Document:

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                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT (this "Agreement") is executed effective as of
December 19, 2001, by and between GE CAPITAL FRANCHISE FINANCE CORPORATION, a
Delaware corporation ("Lender"), whose address is 17207 North Perimeter Drive,
Scottsdale, Arizona 85255, and FRIENDLY'S REALTY III, LLC, a Delaware limited
liability company ("Borrower"), whose address is 1855 Boston Road, Wilbraham,
Massachusetts 01095-1098.

                             PRELIMINARY STATEMENT:

         Unless otherwise expressly provided herein, all defined terms used in
this Agreement shall have the meanings set forth in Section 1. Borrower has
requested that Lender make the Loans which will be secured by the Premises. Each
Loan will be evidenced by a Note and secured by a first priority security
interest in the corresponding Premises pursuant to a Mortgage. Lender has
committed to make the Loans pursuant to the terms and conditions of the
Commitment, this Agreement and the other Loan Documents.

                                   AGREEMENT:

         In consideration of the mutual covenants and provisions of this
Agreement, the parties agree as follows:

         1. DEFINITIONS. The following terms shall have the following meanings
for all purposes of this Agreement:

         "ACTION" has the meaning set forth in Section 10.A(4).

         "ADA" means the Americans with Disabilities Act of 1990, as such act
may be amended from time to time.

         "AFFILIATE" means any Person which directly or indirectly controls, is
under common control with, or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with" and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities or otherwise.

         "APPLICABLE REGULATIONS" means all applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders and approvals of each
Governmental Authority having jurisdiction over the Premises, including, without
limitation, all health, building, fire, safety and other codes, ordinances and
requirements, all applicable standards of the National Board of Fire
Underwriters and the ADA and all rules of common law, in each case, as amended,
and any judicial or administrative interpretation thereof, including any
judicial order, consent, decree or judgment applicable to Borrower or Lessee.

         "BORROWER ENTITIES" means, collectively, Borrower and any Affiliate of
Borrower.

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         "BORROWER GROUP" means Friendly's Realty I, LLC, a Delaware limited
liability company, Friendly's Realty II, LLC, a Delaware limited liability
company and Friendly's Realty III, LLC, a Delaware limited liability company,
and any new borrowing entity formed pursuant to the Post Closing Agreement in
connection with such entity's assumption of certain Related Loans and
acquisition of the real property and other collateral securing the same (all as
provided in the Post Closing Agreement).

         "BUSINESS DAY" means any day on which Lender is open for business other
than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona
time.

         "CAPITAL LEASE" has the meaning set forth in Section 7.J.

         "CHANGE OF CONTROL" means a change in control of Borrower, including,
without limitation, a change in control resulting from direct or indirect
transfers of voting stock or partnership, membership or other ownership
interests, whether in one or a series of transactions, or from a merger or
consolidation by Borrower with or into any other entity. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of Borrower.

         "CLOSING" means the disbursement of the Loan Amounts by Title Company
as contemplated by this Agreement.

         "CLOSING DATE" means the date of this Agreement.

         "CODE" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et
seq., as amended.

         "COLLATERAL ASSIGNMENT OF LICENSE AGREEMENT" means the collateral
assignment of license agreement dated as of the date of this Agreement executed
by Borrower in favor of Lender pursuant to which Borrower has collaterally
assigned the License Agreement to Lender as security for the Loans, as the same
may be amended from time to time.

         "COMMITMENT" means that certain Commitment Letter dated August 29, 2001
between Lender and Lessee, and any amendments or supplements thereto.

         "COUNSEL" means legal counsel to Borrower and Lessee, licensed in the
states in which (i) the Premises are located, (ii) Borrower and Lessee are
incorporated or formed and (iii) Borrower and Lessee maintain their chief
executive offices, as selected by Borrower and Lessee, as the case may be, and
approved by Lender.

         "DEBT" has the meaning set forth in Section 7.J.

         "DEFAULT RATE" has the meaning set forth in the Notes.

         "DEPRECIATION AND AMORTIZATION" has the meaning set forth in Section
7.J.

         "DISCLOSURES" has the meaning set forth in Section 14.P(2).

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         "ENVIRONMENTAL CONDITION" means any condition with respect to soil,
surface waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding any
of the Premises, whether or not yet discovered, which would reasonably be
expected to or does result in any damage, loss, cost, expense, claim, demand,
order or liability to or against Borrower, Lessee or Lender by any third party
(including, without limitation, any Governmental Authority), including, without
limitation, any condition resulting from the operation of business at any of the
Premises and/or the operation of the business of any other property owner or
operator in the vicinity of the Premises and/or any activity or operation
formerly conducted by any person or entity on or off any of the Premises.

         "ENVIRONMENTAL INDEMNITY AGREEMENT" means the environmental indemnity
agreement dated as of the date of this Agreement executed by Borrower for the
benefit of the Indemnified Parties and such other parties as are identified in
such agreement with respect to the Premises, as the same may be amended from
time to time.

         "ENVIRONMENTAL INSURER" means American International Specialty Lines
Insurance Company, or such other environmental insurance company as Lender may
select, and its successors and assigns.

         "ENVIRONMENTAL LAWS" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations, orders, injunctions and
decrees of Governmental Authorities and common law, relating to Hazardous
Materials and/or the protection of human health or the environment by reason
of a Release or a Threatened Release of Hazardous Materials or relating to
liability for or costs of Remediation or prevention of Releases.
"Environmental Laws" includes, but is not limited to, the following statutes,
as amended, any successor thereto, and any regulations, rulings, orders or
decrees promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations, orders, injunctions and decrees of
Governmental Authorities: the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001
et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101
et seq.; the Resource Conservation and Recovery Act (including but not
limited to Subtitle I relating to USTs), 42 U.S.C. Sections 6901 et seq.; the
Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Clean Air Act, 42
U.S.C. Sections 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 7401 et
seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et seq.; the Endangered Species Act, 16 U.S.C. Sections 1531 et seq. and the
National Environmental Policy Act, 42 U.S.C. Section 4321 et seq.
"Environmental Laws" also includes, but is not limited to, any present and
future federal, state and local laws, statutes, ordinances, rules,
regulations, orders, injunctions and decrees of Governmental Authorities and
common law: conditioning transfer of property upon a negative declaration or
other approval of a Governmental Authority of the environmental condition of
the property; requiring notification or disclosure of Releases or other
environmental condition of any of the Premises to any Governmental Authority
or other person or entity, whether or not in connection with transfer of
title to or interest in property; imposing conditions or requirements
relating to Hazardous Materials in connection with permits or other
authorizations required by Governmental Authorities; relating to the handling
and disposal of Hazardous Materials; relating to nuisance,

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trespass or other causes of action related to Hazardous Materials; and relating
to wrongful death, personal injury, or property or other damage in connection
with the physical condition or use of any of the Premises by reason of the
presence of Hazardous Materials in, on, under or above any of the Premises.

         "ENVIRONMENTAL LIEN" has the meaning set forth in Section 6.K(9).

         "ENVIRONMENTAL POLICIES" means environmental insurance policies issued
by Environmental Insurer to Lender with respect to the Premises, which
Environmental Policies shall be in form and substance satisfactory to Lender in
its sole discretion.

         "EQUIPMENT PAYMENT AMOUNT" has the meaning set forth in Section 7.J.

         "EVENT OF DEFAULT" has the meaning set forth in Section 10.

         "EXISTING FACILITY" means the credit facility evidenced by the Credit
Agreement dated November 19, 1997, among Lessee, the several banks and other
financial institutions or entities from time to time parties thereto and Societe
Generale, as arranger and administrative agent, and any amendments or
supplements thereto.

         "FCCR AMOUNT" has the meaning set forth in Section 10.A(7).

         "FCCR AMOUNT NOTICE" has the meaning set forth in Section 10.A(7).

         "FEE" means an underwriting, site assessment, valuation, processing and
commitment fee equal to 1% of the sum of the Loan Amounts for all of the
Premises.

         "FINANCIAL INFORMATION" means the financial statements and other
financial information concerning Borrower and Lessee delivered to Lender by
Borrower and/or Lessee.

         "FIXED CHARGE COVERAGE RATIO" has the meaning set forth in Section 7.J.

          "GAAP" means generally accepted accounting principles consistently
applied.

         "GOVERNMENTAL AUTHORITY" means any governmental authority, agency,
department, commission, bureau, board, instrumentality, court or
quasi-governmental authority having jurisdiction or supervisory or regulatory
authority over any of the Premises or any of the Borrower Entities.

         "GROSS SALES" has the meaning set forth in Section 7.J.

         "HAZARDOUS MATERIALS" means (a) any toxic substance or hazardous waste,
substance, solid waste or related material, or any pollutant or contaminant; (b)
radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment containing
dielectric fluid having levels of polychlorinated biphenyls in excess of
applicable standards established by any Governmental Authority, or any petroleum
product or additive; (c) any substance, gas, material or chemical which is now
or hereafter defined as or included in the definition of "hazardous substances,"
"toxic substances," "hazardous materials,"

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"hazardous wastes," "regulated substances" or words of similar import under any
Environmental Laws; and (d) any other chemical, material, gas or substance the
exposure to or release of which is prohibited, limited or regulated by any
Governmental Authority that asserts or may assert jurisdiction over any of the
Premises or the operations or activity at any of the Premises, or any chemical,
material, gas or substance that does or is reasonably likely to pose a hazard to
the health and/or safety of the occupants of any of the Premises or the owners
and/or occupants of property adjacent to or surrounding any of the Premises.

         "INDEMNIFIED PARTIES" means Lender, Environmental Insurer, the trustees
under the Mortgages, if applicable, and any person or entity who is or will have
been involved in the origination of the Loans, any person or entity who is or
will have been involved in the servicing of the Loans, any person or entity in
whose name the encumbrance created by any of the Mortgages is or will have been
recorded, persons and entities who may hold or acquire or will have held a full
or partial interest in the Loans (including, but not limited to, investors or
prospective investors in any Securitization, Participation or Transfer, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in any of the Loans for the benefits of third parties), as well
as the respective directors, officers, shareholders, partners, members,
employees, lenders, agents, servants, representatives, affiliates, subsidiaries,
participants, successors and assigns of any and all of the foregoing (including,
but not limited to, any other person or entity who holds or acquires or will
have held a participation or other full or partial interest in any of the Loans
or any of the Premises, whether during the term of the Loans or as a part of or
following a foreclosure of any of the Loans and including, but not limited to,
any successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).

         "INDEMNITY AGREEMENTS" means all indemnity agreements executed for the
benefit of Borrower, Lessee or any prior owner, lessee or occupant of the
Premises in connection with Hazardous Materials, including, without limitation,
the right to receive payments under such indemnity agreements.

         "INTEREST EXPENSE" has the meaning set forth in Section 7.J.

         "LEASE" means the master lease between Borrower, as lessor, and Lessee,
as lessee, with respect to the Premises, together with all amendments,
modifications and supplements thereto.

         "LENDER ENTITIES" means, collectively, Lender (including any
predecessor-in-interest to Lender by merger) and any Affiliate of Lender
(including any Affiliate of any predecessor-in-interest to Lender by merger)
that have made any loans to any of the Borrower Entities which have not been
paid in full as of the date of this Agreement.

         "LENDER PAYMENTS" has the meaning set forth in Section 7.J.

         "LESSEE" means Friendly Ice Cream Corporation, a Massachusetts
corporation, and its successors.

         "LICENSE AGREEMENT" means the license agreement dated as of the date of
this Agreement between Borrower and Lessee pursuant to which Lessee has granted
Borrower a license to use the trade name and trademarks of Lessee and to operate
the Premises as a Permitted Concept

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upon the occurrence of an event of default under the Lease, as the same may be
amended from time to time.

         "LOAN" OR "LOANS" means, as the context may require, the loan for each
Premises, or the loans for all of the Premises, described in Section 2.

         "LOAN AMOUNT" OR "LOAN AMOUNTS" means, as the context may require, the
aggregate amount set forth in Section 2 or, with respect to each Premises, the
individual amount set forth in Exhibit A.

         "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Mortgages, the Environmental Indemnity Agreement, the UCC-1 Financing
Statements, the Collateral Assignment of License Agreement and all other
documents, instruments and agreements executed in connection therewith or
contemplated thereby, as the same may be amended from time to time.

         "LOAN POOL" means:

         (i) in the context of a Securitization, any pool or group of loans that
are a part of such Securitization;

         (ii) in the context of a Transfer, all loans which are sold,
transferred or assigned to the same transferee; and

         (iii) in the context of a Participation, all loans as to which
participating interests are granted to the same participant.

         "LOST NOTE" has the meaning set forth in Section 7.K.

         "LOSSES" means any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees, court costs and other costs of defense).

         "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) any of
the Premises, including, without limitation, the operation of any of the
Premises as a Permitted Concept, or (ii) Borrower's ability to perform its
obligations under the Loan Documents.

         "MEMORANDA" has the meaning set forth in Section 4.K.

         "MORTGAGE" OR "MORTGAGES" means, as the context may require, the deed
of trust or mortgage dated as of the date of this Agreement executed by Borrower
for the benefit of Lender with respect to a Premises or the deeds of trust or
mortgages dated as of the date of this Agreement executed by Borrower for the
benefit of Lender with respect to all of the Premises, as the same may be
amended from time to time. A Mortgage has been executed for each Premises.

         "NET INCOME" has the meaning set forth in Section 7.J.

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         "NEW FACILITY" means a new credit facility entered into by Lessee at or
prior to Closing, which (i) is in the principal amount of not less than
$30,000,000, (ii) has a term of not less than three years, and (iii) has a
structure and documentation subject to Lender's approval, including provisions
that certain personal property and real property owned by Lessee after the
Closing (excluding Lessee's leasehold interests in the Premises) may be used by
Lessee for mortgage loan transactions, with the net proceeds therefrom (after
payment of applicable closing costs) being applied first to the remaining
principal amount outstanding under the Existing Facility as of the Closing Date
(the "Remaining Balance"), with any remaining net proceeds therefrom (the
"Excess Proceeds") being applied as Lessee and Lender shall mutually agree;
provided that none of the Excess Proceeds shall be required to be applied to any
amount under the New Facility.

         "NOTE" OR "NOTES" means, as the context may require, the promissory
note dated as of the date of this Agreement executed by Borrower in favor of
Lender evidencing a Loan with respect to a Premises or the promissory notes
dated as of the date of this Agreement executed by Borrower in favor of Lender
evidencing the Loans with respect to all of the Premises, as the same may be
amended, restated and/or substituted from time to time, including, without
limitation, as a result of the payment of the FCCR Amount pursuant to Section
10. A Note has been executed for each Premises in the Loan Amount corresponding
to such Premises.

         "OBLIGATIONS" has the meaning set forth in the Mortgages.

         "OPERATING LEASE EXPENSE" has the meaning set forth in Section 7.J.

         "OTHER AGREEMENTS" means, collectively, all agreements and instruments
between or among any of the Borrower Entities and any of the Lender Entities,
and all agreements and instruments by any of the Borrower Entities for the
benefit of any of the Lender Entities, including, without limitation, the
Related Loan Documents provided, however, the term "Other Agreements" shall not
include the agreements and instruments defined as the Loan Documents.

         "PARTICIPATION" means one or more grants by Lender or any of the other
Lender Entities to a third party of a participating interest in notes evidencing
obligations to repay secured or unsecured loans owned by Lender or any of the
other Lender Entities or any or all servicing rights with respect thereto.

         "PERMITTED AMOUNTS" means, with respect to any given level of Hazardous
Materials, that level or quantity of Hazardous Materials in any form or
combination of forms the presence, use, storage, release or handling of which
does not constitute a violation of any Environmental Laws and is customarily
employed in the ordinary course of, or associated with, similar businesses
located in the states in which the Premises are located.

         "PERMITTED CONCEPT" means a Friendly's restaurant.

         "PERMITTED EXCEPTIONS" means those exceptions set forth as exceptions
in the title insurance policies issued by Title Company to Lender and approved
by Lender in its sole discretion in connection with the closing of the Loans.

         "PERSON" means any individual, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority or
any other form of entity.

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         "PERSONAL PROPERTY" has the meaning set forth in the Mortgages.

         "POST CLOSING AGREEMENT" means that certain Post Closing Agreement
dated as of the date of this Agreement executed by Friendly's Realty I, LLC, a
Delaware limited liability company, and Lender, as the same may be amended from
time to time.

         "PREMISES" means the parcel or parcels of real estate corresponding to
the FFC File Numbers and addresses identified on Exhibit A attached hereto,
together with all rights, privileges and appurtenances associated therewith and
all buildings, fixtures and other improvements now or hereafter located thereon
(whether or not affixed to such real estate) and the Personal Property. As used
herein, the term "Premises" shall mean either a singular property or all of the
properties collectively, as the context may require.

         "PROPOSED SUBSTITUTION NOTICE" has the meaning set forth in Section
13.B(1).

         "QUESTIONNAIRES" means the environmental questionnaires completed by
Lessee with respect to the Premises and submitted to Environmental Insurer in
connection with the issuance of the Environmental Policies.

         "RELATED LOANS" means, collectively, the loans evidenced by the Related
Notes.

         "RELATED LOAN AGREEMENTS" means, collectively, those certain loan
agreements dated as of the date of this Agreement between Lender and each of the
entities in the Borrower Group, as the same may be amended from time to time.

         "RELATED LOAN DOCUMENTS" means, collectively, the Related Loan
Agreements, the Related Notes and all other agreements and instruments between
or by any of the entities in the Borrower Group and, or for the benefit of,
Lender and executed pursuant to any of the Related Loan Agreements, as the same
may be amended from time to time.

         "RELATED NOTES" means, collectively, the promissory notes executed by
the entities in the Borrower Group and payable to Lender pursuant to any of the
related Loan Agreements and any amendments, extensions or modifications of any
thereof.

         "RELEASE" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.

         "REMEDIATION" means any response, remedial, removal, or corrective
action, any activity to clean up, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Materials required by any Environmental Law or any
Governmental Authority, any actions to prevent, cure or mitigate any Release,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or any evaluation
relating to any Hazardous Materials.

         "RESTORATION" has the meaning set forth in the Mortgages.

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         "SECURITIZATION" means one or more sales, dispositions, transfers or
assignments by Lender or any of the other Lender Entities to a special purpose
corporation, trust or other entity identified by Lender or any of the other
Lender Entities of notes evidencing obligations to repay secured or unsecured
loans owned by Lender or any of the other Lender Entities (and, to the extent
applicable, the subsequent sale, transfer or assignment of such notes to another
special purpose corporation, trust or other entity identified by Lender or any
of the other Lender Entities), and the issuance of bonds, certificates, notes or
other instruments evidencing interests in pools of such loans, whether in
connection with a permanent asset securitization or a sale of loans in
anticipation of a permanent asset securitization. Each Securitization shall be
undertaken in accordance with all requirements which may be imposed by the
investors or the rating agencies involved in each such sale, disposition,
transfer or assignment or which may be imposed by applicable securities, tax or
other laws or regulations.

         "SUBJECT PREMISES" has the meaning set forth in Section 10.A(7).

         "SUBSTITUTE DOCUMENTS" has the meaning set forth in Section 13.

         "SUBSTITUTE PREMISES" means one or more parcels of real estate
substituted for a Premises in accordance with the requirements of Section 13,
together with all rights, privileges and appurtenances associated therewith and
all buildings, fixtures and other improvements, equipment, trade fixtures,
appliances and other personal property located thereon (whether or not affixed
to such real estate). For purposes of clarity, where two or more parcels of real
estate comprise a Substitute Premises, such parcels or interests shall be
aggregated and deemed to constitute the Substitute Premises for all purposes of
this Agreement.

         "SUBSTITUTE PREMISES PERMITTED EXCEPTIONS" has the meaning set forth in
Section 13.

         "THREATENED RELEASE" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding any of the Premises
which may result from such Release.

         "TITLE COMPANY" means Lawyers Title Insurance Corporation.

