Document:

Exhibit 10.23

FRIENDLY ICE CREAM CORPORATION

BOARD OF
DIRECTORS COMPENSATION

The
non-employee directors of the Company  are compensated through a
combination of cash and equity-based compensation.

The
following is a summary of the cash compensation paid to the Company’s
non-employee directors.

	
  A.  Annual Retainer

  	
   

  	
  Directors

  	
   

  	
   

  	
   

  	
  $

  	
  30,000

  	
   

  
	
  

  	
   

  	
  Chairman

  	
   

  	
  Additional

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.  Regularly Scheduled Board of 

  Directors 

  Meetings

  	
   

  	
  Directors

  	
   

  	
   

  	
   

  	
  $

  	
  1,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.  Regularly Scheduled 

  Committee 

  Meetings

  	
   

  	
  Members

  	
   

  	
   

  	
   

  	
  $

  	
  1,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.  Special 

  Teleconference 

  Meetings

  	
   

  	
  Directors

  	
   

  	
   

  	
   

  	
  $

  	
  750

  	
   

  

 

A.           
Each director, including the Chairman, of the Company
receives a fee of $2,500 per month. 

Mr. Donald Smith receives additional compensation of $8,333.34 per month for
serving as Chairman of the Board.

B.           
Each director of the Company receives $1,500, plus expenses,
for each regularly scheduled meeting of the Board of Directors attended.

C.           
Each member of the Audit Committee, Compensation Committee
and Nominating and Corporate Governance Committee receives a fee of $1,000,
plus expenses, for each regularly scheduled committee meeting attended. Each
member of the Audit Committee receives a fee of $1,500, plus expenses, for
attendance at the annual Audit Committee meeting.

D.           
Each director receives a fee of $750 for participating in
special teleconference meetings.

In addition to cash
compensation, on annual basis, the non-employee directors are awarded stock
options and/or restricted stock units under the Company’s equity incentive
plans.Exhibit
10.25

No.              

FRANCHISE
AGREEMENT

THIS FRANCHISE AGREEMENT (the “Agreement”)
is made and entered into as of                ,
2007 (the “Agreement Date”), by and between FRIENDLY’S
RESTAURANTS FRANCHISE, INC., a Delaware corporation whose principal
address is 1855 Boston Road, Wilbraham, Massachusetts 01095, and                                                                            , a                                                                   
whose principal address is                                                                                           .  For purposes of simplicity, we will sometimes
refer to Friendly’s Restaurants Franchise, Inc. as “us,” “we” or “Friendly’s”
and we will sometimes refer to you as “you” or “Franchisee.”

CONTRACT DATA SCHEDULE

A.     Location
of the Restaurant (the “Premises”):

	
   

  
	
  (number)

  	
  (street)

  	
  (city or town)

  	
  (state)

  	
  (zip code)

  

 

B.                  Term:  twenty (20)
years from the first date the Restaurant opens to serve the general public, or,
in the case of an existing Restaurant, until                                        ,             

C.      Initial
Franchise Fee:                                                  and 00/100 Dollars
($                 )

D.      Royalty
Fee Rate:                                                                             FOUR percent (4.00%) of Net Sales

E.      Marketing
Fund Fee Rate:                                   THREE and ONE-HALF percent (3.50%) of Net Sales

F.                   Refurbishment
Date:  In the case of a new Restaurant, the date five (5) years from the first
date the Restaurant opens to serve the general public; or, for an existing
Restaurant, on or before                                               (and
each ten (10) year interval thereafter).

Remodel Date:  In the case
of a new Restaurant, the date ten (10) years from the first date the Restaurant
opens to serve the general public; or, for an existing Restaurant, on or before                                              (and
each ten (10) year interval thereafter).

G.      Address for notice to Franchisee will be at the
Premises, unless another address is inserted here:

                                                                                                                                                                          

	
  H.

  	
  Riders:

  	
  x

  	
  Exhibit A

  	
  Disclosure Acknowledgment Statement

  
	
   

  	
   

  	
  x

  	
  Exhibit B

  	
  Guaranty and Assumption of Franchisee’s Obligations

  
	
   

  	
   

  	
  x

  	
  Exhibit C

  	
  Certificate by Franchisee Entity

  
	
   

  	
   

  	
  x

  	
  Exhibit D

  	
  Franchisee’s Construction and Opening of a New
  Restaurant

  
	
   

  	
   

  	
  x

  	
  Exhibit E

  	
  Special Terms and Conditions Applicable to a
  Franchisee or Affiliated Franchisees That Operate Multiple Friendly’s
  Restaurants

  
	
   

  	
   

  	
  State Rider          (If
  Applicable — Illinois, Maryland, New York & Rhode Island)

  

 

For Friendly’s use only:

©2007, Friendly’s
Restaurants Franchise, Inc.

1.      INTRODUCTION
AND GRANT OF LICENSE.

A.     INTRODUCTION.

Through
expenditure of considerable time, skill, effort and money, we have developed a
system for establishing, operating and licensing distinctive, high quality
restaurants (“Friendly’s Restaurants”) serving the public under the name “Friendly’s®.”  A Friendly’s Restaurant consists of all
structures, facilities, appurtenances, grounds, landscaping, signs, furniture,
fixtures, equipment and entry, exit, parking and other areas.  The approved food, beverage and other
products served and sold by Friendly’s Restaurants (the “Products”) for
consumer consumption and not for resale are prepared in accordance with our
standards, specifications and secret recipes. 
Friendly’s Restaurants have a distinctive exterior and interior design,
decor, color and identification schemes and furnishings established pursuant to
our plans and specifications for construction, conversion, remodeling, decorating,
equipment and layout.  Friendly’s
Restaurants are operated in accordance with our distinctive business formats,
construction plans, inspection and consultation programs, signs, equipment,
layouts, methods, specifications, standards, recipes (including ice cream and
other frozen dessert and related toppings recipes), confidential information,
trade secrets, operating procedures, training programs and materials, guidance,
policy statements and related materials, designs, advertising, publicity, and
marketing programs and other materials which we may modify from time to time
(collectively, the “System”).  We own,
use, promote and license certain proprietary interests, trade names,
trademarks, service marks, logos, emblems,
commercial symbols, trade dress and other
indicia of origin, including colors, and applications related thereto,
including “Friendly’s®” and “Friendly’s
Restaurants®”
(collectively, the “Marks”), and the confidential information, copyrights and
business formats which comprise the System. 
We may change, modify or improve the System to enhance the operations of
Friendly’s Restaurants.  All improvements
and additions you, we or anyone else makes to the System, will become our sole
property.

B.      GRANT OF LICENSE; TERM.

You
have applied for a license to own and operate a Friendly’s Restaurant (the “Restaurant”)
at the location described in Item “A” of the Contract Data Schedule of this
Agreement (the “Premises”) and we have approved your application in reliance
upon all of the representations you have made to us in connection with your
desire to operate a Friendly’s Restaurant, including but not limited to the
information, representations and warranties contained in your application for a
license.  You represent and warrant that
all financial and other information you provided us in connection with your
application is true and accurate. 
Subject to the provisions of this Agreement, we grant to you the license
to operate a Friendly’s Restaurant at the Premises (the “License”), and to use
the System and the Marks in operating the Restaurant, for the term described in
Item “B” of the Contract Data Schedule of this Agreement, unless this Agreement
is sooner terminated as provided in Section 17 of this Agreement.  Termination or expiration of this Agreement
will constitute a termination or expiration of the License.  The License is specific to this one location
only.  You may not conduct your business
pursuant to this Agreement from any location other than the Premises.  This Agreement grants no rights outside the
Premises and includes no protection against competition.

(1)     Commencement.  The term of this Agreement begins on the date
hereof, but the License shall only commence
upon the occurrence of all of the following conditions prior to the initial
opening or the transfer of the Restaurant, as the case may be:

(a)          Financing.  Upon our
request, you must provide us evidences that you have binding commitment(s) for
all financing needed to develop or purchase the Restaurant.

(b)         Possession. 
You must have the exclusive right to occupy and use the Premises for at
least the term of this Agreement, whether you own the Premises, or lease the
Premises pursuant to either a lease with a third party landlord on terms
satisfying our then current lease policy and containing provisions required by
us; or a lease from us or from one of our affiliates.

(c)          Training.  You and
your Restaurant Managers must successfully complete the then-current training
program required by Friendly’s at our training centers, at locations from time
to time designated by us.  We may, in our
sole discretion, waive or modify this requirement, in whole or in part, if you
or any of your Restaurant Managers have prior, comparable training or
on-the-job experience.

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(d)         Documents.  You must execute
and deliver to us all documents we provide you related to this License, as we
customarily require, in then-current form.

(e)          Payment.  Before you
begin operating the Restaurant, you must pay us any and all moneys due,
including, but not limited to, purchase price, fees, inventory, rent and/or
security deposit, if required under your lease.

(f)            New Restaurant. 
If you are opening a new Friendly’s Restaurant, before you open for
business, you must comply with all provisions of Exhibit D attached to and made
a part of this Agreement relating to development of new Friendly’s Restaurants.

(2)     Best Efforts.  You acknowledge the importance to us and to
other franchisees of your commitment to operate the Restaurant at all times in
accordance with our standards, in
order to increase the demand for our products, to protect and enhance the
reputation and goodwill of Friendly’s and to promote and protect the value of
the Marks, among other reasons.  You
agree that you will at all times faithfully, honestly and diligently perform
your obligations under this Agreement, and exert your continuous best efforts
to promote and enhance the business of the Restaurant and the goodwill of the
Marks and the System.

(3)     Continuous Operation.  Commencing on the date we authorize you to
open the Restaurant for business to the public, you will continuously occupy,
operate and do business in the Restaurant, for seven (7) days per week
(excluding Christmas and Thanksgiving), 363 days per year and for such hours as
we will from time to time direct, provided, however, for no more than the
maximum number of hours permitted by law. 
It is also understood that the Restaurant may be closed for business
while any repairs or refurbishment we approve are being undertaken) and operate
the Restaurant in such a manner as to produce the maximum volume of net sales
(as defined in paragraph 6.E. of this Agreement.  You may not change or reduce your hours of
operation without first requesting and receiving our prior written approval.

C.      RIGHTS RESERVED BY FRIENDLY’S.

Subject to any
rights granted to you under a Development Agreement, if any, we (including our
parent, subsidiaries and affiliates) retain the rights, in our sole and
absolute discretion:  (1) to operate and
grant to others the right to operate, Friendly’s Restaurants or other
restaurants using the System or the Marks at such locations which may compete with you and draw customers from the same
area as the Restaurant and on such terms and conditions as we deem
appropriate; (2) to acquire other companies, businesses and/or proprietary
marks and to be acquired by others (in either case, regardless of the form of
transaction, and even if the other business competes with you); (3) to operate,
and grant to others the right to operate, restaurants under other trade names,
trademarks, service marks and commercial symbols different from the Marks,
notwithstanding the fact that such restaurants may be the same as or similar to
a Friendly’s Restaurant; and (4) to sell the Products or other products identified
by the Marks or by other trademarks in any channel of distribution.

2.      SERVICES FURNISHED BY FRIENDLY’S.

A.     SERVICES FOR THE INITIAL OPENING OF THE
RESTAURANT.

We will provide you the following services prior to
and at the initial opening of a new Restaurant (these provisions do not apply
to a transfer of an existing Restaurant):

(1)     We will
make available to you our standards for the initial design, construction,
equipping and operation of the Restaurant;

(2)     For your
first or second Friendly’s Restaurant, we will make available to three (3)
individuals designated by you, one of whom must be a party to or guarantor of
this Agreement, our then-current initial
training program regarding the operation of Friendly’s Restaurants, at our
training facility  and/or a designated
training restaurant;

(3)     We will
make our current Operations Manual available to you, so that you have access to
the standards and procedures you must implement at the Restaurant; and

(4)     We will
make available to you assistance in the pre-opening, opening and initial
operation of the Restaurant, at levels we deem advisable based upon your
organization, prior experience and training. 
We will, in our sole discretion, 

 3
 

determine
the number of persons, if any, we will provide to assist you in opening the
Restaurant, their duties and all other matters relating to such persons.  You agree to pay all of our out-of-pocket
expenses for such personnel, including, but not limited to, travel, lodging,
meals, local transportation and miscellaneous office expenses, such as
telephone and copier expenses.  We will
select the appropriate transportation, lodging and meal expense limitations in
accordance with our then-applicable per diem policy.  In general, we only provide personnel for
your first two (2) restaurant openings; you acknowledge, if you desire or
require additional and/or extended services for this Restaurant, that you will
reimburse us our salary costs to provide the personnel for such services.

(5)     We will prepare and coordinate a new restaurant
opening promotional advertising program in such form and content as we may
specify to promote and support the initial opening of the Restaurant.

B.      SERVICES AFTER THE
INITIAL OPENING OF THE RESTAURANT.

After the initial
opening of the Restaurant, we will maintain a continuing advisory relationship
with you, furnishing you guidance and consultation in the following areas:

(1)     preparation, packaging, sale and delivery
of Products authorized for sale at Friendly’s Restaurants;

(2)     development, preparation and packaging of
new Products we develop for sale at Friendly’s Restaurants;

(3)               specifications,
standards and operating procedures utilized by Friendly’s Restaurants, and any
modifications thereof;

(4)     approved equipment, furniture, furnishings,
signs, food products, operating materials and supplies;

(5)     development and implementation of local
advertising and promotional programs; and

(6)     general operating and management procedures
of Friendly’s Restaurants.

In our discretion, we
will furnish this guidance and assistance to you in the form of our
confidential Operations Manual, bulletins, written reports and recommendations,
electronic mail and/or other written or electronic materials (all of which are
hereinafter referred to as the “Operations Manual”), inspection reports for the
Restaurant, refresher training programs and/or telephonic consultations or
consultations at our offices or at the Restaurant.  If you request, we will furnish additional
guidance and assistance at per diem fees and charges that we will
establish.  If you request special
training of Restaurant personnel or other assistance in operating the
Restaurant, and such training must take place at the Restaurant, you must pay
all our expenses for such training, including travel, local transportation, and
living expenses, including meals, for our personnel in accordance with our
applicable per diem policy, and miscellaneous office expenses such as
telephone, copier and meeting room expenses.

C.      TRAINING.

Prior to the
initial opening of the Restaurant, you and your Restaurant Managers (as defined
in paragraph 7.H. below) must successfully complete our current training
program for the operation of a Friendly’s Restaurant.  During the term of the License, we will,
subject to availability and at your cost, also furnish similar training to all
successors to such persons.  Training
programs will include classroom instruction and field training and will be
furnished at our training facility and/or at a certified Friendly’s Training
Restaurant.

(1)     Your Restaurant Managers must obtain our
written certification that they have successfully completed our required
training program to our satisfaction. 
You will not cause or permit the Restaurant to be supervised by any
person who is not certified to have satisfactorily completed our training
program.  If any of your proposed or
existing Restaurant Managers fail to obtain such certification, you must, as
soon as practicable, hire a replacement who must be so certified or who must
promptly complete our training program to our satisfaction.  We may also offer such refresher or
supplemental training programs to you and such persons as we deem appropriate
at such places as we designate.  By
giving you prior written notice, we will have the right to require attendance
at any refresher or supplemental training program by you or any of such
persons.

(2)     We will not charge you tuition for the
required initial training program for your first two (2) restaurants, for up to
three (3) individuals each; however, you must pay us any tuition and/or
participation charges we establish for any successor, 

 4
 

refresher or supplemental
training programs. You will be responsible for all travel, local
transportation, and living expenses, including meals, and compensation of
yourself and your Restaurant Managers incurred while attending any and all
initial training programs, and any successor, refresher or supplemental
training programs we offer to you or require you or such persons to attend.

(3)     You must also pay us our reasonable fees
for training materials and you must purchase certain equipment we may, from
time to time, require you to use in training.

D.      OPERATIONS MANUAL.

We will, during
the term of the License, make our Operations Manual available to you
exclusively at a secure Internet website for franchisees.  We will issue you a secure password needed to
gain access to the website. You must treat your password as highly confidential
and not allow access to the website by any person not expressly authorized by
us.  The Operations Manual will contain
both mandatory and suggested specifications, standards and operating procedures
for Friendly’s Restaurants and information relative to your obligations under
this Agreement and in the operation of a Friendly’s Restaurant (collectively our
“Standards”).  We will from time to time
modify the Operations Manual to reflect changes in the Standards for Friendly’s
Restaurants.  We may communicate
additions, deletions or modifications to our Standards to you by a variety of
means, including, without limitation, email, certified mail, regular mail,
newsletters and/or training materials. 
You must remain current in your knowledge of the Standards, as updated
in the Operations Manual.  In the event
of a dispute relative to the contents of the Operations Manual, the master
copies we maintain on the website and/or at our principal office will be
controlling. You may not at any time, without our prior approval, copy any part
of the Operations Manual or disclose any part of it to employees or others not
having a need to know its contents for purposes of operating the
Restaurant.  To the extent the Operations
Manual contains any specification, standard or operating procedure concerning
the operation of the Restaurant, such provision shall be deemed incorporated
into this Agreement.  We reserve the
right to discontinue use of the Internet for purposes of publishing and
maintaining the Operations Manual.  In
such event we will provide you a new version of the Operations Manual, whether
as a book, in multiple parts or volumes, or in some other format.

3.      MARKS.

A.     GOODWILL AND OWNERSHIP OF MARKS.

Your right to use
the Marks is non-exclusive and derived solely from this Agreement and is
limited to your operation of the Restaurant pursuant to and in compliance with
this Agreement and all applicable standards, specifications and operating
procedures we prescribe from time to time during the term of the License.  You may not sublicense the Marks.  Any unauthorized use of the Marks by you
during the term of this Agreement or after the expiration or earlier
termination of this Agreement will constitute an incurable breach of this
Agreement and an infringement of our rights in and to the Marks that will cause
us irreparable harm subject to injunctive relief.  All of your usage of the
Marks and any goodwill established by your use of the Marks will inure to our
exclusive benefit, and this Agreement does not confer any goodwill or other
interests in the Marks upon you (other than the right to operate a Friendly’s
Restaurant in compliance with this Agreement). 
All provisions of this Agreement applicable to the Marks will apply to
any other trademarks, service marks and commercial symbols we later develop,
authorize and license you to use.

B.      LIMITATIONS ON YOUR USE OF THE MARKS.

The Marks must be
the sole trade identification of the Restaurant.  You must identify yourself as the independent
owner of the Restaurant in the manner we prescribe.  You must not use any Mark as part of any
corporate or trade name including, but not limited to, “Friendly’s”, or any
form or variations thereof, including, but not limited to, “friendly” or “friend”,
which, in our sole judgment, is likely to cause confusion or mistake regarding
the separate identities of Friendly’s and Franchisee.  You must not register or use any of our Marks
as part of a domain name or electronic mail address, nor may you use any of our
Marks in connection with the performance or sale of any unauthorized services
or products or in any other manner we have not expressly authorized in
writing.  The Marks must be prominently
displayed in the manner we prescribe at the Restaurant, on menus and in
connection with advertising and marketing materials.  You must not employ

 5
 

any of the Marks in
signing contracts, applications for licenses or permits, or in any manner that
may imply our responsibility for, or result in our liability for, any of your
indebtedness or obligations, nor may you use the Marks in any way not
authorized herein.  See paragraph 4.B.
below.  You must give notices of trade
and service mark registrations we specify, and obtain fictitious or assumed
name registrations as required under applicable law.

C.      CLAIMS AND INFRINGEMENTS.

During the term of
this Agreement and for two (2) years after the expiration or termination
hereof, you will not directly or indirectly contest or aid in contesting the
validity or our ownership of the Marks. 
You will not, directly or indirectly, apply or assist another to apply
to register, re-register or otherwise seek to use or control or in any way use
any of the Marks or any confusingly similar form or variation thereof in any
place or jurisdiction outside the United States.  You must immediately notify us of any
apparent infringement of or challenge to your use of any Mark, or claim by any
person of any rights in any Mark.  You
may not assert a claim related to the Marks in any litigation against another
party without first obtaining our prior written consent.  You cannot communicate with any person other
than us and our counsel in connection with any such infringement, challenge or
claim.  We will have sole discretion to
take such action as we deem appropriate in connection with any infringement,
challenge or claim, and the right to exclusively control any settlement,
litigation or U.S. Patent and Trademark Office or other proceeding arising out
of the alleged infringement, challenge or claim or otherwise relating to any
Mark.  You agree to execute any and all
instruments and documents, and do such acts and things as may, in the opinion
of our counsel, be necessary or advisable to protect and maintain our interest
in any litigation or other proceeding or to otherwise protect and maintain our
interest in the Marks.

