**Exhibit 4.2**

 

** **

** **

FRIENDLY ICE CREAM CORPORATION

 

8 3/8% Senior Notes Due 2012

 

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INDENTURE

 

Dated as of March 8, 2004

 

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THE BANK OF NEW YORK,

 

as Trustee

 

 

 

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**CROSS REFERENCE TABLE**

** **
| **TIA Section** |               | **Indenture  Section** |
|-----------------|--------------------|------------------------|
| 310             | (a)(1)             |                   | 7.10 |
|            | (a)(2)             |                   | 7.10 |
|            | (a)(3)             |                   | N.A. |
|            | (a)(4)             |                   | N.A. |
|            | (b)                |                   | 7.8; 7.10 |
|            | (c)                |                   | N.A. |
| 311             | (a)                |                   | 7.11 |
|            | (b)                |                   | 7.11 |
| 312             | (a)                |                   | 2.5 |
|            | (b)                |                   | 2.5; 11.3 |
|            | (c)                |                   | 11.3 |
| 313             | (a)                |                   | 11.3 |
|            | (b)(1)             |                   | 7.6 |
|            | (b)(2)             |                   | N.A. |
|            | (c)                |                   | 11.2 |
|            | (d)                |                   | 7.6 |
| 314             | (a)                |                   | 4.2; 4.14; 11.2 |
|            | (b)                |                   | N.A. |
|            | (c)(1)             |                   | 11.4 |
|            | (c)(2)             |                   | 11.4 |
|            | (c)(3)             |                   | N.A. |
|            | (d)                |                   | N.A. |
|            | (e)                |                   | 11.5 |
|            | (f)                |                   | 4.14 |
| 315             | (a)                |                   | 7.1 |
|            | (b)                |                   | 7.5; 11.2 |
|            | (c)                |                   | 7.1 |
|            | (d)                |                   | 7.1 |
|            | (e)                |                   | 6.11 |
| 316             | (a)(last sentence) |                   | 11.6 |
|            | (a)(1)(A)          |                   | 6.5 |
|            | (a)(1)(B)          |                   | 6.4 |
|            | (a)(2)             |                   | N.A. |
|            | (b)                |                   | 6.7 |
| 317             | (a)(1)             |                   | 6.8 |
|            | (a)(2)             |                   | 6.9 |
|            | (b)                |                   | 2.4 |
| 318             | (a)                |                   | 11.1 |

 

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N.A. means Not Applicable.

 

Note: This Cross-Reference Table shall not, for any purpose, be deemedto be a part of the Indenture.

 

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TABLE OF CONTENTS

 
|                                       | **Page**                                                                  |
|--------------------------------------------|---------------------------------------------------------------------------|
|                                       |                                                                      |
| ARTICLE 1                                  |                                                                      |
|                                       |                                                                      |
| DEFINITIONS AND INCORPORATION BY REFERENCE |                                                                      |
|                                       |                                                                      |
| SECTION 1.1.                               | Definitions                                                               | 1 |
| SECTION  1.2.                              | Other  Definitions                                                        | 15 |
| SECTION 1.3.                               | Incorporation by Reference of Trust  Indenture Act                        | 16 |
| SECTION 1.4.                               | Rules of Construction                                                     | 16 |
|                                       |                                                                      |
| ARTICLE 2                                  |                                                                      |
|                                       |                                                                      |
| THE SECURITIES                             |                                                                      |
|                                       |                                                                      |
| SECTION 2.1.                               | Form and Dating                                                           | 17 |
| SECTION 2.2.                               | Execution and Authentication; Additional  Securities; Exchange Securities | 17 |
| SECTION 2.3.                               | Registrar and Paying Agent                                                | 18 |
| SECTION 2.4.                               | Paying Agent To Hold Money in Trust                                       | 18 |
| SECTION 2.5.                               | Securityholder Lists                                                      | 18 |
| SECTION 2.6.                               | Transfer and Exchange                                                     | 18 |
| SECTION 2.7.                               | Replacement Securities                                                    | 20 |
| SECTION 2.8.                               | Outstanding Securities                                                    | 21 |
| SECTION 2.9.                               | Temporary Securities                                                      | 21 |
| SECTION  2.10.                             | Cancellation                                                              | 21 |
| SECTION 2.11.                              | Defaulted Interest                                                        | 21 |
| SECTION 2.12.                              | CUSIP and ISIN Numbers                                                    | 21 |
| SECTION 2.13.                              | Special Transfer Provisions                                               | 22 |
|                                       |                                                                      |
| ARTICLE 3                                  |                                                                      |
|                                       |                                                                      |
| REDEMPTION                                 |                                                                      |
|                                       |                                                                      |
| SECTION 3.1.                               | Notices to Trustee                                                        | 24 |
| SECTION 3.2.                               | Selection of Securities To Be Redeemed                                    | 24 |
| SECTION 3.3.                               | Notice of Redemption                                                      | 24 |
| SECTION 3.4.                               | Effect of Notice of Redemption                                            | 25 |
| SECTION 3.5.                               | Deposit of Redemption Price                                               | 25 |
| SECTION 3.6.                               | Securities Redeemed in Part                                               | 25 |
|                                       |                                                                      |   |
| ARTICLE 4                                  |                                                                      |
|                                       |                                                                      |   |
| COVENANTS                                  |                                                                      |
|                                       |                                                                      |
| SECTION 4.1.                               | Payment of Securities                                                     | 26 |
| SECTION  4.2.                              | SEC  Reports                                                              | 26 |
| SECTION 4.3.                               | Limitation on Indebtedness and Preferred  Stock                           | 26 |
| SECTION 4.4.                               | Limitation on Restricted Payments                                         | 29 |

 

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| SECTION 4.5.          | Limitation on Restrictions on Distributions  from Restricted Subsidiaries | 31     |
|-----------------------|---------------------------------------------------------------------------|--------|
| SECTION 4.6.          | Limitation on Sales of Assets and  Subsidiary Stock                       | 32     |
| SECTION 4.7.          | Limitation on Transactions with Affiliates                                | 34     |
| SECTION  4.8.         | Change  of Control                                                        | 35     |
| SECTION 4.9.          | Limitation on Liens                                                       | 36     |
| SECTION 4.10.         | Limitation on Sale of Subsidiary Capital  Stock                           | 36     |
| SECTION 4.11.         | Limitations on Sale/Leaseback Transactions                                | 36     |
| SECTION  4.12.        | Limitation  on Conduct of Business of Insurance Subsidiary                | 37     |
| SECTION  4.13.        | Future  Guarantors                                                        | 37     |
| SECTION  4.14.        | Compliance  Certificate                                                   | 37     |
| SECTION  4.15.        | Further  Instruments and Acts                                             | 37     |
| SECTION  4.16.        | Maintenance  of Office or Agency                                          | 37     |
| SECTION  4.17.        | Corporate  Existence                                                      | 37     |
| SECTION 4.18.         | Payment of Taxes and Other Claims                                         | 37     |
| SECTION 4.19.         | Maintenance of Properties and Insurance                                   | 38     |
| SECTION  4.20.        | Compliance  with Laws                                                     | 38     |
|                  |                                                                      |
| ARTICLE 5             |                                                                      |
|                  |                                                                      |
| SUCCESSOR COMPANY     |                                                                      |
|                  |                                                                      |
| SECTION 5.1.          | When the Company May Merge or Transfer  Assets                            | 38     |
| SECTION 5.2.          | When Subsidiary Guarantor May Merge or  Transfer Assets                   | 39     |
|                  |                                                                      |   |
| ARTICLE 6             |                                                                      |
|                  |                                                                      |   |
| DEFAULTS AND REMEDIES |                                                                      |
|                  |                                                                      |
| SECTION 6.1.          | Events of Default                                                         | 40     |
| SECTION 6.2.          | Acceleration                                                              | 41     |
| SECTION 6.3.          | Other Remedies                                                            | 42     |
| SECTION 6.4.          | Waiver of Past Defaults                                                   | 42     |
| SECTION 6.5.          | Control by Majority                                                       | 42     |
| SECTION 6.6.          | Limitation on Suits                                                       | 42     |
| SECTION 6.7.          | Rights of Holders To Receive Payment                                      | 43     |
| SECTION 6.8.          | Collection Suit by Trustee                                                | 43     |
| SECTION 6.9.          | Trustee May File Proofs of Claim                                          | 43     |
| SECTION 6.10.         | Priorities                                                                | 43     |
| SECTION 6.11.         | Undertaking for Costs                                                     | 43     |
| SECTION 6.12.         | Waiver of Stay or Extension Laws                                          | 43     |
|                  |                                                                      |   |
| ARTICLE 7             |                                                                      |
|                  |                                                                      |   |
| TRUSTEE               |                                                                      |
| SECTION 7.1.          | Duties of Trustee                                                         | 44     |
| SECTION 7.2.          | Rights of Trustee                                                         | 45     |
| SECTION 7.3.          | Individual Rights of Trustee                                              | 45     |
| SECTION 7.4.          | Trustee’s Disclaimer                                                 | 46     |
| SECTION 7.5.          | Notice of Defaults                                                        | 46     |

 

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| SECTION 7.6.                       | Reports by Trustee to Holders                       | 46     |
|------------------------------------|-----------------------------------------------------|--------|
| SECTION 7.7.                       | Compensation and Indemnity                          | 46     |
| SECTION 7.8.                       | Replacement of Trustee                              | 47     |
| SECTION 7.9.                       | Successor Trustee by Merger                         | 47     |
| SECTION 7.10.                      | Eligibility; Disqualification                       | 48     |
| SECTION 7.11.                      | Preferential Collection of Claims Against  Company  | 48     |
|                               |                                                |   |
| ARTICLE 8                          |                                                |
|                               |                                                |   |
| DISCHARGE OF INDENTURE; DEFEASANCE |                                                |
|                               |                                                |
| SECTION 8.1.                       | Discharge of Liability on Securities;  Defeasance   | 48     |
| SECTION 8.2.                       | Conditions to Defeasance                            | 49     |
| SECTION 8.3.                       | Application of Trust Money                          | 50     |
| SECTION 8.4.                       | Repayment to Company                                | 50     |
| SECTION 8.5.                       | Indemnity for Government Obligations                | 50     |
| SECTION 8.6.                       | Reinstatement                                       | 50     |
|                               |                                                |   |
| ARTICLE 9                          |                                                |
|                               |                                                |   |
| AMENDMENTS                         |                                                |
|                               |                                                |
| SECTION 9.1.                       | Without Consent of Holders                          | 51     |
| SECTION 9.2.                       | With Consent of Holders                             | 51     |
| SECTION 9.3.                       | Compliance with Trust Indenture Act                 | 52     |
| SECTION 9.4.                       | Revocation and Effect of Consents and  Waivers      | 52     |
| SECTION 9.5.                       | Notation on or Exchange of Securities               | 52     |
| SECTION 9.6.                       | Trustee To Sign Amendments                          | 52     |
|                               |                                                |   |
| ARTICLE 10                         |                                                |
|                               |                                                |   |
| SUBSIDIARY GUARANTEES              |                                                |
|                               |                                                |
| SECTION 10.1.                      | Subsidiary Guarantees                               | 53     |
| SECTION 10.2.                      | Limitation on Liability                             | 54     |
| SECTION 10.3.                      | Successors and Assigns                              | 54     |
| SECTION 10.4.                      | No Waiver                                           | 54     |
| SECTION 10.5.                      | Right of Contribution                               | 54     |
| SECTION 10.6.                      | No Subrogation                                      | 55     |
| SECTION 10.7.                      | Modification                                        | 55     |
| SECTION 10.8.                      | Release of Subsidiary Guarantor                     | 55     |
|                               |                                                |   |
| ARTICLE 11                         |                                                |
|                               |                                                |   |
| MISCELLANEOUS                      |                                                |
|                               |                                                |
| SECTION 11.1.                      | Trust Indenture Act Controls                        | 55     |
| SECTION 11.2.                      | Notices                                             | 55     |
| SECTION 11.3.                      | Communication by Holders with Other Holders         | 56     |
| SECTION 11.4.                      | Certificate and Opinion as to Conditions  Precedent | 56     |
| SECTION 11.5.                      | Statements Required in Certificate or  Opinion      | 56     |

 

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| SECTION 11.6.                                                                                                       | When Securities Disregarded                   | 57     |
|---------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|--------|
| SECTION  11.7.                                                                                                      | Rules  by Trustee, Paying Agent and Registrar | 57     |
| SECTION 11.8.                                                                                                       | Legal Holidays                                | 57     |
| SECTION 11.9.                                                                                                       | Governing Law                                 | 57     |
| SECTION 11.10.                                                                                                      | No Recourse Against Others                    | 57     |
| SECTION 11.11.                                                                                                      | Successors                                    | 57     |
| SECTION 11.12.                                                                                                      | Multiple Originals                            | 57     |
| SECTION 11.13.                                                                                                      | Table of Contents; Headings                   | 58     |
| SECTION 11.14.                                                                                                      | Severability Clause                           | 58     |
|                                                                                                                |                                          |   |
|                                                                                                                |                                          |   |
| Exhibit  A — Form of Note                                                                                      |                                          |
| Exhibit  B — Form of Private Placement Legend                                                                  |                                          |
| Exhibit  C — Form of Certificate to be Delivered in Connection with Transfers to  Non-QIB Accredited Investors |                                          |
| Exhibit  D — Form of Certificate to be Delivered in Connection with Transfers Pursuant  to Regulation S        |                                          |

 

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INDENTUREdated as of March 8, 2004, among FRIENDLY ICE CREAM CORPORATION, aMassachusetts corporation (the “*Company*”),FRIENDLY’S RESTAURANTS FRANCHISE, INC., a Delaware corporation, and THE BANK OFNEW YORK, a New York banking corporation (the “*Trustee*”).

 

Each party agrees as follows for the benefitof the other party and for the equal and ratable benefit of the Holders of theCompany’s 8 3/8% Senior Notes Due 2012:

 

# ARTICLE1

#  

# DEFINITIONSAND INCORPORATION BY REFERENCE

#  

## SECTION 1.1.                                                    Definitions.

 

“*AcquiredIndebtedness*” of any specified Person means Indebtedness of anyother Person existing at the time such other Person is merged with or into orbecomes a Restricted Subsidiary of such specified Person, includingIndebtedness Incurred in connection with, or in contemplation of, such otherPerson’s becoming a Restricted Subsidiary of such specified Person.

 

“*AdditionalAssets*” means (i) any property or assets (other than Indebtednessand Capital Stock) in a Related Business; (ii) the Capital Stock of a Personthat becomes a Restricted Subsidiary as a result of the acquisition of suchCapital Stock by the Company or another Restricted Subsidiary; or (iii) CapitalStock constituting a minority interest in any Person that at such time is aRestricted Subsidiary; *provided*, *however*, that, in the caseof clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in aRelated Business.

 

“*Affiliate*”of any specified Person means any other Person, directly or indirectly,controlling or controlled by or under direct or indirect common control withsuch specified Person.  For the purposesof this definition, “control” when used with respect to any Person means thepower to direct the management and policies of such Person, directly orindirectly, whether through the ownership of voting securities, by contract orotherwise; and the terms “controlling” and “controlled” have meanings correlativeto the foregoing.  For purposes ofArticle 4, Donald N. Smith shall be deemed to be an “Affiliate” so long ashe is the beneficial owner of shares representing 5% or more of the totalvoting power of the Voting Stock (on a fully diluted basis) of the Company orof rights or warrants to purchase such Voting Stock (whether or not currentlyexercisable).

 

“*AssetDisposition*” means any sale, lease, transfer or other disposition(or series of related sales, leases, transfers or dispositions) of shares ofCapital Stock of a Restricted Subsidiary (other than directors’ qualifyingshares), property or other assets (including sales and other dispositions of tangibleassets to franchisees and licensees and tangible assets at underperformingrestaurants, but excluding sales, dispositions or licenses of trademarks,service marks, trade names and other intangibles), including by way of aSale/Leaseback Transaction (each referred to for the purposes of thisdefinition as a “disposition”), by the Company or any of its Restricted Subsidiaries(including any disposition by means of a merger, consolidation or similartransaction) other than (i) a disposition to the Company or a RestrictedSubsidiary, (ii) a disposition of property or assets in the ordinarycourse of business, (iii) dispositions of inventory in the ordinary courseof business, (iv) for purposes of Section 4.6 only, a disposition thatconstitutes a Permitted Investment or a Restricted Payment permitted bySection 4.4, (v) the sale, lease, transfer or other disposition ofall or substantially all the assets of the Company as permitted under Article5, (vi) the grant of Liens permitted by Section 4.9 and (vii) salesof obsolete or worn-out equipment, and (viii) dispositions of assets, inany transaction or series of related transactions, with a fair market value ofnot more than $2.5 million.

 

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“*AverageLife*” means, as of the date of determination, with respect to anyIndebtedness or Preferred Stock, the quotient obtained by dividing (i) the sumof the product of the numbers of years from the date of determination to thedates of each successive scheduled principal payment of such Indebtedness orredemption or similar payment with respect to such Preferred Stock multipliedby the amount of such payment by (ii) the sum of all such payments.

 

“*Board ofDirectors*” means the Board of Directors or equivalent governing bodyof a Person (or the general partner of such Person, as the case may be) or,other than for purposes of the definition of “Change of Control,” any committeethereof duly authorized to act on behalf of such Board or equivalent governingbody.

 

“*BusinessDay*” means a day other than a Saturday, Sunday or other day on whichbanking institutions in New York State are authorized or required by law toclose.

 

“*CapitalStock*” of any Person means any and all shares, interests, rights topurchase, warrants, options, participation or other equivalents of or interestsin (however designated) equity of such Person, including any Preferred Stock,but excluding any debt securities convertible into such equity.

 

“*CapitalizedLease Obligation*” of a Person means an obligation of such Personthat is required to be classified and accounted for on the balance sheet ofsuch Person as a capitalized lease for financial reporting purposes inaccordance with GAAP, and the amount of Indebtedness represented by suchobligation shall be the capitalized amount of such obligation determined inaccordance with GAAP; and the Stated Maturity thereof shall be the date of thelast payment of rent or any other amount due under such lease.

 

“*Change ofControl*” means the occurrence of any of the following events withrespect to the Company:

 

#### (i)                           any “person” (as such termis used in Sections 13(d) and 14(d) of the Exchange Act), other than one ormore Permitted Holders, is or becomes the “beneficial owner” (as defined inRules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of 50%or more of the total voting power of the Voting Stock of the Company;

####  

#### (ii)                        during any period of twoconsecutive years, individuals who at the beginning of such period constitutedthe Board of Directors of the Company (together with any new directors whoseelection by such Board of Directors or whose nomination for election by theshareholders of the Company was approved by a vote of a majority of thedirectors of the Company then still in office who were either directors at thebeginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason to constitute a majority of theBoard of Directors of the Company then in office;

####  

#### (iii)                     any sale, lease, exchange or othertransfer (in one transaction or a series of related transactions) of all, orsubstantially all, the assets of the Company to any person or group of persons(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (otherthan to any Wholly Owned Subsidiary of the Company);

####  

#### (iv)                    the Company merges or consolidateswith or into another Person or another Person merges with or into theCompany,  and, in any such case, thesecurities of the Company that are outstanding immediately prior to suchtransaction and that represent 100% of the voting power of the Voting Stock ofthe Company are changed into or exchanged for cash, securities or property,unless pursuant to such transaction such securities of the Company are changedinto or

 

2

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#### exchanged for,in addition to any other consideration, securities of the surviving corporationthat represent immediately after such transaction, at least a majority of theaggregate voting power of the Voting Stock of the surviving Person or transferee;or

####  

#### (v)                                 theadoption of a plan of liquidation of the Company.

####  

“*Code*”means the Internal Revenue Code of 1986, as amended.

 

“*CommodityAgreement*” means any commodity swap agreement, commodity futureagreement, commodity hedge agreement or other similar agreement relating tocommodities, in each case relating to those commodities used in the ordinarycourse of business of the Company and its Subsidiaries.

 

“*ConsolidatedCoverage Ratio*” as of any date of determination means the ratio of(i) the aggregate amount of EBITDA for the period of the most recent fourconsecutive fiscal quarters for which internal financial information isavailable prior to such date of determination to (ii) Consolidated InterestExpense for such four fiscal quarters; *provided*, *however*, that (1) if theCompany or any Restricted Subsidiary has Incurred any Indebtedness since thebeginning of such period that remains outstanding or if the transaction givingrise to the need to calculate the Consolidated Coverage Ratio is an Incurrenceof Indebtedness, or both, EBITDA and Consolidated Interest Expense for such periodshall be calculated after giving effect on a pro forma basis to suchIndebtedness as if such Indebtedness had been Incurred on the first day of suchperiod and the discharge of any other Indebtedness repaid, repurchased,defeased or otherwise discharged with the proceeds of such new Indebtedness asif such discharge had occurred on the first day of such period, (2) if sincethe beginning of such period the Company or any Restricted Subsidiary shallhave made any Asset Disposition or if the transaction giving rise to the needto calculate the Consolidated Coverage Ratio is an Asset Disposition, theEBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive)directly attributable to the assets which are the subject of such AssetDisposition for such period, or increased by an amount equal to the EBITDA (ifnegative) directly attributable thereto for such period and ConsolidatedInterest Expense for such period shall be reduced by an amount equal to theConsolidated Interest Expense directly attributable to any Indebtedness of theCompany or any Restricted Subsidiary repaid, repurchased, defeased or otherwisedischarged with respect to the Company and its continuing RestrictedSubsidiaries in connection with such Asset Disposition for such period (or, ifthe Capital Stock of any Restricted Subsidiary is sold, the ConsolidatedInterest Expense for such period directly attributable to the Indebtedness of suchRestricted Subsidiary to the extent the Company and its continuing RestrictedSubsidiaries are no longer liable for such Indebtedness after such sale), (3)if since the beginning of such period the Company or any Restricted Subsidiary(by merger or otherwise) shall have made an Investment in any RestrictedSubsidiary (or any Person which becomes a Restricted Subsidiary) or anacquisition of assets, including any acquisition of assets occurring inconnection with a transaction causing a calculation to be made hereunder, whichconstitutes all or substantially all of an operating unit of a business, EBITDAand Consolidated Interest Expense for such period shall be calculated aftergiving pro forma effect thereto (including the Incurrence or retirement of anyIndebtedness) as if such Investment or acquisition occurred on the first day ofsuch period and (4) if since the beginning of such period any Person (thatsubsequently became a Restricted Subsidiary or was merged with or into theCompany or any Restricted Subsidiary since the beginning of such period) shallhave made any Asset Disposition or any Investment that would have required anadjustment pursuant to clause (2) or (3) above if made by the Company or aRestricted Subsidiary during such period, EBITDA and Consolidated InterestExpense for such period shall be calculated after giving pro forma effectthereto as if such Asset Disposition or Investment occurred on the first day ofsuch period.  For purposes of thisdefinition, whenever pro forma effect is to be given to an acquisition ofassets, the amount of income or earnings relating thereto and the amount ofConsolidated Interest Expense associated with any Indebtedness Incurred inconnection therewith, the pro forma calculations shall be made on a basisconsistent with

 

3

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Regulation S-X under the ExchangeAct.  If any Indebtedness bears afloating rate of interest and is being given pro forma effect, the interestexpense on such Indebtedness shall be calculated as if the rate in effect onthe date of determination had been the applicable rate for the entire period(taking into account any Interest Rate Agreement applicable to suchIndebtedness).

 

“*ConsolidatedInterest Expense*” means, for any period, the total interest expenseof the Company and its consolidated Restricted Subsidiaries (net of interestincome), plus, to the extent not included in such interest expense,(i) interest expense attributable to capital leases,(ii) amortization of debt discount and debt issuance cost,(iii) capitalized interest, (iv) non-cash interest expense, (v)commissions, discounts and other fees and charges owed with respect to lettersof credit and bankers’ acceptance financing, (vi) interest on Indebtednessreferred to in clause (vii) or (viii) of the definition of “Indebtedness,”(vii) interest with respect to discontinued operations;(viii) Preferred Stock dividends in respect of all Preferred Stock of theCompany and its Subsidiaries held by Persons other than the Company or a WhollyOwned Subsidiary and (ix) the cash contributions to any employee stockownership plan or similar trust to the extent such contributions are used bysuch plan or trust to pay interest or fees to any Person (other than theCompany) in connection with Indebtedness Incurred by such plan or trust; *provided*,*however*,that there shall be excluded therefrom any such interest expense of anyUnrestricted Subsidiary to the extent the related Indebtedness is notGuaranteed or paid by the Company or any Restricted Subsidiary.

 

“*ConsolidatedNet Income*” means, for any period, the net income (loss) of theCompany and its consolidated Subsidiaries; *provided*, *however*, that there shallnot be included in such Consolidated Net Income:

 

#### (i)                           any net income (loss) of anyPerson (other than the Company) if such Person is not a Restricted Subsidiary,except that (A) subject to the limitations contained in clause (iii)below, the Company’s equity in the net income of any such Person for suchperiod shall be included in such Consolidated Net Income up to the aggregateamount of cash actually distributed by such Person during such period to theCompany or a Restricted Subsidiary as a dividend or other distribution(subject, in the case of a dividend or other distribution paid to a RestrictedSubsidiary, to the limitations contained in clause (ii) below) and (B) theCompany’s equity in a net loss of any such Person (other than an UnrestrictedSubsidiary) for such period shall be included in determining such ConsolidatedNet Income,

####  

#### (ii)                        any net income (but not loss)of any Restricted Subsidiary if such Restricted Subsidiary is subject torestrictions, directly or indirectly, on the payment of dividends or the makingof distributions by such Restricted Subsidiary, directly or indirectly, to theCompany, except that (A), subject to the exclusion contained inclause (iii) below, the Company’s equity in the net income of any suchRestricted Subsidiary for such period shall be included in such ConsolidatedNet Income up to the aggregate amount of cash actually distributed by suchRestricted Subsidiary during such period to the Company or another RestrictedSubsidiary as a dividend or other distribution (subject, in the case of adividend paid to another Restricted Subsidiary, to the limitation contained inthis clause) and (B) the Company’s equity in a net loss of any such RestrictedSubsidiary for such period shall be included in determining such ConsolidatedNet Income,

####  

#### (iii)                     any gain or loss realized upon thesale or other disposition of any property, plant or equipment of the Company orits consolidated Subsidiaries (including pursuant to any Sale/LeasebackTransaction) which is not sold or otherwise disposed of in the ordinary courseof business and any gain (or loss) realized upon the sale or other dispositionof any Capital Stock of any Person,

 

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#### (iv)                              anyextraordinary gain or loss,

####  

#### (v)                                 thecumulative effect of a change in accounting principles, and

####  

#### (vi)                              foreigncurrency exchange gains and losses.

####  

Notwithstanding the foregoing, for thepurpose of Section 4.4 only, there shall be excluded from Consolidated NetIncome any dividends, repayments of loans or advances or other transfers ofassets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiaryto the extent such dividends, repayments or transfers increase the amount ofRestricted Payments permitted under such covenant pursuant to clause (3)(D) ofparagraph (a) thereof.

 

“*Credit Facility*” means that certain creditfacility, dated as of December 17, 2001, as amended through the IssueDate, among the Company, Fleet National Bank, as agent, and the lenders fromtime to time party thereto, including any collateral documents, instruments andagreements executed in connection therewith, and the term “Credit Facility”shall also include any amendments, supplements, modifications, extensions,renewals, restatements or refundings thereof and any credit facilities thatreplace, refund or refinance any part of the loans, other credit facilities orcommitments thereunder, including any such replacement, refunding orrefinancing facility that increases the amount borrowable thereunder or altersthe maturity thereof.

 

“*CurrencyAgreement*” means in respect of a Person any foreign exchangecontract, currency swap agreement or other similar agreement as to which suchPerson is a party or a beneficiary.

 

“*Default*”means any event which is, or after notice or passage of time or both would be,an Event of Default.