         "TRANSFER" means one or more sales, transfers or assignments by Lender
or any of the other Lender Entities to a third party of notes evidencing
obligations to repay secured or unsecured loans owned by Lender or any of the
other Lender Entities or any or all servicing rights with respect thereto.

         "UCC-1 FINANCING STATEMENTS" means such UCC-1 Financing Statements as
Lender shall require to be executed and delivered by Borrower with respect to
the transactions contemplated by this Agreement.

         "USTS" means any one or combination of below or above ground tanks and
associated piping systems used in connection with the storage, dispensing and
general use of regulated substances.

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         2. TRANSACTION. On the terms and subject to the conditions set forth in
the Loan Documents, Lender shall make the Loans. The Loans will be evidenced by
the Notes and secured by the Mortgages. Borrower shall repay the outstanding
principal amount of the Loans together with interest thereon in the manner and
in accordance with the terms and conditions of the Notes and the other Loan
Documents. The aggregate Loan Amount shall be $10,000,000, allocated among the
Premises as set forth on the attached Exhibit A. The Loans shall be advanced at
the Closing in cash or otherwise immediately available funds subject to any
prorations and adjustments required by this Agreement. The Premises shall be
leased to the Lessee pursuant to the Lease and, at Closing, Borrower shall
assign the Lease to Lender pursuant to the Mortgages.

         3. ESCROW AGENT; CLOSING COSTS. A. Borrower and Lender hereby employ
Title Company to act as escrow agent in connection with the transaction
described in this Agreement. Title Company shall not cause the transaction to
close unless and until it has received written instructions from Lender and
Borrower to do so. Borrower and Lender will deliver to Title Company all
documents, pay to Title Company all sums and do or cause to be done all other
things reasonably necessary or required by this Agreement, in the reasonable
judgment of Title Company, to enable Title Company to comply herewith and to
enable any title insurance policy provided for herein to be issued. Title
Company is authorized to pay, upon written approval of Borrower and Lender with
respect to their respective funds, from any funds held by it for Lender's or
Borrower's respective credit, all amounts necessary to procure the delivery of
such documents and to pay, on behalf of Lender and Borrower, all charges and
obligations payable by them, respectively. Borrower will pay all charges and
expenses payable by it under the terms of the Loan Documents to Title Company.
Title Company is authorized, in the event any conflicting demand is made upon it
concerning these instructions or the escrow, at its election, to hold any
documents and/or funds deposited hereunder until an action shall be brought in a
court of competent jurisdiction to determine the rights of Borrower and Lender
or to interplead such documents and/or funds in an action brought in any such
court. Deposit by Title Company of such documents and funds, after deducting
therefrom its charges and its expenses and reasonable attorneys' fees incurred
in connection with any such court action, shall relieve Title Company of all
further liability and responsibility for such documents and funds. Title
Company's receipt of this Agreement and opening of an escrow pursuant to this
Agreement shall be deemed to constitute conclusive evidence of Title Company's
agreement to be bound by the terms and conditions of this Agreement pertaining
to Title Company. Disbursement of any funds shall be made by check, certified
check or wire transfer, as directed by Borrower and Lender. Title Company shall
be under no obligation to disburse any funds represented by check or draft, and
no check or draft shall be payment to Title Company in compliance with any of
the requirements hereof, until it is advised by the bank in which such check or
draft is deposited that such check or draft has been honored. Title Company is
authorized to act upon any statement furnished by the holder or payee, or a
collection agent for the holder or payee, of any lien on or charge or assessment
in connection with the Premises, concerning the amount of such charge or
assessment or the amount secured by such lien, without liability or
responsibility for the accuracy of such statement. The employment of Title
Company as escrow agent shall not affect any rights of subrogation under the
terms of any title insurance policy issued pursuant to the provisions thereof.

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             B. Lender has ordered a title insurance commitment for each
Premises from Title Company. Prior to, or concurrently with, the Closing, the
parties hereto shall deposit with Title Company all documents and moneys
necessary to comply with their obligations under this Agreement. Subject to the
terms of this Agreement, all costs of such transaction shall be borne by
Borrower, including, without limitation, the cost of title insurance premiums
and all endorsements required by Lender, the cost of Personal Property lien
insurance premiums and all endorsements required by Lender, survey charges, UCC
and litigation search charges, the attorneys' fees of Borrower, reasonable
attorneys' fees and expenses of Lender (excluding the cost and expense of any of
Lender's in-house legal staff), the cost of the environmental due diligence
undertaken pursuant to Section 4.E, including, without limitation, the cost of
the Environmental Policies, Lender's site inspection costs and fees, stamp
taxes, mortgage taxes, transfer fees, escrow, filing and recording fees and UCC
filing and recording fees (including preparation, filing and recording fees for
UCC continuation statements). All real and personal property and other
applicable taxes and assessments and other charges relating to the Premises
which are due and payable on or prior to the Closing Date as well as taxes and
assessments due and payable subsequent to the Closing Date but which Title
Company requires to be paid at Closing as a condition to the issuance of the
title insurance policy described in Section 4.C, shall be paid by Borrower at or
prior to the Closing. The Loan Documents shall be dated as of the Closing Date.

         4. CLOSING CONDITIONS. The obligation of Lender to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions at, or prior to, Closing:

             A. TITLE. Fee title to each of the Premises (other than the
Personal Property) shall be vested in Borrower, free of all liens, encumbrances,
restrictions, encroachments and easements, subject to the Permitted Exceptions
and the liens created by the Mortgages and the UCC-1 Financing Statements.
Lessee shall be the owner of all of the Personal Property, free and clear of all
liens, encumbrances, charges and security interests, except the liens created by
the Lease. Upon Closing, Lender will obtain a valid and perfected first priority
lien upon and security interest in each of the Premises subject to the Permitted
Exceptions.

             B. CONDITION OF PREMISES. Lender shall have inspected and approved
the Premises.

             C. INSURANCE COMMITMENTS. Lender shall have received for each of
the Premises: a preliminary title report and irrevocable commitment to insure
title in the amount of the Loan relating to such Premises, by means of a
mortgagee's, ALTA extended coverage policy of title insurance (or its
equivalent, in the event such form is not issued in the jurisdiction where the
Premises is located) issued by Title Company showing good and marketable fee
title in the real property comprising such Premises in Borrower, committing to
insure Lender's first priority lien upon and security interest in such real
property subject only to Permitted Exceptions, and containing such endorsements
as Lender may require.

             D. SURVEY. Lender shall have received a current ALTA survey of each
of the Premises or its equivalent, the form and substance of which shall be
satisfactory to Lender in its reasonable discretion. Lender shall have obtained
a flood certificate indicating that the location

                                       11
<PAGE>

of each of the Premises is not within the 100-year flood plain or identified as
a special flood hazard area as defined by the Federal Emergency Management
Agency, or if any Premises is in such a flood plain or special flood hazard
area, Borrower shall have provided Lender with evidence of flood insurance
maintained on such Premises in amounts and on terms and conditions reasonably
satisfactory to Lender.

             E. ENVIRONMENTAL. Lender shall have completed such environmental
due diligence of each of the Premises as it deems necessary or advisable in its
sole discretion, including, without limitation, receiving an Environmental
Policy with respect to each of the Premises, and Lender shall have approved the
environmental condition of each of the Premises in its sole discretion.

             F. ZONING. Borrower shall have provided Lender with evidence
reasonably satisfactory to Lender that each of the Premises is properly zoned
for use as a Permitted Concept and that such use constitutes a legal, conforming
use under applicable zoning requirements.

             G. COMPLIANCE WITH REPRESENTATIONS, WARRANTIES AND COVENANTS. No
event shall have occurred or condition shall exist which would, upon the Closing
Date, or, upon the giving of notice and/or passage of time, constitute a breach
or default hereunder or under the Loan Documents or any other agreement between
or among Lender, Borrower or Lessee pertaining to the subject matter hereof, and
no event shall have occurred or condition shall exist or information shall have
been disclosed by Borrower or discovered by Lender which has had or would be
reasonably likely to have a Material Adverse Effect or a material adverse effect
on Lessee or Lender's willingness to consummate the transaction contemplated by
this Agreement, as determined by Lender in its sole and absolute discretion.

             H. PROOF OF INSURANCE. Borrower shall have delivered to Lender
certificates of insurance and copies of insurance policies showing that all
insurance required by the Loan Documents and providing coverage and limits
satisfactory to Lender are in full force and effect.

             I. OPINION OF COUNSEL. Borrower and Lessee shall have caused
Counsel to prepare and deliver an opinion to Lender in form and substance
reasonably satisfactory to Lender and its counsel, which opinion shall include,
without limitation, those opinions set forth in the Revised Legal Criteria for
Multi- and Single-Member LLCs published in Standard and Poor's CreditWeek on
September 15, 1999, as the same may be amended or revised from time to time.

             J. FEE AND CLOSING COSTS. Concurrently with Closing, Borrower shall
pay the Fee to Lender and shall have paid all of the costs required to be paid
at Closing by Borrower under Section 3. Upon Closing, the fee deposit of
$500,000 previously paid by Borrower and being held by Lender will be applied to
the payment of the Fee.

             K. LEASE, MEMORANDA AND LICENSE AGREEMENT. Borrower and Lessee
shall have executed and delivered the Lease, a memorandum of master lease in
recordable form for each of the Premises (collectively, the "Memoranda") and the
License Agreement. The Lease, the Memoranda and the License Agreement shall be
in form and substance reasonably satisfactory to Lender.

                                       12
<PAGE>

             L. APPLICATION OF CERTAIN PROCEEDS. Concurrently with Closing, the
net proceeds of the Loans (after payment of the Fee and all of the costs
required to be paid by Borrower under Section 3) received by Lessee in
connection with the transfer of the Premises to Borrower shall be applied to the
outstanding balance under the Existing Facility. In addition, prior to or at the
Closing Lessee shall have entered or shall enter into the New Facility.

             M. CLOSING DOCUMENTS. At or prior to the Closing Date, Lender
and/or Borrower, as may be appropriate, shall have executed and delivered or
shall have caused to be executed and delivered to Title Company or Lender, as
may be appropriate, all documents required to be delivered by this Agreement,
and such other documents, payments, instruments and certificates, as Lender may
reasonably require in form acceptable to Lender, including, without limitation,
the following:

                  (1) Notes;

                  (2) Mortgages;

                  (3) UCC-1 Financing Statements;

                  (4) Environmental Indemnity Agreement; and

                  (5) Collateral Assignment of License Agreement.

         Upon fulfillment or waiver of all of the above conditions, Lender shall
deposit funds necessary to close this transaction with the Title Company and
this transaction shall close in accordance with the terms and conditions of this
Agreement.

         5. REPRESENTATIONS AND WARRANTIES OF LENDER. The representations and
warranties of Lender contained in this Section are being made by Lender as of
the Closing Date to induce Borrower to enter into this Agreement and consummate
the transactions contemplated herein and shall survive the Closing. Lender
represents and warrants to Borrower as follows:

             A. ORGANIZATION OF LENDER. Lender has been duly organized, is
validly existing and has taken all necessary action to authorize the execution,
delivery and performance by Lender of this Agreement.

             B. AUTHORITY OF LENDER. The person who has executed this Agreement
on behalf of Lender is duly authorized so to do.

             C. ENFORCEABILITY. Upon execution by Lender, this Agreement shall
constitute the legal, valid and binding obligation of Lender, enforceable
against Lender in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, liquidation, reorganization and
other laws affecting the rights of creditors generally and general principles of
equity.

         6. REPRESENTATIONS AND WARRANTIES OF BORROWER. The representations and
warranties of Borrower contained in this Section are being made by Borrower as
of the Closing Date to induce Lender to enter into this Agreement and consummate
the transactions

                                       13
<PAGE>

contemplated herein and shall survive the Closing. Borrower represents and
warrants to Lender (and Environmental Insurer solely with respect to Section
6.K) as follows:

             A. FINANCIAL INFORMATION. Borrower has delivered to Lender the
Financial Information, which is true, correct and complete in all material
respects; there have been no amendments to the Financial Information since the
date such Financial Information was prepared or delivered to Lender. Borrower
understands that Lender is relying upon the Financial Information and Borrower
represents that such reliance is reasonable. All financial statements included
in the Financial Information were prepared in accordance with GAAP and fairly
present, in all material respects, as of the date of such financial statements
the financial condition of each entity (on a consolidated basis in the case of
Lessee and its subsidiaries other than Borrower Entities) to which they pertain.
No change has occurred with respect to the financial condition of Borrower,
Lessee and/or the Premises as reflected in the Financial Information which has
not been disclosed in writing to Lender or has had, or would reasonably be
expected to result in, a Material Adverse Effect.

             B. ORGANIZATION AND AUTHORITY. (1) Borrower is duly organized or
formed, validly existing and in good standing under the laws of its state of
formation, and qualified as a foreign limited liability company to do business
in each state where the Premises are located and any other jurisdiction where
the failure to be qualified would reasonably be expected to result in a Material
Adverse Effect. All necessary limited liability company action has been taken to
authorize the execution, delivery and performance by Borrower of this Agreement
and the other Loan Documents.

                (2) The person(s) who have executed this Agreement on behalf of
Borrower are duly authorized so to do.

                (3) Borrower is not a "foreign corporation", "foreign
partnership", "foreign trust", "foreign estate" or "foreign person" (as those
terms are defined by the Internal Revenue Code of 1986, as amended). Borrower's
U.S. Federal Tax Identification number, Organization Identification number and
principal place of business are correctly set forth on the signature page of
this Agreement.

         C. ENFORCEABILITY OF DOCUMENTS. Upon execution by Borrower, this
Agreement, the other Loan Documents executed by Borrower, the Lease and the
License Agreement shall constitute the legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, liquidation, reorganization and other laws affecting the rights of
creditors generally and general principles of equity.

         D. LITIGATION. There are no suits, actions, proceedings or
investigations pending, or to the best of its knowledge, threatened against or
involving Borrower or any of the Premises before any arbitrator or Governmental
Authority, except for such lawsuits, actions, proceedings or investigations
which, individually or in the aggregate, have not had, and would not reasonably
be expected to result in, (i) a Material Adverse Effect or (ii) liability to
Borrower (taking into account all applicable insurance, and deductibles and self
insured retentions relating thereto) equal to or in excess of $100,000.

                                       14
<PAGE>

         E. ABSENCE OF BREACHES OR DEFAULTS. Borrower is not, and the
authorization, execution, delivery and performance of this Agreement, the other
Loan Documents, the Lease and the License Agreement will not result, in any
breach or default under any other document, instrument or agreement to which
Borrower is a party or by which Borrower, any of the Premises or any of the
property of Borrower is subject or bound, except for such breaches or defaults
which, individually or in the aggregate, have not had, and would not reasonably
be expected to result in, a Material Adverse Effect. The authorization,
execution, delivery and performance of this Agreement, the other Loan Documents,
the Lease and the License Agreement will not violate any applicable law,
statute, regulation, rule, ordinance, code, rule or order applicable to
Borrower, Lessee or the Premises. None of the Premises are subject to any right
of first refusal, right of first offer or option to purchase or lease (other
than subleases permitted pursuant to the terms of this Agreement) granted to a
third party (other than the Lease).

         F. UTILITIES. Adequate public utilities are available at each of the
Premises to permit utilization of each of the Premises as a Permitted Concept
and all utility connection fees and use charges will have been paid in full
prior to delinquency.

         G. ZONING; COMPLIANCE WITH LAWS. Each of the Premises is in compliance
with all applicable zoning requirements, and the use of each of the Premises as
a Permitted Concept does not constitute a nonconforming use under applicable
zoning requirements. Borrower and the Premises are in compliance with all
Applicable Regulations except for such noncompliance which has not had, and
would not reasonably be expected to result in, a Material Adverse Effect.

         H. AREA DEVELOPMENT; WETLANDS. No condemnation or eminent domain
proceedings covering all or any portion of the Premises have been commenced or,
to the best of Borrower's knowledge, are contemplated. None of the Premises and,
to the best of Borrower's knowledge, none of the real property bordering any of
the Premises are designated by any Governmental Authority as a wetlands.

         I. LICENSES AND PERMITS; ACCESS. All required licenses and permits,
both governmental and private, to use and operate each of the Premises as a
Permitted Concept are in full force and effect, except for such licenses and
permits the failure of which to obtain has not had, and would not reasonably be
expected to result in, a Material Adverse Effect. Adequate rights of access to
public roads and ways are available to each of the Premises for ingress and
egress and otherwise to permit utilization of each of the Premises for their
intended purposes, and all such public roads and ways have been completed and
dedicated to public use.

         J. CONDITION OF PREMISES. Each of the Premises, including the Personal
Property, is in working condition and repair, ordinary wear and tear excepted,
fully equipped and operational, free from structural defects, safe and properly
lighted.

         K. ENVIRONMENTAL. Except as disclosed in the Questionnaires:

            (1) None of the Premises nor any of the Borrower Entities are in
violation of, or subject to, any pending or, to Borrower's actual knowledge,
threatened investigation or inquiry by any Governmental Authority or to any
remedial obligations under any

                                       15
<PAGE>

Environmental Laws, and this representation and warranty would continue to be
true and correct following disclosure to the applicable Governmental Authorities
of all relevant facts, conditions and circumstances, if any, pertaining to any
of the Premises;

            (2) All permits, licenses or similar authorizations required to
construct, occupy, operate or use any buildings, improvements, fixtures and
equipment forming a part of any of the Premises by reason of any Environmental
Laws have been obtained except to the extent that failure to obtain such
permits, licenses or similar authorizations would not reasonably be expected to
result in a Material Adverse Effect;

            (3) No Hazardous Materials have been used, handled, manufactured,
generated, produced, stored, treated, processed, transferred, disposed of or
otherwise Released in, on, under, from or about any of the Premises, except in
Permitted Amounts;

            (4) None of the Premises contain Hazardous Materials, except in
Permitted Amounts, or USTs;

            (5) To the best knowledge of Borrower, there is no threat of any
Release migrating to any of the Premises in excess of Permitted Amounts;

            (6) There is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with any of the
Premises;

            (7) None of the Borrower Entities has received any written notice or
other written communication from any person or entity (including but not limited
to a Governmental Authority) relating to Hazardous Materials or Remediation
thereof in excess of Permitted Amounts, of possible liability of any person or
entity pursuant to any Environmental Law in connection with any of the Premises,
other environmental conditions in connection with any of the Premises, or any
actual or potential administrative or judicial proceedings in connection with
any of the foregoing;

            (8) All information known to any of the Borrower Entities or
contained in the files of any of the Borrower Entities relating to any
Environmental Condition or Releases of Hazardous Materials in, on, under or from
any of the Premises, other than in Permitted Amounts, has been provided, or made
available, to Lender, including, without limitation, information relating to all
prior Remediation;

            (9) All of the Premises have been kept free and clear of all liens
and other encumbrances imposed pursuant to any Environmental Law (the
"Environmental Liens"); and none of the Borrower Entities has allowed any tenant
or other user of any of the Premises to do any act that materially increased the
dangers to human health or the environment, posed an unreasonable risk of harm
to any person or entity (whether on or off any of the Premises), impaired the
value of any of the Premises in any material respect, is contrary to any
requirement of any insurer in connection with such insurer providing insurance
for the Premises in accordance with the terms of the Loan Documents, constituted
a public or private nuisance, constituted waste, or violated any covenant,
condition, agreement or easement applicable to any of the Premises in any
material respect; and

                                       16
<PAGE>

            (10) The information and disclosures in the Questionnaires are true,
correct and complete in all material respects, and the person or persons
executing the Questionnaires were duly authorized to do so.

         Lender has charged Borrower a fee for the Environmental Policies.
Borrower acknowledges that the Environmental Policies are for the sole
protection of Lender and will not protect Borrower or provide Borrower with any
coverage thereunder. Borrower acknowledges and agrees that Environmental Insurer
may rely on the environmental representations and warranties set forth in this
subsection K, that Environmental Insurer is an intended third-party beneficiary
of such representations and warranties and that Environmental Insurer shall have
all rights and remedies available at law or in equity as a result of a breach of
such representations and warranties, including, to the extent applicable, the
right of subrogation.