D.      DISCONTINUANCE OF USE OF MARKS.

If it becomes
advisable at any time in our sole judgment to modify or discontinue use of any
Mark and/or for the Restaurant to use one or more additional or substitute
trade or service marks, you agree, at your expense, to comply with our
directions to modify or otherwise discontinue the use of such Mark, and/or use
one or more additional or substitute trade or service marks, within a
reasonable time after we give you notice.

E.      WE INDEMNIFY YOU.

We agree to
indemnify you against, and to reimburse you for, and, at our option, to defend
you against, all damages for which you are held liable in any proceeding
arising out of your use of the Marks “Friendly’s®” and “Friendly’s Restaurant®”, pursuant to and in compliance with this
Agreement, and for all costs you reasonably incur in the defense of any such
claim brought against you or in any such proceeding in which you are named as a
party, including reasonable attorney’s fees, provided that you have timely
notified us of such claim or proceeding and you have otherwise complied with
this Agreement.  We must approve any
counsel you employ in the defense of any such claim, and in the event we elect
to defend any such claim, the fees and expenses of any separate counsel you
employ will not be reimbursable.

4.      RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.

A.     INDEPENDENT CONTRACTORS.

This Agreement
does not create a fiduciary relationship between you and us.  We and you are and shall be independent
contractors, and nothing in this Agreement is intended to make either you or us
a general or special agent, legal representative, joint venturer, partner or
employee of the other for any purpose or to grant either you or us the right to
direct or supervise the daily affairs of the other.  You will identify yourself conspicuously in
all dealings with third parties as the owner of the Restaurant under a license
granted by us.  You also will place such
other notices of independent ownership on forms, business cards, stationery,
advertising and other materials as we may require.  No agreement we make with any third party is
for your benefit.

 6
 

B.      NO LIABILITY FOR ACTS OF OTHER PARTY.

You will not
employ any of the Marks in signing any contract, check, legal obligation,
application for any license or permit, or in a manner that may imply that we
are responsible, or which may result in liability to us for, any of your
indebtedness or obligations.  You also
will not use the Marks in any way not expressly authorized by this
Agreement.  Except as expressly
authorized in writing, neither we nor you may make any express or implied
agreements, warranties, guarantees or representations, or incur any debt in the
name of or on behalf of the other, or represent that our relationship is other
than Franchisor and Franchisee.

C.      TAXES.

Except for taxes
which we are required to collect from you in connection with items you purchase
from us, we will have no liability for any sales, use, service, occupation,
excise, gross receipts, income, property or other taxes, whether levied upon
you, the Restaurant, your property, us or the royalty, marketing or any other
fees which you pay to us, in connection with the sales made or business
conducted by you.  Payment of all such
taxes will be your responsibility.

D.      YOU INDEMNIFY US.

Franchisee will,
during and after the term of this Agreement, save,
exonerate, indemnify, defend and hold harmless Friendly’s, our parent,
subsidiary or affiliated entities, and their and our shareholders, directors,
partners, officers, employees, agents, representatives, successors and
assignees (collectively, the “Indemnitees”), from and against and reimburse the
Indemnitees for any and all claims arising out of the use of the Marks in any
manner not in accordance with this Agreement and all losses, liabilities,
claims, taxes, demands, damages, causes of action, governmental inquiries and
investigations, costs and expenses, including reasonable attorneys’ and
accountants’ fees, consequently, directly or indirectly incurred, arising from,
as a result of, or in connection with this Agreement, the operation of the
Restaurant or any of your actions, errors, omissions, breaches or defaults
under this Agreement, except those acts or omissions proven to be solely the
result of our negligence or willful misconduct. 
For purposes of this indemnification, “claims” shall mean and include
all obligations, actual and consequential damages, expenses, losses, costs and
other liabilities reasonably incurred in the defense of any claim against the
Indemnitees, including without limitation reasonable accountants’, attorneys’
and expert witness fees, costs of investigation and proof of facts, court
costs, other litigation expenses and travel, lodging and meal expenses incurred
in litigation or preparation for litigation, whether or not litigation is
filed.  If the Indemnitees reasonably
conclude that their interests are not being adequately represented by your
counsel, the Indemnitees will have the right to employ their own attorneys to
defend any claim against them in the manner they deem appropriate or desirable
in their sole discretion, and your indemnification hereunder shall apply to and
include the costs incurred in any such defense. 
Your obligation to indemnify the Indemnitees will continue in full force
and effect subsequent to and notwithstanding the expiration or termination of
this Agreement.

5.      CONFIDENTIALITY.

A.     OUR CONFIDENTIAL INFORMATION.

We possess certain
confidential and proprietary information and trade secrets consisting of, but
not limited to, the following (collectively, the “Confidential Information”):

(1)     methods and procedures relating to the
development and operation of Friendly’s Restaurants, whether contained in the
Operations Manual or otherwise;

(2)     secret recipes of ice cream and other
frozen desserts and related toppings, menu analysis and methods of preparation
of Products and services offered in Friendly’s Restaurants;

(3)     methods, procedures and techniques for
packaging, marketing, selling and delivering Products and services offered in
Friendly’s Restaurants;

 7
 

(4)     knowledge of test programs, concepts and
results relating to the planning, development and testing of the System and
Products and services offered in Friendly’s Restaurants;

(5)     sources for purchase of food, beverages and
other ingredients used by Friendly’s Restaurants;

(6)     methods, techniques, standards,
specifications, procedures, information, systems and knowledge of and
experience in the development, licensing and operation of Friendly’s
Restaurants: and

(7)     any and all other information or knowledge
that we advise you, in writing, is confidential.

We will disclose the
Confidential Information to you during the term of this Agreement.  By virtue of your operation under the terms
of this Agreement, you may also learn additional Confidential Information and
trade secrets of ours during the term of this Agreement.  You will not acquire any interest in the
Confidential Information, other than the right to utilize it in the operation
of the Restaurant.  The use of the
Confidential Information in any other business, or the disclosure of the
Confidential Information to any other person or entity, will constitute an
unfair method of competition with us and other Friendly’s Restaurant
franchisees.

B.      RESTRICTIONS ON YOUR USE OF OUR
CONFIDENTIAL INFORMATION.

The Confidential
Information is a valuable asset of ours, includes trade secrets of ours, and
will be disclosed to you solely on the condition that you:

(1)     will not use the Confidential Information
in any other business or capacity;

(2)     will not communicate or divulge the
Confidential Information to, or use the same for the benefit of any person,
persons, partnership, association or corporation;

(3)     will divulge the Confidential Information
only to such of your employees as must have access to it in order to operate
the franchised business;

(4)     will not make unauthorized copies of any
portion of the Confidential Information whether in written, audio, video or
other reproducible form; and

(5)     will adopt and implement procedures, some
of which we may prescribe, to prevent unauthorized use or disclosure of the Confidential
Information, including requiring your Restaurant Managers and other employees
who have access to the Confidential Information to execute confidentiality
agreements in the form we approve or prescribe prior to or during their
employment.

Furthermore, other
than for consumption in the Restaurant or approved carry-out or retail
sales programs, you agree not to sell or provide to any person or entity other
than us or our designee, for use, testing or any other purpose, any mixes or
formulations for preparation of Products you purchase from us or our designees.

We acknowledge
that the foregoing restrictions on your disclosure and use of Confidential
Information do not apply to the following: 
(i) information, processes or techniques which are generally known in
the restaurant industry, other than through disclosure (whether deliberate or
inadvertent) by you; and (ii) disclosure of Confidential Information in
judicial or administrative proceedings to the extent that you are legally
compelled to disclose such information, provided that you have used your best
efforts, and have afforded us the opportunity, to obtain an appropriate
protective order or other assurance satisfactory to us of confidential
treatment for the information required to be so disclosed.

You agree to fully
and promptly disclose to us, all ideas, concepts, formulas, recipes, methods
and techniques relating to the development and/or operation of the Restaurant,
conceived or developed by you and/or your employees during the term of this Agreement.  Such ideas, concepts, formulas, recipes,
methods and techniques will be our sole property, and you will not be entitled
to any compensation whatsoever for the same.

C.      YOUR CONFIDENTIAL INFORMATION.

We
will treat as confidential the reports and Records we receive from you pursuant
to Section 11 below, provided, however, that information may be released (a) to
any person entitled to the same under any lease; (b) in connection with any
court order, legal proceeding or arbitration proceedings, whether instituted by
us or any other party; (c) to a prospective 

 8
 

transferee of any
interest subject to the transfer provisions of this Agreement, and (d) as
incorporated into anonymous general information disseminated to franchisees,
prospective franchisees and other third parties and in the formulation of plans
and policies in the interest of the System. 
We will also treat as confidential such personal financial records as
you may give us pursuant to paragraph 12.C. below, provided, however, that such
information may be released if required in connection with any court order or
legal or arbitration proceeding, whether instituted by us or any other party,
provided that you receive notice of and an opportunity to obtain an appropriate
protective order or other assurance satisfactory to you of confidential
treatment for the information required to be so disclosed.

6.      FEES.

A.     INITIAL FRANCHISE FEE.

The initial
franchise fee for the License, set forth in Item “C” of the Contract Data
Schedule of this Agreement  (the “Initial
Franchise Fee”), is due and payable in full upon your execution of this
Agreement, subject to credit for any deposit you paid with your application for
this License or any portion of the Development Fee under the provisions of your
Development Agreement, if applicable. 
The Initial Franchise Fee is non-refundable.

B.      NEW
RESTAURANT PROMOTIONAL FUND FEE.

After you have
opened and operated the Restaurant for one (1) year, you will pay us a New
Restaurant Promotional Fund Fee in an amount not to exceed four-tenths of one
percent (0.40%) of the Net Sales of the Restaurant during the first year of
operation.  The fee, combined with an
equal amount paid by us, will fund a promotional advertising program or such other
advertising program as we may specify. 
Payment will be due in full during the thirteenth month following the
opening of the Restaurant and will be nonrefundable.

C.      ROYALTY FEES.

You will pay to us
a monthly “Royalty Fee” determined by multiplying the Net Sales of the
Restaurant (as defined in paragraph 6.F. below) for the immediately preceding
Fiscal Month times the percentage set forth in Item “D” of the Contract Data
Schedule of this Agreement.  A Fiscal
Month begins on a Monday and ends on a Sunday. 
For each calendar quarter, the first and second Fiscal Months are four
(4) weeks and the third fiscal month is five (5) weeks, with a periodic sixth
(6th)
week for alignment purposes.  We will
provide you advance, annual written notice of the specific beginning and end
dates for each Fiscal Month of the next succeeding year.  The Royalty Fee will be payable not later
than the 10th day after the end of each calendar month, without deduction or
set-off, based on Net Sales for the prior Fiscal Month.

D.      MARKETING FUND FEES.

(i)  At the same time as, for the same Fiscal
Month as, in the same manner as, and in addition to the Royalty Fee provided
under paragraph 6.C. above, you will pay to the Marketing Fund described in
paragraph 10.A., without deduction or set-off, a monthly fee determined by multiplying
the Net Sales of the Restaurant, as defined in paragraph 6.E. below, times the
percentage set forth in Item “E” of the Contract Data Schedule of this
Agreement.

(ii)  From time to time you will also pay to the
Marketing Fund, at the same time as, for the same Fiscal Month as, in the same
manner as, and in addition to the fee provided under paragraph 6.D.(i) above,
an additional percentage of Net Sales (the “Additional Advertising Contribution”)
if the owner(s) of at least two-thirds of the Friendly’s restaurants (both
company and franchised) in your advertising market vote to pay such Additional
Advertising Contribution.  We will
designate, and may from time to time change, the advertising market as we
reasonably determine.  We will provide
notice and administer the vote.  The
two-thirds threshold will be determined one vote per restaurant.  The period that each Additional Advertising
Contribution is payable shall not exceed one (1) year in duration.  Additional Advertising Contributions may be
cumulative.  If our parent company,
Friendly Ice Cream Corporation (“FICC”), operates two-thirds or more of the
restaurants in your advertising market, your total Additional Advertising
Contributions at any one time cannot exceed one-half percent (0.50%) of Net
Sales.

 9
 

E.      DEFINITION OF NET SALES.

As used in this
Agreement, the term “Net Sales” shall mean Gross Sales less deductions set
forth below.  “Gross Sales” are all
revenues from the sale of all products or services by or for you or the
Restaurant, in, upon, or from the Premises, or through or by means of the
business conducted at the Restaurant, the Premises or otherwise, whether
derived from cash, credit, the redemption of coupons or gift certificates, or
otherwise, and regardless of collection. 
To arrive at “Net Sales”, deduct the following items from Gross
Sales:  (a) sales and service taxes
collected from customers and paid to the appropriate taxing authority; (b)
revenues from authorized automated teller machines or crane toy machines and
the sale of gift certificates, cigars, cigarettes and newspapers; and (c) the
discounted portion of menu prices whether for employee meals or by way of
coupons, approved promotions or otherwise.

F.      ELECTRONIC FUNDS TRANSFER.

At our
election, we may require you to pay your New Restaurant Promotional Fund Fee,
Royalty Fees, Marketing Fund Fees and any other recurring payments to us, our
parent, subsidiaries or affiliates, such as rent or note payments, by
electronic funds transfer (“ACH”). 
Acceptance of payment by ACH will not be deemed a waiver of any of our
rights.  You agree to promptly provide us all consents, authorizations and bank
account data we need to establish ACH capability at your bank. You also agree:

(1)     to promptly
provide us such forms as we may from time to time require to effectuate any
changes needed to maintain ACH capability;

(2)     to give us at least fourteen (14) days
written notice (except in the case of emergency) before you make any change to
your ACH bank account (providing all information and specimens required to
change ACH to the new account);

(3)     to
immediately replace any ACH request rejected by your bank with a bank certified
or cashier’s check in the aggregate amount owed, plus interest, late fees,
collection fees, costs of collection and attorneys fees.

G.      INTEREST AND COSTS.

If any payment to
us or our parent or any subsidiary or affiliate is not paid when due, you will
pay interest and costs to us, our parent, subsidiary or affiliate, in addition
to the unpaid amount, as described below.

(1)     All Royalty Fees, Marketing Fund Fees and
other amounts which you owe to us or our parent, subsidiaries or affiliates
will bear interest beginning on the date such amounts were due at the highest
applicable legal rate for open account business credit, not to exceed one and
one-half percent (1.5%) per month. 
Entitlement to interest will be in
addition to any other remedies we may have. 
This paragraph 6.G. does not constitute an agreement on our part
to accept payments from you after the payments are due or our commitment to
extend credit to, or otherwise finance your operation of, the Restaurant.  Further, your failure to pay all amounts when
due to us, our parent, subsidiaries or affiliates will constitute grounds for
termination of this Agreement, as provided herein.

(2)     Receipt of any check, draft
or other commercial paper will not constitute payment until such funds are
actually collected.  You will pay all
collection charges on dishonored checks, including reasonable attorney’s
fees.  At our request, you will promptly
replace any dishonored and returned check(s) with a bank certified or cashiers
check in the aggregate amount owed, plus interest, late fees, collection fees,
costs of collection and attorneys fees.

H.      TAX ON ROYALTY AND MARKETING FUND FEES.

You agree to pay any sales, excise, use, privilege or other tax imposed
or levied by any government or governmental agency on account of your payment
of any of the fees under this Agreement. 
This provision does not apply to income taxes.

 10

I.       APPLICATION OF PAYMENTS.

We have sole
discretion to apply any of your payments to any of your past due indebtedness
in such order and amounts as we may elect. 
The acceptance of a partial or late payment will not constitute a waiver
of any of our rights or remedies contained in this Agreement.

7.      RESTAURANT OPERATING STANDARDS.

A.     SPECIFICATIONS, STANDARDS AND PROCEDURES.

The operation of
the Restaurant in compliance with our high standards is important to us and all
other Friendly’s Restaurant franchisees. 
You agree to operate the Restaurant
in strict accordance with all standards we communicate to you from time to
time.  Standards will be established for
and distributed to franchisees generally and you specifically in such form and
content as we may from time to time in our sole discretion prescribe.  You must comply with all mandatory
specifications, standards and operating procedures relating to appearance,
function, cleanliness, sanitation, safety, business hours, delivery services,
new Products, purchasing or leasing new or different equipment, compliance with
the decor, format and image, including equipment, furniture, fixtures and
signage, of a Friendly’s Restaurant and operation of a Friendly’s Restaurant.

Mandatory
specifications, standards and operating procedures that we prescribe from time
to time in the Operations Manual, or otherwise communicate to you in writing,
will constitute provisions of this Agreement as if fully set forth in this
Agreement.  All references to this
Agreement include all such mandatory specifications, standards and operating
procedures.  The Operations Manual is copyrighted and you agree not to at any time
copy, duplicate, record or otherwise reproduce any materials, in whole or in
part, which set forth the standards or other proprietary information, or
otherwise make the same available to any unauthorized person.

Because
strict uniformity may not be possible or practical in all circumstances, we
have the right to vary standards from location to location, as we may deem appropriate
for the System and/or for any individual restaurant.

B.      CONDITION, APPEARANCE & OPERATION
OF THE RESTAURANT.

You agree as
follows:

(1)     You agree to use the Premises only for the
operation of a Friendly’s Restaurant in compliance with this Agreement and for
no other purpose whatsoever;

(2)     You agree to maintain the condition and
appearance of the Restaurant, its equipment, furniture, furnishings, signs and
the Premises in accordance with our specifications and standards and consistent
with the image of a Friendly’s Restaurant as an efficiently operated business
offering high quality food service and observing the highest standards of
cleanliness and sanitation;

(3)     You agree to perform all periodic
maintenance with respect to the decor, equipment, furniture, furnishings and
signs of the Restaurant and the Premises that is required from time to time to
maintain such condition, appearance and efficient operation, including, without
limitation:

(a)          thorough cleaning,
repainting and redecorating of the interior and exterior of the Premises at
reasonable intervals;

(b)         interior and exterior
repair of the Premises; and

(c)          repair or replacement of
damaged, worn out or obsolete equipment, furniture, furnishings, and signs.

(4)     You agree not to make any material
alterations to the Premises, or to the appearance of the Restaurant as
originally developed, without our prior written approval;

(5)     You agree to place or display at the
Premises (interior and exterior) only approved signs, emblems, lettering, logos
and display and advertising materials.

 11
 

(6)     You agree to immediately rectify all
hazardous conditions and immediately remove and destroy any and all hazardous
products.  For purposes hereof, “hazardous
conditions” are conditions that pose a risk of injury, illness or death; and “hazardous
products” are products that are unfit for human consumption or otherwise pose a
risk of injury, illness or death.

(7)     You agree to employ only such methods of
product storage, handling, preparation, packaging, delivery and sale as we from
time to time prescribe in the Operations Manual or otherwise communicate or
approve in writing.  You must sell,
distribute and deliver such products only in weights, sizes, forms and packages
as we provide in the Operations Manual or otherwise communicate or approve in
writing.

(8)     You agree to discontinue offering for sale
any Product if we at any time notify you in writing of our withdrawal of our
approval of that Product for sale at the Restaurant.

(9)     You agree to maintain as business records
provided in paragraph 11.A. below. and to furnish us within five (5) days after
written request, copies of all customer complaints and notices, warnings,
citations, inspection reports and other communications from public authorities
related to the Restaurant. Franchisee hereby authorizes any such public
authority to provide Friendly’s with copies of such notices and/or
communications.  You must promptly notify us if any suit, investigation or other legal
proceeding related to your business is commenced by or against you, and you
must keep us continuously advised of the status of the matter.

(10)   You agree to record all sales at the
Restaurant at the time of sale, in accordance with our procedures and on
devices, the make, model and serial numbers of which we have individually
approved in writing.  Such devices must
record accumulated sales in a manner that cannot be modified, turned back or
reset, and must retain data in memory storage in the event of power loss.  You agree to accurately report all Net Sales
to us and implement all procedures we recommend to minimize employee
theft.  You further acknowledge and agree
that employee theft will not relieve you of the obligation to make all payments
to us based on Net Sales pursuant to this Agreement and that accurate reporting
of Net Sales requires, among other things, compliance with all standards
related thereto and recording all sales at the time the product is delivered to
the purchaser, including, without limitation, bulk discount sales, whether for
cash, by redemption of gift certificates or coupons, or sales for which payment
may be deferred.