 

“*Depositary*” shall mean The DepositoryTrust Company, New York, New York, or a successor thereto registered under theExchange Act or other applicable statute or regulation.

 

“*DisqualifiedStock*” means, with respect to any Person, any Capital Stock which byits terms (or by the terms of any security into which it is convertible or forwhich it is exchangeable) or upon the happening of any event (i) matures or ismandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii)is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii)is redeemable at the option of the holder thereof, in whole or in part, in eachcase on or prior to the 91st day after the Stated Maturity of the Securities.

 

“*EBITDA*”for any period means the Consolidated Net Income for such period, plus thefollowing to the extent deducted in calculating such Consolidated Net Income:(i) income tax expense, (ii) Consolidated Interest Expense, (iii) depreciationexpense, (iv) amortization expense and (v) all other non-cash items reducingsuch Consolidated Net Income (excluding any such non-cash item that results inan accrual of or a reserve for a cash expense or charge in any future period),*minus*allnon-cash items increasing such Consolidated Net Income, in each case for suchperiod.  Notwithstanding the foregoing,the income tax expense, depreciation expense and amortization expense of aRestricted Subsidiary of the Company shall be included in EBITDA only to theextent (and in the same proportion) that the net income of such Subsidiary wasincluded in calculating Consolidated Net Income and only if a correspondingamount would be permitted at the date of determination to be distributable tothe Company by such Subsidiary as a dividend.

 

“*ExchangeAct*” means the Securities Exchange Act of 1934, as amended.

 

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*“Exchange and Registration Rights Agreement”*means (i) the Exchange and Registration Rights Agreement dated as of the IssueDate among the Company, Friendly’s Restaurants Franchise, Inc. and the InitialPurchasers and (ii) any other exchange and registration rights agreemententered into in connection with an issuance of Additional Securities in aprivate offering after the Issue Date.

 

*“Exchange Offer”* means the offer than may bemade by the Company pursuant to the Exchange and Registration Rights Agreementto exchange Securities bearing the Private Placement Legend for the ExchangeSecurities.

 

*“Exchange Securities”* has the meaning setforth in the Exchange and Registration Rights Agreement.

 

“*ForeignSubsidiary*” means any Subsidiary which is incorporated or otherwiseorganized under the laws of any jurisdiction other than the United States ofAmerica, any State thereof or the District of Columbia.

 

“*GAAP*”means generally accepted accounting principles in the United States of Americaas in effect as of the date of this Indenture, including those set forth in theopinions and pronouncements of the Accounting Principles Board of the AmericanInstitute of Certified Public Accountants and statements and pronouncements ofthe Financial Accounting Standards Board or in such other statements by suchother entity as approved by a significant segment of the accountingprofession.  All ratios and computationsbased on GAAP contained in this Indenture shall be computed in conformity withGAAP.

 

 “*Guarantee*” means any obligation,contingent or otherwise, of any Person directly or indirectly guaranteeing anyIndebtedness or other obligation of any other Person and any obligation, director indirect, contingent or otherwise, of such Person (i) to purchase or pay (oradvance or supply funds for the purchase or payment of) such Indebtedness orother obligation of such other Person (whether arising by virtue of partnershiparrangements, or by agreement to keep-well, to purchase assets, goods, securitiesor services, to take-or-pay, or to maintain financial statement conditions orotherwise) or (ii) entered into for purposes of assuring in any other mannerthe obligee of such Indebtedness or other obligation of the payment thereof orto protect such obligee against loss in respect thereof (in whole or in part); *provided*,*however*,that the term “Guarantee” shall not include endorsements for collection ordeposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

 

“*HedgingObligations*” of any Person means the obligations of such Person to acounterparty (net of amounts receivable from such counterparty) pursuant to anyInterest Rate Agreement, Currency Agreement or Commodity Agreement.

 

“*Holder*”or “*Securityholder*” means thePerson in whose name a Security is registered on the Registrar’s books.

 

“*IAI Global Note*” means a permanent globalsecurity in registered form bearing the legend in Exhibit B anddeposited with or on behalf of and registered in the name of the Depositary orits nominee representing the Securities sold to Institutional AccreditedInvestors following the Issue Date in compliance with this Indenture.

 

“*Incur*”means issue, assume, Guarantee, incur or otherwise become liable for; *provided*,*however*,that (i) any Indebtedness or Disqualified Stock of a Person existing atthe time such Person becomes a Subsidiary (whether by merger, consolidation,acquisition or otherwise) shall be deemed to be incurred by such Subsidiary atthe time it becomes a Subsidiary and (ii) neither the accrual of interestor the accretion of original issue discount shall be deemed to be anIncurrence.

 

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“*Indebtedness*”means, with respect to any Person on any date of determination (withoutduplication),

 

(i)                                     the principal ofand premium (if any) in respect of indebtedness of such Person for borrowedmoney,

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(ii)                                  the principal of andpremium (if any) in respect of obligations of such Person evidenced by bonds,debentures, notes or other similar instruments,

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(iii)                               all obligations of suchPerson in respect of unreimbursed drawings under letters of credit or othersimilar instruments (including reimbursement obligations with respect thereto),

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(iv)                              all obligations of suchPerson to pay the deferred and unpaid purchase price of property or services(except Trade Payables and accrued expenses), which purchase price is due morethat six months after the date of placing such property in service or takingdelivery and title thereto or the completion of such services,

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(v)                                 all Capitalized LeaseObligations of such Person,

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(vi)                              the amount of allnon-contingent obligations of such Person with respect to the redemption,repayment or other repurchase of any Disqualified Stock or, with respect to anyRestricted Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock(but excluding, in each case, any accrued dividends),

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(vii)                           all Indebtedness of otherPersons secured by a Lien on any asset of such Person, whether or not suchIndebtedness is assumed by such Person; *provided*, *however*, that the amount ofsuch Indebtedness shall be the lesser of (A) the fair market value of suchasset at such date of determination and (B) the amount of such Indebtedness ofsuch other Person,

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(viii)                        all Indebtedness of otherPersons to the extent Guaranteed by such Person,

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(ix)                                to the extent nototherwise included in this definition, net Hedging Obligations, and

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(x)                                   AcquiredIndebtedness.

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The amount of Indebtedness of any Person atany date shall be the outstanding balance at such date of all unconditionalobligations as described above and the maximum liability, upon the occurrenceof the contingency giving rise to the obligation, of any contingent obligationsat such date.

 

“*Indenture*”means this Indenture as amended or supplemented from time to time by one ormore supplemental indentures entered into pursuant to the applicable provisionshereof or otherwise in accordance with the terms hereof.

 

*“Initial Purchasers”*****means Goldman,Sachs & Co., Banc of America Securities LLC and SG Cowen SecuritiesCorporation.

 

*“Institutional Accredited Investor”* or *“IAI”*means an “accredited investor” with the meaning of Rule 501(a)(1), (2), (3) or(7) under the Securities Act.

 

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“*interest*” means, with respect to anySecurity, interest on such Security plus any Special Interest, if any, underthe Exchange and Registration Rights Agreement.

 

“*InterestRate Agreement*” means with respect to any Person any interest rateprotection agreement, interest rate future agreement, interest rate optionagreement, interest rate swap agreement, interest rate cap agreement, interestrate collar agreement, interest rate hedge agreement or other similar agreementor arrangement as to which such Person is party or a beneficiary.

 

“*Investment*”in any Person means any direct or indirect advance, loan (other than advancesto customers in the ordinary course of business that are recorded as accountsreceivable on the balance sheet of such Person) or other extension of credit(including by way of Guarantee or similar arrangement) or capital contributionto (by means of any transfer of cash or other property to others or any paymentfor property or services for the account or use of others), or any purchase oracquisition of Capital Stock, Indebtedness or other similar instruments issuedby such Person.  Notwithstanding theforegoing, purchases, redemptions or other acquisitions of Capital Stock of theCompany shall be deemed not to be Investments. For purposes of the definition of “Unrestricted Subsidiary” and Section4.4, (i) “Investment” shall include the portion (proportionate to the Company’sequity interest in such Subsidiary) of the fair market value of the net assetsof any Subsidiary of the Company at the time that such Subsidiary is designatedan Unrestricted Subsidiary; *provided*, *however*, that upon aredesignation of such Subsidiary as a Restricted Subsidiary, the Company shallbe deemed to continue to have a permanent “Investment” in an UnrestrictedSubsidiary in an amount (if positive) equal to (x) the Company’s “Investment”in such Subsidiary at the time of such redesignation less (y) the portion(proportionate to the Company’s equity interest in such Subsidiary) of the fairmarket value of the net assets of such Subsidiary at the time that suchSubsidiary is so redesignated a Restricted Subsidiary; and (ii) any propertytransferred to or from an Unrestricted Subsidiary shall be valued at its fairmarket value at the time of such transfer, in each case as determined in goodfaith by the Board of Directors and evidenced by a resolution of such Board ofDirectors certified in an Officers’ Certificate to the Trustee.  For the purposes of calculating the amountof other “Investments,” including Permitted Investments, the amount of anyInvestment shall be the original cost of such Investment plus the cost of alladditional Investments by the Company or any of its Restricted Subsidiaries,without any adjustments for increases or decreases in value, or write-ups,write-downs or write-offs with respect to such Investment, reduced by thepayment of dividends or distributions in connection with such Investment or anyother amounts received in respect of such Investment; *provided* that no suchpayment of dividends or distributions or receipt of any such other amountsshall reduce the amount of any Investment if such payment of dividends ordistributions or receipt of any such amounts would be included in ConsolidatedNet Income.  If the Company or anyRestricted Subsidiary sells or otherwise disposes of any Capital Stock of anyRestricted Subsidiary such that, after giving effect to any such sale or disposition,such Person is no longer a Restricted Subsidiary, the Company shall be deemedto have made an Investment on the date of any such sale or other dispositionequal to the fair market value of the Capital Stock of and all otherInvestments in such Subsidiary not sold or disposed of, which amount shall bedetermined by the Board of Directors of the Company.

 

“*IssueDate*” means the date on which the Initial Securities are firstissued under this Indenture.

 

“*Lien*”means any mortgage, pledge, security interest, encumbrance, lien or charge of anykind (including any conditional sale or other title retention agreement orlease in the nature thereof).

 

“*NetAvailable Cash*” from an Asset Disposition means cash paymentsreceived (including any cash payments received by way of deferred payment ofprincipal pursuant to a note or installment receivable or otherwise, but onlyas and when received, but excluding any other consideration received in theform of assumption by the acquiring Person of Indebtedness or other obligationsrelating to such

 

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properties or assets or received in any othernon cash form) therefrom, in each case net of (i) all legal, accounting,investment banking, title and recording tax expenses, commissions and otherfees and expenses incurred, and all Federal, state, provincial, foreign andlocal taxes required to be paid or accrued as a liability under GAAP, as aconsequence of such Asset Disposition, (ii) all payments made on anyIndebtedness which is secured by any assets subject to such Asset Disposition,in accordance with the terms of any Lien upon such assets, or which must by itsterms, or in order to obtain a necessary consent to such Asset Disposition, orby applicable law be repaid out of the proceeds from such Asset Disposition,(iii) all distributions and other payments required to be made to minorityinterest holders in Subsidiaries or joint ventures as a result of such AssetDisposition and (iv) the deduction of appropriate amounts to be provided by theseller as a reserve, in accordance with GAAP, against any liabilitiesassociated with the assets disposed of in such Asset Disposition and retainedby the Company or any Restricted Subsidiary after such Asset Disposition.

 

“*Net CashProceeds,*” with respect to any issuance or sale of Capital Stock,means the cash proceeds of such issuance or sale net of attorneys’ fees,accountants’ fees, underwriters’ or placement agents’ fees, discounts orcommissions and brokerage, consultants’ and other fees actually incurred inconnection with such issuance or sale and net of taxes paid or payable as aresult thereof.

 

“*Non-RecourseDebt*” means Indebtedness (i) as to which neither the Company nor anyRestricted Subsidiary (a) provides any Guarantee or credit support of any kind(including any undertaking, Guarantee, indemnity, agreement or instrument thatwould constitute Indebtedness) or (b) is directly or indirectly liable (as aguarantor or otherwise) and (ii) no default with respect to which (includingany rights that the holders thereof may have to take enforcement action againstan Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)any holder of any other Indebtedness of the Company or any RestrictedSubsidiary to declare a default under such other Indebtedness or cause thepayment thereof to be accelerated or payable prior to its stated maturity.

 

*“Non-U.S. Person”* has the meaning assigned tosuch term in Regulation S.

 

*“Offering Circular*” means the OfferingCircular dated March 3, 2004 relating to the Initial Securities issued on theIssue Date.

 

“*Officer*”means the Chairman of the Board, any Vice Chairman, the Chief Executive Officer,the Chief Financial Officer, the President, any Executive Vice President, theTreasurer or the Clerk.

 

“*Officers’Certificate*” means a certificate signed by two Officers, one ofwhich is the Chairman of the Board, the Chief Executive Officer, the ChiefFinancial Officer, the President, any Executive Vice President, the Treasureror the Clerk.

 

“*144A Global Note*” means a permanent globalsecurity in registered form representing the Securities sold in reliance onRule 144A under the Securities Act.

 

“*Opinionof Counsel*” means a written opinion from legal counsel who isreasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or theTrustee.  Opinions of Counsel requiredto be delivered under this Indenture may have qualifications customary foropinions of the type required and counsel delivering such Opinions of Counselmay rely on certificates of the Company or government or other officialscustomary for opinions of the type required, including certificates certifyingas to matters of fact.

 

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“*Pari Passu Indebtedness*” means anyIndebtedness of the Company or any Subsidiary Guarantor that ranks *pari**passu*in right of payment with the Securities or the Subsidiary Guarantees, as applicable.

 

“*Permitted Holders*” means (1) DonaldN. Smith, John L. Cutter, Paul V. Hoagland, Lawrence A. Rusinko, Michael A.Maglioli, Garret J. Ulrich and Allan J. Okscin and (2) Related Parties ofany of the foregoing.

 

“*PermittedInvestment*” means an Investment by the Company or any RestrictedSubsidiary in (i) the Company, or a Restricted Subsidiary or a Personwhich will, upon the making of such Investment, become a Restricted Subsidiary;*provided*,*however*,that the primary business of such Restricted Subsidiary is a Related Business;(ii) another Person if as a result of such Investment such other Person ismerged or consolidated with or into, or transfers or conveys all orsubstantially all its assets to, the Company or a Restricted Subsidiary; *provided*,*however*,that such Person’s primary business is a Related Business; (iii) TemporaryCash Investments; (iv) accounts and receivables owing to the Company orany Restricted Subsidiary, if created or acquired in the ordinary course ofbusiness and payable or dischargeable in accordance with customary trade terms;*provided*,*however*,that such trade terms may include such concessionary trade terms as the Companyor any such Restricted Subsidiary deems reasonable under the circumstances;(v) payroll, travel and similar advances to cover matters that areexpected at the time of such advances ultimately to be treated as expenses foraccounting purposes and that are made in the ordinary course of business;(vi) loans or advances to employees made in the ordinary course ofbusiness; (vii) stock, obligations or securities received in settlement ofdebts created in the ordinary course of business and owing to the Company orany Restricted Subsidiary or in satisfaction of judgments;(viii) franchisees of the Company in an amount at any one time outstandingnot to exceed $10 million; (ix) Unrestricted Subsidiaries in anaggregate amount at any one time outstanding not to exceed $10 million;(x) Guarantees permitted to be made pursuant to Section 4.3;(xi) securities of account debtors received in settlement of obligationsor pursuant to any plan of reorganization or similar arrangement upon thebankruptcy or insolvency of any account debtors or customers,(xii) Currency Agreements, Interest Rate Agreements and CommodityAgreements entered into in the ordinary course of business; *provided*that such agreements are entered into for bona fide hedging purposes, are notfor speculation or trading purposes and are designed to protect againstfluctuations in interest rates, currency exchange rates or commodity prices, asthe case may be, and, in the case of Interest Rate Agreements, any such InterestRate Agreement has a notional amount corresponding to the Indebtedness beinghedged thereby, (xiii) accounts and notes receivable from franchisees,customers, suppliers and others in the ordinary course of business,(xiv) in connection with an Asset Disposition made in compliance withSection 4.6, (xv) Investments made in the form of Capital Stock(other than Disqualified Stock) of the Company; and (xvi) otherInvestments in an aggregate amount at any time outstanding not to exceed $10million (with each Investment being valued as of the date made and withoutregard to subsequent changes in value).

 

“*PermittedLiens*” means, with respect to any Person, (a) pledges ordeposits by such Person under workmen’s compensation laws, unemploymentinsurance laws or similar legislation, or good faith deposits in connectionwith bids, tenders, contracts (other than for the payment of Indebtedness) orleases to which such Person is a party, or deposits to secure public orstatutory obligations of such Person or deposits of cash or cash equivalents tosecure surety or appeal bonds to which such Person is a party, or deposits assecurity for contested taxes or import duties or for the payment of rent, ineach case incurred in the ordinary course of business; (b) Liens imposedby law, such as carriers’, warehousemen’s and mechanics’ Liens, in each casefor sums not yet due or being contested in good faith by appropriateproceedings or other Liens arising out of judgments or awards against suchPerson with respect to which such Person shall then be proceeding with anappeal or other proceedings for review; (c) Liens for taxes, assessments,governmental charges or claims not yet subject to penalties for non-payment orwhich are being contested in good faith by appropriate proceedings;(d) Liens in favor of issuers of surety bonds or

 

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letters of credit issued pursuant to therequest of and for the account of such Person, and Liens to secure bankers’acceptances, in each case in the ordinary course of its business;(e) survey exceptions, encumbrances, easements or reservations of, orrights of others for, licenses, rights of way, sewers, electric lines,telegraph and telephone lines and other similar purposes, or zoning or otherrestrictions as to the use of real properties or Liens incidental to theconduct of the business of such Person or to the ownership of its propertieswhich were not incurred in connection with Indebtedness and which do not in theaggregate materially adversely affect the value of said properties ormaterially impair their use in the operation of the business of such Person;(f) Liens (A) securing obligations under Interest Rate Agreements solong as the related Indebtedness is, and is permitted to be under theIndenture, secured by a Lien on the same property securing such obligations and(B) securing obligations under Currency Agreements and CommodityAgreements, *provided*that such Liens shall not encumber any assets or property of the Company otherthan the underlying contracts and the rights thereunder; (g) Liensexisting as of the Issue Date and Liens created by the Indenture;(h) Liens created solely for the purpose of securing the payment of all ora part of the purchase price or construction cost of assets or propertyacquired or constructed in the ordinary course of business after the IssueDate; *provided*,*however*,that (A) the aggregate principal amount of Indebtedness secured by suchLiens shall not exceed the cost of the assets or property so acquired orconstructed, (B) the Indebtedness secured by such Liens shall haveotherwise been permitted to be issued under the Indenture and (C) suchLiens shall not encumber any other assets or property of the Company or any ofits Restricted Subsidiaries (other than assets or property affixed orappurtenant thereto) and shall attach to such assets or property within 180days of the construction or acquisition of such assets or property; (i) Lienson the assets or property of a Restricted Subsidiary of the Company existing atthe time such Restricted Subsidiary became a Subsidiary of the Company and notincurred as a result of (or in connection with or in anticipation of) suchRestricted Subsidiary becoming a Subsidiary of the Company; *provided*,*however*,that (A) any such Lien does not by its terms cover any categories ofproperty or assets after the time such Restricted Subsidiary becomes aSubsidiary which were not covered immediately prior to such transaction,(B) the incurrence of the Indebtedness secured by such Lien shall haveotherwise been permitted to be issued under the Indenture, and (C) suchLiens do not extend to or cover any other categories of property or assets(other than assets or property affixed or appurtenant thereto) of the Companyor any of its Restricted Subsidiaries; (j) Liens to secure CapitalizedLease Obligations permitted to be Incurred under the Indenture; (k) Lienson assets existing at the time such assets are acquired by the Company or anyRestricted Subsidiary (and not created in anticipation or contemplationthereof); (l) Liens securing Indebtedness outstanding under the CreditFacility; (m) any interest or title of a lessor under any lease, whetheror not characterized as an operating or capital lease; (n) Liensencumbering deposits made to secure obligations arising from statutory,regulatory, contractual or warranty requirements of the Company or anyRestricted Subsidiary, including rights of set-off; (o) leases or subleasesgranted in the ordinary course of business; (p) Liens arising out ofconsignment or similar arrangements for the sale of goods; (q) rights ofset-off on bank accounts and Liens of securities intermediaries arising onaccounts maintained in the ordinary course of business; (r) Liens inaddition to the foregoing; *provided* that the amount of theobligations of the Company and its Restricted Subsidiaries secured by suchLiens does not exceed in the aggregate $2 million at any one timeoutstanding; and (s) Liens extending, renewing or replacing in whole or inpart a Lien permitted by clause (g), (h), (i), (j) or (k) above; *provided*,*however*,that (A) such Liens do not extend beyond the property subject to theexisting Lien and improvements and construction on such property and proceedsthereof and (B) the Indebtedness secured by the Lien may not exceed theIndebtedness secured at the time by the existing Lien, plus an amount necessaryto pay any fees and expenses relating to such extension, renewal or replacement(including premiums related thereto).

 

“*Person*”means any individual, corporation, partnership, limited liability company,joint venture, association, joint-stock company, trust, unincorporatedorganization, government or any agency or political subdivision thereof or anyother entity.

 

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“*PreferredStock,*” as applied to the Capital Stock of any Person, means CapitalStock of any class or classes (however designated) which is preferred as to thepayment of dividends, or as to the distribution of assets upon any voluntary orinvoluntary liquidation or dissolution of such Person, over shares of CapitalStock of any other class of such Person.

 

“*principal*”of a Security means the principal of the Security plus the premium, if any,payable on the Security which is due or overdue or is to become due at therelevant time.

 

“*Private Placement Legend*” means thelegends initially set forth on the Securities in the form set forth in Exhibit B.

 

“*QualifiedEquity Offering*” means (i) an underwritten primary public offeringof common stock of the Company pursuant to an effective registration statementunder the Securities Act or (ii) a private offering of common stock other thanissuances of common stock pursuant to employee benefit plans or as compensationto employees.

 

*“Qualified Institutional Buyer”* or *“QIB”*shall have the meaning specified in Rule 144A under the Securities Act.

 

“*RefinancingIndebtedness*” means Indebtedness that refunds, refinances, replaces,renews, repays or extends (including pursuant to any defeasance or dischargemechanism) (collectively, “refinances,” and “refinanced” shall have acorrelative meaning) any Indebtedness existing on the date of the Indenture orIncurred in compliance with the Indenture (including Indebtedness of theCompany that refinances Indebtedness of any Restricted Subsidiary andIndebtedness of any Restricted Subsidiary that refinances Indebtedness ofanother Restricted Subsidiary) including Indebtedness that refinances otherRefinancing Indebtedness; *provided*, *however*, that (i) theRefinancing Indebtedness has a Stated Maturity no earlier than the StatedMaturity of the Indebtedness being refinanced, (ii) the RefinancingIndebtedness has an Average Life at the time such Refinancing Indebtedness isIncurred that is equal to or greater than the Average Life of the Indebtednessbeing refinanced, (iii) if the Indebtedness being refinanced wassubordinated to the Securities or any Subsidiary Guaranty, as the case may be,then such Refinancing Indebtedness, by its terms, is subordinate in right ofpayment to the Securities or such Subsidiary Guaranty, as the case may be, atleast to the same extent as the Indebtedness being refinanced and(iv) such Refinancing Indebtedness is Incurred in an aggregate principalamount (or if issued with original issue discount, an aggregate issue price)that is equal to or less than the sum of the aggregate principal amount (or ifissued with original issue discount, the aggregate accreted value) thenoutstanding of the Indebtedness being refinanced plus the amount of accrued andunpaid interest on the Indebtedness being refinanced, any premium paid to theholders of the Indebtedness being refinanced and reasonable expenses incurredin connection with the incurrence of the Refinancing Indebtedness; *provided further*,*however*,that Refinancing Indebtedness shall not include (x) Indebtedness of aRestricted Subsidiary (other than a Subsidiary Guarantor) that refinances Indebtednessof the Company or (y) Indebtedness of the Company or a Restricted Subsidiarythat refinances Indebtedness of an Unrestricted Subsidiary (unless suchUnrestricted Subsidiary is concurrently redesignated a Restricted Subsidiary).

 

“*Regulation S Global Note*” means apermanent global security in registered form representing the Securities soldin reliance on Regulation S under the Securities Act.

 

“*RelatedBusiness*” means the businesses of the Company and the RestrictedSubsidiaries on the date of the Indenture and any business related, ancillaryor complementary thereto, in each case as determined by the Company in goodfaith.

 

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“*Related Party*”means, with respect to any Person, (1) the spouse or immediate family member ofsuch Person, (2) any estate, trust, corporation, partnership or other entity,the beneficiaries, stockholders, partners or owners of which consist solely ofone or more Permitted Holders and/or such other persons referred to in theimmediately preceding clause (1), or (3) any executor, administrator, trustee,manager, director or other similar fiduciary of any Person referred to in theimmediately preceding clause (2), acting solely in such capacity.

 

*“Responsible Officer”* when used with respectto the Trustee, means any vice president, any assistant vice president, any seniortrust officer or assistant trust officer, any trust officer, or any otherofficer associated with the corporate trust department of the Trusteecustomarily performing functions similar to those performed by any of the abovedesignated officers and also means, with respect to a particular corporatetrust matter, any other officer to whom such matter is referred because of suchperson’s knowledge of and familiarity with the particular subject.

 

*“Restricted Security”* means a Security thatconstitutes a “Restricted Security” within the meaning of Rule 144(a)(3) underthe Securities Act; provided, however, that the Trustee shall be entitled torequest and conclusively rely on an Opinion of Counsel with respect to whetherany Security constitutes a Restricted Security.

 

“*RestrictedSubsidiary*” means any Subsidiary of the Company other than an UnrestrictedSubsidiary.

 

“*Sale/LeasebackTransaction*” means an arrangement relating to property now owned orhereafter acquired whereby the Company or a Restricted Subsidiary transferssuch property to a Person and the Company or a Restricted Subsidiary leases itfrom such Person.

 

“*SEC*”means the U.S. Securities and Exchange Commission.

 

*“Securities”* means, collectively, theCompany’s 8 3/8% Senior Notes due 2012 issued in accordance with Section 2.2(whether issued on the Issue Date, issued as Additional Securities, issued asExchange Securities or otherwise issued after the Issue Date) treated as asingle class of securities under this Indenture, as amended or supplementedfrom time to time in accordance with the terms of this Indenture.

 

*“Securities Act”* means the U.S. Securities Actof 1933, as amended.

 

“*SignificantSubsidiary*” means any Restricted Subsidiary that would be a“Significant Subsidiary” of the Company within the meaning of Rule 1-02 underRegulation S-X promulgated by the SEC.

 

*“Special Interest*” has the meaning provided inthe Exchange and Registration Rights Agreement.

 

“*StatedMaturity*” means, with respect to any security, the date specified insuch security as the fixed date on which the payment of principal of suchsecurity is due and payable, including pursuant to any mandatory redemptionprovision (but excluding any provision providing for the repurchase of suchsecurity at the option of the holder thereof upon the happening of anycontingency beyond the control of the issuer unless such contingency hasoccurred).

 

“*SubordinatedObligation*” means any Indebtedness of the Company or any SubsidiaryGuarantor (whether outstanding on the Issue Date or thereafter Incurred) whichis subordinate or junior in

 

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right of payment to the Securities or theSubsidiary Guaranty of such Subsidiary Guarantor, as the case may be, pursuantto a written agreement.

 

“*Subsidiary*”of any Person means any corporation, association, partnership or other businessentity of which more than 50% of the total voting power of shares of CapitalStock or other interests (including partnership interests) entitled (withoutregard to the occurrence of any contingency) to vote in the election ofdirectors, managers or trustees thereof is at the time owned or controlled,directly or indirectly, by (i) such Person, (ii) such Person and one or moreSubsidiaries of such Person or (iii) one or more Subsidiaries of such Person.