            L. TITLE TO PREMISES; FIRST PRIORITY LIEN. Fee title to the real
property comprising each of the Premises is vested in Borrower, free and clear
of all liens, encumbrances, charges and security interests of any nature
whatsoever, except the Permitted Exceptions and the liens created by the
Mortgages and the UCC-1 Financing Statements. Lessee is the owner of all
Personal Property, free and clear of all liens, encumbrances, charges and
security interests of any nature whatsoever, except the liens created by the
Lease, and no Affiliate of Borrower (other than Lessee) owns any of the Personal
Property. Upon Closing, Lender shall have a first priority lien upon and
security interest in and to each of the Premises pursuant to the Mortgages and
the UCC-1 Financing Statements.

            M. NO MECHANICS' LIENS. There are no delinquent accounts payable or
mechanics' liens in favor of any materialman, laborer, or any other person or
entity in connection with labor or materials furnished to or performed on any
portion of the Premises; and no work has been performed or is in progress nor
have materials been supplied to the Premises or agreements entered into for work
to be performed or materials to be supplied to the Premises prior to the date
hereof, which will be delinquent on or before the Closing Date.

            N. LEASE. Borrower has delivered to Lender a true, correct and
complete copy of the Lease. The Lease is the only lease with respect to the
Premises, and is in full force and effect, and constitutes the legal, valid and
binding obligation of Borrower and Lessee, enforceable against Lessee and
Borrower in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, liquidation, reorganization and
other laws affecting the rights of creditors generally and general principles of
equity. Other than in connection with the Loans, Borrower has not assigned,
transferred, mortgaged, hypothecated or otherwise encumbered the Lease or any
interest therein, and Borrower has not received any notice that the Lessee has
made any assignment, pledge or hypothecation of all or any part of its interest
in the Lease. Borrower has not received any notice of default from the Lessee
which has not been cured or given any notice of default to the Lessee which has
not been cured. No event has occurred and no condition exists which, with the
giving of notice or the lapse of time or both, would constitute a default by the
Lessee or Borrower under the Lease.

            O. NONCONSOLIDATION. (1) Borrower maintains correct and complete
books and records of account separate from all other Persons. Where necessary or
appropriate, Borrower has disclosed the nature of the transaction contemplated
by the Loan Documents and

                                       17
<PAGE>

Borrower's independent status to its creditors. The Premises represent all of
the assets owned or leased by Borrower as of the date hereof, and Borrower has
not commingled its assets and its liabilities with those of any other Person.

                (2) Borrower maintains its own checking account or accounts with
commercial banking institutions separate from other Persons.

                (3) To the extent that Borrower shares the same employees with
other Persons, the salaries of and the expenses related to providing benefits to
such employees have been fairly and nonarbitrarily allocated among such Persons,
with the result that each such Person bears its fair share of the salary and
benefit costs associated with all such common employees.

                (4) To the extent that Borrower jointly contracts with other
Persons to do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing are, and at all times shall be, fairly
and nonarbitrarily allocated among such Persons, with the result that each such
Person bears its fair share of such costs. To the extent that Borrower contracts
or does business with vendors or service providers where the goods or services
provided are or shall be partially for the benefit of other Persons, the costs
incurred in so doing are fairly and nonarbitrarily allocated to or among such
Persons for whose benefit the goods or services are provided, with the result
that each such Person bears its fair share of such costs.

                (5) To the extent that Borrower or other Persons have offices in
the same location, there is a fair, appropriate and nonarbitrary allocation of
overhead among them, with the result that each such Person bears its fair share
of such expenses.

                (6) Borrower has not incurred any indebtedness, secured or
unsecured, direct or indirect, absolute or contingent, including, without
limitation, liability for the debts of any other Person (and Borrower has not
held itself out as being liable for the debts of any other Person), other than
the Loans and trade and operational debt incurred in the ordinary course of
business with trade creditors and in amounts as are normal and reasonable under
the circumstances. Borrower is not a guarantor of any obligations.

                (7) Except as contemplated by the Loan Documents, Borrower is
not presently a party to a pledge of its assets for the benefit of other
Persons. Borrower has not made any loans or advances to any third party
(including any Affiliate or constituent party of Borrower).

                (8) Borrower has conducted its affairs strictly in accordance
with its organizational documents including Borrower's corporate managing
member's organizational documents and has observed all necessary, appropriate
and customary formalities.

                (9) Borrower does not hold itself out to the public or to any of
its individual creditors as being a unified entity with assets and liabilities
in common with any other Person.

                                       18
<PAGE>

                (10) Borrower (a) is solvent, (b) is able to pay its obligations
as they become due and (c) is not and shall not be engaged in any business or
transaction for which its remaining capital is or may be unreasonably small.

                (11) Borrower has no actual intent to hinder, delay or defraud
creditors in connection with any of the transactions contemplated herein or
intent to incur (or belief that it is incurring) debts beyond its ability to pay
the same as they mature.

                (12) Borrower has not, as to itself or as to other Persons, (a)
commenced any case, proceeding or other action under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to Borrower or other Persons or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to Borrower or its debts or other Persons or their
debts or (b) sought appointment of a receiver, trustee, custodian or other
similar official for Borrower or for all or any substantial part of its or other
Person's assets or made a general assignment for the benefit of Borrower's
creditors.

         7. COVENANTS. Borrower covenants to Lender (and Environmental Insurer
solely with respect to Section 7.F) from and after the Closing Date and until
all of the Obligations are satisfied in full, as follows:

            A. PAYMENT OF THE NOTES. Borrower shall punctually pay, or cause to
be paid, the principal, interest and all other sums to become due in respect of
the Notes and the other Loan Documents in accordance with the Notes and the
other Loan Documents.

            B. TITLE. Borrower shall maintain good and marketable fee simple
title to the real property comprising each of the Premises and Lessee shall
maintain title to the Personal Property, in each case, free and clear of all
liens, encumbrances, charges and other exceptions to title, except the Permitted
Exceptions and the liens created by the Mortgages, the UCC-1 Financing
Statements, the Lease and any other exception to title permitted by Lender in
writing. Lender shall have valid first liens upon and security interests in the
Premises, including the Personal Property, pursuant to the Mortgages and the
UCC-1 Financing Statements, subject to Permitted Exceptions.

            C. ORGANIZATION AND STATUS OF BORROWER; PRESERVATION OF EXISTENCE.
Borrower shall be validly existing and in good standing under the laws of its
state of incorporation or formation and qualified as a foreign corporation,
partnership or limited liability company to do business in each state where the
Premises are located and any other jurisdiction where the failure to be
qualified would reasonably be expected to result in a Material Adverse Effect.
Borrower shall preserve its current form of organization and shall not change
its legal name, its state of formation, nor, in one transaction or a series of
related transactions, merge with or into, or consolidate with, any other entity
without providing, in each case, Lender with 30 days' prior written notice and
obtaining Lender's prior written consent (to the extent such consent is required
under Section 8 of this Agreement).

                                       19
<PAGE>

            D. LICENSES AND PERMITS. All required licenses and permits, both
governmental and private, to use and operate each of the Premises as a Permitted
Concept shall be maintained in full force and effect, except to the extent that
the failure to maintain such licenses and permits in full force and effect would
not reasonably be expected to have a Material Adverse Effect.

            E. COMPLIANCE WITH LAWS GENERALLY. Borrower shall, at the sole cost
of Borrower, take all steps required to ensure that the use and occupation of
each of the Premises, and the condition thereof, including, without limitation,
any Restoration, shall not be in violation of any Applicable Regulations now or
hereafter in effect in such a manner as would reasonably be expected to result
in a Material Adverse Effect. In addition, Borrower shall not violate, and shall
ensure that Lessee shall not violate, any Applicable Regulations now or
hereafter in effect in such a manner as would reasonably be expected to result
in a Material Adverse Effect. Without limiting the generality of the other
provisions of this Section, Borrower shall not violate, and shall ensure that
Lessee shall not violate, the ADA, and all regulations promulgated thereunder,
as it affects each of the Premises in such a manner as would reasonably be
expected to result in a Material Adverse Effect.

            F. COMPLIANCE WITH ENVIRONMENTAL LAWS. (1) The Premises, the
Borrower Entities and any other operator or user of any of the Premises shall
not be in violation of or subject to any investigation or inquiry by any
Governmental Authority or subject to any Remediation obligations under any
Environmental Laws (other than any violation, investigation or inquiry disclosed
in the Questionnaires).

               (2) All uses and operations on or of each of the Premises,
whether by Borrower or any other person or entity, shall be in compliance with
all Environmental Laws and permits issued pursuant thereto.

               (3) There shall be no Releases in, on, under or from any of the
Premises, except in Permitted Amounts (other than Releases disclosed in the
Questionnaires).

               (4) There shall be no Hazardous Materials in, on or under any of
the Premises, except in Permitted Amounts (other than such Hazardous Materials
in, on or under any of the Premises disclosed in the Questionnaires).

               (5) Borrower shall keep each of the Premises, or cause each of
the Premises to be kept, free and clear of all Environmental Liens.

               (6) Borrower shall not do or allow any tenant or other user of
any of the Premises to do any act that (a) materially increases the dangers to
human health or the environment, (b) poses an unreasonable risk of harm to any
person or entity (whether on or off any of the Premises), (c) impairs or is
reasonably likely to impair the value of any of the Premises, (d) is contrary to
any requirement of any insurer in connection with such insurer providing
insurance for the Premises, in accordance with the terms of the Loan Documents,
(e) constitutes a public or private nuisance or constitutes waste, or (f)
violates any covenant, condition, agreement or easement applicable to any of the
Premises which violation would reasonably be expected to result in a Material
Adverse Effect.

                                       20
<PAGE>

               (7) Borrower shall promptly notify Lender in writing upon
Borrower obtaining actual knowledge of:

                   (a) any presence of Releases or Threatened Releases in, on,
under, from or migrating towards any of the Premises, in excess of Permitted
Amounts, including, without limitation, the presence on or under any of the
Premises of any Hazardous Materials, in excess of Permitted Amounts;

                   (b) any non-compliance with any Environmental Laws related in
any way to any of the Premises;

                   (c) any Environmental Lien or any act or omission which could
reasonably be expected to result in the imposition of an Environmental Lien
against any of the Premises;

                   (d) any required or proposed Remediation of environmental
conditions relating to any of the Premises, including, without limitation, any
and all enforcement, clean-up, remedial, removal or other governmental or
regulatory actions threatened, instituted or completed pursuant to any of the
Environmental Laws affecting any of the Premises;

                   (e) any written or oral notice or other communication of
which any of the Borrower Entities becomes aware from any source whatsoever
(including but not limited to a Governmental Authority) relating in any way to
Hazardous Materials or Remediation thereof, possible liability of any person or
entity pursuant to any Environmental Law relating to the Premises, other
environmental conditions in connection with any of the Premises, or any actual
or potential administrative or judicial proceedings in connection with the
violation by Borrower of any obligation under this Agreement; or

                   (f) any investigation or inquiry initiated by any
Governmental Authority relating to the Environmental Condition of any of the
Premises.

            (8) Borrower shall, at its sole cost and expense:

                (a) perform any environmental site assessment or other
investigation of environmental conditions in connection with any of the Premises
as may be reasonably requested by Lender (including but not limited to
non-invasive sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas);
provided, however, that Lender shall not require or request that Borrower
conduct any invasive testing or investigation unless (i) such testing is
recommended pursuant to an environmental assessment of the Premises, (ii) Lender
reasonably believes that an Environmental Condition exists at the Premises or
any portion thereof, (iii) there is an uncured Event of Default, (iv) upon the
occurrence of an emergency or (v) in connection with any Securitization,
Participation or Transfer contemplated by this Agreement (Borrower shall share
with Lender and Environmental Insurer the reports and other results thereof, and
Lender, Environmental Insurer and other Indemnified Parties shall be entitled to
rely on such reports and other results thereof). Notwithstanding the foregoing
to the contrary, Borrower shall be required to perform the foregoing
environmental site assessments or other investigations of environmental
conditions on a Premises only (1) once every year during the term of the Loan
secured by such Premises or in

                                       21
<PAGE>

connection with any Securitization, Participation or Transfer contemplated by
this Agreement, and either such event upon reasonable prior written notice
delivered by Lender to Borrower, or (2) at any time and without prior written
notice (x) Lender reasonably requests if such request is made because Lender
reasonably believes that an Environmental Condition exists at the Premises, (y)
upon the occurrence of an event of an emergency, or (z) upon the occurrence and
during the continuation of an Event of Default); and

                (b) have the Premises inspected as may be required by any
Environmental Laws for seepage, spillage and other environmental concerns.
Borrower shall provide Lender with written certified results of all inspections
performed on any of the Premises. All costs and expenses associated with the
inspection, preparation and certification of results, as well as those
associated with any corrective action, shall be paid by Borrower. All
inspections and tests performed on any of the Premises shall be conducted in
compliance with all Environmental Laws.

         (9) Borrower shall, at its sole cost and expense, and without limiting
the rights of Lender under any other provision of this Agreement, comply with
all reasonable written requests of Lender to:

             (a) reasonably effectuate Remediation of any condition (including
but not limited to a Release) in, on, under or from any of the Premises;

             (b) comply with any Environmental Law;

             (c) comply with any directive from any Governmental Authority; and

             (d) take any other reasonable action reasonably necessary or
appropriate for protection of human health or the environment.

         (10) Lender, Environmental Insurer and any other person or entity
designated by Lender, including but not limited to any receiver, any
representative of a Governmental Authority, and any environmental consultant,
shall have the right, but not the obligation, to enter upon any of the Premises
(a) once every year during the term of the Loan encumbered by such Premises,
during normal business hours, but only upon reasonable prior written notice to
Borrower, or (b) in connection with any Securitization, Participation or
Transfer contemplated by this Agreement, during normal business hours, but only
upon reasonable prior written notice to Borrower, or (c) at any time in the
event of an emergency, upon Lender's reasonable belief that an Environmental
Condition exists at the Premises, or upon the occurrence and during the
continuation of an Event of Default, in any of which events no prior written
notice shall be required, in order to assess any and all aspects of the
environmental condition of any of the Premises and its use, including but not
limited to conducting any environmental assessment or audit (the scope of which
shall be determined in Lender's sole and absolute discretion) and taking samples
of soil, groundwater or other water, air, or building materials; provided,
however, that no party shall conduct any invasive testing or investigation
without Borrower's prior written consent unless such testing is recommended
pursuant to an environmental assessment of a Premises. With respect to any
inspection hereunder that is conditioned upon reasonable notice to

                                       22
<PAGE>

the Borrower, Lender shall use good faith efforts to coordinate such
inspection with Borrower so as to permit Borrower to have a representative
present during such inspection; provided, however, Lender shall have no
liability to Borrower and Borrower shall not have the right to prevent any such
inspection if, despite Lender's good faith efforts, Lender is unable to
coordinate its inspection in a manner facilitating the presence of Borrower's
representative at such inspection. Borrower shall cooperate with and provide
access to Lender, Environmental Insurer and any such person or entity designated
by Lender, provided that Lender, Environmental Insurer and any such person shall
use commercially reasonable efforts to avoid disturbing Lessee's possession of
the Premises and the operation of Lessee's business on the Premises. Any such
assessment and investigation shall be at Borrower's sole cost and expense if, at
the time Lender undertakes such assessment or investigation, Lender has a
reasonable basis for believing that a Release has occurred at any of the
Premises in excess of Permitted Amounts or if an Event of Default has occurred
and is continuing. Otherwise, any such assessment and investigation shall be at
Lender's sole cost and expense. If invasive testing is permitted pursuant to the
terms of this Section or Section 7I. below, Lender shall cause any party
performing such testing to be appropriately insured or bonded in such amounts as
are commercially reasonable.

         (11) To the extent any Environmental Condition stems from an action or
omission by a party other than Lessee or any of the Borrower Entities (a
"Responsible Party"), Lender agrees that (a) nothing set forth herein shall
limit Borrower's rights to seek contribution and/or reimbursement from such
Responsible Party or to compel such Responsible Party to take all steps
necessary to satisfy Borrower's Remediation obligation with respect to such
Environmental Condition, and (b) Borrower shall be deemed to have satisfied any
such Remediation obligation to the extent effected by such Responsible Party;
provided, however, that nothing herein shall or shall be deemed to obviate,
excuse or exonerate Borrower's Remediation obligation with respect to such
Environmental Condition to the extent (x) such Responsible Party contests any
such Remediation obligation (or the scope thereof) and (y) such Responsible
Party does not cause such Remediation obligation to be completed in due course
with all due diligence.

             G. FINANCIAL STATEMENTS. (1) Within 45 days after the end of each
fiscal quarter and within 120 days after the end of each fiscal year of
Borrower, Borrower shall deliver to Lender (a) complete financial statements of
Borrower including a balance sheet, profit and loss statement, statement of cash
flows and all other related schedules for the fiscal period then ended; and (b)
such other financial information as Lender may reasonably request in order to
establish compliance with the financial covenants in the Loan Documents,
including, without limitation, Section 7.J of this Agreement. All such financial
statements shall be prepared in accordance with GAAP from period to period, and
shall be certified to be accurate and complete by Borrower (or the Treasurer or
other appropriate officer of Borrower or Lessee). Borrower understands that
Lender is relying upon such financial statements and Borrower represents that
such reliance is reasonable. In the event the property and business at the
Premises is ordinarily consolidated with other business for financial statement
purposes, such financial statements shall be prepared on a consolidated basis
showing separately the sales, profits and losses, assets and liabilities
pertaining to each of the Premises with the basis for allocation of overhead of
other charges being clearly set forth. The financial statements delivered to
Lender need not be audited, but Borrower shall deliver to Lender copies of any
audited financial statements of Borrower which may be prepared, as soon as they
are available.

                                       23
<PAGE>

             (2) Borrower shall cause to be delivered to Lender copies of the
financial statements required to be delivered pursuant to Section 32 of the
Lease within the time periods set forth in such Section.

         H. COMPLIANCE CERTIFICATES. Within 90 days after the end of each fiscal
year of Borrower, Borrower shall deliver a compliance certificate to Lender in a
form to be provided by Lender in order to establish that Borrower is in
compliance in all material respects with all of its obligations, duties and
covenants under the Loan Documents.

         I. INSPECTIONS. Borrower shall, upon not less than 24 hours written
notice and during normal business hours (or without prior notice and at any time
in the event of an emergency), (1) provide Lender and Lender's officers,
employees, agents, advisors, attorneys, accountants, architects, and engineers
with access to each of the Premises, all drawings, plans, and specifications for
each of the Premises in possession of Borrower or Lessee, all engineering
reports relating to each of the Premises in the possession of Borrower or
Lessee, the files, correspondence and documents relating to each of the
Premises, and the financial books and records, including lists of delinquencies,
relating to the ownership, operation, and maintenance of each of the Premises
(including, without limitation, any of the foregoing information stored in any
computer files), (2) allow such persons to make such inspections, tests, copies,
and verifications as Lender considers reasonably necessary (except that none of
Lender nor such persons shall conduct any invasive testing on the Premises
without obtaining the prior consent of Borrower which may withheld in Borrower's
sole and absolute discretion), and (3) if Borrower is in breach of the Fixed
Charge Coverage Ratio requirement set forth in the following subsection J, pay
expenses reasonably incurred by Lender from time to time in conducting such
inspections, tests, copies and verifications upon demand (such amounts to bear
interest at the Default Rate if not paid upon demand until paid). All access and
entry onto the Premises or other property in connection with the exercise of the
rights granted to Lender in this Section shall occur (a) once every year during
the term of the Loan encumbered by such Premises, upon not less than 24 hours
written notice and during normal business hours, or (b) in connection with any
Securitization, Participation or Transfer contemplated by this Agreement, upon
not less than 24 hours written notice and during normal business hours, or (c)
at any time in the event of an emergency or upon the occurrence and during the
continuation of an Event of Default, in either of which cases no prior written
notice shall be required; provided, however, that the exercise of such access
and entry rights shall in no event disturb Lessee's possession of the Premises
nor the operation of Lessee's business on the Premises. With respect to any
inspection hereunder that is conditioned upon notice to the Borrower, Lender
shall use good faith efforts to coordinate such inspection with Borrower so as
to permit Borrower to have a representative present during such inspection;
provided, however, Lender shall have no liability to Borrower and Borrower shall
not have the right to prevent any such inspection if, despite Lender's good
faith efforts, Lender is unable to coordinate its inspection in a manner
facilitating the presence of Borrower's representative at such inspection.