C.      RESTAURANT MENU.

The Restaurant
will offer for sale all food and beverage products and services that we require
and sell only products that we have approved. 
The Restaurant will not sell any Products to any person for resale to
any third person.  The Restaurant cannot
offer for sale or sell at the Premises or any other location any unapproved
products, or use the Premises for any purpose other than the operation of the
Restaurant.

We can approve the
Restaurant’s offering of Products or services on a test basis, which approval
we may condition in any reasonable manner. 
We may stop the test at any time after its commencement.

D.      APPROVED
PRODUCTS, DISTRIBUTORS AND SUPPLIERS.

The reputation and
goodwill of Friendly’s Restaurants is based upon and maintained by the sale of
distinctive, high quality food products and beverages and the presentation,
packaging, service and delivery of such products in an efficient and appealing
manner.  We have developed various
proprietary products according to our proprietary and secret recipes and
formulas.  We have developed standards
and specifications for food products, ingredients, seasonings, mixes,
beverages, materials and supplies incorporated in or used in the preparation,
cooking, serving, packaging and delivery of prepared food products authorized
for sale at Friendly’s Restaurants.  We
have and will periodically approve suppliers and distributors of such products
that meet our standards and requirements. 
You must purchase:

(1)     Proprietary
Products - our proprietary ice cream, frozen yogurt and
other frozen desserts and related toppings, muffin and other mixes and batters,
and other products developed by us from time to time pursuant to secret recipes
or formulas, only from FICC, or from a third party designated by us; and

(2)     Non-Proprietary
Products - all other furnishings, fixtures, signs,
equipment, food products, ingredients, seasonings, mixes, beverages, materials
and supplies used in the preparation of Products; menus, paper, glassware,
china and plastic products; packaging or other materials, utensils and uniforms
that meet our standards and specifications from 

 12
 

suppliers we have
approved in writing as having demonstrated to our reasonable satisfaction (a)
the capability to supply products that meet all of our standards and (b)
adequate capacity and facilities to supply your needs, as well as the needs of
other franchisees, in the quantities, at the times and with the reliability
requisite to an efficient operation.

You will at all
times maintain a sufficient quantity and variety of approved food products,
beverages, ingredients and other products.

Provided you are
creditworthy in our parent company’s sole judgment, you will be offered
standard credit terms on your purchase of Products as is then-generally
available to franchisees.  If at any time
our parent determines that you are not creditworthy, your credit terms may be
modified or revoked, and/or you may be required to pre-pay for Products and/or
you may be required to pay a deposit or provide our Parent collateral or a
letter of credit.

We can approve a
single distributor or other supplier for any Product and can approve a
distributor or other supplier only as to certain of the Products.  We can concentrate purchases with one or more
distributors or suppliers to obtain lower prices and/or the best advertising
support and/or services.  Approval of a
distributor or other supplier may be conditioned on requirements relating to
the frequency of delivery, standards of service, and concentration of
purchases, and may be temporary, pending our further evaluation of such
distributor or other supplier.

You can request
our approval of alternative suppliers or distributors for Non-Proprietary
Products (items other than those listed in (1) above).  Our evaluation of prospective suppliers
and/or distributors will be conditioned upon payment of our reasonable
evaluation costs.  You will notify us and
submit to us all information, specifications and samples that we reasonably
request if you propose to purchase any non-proprietary item from a distributor
or other supplier who has not been previously approved by us.  We will notify you within a reasonable time
whether you are authorized to purchase such products from such distributor or
other supplier.

We may conduct
market research and testing to determine consumer trends and the marketability
of new food products and services.  You
agree to cooperate and assist us by participating in our customer surveys and
market research programs, test marketing new food products and services in the
Restaurant and providing us with timely reports and other relevant information
regarding such customer surveys and market research.

E.      PRICING.

We
may, from time to time, set maximum prices on products and services offered
from the Restaurant.  If we have imposed
such a maximum price on a particular product or service, you may charge any
price for such product or service up to and including the maximum price set by
us.

F.      COMPLIANCE WITH LAWS AND GOOD BUSINESS
PRACTICES.

You will secure
and maintain in force in your name all required licenses, permits and
certificates relating to the operation of the Restaurant.  You also will maintain and operate the Restaurant
in full compliance with all applicable civil and criminal laws, ordinances,
rules, regulations and orders of public authorities, including, without
limitation, those relating to health, safety and sanitation, workers’
compensation insurance, unemployment insurance and withholding and payment of
federal, state and local income taxes, social security taxes, sales taxes and
The Americans With Disabilities Act.  All
of your advertising must be completely factual, be in good taste in our
judgment and conform to the highest standards of ethical advertising.  In all dealings with us, your customers,
suppliers and public officials, you will adhere to the highest standards of
honesty, integrity, fair dealing and ethical conduct.  You will refrain from any business or
advertising practice which may injure our business or the goodwill associated
with the Marks and other Friendly’s Restaurants.

You agree to
notify us, by telephone within forty-eight (48) hours followed within
five (5) days by written notification, including copies of any pleadings or
process received of:  (i) the
commencement of any action, suit or proceeding relative to the Restaurant; (ii)
the issuance of any order, writ, injunction, award or decree of any court,
agency or other governmental instrumentality which may adversely affect the
operation or financial condition of the Restaurant; and (iii) any notice of
violation of any law, ordinance or regulation relating to health or
safety.  You must not accept service of
process for us and on our behalf.

 13
 

You and your
owners agree to comply with and/or to assist us to the fullest extent possible
in our efforts to comply with Anti-Terrorism Laws (as defined below).  In connection with such compliance, you and
your owners certify, represent and warrant that none of your or any of your
owner’s property or interests is subject to being “blocked” under any of the
Anti-Terrorism Laws and that you and your owners are not otherwise in violation
of any of the Anti-Terrorism Laws.  You
further certify that you and your owners are not listed on the Annex to
Executive Order 13244 (the Annex is available at http://www.treasury.gov) and
will not become so listed, hire any person so listed or have dealings with a
person so listed.  You agree to
immediately notify Franchisor if you or any of your owners become so
listed.  “Anti-Terrorism
Laws” means Executive Order 13224 issued by the President of the
United States, the USA PATRIOT Act, and all other present and future federal,
state and local laws, ordinances, regulations, policies, lists and any other
requirements of any governmental authority addressing or in any way relating to
terrorist acts and acts of war.  If you,
your owners or your employees violate any of the Anti-Terrorism Laws, or become
listed on the Annex to Executive Order 13244, we may terminate this Agreement
immediately.

G.      COMPUTER
SYSTEMS.

You have the sole
and complete responsibility for: (a) acquiring, installing, operating,
maintaining and upgrading your computer hardware, software, cash register and
other equipment (your “Restaurant Technology System” or, for convenience, “RTS”);
(b) the manner in which your RTS interfaces with our computer systems and those
of third parties; and (c) any and all consequences that may arise if your RTS
is not properly operated, maintained, and upgraded.  The term “RTS” includes, without limitation,
all hardware and software and the data you store.  You will use your RTS solely in connection
with the operation of the Restaurant, in the manner reasonably specified by us
from time to time.  In order for your
Restaurant to be able to communicate with our computers to exchange data needed
for the efficient functioning of your Restaurant, you must, at your sole
expense, purchase or lease our designated RTS from us or our designated
supplier, including computers, printers, touch-screens, cash drawers, satellite
dish, software and other equipment designated by us for the Restaurant.  You must, at your sole expense, (a) maintain
your RTS in continuous operation at the Restaurant, (b) comply with our
requirements for safeguarding of data, records, and reports, (c) maintain an
ongoing maintenance and support contract for your RTS through a service
provider approved by us, and replace components as necessary, and (d) attend,
and/or cause employees in the Restaurant to attend, such initial and other RTS
training as we specify.  Some or all
components of our RTS may be licensed to us and sublicensed to you.  You must, at your sole expense, at any time
after your RTS is three (3) years old, replace such system upon our request,
given the age, cost to operate and condition of the RTS then in the Restaurant,
then-current and anticipated technology, and other factors as may be relevant.

You agree to at
all times permit us immediate access to your RTS, electronically or otherwise,
without giving you advance notice.  Such
access will not unreasonably interfere with normal Restaurant operations.  To facilitate such access, you will install
and maintain such satellite, telephone or other service we designate.

We make no
representation or warranty as to the costs, sales or profits, if any, which may
result from the installation or replacement of your RTS.

H.      MANAGEMENT AND PERSONNEL OF THE
RESTAURANT.

(1)     You will at all times (i) employ a General
Manager who will have principal operational responsibility for the Restaurant
and who will have such qualifications and experience as we will reasonably
require and who will have satisfactorily completed our training program; and
(ii) employ on a full-time basis two (2) Managers, each of whom has
satisfactorily completed our training program (collectively, the General
Manager and Managers are referred to as “Certified Restaurant Managers”).  The Restaurant will at all times be under the
direct on-premises supervision of a Certified Restaurant Manager.  You agree to hire, train and supervise
efficient, competent and courteous employees of good character for the
operation of the Restaurant and to be exclusively responsible for the terms of
their employment and compensation and for the proper training of your employees
in the operation of the Restaurant.  See
paragraph 15.B.(2).  All Certified
Restaurant Managers and other employees must have literacy and fluency in the
English language sufficient, in our opinion, to satisfactorily complete the
training program, to communicate with employees, customers, and suppliers and
to satisfactorily serve customers in the Restaurant.

 14
 

(2)     The parties acknowledge and agree that the
initial and ongoing training of a Certified Restaurant Manager requires
significant investment of the employer’s time, effort and expense.  Accordingly:

(a)     You agree that if you hire any person who,
at the time of his/her hiring, (a) is an existing Certified Restaurant Manager
(including persons in higher levels of management) and (b) within six months
prior to such hiring was employed by us or FICC, then you will pay us, as
compensation for the investment in that person’s training, a fee equal to the
wages/salary and bonus we or FICC had paid the person during the last twelve
(12) months of his/her employment with us or FICC.  If that employment was for less than 12
months, the total wages/salary we or FICC paid (excluding bonus) will be
divided by the number of weeks actually worked and the result will be
multiplied times fifty-two and then added to any bonus.  The fee will be due and payable thirty (30)
days after our written demand.

(b)     We agree that if we or FICC hires any
person who, at the time of his/her hiring (a) is an existing Certified Restaurant
Manager (including persons in higher levels of management) and (b) within six
months prior to such hiring, was employed by you, then we will pay you, as
compensation for your investment in that person’s training, a fee calculated
and payable in the same manner as described in subparagraph (a) above.

I.           INSURANCE.

You must procure,
before the commencement of business, and maintain in full force and effect
during the entire term of the License, at your sole expense, an insurance
policy or policies protecting you and Friendly’s and our directors and
employees, against any loss, liability or expense whatsoever, including but not
limited to employment practices liability, from, but not limited to, fire,
personal injury, theft, death, property damage or otherwise, arising or
occurring upon or in connection with your operation of the Restaurant or your
occupancy of the Premises. you must also comply with all insurance requirements
related to the Restaurant’s lease or mortgage. 
You must maintain in force at all times, under policies of insurance
issued by carriers we have approved:

(1)     Employer’s liability and workers’
compensation insurance as prescribed by applicable law;

(2)     Comprehensive general liability insurance
(with products, completed operations and contractual liability and independent
contractors and escalators coverage) against claims for bodily and personal
injury, death and property damage caused by or occurring in conjunction with
the operation of the Restaurant (or otherwise in conjunction with your conduct
of business pursuant to this License) under one or more primary policies of
insurance, each on an occurrence basis, with single-limit coverage for
personal and bodily injury, death and property damage of at least one million
dollars ($1,000,000) (or such other amount as we may reasonably require), for
each occurrence and a “per location” aggregate limit of at least two million
dollars ($2,000,000), as well as follow-form excess liability coverage of at
least three million dollars ($3,000,000) per location.  These policies must be non-contributory;

(3)     Motor vehicle/automobile liability
insurance for owned and non-owned vehicles, against claims for bodily and
personal injury, death and property damage caused by or occurring in
conjunction with the operation of the Restaurant (or otherwise in conjunction
with your conduct of business pursuant to this License) with combined single-limit
coverage (personal and bodily injury, death and property damage) of at least
one million dollars ($1,000,000) for each accident with follow-form excess
liability coverage of at least three million dollars ($3,000,000) per accident;

(4)     All-risk building and contents
insurance including flood and earthquake, vandalism and theft insurance for the
replacement value of the Restaurant and its contents;

(5)     Business interruption insurance for a
period adequate to reestablish normal business operations; and

(6)     Builders’ risk insurance on a completed
value non-reporting basis during the period of construction and/or any remodeling
of the Restaurant.

We may periodically increase the amounts of insurance you will be
required to maintain, and we may require different or additional kinds of
insurance at any time.  Each insurance
policy (i) must name as additional insured parties “Friendly Ice Cream
Corporation” and “Friendly’s Restaurants Franchise, Inc.” and any other party
or parties designated by us, as their interest may appear;  (ii) must contain provisions denying to the
insurer acquisition by subrogation of rights of recovery against any party
named;  (iii) must provide for thirty
(30) days’ prior written notice to us of any material modification,
cancellation, termination or expiration of such policy;  and (iv) must not be limited in any way by
reason of any insurance which may be maintained by Friendly’s or any other
named party.

 15
 

Prior to the
expiration of the term of each insurance policy, you will furnish us with a
certificate of insurance or with a certified copy of each renewal or
replacement insurance policy you will maintain for the immediately following
term and evidence of the payment of the premium for the insurance policy.  If you fail or refuse to maintain required
insurance coverage, or to furnish satisfactory evidence of required insurance
coverage and payment of the premiums we can obtain the required insurance
coverage on your behalf.  You must
cooperate fully with us in our effort to obtain such insurance policies,
promptly execute all forms or instruments required to obtain or maintain any
such insurance, allow any inspections of the Restaurant which are required to
obtain or maintain such insurance and pay to us, on demand, any costs and
premiums we incur.

Your obligations
to maintain insurance coverage as described above will not be affected in any
manner by reason of any separate insurance we maintain, nor will the
maintenance of insurance relieve you of any obligations under Section 4 of this
Agreement.

Each party hereby
waives any and all rights of recovery against the other party, and against the
officers, members, employees, agents, and representatives of the other party,
for damage to such waiving party or for loss of its property or the property of
others under its control to the extent that such loss or damage is insured
against under any insurance policy in force at the time of such loss or
damage.  You must give notice to your
insurance carrier or carriers that a mutual waiver of subrogation rights is
contained in this Agreement.  The
foregoing waiver does not apply to either party’s performance of contractual
obligations of this Agreement.

8.      REFURBISHMENT AND REMODELING.

In order to ensure continued public acceptance and patronage
of the System, to avoid deterioration or obsolescence of the Restaurant and to
take advantage of changes and improvements in design, concept and décor,
you must timely complete the following refurbishments and remodeling of the
Restaurant.  These requirements are in
addition to your continuing obligations to maintain, repair and replace all
equipment, signage, furnishing, decor and personal property related to the
Restaurant in accordance with our standards. 
Your obligations to maintain, repair and replace will not be delayed or
deferred pending or in anticipation of any refurbishment or remodeling.

A.     REFURBISHMENT.

No later than the
Refurbishment Date set forth in Item “F” of the Contract Data Schedule of this
Agreement, and at each ten (10) year interval thereafter, you will refurbish
the Restaurant in accordance with our then-current refurbishment
standards.  Refurbishment means replacing
décor, wall treatments, carpeting, upholstery and awnings; both interior and
exterior painting; and will be generally the same as then required of
Restaurants of the same age and condition.

B.      REMODELING.

No later than the Remodel
Date set forth in Item “F” of the Contract Data Schedule of this Agreement (and
at each ten {10} year interval thereafter, if this Agreement is renewed), you
will remodel the Restaurant in accordance with our then-current remodeling
standards, including but not limited to fixtures, furnishings, signs and
equipment.  The remodeling will be
generally the same as then required of Restaurants of the same age, condition,
location and geographic region.

9.     THE INTERNET.

This Agreement
grants you no right to use any of our Marks to advertise products and/or
services for order through the mail or by any electronic or other medium.  You will not, without our prior written
approval, use any of our Marks on the Internet or in any similar electronic or
other communications medium, to promote your business and/or advertise and/or
sell Friendly’s products and/or services. 
We have the sole right to establish an Internet “home page” using any of
our Marks, and to regulate the establishment and use of linked home pages by
franchisees.  Before you establish a
website in connection with your operation of the Restaurant, you must submit to
us a complete sample of the proposed website. 
The website must 

 16
 

comply with our standards
and specifications as prescribed by us from time to time.  If you propose to alter a previously approved
website, you must first submit to us a sample of alterations and obtain our
approval before they are implemented.

10.    MARKETING.

A.     BY FRIENDLY’S.

Because
of the value of advertising to the goodwill and public image of Friendly’s
Restaurants, we will maintain and administer a marketing fund (the “Marketing
Fund”) for advertising, marketing, promotion
and other purposes and programs that we deem necessary or
appropriate.  We will direct all
advertising, marketing and promotional programs for the System, and will have
sole discretion over the creative concepts, materials and endorsements used in
the programs, and the geographic, market, and media placement and allocation of
the programs.  The Marketing Fund will be
administered as follows:

(1)     The Production
and Research Fund will be funded at a minimum of one-half
percent (0.5%), but no more than three-quarter percent (0.75%) of reported Net
Sales, and may be used to pay the costs of (a) preparing and producing video,
audio and written advertising materials; developing regional and system-wide
advertising and promotional programs, including, without limitation, developing
direct mail and other media advertising, and employing advertising agencies to
assist therewith; (b) supporting public relations, (c) merchandising, (d)
market research, (e) menu development, (f) trademark development, (g) salaries,
administrative costs and overhead we pay in connection with the Marketing Fund,
and (h) other advertising, marketing and promotional activities designed to
increase sales and enhance the public reputation of Friendly’s and the System,
as we deem appropriate; and

(2)     The balance of the Marketing Fund Fee set
forth in Item “E” of the Contract Data Schedule will support the Advertising and Promotion Fund, to be
used to pay the costs of placing video, audio and written advertising
materials, and otherwise implementing regional or system-wide advertising and
promotional programs, including, without limitation, purchasing direct mail and
other media advertising, and employing advertising agencies to assist
therewith; and to implement such other advertising, marketing and promotional
activities designed to increase sales and enhance the public reputation of
Friendly’s and the System, as we deem appropriate.

The Marketing Fund
will be accounted for separately from our other funds and will not be used to
defray any of our general operating expenses, except for such reasonable
salaries, administrative costs and overhead as we may incur in activities
reasonably related to the administration of the Marketing Fund and its
marketing programs including, without limitation, conducting market research
and menu development, preparing advertising and marketing materials, and
collecting and accounting for contributions to the Marketing Fund (including,
but not limited to, attorneys’ and accountants’ fees and other expenses of
litigation).  We may spend in any fiscal
year an amount that is greater or less than the aggregate contribution of all
Friendly’s Restaurants to the Marketing Fund in that year.  We may loan money to the Marketing Fund, or
we may borrow money from other lenders, to cover deficits of the Marketing Fund
and we may charge the Marketing Fund the interest on such loans.  We may cause the Marketing Fund to invest any
surplus for future use by the Marketing Fund. 
You authorize us to collect for the Marketing Fund any advertising or
promotional monies or credits offered by any supplier based upon your
purchases.  All interest earned on monies
contributed to the Marketing Fund will be added to and supplement the
Production and Research Fund.  We will
prepare an annual statement of monies collected and costs incurred by the
Marketing Fund within one hundred twenty (120) days after the end of our fiscal
year and will furnish this statement to you upon your written request.  At our sole discretion, we can cause the
Marketing Fund to be incorporated or operated through a separate entity at such
time as we deem appropriate, and if we do so, that entity will have all of our
rights and duties pursuant to this paragraph 10A.

The Marketing Fund
is intended to enhance recognition of the Marks and patronage of Friendly’s
Restaurants and Friendly’s proprietary branded products.  Although we will endeavor to utilize the
Marketing Fund to develop advertising and marketing materials and programs, and
to place advertising that will benefit all Friendly’s Restaurants, we undertake
no obligation to ensure that expenditures by the Marketing Fund in or affecting
any geographic area are proportionate or equivalent to the contributions to the
Marketing Fund by Friendly’s Restaurants operating in that geographic area or
that any Friendly’s Restaurant will benefit directly or in proportion to its
contributions to the Marketing Fund from the development of advertising and
marketing materials or the placement of advertising.  Except as expressly provided in this Section
10, we 

 17
 

assume no direct or
indirect liability or obligation to you with respect to our maintenance,
direction or administration of the Marketing Fund.  We have the right, and you hereby authorize
us, to settle or otherwise compromise all disputes with regard to the Marketing
Fund.  The Marketing Fund is not a
trust.  We do not owe any fiduciary
obligation to you for administering the Marketing Fund or for any other reason.

