Sample Business Contracts


Management Agreement - Friendly Ice Cream Corp. and FriendCo Restaurants Inc.

Management Forms


                             MANAGEMENT AGREEMENT
                                       
                                       
                                       
                                   BETWEEN
                                       
                                       
                        FRIENDLY ICE CREAM CORPORATION
                               1855 Boston Road
                       Wilbraham, Massachusetts   01095
                                           
                                           
                                     AND
                                           
                                           
                          FRIENDCO RESTAURANTS, INC.
                            1657 Crofton Boulevard
                          Crofton, Maryland   21114
                                           
                                           
                                           
                                           
                                           
                                    DATED
                                           
                              July_____, 1997
                                           






<PAGE>


                                  TABLE OF CONTENTS

         Section                                  Page
         -------                                  -----

    1.   Defined Terms                              1

    2.   Scope                                      4

    3.   Term                                       4

    4.   Authority to Act                           5

    5.   Compensation                               5

    6.   Restaurant Capital Requirements            6

    7.   Non-Solicitation                           6

    8.   Termination                                7

    9.   Indemnification                            8

    10.  Breach; Notice and Right to Cure           9

    11.  Reporting of Sales                         9

    12.  Assignment                                 9

    13.  Conflict of Interest                       10

    14.  Choice of Law; Arbitration of Disputes     10

    15.  Insurance                                  10

    16.  Notices                                    11

    17.  General Provisions                         12


    EXHIBITS:
    Exhibit A:    List of Managed Restaurants
    Exhibit B:    Arbitration Program
 

<PAGE>


                                MANAGEMENT  AGREEMENT



    This Management Agreement is made and dated this _____day of_____, 
1997, by and between Friendly Ice Cream Corporation, a Massachusetts 
Corporation with its principal location at 1855 Boston Road, Wilbraham, 
Massachusetts, 01095 (hereinafter "FICC"), and FriendCo Restaurants, Inc., a 
Maryland Corporation with its principal location at 1657 Crofton Boulevard, 
Crofton, Maryland, 21114 (hereinafter "FriendCo").

    1.   DEFINED TERMS

         a.   "Definitive Agreement" shall mean all documents executed 
between FriendCo, FICC and Friendly's Restaurants, Franchise, Inc. relating 
to the acquisition by FriendCo of the right to lease and operate thirty-four 
(34) Friendly's Restaurants and to construct an additional seventy-four (74) 
Friendly's Restaurants.

         b.   "Dispute" shall mean any claim of breach, action to enforce, 
material disagreement in interpretation, or legal proceeding involving or 
arising out of this Agreement.

         c.   "Exclusive Territory" shall mean the territory in the States of 
Delaware and Maryland, the District of Columbia, and such portion of Northern

<PAGE>
 
Virginia as is assigned to FriendCo in the Definitive Agreement wherein 
FriendCo has the exclusive right to construct and to operate Friendly's 
Restaurants.

         d.   "Net Sales" shall mean all sales of all food, beverage, other 
menu items, merchandise, and goods and other services sold or performed 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 or the Premises, whether 
for cash or credit.  Sales and service taxes collected from customers and 
paid to the appropriate taxing authority, all management or employee meals, 
and sale of cigars, cigarettes and newspapers as well as income from pay 
telephones shall not be included in Net Sales.  The discounted portion of on 
menu prices whether by way of coupons, promotions or otherwise shall not be 
included in Net Sales. 

         e.   "Restaurant Capital Requirements" shall mean any replacement, 
improvement or addition of equipment, fixtures or improvements which, in 
accordance with generally accepted accounting principles would be treated as 
a capitalized cost rather than an expense.

         f.   "Restaurant Cash Flow" shall mean Net Sales less (i) restaurant 
cost of food and merchandise, (ii) restaurant labor including all restaurant 
employee wages, sick, holiday and vacation pay and in-restaurant cleaning 
services, (iii) restaurant fringes including payroll taxes, group and 
workers' compensation insurance

<PAGE>

 
and pension, (iv) restaurant supplies including china, glassware, utensils, 
cleaning supplies, uniforms, and paper & plastic supplies, (v) restaurant 
utilities including electricity, allocated Friendly Ice Cream energy 
management fees, natural gas, telephone and water and sewer, (vi) restaurant 
maintenance costs including landscaping, snow removal, maintenance service 
contracts and repairs to property and equipment that would not be considered 
a Restaurant Capital Requirement, (vii) restaurant administrative costs 
including office expense, trash, other services (rug cleaning services, 
music, etc.) allocated property and general liability insurance, employee 
relocation expense, travel costs, credit card expenses, bank service charges, 
commission income, safety program costs, police and security costs, use taxes 
and other miscellaneous restaurant expenses, (viii) restaurant advertising 
and promotional costs including allocated advertising costs, local restaurant 
promotions (team sponsorships, etc.), required lease advertising, specific 
billboard costs and mall displays and (ix) restaurant occupancy costs 
including  rent, common area maintenance, real estate and personal taxes and 
decorating expenses.

