Document:

Exhibit
4.1

 

AMENDED AND
RESTATED AMENDMENT NO. 4

TO REVOLVING
CREDIT AGREEMENT

 

This AMENDED
AND RESTATED AMENDMENT NO. 4 TO REVOLVING CREDIT AGREEMENT (this “Amendment”)
is dated as of February 27,
2004, by and among (a) FRIENDLY ICE CREAM CORPORATION, a Massachusetts
corporation (the “Borrower”), (b) the Lenders and (c) FLEET NATIONAL
BANK, as administrative agent for the Lenders a party to the Revolving Credit
Agreement (as hereinafter defined) (in such capacity, the “Administrative
Agent”).  Capitalized terms as used
and not otherwise defined in this Amendment shall have the meanings assigned to
such terms in the Revolving Credit Agreement.

 

WHEREAS, the
Borrower, the Lenders and the Administrative Agent are parties to that certain
Revolving Credit Agreement, dated as of December 17, 2001 (as heretofore
amended or otherwise amended, modified, or amended and restated and in effect
immediately prior to the date hereof, the “Revolving Credit Agreement”;
the Revolving Credit Agreement as further amended by this Amendment, the “Amended
Revolving Credit Agreement”);

 

WHEREAS, it is the intent of the parties
hereto that this Amendment amend and restate in its entirety that certain
Amendment No. 4 to the Revolving Credit Agreement, dated as of February 17,
2004, between the Borrower, the Lenders and the Administrative Agent (the “Existing
Amendment No. 4”) and that from the date hereof, the Existing Amendment No.
4 be amended and restated in its entirety as set forth herein;

 

WHEREAS, the
Borrower has requested that the Lenders (a) amend the Revolving Credit
Agreement to increase the Total Commitment, (b) extend the Revolving
Credit Loan Maturity Date, (c) permit the 2004 Refinancing (as defined below)
and (d)  agree to certain other amendments and modifications to the
Revolving Credit Agreement, in each case as set forth herein;

 

WHEREAS,
pursuant to the terms, subject to the conditions and in reliance on the
representations and warranties contained in this Amendment, the undersigned
Lenders are prepared to (a) amend the Revolving Credit Agreement to increase
the Total Commitment, (b) extend the Revolving Credit Loan Maturity Date,
(c) permit the 2004 Refinancing and (d)  agree to certain other amendments
and modifications to the Revolving Credit Agreement, in each case as set forth
herein;

 

NOW THEREFORE,
in consideration of the premises and the mutual covenants contained in this
Amendment, the Borrower, the Administrative Agent and the Lenders hereby agree
as follows:

 

SECTION
1.  Amendment to Revolving Credit
Agreement.

 

1.1.         Amendment to
Schedules.

 

(a)           Schedule 1(a) to
the Revolving Credit Agreement is hereby amended by amended and restating in
its entirety by replacing the table located therein as follows:

 

 

	
  LENDER

  	
   

  	
  COMMITMENT ($)

  
	
   

  	
   

  	
   

  
	
  FLEET NATIONAL BANK

  	
   

  	
  15,000,000

  
	
  100 Federal Street

  	
   

  	
   

  
	
  Boston, Massachusetts 02110

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CITIZEN’S BANK

  	
   

  	
  12,000,000

  
	
  28 State Street

  	
   

  	
   

  
	
  Boston, Massachusetts 02109

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BANKNORTH, N.A.

  	
   

  	
   

  
	
  1441 Main Street

  	
   

  	
  8,000,000

  
	
  Springfield, Massachusetts 01103

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  35,000,000

  

 

1.2.         Certain Defined
Terms.  Section 1.1 of the Revolving
Credit Agreement is hereby amended as follows:

 

(a)           by inserting the
following new defined term in the appropriate alphabetical sequence in such
Section 1.1:

 

“Deferred
Compensation.  Payments of salary
and compensation by Borrower in connection with Borrower’s deferred
compensation plan.”

 

“Fourth
Amendment Effective Date.  The date
on which all conditions precedent to the Fourth Amendment hereto shall have
been satisfied or waived by the Lenders.”

 

“New Senior
Notes.  The senior notes issued
pursuant to the New Senior Note Indenture.”

 

“New Senior
Note Indenture. The indenture by and among the Borrower and an indenture
trustee, pursuant to which up to $175,000,000 of New Senior Notes have been
issued or will be issued on terms no less favorable to the Borrower than the
Senior Note Indenture.”

 

“Initial Closing Date. 
December 17, 2001.”

 

“Rabbi
Trust.  Any trust established for
the satisfaction of obligations of any of the Borrower or its Subsidiaries for
Deferred Compensation, the terms of which trust will not, at any time, result
in obligations being treated as funded under applicable Department of Labor or
Internal Revenue guidelines as of the Fourth Amendment Effective Date.”

 

“Refinancing
Indebtedness.  Indebtedness that
refunds, refinances, replaces, renews, repays or extends (including pursuant to
any defeasance or discharge mechanism) (collectively, “refinances,” and
“refinanced” shall have a correlative meaning) any Indebtedness including Indebtedness
that refinances other Refinancing Indebtedness; provided, however,
that (1) the Refinancing Indebtedness has a stated maturity no earlier than the
stated maturity of the Indebtedness being refinanced, (2) such Refinancing
Indebtedness is incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the sum of the aggregate

 

2

 

principal amount (or if issued with original
issue discount, the aggregate accreted value) then outstanding of the
Indebtedness being refinanced plus the amount of accrued and unpaid interest on
the Indebtedness being refinanced, any premium paid to the holders of the
Indebtedness being refinanced and reasonable expenses incurred in connection
with the incurrence of the Refinancing Indebtedness and (3) the material terms
of such Refinancing Indebtedness shall be on terms which are not materially
more onerous on the Borrower than the terms in the Indebtedness being
refinanced.”

 

“2004
Refinancing.  The refinancing of the
Senior Notes issued with the proceeds of the New Senior Notes and not more than
$13,000,000 of Revolving Credit Loans.”

 

(b)           by amending and
restating in their entirety the definitions of “Consolidated Net Income (or
Deficit)”, “Change of Control”, “Excess Cash Flow”, “Fixed Charge Coverage
Ratio”, “Revolving Credit Loan Maturity Date” and “Total Commitment” as
follows:

 

“Consolidated Net Income (or Deficit).  The consolidated net income (or deficit) of the Borrower and its
Subsidiaries, after deduction of all expenses, taxes, and other proper charges,
after eliminating therefrom all extraordinary nonrecurring items of income,
each as determined in accordance with GAAP and excluding therefrom any charges
associated with the 2004 Refinancing.”

 

“Excess
Cash Flow.  For each fiscal year of
the Borrower commencing with the Borrower’s 2004 fiscal year, the excess (if
any), of (a) Consolidated EBITDA for such fiscal year, less, (b) the sum
(for such fiscal year) of (i) Consolidated Total Interest Expense actually paid
in cash by the Borrower and its Subsidiaries, (ii) actual and accrued scheduled
principal repayments, (iii) all income taxes actually paid in cash by the
Borrower and its Subsidiaries, (iv) (A) Capital Expenditures and (B) Growth
Capital Expenditures made in connection with any Permitted Acquisition
(excluding Growth Capital Expenditures in an amount equal to such portion of
such Permitted Acquisition paid for with the proceeds of Indebtedness permitted
pursuant to §9.1(c)(ii)), in each case actually made by the Borrower and its
Subsidiaries in such fiscal year, and (v) any net increase (or, minus,
any net decrease) in Consolidated Working Capital from the end of the prior
fiscal year.”

 

“Fixed
Charge Coverage Ratio.  As of any
date of determination, the ratio of (a) Consolidated EBITDAR, minus, the sum of
(b)(i) Capital Expenditures (excluding Capital Expenditures made during the
Borrower’s 2003 and 2004 fiscal years in connection with the lease of a new
Micros POS system not to exceed $5,000,000), and (ii) cash income tax expense,
to, the sum of (w) Consolidated Total Interest Expense payable in cash, (x)
actual and accrued scheduled principal repayments of Indebtedness made or accrued
during such period, (y) Rental Expense and (z) mandatory cash contributions
made by the Borrower to any of its pension plans due to changes in fair market
value of pension plan assets (to the extent not already deducted in the
calculation of Consolidated EBITDA).”

 

“Revolving Credit Loan Maturity Date.  June 30, 2007.”

 

3

 

“Total Commitment.  The
sum of the Commitments of the Lenders, as in effect from time to time, and
which shall be in the aggregate principal amount not to exceed $35,000,000.”

 

(c)           by deleting in its
entirety the definition of “Permitted Excess Cash Flow Prepayments”.

 

1.3.         Mandatory
Repayments of Revolving Credit Loans. 
Section 3.2(c) of the Revolving Credit Agreement is hereby amended by
deleting the phrase “2002 calendar year” located therein and replacing it with
the phrase “2005 calendar year”.

 

1.4.          Use of Proceeds.  Section 7.17.1 of the Revolving Credit
Agreement is hereby amended by amending and restating such Section in its
entirety as follows:

 

“7.17.1.                  General. The
proceeds of the Loans shall be used for working capital, capital expenditures
(to the extent permitted in §10.2 of this Credit Agreement) and general
corporate purposes.  For the avoidance
of doubt, proceeds of the Loans shall not be used for the repurchase of more
than $13,000,000 of the New Senior Notes.”

 

1.5.         Restrictions on
Indebtedness.

 

(a)           Section 9.1 of the
Revolving Credit Agreement is hereby amended by amending and restating clause
(c) in its entirety with the following:

 

“(c)
Indebtedness incurred in connection with (i) the acquisition after the Initial
Closing Date of any real or personal property by the Borrower or any Restricted
Subsidiary or under any Capitalized Lease, provided that (A) the aggregate
principal amount of such Indebtedness of the Borrower and its Restricted
Subsidiaries incurred after the Fourth Amendment Effective Date shall not
exceed the aggregate amount of $10,000,000 at any one time during the period
beginning on the Fourth Amendment Effective Date and ending on the Revolving
Credit Loan Maturity Date and (B) the Borrower and its Restricted Subsidiaries
shall not incur such Indebtedness in an aggregate amount greater than
$4,000,000 per fiscal year, and (ii) a Permitted Acquisition;”.

 

(b)           Section 9.1 of the
Revolving Credit Agreement is hereby amended by inserting the following
additional clauses at the end of such Section:

 

“(o)               Indebtedness pursuant to the New
Senior Notes and guarantees thereof by Subsidiaries and Refinancing
Indebtedness in respect of the foregoing.”

 

1.6.         Restricted
Payments.  Section 9.4 of the
Revolving Credit Agreement is hereby amended by amending and restating such
Section in its entirety as follows:

 

“9.4.       Restricted
Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, make any Restricted Payments other than (a) payments of salary
and compensation to employees and members of the Board of Directors of the
Borrower and its

 

4

 

Subsidiaries in the ordinary course of
business and consistent with past practices or as Deferred Compensation, (b)
payments of Fees and expenses payable pursuant to this Credit Agreement, and
(c) payments to suppliers and customers in the ordinary course of business and
consistent with past practices.”

 

1.7.         Permitted Liens.  Section 9.2.1 of the Revolving Credit
Agreement is hereby amended by inserting the following additional clause at the
end of such Section:

 

“(xx)
transfers to any Rabbi Trust in an aggregate amount not to exceed $10,000,000
at any time outstanding.”

 

1.8.         Restrictions on
Investments.  Section 9.3(b) of the
Revolving Credit Agreement is hereby amended by amending and restating it in
its entirety as follows:

 

“(b)
Investments with respect to Indebtedness permitted by §§ 9.1(d), (g), (h), (i),
(j), (k), (l), and (o) and transfers permitted by §9.2.1(xx);”.

 

1.9.         Prepayments;
Modification of Certain Documents. 
Section 9.8 of the Revolving Credit Agreement is hereby amended by
amending and restating such Section in its entirety as follows:

 

“9.8.  Prepayments; Modification of Certain Documents.

 

(a)   The Borrower will not, and will not permit
any of its Subsidiaries to, prepay, redeem or repurchase any of the
Indebtedness outstanding under the New Senior Note Indenture, other than in
connection with a refinancing thereof with Refinancing Indebtedness.

 

(b)   The Borrower will not, and will not permit
any of its Subsidiaries to, consent to or enter into any amendment, supplement
or other modification of any of the terms or provisions contained in, or
applicable to, (i) the New Senior Note Indenture, other than any amendment,
supplement, waiver or modification for which no fee is payable to the holders
of the New Senior Notes and which (A) extends the date or reduces the amount of
any required repayment, prepayment or redemption of the principal of such New
Senior Note Indenture, (B) reduces the rate or extends the date for payment of
the interest, premium (if any) or fees payable on such New Senior Note
Indenture or (C) makes the covenants, events of default or remedies in such New
Senior Note Indenture less restrictive on the Borrower, or (ii) any
Sale-Leaseback Transaction Documents or FFCA Mortgage Financing Documents, in
each case in any manner that is adverse in any respect to the Lenders unless
consented to in writing prior thereto by the Required Lenders.”

 

1.10.       Interest Coverage.  Section 10.1 of the Revolving Credit
Agreement is hereby amended by amending and restating in its entirety the table
set forth at the end of such Section 10.1 as follows:

 

5

 

	
  “Period

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second and
  Third Fiscal Quarters of 2004

  	
   

  	
  2.20:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fourth
  Fiscal Quarter of 2004 and First Fiscal Quarter of 2005

  	
   

  	
  2.25:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second and
  Third Fiscal Quarters of 2005

  	
   

  	
  2.30:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fourth
  Fiscal Quarter of 2005 through the Third Fiscal Quarter of 2006

  	
   

  	
  2.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fourth
  Fiscal Quarter of 2006 and each fiscal quarter thereafter

  	
   

  	
  2.75:1.00

  	
   

  

 

1.11.       Capital Expenditures.  Section 10.2 of the Revolving Credit
Agreement is hereby amended by amending and restating in its entirety such
Section as follows:

 

“10.2.     Capital
Expenditures.  The
Borrower will not make, or permit any Subsidiary of the Borrower to make (a)
Growth Capital Expenditures that exceed, in the aggregate, $7,000,000 per
fiscal year, or (b) Capital Expenditures in any fiscal year that exceed, in the
aggregate, the amount set forth below opposite such fiscal year and such amount
shall include any Growth Capital Expenditures during such fiscal year (provided,
that if the Borrower and its Subsidiaries do not utilize the entire amount of
Capital Expenditures permitted in any one fiscal year (beginning with
unutilized Capital Expenditures permitted in fiscal year 2003), so long as no
Default or Event of Default exists or would be caused thereby, the Borrower may
carry forward to the immediately succeeding fiscal year $1,000,000 of such
unutilized amount (with Capital Expenditures made by the Borrower or any
Subsidiary of the Borrower in such succeeding fiscal year applied last to such
unutilized amount)):

 

	
  Fiscal Year

  	
   

  	
  Capital Expenditures

  	
   

  
	
  2003

  	
   

  	
  $

  	
  21,000,000

  	
   

  
	
  2004

  	
   

  	
  $

  	
  32,000,000

  	
   

  
	
  2005

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  30,000,000

  	
   

  

 

1.12.       Minimum EBITDA.  Section 10.3(a) of the Revolving Credit
Agreement is hereby amended by amending and restating in its entirety the table
set forth at the end of such Section 10.3(a) as follows:

 

	
  “Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second
  Fiscal Quarter of 2004 through the Fourth Fiscal Quarter of 2005

  	
   

  	
  $

  	
  52,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  First Fiscal
  Quarter of 2006 and each fiscal quarter thereafter

  	
   

  	
  $

  	
  55,000,000”

  	
   

  

 

6

 

1.13.       Leverage Ratio.  Section 10.4 of the Revolving Credit
Agreement is hereby amended by amending and restating in its entirety the table
set forth at the end of Section 10.4 as follows: 

 

	
  “Period

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second and
  Third Fiscal Quarters of 2004

  	
   

  	
  4.75:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fourth
  Fiscal Quarter of 2004 and First and Second Fiscal Quarters of 2005

  	
   

  	
  4.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Third Fiscal
  Quarter of 2005 through the Second Fiscal Quarter of 2006

  	
   

  	
  4.25:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Third Fiscal
  Quarter of 2006 and each fiscal quarter thereafter

  	
   

  	
  4.00:1.00”

  	
   

  

 

1.14.       Fixed Charge
Coverage Ratio.  Section 10.6 of the
Revolving Credit Agreement is hereby amended by amending and restating in its
entirety the table set forth at the end of Section 10.6 as follows: 

 

	
  “Period

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second Fiscal Quarter of 2004 through the
  First Fiscal Quarter of 2005

  	
   

  	
  1.00:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second Fiscal Quarter of 2005 and each
  fiscal quarter thereafter

  	
   

  	
  1.05:1.00’

  	
   

  

 

1.15.       Replacement of
Senior Note Indenture with New Senior Note Indenture.  The Revolving Credit Agreement is hereby
amend by replacing each reference to “Senior Note Indenture” contained in
Sections 8.5.1 and 13.1(f)  with the
term “New Senior Note Indenture”.