B.      BY FRANCHISEE.

You must
participate in all advertising, marketing and promotional programs of the
Marketing Fund.

In addition to all
of your payments to the Marketing Fund described in paragraph 6.D., you also
agree to spend annually for local advertising for the Restaurant, a percentage
of the Net Sales at the Restaurant which is at least one-half percent (0.5%),
but no less than the minimum percentage of Net Sales that Friendly’s commits to
spend for local advertising for company-operated restaurants for our
then-current fiscal year, and in no event more than one percent (1.0%) of Net
Sales. .  We will advise you of our
minimum commitment for local advertising for each fiscal year.  Without limitation, local advertising
expenses for the Restaurant include advertising specifically for the
Restaurant, such as a telephone directory advertisement, directional billboard
or direct mail inserts for the Restaurant only, and include local promotional
campaigns, such as local charity and youth group sponsorships.  The cost of menus and the value of coupon
discounts are not included in local advertising expenses.

Prior to using any
advertising or promotional material that you prepare for use in your local
area, you must submit a specimen to us for our review and approval.  If you do not receive our written disapproval
of the specimen within fifteen (15) days from the date we received it, materials
that conform to the specimen will be deemed approved for your use, unless we
later disapprove it, in which case you must promptly discontinue further use.

C.      BY COOPERATIVE.

Friendly’s may
elect, in its sole discretion, to form (and you will contribute to) a
cooperative marketing fund organized on a regional basis.  Franchisees must contribute to the
cooperative marketing fund up to three percent (3%) of the Net Sales of each
restaurant located within the region of the cooperative marketing fund.  Such contribution will offset on a dollar-for-dollar
basis the Marketing Fund Fee referenced in paragraph 6.D. above.  Each company-operated restaurant within the
region of the cooperative marketing fund will also contribute the same
percentage of Net Sales to the cooperative fund, per restaurant within the
region, as Franchisees.  Each franchised
and company operated restaurant contributing to the cooperative will have one
vote per restaurant in determining how the cooperative will apply the funds of
such cooperative.

11.            RECORDS, REPORTS,
FINANCIAL STATEMENTS AND CONDITION.

A.     RECORDS.

You must keep
full, complete and accurate books and accounts with respect to the Restaurant,
in accordance with generally accepted accounting principles and all
requirements of law.  Unless we otherwise
agree in writing, you must adopt our financial and operational reporting chart
of accounts format, as set forth in the Operations Manual or otherwise
furnished to you.  You must preserve, in
the English language and for the time periods set forth below, all books of
account, governmental reports, register tapes, guest checks, daily reports and
complete copies of all federal and state income tax returns, property and sales
and use tax returns and supporting documents relating to your business
operations at the Restaurant (hereinafter called the “Records”), including but
not limited to, daily cash reports; cash receipts journal and general ledger;
cash disbursements journal and weekly payroll register; monthly bank
statements, and daily deposit slips and canceled checks; all business tax
returns; suppliers invoices (paid and unpaid); dated cash register tapes
(detailed and summary); monthly profit and loss statements; weekly guest
counts; records of promotion & coupon redemptions; records described in
subparagraph 7.B.(9) above; and such other records and information as we may
from time to time request.  With our
prior written approval, you may preserve Records and submit reports
electronically in accordance with our prescribed standards and requirements.

 

 18

During the term of
this Agreement, you must preserve and make available to us all Records for no
less than your current fiscal year and your three (3) immediate-past fiscal
years.  For three (3) years after the
date of any transfer of the controlling interest in this Agreement, the
transferor must preserve and make available to us all Records of the last three
(3) fiscal years of the transferor’s operation under this Agreement.  For a period of three (3) years after the
expiration of the term of this Agreement (or after any earlier termination
thereof) you must preserve and make available to us all Records for the last
three (3) fiscal years of your business operation at the Restaurant.

B.      REPORTS AND FINANCIAL STATEMENTS.

You will furnish
us the following reports, in the form we prescribe:

(1)     by the tenth (10th) day of each calendar
month for the preceding Fiscal Month, a report of the Net Sales of the
Restaurant, other revenues generated at the Restaurant and other information we
request.  This report must also include a
statement computing amounts then due for Royalty Fees and Marketing Fund Fees
and be certified by you or by your chief executive or financial officer;

(2)     by the twentieth (20th) day of each
calendar month for the preceding Fiscal Month, a profit and loss statement for
the Restaurant certified by you or by your chief executive or financial
officer;

(3)     on Monday of each week, on our standard
form, a signed weekly statement of the Restaurant’s Net Sales and guest counts
for the seven (7) day period (Monday through Sunday) ending at the close of
business on the preceding day, transmitted to us over the Internet (provided,
however, for each week for which we are able to successfully obtain your weekly
Net Sales directly from your RTS by electronic means, we will waive your
requirement to provide us a weekly sales statement);

(4)     upon our request, such other data,
information and supporting records for such periods as we reasonably require;
and

(5)     within one hundred twenty (120) days after
the end of your fiscal year, a fiscal year-end balance sheet, income
statement and statement of changes in financial position (cash flow) of the
Restaurant for such fiscal year, reflecting all year-end adjustments,
compiled, reviewed or certified by an independent certified public accountant
in compliance with standards established by the American Institute of Certified
Public Accountants, and a statement of annual Net Sales certifying that your
Net Sales for the immediately preceding fiscal year have been calculated and
reported in compliance with the terms of this Agreement, each of which will be
certified by you or your chief executive or financial officer.

C.      FINANCIAL CONDITION.

If at
any time you are delinquent in the payment of any amount owed to us or our affiliates,
you agree:  (1) upon our request, to
furnish us income statements and balance sheets for such periods and as of such
dates and all in such detail as we may request, for you and each entity
affiliated with you, whether or not such entity conducts any business with the
Restaurant, (2) that we may directly contact any lender, lessor, supplier or
vendor for the purpose of obtaining information relating to the Restaurant and
any lease or financial arrangements and you hereby authorize such persons to
disclose all such information to us and, if you are an entity, you agree that
we may contact any of your officers, directors, shareholders or partners for
any purpose reasonably related to your undertakings contained in this Agreement
and (3) to furnish, at our request, books of account, governmental reports,
register tapes, guest checks, daily reports and complete copies of federal and
state income tax returns, property and sales and use tax returns.

12.    INSPECTIONS AND AUDITS.

A.     FRIENDLY’S RIGHT TO INSPECT THE
RESTAURANT.

In order to
preserve the validity and integrity of the Marks and to determine whether you
and the Restaurant are complying with this Agreement, and with specifications,
standards and operating procedures we prescribe for the operation of Friendly’s
Restaurants, we or our agents can, at any reasonable time, with or without
prior notice:

(1)     inspect the Restaurant and the Premises;

 19
 

(2)               observe, photograph
and make audio and/or video recordings of the operations of the Restaurant
(whether or not you are present);

(3)     remove samples of any food and beverage
product, material or other products for testing and analysis;

(4)     interview personnel of the Restaurant;

(5)     interview customers of the Restaurant; and

(6)     inspect and copy any books, records and
documents relating to the operation of the Restaurant.

To the fullest extent
required by applicable law, you consent to our making audio and/or video
recordings of the operations of the Restaurant.

You agree to cooperate
fully with us in connection with any such inspection, observation, recording,
product removal and interviews, including presenting to your customers any
evaluation forms that we periodically prescribe and participating and/or
requesting your customers to participate in any surveys performed by us or on
our behalf.

B.      FRIENDLY’S RIGHTS UPON INSPECTION.

In the event of
any unsatisfactory inspection, we will have, in addition to all other rights
and remedies set forth in this Agreement, any one or more of the following
rights:

(1)     We will
have the right to require you to remove any item that fails to conform to
applicable standards;

(2)     We will
have the right to immediately remove or destroy any product that we believe to
be hazardous, contaminated or to otherwise pose an imminent risk to public
health or safety, or that otherwise materially fails to conform to applicable
standards;

(3)     If we find the Premises to have a hazardous, unsafe,
unhealthy or unsanitary condition and/or
there is reason to believe that any product or products in the Restaurant are
contaminated, and/or for any other reason of imminent risk to public health and
safety, we will have the right to
require you to immediately close and suspend operation of the Restaurant and/or
to require such other actions as we, in our sole discretion, deem
advisable.  You must notify us
immediately of any suspected product contamination or other violation affecting
public health or safety and to promptly take any action we require in response
thereto.

(4)     We will
also have the right to give you twenty-four (24) hours written notice requiring
the correction of an unsafe, unhealthy, unsanitary or unclean condition.  If we elect to do so, and you do not timely
correct the condition, we may enter the Restaurant, without being guilty of or
liable for trespass or tort, and may cause the condition to be corrected at
your expense and without prejudice to any other of our rights or remedies.

You will be solely responsible for all of losses, costs and other
expenses incurred by either us or you in complying with the provisions of this
paragraph 12.B.

C.      FRIENDLY’S RIGHT TO AUDIT.

We may at any time
during business hours, and without prior notice to you, inspect and audit, or
cause to be inspected and audited, the original business records, bookkeeping
and accounting records, sales and income tax records and returns and other
records of the Restaurant and the original books and records and tax returns of
any entity which holds the License granted under this Agreement and to perform
whatever tests and analyses we deem appropriate to verify Net Sales at the
Restaurant.  You must cooperate fully
with our representatives and any independent accountants that we hire to
conduct any such inspection or audit.  If
any such inspection or audit discloses an understatement of the Net Sales of
the Restaurant, you will pay to us, within fifteen (15) days after receipt of
the inspection or audit report, the Royalty Fees, and Marketing Fund Fees (and
percentage rent, if applicable) due on the amount of such understatement, plus
interest (at the rate and on the terms provided in paragraph 6.G, of this
Agreement) from the date originally due until the date of payment.  Further, in the event such inspection or
audit is made necessary due to (i) your failure to maintain your Restaurant
Technology System in continuous operation, or (ii) your failure to furnish us
with reports, supporting records other information or financial statements on a
timely basis, or if an understatement of Net Sales for the period of any audit
is determined by any such audit or inspection to be greater than two percent
(2%), you will reimburse us immediately upon notice for the cost of the 

 20
 

inspection or audit,
including, without limitation, the charges of attorneys and independent
accountants, and the travel, lodging and meal expenses and applicable per diem
charges for our employees.  The foregoing
rights will be in addition to all other remedies and rights that we may have
under this Agreement or under applicable law, including the right to terminate
this Agreement without opportunity to cure in the case of intentional
under-reporting of Net Sales.

If we
believe there may have been intentional under-reporting of Net Sales for the
Restaurant, you and all your partners, members and shareholders, as applicable,
will, upon our written demand, provide us, in addition to all of the Records
described in Section 11, personal federal and state tax returns, personal bank
statements, including deposit slips and canceled checks, and such other
documents and information as we may in our sole discretion request in
connection with our efforts to verify Net Sales reported by you under this
Agreement. 
Schedules to personal tax returns and other financial data which
are unrelated to the business of the Restaurant need not be provided by any
partner, member or shareholder who has not been active in the business, and, in
addition, has not directly or indirectly owned or controlled a majority
interest in the business at the Restaurant, alone or in conjunction with any other
family member or related entity.

13.    TRANSFER OF LICENSE.

A.     BY FRIENDLY’S.

This Agreement is
fully transferable by us and will inure to the benefit of any transferee or
other legal successor to our interests in this Agreement.

B.      BY FRANCHISEE.

You may
not transfer the License without our approval.  The rights and duties created by this
Agreement are personal to you.  We have
granted the License to you in reliance upon the individual and collective
character, skill, aptitude, attitude, and business ability of the persons who
will be engaged in the ownership and management of the Restaurant, your
financial capacity and the representations and warranties made to us in your
application, and the representations, warranties and covenants contained in
this Agreement.  Accordingly, neither
this Agreement nor the License (or any interest therein), nor any part or all
of the ownership of Franchisee (if an entity) or the Restaurant (or any
interest therein), may be transferred, in whole or in part, directly or indirectly,
without our prior written approval, and any attempted transfer without our
prior written approval will constitute a breach of this Agreement and convey no
rights to or interests in this Agreement or the License.  As used in this Agreement the term “transfer”
means and includes the voluntary, involuntary, direct or indirect assignment,
sale, gift, pledge, grant of security interest or other transfer by you of any
interest in:  (i) this Agreement or any
related agreement between you and us; (ii) the License; (iii) the Franchisee;
(iv) the Restaurant or (v) the Premises. 
Provided that all conditions set forth in this Section 13 are satisfied,
we will not unreasonably withhold our approval of any transfer by you.

This paragraph
13.B. does not apply to an interest in the Restaurant or the Premises
conditionally transferred to a bona fide lender as collateral security for a
loan to you or to any financing or refinancing structured as a sale-leaseback,
provided that upon the sale of the Restaurant, it is simultaneously leased back
pursuant to a Lease Agreement which is subject to our rights under this
Agreement.  At no time, however, may a
security interest be given in this Agreement or the License granted hereunder.

C.      OUR RIGHT OF FIRST REFUSAL.

If, at any time
during the term of this Agreement and for a period of one year thereafter, you
or any of your shareholders, members or partners has received and desires to
accept a signed, bona fide written offer from a third party to purchase any
interest in this Agreement, the License, the Restaurant, the Premises, or a
controlling interest in the Franchisee-entity, you must submit to us an exact
copy of the executed, written offer from a responsible and fully disclosed
purchaser along with any other information that we may reasonably request.  We may, upon written notice to you within
forty-five (45) days after the date of delivery of an exact copy of such offer
and all requested information to us, elect to purchase such interest for the
same price and on the same terms and conditions as are contained in such
offer.  Regardless of the terms of the
offer, we may, in our discretion, structure the transaction as an asset
purchase, rather than a stock purchase, 

 21
 

and to substitute cash
for securities or other property as consideration.  If less than the entire interest in the
Franchisee, this Agreement, the License, the Restaurant or the Premises is
proposed to be sold, we can purchase the entire interest for a price equal to
the proposed price plus a pro-rata increase based on the value of the
interest to be purchased.  Our credit
will be deemed equal to the credit of any proposed purchaser, and we will have
not less than ninety (90) days to prepare for closing.  We will be entitled to all representations
and warranties customarily given by the seller of assets of a business.  We will not be obligated to pay any finder’s
or broker’s fee or commission.  Our
exercise of our rights hereunder will not modify the transfer requirements of
this Section 13 nor relieve you of your obligation to pay us the then-current
transfer fee.

If we do not
exercise our right of first refusal, the sale or other transfer may be
completed pursuant to and on the terms of such offer, subject to our approval
of the transfer as otherwise provided in this Agreement; provided, however,
that if the proposed sale or other transfer is not completed within one hundred
twenty (120) days after delivery of such offer to us, or if there is any change
in the terms of the proposed transaction, we will have an additional right of
first refusal for an additional thirty (30) days.

Our right of first
refusal will not apply to the sale or transfer of an interest in this
Agreement, the License, Franchisee, the Premises or the Restaurant to a member
of the Seller’s immediate family or, if Franchisee is an entity, between or
among previously approved owners of Franchisee, provided that such transfer is
otherwise permissible under this Agreement.

D.      CONDITIONS FOR OUR APPROVAL OF YOUR
TRANSFER.

The proposed
transferee and its owners (if the proposed transferee is an entity) must meet
our then applicable standards for Friendly’s Restaurant franchisees.  In addition, if the transfer is one of a
series of transfers which in the aggregate constitute the transfer of the
License or the Restaurant or a controlling interest in the Franchisee, all of
the following conditions must also be met prior to, or concurrently with, the
effective date of the transfer:

(1)     You must have operated the Restaurant for a
period of not less than six (6) months prior to the proposed transfer;

(2)     You must pay and satisfy (i) all accrued
money obligations to us, including but not limited to Royalty Fees, Marketing
Fund Fees and all amounts owed to us or our parent, subsidiaries and
affiliates, and (ii) your obligations to any third party that we have
guaranteed, if any;

(3)     You must cure to our satisfaction any and
all defaults under this Agreement or any other agreement between you and us;

(4)     The Restaurant, including equipment, signs,
building, improvements, interior and exterior, must be in good operating
condition and repair and in compliance with our then-current standards,
including, without limitation, standards for replacements and additions;

(5)     The transferee and each partner,
shareholder or member of the transferee, as the case may be, must be a United
States citizen or lawful resident alien, of good moral character and
reputation, must be creditworthy and must have sufficient business experience,
aptitude and financial resources to operate the Restaurant.  Such qualifications include, without
limitation, literacy and fluency in the English language sufficient, in our
opinion, to communicate with employees, customers, and suppliers and to
satisfactorily complete our training program, and such other tests and
interviews as we reasonably require;

(6)     The transferee and its management personnel
must have completed our training program to our satisfaction;

(7)     The transferee, including, where
appropriate, all shareholders, members and partners of the transferee, must
jointly and severally execute, on our then-current forms, a franchise agreement
and all other standard ancillary agreements, including, but not limited to, an
agreement, if applicable, that in the event the transferee will at any time be unable
to make payments both to Friendly’s and to you for the purchase of the
Restaurant, payments to Friendly’s, its affiliates and/or subsidiaries
(including the Marketing Fund) will have priority;

(8)     You and/or the transferee must pay us our
then-current transfer fee as set forth in our then-current Uniform Franchise
Offering Circular;

 22
 

(9)     You, and all of your partners, members,
shareholders, officers and directors and any other owners must execute a
general release in a form satisfactory to us, of any and all claims against us,
our subsidiaries and affiliates, and our and their officers, directors,
partners, employees and agents;

(10)   We must approve the material terms and
conditions of such transfer, including, without limitation, our determination
that the price and terms of payment are not so burdensome as to adversely
affect the subsequent operation or financial results of the Restaurant.  This requirement creates no liability on our
part to either you or your transferee, if we approve the transfer and the
transferee later experiences financial difficulties;

(11)   The transferee may not be a limited
partnership, trust or other entity we do not specifically authorize and
approve;

(12)   You and your transferring owners must execute
a non-competition covenant in favor of us and the transferee, containing the
terms set forth in paragraph 15.A.;

(13)   The lessor and lender, if any, of the
Premises must give you any and all required advance written consent to the
transfer of the Premises, and you must provide us with a copy of such consent;
and

(14)   You and your owners must guarantee the
transferee’s financial obligations to us in its commitment agreement and
license agreement for two (2) years from the date of transfer.

In addition, we reserve the right to promulgate,
communicate and enforce such additional reasonable requirements as we may
hereafter, in good faith, establish.

Neither you nor
any lending institution may assert any security interest, lien, claim or right
now or hereafter in the License or franchise agreement granted to the
transferee, or, if applicable, our lease of the Restaurant.  Any security interest, lien, claim or right
asserted with respect to any personal property at the above location will not
include “after-acquired” property unless the same is subordinated to any
subsequent lien for purchase-money financing of said after-acquired property.

E.      YOUR TRANSFER TO A WHOLLY-OWNED
ENTITY.

If you are in full
compliance with this Agreement, we will not unreasonably withhold our approval
of a transfer to an entity which conducts no business other than the Restaurant
(or other Friendly’s Restaurants), which is actually managed by you and in
which you maintain management control and own and control one hundred percent
(100%) of the equity and voting power of all issued and outstanding securities,
provided that you guarantee, in accordance with our then current form, the
performance of such transferee’s obligations under this Agreement.  Transfers of interests in such entity will be
subject to the other provisions of this Section 13 and of Section 22.

F.      YOUR DEATH, DISABILITY OR INCAPACITY.

In the event of
the death, permanent disability or mental
incapacity of you or any partner, member or shareholder of your entity,
as the case may be, the legal representative of the deceased, disabled or
incapacitated party, as the case may be, together with all surviving partners,
members or shareholders, if any, must, within six (6) months of such death,
disability or mental incapacity, jointly apply in writing to transfer this
Agreement or the interest of the affected party in this Agreement, to such
person or persons as the legal representative may specify and who meets our
then-current qualifications for franchisees and whom we approve.