    Restaurant Cash Flow specifically excludes (i) restaurant depreciation, 
amortization, interest or taxes, (ii) any allocation of costs except for 
insurance, pension, energy management, maintenance contracts and advertising 
and (iii) costs relating to the supervision of the restaurants by district, 
division, area and corporate personnel.


<PAGE>
 
    2.   SCOPE

         Upon execution of this Agreement, FICC grants to FriendCo the 
exclusive right to manage the Friendly's Restaurants identified on Exhibit A, 
attached hereto, for the duration of the Term, unless this Agreement is 
terminated by either party as of some earlier date.

    3.   TERM

         This Agreement shall be in effect for one (1) year from the date 
first written above, unless terminated by either party in accordance with 
Paragraph 8, infra.  At the option of FICC, this Agreement may be extended 
for two (2) successive six (6) month periods, as long as all payments due 
hereunder are current and timely made.  Thereafter, the parties agree to 
negotiate in good faith concerning any further extensions hereof.

    4.   AUTHORITY TO ACT

    For each managed restaurant, FriendCo and its management employees shall 
have the authority to approve hiring, discipline, and termination of all crew 
(i.e. waiter/waitress, host/hostess, Guest Service Supervisor, grill worker, 
fountain worker, and dish washers) providing all FICC policies and procedures 
are followed.  Failure by FriendCo to adhere to FICC's policies and 
procedures in performing the foregoing functions shall obligate FriendCo to 
indemnify FICC (pursuant to Section 9 of this Agreement) from any liabilities 
caused therefrom. FriendCo shall have the right to

<PAGE>


seek guidance from FICC on a case-by-case basis to interpret FICC's policies 
and procedures as applied to case specific situations.  FriendCo will have 
authority to schedule and assign employee jobs as well as schedule deliveries 
of milk, bread and produce.  FriendCo will also have authority to perform 
routine restaurant maintenance and such other incidences of routine 
restaurant operations.   FriendCo and its management employees will not have 
authority to alter any other secondary restaurant management position (i.e. 
general managers or assistant managers) without FICC approval as well as 
contract for or approve any extraordinary expenses, hire consultants or 
arrange for or approve capital expenditures without the prior express written 
consent of FICC.

    5.   COMPENSATION

         For each fiscal month or partial fiscal month during the Term for 
which this Agreement is in effect, FICC shall pay to FriendCo a management 
fee equal to four percent (4%) of the Net Sales for each managed restaurant 
prorated for such days the restaurant was open.  This management fee shall be 
paid on or before the 20th day following the end of such month or partial 
month.

    In addition to the management fee, FICC shall pay FriendCo an operations 
improvement fee in an amount equal to fifteen percent (15%) of the 
improvement in Restaurant Cash Flow ("RCF") which will be calculated based 
upon one of two ways:

<PAGE>
 
    (1)FriendCo manages for a full year -- to the anniversary date of this 
agreement; operations improvement is calculated based on aggregate RCF for 
the twelve (12) month period of FriendCo's oversight less aggregate RCF for 
prior twelve (12) month corresponding period;

    (2)FriendCo manages less than a full year (i.e., to a termination date 
for the Agreement); operations improvement is calculated based on aggregate 
RCF corresponding partial period of the prior year (in whole months).  

    This operations improvement fee will be paid on or before the 45th day 
following the end of the measurement period.

    6.   RESTAURANT  CAPITAL REQUIREMENTS

         Any Restaurant Capital Requirements shall be determined on a monthly 
basis by mutual agreement between FICC and FriendCo.  All agreed upon 
Restaurant Capital Requirements shall be the sole responsibility of FICC, and 
FICC agrees to reimburse FriendCo for any expenditures made by FriendCo for 
any approved Restaurant Capital Requirements.

