Exhibit
10.1


MEMORANDUM OF AGREEMENT


Between John L. Cutter and Friendly Ice Cream Corporation


This acknowledges and documents our mutual agreement concerning your
separation from Friendly Ice Cream Corporation (“Friendly’s”) effective
September 28, 2006 (“Separation
Date”).  This Agreement will confirm
various matters concerning your separation from employment so that no
misunderstanding exists between you and Friendly’s.


I.              SALARY
CONTINUATION


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


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


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


II.            BENEFIT/RETIREMENT
PLANS


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


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












 


Reimbursement by Friendly’s of costs related to all club memberships,
including membership in the Wilbraham Country Club, shall cease as of December
31, 2006.  The benefit of financial
services and planning provided by AYCO Corporation, and paid for by Friendly’s,
will cease as of June 1, 2007.


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


Friendly’s will reimburse you for reasonable costs and fees associated
with your participation, if called as a witness by or on the behalf of Friendly’s,
in any litigation matter existing as of the date hereof.  Reasonable costs and fees for legal
representation will be reimbursed; costs and fees relating to your time will
not be reimbursed.


IIII.          COVENANTS


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


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


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


3.         You agree not
to file a lawsuit in any court of the United States or any State thereof
concerning any matter released in this Agreement or from participating in any
investigation or proceeding conducted by any state or federal agency regarding
any released claim.  By signing this
Agreement, you acknowledge that you are waiving your right to money damages and
any other relief should any agency pursue claims on your behalf arising out of
or relating to your employment with and/or separation from Friendly’s.


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



 2
 








 


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


6.         You acknowledge
that in the course of your employment by and service to Friendly’s, you have
had, and may continue to have, access to confidential information of Friendly’s
and related or affiliated entities (collectively referred to herein as “the
Companies”), including without limitation to, financial statements; sales
figures; projections; estimates; promotions; contracts; pricing; purchasing
methods and sources; marketing methods; sales sheets; customer lists; employee
lists; literature; catalogues; designs; specifications; bills of material;
processes; software; the Companies’ operational policies, procedures, or
practices; any documents utilized in the administration or operation of the
Companies including contracts, agreements, memorandums of understanding or
policies; any conversations within or among the Companies or between employees
not explicitly intended for public knowledge, and all other information
furnished by the Companies or acquired by you during the term of your
employment with Friendly’s (hereinafter “Confidential Information”). You
acknowledge that such Confidential Information is a valuable and unique asset
of the Companies and agree that you will not disclose any such Confidential
Information to any person for any reason whatsoever without the prior written
authorization of any of the Companies unless such information is in the public domain
through no fault of yours, or except as may be required by law or in the event
that you are compelled to testify under oath. 
You also acknowledge that the Companies may have received, and may
receive in the future, proprietary information from third parties (“Third-Party
Confidential Information”) subject to the provisions of various confidentiality
agreements, and you have had, and may continue to have, access to such
Third-Party Confidential Information. 
You agree that you will continue to be subject to the provisions of such
confidentiality agreements.


7.           You agree
that for a period of one (1) year following the Separation Date, you will not
directly or indirectly, for your own account or for any other person, as agent,
employee, officer, director, trustee, consultant, owner, partner or
shareholder, or in any other capacity:


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


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


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


(iv)                  sell or market
or assist any other person in selling or marketing any product or service that
competes, directly or indirectly with any product or service manufactured, sold
or under development by Friendly’s at the time your employment with Friendly’s
is terminated; or



 3
 








 


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


V.            OTHER


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


Pursuant to its obligations under the ADEA, Friendly’s advises you to
consult with an attorney prior to executing this Agreement.  You have 21 days from the date of receipt of
this document in which to consider this Agreement.  In addition, you may revoke this Agreement
within seven days following its execution, but only by delivering a written
revocation notice to Friendly’s Vice President of Human Resources within such
timeframe.  This Agreement shall not
become effective or enforceable until the seven-day revocation period has
expired.


By signing this Agreement, you acknowledge that you have read and fully
understand all of its provisions and that you are signing it voluntarily.  You also acknowledge that you are not relying
on any representations by any representative of Friendly’s concerning the
meaning of any aspect of this Agreement.


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


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


This Agreement is
made and entered into in the Commonwealth of Massachusetts and shall in all
respects be interpreted, enforced, and governed by the laws of the Commonwealth
of Massachusetts.  You consent to the
exclusive jurisdiction of the courts of the Commonwealth of Massachusetts for
any litigation concerning the terms of this Agreement.


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



 4
 








 


ACCEPTED AND AGREED TO AS OF THIS 6th DAY
OF  NOVEMBER, 2006.


	
  FRIENDLY ICE CREAM CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Garrett J. Ulrich

  	
   

  	
   

  
	
   

  	
   

  	
  Garrett J. Ulrich

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President, Human
  Resources

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ John L. Cutter

  	
   

  	
   

  
	
   

  	
   

  	
  John L. Cutter

  	
   

  	
   

  



 



 5