If the legal
representative and all surviving partners, members or shareholders, if any, do
not propose a transferee acceptable to us under the standards set forth in this
Agreement within the period set forth above, or if no transfer of the interest will have been accomplished consistent
with the provisions of this Section 13 within one (1) year from the date of
death, disability or mental incapacity, this Agreement will terminate
forthwith and all rights licensed hereunder will automatically revert to
us.  We will have the right and option,
exercisable upon such termination, to purchase all furniture, fixtures, signs,
equipment and other chattels at a price to be agreed upon by the parties or, if
no agreement as to price is reached by the parties, at such price as may be
determined by a qualified, independent appraiser approved by both parties, such
approval not to be unreasonably withheld. 
We will give you notice of our intention to exercise this option no
later than twenty-one 

 23
 

(21) days prior to
termination.  If you do not object to
proposed appraiser within twenty (20) days after our notice, such appraiser
will be deemed approved by both parties.

If the deceased, disabled or
incapacitated party is also the General Manager of the Restaurant, then during
the interim period until a transfer of the interest under this paragraph 13.F
has taken place, the legal representative and surviving partners, members or
shareholders will operate the Restaurant through a successor General Manager
who we have approved.  If you fail to
appoint a successor General Manager approved by us within ninety (90) days
after the date of death, disability or mental incapacity of the General Manager
we may terminate this Agreement after sending you a thirty (30) day written
notice-to cure.

We may require a
certified copy of an order of a court of competent jurisdiction over the estate
of the deceased or incapacitated person, in which the legal representative or
heir or legatee will be determined, and may rely on such certified copy for the
purposes of this paragraph 13.F.  If not
furnished with such certified copy of a court order, or in the event of a legal
contest, we may decline, without liability, to recognize the claim of a party
to such interest.  We will not be liable
to any heir, next of kin, devisee, legatee, or legal representatives of a
deceased or incapacitated person by reason of approval of a transfer of the
interest to the surviving spouse or a child of the deceased, so long as such
approval is not contrary to an order of a court of competent jurisdiction
previously served on us.

G.      EFFECT OF OUR CONSENT TO YOUR TRANSFER.

Our consent to a
transfer of this Agreement, the License, the Restaurant and/or an interest in
the Franchisee-entity will not constitute a waiver of any claims we may have
against you (or your owners if you are an entity), nor will it be deemed a
waiver of our right to demand exact compliance with any of the terms or
conditions of this Agreement by the transferee.

14.    CONDEMNATION AND CASUALTY.

You must give us
immediate notice in writing of any fire or casualty at the Restaurant or of any
proposed taking by eminent domain of the Restaurant or any means of access
thereto or any portion of the Premises. 
If we determine that (i) it is impossible or economically unreasonable
to rebuild the Restaurant on the Premises or (ii) the taking will have a
material, sustained adverse impact on the operation of the Restaurant on the
Premises (or whatever remains thereof), we will permit you to transfer the
License to a nearby location that you select within six (6) months of the
casualty or taking, as the case may be. 
If we approve the new location, and provided you are not in default of
this Agreement, you must open a new restaurant at such approved location in
accordance with our specifications within one (1) year of the closing of this
Restaurant. The new restaurant will be deemed to be the Restaurant under this
Agreement, for the balance of the term hereof.

Except for
permanent closing authorized as stated above, if the Restaurant is damaged by
fire or other casualty, you will expeditiously repair the damage.  If the damage or repair requires closing the
Restaurant, you will diligently repair or rebuild the Restaurant in accordance
with our standards, commencing reconstruction no later than four (4) months
after the fire or casualty, and completing reconstruction in order to reopen
the Restaurant for continuous business operations in no event later than twelve
(12) months after the fire or casualty. 
You will give us ample advance written notice of the date of
reopening.  If the Restaurant is not
reopened in accordance with this Section 14, the License and this Agreement
will terminate as prescribed in Section 17.

Nothing in this
Section 14 will extend the term of this Agreement, but you will not be required
to pay us any Royalty Fees or Marketing Fund Fees for periods during which the
Restaurant is closed by reason of condemnation or casualty.

15.    FRANCHISEE’S RESTRICTIVE COVENANTS.

A.     YOUR COVENANTS NOT TO COMPETE.

We have invested a
substantial amount of time and money in developing the System, the Marks, and
the Confidential Information and we would be unable to protect our System, the
Marks, Confidential Information and trade secrets against 

 24
 

unauthorized use or
disclosure and would be unable to encourage a free exchange of ideas and
information among us and our franchisees if prospective franchisees or
franchisees were permitted to hold interests in or perform services for any
competing business and that the following restrictions are reasonably required
in order to protect our information, marketing strategies, operating policies
and other elements of the System from unauthorized appropriation.  Therefore, except for the operation of
additional Friendly’s Restaurants under licenses we grant you, you agree that
(i) during the term of this Agreement, including any extension or renewal
hereof, and (ii) for a period of two (2) years after expiration or termination
of this Agreement, regardless of the cause of termination (hereinafter called
the “Post-Term Period”), neither you nor any of your officers, directors,
stockholders, members or partners, as the case may be, will own, maintain or
otherwise have any direct or indirect or beneficial interest in or perform
services as an officer, director, manager, employee or consultant or otherwise
for any business which owns, operates, licenses, franchises or develops one or
more food service establishments that are mid-scale priced, family style
restaurants, including, but not limited to, Denny’s, Shoney’s, Big Boy, Country
Kitchen, Bob Evans, Cracker Barrel, IHOP, Village Inn, Waffle House or similar
establishments.  Notwithstanding the
above, any food service establishment, whether or not it is a mid-scale
priced family style restaurant, will be deemed to violate this restriction if
frozen desserts comprise five percent (5%) or more of gross sales as measured
on any six (6) month basis, including, but not limited to, Dairy Queen, Swensen’s,
Carvel, Baskin-Robbins, Ben & Jerry’s, Cold Stone Creamery, TCBY or similar
establishments.  With respect to the Post
Term Period, this restriction will apply to any such competing activities
within the Trade Area of this Restaurant or any other Friendly’s Restaurant
operated by us or any other of our franchisees. 
The term “Trade Area” will mean the geographic area surrounding a
restaurant from which it draws the majority of its customers, as we reasonably
determine at the time, but in no event shall be less than a radius of three (3)
miles from such restaurant.  You acknowledge
that the determination of the Trade Area is based on many factors, some of
which are subjective, and that the Trade Area as described in this Agreement is
reasonable under the circumstances.

With respect to
the Post-Term Period, only, you may, upon written notice to us, seek
arbitration, in accordance with Section 19 of this Agreement, of whether our
determination of any Post-Term Trade Area is a reasonable restriction on your
activities.  In such event, the decision
of the arbitrator will be final and binding upon the parties.  You further agree that, if you request
arbitration, you will not engage in competitive activities pending resolution
of the dispute.

For purposes
hereof, an indirect interest will be presumed to exist if such interest is that
of the spouse or of a parent or child of another person, in addition to other
forms of indirect or beneficial interests. 
Such restriction will not apply to the ownership of shares of a class of
securities listed on a stock exchange or traded on the over-the-counter
market that represent five percent (5%) or less of the number of shares of that
class of securities issued and outstanding.

This Agreement
does not confer any rights of exclusivity on you with respect to your operation
of a Friendly’s Restaurant within the Trade Area and will not prevent us from
placing another Friendly’s Restaurant or other food service establishment
within the Trade Area.

B.      YOUR ADDITIONAL RESTRICTIVE COVENANTS.

For and during the
term of this Agreement and for the Post Term Period defined above, neither you
nor any of your officers, directors, stockholders, members or partners, as the
case may be, will do any of the following:

(1)     you will
not divert or attempt to divert any business or customer of the Restaurant to
any competitor, by direct or indirect inducement or otherwise, or do or
perform, directly or indirectly, any other act injurious or prejudicial to the
goodwill associated with our Marks and System; and/or

(2)     you will
not offer to employ or employ any person who is then, or was within six (6)
months prior thereto, employed by us, our affiliates or any other Friendly’s
franchisee; and/or

(3)     you will
not directly or indirectly contest or aid in contesting our right, or the right
of any of our prospective franchisees to obtain a building permit, zoning
variance or other governmental approval required for the development of another
location as a Friendly’s Restaurant.; and/or

(4)     you will
not violate the restrictions contained in paragraphs 3.C. and 5.B. of this
Agreement.

 25
 

C.      SCOPE AND APPLICABILITY.

The covenants contained in this Section 15 will be
construed as severable and independent and will be interpreted and applied
consistently with the requirements of reasonableness and equity.  If all or any portion of a covenant in this
Section 15 is held unreasonable or unenforceable by a court, arbitration panel
or other agency having valid jurisdiction in a decision to which we are a
party, you expressly agrees to be bound by any lesser covenant included within
the terms of such greater covenant that imposes the maximum duty permitted by
law, as if the lesser covenant were separately stated in, and made a part of,
this Section 15.  We will have the right,
in our sole discretion, to reduce the scope of any covenant set forth in this
Section 15, or any portion or portions thereof, without your consent, and you
agree you will comply with any covenant as modified.

16.    DEFAULT.

A.     BY FRIENDLY’S.

We will have the
right to cure any default under this Agreement for sixty (60) days after your
written notice of such default is delivered pursuant to Section 21 hereof;
provided, however that if such default cannot reasonably be cured within sixty
(60) days, provided we commence to cure within sixty (60) days after your
written notice is delivered and continue to diligently prosecute such cure to
completion, we will not be deemed to be in breach hereunder.

B.      BY FRANCHISEE.

You will be in
default under this Agreement:

(1)     If you become insolvent or make an
assignment for the benefit of creditors, or if you file a petition in
bankruptcy, or if such a petition is filed against and consented to by you or
is not dismissed within thirty (30) days, or if you are adjudicated a bankrupt,
or if a bill in equity or other proceeding for the appointment of a receiver or
other custodian for your business or assets is filed and is consented to by you
or is not dismissed within thirty (30) days, or if a receiver or other
custodian is appointed, or if proceedings for composition with creditors under
any state or federal law should be instituted by or against you, or if your
real or personal property will be sold at levy thereupon by any sheriff,
marshall or constable, or if you take action toward dissolving or liquidating
the entity owning the License, or any such action is taken against you, without
first complying with Section 13 of this Agreement; or

(2)     If you or any one of you or your
shareholders, members or partners is convicted of or pleads guilty or “nolo
contendere” to a felony, a crime involving moral turpitude, or any other crime
or offense that we believe is injurious to the System, the Marks or the
goodwill associated therewith, or if we have clear and convincing evidence that
any of you committed such a felony, crime or offense; or

(3)     If you permit the use of the Restaurant or
Premises for any illegal or unauthorized purpose, including, without
limitation, palming off or substitution of products under the Marks or any
other marks; or

(4)     If any other franchise agreement between
you and us is terminated because of your default; or

(5)     If you have made any material
misrepresentation or omission in the application for the License or this
Agreement or in any other material submitted to us on which we have relied in
determining whether to grant you the License; or

(6)     If you suffer or permit any expiration or
termination of a lease, foreclosure of any mortgage, fire, casualty,
condemnation or other event the result of which prevents your continued,
uninterrupted exclusive possession and occupancy of the Premises, except as
otherwise provided in Section 14 of this Agreement; or

(7)     If you fail to pay, perform, observe or
comply with any of your duties and obligations under this Agreement; or if you
fail to carry out in all respects your obligations under any lease, mortgage,
equipment agreement, promissory note, conditional sales contract or other
contract materially affecting the Restaurant, to which you are a party or by
which your are bound, whether or not we are a party thereto.

 26
 

C.      YOUR CURE PERIODS.

The following cure
periods will apply to your default under this Agreement:

(1)     No
Cure Period.  No
cure period will be available if you are in default under subparagraphs
16.B.(1) through 16.B.(6) above; or if you abandon the Restaurant; or if you
intentionally underreport Net Sales, falsify financial data or otherwise commit
an act of fraud with respect to your acquisition of this License or your rights
or obligations under this Agreement.  In
addition, no cure period will be available for any default if you have received
three (3) or more previous notices-to-cure for the same or a substantially
similar default, whether or not you have cured the same, within the immediately
preceding twelve (12) month period;

(2)     Cure
on Demand.  You
must cure on demand all “hazardous conditions” and remove and destroy on demand
all “hazardous products” as set forth in paragraph 7.B.(6) and will cure any
situation which poses an imminent risk to public health and safety as provided
in paragraph 12.B.;

(3)     24 Hour Cure Period. 
A twenty-four (24) hour cure period will apply to the violation of any
law, regulation or government order relating to health, sanitation or safety;
as provided in paragraph 12.B.(4), or if you cease to operate the Restaurant
for a period of forty-eight (48) hours without our prior written consent
(provided, however, that if you abandon the Restaurant, no cure period will
apply);

(4)     Seven Day Cure Period. 
A seven (7) day cure period will apply if you fail, refuse or neglect to
pay when due any moneys owing to us, the Fund or our parent; or if you fail to
maintain the insurance coverage set forth in paragraph 7.I. of this Agreement;

(5)     Thirty Day Cure Period. 
Except as otherwise provided in this paragraph 16.B. you will have the
right to cure any default under this Agreement within thirty (30) days after
our written notice of default is delivered pursuant to Section 21 hereof,
unless such default cannot reasonably be corrected within such thirty (30) day
period and you undertake, within ten (10) days after such written notice is
delivered to you, and continue efforts to bring the Restaurant and the Premises
into full compliance, and furnish proof acceptable to us of such efforts and
the date by which full compliance will be achieved; or

(6)     Statutory
Cure Period.  If
any statute of the state in which the Restaurant is located requires a cure
period for a default that is longer than the applicable cure period specified
in this paragraph 16.B., the longer statutory cure period will apply.

D.      INTEREST AND COSTS.

If you fail to
cure a default within the applicable time period following notice set forth in
paragraph 16.C. above, whether or not the Agreement is terminated as a result
of your default, you will pay us all damages, costs and expenses, including,
without limitation, interest at one and one-half percent (1.5%) per month or
the highest permissible rate, and reasonable collection fees, investigation
costs and attorneys’ fees incurred by us as a result of such default or
termination.  All such interest, damages,
costs and expenses may be included in and form part of the judgment awarded to
us in any proceedings brought by us against you or any of you.

17.    TERMINATION.

If you fail to cure a
default within the applicable period following notice set forth in
subparagraphs 16.C.(1) through 16.C.(6) above, we may, in addition to all other
remedies at law or in equity or as otherwise set forth herein, immediately
terminate this Agreement and the License granted hereunder.  Such termination will be effective immediately
upon your receipt of our written notice of termination.  Notwithstanding the foregoing, this Agreement
will, to the extent not prohibited by law, terminate without our giving a
notice of termination immediately upon the occurrence of any event described in
paragraph 16.B.(1).

 

 27

A.     NO LIMITATION.

In any judicial proceeding in which the validity of termination is at
issue, we will not be limited to relying on the reasons for termination which
are set forth in any notice sent to you in accordance with Section 16 above.

B.      YOUR RIGHT TO TERMINATE THIS AGREEMENT.

You may terminate this Agreement at any time by giving us at least
twelve (12) months, but not more than fifteen (15) months, written notice, and
complying with the liquidated damages provisions of paragraph 17.D. below.

C.      RIGHTS ARE CUMULATIVE.

Our rights to terminate this Agreement are in addition to all rights or
remedies available at law or in equity in case of any breach, failure or
default, or threatened breach, failure or default, all of which rights and
remedies will be cumulative and not alternative.

D.      LIQUIDATED DAMAGES.

(1)     Except as otherwise provided in this
Agreement, if this Agreement and the License granted hereby are terminated
under or by reason of any of the provisions of Section 16 of this Agreement, or
by reason of your exercise of your right under paragraph 17.B. above, you agree
to promptly pay us (as liquidated damages for the loss of the benefit bargained
for in this Agreement due to premature termination only, and not as a penalty
or as damages for breaching this Agreement or in lieu of any other payment) a
lump sum equal to the royalty fees and Marketing Fund contributions payable to
us during the thirty-six (36) calendar months immediately preceding the
termination.  If the Restaurant will not
have been open for thirty-six (36) months prior to termination, the monthly
average of such payments during such shorter period will be multiplied by
thirty-six (36) for purposes of determining liquidated damages.  If there are fewer than thirty-six (36)
months remaining in the term hereof, the amount that you agree to pay will be
equal to the number of months remaining in the term of this Agreement
multiplied by the average monthly royalty fees and Marketing Fund contributions
payable to us during the thirty-six (36) months immediately preceding
termination.

(2)     If we cannot determine the amount you owe
by reason of your failure to submit some or all of your Net Sales reports as
required pursuant to paragraph 11.B. of this Agreement, you agree that we may
estimate the Net Sales of your Restaurant for the applicable periods described
above for the purpose of computing the amount payable to us by you under this
paragraph 17.D.

(3)     If we elect to and successfully obtain
control and possession of the Premises and Restaurant, on terms and conditions
satisfactory to us for the purpose of reopening the Restaurant, we will refund
(or, if applicable, reduce our claim against you by) a pro rata portion of the
liquidated damages paid or due us pursuant to this paragraph 17.D. based upon
the number of full months the Premises reopens for business as a Friendly’s
restaurant during the liquidated damage period following termination.  Such credit will not apply for any period in
which you continue to operate the Restaurant following termination, with or
without our permission.

E.      YOUR OBLIGATIONS UPON TERMINATION OR
EXPIRATION.

Upon any termination or expiration of this Agreement, your License to use the Marks and the System and
your right to operate the Restaurant under the Marks will immediately
terminate, and:

(1)     You must pay to us, within fifteen (15)
days after termination or expiration or such later date on which the amounts
due to us are determined, all sums owing or accrued from you to us, including
but not limited to, royalty fees, Marketing Fund contributions, amounts owed
for your purchases from us or our parent, subsidiaries and affiliates,
predecessors, successors and assigns, interest due on any of the foregoing, and
all other amounts owed to us or our parent, subsidiaries and affiliates under
this Agreement or otherwise and any costs and expenses, including reasonable
attorneys’ fees, incurred by us by reason of your default; and

 28
 

(2)     You must immediately cease to operate the
Restaurant and not directly or indirectly at any time or in any manner identify
yourself or any business as a current or former Friendly’s Restaurant, or as a
franchisee or licensee of, or as otherwise associated with us, or utilize for
any purpose any trade name, trade or service mark or other commercial symbol
that suggests or indicates a connection or association with us.  You must also return to us any and all
resalable inventory of our Proprietary Products for which you will be
compensated at the lower of their cost or market value; and

(3)     You must immediately and permanently cease to use, by advertising or in any other
manner whatsoever, any feature or method associated with the System, any or all
of the Marks or any colorable imitation thereof and any other trade secrets,
confidential information, operating manuals, slogans, trade dress, signs,
symbols or devices which are part of our System or are otherwise used in
connection with the operation of the Restaurant.  You agree that any unauthorized use of our
trademarks, trade names, proprietary marks, and service marks after termination
of this Agreement will constitute willful trademark infringement and will cause
us irreparable harm; and

(4)     You must immediately cease to use in any
business or otherwise any of our Confidential Information which has been
disclosed to, learned by or acquired by you. 
You must immediately return to us all
copies of the Operations Manual and other Confidential Information in your possession  (all of which you acknowledge to be our property), and will retain no
copy or record of any of the foregoing, except your copy of this Agreement, any
correspondence between the parties, and any other documents which you
reasonably needs for compliance with any provision of law; and

(5)     You must immediately remove from the
Premises, and return to us (or with our consent, destroy) any and all signs,
menus, fixtures, furniture, furnishings, equipment, advertising, materials,
stationery supplies, forms or other articles that display or contain any Mark
or that otherwise identify or relate to a Friendly’s Restaurant; and

(6)     You must immediately remove all Marks that
are affixed to uniforms and/or, at our direction, cease to use all uniforms
that have been used in the Restaurant; and

(7)     You must, within five (5) days after
termination or expiration, disconnect, withdraw and/or terminate any telephone
listings and/or fictitious name registration containing the word “Friendly”.  Upon our written demand upon any termination,
expiration or non-renewal of the License, you must assign to us any telephone
number used in the operation of the Restaurant. 
You hereby appoint us as your attorney-in-fact to do any act necessary
to effect the intent of this paragraph; and

(8)     You must continue to comply with Section
15. of this Agreement, for the Post-Term Period specified therein.  If you
begin to operate any other business, wherever situated, you will not, in
connection with such other business or the promotion thereof, any reproduction,
counterfeit, copy or colorable imitation of any of our Marks or trade dress;
and you will not utilize any designation of origin or description or
representation which falsely suggests or represent an association or connection
with Friendly’s, whether or not it constitutes unfair competition; and.