         J. FIXED CHARGE COVERAGE RATIO. Until such time as all of Borrower's
obligations under the Notes and the other Loan Documents are paid, satisfied and
discharged in full, Borrower shall cause to be maintained an aggregate Fixed
Charge Coverage Ratio at all of the Premises of at least 1.25:1, as determined
on the last day of each fiscal year of Borrower. For purposes of this Section,
the term "Fixed Charge Coverage Ratio" shall mean with respect to the

                                       24
<PAGE>

twelve month period of time immediately preceding the date of determination, the
ratio calculated for such period of time, each as determined in accordance with
GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest
Expense and Operating Lease Expense, less a corporate overhead allocation in an
amount equal to 5% of Gross Sales, to (b) the sum of the Lender Payments,
Operating Lease Expense and the Equipment Payment Amount.

         For purposes of this Section, the following terms shall be defined as
set forth below:

         "CAPITAL LEASE" shall mean any lease of any property (whether real,
personal or mixed) with respect to one or more of the Premises which lease
would, in conformity with GAAP, be required to be accounted for as a capital
lease on the balance sheet of the lessee. The term "Capital Lease" shall not
include any operating lease.

         "DEBT" shall mean as directly related to all of the Premises and the
period of determination (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, indentures, notes or similar instruments, (iii) obligations
to pay the deferred purchase price of property or services, (iv) obligations
under leases which should be, in accordance with GAAP, accounted for as Capital
Leases, and (v) obligations under direct or indirect guarantees in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above.

         "DEPRECIATION AND AMORTIZATION" shall mean with respect to all of the
Premises the depreciation and amortization accruing during any period of
determination as determined in accordance with GAAP.

         "EQUIPMENT PAYMENT AMOUNT" shall mean for any period of determination
the sum of all regularly scheduled payments payable during such period of
determination under all (i) leases for equipment located at one or more of the
Premises, other than operating leases and (ii) all loans secured by equipment
located at one or more of the Premises.

         "GROSS SALES" shall mean the sales or other income arising from all
business conducted at all of the Premises during the period of determination,
less sales tax and any amounts received from not-for-profit sales of all
non-food items approved for use in connection with promotional campaigns, if
any.

         "INTEREST EXPENSE" shall mean for any period of determination, the sum
of all interest accrued or which should be accrued in respect of all Debt
allocable to one or more of the Premises and all business operations thereon
during such period (including interest attributable to Capital Leases), as
determined in accordance with GAAP.

         "LENDER PAYMENTS" shall mean with respect to the period of
determination, the sum of all regularly scheduled payments payable under the
Notes.

         "NET INCOME" shall mean with respect to the period of determination,
the aggregate net income or net loss allocable to all of the Premises. In
determining the amount of Net Income, (i) adjustments shall be made for
nonrecurring gains and losses allocable to the period of determination, (ii)
deductions shall be made for Depreciation and Amortization, Interest Expense

                                       25
<PAGE>

and Operating Lease Expense allocable to the period of determination, and (iii)
no deductions shall be made for (x) income taxes or charges equivalent to income
taxes allocable to the period of determination, as determined in accordance with
GAAP, or (y) corporate overhead expense allocable to the period of
determination.

         "OPERATING LEASE EXPENSE" shall mean the sum of all payments and
expenses incurred by the lessee under any operating leases with respect to one
or more of the Premises and the business operations thereon during the period of
determination, as determined in accordance with GAAP.

             K. LOST NOTE. Borrower shall, if any Note is mutilated, destroyed,
lost or stolen (a "Lost Note"), promptly deliver to Lender, upon receipt from
Lender of an affidavit and indemnity in a form reasonably acceptable to Lender
and Borrower stipulating that such Note has been mutilated, destroyed, lost or
stolen (and, in the case of a mutilated Note, such mutilated Note), in
substitution therefor, a new promissory note containing the same terms and
conditions as such Lost Note with a notation thereon of the unpaid principal and
accrued and unpaid interest.

             L. AFFILIATE TRANSACTIONS. Unless otherwise approved by Lender, all
transactions between Borrower and any of its Affiliates shall be on terms
substantially as advantageous to Borrower as those which could be obtained by
Borrower in a comparable arm's length transaction with a non-Affiliate of
Borrower.

             M. NONCONSOLIDATION. (1) Borrower shall at all times maintain
correct and complete books and records of account separate from all other
Persons. Where necessary or appropriate, Borrower shall disclose the nature of
the transactions contemplated by the Loan Documents and Borrower's independent
status to its creditors. Borrower shall not own or lease any assets other than
the Premises, nor engage in any business other than owning and leasing the
Premises, including financing the Premises with Lender. Borrower shall not
commingle its assets and its liabilities with those of any other Person.

                (2) Borrower shall maintain its own checking account or accounts
with commercial banking institutions separate from other Persons.

                (3) To the extent that Borrower shares the same employees with
other Persons, the salaries of and the expenses related to providing benefits to
such employees, at all times shall be, fairly and nonarbitrarily allocated among
such Persons, with the result that each such Person shall bear its fair share of
the salary and benefit costs associated with all such common employees.

                (4) To the extent that Borrower jointly contracts with other
Persons to do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing at all times shall be, fairly and
nonarbitrarily allocated among such Persons, with the result that each such
Person shall bear its fair share of such costs. To the extent that Borrower
contracts or does business with vendors or service providers where the goods or
services provided are or shall be partially for the benefit of other Persons,
the costs incurred in so doing at all times shall be, fairly and nonarbitrarily
allocated to or among such Persons for whose benefit

                                       26
<PAGE>

the goods or services are provided, with the result that each such Person shall
bear its fair share of such costs. All transactions between Borrower and other
Persons shall be only on an arm's-length basis.

                (5) To the extent that Borrower or other Persons have offices in
the same location, there shall be a fair, appropriate and nonarbitrary
allocation of overhead among them, with the result that each such Person shall
bear its fair share of such expenses.

                (6) Borrower shall not incur any indebtedness, secured or
unsecured, direct or indirect, absolute or contingent (including guaranteeing
any obligation or assuming liability for the debts of any other Person and
Borrower will not hold itself out as being liable for the debts of any other
Person), other than the Loans and trade and operational debt incurred in the
ordinary course of business with trade creditors and in amounts as are normal
and reasonable under the circumstances. No indebtedness other than the Loans may
be secured (subordinate or pari passu) by the Premises or any portion thereof.

                (7) Borrower shall not enter into any contract or agreement with
any Affiliate of Borrower, any constituent party of Borrower or any Affiliate of
any constituent party of Borrower except upon terms and conditions that are
intrinsically fair and no more favorable to Borrower than to those that would be
available on an arms-length basis with third parties other than any such party.

                (8) Except as contemplated by the Loan Documents, Borrower shall
not pledge, grant any security interest in, hypothecate or otherwise encumber
its assets for the benefit of any other Persons.

                (9) Borrower shall issue separate financial statements prepared
not less frequently than annually and prepared according to GAAP.

                (10) Borrower shall maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character in
light of its contemplated business operations.

                (11) Borrower shall conduct its affairs strictly in accordance
with its organizational documents, including Borrower's corporate managing
member's organizational documents and shall observe all necessary, appropriate
and customary formalities. The books, records and accounts of Borrower shall at
all times be maintained in a manner permitting the assets and liabilities of
Borrower to be easily separated and readily ascertained from those of any other
Person and Borrower shall file its own tax returns.

                (12) Borrower shall not hold itself out to the public or to any
of its individual creditors as being a unified entity with assets and
liabilities in common with any other Person. Borrower shall maintain and utilize
separate stationery, invoices and checks.

                (13) Borrower shall not make any loans or advances to any third
party (including any Affiliate of Borrower or constituent party of Borrower).

                                       27
<PAGE>

                (14) Borrower shall not, as to itself or as to other Persons,
(a) commence any case, proceeding or other action under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to Borrower or other Persons or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to Borrower or its debts or other
Persons or their debts or (b) seek appointment of a receiver, trustee, custodian
or other similar official for Borrower or for all or any substantial part of its
or other Person's assets or make a general assignment for the benefit of
Borrower's creditors. Borrower shall not take any action in furtherance of, or
indicating its consents to, approval of or acquiescence in, any of the acts set
forth above. Borrower shall not be unable to, or admit in writing its inability
to, pay its debts.

         8. PROHIBITION ON CHANGE OF CONTROL AND PLEDGE. Without limiting the
terms and conditions of Section 3.09 of the Mortgages, Borrower agrees that,
from and after the Closing Date and until all of the Obligations are satisfied
in full, without the prior written consent of Lender:

              (1) no Change of Control shall occur; and

              (2) no interest in Borrower shall be pledged, encumbered,
hypothecated or assigned as collateral for any obligation of any of the Borrower
Entities (each, a "Pledge").

         Lender's consent to a Change of Control and/or Pledge shall be subject
to the satisfaction of such conditions as Lender shall determine in its sole
discretion, including, without limitation, (i) the execution and delivery of
such modifications to the terms of the Loan Documents as Lender shall reasonably
request, (ii) the proposed Change of Control and/or Pledge having been approved
by each of the rating agencies which have issued ratings in connection with any
Securitization of the Loans as well as any other rating agency selected by
Lender, and (iii) the proposed transferee having agreed to comply with all of
the terms and conditions of the Loan Documents (including any modifications
reasonably requested by Lender pursuant to clause (i) above). In addition, any
such consent shall be conditioned upon payment by Borrower to Lender of (x) a
fee equal to one percent (1%) of the then outstanding principal balance of the
Notes and (y) all out-of-pocket costs and expenses incurred by Lender in
connection with such consent, including, without limitation, reasonable
attorneys' fees. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Obligations immediately due and payable upon a Change of Control
or Pledge in violation of this Section. The provisions of this Section shall
apply to every Change of Control or Pledge regardless of whether voluntary or
not, or whether or not Lender has consented to any previous Change of Control or
Pledge.

         9. TRANSACTION CHARACTERIZATION. A. It is the intent of the parties
hereto that this Agreement and the other Loan Documents are a contract to extend
a financial accommodation (as such term is used in the Code) for the benefit of
Borrower and that, except as otherwise contemplated by Sections 14.P(4) and (5),
the Loan Documents evidence one unitary, unseverable transaction pertaining to
all of the Premises. Borrower acknowledges that all of the Loans are
cross-defaulted and cross-collateralized, except as otherwise contemplated by
Sections

                                       28
<PAGE>

14.P(4) and (5), and that such cross-default and cross-collateralization is a
material inducement to Lender making the Loans.

                B. It is the intent of the parties hereto that the business
relationship created by the Loan Documents is solely that of creditor and debtor
and has been entered into by both parties in reliance upon the economic and
legal bargains contained in the Loan Documents. None of the agreements contained
in the Loan Documents is intended, nor shall the same be deemed or construed, to
create a partnership (either de jure or de facto) between Borrower and Lender,
to make them joint venturers, to make Borrower an agent, legal representative,
partner, subsidiary or employee of Lender, nor to make Lender in any way
responsible for the debts, obligations or losses of Borrower.

         10. DEFAULT AND REMEDIES. A. Each of the following shall be deemed an
event of default by Borrower (each, an "Event of Default"):

                (1) If any representation or warranty of Borrower set forth in
any of the Loan Documents is false in any material respect which would have a
Material Adverse Effect, or if Borrower renders any statement or account which
is false in any material respect as of the effective date of such
representation.

                (2) If any principal, interest or other monetary sum due under
the Notes, the Mortgages or any other Loan Document is not paid within five days
after the date when due; provided, however, notwithstanding the occurrence of
such an Event of Default, Lender shall not be entitled to exercise its rights
and remedies set forth below unless and until Lender shall have given Borrower
notice thereof and a period of five days from the delivery of such notice shall
have elapsed without such Event of Default being cured.

                (3) If Borrower fails to observe or perform any of the other
covenants (except with respect to a breach of the Fixed Charge Coverage Ratio,
which breach is addressed in subitem (7) below), conditions, or obligations of
this Agreement; provided, however, if any such failure does not involve the
payment of any monetary sum, is not willful or intentional, does not place any
rights or interest in collateral of Lender in immediate jeopardy, and is within
the reasonable power of Borrower to promptly cure after receipt of notice
thereof, all as determined by Lender in its reasonable discretion, then such
failure shall not constitute an Event of Default hereunder, except as otherwise
expressly provided herein, unless and until Lender shall have given Borrower
notice thereof and a period of 30 days shall have elapsed, during which period
Borrower may correct or cure such failure, upon failure of which an Event of
Default shall be deemed to have occurred hereunder without further notice or
demand of any kind being required. If such failure cannot reasonably be cured
within such 30-day period, as determined by Lender in its reasonable discretion,
and Borrower is diligently pursuing a cure of such failure, then Borrower shall
have a reasonable period to cure such failure beyond such 30-day period, which
shall not, except for Remediation exceed 90 days after receiving notice of the
failure from Lender. Except for Remediation, if Borrower shall fail to correct
or cure such failure within such 90-day period, an Event of Default shall be
deemed to have occurred hereunder without further notice or demand of any kind
being required.

                                       29
<PAGE>

                (4) If Borrower becomes insolvent within the meaning of the
Code, files or notifies Lender that it intends to file a petition under the
Code, initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, an "Action"), becomes the subject of either a petition under the
Code or an Action, or is not generally paying its debts as the same become due;
provided that if the Action is commenced by a party other than a Borrower
Entity, the commencement of such Action shall not be an Event of Default
hereunder if such Action is dismissed or discharged within sixty (60) days of
filing thereof.

                (5) If there is an "Event of Default" or a breach or default,
after the passage of all applicable notice and cure or grace periods, under any
other Loan Document, the Lease, any of the Related Loan Documents or any of the
Other Agreements.

                (6) If a final, nonappealable judgment is rendered by a court
against Borrower which (i) has a material adverse effect on the operation of any
of the Premises as a Permitted Concept, or (ii) is in an amount greater than
$100,000.00; provided, however, that any such judgment of the nature specified
in Sections 10.A(6)(i) or 10.A(6)(ii) shall not result in an Event of Default if
(x) such judgment is discharged or provision made for such discharge within 60
days from the date of entry of such judgment, or (y) (1) Borrower has valid and
collectible insurance coverage for such judgment and (2) the total amount of
liability of the Borrower not paid or payable by such insurance, taking into
account all deductibles or self insured retentions, does not exceed $100,000.

                (7) If there is a breach of the Fixed Charge Coverage Ratio
requirement and Lender shall have given Borrower written notice thereof (the
"FCCR Amount Notice") and Borrower shall have failed within a period of 30 days
from the delivery of such notice to (i) pay to Lender the FCCR Amount (without
premium or penalty) with respect to such of the Premises (starting with the
Premises with the lowest Fixed Charge Coverage Ratio and proceeding in ascending
order to the Premises with the next lowest Fixed Charge Coverage Ratio) as is
necessary to cure the breach of the Fixed Charge Coverage Ratio requirement and
for which the then Fixed Charge Coverage Ratio (with the definitions in Section
7.J being deemed to be modified as applicable to provide for the calculation of
the Fixed Charge Coverage Ratio for each such Premises on an individual basis
rather than on an aggregate basis with the other Premises) is below 1.25:1
(each, a "Subject Premises"), (ii) prepay the Note or Notes corresponding to the
Subject Premises in whole but not in part (without premium or penalty) or (iii)
notify Lender of Borrower's election to substitute a Substitute Premises for
each Subject Premises in accordance with the terms of Section 13 (the failure of
Borrower to complete such substitution within 60 days after Borrower has
delivered the Proposed Substitution Notice to Lender shall be deemed to be an
Event of Default without further notice or demand of any kind being required).
For purposes of the preceding sentence, "FCCR Amount" means that sum of money
which, when subtracted from the outstanding principal amount of the Note
corresponding to a Subject Premises, and assuming the resulting principal
balance is reamortized in equal monthly payments over the remaining term of such
Note at the rate of interest set forth therein, will result in an adjusted
aggregate Fixed Charge Coverage Ratio for all of the Premises of at least 1.25:1
based on the prior year's operations. Promptly after Borrower's payment of the
FCCR Amount, Borrower and Lender shall execute an amendment to each such Note in
form and substance reasonably acceptable to Lender reducing the principal amount
payable to Lender

                                       30
<PAGE>

under such Note and reamortizing the principal amount of such Note in equal
monthly payments over the then remaining term of such Note at the rate of
interest set forth therein.

              B. Upon the occurrence and during the continuance of an Event of
Default, subject to the limitations set forth in subsection A, Lender may
declare all or any part of the obligations of Borrower under the Notes, this
Agreement and any other Loan Document to be due and payable, and the same shall
thereupon become due and payable without any presentment, demand, protest or
notice of any kind except as otherwise expressly provided herein, and Borrower
hereby waives notice of intent to accelerate the obligations secured by the
Mortgages and notice of acceleration. Thereafter, Lender may exercise, at its
option, concurrently, successively or in any combination, all remedies available
at law or in equity, including without limitation any one or more of the
remedies available under the Notes, the Mortgages or any other Loan Document.
Neither the acceptance of this Agreement nor its enforcement shall prejudice or
in any manner affect Lender's right to realize upon or enforce any other
security now or hereafter held by Lender, it being agreed that Lender shall be
entitled to enforce this Agreement and any other security now or hereafter held
by Lender in such order and manner as it may in its absolute discretion
determine. No remedy herein conferred upon or reserved to Lender is intended to
be exclusive of any other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Lender, or to which Lender may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Lender.

         11. ASSIGNMENTS BY LENDER. Subject to the terms of Section 14P.(2) of
this Agreement, Lender may assign in whole or in part its rights under this
Agreement, including, without limitation, in connection with any Transfer,
Participation and/or Securitization. Upon any unconditional assignment of
Lender's entire right and interest hereunder, Lender shall automatically be
relieved, from and after the date of such assignment, of liability for the
performance of any obligation of Lender contained herein.

         12. INDEMNITY; RELEASE. A. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless each of the
Indemnified Parties for, from and against any and all Losses (excluding Losses
suffered by an Indemnified Party directly arising out of such Indemnified
Party's gross negligence or willful misconduct; provided, however, that the term
"gross negligence" shall not include gross negligence imputed as a matter of law
to any of the Indemnified Parties solely by reason of Borrower's interest in any
of the Premises or Borrower's failure to act in respect of matters which are or
were the obligation of Borrower under the Loan Documents), and costs of
Remediation (whether or not performed voluntarily), engineers' fees,
environmental consultants' fees, and costs of investigation (including but not
limited to sampling, testing, and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
imposed upon or incurred by or asserted against any Indemnified Parties, and
directly or indirectly arising out of or in any way relating to any one or more
of the following:

                (1) any presence of any Hazardous Materials in, on, above, or
under any of the Premises;

                                       31
<PAGE>

                (2) any past, present or Threatened Release in, on, above, under
or from any of the Premises;

                (3) any activity by Borrower, any person or entity affiliated
with Borrower or any tenant or other user of any of the Premises in connection
with any actual, proposed or threatened use, treatment, storage, holding,
existence, disposition or other Release, generation, production, manufacturing,
processing, refining, control, management, abatement, removal, handling,
transfer or transportation to or from any of the Premises of any Hazardous
Materials at any time located in, under, on or above any of the Premises;

                (4) any activity by Borrower, any person or entity affiliated
with Borrower or any tenant or other user of any of the Premises in connection
with any actual or proposed Remediation of any Hazardous Materials at any time
located in, under, on or above any of the Premises, whether or not such
Remediation is voluntary or pursuant to court or administrative order, including
but not limited to any removal, remedial or corrective action;

                (5) any past, present or threatened non-compliance or violations
of any Environmental Laws (or permits issued pursuant to any Environmental Law)
in connection with any of the Premises or operations thereon, including but not
limited to any failure by Borrower, any person or entity affiliated with
Borrower or any tenant or other user of any of the Premises to comply with any
order of any Governmental Authority in connection with any Environmental Laws;

                (6) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering any of the
Premises;

                (7) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Agreement;

                (8) any past, present or threatened injury to, destruction of or
loss of natural resources in any way connected with any of the Premises,
including but not limited to costs to investigate and assess such injury,
destruction or loss;

                (9) any acts of Borrower, any person or entity affiliated with
Borrower or any tenant or other user of any of the Premises in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Materials owned or possessed by Borrower,
any person or entity affiliated with Borrower or any tenant or other user, at
any facility or incineration vessel owned or operated by another person or
entity and containing such or similar Hazardous Materials;

                (10) any acts of Borrower, any person or entity affiliated with
Borrower or any tenant or other user of any of the Premises, in accepting any
Hazardous Materials for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower, any person or entity
affiliated with Borrower or any tenant or other user of any of the Premises,
from which there is a Release, or a Threatened Release of any Hazardous Material
which causes the incurrence of costs for Remediation;

                                       32
<PAGE>

                (11) any personal injury, wrongful death, or property damage
arising under any statutory or common law or tort law theory, including but not
limited to damages assessed for the maintenance of a private or public nuisance
or for the conducting of an abnormally dangerous activity on or near any of the
Premises; or

                (12) any misrepresentation or inaccuracy in any representation
or warranty or material breach or failure to perform any covenants or other
obligations pursuant to this Agreement.