 

“*SubsidiaryGuarantor*” means Friendly’s Restaurants Franchise, Inc. and eachFuture Guarantor, in each case, until such Person is released from itsSubsidiary Guaranty in accordance with the terms of this Indenture.

 

“*SubsidiaryGuaranty*” means the Guaranty by a Subsidiary Guarantor of theCompany’s obligations with respect to the Securities.

 

“*TemporaryCash Investments*” means any of the following: (i) any investment indirect obligations of the United States of America or any agency thereof orobligations Guaranteed by the United States of America or any agency thereof,in each case maturing within 360 days of the date of acquisition thereof,(ii) investments in time deposit accounts, certificates of deposit and moneymarket deposits maturing within 360 days of the date of acquisition thereofissued by a bank or trust company which is organized under the laws of theUnited States of America, any state thereof or any foreign country recognizedby the United States of America having capital, surplus and undivided profitsaggregating in excess of $250,000,000 (or the foreign currency equivalentthereof) and whose long-term debt is rated “A” (or such similar equivalentrating) or higher by at least one nationally recognized statistical ratingorganization (as defined in Rule 436 under the Securities Act), (iii)repurchase obligations with a term of not more than 60 days for underlyingsecurities of the types described in clause (i) above entered into with a bankmeeting the qualifications described in clause (ii) above, (iv) investments incommercial paper, maturing not more than 270 days after the date ofacquisition, issued by a corporation (other than an Affiliate of the Company)organized and in existence under the laws of the United States of America orany foreign country recognized by the United States of America with a rating atthe time as of which any investment therein is made of “P-1” (or higher)according to Moody’s Investors Service, Inc. or “A-1” (or higher) according toStandard & Poor’s Ratings Group, (v) investments in securities withmaturities of 12 months or less from the date of acquisition issued or fullyguaranteed by any state, commonwealth or territory of the United States ofAmerica, or by any political subdivision or taxing authority thereof, and ratedat least “A” by Standard & Poor’s Ratings Group or “A” by Moody’s InvestorsService, Inc. and (vi) investments in shares of money market funds registeredunder the Investment Company Act of 1940, as amended.

 

“*TIA*”means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effecton the date of this Indenture except as provided in Section 9.3.

 

“*TradePayables*” means, with respect to any Person, any accounts payable orany indebtedness or monetary obligation to trade creditors created, assumed orGuaranteed by such Person arising in the ordinary course of business inconnection with the acquisition of goods or services.

 

“*Trustee*”means the party named as such in this Indenture until a successor replaces itand, thereafter, means the successor.

 

14

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“*UniformCommercial Code*” means the New York Uniform Commercial Code as in effectfrom time to time.

 

“*UnrestrictedSubsidiary*” means (i) Friendly’s International, Inc., Friendly’sRealty I, LLC, Friendly’s Realty II, LLC and Friendly’s Realty III, LLC, (ii)any Subsidiary of the Company that at the time of determination shall bedesignated an Unrestricted Subsidiary by the Board of Directors in the mannerprovided below and (iii) any Subsidiary of an Unrestricted Subsidiary.  The Board of Directors may designate anySubsidiary of the Company (including any newly acquired or newly formedSubsidiary of the Company) to be an Unrestricted Subsidiary unless suchSubsidiary or any of its Subsidiaries owns any Capital Stock or Indebtednessof, or owns or holds any Lien (other than Permitted Liens) on any property of,the Company or any other Subsidiary of the Company that is not a Subsidiary ofthe Subsidiary to be so designated; *provided*, *however*, that either (A) theSubsidiary to be so designated has total consolidated assets of $1,000 or lessor (B) if such Subsidiary has consolidated assets greater than $1,000, thensuch designation would be permitted under Section 4.4.  The Board of Directors may designate anyUnrestricted Subsidiary to be a Restricted Subsidiary; *provided*, *however*,that immediately after giving effect to such designation (x) the Company couldIncur $1.00 of additional Indebtedness under Section 4.3(a) and (y) no Defaultshall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to theTrustee by promptly filing with the Trustee a copy of the Board of Directorsresolution giving effect to such designation and an Officers’ Certificatecertifying that such designation complied with the foregoing provisions.

 

“*U.S.Government Obligations*” means direct obligations (or certificatesrepresenting an ownership interest in such obligations) of the United States ofAmerica (including any agency or instrumentality thereof) for the payment ofwhich the full faith and credit of the United States of America is pledged andwhich are not callable or redeemable at the issuer’s option.

 

“*VotingStock*” of a Person means all classes of Capital Stock of such Personthen outstanding and normally entitled to vote in the election of directors (orfunctional equivalent).

 

“*WhollyOwned Subsidiary*” means a Restricted Subsidiary of the Company allthe Capital Stock of which (other than directors’ qualifying shares and, in thecase of Foreign Subsidiaries, shares required to be held by foreign nationalsrepresenting not more than 2% of such Capital Stock) is owned by the Company oranother Wholly Owned Subsidiary.

 

## SECTION 1.2.                                                    Other Definitions.

##  

 
| **Term**                               |   | **Defined in  Section** |
|----------------------------------------|--------|-------------------------|
| “Additional Securities”      |   |                    | 2.2 |
| “Affiliate Transaction”      |   |                    | 4.7 |
| “Authentication Order”       |   |                    | 2.2 |
| “Bankruptcy Law”             |   |                    | 6.1 |
| “covenant defeasance option” |   |                    | 8.1(b) |
| “Change of Control Offer”    |   |                    | 4.8(b) |
| “Custodian”                  |   |                    | 6.1 |
| “Event of Default”           |   |                    | 6.1 |
| “Global Securities”          |   |                    | 2.1 |
| “Initial Securities”         |   |                    | 2.2 |
| “legal defeasance option”    |   |                    | 8.1(b) |
| “Legal Holiday”              |   |                    | 11.8 |
| “Notice of Default”          |   |                    | 6.1 |
| “Offer”                      |   |                    | 4.6(b) |
| “Participants”               |   |                    | 2.6 |
| “Paying Agent”               |   |                    | 2.3 |
| “Physical Securities”        |   |                    | 2.1 |
| “Registrar”                  |   |                    | 2.3 |
| “Restricted Payment”         |   |                    | 4.4(a) |
| “Securities Register”        |   |                    | 2.3 |
| “Successor Company”          |   |                    | 5.1 |

 

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## SECTION 1.3.                                 Incorporation by Reference of TrustIndenture Act.  ThisIndenture is subject to the mandatory provisions of the TIA which areincorporated by reference in and made a part of this Indenture.  The following TIA terms have the followingmeanings:

 

“*Commission*” means the SEC.

 

“*indenture securities*” means theSecurities.

 

“*indenture security holder*” means aSecurityholder.

 

“*indenture to be qualified”* means thisIndenture.

 

“*indenture trustee*” or “institutionaltrustee” means the Trustee.

 

“*obligor*” on the indenture securities meansthe Company and any other obligor on the indenture securities.

 

All other TIA terms used in this Indenturethat are defined by the TIA, defined by TIA reference to another statute ordefined by SEC rule have the meanings assigned to them by such definitions.

 

## SECTION 1.4.                                 Rules of Construction.  Unless the context otherwise requires:

 

##### (1)                                  a term has themeaning assigned to it;

#####  

##### (2)                                  an accounting termnot otherwise defined has the meaning assigned to it in accordance with GAAP;

#####  

##### (3)                                  “or” is notexclusive;

#####  

##### (4)                                  “including” meansincluding without limitation;

#####  

##### (5)                                  words in the singularinclude the plural and words in the plural include the singular;

#####  

##### (6)                                  unsecuredIndebtedness shall not be deemed to be subordinate or junior to securedIndebtedness merely by virtue of its nature as unsecured Indebtedness;

#####  

##### (7)                                  the principal amountof any non-interest bearing or other discount security at any date shall be theprincipal amount thereof that would be shown on a balance sheet of the issuerdated such date prepared in accordance with GAAP;

 

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##### (8)                                  the principal amountof any Preferred Stock shall be (i) the maximum liquidation value of suchPreferred Stock or (ii) the maximum mandatory redemption or mandatoryrepurchase price with respect to such Preferred Stock, whichever is greater;and

#####  

##### (9)                                  all references to $,US$, dollars or United States dollars shall refer to the lawful currency of theUnited States.

#####  

# ARTICLE2

#  

# THE SECURITIES

#  

## SECTION 2.1.                                 Form and Dating.  The Securities shall be issued initially inthe form of one or more permanent global securities (“*Global Securities*”) in definitive,fully registered form without interest coupons in substantially the form ofExhibit A, which shall be deposited on behalf of the purchasers of theSecurities represented thereby with the Trustee, at its principal corporatetrust office in New York City, as custodian for the Depositary, and registeredin the name of the Depositary or a nominee of the Depositary, duly executed bythe Company and authenticated by the Trustee as hereinafter provided.  The aggregate principal amount of the GlobalSecurities may from time to time be increased or decreased by adjustments madeon the records of the Trustee and the Depositary or its nominee in the limitedcircumstances hereinafter provided.

 

The Securities may have notations, legends orendorsements required by law, stock exchange rule, agreements to which theCompany is subject, if any, or usage (*provided* that any such notation, legend orendorsement is in a form acceptable to the Company).  Each Security shall be dated the date of its authentication.  The terms of the Securities set forth inExhibit A are part of the terms of this Indenture.

 

Except as provided in Section 2.6, owners ofbeneficial interests in Global Securities will not be entitled to receivephysical delivery of certificated securities (the *“Physical Securities”*).

 

## SECTION 2.2.                                 Execution and Authentication;Additional Securities; Exchange Securities.  An Officer of the Company shall sign the Securities for theCompany by manual or facsimile signature.

 

If an Officer whose signature is on aSecurity no longer holds that office at the time the Trustee authenticates theSecurity, the Security shall be valid nevertheless.

 

A Security shall not be valid until anauthorized signatory of the Trustee manually signs the certificate ofauthentication on the Security.  Thesignature shall be conclusive evidence that the Security has been authenticatedunder this Indenture.

 

The Trustee shall authenticate (i) on theIssue Date, Securities for original issue in an aggregate principal amount notto exceed $175,000,000 (the “*Initial Securities*”), (ii) additionalSecurities (the “*Additional Securities*”) in an unlimited amount (so long asnot otherwise prohibited by the terms of this Indenture, including, withoutlimitation, Section 4.3) and (iii) Exchange Securities (x) in exchange for alike principal amount of Initial Securities or (y) in exchange for a likeprincipal amount of Additional Securities, in each case, upon a written orderof the Company signed by an Officer of the Company (an “*Authentication Order*”).  Each such Authentication Order shall specifythe amount of Securities to be authenticated and the date on which theSecurities are to be authenticated, whether the Securities are to be InitialSecurities, Exchange Securities or Additional Securities and such otherinformation as the Trustee

 

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may reasonably request.  The Initial Securities authenticated on theIssue Date shall consist of one or more Global Securities, each bearing thePrivate Placement Legend set forth in Exhibit B.

 

The Trustee may appoint an authenticatingagent acceptable to the Company to authenticate the Securities, upon theconsent of the Company to such appointment.  Unless limited by the terms of such appointment, an authenticatingagent may authenticate Securities whenever the Trustee may do so.  Each reference in this Indenture to authenticationby the Trustee includes authentication by such agent.  An authenticating agent has the same rights as any Registrar,Paying Agent or agent for service of notices and demands.

 

## SECTION 2.3.                                 Registrar and Paying Agent.  The Company shall maintain an office oragency where Securities may be presented for registration of transfer or forexchange (the “*Registrar*”) and an office or agency where Securities may bepresented for payment (the “*Paying Agent*”).  The Registrar, acting on behalf of and as agent for the Company,shall keep a register (the “*Securities Register*”) of the Securitiesand of their transfer and exchange.  TheCompany may have one or more co-registrars and one or more additional payingagents.  The term “Paying Agent”includes any additional paying agent.

 

The Company shall enter into an appropriateagency agreement with any Registrar, Paying Agent or co-registrar not a partyto this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisionsof this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any suchagent.  If the Company fails to maintaina Registrar or Paying Agent, the Trustee shall act as such and shall beentitled to appropriate compensation therefor pursuant to Section 7.7.  The Company or any of its domesticallyincorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar,co-registrar or transfer agent, except that for purposes of Article 8, neitherthe Company nor any of its Affiliates shall act as Paying Agent.

 

The Company initially appoints the Trustee asRegistrar and Paying Agent in connection with the Securities.

 

## SECTION 2.4.                                 Paying Agent To Hold Money in Trust.  Prior to 10:00 a.m. New York Time on eachdue date of the principal and interest on any Security, the Company shalldeposit with the Paying Agent a sum sufficient to pay such principal andinterest when so becoming due.  TheCompany shall require each Paying Agent (other than the Trustee) to agree inwriting that the Paying Agent shall hold in trust for the benefit ofSecurityholders or the Trustee all money held by the Paying Agent for thepayment of principal of or interest on the Securities and shall notify theTrustee of any default by the Company in making any such payment.  If the Company or a Wholly Owned Subsidiaryacts as Paying Agent, it shall segregate the money held by it as Paying Agentand hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money heldby it to the Trustee and to account for any funds disbursed by the Paying Agent.  Upon complying with this Section, the PayingAgent shall have no further liability for the money delivered to the Trustee.

 

## SECTION 2.5.                                 Securityholder Lists.  The Trustee shall preserve in as current aform as is reasonably practicable the most recent list available to it of thenames and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to theTrustee, in writing at least five Business Days before each interest paymentdate and at such other times as the Trustee may request in writing, a list insuch form and as of such date as the Trustee may reasonably require of thenames and addresses of Securityholders; *provided* that as long as the Trustee isthe Registrar, no such list need be furnished.

 

## SECTION 2.6.                                 Transfer and Exchange.  The Securities shall be issued in registeredform and shall be transferable only upon the surrender of a Security forregistration of transfer.  When a

 

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## Security is presented to the Registrar or aco-registrar with a request to register a transfer, the Registrar and theTrustee may require a Holder, among other things, to furnish appropriateendorsements and transfer documents and the Registrar shall record in theSecurities Register the transfer as requested if the requirements of Section8-401(1) of the Uniform Commercial Code are met, and thereupon one or more newSecurities in the same aggregate principal amount shall be issued to thedesignated assignee or transferee and the old Security will be returned to theCompany.  When Securities are presentedto the Registrar or a co-registrar with a request to exchange them for an equalprincipal amount of Securities of other denominations, the Registrar shall makethe exchange as requested, in the same manner, if the same requirements aremet.  To permit registration oftransfers and exchanges, the Company shall execute and the Trustee shallauthenticate Securities at the Registrar’s or co-registrar’s request.  The Company may require payment of a sumsufficient to pay all taxes, assessments or other governmental charges inconnection with any transfer or exchange pursuant to this Section.  The Company shall not be required to makeand the Registrar need not register transfers or exchanges of Securitiesselected for redemption (except, in the case of Securities to be redeemed inpart, the portion thereof not to be redeemed) or any Securities for a period of15 days before a selection of Securities to be redeemed or 15 days before aninterest payment date.

 

Prior to the due presentation forregistration of transfer of any Security, the Company, the Trustee, the PayingAgent, the Registrar or any co-registrar may deem and treat the person in whosename a Security is registered as the absolute owner of such Security for the purposeof receiving payment of principal of and interest on such Security and for allother purposes whatsoever, whether or not such Security is overdue, and none ofthe Company, the Trustee, the Paying Agent, the Registrar or any co-registrarshall be affected by notice to the contrary.

 

All Securities issued upon any transfer orexchange pursuant to the terms of this Indenture will evidence the same debtand will be entitled to the same benefits under this Indenture as theSecurities surrendered upon such transfer or exchange.

 

With respect to Global Securities:

 

##### (1)                                  Each Global Securityauthenticated under this Indenture shall be registered in the name of theDepositary designated for such Global Security or a nominee thereof anddeposited with such Depositary or a nominee thereof or custodian therefor, andeach such Global Security shall constitute a single Security for all purposesof this Indenture.

#####  

##### (2)                                  A Global Security maynot be transferred except as a whole by the Depositary to a nominee of theDepositary or by a nominee of the Depositary to the Depositary.  A Global Security is exchangeable forcertificated Securities only if (i) the Depositary notifies the Company that itis unwilling or unable to continue as a Depositary for such Global Security orif at any time the Depositary ceases to be a clearing agency registered underthe Exchange Act, (ii) the Company executes and delivers to the Trustee anotice that such Global Security shall be so transferable, registrable, andexchangeable, and such transfers shall be registrable or (iii) there shall haveoccurred and be continuing an Event of Default or an event which, with thegiving of notice or lapse of time or both, would constitute an Event of Defaultwith respect to the Securities represented by such Global Security.  Any Global Security that is exchangeable forcertificated Securities pursuant to the preceding sentence will be transferredto, and registered and exchanged for, certificated Securities in authorizeddenominations, without legends applicable to a Global Security, and registeredin such names as the Depositary holding such Global Security may direct.  Subject to the foregoing, a Global Securityis not exchangeable, except for a Global Security of like denomination to beregistered in the name of the Depositary or its nominee.  In the event that a Global Security becomesexchangeable for certificated Securities, (i) certificated Securities will

 

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##### be issued only in fully registered form in denominations of $1,000 orintegral multiples thereof, (ii) payment of principal, any repurchase price,and interest on the certificated Securities will be payable, and the transferof the certificated Securities will be registrable, at the office or agency ofthe Company maintained for such purposes, and (iii) no service charge will bemade for any registration or transfer or exchange of the certificatedSecurities, although the Company may require payment of a sum sufficient tocover any tax or governmental charge imposed in connection therewith.

#####  

##### (3)                                  Securities issued inexchange for a Global Security or any portion thereof shall have an aggregateprincipal amount equal to that of such Global Security or portion thereof to beso exchanged, shall be registered in such names and be in such authorizeddenominations as the Depositary shall designate and shall bear the applicablelegends provided for herein.  Any GlobalSecurity to be exchanged in whole shall be surrendered by the Depositary to theTrustee.  With respect to any GlobalSecurity to be exchanged in part, either such Global Security shall be sosurrendered for exchange or, if the Trustee is acting as custodian for the Depositaryor its nominee with respect to such Global Security, the principal amountthereof shall be reduced, by an amount equal to the portion thereof to be soexchanged, by means of an appropriate adjustment made on the records of theTrustee.  Upon any such surrender oradjustment, the Trustee shall authenticate and deliver the Security issuable onsuch exchange to or upon the order of the Depositary or an authorizedrepresentative thereof.

#####  

##### (4)                                  Every Securityauthenticated and delivered upon registration of transfer of, or in exchangefor or in lieu of, a Global Security or any portion mutilated thereof, whetherpursuant to this Section, Section 2.7 or 2.9 or otherwise, shall beauthenticated and delivered in the form of, and shall be, a Global Security,unless such Security is registered in the name of a Person other than theDepositary for such Global Security or a nominee thereof.

#####  

##### (5)                                  Any Physical Securityconstituting a Restricted Security delivered in exchange for an interest in aGlobal Security pursuant to this Section 2.6 shall, except as otherwiseprovided by Section 2.13, bear the Private Placement Legend.

#####  

Members of, or participants in, theDepositary (“*Participants*”) shall have no rights under this Indenturewith respect to any Global Security held on their behalf by the Depositary orby the Trustee as the custodian of the Depositary or under such GlobalSecurity, and the Depositary may be treated by the Company, the Trustee and anyagent of the Company or the Trustee as the absolute owner of such GlobalSecurity for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company,the Trustee or any agent of the Company or the Trustee from giving effect toany written certification, proxy or other authorization furnished by theDepositary or impair, as between the Depositary and its Participants, theoperation of customary practices of such Depositary governing the exercise ofthe rights of a holder of a beneficial interest in any Global Security.

 

## SECTION 2.7.                                 Replacement Securities.  If a mutilated Security is surrendered tothe Trustee or Registrar or if the Holder of a Security claims that the Securityhas been lost, destroyed or wrongfully taken, the Company shall issue and theTrustee shall authenticate a replacement Security if the requirements ofSection 8-405 of the Uniform Commercial Code are met and the Holder satisfiesany other reasonable requirements of the Trustee and the Company.  Such Holder shall furnish an indemnity bondsufficient in the judgment of the Company and the Trustee to protect theCompany, the Trustee, the Paying Agent, the Registrar and any co-registrar fromany loss which any of them may suffer if a security is replaced.  The Company and the Trustee may charge theHolder for their expenses in replacing a Security.

 

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Every replacement Security is an obligationof the Company under this Indenture.

 

The provisions of this Section are exclusiveand shall preclude (to the extent lawful) all other rights and remedies withrespect to the replacement or payment of mutilated, destroyed, lost or stolenSecurities.

 

## SECTION 2.8.                                 Outstanding Securities.  Securities outstanding at any time are allSecurities authenticated by the Trustee except for those canceled by it, thosedelivered to it for cancellation and those described in this Section as notoutstanding.  A Security does not ceaseto be outstanding because the Company or an Affiliate of the Company holds thesecurity.

 

If a Security is replaced pursuant to Section2.7, it ceases to be outstanding unless the Trustee and the Company receiveproof satisfactory to them that the replaced Security is held by a bona fidepurchaser.

 

If the Paying Agent segregates and holds intrust, in accordance with this Indenture, on a redemption date or maturity dateor, pursuant to Section 8.1(a), within 91 days prior thereto, money sufficientto pay all principal and interest payable on that redemption or maturity datewith respect to the Securities (or portions thereof) to be redeemed ormaturing, as the case may be, then on and after such date such Securities (orportions thereof) cease to be outstanding and on and after such redemption ormaturity date interest on them ceases to accrue.

 

## SECTION 2.9.                                 Temporary Securities.  Until definitive Securities are ready for delivery,the Company may prepare and the Trustee shall authenticate temporarySecurities.  Temporary Securities shallbe substantially in the form of definitive Securities but may have variationsthat the Company considers appropriate for temporary Securities.  Without unreasonable delay, the Companyshall prepare and the Trustee shall authenticate definitive Securities anddeliver them in exchange for temporary Securities.

 

## SECTION 2.10.                           Cancellation. The Company at any time may deliver Securities to the Trustee forcancellation.  The Registrar and thePaying Agent shall forward to the Trustee any Securities surrendered to themfor registration of transfer, exchange or payment.  The Trustee and no one else shall cancel all Securities surrenderedfor registration of transfer, exchange, payment or cancellation and deliversuch canceled Securities to the Company. The Trustee shall from time to time provide the Company a list of allSecurities that have been canceled as requested by the Company.  The Company may not issue new Securities toreplace Securities it has redeemed, paid or delivered to the Trustee forcancellation.

 

## SECTION 2.11.                           Defaulted Interest.  If the Company defaults in a payment of interest on theSecurities, the Company shall pay defaulted interest (plus interest on suchdefaulted interest to the extent lawful) in any lawful manner.  The Company may pay the defaulted interestto the persons who are Securityholders on a subsequent special recorddate.  The Company shall fix or cause tobe fixed any such special record date and payment date to the reasonablesatisfaction of the Trustee and shall promptly mail to each Securityholder anotice that states the special record date, the payment date and the amount ofdefaulted interest to be paid.

 

## SECTION 2.12.                           CUSIP and ISIN Numbers.  The Company in issuing the Securities mayuse “CUSIP”  and “ISIN” numbers (if thengenerally in use), and, if so, the Trustee shall use “CUSIP” numbers in noticesof redemption as a convenience to Holders; *provided* that any such notice may statethat no representation is made as to the correctness of such numbers either asprinted on the Securities or as contained in any notice of a redemption andthat reliance may be placed only on the other

 

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identification numbers printed on theSecurities, and any such redemption shall not be affected by any defect in oromission of such numbers.  The Companywill promptly notify the Trustee of any change in the CUSIP and ISIN numbers.

 

## SECTION 2.13.                           Special Transfer Provisions.

 

### (a)                                  Transfersto Non-QIB Institutional Accredited Investors and Non-U.S. Persons.  The following provisions shall apply withrespect to the registration of any proposed transfer of a Restricted Securityto any Institutional Accredited Investor which is not a QIB or to any Non-U.S.Person:

###  

#### (i)                                     the Registrarshall register the transfer of any Restricted Security, whether or not suchSecurity bears the Private Placement Legend, if (x) the requested transfer isafter the second anniversary of the Issue Date; *provided*, *however*,that neither the Company nor any Affiliate of the Company has held anybeneficial interest in such Security, or portion thereof, at any time on orprior to the second anniversary of the Issue Date or (y) (1) in the caseof a transfer to an Institutional Accredited Investor which is not a QIB(excluding Non-U.S. Persons), the proposed transferee has delivered to theRegistrar a certificate substantially in the form of Exhibit C heretoand any legal opinions and certifications required thereby and (2) in thecase of a transfer to a Non-U.S. Person, the proposed transferor has deliveredto the Registrar a certificate substantially in the form of Exhibit Dhereto;

####  

#### (ii)                                  if the proposedtransferee is a Participant and the Securities to be transferred consist ofPhysical Securities which after transfer are to be evidenced by an interest inthe IAI Global Note or Regulation S Global Note, as the case may be, uponreceipt by the Registrar of the Physical Security and (x) writteninstructions given in accordance with the Depositary’s and the Registrar’sprocedures and (y) the appropriate certificate, if any, required by clause (y)of paragraph (i) above, the Registrar shall register the transfer and reflecton its books and records the date and an increase in the principal amount ofthe IAI Global Note or Regulation S Global Note, as the case may be, in anamount equal to the principal amount of Physical Securities to be transferred,and the Registrar shall cancel the Physical Securities so transferred; and

####  

#### (iii)                               if the proposedtransferor is a Participant seeking to transfer an interest in a GlobalSecurity, upon receipt by the Registrar of (x) written instructions given inaccordance with the Depositary’s and the Registrar’s procedures and (y) theappropriate certificate, if any, required by clause (y) of paragraph (i) above,the Registrar shall register the transfer and reflect on its books and recordsthe date and (A) a decrease in the principal amount of the Global Security fromwhich such interests are to be transferred in an amount equal to the principalamount of the Securities to be transferred and (B) an increase in the principalamount of the IAI Global Note or the Regulation S Global Note, as the casemay be, in an amount equal to the principal amount of the Securities to betransferred.

####  

### (b)                                 Transfersto QIBs.  The following provisionsshall apply with respect to the registration of any proposed transfer of aRestricted Security to a QIB:

###  

#### (i)                                     the Registrarshall register the transfer of any Restricted Security, whether or not suchSecurity bears the Private Placement Legend, if (x) the requested transferis after the second anniversary of the Issue Date; *provided*, *however*,that neither the Company nor any Affiliate of the Company has held anybeneficial interest in such Security, or portion thereof, at any time on orprior to the second anniversary of the Issue Date or (y) such transfer isbeing made by a proposed transferor who has checked the box provided for on theform of Security stating, or has otherwise advised the Company and theRegistrar in writing, that the sale has been made in compliance

 

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#### with the provisions of Rule 144A to a transferee who has signed thecertification provided for on the form of Security stating, or has otherwiseadvised the Company and the Registrar in writing, that it is purchasing theSecurity for its own account or an account with respect to which it exercisessole investment discretion and that it and any such account is a QIB within themeaning of Rule 144A, and is aware that the sale to it is being made inreliance on Rule 144A and acknowledges that it has received such informationregarding the Company as it has requested pursuant to Rule 144A or hasdetermined not to request such information and that it is aware that thetransferor is relying upon its foregoing representations in order to claim theexemption from registration provided by Rule 144A;

####  

#### (ii)                                  if the proposedtransferee is a Participant and the Securities to be transferred consist ofPhysical Securities which after transfer are to be evidenced by an interest inthe 144A Global Note, upon receipt by the Registrar of the Physical Securityand written instructions given in accordance with the Depositary’s and theRegistrar’s procedures, the Registrar shall register the transfer and reflecton its book and records the date and an increase in the principal amount of the144A Global Note in an amount equal to the principal amount of PhysicalSecurities to be transferred, and the Registrar shall cancel the PhysicalSecurities so transferred; and

####  

#### (iii)                               if the proposedtransferor is a Participant seeking to transfer an interest in the IAI GlobalNote or the Regulation S Global Note, upon receipt by the Registrar ofwritten instructions given in accordance with the Depositary’s and theRegistrar’s procedures, the Registrar shall register the transfer and reflecton its books and records the date and (A) a decrease in the principal amount ofthe IAI Global Note or the Regulation S Global Note, as the case may be,in an amount equal to the principal amount of the Securities to be transferredand (B) an increase in the principal amount of the 144A Global Note in anamount equal to the principal amount of the Securities to be transferred.