(9)     You must, at our request, either terminate
or assign to us any website that identifies you as currently or formerly
associated with us or that displays any Mark, as well as any domain name of
such website or any of your domain names (collectively the “Domain Names”), and
you acknowledge that, between Friendly’s and Franchisee, Friendly’s has the
sole right to any Domain Name; and

(10)   You must furnish to us within sixty (60) days
after the effective date of termination or expiration, evidence satisfactory to
us of your compliance with the foregoing obligations.

F.      OUR RIGHTS AND REMEDIES UPON
TERMINATION.

If you fail to
take such actions as required above to our satisfaction within thirty (30) days
of termination or expiration of this Agreement, you grant us the right to enter
the Premises to remove all items bearing the Marks and take such actions as we
deem necessary to de-identify the Restaurant from the System without
committing any trespass or incurring any liability for such actions. You will
be responsible for all costs and expenses that we incur in taking such actions.

No right or remedy herein conferred upon or reserved
to us is exclusive of any other right or remedy herein, or by law or equity
provided or permitted, but each will be cumulative of every other right or
remedy given hereunder.  You agree that
the existence of any claims against us, whether or not arising from this
Agreement, will not constitute a defense to the enforcement by us of any
provision of this Agreement.

Nothing in this Agreement precludes us from seeking
any remedy under federal or state law for willful trademark infringement,
including, without limitation, injunctive relief.

 29
 

Because the
Restaurant is one of many restaurants within the System that sell similar
products and services to the public, you agrees that your failure to comply
with the terms of this Agreement would cause irreparable damage to Friendly’s
and the System as a whole for which no adequate remedy at law may be
available, including, without limitation, violations of standards, unhealthy,
unsafe or unsanitary conditions, unauthorized use of the Marks and breaches
under Section 17 of this Agreement.  In the event of your breach or threatened breach
of any of the terms of this Agreement, we will be forthwith entitled to an
injunction restraining such breach and/or to a decree of specific performance,
without showing or proving any actual damage or irreparable harm or lack of an
adequate remedy at law, and without the requirement for the posting of bond,
which bond you hereby waive, until a final determination is made by a court of
competent jurisdiction.  The foregoing
remedy will be in addition to all other remedies or rights that you might
otherwise have by virtue of your breach of this Agreement.

G.      CONTINUING OBLIGATIONS.

All obligations of
Friendly’s and Franchisee which expressly or by their nature survive the
expiration or termination of this Agreement will continue in full force and
effect subsequent to and notwithstanding its expiration or termination and
until they are satisfied in full or by their nature expire.

18.    RENEWAL OF LICENSE.

You have no
unilateral right to renew or extend this Agreement or to obtain a new license
to operate the Restaurant in the System beyond the expiration date provided for
in this Agreement.  However, if you
desire to obtain a new license upon the expiration of this Agreement, you must
apply to us for a new license agreement at least ninety (90) days, but not more
than twelve (12) months, before expiration of the term of this Agreement.  Upon payment of the then current renewal fee,
which will not exceed the then current Initial Franchise Fee, we will process
your application and in accordance with our procedures, criteria and
requirements regarding upgrading of facilities, credit, market feasibility,
your history of defaults under this Agreement and related criteria then being
applied by us in issuing new licenses to use the System.  If you fulfill our upgrading and other then
current requirements, we will grant you a new license in the form of agreement
then in use by us.  If you are granted a
new license, you (and if you are an entity, your owners) will be required to
execute, in a form satisfactory to us, a general release of any and all claims
against us and our subsidiaries, affiliates, partners, successors and assigns,
and our and their respective officers, directors, shareholders, partners,
agents, employees, representatives and servants, including claims arising under
this Agreement and federal, state and local laws, rules and regulations.  If you are not granted a new license, we will
return the renewal fee less expenses incurred in processing your application.

During the
pendency of your application for the issuance of a new license, royalty fees
and Marketing Fund contributions and other fees will be paid at the rate
specified in this Agreement.  Upon
issuance of the new license agreement, all such fees must be paid at the rates
specified in the new license agreement, which may be greater than the rates
specified in this Agreement, effective as of the date this Agreement expires or
expired, as the case may be.

19.    ARBITRATION.

As used in this Section 19, the term “Dispute” means and encompasses all
types of disagreements, controversies or causes of action, whether arising
under common law or any state or federal statute and whether a claim,
counterclaim or cross-claim.  As
used in this Section 19, the terms “Friendly’s” “we” and “us” and “Franchisee”
and “you” include, without limitation, the past and present employees, agents,
representatives, officers, directors, shareholders, members, guarantors,
sureties, parent corporations, subsidiary corporations, controlled affiliated
entities, predecessors, successors and/or assigns of each party hereto.  The parties intend for these definitions to be
given the broadest possible interpretation by a court of law.  Except
as otherwise specified in this Section 19, all Disputes between Friendly’s and
Franchisee, of whatever kind or nature, whether arising out of or relating to
the negotiation, performance or breach of this or any other agreement or
otherwise, must be settled by arbitration administered by a recognized
independent alternative dispute resolution service to be selected by Friendly’s,
such as, without limitation, the American Arbitration Association, CPR
Institute for Dispute Resolution or JAMS/Endispute ( the “Arbitration Service”)
under the then-current rules for commercial arbitration of the Arbitration
Service (collectively the “Rules”), except as herein expressly modified.

 30
 

A.     ELIGIBILITY AND PROCEDURES.

Either party (as “Claimant”)
may initiate arbitration by delivering a notice of arbitration to the other
party (“Respondent”) in accordance with Section 21 below.  The Claimant must initiate arbitration within
two (2) years after the discovery of the facts giving rise to the claim or
action, or within the time set forth in the statute of limitations applicable
to the cause of action asserted, if less. 
Any cause of action that is not initiated within the lesser period
stated above will not be eligible for arbitration.  The arbitration will be deemed to have
commenced on the date the Respondent receives the notice of arbitration from
the Claimant.  The Claimant’s notice of
arbitration must contain a general statement of the nature of the claim and the
relief sought.  We will establish the
identity of the selected Arbitration Service by written notice to you no later
than fifteen (15) days after the Respondent receives the notice of arbitration.  Arbitration shall be by a single arbitrator,
provided however, that either party may elect, within thirty (30) days after
the Respondent receives the notice of arbitration, to require a panel of three
(3) arbitrators.  Selection of the
arbitrator(s) will be in accordance with the Rules of the Arbitration
Service.  In addition to the
qualifications set forth in the Rules, the aribitrator(s) must have prior
experience in franchise arbitration.  All arbitration proceedings, including without
limitation all conferences, preliminary and dispositive hearings will be
conducted in the city closest to our principal place of business
(currently Springfield, Massachusetts),
unless otherwise required by law or if all parties agree to another venue.  The arbitrator(s) may issue such
orders for interim relief as may be deemed necessary to safeguard the rights of
the parties during the arbitration proceedings, but without prejudice to the
ultimate rights of the parties, the final determination of the Dispute or the
parties’ rights to seek equitable relief from a court of competent jurisdiction
at any time during the term of the arbitration proceedings.

B.      ENFORCEABILITY AND EFFECT.

The decision of
the arbitrator(s) will be final and binding on the parties hereto.  Judgment on the award, including, without
limitation, any interim award for interim relief, rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.  The binding or preclusive effect of any award
will be limited to the actual dispute or claim arbitrated, and to the parties,
and will have no collateral effect on any other dispute or claim of any kind
whatsoever.

C.      GOVERNING
LAW.

The Federal Arbitration Act, 9 U.S.C. §§ 1-16, and related federal
judicial procedure will govern this contract to the fullest extent possible,
superceding all state arbitration law, irrespective of the location of the
arbitration proceedings, the nature of the Dispute between the parties or the
nature of the court in which any related judicial proceedings may be
brought.  Except as provided in the
preceding sentence respecting arbitration law, the resolution of all Disputes
between the parties bound hereunder, whether in tort and regardless of the
place of injury or the place of the alleged wrongdoing or whether arising out
of or relating to the parties’ contractual relationship, will be governed by
the laws of the Commonwealth of Massachusetts without regard to conflict of law
principles.

D.      EXCEPTIONS TO ARBITRATION.

(1)     Friendly’s will have the right to litigate
any one or more of the following causes of action, by filing a complaint in any
court of competent jurisdiction:

(a)          The enforcement of an
obligation to pay money to Friendly’s under an express term of any agreement;

(b)         Any action based upon an
allegation of intentional underreporting of Net Sales by Franchisee;

(c)          Any action for
declaratory or equitable relief, including, without limitation, seeking of
preliminary and/or permanent injunctive relief, specific performance, other
relief in the nature of equity or any action in equity to enjoin any harm or
threat of harm to Friendly’s goodwill, Marks or its tangible or intangible
property, brought at any time, including, without limitation, prior to or
during the pendency of any arbitration proceedings initiated hereunder; or

(d)         Any action in ejectment or
for possession of any interest in real or personal property.

(2)     Franchisee will have the right to litigate
any action for declaratory or equitable relief, including, without limitation,
seeking of preliminary and/or permanent injunctive relief, specific
performance, other relief in the nature of 

 31
 

equity or any action in
equity to enjoin any harm or threat of harm to Franchisee’s interests, brought
at any time, including, without limitation, prior to or during the pendency of
any arbitration proceedings initiated hereunder.

(3)     If Friendly’s litigates any
cause of action pursuant to subparagraph 19.D.(1) above, and if Franchisee
files any counterclaim, cross-claim, offset claim or the like against Friendly’s
in the litigation, Franchisee must waive the right to a trial by jury and the
rights to any and all claim(s) for punitive, multiple and/or exemplary
damages.  Otherwise, Franchisee must
submit each such counterclaim, cross-claim, offset claim or the like to arbitration,
if then available pursuant to this Section 19.

(4)     Disputes concerning the
validity or scope of this Section 19 (Arbitration) are within the
authority of the arbitrator(s), including,
without limitation, whether a dispute is subject to arbitration hereunder.

E.      WAIVERS
AND OTHER AGREEMENTS.

The parties hereto and each of
them knowingly, voluntarily and intentionally agree as follows:

(1)     Each party expressly waives any and all
rights to a trial by jury; and

(2)     Each party expressly waives any and all
claims for punitive, multiple and/or exemplary damages, except that Friendly’s
may at any time bring an action for willful trademark infringement and, if
successful, receive an award of multiple damages as provided by law; and

(3)     Each party expressly agrees that no party
may recover damages for economic loss attributable to negligent acts or
omissions, except for conduct which is determined to constitute gross
negligence or an intentional wrong; and

(4)     Each party expressly agrees that in the
event of any final adjudication or applicable enactment of law that punitive,
multiple and/or exemplary damages may not be waived by the parties, no recovery
by any party in any forum will ever exceed two (2) times actual damages, except
for an award of multiple damages to Friendly’s for willful trademark infringement,
as provided by law; and

(5)     Each party expressly agrees that any and
all claims and actions arising out of or relating to this Agreement, or the
relationship of Friendly’s and Franchisee, or Franchisee’s operation of the
Restaurant, brought in any forum by any party hereto against another, must be
commenced within two (2) years
after the discovery of the facts giving rise to such claim or action, or such
claim or action will be barred.

(6)     Each party expressly agrees that it will
not initiate or participate in any class action litigation claim against any
other party hereto.

(7)     The foregoing provisions shall govern all
Disputes, whether settled by arbitration or brought in any other forum.

F.      POST-TERM APPLICABILITY.

The provisions of this Section 19 will continue in
full force and effect subsequent to and notwithstanding the expiration or
termination of this Agreement, however effected.

20.    ENFORCEMENT.

A.     SEVERABILITY AND SUBSTITUTION OF VALID
PROVISIONS.

Except as
expressly provided to the contrary, each section, paragraph, term and provision
of this Agreement, and any portion thereof, shall be considered severable and
if, for any reason, any such provision of this Agreement is held to be invalid,
contrary to, or in conflict with any applicable present or future law or
regulation in a final, unappealable ruling issued by any court, agency or
tribunal with competent jurisdiction in a proceeding to which we are a party,
that ruling will not impair the operation of, or have any other effect upon,
such other portions of this Agreement as may remain otherwise enforceable, all
of which will continue to be given full force and effect and bind the parties
to this Agreement, although any portion held to be invalid will be deemed not
to be a part of this Agreement from the date the time for appeal expires, if
you are a party thereto, or otherwise upon your receipt of a notice of non-enforcement
thereof from us.  To the extent that any
provision of subparagraph 13.D.(12) or paragraph 15.A. is deemed unenforceable
by virtue of its scope in terms of area, 

 32
 

business activity
prohibited and/or length of time, but could be made enforceable by reducing any
or all thereof, you and we agree that such provisions will be enforced to the
fullest extent permissible under the laws and public policies applied in the
jurisdiction in which enforcement is sought. 
If any applicable and binding law or rule of any jurisdiction requires a
greater prior notice of the termination of or refusal to renew this Agreement
than is required under this Agreement, or the taking of some other action not
required under this Agreement, or if under any applicable and binding law or
rule of any jurisdiction, any provision of this Agreement or any specification,
standard or operating procedure we prescribe is invalid or unenforceable, the
prior notice and/or other action required by such law or rule will be
substituted for the comparable provisions of this Agreement, and we will have
the right, in our sole discretion, to modify such invalid or unenforceable
provision, specification, standard or operating procedure to the extent
required to be valid and enforceable. 
You agree to be bound by any promise or covenant imposing the maximum
duty permitted by law which is contained within the terms of any provision of
this Agreement, as though it were separately articulated in and made a part of
this Agreement, that may result from striking from any of the provisions of
this Agreement, or any specification, standard or operating procedure that we
prescribe, any portion or portions which a court may hold to be unenforceable
in a final decision to which we are a party, or from reducing the scope of any
promise or covenant to the extent required to comply with such a court order.  Such modifications to this Agreement will be
effective only in such jurisdiction, unless we elect to give them greater
applicability, and will be enforced as originally made and entered into in all
other jurisdictions.

B.      WAIVER OF OBLIGATIONS.

You and we may by
written instrument unilaterally waive or reduce any obligation of or
restriction upon the other under this Agreement, effective upon delivery of
written notice thereof to the other or such other effective date stated in the
notice of waiver.  Any waiver granted by
us will be without prejudice to any other rights we may have, will be subject
to continuing review by us, and may be revoked, in the good faith exercise of
our sole discretion, at any time and for any reason, effective upon delivery to
you of ten (10) days’ prior written notice. 
You and we will not be deemed to have waived or impaired any right,
power, or option reserved by this Agreement (including, without limitation, the
right to demand strict compliance with every term, condition, and covenant
herein, or to declare any breach thereof to be a default and to terminate the
License prior to the expiration of its term), by virtue of any custom or
practice of the parties at variance with the terms hereof; any failure,
refusal, or neglect by you or us to exercise any right under this Agreement or
to insist upon exact compliance by the other with its obligations hereunder.

C.      FORCE MAJEURE.

Neither you nor we
will be liable for loss or damage or deemed to be in breach of this Agreement
if a failure to perform particular obligations results from:  (i) transportation shortages, inadequate
supply or unavailability from the manufacturers or suppliers of equipment,
merchandise, supplies, labor, material, or energy, or the voluntary surrender
of the right to acquire or use any of the foregoing in order to accommodate or
comply with the orders, requests, regulations, recommendations, or instructions
of any federal, state, or municipal government or any department or agency
thereof; (ii) compliance with any law, ruling, order, regulation, requirement
or instruction of any federal, state or municipal government or any department
or agency thereof; (iii) acts of God; (iv) fires, strikes, embargoes, war or
riot; or (v) any other similar event or cause.

Any delay
resulting from any of such causes will extend the time for performance or
excuse performance, in whole or in part, as may be reasonable, except that such
causes will not excuse payments of amounts owed at the time of such occurrence
or payment of any amounts due thereafter.

D.      INJUNCTIVE RELIEF.

You agree that we
will have the right, without limitation, to preliminary injunctive relief to
restrain any conduct by you in the development or operation of the Restaurant
that could materially damage the goodwill associated with the System, the Marks
and Friendly’s Restaurants.  We will not
be required to post a bond to obtain injunctive relief.  Your only remedy if an injunction is entered
against you will be the dissolution of that injunction, and you will not have
any right to recover damages for wrongful entry of such an injunction.

 33
 

E.      RIGHTS OF PARTIES ARE CUMULATIVE.

Your and our
rights under this Agreement are cumulative and no exercise or enforcement by
you or us of any right or remedy hereunder will preclude the exercise or enforcement
by you or either of us of any other right or remedy hereunder or which you or
we are entitled by law to enforce.

F.      COSTS AND ATTORNEYS’ FEES.

In any proceeding
by either party to enforce or interpret any provision of this Agreement, or
appeal thereof, the party prevailing in such proceeding shall be entitled to
reimbursement of its costs and expenses, including but not limited to,
reasonable accounting and attorneys’ fees. 
Attorneys’ fees shall include, without limitation, reasonable legal and
expert witness fees, cost of investigation and proof of facts, court costs,
other litigation expenses and travel and living expenses, whether incurred
prior to or in preparation for or in contemplation of the filing of any written
demand or claim, action, hearing or proceeding. 
In any such proceeding involving more than one allegation, issue or
provision of this Agreement under circumstances where neither party prevails on
all allegations or issues, the presiding court or other body may apportion
costs and expenses between the parties.

G.      VENUE
AND JURISDICTION.

Except for
arbitration, as required under Section 19 above, you agree that (i) we may
institute any action against you to enforce the provisions of this Agreement in
any state or federal court of competent jurisdiction in the state and county in
which our principal place of business is then located and you irrevocably
submit to the jurisdiction and venue of such courts and waive any objection you
may have to either the jurisdiction or venue of such courts and (ii) any action
brought by you to enforce any provision of this Agreement will be brought and
maintained only in a state or federal court of competent jurisdiction in such
county and state.  The provisions of paragraph
19.E above shall govern all Disputes, whether settled by arbitration or brought
in any other forum.

H.      BINDING EFFECT.

This Agreement is
binding upon the parties hereto and their respective executors, administrators,
heirs, assigns and successors in interest, and will not be modified except by
written agreement signed by both you and us.

I.       INTERPRETATION.

The preambles and
exhibits are a part of this Agreement, which constitutes the entire agreement
of the parties, and there are no other oral or written understandings or
agreements between Friendly’s and the Franchisee relating to the subject matter
of this Agreement except for the Development Agreement, certain portions of
which survive the execution and delivery of this Agreement.  In the event of a conflict between this
Agreement and the Development Agreement (if applicable), the provisions of this
Agreement will control.  This Agreement
may be modified only by a writing signed by both you and us.  Nothing in this Agreement is intended, nor
will be deemed, to confer any rights or remedies upon any person or legal
entity not a party hereto.  Except where
this Agreement expressly obligates Friendly’s to reasonably approve or not
unreasonably withhold its approval of any action or request by the Franchisee,
Friendly’s has the absolute right to refuse any request by the Franchisee or to
withhold its approval of any action or omission by the Franchisee.  The headings of the several sections and
paragraphs hereof are for convenience only and do not define, limit, or
construe the contents of such sections or paragraphs.  The term “attorneys’ fees” will include,
without limitation, reasonable legal fees, whether incurred prior to, in
preparation for or in contemplation of the filing of any written demand or
claim, action, hearing or proceeding, including appellate proceedings, to
enforce the obligations of this Agreement. 
The term “family member” as used herein refers to parents, spouses,
offspring and siblings, and the spouses of parents and siblings.  The term “affiliate” as used herein means any
person or entity that directly or indirectly owns or controls, or is owned or
controlled by, or is under common ownership or control with, another person or
entity.  References to a “controlling
interest” in the Franchisee will mean fifty percent (50%) or more of the voting
control of the Franchisee or such lesser percentage that may have the power to
control the management and affairs of the Restaurant or the Franchisee.  The term “Franchisee” as used herein is
applicable to one or more persons, a corporation or a partnership or other
entity, as the case may be, and the singular usage

 34
 

includes the plural and
the masculine and neuter usages include the other and the feminine.  If two or more persons are at any time the
Franchisee hereunder, whether or not as partners or joint venturers, their
obligations and liabilities to Friendly’s will be joint and several.  This Agreement may be executed in
counterparts, each of which will be deemed an original.

J.       TIME.

Time is of the
essence of this Agreement.

