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Purchase and Sale Agreement - Friendly Ice Cream Corp. and FriendCo Restaurants Inc.

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                            PURCHASE AND SALE 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.  Assets Purchased........................................1
    A.   Franchise Rights...................................2

    B.   Management Rights                                  2
    C.   Development Rights                                 2
    D.   Equipment and Tenant Improvements                  3
    E.   Software Rights                                    3
    F.   Trademark and Service Mark Rights                  3
    G.   Inventory and Restaurant Cash                      3

2.  Purchase Price and Allocation                           4

3.  Purchase Price Refunded on Loss of 
    Franchised Restaurant                                   5

4.  Holdback of Portion of Purchase Price                   6
    A.   Creation of Escrow Account                         6
    B.   Application of Escrow                              7
    C.   Notice  of Claims                                  8
    D.   Disbursement by Escrow Agent                       9

5.  Closing                                                 9
    A.   Time and Place                                     9
    B.   Documents Executed at Closing                     10
    C.   Documents Delivered at Closing                    10
    D.   Real Estate Closing                               11  

<PAGE>

    E.   Documents Executed at Real Estate Closing         11
    F.   Documents Delivered at Post-Real Estate Closing   11 

6.  Conditions of F.I.C.C.'s Obligation to Close           12
    A.   Board of Director Approval                        12
    B.   Approval of Non-Disturbance Agreement 
         By Voting Majority of Lending
         Group 12
    C.   Representations and Warranties                    13
    D.   Opinion of FriendCo's Counsel                     13
    E.   Evidence of Payment                               13

7.  Conditions of FriendCo's Obligation to Close           13
    A.   Board of Director Approval of FriendCo 
         and DavCo Restaurants, Inc.                       14
    B.   Receipt of Executed Non-Disturbance Agreement     14
    C.   Representations and Warranties                    14

8.  Representations and Warranties of F.I.C.C.             14
    A.   Organization                                      14
    B.   Authorization                                     15
    C.   No Violations                                     15
    D.   Title to Assets                                   16
    E.   Joint Inspection                                  16
    F    No Brokers                                        16
    G.   Post Closing                                      17
 
<PAGE>

9.  Representations and Warranties of FriendCo             17
    A.   Organization                                      17
    B.   Authorization                                     17
    C.   No Violations                                     18
    D.   No Conflict with Wendy's International            18
    E.   No Brokers                                        19
    F.   Offer of Employment                               19



10. Indemnification                                        19
    A.   Pre-Effective Date                                19
    B.   Post-Effective Date Expenses                      20
    C.   General Indemnification                           20
    D.   Environmental Indemnification                     20

11. Definitions                                            21

12. Choice of Law and Jurisdiction                         23
    A.   Governing Law and Forum                           23
    B.   Arbitration of Minor Disputes                     23
    C.   Award of Costs and Attorney's Fees                23

13. Survival of Terms, Representations and Warranties      24 

14. Severability                                           24
 
<PAGE>

15. Notices                                                25



EXHIBITS:                                          SCHEDULES:
Exhibit A:  Franchise Agreement       Schedule A: List of Franchised Restaurants
Exhibit B:  Management Agreement      Schedule B: List of Managed Restaurants 
Exhibit C:  Development Agreement     Schedule C: List of Exempted Equipment 
Exhibit D:  Software License Agreement
Exhibit E:  Trademark License Agreement
Exhibit F:  Escrow Agreement
Exhibit G:  Non-Disturbance Agreement
Exhibit H:  Guaranty
 
<PAGE>

                             PURCHASE AND SALE AGREEMENT



    THIS AGREEMENT is dated                                    , 1997, by and
between Friendly Ice Cream Corporation, a Massachusetts corporation ("F.I.C.C.")
and  FriendCo Restaurants, Inc., a Maryland corporation ("FriendCo"). 

    WHEREAS, F.I.C.C. owns and operates 51 Friendly's Restaurants in Delaware,
Maryland and certain  counties of Northern Virginia; and

    WHEREAS, F.I.C.C. desires to achieve additional market penetration in the
above-mentioned territory, and  FriendCo desires to operate Friendly's
Restaurants and to construct new Friendly's Restaurants; 

    NOW, THEREFORE, in consideration of the exchange of mutual covenants and
the consideration contained  herein, F.I.C.C. hereby agrees to sell, and
FriendCo hereby agrees to buy, the following rights and assets  pursuant to the
terms and conditions of this Agreement.