####  

### (c)                                  ExchangeOffer.  Upon the occurrence of theExchange Offer in accordance with the Exchange and Registration RightsAgreement, the Company shall issue and, upon receipt of an Authentication Orderin accordance with Section 2.2, the Trustee shall authenticate one or moreGlobal Securities not bearing the Private Placement Legend in an aggregateprincipal amount equal to the principal amount of the beneficial interests inthe Global Securities tendered for acceptance in accordance with the ExchangeOffer and accepted for exchange in the Exchange Offer.

###  

### (d)                                 PrivatePlacement Legend.  Upon thetransfer, exchange or replacement of Securities not bearing the Private PlacementLegend, the Registrar or co-Registrar shall deliver Securities that do not bearthe Private Placement Legend.  Upon thetransfer, exchange or replacement of Securities bearing the Private PlacementLegend, the Registrar or co-Registrar shall deliver only Securities that bearthe Private Placement Legend unless (i) there is delivered to the Trusteean Opinion of Counsel reasonably satisfactory to the Company and the Trustee tothe effect that neither such legend nor the related restrictions on transferare required in order to maintain compliance with the provisions of theSecurities Act or (ii) such Security has been offered and sold (includingpursuant to the Exchange Offer) pursuant to an effective registration statementunder the Securities Act.

###  

### (e)                                  General.  By its acceptance of any Security bearingthe Private Placement Legend, each Holder of such a Security acknowledges therestrictions on transfer of such Security set forth in this Indenture and inthe Private Placement Legend and agrees that it will transfer such Securityonly as provided in this Indenture.

###  

The Registrar shall retain copies of allletters, notices and other written communications received pursuant to thisSection 2.13.  The Company shallhave the right to inspect and make copies of

 

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all such letters, notices or other writtencommunications at any reasonable time upon the giving of reasonable writtennotice to the Registrar.

 

The Trustee shall have no obligation or dutyto monitor, determine or inquire as to compliance with any restrictions ontransfer imposed under this Indenture or under applicable law with respect toany transfer of any interest in any Security (including any transfers betweenor among Participants or beneficial owners of interests in any Global Security)other than to require delivery of such certificates and other documentation orevidence as are expressly required by, and to do so if and when expresslyrequired by the terms of, this Indenture, and to examine the same to determinesubstantial compliance as to form with the express requirements hereof.

 

The Trustee shall have no responsibility forthe actions or omissions of the Depositary, or the accuracy of the books andrecords of the Depositary.

 

# ARTICLE3

#  

# REDEMPTION

#  

## SECTION 3.1.                                 Notices to Trustee.  If the Company elects to redeem Securities pursuant to paragraph5 of the Securities, it shall notify the Trustee in writing of the redemptiondate, the principal amount of Securities to be redeemed and the paragraph ofthe Securities pursuant to which the redemption will occur.

 

The Company shall give each notice to theTrustee provided for in this Section at least 45 days before the redemptiondate unless the Trustee consents to a shorter period.  Such notice shall be accompanied by an Officers’ Certificate fromthe Company to the effect that such redemption will comply with the provisionsherein.

 

## SECTION 3.2.                                 Selection of Securities To BeRedeemed.  If fewer than all theSecurities are to be redeemed, the Trustee shall select the Securities to beredeemed pro rata or by lot or by a method that complies with applicable legaland securities exchange requirements, if any, and that the Trustee considers inits sole discretion to be fair and appropriate and in accordance with methodsgenerally used at the time of selection by fiduciaries in similar circumstances;*provided,however,* that, in the case of such redemption pursuant to paragraph5(b) of the Securities, the Trustee will select the Securities on a pro ratabasis or on as nearly a pro rata basis as practicable (subject to theprocedures of the Depositary) unless that method is otherwise prohibited.  The Trustee shall make the selection from outstandingSecurities not previously called for redemption.  The Trustee may select for redemption portions of the principalof Securities that have denominations larger than $1,000.  Securities and portions of them the Trusteeselects shall be in amounts of $1,000 or a whole multiple of $1,000.  Provisions of this Indenture that apply toSecurities called for redemption also apply to portions of Securities calledfor redemption.  The Trustee shallnotify the Company promptly of the Securities or portions of Securities to beredeemed.  In the event the Company isrequired to make an offer to redeem Securities pursuant to Sections 4.6 or 4.8and the amount available for such offer is not evenly divisible by $1,000, theTrustee shall promptly refund to the Company any remaining funds, which in noevent will exceed $1,000.

 

## SECTION 3.3.                                 Notice of Redemption.  At least 30 days but not more than 60 daysbefore a date for redemption of Securities, the Company shall mail a notice ofredemption by first-class mail to the registered address appearing in theSecurity Register of each Holder of Securities to be redeemed.

 

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The notice shall identify the Securities(including CUSIP or ISIN numbers, if any) to be redeemed and shall state:

 

##### (1)                                  the redemption date;

#####  

##### (2)                                  the redemption price;

#####  

##### (3)                                  the name and addressof the Paying Agent;

#####  

##### (4)                                  that Securitiescalled for redemption must be surrendered to the Paying Agent to collect theredemption price;

#####  

##### (5)                                  if fewer than all theoutstanding Securities are to be redeemed, the identification and principalamounts of the particular Securities to be redeemed;

#####  

##### (6)                                  that, unless theCompany defaults in making such redemption payment, interest on Securities (orportion thereof) called for redemption ceases to accrue on and after the redemptiondate;

#####  

##### (7)                                  the paragraph of theSecurities pursuant to which the Securities called for redemption are beingredeemed; and

#####  

##### (8)                                  that norepresentation is made as to the correctness or accuracy of the CUSIP or ISINnumber, if any, listed in such notice or printed on the Securities.

#####  

At the Company’s request, the Trustee shallgive the notice of redemption in the Company’s name and at the Company’sexpense.  In such event, the Companyshall provide the Trustee with the information required by this Section.

 

## SECTION 3.4.                                 Effect of Notice of Redemption.  Once notice of redemption is mailed,Securities called for redemption become due and payable on the redemption dateand at the redemption price stated in the notice.  Upon surrender to the Paying Agent, such Securities shall be paidat the redemption price stated in the notice, plus accrued interest to theredemption date.  Such notice if mailedin the manner herein provided shall be conclusively presumed to have beengiven, whether or not the Holder receives such notice.  Failure to give notice or any defect in thenotice to any Holder shall not affect the validity of the notice to any otherHolder.

 

## SECTION 3.5.                                 Deposit of Redemption Price.  Prior to 10:00 a.m. (New York City time) onthe redemption date, the Company shall deposit with the Trustee or Paying Agent(or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shallsegregate and hold in trust) money sufficient to pay the redemption price ofand accrued interest (if any) on all Securities or portions thereof to beredeemed on that date other than Securities or portions of Securities calledfor redemption which have been delivered by the Company to the Trustee forcancellation.

 

## SECTION 3.6.                                 Securities Redeemed in Part.  Upon surrender of a Security that isredeemed in part (with, if the Company or the Trustee so requires, dueendorsement by, or a written instrument of transfer in form satisfactory to theCompany and the Trustee duly executed by, the Holder thereof or his attorneyduly authorized in writing), the Company shall execute, and the Trustee shallauthenticate and deliver to the Holder of such Security without service charge,a new Security or Securities of any authorized denomination as requested bysuch Holder, in aggregate principal amount equal to and in exchange for theunredeemed portion of the principal of the Security so surrendered, except thatif a

 

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## Global Security is so surrendered, theCompany shall execute, and the Trustee shall authenticate and deliver to theDepositary for such Global Security, without service charge, a new GlobalSecurity in denomination equal to and in exchange for the unredeemed portion ofthe principal of the Global Security so surrendered.

 

# ARTICLE4

#  

# COVENANTS

#  

## SECTION 4.1.                                 Payment of Securities.  The Company shall promptly pay the principalof and interest on the Securities on the dates and in the manner provided inthe Securities and in this Indenture. Principal and interest shall be considered paid on the date due if onsuch date the Trustee or the Paying Agent holds in accordance with thisIndenture money sufficient to pay all principal and interest then due.

 

The Company shall pay interest on overdueprincipal at the rate specified therefor in the Securities, and it shall payinterest on overdue installments of interest at the same rate to the extentlawful.

 

## SECTION 4.2.                                 SEC Reports. The Company shall file with the Trustee and provide Holders, as theirnames appear in the Security Register, within 15 days after it files them withthe SEC, copies of the annual reports and the information, documents and otherreports which it is required to file with the SEC pursuant to Section 13 or15(d) of the Exchange Act. Notwithstanding that the Company may not be required to be or remainsubject to the reporting requirements of Section 13 or 15(d) of the ExchangeAct, the Company shall continue to file with the SEC and provide the Trusteeand Holders with the annual reports and the information, documents and otherreports which are specified in Sections 13 and 15(d) of the Exchange Act.  The Company also shall comply with the otherprovisions of TIA §314(a).

 

Delivery of such reports, information anddocuments to the Trustee is for informational purposes only and the Trustee’sreceipt of such shall not constitute constructive notice of any informationcontained therein or determinable from information contained therein, includingthe Company’s compliance with any of its covenants hereunder (as to which theTrustee is entitled to rely exclusively on Officers’ Certificates).

 

## SECTION 4.3.                                 Limitation on Indebtedness andPreferred Stock.  (a)(i) TheCompany will not Incur, and will not permit any Restricted Subsidiary to Incur,any Indebtedness (including Acquired Indebtedness) or issue Disqualified Stockand (ii) the Company will not permit any of its Restricted Subsidiaries thatare not Subsidiary Guarantors to issue any shares of Preferred Stock; *provided*,*however*,that the Company and any Subsidiary Guarantor may Incur Indebtedness (includingAcquired Indebtedness) or issue Disqualified Stock if on the date thereof (andafter giving effect to the application of proceeds therefrom) the ConsolidatedCoverage Ratio would be greater than 2.00:1.00.

 

### (b)                                 Notwithstandingthe foregoing paragraph (a), the Company and its Restricted Subsidiaries mayIncur the following Indebtedness:

###  

#### (i)                                     Indebtedness ofthe Company or any Restricted Subsidiary (including any Guarantees thereof)under the Credit Facility in an aggregate principal amount outstanding at anytime not to exceed $60 million;

####  

#### (ii)                                  Indebtedness of theCompany owing to and held by any Wholly Owned Subsidiary or Indebtedness of aRestricted Subsidiary owing to and held by the Company or any Wholly

 

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#### Owned Subsidiary; *provided*, *however*, that any subsequentissuance or transfer of any Capital Stock or any other event which results inany such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or anysubsequent transfer of any such Indebtedness (except to the Company or a WhollyOwned Subsidiary) will be deemed, in each case, to constitute the Incurrence ofsuch Indebtedness by the issuer thereof not permitted by this clause (ii);

####  

#### (iii)                               (A) Indebtednessrepresented by the Securities (including Subsidiary Guarantees) issued on theIssue Date, (B) any Indebtedness of the Company or any RestrictedSubsidiary (other than the Indebtedness described in clause (i) or (ii)above) outstanding on the Issue Date and (C) any Refinancing IndebtednessIncurred in respect of any Indebtedness described in this clause (iii) orIndebtedness Incurred pursuant to paragraph (a) of this Section 4.3;

####  

#### (iv)                              (A) Indebtedness of aRestricted Subsidiary outstanding on or prior to the date on which suchRestricted Subsidiary was acquired by the Company or a Restricted Subsidiary(other than Indebtedness Incurred in connection with, or in contemplation of,the transaction or series of related transactions pursuant to which suchRestricted Subsidiary became a Restricted Subsidiary or was otherwise acquiredby the Company or a Restricted Subsidiary); *provided*, *however*, that at the timesuch Restricted Subsidiary is acquired by the Company or a RestrictedSubsidiary, the Company would have been able to Incur $1.00 of additionalIndebtedness pursuant to paragraph (a) above after giving effect to theIncurrence of such Indebtedness pursuant to this clause (iv) and suchtransaction or series of related transactions and (B) Refinancing IndebtednessIncurred by a Restricted Subsidiary in respect of Indebtedness Incurred by suchRestricted Subsidiary pursuant to this clause (iv);

####  

#### (v)                                 Indebtedness (A)represented by letters of credit (and reimbursement obligations with respectthereto) to secure the purchase price of inventory and/or equipment in theordinary course of business or to secure Indebtedness (including CapitalizedLease Obligations) otherwise permitted to be Incurred under this Indenture, (B)in respect of performance bonds (and letters of credit in respect thereof),bankers’ acceptances, letters of credit for workers’ compensation claims, andsurety or appeal bonds (and letters of credit in respect thereof) provided bythe Company or any Restricted Subsidiary in the ordinary course of its businessand which do not secure other Indebtedness and (C) under Currency Agreements,Interest Rate Agreements and Commodity Agreements Incurred which, at the timeof Incurrence, is in the ordinary course of business; *provided* that suchagreements are entered into in the ordinary course of business and not forspeculation or trading purposes and, in the case of Interest Rate Agreements,any such Interest Rate Agreement has a notional amount corresponding to theIndebtedness being hedged thereby;

####  

#### (vi)                              Indebtedness representedby Guarantees by the Company of Indebtedness otherwise permitted to be Incurredpursuant to this Section 4.3 and Indebtedness represented by Guarantees by aRestricted Subsidiary of Indebtedness of the Company or of another Restricted Subsidiaryotherwise permitted to be Incurred pursuant to this Section 4.3;

####  

#### (vii)                           obligations with respect tocustomary provisions regarding post-closing purchase price adjustments andindemnification in agreements for the purchase or sale of a business or assetsotherwise permitted by the Indenture;

####  

#### (viii)                        Guarantees of Indebtedness offranchisees of the Company or a Restricted Subsidiary in an aggregate principalamount at any one time outstanding not to exceed $20 million, *provided*that any such Guarantees shall be deemed to be Indebtedness Incurred by theCompany or such Restricted Subsidiary not permitted by this clause (viii) atthe time any such franchisee ceases to be a franchisee of the Company or suchRestricted Subsidiary;

 

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#### (ix)                                Indebtedness Incurredby the Company or any Restricted Subsidiary to finance the payment of property,casualty and specialty insurance premiums in the ordinary course of theCompany’s business which is repaid within 18 months of its Incurrence, *provided*that such Indebtedness does not exceed $7.5 million in the aggregate at any onetime outstanding;

####  

#### (x)                                   Indebtedness of theCompany Incurred to finance the acquisition, construction or improvement offixed or capital assets, and Refinancing Indebtedness in respect thereof, in anaggregate principal amount at any one time outstanding not to exceed$25 million, *provided* that such Indebtedness is Incurred within360 days after the date of such acquisition, construction or improvementand does not exceed the fair market value of such acquired, constructed orimproved assets as determined in good faith by the Board of Directors;

####  

#### (xi)                                Indebtednessrepresented by Capitalized Lease Obligations in respect of Sale/LeasebackTransactions involving the sale of restaurants within 24 months of the purchaseof the associated real property, in an aggregate principal amount at any onetime outstanding not to exceed $20 million;

####  

#### (xii)                             Indebtedness representedby Guarantees of loans to employees of the Company or its Subsidiaries for thepurpose of paying withholding taxes incurred by such employees in connectionwith the vesting of stock and/or stock options granted by the Company, in anaggregate amount at any one time outstanding not to exceed $3 million;

####  

#### (xiii)                          Indebtedness arising from thehonoring by a bank or other financial institution of a check, draft or similarinstrument inadvertently (except in the case of daylight overdrafts) drawnagainst insufficient funds in the ordinary course of business; *provided*,*however*,that such Indebtedness is extinguished within five Business Days of Incurrence;and

####  

#### (xiv)                         other Indebtedness in anaggregate principal amount at any one time outstanding not to exceed $20million.

####  

### (c)                                  TheCompany will not permit any Unrestricted Subsidiary to Incur any Indebtednessother than Non-Recourse Debt, except that an Unrestricted Subsidiary may incurIndebtedness Guaranteed by the Company or any of its Restricted Subsidiaries tothe extent such Guarantee is permitted by Section 4.4(b)(iv); *provided*,*however*,if any such Indebtedness ceases to be Non-Recourse Debt, such event shall bedeemed to constitute an Incurrence of Indebtedness by the Company or aRestricted Subsidiary.

###  

### (d)                                 TheCompany will not, and will not permit any Subsidiary Guarantor to, directly orindirectly, Incur any Indebtedness that is or purports to be by its terms (orby the terms of any agreement governing such Indebtedness) subordinated to anyother Indebtedness of the Company or of such Subsidiary Guarantor, as the casemay be, unless such Indebtedness is also by its terms (or by the terms of anyagreement governing such Indebtedness) made expressly subordinate to theSecurities or the Subsidiary Guaranty of such Subsidiary Guarantor, to the sameextent and in the same manner as such Indebtedness is subordinated to suchother Indebtedness of the Company or such Subsidiary Guarantor, as the case maybe.

###  

### (e)                                  Forpurposes of determining compliance with this Section 4.3, (i) in the event thatan item of Indebtedness meets the criteria of more than one of the types ofIndebtedness described above, the Company will classify, in its sole discretion,such item of Indebtedness and only be required to include the amount and typeof such Indebtedness in one of the above clauses; (ii) Indebtedness Incurredpursuant to the Credit Facility prior to or on the date of this Indenture shallbe treated as Incurred pursuant

 

28

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### to Section 4.3(b)(i); and (iii) Indebtednesspermitted by this Section 4.3 need not be permitted solely by reference to oneprovision permitting such Indebtedness but may be divided and classified inmore than one type and permitted in part by one such provision and in part byone or more other provisions of this Section 4.3 permitting such Indebtedness.

###  

## SECTION 4.4.                                 Limitation on Restricted Payments.  (a) The Company will not, and will not permit any Restricted Subsidiary to,directly or indirectly, (i) declare or pay any dividend or make anydistribution on or in respect of its Capital Stock (including any payment inconnection with any merger or consolidation involving the Company) exceptdividends or distributions payable solely in its Capital Stock (other thanDisqualified Stock) or in options, warrants or other rights to purchase suchCapital Stock and except dividends or distributions payable to the Company oranother Restricted Subsidiary (and, if such Restricted Subsidiary making suchdividend or distribution is not wholly owned, to its other shareholders on apro rata basis), (ii) purchase, repurchase, redeem, retire or otherwise acquireor retire for value any Capital Stock of the Company or any RestrictedSubsidiary held by Persons other than the Company or another Restricted Subsidiary,(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire forvalue, prior to scheduled maturity, scheduled repayment or scheduled sinkingfund payment any Subordinated Obligations (other than the purchase, repurchaseor other acquisition of Subordinated Obligations in anticipation of satisfyinga sinking fund obligation, principal installment or final maturity, in eachcase due within one year of the date of such purchase, repurchase, redemption,defeasance or other acquisition or retirement for value) or (iv) make anyInvestment (other than a Permitted Investment) in any Person (any suchdividend, distribution, purchase, redemption, repurchase, defeasance, otheracquisition, retirement, payment or Investment being herein referred to as a “*RestrictedPayment*”) if at the time the Company or such Restricted Subsidiarymakes such Restricted Payment:

 

##### (1)                                  a Default or Event ofDefault shall have occurred and be continuing (or would result therefrom);

#####  

##### (2)                                  the Company and itsRestricted Subsidiaries could not Incur at least $1.00 of additionalIndebtedness under Section 4.3(a); or

#####  

##### (3)                                  the aggregate amountof such Restricted Payment and all other Restricted Payments (the amount soexpended, if other than in cash, to be determined in good faith by the Board ofDirectors of the Company, whose determination will be evidenced by a resolutionof such Board of Directors certified in an Officers’ Certificate to theTrustee) declared or made subsequent to the Issue Date would exceed the sum of:

#####  

###### (A)                              50% of the ConsolidatedNet Income with respect to the period (treated as one accounting period) fromthe beginning of the fiscal quarter in which the Issue Date occurs to the endof the most recent fiscal quarter prior to the date of such Restricted Paymentfor which internal financial statements are available (or, in case such ConsolidatedNet Income is a deficit, minus 100% of such deficit);

######  

###### (B)                                the aggregate Net CashProceeds received by the Company from the issue or sale of Capital Stock (otherthan Disqualified Stock) subsequent to the Issue Date (other than an issuanceor sale to a Subsidiary of the Company and other than any such proceeds whichare used to redeem Securities in accordance with paragraph 5(b) of theSecurities);

######  

###### (C)                                the amount by whichIndebtedness of the Company is reduced on the Company’s balance sheet upon theconversion or exchange (other than by a Restricted Subsidiary) subsequent tothe Issue Date of any Indebtedness of the Company convertible

 

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###### or exchangeable for Capital Stock (other than Disqualified Stock) ofthe Company (less the amount of any cash or other property distributed by theCompany upon such conversion or exchange);

######  

###### (D)                               an amount equal to thenet reduction in any Investment (other than any Investment made pursuant toclause (vii) of paragraph (b) below) that was included in the calculation ofthe amount of Restricted Payments resulting from repayments of the principal ofloans or advances or other transfers of assets to the Company or any RestrictedSubsidiary (valued as provided in the definition of “Investment”), not toexceed the amount that was included in the calculation of the amount ofRestricted Payments in respect of such Investment; and

######  

###### (E)                                 upon the redesignationof any Unrestricted Subsidiary as a Restricted Subsidiary, an amount not toexceed the lesser of (x) the fair market value of the net assets of suchSubsidiary at the time that such Subsidiary is so redesignated a RestrictedSubsidiary and (y) the amount of Investments previously made by theCompany or any Restricted Subsidiary in such Unrestricted Subsidiary (valued asprovided in the definition of “Investment”), to the extent such amount waspreviously included in the calculation of the amount of Restricted Payments.

######  

### (b)                                 Theprovisions of Section 4.4(a) will not prohibit:

###  

#### (i)                                     any purchase,redemption, defeasance or other acquisition of Capital Stock of the Company orSubordinated Obligations made by exchange for, or out of the net proceeds of thesubstantially concurrent sale of, Capital Stock of the Company (other thanDisqualified Stock and other than Capital Stock issued or sold to a Subsidiaryof the Company); *provided*, *however*, that (A) such purchase,redemption, defeasance or other acquisition will be excluded in the calculationof the amount of Restricted Payments pursuant to clause (3) of paragraph (a)above and (B) the Net Cash Proceeds from such sale will be excluded from clause(3)(B) of Section 4.4(a);

####  

#### (ii)                                  any purchase,redemption, defeasance or other acquisition of Subordinated Obligations made byexchange for, or out of the net proceeds of the substantially concurrent saleof, Refinancing Indebtedness permitted to be incurred under this Indenture; *provided*,*however*,that such purchase, redemption, defeasance or other acquisition will beexcluded in the calculation of the amount of Restricted Payments pursuant toclause (3) of Section 4.4(a);

####  

#### (iii)                               dividends paid within 60days after the date of declaration thereof if at such date of declaration suchdividend would have complied with this Section; *provided*, *however*,that the amount of such dividend will be included in the calculation of theamount of Restricted Payments pursuant to clause (3) of Section 4.4(a);

####  

#### (iv)                              Investments in the formof Guarantees by the Company or any of its Restricted Subsidiaries ofIndebtedness of an Unrestricted Subsidiary solely to the extent that theCompany or any such Restricted Subsidiary would then be permitted to make anInvestment in such Unrestricted Subsidiary pursuant to clause (3) of Section4.4(a); *provided*that the amount of any such Investment will be included in the calculation ofthe amount of Restricted Payments pursuant to clause (3) of Section 4.4(a);

####  

#### (v)                                 the repurchase,redemption or other acquisition or retirement for value of any Capital Stock ofthe Company held by any member of the Company’s management pursuant to employeebenefit plans or agreements; *provided* that the aggregate price paid forall such Capital

 

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#### Stock shall not exceed, in any calendar year, the sum of (A) $2 million(and any portion of such $2 million not used in such calendar year may becarried forward to the next succeeding (but no other) calendar year) plus (B)the amount of any Net Cash Proceeds received by the Company from the issuanceand sale after the Issue Date of Capital Stock (other than Disqualified Stock)of the Company to its officers, directors or employees (provided such Net CashProceeds so used shall be excluded from clause (3)(B) of paragraph (a) above)plus (C) the net cash proceeds of any “key-man” life insurance policies thathave not been applied to the payment of Restricted Payments pursuant to thisclause (v); provided further that such amounts will be excluded from thecalculation of the amount of Restricted Payments pursuant to clause (3) ofSection 4.4(a);

####  

#### (vi)                              (A) repurchases ofCapital Stock deemed to occur upon the exercise of stock options if the CapitalStock represents a portion of the exercise price thereof and (B) payments ordistributions to dissenting holders of Capital Stock of the Company pursuant toapplicable law in connection with a consolidation, merger or transfer of assetsthat complies with Section 5.1; provided that such amounts will be excludedfrom the calculation of the amount of Restricted Payments pursuant to clause(3) of Section 4.4(a); and

####  

#### (vii)                           other Restricted Payments inan aggregate amount not to exceed $5 million at any one time outstanding; *provided*that such amounts will be excluded from the calculation of the amount ofRestricted Payments pursuant to clause (3) of Section 4.4(a);

####  

*provided*, *however*,that at the time of, and after giving effect to, any Restricted Paymentpermitted by clauses (v) and (vii), no Default or Event of Default shall haveoccurred and be continuing.

 

## SECTION 4.5.                                 Limitation on Restrictions onDistributions from Restricted Subsidiaries.  The Company will not, and will not permit any RestrictedSubsidiary to, create or otherwise cause or permit to exist or become effectiveany consensual encumbrance or restriction on the ability of any RestrictedSubsidiary to (i) pay dividends or make any other distributions on its CapitalStock or pay any Indebtedness or other obligation owed to the Company, (ii)make any loans or advances to the Company or (iii) transfer any of its propertyor assets to the Company or any Restricted Subsidiary, except:

 

#### (1)                                  any encumbrance orrestriction pursuant to an agreement in effect at or entered into on the IssueDate (including pursuant to the Credit Facility);

####  

#### (2)                                  any encumbrance orrestriction with respect to a Restricted Subsidiary pursuant to an agreementrelating to any Indebtedness Incurred by such Restricted Subsidiary on or priorto the date on which such Restricted Subsidiary was acquired by the Company ora Restricted Subsidiary and outstanding on such date (other than IndebtednessIncurred in connection with, or in contemplation of, the transaction or seriesof related transactions pursuant to which such Restricted Subsidiary became aRestricted Subsidiary or was acquired by the Company or a RestrictedSubsidiary);

#####  

#### (3)                                  any encumbrance orrestriction pursuant to an agreement effecting a refinancing of IndebtednessIncurred pursuant to an agreement referred to in clause (1) or (2) of thisSection or contained in any amendment to an agreement referred to in clause (1)or (2) of this Section; *provided*, *however*, that theencumbrances and restrictions contained in any such refinancing agreement oramendment are not materially less favorable to the Holders than the encumbrancesand restrictions contained in any such agreement as determined in good faith bythe Company and evidenced by an Officers’ Certificate;

 

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#### (4)                                  in the case of clause(iii), any encumbrance or restriction (A) that restricts in a customary mannerthe subletting, assignment or transfer of any property or asset that is subjectto a lease, license or similar contract, (B) by virtue of any transfer of,agreement to transfer, option or right with respect to, or Lien on, anyproperty or assets of the Company or any Restricted Subsidiary not otherwiseprohibited by the Indenture or (C) contained in security agreements securingIndebtedness of a Restricted Subsidiary to the extent such encumbrance orrestriction restricts the transfer of the property subject to such securityagreements;

#####  

#### (5)                                  any restriction withrespect to a Restricted Subsidiary imposed pursuant to an agreement enteredinto for the sale or disposition of all or substantially all the Capital Stockor assets of such Restricted Subsidiary pending the closing of such sale ordisposition;

#####  

#### (6)                                  any encumbrance orrestriction arising under or by reason of applicable law;

#####  

#### (7)                                  any encumbrance orrestriction contained in the Indenture;

#####  

#### (8)                                  customary provisionsin joint venture agreements relating solely to the securities, assets andrevenues of such joint venture or other business venture;

#####  

#### (9)                                  any encumbrance orrestriction applicable to secured Indebtedness otherwise permitted to beIncurred under the Indenture that limits the right of the debtor to dispose ofthe assets securing such Indebtedness;

#####  

#### (10)                            customary net worthprovisions contained in leases and other agreements entered into by aRestricted Subsidiary in the ordinary course of business; and

#####  

#### (11)                            customary restrictions withrespect to a Restricted Subsidiary pursuant to an agreement that has beenentered into for the sale or other disposition of all of the Capital Stock orassets of such Restricted Subsidiary.