 

SECTION
2.  Representations and Warranties.  The Borrower hereby represents and warrants
to the Administrative Agent and each Lender, on and as of the date hereof, as
follows:

 

(a)           This Amendment has
been duly executed and delivered by the Borrower.  The execution and delivery by the Borrower of this Amendment and
the performance by the Borrower of this Amendment and the Amended Revolving
Credit Agreement have been duly authorized by proper corporate or other
proceedings by the Borrower, and this Amendment and the Amended Revolving
Credit Agreement constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with the terms hereof
and thereof,

 

7

 

except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors’ rights and general principles
of equity and except to the extent that availability of the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.

 

(b)           No Default or Event
of Default exists on the date hereof after giving effect to the amendments to
the Revolving Credit Agreement effected hereby.

 

SECTION
3.  Effectiveness.  This Amendment shall be deemed to be
effective as of the Fourth Amendment Effective Date only upon satisfaction of
each of the following conditions precedent to the Administrative Agent’s
reasonable satisfaction, in each case on or prior to (or contemporaneously
with) the Fourth Amendment Effective Date:

 

(a)           Amendment to Revolving
Credit Agreement.  The
Administrative Agent shall have received duly executed counterpart signature
pages to (1) this Amendment from each of the Borrower and the Lenders and (2)
the amended and restated Revolving Credit Notes from the Borrower in favor of
each of the Lenders, dated as of the Fourth Amendment Effective Date and
reflecting the amended amounts set forth on Schedule 1(a) of the Amended
Revolving Credit Agreement (the “Amended Notes”; together with this
Amendment shall be referred to herein as the “Amendment Documents”).  The prior Revolving Credit Notes executed by
the Borrower in favor of each of the Lenders, dated as of the Initial Closing
Date, shall be exchanged for the Amended Notes in a manner, and on terms and
conditions, reasonably satisfactory to the Administrative Agent.  The Amendment Documents shall be in full
force and effect and shall be in form and substance reasonably satisfactory to
the Administrative Agent.

 

(b)           Costs and
Expenses.  The Borrower shall pay,
in accordance with Section 16.2 of the Revolving Credit Agreement, all
reasonable out-of-pocket costs and expenses incurred by the Administrative
Agent in connection with the preparation, negotiation, execution, delivery and
enforcement of this Amendment, including, but not limited to, the reasonable
fees, expenses and disbursements of Bingham McCutchen LLP.

 

(c)           2004 Refinancing.  (i) The New Senior Notes shall have been
issued by the Borrower pursuant to the New Senior Notes Indenture for gross
proceeds of not less than $175,000,000 and (ii) the Senior Notes shall have
been repurchased on the Fourth Amendment Effective Date (or, to the extent not
repurchased on such date, a notice of redemption shall have been delivered to
the trustee for the Senior Notes calling the remaining Senior Notes for
redemption within 60 days of the Fourth Amendment Effective Date).

 

(d)           Opinion of
Counsel.  The Administrative Agent
shall have received from each of (i) Mayer, Brown, Rowe & Maw LLP, counsel
to the Borrower, and (ii) Choate, Hall & Stewart, counsel to the Borrower,
a favorable legal opinion addressed to the Administrative Agent and each of the
Lenders and dated the Fourth Amendment Effective Date, which opinions shall be
in form and substance reasonably satisfactory to the Administrative Agent.

 

(e)           Fees.  The Administrative Agent shall have received
from the Borrower the (1)  fee (the “Amendment
Fee”) in the amount of (A) $225,000 for the pro rata account of the

 

8

 

Lenders based upon their
Commitments immediately prior to the Fourth Amendment Effective Date and (B)
$50,000 for the pro rata account of the Lenders based upon their increase in
Commitment in connection with this Amendment and (2) the arrangement fee for
the Administrative Agent’s own account as set forth in that certain letter
agreement, dated as of the date hereof, between the Borrower and Administrative
Agent.

 

(f)            Certified
Copies of Governing Documents and New Senior Note Indenture. The
Administrative Agent shall have received from the Borrower a certificate of a
duly authorized officer of the Borrower, dated as of the Fourth Amendment
Effective Date, certifying that no amendments to any of (1) its charter or
other organizational documents as in effect on such date of certification, (2)
its by-laws or limited liability company agreement (as the case may be), have
occurred since the Initial Closing Date and (3) the New Senior Note Indenture
and documents executed in connection therewith.

 

(g)           Corporate or
Other Action; Corporate Structure. All corporate (or other) action
necessary for the valid execution, delivery and performance by the Borrower of
the Amendment Documents shall have been duly and effectively taken, and
evidence thereof satisfactory to the Lenders shall have been provided to each
of the Lenders. The Administrative Agent shall be reasonably satisfied with the
New Senior Note Indenture and all aspects of the transactions contemplated by
the Amendment Documents.

 

(h)           Incumbency Certificates. Each of the
Lenders shall have received from the Borrower an incumbency certificate, dated
as of the Fourth Amendment Effective Date, signed by a duly authorized officer
of the Borrower, and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of the
Borrower, each of the Amendment Documents to which the Borrower is or is to
become a party.

 

(i)            Minimum EBITDA.  The Borrower’s Consolidated EBITDA for the
fiscal year ending December 28, 2003 shall not be less than $54,000,000.

 

(j)            Leverage Ratio.  The Leverage Ratio for the Reference Period
ending December 28, 2003 shall not exceed 4.5:1.00.

 

SECTION
4.  Applicable Law.  THIS AMENDMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.

 

SECTION
5.  Ratification by Guarantors.  By
their signatures below, Friendly’s Restaurants Franchise, Inc. and Friendly’s
International, Inc. (collectively, the “Guarantors”) (a) ratify and confirm
that certain Guaranty dated as of the Initial Closing Date delivered by
Guarantors in connection with the Revolving Credit Agreement (the “Guaranty”),
(b) represent the Guaranty is in full force and effect and (c) acknowledge that
the obligations and liability of the Guarantors thereunder have not been
affected, diminished or impaired in any manner.

 

9

 

SECTION
6.  Miscellaneous.

 

6.1.         From and after the
date hereof, this Amendment shall be deemed a Loan Document for all purposes of
the Revolving Credit Agreement and the other Loan Documents and each reference
to Loan Documents in the Revolving Credit Agreement and the other Loan
Documents shall be deemed to include this Amendment.  This Amendment may be executed in any number of counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute but one agreement. 
Delivery of an executed counterpart of a signature page by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Amendment.

 

6.2.         Except as expressly
provided herein, (a) this Amendment shall not limit the rights of or otherwise
adversely affect the Lenders under the Revolving Credit Agreement or any other
Loan Document, and (b) the Lenders reserve the right to insist on strict
compliance with the terms of the Revolving Credit Agreement and the other Loan
Documents, and the Borrower expressly acknowledges such reservation of rights.  The grant of the consent and waiver herein
will not, either alone or taken with other waivers of provisions of the
Revolving Credit Agreement or any other Loan Document or consents with respect
thereto, be deemed to create or be evidence of a course of conduct.  Any future or additional waiver of any
provision of the Revolving Credit Agreement, or of any other Loan Document to
which the Lenders are a party or have consented, or consent with respect
thereto shall be effective only if set forth in a writing separate and distinct
from this Amendment and duly executed by such parties as are required by
Section 16.12 of the Revolving Credit Agreement.

 

[Remainder of
page intentionally left blank]

 

10

 

IN WITNESS WHEREOF, each of the undersigned
has caused this Amendment to be executed and delivered as an agreement as of
the date first written above.

 

	
   

  	
  FRIENDLY ICE CREAM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul V. Hoagland

  	
   

  
	
   

  	
   

  	
  Name: Paul V. Hoagland

  
	
   

  	
   

  	
  Title: Executive Vice President of
  Administration

  
	
   

  	
   

  	
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK,

  
	
   

  	
   

  	
  individually and as Administrative Agent

  
	
   

  	
   

  	
  and as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/: Robert W. MacEthiney

  	
   

  
	
   

  	
   

  	
  Name: Robert W. MacEthiney

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  
	
   

  	
  CITIZENS BANK,

  
	
   

  	
   

  	
  individually and as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Cindy Chen

  	
   

  
	
   

  	
   

  	
  Name: Cindy Chen

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  BANKNORTH, N.A.,

  
	
   

  	
   

  	
  individually and as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Maria P. Goncalves

  	
   

  
	
   

  	
   

  	
  Name: Maria P. Goncalves

  
	
   

  	
   

  	
  Title: Vice President

  

 

11

 

SECTION 6
AGREED TO AND ACCEPTED:

 

	
  FRIENDLY’S RESTAURANTS FRANCHISE, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Paul V. Hoagland

  	
   

  
	
   

  	
  Name: Paul V. Hoagland

  
	
   

  	
  Title: Executive Vice President of
  Administration

  
	
   

  	
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  FRIENDLY’S INTERNATIONAL, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Paul V. Hoagland

  	
   

  
	
   

  	
  Name: Paul V. Hoagland

  
	
   

  	
  Title: Executive Vice President of
  Administration

  
	
   

  	
  and Chief Financial Officer

  

 

12Exhibit 4.2

 

 

 

FRIENDLY ICE CREAM CORPORATION

 

8 3/8% Senior Notes Due 2012

 

 

INDENTURE

 

Dated as of March 8, 2004

 

 

THE BANK OF NEW YORK,

 

as Trustee

 

 

 

 

CROSS REFERENCE TABLE

 

	
  TIA Section

  	
   

  	
  Indenture

  Section

  
	
  310

  	
  (a)(1)

  	
   

  	
  7.10

  
	
   

  	
  (a)(2)

  	
   

  	
  7.10

  
	
   

  	
  (a)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
  7.8; 7.10

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  311

  	
  (a)

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
  7.11

  
	
  312

  	
  (a)

  	
   

  	
  2.5

  
	
   

  	
  (b)

  	
   

  	
  2.5; 11.3

  
	
   

  	
  (c)

  	
   

  	
  11.3

  
	
  313

  	
  (a)

  	
   

  	
  11.3

  
	
   

  	
  (b)(1)

  	
   

  	
  7.6

  
	
   

  	
  (b)(2)

  	
   

  	
  N.A.

  
	
   

  	
  (c)

  	
   

  	
  11.2

  
	
   

  	
  (d)

  	
   

  	
  7.6

  
	
  314

  	
  (a)

  	
   

  	
  4.2; 4.14; 11.2

  
	
   

  	
  (b)

  	
   

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
   

  	
  11.4

  
	
   

  	
  (c)(2)

  	
   

  	
  11.4

  
	
   

  	
  (c)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (d)

  	
   

  	
  N.A.

  
	
   

  	
  (e)

  	
   

  	
  11.5

  
	
   

  	
  (f)

  	
   

  	
  4.14

  
	
  315

  	
  (a)

  	
   

  	
  7.1

  
	
   

  	
  (b)

  	
   

  	
  7.5; 11.2

  
	
   

  	
  (c)

  	
   

  	
  7.1

  
	
   

  	
  (d)

  	
   

  	
  7.1

  
	
   

  	
  (e)

  	
   

  	
  6.11

  
	
  316

  	
  (a)(last sentence)

  	
   

  	
  11.6

  
	
   

  	
  (a)(1)(A)

  	
   

  	
  6.5

  
	
   

  	
  (a)(1)(B)

  	
   

  	
  6.4

  
	
   

  	
  (a)(2)

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
  6.7

  
	
  317

  	
  (a)(1)

  	
   

  	
  6.8

  
	
   

  	
  (a)(2)

  	
   

  	
  6.9

  
	
   

  	
  (b)

  	
   

  	
  2.4

  
	
  318

  	
  (a)

  	
   

  	
  11.1

  

 

N.A. means Not Applicable.

 

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

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE 1

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS AND INCORPORATION BY REFERENCE

  	
   

  
	
   

  	
   

  
	
  SECTION 1.1.

  	
  Definitions

  	
  1

  
	
  SECTION
  1.2.

  	
  Other
  Definitions

  	
  15

  
	
  SECTION 1.3.

  	
  Incorporation by Reference of Trust
  Indenture Act

  	
  16

  
	
  SECTION 1.4.

  	
  Rules of Construction

  	
  16

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
   

  	
   

  
	
  THE SECURITIES

  	
   

  
	
   

  	
   

  
	
  SECTION 2.1.

  	
  Form and Dating

  	
  17

  
	
  SECTION 2.2.

  	
  Execution and Authentication; Additional
  Securities; Exchange Securities

  	
  17

  
	
  SECTION 2.3.

  	
  Registrar and Paying Agent

  	
  18

  
	
  SECTION 2.4.

  	
  Paying Agent To Hold Money in Trust

  	
  18

  
	
  SECTION 2.5.

  	
  Securityholder Lists

  	
  18

  
	
  SECTION 2.6.

  	
  Transfer and Exchange

  	
  18

  
	
  SECTION 2.7.

  	
  Replacement Securities

  	
  20

  
	
  SECTION 2.8.

  	
  Outstanding Securities

  	
  21

  
	
  SECTION 2.9.

  	
  Temporary Securities

  	
  21

  
	
  SECTION
  2.10.

  	
  Cancellation

  	
  21

  
	
  SECTION 2.11.

  	
  Defaulted Interest

  	
  21

  
	
  SECTION 2.12.

  	
  CUSIP and ISIN Numbers

  	
  21

  
	
  SECTION 2.13.

  	
  Special Transfer Provisions

  	
  22

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
   

  	
   

  
	
  REDEMPTION

  	
   

  
	
   

  	
   

  
	
  SECTION 3.1.

  	
  Notices to Trustee

  	
  24

  
	
  SECTION 3.2.

  	
  Selection of Securities To Be Redeemed

  	
  24

  
	
  SECTION 3.3.

  	
  Notice of Redemption

  	
  24

  
	
  SECTION 3.4.

  	
  Effect of Notice of Redemption

  	
  25

  
	
  SECTION 3.5.

  	
  Deposit of Redemption Price

  	
  25

  
	
  SECTION 3.6.

  	
  Securities Redeemed in Part

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
   

  	
   

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  SECTION 4.1.

  	
  Payment of Securities

  	
  26

  
	
  SECTION
  4.2.

  	
  SEC
  Reports

  	
  26

  
	
  SECTION 4.3.

  	
  Limitation on Indebtedness and Preferred
  Stock

  	
  26

  
	
  SECTION 4.4.

  	
  Limitation on Restricted Payments

  	
  29

  

 

i

 

	
  SECTION 4.5.

  	
  Limitation on Restrictions on Distributions
  from Restricted Subsidiaries

  	
  31

  
	
  SECTION 4.6.

  	
  Limitation on Sales of Assets and
  Subsidiary Stock

  	
  32

  
	
  SECTION 4.7.

  	
  Limitation on Transactions with Affiliates

  	
  34

  
	
  SECTION
  4.8.

  	
  Change
  of Control

  	
  35

  
	
  SECTION 4.9.

  	
  Limitation on Liens

  	
  36

  
	
  SECTION 4.10.

  	
  Limitation on Sale of Subsidiary Capital
  Stock

  	
  36

  
	
  SECTION 4.11.

  	
  Limitations on Sale/Leaseback Transactions

  	
  36

  
	
  SECTION
  4.12.

