Exhibit
10.7


 


FRIENDLY ICE CREAM
CORPORATION

ANNUAL INCENTIVE PLAN

CORPORATE AND COMPANY RESTAURANTS GROUP


 


	
  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 2005.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company:

  	
   

  	
  The
  Company is Friendly Ice Cream Corporation.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Eligible
  Employee:

  	
   

  	
  Eligible
  Employees are Officers, Directors, Corporate Employees in pay grades 107 and
  108, in both the Corporate and Company Restaurants groups, 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 “Fully Satisfactory”, 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
  EBITDA Target:

  	
   

  	
  The
  Earnings Before 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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company Restaurants EBITDA

  Target:

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participating
  Employee:

  	
   

  	
  A
  Participating Employee is an Eligible Employee who is 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, 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
  the results of the Corporate and the Company Restaurants Groups.

  



 

















 


	
  3.

  	
   

  	
  CORPORATE
  FINANCIAL

  PERFORMANCE FACTOR:

  	
   

  	
  The
  Corporate Financial Performance Factor is a function of the Corporate
  Earnings Before Interest, Taxes, Depreciation and Amortization 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.

  	
   

  	
  COMPANY
  RESTAURANTS

  FINANCIAL PERFORMANCE

  FACTOR:

  	
   

  	
  The
  Company Restaurants Financial Performance Factor is a function of the Company
  Restaurants’ Earnings Before Interest, Taxes, Depreciation and Amortization
  Target. The relationship between levels of achievement and the Company
  Restaurants group’s performance results is contained in the 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 of the individual, 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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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 Employee times the Target Bonus Percentage for such
  Participating Employee.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  BONUS
  AMOUNT:

  	
   

  	
  The
  Bonus Amount is determined by multiplying the Bonus Award Factor by the
  Corporate Financial Performance Factor and the Company Restaurants Financial
  Performance Factor.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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, 2006.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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
  Employees.

  



 

















 


	
  11.

  	
   

  	
  DISABILITY,
  DEATH AND RETIREMENT:

  	
   

  	
  Participating
  Employees who are disabled, die or retire during any Bonus Year may receive a
  pro rata bonus for the period during which such Participating Employee 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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  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 Financial Performance Factor Targets at any time during the
  Bonus Year.