#####  

## SECTION 4.6.                                 Limitation on Sales of Assets andSubsidiary Stock.  (a)  The Company will not, and will not permitany Restricted Subsidiary to, make any Asset Disposition unless (i) the Companyor such Restricted Subsidiary receives consideration at the time of such AssetDisposition at least equal to the fair market value, as determined in goodfaith by senior management for Asset Dispositions of less than $5 million andby the Board of Directors of the Company in good faith for Asset Dispositionsof $5 million or more (including in each case as to the value of all non-cashconsideration), of the shares and assets subject to such Asset Disposition,(ii) at least 75% of the consideration thereof received by the Company or suchRestricted Subsidiary is in the form of cash or Temporary Cash Investments and(iii) an amount equal to 100% of the Net Available Cash from such AssetDisposition is applied by the Company or such Restricted Subsidiary, as thecase may be, (A) within 360 days from the receipt of such NetAvailable Cash to the extent the Company or any Restricted Subsidiary, as thecase may be, elects (or is required by the terms of the Credit Facility orother applicable Indebtedness), to prepay, repay, purchase or otherwise acquire(1) Indebtedness under the Credit Facility (2) any other securedIndebtedness of the Company or any Restricted Subsidiary, or (3) anyIndebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor;(B) to the extent of any remaining balance of Net Available Cash after anyelection in accordance with clause (A), to the extent the Company or suchRestricted Subsidiary, as the case may be, elects, to the investment by theCompany or any Restricted Subsidiary in Additional Assets within 360 days fromthe receipt of such Net Available Cash (except that the Company or suchRestricted Subsidiary shall be deemed to have so invested such Net AvailableCash within 360 days if, within such 360 days, it has entered into a bindingcommitment to invest such Net Available Cash and such Net Available Cash isactually invested within 90 days thereafter); (C) to the extent of anyremaining balance

 

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## of such Net Available Cash after any electionin accordance with clauses (A) and (B), to make an Offer (as defined below) topurchase Securities and, if required, any Pari Passu Indebtedness pursuant toand subject to the conditions set forth in paragraph (b) of this Section 4.6within 45 days from the application of Net Available Cash in accordance withclauses (A) and (B).  Pending the finalapplication of any such Net Available Cash, the Company or such RestrictedSubsidiary may temporarily reduce Indebtedness under a revolving creditfacility or otherwise invest such Net Available Cash in Temporary Cash Investments.

 

For the purposes of this Section 4.6, thefollowing are deemed to be cash: (x) the assumption by the transferee ofIndebtedness of the Company or any Restricted Subsidiary and the release of theCompany or such Restricted Subsidiary from all liability on such Indebtednessin connection with such Asset Disposition, (y) securities received by theCompany or any Restricted Subsidiary from the transferee that are promptlyconverted by the Company or such Restricted Subsidiary into cash and (z) AdditionalAssets received in an exchange of assets transaction; *provided* that (i) in theevent such exchange of assets transaction or series of related exchange ofassets transactions (each, an “*Exchange Transaction*”) involves anaggregate value in excess of $5,000,000, the terms of such Exchange Transactionshall have been approved by the Board of Directors of the Company, and(ii) in the event such Exchange Transaction involves an aggregate value inexcess of $10,000,000, the Company shall have received a written opinion from anationally recognized independent investment banking, accounting or appraisalfirm that the Company has received consideration equal to the fair market valueof the assets disposed of.

 

### (b)                                 Inthe event of an Asset Disposition that requires the purchase of Securitiespursuant to Section 4.6(a)(iii)(C), the Company will be required to(i) purchase Securities tendered pursuant to an offer by the Company forthe Securities and (ii) redeem or offer to purchase any Pari Passu Indebtednessthe terms of which require the Company or the applicable Subsidiary Guarantorto so redeem or repurchase such Pari Passu Indebtedness, pro rata in proportionto the respective principal amounts of the Securities and such Pari PassuIndebtedness required to be so redeemed or repurchased, the maximum principalamount of Securities and Pari Passu Indebtedness that may be redeemed orrepurchased out of the amount of Net Available Cash referred to in clause (a)(iii)(C)of this Section 4.6 (the “*Offer*”) at a purchase price of (x) inthe case of the Securities, 100% of their principal amount plus accruedinterest to the date of purchase in accordance with the procedures (includingprorating in the event of oversubscription) set forth in this Section 4.6 and(y) in the case of such Pari Passu Indebtedness, the redemption price orrepurchase price, as applicable for such Pari Passu Indebtedness shall be asset forth in the related documentation governing such Pari PassuIndebtedness.  If the aggregate purchaseprice for the Securities and Pari Passu Indebtedness tendered or redeemedpursuant to the Offer is less than the Net Available Cash allotted to thepurchase of the Securities and Pari Passu Indebtedness, the Company will usethe remaining Net Available Cash for general corporate purposes not prohibitedby this Indenture.  The Company shallnot be required to make an Offer for Securities pursuant to this covenant ifthe Net Available Cash available therefor (after application of the proceeds asprovided in clauses (A) and (B)) is less than $10,000,000 (which lesser amountsshall be carried forward for purposes of determining whether an Offer isrequired with respect to the Net Available Cash from subsequent Asset Dispositions).

###  

### (c)                                  (1)  Promptly, and in any event within 30 daysafter the Company becomes obligated to make an Offer, the Company shall beobligated to deliver to the Trustee and send, by first-class mail to eachHolder, at the address appearing in the Security Register, a written noticestating that the Holder may elect to have his Securities purchased by theCompany either in whole or in part (subject to prorationing as hereinafterdescribed in the event the Offer is oversubscribed) in integral multiples of$1,000 of principal amount, at the applicable purchase price.  The notice shall specify a purchase date notless than 30 days nor more than 60 days after the date of such notice (the “*PurchaseDate*”) and shall contain all instructions and materials necessary totender Securities pursuant to the Offer, together with the informationcontained in clause (3).

 

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(2)                                  Notlater than the date upon which written notice of an Offer is delivered to theTrustee as provided above, the Company shall deliver to the Trustee anOfficers’ Certificate as to (i) the amount of the Offer (the “*Offer Amount*”),(ii) the allocation of the Net Available Cash from the Asset Dispositionspursuant to which such Offer is being made and (iii) the compliance of suchallocation with the provisions of Section 4.6(a).  Upon the expiration of the period for which the Offer remainsopen (the “*OfferPeriod*”), the Company shall deliver to the Trustee for cancellationthe Securities or portions thereof which have been properly tendered to and areto be accepted by the Company.  Notlater than 10:00 a.m. (New York City time) on the Purchase Date, the Companyshall irrevocably deposit with the Trustee or with a paying agent (or, if theCompany is acting as Paying Agent, segregate and hold in trust) an amount incash sufficient to pay the Offer Amount for all Securities properly tendered toand accepted by the Company.  TheTrustee shall, on the Purchase Date, mail or deliver payment to each tenderingHolder in the amount of the purchase price.

 

(3)                                  Holderselecting to have a Security purchased will be required to surrender theSecurity, together with all necessary endorsements and other appropriatematerials duly completed, to the Company at the address specified in the noticeat least three Business Days prior to the Purchase Date.  Holders will be entitled to withdraw theirelection in whole or in part if the Trustee or the Company receives not laterthan one Business Day prior to the Purchase Date, a facsimile transmission orletter setting forth the name of the Holder, the principal amount of theSecurity (which shall be $1,000 or an integral multiple thereof) which wasdelivered for purchase by the Holder, the aggregate principal amount of suchSecurity (if any) that remains subject to the original notice of the Offer andthat has been or will be delivered for purchase by the Company and a statementthat such Holder is withdrawing his election to have such Securitypurchased.  If at the expiration of theOffer Period the aggregate principal amount of Securities surrendered byHolders exceeds the Offer Amount, the Company shall select the Securities to bepurchased on a pro rata basis (with such adjustments as may be deemedappropriate by the Company so that only securities in denominations of $1,000,or integral multiples thereof, shall be purchased).  Holders whose Securities are purchased only in part will beissued new Securities equal in principal amount to the unpurchased portion ofthe Securities surrendered.

 

(4)                                  ASecurity shall be deemed to have been accepted for purchase at the time theTrustee, directly or through an agent, mails or delivers payment therefor tothe surrendering Holder.

 

### (d)                                 TheCompany shall comply, to the extent applicable, with the requirements ofSection 14(e) of the Exchange Act and any other securities laws or regulationsin connection with the repurchase of Securities pursuant to this Section4.6.  To the extent that the provisionsof any securities laws or regulations conflict with provisions of this Section4.6, the Company shall comply with the applicable securities laws and regulationsand shall not be deemed to have breached its obligations under this Section 4.6by virtue thereof.

###  

## SECTION 4.7.                                 Limitation on Transactions withAffiliates.  (a)  The Company will not, and will not permitany Restricted Subsidiary to, directly or indirectly, enter into or conduct anytransaction or series of transactions (including the purchase, sale, lease orexchange of any property, or rendering of any service) with any Affiliate ofthe Company (an “*Affiliate Transaction*”) unless (i) the terms of suchtransaction are no less favorable to the Company or such Restricted Subsidiary,as the case may be, than those that could be obtained at the time of suchtransaction in arm’s-length dealings with a Person who is not such anAffiliate; (ii) in the event such Affiliate Transaction involves an aggregateamount in excess of $2,500,000, the terms of such transaction shall have beenapproved by a majority of the disinterested members of the Board of Directors(and such majority determines that such Affiliate Transaction satisfies thecriteria in clause (i) above) and (iii) in the event such Affiliate Transactioninvolves an aggregate amount in excess of $10,000,000, the Company has receiveda written opinion from a

 

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## nationally recognized independent investmentbanking, accounting or appraisal firm that such Affiliate Transaction is fairto the Company from a financial point of view.

 

### (b)                                 Theforegoing provision of Section 4.7(a) shall not apply to (i) any RestrictedPayment permitted to be made pursuant to Section 4.4, (ii) any issuance ofequity securities (other than Disqualified Stock), or other payments, awards orgrants in cash, equity securities (other than Disqualified Stock) or otherwisepursuant to, or the funding of, employment arrangements, stock options andstock ownership plans approved by the Board of Directors, (iii) any fees, indemnities,loans or advances to employees in the ordinary course of business, and, to theextent permitted by Section 4.3(b)(xii), Guarantees, (iv) anytransaction between the Company and a Restricted Subsidiary or between or amongRestricted Subsidiaries, (v) any issuance of Capital Stock (other than DisqualifiedStock) of the Company; (vi) transactions with suppliers or purchasers ofgoods and services (including, without limitation, pursuant to joint ventureagreements and franchise agreements) and (vii) any agreement in effect onthe Issue Date or transaction contemplated thereby (and any replacement oramendment of any such agreement so long as any such amendment or replacementthereof is not materially less favorable to the Holders than the agreement ineffect on the Issue Date).

###  

## SECTION 4.8.                                 Change of Control.  (a)  Upon a Change ofControl, each Holder shall have the right to require that the Companyrepurchase all or any part of such Holder’s Securities at a purchase price incash equal to 101% of the principal amount thereof, plus accrued and unpaidinterest, if any, to the date of repurchase (subject to the right of Holders ofrecord on the relevant record date to receive interest due on the relatedinterest payment date), in accordance with the terms contemplated in Section4.8(b).

 

### (b)                                 (i)Within 30 days following any Change of Control, the Company shall mail a noticeto each Holder with a copy to the Trustee stating:

###  

##### (1)                                  that a Change ofControl has occurred and that such Holder has the right to require the Companyto purchase (the “Change of Control Offer”) any or all of such Holder’sSecurities in denominations of $1,000 or any integral multiple thereof at apurchase price in cash equal to 101% of the principal amount thereof, plusaccrued and unpaid interest, if any, to the date of repurchase (subject to theright of Holders of record on a record date to receive interest on the relevantinterest payment date);

#####  

##### (2)                                  the circumstances andrelevant facts regarding such Change of Control;

#####  

##### (3)                                  the repurchase date(which shall be no earlier than 30 days nor later than 60 days from the datesuch notice is mailed); and

#####  

##### (4)                                  the instructionsdetermined by the Company, consistent with this Section 4.8, that a Holder mustfollow in order to have its Securities purchased by the Company.

#####  

### (c)                                  Holderselecting to have a Security purchased will be required to surrender theSecurity, together with all necessary endorsements and other appropriatematerials duly completed, to the Company at the address specified in the noticeat least three Business Days prior to the purchase date.  Holders will be entitled to withdraw theirelection if the Trustee or the Company receives not later than one Business Dayprior to the purchase date, a facsimile transmission or letter setting forththe name of the Holder, the principal amount of the Security which was deliveredfor purchase by the Holder as to which such notice of withdrawal is beingsubmitted and a statement that such Holder is withdrawing his election to havesuch Security purchased.

 

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### (d)                                 Onthe purchase date, all Securities purchased by the Company under this Sectionshall be delivered to the Trustee for cancellation, and the Company shall paythe purchase price plus accrued and unpaid interest, if any, to the Holders entitledthereto.

###  

### (e)                                  TheCompany’s obligation to make a Change of Control Offer will be satisfied if athird party makes the Change of Control Offer in the manner and at the timesand otherwise in compliance with the requirements applicable to a Change ofControl Offer made by the Company and purchases all Securities properlytendered and not withdrawn under the Change of Control Offer.

###  

### (f)                                    TheCompany will comply, to the extent applicable, with the requirements of Section14(e) of the Exchange Act and any other securities laws or regulations inconnection with the repurchase of Securities pursuant to this Section 4.8.  To the extent that the provisions of anysecurities laws or regulations conflict with provisions of this Section 4.8,the Company will comply with the applicable securities laws and regulations andwill not be deemed to have breached its obligations under this Section 4.8 byvirtue thereof.

###  

### (g)                                 Notwithstandingthe occurrence of a Change of Control, the Company shall not be obligated torepurchase the Securities or otherwise comply with this Section 4.8 if theCompany has irrevocably elected to redeem all the Securities in accordance withArticle 3; *provided*that the Company does not default in its redemption obligations pursuant tosuch election.

###  

## SECTION 4.9.                                 Limitation on Liens.  The Company will not, and will not permitany Restricted Subsidiary to, directly or indirectly, create or permit to existany Lien on any of its property or assets (including Capital Stock), whetherowned on the Issue Date or thereafter acquired, securing any obligation, otherthan Permitted Liens, unless contemporaneously therewith effective provision ismade to secure the Securities equally and ratably with (or on a senior basisto, in the case of Subordinated Obligations) such obligation for so long assuch obligation is so secured by a Lien on property or assets of the Company ora Restricted Subsidiary.

 

## SECTION 4.10.                           Limitation on Sale of SubsidiaryCapital Stock.  The Company(i) will not, and will not permit any Restricted Subsidiary of the Companyto, transfer, convey, sell, lease or otherwise dispose of any Capital Stock ofany Restricted Subsidiary to any Person (other than to the Company or a WhollyOwned Subsidiary) and (ii) will not permit any Restricted Subsidiary toissue any of its Capital Stock (other than, if necessary, shares of its CapitalStock constituting directors’ qualifying shares) to any Person other than tothe Company or a Wholly Owned Subsidiary, unless, in either case,(a) after any such transfer, conveyance, sale, lease, disposition or issuance,such Subsidiary constitutes a Restricted Subsidiary and (b) the NetAvailable Cash from such transfer, conveyance, sale, lease or other dispositionis applied in accordance with Section 4.6; *provided*, *however*, that this provisionshall not prohibit the transfer, conveyance, sale, lease or other dispositionof all of the Capital Stock of any Restricted Subsidiary.

 

## SECTION 4.11.                           Limitations on Sale/LeasebackTransactions.  The Company willnot, and will not permit any Restricted Subsidiary to, directly or indirectly,enter into any Sale/Leaseback Transaction; provided that the Company or anyRestricted Subsidiary may enter into a Sale/Leaseback Transaction if:

 

##### (1)               the Company or such RestrictedSubsidiary could have (a) Incurred any Indebtedness attributable to suchSale/Leaseback Transaction pursuant to Section 4.3 and (b) Incurred a Lien tosecure such Indebtedness without equally and ratably securing the Securitiespursuant to Section 4.9; and

#####  

##### 36

##### 

##### (2)               thetransfer of assets in such Sale/Leaseback Transaction is permitted by, and theCompany or the applicable Restricted Subsidiary applies the proceeds of suchtransaction in accordance with, Section 4.6.

#####  

## SECTION 4.12.                           Limitationon Conduct of Business of Insurance Subsidiary.  Unless it is designated as an Unrestricted Subsidiary inaccordance with this Indenture, the Company shall not permit RestaurantInsurance Corporation to engage in any business or activities other thanwriting insurance and reinsurance with respect to liabilities of the Companyand its Subsidiaries and activities incidental thereto.

 

## SECTION 4.13.                           FutureGuarantors.  The Company shall causeeach new Subsidiary of the Company (other than (i) a new Subsidiary designatedas an Unrestricted Subsidiary and (ii) Foreign Subsidiaries), and anyUnrestricted Subsidiary that is redesignated a Restricted Subsidiary (otherthan Restaurant Insurance Corporation, if it is designated as an UnrestrictedSubsidiary), to become a Subsidiary Guarantor under this Indenture and therebyGuarantee the Securities on the terms and conditions set forth inArticle 10 (each a “*Future Guarantor*”).

 

## SECTION 4.14.                           ComplianceCertificate.  The Company shalldeliver to the Trustee within 120 days after the end of each fiscal year of theCompany an Officers’ Certificate, one of the signers of which shall be theprincipal executive, financial or accounting officer of the Company, statingthat in the course of the performance by the signers of their duties asOfficers of the Company they would normally have knowledge of any Default andwhether or not the signers know of any Default that occurred during suchperiod.  If they do, the certificateshall describe the Default, its status and what action the Company is taking orproposes to take with respect thereto. The Company also shall comply with TIA § 314(a)(4).

 

## SECTION 4.15.                           FurtherInstruments and Acts.  Upon requestof the Trustee, the Company will execute and deliver such further instrumentsand do such further acts as may be reasonably necessary or proper to carry outmore effectively the purpose of this Indenture.

 

## SECTION 4.16.                           Maintenanceof Office or Agency.  The Companyshall maintain the office or agency required under Section 2.3.  The Company shall give prior written noticeto the Trustee of the location, and any change in the location, of such officeor agency.  If at any time the Companyshall fail to maintain any such required office or agency or shall fail tofurnish the Trustee with the address thereof, such presentations, surrenders,notices and demands may be made or served at the address of the Trustee setforth in Section 11.2.

 

## SECTION 4.17.                           CorporateExistence.  Except as otherwisepermitted by Article 5, the Company shall do or cause to be done, at its owncost and expense, all things necessary to preserve and keep in full force andeffect its corporate existence and the corporate existence of each of itsSubsidiaries in accordance with the respective organizational documents of eachsuch Subsidiary and the material rights (charter and statutory) and franchisesof the Company and each such Subsidiary; *provided*, *however*, that the Companyshall not be required to preserve, with respect to itself, any material rightor franchise and, with respect to any of its Subsidiaries, any such existence,material right or franchise, if the Board of Directors of the Company shalldetermine in good faith that the preservation thereof is no longer desirable inthe conduct of the business of the Company and its Subsidiaries, taken as awhole.

 

## SECTION 4.18.                           Payment of Taxes andOther Claims.  The Companyshall pay or discharge or cause to be paid or discharged, before the same shallbecome delinquent, (i) all material taxes, assessments and governmental charges(including withholding taxes and any penalties, interest and additions totaxes) levied or imposed upon it or any of its Subsidiaries or properties of itor any of its Subsidiaries

 

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## and (ii) alllawful claims for labor, materials and supplies that, if unpaid, might by lawbecome a Lien upon the property of it or any of its Subsidiaries; *provided*,*however*,that the Company shall not be required to pay or discharge or cause to be paidor discharged any such tax, assessment, charge or claim whose amount,applicability or validity is being contested in good faith by appropriateproceedings properly instituted and diligently conducted for which adequatereserves, to the extent required under GAAP, have been taken.

 

## SECTION 4.19.                           Maintenance of Propertiesand Insurance.  (a)  The Company shall, and shall cause each ofits Subsidiaries to, maintain its material properties in good working order andcondition (subject to ordinary wear and tear) and make all necessary repairs,renewals, replacements, additions, betterments and improvements thereto andactively conduct and carry on its business; *provided*, *however*, that nothing inthis Section 4.19 shall prevent the Company or any of its Subsidiaries from discontinuingthe operation and maintenance of any of its properties, if such discontinuanceis, in the good faith judgment of the Board of Directors of the Company or theSubsidiary, as the case may be, desirable in the conduct of their respectivebusinesses and is not disadvantageous in any material respect to the Holders.

 

### (b)                                 TheCompany shall provide or cause to be provided, for itself and each of itsSubsidiaries, insurance (including appropriate self-insurance) against loss ordamage of the kinds that, in the good faith judgment of the Board of Directorsof the Company, are adequate and appropriate for the conduct of the business ofthe Company and such Subsidiaries in a prudent manner, with reputable insurersor with the government of the United States of America or any agency orinstrumentality thereof, in such amounts, with such deductibles, and by suchmethods as shall be customary, in the good faith judgment of the Board ofDirectors of the Company, for companies similarly situated in the industry.

###  

## SECTION 4.20.                           Compliancewith Laws.  The Company shallcomply, and shall cause each of its Subsidiaries to comply, with all applicablestatutes, rules, regulations, orders and restrictions of the United States ofAmerica, all states and municipalities thereof, and of any governmentaldepartment, commission, board, regulatory authority, bureau, agency andinstrumentality of the foregoing, in respect of the conduct of their respectivebusinesses and the ownership of their respective properties, except for suchnoncompliances as are not in the aggregate reasonably likely to have a materialadverse effect on the financial condition or results of operations of theCompany and its Subsidiaries, taken as a whole.

 

# ARTICLE 5

##  

# SUCCESSORCOMPANY

#  

## SECTION 5.1.                                 When the CompanyMay Merge or Transfer Assets.  TheCompany will not consolidate with or merge with or into, or convey, transfer orlease all or substantially all its assets to, any Person, unless:

 

#### (i)                                     theresulting, surviving or transferee Person (the “*Successor Company*”) will bea corporation, limited liability company or limited partnership organized andexisting under the laws of the United States of America, any State thereof orthe District of Columbia and the Successor Company (if not the Company) willexpressly assume, by supplemental indenture, executed and delivered to theTrustee, in form satisfactory to the Trustee, all the obligations of theCompany under the Securities, this Indenture and the Exchange and RegistrationRights Agreement;

 

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#### (ii)                                  immediatelyafter giving pro forma effect to such transaction (and treating anyIndebtedness which becomes an obligation of the Successor Company or anyRestricted Subsidiary as a result of such transaction as having been Incurredby the Successor Company or such Restricted Subsidiary at the time of suchtransaction), no Default or Event of Default will have occurred and becontinuing;

####  

#### (iii)                               immediatelyafter giving pro forma effect to such transaction, the Successor Company wouldbe able to Incur an additional $1.00 of Indebtedness under Section 4.3(a); and

####  

#### (iv)                              theCompany will have delivered to the Trustee an Officers’ Certificate and anOpinion of Counsel, each stating that such consolidation, merger or transferand such supplemental indenture (if any) comply with the Indenture, as setforth in the Indenture.

####  

Upon anyconsolidation or merger of the Company, or any conveyance, transfer or lease ofall or substantially all of the assets of the Company in accordance with the foregoing,in which the Company is not the continuing obligor under the Securities, the survivingentity formed by such consolidation or into which the Company is merged or thePerson to which the conveyance, transfer or lease is made will succeed to, and besubstituted for, and may exercise every right and power of the Company underthis Indenture and the Securities with the same effect as if such survivingentity had been named therein as the Company and, except in the case of alease, the Company will be released from the obligation to pay the principal ofand interest on the Securities and all of the Company’s other obligations andcovenants under the Securities and this Indenture.

 

Notwithstandingthe foregoing clause (iii), any Wholly Owned Subsidiary may consolidate with,merge into or transfer all or part of its properties and assets to the Company.

 

## SECTION 5.2.                                 When SubsidiaryGuarantor May Merge or Transfer Assets.  No Subsidiary Guarantor may consolidate with or merge with orinto, or convey, transfer or lease, in one transaction or a series oftransactions, all or substantially all of its assets to any Person unless (i)the resulting, surviving or transferee Person (if not such SubsidiaryGuarantor) shall be a Person organized and existing under the laws of thejurisdiction under which such Subsidiary Guarantor was organized or under thelaws of the United States of America, or any State thereof or the District ofColumbia, and, subject to Section 10.8, such Person shall expressly assume, bya supplement to this Indenture, in a form satisfactory to the Trustee, all theobligations of such Subsidiary Guarantor under its Subsidiary Guaranty, thisIndenture and the Exchange and Registration Rights Agreement; (ii) immediatelyafter giving effect to such transaction or transactions on a pro forma basis(and treating any Indebtedness which becomes an obligation of the resulting,surviving or transferee Person as a result of such transaction as having beenincurred by such Person at the time of such transaction), no Default or Eventof Default shall have occurred and be continuing; and (iii) the Companydelivers to the Trustee an Officers’ Certificate and an Opinion of Counsel,each stating that such consolidation, merger or transfer, if any, complies withthis Indenture.

 

Upon anyconsolidation, combination or merger of a Subsidiary Guarantor in which theSubsidiary Guarantor is not the continuing obligor under its SubsidiaryGuaranty, the surviving entity formed by such consolidation or into which theSubsidiary Guarantor is merged will succeed to, and be substituted for, and mayexercise every right and power of, the Subsidiary Guarantor under thisIndenture and the Subsidiary Guaranty with the same effect as if such survivingentity had been named therein as the Subsidiary Guarantor, and the SubsidiaryGuarantor will be released from the obligation to pay the principal of andinterest in respect of its Subsidiary Guaranty and all of the SubsidiaryGuarantor’s other obligations and covenants under this Indenture and itsSubsidiary Guaranty.