21.    NOTICES AND PAYMENTS.

All written
notices and reports permitted or required to be delivered hereunder will be
deemed so delivered at the time delivered by hand, the day of transmission by
facsimile or other electronic system, with a copy sent by an overnight
commercial courier service one (1) business day after being placed in the hands
of a commercial courier service for overnight delivery, or three (3) business
days after placement in the United States Mail by Registered or Certified Mail,
Return Receipt Requested, postage prepaid and addressed to the party to be
notified at its most current principal business address of which the notifying
party has been notified.  All payments
and reports required by this Agreement will be directed to Friendly’s at the address
notified to the Franchisee from time to time, or to such other persons and
places as Friendly’s may direct from time to time.  Any required payment or report not actually
received by Friendly’s during regular business hours on the date due (or postmarked
by postal authorities at least two (2) days prior thereto) will be deemed
delinquent.

22.    PROVISIONS
APPLICABLE IF FRANCHISEE IS AN ENTITY.

You may be a sole
proprietorship or organized as a general partnership, corporation or limited
liability company.  You may not be a
limited partnership, trust or other entity we have not specifically authorized
herein or approved in writing.

A.     IF YOU
ARE A CORPORATION.

You represent,
warrant and agree that (i) you are organized under the laws of the state set
forth at your signature below, (ii) your charter provides that your activities
are limited to developing and operating Friendly’s Restaurants, (iii) you are
and will remain duly organized and in good standing during the term of this
Agreement, (iv) each of your stock certificates has and will have conspicuously
endorsed upon it a statement that any assignment or transfer thereof is subject
to all restrictions imposed upon transfers by this Agreement; (v) all your
shareholders must enter into a written agreement, in a form satisfactory to us,
to jointly and severally guaranty the full payment and performance of the
corporation’s obligations to Friendly’s and to assume all personal obligations
required of partners, members and/or shareholders contained in this Agreement;  and (vi) no new shares of your common or
preferred voting stock will be issued to any person, persons, partnership,
association, LLC or corporation without obtaining our prior written consent
pursuant to Section 13 of this Agreement. 
You will at all times maintain a
current list of all owners of record and all beneficial owners of any class of
your voting stock and you will furnish the list to us upon request.  You agree to complete and execute, from time
to time upon our request, a Certificate of Resolution in form as attached
hereto as Exhibit C-1.

B.      IF YOU
ARE A LIMITED LIABILITY COMPANY.

You represent,
warrant and agree that (i) you are a limited liability company (“LLC”)
organized under the laws of the state set forth at your signature below, (ii)
your Operating Agreement provides that your activities are limited to
developing and operating Friendly’s Restaurants, (iii) you are and will remain
duly organized and in good standing during the term of this Agreement, (iv)
your Operating Agreement provides that any assignment or transfer of membership
interests in the LLC is subject to all restrictions imposed upon transfers by
this Agreement; (v) all your members must enter into a written agreement, in a
form satisfactory to us, to jointly and severally guaranty the full payment and
performance of the LLC’s obligations to Friendly’s and to assume all personal
obligations required of partners, members and/or shareholders contained in this
Agreement and (vi) no new membership interest(s) in the LLC will be created
for, issued or granted to any person, persons, partnership, association LLC or
corporation without obtaining our prior written consent, pursuant to 

 35
 

Section 13 of this
Agreement.  You will at all times maintain a current list of all your members of record
and you will furnish the list to us upon request. You agree to complete and
execute, from time to time upon our request, a Certificate of Authority and
Incumbency in form as attached hereto as Exhibit C-2.

C.      MANAGING
OWNER/MEMBER.

You represent and
warrant that your Managing Owner/Member designated in Exhibit C presently has
and will have, throughout the term of this Agreement, the authority to bind you
in any dealings with us, our parent, subsidiaries and affiliates and to direct
any action necessary to ensure compliance with this Agreement and any other
agreements relating to the Restaurant, Premises and License.  You agree to furnish us with such evidence as
we may from time to time request.  We may
fully rely upon these representations and warranties until such time as you
notify us in writing of a change of your Managing Owner/Member.  No change in the Managing Owner/Member may be
made without prior written notice to us. 
If you wish to change your Managing Owner/Member, we must approve your
proposed new Managing Owner/Member pursuant to our then-current criteria for
Managing Owners/Members.  If your
Managing Owner/Member dies or becomes disabled or incapacitated, you must,
within sixty (60) days thereafter, name a new Managing Owner/Member approved by
us pursuant to our then current criteria for Managing Owners/Members.

23.    ACKNOWLEDGEMENTS.

Contemporaneously with
your execution of this Agreement, you have carefully reviewed and executed the
Disclosure Acknowledgment Statement attached to and incorporated into this
Agreement as Exhibit A.

You acknowledge that, due
to the length of time we have been granting licenses to operate Friendly’s
Restaurants or other food service concepts using the Marks, there is more than
one form of license agreement in effect between us and our various franchisees
and that such agreements contain provisions that may be materially different
from the provisions contained in this Agreement and that you are not entitled
to rely on any provision of any other such agreement, whether to establish
course of dealing, waiver, estoppel or for any other purpose.

You acknowledge receiving a copy of this Agreement,
the attachments hereto, and agreements relating hereto, if any, at least five
(5) business days before the date you sign this Agreement.  You further acknowledge receiving our Uniform
Franchise Offering Circular on or before the date of your first personal
meeting with us, and no less than ten (10) business days before the date you
execute this Agreement.

[SIGNATURE PAGE FOLLOWS]

 36
 

The Undersigned Franchisee hereby grants Friendly’s
the right to inspect the records of any of Franchisee’s suppliers and
distributors of raw materials, food products, supplies and equipment and hereby
authorizes such parties to release to Friendly’s records of the Franchisee’s
purchases and deliveries, by electronic transfer or otherwise, at such times
and places as Friendly’s may from time to time reasonably request.

IN
WITNESS WHEREOF the parties hereto have executed and
delivered this Agreement as of the Agreement Date.

	
  Attest:

  	
   

  	
   

  	
  FRIENDLY’S RESTAURANTS FRANCHISE, 

  INC., a Delaware corporation

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  The parties expressly acknowledge their
  understanding of the waiver of rights set forth in Section 19 of this
  Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  FRANCHISEE

  	
   

  
	
  Attest/Witness:

  	
   

  	
   

  	
  Entity:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  organized under
  the laws of the state of

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  	
  Individually:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

 37

 

EXHIBIT A

TO THE FRANCHISE AGREEMENT

BETWEEN

FRIENDLY’S RESTAURANTS FRANCHISE,
INC.

AND

 

Dated:                                 ,
2007

DISCLOSURE ACKNOWLEDGMENT STATEMENT

FRIENDLY’S RESTAURANTS FRANCHISE, INC. (“we”
or “us”) through the use of this Disclosure Acknowledgment Statement, desires
to ascertain that                                                           
(“you”) fully understand and comprehend that your execution of this Franchise
Agreement for a License to own and operate a Friendly’s Restaurant (the “Restaurant”)
is a business decision, complete with its associated risks, and that it is our
policy to verify that you are not relying upon any oral or written statements,
representations, promises or assurances or visual observations relating to a
Friendly’s Restaurant which have not been authorized by us.

1.          You
recognize and understand that business risks, which exist in connection with
the ownership, development and operation of any business, make the success or
failure of the Restaurant subject to many variables, including such factors as
your skills and abilities, competition, interest rates, the economy, inflation,
store location, operation, labor and supply costs, lease terms and costs, the
market place and others.  You acknowledge
that you have conducted an independent investigation of the business venture
contemplated by this Agreement and recognize that the success of the venture
involves substantial business risk and will be primarily dependent upon your
ability as an independent business person. 
You hereby acknowledge your willingness to undertake these business
risks.

2.          You
acknowledge that you have received and had the opportunity to personally read
and review, and that you comprehend and understand this Franchise
Agreement.  You acknowledge that we have
permitted you ample time and opportunity to consult with advisors of your own
choosing about the potential benefits and risks associated with the operation
of a Friendly’s Restaurant and of entering into this Franchise Agreement.  You also acknowledge that you have received
and read carefully, and that you understand, the Uniform Franchise Offering
Circular (the “Offering Circular”) prepared by us, and that we have not made
any oral, written or visual claims, representations, promises, agreements,
contracts, commitments, understandings or statements which contradict or are
inconsistent with and not contained in the Offering Circular, except as follows
(if no exceptions, write “None” and initial): 

	
  

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

3.          You
agree and acknowledge that your decision to enter into this business and
undertake the risks inherent therein is in no manner predicated upon any oral,
written or visual representations, assurances, warranties, guarantees or
promises made by us or any of our directors, officers, employees or agents
(including any broker) as to the likelihood of success of the Restaurant.

4.          We
expressly disclaim the making of, and you acknowledge that you have not
received or relied upon, any information, representations, warranties,
guarantees, inducements, promises or agreements, express or implied, orally or
otherwise, from us or any of our directors, officers, employees or agents
(including any broker) concerning the actual, average, projected or forecasted sales,
revenues, profits, earnings or likelihood of success that you might expect to
achieve from operating a Friendly’s Restaurant, that are contrary to the
statements made in the

Offering Circular, except
as follows (if no exceptions, write “None” and initial): 

	
  

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

5.          We
expressly disclaim the making of, and you acknowledge that you have not
received or relied upon, any promises, agreements, contracts, commitments,
representations, understandings, “side deals” or other assurances, express or
implied, orally or otherwise, that we have made to or with you with respect to
any matter regarding advertising, marketing, television, radio or other media
support, site location, market penetration, or training, operating and support
assistance or other services, that are contrary to the statements made in our
Offering Circular, except as follows (if no exceptions, write “None” and
initial): 

	
  

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

6.          You
acknowledge that you have evaluated on your own and have made an independent
investigation of the site for the Restaurant and the lease or purchase
agreement for the site.  You acknowledge
that you bear primary responsibility for selecting the site for the Restaurant
and for negotiating the terms and conditions of your lease or purchase
agreement for the site.

7.          You
acknowledge that, although we have provided you with the plans and
specifications for the Restaurant, have specified certain furniture, fixtures
and equipment for the Restaurant, and have certain rights of review and/or
approval under our Franchise Agreement with you, that you have not received or
relied upon, and we have not made, any warranty whatsoever, of the Restaurant
or the plans, specifications, furniture, fixtures and equipment.  You acknowledge that it is your sole
responsibility to insure that the Restaurant’s construction or conversion
remodeling complies with any and all applicable laws, codes or
regulations.  You acknowledge that you
are solely responsible for, and that we will have no liability or obligation,
whatsoever, with respect to the plans, the construction or the conversion
remodeling of the Restaurant.

8.          You
agree and acknowledge that system uniformity is a material benefit of operating
a franchise business and that a single system dispute resolution procedure
significantly contributes to uniformity. 
You have knowingly and willingly accepted arbitration and, unless
limited by law, a uniform choice of law and venue.

9.          You
understand that the Franchise Agreement is non-exclusive and that we or another
franchisee may open one or more Friendly’s Restaurants, or other food service
establishments, near your Restaurant. 

	
  

  	
   

  	
  FRANCHISEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Individually:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

EXHIBIT B

GUARANTY
AND ASSUMPTION OF FRANCHISEE’S OBLIGATIONS

This Guaranty is from the
undersigned officers, directors or owners of the Franchisee under the Franchise
Agreement (the “Agreement”) dated the date hereof between FRIENDLY’S
RESTAURANTS FRANCHISE, INC. (“Friendly’s”) and                                                                               
(the “Franchisee”).

In consideration of and as an inducement to the
execution of the Agreement by Friendly’s, each person signing this Guaranty
hereby personally and unconditionally, jointly and severally:  (i) guarantees to Friendly’s and its
successors and assigns that the Franchisee will punctually pay when due all
amounts required to be paid under the Agreement and perform each and every
undertaking, agreement and covenant set forth in the Agreement; and (ii) agrees
to be personally bound by, and personally liable for the breach of, each and
every provision in the Agreement, including, without limitation, provisions for
non-competition, confidentiality, audits, transfer, arbitration, venue and
jurisdiction.

Each of the undersigned waives:  (i) all rights to payments and claims for
reimbursement or subrogation which any of the undersigned may have against
Friendly’s arising or resulting from the undersigned’s execution of and
performance under this Guaranty; (ii) acceptance and notice of acceptance by
Friendly’s of the undersigned’s obligations under this Guaranty; (iii) notice
of demand for payment of any indebtedness or nonperformance of any obligation
guaranteed by the undersigned; (iv) protest and notice of default to any party
with respect to the indebtedness or nonperformance of any obligations
guaranteed by the undersigned; (v) any right the undersigned may have to
require that an action be brought against the Franchisee or any other person as
a condition of the undersigned’s liability; and (vi) all other notices and
legal or equitable defenses to which the undersigned may be entitled in the
undersigned’s capacity as guarantor.

Each of the undersigned consents and agrees that:  (i) the undersigned’s direct and immediate
liability under this Guaranty will be joint and several; (ii) the undersigned
will make any payment or render any performance required under the Agreement
upon demand if the Franchisee fails or refuses punctually to do so; (iii) the
undersigned’s liability will not be contingent or conditioned upon Friendly’s
pursuit of any remedies against the Franchisee or any other person, including
any other guarantor; (iv) the undersigned’s liability will not be diminished,
relieved or otherwise affected by any extension of time, credit or other
indulgence which Friendly’s may from time to time grant to the Franchisee, any
guarantor or to any other person, including, for example, the acceptance of any
partial payment or performance or the compromise or release of any claims and
no such indulgence will in any way modify or amend this Guaranty; (v) the
undersigned’s liability will not be diminished, relieved or otherwise affected
by any amendment or modification to the Agreement and (vi) this Guaranty will
continue and be irrevocable during the term of the Agreement and, as to those
provisions of the Agreement that survive its termination or expiration, after
its termination or expiration.

This Guaranty shall be
governed by, and construed under, the laws of the Commonwealth of
Massachusetts, without regard to its conflicts of law principles.

	
  WITNESS:

  	
   

  	
  GUARANTOR(S):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , personally

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , personally

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , personally

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , personally

  

 

Dated:                                                           

Friendly’s 2006 Franchise Agreement

Exhibit B

 

 Friendly’s 2006 Franchise Agreement

EXHIBIT
C-1

CERTIFICATE OF CORPORATE
RESOLUTION

The
undersigned officers hereby certify that they are the duly elected and acting
officers of                                                        
(the “Corporation”) and that the following is a true and correct copy of the
resolutions adopted by the Board of Directors of the Corporation at a meeting
duly called and held, at which meeting a quorum was present and acting
throughout and that such resolutions have not been rescinded or modified and
are now in full force and effect:

“RESOLVED, that this corporation enter into agreements
with Friendly’s Restaurants Franchise, Inc. and/or its parent, affiliates or
subsidiaries, as are necessary and proper to acquire an interest in the
Friendly’s Restaurant located at                                                                            .

FURTHER RESOLVED, that any one of the officers of the
corporation is authorized and directed to execute said agreements on behalf of
this corporation, and to approve any modifications, extensions, amendments or
terminations of said agreements as any said officer may deem to be in the best
interests of the corporation, notwithstanding the fact that such documents as
amended, modified, terminated or extended may differ from those presented at
this meeting.”

We further certify
that there is no provision in the Charter or By-Laws of the Corporation that
limits the power of the Board of Directors to adopt the foregoing resolutions,
and that the same are in conformity with the provisions of said Charter and
By-Laws.

We further certify
that the Corporation is duly organized under the laws of the state of                                   
and the Corporation currently has issued and outstanding a total of                      
shares of its capital stock, and all of the owners of stock and the number of
shares owned by each are as follows:

	
  Print or Type
  Shareholder’s Name

  	
   

  	
  Social Security No.

  	
   

  	
  Number of

  Shares Owned

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

   Þ  Attach an additional sheet, if needed.  The sum of shares must equal the total stated
above.

We further certify that
the following list sets forth the current Directors of the Corporation:

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

  Þ  print or type names of Directors above.

We further certify that
the Corporation’s federal tax identification number (FEI) is                         .

We further certify
that the “Managing Owner” designated by the Corporation pursuant to Section 22
of the Franchise Agreement is:

	
  Print or Type
  Name:

  	
   

  	
  Title:

  	
   

  	
  Signature of Managing Owner:

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

We further certify
that each of the Corporation’s stock certificates has conspicuously endorsed
thereon the following statement:

“The shares
represented by this certificate are held subject to restrictions imposed on
transfers by a certain Franchise Agreement between the corporation and Friendly’s
Restaurants Franchise, Inc.”

IN WITNESS
WHEREOF, we have hereunto each subscribed our name under the penalties of
perjury on or as of the date of this Franchise Agreement.

The following are names
and official signatures of the present officers of the Corporation:

	
  Print or Type Name:

  	
   

  	
  Signature of Officer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Secretary (Clerk)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  	
   

  

 

EXHIBIT C-2

CERTIFICATE OF AUTHORITY AND
INCUMBENCY

BY MEMBERS OF A LIMITED LIABILITY COMPANY

The undersigned
individuals hereby certify that we are all of the members of                    ,
a Limited Liability Company (“LLC”) duly organized under the laws of the state
of                           ;

We further certify
that the following member (the “Managing Member”) is authorized to execute, on
behalf of the LLC, any agreements with Friendly’s Restaurants Franchise, Inc.
and/or its parent, affiliates or subsidiaries (collectively “Friendly’s”), as
are necessary and proper to acquire an interest in the Friendly’s Restaurant
located at                                                                                                        .  We further certify that the Managing Member
is authorized to make such modifications, extensions, amendments or termination
of said agreements as the member may at any time deem to be in the best
interest of the LLC and that there is no provision of the LLC’s Organization Agreement
which limits the power of the Managing Member to bind the LLC to contracts with
Friendly’s.

	
  

  	
   

  	 

	
   

  	
  The name and specimen signature of the Managing
  Member of the LLC is as follows:

  
	
   

  	
   

  	
   

  	
   

  
	
  

  	
  Print or Type Name:

  	
   

  	
  Signature of Managing Member:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Friendly’s may rely upon this authorization until
  such time as the LLC submits and Friendly’s approves a successor Managing
  Member.

  
						

 

We acknowledge
that any transfer of an interest in the LLC is subject to all restrictions
imposed on transfers by the Friendly’s Franchise Agreement.

We further certify that
the LLC’s federal tax identification number (FEI) is                        .

We further certify
that the members own the percentage interest in the LLC stated below:

IN WITNESS WHEREOF, we
have hereunto each subscribed our name under the penalties of perjury on or as
of the date of this Franchise Agreement.

	
  MEMBER:   (type or print name)

  	
   

  	
  % INTEREST:

  	
   

  	
  SIGNATURE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
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EXHIBIT D

SPECIAL TERMS AND CONDITIONS
APPLICABLE TO

FRANCHISEE’S
CONSTRUCTION AND OPENING OF A NEW RESTAURANT

You intend to build a new
Friendly’s® Restaurant at the Premises set forth in Item A
of the Contract Data Schedule of this Agreement.  In order to achieve reasonable uniformity in
the System, the Restaurant must be constructed (or remodeled for conversion, as
the case may be), furnished and equipped in strict compliance with our
standards, specifications, procedures and requirements, including our generic,
prototypical plans and specifications for the building design and configuration
approved for the Premises (collectively, our “Requirements”).  In order to facilitate your obtaining
financing and other needed resources, we have elected to enter into this
Franchise Agreement prior to having the opportunity to ensure that the
Restaurant has been built in accordance with all of our Requirements.  Accordingly, you acknowledge and agree that
your right to commence operations of your Restaurant under the terms of this
Agreement is subject to the condition that you will strictly comply with all of
our Requirements and procedures, as set forth in both your Development
Agreement and this Agreement.  You
further agree not to open the Restaurant for business until we authorize you in
writing to do so.  In consideration of
our conditional grant of a franchise to you for the Premises, you hereby agree
as follows:

1.     Net Worth and Liquidity
Requirements.  Until the Restaurant opens for business at
the Premises, you agree you will maintain and preserve your Net Worth, (defined
as the excess of your assets, excluding homes, furnishings and automobiles and
any intangibles such as goodwill, over your liabilities) at or above the Net
Worth you represented to us in the financial statements you submitted to us in
connection with your approval as franchisee.

2.     Real Estate Control.  If, twelve (12) months after the date of this
Agreement, (a) you have failed to obtain possession of the Premises by purchase
or lease, or (b) you have failed to obtain all necessary permits, licenses and
local governmental approvals needed to commence construction and operation of
the Restaurant at the Premises, we will have the right to terminate this
Franchise Agreement by written notice to you, upon the occurrence of which, all
rights and obligations hereunder shall immediately cease and be of no further
force and effect.