  	
  Limitation
  on Conduct of Business of Insurance Subsidiary

  	
  37

  
	
  SECTION
  4.13.

  	
  Future
  Guarantors

  	
  37

  
	
  SECTION
  4.14.

  	
  Compliance
  Certificate

  	
  37

  
	
  SECTION
  4.15.

  	
  Further
  Instruments and Acts

  	
  37

  
	
  SECTION
  4.16.

  	
  Maintenance
  of Office or Agency

  	
  37

  
	
  SECTION
  4.17.

  	
  Corporate
  Existence

  	
  37

  
	
  SECTION 4.18.

  	
  Payment of Taxes and Other Claims

  	
  37

  
	
  SECTION 4.19.

  	
  Maintenance of Properties and Insurance

  	
  38

  
	
  SECTION
  4.20.

  	
  Compliance
  with Laws

  	
  38

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
   

  	
   

  
	
  SUCCESSOR COMPANY

  	
   

  
	
   

  	
   

  
	
  SECTION 5.1.

  	
  When the Company May Merge or Transfer
  Assets

  	
  38

  
	
  SECTION 5.2.

  	
  When Subsidiary Guarantor May Merge or
  Transfer Assets

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
   

  	
   

  	
   

  
	
  DEFAULTS AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  SECTION 6.1.

  	
  Events of Default

  	
  40

  
	
  SECTION 6.2.

  	
  Acceleration

  	
  41

  
	
  SECTION 6.3.

  	
  Other Remedies

  	
  42

  
	
  SECTION 6.4.

  	
  Waiver of Past Defaults

  	
  42

  
	
  SECTION 6.5.

  	
  Control by Majority

  	
  42

  
	
  SECTION 6.6.

  	
  Limitation on Suits

  	
  42

  
	
  SECTION 6.7.

  	
  Rights of Holders To Receive Payment

  	
  43

  
	
  SECTION 6.8.

  	
  Collection Suit by Trustee

  	
  43

  
	
  SECTION 6.9.

  	
  Trustee May File Proofs of Claim

  	
  43

  
	
  SECTION 6.10.

  	
  Priorities

  	
  43

  
	
  SECTION 6.11.

  	
  Undertaking for Costs

  	
  43

  
	
  SECTION 6.12.

  	
  Waiver of Stay or Extension Laws

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  
	
   

  	
   

  	
   

  
	
  TRUSTEE

  	
   

  
	
  SECTION 7.1.

  	
  Duties of Trustee

  	
  44

  
	
  SECTION 7.2.

  	
  Rights of Trustee

  	
  45

  
	
  SECTION 7.3.

  	
  Individual Rights of Trustee

  	
  45

  
	
  SECTION 7.4.

  	
  Trustee’s Disclaimer

  	
  46

  
	
  SECTION 7.5.

  	
  Notice of Defaults

  	
  46

  

 

ii

 

	
  SECTION 7.6.

  	
  Reports by Trustee to Holders

  	
  46

  
	
  SECTION 7.7.

  	
  Compensation and Indemnity

  	
  46

  
	
  SECTION 7.8.

  	
  Replacement of Trustee

  	
  47

  
	
  SECTION 7.9.

  	
  Successor Trustee by Merger

  	
  47

  
	
  SECTION 7.10.

  	
  Eligibility; Disqualification

  	
  48

  
	
  SECTION 7.11.

  	
  Preferential Collection of Claims Against
  Company

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  
	
   

  	
   

  	
   

  
	
  DISCHARGE OF INDENTURE; DEFEASANCE

  	
   

  
	
   

  	
   

  
	
  SECTION 8.1.

  	
  Discharge of Liability on Securities;
  Defeasance

  	
  48

  
	
  SECTION 8.2.

  	
  Conditions to Defeasance

  	
  49

  
	
  SECTION 8.3.

  	
  Application of Trust Money

  	
  50

  
	
  SECTION 8.4.

  	
  Repayment to Company

  	
  50

  
	
  SECTION 8.5.

  	
  Indemnity for Government Obligations

  	
  50

  
	
  SECTION 8.6.

  	
  Reinstatement

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  
	
   

  	
   

  	
   

  
	
  AMENDMENTS

  	
   

  
	
   

  	
   

  
	
  SECTION 9.1.

  	
  Without Consent of Holders

  	
  51

  
	
  SECTION 9.2.

  	
  With Consent of Holders

  	
  51

  
	
  SECTION 9.3.

  	
  Compliance with Trust Indenture Act

  	
  52

  
	
  SECTION 9.4.

  	
  Revocation and Effect of Consents and
  Waivers

  	
  52

  
	
  SECTION 9.5.

  	
  Notation on or Exchange of Securities

  	
  52

  
	
  SECTION 9.6.

  	
  Trustee To Sign Amendments

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBSIDIARY GUARANTEES

  	
   

  
	
   

  	
   

  
	
  SECTION 10.1.

  	
  Subsidiary Guarantees

  	
  53

  
	
  SECTION 10.2.

  	
  Limitation on Liability

  	
  54

  
	
  SECTION 10.3.

  	
  Successors and Assigns

  	
  54

  
	
  SECTION 10.4.

  	
  No Waiver

  	
  54

  
	
  SECTION 10.5.

  	
  Right of Contribution

  	
  54

  
	
  SECTION 10.6.

  	
  No Subrogation

  	
  55

  
	
  SECTION 10.7.

  	
  Modification

  	
  55

  
	
  SECTION 10.8.

  	
  Release of Subsidiary Guarantor

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  SECTION 11.1.

  	
  Trust Indenture Act Controls

  	
  55

  
	
  SECTION 11.2.

  	
  Notices

  	
  55

  
	
  SECTION 11.3.

  	
  Communication by Holders with Other Holders

  	
  56

  
	
  SECTION 11.4.

  	
  Certificate and Opinion as to Conditions
  Precedent

  	
  56

  
	
  SECTION 11.5.

  	
  Statements Required in Certificate or
  Opinion

  	
  56

  

 

iii

 

	
  SECTION 11.6.

  	
  When Securities Disregarded

  	
  57

  
	
  SECTION
  11.7.

  	
  Rules
  by Trustee, Paying Agent and Registrar

  	
  57

  
	
  SECTION 11.8.

  	
  Legal Holidays

  	
  57

  
	
  SECTION 11.9.

  	
  Governing Law

  	
  57

  
	
  SECTION 11.10.

  	
  No Recourse Against Others

  	
  57

  
	
  SECTION 11.11.

  	
  Successors

  	
  57

  
	
  SECTION 11.12.

  	
  Multiple Originals

  	
  57

  
	
  SECTION 11.13.

  	
  Table of Contents; Headings

  	
  58

  
	
  SECTION 11.14.

  	
  Severability Clause

  	
  58

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  A — Form of Note

  	
   

  
	
  Exhibit
  B — Form of Private Placement Legend

  	
   

  
	
  Exhibit
  C — Form of Certificate to be Delivered in Connection with Transfers to
  Non-QIB Accredited Investors

  	
   

  
	
  Exhibit
  D — Form of Certificate to be Delivered in Connection with Transfers Pursuant
  to Regulation S

  	
   

  

 

iv

 

INDENTURE
dated as of March 8, 2004, among FRIENDLY ICE CREAM CORPORATION, a
Massachusetts corporation (the “Company”),
FRIENDLY’S RESTAURANTS FRANCHISE, INC., a Delaware corporation, and THE BANK OF
NEW YORK, a New York banking corporation (the “Trustee”).

 

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

 

ARTICLE
1

 

DEFINITIONS
AND INCORPORATION BY REFERENCE

 

SECTION 1.1.                                                    Definitions.

 

“Acquired
Indebtedness” of any specified Person means Indebtedness of any
other Person existing at the time such other Person is merged with or into or
becomes a Restricted Subsidiary of such specified Person, including
Indebtedness Incurred in connection with, or in contemplation of, such other
Person’s becoming a Restricted Subsidiary of such specified Person.

 

“Additional
Assets” means (i) any property or assets (other than Indebtedness
and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that, in the case
of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.

 

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

 

“Asset
Disposition” means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Restricted Subsidiary (other than directors’ qualifying
shares), property or other assets (including sales and other dispositions of tangible
assets to franchisees and licensees and tangible assets at underperforming
restaurants, but excluding sales, dispositions or licenses of trademarks,
service marks, trade names and other intangibles), including by way of a
Sale/Leaseback Transaction (each referred to for the purposes of this
definition as a “disposition”), by the Company or any of its Restricted Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition to the Company or a Restricted
Subsidiary, (ii) a disposition of property or assets in the ordinary
course of business, (iii) dispositions of inventory in the ordinary course
of business, (iv) for purposes of Section 4.6 only, a disposition that
constitutes a Permitted Investment or a Restricted Payment permitted by
Section 4.4, (v) the sale, lease, transfer or other disposition of
all or substantially all the assets of the Company as permitted under Article
5, (vi) the grant of Liens permitted by Section 4.9 and (vii) sales
of obsolete or worn-out equipment, and (viii) dispositions of assets, in
any transaction or series of related transactions, with a fair market value of
not more than $2.5 million.

 

 

“Average
Life” means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.

 

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

 

“Business
Day” means a day other than a Saturday, Sunday or other day on which
banking institutions in New York State are authorized or required by law to
close.

 

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

 

“Capitalized
Lease Obligation” of a Person means an obligation of such Person
that is required to be classified and accounted for on the balance sheet of
such Person as a capitalized lease for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.

 

“Change of
Control” means the occurrence of any of the following events with
respect to the Company:

 

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

 

(ii)                        during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office;

 

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

 

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

 

2

 

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

 

(v)                                 the
adoption of a plan of liquidation of the Company.

 

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

 

“Commodity
Agreement” means any commodity swap agreement, commodity future
agreement, commodity hedge agreement or other similar agreement relating to
commodities, in each case relating to those commodities used in the ordinary
course of business of the Company and its Subsidiaries.

 

“Consolidated
Coverage Ratio” as of any date of determination means the ratio of
(i) the aggregate amount of EBITDA for the period of the most recent four
consecutive fiscal quarters for which internal financial information is
available prior to such date of determination to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (1) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (2) if since
the beginning of such period the Company or any Restricted Subsidiary shall
have made any Asset Disposition or if the transaction giving rise to the need
to calculate the Consolidated Coverage Ratio is an Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (3)
if since the beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence or retirement of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such period and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition or any Investment that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment occurred on the first day of
such period.  For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be made on a basis
consistent with

 

3

 

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

 

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

 

“Consolidated
Net Income” means, for any period, the net income (loss) of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:

 

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

 

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

 

(iii)                     any gain or loss realized upon the
sale or other disposition of any property, plant or equipment of the Company or
its consolidated Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person,

 

4

 

(iv)                              any
extraordinary gain or loss,

 

(v)                                 the
cumulative effect of a change in accounting principles, and

 

(vi)                              foreign
currency exchange gains and losses.

 

Notwithstanding the foregoing, for the
purpose of Section 4.4 only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary
to the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (3)(D) of
paragraph (a) thereof.

 

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

 

“Currency
Agreement” means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.

 

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

 

“Depositary” shall mean The Depository
Trust Company, New York, New York, or a successor thereto registered under the
Exchange Act or other applicable statute or regulation.

 

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

 

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

 

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

 

5

 

“Exchange and Registration Rights Agreement”
means (i) the Exchange and Registration Rights Agreement dated as of the Issue
Date among the Company, Friendly’s Restaurants Franchise, Inc. and the Initial
Purchasers and (ii) any other exchange and registration rights agreement
entered into in connection with an issuance of Additional Securities in a
private offering after the Issue Date.

 

“Exchange Offer” means the offer than may be
made by the Company pursuant to the Exchange and Registration Rights Agreement
to exchange Securities bearing the Private Placement Legend for the Exchange
Securities.

 

“Exchange Securities” has the meaning set
forth in the Exchange and Registration Rights Agreement.

 

“Foreign
Subsidiary” means any Subsidiary which is incorporated or otherwise
organized under the laws of any jurisdiction other than the United States of
America, any State thereof or the District of Columbia.

 

“GAAP”
means generally accepted accounting principles in the United States of America
as in effect as of the date of this Indenture, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession.  All ratios and computations
based on GAAP contained in this Indenture shall be computed in conformity with
GAAP.

 

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

 

“Hedging
Obligations” of any Person means the obligations of such Person to a
counterparty (net of amounts receivable from such counterparty) pursuant to any
Interest Rate Agreement, Currency Agreement or Commodity Agreement.

 

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

 

“IAI Global Note” means a permanent global
security in registered form bearing the legend in Exhibit B and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee representing the Securities sold to Institutional Accredited
Investors following the Issue Date in compliance with this Indenture.

 

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

 

6

 

“Indebtedness”
means, with respect to any Person on any date of determination (without
duplication),

 

(i)                                     the principal of
and premium (if any) in respect of indebtedness of such Person for borrowed
money,

 

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

 

(iii)                               all obligations of such
Person in respect of unreimbursed drawings under letters of credit or other
similar instruments (including reimbursement obligations with respect thereto),

 

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

 

(v)                                 all Capitalized Lease
Obligations of such Person,

 

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

 

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

 

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

 

(ix)                                to the extent not
otherwise included in this definition, net Hedging Obligations, and

 

(x)                                   Acquired
Indebtedness.

 

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

 

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

 

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

 

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

 

7

 

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

 

“Interest
Rate Agreement” means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.

 

“Investment”
in any Person means any direct or indirect advance, loan (other than advances
to customers in the ordinary course of business that are recorded as accounts
receivable on the balance sheet of such Person) or other extension of credit
(including by way of Guarantee or similar arrangement) or capital contribution
to (by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person.  Notwithstanding the
foregoing, purchases, redemptions or other acquisitions of Capital Stock of the
Company shall be deemed not to be Investments. 
For purposes of the definition of “Unrestricted Subsidiary” and Section
4.4, (i) “Investment” shall include the portion (proportionate to the Company’s
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company’s “Investment”
in such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company’s equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time that such
Subsidiary is so redesignated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors and evidenced by a resolution of such Board of
Directors certified in an Officers’ Certificate to the Trustee.  For the purposes of calculating the amount
of other “Investments,” including Permitted Investments, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income.  If the Company or any
Restricted Subsidiary sells or otherwise disposes of any Capital Stock of any
Restricted Subsidiary such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary, the Company shall be deemed
to have made an Investment on the date of any such sale or other disposition
equal to the fair market value of the Capital Stock of and all other
Investments in such Subsidiary not sold or disposed of, which amount shall be
determined by the Board of Directors of the Company.

 

“Issue
Date” means the date on which the Initial Securities are first
issued under this Indenture.

 

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

 

“Net
Available Cash” from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or other obligations
relating to such

 

8

 

properties or assets or received in any other
non cash form) therefrom, in each case net of (i) all legal, accounting,
investment banking, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained
by the Company or any Restricted Subsidiary after such Asset Disposition.

 

“Net Cash
Proceeds,” with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys’ fees,
accountants’ fees, underwriters’ or placement agents’ fees, discounts or
commissions and brokerage, consultants’ and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

 

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

 

“Non-U.S. Person” has the meaning assigned to
such term in Regulation S.

 

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

 

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

 

“Officers’
Certificate” means a certificate signed by two Officers, one of
which is the Chairman of the Board, the Chief Executive Officer, the Chief
Financial Officer, the President, any Executive Vice President, the Treasurer
or the Clerk.

 

“144A Global Note” means a permanent global
security in registered form representing the Securities sold in reliance on
Rule 144A under the Securities Act.

 

“Opinion
of Counsel” means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. 
The counsel may be an employee of or counsel to the Company or the
Trustee.  Opinions of Counsel required
to be delivered under this Indenture may have qualifications customary for
opinions of the type required and counsel delivering such Opinions of Counsel
may rely on certificates of the Company or government or other officials
customary for opinions of the type required, including certificates certifying
as to matters of fact.

