Retirement, the three-year anniversary of the
date of such termination; or


(d)                                 if the Recipient’s termination of employment with
the Company occurs for reasons other than death, Disability or Retirement, the
three-month anniversary of the date of such termination;


which
shall be the “Expiration Date” for the Option. 
Notwithstanding the foregoing provisions of this paragraph 4, except as
provided in paragraph 3 above, no portion of the Option shall be



 2
 









 


exercisable
after the Recipient’s termination of employment with the Company except to the
extent that it is exercisable as of the date immediately prior to the date of
termination of employment with the Company.


5.             Method of Option
Exercise.  Any portion of the Option
that is exercisable may be exercised in whole or in part by filing a written
notice with the Clerk of the Company at its corporate headquarters, provided
that the notice is filed prior to the Expiration Date of the Option.  Such notice shall specify the number of
shares of Stock which the Recipient elects to purchase, and shall be
accompanied by payment of the Exercise Price for such shares indicated by the
Recipient’s election.  Payment shall be
by cash.


6.             Withholding.  Pursuant to applicable federal, state,
local or foreign laws, the Company may be required to collect income or other
taxes on the grant of this Option, the exercise of this Option, the lapse of a
restriction placed on this Option or the shares of Stock issued upon exercise
of this Option, or at other times.  The
Company may require, at such time as it considers appropriate, that the
Recipient pay the Company the amount of any taxes which the Company may
determine is required to be withheld or collected, and the Recipient shall
comply with the requirement or demand of the Company.  In its discretion, the Company may withhold
shares of Stock to be issued upon exercise of this Option or offset against any
amount owed by the Company to the Recipient, including compensation amounts, if
in its sole discretion it deems this to be an appropriate method for
withholding or collecting taxes.


7.             Transferability.  This Option is not transferable except as
designated by the Recipient by will or by the laws of descent and distribution.


8.             Adjustment of Option.  In the event of any stock dividend,
stock split, reverse stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination
or exchange of shares or similar corporate transaction, the Committee may
adjust the Option to preserve the benefits or potential benefits of the Option.
Action by the Committee may include: (i) adjustment of the number and kind of
securities which may be delivered under this Agreement; (ii) adjustment of the
Exercise Price; and (iii) any other adjustments that the Committee determines
to be equitable (which may include, without limitation, (I) replacement of the
Option with other awards which the Committee determines have comparable value
and which are based on the securities of a company resulting from the
transaction, and (II) cancellation of the vested and unvested portion of the
Option in return for cash payment of the current value of Option, determined as
though the Option is fully vested at the time of payment, provided that the
amount of such payment may be the excess of value of the Stock subject to the
Option at the time of the transaction over the Exercise Price).  Any such adjustment to an outstanding Option,
shall be effected in a manner that precludes the enlargement of Recipient’s
rights and benefits under such Option.


9.             Change in Control.  If the Recipient is employed by the Company
or an Affiliate at the time of a Change in Control, all outstanding Options
subject to this Agreement then held by the Recipient shall become fully
exercisable on and after the date of the Change in Control (subject to the
expiration provisions otherwise applicable to the Options).  A “Change in Control” shall be deemed to
occur on the earliest of the existence of one of the following events:



 3
 









 


(a)                                  (i) any “person” (as such term is used in
Sections 13(d) or 14(d) of the Exchange Act), other than one or more Permitted
Holders (as defined below), is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock (as defined below) of
the Company and (ii) the Permitted Holders “beneficially own” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of the
Company than such other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the Board of Directors of the Company;


(b)                                 individuals who constitute the Board as of the
date hereof (the “Incumbent Board”) cease for any reason to constitute at least
a majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened “election contest” relating to the
election of the directors of the Company; or


(c)                                  approval by the Company’s shareholders of a
reorganization, merger or consolidation of the Company, in each case, with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the common stock and voting securities
of the Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly and indirectly, more than 70% of, respectively, the
then outstanding shares of common stock or the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or of a complete liquidation or
dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company.


For purposes of this paragraph 9, the term “Permitted Holders”
means Donald N. Smith, the Company’s then existing executive officers and their
respective Affiliates.  The term “Voting
Stock” of the Company means all classes of capital stock of the Company then
outstanding and normally entitled to vote in the election of directors.


