**Exhibit10.1**

**MEMORANDUM OF AGREEMENT**

**Between John L. Cutter and Friendly Ice Cream Corporation**

This acknowledges and documents our mutual agreement concerning yourseparation from Friendly Ice Cream Corporation (“Friendly’s”) effectiveSeptember 28, 2006****(“SeparationDate”).  This Agreement will confirmvarious matters concerning your separation from employment so that nomisunderstanding exists between you and Friendly’s.

**I.              SALARYCONTINUATION**

Friendly’s will continue to pay you semi-monthly fromthe Separation Date until March 14, 2007 at your current base rate of pay (plusexecutive match and automobile allowance) (“Semi-Monthly Payments”).  On or before March 15, 2007, Friendly’s willpay you a lump sum payment equal to the semi-monthly pay you would havereceived between March 15, 2007 and September 27, 2007, at your current baserate of pay (plus executive match and automobile allowance) (“Lump Sum Payment”).  Both the Semi-Monthly Payments and the LumpSum Payment you receive will be subject to appropriate statutory deductions andsuch other deductions normally made for employees of Friendly’s.

From time to timeafter your separation, you may be contacted with questions relating to mattersyou have been involved with while employed by Friendly’s.  You agree to provide your completecooperation and make all pertinent information regarding these mattersavailable upon request, as well as be personally available upon reasonableadvance notice, at mutually convenient times, on an as-needed basis.

You will be eligible, regardless of the dates of your employment ortermination, to receive a bonus for 2006. A bonus, if any is paid to you, 1) will be paid at the time that a bonusfor 2006 is paid to officers of Friendly’s (Friendly’s will use its bestefforts to pay any bonus to you on or before March 15, 2007), and 2) will bedetermined by the provisions of, and in a manner consistent with, the currentbonus plan approved by the Board of Directors. Attached hereto as Exhibit A is the outline of your potential 2006AIP bonus award, a copy of which has already been provided to you.

**II.            BENEFIT/RETIREMENTPLANS**

Your group medical/dental insurance and other such benefits, if enrolled,end on your last day of active work.  Tocontinue medical/dental coverage beyond your Separation Date, you must completea continuation of coverage (COBRA) application, which will be provided toyou.  It is your responsibility to makeall payments to the COBRA carrier. Friendly’s will reimburse you for COBRA payments made by you for periodsthrough December 31, 2007.

Your group life insurance ends on your Separation Date, but if your lifeinsurance is provided through Pacific Mutual Life Insurance Company, it isunaffected by your leaving employment because it is your own personal policy.  Payments by Friendly’s on your behalf willcease as of your Separation Date. Questions about coverage thereafter or about other matters related tothis policy should be referred to Ms. Karen Socola of the AYCO Corporation at(518) 373-7725.

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Reimbursement by Friendly’s of costs related to all club memberships,including membership in the Wilbraham Country Club, shall cease as of December31, 2006.  The benefit of financialservices and planning provided by AYCO Corporation, and paid for by Friendly’s,will cease as of June 1, 2007.

To assist you in securing a new position, Friendly’s will pay to you$10,000, less applicable deductions, which sum may be used by you to engage theservices of an outplacement firm.

Friendly’s will reimburse you for reasonable costs and fees associatedwith your participation, if called as a witness by or on the behalf of Friendly’s,in any litigation matter existing as of the date hereof.  Reasonable costs and fees for legalrepresentation will be reimbursed; costs and fees relating to your time willnot be reimbursed.

**IIII.          COVENANTS**

In consideration of the terms set forth in this letter, you agree to thefollowing:

1.         You will turn over toFriendly’s Vice President, Human Resources all confidential information and,whether or not confidential, all originals and copies of any documents,manuals, plans, equipment, business papers, computer diskettes or othermaterials relating to Friendly’s and its subsidiaries, divisions, parents andaffiliates, their agents, employees, directors and officers which are in yourcontrol or possession within two days of the Separation Date.

2.         You, onbehalf of yourself, your spouse, heirs, agents, attorneys, representatives andassigns, hereby release and discharge forever all claims and causes of actionof every name and nature that have arisen or might have arisen at any time upto and including the date on which you sign this Agreement (whether known orunknown, accrued, contingent, or liquidated) that you now have or may haveagainst Friendly’s, any of its subsidiaries, divisions, parents and affiliates,or any of the aforementioned entities’ agents, employees, directors, andofficers, including but not limited to, any claims relating to your employmentwith Friendly’s and the termination thereof; any claims based on statute,regulation, ordinance, contract or tort; any claims arising under the AgeDiscrimination in Employment Act of 1967, as amended (the “ADEA”), or any otherfederal, state, or local law relating to employment discrimination, harassment,or retaliation; any claims relating to wages, compensation, or benefits; andany related claims for attorney’s fees, except that you do not release Friendly’sfrom claims for payments and other benefits related to this Agreement.

3.         You agree notto file a lawsuit in any court of the United States or any State thereofconcerning any matter released in this Agreement or from participating in anyinvestigation or proceeding conducted by any state or federal agency regardingany released claim.  By signing thisAgreement, you acknowledge that you are waiving your right to money damages andany other relief should any agency pursue claims on your behalf arising out ofor relating to your employment with and/or separation from Friendly’s.

4.         The parties agree toforever refrain from taking any action or making any statement which bringsdiscredit upon or disparages the other party (including, with respect toFriendly’s, its services or products, or any of its directors, officers,employees, or agents).