    1.   ASSETS PURCHASED

    Upon the Effective Date of this Agreement, FriendCo will acquire from
F.I.C.C. and its relevant subsidiaries  all right, title and interest in the
following assets:

<PAGE> 
   
      A.   Franchise Rights.  FriendCo will receive the right to operate the
thirty-four (34) Friendly's  Restaurants identified in Schedule A pursuant to
the terms of a Franchise Agreement with  Friendly's Restaurants Franchise, Inc.
("F.R.F.I.") in the form attached hereto as Exhibit A. 

         B.   Management Rights.  FriendCo will receive the right to manage
fourteen (14) Friendly's  Restaurants identified in Schedule B pursuant to the
terms of a Management Agreement with  F.I.C.C. in the form attached hereto as
Exhibit B.  FriendCo will also receive the right to convert  any managed
restaurant to a franchised restaurant during the term of the Management 
Agreement at FriendCo's sole option (subject only to landlord consent to lease
assignment or  subletting, if necessary) upon notice to F.I.C.C., payment of an
initial franchise fee, execution of a  Franchise Agreement, execution of a
sublease in substantially the form of the subleases  employed the parties
pursuant to this transaction and payment to F.I.C.C. of an amount equal to a 5.3
multiple of the restaurant earnings before interest, taxes, depreciation and
amortization  (hereinafter "Restaurant EBITDA") as measured on a trailing twelve
(12) month basis from the last  day of the last full month preceding the notice
to F.I.C.C. (but in no event shall the payment be  less than the amount of the
depreciated book value of the restaurant equipment, cash and  inventory).

         C.   Development Rights.  FriendCo will receive the right to construct
and operate up to one  hundred (100) additional Friendly's Restaurants in an
exclusive territory consisting of the States  of Delaware and Maryland, the
District of Columbia, and certain 

<PAGE>

counties of Northern Virginia, all as is more specifically set forth in the 
Development  Agreement between F.R.F.I. and FriendCo, in the form attached 
hereto as Exhibit C. 

         D.   Equipment  and Tenant Improvements.  FriendCo will receive all of
F.I.C.C.'s rights, title and  interest to the equipment and tenant improvements
(but not fixtures) in each of the thirty-four  (34) Friendly's Restaurants
identified in Schedule A, with the sole exception of such  equipment identified
in Schedule C, attached hereto.

         E.   Software Rights.  FriendCo will receive the rights to use all
current F.I.C.C. operating  software in all franchised restaurants, and will be
entitled to receive all improvements and upgrades  to such software, pursuant to
the terms of a Software License Agreement with F.I.C.C. in the  form attached
hereto as Exhibit D.

         F.   Trademark and Service Mark Rights.  FriendCo will receive the
non-exclusive rights to utilize  for the benefit of each franchised or managed
restaurant all valid Trademarks and Service  Marks owned or licensed by F.I.C.C.
pursuant to the terms of the Franchise Agreements with  F.R.F.I. and a Trademark
License Agreement with F.I.C.C. in the form attached hereto as Exhibit E. 

         G.   Inventory and Restaurant Cash.  FriendCo will receive on the
Effective Date the rights to all  inventory and restaurant cash for each of the
thirty-four (34) franchised restaurants identified  in Schedule A.

<PAGE>

    2.   PURCHASE PRICE AND ALLOCATION

         A.   With respect to the assets listed in subparagraphs 1.A., 1.B.,
1.C., 1.D., 1.E. and 1.F., the  purchase price shall be Seven Million Five
Hundred Fifty-Six Thousand Dollars  ($7,556,000.00), representing approximately
a 5.3 times multiple of the represented Restaurant EBITDA of  the thirty-four
(34) restaurants identified in Schedule A. 

         B.   With respect to the assets listed in category 1.G., the purchase
price shall be an amount  agreed upon by F.I.C.C. and FriendCo following the
conclusion of an Inventory and Restaurant  Cash audit performed jointly by
F.I.C.C. and FriendCo on the Effective Date. 