10.           Administration.


(a)                                  The
authority to control and manage the operation and administration of this
Agreement shall be vested in the Committee. 
The Committee has the authority and discretion to interpret this
Agreement, to establish, amend,



 4
 









 


and rescind any rules and
regulations relating to the Agreement, and to make all other determinations
that may be necessary or advisable for the administration of the
Agreement.  Any interpretation of this
Agreement by the Committee and any decision made by it under this Agreement is
final and binding on all persons.  In
controlling and managing the operation and administration of this Agreement,
the Committee shall take action in a manner that conforms to the articles and
by-laws of the Company, applicable state corporate law and applicable stock
exchange requirements.


(b)                                 Except
to the extent prohibited by applicable law or the applicable rules of a stock
exchange, the Committee may allocate all or any portion of its responsibilities
and powers to any one or more of its members and may delegate all or any part
of its responsibilities and powers to any person or persons selected by
it.  Any such allocation or delegation
may be revoked by the Committee at any time.


(c)                                  The
Company and its subsidiaries shall furnish the Committee with such data and
information as it determines may be required for it to discharge its
duties.  The records of the Company and
its subsidiaries as to Recipient’s employment, termination of employment, leave
of absence, reemployment and compensation shall be conclusive on all persons
unless determined to be incorrect. 
Recipient must furnish the Committee such evidence, data or information
as the Committee considers desirable to carry out the terms of the Agreement.


11.           General Restrictions.  Notwithstanding any other provision of
this Agreement, the Company shall have no obligation or liability to deliver
any shares of Stock under this Agreement or make any other distribution of
benefits under this Agreement unless such delivery or distribution would comply
with all applicable laws (including, without limitation, the requirements of
the Securities Act of 1933, as amended), and the applicable requirements of any
stock exchange or similar entity.  The
Company may also require the Recipient to execute and deliver such other
representations and agreements, and take such other action, as may be required
by the Company to comply with applicable law.


12.           Limitation of Implied Rights.


(a)                                  Recipient
shall not, by reason of this Agreement, acquire any right in or title to any
assets, funds or property of the Company or any subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other property
which the Company or any subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Agreement.  A Recipient shall have only a contractual
right to the Stock issuable upon exercise of the Option in accordance with this
Agreement, unsecured by any assets of the Company or any subsidiary, and
nothing contained in this



 5
 









 


Agreement
shall constitute a guarantee that the assets of the Company or any Subsidiary
shall be sufficient to pay any benefits to any person.


(b)                                 This
Agreement does not constitute a contract of employment, and the Award granted
to Recipient pursuant to this Agreement does not give the Recipient the right
to be retained in the employ of the Company or any subsidiary, nor any right or
claim to any benefit under this Agreement, unless such right or claim has
specifically accrued under the terms of this Agreement.  Except as otherwise provided in this
Agreement, the Award does not confer upon the Recipient any rights as a
shareholder of the Company prior to the date on which the individual fulfills
all conditions for receipt of such rights and is issued shares.


13.           Amendment.  This Agreement may only be modified or
amended by a writing signed by both parties.


14.           Notices.  Any notices required to be given under this
Agreement shall be sufficient if in writing and if hand-delivered or if sent by
first class mail and addressed as follows:


if to the Company:


Friendly Ice Cream
Corporation

1855 Boston Road

Wilbraham, MA  01095

Attn:  Vice President, Human Resources


if to the
Recipient:


George M. Condos

299 Great Bay Street

East Falmouth, MA  02536


or to such other address as either party may designate
under the provisions hereof.


15.           Successors
and Assigns.  The rights and
obligations of the Company under this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company.


16.           Entire Agreement.   This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes in their entirety all prior undertakings and agreements of the
Company and Recipient with respect to the subject matter hereof including,
without limitation, the offer letter and employment agreement.



 6
 









 


17.           Governing Law.  The terms of this Agreement shall be governed
by and interpreted in accordance with the laws of the Commonwealth of Massachusetts.


IN WITNESS WHEREOF, the Recipient has hereunto set his hand, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.


 


	
  

  	
   

  	
  RECIPIENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ George M. Condos

  	
   

  	
   

  
	
   

  	
   

  	
  GEORGE M. CONDOS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FRIENDLY ICE CREAM CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Garrett J. Ulrich

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  GARRETT J. ULRICH,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  VICE PRESIDENT, HUMAN
  RESOURCES

  	
   

  	
   

  



 


 



 7