 

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# ARTICLE 6

#  

# DEFAULTS ANDREMEDIES

#  

## SECTION 6.1.                                 Events of Default.  An “Event of Default” occurs if:

 

#### (1)                                  theCompany defaults in any payment of interest on any Security when the samebecomes due and payable, and such default continues for a period of 30 days;

####  

#### (2)                                  theCompany defaults in the payment of the principal or premium, if any, of anySecurity when the same becomes due and payable at its Stated Maturity, upon optionalredemption, upon required repurchase, upon acceleration or otherwise;

####  

#### (3)                                  theCompany fails to comply with Article 5;

####  

#### (4)                                  theCompany fails to comply with any of its agreements in the Securities or thisIndenture (other than those referred to in (1), (2) or (3) above) and suchfailure continues for 60 days after the notice specified below;

####  

#### (5)                                  theCompany or any Significant Subsidiary of the Company fails to pay anyIndebtedness within any applicable grace period after final maturity or thefinal maturity of any Indebtedness of the Company or any Significant Subsidiaryof the Company is accelerated by the holders thereof because of a default, andthe total amount of such Indebtedness unpaid or accelerated exceeds $10,000,000or its foreign currency equivalent at the time;

####  

#### (6)                                  theCompany or any Significant Subsidiary of the Company pursuant to or within themeaning of any Bankruptcy Law:

#####  

###### (A)                              commencesa voluntary case;

######  

###### (B)                                consentsto the entry of an order for relief against it in an involuntary case in whichit is the debtor;

######  

###### (C)                                consentsto the appointment of a Custodian of it or for any substantial part of itsproperty; or

######  

###### (D)                               makesa general assignment for the benefit of its creditors; or

######  

###### (E)                                 takesany comparable action under any foreign laws relating to insolvency;

######  

#### (7)                                  acourt of competent jurisdiction enters an order or decree under any BankruptcyLaw that:

#####  

###### (A)                              isfor relief against the Company or any Significant Subsidiary of the Company inan involuntary case;

######  

###### (B)                                appointsa Custodian of the Company or any Significant Subsidiary of the Company or forany substantial part of the property of the Company or Significant Subsidiary;or

 

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###### (C)                                ordersthe winding up or liquidation of the Company or any Significant Subsidiary ofthe Company;

######  

##### (or anysimilar relief is granted under any foreign laws) and the order or decreeremains unstayed                andin effect for 60 days; or

 

##### (8)                                  anyfinal, non-appealable judgment or decree for the payment of money in excess of$10,000,000 or its foreign currency equivalent at the time is entered againstthe Company or any Significant Subsidiary of the Company and such judgment ordecree remains unpaid and outstanding for a period of 60 days following suchjudgment and is not discharged, waived or stayed; or

#####  

##### (9)                                  aSubsidiary Guaranty ceases to be in full force and effect (other than inaccordance with the terms of this Indenture) or a Subsidiary Guarantor deniesor disaffirms its obligations under its Subsidiary Guarantee.

#####  

The foregoingwill constitute Events of Default whatever the reason for any such Event ofDefault and whether it is voluntary or involuntary or is effected by operationof law or pursuant to any judgment, decree or order of any court or any order,rule or regulation of any administrative or governmental body.

 

The term“Bankruptcy Law” means Title 11, United States Code, as amended, or any similarfederal or state law for the relief of debtors.  The term “Custodian” means any receiver, trustee, assignee,liquidator, custodian or similar official under any Bankruptcy Law.

 

A Defaultunder clause (4) is not an Event of Default until the Trustee or the Holders ofat least 25% in aggregate principal amount of the outstanding Securities notifythe Company of the Default and the Company does not cure such Default withinthe time specified after receipt of such notice.  Such notice must specify the Default, demand that it be remediedand state that such notice is a “Notice of Default”.

 

The Companyshall deliver to the Trustee, within 30 days after the occurrence thereof,written notice in the form of an Officers’ Certificate of any Event of Defaultunder clause (5) and any event which with the giving of notice or the lapse oftime would become an Event of Default under clause (4) or (8), its status andwhat action the Company is taking or proposes to take with respect thereto.

 

## SECTION 6.2.                                 Acceleration.  If an Event of Default (other than an Eventof Default specified in Section 6.1(6) or (7) with respect to the Company)occurs and is continuing, the Trustee by notice to the Company, or the Holdersof at least 25% in aggregate principal amount of the outstanding Securities bynotice to the Company and the Trustee, may declare the principal of and accruedbut unpaid interest on all the Securities to be due and payable.  Upon such a declaration, such principal andinterest shall be due and payable immediately. If an Event of Default specified in Section 6.1(6) or (7) withrespect to the Company occurs and is continuing, the principal of and accruedinterest on all the Securities shall ipso facto become and be immediately dueand payable without any declaration or other act on the part of the Trustee orany Holders.  The Holders of a majorityin aggregate principal amount of the outstanding Securities by notice to theTrustee may rescind an acceleration and its consequences if the rescissionwould not conflict with any judgment or decree and if all existing Events ofDefault have been cured or waived except nonpayment of principal or interestthat has become due solely because of acceleration.  No such rescission shall affect any subsequent Default or impairany right consequent thereto.

 

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## SECTION 6.3.                                 Other Remedies.  If an Event of Default occurs and iscontinuing, the Trustee may pursue any available remedy to collect the paymentof principal of or interest on the Securities or to enforce the performance ofany provision of the Securities or this Indenture.

 

The Trusteemay maintain a proceeding even if it does not possess any of the Securities ordoes not produce any of them in the proceeding.  A delay or omission by the Trustee or any Securityholder inexercising any right or remedy accruing upon an Event of Default shall notimpair the right or remedy or constitute a waiver of or acquiescence in theEvent of Default.  No remedy isexclusive of any other remedy.  Allavailable remedies are, to the extent permitted by law, cumulative.

 

## SECTION 6.4.                                 Waiver of Past Defaults.  The Holders of a majority in aggregateprincipal amount of the Securities then outstanding by notice to the Trusteemay waive any past or existing Default and its consequences except (i) aDefault in the payment of the principal of or interest on a Security or (ii) aDefault in respect of a provision that under Section 9.2 cannot be amendedwithout the consent of each Securityholder affected.  When a Default is waived, it is deemed cured, and any Event ofDefault arising therefrom shall be deemed to have been cured, but no suchwaiver shall extend to any subsequent or other Default or impair any consequentright.

 

## SECTION 6.5.                                 Control by Majority.  The Holders of a majority in aggregate principalamount of the Securities then outstanding may direct the time, method and placeof conducting any proceeding for any remedy available to the Trustee or ofexercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to followany direction that conflicts with law or this Indenture or, subject to Section7.1, that the Trustee determines is unduly prejudicial to the rights of otherSecurityholders or would involve the Trustee in personal liability; *provided*,*however*,that the Trustee may take any other action deemed proper by the Trustee that isnot inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled toindemnification from the Securityholders satisfactory to it in its solediscretion against all losses and expenses caused by taking or not taking suchaction.

 

## SECTION 6.6.                                 Limitation on Suits.  A Holder may not pursue any remedy with respectto this Indenture or the Securities unless:

 

##### (1)                                  theHolder gives to the Trustee written notice stating that an Event of Default iscontinuing;

#####  

##### (2)                                  theHolders of at least 25% in aggregate principal amount of the Securities thenoutstanding make a written request to the Trustee to pursue the remedy;

#####  

##### (3)                                  suchHolder or Holders offer to the Trustee reasonable security or indemnity againstany loss, liability or expense;

#####  

##### (4)                                  theTrustee does not comply with the request within 60 days after receipt of therequest and the offer of security or indemnity; and

#####  

##### (5)                                  theHolders of a majority in aggregate principal amount of the Securities thenoutstanding do not give the Trustee a direction inconsistent with the requestduring such 60-day period.

#####  

ASecurityholder may not use this Indenture to prejudice the rights of anotherSecurityholder or to obtain a preference or priority over another Securityholder.

 

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## SECTION 6.7.                                 Rights of HoldersTo Receive Payment. Notwithstanding any other provision of this Indenture, the right of anyHolder to receive payment of principal of and interest on the Securities held bysuch Holder, on or after the respective due dates expressed in the Securities,or to bring suit for the enforcement of any such payment on or after suchrespective dates, shall not be impaired or affected without the consent of suchHolder.

 

## SECTION 6.8.                                 Collection Suit byTrustee.  If an Event ofDefault specified in Section 6.1(1) or (2) occurs and is continuing, theTrustee may recover judgment in its own name and as trustee of an express trustagainst the Company for the whole amount then due and owing (together with intereston any unpaid interest to the extent lawful) and the amounts provided for inSection 7.7.

 

## SECTION 6.9.                                 Trustee May FileProofs of Claim.  The Trusteemay file such proofs of claim and other papers or documents as may be necessaryor advisable in order to have the claims of the Trustee and the Securityholdersallowed in any judicial proceedings relative to the Company, its creditors orits property and, unless prohibited by law or applicable regulations, may voteon behalf of the Holders in any election of a trustee in bankruptcy or otherPerson performing similar functions, and any Custodian in any such judicialproceeding is hereby authorized by each Holder to make payments to the Trusteeand, in the event that the Trustee shall consent to the making of such paymentsdirectly to the Holders, to pay to the Trustee any amount due it for thereasonable compensation, expenses, disbursements and advances of the Trustee,its agents and its counsel, and any other amounts due the Trustee under Section7.7.

 

## SECTION 6.10.                           Priorities.  If the Trustee collects any money orproperty pursuant to this Article 6, it shall pay out the money or property inthe following order, subject to applicable law:

 

FIRST:  to the Trustee for amounts due under Section7.7;

 

SECOND:  to Securityholders for amounts due andunpaid on the Securities for principal and interest, ratably, withoutpreference or priority of any kind, according to the amounts due and payable onthe Securities for principal and interest, respectively; and

 

THIRD:  to the Company.

 

The Trusteemay, upon prior written notice to the Company, fix a record date and paymentdate for any payment to Securityholders pursuant to this Section.  At least 15 days before such record date,the Company shall mail to each Securityholder and the Trustee a notice thatstates the record date, the payment date and amount to be paid.

 

## SECTION 6.11.                           Undertaking for Costs. In any suit for the enforcementof any right or remedy under this Indenture or in any suit against the Trusteefor any action taken or omitted by it as Trustee, a court in its discretion mayrequire the filing by any party litigant in the suit of an undertaking to paythe costs of the suit, and the court in its discretion may assess reasonable costs,including reasonable attorneys’ fees and expenses, against any party litigantin the suit, having due regard to the merits and good faith of the claims ordefenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holderpursuant to Section 6.7 or a suit by Holders of more than 10% in aggregateprincipal amount of the outstanding Securities.

 

## SECTION 6.12.                           Waiver of Stay orExtension Laws.  The Company(to the extent it may lawfully do so) shall not at any time insist upon, orplead, or in any manner whatsoever claim or take the benefit or advantage of,any stay or extension law wherever enacted, now or at any time hereafter inforce, which may affect the covenants or the performance of this Indenture; andthe Company (to the extent

 

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## that it maylawfully do so) hereby expressly waives all benefit or advantage of any suchlaw, and shall not hinder, delay or impede the execution of any power hereingranted to the Trustee, but shall suffer and permit the execution of every suchpower as though no such law had been enacted.

 

# ARTICLE 7

#  

# TRUSTEE

#  

## SECTION 7.1.                                 Duties of Trustee.  (a) If an Event of Default has occurred and is continuing, the Trustee shallexercise the rights and powers vested in it by this Indenture and use the samedegree of care and skill in their exercise as a prudent Person would exerciseor use under the circumstances in the conduct of such Person’s own affairs.

 

### (b)                                 Exceptduring the continuance of an Event of Default:

###  

##### (1)                                  theTrustee undertakes to perform such duties and only such duties as arespecifically set forth in this Indenture and no implied covenants orobligations shall be read into this Indenture against the Trustee; and

#####  

##### (2)                                  inthe absence of bad faith on its part, the Trustee may conclusively rely, as tothe truth of the statements and the correctness of the opinions expressedtherein, upon certificates or opinions furnished to the Trustee and conformingto the requirements of this Indenture. However, in the case of any such certificates or opinions which by anyprovision hereof are specifically required to be furnished to the Trustee, theTrustee shall examine the certificates and opinions to determine whether or notthey conform to the requirements of this Indenture.

#####  

### (c)                                  TheTrustee may not be relieved from liability for its own negligent action, itsown negligent failure to act or its own wilful misconduct, except that:

###  

##### (1)                                  thisparagraph does not limit the effect of paragraph (b) of this Section;

#####  

##### (2)                                  theTrustee shall not be liable for any error of judgment made in good faith by aResponsible Officer unless it is proved that the Trustee was negligent inascertaining the pertinent facts; and

#####  

##### (3)                                  theTrustee shall not be liable with respect to any action it takes or omits totake in good faith in accordance with a direction received by it pursuant toSection 6.5.

#####  

### (d)                                 Everyprovision of this Indenture that in any way relates to the Trustee is subjectto paragraphs (a), (b) and (c) of this Section.

###  

### (e)                                  Moneyheld in trust by the Trustee need not be segregated from other funds except tothe extent required by law.

###  

### (f)                                    Noprovision of this Indenture shall require the Trustee to expend or risk its ownfunds or otherwise incur financial liability in the performance of any of itsduties hereunder or in the exercise of any of its rights or powers, if it shallhave reasonable grounds to believe that repayment of such funds or adequateindemnity against such risk or liability is not reasonably assured to it.

 

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### (g)                                 Everyprovision of this Indenture relating to the conduct or affecting the liabilityof or affording protection to the Trustee shall be subject to the provisions ofthis Section and to the provisions of the TIA.

###  

## SECTION 7.2.                                 Rights of Trustee.  (a) The Trustee may conclusively rely on any document believed by it to begenuine and to have been signed or presented by the proper person.  The Trustee need not investigate any fact ormatter stated in the document.

 

### (b)                                 Beforethe Trustee acts or refrains from acting, it may require an Officers’Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to takein good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

###  

### (c)                                  TheTrustee may act through agents and shall not be responsible for the misconductor negligence of any agent appointed with due care.

###  

### (d)                                 TheTrustee shall not be liable for any action it takes or omits to take in goodfaith which it believes to be authorized or within its rights or powers; *provided*,*however*,that the Trustee’s conduct does not constitute wilful misconduct or negligence.

###  

### (e)                                  TheTrustee may consult with counsel of its selection, and the advice or opinion ofcounsel with respect to legal matters relating to this Indenture and theSecurities shall be full and complete authorization and protection fromliability in respect to any action taken, omitted or suffered by it hereunderin good faith and in accordance with the advice or opinion of such counsel.

###  

### (f)                                    TheTrustee shall be under no obligation to exercise any of the rights or powersvested in it by this Indenture at the request or direction of any of theHolders pursuant to this Indenture, unless such Holders shall have offered tothe Trustee reasonable security or indemnity against the costs, expenses andliabilities which might be incurred by it in compliance with such request ordirection.

###  

### (g)                                 TheTrustee shall not be bound to make any investigation into the facts or mattersstated in any resolution, certificate, statement, instrument, opinion, report,notice, request, direction, consent, order, bond, debenture, note, otherevidence of indebtedness or other paper or document, but the Trustee, in itsdiscretion, may make such further inquiry or investigation into such facts ormatters as it may see fit.

###  

### (h)                                 TheTrustee may request that the Company deliver an Officers’ Certificate settingforth the names of individuals and/or titles of officers authorized at suchtime to take specified actions pursuant to this Indenture, which Officers’Certificate may be signed by any person authorized to sign an Officers’Certificate, including any person specified as so authorized in any such certificatepreviously delivered and not superseded.

###  

### (i)                                     Therights, privileges, protections, immunities and benefits given to the Trustee,including, without limitation, its right to be indemnified, are extended to,and shall be enforceable by, the Trustee in each of its capacities hereunder,and to each agent, custodian and other Person employed to act hereunder

###  

## SECTION 7.3.                                 Individual Rightsof Trustee.  The Trustee inits individual or any other capacity may become the owner or pledgee ofSecurities and may otherwise deal with the Company or its respective Affiliateswith the same rights it would have if it were not Trustee.  Any Paying Agent, Registrar, co-registrar orco-paying agent may do the same with like rights.  However, the Trustee must comply with Sections 7.10 and 7.11.

 

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## SECTION 7.4.                                 Trustee’sDisclaimer.  The Trusteeshall not be responsible for and makes no representation as to the validity oradequacy of this Indenture or the Securities, it shall not be accountable forthe Company’s use of the proceeds from the Securities, and it shall not beresponsible for any statement of the Company in this Indenture or in anydocument issued in connection with the sale of the Securities or in the Securitiesother than the Trustee’s certificate of authentication.

 

## SECTION 7.5.                                 Notice of Defaults.  If a Default or Event of Default occurs andis continuing and if it is known to the Trustee, the Trustee shall mail to eachSecurityholder notice of the Default within the earlier of 90 days after itoccurs or 30 days after it is actually known to a Responsible Officer orwritten notice of it is received by the Trustee.  Except in the case of a Default in payment of principal of,premium (if any) or interest on any Security, the Trustee may withhold thenotice if and so long as a committee of its Responsible Officers in good faithdetermines that withholding the notice is in the interests of Securityholders.

 

## SECTION 7.6.                                 Reports by Trusteeto Holders.  As promptly aspracticable after each May 15 beginning with the May 15 following the date ofthis Indenture, and in any event prior to July 15 in each year, the Trusteeshall mail to each Securityholder a brief report dated as of May 15 thatcomplies with TIA § 313(a).  The Trusteealso shall comply with TIA § 313(b). The Trustee shall promptly deliver to the Company a copy of any reportit delivers to Holders pursuant to this Section 7.6.

 

A copy of eachreport at the time of its mailing to Securityholders shall be filed with theSEC and each stock exchange (if any) on which the Securities are listed.  The Company agrees to notify promptly theTrustee whenever the Securities become listed on any stock exchange and of anydelisting thereof.

 

## SECTION 7.7.                                 Compensation andIndemnity.  The Company shallpay to the Trustee from time to time such compensation for its services as theCompany and the Trustee shall from time to time agree in writing.  The Trustee’s compensation shall not be limitedby any law on compensation of a trustee of an express trust.  The Company shall reimburse the Trustee uponrequest for all reasonable out-of-pocket expenses incurred or made by it,including costs of collection, in addition to such compensation for itsservices, except any such expense, disbursement or advance as may arise fromits negligence, wilful misconduct or bad faith.  Such expenses shall include the reasonable compensation andexpenses, disbursements and advances of the Trustee’s agents, counsel,accountants and experts.  The Trusteeshall provide the Company reasonable notice of any expenditure not in theordinary course of business; *provided* that prior approval by theCompany of any such expenditure shall not be a requirement for the making ofsuch expenditure nor for reimbursement by the Company thereof.  The Company shall indemnify each of theTrustee and any predecessor Trustees against any and all loss, damage, claim,liability or expense (including attorneys’ fees and expenses) (other than taxesapplicable to the Trustee’s compensation hereunder) incurred by it inconnection with the acceptance or administration of this trust and theperformance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which itmay seek indemnity.  Failure by theTrustee to so notify the Company shall not relieve the Company of itsobligations hereunder.  The Companyshall defend the claim and the Trustee may have separate counsel, which counselmust be reasonably acceptable to the Company and the Company will pay thereasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against anyloss, liability or expense incurred by the Trustee through the Trustee’s ownwilful misconduct, negligence or bad faith.

 

To secure theCompany’s payment obligations in this Section, the Trustee shall have a lienprior to the Securities on all money or property held or collected by theTrustee other than money or property held in trust to pay principal of and intereston particular Securities.

 

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The Company’spayment obligations pursuant to this Section shall survive the discharge ofthis Indenture.  When the Trustee incursexpenses after the occurrence of a Default specified in Section 6.1(6) or (7)with respect to the Company, the expenses are intended to constitute expensesof administration under the Bankruptcy Law.

 

## SECTION 7.8.                                 Replacement ofTrustee.  The Trustee mayresign at any time by so notifying the Company.  The Holders of a majority in principal amount of the Securitiesthen outstanding, may remove the Trustee by so notifying the Trustee and may appointa successor Trustee.  The Company shallremove the Trustee if:

 

##### (1)                                  theTrustee fails to comply with Section 7.10;

#####  

##### (2)                                  theTrustee is adjudged bankrupt or insolvent;

#####  

##### (3)                                  areceiver or other public officer takes charge of the Trustee or its property;or

#####  

##### (4)                                  theTrustee otherwise becomes incapable of acting.

#####  

If the Trusteeresigns, is removed by the Company or by the Holders of a majority in principalamount of the Securities and such Holders do not reasonably promptly appoint asuccessor Trustee, or if a vacancy exists in the office of Trustee for anyreason (the Trustee in such event being referred to herein as the retiringTrustee), the Company shall promptly appoint a successor Trustee.

 

A successorTrustee shall deliver a written acceptance of its appointment to the retiringTrustee and to the Company.  Thereuponthe resignation or removal of the retiring Trustee shall become effective, andthe successor Trustee shall have all the rights, powers and duties of theTrustee under this Indenture.  Thesuccessor Trustee shall mail a notice of its succession toSecurityholders.  The retiring Trusteeshall promptly transfer all property held by it as Trustee to the successorTrustee, subject to the lien provided for in Section 7.7.

 

If a successorTrustee does not take office within 60 days after the retiring Trustee resignsor is removed, the retiring Trustee or the Holders of 10% in principal amountof the Securities may petition at the expense of the Company any court ofcompetent jurisdiction for the appointment of a successor Trustee.

 

If the Trusteefails to comply with Section 7.10, any Securityholder may petition any court ofcompetent jurisdiction for the removal of the Trustee and the appointment of asuccessor Trustee.

 

Notwithstandingthe replacement of the Trustee pursuant to this Section, the Company’s,obligations under Section 7.7 shall continue for the benefit of the retiringTrustee.

 

## SECTION 7.9.                                 Successor Trusteeby Merger.  If the Trusteeconsolidates with, merges or converts into, or transfers all or substantiallyall its corporate trust business or assets to, another corporation or bankingassociation, the resulting, surviving or transferee corporation without anyfurther act shall be the successor Trustee, *provided* that such corporation shall beeligible under this Article 7 and TIA § 3.10(a).

 

In case at thetime such successor or successors by merger, conversion or consolidation to theTrustee shall succeed to the trusts created by this Indenture any of theSecurities shall have been authenticated but not delivered, any such successorto the Trustee may adopt the certificate of authentication of any predecessortrustee, and deliver such Securities so authenticated; and in case at that timeany of the

 

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Securities shall not have been authenticated,any successor to the Trustee may authenticate such Securities either in thename of any predecessor hereunder or in the name of the successor to theTrustee; and in all such cases such certificates shall have the full forcewhich it is anywhere in the Securities or in this Indenture provided that thecertificate of the Trustee shall have.

 

## SECTION 7.10.                           Eligibility;Disqualification.  TheTrustee shall at all times satisfy the requirements of TIA § 310(a).  The Trustee shall have a combined capitaland surplus of at least $50,000,000 as set forth in its most recent publishedannual report of condition.  The Trusteeshall comply with TIA § 310(b); *provided*, *however*, that there shall beexcluded from the operation of TIA § 310(b)(1) any indenture or indenturesunder which other securities or certificates of interest or participation inother securities of the Company are outstanding if the requirements for suchexclusion set forth in TIA § 310(b)(1) are met.

 

## SECTION 7.11.                           Preferential Collectionof Claims Against Company. The Trustee shall comply with TIA § 311(a), excluding any creditorrelationship listed in TIA § 311(b).  ATrustee who has resigned or been removed shall be subject to TIA § 311(a) tothe extent indicated.

 

# ARTICLE 8

#  

# DISCHARGE OFINDENTURE; DEFEASANCE

#  

## SECTION 8.1.                                 Discharge ofLiability on Securities; Defeasance.  (a)  When (i) the Companydelivers to the Trustee all outstanding Securities (other than Securitiesreplaced pursuant to Section 2.7) for cancellation or (ii) all outstandingSecurities have become due and payable, whether at maturity or as a result ofthe mailing of a notice of redemption pursuant to Article 3 hereof or the Securitieswill become due and payable at their maturity within 91 days, or the Securitiesare to be called for redemption within 91 days under arrangements satisfactoryto the Trustee for the giving of notice of redemption by the Trustee in thename, and at the expense, of the Company, and, in each case of this clause(ii), the Company irrevocably deposits or causes to be deposited with theTrustee funds sufficient to pay at maturity or upon redemption all outstandingSecurities, including interest thereon to maturity or such redemption date(other than Securities replaced pursuant to Section 2.7), and if in either casethe Company pays all other sums payable hereunder by the Company, then thisIndenture shall, subject to Section 8.1(c), cease to be of further effect.  The Trustee shall acknowledge satisfactionand discharge of this Indenture on demand of the Company accompanied by anOfficers’ Certificate and an Opinion of Counsel from the Company that allconditions precedent provided herein for relating to satisfaction and dischargeof this Indenture have been complied with and at the cost and expense of the Company.

 

### (b)                                 Subjectto Sections 8.1(c) and 8.2, the Company at any time may terminate (i) allof its obligations under the Securities and this Indenture (“*legal defeasanceoption*”) or (ii) its obligations under Sections 4.2, 4.3, 4.4,4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 4.17 (other than withrespect to the corporate existence of the Company), 4.18, 4.19 and 4.20 and theoperation of Sections 6.1(5), 6.1(6) (but only with respect to a SignificantSubsidiary), 6.1(7) (but only with respect to a Significant Subsidiary), 6.1(8)and 5.1(iii) (“*covenant defeasance option*”).  The Company may exercise its legal defeasance optionnotwithstanding its prior exercise of its covenant defeasance option.

###  

If the Companyexercises its legal defeasance option, payment of the Securities may not beaccelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of theSecurities may not be accelerated because of an Event of Default specified inSection 6.1(5), 6.1(6) (but only with respect to a Significant Subsidiary),6.1(7) (but only with respect to a Significant Subsidiary) or 6.1(8) or becauseof the failure of the Company to comply with Sections 5.1(iii).

 

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If the Company exercises its legal defeasanceoption, each Subsidiary Guarantor will be released from all of its obligationsunder its Subsidiary Guarantee.

 

Uponsatisfaction of the conditions set forth herein and upon request of the Company,the Trustee shall acknowledge in writing the discharge of those obligationsthat the Company terminates.

 

### (c)                                  Notwithstandingclauses (a) and (b) above, the Company’s obligations in Sections 2.3, 2.4, 2.5,2.6, 2.7, 4.16, 4.17 (only with respect to the corporate existence of theCompany), 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until the Securities havebeen paid in full.  Thereafter, theCompany’s obligations in Sections 7.7, 8.4 and 8.5 shall survive.

###  

## SECTION 8.2.                                 Conditions toDefeasance.  The Company mayexercise its legal defeasance option or its covenant defeasance option only if:

 

##### (1)                                  theCompany irrevocably deposits or causes to be deposited in trust with theTrustee money or U.S. Government Obligations which through the scheduledpayment of principal and interest in respect thereof in accordance with theirterms will provide cash at such times and in such amounts as will be sufficient(without reinvestment) to pay principal and interest when due on alloutstanding Securities (except Securities replaced pursuant to Section 2.7) tomaturity or redemption, as the case may be;

#####  

##### (2)                                  theCompany delivers to the Trustee a certificate from a nationally recognized firmof independent accountants expressing their opinion that the payments ofprincipal and interest when due and without reinvestment on the depositedU.S.  Government Obligations plus anydeposited money without investment will provide cash at such times and in suchamounts as will be sufficient to pay principal and interest when due on alloutstanding Securities (except Securities replaced pursuant to Section 2.7) tomaturity or redemption, as the case may be;

#####  

##### (3)                                  91days pass after the deposit is made and during the 91-day period no Defaultspecified in Section 6.1(6) or (7) with respect to the Company occurs which iscontinuing at the end of the period;

#####  

##### (4)                                  thedeposit does not constitute a default under any other material agreementbinding on the Company;

#####  

##### (5)                                  theCompany delivers to the Trustee an Opinion of Counsel to the effect that thetrust resulting from the deposit does not constitute, or is qualified as, a regulatedinvestment company under the Investment Company Act of 1940;

#####  

##### (6)                                  inthe case of the legal defeasance option, the Company shall have delivered tothe Trustee an Opinion of Counsel stating that (i) the Company have receivedfrom, or there has been published by, the Internal Revenue Service a ruling, or(ii) since the date of this Indenture there has been a change in the applicablefederal income tax law, in either case to the effect that, and based thereonsuch Opinion of Counsel shall confirm that, the Securityholders will notrecognize income, gain or loss for federal income tax purposes as a result ofsuch deposit and defeasance and will be subject to federal income tax on thesame amounts, in the same manner and at the same times as would have been thecase if such deposit and defeasance had not occurred;

#####  

##### (7)                                  inthe case of the covenant defeasance option, the Company shall have delivered tothe Trustee an Opinion of Counsel to the effect that the Securityholders willnot recognize income, gain or loss for federal income tax purposes as a resultof such covenant defeasance and

 

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##### will be subject to federal income tax on the same amounts, in the samemanner and at the same times as would have been the case if such deposit andcovenant defeasance had not occurred; and

#####  

##### (8)                                  theCompany delivers to the Trustee an Officers’ Certificate and an Opinion ofCounsel, each stating that all conditions precedent to the defeasance anddischarge of the Securities as contemplated by this Article 8 have beencomplied with.