3.     No Liability.  Our consent regarding the Premises is not a
representation or a warranty that the Restaurant will be profitable or that you
will achieve any particular level of sales at the Restaurant.  It merely means that the Premises have met
certain minimum criteria we have established for identifying suitable sites for
proposed Restaurants in the region in which the Premises are located.  You acknowledge that restaurant development
is not a precise science and agree that our consent regarding the Premises does
not impose any liability or obligation upon us. 
The decision to proceed to develop the Restaurant under this Agreement
is yours, alone.

4.     Design Approval.  We will furnish you a set of our prototypical
plans and specifications (the “Friendly’s Plans”).  The Friendly’s Plans are and at all times
shall remain our exclusive property.  You
must employ a licensed architect (your “Architect”) to develop a complete set
of plans and specifications for the Restaurant in accordance with our
Requirements and the laws, codes and regulations of the jurisdiction in which
the Premises are located (your “Proposed Plans”).  You must submit your Proposed Plans to us for
our review and written approval.  If we
require changes, you must revise your Proposed Plans and resubmit them to
us.  You must not commence construction
until after your Proposed Plans have received our written approval (the “Approved
Plans”).

NEITHER YOU NOR YOUR ARCHITECT SHALL OBTAIN ANY RIGHTS
OF OWNERSHIP, USE OR REUSE IN OUR PROTOTYPICAL PLANS AND SPECIFICATIONS OR IN
ANY AND ALL OF YOUR ARCHITECT’S ADAPTATIONS THEREOF, EXCEPT AS IS NECESSARY TO
CONSTRUCT THE RESTAURANT.

5.     No Modifications.  Once we have approved your plans and
specifications for the Restaurant at the Premises, there can be no further
material change in the site plan, building plans, specifications or zoning
approvals without our approval.  Without
limiting the generality of the foregoing, you must notify us of all
modifications required to be made by any governmental agency or other third
party, and obtain our prior written approval. 
We may disapprove any material modification that results in non-compliance
with our Requirements.  If the party
requiring the modification refuses to compromise the change in order to comply
with our Requirements, we may then terminate this Agreement by written notice
to you.

6.     Environmental & ADA Compliance.  It is your responsibility to obtain
satisfactory evidence and/or assurance that the Premises and all structures
thereon are free from environmental contamination and in compliance with the
requirements of the Americans With Disabilities Act (“ADA”).  We assume no responsibility for evaluation of
the soil or subsoil on the Premises for hazardous substances or unstable
conditions, inspection of any structure on the Premises for asbestos or other
hazardous materials or compliance with the ADA.

7.     Orientation and Training. 
Your designated representatives must successfully complete our initial
training programs at least thirty (30) days prior to the opening of the
Restaurant.  You will pay all costs and
expenses incurred directly or indirectly in connection with such training,
including travel, lodging and compensation, except that you will not be
required to pay any tuition or participation charge to us.  We will not provide any training in your
Restaurant until you have received a certificate of occupancy or its equivalent
from the appropriate public official.

8.     Construction.  You must commence construction within twelve
(12) months after the date of this Agreement. 
If you fail to do so, we may, in our sole discretion, terminate this
Agreement by written notice to you. 
Commencement of construction means, in the case of new construction,
excavation for footings, or, in the case of remodeling, demolition.

A.         Before construction commences, you and your contractor(s)
must obtain and maintain a comprehensive general liability insurance policy
that conforms to subsection 7.I. of this Agreement.  Coverage under such insurance shall include
operations, premises liability, independent contractor’s coverage, contractual
liability and automobile liability (owned and non-owned).  Prior to commencing construction, you must
furnish us with an insurance certificate evidencing the foregoing policy and
that all contractors have procured worker’s compensation insurance covering all
persons employed in construction of the Restaurant.

B.         Once
commenced, you will ensure that construction is diligently prosecuted to
completion, suffering only delays caused by circumstances beyond your
control.  During the course of
construction, we will have access to the Premises at all times, to inspect
construction in progress and ensure compliance with our Requirements.  You will cause your architects, engineers,
contractors and subcontractors to cooperate fully with us for the purpose of
permitting us to inspect the Restaurant. Without limiting the generality of the
foregoing, you must  supply us with
such samples of construction or remodeling materials, test borings, corings,
supplies, equipment and other materials and reports as we may request.

C.         Neither
Friendly’s nor any of our employees will act as your architect or agent.  The duties of our construction
representatives are limited solely to assuring us that you are complying with
our Requirements on the Premises. You expressly agree not to rely upon any opinions
expressed by any of our employees or agents regarding structural integrity,
safety or construction procedures, building codes or 

ordinances or other matters properly within the
responsibility of your architect.  We
assume no liability or responsibility for architectural or engineering judgments
outside the scope of the duties stated above.

D.         You will bear the entire cost of
constructing and equipping the Restaurant, including, without limitation, the
cost of all professional fees, licenses and permits, building contracts,
fixtures, furnishings, equipment, signs, pylons, decor, landscaping, supplies
and other items required by the Plans, your lease, all applicable laws, codes
and ordinances and this Agreement.  You
agree to furnish us, within ninety (90) days after the Restaurant opens, a report
in a form prescribed by us, certifying all such costs.

E.          Except in the case of delay caused by
us, if the Restaurant does not commence to open and serve the general public
within fifteen (15) months after the date of this Agreement, we will have the
right, in our sole discretion, to terminate this Agreement by written notice to
you.  If
you have been unavoidably delayed by act of God, government restrictions, labor
difficulties, inability to obtain building materials or similar circumstances
not within your control, you may submit to us a written request for a new
Franchise on our then-current franchise agreement and with our then-current
fees.  Subject to your obligation to
substantiate the cause(s) for delay, and to meet our then-current requirements
for franchisee candidates, we will not unreasonably withhold our approval.  Your Initial Franchise Fee under this
Agreement will be credited toward the initial franchise fee due under the new
franchise agreement.

9.     Conditions for Opening.  

A.            Before you open the Restaurant to commence serving the
general public, you must obtain our final written approval of your construction
of the site improvements, building and landscaping, as appropriate, and
installation of all furniture, signs and equipment.  Our approval does not mean that we represent
or warrant that the Restaurant was constructed in accordance with any
architectural, engineering or legal standard(s) for design or workmanship and
you agree that our approval of construction of the Restaurant will not impose
any liability or obligation upon us.  Our
approval merely means that we are satisfied that the Restaurant substantially
complies with our Requirements.  If we
request, your Architect must certify to us in writing that the Restaurant has
been constructed or remodeled in strict compliance with the Approved Plans, as
well as all applicable codes or other requirements of applicable law.

B.            You must also comply with all the conditions of
subsection 1.B. of this Agreement before you open the Restaurant for business.

C.            As soon as we have approved that your construction and
equipping of the Restaurant are substantially complete and that all conditions
required for opening the Restaurant have been met, you will promptly open the
Restaurant to serve the general public.

 

	
  

  	
   

  	
  Initial:

  
	
  Initial:

  	
   

  	
   

  
	
   

  	
   

  	
  Friendly’s:

  
	
  Franchisee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

 

EXHIBIT E

SPECIAL TERMS AND CONDITIONS
APPLICABLE TO 

A FRANCHISEE OR AFFILIATED
FRANCHISEES

THAT
OPERATE MULTIPLE FRIENDLY®’S RESTAURANTS

SUPERVISION
OF MULTIPLE RESTAURANTS.

In addition to
your obligations with respect to managing the Restaurant set forth in section
7.H. of this Franchise Agreement, you further agree you will at all times
comply with the standards and requirements we establish and from time to time
revise, for the supervision of multiple Friendly®’s Restaurants, including, without limitation,
employment of such multiple-unit supervisory personnel as shall be needed to
ensure your consistent operational responsibility for all Restaurants now or
hereafter operated by you (and your affiliated franchisees, if applicable).  Your Restaurant Managers must at all times be
under the direct supervision of a multiple unit supervisor.  Your multiple-unit supervisor(s) must: (a)
have such qualifications and experience as we will reasonably require, (b) must
be literate and fluent in the English language, (c) must have satisfactorily
completed our required training programs and (d) must devote their full time
and effort exclusively to supervising the operation of Friendly’s Restaurants.

 

	
  

  	
   

  	
  Initial:

  
	
  Initial:

  	
   

  	
   

  
	
   

  	
   

  	
  Friendly’s:

  
	
  Franchisee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

STATE RIDER (IF APPLICABLE)

(ILLINOIS, MARYLAND, NEW YORK
& RHODE ISLAND)

RIDER TO THE

FRIENDLY’S RESTAURANTS FRANCHISE,
INC.

FRANCHISE AGREEMENT

FOR USE
IN ILLINOIS

This Rider to the
Franchise Agreement is entered into this          
day of                 ,
200  , by and between FRIENDLY’S RESTAURANTS
FRANCHISE, INC., a Delaware corporation (referred to herein as “we”
or “us”), and                                                                    
(“referred to herein as “you”).

1.       Background.  The parties have entered into that certain
Franchise Agreement dated                                              ,
             
(the “Agreement”) concurrently with this Rider. 
This Rider is annexed to and forms part of the Agreement.  To the extent this Rider shall be deemed
inconsistent with the Agreement, the terms of this Rider shall govern.  This Rider is being executed because (a) the
offer or sale of the franchise contemplated by the Agreement was made in
Illinois and the Restaurant to be operated by you pursuant to the Agreement
will be located in Illinois, and/ or (b) you are a resident of Illinois.

2.       Governing Law.  Section 19.C. of the Agreement is hereby
deleted in its entirety and the following shall be substituted in its place:

C.         GOVERNING
LAW.

The Federal Arbitration Act, 9 U.S.C. §§ 1-16, and related federal
judicial procedure will govern this contract to the fullest extent possible,
excluding all state arbitration law, irrespective of the location of the
arbitration proceedings, the nature of the dispute between the parties or the
nature of the court in which any related judicial proceedings may be
brought.  Except as provided in the
preceding sentence respecting arbitration law, the resolution of all disputes
between the parties bound hereunder, whether in tort and regardless of the
place of injury or the place of the alleged wrongdoing or whether arising out
of or relating to the parties’ contractual relationship, will be governed by
the law of the Commonwealth of Massachusetts without regard to conflict of law
principles.  However, Illinois law
shall govern if the jurisdictional requirements of the Illinois Franchise
Disclosure Act, as amended, are met.

3.       Waivers and Other
Agreements.  Section 19.E.
of the Agreement is hereby amended to delete subsection (i), mutual waiver of
trial by jury, which shall be null and void.

4.       Venue and Jurisdiction.  Section 20.G. of the Agreement is hereby
deleted in its entirety.

5.       Interpretation.  Nothing contained in Section 20.I. of the
Agreement shall be deemed to waive your reliance on our most recent Uniform
Franchise Offering Circular delivered to you before you enter into this
Agreement.

6.       Application.  Each provision of this Rider to the Agreement
shall be effective only to the extent, with respect to such provision, that the
jurisdictional requirements of the Illinois Franchise Disclosure Act, Ill.
Comp. Stat § 705/1 et. seq., as amended, or the rules and regulations
promulgated thereunder, are met independently without reference to this Rider.

IN
WITNESS WHEREOF, the parties hereto have duly executed this
Rider on the day and year first above written.

	
  

  	
  FRIENDLY’S RESTAURANTS FRANCHISE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRANCHISEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INDIVIDUALLY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

RIDER TO
THE FRIENDLY’S RESTAURANTS FRANCHISE, INC.

FRANCHISE AGREEMENT

FOR USE
IN MARYLAND

In
recognition of the requirements of the Maryland Franchise Registration and Disclosure
Law, Md. Code Bus. Reg. Sections 14-201 through 14-233, the parties to
the attached Friendly’s Restaurants Franchise Agreement, agree as follows:

1.     Conditions for Approval of
Transfer.  The following
language is added to the end of Section 13.D.(9) of the Franchise
Agreement:

, excluding any claims that may arise under the
Maryland Franchise Registration and Disclosure Law.

2.     Termination of the License.  The following language is hereby added to the
end of Section 16.B.(1) of the Franchise Agreement:

, however such provision may not be enforceable under
federal bankruptcy law (11 U.S.C. Section 101 et  seq.);

3.     Renewal of License.  The following language is added to the end of
the second to last sentence of the first paragraph of Section 18 of the
Franchise Agreement:

, excluding any claims that may arise under the
Maryland Franchise Registration and Disclosure Law.

4.     Governing Law.  Section 19.C. of the Franchise Agreement
is hereby deleted in its entirety and the following shall be substituted in its
place:

G.   GOVERNING LAW.

The
Federal Arbitration Act, 9 U.S.C. §§ 1-16, and related federal judicial
procedure will govern this contract to the fullest extent possible, excluding
all state arbitration law, irrespective of the location of the arbitration
proceedings, the nature of the dispute between the parties or the nature of the
court in which any related judicial proceedings may be brought.  Except as provided in the preceding sentence
respecting arbitration law and excluding any claims arising under the
Maryland Franchise Registration and Disclosure Law, the resolution of all disputes between the parties bound hereunder,
whether in tort and regardless of the place of injury or the place of the
alleged wrongdoing or whether arising out of or relating to the parties’
contractual relationship, will be governed by the laws of the
Commonwealth of Massachusetts without regard to conflict of laws rules.

5.     Waiver of Rights
(Limitation of Actions). 
The following language is added to the end of Section 19.E.(5) of
the Franchise Agreement:

; provided, however, that the limitation of such
claims shall not act to reduce the three (3) year statute of limitations
afforded you for bringing a claim under the Maryland Franchise Registration and
Disclosure Law.

6.     Waiver of Obligations.  The following language is added to the end of
Section 20.B. of the Franchise Agreement:

Such representations are not intended to nor shall
they act as a release, estoppel or waiver of any liability incurred under the
Maryland Franchise Registration and Disclosure Law.

7.     Venue and Jurisdiction.  Section 20.G. of the Franchise Agreement is
hereby deleted in its entirety and the following shall be substituted in its
place:

G.   VENUE AND JURISDICTION.

Subject to the provisions
of Section 19 above, you agree that we may institute any action against you to
enforce the provisions of this Agreement in any state or federal court of
competent jurisdiction in the state and county in which our principal place of
business is then located, excluding any claims arising under the Maryland
Franchise Registration and Disclosure law, and you irrevocably submit to the
jurisdiction and venue of such courts and waive any objection you may have to
either the jurisdiction or venue of such courts.  You agree that any action brought by you to
enforce any provision of this Agreement will be brought and maintained only in
a state or federal court of competent jurisdiction in the county and state in
which our principal place of business is then located, excluding any claims
arising under the Maryland Franchise Registration and Disclosure Law, which
claims you can bring and maintain in a court of competent jurisdiction in
Maryland.

8.     Acknowledgments.  The following language is added to the end of
Section 23 of the Franchise Agreement:

Such representations are not intended to nor shall
they act as a release, estoppel or waiver of any liability incurred under the
Maryland Franchise Registration and Disclosure Law.

Each
provision of this Rider shall be effective only to the extent, with respect to
such provision, that the jurisdictional requirements of the Maryland Franchise
Registration and Disclosure Law (Md. Code Bus. Reg. Sections 14-201
through 14-233) are met independently without reference to this Rider.

Except
as set forth in this Rider, the provisions of the Franchise Agreement shall
remain effective as provided therein.

IN WITNESS WHEREOF the parties
hereto have executed and delivered this Rider on                                               ,
200   .

 

	
  FRIENDLY RESTAURANTS FRANCHISE, INC.

  	
   

  	
  FRANCHISEE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its.

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  INDIVIDUALLY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

RIDER
TO THE DISCLOSURE ACKNOWLEDGEMENT STATEMENT

(EXHIBIT
A TO THE FRIENDLY’S RESTAURANTS FRANCHISE, INC.

FRANCHISE AGREEMENT)

FOR USE IN MARYLAND

1.     The following language is added to the end of the Disclosure
Acknowledgement Statement (Exhibit A to the Franchise Agreement):

Such representations are not intended to nor shall
they act as a release, estoppel or waiver of any liability incurred under the
Maryland Franchise Registration and Disclosure Law.

IN WITNESS WHEREOF the parties
hereto have executed and delivered this Rider on                                              ,
200   .

 

	
  

  	
  FRIENDLY’S RESTAURANTS FRANCHISE,

  INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ACCEPTED AND AGREED TO BY:

  
	
   

  	
   

  	
   

  
	
   

  	
  FRANCHISEE:
 if corporation:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  if partnership:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Individually:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

RIDER TO THE FRIENDLY’S
RESTAURANTS FRANCHISE, INC.

FRANCHISE AGREEMENT

FOR USE
IN NEW YORK

1.     Conditions for Approval of
Transfer.  The following
language is added to the end of Section 13D(9) of the Franchise Agreement:

; provided, however, that all rights enjoyed by you
and any causes of action arising in your favor from the provisions of
Article 33 of the General Business Law of the State of New York and
the regulations issued thereunder shall remain in force; it being the intent of
this proviso that the non-waiver provisions of GBL 687.4 and 687.5
be satisfied.

2.     Renewal of Franchise.  The following language is added to the end of
the second to last sentence of the first paragraph of Section 18 of the
Franchise Agreement:

; provided, however, that all rights enjoyed by you
and any causes of action arising in your favor from the provisions of
Article 33 of the General Business Law of the State of New York and
the regulations issued thereunder shall remain in force; it being the intent of
this proviso that the non-waiver provisions of GBL 687.4 and 687.5
be satisfied.

3.     Governing Law.  The following language is added to the end of
Section 19.C. of the Franchise Agreement:

; however, the governing choice of law shall not be
considered a waiver of any right conferred upon you by the provisions of
Article 33 of the General Business Law of the State of New York.

4.     Venue and Jurisdiction.
The following language is added to the end of Section 20.G. of the Franchise
Agreement:

This section shall not be considered a waiver of any
right conferred upon you by the provisions of Article 33 of the General
Business Law of the State of New York.

IN WITNESS WHEREOF the parties
hereto have executed and delivered this Rider on                                                         ,
200   .

 

	
  FRIENDLY’S RESTAURANTS

  FRANCHISE, INC.

  	
   

  	
   

  	
  FRANCHISEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  INDIVIDUALLY:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

RIDER TO THE FRIENDLY’S RESTAURANTS
FRANCHISE, INC.

FRANCHISE AGREEMENT

FOR USE
IN RHODE ISLAND

1.     Governing Law.  Section 19.C. of the Franchise Agreement
is hereby deleted in its entirety and the following shall be substituted in its
place:

C.            GOVERNING LAW.

The Federal Arbitration Act, 9 U.S.C. §§ 1-16, and related federal
judicial procedure will govern this contract to the fullest extent possible,
excluding all state arbitration law, irrespective of the location of the
arbitration proceedings, the nature of the dispute between the parties or the
nature of the court in which any related judicial proceedings may be
brought.  Except as provided in the
preceding sentence respecting arbitration law, and excluding any claims
arising under the Rhode Island Franchise Investment Law, the resolution of all disputes between the parties
bound hereunder, whether in tort and regardless of the place of injury or the
place of the alleged wrongdoing or whether arising out of or relating to the
parties’ contractual relationship, will be governed by the laws of the
Commonwealth of Massachusetts without regard to conflict of laws rules.

2.     Venue and Jurisdiction.  Section 20.G. of the Franchise Agreement is
hereby deleted in its entirety and the following shall be substituted in its
place:

G.         VENUE
AND JURISDICTION.

You agree that we may
institute any action against you to enforce the provisions of this Agreement in
any state or federal court of competent jurisdiction in the state and county in
which our principal place of business is then located, excluding any claims
arising under the Rhode Island Franchise Investment Law, and you
irrevocably submit to the jurisdiction and venue of such courts and waive any
objection you may have to either the jurisdiction or venue of such courts.  You agree that any action brought by you to
enforce any provision of this Agreement will be brought and maintained only in
a state or federal court of competent jurisdiction in the county and state in
which our principal place of business is then located, excluding any claims arising
under the Rhode Island Franchise Investment Law.

IN
WITNESS WHEREOF the parties hereto have executed and
delivered this Rider on                     ,
200   .

 

	
  FRIENDLY’S RESTAURANTS

  FRANCHISE, INC.

  	
   

  	
   

  	
  FRANCHISEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  INDIVIDUALLY:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}]]