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5.         If either party breachesany of the terms of this Agreement, the non-breaching party may be entitled torecover from the breaching party all costs, fees, and expenses (includingattorney’s fees) as may be awarded by a court of competent jurisdiction underapplicable law and if Friendly’s prevails as a non-breaching party, it will beentitled to recover what it has paid you under this Agreement.

6.         You acknowledgethat in the course of your employment by and service to Friendly’s, you havehad, and may continue to have, access to confidential information of Friendly’sand related or affiliated entities (collectively referred to herein as “theCompanies”), including without limitation to, financial statements; salesfigures; projections; estimates; promotions; contracts; pricing; purchasingmethods and sources; marketing methods; sales sheets; customer lists; employeelists; literature; catalogues; designs; specifications; bills of material;processes; software; the Companies’ operational policies, procedures, orpractices; any documents utilized in the administration or operation of theCompanies including contracts, agreements, memorandums of understanding orpolicies; any conversations within or among the Companies or between employeesnot explicitly intended for public knowledge, and all other informationfurnished by the Companies or acquired by you during the term of youremployment with Friendly’s (hereinafter “Confidential Information”). Youacknowledge that such Confidential Information is a valuable and unique assetof the Companies and agree that you will not disclose any such ConfidentialInformation to any person for any reason whatsoever without the prior writtenauthorization of any of the Companies unless such information is in the public domainthrough no fault of yours, or except as may be required by law or in the eventthat you are compelled to testify under oath. You also acknowledge that the Companies may have received, and mayreceive in the future, proprietary information from third parties (“Third-PartyConfidential Information”) subject to the provisions of various confidentialityagreements, and you have had, and may continue to have, access to suchThird-Party Confidential Information. You agree that you will continue to be subject to the provisions of suchconfidentiality agreements.

7.*          *You**agreethat for a period of one (1) year following the Separation Date, you will notdirectly or indirectly, for your own account or for any other person, as agent,employee, officer, director, trustee, consultant, owner, partner orshareholder, or in any other capacity:

(i)                         hire orattempt to hire or assist any other person in hiring or attempting to hire anyemployee of Friendly’s; or

(ii)                      encourage orassist any other person in encouraging any director, officer, employee, agent,consultant or any other person affiliated with Friendly’s to terminate or alterhis or her or its relationship with Friendly’s; or

(iii)                   encourage orassist any other person in encouraging any customer or supplier of Friendly’sto terminate or alter its relationship with Friendly’s; or

(iv)                  sell or marketor assist any other person in selling or marketing any product or service thatcompetes, directly or indirectly with any product or service manufactured, soldor under development by Friendly’s at the time your employment with Friendly’sis terminated; or

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(v)                     research,develop or manufacture or assist any other person in researching, developing ormanufacturing any product or service that competes with any product or serviceconceived, manufactured, sold or under development by Friendly’s at the time youremployment with Friendly’s is terminated.

**V.            OTHER**

This is the entire agreement between us and any prior agreements orunderstandings, whether oral or written, are entirely superseded by thisAgreement and you have not relied upon any other agreement or representationnot found in this Agreement.  We eachhave voluntarily accepted the terms as sufficient without reservation.  This Agreement may only be modified by a writtenagreement signed by you and an officer of Friendly’s.

Pursuant to its obligations under the ADEA, Friendly’s advises you toconsult with an attorney prior to executing this Agreement.  You have 21 days from the date of receipt ofthis document in which to consider this Agreement.  In addition, you may revoke this Agreementwithin seven days following its execution, but only by delivering a writtenrevocation notice to Friendly’s Vice President of Human Resources within suchtimeframe.  This Agreement shall notbecome effective or enforceable until the seven-day revocation period hasexpired.

By signing this Agreement, you acknowledge that you have read and fullyunderstand all of its provisions and that you are signing it voluntarily.  You also acknowledge that you are not relyingon any representations by any representative of Friendly’s concerning themeaning of any aspect of this Agreement.

In the event,after the execution of this Agreement but before all payments to you have beenmade, Friendly’s determines that you have engaged in any fraudulent or illegalactivity related to Friendly’s not actually known to Friendly’s prior to theexecution of this Agreement, Friendly’s shall have the right to terminate itsremaining obligations under this Agreement, declaring it null and void.

Each party heretoagrees that they are fully authorized and have all of the requisite right,power, and authority to enter into this Agreement, which is fully binding uponand enforceable against the respective parties hereto in accordance with itsterms.

This Agreement ismade and entered into in the Commonwealth of Massachusetts and shall in allrespects be interpreted, enforced, and governed by the laws of the Commonwealthof Massachusetts.  You consent to theexclusive jurisdiction of the courts of the Commonwealth of Massachusetts forany litigation concerning the terms of this Agreement.

If the above is in agreement with your understanding, please sign andkeep one copy of this document for your records and return one copy to me.

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ACCEPTED AND AGREED TO AS OF THIS 6th DAYOF  NOVEMBER, 2006.
| FRIENDLY ICE CREAM CORPORATION |   |
|--------------------------------|--------|
|                           |   |   |   |   |
| By:                            |   | /s/ Garrett J. Ulrich |   |   |
|                           |   | Garrett J. Ulrich |   |   |
|                           |   | Vice President, Human  Resources |   |   |
|                           |   |   |   |   |
|                           |   |   |   |   |
| By:                            |   | /s/ John L. Cutter |   |   |
|                           |   | John L. Cutter |   |   |

 

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