              B. Borrower fully and completely releases, waives and covenants
not to assert any claims, liabilities, actions, defenses, challenges, contests
or other opposition against Lender and Environmental Insurer, however
characterized, known or unknown, foreseen or unforeseen, now existing or arising
in the future, relating to Borrower's breach of any representation, covenant, or
obligation set forth in this Agreement with respect to any Hazardous Materials,
Releases and/or Remediation on, at or affecting any of the Premises.

         13. SUBSTITUTION. A. Borrower shall have the right to obtain a release
of all liens granted in favor of Lender with respect to a Premises by
substituting a Substitute Premises for such Premises if:

                (1) the terms of Section 10.A(7) permit such substitution;

                (2) there is an event that results in a default under, or an
event that, but for the passage of time or giving of notice would be a default
under, Section 7.D., 7.E. or 7.F. hereof; or

                (3) Borrower determines for any reason to make a substitution,
provided, however, that Borrower may not substitute more than three (3) of the
Premises pursuant to the provisions of this subitem (3).

              B. Borrower's right to substitute a Substitute Premises for a
Premises pursuant to the preceding subsection A. shall be subject to the
fulfillment of each of the following terms and conditions:

                (1) Borrower shall provide Lender with notice of its intention
to substitute a Substitute Premises. Any notice (the "Proposed Substitution
Notice") with respect to a proposed substitution pursuant to the preceding
subsection A(1) must be delivered within the 30 day period following Borrower's
receipt of the FCCR Amount Notice and the closing of the substitution shall take
place within the 60 day period following Borrower's delivery of the Proposed
Substitution Notice. Any substitution pursuant to the preceding subsection A(2)
or A(3) shall take place within 60 days after delivery to Lender of the
substitution notice.

                (2) Borrower must provide for the substitution of a Substitute
Premises, and the proposed Substitute Premises must:

                    (a) be a Permitted Concept, in good condition and repair,
ordinary wear and tear excepted;

                                       33
<PAGE>

                    (b) have for the twelve month period preceding the date of
the closing of such substitution a Fixed Charge Coverage Ratio (with the
definitions of Section 7.J being deemed to be modified if necessary and as
applicable to provide for a calculation of the Fixed Charge Coverage Ratio for
each of the Substitute Premises, and the Premises being replaced on an
individual basis rather than on an aggregate basis with the other Substitute
Premises and the other Premises, respectively) at least equal to the Fixed
Charge Coverage Ratio for the Premises being replaced and the substitution must
not cause a breach of any Fixed Charge Coverage Ratio requirement under this
Agreement;

                    (c) be owned in fee simple by Borrower;

                    (d) Borrower's right, title and interest in and to each
proposed Substitute Premises shall be free and clear of all liens, restrictions,
easements and encumbrances, except such matters as are acceptable to Lender (the
"Substitute Premises Permitted Exceptions"); and

                    (e) have a fair market value no less than the greater of the
then fair market value of the Premises to be replaced or the fair market value
of such Premises as of the Closing, all as reasonably determined by Lender's
in-house inspectors and underwriters utilizing the same valuation method as used
in connection with the Closing.

                (3) Lender shall have inspected and approved the Substitute
Premises utilizing Lender customary site inspection and underwriting approval
criteria. Borrower shall have reimbursed Lender for all of its costs and
expenses incurred with respect to such proposed substitution, including, without
limitation, Lender's site inspectors' costs and expenses with respect to the
proposed Substitute Premises. Borrower shall be solely responsible for the
payment of all costs and expenses resulting from such proposed substitution,
including, without limitation, the cost of title insurance premiums and
endorsements, the cost of personal property lien insurance premiums and
endorsements, survey charges, stamp taxes, mortgage taxes, transfer fees,
escrow, filing and recording fees and UCC filing and recording fees (including
preparation, filing and recording fees for UCC continuation statements), the
cost of environmental due diligence undertaken pursuant to subsection (7) below,
including, without limitation, the cost of environmental insurance, and the
reasonable attorneys' fees and expenses of counsel to Borrower and Lender.

                (4) Lender shall have received a preliminary title report and
irrevocable commitment to insure title in the amount of the then outstanding
principal balance of the Loan relating to the Premises to be replaced by means
of a mortgagee's ALTA extended coverage policy of title insurance (or its
equivalent, in the event such form is not issued in the jurisdiction where the
proposed Substitute Premises is located) for such proposed Substitute Premises
issued by Title Company showing good and marketable title in the real property
comprising the Substitute Premises vested in Borrower and committing to insure
Lender's first priority lien upon and security interest in the proposed
Substitute Premises, subject only to the Substitute Premises Permitted
Exceptions and containing endorsements substantially comparable to those
required by Lender at the Closing.

                                       34
<PAGE>

                (5) Lender shall have received an irrevocable commitment issued
by First American Corporation to insure Lender's first priority lien upon and
security interest in the "Personal Property" (as defined in the Substitute
Documents) subject only to such exceptions as Lender shall approve and
containing endorsements substantially comparable to those required by Lender at
the Closing.

                (6) Lender shall have received a current ALTA survey of such
proposed Substitute Premises or its equivalent, the form of which shall be
comparable to those received by Lender at the Closing and sufficient to cause
the standard survey exceptions set forth in the title policy referred to in the
preceding subsection to be deleted, and disclosing no matters other than the
Substitute Premises Permitted Exceptions.

                (7) Lender shall have completed such environmental due diligence
of each of the Premises as it deems necessary or advisable in its sole
discretion, including, without limitation, receiving an environmental insurance
policy with respect to such proposed Substitute Premises in form and substance
and issued by such environmental insurance company as is acceptable to Lender in
its sole discretion, and Lender shall have approved the environmental condition
of the Substitute Premises in its sole discretion.

                (8) Borrower shall deliver, or cause to be delivered, with
respect to Borrower and Lessee and the Substitute Premises, opinions of Counsel
in form and substance comparable to those received at Closing (but also
addressing such matters unique to the Substitute Premises as may be reasonably
required by Lender).

                (9) Borrower shall have provided Lender with evidence reasonably
satisfactory to Lender that the Substitute Premises is properly zoned for use as
a Permitted Concept and that such use constitutes a legal, conforming use under
applicable zoning requirements.

                (10) no Event of Default shall have occurred and be continuing
under any of the Loan Documents.

                (11) Borrower and Lessee shall have executed such documents as
are comparable to the security documents executed and delivered at Closing, as
applicable (but with such revisions as may be reasonably required by Lender to
address matters unique to the Substitute Premises) or amendments to such
documents, including, without limitation, a Mortgage, amendments to the Lease,
Memoranda and License Agreement, and UCC-1 Financing Statements (the "Substitute
Documents"), to provide Lender with a first priority lien on the proposed
Substitute Premises, subject only to the Substitute Premises Permitted
Exceptions, and all other rights, remedies and benefits with respect to the
proposed Substitute Premises which Lender holds in the Premises to be replaced,
all of which documents shall be in form and substance reasonably satisfactory to
Lender.

                (12) the representations and warranties set forth in the
Substitute Documents and Section 6 of this Agreement applicable to the proposed
Substitute Premises shall be true and correct in all material respects as of the
date of substitution, and Borrower shall have delivered to Lender an officer's
certificate to that effect.
                                       35
<PAGE>

                (13) Borrower shall have delivered to Lender certificates of
insurance and insurance policies showing that all insurance required by the
Substitute Documents is in full force and effect.

         Upon satisfaction of the foregoing conditions with respect to the
release of a Premises:

                     (a) the proposed Substitute Premises shall be deemed
substituted for the Premises to be replaced;

                     (b) the Loan Amount for the Substitute Premises shall be
the same as for the replaced Premises;

                     (c) the Substitute Premises shall be referred to herein as
a "Premises" and included within the definition of "Premises" and shall secure
the same Obligations as were secured by the Premises that were replaced;

                     (d) the Substitute Documents shall be dated as of the date
of the substitution;

                     (e) Lender will release, or cause to be released, the lien
of the Mortgage, UCC-1 Financing Statements and any other Loan Documents
encumbering the replaced Premises; and

                     (f) at the closing of the substitution, Borrower shall
convey without warranty or recourse the replaced Premises to a third party
(including without limitation Lessee, but excluding any of the Borrower Group).

         14. MISCELLANEOUS PROVISIONS.

             A. NOTICES. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Agreement or
any of the other Loan Documents shall be in writing and given by (i) hand
delivery, (ii) facsimile, (iii) express overnight delivery service or (iv)
certified or registered mail, return receipt requested, and shall be deemed to
have been delivered upon (a) receipt, if hand delivered, (b) transmission, if
delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day of
deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:

             If to Borrower:        Friendly's Realty III, LLC

                                    1855 Boston Road
                                    Wilbraham, Massachusetts 01095-1098
                                    Attention: Aaron Parker
                                    Telephone: (413) 543-2400
                                    Telecopy:  (413) 543-3282

                                       36
<PAGE>

             If to Lender:    Dennis L. Ruben, Esq.

                              Executive Vice President,
                              General Counseland Secretary
                              GE Capital Franchise Finance Corporation
                              17207 North Perimeter Drive
                              Scottsdale, AZ  85255
                              Telephone: (480) 585-4500
                              Telecopy:  (480) 585-2226

             B. REAL ESTATE COMMISSION. Lender and Borrower represent and
warrant to each other that they have dealt with no real estate or mortgage
broker, agent, finder or other intermediary in connection with the transactions
contemplated by this Agreement or the other Loan Documents. Lender and Borrower
shall indemnify and hold each other harmless from and against any costs, claims
or expenses, including attorneys' fees, arising out of the breach of their
respective representations and warranties contained within this Section.

             C. WAIVER AND AMENDMENT; DOCUMENT REVIEW. (1) No provisions of this
Agreement or the other Loan Documents shall be deemed waived or amended except
by a written instrument unambiguously setting forth the matter waived or amended
and signed by the party against which enforcement of such waiver or amendment is
sought. Waiver of any matter shall not be deemed a waiver of the same or any
other matter on any future occasion.

                (2) In the event Borrower makes any request upon Lender
requiring Lender or Lender's attorneys to review and/or prepare (or cause to be
reviewed and/or prepared) any documents, plans, specifications or other
submissions in connection with or arising out of this Agreement or any of the
other Loan Documents, then Borrower shall (x) reimburse Lender promptly upon
Lender's demand for all reasonable out-of-pocket costs and expenses incurred by
Lender in connection with such review and/or preparation, including, without
limitation, reasonable attorneys' fees, and (y) pay Lender a reasonable
processing and review fee.

             D. CAPTIONS. Captions are used throughout this Agreement and the
other Loan Documents for convenience of reference only and shall not be
considered in any manner in the construction or interpretation hereof.

             E. LENDER'S LIABILITY. Notwithstanding anything to the contrary
provided in this Agreement or the other Loan Documents, it is specifically
understood and agreed, such agreement being a primary consideration for the
execution of this Agreement and the other Loan Documents by Lender, that (1)
there shall be absolutely no personal liability on the part of any shareholder,
director, officer or employee of Lender, with respect to any of the terms,
covenants and conditions of this Agreement or the other Loan Documents, (2)
Borrower waives all claims, demands and causes of action against Lender's
officers, directors, employees and agents in the event of any breach by Lender
of any of the terms, covenants and conditions of this Agreement or the other
Loan Documents to be performed by Lender and (3) Borrower shall look solely to
the assets of Lender for the satisfaction of each and every remedy of Borrower
in the event of any breach by Lender of any of the terms, covenants and
conditions of this Agreement or the

                                       37
<PAGE>

other Loan Documents to be performed by Lender, such exculpation of liability to
be absolute and without any exception whatsoever.

             F. SEVERABILITY. The provisions of this Agreement and the other
Loan Documents shall be deemed severable. If any part of this Agreement or the
other Loan Documents shall be held invalid, illegal or unenforceable, the
remainder shall remain in full force and effect, and such invalid, illegal or
unenforceable provision shall be reformed by such court so as to give maximum
legal effect to the intention of the parties as expressed therein.

             G. CONSTRUCTION GENERALLY. This Agreement and the other Loan
Documents have been entered into by parties who are experienced in sophisticated
and complex matters similar to the transaction contemplated by this Agreement
and the other Loan Documents and is entered into by both parties in reliance
upon the economic and legal bargains contained therein and shall be interpreted
and construed in a fair and impartial manner without regard to such factors as
the party which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Borrower and Lender were each represented
by legal counsel competent in advising them of their obligations and liabilities
hereunder.

             H. FURTHER ASSURANCES. Borrower will, at its sole cost and expense,
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered all such further acts, documents, conveyances, notes, mortgages,
deeds of trust, assignments, security agreements, financing statements and
assurances as Lender shall from time to time reasonably require or deem
advisable to carry into effect the purposes of this Agreement and the other Loan
Documents, to perfect any lien or security interest granted in any of the Loan
Documents and for the better assuring and confirming of all of Lender's rights,
powers and remedies under the Loan Documents.

             I. ATTORNEYS' FEES. In the event of any judicial or other
adversarial proceeding between the parties concerning this Agreement or the
other Loan Documents, the prevailing party shall be entitled to recover its
attorneys' fees and other costs in addition to any other relief to which it may
be entitled.

             J. ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with any other certificates, instruments or agreements to be delivered
in connection therewith, constitute the entire agreement between the parties
with respect to the subject matter hereof, and there are no other
representations, warranties or agreements, written or oral, between Borrower and
Lender with respect to the subject matter of this Agreement and the other Loan
Documents. Notwithstanding anything in this Agreement and the other Loan
Documents to the contrary, with respect to the Premises, upon the execution and
delivery of this Agreement by Borrower and Lender, the Commitment shall be
deemed null and void and of no further force and effect and the terms and
conditions of this Agreement shall control notwithstanding that such terms and
conditions may be inconsistent with or vary from those set forth in the
Commitment.

             K. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Borrower
acknowledges that this Agreement and the other Loan Documents were substantially
negotiated in the State of Arizona, this Agreement and the other Loan Documents
were executed by Lender in the State of Arizona and executed and delivered by
Borrower in the State of Arizona, all

                                       38
<PAGE>

payments under the Notes will be delivered in the State of Arizona and there are
substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Agreement or any of the other Loan Documents, the parties
hereto hereby expressly submit to the jurisdiction of all federal and state
courts located in the State of Arizona and Borrower consents that it may be
served with any process or paper by registered mail or by personal service
within or without the State of Arizona in accordance with applicable law.
Furthermore, Borrower waives and agrees not to assert in any such action, suit
or proceeding that it is not personally subject to the jurisdiction of such
courts, that the action, suit or proceeding is brought in an inconvenient forum
or that venue of the action, suit or proceeding is improper. It is the intent of
the parties hereto that all provisions of this Agreement and the Notes shall be
governed by and construed under the laws of the State of Arizona, without giving
effect to its principles of conflicts of law. To the extent that a court of
competent jurisdiction finds Arizona law inapplicable with respect to any
provisions of this Agreement or the Notes, then, as to those provisions only,
the laws of the states where the Premises are located shall be deemed to apply.
Nothing in this Section shall limit or restrict the right of Lender to commence
any proceeding in the federal or state courts located in the states in which the
Premises are located to the extent Lender deems such proceeding necessary or
advisable to exercise remedies available under this Agreement or the other Loan
Documents.

             L. COUNTERPARTS. This Agreement and the other Loan Documents may be
executed in one or more counterparts, each of which shall be deemed an original.

             M. BINDING EFFECT. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and permitted assigns, including, without limitation, any
United States trustee, any debtor in possession or any trustee appointed from a
private panel.

             N. SURVIVAL. Except for the conditions of Closing set forth in
Section 4, which shall be satisfied or waived as of the Closing Date, all
representations, warranties, agreements, obligations and indemnities of Borrower
and Lender set forth in this Agreement and the other Loan Documents shall
survive the Closing.

             O. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES. BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY
OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED
HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES FROM THE OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS,
DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH

                                       39
<PAGE>

RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER'S
AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY
OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED
HERETO. THE WAIVER BY BORROWER AND LENDER OF ANY RIGHT THEY MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE
PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.

             P. TRANSFERS, PARTICIPATIONS AND SECURITIZATIONS. (1) A material
inducement to Lender's willingness to complete the transactions contemplated by
the Loan Documents is Borrower's agreement that Lender may, at any time,
complete a Transfer, Participation or Securitization with respect to any Note,
Mortgage and/or any of the other Loan Documents or any or all servicing rights
with respect thereto.

                (2) Borrower agrees to cooperate in good faith with Lender in
connection with any such Transfer, Participation and/or Securitization of any
Note, Mortgage and/or any of the other Loan Documents, or any or all servicing
rights with respect thereto, including, without limitation (i) providing such
documents, financial and other data, and other information and materials (the
"Disclosures") which would typically be required with respect to Borrower or
Lessee by a purchaser, transferee, assignee, servicer, participant, investor or
rating agency involved with respect to such Transfer, Participation and/or
Securitization, as applicable; provided, however, (x) Borrower and Lessee shall
not be required to make Disclosures of any confidential information or any
information which has not previously been made public unless required by
applicable federal or state securities laws, and (y) each such purchaser,
transferee, assignee, servicer or participant acknowledges the confidential
nature of such information; and (ii) amending the terms of the transactions
evidenced by the Loan Documents to the extent necessary so as to satisfy the
requirements of purchasers, transferees, assignees, servicers, participants,
investors or selected rating agencies involved in any such Transfer,
Participation or Securitization, so long as such amendments would not have a
material adverse effect upon Borrower, Lessee or the transactions contemplated
hereunder. Notwithstanding the preceding sentence, Borrower shall not be
required to amend or change any documents evidencing or securing any Loan
Documents which would modify (a) the interest rate payable under the Notes, (b)
the stated maturity date of the Notes, (c) the amortization of principal or
prepayment rights with respect to the Notes, or (d) any other material economic
term of the Loan Documents that would have a material adverse effect on
Borrower. Lender shall be responsible for preparing at its expense any documents
in connection with any Transfer, Participation and/or Securitization, including
without limitation all documents evidencing the amendments referred to in the
preceding subitem (ii).

                (3) Subject to the terms of Section 14P.(2) above, Borrower
consents to Lender providing the Disclosures, as well as any other information
which Lender may now have or hereafter acquire with respect to the Premises or
the financial condition of Borrower and Lessee to each purchaser, transferee,
assignee, servicer, participant, investor or rating agency involved with respect
to each Transfer, Participation and/or Securitization, as applicable. Lender

                                       40
<PAGE>

and Borrower (and their respective Affiliates) shall each pay their own
attorneys fees and other out-of-pocket expenses incurred in connection with the
performance of their respective obligations under this Section.