         C.   The purchase price set forth in subparagraph 2.A. shall be
allocated as follows:  first, in  the amount of Eight Hundred Sixty Thousand
Dollars ($860,000.00) to initial franchise fees for  the thirty-four (34)
franchised restaurants; second, in the amount of Two Million Seven  Hundred
Thousand Dollars ($2,700,000.00) to equipment and tenant improvements in the 
thirty-four (34) franchised restaurants; third, in the amount of Three Million
Four Hundred  Ninety-Six Thousand Dollars ($3,496,000.00) to goodwill; and
fourth in the amount of Five Hundred  Thousand Dollars ($500,000.00) to
franchise development rights for the States of Delaware  and Maryland, the
District of Columbia and Northern Virginia.  

<PAGE>

    3.   PURCHASE PRICE REFUNDED ON LOSS OF FRANCHISED RESTAURANT

         A.   For any of the thirty-four (34) franchised restaurants being
acquired by FriendCo from  F.I.C.C., if the right to occupy and operate such
restaurant is terminated by a landlord, lender or  governmental agency or if
primary access to such restaurant is lost due to a defect in title  existing as
of the Effective Date, within ten (10) years of the Effective Date hereof, and
such  termination was neither caused nor contributed to by FriendCo but results
from the loss or denial of  a Certificate of Occupancy, or the loss of the right
to occupy or access the property other than  through an eminent domain
proceeding which provides FriendCo with compensation for its  loss of business
at such location, then for each such terminated restaurant, an allocable 
portion of the purchase price will be refunded to FriendCo by F.I.C.C. in
accordance with the  following formula:

         1) For each full year less than ten (10) years of occupancy lost
through such termination,  F.I.C.C. shall refund 10% of the allocable portion of
the restaurant purchase price (i.e. 5.3 times  the restaurant's 1996
E.B.I.T.D.A.) to FriendCo.

         2) For any partial year of occupancy lost through such termination,
F.I.C.C. shall refund an  amount  equal to .00274 times the number of days lost
in such partial year times the allocable  portion of the restaurant purchase
price (i.e. 5.3 times the restaurant's 1996 E.B.I.T.D.A.) to  FriendCo.
 
<PAGE>

          3) In addition, FriendCo shall be entitled to recover from F.I.C.C. 
FriendCo's reasonable  expenses incurred in attempting to prevent the 
termination of its right to occupy and operate such  restaurant only, if 
F.I.C.C. does not elect to attempt to prevent the termination of such rights  
itself.

         B.   No refund shall be due to FriendCo for any of the thirty-four
(34) franchised restaurants  lost or terminated after ten (10) years of
occupancy by FriendCo, for any franchised restaurant  lost or terminated due to
any action or inaction specifically attributable to FriendCo, or for  any newly
constructed restaurant beyond the original thirty-four (34) franchised
restaurants. 

         C.   The sole exceptions to the ten (10) year period of occupancy and
operation required under  this Paragraph shall be for the expiration of the
lease for restaurant numbered 751 and 461,  which the parties hereby acknowledge
expire on January 31, 2006 and February 28, 2007. 

    4.   HOLDBACK OF PORTION OF PURCHASE PRICE

         A.   Creation of Escrow Account.  F.I.C.C. and FriendCo agree to the
creation of an Escrow  Account at First National Bank of Maryland pursuant to
the terms of an Escrow Agreement, in the  form attached hereto as Exhibit F, to
be funded by the 

<PAGE>

holdback of Two Hundred Fifty Thousand Dollars ($250,000.00),
which amount shall be deposited into the Escrow Account.

         B.   Application of Escrow. 

         1)   Subject to subparagraph 4.B.2), below, the parties hereto agree
that the amounts in the  Escrow Account shall be used to indemnify and hold
harmless FriendCo from and against  losses relating to cash, inventory and
restaurant conditions existing as of the Effective Date in the  manner set forth
in Paragraph 4 of this Agreement and in the Escrow Agreement.  All such  amounts
shall be disbursed out of the Escrow Account in accordance with the terms of the
Escrow Agreement, and any such amounts distributed to FriendCo shall be deemed
to reduce the  goodwill portion of the Purchase Price as set forth in Paragraph
2 of this Agreement. 

         2)   FriendCo may not make any claim for losses (other than for
Restaurant Cash Losses or  Inventory Losses) pursuant to this Paragraph 4 unless
the claim relates to a condition which  existed as of the Effective Date and
such claim amounts to Ten Thousand Dollars ($10,000.00)  for a loss relating to
an individual item, occurrence or event or Twenty Thousand Dollars  ($20,000.00)
for a claim arising out of or relating to a series of items, occurrences or
events or  related items occurrences or events (collectively, the "Threshold
Amount").  A claim for each of  Restaurant Cash Losses or Inventory Losses may
not be made unless such claim exceeds One  Hundred Dollars ($100.00) on an
individual restaurant basis.  