    7.   NON-SOLICITATION

         During the Term of this Agreement, and for a period of six (6) 
months following the termination of this Agreement, FriendCo and its 
affiliates agree that they shall not solicit for employment, offer to employ 
or employ any employees of FICC employed at any managed restaurant without 
the express written consent of FICC.  FriendCo agrees that, in addition to 
other remedies, FICC may seek an injunction in a court of competent 
jurisdiction to enforce this provision.

<PAGE>
 
         During the term of this Agreement and for a period of six (6) months 
following the termination of this Agreement, FICC agrees that it shall not 
solicit for employment, offer to employ or employ any employees of FriendCo 
or its affiliates without the express written consent of FriendCo.  FICA 
agrees that, in addition to other remedies, FriendCo may seek an injunction 
to a court of competent jurisdiction to enforce this provision.

    8.   TERMINATION

         a.   This Agreement may be terminated by FICC without cause, with 
such termination effective upon the ninetieth (90th) day following the 
receipt of a written notice of termination.

         b.   Termination for failure of payment or abandonment of any 
restaurant shall be effective upon the tenth (10th) day following the receipt 
of a written notice of Termination for Cause issued by either party.

         c.   The termination of this Agreement pursuant to Subparagraph a., 
supra, shall operate to release both parties from any claims for lost 
business opportunities, lost future economic benefit, interference with 
existing or future contractual relations or trade disparagement, as well as 
from any claims for consequential damages arising from such termination.

<PAGE>
 
         d.   The termination of this Agreement pursuant to either 
Subparagraph a. or Subparagraph b. shall not operate to release either party 
from any obligation arising under this Agreement.

    9.   INDEMNIFICATION

         FICC and FriendCo shall indemnify, defend and hold each other 
harmless from claims, demands and causes of action asserted against the 
indemnitee by any person (including, without limitation, FICC's and 
FriendCo's employees) for personal injury, death, or loss of or damage to 
property resulting from the indemnitor's active or passive negligence or 
willful misconduct.  Where such personal injury, death, or loss of or damage 
to property is the result of joint active or passive negligence or willful 
misconduct of FICC and FriendCo, the indemnitor's duty of indemnification 
shall be in proportion to its allocable share of joint active or passive 
negligence or willful misconduct.  If FICC is strictly liable under law, 
FriendCo's duty of indemnification shall be in the same proportion that the 
negligent acts or omissions or willful acts of FriendCo contributed to the 
personal injury, death, or loss of or damage to property for which FICC is 
strictly liable.  If FriendCo is strictly liable under law, FICC's duty of 
indemnification shall be in the same proportion that the negligent acts or 
omissions or willful acts of FICC contributed to the personal injury, death, 
or loss of or damage to property for which FriendCo is strictly liable.
 
<PAGE>

    10.  BREACH; NOTICE AND RIGHT TO CURE

         For any claim of breach of this Agreement to be effective, the 
breaching party must be sent written notice detailing the particulars of the 
breach and provided not less than ten (10) days in which to cure the claim of 
breach or to dispute such claim.  For any claim of breach which does not 
create grounds for a Termination for Cause, the breaching party may cure the 
breach within such ten (10) day period, or, if such breach is not capable of 
being cured within such ten (10) day period, the breaching party must 
commence its efforts to cure the breach within such ten (10) day period and 
thereafter must diligently pursue such cure.

    11.  REPORTING  OF SALES

         FICC shall provide FriendCo with a complete report of monthly sales 
and a unit level profit and loss statement within ten (10) days of the close 
of each financial reporting period.

    12.  ASSIGNMENT

         Neither party to this Agreement can assign its interest herein 
(other than to an affiliate or subsidiary) without the prior written consent 
of the other party, and the granting of such consent is at the sole 
discretion of the granting party.

<PAGE>

 
    13.  CONFLICT OF INTEREST

         FICC and FriendCo will exercise utmost care and diligence in the 
application of reasonable business practices, to prevent any actions or 
conditions which could result in a conflict with the other's best interest.

    14.  CHOICE OF LAW; ARBITRATION OF DISPUTES

         This Agreement shall be governed and interpreted in accordance with 
the substantive laws (but not the choice of law provisions) of the State of 
Delaware.  No party to this Agreement may bring or maintain an action 
against, or which includes, another party to this Agreement except in the 
federal or state courts located in the State of Delaware.  All parties to 
this Agreement expressly waive any defense of lack of jurisdiction or 
improper venue to any action brought in the State of Delaware.