                (4) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents:

                    (a) an Event of Default or a breach or default, after the
passage of all applicable notice and cure or grace periods, under any Loan
Document or Other Agreement which relates to a loan or sale/leaseback
transaction which has not been the subject of a Securitization, Participation or
Transfer shall not constitute an Event of Default or a breach or default, as
applicable, under any Loan Document or Other Agreement which relates to a loan
which has been the subject of a Securitization, Participation or Transfer;

                    (b) an Event of Default or a breach or default, after the
passage of all applicable notice and cure or grace periods, under any Loan
Document or Other Agreement which relates to a loan which is included in any
Loan Pool shall not constitute an Event of Default or a breach or default, as
applicable, under any Loan Document or Other Agreement which relates to a loan
which is included in any other Loan Pool;

                    (c) the Loan Documents and Other Agreements corresponding to
the loans in any Loan Pool shall not secure the obligations of any of the
Borrower Entities contained in any Loan Document or Other Agreement which does
not correspond to a loan in such Loan Pool; and

                    (d) the Loan Documents and Other Agreements which do not
correspond to a loan in any Loan Pool shall not secure the obligations of any of
the Borrower Entities contained in any Loan Document or Other Agreement which
does correspond to a loan in such Loan Pool.

                (5) In the event that at least one, but not all, of the Loans
are included in a Loan Pool, Borrower, at the request of Lender, shall execute
(i) a separate Loan Agreement with respect to those Loans included in such Loan
Pool, which Loan Agreement shall be in substantially the same form and substance
as this Agreement but shall only apply with respect to those Premises
corresponding to such Loans (the "Other Loan Agreement"), (ii) an amendment to
this Agreement that shall modify the term "Premises" to delete those Premises
corresponding to the Other Loan Agreement from this Agreement. Lender shall
prepare, at Lender's expense, the documents contemplated by the preceding
sentence. Subject to the terms of Section 14P.(2) of this Agreement, if Borrower
shall fail to execute and deliver any of the documents contemplated by this
subsection (5) within ten (10) days after Lender's request, Lender shall be and
is hereby irrevocably appointed the agent and attorney-in-fact of Borrower to
execute and deliver such documents, which appointment is coupled with an
interest and is irrevocable and binding.

            Q. ESTOPPEL CERTIFICATE. (1) At any time, and from time to time,
Borrower agrees, promptly and in no event later than fifteen (15) days after a
written request from Lender, to execute, acknowledge and deliver to Lender a
certificate in the form supplied by Lender,

                                       41
<PAGE>

certifying: (a) the date to which principal and interest have been paid under
the Note and the amount thereof then payable; (b) that no written notice has
been received by Borrower of any default under this Agreement or any of the
other Loan Documents which has not been cured, except as to defaults specified
in the certificate; (c) the capacity of the person executing such certificate,
and that such person is duly authorized to execute the same on behalf of
Borrower; (d) that Lender does not have actual involvement in the management or
control of decision making related to the operational aspects or the day-to-day
operations of the Premises; and (e) any other information reasonably requested
by Lender in connection with this Agreement and the other Loan Documents. If
Borrower shall fail or refuse to sign a certificate in accordance with the
provisions of this Section within fifteen (15) days following a request by
Lender, Borrower irrevocably constitutes and appoints Lender as its
attorney-in-fact to execute and deliver the certificate to any such third party,
it being stipulated that such power of attorney is coupled with an interest and
is irrevocable and binding.

                (2) At any time, and from time to time, Lender, agrees, promptly
and in no event later than fifteen (15) days' after a request from Borrower, to
execute, acknowledge and deliver to Borrower a certificate in the form supplied
by Borrower, certifying: (a) to Lender's knowledge, whether there are then any
existing defaults by Borrower in the performance of its obligations under this
Agreement or any of the other Loan Documents, and, if there are any such
defaults, specifying the nature and extent thereof; (b) that no notice has been
delivered by Lender to Borrower of any default under this Agreement or the other
Loan Document which has not been cured, except as to defaults specified in the
certificate; (c) the date to which the principal and interest have been paid
under the Notes and the amount thereof then payable; (d) the capacity of the
person executing such certificate, and that such person is duly authorized to
execute the same on behalf of Lender; and (e) any other information reasonably
requested by Borrower in connection with this Agreement and the other Loan
Documents.

            R. CONFIDENTIALITY. Lender shall take reasonable precautions and
exercise due care to maintain the confidentiality of all information provided to
it by Borrower or Lessee, and Lender shall not use any such information other
than in connection with the transactions contemplated hereunder or with other
business now or hereafter existing with Borrower, Lessee or any Affiliate of
Borrower or Lessee. The foregoing shall not apply to information which (i) is
generally available to the public other than as a result of Lender disclosing
such information, or (ii) was, is or becomes available on a non-confidential
basis from a source other than Borrower, Lessee or any Affiliate of Borrower or
Lessee, provided that such source is not bound by a confidentiality agreement
with Borrower, Lessee or any Affiliate of Borrower or Lessee, the existence of
which is known to Lender. In addition, Lender may disclose any confidential
information (a) at the request of, or pursuant to any requirement of, any
governmental authority of competent jurisdiction or in connection with an
examination of Lender by any such authority; (b) pursuant to subpoena or other
court process; (c) when required to do so in accordance with the provisions of
any applicable requirement of law; (d) to independent auditors and other
professional advisors of Lender; and (e) to any purchaser or transferee of, or
participant in, a Loan, or to any investor or servicer in connection with a
Transfer, Participation or Securitization, so long as such recipient
acknowledges that Lender has agreed to maintain the confidentiality of such
confidential information and agrees to maintain such confidentiality itself.

                                       42
<PAGE>

         IN WITNESS WHEREOF, Borrower and Lender have entered into this
Agreement as of the date first above written.

                                      LENDER:

                                      GE CAPITAL FRANCHISE FINANCE CORPORATION,
                                      a Delaware corporation

                                      By
                                        ---------------------------------------
                                      Printed Name
                                                  -----------------------------
                                      Its
                                         --------------------------------------

                                      BORROWER:

                                      FRIENDLY'S REALTY III, LLC, a Delaware
                                      limited liability company

                                      By
                                        ---------------------------------------
                                        Aaron Parker, Vice President

         U.S. Federal Tax Identification Number:
         04-3582583

         Organization Identification Number:
         3449981

         Principal Place of Business:
         Wilbraham, Massachusetts

                                       S-1

<PAGE>

                                POWER OF ATTORNEY

         Lender may act as attorney-in-fact or otherwise on behalf of Borrower
pursuant to Sections 14.P(5) and 14.Q(1) of this Agreement. This power of
attorney is coupled with an interest, is durable and is not affected by
subsequent disability or incapacity of the principal or lapse of time.

         ---------------                             --------------------
         Witness                                     Borrower

                                     WITNESS

         In accordance with the requirements of Arizona Revised Statutes Section
14-5506 and other applicable law, the undersigned has executed this Agreement
for the purpose of witnessing the grant of the powers of attorney by Borrower to
Lender.

                                              ---------------------------------

                                      S-2

<PAGE>

STATE OF ARIZONA   )
                   ) SS.
COUNTY OF MARICOPA )

         The foregoing instrument was acknowledged before me on November __,
2001 by, _______________________________, of GE Capital Franchise Finance
Corporation, a Delaware corporation, on behalf of the corporation.

                                             ----------------------------------
                                             Notary Public
My Commission Expires:

------------------------------------------------------------

                                      S-3

<PAGE>

STATE OF ARIZONA   )
                   ) SS.
COUNTY OF MARICOPA )

         The foregoing instrument was acknowledged before me on November __,
2001 by Aaron Parker, Vice President of Friendly's Realty III, LLC, a Delaware
limited liability company, on behalf of the limited liability company.

                                                   ----------------------------
                                                   Notary Public

My Commission Expires:

------------------------------------------------------------

                                      S-4<Page>

                                                                   Exhibit 10.3

                   PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

                                DECEMBER 13, 2001

                                     BUYER:

                           REALTY INCOME CORPORATION,
                             A MARYLAND CORPORATION

                                     SELLER:

                         FRIENDLY ICE CREAM CORPORATION,
                           A MASSACHUSETTS CORPORATION
<Page>

                   PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

                                TABLE OF CONTENTS
<Table>
<S>      <C>          <C>                                                                                        <C>
RECITALS..........................................................................................................1
1.       PURCHASE PRICE...........................................................................................1
2.       OPENING OF ESCROW........................................................................................2
3.       TITLE TO PROPERTIES......................................................................................2
4.       CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE.............................................................3
         4.1          Approvals by Buyer..........................................................................3
         4.2          Accuracy of Representations.................................................................4
         4.3          No Hazardous Materials......................................................................4
         4.4          Foreign Investments.........................................................................4
         4.5          Change in Conditions........................................................................4
         4.6          Failure of Conditions.......................................................................4
         4.7          Leases......................................................................................5
5.       CONDITIONS TO SELLER'S OBLIGATION TO SELL................................................................5
         5.1          Performance by Buyer........................................................................5
         5.2          Accuracy of Representations.................................................................5
         5.3          Payment of Purchase Price...................................................................5
         5.4          Leases......................................................................................5
6.       BUYER'S DELIVERIES TO ESCROW AGENT AND SELLER............................................................5
         6.1          Purchase Price..............................................................................5
         6.2          Leases and Memorandums......................................................................6
         6.3          Failure to Deliver..........................................................................6
7.       SELLER'S DELIVERIES TO ESCROW AGENT AND BUYER............................................................6
         7.1          Deeds.......................................................................................6
         7.2          Leases and Memorandums......................................................................6
         7.3          Documents Needed to Close...................................................................6
         7.4          Failure to Deliver..........................................................................6
8.       THE CLOSING..............................................................................................6
         8.1          Date and Manner of Closing..................................................................6
         8.2          Delay in Closing; Authority to Close........................................................7
9.       PRORATION, COSTS AND EXPENSES............................................................................7
         9.1          Prorations and Apportionments...............................................................7
         9.2          Payment of Adjustments to Proration.........................................................7
         9.3          Seller's Costs and Expenses.................................................................7
         9.4          Buyer's Costs and Expenses..................................................................7
10.      DISTRIBUTION OF FUNDS AND DOCUMENTS......................................................................8
         10.1         Form of Distributions.......................................................................8
         10.2         Recorded Documents..........................................................................8
         10.3         Non-Recorded Documents......................................................................8

                                      (i)
<Page>

         10.4         Cash Disbursements..........................................................................8
         10.5         Copies of Documents.........................................................................8
11.      RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION...........................................................8
         11.1         Return of Seller's Documents................................................................8
         11.2         Return of Buyer's Documents.................................................................8
         11.3         No Effect on Rights of Parties..............................................................9
         11.4         Payment of Termination Fee..................................................................9
12.      DEFAULT..................................................................................................9
         12.1         Seller's Remedy.............................................................................9
         12.2         Buyer's Remedies............................................................................9
13.      REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................9
         13.1         Authority of Seller.........................................................................9
         13.2         Condition of Properties.....................................................................9
         13.3         Use and Operation..........................................................................10
         13.4         Land Use Regulation........................................................................10
         13.5         Reports, Contracts and Other Documents.....................................................10
         13.6         Absence of Fraud and Misleading Statements.................................................10
         13.7         Litigation.................................................................................11
         13.8         Other Contracts to Convey..................................................................11
         13.9         Environmental Compliance/Hazardous Materials...............................................11
         13.10        Properties Tax Assessment..................................................................11
         13.11        Agreements Affecting the Properties........................................................12
         13.12        Use Permits and Other Approvals............................................................12
         13.13        Confidentiality............................................................................12
         13.14        Survival...................................................................................12
         13.15        No Broker..................................................................................12
14.      REPRESENTATIONS & WARRANTIES OF BUYER...................................................................12
         14.1         Authority of Buyer.........................................................................12
         14.2         Absence of Fraud and Misleading Statements.................................................13
         14.3         Litigation.................................................................................13
         14.4         Financial Condition........................................................................13
         14.5         Confidentiality............................................................................13
         14.6         Survival...................................................................................13
         14.7         No Broker..................................................................................13
15.      COVENANTS...............................................................................................13
         15.1         Indemnification by Parties.................................................................13
         15.2         Maintenance................................................................................14
         15.3         Other Agreements...........................................................................14
         15.4         Buyer's Mortgages..........................................................................14
16.      LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION............................................................14
         16.1         Damage or Destruction......................................................................14
         16.2         Condemnation...............................................................................15
17.      POSSESSION..............................................................................................15
18.      NOTICES.................................................................................................15

                                      (ii)
<Page>

19.      GENERAL PROVISIONS......................................................................................16
         19.1         Recitals...................................................................................16
         19.2         Manner of Taking Title.....................................................................16
         19.3         Right to Assign............................................................................16
         19.4         Gender; Number.............................................................................17
         19.5         Captions...................................................................................17
         19.6         Exhibits...................................................................................17
         19.7         Entire Agreement...........................................................................17
         19.8         Modification...............................................................................17
         19.9         Attorneys' Fees............................................................................17
         19.10        Joint and Several Liability................................................................17
         19.11        Governing Law..............................................................................17
         19.12        Time of Essence............................................................................17
         19.13        Severability...............................................................................17
         19.14        Successors and Assigns.....................................................................18
         19.15        Drafting...................................................................................18
         19.16        No Agreement Until Accepted................................................................18
         19.17        Substitute Properties......................................................................18
         19.18        Counterparts...............................................................................19
</Table>

EXHIBIT "A" - PROPERTY LIST
EXHIBIT "B" - LAND AND BUILDING LEASE AGREEMENT
EXHIBIT "C" - CLOSING CHECKLIST
EXHIBIT "D" - MINIMUM REQUIREMENTS FOR ALTA/ACSM LAND TITLE SURVEYS

                                     (iii)
<Page>

                   PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

             This Purchase Agreement and Escrow Instructions (this "Agreement"),
dated December 13, 2001 for reference purposes only, is made by and between
FRIENDLY ICE CREAM CORPORATION, a Massachusetts corporation ("Seller"), and
REALTY INCOME CORPORATION, a Maryland corporation ("Buyer"), and is made with
reference to the recitals set forth below, and constitutes (i) a contract of
purchase and sale between the parties and (ii) escrow instructions to FIRST
AMERICAN TITLE INSURANCE COMPANY (the "Escrow Agent").

                                    RECITALS

         A. PROPERTIES. Seller, or one or more wholly-owned subsidiaries
controlled by Seller, owns forty-five (45) certain real properties, together
with all improvements located thereon and appurtenances thereunto belonging,
which real properties are identified on the "Property List," attached hereto and
incorporated herein as Exhibit "A." The terms "Property" or "Properties" as used
in this Agreement shall mean certain or all (as the context may require) of the
real properties identified on the Property List.

         B. PURCHASE AND SALE. Seller desires to sell all of Seller's right,
title and interest in and to the Properties upon the terms and conditions set
forth below. Buyer desires to purchase all of Seller's right, title, and
interest in and to the Properties upon the terms and conditions set forth below.

         C. LEASEHOLD INTEREST. Concurrently with the Closing (as defined in
Section 8), Buyer, as landlord, shall lease the Properties to Seller, as tenant,
pursuant to a certain Land and Building Lease Agreement (the "Leases"),
substantially in the form of Exhibit "B," attached hereto and incorporated
hereby.

                               1. PURCHASE PRICE

         In consideration of the covenants contained in this Agreement, subject
to the terms of this Agreement, Seller shall sell and Buyer shall purchase the
Properties for a total purchase price of THIRTY-FOUR MILLION FOUR HUNDRED
EIGHTY-TWO THOUSAND SIX HUNDRED SEVENTY-EIGHT DOLLARS ($34,482,678) (the
"Purchase Price") which shall be delivered by Buyer to Escrow Agent on or before
the Closing in Cash (defined as (i) United States currency, (ii) cashier's or
certified check(s) currently dated, payable to Escrow Agent, and honored upon
presentation for payment, (iii) an amount credited by wire transfer into Escrow
Agent's bank account, or (iv) if monies are deposited with Escrow Agent within
twenty (20) days prior to the Closing, funds in such form as Escrow Agent in its
sole discretion requires). The Purchase Price allocated by Buyer in its
reasonable discretion to each of the Properties (the "Individual Purchase
Price") is listed on Exhibit "A." Upon Closing, the Escrow Agent will wire
transfer the Purchase Price to Seller or at Seller's direction.

                                                              PAGE 1 of 19 PAGES
<Page>

                              2. OPENING OF ESCROW

         Within five (5) business days following the execution of this
Agreement, Buyer and Seller shall open an escrow (the "Escrow") with Escrow
Agent for the Properties and shall deposit with Escrow Agent fully executed
counterparts of this Agreement for use as escrow instructions. Buyer and Seller
shall execute Escrow Agent's usual form of supplemental escrow instructions for
transactions of this type; provided, however, that such escrow instructions
shall be for the purpose of implementing this Agreement, shall incorporate this
Agreement by reference, and shall specifically provide that no provisions shall
have the effect of modifying this Agreement unless it is so expressly stated and
initialed on behalf of Buyer and Seller.

                             3. TITLE TO PROPERTIES

         At Closing, Seller shall convey to Buyer fee simple title to the
Properties by execution and delivery at the Closing of deeds for the Properties
in form as approved by Seller's title insurance company, which shall be of equal
character and covenants as the deeds received by Seller (the "Deeds"). At the
Closing Buyer shall receive from FIRST AMERICAN TITLE INSURANCE COMPANY ("Title
Company") an ALTA Owner's Extended Policy of Title Insurance (the "Title
Policy") with liability in the full amount of the Individual Purchase Price
insuring fee simple title to each of the Properties in Buyer, subject only to
exceptions which do not materially, adversely affect the use of the Properties
as a restaurant, together with such endorsements as may be reasonably requested
by Buyer. Indemnification of Title Company to induce it to insure any otherwise
non-permitted exception to title shall only be allowed with the prior written
consent of Buyer, which consent shall not be unreasonably withheld, after full
disclosure to Buyer of the nature and substance of such exception and indemnity.
The Title Policy for each of the Properties shall provide survey coverage and
shall provide full coverage against mechanics' and materialmen's liens arising
out of the construction, repair, or alteration of any of improvements located on
such of the Properties.

         If Seller is unable to convey title to any of the Properties in
accordance with the requirements of this Agreement, Seller shall have the option
to (a) substitute the affected Property as provided in Section 19.17 below, or
(b) use reasonable efforts to remove any material defects in title; and the time
for performance and the Closing Date with respect to said Property shall be
extended for a period not to exceed thirty (30) days (the "Extended Closing
Date"). If, upon the expiration of the Extended Closing Date, Seller shall have
failed to provide a suitable substitute property or remove the material defects
in title for the affected Property, any payments held in escrow with respect to
the same shall be refunded to Buyer and all other obligations of Buyer and
Seller with respect to said Property or Properties shall cease under this
Agreement and shall be void without recourse by either party to the other.

         Notwithstanding anything in this Agreement to the contrary, Buyer shall
have the continuing option, at the original time for performance, or prior to
the expiration of the Extended Closing Date, to accept such title as Seller can
deliver and to waive any condition or provision of this Agreement not complied
with, in which event the Closing shall take place within five (5) days of the
notice of Buyer's election to proceed.

                                                              PAGE 2 of 19 PAGES
<Page>

                4. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE

         Buyer's obligation to purchase each of the Properties is expressly
conditioned upon each of the following:

4.1      APPROVALS BY BUYER

         Buyer's receipt and approval for each of the Properties of the
following prior to the Closing:

         4.1.1    ALTA COMMITMENTS FOR POLICIES OF TITLE INSURANCE. Seller has
                  or shall cause the issuance of an ALTA commitment for policy
                  of title insurance, together with complete legible copies of
                  all encumbrances and liens of record (the "Commitment"), with
                  respect to each of the Properties to be forwarded to Buyer for
                  approval. If no written disapproval of any items in the
                  Commitment is received from Buyer on or before seven (7) days
                  after the later of delivery of the Commitment or the As-built
                  Survey (as defined in Section 4.1.2), the Commitment shall be
                  deemed approved by Buyer.