 

9

 

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

 

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

 

“Permitted
Investment” means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, or a Restricted Subsidiary or a Person
which will, upon the making of such Investment, become a Restricted Subsidiary;
provided,
however,
that the primary business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary; provided,
however,
that such Person’s primary business is a Related Business; (iii) Temporary
Cash Investments; (iv) accounts and receivables owing to the Company or
any Restricted Subsidiary, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided,
however,
that such trade terms may include such concessionary trade terms as the Company
or any such Restricted Subsidiary deems reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of
business; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments;
(viii) franchisees of the Company in an amount at any one time outstanding
not to exceed $10 million; (ix) Unrestricted Subsidiaries in an
aggregate amount at any one time outstanding not to exceed $10 million;
(x) Guarantees permitted to be made pursuant to Section 4.3;
(xi) securities of account debtors received in settlement of obligations
or pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any account debtors or customers,
(xii) Currency Agreements, Interest Rate Agreements and Commodity
Agreements entered into in the ordinary course of business; provided
that such agreements are entered into for bona fide hedging purposes, are not
for speculation or trading purposes and are designed to protect against
fluctuations in interest rates, currency exchange rates or commodity prices, as
the case may be, and, in the case of Interest Rate Agreements, any such Interest
Rate Agreement has a notional amount corresponding to the Indebtedness being
hedged thereby, (xiii) accounts and notes receivable from franchisees,
customers, suppliers and others in the ordinary course of business,
(xiv) in connection with an Asset Disposition made in compliance with
Section 4.6, (xv) Investments made in the form of Capital Stock
(other than Disqualified Stock) of the Company; and (xvi) other
Investments in an aggregate amount at any time outstanding not to exceed $10
million (with each Investment being valued as of the date made and without
regard to subsequent changes in value).

 

“Permitted
Liens” means, with respect to any Person, (a) pledges or
deposits by such Person under workmen’s compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness) or
leases to which such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or cash equivalents to
secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case incurred in the ordinary course of business; (b) Liens imposed
by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case
for sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards against such
Person with respect to which such Person shall then be proceeding with an
appeal or other proceedings for review; (c) Liens for taxes, assessments,
governmental charges or claims not yet subject to penalties for non-payment or
which are being contested in good faith by appropriate proceedings;
(d) Liens in favor of issuers of surety bonds or

 

10

 

letters of credit issued pursuant to the
request of and for the account of such Person, and Liens to secure bankers’
acceptances, in each case in the ordinary course of its business;
(e) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness and which do not in the
aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;
(f) Liens (A) securing obligations under Interest Rate Agreements so
long as the related Indebtedness is, and is permitted to be under the
Indenture, secured by a Lien on the same property securing such obligations and
(B) securing obligations under Currency Agreements and Commodity
Agreements, provided
that such Liens shall not encumber any assets or property of the Company other
than the underlying contracts and the rights thereunder; (g) Liens
existing as of the Issue Date and Liens created by the Indenture;
(h) Liens created solely for the purpose of securing the payment of all or
a part of the purchase price or construction cost of assets or property
acquired or constructed in the ordinary course of business after the Issue
Date; provided,
however,
that (A) the aggregate principal amount of Indebtedness secured by such
Liens shall not exceed the cost of the assets or property so acquired or
constructed, (B) the Indebtedness secured by such Liens shall have
otherwise been permitted to be issued under the Indenture and (C) such
Liens shall not encumber any other assets or property of the Company or any of
its Restricted Subsidiaries (other than assets or property affixed or
appurtenant thereto) and shall attach to such assets or property within 180
days of the construction or acquisition of such assets or property; (i) Liens
on the assets or property of a Restricted Subsidiary of the Company existing at
the time such Restricted Subsidiary became a Subsidiary of the Company and not
incurred as a result of (or in connection with or in anticipation of) such
Restricted Subsidiary becoming a Subsidiary of the Company; provided,
however,
that (A) any such Lien does not by its terms cover any categories of
property or assets after the time such Restricted Subsidiary becomes a
Subsidiary which were not covered immediately prior to such transaction,
(B) the incurrence of the Indebtedness secured by such Lien shall have
otherwise been permitted to be issued under the Indenture, and (C) such
Liens do not extend to or cover any other categories of property or assets
(other than assets or property affixed or appurtenant thereto) of the Company
or any of its Restricted Subsidiaries; (j) Liens to secure Capitalized
Lease Obligations permitted to be Incurred under the Indenture; (k) Liens
on assets existing at the time such assets are acquired by the Company or any
Restricted Subsidiary (and not created in anticipation or contemplation
thereof); (l) Liens securing Indebtedness outstanding under the Credit
Facility; (m) any interest or title of a lessor under any lease, whether
or not characterized as an operating or capital lease; (n) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or any
Restricted Subsidiary, including rights of set-off; (o) leases or subleases
granted in the ordinary course of business; (p) Liens arising out of
consignment or similar arrangements for the sale of goods; (q) rights of
set-off on bank accounts and Liens of securities intermediaries arising on
accounts maintained in the ordinary course of business; (r) Liens in
addition to the foregoing; provided that the amount of the
obligations of the Company and its Restricted Subsidiaries secured by such
Liens does not exceed in the aggregate $2 million at any one time
outstanding; and (s) Liens extending, renewing or replacing in whole or in
part a Lien permitted by clause (g), (h), (i), (j) or (k) above; provided,
however,
that (A) such Liens do not extend beyond the property subject to the
existing Lien and improvements and construction on such property and proceeds
thereof and (B) the Indebtedness secured by the Lien may not exceed the
Indebtedness secured at the time by the existing Lien, plus an amount necessary
to pay any fees and expenses relating to such extension, renewal or replacement
(including premiums related thereto).

 

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

 

11

 

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

 

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

 

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

 

“Qualified
Equity Offering” means (i) an underwritten primary public offering
of common stock of the Company pursuant to an effective registration statement
under the Securities Act or (ii) a private offering of common stock other than
issuances of common stock pursuant to employee benefit plans or as compensation
to employees.

 

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

 

“Refinancing
Indebtedness” means Indebtedness that refunds, refinances, replaces,
renews, repays or extends (including pursuant to any defeasance or discharge
mechanism) (collectively, “refinances,” and “refinanced” shall have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances other
Refinancing Indebtedness; provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced, (iii) if the Indebtedness being refinanced was
subordinated to the Securities or any Subsidiary Guaranty, as the case may be,
then such Refinancing Indebtedness, by its terms, is subordinate in right of
payment to the Securities or such Subsidiary Guaranty, as the case may be, at
least to the same extent as the Indebtedness being refinanced and
(iv) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to or less than the sum of the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced plus the amount of accrued and
unpaid interest on the Indebtedness being refinanced, any premium paid to the
holders of the Indebtedness being refinanced and reasonable expenses incurred
in connection with the incurrence of the Refinancing Indebtedness; provided further,
however,
that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary (other than a Subsidiary Guarantor) that refinances Indebtedness
of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary
that refinances Indebtedness of an Unrestricted Subsidiary (unless such
Unrestricted Subsidiary is concurrently redesignated a Restricted Subsidiary).

 

“Regulation S Global Note” means a
permanent global security in registered form representing the Securities sold
in reliance on Regulation S under the Securities Act.

 

“Related
Business” means the businesses of the Company and the Restricted
Subsidiaries on the date of the Indenture and any business related, ancillary
or complementary thereto, in each case as determined by the Company in good
faith.

 

12

 

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

 

“Responsible Officer” when used with respect
to the Trustee, means any vice president, any assistant vice president, any senior
trust officer or assistant trust officer, any trust officer, or any other
officer associated with the corporate trust department of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of such
person’s knowledge of and familiarity with the particular subject.

 

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

 

“Restricted
Subsidiary” means any Subsidiary of the Company other than an Unrestricted
Subsidiary.

 

“Sale/Leaseback
Transaction” means an arrangement relating to property now owned or
hereafter acquired whereby the Company or a Restricted Subsidiary transfers
such property to a Person and the Company or a Restricted Subsidiary leases it
from such Person.

 

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

 

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

 

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

 

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

 

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

 

“Stated
Maturity” means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).

 

“Subordinated
Obligation” means any Indebtedness of the Company or any Subsidiary
Guarantor (whether outstanding on the Issue Date or thereafter Incurred) which
is subordinate or junior in

 

13

 

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

 

“Subsidiary”
of any Person means any corporation, association, partnership or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.

 

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

 

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

 

“Temporary
Cash Investments” means any of the following: (i) any investment in
direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
in each case maturing within 360 days of the date of acquisition thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 360 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America having capital, surplus and undivided profits
aggregating in excess of $250,000,000 (or the foreign currency equivalent
thereof) and whose long-term debt is rated “A” (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (iii)
repurchase obligations with a term of not more than 60 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 270 days after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or
any foreign country recognized by the United States of America with a rating at
the time as of which any investment therein is made of “P-1” (or higher)
according to Moody’s Investors Service, Inc. or “A-1” (or higher) according to
Standard & Poor’s Ratings Group, (v) investments in securities with
maturities of 12 months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least “A” by Standard & Poor’s Ratings Group or “A” by Moody’s Investors
Service, Inc. and (vi) investments in shares of money market funds registered
under the Investment Company Act of 1940, as amended.

 

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

 

“Trade
Payables” means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.

 

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

 

14

 

“Uniform
Commercial Code” means the New York Uniform Commercial Code as in effect
from time to time.

 

“Unrestricted
Subsidiary” means (i) Friendly’s International, Inc., Friendly’s
Realty I, LLC, Friendly’s Realty II, LLC and Friendly’s Realty III, LLC, (ii)
any Subsidiary of the Company that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the manner
provided below and (iii) any Subsidiary of an Unrestricted Subsidiary.  The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien (other than Permitted Liens) on any property of,
the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total consolidated assets of $1,000 or less
or (B) if such Subsidiary has consolidated assets greater than $1,000, then
such designation would be permitted under Section 4.4.  The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however,
that immediately after giving effect to such designation (x) the Company could
Incur $1.00 of additional Indebtedness under Section 4.3(a) and (y) no Default
shall have occurred and be continuing. 
Any such designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board of Directors
resolution giving effect to such designation and an Officers’ Certificate
certifying that such designation complied with the foregoing provisions.

 

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

 

“Voting
Stock” of a Person means all classes of Capital Stock of such Person
then outstanding and normally entitled to vote in the election of directors (or
functional equivalent).

 

“Wholly
Owned Subsidiary” means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors’ qualifying shares and, in the
case of Foreign Subsidiaries, shares required to be held by foreign nationals
representing not more than 2% of such Capital Stock) is owned by the Company or
another Wholly Owned Subsidiary.

 

SECTION 1.2.                                                    Other Definitions.

 

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
  “Additional Securities”

  	
   

  	
   

  	
  2.2

  
	
  “Affiliate Transaction”

  	
   

  	
   

  	
  4.7

  
	
  “Authentication Order”

  	
   

  	
   

  	
  2.2

  
	
  “Bankruptcy Law”

  	
   

  	
   

  	
  6.1

  
	
  “covenant defeasance option”

  	
   

  	
   

  	
  8.1(b)

  
	
  “Change of Control Offer”

  	
   

  	
   

  	
  4.8(b)

  
	
  “Custodian”

  	
   

  	
   

  	
  6.1

  
	
  “Event of Default”

  	
   

  	
   

  	
  6.1

  
	
  “Global Securities”

  	
   

  	
   

  	
  2.1

  
	
  “Initial Securities”

  	
   

  	
   

  	
  2.2

  
	
  “legal defeasance option”

  	
   

  	
   

  	
  8.1(b)

  
	
  “Legal Holiday”

  	
   

  	
   

  	
  11.8

  
	
  “Notice of Default”

  	
   

  	
   

  	
  6.1

  
	
  “Offer”

  	
   

  	
   

  	
  4.6(b)

  
	
  “Participants”

  	
   

  	
   

  	
  2.6

  
	
  “Paying Agent”

  	
   

  	
   

  	
  2.3

  
	
  “Physical Securities”

  	
   

  	
   

  	
  2.1

  
	
  “Registrar”

  	
   

  	
   

  	
  2.3

  
	
  “Restricted Payment”

  	
   

  	
   

  	
  4.4(a)

  
	
  “Securities Register”

  	
   

  	
   

  	
  2.3

  
	
  “Successor Company”

  	
   

  	
   

  	
  5.1

  

 

15

 

SECTION 1.3.                                 Incorporation by Reference of Trust
Indenture Act.  This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture.  The following TIA terms have the following
meanings:

 

“Commission” means the SEC.

 

“indenture securities” means the
Securities.

 

“indenture security holder” means a
Securityholder.

 

“indenture to be qualified” means this
Indenture.

 

“indenture trustee” or “institutional
trustee” means the Trustee.

 

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

 

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

 

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

 

(1)                                  a term has the
meaning assigned to it;

 

(2)                                  an accounting term
not otherwise defined has the meaning assigned to it in accordance with GAAP;

 

(3)                                  “or” is not
exclusive;

 

(4)                                  “including” means
including without limitation;

 

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

 

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

 

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

 

16

 

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

 

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

 

ARTICLE
2

 

THE SECURITIES

 

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

 

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

 

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

 

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

 

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

 

A Security shall not be valid until an
authorized signatory of the Trustee manually signs the certificate of
authentication on the Security.  The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.

 

The Trustee shall authenticate (i) on the
Issue Date, Securities for original issue in an aggregate principal amount not
to exceed $175,000,000 (the “Initial Securities”), (ii) additional
Securities (the “Additional Securities”) in an unlimited amount (so long as
not otherwise prohibited by the terms of this Indenture, including, without
limitation, Section 4.3) and (iii) Exchange Securities (x) in exchange for a
like principal amount of Initial Securities or (y) in exchange for a like
principal amount of Additional Securities, in each case, upon a written order
of the Company signed by an Officer of the Company (an “Authentication Order”).  Each such Authentication Order shall specify
the amount of Securities to be authenticated and the date on which the
Securities are to be authenticated, whether the Securities are to be Initial
Securities, Exchange Securities or Additional Securities and such other
information as the Trustee

 

17

 

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

 

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

 

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

 

The Company shall enter into an appropriate
agency agreement with any Registrar, Paying Agent or co-registrar not a party
to this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisions
of this Indenture that relate to such agent. 
The Company shall notify the Trustee of the name and address of any such
agent.  If the Company fails to maintain
a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7.  The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar,
co-registrar or transfer agent, except that for purposes of Article 8, neither
the Company nor any of its Affiliates shall act as Paying Agent.

 

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

 

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

 

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

 

SECTION 2.6.                                 Transfer and Exchange.  The Securities shall be issued in registered
form and shall be transferable only upon the surrender of a Security for
registration of transfer.  When a

 

18

 

Security is presented to the Registrar or a
co-registrar with a request to register a transfer, the Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Registrar shall record in the
Securities Register the transfer as requested if the requirements of Section
8-401(1) of the Uniform Commercial Code are met, and thereupon one or more new
Securities in the same aggregate principal amount shall be issued to the
designated assignee or transferee and the old Security will be returned to the
Company.  When Securities are presented
to the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested, in the same manner, if the same requirements are
met.  To permit registration of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar’s or co-registrar’s request.  The Company may require payment of a sum
sufficient to pay all taxes, assessments or other governmental charges in
connection with any transfer or exchange pursuant to this Section.  The Company shall not be required to make
and the Registrar need not register transfers or exchanges of Securities
selected for redemption (except, in the case of Securities to be redeemed in
part, the portion thereof not to be redeemed) or any Securities for a period of
15 days before a selection of Securities to be redeemed or 15 days before an
interest payment date.

 

Prior to the due presentation for
registration of transfer of any Security, the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security for the purpose
of receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and none of
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.

 

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

 

With respect to Global Securities:

 

(1)                                  Each Global Security
authenticated under this Indenture shall be registered in the name of the
Depositary designated for such Global Security or a nominee thereof and
deposited with such Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all purposes
of this Indenture.