         For any action or Dispute arising under this Agreement, the parties 
expressly agree that the sole forum shall be in arbitration before the 
American Arbitration Association pursuant to the terms of the Arbitration 
Program attached hereto as Exhibit B.  Add attorneys fees/cost to prevailing 
party.

    15.  INSURANCE

         During the term of this Agreement, and for a period of one (1) year 
following the termination of this Agreement, FICC agrees to maintain in 
effect such policies of commercial general liability, workers compensation, 
unemployment,

<PAGE>
 
property and hazard insurance as are commercially reasonable and necessary to 
fulfill each of its obligations under Paragraph 11, supra; and to provide 
FriendCo with certificates of insurance naming FriendCo as an additional 
insured on such policies.

    16.  NOTICES

To F.I.C.C.:

Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts   01095

Attention:  Donald N. Smith
           Chairman and President

Facsimile No.:  (413)543-3282

with a copy to:

Aaron B. Parker
Associate General Counsel
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts   01095

Facsimile No.:  (413)543-3282


To  FriendCo:

FriendCo Restaurants, Inc.
1657 Crofton Boulevard
Crofton, Maryland   21114

Attention:  Ronald D. Kirstien
         Chairman, President and CEO

Facsimile No.:  (410)793-0754

<PAGE>

with a copy to:

David J. Norman
Mason, Ketterman & Morgan, P.A.
1657 Crofton Boulevard
Suite 100
Crofton, Maryland   21114

Facsimile No.:  (410)793-0522



    17.  GENERAL PROVISIONS

         a.   Modifications.  No change or modification of this Agreement 
shall be valid or binding upon the parties hereto, nor shall any waiver of 
any term or condition in the future unless such change, modification or 
waiver shall be in writing and signed by all of the parties hereto.

         b.   Binding Effect.  This Agreement shall inure to the benefit of 
and shall be binding upon the parties, their transferees, successors and 
assigns.

         c.   Entire Agreement.  This Agreement represents the entire and 
integrated agreement of the parties with respect to the subject matter 
hereof, and supersedes all prior agreements, oral and written, relating to 
the subject matter hereof.

         d.   Exhibits.  All exhibits which are referenced herein and 
attached hereto are incorporated herein by reference.

<PAGE>
 
         e.   Severability.  In the event any provision of this Agreement is 
held to be unenforceable or invalid, such finding of unenforceability or 
invalidity shall not affect the enforceability or validity of the remaining 
provisions of this Agreement.

         f.   Continuing Obligations.  Each indemnity provided for herein 
shall survive the termination of this Agreement for any reason whatsoever and 
each covenant which provides for or permits performance hereunder after 
termination or by its nature requires performance after termination shall 
survive the termination of this Agreement.

    g.   Audit.  Either party, at its expense, shall have the right to audit 
the other's books and records relating to any managed restaurant from 
time-to-time, limited, however, to two (2) times during the Term of this 
Agreement.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be 
executed on the day and date first written above.

ATTEST:                                FRIENDLY ICE CREAM CORPORATION



By:___________________________        By:


Name:_________________________        Name:


Title:________________________        Title:


<PAGE>


ATTEST:             FRIENDCO RESTAURANTS, INC.



By:___________________________         By:


Name:_________________________         Name:


Title:________________________         Title:



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                                 E  X  H I B I T    A


                      Management Agreement Properties (14 Total)



No.    Rest. No.   City                Address                            State

1        0384      Baltimore           6901 Security Boulevard            MD
2        0780      Cockeysville        240 Hunt Valley                    MD
3        0880      Randallstown        9428 - 30 Liberty Road             MD
4        0905      Laurel              14750 Baltimore Washington Blvd.   MD
5        0919      Gaithersburg        701 Russell Avenue                 MD
6        0929      Fredericksburg      280 Spotsylvania Mall              VA
7        0939      Waldorf             2850 Crain Highway                 MD
8        0956      Manassas            8891 Centerville Road              VA
9        0972      Alexandria          6550-A Little River Turnpike       VA
10       1013      Columbia            8660 Guilford Road                 MD
11       1028      Glen Burnie         7900 Ritchie Highway               MD
12       0393      Wilmington          Concord Mall                       DE
13       0452      Towson              825 Dulaney Valley Road            MD
14       0835      Woodbridge          14510 Jefferson Davis Highway      VA

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