#####  

Opinions ofCounsel required to be delivered under this Section may have qualificationscustomary for opinions of the type required and counsel delivering suchOpinions of Counsel may rely on certificates of the Company or government orother officials customary for opinions of the type required, includingcertificates certifying as to matters of fact.

 

Before orafter a deposit, the Company may make arrangements satisfactory to the Trusteefor the redemption of Securities at a future date in accordance with Article 3.

 

## SECTION 8.3.                                 Application ofTrust Money.  The Trusteeshall hold in trust money or U.S. Government Obligations deposited with itpursuant to this Article 8.  It shall applythe deposited money and the money from U.S. Government Obligations either directlyor through the Paying Agent (including the Company acting as its own PayingAgent as the Trustee may determine) and in accordance with this Indenture tothe payment of principal of and interest on the Securities.

 

## SECTION 8.4.                                 Repayment toCompany.  The Trustee and thePaying Agent shall promptly turn over to the Company upon request any excessmoney or securities held by them at any time.

 

Subject to anyapplicable abandoned property law, the Trustee and the Paying Agent shall payto the Company upon written request any money held by them for the payment ofprincipal or interest that remains unclaimed for two years, and, thereafter,Securityholders entitled to the money must look to the Company for payment asgeneral creditors.

 

## SECTION 8.5.                                 Indemnity forGovernment Obligations.  TheCompany shall pay and shall indemnify the Trustee against any tax, fee or othercharge imposed on or assessed against deposited U.S. Government Obligations orthe principal and interest received on such U.S. Government Obligations otherthan any such tax, fee or other charge which by law is for the account of theHolders of the defeased Securities; *provided* that the Trustee shall beentitled to charge any such tax, fee or other charge to such Holder’s account.

 

## SECTION 8.6.                                 Reinstatement.  If the Trustee or Paying Agent is unable toapply any money or U.S. Government Obligations in accordance with this Article8 by reason of any legal proceeding or by reason of any order or judgment ofany court or governmental authority enjoining, restraining or otherwiseprohibiting such application, the Company’s obligations under this Indentureand the Securities shall be revived and reinstated as though no deposit had occurredpursuant to this Article 8 until such time as the Trustee or Paying Agent ispermitted to apply all such money or U.S. Government Obligations in accordancewith this Article 8; *provided*, *however*, that, (a) if theCompany has made any payment of interest on or principal of any Securitiesfollowing the reinstatement of their obligations, the Company shall besubrogated to the rights of the Holders of such Securities to receive suchpayment from the money or U.S. Government Obligations held by the Trustee orPaying Agent and (b) unless otherwise required by any legal proceeding or anyorder or judgment of any court or governmental authority, the Trustee or PayingAgent shall return all such money and U.S. Government Obligations to theCompany promptly after receiving a written request therefor at any time, ifsuch reinstatement of the Company’s obligations has occurred and continues tobe in effect.

 

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# ARTICLE 9

#  

# AMENDMENTS

#  

## SECTION 9.1.                                 Without Consent ofHolders.  The Company and theTrustee may amend this Indenture or the Securities without notice to or consentof any Securityholder:

 

##### (1)                                  tocure any ambiguity, omission, defect or inconsistency;

#####  

##### (2)                                  toprovide for the assumption by a Successor Company of the obligations of theCompany in accordance with Article 5;

#####  

##### (3)                                  toprovide for uncertificated Securities in addition to or in place ofcertificated Securities; *provided*, that the uncertificatedSecurities are issued in registered form for purposes of Section 163(f) of theCode or in a manner such that the uncertificated Securities are as described inSection 163(f)(2)(B) of the Code;

#####  

##### (4)                                  toadd additional guarantees with respect to the Securities; including any newSubsidiary Guarantees;

#####  

##### (5)                                  tosecure the Securities and the Subsidiary Guarantees;

#####  

##### (6)                                  toadd to the covenants of the Company for the benefit of the Holders or tosurrender any right or power herein conferred upon the Company;

#####  

##### (7)                                  tomake any change that does not materially adversely affect the rights of anySecurityholder; or

#####  

##### (8)                                  tocomply with any requirements of the SEC in connection with qualifying thisIndenture under the TIA.

#####  

After anamendment under this Section becomes effective, the Company shall mail toSecurityholders a notice briefly describing such amendment.  The failure to give such notice to allSecurityholders, or any defect therein, shall not impair or affect the validityof an amendment under this section.

 

## SECTION 9.2.                                 With Consent ofHolders.  The Company and theTrustee may amend this Indenture or the Securities without notice to anySecurityholder but with the written consent of the Holders of at least amajority in principal amount of the Securities then outstanding.  However, without the consent of eachSecurityholder affected, an amendment may not:

 

##### (1)                                  reducethe amount of Securities whose Holders must consent to an amendment;

#####  

##### (2)                                  reducethe rate of or extend the time for payment of interest on any Security;

#####  

##### (3)                                  reducethe principal of or change the Stated Maturity of any Security;

#####  

##### (4)                                  reducethe premium payable upon the redemption of any Security or change the time atwhich any Security may be redeemed in accordance with Article 3;

#####  

##### (5)                                  makeany Security payable in money other than that stated in the Security;

 

51

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##### (6)                                  impairthe right of any Holder to receive payment of principal of and interest on suchHolder’s Securities on or after the due dates therefor or to institute suit forthe enforcement of any payment on or with respect to such Holder’s Securities;

#####  

##### (7)                                  releaseany Subsidiary Guarantor that is a Significant Subsidiary from its SubsidiaryGuaranty, other than in accordance with the provisions of this Indenture;

#####  

##### (8)                                  subordinatethe Securities or any Subsidiary Guaranty in right of payment to any otherobligation of the Company or any Subsidiary Guarantor; or

#####  

##### (9)                                  makeany change in Section 6.4 or 6.7 or the second sentence of this Section.

#####  

It shall notbe necessary for the consent of the Holders under this Section to approve theparticular form of any proposed amendment, but it shall be sufficient if suchconsent approves the substance thereof.

 

After anamendment under this Section becomes effective, the Company shall mail toSecurityholders a notice briefly describing such amendment.  The failure to give such notice to allSecurityholders, or any defect therein, shall not impair or affect the validityof an amendment under this Section.

 

## SECTION 9.3.                                 Compliance withTrust Indenture Act.  Everyamendment to this Indenture or the Securities shall comply with the TIA as thenin effect.

 

## SECTION 9.4.                                 Revocation andEffect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shallbind the Holder and every subsequent Holder of that Security or portion of theSecurity that evidences the same debt as the consenting Holder’s Security, evenif notation of the consent or waiver is not made on the Security.  After an amendment or waiver becomeseffective, it shall bind every Securityholder.

 

The Companymay, but shall not be obligated to, fix a record date for the purpose ofdetermining the Securityholders entitled to give their consent or take anyother action described above or required or permitted to be taken pursuant tothis Indenture.  If a record date isfixed, then notwithstanding the immediately preceding paragraph, those Personswho were Securityholders at such record date (or their duly designatedproxies), and only those Persons, shall be entitled to give such consent or torevoke any consent previously given or to take any such action, whether or notsuch Persons continue to be Holders after such record date.  No such consent shall be valid or effectivefor more than 120 days after such record date.

 

## SECTION 9.5.                                 Notation on orExchange of Securities.  Ifan amendment changes the terms of a Security, the Trustee may require theHolder of the Security to deliver it to the Trustee.  The Trustee may place an appropriate notation on the Securityregarding the changed terms and return it to the Holder.  Alternatively, if the Company or the Trusteeso determine, the Company in exchange for the Security shall issue and theTrustee shall authenticate a new Security that reflects the changed terms.  Failure to make the appropriate notation orto issue a new Security shall not affect the validity of such amendment.

 

## SECTION 9.6.                                 Trustee To SignAmendments.  The Trusteeshall sign any amendment authorized pursuant to this Article 9 if the amendmentdoes not adversely affect the rights, duties, liabilities or immunities of theTrustee.  If it does, the Trustee maybut need not sign it.  In signing suchamendment the Trustee shall be entitled to receive indemnity reasonablysatisfactory to it and to receive,

 

52

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## and (subjectto Section 7.1) shall be fully protected in relying upon, an Officers’Certificate and an Opinion of Counsel stating that such amendment complies withthe provisions of this Article 9.

 

# ARTICLE 10

#  

SUBSIDIARYGUARANTEES

#  

## SECTION 10.1.                           Subsidiary Guarantees.  Each Subsidiary Guarantor hereby unconditionallyand irrevocably Guarantees, jointly and severally, to each Holder and to theTrustee and its successors and assigns (a) the full and punctual payment ofprincipal of and interest on the Securities when due, whether at maturity, byacceleration, by redemption or otherwise, and all other monetary obligations ofthe Company under this Indenture and the Securities (including obligations tothe Trustee) and (b) the full and punctual performance within applicable graceperiods of all other obligations of the Company under this Indenture and theSecurities (all the foregoing being hereinafter collectively called the “*Obligations*”).  Each Subsidiary Guarantor further agrees thatthe Obligations may be extended or renewed, in whole or in part, without noticeor further assent from such Subsidiary Guarantor, and that such SubsidiaryGuarantor will remain bound under this Article 10 notwithstanding any extensionor renewal of any Obligation.

 

EachSubsidiary Guarantor waives presentation to, demand of, payment from andprotest to the Company of any of the Obligations and also waives notice ofprotest for nonpayment.  Each SubsidiaryGuarantor waives notice of any default under the Securities or the Obligations.  The obligations of each Subsidiary Guarantorhereunder shall not be affected by (a) the failure of any Holder or the Trusteeto assert any claim or demand or to enforce any right or remedy against theCompany or any other Person under this Indenture, the Securities or any otheragreement or otherwise; (b) any extension or renewal of any Obligation; (c) anyrescission, waiver, amendment, modification or supplement of any of the termsor provisions of this Indenture (other than this Article 10), the Securities orany other agreement; (d) the release of any security held by any Holder or theTrustee for the Obligations or any of them; (e) the failure of any Holder orTrustee to exercise any right or remedy against any other guarantor of theObligations; or (f) any change in the ownership of the Company or suchGuarantor.

 

EachSubsidiary Guarantor further agrees that its Guarantee herein constitutes aguarantee of payment, performance and compliance when due (and not a guaranteeof collection) and waives any right to require that any resort be had by anyHolder or the Trustee to any security held for payment of the Obligations.

 

Except asexpressly set forth in Sections 8.1(b), 10.2 and 10.8, the obligations of eachSubsidiary Guarantor hereunder shall not be subject to any reduction,limitation, impairment or termination for any reason, including any claim ofwaiver, release, surrender, alteration or compromise, and shall not be subjectto any defense, setoff, counterclaim, recoupment or termination whatsoever orby reason of the invalidity, illegality or unenforceability of the Obligationsor otherwise.  Without limiting thegenerality of the foregoing, the obligations of each Subsidiary Guarantor hereinshall not be discharged or impaired or otherwise affected by the failure of anyHolder or the Trustee to assert any claim or demand or to enforce any remedyunder this Indenture, the Securities or any other agreement, by any waiver ormodification of any thereof, by any default, failure or delay, willful orotherwise, in the performance of the Obligations, or by any other act or thingor omission or delay to do any other act or thing which may or might in anymanner or to any extent vary the risk of such Subsidiary Guarantor or would otherwiseoperate as a discharge of such Subsidiary Guarantor as a matter of law orequity.

 

EachSubsidiary Guarantor further agrees that its Guarantee herein shall continue tobe effective or be reinstated, as the case may be, if at any time payment, or anypart thereof, of principal of

 

53

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or interest on any Obligation is rescinded ormust otherwise be restored by any Holder or the Trustee upon the bankruptcy orreorganization of the Company or otherwise.

 

In furtheranceof the foregoing and not in limitation of any other right which any Holder orthe Trustee has at law or in equity against any Subsidiary Guarantor by virtuehereof, upon the failure of the Company to pay principal of or interest on anyObligation when and as the same shall become due, whether at maturity, byacceleration, by redemption or otherwise, or to perform or comply with anyother Obligation, each Subsidiary Guarantor hereby promises to and will, uponreceipt of written demand by the Trustee, forthwith pay, or cause to be paid,in cash, to the Holders or the Trustee an amount equal to the sum of (i) theunpaid principal amount of such Obligations, (ii) accrued and unpaid intereston such Obligations (but only to the extent not prohibited by law) and (iii)all other monetary Obligations of the Company to the Holders and the Trustee.

 

EachSubsidiary Guarantor agrees that, as between such Subsidiary Guarantor, on theone hand, and the Holders and the Trustee, on the other hand, (x) the maturityof the Obligations guaranteed hereby may be accelerated as provided in Article6 for the purposes of such Subsidiary Guarantor’s Guarantee herein,notwithstanding any stay, injunction or other prohibition preventing suchacceleration in respect of the Obligations guaranteed hereby, and (y) in theevent of any declaration of acceleration of such Obligations as provided inArticle 6, such Obligations (whether or not due and payable) shall forthwithbecome due and payable by such Subsidiary Guarantor for the purposes of thisSection.

 

EachSubsidiary Guarantor also agrees to pay any and all costs and expenses(including reasonable attorneys’ fees) incurred by the Trustee or any Holder inenforcing any rights under this Section.

 

## SECTION 10.2.                           Limitation on Liability.  Any term or provision of this Indenture tothe contrary notwithstanding, the maximum aggregate amount of the obligationsguaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximumamount that can be hereby guaranteed without rendering this Indenture, as itrelates to such Subsidiary Guarantor, void or voidable under applicable lawrelating to fraudulent conveyance or fraudulent transfer or similar lawsaffecting the rights of creditors generally (taking into account, for purposesof such determination, the full amount, without any reduction, of suchSubsidiary Guarantor’s liability under its guarantee of the Credit Facility).

 

## SECTION 10.3.                           Successors and Assigns.  This Article 10 shall be binding upon eachSubsidiary Guarantor and its successors and assigns and shall enure to thebenefit of the successors and assigns of the Trustee and the Holders and, inthe event of any transfer or assignment of rights by any Holder or the Trustee,the rights and privileges conferred upon that party in this Indenture and inthe Securities shall automatically extend to and be vested in such transfereeor assignee, all subject to the terms and conditions of this Indenture.

 

## SECTION 10.4.                           NoWaiver.  Neither a failurenor a delay on the part of either the Trustee or the Holders in exercising anyright, power or privilege under this Article 10 shall operate as a waiverthereof, nor shall a single or partial exercise thereof preclude any other orfurther exercise of any right, power or privilege.  The rights, remedies and benefits of the Trustee and the Holdersherein expressly specified are cumulative and not exclusive of any otherrights, remedies or benefits which either may have under this Article 10 atlaw, in equity, by statute or otherwise.

 

## SECTION 10.5.                           Right of Contribution.  Each Subsidiary Guarantor agrees that to theextent that such Subsidiary Guarantor shall have paid more than itsproportionate share of any payment made hereunder, such Subsidiary Guarantorshall be entitled to seek and receive contribution from and against any otherSubsidiary Guarantor hereunder who has not paid its proportionate share of suchpayment.

 

54

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## Each SubsidiaryGuarantor’s right of contribution shall be subject to the terms and conditionsof Section 10.6.  The provisions of thisSection shall in no respect limit the obligations and liabilities of anySubsidiary Guarantor to the Trustee and the Holders and each SubsidiaryGuarantor shall remain liable to the Trustee and the Holders for the fullamount guaranteed by such Subsidiary Guarantor hereunder.

 

## SECTION 10.6.                           No Subrogation.  Notwithstanding any payment or payments madeby any Subsidiary Guarantor hereunder, no Subsidiary Guarantor shall beentitled to be subrogated to any of the rights of the Trustee or any Holdersagainst the Company or any collateral security or guarantee or right of offsetheld by the Trustee or any Holder for the payment of the Obligations, nor shallany Subsidiary Guarantor seek or be entitled to seek any contribution orreimbursement from the Company in respect of payments made by such SubsidiaryGuarantor hereunder, until all amounts owing to the Trustee and the Holder bythe Company on account of the Obligations are paid in full.  If any amount shall be paid to anySubsidiary Guarantor on account of such subrogation rights at any time when allof the Obligations shall not have been paid in full, such amount shall be heldby such Subsidiary Guarantor in trust for the Trustee and the Holders,segregated from other funds of such Subsidiary Guarantor, and shall, forthwithupon receipt by such Subsidiary Guarantor, be turned over to the Trustee in theexact form received by such Subsidiary Guarantor (duly indorsed by suchSubsidiary Guarantor to the Trustee, if required), to be applied against theObligations.

 

## SECTION 10.7.                           Modification.  No modification, amendment or waiver of anyprovision of this Article 10, nor the consent to any departure by anySubsidiary Guarantor therefrom, shall in any event be effective unless the sameshall be in writing and signed by the Trustee, and then such waiver or consentshall be effective only in the specific instance and for the purpose for whichgiven.  No notice to or demand on anySubsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to anyother or further notice or demand in the same, similar or other circumstances.

 

## SECTION 10.8.                           Release of SubsidiaryGuarantor.  Upon the sale orother disposition (including by way of consolidation or merger) of a SubsidiaryGuarantor or the sale or disposition of all or substantially all the assets ofa Subsidiary Guarantor (in each case other than to the Company or an Affiliateof the Company), such Subsidiary Guarantor shall be deemed released andrelieved from all its obligations under its Subsidiary Guarantee; *provided*that such sale or disposition shall constitute an Asset Disposition under, andthe Net Available Cash from such sale or disposition shall be applied in accordancewith, Section 4.6.  At the request ofthe Company, the Trustee shall execute and deliver an appropriate instrumentevidencing such release.

 

# ARTICLE 11

#  

# MISCELLANEOUS

#  

## SECTION 11.1.                           Trust Indenture ActControls.  If any provisionof this Indenture limits, qualifies or conflicts with another provision whichis required to be included in this Indenture by the TIA, the required provisionshall control.  If this Indentureexcludes any provision of the TIA that is required to be included, such provisionshall be deemed included herein.

 

## SECTION 11.2.                           Notices.  Any notice or communication shall be inwriting and delivered in person, by overnight courier or facsimile (if to theCompany, with receipt confirmed by an Officer) or mailed by first-class mailaddressed as follows:

 

55

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if to the Company or any SubsidiaryGuarantor:

 

Friendly Ice Cream Corporation1855 Boston RoadWilbraham, Massachusetts  01095Attention:  Treasurer

 

if to the Trustee:

 

The Bank of New York101 Barclay Street, Floor 8 WestNew York, New York 10286Attention:  Corporate TrustAdministration

 

The Company orthe Trustee by notice to the other may designate additional or differentaddresses for subsequent notices or communications.

 

Any notice orcommunication mailed or sent by overnight courier or facsimile to aSecurityholder shall be sent to the Securityholder at the Securityholder’saddress as it appears on the registration books of the Registrar and shall besufficiently given if so sent within the time prescribed.

 

Failure tosend a notice or communication to a Securityholder or any defect in it shallnot affect its sufficiency with respect to other Securityholders.  If a notice or communication is sent in themanner provided above, it is duly given, whether or not the addressee receivesit.

 

Where thisIndenture provides for notice in any manner, such notice may be waived inwriting by the Person entitled to receive such notice, either before or afterthe event, and such waiver shall be the equivalent of such notice.

 

## SECTION 11.3.                           Communication by Holderswith Other Holders. Securityholders may communicate pursuant to TIA § 312(b) with otherSecurityholders with respect to their rights under this Indenture or theSecurities.  The Company, the Trustee,the Registrar and anyone else shall have the protection of TIA § 312(c).

 

## SECTION 11.4.                           Certificate and Opinionas to Conditions Precedent. Upon any request or application by the Company to the Trustee to take orrefrain from taking any action under this Indenture, each the Company shallfurnish to the Trustee:

 

##### (1)                                  anOfficers’ Certificate (which in connection with the original issuance of theSecurities need only be executed by one Officer for the Company) in form andsubstance reasonably satisfactory to the Trustee stating that, in the opinionof the signers, all conditions precedent, if any, provided for in thisIndenture relating to the proposed action have been complied with; and

#####  

##### (2)                                  anOpinion of Counsel in form and substance reasonably satisfactory to the Trusteestating that, in the opinion of such counsel, all such conditions precedenthave been complied with.

#####  

## SECTION 11.5.                           Statements Required inCertificate or Opinion.  Eachcertificate or opinion with respect to compliance with a covenant or conditionprovided for in this Indenture shall include:

 

##### (1)                                  astatement that the individual making such certificate or opinion has read suchcovenant or condition;

 

56

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##### (2)                                  abrief statement as to the nature and scope of the examination or investigationupon which the statements or opinions contained in such certificate or opinionare based;

#####  

##### (3)                                  astatement that, in the opinion of such individual, he has made such examinationor investigation as is necessary to enable him to express an informed opinionas to whether or not such covenant or condition has been complied with; and

#####  

##### (4)                                  astatement as to whether or not, in the opinion of such individual, such covenantor condition has been complied with.

#####  

## SECTION 11.6.                           When SecuritiesDisregarded.  In determiningwhether the Holders of the required principal amount of Securities haveconcurred in any direction, waiver or consent, Securities owned by the Companyor by any Person directly or indirectly controlling or controlled by or underdirect or indirect common control with the Company shall be disregarded anddeemed not to be outstanding, except that, for the purpose of determiningwhether the Trustee shall be protected in relying on any such direction, waiveror consent, only Securities which a Responsible Officer of the Trustee actuallyknows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the timeshall be considered in any such determination.

 

## SECTION 11.7.                           Rulesby Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting ofSecurityholders.  The Trustee shallprovide the Company reasonable notice of such rules; *provided* that neither priornotice to the Company of such rules nor prior approval by the Company of suchrules shall be a requirement for their effectiveness.  The Registrar and the Paying Agent may make reasonable rules fortheir functions.

 

## SECTION 11.8.                           Legal Holidays.  A “Legal Holiday” is a Saturday, a Sunday ora day on which banking institutions are not required to be open in the State ofNew York.  If a payment date is a LegalHoliday, payment shall be made on the next succeeding day that is not a LegalHoliday, and no interest shall accrue for the intervening period.  If a regular record date is a Legal Holiday,the record date shall not be affected.

 

## SECTION 11.9.                           Governing Law.  This Indenture and the Securities shall begoverned by, and construed in accordance with, the laws of the State of NewYork but without giving effect to applicable principles of conflict of laws tothe extent that the application of the laws of another jurisdiction would berequired thereby.

 

## SECTION 11.10.                     No Recourse Against Others.  A director, officer, employee or stockholder,as such, of the Company or any Subsidiary Guarantor shall not have anyliability for any obligations of the Company or any Subsidiary Guarantor underthe Securities or this Indenture or for any claim based on, in respect of or byreason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release allsuch liability.  The waiver and releaseshall be part of the consideration for the issue of the Securities.

 

## SECTION 11.11.                     Successors.  All agreements of the Company and theSubsidiary Guarantor in this Indenture and the Securities and SubsidiaryGuarantees shall bind their respective successors.  All agreements of the Trustee in this Indenture shall bind itssuccessors.

 

## SECTION 11.12.                     Multiple Originals.  The parties may sign any number of copies ofthis Indenture.  Each signed copy shallbe an original, but all of them together represent the same agreement.  One signed copy is enough to prove thisIndenture.

 

57

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## SECTION 11.13.                     Table of Contents; Headings.  The table of contents, cross-reference sheetand headings of the Articles and Sections of this Indenture have been insertedfor convenience of reference only, are not intended to be considered a part hereofand shall not modify or restrict any of the terms or provisions hereof.

 

## SECTION 11.14.                     Severability Clause.  In case any provision in this Indenture orin the Securities shall be invalid, illegal or unenforceable, the validity,legality and enforceability of the remaining provisions shall not in any way beaffected or impaired thereby.

 

58

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IN WITNESSWHEREOF, the parties have caused this Indenture to be duly executed as of thedate first written above.

 
|   | FRIENDLY ICE CREAM CORPORATION              |
|--------|---------------------------------------------|
|   |                                        |
|   |                                        |
|   | By:                                         | /s/ Paul V. Hoagland |   |
|   |                                        | Name: Paul V. Hoagland |
|   |                                        | Title: Executive Vice President of  Administration, Chief Financial Officer and Treasurer |
|   |                                        |
|   |                                        |
|   | FRIENDLY’S RESTAURANTS FRANCHISE, INC. |
|   |                                        |
|   |                                        |
|   | By:                                         | /s/ Paul V. Hoagland |
|   |                                        | Name: Paul V. Hoagland |
|   |                                        | Title: Treasurer |

 

59

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|   | THE BANK OF NEW YORK, as Trustee |
|--------|----------------------------------|
|   |                             |
|   |                             |
|   | By:                              | /s/ Kisha A. Holder |   |
|   |                             | Name: Kisha A. Holder |
|   |                             | Title: Assistant Vice President |

 

60

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EXHIBIT A

 

***[Insert the PrivatePlacement Legend, if applicable pursuant to the provisions of the Indenture]***

 

**FACE OF SECURITY**

** **

UNLESS THISCERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUSTCOMPANY, A NEW YORK CORPORATION (“*DTC*”), NEW YORK, NEW YORK, TO THE COMPANYOR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANYCERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHERNAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT ISMADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY ANAUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FORVALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTEREDOWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OFTHIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART,TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE ANDLIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THEINDENTURE REFERRED TO ON THE REVERSE HEREOF.

 
| No.                           |      | $      |
|-------------------------------|-----------|--------|
| 8 3/8%  Senior Notes Due 2012 |      |
|                          | CUSIP No. |   |   |
|                               |           |        |  |

 

FRIENDLY ICECREAM CORPORATION, a Massachusetts corporation, promises to pay to[   ], or registered assigns, the principal sum of[                    ]Dollars on June 15, 2012.

 

InterestPayment Dates: June 15 and December 15

 

Record Dates:June 1 and December 1

 

A-1

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Additionalprovisions of this Security are set forth on the other side of this Security.

 
|   | FRIENDLY ICE CREAM CORPORATION |
|--------|--------------------------------|
|   |                           |
|   | By:                            |   |   |
|   |                           | Name: |
|   |                           | Title: |
| Dated: |                           |

 

A-2

----

 
| TRUSTEE’S  CERTIFICATE OF  AUTHENTICATION                                                               |
|--------------------------------------------------------------------------------------------------------------|
|                                                                                                         |
| THE BANK OF  NEW YORK,                                                                                       |
| as Trustee,  certifies  that this is one of  the Securities referred  to in the within-mentioned  Indenture. |
|                                                                                                         |
|                                                                                                         |
| By:                                                                                                     |   |   |
|                                                                                                         | Authorized Signatory |   |

 

A-3

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**REVERSE OF SECURITY8 3/8% Senior Note Due 2012**

** **

1.                                       Interest

 

FRIENDLY ICECREAM CORPORATION, a Massachusetts corporation (such entity, and its successorsand assigns under the Indenture hereinafter referred to, being herein calledthe “*Company*”),promises to pay interest on the principal amount of this Security at the rateper annum shown above.  The Company willpay interest semiannually on June 15 and December 15 of each year commencingJune 15, 2004.  Interest on theSecurities will accrue from the Issue Date, or if interest has already beenpaid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised oftwelve 30-day months.  The Company shallpay interest on overdue principal at the rate borne by the Securities, and itshall pay interest on overdue installments of interest at the same rate to theextent lawful.