 

(2)                                  A Global Security may
not be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary.  A Global Security is exchangeable for
certificated Securities only if (i) the Depositary notifies the Company that it
is unwilling or unable to continue as a Depositary for such Global Security or
if at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act, (ii) the Company executes and delivers to the Trustee a
notice that such Global Security shall be so transferable, registrable, and
exchangeable, and such transfers shall be registrable or (iii) there shall have
occurred and be continuing an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default
with respect to the Securities represented by such Global Security.  Any Global Security that is exchangeable for
certificated Securities pursuant to the preceding sentence will be transferred
to, and registered and exchanged for, certificated Securities in authorized
denominations, without legends applicable to a Global Security, and registered
in such names as the Depositary holding such Global Security may direct.  Subject to the foregoing, a Global Security
is not exchangeable, except for a Global Security of like denomination to be
registered in the name of the Depositary or its nominee.  In the event that a Global Security becomes
exchangeable for certificated Securities, (i) certificated Securities will

 

19

 

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

 

(3)                                  Securities issued in
exchange for a Global Security or any portion thereof shall have an aggregate
principal amount equal to that of such Global Security or portion thereof to be
so exchanged, shall be registered in such names and be in such authorized
denominations as the Depositary shall designate and shall bear the applicable
legends provided for herein.  Any Global
Security to be exchanged in whole shall be surrendered by the Depositary to the
Trustee.  With respect to any Global
Security to be exchanged in part, either such Global Security shall be so
surrendered for exchange or, if the Trustee is acting as custodian for the Depositary
or its nominee with respect to such Global Security, the principal amount
thereof shall be reduced, by an amount equal to the portion thereof to be so
exchanged, by means of an appropriate adjustment made on the records of the
Trustee.  Upon any such surrender or
adjustment, the Trustee shall authenticate and deliver the Security issuable on
such exchange to or upon the order of the Depositary or an authorized
representative thereof.

 

(4)                                  Every Security
authenticated and delivered upon registration of transfer of, or in exchange
for or in lieu of, a Global Security or any portion mutilated thereof, whether
pursuant to this Section, Section 2.7 or 2.9 or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.

 

(5)                                  Any Physical Security
constituting a Restricted Security delivered in exchange for an interest in a
Global Security pursuant to this Section 2.6 shall, except as otherwise
provided by Section 2.13, bear the Private Placement Legend.

 

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

 

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

 

20

 

Every replacement Security is an obligation
of the Company under this Indenture.

 

The provisions of this Section are exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.

 

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

 

If a Security is replaced pursuant to Section
2.7, it ceases to be outstanding unless the Trustee and the Company receive
proof satisfactory to them that the replaced Security is held by a bona fide
purchaser.

 

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

 

SECTION 2.9.                                 Temporary Securities.  Until definitive Securities are ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary
Securities.  Temporary Securities shall
be substantially in the form of definitive Securities but may have variations
that the Company considers appropriate for temporary Securities.  Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.

 

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

 

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

 

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

 

21

 

identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.  The Company
will promptly notify the Trustee of any change in the CUSIP and ISIN numbers.

 

SECTION 2.13.                           Special Transfer Provisions.

 

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

 

(i)                                     the Registrar
shall register the transfer of any Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested transfer is
after the second anniversary of the Issue Date; provided, however,
that neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any time on or
prior to the second anniversary of the Issue Date or (y) (1) in the case
of a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto
and any legal opinions and certifications required thereby and (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has delivered
to the Registrar a certificate substantially in the form of Exhibit D
hereto;

 

(ii)                                  if the proposed
transferee is a Participant and the Securities to be transferred consist of
Physical Securities which after transfer are to be evidenced by an interest in
the IAI Global Note or Regulation S Global Note, as the case may be, upon
receipt by the Registrar of the Physical Security and (x) written
instructions given in accordance with the Depositary’s and the Registrar’s
procedures and (y) the appropriate certificate, if any, required by clause (y)
of paragraph (i) above, the Registrar shall register the transfer and reflect
on its books and records the date and an increase in the principal amount of
the IAI Global Note or Regulation S Global Note, as the case may be, in an
amount equal to the principal amount of Physical Securities to be transferred,
and the Registrar shall cancel the Physical Securities so transferred; and

 

(iii)                               if the proposed
transferor is a Participant seeking to transfer an interest in a Global
Security, upon receipt by the Registrar of (x) written instructions given in
accordance with the Depositary’s and the Registrar’s procedures and (y) the
appropriate certificate, if any, required by clause (y) of paragraph (i) above,
the Registrar shall register the transfer and reflect on its books and records
the date and (A) a decrease in the principal amount of the Global Security from
which such interests are to be transferred in an amount equal to the principal
amount of the Securities to be transferred and (B) an increase in the principal
amount of the IAI Global Note or the Regulation S Global Note, as the case
may be, in an amount equal to the principal amount of the Securities to be
transferred.

 

(b)                                 Transfers
to QIBs.  The following provisions
shall apply with respect to the registration of any proposed transfer of a
Restricted Security to a QIB:

 

(i)                                     the Registrar
shall register the transfer of any Restricted Security, whether or not such
Security bears the Private Placement Legend, if (x) the requested transfer
is after the second anniversary of the Issue Date; provided, however,
that neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any time on or
prior to the second anniversary of the Issue Date or (y) such transfer is
being made by a proposed transferor who has checked the box provided for on the
form of Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance

 

22

 

with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A;

 

(ii)                                  if the proposed
transferee is a Participant and the Securities to be transferred consist of
Physical Securities which after transfer are to be evidenced by an interest in
the 144A Global Note, upon receipt by the Registrar of the Physical Security
and written instructions given in accordance with the Depositary’s and the
Registrar’s procedures, the Registrar shall register the transfer and reflect
on its book and records the date and an increase in the principal amount of the
144A Global Note in an amount equal to the principal amount of Physical
Securities to be transferred, and the Registrar shall cancel the Physical
Securities so transferred; and

 

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

 

(c)                                  Exchange
Offer.  Upon the occurrence of the
Exchange Offer in accordance with the Exchange and Registration Rights
Agreement, the Company shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.2, the Trustee shall authenticate one or more
Global Securities not bearing the Private Placement Legend in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Global Securities tendered for acceptance in accordance with the Exchange
Offer and accepted for exchange in the Exchange Offer.

 

(d)                                 Private
Placement Legend.  Upon the
transfer, exchange or replacement of Securities not bearing the Private Placement
Legend, the Registrar or co-Registrar shall deliver Securities that do not bear
the Private Placement Legend.  Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar or co-Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) there is delivered to the Trustee
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act or (ii) such Security has been offered and sold (including
pursuant to the Exchange Offer) pursuant to an effective registration statement
under the Securities Act.

 

(e)                                  General.  By its acceptance of any Security bearing
the Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.

 

The Registrar shall retain copies of all
letters, notices and other written communications received pursuant to this
Section 2.13.  The Company shall
have the right to inspect and make copies of

 

23

 

all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.

 

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

 

The Trustee shall have no responsibility for
the actions or omissions of the Depositary, or the accuracy of the books and
records of the Depositary.

 

ARTICLE
3

 

REDEMPTION

 

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

 

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

 

SECTION 3.2.                                 Selection of Securities To Be
Redeemed.  If fewer than all the
Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by a method that complies with applicable legal
and securities exchange requirements, if any, and that the Trustee considers in
its sole discretion to be fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances;
provided,
however, that, in the case of such redemption pursuant to paragraph
5(b) of the Securities, the Trustee will select the Securities on a pro rata
basis or on as nearly a pro rata basis as practicable (subject to the
procedures of the Depositary) unless that method is otherwise prohibited.  The Trustee shall make the selection from outstanding
Securities not previously called for redemption.  The Trustee may select for redemption portions of the principal
of Securities that have denominations larger than $1,000.  Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000.  Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.  The Trustee shall
notify the Company promptly of the Securities or portions of Securities to be
redeemed.  In the event the Company is
required to make an offer to redeem Securities pursuant to Sections 4.6 or 4.8
and the amount available for such offer is not evenly divisible by $1,000, the
Trustee shall promptly refund to the Company any remaining funds, which in no
event will exceed $1,000.

 

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

 

24

 

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

 

(1)                                  the redemption date;

 

(2)                                  the redemption price;

 

(3)                                  the name and address
of the Paying Agent;

 

(4)                                  that Securities
called for redemption must be surrendered to the Paying Agent to collect the
redemption price;

 

(5)                                  if fewer than all the
outstanding Securities are to be redeemed, the identification and principal
amounts of the particular Securities to be redeemed;

 

(6)                                  that, unless the
Company defaults in making such redemption payment, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the redemption
date;

 

(7)                                  the paragraph of the
Securities pursuant to which the Securities called for redemption are being
redeemed; and

 

(8)                                  that no
representation is made as to the correctness or accuracy of the CUSIP or ISIN
number, if any, listed in such notice or printed on the Securities.

 

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

 

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

 

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

 

SECTION 3.6.                                 Securities Redeemed in Part.  Upon surrender of a Security that is
redeemed in part (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered, except that
if a

 

25

 

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

 

ARTICLE
4

 

COVENANTS

 

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

 

The Company shall pay interest on overdue
principal at the rate specified therefor in the Securities, and it shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.

 

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

 

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

 

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

 

(b)                                 Notwithstanding
the foregoing paragraph (a), the Company and its Restricted Subsidiaries may
Incur the following Indebtedness:

 

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

 

(ii)                                  Indebtedness of the
Company owing to and held by any Wholly Owned Subsidiary or Indebtedness of a
Restricted Subsidiary owing to and held by the Company or any Wholly

 

26

 

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

 

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

 

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

 

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

 

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

 

(vii)                           obligations with respect to
customary provisions regarding post-closing purchase price adjustments and
indemnification in agreements for the purchase or sale of a business or assets
otherwise permitted by the Indenture;

 

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

 

27

 

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

 

(x)                                   Indebtedness of the
Company Incurred to finance the acquisition, construction or improvement of
fixed or capital assets, and Refinancing Indebtedness in respect thereof, in an
aggregate principal amount at any one time outstanding not to exceed
$25 million, provided that such Indebtedness is Incurred within
360 days after the date of such acquisition, construction or improvement
and does not exceed the fair market value of such acquired, constructed or
improved assets as determined in good faith by the Board of Directors;

 

(xi)                                Indebtedness
represented by Capitalized Lease Obligations in respect of Sale/Leaseback
Transactions involving the sale of restaurants within 24 months of the purchase
of the associated real property, in an aggregate principal amount at any one
time outstanding not to exceed $20 million;

 

(xii)                             Indebtedness represented
by Guarantees of loans to employees of the Company or its Subsidiaries for the
purpose of paying withholding taxes incurred by such employees in connection
with the vesting of stock and/or stock options granted by the Company, in an
aggregate amount at any one time outstanding not to exceed $3 million;

 

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

 

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

 

(c)                                  The
Company will not permit any Unrestricted Subsidiary to Incur any Indebtedness
other than Non-Recourse Debt, except that an Unrestricted Subsidiary may incur
Indebtedness Guaranteed by the Company or any of its Restricted Subsidiaries to
the extent such Guarantee is permitted by Section 4.4(b)(iv); provided,
however,
if any such Indebtedness ceases to be Non-Recourse Debt, such event shall be
deemed to constitute an Incurrence of Indebtedness by the Company or a
Restricted Subsidiary.

 

(d)                                 The
Company will not, and will not permit any Subsidiary Guarantor to, directly or
indirectly, Incur any Indebtedness that is or purports to be by its terms (or
by the terms of any agreement governing such Indebtedness) subordinated to any
other Indebtedness of the Company or of such Subsidiary Guarantor, as the case
may be, unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinate to the
Securities or the Subsidiary Guaranty of such Subsidiary Guarantor, to the same
extent and in the same manner as such Indebtedness is subordinated to such
other Indebtedness of the Company or such Subsidiary Guarantor, as the case may
be.

 

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

 

28

 

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

 

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

 

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

 

(2)                                  the Company and its
Restricted Subsidiaries could not Incur at least $1.00 of additional
Indebtedness under Section 4.3(a); or

 

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

 

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

 

(B)                                the aggregate Net Cash
Proceeds received by the Company from the issue or sale of Capital Stock (other
than Disqualified Stock) subsequent to the Issue Date (other than an issuance
or sale to a Subsidiary of the Company and other than any such proceeds which
are used to redeem Securities in accordance with paragraph 5(b) of the
Securities);

 

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

 

29

 

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

 

(D)                               an amount equal to the
net reduction in any Investment (other than any Investment made pursuant to
clause (vii) of paragraph (b) below) that was included in the calculation of
the amount of Restricted Payments resulting from repayments of the principal of
loans or advances or other transfers of assets to the Company or any Restricted
Subsidiary (valued as provided in the definition of “Investment”), not to
exceed the amount that was included in the calculation of the amount of
Restricted Payments in respect of such Investment; and

 

(E)                                 upon the redesignation
of any Unrestricted Subsidiary as a Restricted Subsidiary, an amount not to
exceed the lesser of (x) the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary and (y) the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary (valued as
provided in the definition of “Investment”), to the extent such amount was
previously included in the calculation of the amount of Restricted Payments.

 

(b)                                 The
provisions of Section 4.4(a) will not prohibit:

 

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

 

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

 

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

 

(iv)                              Investments in the form
of Guarantees by the Company or any of its Restricted Subsidiaries of
Indebtedness of an Unrestricted Subsidiary solely to the extent that the
Company or any such Restricted Subsidiary would then be permitted to make an
Investment in such Unrestricted Subsidiary pursuant to clause (3) of Section
4.4(a); provided
that the amount of any such Investment will be included in the calculation of
the amount of Restricted Payments pursuant to clause (3) of Section 4.4(a);

 

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

 

30

 

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

 

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

 

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

 

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

 

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

 

(1)                                  any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date (including pursuant to the Credit Facility);

 

(2)                                  any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by the Company or
a Restricted Subsidiary and outstanding on such date (other than Indebtedness
Incurred in connection with, or in contemplation of, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company or a Restricted
Subsidiary);

 

(3)                                  any encumbrance or
restriction pursuant to an agreement effecting a refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (1) or (2) of this
Section or contained in any amendment to an agreement referred to in clause (1)
or (2) of this Section; provided, however, that the
encumbrances and restrictions contained in any such refinancing agreement or
amendment are not materially less favorable to the Holders than the encumbrances
and restrictions contained in any such agreement as determined in good faith by
the Company and evidenced by an Officers’ Certificate;

 

31

 

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

 

(5)                                  any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary pending the closing of such sale or
disposition;

 

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

 

(7)                                  any encumbrance or
restriction contained in the Indenture;

 

(8)                                  customary provisions
in joint venture agreements relating solely to the securities, assets and
revenues of such joint venture or other business venture;

 

(9)                                  any encumbrance or
restriction applicable to secured Indebtedness otherwise permitted to be
Incurred under the Indenture that limits the right of the debtor to dispose of
the assets securing such Indebtedness;

 

(10)                            customary net worth
provisions contained in leases and other agreements entered into by a
Restricted Subsidiary in the ordinary course of business; and

 

(11)                            customary restrictions with
respect to a Restricted Subsidiary pursuant to an agreement that has been
entered into for the sale or other disposition of all of the Capital Stock or
assets of such Restricted Subsidiary.

 

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

 

32

 

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

 

For the purposes of this Section 4.6, the
following are deemed to be cash: (x) the assumption by the transferee of
Indebtedness of the Company or any Restricted Subsidiary and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness
in connection with such Asset Disposition, (y) securities received by the
Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash and (z) Additional
Assets received in an exchange of assets transaction; provided that (i) in the
event such exchange of assets transaction or series of related exchange of
assets transactions (each, an “Exchange Transaction”) involves an
aggregate value in excess of $5,000,000, the terms of such Exchange Transaction
shall have been approved by the Board of Directors of the Company, and
(ii) in the event such Exchange Transaction involves an aggregate value in
excess of $10,000,000, the Company shall have received a written opinion from a
nationally recognized independent investment banking, accounting or appraisal
firm that the Company has received consideration equal to the fair market value
of the assets disposed of.