         4.1.2    AS-BUILT SURVEY. A survey of the Property (the "As-built
                  Survey") prepared by a licensed surveyor or civil engineer in
                  sufficient detail to provide for the Title Policy, certified
                  to Buyer and the Title Company conforming to the minimum
                  requirements for ALTA/ACSM land title surveys set forth on
                  Exhibit "E," attached hereto and made a part hereof. If no
                  written disapproval of the As-built Survey is received from
                  Buyer on or before seven (7) days after the later of delivery
                  of the Commitment or the As-built Survey, the As-built Survey
                  shall be deemed approved by Buyer.

         4.1.3    PHASE I ENVIRONMENTAL SITE ASSESSMENT REPORT. A Phase I
                  environmental site assessment report ("Phase I") prepared by
                  Giles Engineering Associates in accordance with ASTM
                  guidelines; provided that the Phase I be dated no earlier than
                  one (1) year prior to the Scheduled Closing Date (as defined
                  in Section 8), and further provided that written evidence of
                  Buyer's ability to rely on the Phase I be contemporaneously
                  delivered to Buyer. If no written disapproval of the Phase I
                  is received from Buyer on or before ten (10) days after
                  delivery of same, the Phase I shall be deemed approved by
                  Buyer.

         4.1.4    PLANS AND SPECIFICATIONS. Seller shall submit to Buyer copies
                  of any as-built plans and specifications ("Plans & Specs") it
                  has in its possession in connection with the Properties.
                  Seller's failure to deliver copies of Plans & Specs for any of
                  the Properties shall constitute Seller's representation to
                  Buyer that Seller does not have such Plans & Specs in its
                  possession.

                                                              PAGE 3 of 19 PAGES
<Page>

         4.1.5    APPRAISAL. Seller has or shall cause a narrative appraisal
                  ("Appraisal") to be prepared on a completed project basis,
                  covering the land, improvements, and the Leases for the
                  Properties by Cushman & Wakefield. If no written disapproval
                  of the Appraisal is received from Buyer or before ten (10)
                  days after delivery of same, the Appraisal shall be deemed
                  approved by Buyer.

         4.1.6    CERTIFICATE OF OCCUPANCY. Seller has caused or shall cause a
                  notice of completion and/or permanent certificate of occupancy
                  or its equivalent to be delivered to Buyer for each of the
                  Properties to the extent issued by the municipality in which
                  the Property is located.

         4.1.7 OTHER DOCUMENTS. All other documents listed on Exhibit "D"
entitled "Closing Checklist" for the Properties.

4.2      ACCURACY OF REPRESENTATIONS

         All of Seller's representations and warranties contained in or made
pursuant to this Agreement shall have been true and correct when made and shall
be true and correct as of the Closing, and Seller shall have complied with all
of Seller's covenants and agreements contained in or made pursuant to this
Agreement.

4.3      NO HAZARDOUS MATERIALS

         Buyer's satisfaction that there are no Hazardous Materials (as defined
in Section 13.9) on the Properties.

4.4      FOREIGN INVESTMENTS

         Buyer's receipt of the affidavit, certification, or notice required by
Section 1445 of the Internal Revenue Code of 1954, as amended and the
Regulations pursuant thereto, in a form sufficient to relieve Buyer of any
potential transferee withholding liability under such Section. If Seller fails
to deliver such affidavit, certification, or notice to Buyer prior to or at the
Closing, or Buyer has knowledge or receives notice of the falsity of such
document, then the transactions shall be completed at the Closing, but Buyer
shall withhold ten percent (10%) of the "amount realized" (as set forth in the
Regulations) by Seller and transmit it to the Internal Revenue Service Center,
Philadelphia, PA 19255, all in accordance with Section 1445 and the Regulations
pursuant thereto.

4.5      CHANGE IN CONDITIONS

         If any of the conditions in this Section 4 change after having been
satisfied or waived by Buyer and before the transaction contemplated herein is
closed, then such condition(s) shall be reinstated as if having never been
satisfied or waived by Buyer.

4.6      FAILURE OF CONDITIONS

         4.6.1    The foregoing conditions contained in this Section 4 are
                  intended solely for the benefit of Buyer. If any of the
                  foregoing conditions are not satisfied or approved by Buyer,
                  Buyer shall have the right at its sole

                                                              PAGE 4 of 19 PAGES
<Page>

                  election, but subject to Seller's substitution rights set
                  forth in section 19.17 below, either (i) to waive the
                  condition in question and proceed with the purchase of all of
                  the Properties pursuant to all of the other terms of this
                  Agreement, reserving all of its other rights and remedies
                  available to it under this Agreement or otherwise at law or in
                  equity by reason of such failure of condition or (ii) to not
                  purchase such of the Properties on which conditions are not
                  satisfied, in which case the Purchase Price shall be adjusted
                  by the aggregate of the Individual Purchase Prices of the
                  Properties not purchased pursuant to this Section 4.8.1.

         4.6.2    By written agreement, the Closing may be extended for a
                  reasonable time if required to allow the conditions contained
                  in this Section 4 to be satisfied, subject to Buyer's further
                  rights to terminate this Agreement upon the expiration of the
                  period of any extension if all such conditions have not then
                  been satisfied.

4.7      LEASES

         Execution by Seller of the Leases and Lease Memorandums for the
Properties.

                  5. CONDITIONS TO SELLER'S OBLIGATION TO SELL

         Seller's obligation to sell is expressly conditioned upon each of the
following:

5.1      PERFORMANCE BY BUYER

         Timely performance of each obligation, covenant, and delivery required
of Buyer.

5.2      ACCURACY OF REPRESENTATIONS

         All of Buyer's representations and warranties contained in or made
pursuant to this Agreement shall have been true and correct when made and shall
be true and correct at the Closing, and Buyer shall have complied with all of
Buyer's covenants and agreements contained in or made pursuant to this
Agreement.

5.3      PAYMENT OF PURCHASE PRICE

         Payment of the Purchase Price at the Closing in the manner provided in
this Agreement.

5.4      LEASES

         Execution by Buyer of the Leases and Lease Memorandums for the
Properties.

                6. BUYER'S DELIVERIES TO ESCROW AGENT AND SELLER

6.1      PURCHASE PRICE

         Buyer shall, on or before Closing, deliver in Cash to Escrow Agent the
Purchase Price as set forth in Section 1, plus or less adjustments pursuant to
Section 9. Escrow Agent shall

                                                              PAGE 5 of 19 PAGES
<Page>

deposit the Purchase Price in an interest bearing account, the interest upon
which shall accrue to the benefit of Buyer.

6.2      LEASES AND MEMORANDUMS

         On or before the Closing, Buyer shall deliver to Escrow Agent the
Leases and Memorandums of Lease for each of the Properties executed and
acknowledged by Buyer.

6.3      FAILURE TO DELIVER

         The failure of Buyer to make any required delivery within the specified
time shall constitute a material breach by Buyer.

                7. SELLER'S DELIVERIES TO ESCROW AGENT AND BUYER

7.1      DEEDS

         On or before the Closing, Seller shall deliver to Escrow Agent the
Deeds for the Properties executed and acknowledged by Seller.

7.2      LEASES AND MEMORANDUMS

         On or before the Closing, Seller shall deliver to Escrow Agent the
Leases and Memorandums of Lease for each of the Properties executed and
acknowledged by Seller.

7.3      DOCUMENTS NEEDED TO CLOSE

         On or before the Closing, Seller shall deliver to Buyer each and every
document described in Section4, subject to Buyer's right to waive delivery for
any or all of the Properties.

7.4      FAILURE TO DELIVER

         The failure of Seller to make any required delivery within the
specified time shall constitute a material breach by Seller.

                                 8. THE CLOSING

8.1      DATE AND MANNER OF CLOSING

         Escrow Agent shall close the Escrow (the "Closing") on or before
December 20, 2001 (the "Scheduled Closing Date"), provided that all of the
conditions to Buyer's obligation to purchase and Seller's obligation to sell
have been either satisfied or waived. The Escrow shall be deemed closed when (i)
all documents required to be delivered to Buyer, Seller and Escrow Agent
pursuant to this Agreement have been delivered or delivery of such document(s)
has been waived; (ii) the Title Company is irrevocably committed to issuing the
Title Policy; and (iii) all funds required to be delivered to Escrow Agent
pursuant to this Agreement have been delivered.

         The parties may authorize Escrow Agent to close on the Properties all
at once or individually in certain intervals. If the parties authorize Escrow
Agent to close on the Properties individually, Buyer shall deliver to Escrow
Agent the portion of the Purchase Price representing payment due in connection
with those Properties for which Escrow Agent has received authorization to
close.

                                                              PAGE 6 of 19 PAGES
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8.2      DELAY IN CLOSING; AUTHORITY TO CLOSE

         If Escrow Agent cannot close the Escrow on or before the Scheduled
Closing Date, it will nevertheless close when all conditions have been satisfied
or waived, notwithstanding that one or more of such conditions was not timely
performed, unless after the Scheduled Closing Date and prior to the close of the
delayed Escrow, Escrow Agent receives a written notice to terminate the Escrow
and this Agreement from a party who, at the time such notice is delivered, is
not in default. Neither (i) the exercise of the right of termination, (ii) delay
in the exercise of the right of termination, nor (iii) the return of monies and
documents, shall affect the right of the party giving notice of termination to
pursue legal or equitable remedies for the other party's breach of this
Agreement. Nor shall (i) the giving of such notice, (ii) the failure to object
to termination of the Escrow, or (iii) the return of monies and documents affect
the right of the other party to pursue legal or equitable remedies for the
breach of the party who gives notice.

                        9. PRORATION, COSTS AND EXPENSES

9.1      PRORATIONS AND APPORTIONMENTS

         Contemporaneously with the Closing, Seller intends to lease the
Properties from Buyer. Therefore, the parties do not anticipate the need to
prorate revenues or expenses. However, in the event an item of expense or
revenue must be prorated, it shall be prorated and apportioned as of 12:01 a.m.
on the date of the Closing so that Seller shall bear all expenses with respect
to the Properties and shall have the benefit of all income with respect to the
Properties through and including the period preceding the date of the Closing.
Any taxes or other amounts which cannot be ascertained with certainty as of the
Closing shall be prorated on the basis of the parties' reasonable estimates of
such amount(s) and shall be the subject of a final proration thirty (30) days
after the Closing or as soon thereafter as the precise amounts can be
ascertained.

9.2      PAYMENT OF ADJUSTMENTS TO PRORATION

         Either party owing the other party a sum of money based on adjustments
made to prorations after the Closing shall promptly pay that sum to the other
party, together with interest thereon at the rate of twelve percent (12%) per
annum to the date of payment if payment is not made within ten (10) days after
mutual agreement of the amount due.

9.3      SELLER'S COSTS AND EXPENSES

         Seller shall pay the cost of procuring the Commitment, Title Policy,
As-built Survey, Appraisal, Phase I, documentary or other transfer taxes
applicable to the sale, Escrow fee and all other costs and charges of Escrow and
the transaction contemplated hereby except as set forth in Section 9.4 below,
all brokerage commissions or finders' fees (if any), and Seller's own attorneys'
fees.

9.4      BUYER'S COSTS AND EXPENSES

         Buyer shall pay for Buyer's own attorneys' fees.

                                                              PAGE 7 of 19 PAGES
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                    10. DISTRIBUTION OF FUNDS AND DOCUMENTS

10.1     FORM OF DISTRIBUTIONS

         All disbursements by Escrow Agent shall be made by checks of Escrow
Agent or by wire transfers to the account of, and as directed by, the receiving
party.

10.2     RECORDED DOCUMENTS

         Escrow Agent shall cause the County Recorder of the County in which the
Properties are located to mail the Deeds (and any other documents which are
required by this Agreement to be, or by general usage are, recorded) after
recordation, to the grantee, beneficiaries, or person (i) acquiring rights under
the documents or (ii) for whose benefit the documents were acquired.

10.3     NON-RECORDED DOCUMENTS

         Escrow Agent shall, at the Closing, deliver by United States mail or by
nationally recognized overnight courier (or shall hold for personal pickup, if
requested), each non-recorded document received by Escrow Agent to the payee or
person (i) acquiring rights under the document or (ii) for whose benefit the
documents were acquired.

10.4     CASH DISBURSEMENTS

         At the Closing, Escrow Agent shall arrange for wire transfer (i) to
Seller, or order, the Purchase Price plus any proration or other credits to
which Seller shall be entitled for the Properties and less any appropriate
proration or other charges and (ii) to Buyer, or order, any excess funds
previously delivered to Escrow Agent by Buyer.

10.5     COPIES OF DOCUMENTS

         Following the Closing, Escrow Agent shall deliver to Buyer and to
Seller a copy of the Deeds (conformed to show recording data) and each other
recorded document for the Properties.

               11. RETURN OF DOCUMENTS AND FUNDS UPON TERMINATION

11.1     RETURN OF SELLER'S DOCUMENTS

         In the event the Escrow is terminated for any reason (other than the
default of Seller), Buyer shall, within fifteen (15) calendar days following the
termination, deliver to Seller all documents and materials, if any, relating to
the Properties previously delivered to Buyer by Seller. Escrow Agent shall
deliver all documents and materials relating to the Properties previously
deposited by Seller and then in Escrow Agent's possession to Seller.

11.2     RETURN OF BUYER'S DOCUMENTS

         In the event the Escrow is terminated for any reason (other than the
default of Buyer), Seller shall, within fifteen (15) calendar days following
termination, deliver to Buyer all funds and documents, if any, relating to the
Properties, previously delivered to Seller by Buyer. Escrow Agent shall deliver
all documents, materials, and funds relating to the Properties previously
deposited by Buyer and then in Escrow Agent's possession to Buyer.

                                                              PAGE 8 of 19 PAGES
<Page>

11.3     NO EFFECT ON RIGHTS OF PARTIES

         The return of documents and monies as set forth above shall not affect
the right of either party to seek the legal or equitable remedies that the party
may have with respect to the enforcement of this Agreement.

11.4     PAYMENT OF TERMINATION FEE

         Escrow Agent may condition its deliveries upon payment of a reasonable
termination fee by the party requesting delivery. Notwithstanding the foregoing,
any termination fee shall be paid (or reimbursed) by the defaulting party, or
paid equally if neither party is then in default.

                                  12. DEFAULT

12.1     SELLER'S REMEDY

         If Buyer fails to complete the acquisition of the Properties by reason
of any default by Buyer, Seller shall be entitled to such remedies for breach of
contract as may be available under applicable law, including, without
limitation, the remedy of specific performance.

12.2     BUYER'S REMEDIES

         In the event that the transaction fails to close on account of Seller's
fault or Seller's breach of this Agreement, Buyer shall be entitled to such
remedies for breach of contract as may be available under applicable law,
including, without limitation, the remedy of specific performance.

                  13. REPRESENTATIONS AND WARRANTIES OF SELLER

         The following representations by Seller are now, to the best of
Seller's knowledge, true and accurate; and Seller warrants that, at the Closing,
the same shall be true and correct. If during the period between the execution
of this Agreement and the Closing, Seller learns that any of the following
representations and warranties has ceased to be true, Seller covenants to give
notice thereof to Buyer immediately.

13.1     AUTHORITY OF SELLER

         Seller is a corporation duly organized and validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
authority to own and convey the Properties. This Agreement and all documents
executed by Seller which are to be delivered to Buyer are, or at the time of the
Closing will be, duly authorized, executed, and delivered by Seller and do not,
and at the time of the Closing will not, materially violate any provisions of
any agreement or judicial order to which Seller is a party or to which Seller or
the Properties are subject.

13.2     CONDITION OF PROPERTIES

         There are now, and at the Closing there will be, no material, physical
or mechanical defects of the Properties, including, without limitation, the
plumbing, heating, air conditioning, ventilating, emergency safety systems, and
electrical systems, and all such items are in good operating condition and
repair and in compliance with all applicable governmental laws,

                                                              PAGE 9 of 19 PAGES
<Page>

ordinances, regulations, and requirements, including, but not limited to, the
Americans with Disabilities Act, except for ADA compliance with respect to two
(2) Properties as set forth below. In addition, there are no existing leases on
the Properties.

         On May 19, 1997, Seller signed a consent order with the U.S. Department
of Justice (the "Consent Order"). The Consent Order requires Seller to bring all
of its Friendly's Restaurants into compliance with the Americans With
Disabilities Act, on or before March 1, 2003. Seller represents and warrants
that Seller is presently in full compliance with the Consent Order. Two (2)
Properties (Bennington, VT, and So. Weymouth, MA) will transfer to Buyer with
ADA compliance work yet to be completed. Seller agrees to complete renovations
at the two (2) Properties at such times as shall ensure compliance with the
Consent Order, and Seller's obligations hereunder with respect to such
compliance shall survive the Closing and delivery of the Deeds.

13.3     USE AND OPERATION

         The use and operation of the Properties now is, and at the time of
Closing will be, in material compliance with applicable building codes, safety,
fire, environmental, zoning, and land use laws, and other applicable local,
state, and federal laws, ordinances, regulations, and requirements. Seller knows
of no facts nor has Seller failed to disclose to Buyer any fact which would
prevent Buyer from using and operating the Properties after the Closing in the
manner in which the Properties has been used, leased, and operated prior to the
date of this Agreement.

13.4     LAND USE REGULATION

         Seller has received no written notice, nor does Seller have any
knowledge of any condemnation, environmental, zoning, or other land use
regulation proceedings, contemplated or instituted, which could detrimentally or
materially affect the use or operation of the Properties or the value of the
Properties, nor has Seller received notice of any special assessment proceedings
affecting the Properties.

13.5     REPORTS, CONTRACTS AND OTHER DOCUMENTS

         Contracts or documents delivered to Buyer pursuant to this Agreement
will be, at the time of Closing, true and correct copies, in full force and
effect, and contain no inaccuracies or misstatements of fact.

13.6     ABSENCE OF FRAUD AND MISLEADING STATEMENTS

         No representation, warranty, or statement of Seller in this Agreement
or in any document, certificate, or schedule furnished or to be furnished to
Buyer pursuant thereto, contains or will contain any knowingly untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements or facts not materially misleading. All representations,
warranties, or statements of Seller are based upon current, accurate, and
complete information as of the time of their making and there has been no
subsequent material change in the information.

                                                             PAGE 10 of 19 PAGES
<Page>

13.7     LITIGATION

         There is no litigation, pending or threatened, against Seller or any
basis therefor that arises out of the ownership of the Properties, or that might
detrimentally affect the use or operation of the Properties for its intended
purpose or the value of the Properties, or adversely affect the ability of
Seller to perform its obligations under this Agreement.

13.8     OTHER CONTRACTS TO CONVEY

         Seller has not committed nor obligated itself in any manner whatsoever
to sell the Properties to any party other than Buyer. Except to Societe
Generale, which is to be released at Closing, Seller has not hypothecated or
assigned any rents or income from the Properties in any manner.

13.9     ENVIRONMENTAL COMPLIANCE/HAZARDOUS MATERIALS

         The Properties are not, and, as of the Closing will not be, in
violation of any federal, state, or local law, ordinance, or regulation relating
to Hazardous Materials (as defined below) on, under, or about any of the
Properties including, but not limited to, soil and groundwater conditions. There
are no Hazardous Materials (as defined below) present on the Properties, except
in reasonable quantities used in the ordinary course of business, which are
stored, maintained, used and disposed of in accordance with all laws regulating
the same. Seller further warrants and represents that during the time in which
Seller owned the Properties, neither Seller nor, to the best of Seller's
knowledge, any third party has used, generated, manufactured, produced, stored,
or disposed of on, under, or about the Properties or transported to or from the
Properties any Hazardous Materials. There is no proceeding or inquiry by any
governmental authority with respect to the presence of Hazardous Materials on
the Properties or the migration of Hazardous Materials from or to the
Properties. There are no storage tanks located in or under the Properties. The
term "Hazardous Material" includes, without limitation, any material or
substance which is (i) defined as a "hazardous waste," "extremely hazardous
waste," "restricted hazardous waste," "hazardous substance," "pollutant or
contaminant," or "hazardous material," by any local or state law, (ii) oil and
petroleum products and their by-products, (iii) asbestos or asbestos-containing
materials, (iv) designated as a "hazardous substance" pursuant to the Federal
Water Pollution Control Act, (v) defined as a "hazardous waste" pursuant to the
Federal Resource Conservation and Recovery Act, or (vi) defined as a "hazardous
substance" pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act. Seller has disclosed to Buyer in writing all information in
Seller's possession or control that relates to the environmental condition of
the Properties.