 

2.                                       Methodof Payment

 

The Companywill pay interest on the Securities (except defaulted interest) to the Personswho are registered holders of Securities at the close of business on the June 1or December 1 next preceding the interest payment date even if Securities arecanceled after the record date and on or before the interest payment date.  Holders must surrender Securities to aPaying Agent to collect principal payments. The Company will pay principal and interest in money of the UnitedStates that at the time of payment is legal tender for payment of public andprivate debts.  However, the Company maypay principal and interest by check payable in such money and may mail aninterest check to a Holder’s registered address.  All payments of principal of, premium, if any, and interest onthe Securities will be made by the Company in immediately available funds.  If a Holder has given wire transferinstructions to the Company, the Company will make all payments of principal,premium, if any, and interest on the Securities of such Holder in accordancewith these instructions.

 

3.                                       PayingAgent and Registrar

 

Initially, TheBank of New York, a New York banking corporation (“*Trustee*”), will act asPaying Agent and Registrar.  The Companymay appoint and change any Paying Agent, Registrar or co-registrar withoutnotice.  The Company or any of itsdomestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,Registrar or co-registrar.

 

4.                                       Indenture

 

The Companyissued the Securities under an Indenture dated as of March 8, 2004 (the “*Indenture*”),among the Company, Friendly’s Restaurants Franchise, Inc. and the Trustee.  The terms of the Securities include thosestated in the Indenture and those made part of the Indenture by reference tothe Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on thedate of the Indenture (the “*TIA*”). Terms defined in the Indenture and not defined herein have the meaningsascribed thereto in the Indenture.  TheSecurities are subject to all such terms, and Securityholders are referred tothe Indenture and the TIA for a statement of those terms.  Any conflict between this Security and theIndenture will be governed by the Indenture.

 

The Securitiesare general unsecured senior obligations of the Company initially issued inaggregate principal amount not to exceed $175,000,000 (the “InitialSecurities”), with additional Securities

 

A-1

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(the “Additional Securities”) authorized tobe issued in an unlimited amount, so long as such issuance would not otherwisebe prohibited by the terms of the Indenture.

 

The Indentureimposes certain limitations on the Incurrence of Indebtedness by the Companyand its Restricted Subsidiaries, the existence of liens, the payment ofdividends on, and redemption of, the Capital Stock of the Company and itsSubsidiaries and the redemption of certain subordinated obligations of theCompany and its Subsidiaries, restricted payments, the sale or transfer ofassets and Subsidiary stock, the issuance or sale of Capital Stock ofRestricted Subsidiaries, the investments of the Company and its Restricted Subsidiaries,consolidations, mergers and transfers of all or substantially all the assets ofthe Company, and transactions with Affiliates. In addition, the Indenture limits the ability of the Company and certainof its Subsidiaries to restrict distributions and dividends from Subsidiaries.

 

5.                                       OptionalRedemption

 

(a)                                  Exceptas set forth in the next paragraph, the Securities may not be redeemed prior toJune 15, 2008.  On and after that date,the Company may redeem, as provided in and subject to the terms of, theIndenture, the Securities in whole at any time or in part from time to time atthe following redemption prices (expressed in percentages of principal amount),plus accrued interest to the redemption date (subject to the right of Holdersof record on the relevant record date to receive interest due on the relatedinterest payment date) if redeemed during the 12-month period beginning June15:

 

| **Period**          |   | **Percentage** |   |
|---------------------|--------|----------------|--------|
| 2008                |   | 104.188        | %      |
| 2009                |   | 102.094        | %      |
| 2010 and thereafter |   | 100.000        | %      |

 

(b)                                 Inaddition, at any time and from time to time prior to June 15, 2007, the Companymay redeem in the aggregate up to 35% of the aggregate principal amount of theSecurities issued under the Indenture with the proceeds of one or moreQualified Equity Offerings at a redemption price (expressed as a percentage ofprincipal amount thereof) of 108.375% plus accrued interest, if any, to the redemptiondate (subject to the right of Holders of record on the relevant record date toreceive interest due on the related interest payment date); *provided,however*, that (i) at least 65% of the aggregate principal amount ofthe Securities issued under the Indenture must remain outstanding after eachsuch redemption and (ii) such redemption must occur within 90 days of the dateof closing of the relevant Qualified Equity Offering.

 

6.                                       Noticeof Redemption

 

Notice of redemptionwill be mailed by first-class mail at least 30 days but not more than 60 daysbefore the redemption date to each Holder of Securities to be redeemed at hisregistered address.  Securities indenominations larger than $1,000 may be redeemed in part but only in wholemultiples of $1,000.  If moneysufficient to pay the redemption price of and accrued interest on allSecurities (or portions thereof) to be redeemed on the redemption date is depositedwith the Paying Agent on or before the redemption date and certain otherconditions are satisfied, on and after such date interest ceases to accrue onsuch Securities (or such portions thereof) called for redemption.  If a notice or communication is sent in themanner provided in the Indenture, it is duly given, whether or not theaddressee receives it.  Failure to senda notice or communication to a Securityholder or any defect in it shall notaffect its sufficiency with respect to other Securityholders.

 

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7.                                       PutProvisions

 

Upon a Changeof Control, any Holder of Securities will have the right to require the Companyto repurchase all or any part of the Securities of such Holder at a repurchaseprice in cash equal to 101% of the principal amount of the Securities to berepurchased plus accrued interest to the date of repurchase (subject to theright of Holders of record on the relevant record date to receive interest dueon the related interest payment date) as provided in, and subject to the termsof, the Indenture.

 

In addition,in the event of certain Asset Dispositions, the Company will be required tomake an offer to purchase Securities at a purchase price of 100% of theirprincipal amount plus accrued interest to the date of purchase (subject to therights of Holders of record on the relevant record date to receive interest dueon the related interest payment date) as provided in, and subject to the termsof, the Indenture.

 

8.                                       Guarantees

 

To guaranteethe due and punctual payment of the principal of and interest on the Securitiesand all other amounts payable by the Company under the Indenture and the Securitieswhen and as the same shall be due and payable, whether at maturity, by accelerationor otherwise, according to the terms of the Securities and the Indenture,Friendly’s Restaurants Franchise, Inc. has unconditionally guaranteed suchobligations on an unsecured, senior basis pursuant to the terms of theIndenture.  In addition, the Companyshall cause each new Subsidiary (other than (i) a new Subsidiary designated asan Unrestricted Subsidiary and (ii) Foreign Subsidiaries), and any UnrestrictedSubsidiary that is redesignated a Restricted Subsidiary (other than RestaurantInsurance Corporation, if it is designated as an Unrestricted Subsidiary), tobecome a Subsidiary Guarantor under the Indenture and thereby Guarantee theSecurities on the terms and conditions set forth in the Indenture.

 

9.                                       RegistrationRights.

 

Pursuant to anExchange and Registration Rights Agreement among the Company, Friendly’sRestaurants Franchise, Inc., and the initial purchasers named therein (the“Exchange and Registration Rights Agreement”), the Company will be obligated toconsummate an exchange offer pursuant to which the Holder of this Securityshall have the right to exchange this Security for securities issued under theIndenture (or a trust indenture substantially identical to the Indenture inaccordance with the terms of the Exchange and Registration Rights Agreement)which have been registered under the Securities Act, in like principal amountand having substantially identical terms as the Securities.  The Holders shall be entitled to receivecertain additional interest payments in the event such exchange offer is notconsummated and upon certain other conditions, all pursuant to and inaccordance with the terms of the Exchange and Registration Rights Agreement. **[To beincluded in form of Initial Securities only]**

 

10.                                 Denominations;Transfer; Exchange

 

The Securitiesare in registered form without coupons in denominations of $1,000 and wholemultiples of $1,000.  A Holder maytransfer or exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, amongother things, to furnish appropriate endorsements or transfer documents and topay any taxes and fees required by law or permitted by the Indenture, includingany transfer tax or other similar governmental charge payable in connectiontherewith.  The Registrar need notregister the transfer of or exchange any Securities selected for redemption (except,in the case of a Security to be redeemed in part, the portion of the Securitynot to be redeemed) or any Securities for a period of 15 days before aselection of Securities to be redeemed or 15 days before an interest paymentdate.

 

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11.                                 PersonsDeemed Owners

 

The registeredHolder of this Security may be treated as the owner of it for all purposes.

 

12.                                 UnclaimedMoney

 

If money forthe payment of principal or interest remains unclaimed for two years, theTrustee or Paying Agent shall pay the money back to the Company at its writtenrequest unless an abandoned property law designates another Person.  After any such payment, Holders entitled tothe money must look only to the Company and not to the Trustee for payment.

 

13.                                 Dischargeand Defeasance

 

Subject tocertain conditions, the Company at any time may terminate some or all of itsobligations under the Securities and the Indenture if the Company deposits withthe Trustee money or U.S. Government Obligations for the payment of principaland interest on the Securities to redemption or maturity, as the case may be.

 

14.                                 Amendment,Waiver

 

Subject tocertain exceptions set forth in the Indenture, (i) the Indenture or the Securitiesmay be amended with the written consent of the Holders of at least a majorityin principal amount outstanding of the Securities and (ii) any default ornoncompliance with any provision may be waived with the written consent of theHolders of a majority in principal amount outstanding of the Securities.  Subject to certain exceptions set forth inthe Indenture, without the consent of any Securityholder, the Company and theTrustee may amend the Indenture or the Securities to cure any ambiguity,omission, defect or inconsistency, or to comply with Article 5 of theIndenture, or to provide for uncertificated Securities in addition to or inplace of certificated Securities, or to add guarantees with respect to theSecurities, or to secure the Securities, or to add additional covenants orsurrender rights and powers conferred on the Company, or to make any changethat does not materially adversely affect the rights of any Securityholder orto comply with any request of the SEC in connection with qualifying theIndenture under the TIA.

 

15.                                 Defaultsand Remedies

 

Under theIndenture, Events of Default include (i) default for 30 days in payment ofinterest on the Securities; (ii) default in payment of principal on the Securitiesat maturity, upon redemption pursuant to paragraph 5 above, upon requiredrepurchase, upon acceleration or otherwise; (iii) failure by the Company tocomply with other agreements in the Indenture or the Securities, in certaincases subject to notice and lapse of time; (iv) certain accelerations (includingfailure to pay within any grace period after final maturity) of other Indebtednessof the Company and any Significant Subsidiary if the amount accelerated (or sounpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvencywith respect to the Company and its Significant Subsidiaries; (vi) certainjudgments or decrees for the payment of money is in excess of $10 million; and(vii) any Subsidiary Guaranty ceases to be in full force and effect (except ascontemplated in the Indenture) or any Subsidiary Guarantor denies or disaffirmsits obligations under the Indenture or its Subsidiary Guaranty.

 

If an Event ofDefault occurs and is continuing, the Trustee or the Holders of at least 25% inprincipal amount of the Securities then outstanding may declare all theSecurities to be due and payable. Certain events of bankruptcy or insolvency are Events of Default whichwill result in the Securities being due and payable immediately upon theoccurrence of such Events of Default.

 

A-4

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Securityholdersmay not enforce the Indenture or the Securities except as provided in theIndenture.  The Trustee may refuse toenforce the Indenture or the Securities unless it receives reasonable indemnityor security.  Subject to certainlimitations, Holders of a majority in principal amount of the Securities maydirect the Trustee in its exercise of any trust or power.  The Trustee may withhold fromSecurityholders notice of any continuing Default (except a Default in paymentof principal or interest) if it determines that withholding notice is in theinterest of the Holders.

 

16.                                 TrusteeDealings with the Company

 

Subject tocertain limitations imposed by the TIA, the Trustee under the Indenture, in itsindividual or any other capacity, may become the owner or pledgee of Securitiesand may otherwise deal with and collect obligations owed to it by the Companyor any of its Affiliates and may otherwise deal with the Company or any of itsAffiliates with the same rights it would have if it were not Trustee.

 

17.                                 NoRecourse Against Others

 

A director,officer, employee or stockholder, as such, of the Company shall not have anyliability for any obligations of the Company under the Securities or theIndenture or for any claim based on, in respect of or by reason of suchobligations or their creation.  Byaccepting a Security, each Securityholder waives and releases all suchliability.  The waiver and release arepart of the consideration for the issue of the Securities.

 

18.                                 GoverningLaw

 

The Indentureand the Securities shall be governed by, and construed in accordance with, thelaws of the State of New York but without giving effect to applicableprinciples of conflict of laws to the extent that the application of the laws ofanother jurisdiction would be required thereby.

 

19.                                 Authentication

 

This Securityshall not be valid until an authorized signatory of the Trustee (or anauthenticating agent) manually signs the certificate of authentication on theother side of this Security.

 

20.                                 LegalHolidays

 

A “LegalHoliday” is a Saturday, a Sunday or a day on which banking institutions are notrequired to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the nextsucceeding day that is not a Legal Holiday, and no interest shall accrue forthe intervening period.  If a regularrecord date is a Legal Holiday, the record date shall not be affected.

 

21.                                 Abbreviations

 

Customaryabbreviations may be used in the name of a Securityholder or an assignee, suchas TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN(=joint tenants with rights of survivorship and not as tenants in common), CUST(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

 

22.                                 CUSIPNumbers

 

Pursuant to arecommendation promulgated by the Committee on Uniform Security IdentificationProcedures the Company has caused CUSIP numbers to be printed on the Securitiesand have

 

A-5

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directed the Trustee to use CUSIP numbers innotices of redemption as a convenience to Securityholders.  No representation is made as to the accuracyof such numbers either as printed on the Securities or as contained in any noticeof redemption and reliance may be placed only on the other identificationnumbers placed thereon.

 

The Companywill furnish to any Securityholder upon written request and without charge tothe Securityholder a copy of the Indenture which has in it the text of thisSecurity in larger type.  Requests maybe made as follows:

 

Friendly Ice Cream Corporation1855 Boston RoadWilbraham, Massachusetts  01095Attention:  Treasurer

 

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SUBSIDIARY GUARANTEE

 

For valuereceived, the undersigned hereby unconditionally guarantees, as principalobligor and not only as a surety, to the Holder of this Security the cashpayment in United States dollars of principal of, premium, if any, and intereston this Security in the amounts and at the times when due and interest on theoverdue principal, premium, if any, and interest, if any, of this Security, iflawful, and the payment or performance of all other obligations of the Companyunder the Indenture (as defined below) or the Securities, to the Holder of thisSecurity and the Trustee, all in accordance with and subject to the terms andlimitations of this Security, Article 10 of the Indenture and this SubsidiaryGuarantee.  This Subsidiary Guarantywill become effective in accordance with Article 10 of the Indenture and itsterms shall be evidenced therein.  Thevalidity and enforceability of any Subsidiary Guaranty shall not be affected bythe fact that it is not affixed to any particular Security.

 

Capitalizedterms used but not defined herein shall have the meanings ascribed to them inthe Indenture dated as of March 8, 2004, among Friendly Ice CreamCorporation, a Massachusetts corporation, as issuer (the “Company”), theguarantor named therein and The Bank of New York, as trustee (the “Trustee”),as amended or supplemented (the “Indenture”).

 

Theobligations of the undersigned to the Holders of Securities and to the Trusteepursuant to this Subsidiary Guaranty and the Indenture are expressly set forthin Article 10 of the Indenture and reference is hereby made to the Indenturefor the precise terms of the Subsidiary Guaranty and all of the other provisionsof the Indenture to which this Subsidiary Guaranty relates.

 

No director,officer, employee, incorporator or stockholder of the Subsidiary Guarantor, assuch, shall have any liability for any obligations of the Subsidiary Guarantorunder the Subsidiary Guarantor’s Subsidiary Guarantee or for any claim basedon, in respect of, or by reason of, such obligations or their creation.

 

**This Subsidiary Guarantee shall be governedby, and construed in accordance with, the laws of the State of New York withoutgiving effect to principles of conflicts of law.**  The undersigned Subsidiary Guarantor herebyagrees to submit to the jurisdiction of the courts of the State of New York in anyaction or proceeding arising out of or relating to this Subsidiary Guarantee.

 

ThisSubsidiary Guarantee is subject to release upon the terms set forth in theIndenture.

 

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IN WITNESSWHEREOF, the Subsidiary Guarantor has caused this Subsidiary Guarantee to beduly executed.

 
| Date:  | [name of  guarantor] |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By:                  |   |   |
|   |                 | Name: |
|   |                 | Title: |

 

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**ASSIGNMENT FORM**

** **

I or we assign and transferthis Security to

 

 

(Print or type name, addressand zip code of assignee or transferee)

 

 

(Insert Social Security orother identifying number of assignee or transferee)

 

and irrevocably appoint                                                                                  agent to transfer this Security on the books of the Company.  The agent may substitute another to act forhim.

 
| Dated:                |                                                                                                                                            |   |                                                                | Signed: |   |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|--------|
|                  |                                                                                                                                            |   | (Sign  exactly as name appears on  the other side of this Security) |
|                  |                                                                                                                                            |
| Signature  Guarantee: |                                                                                                                                            |   |
|                  | Participant  in a recognized Signature Guarantee Medallion Program (or other signature  guarantor program reasonably acceptable to the Trustee) |
|                       |                                                                                                                                                 |        |                                                                     |         |        |  |

 

In connectionwith any transfer of this Security occurring prior to the date which is the earlierof (i) the date of the declaration by the Commission of the effectiveness of aregistration statement under the Securities Act of 1933, as amended (the“Securities Act”), covering resales of this Security (which effectiveness shallnot have been suspended or terminated at the date of the transfer) and (ii) thedate following the second anniversary of the original issuance of thisSecurity, the undersigned confirms that it has not utilized any generalsolicitation or general advertising in connection with the transfer:

 

[Check One]

 
| (1)    |   | to the  Company or a subsidiary thereof; or                                                                                                                                                                                                                                                          |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                 |
| (2)    |   | pursuant to  and in compliance with Rule 144A under the Securities Act; or                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (3)    |   | to an  institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3)  or (7) under the Securities Act) that has furnished to the Trustee a signed  letter containing certain representations and agreements (the form of which  letter can be obtained from the Trustee); or |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (4)    |   | outside the  United States to a “foreign purchaser” in compliance with Rule 904 of  Regulation S under the Securities Act; or                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (5)    |   | pursuant to  the exemption from registration provided by Rule 144 under the Securities  Act; or                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (6)    |   | pursuant to  an effective registration statement under the Securities Act; or                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (7)    |   | pursuant to  another available exemption from the registration statement requirements of  the Securities Act of 1933;                                                                                                                                                                                |

 

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and unless the box below ischecked, the undersigned confirms that such Security is not being transferredto an “affiliate” of the Company as defined in Rule 144 under the SecuritiesAct (an “Affiliate”):

 

The transfereeis an Affiliate of the Company.

 

Unless one ofthe items is checked, the Trustee will refuse to register any of the Securitiesevidenced by this certificate in the name of any person other than theregistered Holder thereof; provided, however, that if item (3), (4), (5) or (7)is checked, the Company or the Trustee may require, prior to registering anysuch transfer of the Securities, in their sole discretion, such written legalopinions, certifications (including an investment letter in the case of box (3)or (4)) and other information as the Trustee or the Company has reasonably requestedto confirm that such transfer is being made pursuant to an exemption from, orin a transaction not subject to, the registration requirements of theSecurities Act.

 

If none of theforegoing items are checked, the Trustee or Registrar shall not be obligated toregister this Security in the name of any person other than the Holder hereofunless and until the conditions to any such transfer of registration set forthherein and in Section 2.13 of the Indenture shall have been satisfied.

 
| Dated:                |   |                                                                | Signed: |   |
|-----------------------|--------|---------------------------------------------------------------------|---------|--------|
|                  |   | (Sign  exactly as name appears on the other  side of this Security) |
|                  |   |
| Signature  Guarantee: |   |
|                       |        |                                                                     |         |        |  |

 

TO BE COMPLETED BY PURCHASER IF(2) ABOVE IS CHECKED

 

Theundersigned represents and warrants that it is purchasing this Security for itsown account or an account with respect to which it exercises sole investment discretionand that it and any such account is a “qualified institutional buyer” withinthe meaning of Rule 144A under the Securities Act and is aware that the sale toit is being made in reliance on Rule 144A and acknowledges that it has receivedsuch information regarding the Company as the undersigned has requestedpursuant to Rule 144A or has determined not to request such information andthat it is aware that the transferor is relying upon the undersigned’s foregoingrepresentations in order to claim the exemption from registration provided byRule 144A.

 
| Dated: |                                                       |
|--------|------------------------------------------------------------|
|   | NOTICE:   To be executed by an executive officer |

 

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**OPTION OF HOLDER TO ELECT PURCHASE**

** **

If you want toelect to have this Security purchased by the Company pursuant toSection 4.6 or Section 4.8 of the Indenture, check the appropriate box:

 

Section 4.6[     ]                                                            Section4.8 [     ]

 

If you want toelect to have only part of this Security purchased by the Company pursuant toSection 4.6 or Section 4.8 of the Indenture, state the amount:  $

 
| Dated:                |                                                                                                                                            |   |                                                                | Signed:  |   |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------------|--------|
|                  |                                                                                                                                            |   | (Sign  exactly as name appears on  the other side of this Security) |
|                  |                                                                                                                                            |
| Signature  Guarantee: |                                                                                                                                            |   |
|                  | Participant  in a recognized Signature Guarantee Medallion Program (or other signature guarantor  program reasonably acceptable to the Trustee) |
|                       |                                                                                                                                                 |        |                                                                     |               |        |  |

 

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EXHIBIT B

 

**FORM OF PRIVATE PLACEMENT LEGEND**

** **

Each GlobalSecurity and Physical Security that constitutes a Restricted Security or issold in compliance with Regulation S shall bear the following legend (the“Private Placement Legend”) on the face thereof until after the secondanniversary of the Issue Date, unless otherwise agreed by the Company and theHolder thereof:

 

THE SECURITIESEVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIESACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OROTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLYBELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144AUNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AQUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OFREGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROMREGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IFAVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPTFROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO ANEFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCEWITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND OTHERJURISDICTIONS.

 

B-1

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EXHIBIT C

 

Form of Certificate To Be

Delivered in Connection with

Transfers to Non-QIB Accredited Investors

 

[                        ],[    ]

 

The Bank of New York

101 Barclay Street, Floor 8West

New York, NY  10286

Attention:  Corporate Trust Administration

 

Ladies and Gentlemen:

 

In connectionwith our proposed purchase of 8 3/8% Senior Notes due 2012 (the “Notes”) ofFRIENDLY ICE CREAM CORPORATION, a Massachusetts corporation (the “Company”), weconfirm that:

 

1.                                       Weunderstand that any subsequent transfer of the Notes is subject to certainrestrictions and conditions set forth in the Indenture relating to the Notes(the “Indenture”) and the undersigned agrees to be bound by, and not to resell,pledge or otherwise transfer the Notes except in compliance with, suchrestrictions and conditions and the Securities Act of 1933, as amended (the“Securities Act”), and all applicable State securities laws.

 

2.                                       Weunderstand that the offer and sale of the Notes have not been registered underthe Securities Act, and that the Notes may not be offered or sold except aspermitted in the following sentence.  Weagree, on our own behalf and on behalf of any accounts for which we are actingas hereinafter stated, that if we should sell any Notes, we will do so only (i)to the Company or any of its subsidiaries, (ii) inside the United States inaccordance with Rule 144A under the Securities Act to a “qualified institutionalbuyer” (as defined in Rule 144A under the Securities Act), (iii) inside theUnited States to an institutional “accredited investor” (as defined below)that, prior to such transfer, furnishes (or has furnished on its behalf by aU.S. broker-dealer) to the Trustee (as defined in the Indenture) a signedletter containing certain representations and agreements relating to therestrictions on transfer of the Notes (the form of which letter can be obtainedfrom the Trustee), (iv) outside the United States in accordance with RegulationS promulgated under the Securities Act to non-U.S. persons, (v) pursuant to theexemption from registration provided by Rule 144 under the Securities Act (ifavailable), (vi) in accordance with another exemption from the registrationrequirements of the Securities Act (and based upon an opinion of counsel if theCompany so requests) or (vii) pursuant to an effective registration statementunder the Securities Act, and we further agree to provide to any person purchasingany of the Notes from us a notice advising such purchaser that resales of theNotes are restricted as stated herein.

 

3.                                       Weunderstand that, on any proposed resale of any Notes, we will be required tofurnish to the Trustee and the Company such certification, legal opinions andother information as the Trustee and the Company may reasonably require toconfirm that the proposed sale complies with the foregoing restrictions.  We further understand that the Notespurchased by us will bear a legend to the foregoing effect.

 

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4.                                       Weare an institutional “accredited investor” (as defined in Rule 501(a)(1), (2),(3) or (7) of Regulation D under the Securities Act) and have such knowledgeand experience in financial and business matters as to be capable of evaluatingthe merits and risks of our investment in the Notes, and we and any accountsfor which we are acting are each able to bear the economic risk of our or theirinvestment, as the case may be.

 

5.                                       Weare acquiring the Notes purchased by us for our account or for one or moreaccounts (each of which is an institutional “accredited investor”) as to eachof which we exercise sole investment discretion.

 

You, theCompany, the Trustee and others are entitled to rely upon this letter and areirrevocably authorized to produce this letter or a copy hereof to anyinterested party in any administrative or legal proceeding or official inquirywith respect to the matters covered hereby.

 
|   | Very truly yours,    |
|--------|----------------------|
|   |                 |
|   | [Name of Transferee] |
|   |                 |
|   |                 |
|   | By:                  |   |
|   |                 | Name: |
|   |                 | Title: |

 

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EXHIBIT D

 

Form of Certificate To Be Delivered inConnection with Transfers Pursuant to Regulation S

 

[                      ],[    ]

 

The Bank of New York

101 Barclay Street, Floor 8West

New York, NY  10286

Attention:  Corporate Trust Administration

 

Re:                               FriendlyIce Cream Corporation (the “Company”)8 3/8% Senior Notes due 2012 (the “Notes”)

 

Ladies andGentlemen:

 

In connectionwith our proposed sale of$[            ]aggregate principal amount of the Notes, we confirm that such sale has beeneffected pursuant to and in accordance with Regulation S under the U.S.Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, werepresent that:

 

(1)                                  theoffer of the Notes was not made to a person in the United States;

 

(2)                                  either(a) at the time the buy offer was originated, the transferee was outside theUnited States or we and any person acting on our behalf reasonably believedthat the transferee was outside the United States, or (b) the transaction wasexecuted in, on or through the facilities of a designated offshore securitiesmarket and neither we nor any person acting on our behalf knows that thetransaction has been prearranged with a buyer in the United States;

 

(3)                                  nodirected selling efforts have been made in the United States in contraventionof the requirements of Rule 903(b) or Rule 904(b) of Regulation S, asapplicable;

 

(4)                                  thetransaction is not part of a plan or scheme to evade the registrationrequirements of the Securities Act; and

 

(5)                                  wehave advised the transferee of the transfer restrictions applicable to theNotes.

 

You, theCompany and counsel for the Company are entitled to rely upon this letter andare irrevocably authorized to produce this letter or a copy hereof to anyinterested party in any administrative or legal proceedings or official inquirywith respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in RegulationS.

 
|   | Very truly yours,    |
|--------|----------------------|
|   |                 |
|   | [Name of Transferor] |
|   |                 |
|   |                 |
|   | By:                  |   |
|   |                 | Authorized  Signature |

 

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