 

(b)                                 In
the event of an Asset Disposition that requires the purchase of Securities
pursuant to Section 4.6(a)(iii)(C), the Company will be required to
(i) purchase Securities tendered pursuant to an offer by the Company for
the Securities and (ii) redeem or offer to purchase any Pari Passu Indebtedness
the terms of which require the Company or the applicable Subsidiary Guarantor
to so redeem or repurchase such Pari Passu Indebtedness, pro rata in proportion
to the respective principal amounts of the Securities and such Pari Passu
Indebtedness required to be so redeemed or repurchased, the maximum principal
amount of Securities and Pari Passu Indebtedness that may be redeemed or
repurchased out of the amount of Net Available Cash referred to in clause (a)(iii)(C)
of this Section 4.6 (the “Offer”) at a purchase price of (x) in
the case of the Securities, 100% of their principal amount plus accrued
interest to the date of purchase in accordance with the procedures (including
prorating in the event of oversubscription) set forth in this Section 4.6 and
(y) in the case of such Pari Passu Indebtedness, the redemption price or
repurchase price, as applicable for such Pari Passu Indebtedness shall be as
set forth in the related documentation governing such Pari Passu
Indebtedness.  If the aggregate purchase
price for the Securities and Pari Passu Indebtedness tendered or redeemed
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities and Pari Passu Indebtedness, the Company will use
the remaining Net Available Cash for general corporate purposes not prohibited
by this Indenture.  The Company shall
not be required to make an Offer for Securities pursuant to this covenant if
the Net Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B)) is less than $10,000,000 (which lesser amounts
shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from subsequent Asset Dispositions).

 

(c)                                  (1)  Promptly, and in any event within 30 days
after the Company becomes obligated to make an Offer, the Company shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, at the address appearing in the Security Register, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price.  The notice shall specify a purchase date not
less than 30 days nor more than 60 days after the date of such notice (the “Purchase
Date”) and shall contain all instructions and materials necessary to
tender Securities pursuant to the Offer, together with the information
contained in clause (3).

 

33

 

(2)                                  Not
later than the date upon which written notice of an Offer is delivered to the
Trustee as provided above, the Company shall deliver to the Trustee an
Officers’ Certificate as to (i) the amount of the Offer (the “Offer Amount”),
(ii) the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 4.6(a).  Upon the expiration of the period for which the Offer remains
open (the “Offer
Period”), the Company shall deliver to the Trustee for cancellation
the Securities or portions thereof which have been properly tendered to and are
to be accepted by the Company.  Not
later than 10:00 a.m. (New York City time) on the Purchase Date, the Company
shall irrevocably deposit with the Trustee or with a paying agent (or, if the
Company is acting as Paying Agent, segregate and hold in trust) an amount in
cash sufficient to pay the Offer Amount for all Securities properly tendered to
and accepted by the Company.  The
Trustee shall, on the Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price.

 

(3)                                  Holders
electing to have a Security purchased will be required to surrender the
Security, together with all necessary endorsements and other appropriate
materials duly completed, to the Company at the address specified in the notice
at least three Business Days prior to the Purchase Date.  Holders will be entitled to withdraw their
election in whole or in part if the Trustee or the Company receives not later
than one Business Day prior to the Purchase Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security (which shall be $1,000 or an integral multiple thereof) which was
delivered for purchase by the Holder, the aggregate principal amount of such
Security (if any) that remains subject to the original notice of the Offer and
that has been or will be delivered for purchase by the Company and a statement
that such Holder is withdrawing his election to have such Security
purchased.  If at the expiration of the
Offer Period the aggregate principal amount of Securities surrendered by
Holders exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only securities in denominations of $1,000,
or integral multiples thereof, shall be purchased).  Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.

 

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

 

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

 

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

 

34

 

nationally recognized independent investment
banking, accounting or appraisal firm that such Affiliate Transaction is fair
to the Company from a financial point of view.

 

(b)                                 The
foregoing provision of Section 4.7(a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to Section 4.4, (ii) any issuance of
equity securities (other than Disqualified Stock), or other payments, awards or
grants in cash, equity securities (other than Disqualified Stock) or otherwise
pursuant to, or the funding of, employment arrangements, stock options and
stock ownership plans approved by the Board of Directors, (iii) any fees, indemnities,
loans or advances to employees in the ordinary course of business, and, to the
extent permitted by Section 4.3(b)(xii), Guarantees, (iv) any
transaction between the Company and a Restricted Subsidiary or between or among
Restricted Subsidiaries, (v) any issuance of Capital Stock (other than Disqualified
Stock) of the Company; (vi) transactions with suppliers or purchasers of
goods and services (including, without limitation, pursuant to joint venture
agreements and franchise agreements) and (vii) any agreement in effect on
the Issue Date or transaction contemplated thereby (and any replacement or
amendment of any such agreement so long as any such amendment or replacement
thereof is not materially less favorable to the Holders than the agreement in
effect on the Issue Date).

 

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

 

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

 

(1)                                  that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase (the “Change of Control Offer”) any or all of such Holder’s
Securities in denominations of $1,000 or any integral multiple thereof at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date);

 

(2)                                  the circumstances and
relevant facts regarding such Change of Control;

 

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

 

(4)                                  the instructions
determined by the Company, consistent with this Section 4.8, that a Holder must
follow in order to have its Securities purchased by the Company.

 

(c)                                  Holders
electing to have a Security purchased will be required to surrender the
Security, together with all necessary endorsements and other appropriate
materials duly completed, to the Company at the address specified in the notice
at least three Business Days prior to the purchase date.  Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than one Business Day
prior to the purchase date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder as to which such notice of withdrawal is being
submitted and a statement that such Holder is withdrawing his election to have
such Security purchased.

 

35

 

(d)                                 On
the purchase date, all Securities purchased by the Company under this Section
shall be delivered to the Trustee for cancellation, and the Company shall pay
the purchase price plus accrued and unpaid interest, if any, to the Holders entitled
thereto.

 

(e)                                  The
Company’s obligation to make a Change of Control Offer will be satisfied if a
third party makes the Change of Control Offer in the manner and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Securities properly
tendered and not withdrawn under the Change of Control Offer.

 

(f)                                    The
Company will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Securities pursuant to this Section 4.8.  To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.8,
the Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this Section 4.8 by
virtue thereof.

 

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

 

SECTION 4.9.                                 Limitation on Liens.  The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Lien on any of its property or assets (including Capital Stock), whether
owned on the Issue Date or thereafter acquired, securing any obligation, other
than Permitted Liens, unless contemporaneously therewith effective provision is
made to secure the Securities equally and ratably with (or on a senior basis
to, in the case of Subordinated Obligations) such obligation for so long as
such obligation is so secured by a Lien on property or assets of the Company or
a Restricted Subsidiary.

 

SECTION 4.10.                           Limitation on Sale of Subsidiary
Capital Stock.  The Company
(i) will not, and will not permit any Restricted Subsidiary of the Company
to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of
any Restricted Subsidiary to any Person (other than to the Company or a Wholly
Owned Subsidiary) and (ii) will not permit any Restricted Subsidiary to
issue any of its Capital Stock (other than, if necessary, shares of its Capital
Stock constituting directors’ qualifying shares) to any Person other than to
the Company or a Wholly Owned Subsidiary, unless, in either case,
(a) after any such transfer, conveyance, sale, lease, disposition or issuance,
such Subsidiary constitutes a Restricted Subsidiary and (b) the Net
Available Cash from such transfer, conveyance, sale, lease or other disposition
is applied in accordance with Section 4.6; provided, however, that this provision
shall not prohibit the transfer, conveyance, sale, lease or other disposition
of all of the Capital Stock of any Restricted Subsidiary.

 

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

 

(1)               the Company or such Restricted
Subsidiary could have (a) Incurred any Indebtedness attributable to such
Sale/Leaseback Transaction pursuant to Section 4.3 and (b) Incurred a Lien to
secure such Indebtedness without equally and ratably securing the Securities
pursuant to Section 4.9; and

 

36

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

 

SECTION 4.12.                           Limitation
on Conduct of Business of Insurance Subsidiary.  Unless it is designated as an Unrestricted Subsidiary in
accordance with this Indenture, the Company shall not permit Restaurant
Insurance Corporation to engage in any business or activities other than
writing insurance and reinsurance with respect to liabilities of the Company
and its Subsidiaries and activities incidental thereto.

 

SECTION 4.13.                           Future
Guarantors.  The Company shall cause
each new Subsidiary of the Company (other than (i) a new Subsidiary designated
as an Unrestricted Subsidiary and (ii) Foreign Subsidiaries), and any
Unrestricted Subsidiary that is redesignated a Restricted Subsidiary (other
than Restaurant Insurance Corporation, if it is designated as an Unrestricted
Subsidiary), to become a Subsidiary Guarantor under this Indenture and thereby
Guarantee the Securities on the terms and conditions set forth in
Article 10 (each a “Future Guarantor”).

 

SECTION 4.14.                           Compliance
Certificate.  The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers’ Certificate, one of the signers of which shall be the
principal executive, financial or accounting officer of the Company, stating
that in the course of the performance by the signers of their duties as
Officers of the Company they would normally have knowledge of any Default and
whether or not the signers know of any Default that occurred during such
period.  If they do, the certificate
shall describe the Default, its status and what action the Company is taking or
proposes to take with respect thereto. 
The Company also shall comply with TIA § 314(a)(4).

 

SECTION 4.15.                           Further
Instruments and Acts.  Upon request
of the Trustee, the Company will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.

 

SECTION 4.16.                           Maintenance
of Office or Agency.  The Company
shall maintain the office or agency required under Section 2.3.  The Company shall give prior written notice
to the Trustee of the location, and any change in the location, of such office
or agency.  If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.2.

 

SECTION 4.17.                           Corporate
Existence.  Except as otherwise
permitted by Article 5, the Company shall do or cause to be done, at its own
cost and expense, all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate existence of each of its
Subsidiaries in accordance with the respective organizational documents of each
such Subsidiary and the material rights (charter and statutory) and franchises
of the Company and each such Subsidiary; provided, however, that the Company
shall not be required to preserve, with respect to itself, any material right
or franchise and, with respect to any of its Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole.

 

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

 

37

 

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

 

SECTION 4.19.                           Maintenance of Properties
and Insurance.  (a)  The Company shall, and shall cause each of
its Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto and
actively conduct and carry on its business; provided, however, that nothing in
this Section 4.19 shall prevent the Company or any of its Subsidiaries from discontinuing
the operation and maintenance of any of its properties, if such discontinuance
is, in the good faith judgment of the Board of Directors of the Company or the
Subsidiary, as the case may be, desirable in the conduct of their respective
businesses and is not disadvantageous in any material respect to the Holders.

 

(b)                                 The
Company shall provide or cause to be provided, for itself and each of its
Subsidiaries, insurance (including appropriate self-insurance) against loss or
damage of the kinds that, in the good faith judgment of the Board of Directors
of the Company, are adequate and appropriate for the conduct of the business of
the Company and such Subsidiaries in a prudent manner, with reputable insurers
or with the government of the United States of America or any agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Board of
Directors of the Company, for companies similarly situated in the industry.

 

SECTION 4.20.                           Compliance
with Laws.  The Company shall
comply, and shall cause each of its Subsidiaries to comply, with all applicable
statutes, rules, regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except for such
noncompliances as are not in the aggregate reasonably likely to have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.

 

ARTICLE 5

 

SUCCESSOR
COMPANY

 

SECTION 5.1.                                 When the Company
May Merge or Transfer Assets.  The
Company will not consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets to, any Person, unless:

 

(i)                                     the
resulting, surviving or transferee Person (the “Successor Company”) will be
a corporation, limited liability company or limited partnership organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia and the Successor Company (if not the Company) will
expressly assume, by supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities, this Indenture and the Exchange and Registration
Rights Agreement;

 

38

 

(ii)                                  immediately
after giving pro forma effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred
by the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default or Event of Default will have occurred and be
continuing;

 

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

 

(iv)                              the
Company will have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture, as set
forth in the Indenture.

 

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

 

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

 

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

 

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

 

39

 

ARTICLE 6

 

DEFAULTS AND
REMEDIES

 

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

 

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

 

(2)                                  the
Company defaults in the payment of the principal or premium, if any, of any
Security when the same becomes due and payable at its Stated Maturity, upon optional
redemption, upon required repurchase, upon acceleration or otherwise;

 

(3)                                  the
Company fails to comply with Article 5;

 

(4)                                  the
Company fails to comply with any of its agreements in the Securities or this
Indenture (other than those referred to in (1), (2) or (3) above) and such
failure continues for 60 days after the notice specified below;

 

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

 

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

 

(A)                              commences
a voluntary case;

 

(B)                                consents
to the entry of an order for relief against it in an involuntary case in which
it is the debtor;

 

(C)                                consents
to the appointment of a Custodian of it or for any substantial part of its
property; or

 

(D)                               makes
a general assignment for the benefit of its creditors; or

 

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

 

(7)                                  a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:

 

(A)                              is
for relief against the Company or any Significant Subsidiary of the Company in
an involuntary case;

 

(B)                                appoints
a Custodian of the Company or any Significant Subsidiary of the Company or for
any substantial part of the property of the Company or Significant Subsidiary;
or

 

40

 

(C)                                orders
the winding up or liquidation of the Company or any Significant Subsidiary of
the Company;

 

(or any
similar relief is granted under any foreign laws) and the order or decree
remains unstayed                and
in effect for 60 days; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

The Trustee
may maintain a proceeding even if it does not possess any of the Securities or
does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default.  No remedy is
exclusive of any other remedy.  All
available remedies are, to the extent permitted by law, cumulative.

 

SECTION 6.4.                                 Waiver of Past Defaults.  The Holders of a majority in aggregate
principal amount of the Securities then outstanding by notice to the Trustee
may waive any past or existing Default and its consequences except (i) a
Default in the payment of the principal of or interest on a Security or (ii) a
Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Securityholder affected.  When a Default is waived, it is deemed cured, and any Event of
Default arising therefrom shall be deemed to have been cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.

 

SECTION 6.5.                                 Control by Majority.  The Holders of a majority in aggregate principal
amount of the Securities then outstanding may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee.  However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or, subject to Section
7.1, that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however,
that the Trustee may take any other action deemed proper by the Trustee that is
not inconsistent with such direction. 
Prior to taking any action hereunder, the Trustee shall be entitled to
indemnification from the Securityholders satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.

 

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

 

(1)                                  the
Holder gives to the Trustee written notice stating that an Event of Default is
continuing;

 

(2)                                  the
Holders of at least 25% in aggregate principal amount of the Securities then
outstanding make a written request to the Trustee to pursue the remedy;

 

(3)                                  such
Holder or Holders offer to the Trustee reasonable security or indemnity against
any loss, liability or expense;

 

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

 

(5)                                  the
Holders of a majority in aggregate principal amount of the Securities then
outstanding do not give the Trustee a direction inconsistent with the request
during such 60-day period.

 

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

 

42

 

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

 

SECTION 6.8.                                 Collection Suit by
Trustee.  If an Event of
Default specified in Section 6.1(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with interest
on any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.7.

 

SECTION 6.9.                                 Trustee May File
Proofs of Claim.  The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.7.

 

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

 

FIRST:  to the Trustee for amounts due under Section
7.7;

 

SECOND:  to Securityholders for amounts due and
unpaid on the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Securities for principal and interest, respectively; and

 

THIRD:  to the Company.

 

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

 

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

 

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

 

43

 

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

 

ARTICLE 7

 

TRUSTEE

 

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

 

(b)                                 Except
during the continuance of an Event of Default:

 

(1)                                  the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

 

(2)                                  in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. 
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.

 

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

 

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

 

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

 

(3)                                  the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 6.5.

 

(d)                                 Every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b) and (c) of this Section.

 

(e)                                  Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.

 

(f)                                    No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers, if it shall
have reasonable grounds to believe that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

 

44

 

(g)                                 Every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section and to the provisions of the TIA.

 

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

 

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

 

(c)                                  The
Trustee may act through agents and shall not be responsible for the misconduct
or negligence of any agent appointed with due care.

 

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

 

(e)                                  The
Trustee may consult with counsel of its selection, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.

 

(f)                                    The
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.

 

(g)                                 The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.

 

(h)                                 The
Trustee may request that the Company deliver an Officers’ Certificate setting
forth the names of individuals and/or titles of officers authorized at such
time to take specified actions pursuant to this Indenture, which Officers’
Certificate may be signed by any person authorized to sign an Officers’
Certificate, including any person specified as so authorized in any such certificate
previously delivered and not superseded.

 

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

 

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

 

45

 

SECTION 7.4.                                 Trustee’s
Disclaimer.  The Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company’s use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or in any
document issued in connection with the sale of the Securities or in the Securities
other than the Trustee’s certificate of authentication.