13.10    PROPERTIES TAX ASSESSMENT

         There are no special assessments levied against the Property except as
appear on the last available tax statement. Notwithstanding any other provision
of this Agreement to the contrary, if Buyer shall become liable after the
Closing for payment of any property taxes assessed against the Properties for
any period of time prior to the Closing, Seller, subject to its right to
lawfully contest such assessment, shall immediately pay to Buyer on demand an
amount equal to such tax assessment.

                                                             PAGE 11 of 19 PAGES
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13.11    AGREEMENTS AFFECTING THE PROPERTIES

         At the Closing there will be no leases (other than the Leases),
easements, encumbrances, or other agreements affecting the Properties except as
shown in the Commitment for the Properties or as otherwise disclosed to Buyer by
Seller in writing and approved by Buyer.

13.12    USE PERMITS AND OTHER APPROVALS

         Seller has obtained all material licenses, permits, approvals,
easements, and rights of way required from all governmental authorities having
jurisdiction over the Properties or from private parties for the normal use and
operation of the Properties and to ensure free and unimpeded vehicular and
pedestrian ingress to and egress from the Properties as required to permit the
normal intended usage of the Properties. Seller has materially complied with all
licenses and permits and has not received any notice that any material licenses
or permits will not be renewed upon expiration, or of any material conditions
which will be imposed (and which Seller cannot comply with) in order to receive
any renewal.

13.13    CONFIDENTIALITY

         For a period ending one year after the Closing, Seller shall hold as
confidential all information concerning Buyer and this transaction. Except as
may otherwise be required to carry out the provisions of this Agreement, Seller
shall not release any such information to third parties without Buyer's prior
written consent, except pursuant to a court order requiring such release or as
otherwise may be required by law. The term "Third parties" does not include
employees or consultants who agree to keep such information confidential.

13.14    SURVIVAL

         The representations and warranties of Seller contained herein shall
survive the Closing and delivery of the Deeds.

13.15    NO BROKER

         Seller warrants that, except for Bank of America, there are no
brokerage commissions payable as a result of the Closing herein. Seller shall
indemnify and hold harmless Buyer from any claims, costs, damages, or liability
based on any statement, representations, or agreement by Seller with respect to
the payment of any brokerage commissions or finders' fees.

                   14. REPRESENTATIONS & WARRANTIES OF BUYER

         Buyer hereby represents and warrants to Seller as follows:

14.1     AUTHORITY OF BUYER

         Buyer is a corporation duly organized and validly existing under the
laws of the State of Maryland. This Agreement and all documents executed by
Buyer which are to be delivered to Seller at the Closing are, or at the time of
Closing will be, duly authorized, executed, and delivered by Buyer, and are, or
at the Closing will be, legal, valid, and binding obligations of Buyer, and do
not, and at the time of Closing will not, violate any provisions of any
agreement or judicial order to which Buyer is a party or to which it is subject.

                                                             PAGE 12 of 19 PAGES
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14.2     ABSENCE OF FRAUD AND MISLEADING STATEMENTS

         No representation, warranty, or statement of Buyer in this Agreement or
in any document, certificate, or schedule furnished or to be furnished to Seller
pursuant thereto contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements or facts not misleading. All representations, warranties, or
statements of Buyer are based upon current, accurate, and complete information
as of the time of their making and there has been no subsequent material change
in the information.

14.3     LITIGATION

         There is no litigation pending or, to Buyer's knowledge, threatened,
against Buyer or any basis therefore before any court or administrative agency
that might adversely affect the ability of Buyer to perform its obligations
under this Agreement.

14.4     FINANCIAL CONDITION

         Buyer has adequate financial resources to make timely payment of all
sums due from Buyer hereunder and to perform all of its obligations hereunder.

14.5     CONFIDENTIALITY

         For a period ending one year after the Closing, Buyer shall hold as
confidential all information concerning Seller and this transaction; provided,
however, Buyer may disclose so much of the information concerning Seller and
this transaction as may be necessary from time to time in carrying out the
ordinary, normal and customary activities of its business. Except as provided
herein, and except as may otherwise be required to carry out the provisions of
this Agreement, Buyer shall not release any such information to third parties
without Seller's prior written consent, except pursuant to a court order
requiring such release or as otherwise may be required by law. The term "Third
parties" does not include employees or consultants who agree to keep such
information confidential.

14.6     SURVIVAL

         The representations and warranties of Buyer contained herein shall
survive the Closing.

14.7     NO BROKER

         Buyer warrants there are no brokerage commissions payable as a result
of the Closing herein. Buyer shall indemnify and hold harmless Seller from any
claims, costs, damages, or liability based on any statement, representations, or
agreement by Buyer with respect to the payment of any brokerage commissions or
finders' fees.

                                 15. COVENANTS

         Matters as to which Escrow Agent need not be concerned, Seller and
Buyer covenant and agree with one another as follows:

15.1     INDEMNIFICATION BY PARTIES

         Each party shall indemnify the other party and hold the other party
harmless from and against any and all claims, demands, liabilities, liens,
costs, expenses, penalties, damages, and

                                                             PAGE 13 of 19 PAGES
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losses, including, without limitation, reasonable attorneys' fees and costs,
suffered as a direct or indirect result of:

         15.1.1   Any misrepresentation, breach of warranty, or breach of
                  covenant made pursuant to this Agreement or in any document,
                  certificate, or exhibit given or delivered pursuant to or in
                  connection with this Agreement; and

         15.1.2   Any and all obligations, liabilities, claims, liens, or
                  encumbrances, no matter how arising or accruing, which are in
                  any way related to or arising from any act, conduct, omission,
                  contract, or commitment of a party (or any of its agents or
                  employees) at any time or times before the Closing, including
                  indemnification by Seller of Buyer, without limitation, of the
                  cost of any required repair, cleanup, remediation, removal, or
                  detoxification and the preparation of any closure or other
                  required plans, or actions, whether such action is required
                  prior to or following transfer of title to the Properties, to
                  the full extent that such action is attributable, directly or
                  indirectly, to the presence, use, generation, storage,
                  release, threatened release, treatment, or disposal of
                  Hazardous Materials by any person on the Properties prior to
                  transfer of title to Buyer. The provisions of this Section
                  shall survive the execution and delivery of this Agreement,
                  the delivery of the Deeds, and transfer of title.

15.2     MAINTENANCE

         Between the Seller's execution of this Agreement and the Closing,
Seller shall, at Seller's sole cost and expense, maintain the Properties in good
order, condition, and repair, reasonable wear and tear excepted, and shall
operate the Properties in the same manner as before the making of this Agreement
as though Seller were retaining the Properties.

15.3     OTHER AGREEMENTS

         Seller shall not enter into or terminate any material contracts or
agreements pertaining to the Properties without in each case obtaining Buyer's
prior written consent thereto.

15.4     BUYER'S MORTGAGES

         Buyer shall not place a mortgage upon any Property to which the
Seller's Lease shall be subordinate or subordinated, unless Buyer shall have
caused the mortgagee to execute and deliver to Seller a non-disturbance
agreement with respect to such Lease, in a form reasonably acceptable to Seller.

                16. LOSS BY FIRE OR OTHER CASUALTY; CONDEMNATION

16.1     DAMAGE OR DESTRUCTION

         In the event that any of the improvements on the Properties are damaged
or destroyed by fire or other casualty prior to the Closing, then Seller may
terminate this Agreement as to each

                                                             PAGE 14 of 19 PAGES
<Page>

damaged or destroyed Property, or may agree to restore and repair such damage,
either before or after the Closing. Termination shall be by written notice to
Buyer within five (5) days after the occurrence of the damage or destruction.
Buyer shall have no obligation to accept Seller's offer to restore or repair
such damage if such restoration and repair would cause the Scheduled Closing
Date to be extended. If the restoration or repair shall take place after the
Closing, a portion of the proceeds of sale equal to the estimated cost of such
restoration or repair, shall be held in escrow by the Title Company until Seller
has completed the restoration or repair to the reasonable satisfaction of Buyer.
Seller shall pay escrow and related costs, if any, that exist as a result of
terminating this Agreement under this Section.

16.2     CONDEMNATION

         In the event that prior to the Closing a governmental entity shall
commence any eminent domain proceeding to take any portion of the Properties,
Buyer shall have the option to make either of the following elections:

         16.2.1   Terminate this Agreement with respect to the affected Property
                  by written notice to Seller within five (5) days of its
                  receiving notice of such action of condemnation; or

         16.2.2   Proceed with the transaction in which case the Purchase Price
                  shall not be reduced and Buyer shall be entitled to the net
                  award paid to Seller or Seller's mortgagee for the taking, if
                  any, and Seller shall assign and transfer to Buyer all right,
                  title, and interest in and to any awards. Notwithstanding the
                  foregoing, any portion of any award granted for the
                  restoration or repair of the Property shall be paid over to
                  Seller upon Seller's completion of such restoration and
                  repairs.

                                 17. POSSESSION

         Possession of the Properties shall be delivered to Buyer at the
Closing, subject to Seller's rights as tenant pursuant to the Leases.

                                  18. NOTICES

         All notices, request, or demands herein provided to be given or made,
or which may be given or made by either party to the other, shall be given or
made only in writing and shall be deemed to have been duly given: (i) when
delivered personally at the address set forth below, or to any agent of the
party to whom notice is being given, or (ii) on the date delivered when sent via
Overnight Mail, properly addressed and postage prepaid, or (iii) on the date
sent via facsimile transmission, or (iv) seventy-two (72) hours after the time
the same is deposited in the United States mail, properly addressed and first
class postage prepaid, return receipt requested. The proper address to which
notices, requests, or demands may be given or made by either party shall be the
address set forth at the end of this Section or to such other address or to such
other person as any party shall designate. Such address may be changed by
written notice given to the other party in accordance to this Section.

                                                             PAGE 15 of 19 PAGES
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         IF TO BUYER:

                  REALTY INCOME CORPORATION
                  Attn:  Legal Department
                  220 West Crest Street
                  Escondido, CA  92025-1707
                  (760) 741-2111
                  (760) 741-8674 (Fax number)

         IF TO SELLER:

                  FRIENDLY ICE CREAM CORPORATION
                  Attn:  Vice President - General Counsel
                  1855 Boston Road

                  Wilbraham, MA  01095
                  (413) 543-2400
                  (413) 543-3282 (Fax number)

         IF TO ESCROW AGENT:

                  FIRST AMERICAN TITLE INSURANCE COMPANY
                  Attn:  John S. Cominos, Esq.
                  401 East Corporate Drive, Suite 100
                  Lewisville, TX  75057
                  (800) 683-3332
                  (214) 222-7022 (direct dial)
                  (214) 222-6860 (Fax number)

                             19. GENERAL PROVISIONS

19.1     RECITALS

         The Recitals set forth above commencing on Page 1 of this Agreement are
incorporated herein by reference.

19.2     MANNER OF TAKING TITLE

         Buyer shall have the right to take title to the Properties at the
Closing in a name other than Buyer's name.

19.3     RIGHT TO ASSIGN

         Buyer shall have the right to assign Buyer's rights hereunder in whole
or in part without Seller's consent to Crest Net Lease, Inc., a Delaware
corporation. Buyer shall have the right to assign Buyer's rights hereunder to
any other person or entity with Seller's prior written consent, which shall not
be unreasonably withheld, conditioned or delayed. Any such assignment shall not
relieve Buyer of Buyer's obligations herein unless Seller expressly relieves
Buyer.

                                                             PAGE 16 of 19 PAGES
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19.4     GENDER; NUMBER

         The use of (i) the neuter gender includes the masculine and feminine
and (ii) the singular number includes the plural whenever the context requires.

19.5     CAPTIONS

         Captions in this Agreement are inserted for the convenience of
reference only and do not define, describe, or limit the scope or the intent of
this Agreement or any of its terms.

19.6     EXHIBITS

         All attached exhibits are a part of this Agreement and are incorporated
in full by this reference.

19.7     ENTIRE AGREEMENT

         This Agreement contains the entire agreement between the parties
relating to the transactions contemplated hereby and all prior or
contemporaneous agreements, understandings, representations, and statements,
oral or written, are merged into this Agreement.

19.8     MODIFICATION

         No modification, waiver, amendment, discharge, or change of this
Agreement shall be valid unless it is in writing and signed by the party against
which the enforcement of the modification, waiver, amendment, discharge, or
change is or may be sought.

19.9     ATTORNEYS' FEES

         Should any party employ an attorney for the purpose of enforcing or
construing this Agreement, or any judgment based on this Agreement, in any legal
proceeding whatsoever, including insolvency, bankruptcy, arbitration,
declaratory relief, or other litigation, the prevailing party shall be entitled
to receive from the other party or parties, reimbursement for all reasonable
attorneys' fees and all costs, including, but not limited to, service of
process, filing fees, court and court reporter costs, investigative costs,
expert witness fees, and the cost of any bonds, whether taxable or not, and that
such reimbursement shall be included in any judgment or final order issued in
that proceeding.

19.10    JOINT AND SEVERAL LIABILITY

         If any party consists of more than one person or entity, the liability
of each such person or entity signing this Agreement shall be joint and several.

19.11    GOVERNING LAW

         This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts.

19.12    TIME OF ESSENCE

         Time is of the essence of this Agreement and every provision hereof.

19.13    SEVERABILITY

         In the event any term, covenant, condition, or provision of this
Agreement is held to be invalid, void, or otherwise unenforceable by any court
of competent jurisdiction, the fact that

                                                             PAGE 17 of 19 PAGES
<Page>

such term, covenant, condition, or provision is invalid, void, or otherwise
unenforceable shall in no way affect the validity or enforceability of any other
term, covenant, condition, or provision of this Agreement.

19.14    SUCCESSORS AND ASSIGNS

         All terms of this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by the parties and their respective legal
representatives, successors, and assigns.

19.15    DRAFTING

         This Agreement shall not be construed more strictly against one party
than the other because it may have been drafted by one of the parties or its
counsel, each having contributed substantially and materially to the negotiation
and drafting hereof.

19.16    NO AGREEMENT UNTIL ACCEPTED

         Buyer's delivery of unexecuted copies or drafts of this Agreement is
solely for the purpose of review by the party to whom delivered and is in no way
to be construed as an offer by Buyer nor in any way implies that Buyer is under
any obligation to purchase the Properties. When this Agreement has been executed
by both Buyer and Seller, it shall constitute a binding agreement to purchase
and sell the Properties upon the terms and conditions provided herein and Buyer
and Seller agree to execute all instruments and documents and take all actions
as may be reasonably necessary or required in order to consummate the purchase
and sale of the Properties as contemplated herein.

19.17    SUBSTITUTE PROPERTIES.

         Seller is prepared to substitute up to seven (7) additional properties
for any of the 45 Properties in the event of any problems with respect to
representations and warranties for any of the Properties, such as, but not
limited to, title, environmental condition, casualty or eminent domain. Seller
shall not be in default of this Agreement with respect to its representations
and warranties as to any one of the Properties, provided that an equivalent or
better substitute property is available and satisfactory to Buyer in accordance
with the terms of this Agreement. The provisions of this Section 19.17 shall
survive the Closing and delivery of the Deeds.

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                                                             PAGE 18 of 19 PAGES
<Page>

19.18    COUNTERPARTS

         This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original. The counterparts shall together constitute
but one agreement. Any signature on a copy of this Agreement or any document
necessary or convenient thereto sent by facsimile shall be binding upon
transmission by facsimile and the facsimile copy may be utilized for the
purposes of this Agreement.

BUYER:                                      SELLER:
-----                                       ------

REALTY INCOME CORPORATION,                  FRIENDLY ICE CREAM CORPORATION,
a Maryland corporation                      a Massachusetts corporation

By:                                         By:
   ----------------------------------          ---------------------------------

Date:                                       Date:
     --------------------------------            -------------------------------

ESCROW AGENT:
------------

FIRST AMERICAN TITLE INSURANCE COMPANY

By:
   ----------------------------------

Date:
     --------------------------------

                                                             PAGE 19 of 19 PAGES

<PAGE>

             ADDENDUM TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
                                 BY AND BETWEEN
  FRIENDLY ICE CREAM CORPORATION, A MASSACHUSETTS CORPORATION, AS "SELLER" AND
          REALTY INCOME CORPORATION, A MARYLAND CORPORATION, AS "BUYER"

                                    RECITALS

A.  Friendly Ice Cream Corporation, a Massachusetts corporation as "Seller," and
    Realty Income Corporation, a Maryland corporation as "Buyer," entered into
    that certain Purchase Agreement and Escrow Instructions dated December 13,
    2001 ("Purchase Agreement") in connection with the purchase and sale of
    certain improved real property identified on Exhibit "A" of the Purchase
    Agreement.

B.  Seller and Buyer desire to enter into this Addendum ("Addendum") to clarify
    certain aspects of the Closing as set forth in the Purchase Agreement.

                                AGREEMENT

1.  This Addendum is incorporated into and made a part of the Purchase
    Agreement. The Recitals set forth above are incorporated herein by
    reference. All capitalized terms used herein, unless otherwise defined,
    shall have the same meaning as given in the Purchase Agreement. In the event
    of any conflict between the terms of the Purchase Agreement and the terms of
    this Addendum, the terms of this Addendum shall prevail.

2.  The Scheduled Closing Date shall be on or before December 20, 2001;
    provided, however, Buyer shall deliver the Purchase Price as set forth in
    Section 1 (the "Funds") by wire transfer to Escrow Agent's bank account on
    December 18, 2001. Escrow Agent immediately shall deposit the Funds in an
    interest bearing account. Interest accrued on the Funds shall run with the
    Funds and become a part of the Funds.

3.  In the event Escrow closes on December 19, 2001 or December 20, 2001, Escrow
    Agent shall disburse the Funds in accordance with the provisions of the
    Purchase Agreement; provided, however, Buyer shall receive a credit equal to
    Buyer's actual cost of funds, calculated for one or two business days on the
    Funds (as the case may be) at the rate of Three Point One Two Percent
    (3.12%) annualized, in consideration for Buyer delivering the Funds to
    Escrow Agent on December 18, 2001.

4.  In the event Escrow does not close on or before December 20, 2001, Escrow
    Agent shall return the Funds to Buyer via wire transfer to Buyer's bank
    account prior to 2:00 p.m. Pacific Daylight Time on December 20, 2001, and
    the transactions contemplated by the Purchase Agreement shall proceed on all
    of the remaining terms and conditions of the Purchase Agreement, unaffected
    by this Addendum.

            THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.

<PAGE>

5.  This Addendum may be executed in any number of counterparts, each of which
    shall be deemed an original. The counterparts shall together constitute but
    one addendum. Any signature on a copy of this Addendum or any document
    necessary or convenient thereto sent by facsimile shall be binding upon
    transmission by facsimile and the facsimile copy may be utilized for the
    purposes of this Addendum.

<TABLE>
<CAPTION>
BUYER:                                                  SELLER:
<S>                                                     <C>
REALTY INCOME CORPORATION                               FRIENDLY ICE CREAM CORPORATION,
A MARYLAND CORPORATION                                  A MASSACHUSETTS CORPORATION

By:  _______________________________                    By: ________________________________
Name Printed: ______________________                    Name Printed: ______________________
Title: _____________________________                    Title: _____________________________

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By: ________________________________
Name Printed: ______________________
Title: _____________________________
</TABLE>

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