 

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

 

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

 

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

 

SECTION 7.7.                                 Compensation and
Indemnity.  The Company shall
pay to the Trustee from time to time such compensation for its services as the
Company and the Trustee shall from time to time agree in writing.  The Trustee’s compensation shall not be limited
by any law on compensation of a trustee of an express trust.  The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to such compensation for its
services, except any such expense, disbursement or advance as may arise from
its negligence, wilful misconduct or bad faith.  Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee’s agents, counsel,
accountants and experts.  The Trustee
shall provide the Company reasonable notice of any expenditure not in the
ordinary course of business; provided that prior approval by the
Company of any such expenditure shall not be a requirement for the making of
such expenditure nor for reimbursement by the Company thereof.  The Company shall indemnify each of the
Trustee and any predecessor Trustees against any and all loss, damage, claim,
liability or expense (including attorneys’ fees and expenses) (other than taxes
applicable to the Trustee’s compensation hereunder) incurred by it in
connection with the acceptance or administration of this trust and the
performance of its duties hereunder. 
The Trustee shall notify the Company promptly of any claim for which it
may seek indemnity.  Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder.  The Company
shall defend the claim and the Trustee may have separate counsel, which counsel
must be reasonably acceptable to the Company and the Company will pay the
reasonable fees and expenses of such counsel. 
The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee’s own
wilful misconduct, negligence or bad faith.

 

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

 

46

 

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

 

SECTION 7.8.                                 Replacement of
Trustee.  The Trustee may
resign at any time by so notifying the Company.  The Holders of a majority in principal amount of the Securities
then outstanding, may remove the Trustee by so notifying the Trustee and may appoint
a successor Trustee.  The Company shall
remove the Trustee if:

 

(1)                                  the
Trustee fails to comply with Section 7.10;

 

(2)                                  the
Trustee is adjudged bankrupt or insolvent;

 

(3)                                  a
receiver or other public officer takes charge of the Trustee or its property;
or

 

(4)                                  the
Trustee otherwise becomes incapable of acting.

 

If the Trustee
resigns, is removed by the Company or by the Holders of a majority in principal
amount of the Securities and such Holders do not reasonably promptly appoint a
successor Trustee, or if a vacancy exists in the office of Trustee for any
reason (the Trustee in such event being referred to herein as the retiring
Trustee), the Company shall promptly appoint a successor Trustee.

 

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

 

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

 

If the Trustee
fails to comply with Section 7.10, any Securityholder may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

 

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

 

SECTION 7.9.                                 Successor Trustee
by Merger.  If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, provided that such corporation shall be
eligible under this Article 7 and TIA § 3.10(a).

 

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

 

47

 

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

 

SECTION 7.10.                           Eligibility;
Disqualification.  The
Trustee shall at all times satisfy the requirements of TIA § 310(a).  The Trustee shall have a combined capital
and surplus of at least $50,000,000 as set forth in its most recent published
annual report of condition.  The Trustee
shall comply with TIA § 310(b); provided, however, that there shall be
excluded from the operation of TIA § 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA § 310(b)(1) are met.

 

SECTION 7.11.                           Preferential Collection
of Claims Against Company. 
The Trustee shall comply with TIA § 311(a), excluding any creditor
relationship listed in TIA § 311(b).  A
Trustee who has resigned or been removed shall be subject to TIA § 311(a) to
the extent indicated.

 

ARTICLE 8

 

DISCHARGE OF
INDENTURE; DEFEASANCE

 

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

 

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

 

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

 

48

 

If the Company exercises its legal defeasance
option, each Subsidiary Guarantor will be released from all of its obligations
under its Subsidiary Guarantee.

 

Upon
satisfaction of the conditions set forth herein and upon request of the Company,
the Trustee shall acknowledge in writing the discharge of those obligations
that the Company terminates.

 

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

 

SECTION 8.2.                                 Conditions to
Defeasance.  The Company may
exercise its legal defeasance option or its covenant defeasance option only if:

 

(1)                                  the
Company irrevocably deposits or causes to be deposited in trust with the
Trustee money or U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide cash at such times and in such amounts as will be sufficient
(without reinvestment) to pay principal and interest when due on all
outstanding Securities (except Securities replaced pursuant to Section 2.7) to
maturity or redemption, as the case may be;

 

(2)                                  the
Company delivers to the Trustee a certificate from a nationally recognized firm
of independent accountants expressing their opinion that the payments of
principal and interest when due and without reinvestment on the deposited
U.S.  Government Obligations plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due on all
outstanding Securities (except Securities replaced pursuant to Section 2.7) to
maturity or redemption, as the case may be;

 

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

 

(4)                                  the
deposit does not constitute a default under any other material agreement
binding on the Company;

 

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

 

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

 

(7)                                  in
the case of the covenant defeasance option, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that the Securityholders will
not recognize income, gain or loss for federal income tax purposes as a result
of such covenant defeasance and

 

49

 

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

 

(8)                                  the
Company delivers to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent to the defeasance and
discharge of the Securities as contemplated by this Article 8 have been
complied with.

 

Opinions of
Counsel required to be delivered under this Section may have qualifications
customary for opinions of the type required and counsel delivering such
Opinions of Counsel may rely on certificates of the Company or government or
other officials customary for opinions of the type required, including
certificates certifying as to matters of fact.

 

Before or
after a deposit, the Company may make arrangements satisfactory to the Trustee
for the redemption of Securities at a future date in accordance with Article 3.

 

SECTION 8.3.                                 Application of
Trust Money.  The Trustee
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to this Article 8.  It shall apply
the deposited money and the money from U.S. Government Obligations either directly
or through the Paying Agent (including the Company acting as its own Paying
Agent as the Trustee may determine) and in accordance with this Indenture to
the payment of principal of and interest on the Securities.

 

SECTION 8.4.                                 Repayment to
Company.  The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them at any time.

 

Subject to any
applicable abandoned property law, the Trustee and the Paying Agent shall pay
to the Company upon written request any money held by them for the payment of
principal or interest that remains unclaimed for two years, and, thereafter,
Securityholders entitled to the money must look to the Company for payment as
general creditors.

 

SECTION 8.5.                                 Indemnity for
Government Obligations.  The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations other
than any such tax, fee or other charge which by law is for the account of the
Holders of the defeased Securities; provided that the Trustee shall be
entitled to charge any such tax, fee or other charge to such Holder’s account.

 

SECTION 8.6.                                 Reinstatement.  If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article
8 by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company’s obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article 8; provided, however, that, (a) if the
Company has made any payment of interest on or principal of any Securities
following the reinstatement of their obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent and (b) unless otherwise required by any legal proceeding or any
order or judgment of any court or governmental authority, the Trustee or Paying
Agent shall return all such money and U.S. Government Obligations to the
Company promptly after receiving a written request therefor at any time, if
such reinstatement of the Company’s obligations has occurred and continues to
be in effect.

 

50

 

ARTICLE 9

 

AMENDMENTS

 

SECTION 9.1.                                 Without Consent of
Holders.  The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:

 

(1)                                  to
cure any ambiguity, omission, defect or inconsistency;

 

(2)                                  to
provide for the assumption by a Successor Company of the obligations of the
Company in accordance with Article 5;

 

(3)                                  to
provide for uncertificated Securities in addition to or in place of
certificated Securities; provided, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of the
Code or in a manner such that the uncertificated Securities are as described in
Section 163(f)(2)(B) of the Code;

 

(4)                                  to
add additional guarantees with respect to the Securities; including any new
Subsidiary Guarantees;

 

(5)                                  to
secure the Securities and the Subsidiary Guarantees;

 

(6)                                  to
add to the covenants of the Company for the benefit of the Holders or to
surrender any right or power herein conferred upon the Company;

 

(7)                                  to
make any change that does not materially adversely affect the rights of any
Securityholder; or

 

(8)                                  to
comply with any requirements of the SEC in connection with qualifying this
Indenture under the TIA.

 

After an
amendment under this Section becomes effective, the Company shall mail to
Securityholders a notice briefly describing such amendment.  The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this section.

 

SECTION 9.2.                                 With Consent of
Holders.  The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities then outstanding.  However, without the consent of each
Securityholder affected, an amendment may not:

 

(1)                                  reduce
the amount of Securities whose Holders must consent to an amendment;

 

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

 

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

 

(4)                                  reduce
the premium payable upon the redemption of any Security or change the time at
which any Security may be redeemed in accordance with Article 3;

 

(5)                                  make
any Security payable in money other than that stated in the Security;

 

51

 

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

 

(7)                                  release
any Subsidiary Guarantor that is a Significant Subsidiary from its Subsidiary
Guaranty, other than in accordance with the provisions of this Indenture;

 

(8)                                  subordinate
the Securities or any Subsidiary Guaranty in right of payment to any other
obligation of the Company or any Subsidiary Guarantor; or

 

(9)                                  make
any change in Section 6.4 or 6.7 or the second sentence of this Section.

 

It shall not
be necessary for the consent of the Holders under this Section to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent approves the substance thereof.

 

After an
amendment under this Section becomes effective, the Company shall mail to
Securityholders a notice briefly describing such amendment.  The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section.

 

SECTION 9.3.                                 Compliance with
Trust Indenture Act.  Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.

 

SECTION 9.4.                                 Revocation and
Effect of Consents and Waivers. 
A consent to an amendment or a waiver by a Holder of a Security shall
bind the Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same debt as the consenting Holder’s Security, even
if notation of the consent or waiver is not made on the Security.  After an amendment or waiver becomes
effective, it shall bind every Securityholder.

 

The Company
may, but shall not be obligated to, fix a record date for the purpose of
determining the Securityholders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Indenture.  If a record date is
fixed, then notwithstanding the immediately preceding paragraph, those Persons
who were Securityholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such Persons continue to be Holders after such record date.  No such consent shall be valid or effective
for more than 120 days after such record date.

 

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

 

SECTION 9.6.                                 Trustee To Sign
Amendments.  The Trustee
shall sign any amendment authorized pursuant to this Article 9 if the amendment
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee.  If it does, the Trustee may
but need not sign it.  In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive,

 

52

 

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

 

ARTICLE 10

 

SUBSIDIARY
GUARANTEES

 

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

 

Each
Subsidiary Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment.  Each Subsidiary
Guarantor waives notice of any default under the Securities or the Obligations.  The obligations of each Subsidiary Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any Obligation; (c) any
rescission, waiver, amendment, modification or supplement of any of the terms
or provisions of this Indenture (other than this Article 10), the Securities or
any other agreement; (d) the release of any security held by any Holder or the
Trustee for the Obligations or any of them; (e) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Obligations; or (f) any change in the ownership of the Company or such
Guarantor.

 

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

 

Except as
expressly set forth in Sections 8.1(b), 10.2 and 10.8, the obligations of each
Subsidiary Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense, setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Obligations
or otherwise.  Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise
operate as a discharge of such Subsidiary Guarantor as a matter of law or
equity.

 

Each
Subsidiary Guarantor further agrees that its Guarantee herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of

 

53

 

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

 

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

 

Each
Subsidiary Guarantor agrees that, as between such Subsidiary Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Article
6 for the purposes of such Subsidiary Guarantor’s Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Subsidiary Guarantor for the purposes of this
Section.

 

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

 

SECTION 10.2.                           Limitation on Liability.  Any term or provision of this Indenture to
the contrary notwithstanding, the maximum aggregate amount of the obligations
guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Indenture, as it
relates to such Subsidiary Guarantor, void or voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally (taking into account, for purposes
of such determination, the full amount, without any reduction, of such
Subsidiary Guarantor’s liability under its guarantee of the Credit Facility).

 

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

 

SECTION 10.4.                           No
Waiver.  Neither a failure
nor a delay on the part of either the Trustee or the Holders in exercising any
right, power or privilege under this Article 10 shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any right, power or privilege.  The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at
law, in equity, by statute or otherwise.

 

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

 

54

 

Each Subsidiary
Guarantor’s right of contribution shall be subject to the terms and conditions
of Section 10.6.  The provisions of this
Section shall in no respect limit the obligations and liabilities of any
Subsidiary Guarantor to the Trustee and the Holders and each Subsidiary
Guarantor shall remain liable to the Trustee and the Holders for the full
amount guaranteed by such Subsidiary Guarantor hereunder.

 

SECTION 10.6.                           No Subrogation.  Notwithstanding any payment or payments made
by any Subsidiary Guarantor hereunder, no Subsidiary Guarantor shall be
entitled to be subrogated to any of the rights of the Trustee or any Holders
against the Company or any collateral security or guarantee or right of offset
held by the Trustee or any Holder for the payment of the Obligations, nor shall
any Subsidiary Guarantor seek or be entitled to seek any contribution or
reimbursement from the Company in respect of payments made by such Subsidiary
Guarantor hereunder, until all amounts owing to the Trustee and the Holder by
the Company on account of the Obligations are paid in full.  If any amount shall be paid to any
Subsidiary Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be held
by such Subsidiary Guarantor in trust for the Trustee and the Holders,
segregated from other funds of such Subsidiary Guarantor, and shall, forthwith
upon receipt by such Subsidiary Guarantor, be turned over to the Trustee in the
exact form received by such Subsidiary Guarantor (duly indorsed by such
Subsidiary Guarantor to the Trustee, if required), to be applied against the
Obligations.

 

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

 

SECTION 10.8.                           Release of Subsidiary
Guarantor.  Upon the sale or
other disposition (including by way of consolidation or merger) of a Subsidiary
Guarantor or the sale or disposition of all or substantially all the assets of
a Subsidiary Guarantor (in each case other than to the Company or an Affiliate
of the Company), such Subsidiary Guarantor shall be deemed released and
relieved from all its obligations under its Subsidiary Guarantee; provided
that such sale or disposition shall constitute an Asset Disposition under, and
the Net Available Cash from such sale or disposition shall be applied in accordance
with, Section 4.6.  At the request of
the Company, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.

 

ARTICLE 11

 

MISCELLANEOUS

 

SECTION 11.1.                           Trust Indenture Act
Controls.  If any provision
of this Indenture limits, qualifies or conflicts with another provision which
is required to be included in this Indenture by the TIA, the required provision
shall control.  If this Indenture
excludes any provision of the TIA that is required to be included, such provision
shall be deemed included herein.

 

SECTION 11.2.                           Notices.  Any notice or communication shall be in
writing and delivered in person, by overnight courier or facsimile (if to the
Company, with receipt confirmed by an Officer) or mailed by first-class mail
addressed as follows:

 

55

 

if to the Company or any Subsidiary
Guarantor:

 

Friendly Ice Cream Corporation

1855 Boston Road

Wilbraham, Massachusetts  01095

Attention:  Treasurer

 

if to the Trustee:

 

The Bank of New York

101 Barclay Street, Floor 8 West

New York, New York 10286

Attention:  Corporate Trust
Administration

 

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

 

Any notice or
communication mailed or sent by overnight courier or facsimile to a
Securityholder shall be sent to the Securityholder at the Securityholder’s
address as it appears on the registration books of the Registrar and shall be
sufficiently given if so sent within the time prescribed.

 

Failure to
send a notice or communication to a Securityholder or any defect in it shall
not affect its sufficiency with respect to other Securityholders.  If a notice or communication is sent in the
manner provided above, it is duly given, whether or not the addressee receives
it.

 

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

 

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

 

SECTION 11.4.                           Certificate and Opinion
as to Conditions Precedent. 
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, each the Company shall
furnish to the Trustee:

 

(1)                                  an
Officers’ Certificate (which in connection with the original issuance of the
Securities need only be executed by one Officer for the Company) in form and
substance reasonably satisfactory to the Trustee stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and

 

(2)                                  an
Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
stating that, in the opinion of such counsel, all such conditions precedent
have been complied with.

 

SECTION 11.5.                           Statements Required in
Certificate or Opinion.  Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:

 

(1)                                  a
statement that the individual making such certificate or opinion has read such
covenant or condition;

 

56

 

(2)                                  a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

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

 

(4)                                  a
statement as to whether or not, in the opinion of such individual, such covenant
or condition has been complied with.

 

SECTION 11.6.                           When Securities
Disregarded.  In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Responsible Officer of the Trustee actually
knows are so owned shall be so disregarded. 
Also, subject to the foregoing, only Securities outstanding at the time
shall be considered in any such determination.

 

SECTION 11.7.                           Rules
by Trustee, Paying Agent and Registrar. 
The Trustee may make reasonable rules for action by or a meeting of
Securityholders.  The Trustee shall
provide the Company reasonable notice of such rules; provided that neither prior
notice to the Company of such rules nor prior approval by the Company of such
rules shall be a requirement for their effectiveness.  The Registrar and the Paying Agent may make reasonable rules for
their functions.

 

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

 

SECTION 11.9.                           Governing Law.  This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflict of laws to
the extent that the application of the laws of another jurisdiction would be
required thereby.

 

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

 

SECTION 11.11.                     Successors.  All agreements of the Company and the
Subsidiary Guarantor in this Indenture and the Securities and Subsidiary
Guarantees shall bind their respective successors.  All agreements of the Trustee in this Indenture shall bind its
successors.

 

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

 

57

 

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

 

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

 

58

 

IN WITNESS
WHEREOF, the parties have caused this Indenture to be duly executed as of the
date first written above.

 

	
   

  	
  FRIENDLY ICE CREAM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul V. Hoagland

  	
   

  
	
   

  	
   

  	
  Name: Paul V. Hoagland

  
	
   

  	
   

  	
  Title: Executive Vice President of
  Administration, Chief Financial Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FRIENDLY’S RESTAURANTS FRANCHISE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul V. Hoagland

  
	
   

  	
   

  	
  Name: Paul V. Hoagland

  
	
   

  	
   

  	
  Title: Treasurer

  

 

59

 

	
   

  	
  THE BANK OF NEW YORK, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kisha A. Holder

  	
   

  
	
   

  	
   

  	
  Name: Kisha A. Holder

  
	
   

  	
   

  	
  Title: Assistant Vice President

  

 

60

 

EXHIBIT A

 

[Insert the Private
Placement Legend, if applicable pursuant to the provisions of the Indenture]

 

FACE OF SECURITY

 

UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

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

 

	
  No.

  	
   

  	
  $

  
	
  8 3/8%
  Senior Notes Due 2012

  	
   

  
	
   

  	
  CUSIP No.

  	
   

  	
   

  
				

 

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

 

Interest
Payment Dates: June 15 and December 15

 

Record Dates:
June 1 and December 1

 

A-1

 

Additional
provisions of this Security are set forth on the other side of this Security.

 

	
   

  	
  FRIENDLY ICE CREAM CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
  Dated:

  	
   

  

 

A-2

 

	
  TRUSTEE’S
  CERTIFICATE OF

  AUTHENTICATION

  
	
   

  
	
  THE BANK OF
  NEW YORK,

  
	
  as Trustee,
  certifies

  that this is one of

  the Securities referred

  to in the within-mentioned

  Indenture.

  
	
   

  
	
   

  
	
  By:  

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  

 

A-3

 

REVERSE OF SECURITY

8 3/8% Senior Note Due 2012

 

1.                                       Interest

 

FRIENDLY ICE
CREAM CORPORATION, a Massachusetts corporation (such entity, and its successors
and assigns under the Indenture hereinafter referred to, being herein called
the “Company”),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.  The Company will
pay interest semiannually on June 15 and December 15 of each year commencing
June 15, 2004.  Interest on the
Securities will accrue from the Issue Date, or if interest has already been
paid, from the date it was most recently paid. 
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.  The Company shall
pay interest on overdue principal at the rate borne by the Securities, and it
shall pay interest on overdue installments of interest at the same rate to the
extent lawful.

 

2.                                       Method
of Payment

 

The Company
will pay interest on the Securities (except defaulted interest) to the Persons
who are registered holders of Securities at the close of business on the June 1
or December 1 next preceding the interest payment date even if Securities are
canceled after the record date and on or before the interest payment date.  Holders must surrender Securities to a
Paying Agent to collect principal payments. 
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts.  However, the Company may
pay principal and interest by check payable in such money and may mail an
interest check to a Holder’s registered address.  All payments of principal of, premium, if any, and interest on
the Securities will be made by the Company in immediately available funds.  If a Holder has given wire transfer
instructions to the Company, the Company will make all payments of principal,
premium, if any, and interest on the Securities of such Holder in accordance
with these instructions.

 

3.                                       Paying
Agent and Registrar

 

Initially, The
Bank of New York, a New York banking corporation (“Trustee”), will act as
Paying Agent and Registrar.  The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice.  The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.

 

4.                                       Indenture

 

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

 

The Securities
are general unsecured senior obligations of the Company initially issued in
aggregate principal amount not to exceed $175,000,000 (the “Initial
Securities”), with additional Securities

 

A-1

 

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

 

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

 

5.                                       Optional
Redemption

 

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

 

	
  Period

  	
   

  	
  Percentage

  	
   

  
	
  2008

  	
   

  	
  104.188

  	
  %

  
	
  2009

  	
   

  	
  102.094

  	
  %

  
	
  2010 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

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

 

6.                                       Notice
of Redemption

 

Notice of redemption
will be mailed by first-class mail at least 30 days but not more than 60 days
before the redemption date to each Holder of Securities to be redeemed at his
registered address.  Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000.  If money
sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Securities (or such portions thereof) called for redemption.  If a notice or communication is sent in the
manner provided in the Indenture, it is duly given, whether or not the
addressee receives it.  Failure to send
a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders.

 

A-2

 

7.                                       Put
Provisions

 

Upon a Change
of Control, any Holder of Securities will have the right to require the Company
to repurchase all or any part of the Securities of such Holder at a repurchase
price in cash equal to 101% of the principal amount of the Securities to be
repurchased plus accrued interest to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the related interest payment date) as provided in, and subject to the terms
of, the Indenture.

 

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

 

8.                                       Guarantees

 

To guarantee
the due and punctual payment of the principal of and interest on the Securities
and all other amounts payable by the Company under the Indenture and the Securities
when and as the same shall be due and payable, whether at maturity, by acceleration
or otherwise, according to the terms of the Securities and the Indenture,
Friendly’s Restaurants Franchise, Inc. has unconditionally guaranteed such
obligations on an unsecured, senior basis pursuant to the terms of the
Indenture.  In addition, the Company
shall cause each new Subsidiary (other than (i) a new Subsidiary designated as
an Unrestricted Subsidiary and (ii) Foreign Subsidiaries), and any Unrestricted
Subsidiary that is redesignated a Restricted Subsidiary (other than Restaurant
Insurance Corporation, if it is designated as an Unrestricted Subsidiary), to
become a Subsidiary Guarantor under the Indenture and thereby Guarantee the
Securities on the terms and conditions set forth in the Indenture.

 

9.                                       Registration
Rights.

 

Pursuant to an
Exchange and Registration Rights Agreement among the Company, Friendly’s
Restaurants Franchise, Inc., and the initial purchasers named therein (the
“Exchange and Registration Rights Agreement”), the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Security for securities issued under the
Indenture (or a trust indenture substantially identical to the Indenture in
accordance with the terms of the Exchange and Registration Rights Agreement)
which have been registered under the Securities Act, in like principal amount
and having substantially identical terms as the Securities.  The Holders shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Exchange and Registration Rights Agreement. [To be
included in form of Initial Securities only]

 

10.                                 Denominations;
Transfer; Exchange

 

The Securities
are in registered form without coupons in denominations of $1,000 and whole
multiples of $1,000.  A Holder may
transfer or exchange Securities in accordance with the Indenture.  The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture, including
any transfer tax or other similar governmental charge payable in connection
therewith.  The Registrar need not
register the transfer of or exchange any Securities selected for redemption (except,
in the case of a Security to be redeemed in part, the portion of the Security
not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.

 

A-3

 

11.                                 Persons
Deemed Owners

 

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

 

12.                                 Unclaimed
Money

 

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

 

13.                                 Discharge
and Defeasance

 

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

 

14.                                 Amendment,
Waiver

 

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

 

15.                                 Defaults
and Remedies

 

Under the
Indenture, Events of Default include (i) default for 30 days in payment of
interest on the Securities; (ii) default in payment of principal on the Securities
at maturity, upon redemption pursuant to paragraph 5 above, upon required
repurchase, upon acceleration or otherwise; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other Indebtedness
of the Company and any Significant Subsidiary if the amount accelerated (or so
unpaid) exceeds $10 million; (v) certain events of bankruptcy or insolvency
with respect to the Company and its Significant Subsidiaries; (vi) certain
judgments or decrees for the payment of money is in excess of $10 million; and
(vii) any Subsidiary Guaranty ceases to be in full force and effect (except as
contemplated in the Indenture) or any Subsidiary Guarantor denies or disaffirms
its obligations under the Indenture or its Subsidiary Guaranty.

 

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

 

A-4

 

Securityholders
may not enforce the Indenture or the Securities except as provided in the
Indenture.  The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security.  Subject to certain
limitations, Holders of a majority in principal amount of the Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from
Securityholders notice of any continuing Default (except a Default in payment
of principal or interest) if it determines that withholding notice is in the
interest of the Holders.

 

16.                                 Trustee
Dealings with the Company

 

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

 

17.                                 No
Recourse Against Others

 

A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation.  By
accepting a Security, each Securityholder waives and releases all such
liability.  The waiver and release are
part of the consideration for the issue of the Securities.

 

18.                                 Governing
Law

 

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

 

19.                                 Authentication

 

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

 

20.                                 Legal
Holidays

 

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

 

21.                                 Abbreviations

 

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

 

22.                                 CUSIP
Numbers

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures the Company has caused CUSIP numbers to be printed on the Securities
and have

 

A-5

 

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

 

The Company
will furnish to any Securityholder upon written request and without charge to
the Securityholder a copy of the Indenture which has in it the text of this
Security in larger type.  Requests may
be made as follows:

 

Friendly Ice Cream Corporation

1855 Boston Road

Wilbraham, Massachusetts  01095

Attention:  Treasurer

 

A-6

 

SUBSIDIARY GUARANTEE

 

For value
received, the undersigned hereby unconditionally guarantees, as principal
obligor and not only as a surety, to the Holder of this Security the cash
payment in United States dollars of principal of, premium, if any, and interest
on this Security in the amounts and at the times when due and interest on the
overdue principal, premium, if any, and interest, if any, of this Security, if
lawful, and the payment or performance of all other obligations of the Company
under the Indenture (as defined below) or the Securities, to the Holder of this
Security and the Trustee, all in accordance with and subject to the terms and
limitations of this Security, Article 10 of the Indenture and this Subsidiary
Guarantee.  This Subsidiary Guaranty
will become effective in accordance with Article 10 of the Indenture and its
terms shall be evidenced therein.  The
validity and enforceability of any Subsidiary Guaranty shall not be affected by
the fact that it is not affixed to any particular Security.

 

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

 

The
obligations of the undersigned to the Holders of Securities and to the Trustee
pursuant to this Subsidiary Guaranty and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Subsidiary Guaranty and all of the other provisions
of the Indenture to which this Subsidiary Guaranty relates.

 

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

 

This Subsidiary Guarantee shall be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to principles of conflicts of law.  The undersigned Subsidiary Guarantor hereby
agrees to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Subsidiary Guarantee.

 

This
Subsidiary Guarantee is subject to release upon the terms set forth in the
Indenture.

 

A-7

 

IN WITNESS
WHEREOF, the Subsidiary Guarantor has caused this Subsidiary Guarantee to be
duly executed.

 

	
  Date:

  	
  [name of
  guarantor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-8

 

ASSIGNMENT FORM

 

I or we assign and transfer
this Security to

 

 

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

 

 

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

 

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

 

	
  Dated: 

  	
   

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign
  exactly as name appears on

  the other side of this Security)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  	
   

  
	
   

  	
  Participant
  in a recognized Signature Guarantee Medallion Program (or other signature
  guarantor program reasonably acceptable to the Trustee)

  
							

 

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

 

[Check One]

 

	
  (1)

  	
   

  	
  to the
  Company or a subsidiary thereof; or

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  pursuant to
  and in compliance with Rule 144A under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  (3)

  	
   

  	
  to an
  institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3)
  or (7) under the Securities Act) that has furnished to the Trustee a signed
  letter containing certain representations and agreements (the form of which
  letter can be obtained from the Trustee); or

  
	
   

  	
   

  	
   

  
	
  (4)

  	
   

  	
  outside the
  United States to a “foreign purchaser” in compliance with Rule 904 of
  Regulation S under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  (5)

  	
   

  	
  pursuant to
  the exemption from registration provided by Rule 144 under the Securities
  Act; or

  
	
   

  	
   

  	
   

  
	
  (6)

  	
   

  	
  pursuant to
  an effective registration statement under the Securities Act; or

  
	
   

  	
   

  	
   

  
	
  (7)

  	
   

  	
  pursuant to
  another available exemption from the registration statement requirements of
  the Securities Act of 1933;

  

 

A-9

 

and unless the box below is
checked, the undersigned confirms that such Security is not being transferred
to an “affiliate” of the Company as defined in Rule 144 under the Securities
Act (an “Affiliate”):

 

The transferee
is an Affiliate of the Company.

 

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

 

If none of the
foregoing items are checked, the Trustee or Registrar shall not be obligated to
register this Security in the name of any person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Section 2.13 of the Indenture shall have been satisfied.

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
  (Sign
  exactly as name appears on the other

  side of this Security)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
						

 

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

 

The
undersigned represents and warrants that it is purchasing this Security for its
own account or an account with respect to which it exercises sole investment discretion
and that it and any such account is a “qualified institutional buyer” within
the meaning of Rule 144A under the Securities Act and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned’s foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.

 

	
  Dated:

  	
   

  
	
   

  	
  NOTICE:   To be executed by an executive officer

  

 

A-10

 

OPTION OF HOLDER TO ELECT PURCHASE

 

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

 

Section 4.6
[     ]                                                            Section
4.8 [     ]

 

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

 

	
  Dated: 

  	
   

  	
   

  	
   

  	
  Signed:  

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign
  exactly as name appears on

  the other side of this Security)

  
	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  	
   

  
	
   

  	
  Participant
  in a recognized Signature Guarantee Medallion Program (or other signature guarantor
  program reasonably acceptable to the Trustee)

  
							

 

A-11

 

EXHIBIT B

 

FORM OF PRIVATE PLACEMENT LEGEND

 

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

 

THE SECURITIES
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND OTHER
JURISDICTIONS.

 

B-1

 

EXHIBIT C

 

Form of Certificate To Be

Delivered in Connection with

Transfers to Non-QIB Accredited Investors

 

[                        ],
[    ]

 

The Bank of New York

101 Barclay Street, Floor 8
West

New York, NY  10286

Attention:  Corporate Trust Administration

 

Ladies and Gentlemen:

 

In connection
with our proposed purchase of 8 3/8% Senior Notes due 2012 (the “Notes”) of
FRIENDLY ICE CREAM CORPORATION, a Massachusetts corporation (the “Company”), we
confirm that:

 

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

 

2.                                       We
understand that the offer and sale of the Notes have not been registered under
the Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence.  We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell any Notes, we will do so only (i)
to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a “qualified institutional
buyer” (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional “accredited investor” (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Notes (the form of which letter can be obtained
from the Trustee), (iv) outside the United States in accordance with Regulation
S promulgated under the Securities Act to non-U.S. persons, (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available), (vi) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Company so requests) or (vii) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person purchasing
any of the Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.

 

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

 

C-1

 

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

 

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

 

You, the
Company, the Trustee and others are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

C-2

 

EXHIBIT D

 

Form of Certificate To Be Delivered in

Connection with Transfers Pursuant to Regulation S

 

[                      ],
[    ]

 

The Bank of New York

101 Barclay Street, Floor 8
West

New York, NY  10286

Attention:  Corporate Trust Administration

 

Re:                               Friendly
Ice Cream Corporation (the “Company”)

8 3/8% Senior Notes due 2012 (the “Notes”)

 

Ladies and
Gentlemen:

 

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

 

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

 

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

 

(3)                                  no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as
applicable;

 

(4)                                  the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act; and

 

(5)                                  we
have advised the transferee of the transfer restrictions applicable to the
Notes.

 

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

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signature

  

 

D-1

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