<PAGE>

         C.   Notice of Claims.

         1)   For any claims relating to Restaurant Cash Losses or Inventory
Losses, FriendCo shall  have thirty (30) days from the Effective Date hereof to
send written notice of the claim(s)  simultaneously to the Escrow Agent and to
F.I.C.C.  Such written notice shall identify the  franchised restaurant(s) to
which the claim applies and shall state the factual basis for the claim and 
well as the exact amount of the claim.

         2)   For any other claims for losses which exceed the Threshold
Amount, FriendCo shall have  ninety (90) days from the Effective Date to send
written notice of such claims(s)  simultaneously to the Escrow Agent and to
F.I.C.C.  Such written notice shall identify the franchised  restaurant(s) to
which the claim applies and shall state the factual basis for the claim as well
as the  exact amount of the claim or an estimate of the amount of the claim if
the exact amount is not  determinable  at the time written notice is given.

         3)   If F.I.C.C. shall object to either the claim or the amount
claimed in the written notice,  F.I.C.C. shall send written notice of its
objection simultaneously to the Escrow Agent and  FriendCo within thirty (30)
days of its receipt of the written notice of the claim.  If no objection is 
provided within such thirty (30) day period, F.I.C.C. shall be deemed to have
acknowledged  the validity of the amount claimed, and the Escrow Agent shall
thereafter transfer to FriendCo  in immediately available funds an amount equal
to the claim, pursuant to the terms of the  Escrow Agreement.
 
<PAGE>
         4)   If F.I.C.C. shall have sent a written objection to FriendCo and
the Escrow Agent within  the thirty (30) day period for objection, F.I.C.C. and
FriendCo shall have a period of thirty  (30) days thereafter to resolve or
compromise the claim.  If a resolution or compromise is reached,  the parties
shall jointly send to the Escrow Agent a notice of resolution, and the Escrow 
Agent shall make such distribution(s) as are specified in the notice of
resolution.  If F.I.C.C.  and FriendCo are unable to resolve or compromise the
claim within the thirty (30) day period,  then the Escrow Agent shall retain an
amount equal to the amount in dispute between the  parties, and either F.I.C.C.
or FriendCo shall have the right to refer the disputed claim(s) to  arbitration
pursuant to Paragraph 12.B, infra.

         D.   Disbursement by Escrow Agent.  If the Escrow Agent shall not have
received any written  notice of claim(s) by the ninety-third (93rd) day
following the Effective Date of this Agreement,  or if the total amount of all
claims received does not equal or exceed the amount of the Escrow  Account, the
Escrow Agent shall thereafter proceed to disburse to F.I.C.C. the amount by 
which the Escrow Account exceeds the amount of any claims in immediately
available funds,  pursuant to the terms of the Escrow Agreement.

    5.   CLOSING

         A.   Time and Place.  The Closing on this Purchase and Sale Agreement
will take place at the  offices of DavCo Restaurants, Inc., 1657 Crofton
Boulevard, Crofton, Maryland, 21114 on  Thursday, July 10, 1997, or at such time
and place as the parties hereto may agree.  Any  documents necessary to
effectuate the Closing on this Purchase and Sale 

<PAGE>

Agreement may be executed in two (2) or more original counterparts, any one 
of which need  not contain the signatures of more than one (1) party, but all 
such counterparts taken together will constitute one and the same agreed 
document. 

     
         B.   Documents Executed at Closing.  The following documents shall be
executed by all such  necessary parties at the Closing:

         1) Purchase and Sale Agreement between F.I.C.C. and FriendCo
 
         2) Development Agreement between F.R.F.I. and FriendCo

         3) 34 Individual Restaurant Franchise Agreements between F.R.F.I.
            and FriendCo

         4) Trademark License Agreement between F.I.C.C. and FriendCo

         5) Software License Agreement between F.I.C.C. and FriendCo

         6) Escrow Agreement between  F.I.C.C., FriendCo and First National
            Bank of Maryland 

         7) Letter Agreement regarding Maryland Science Center restaurant
            between F.I.C.C. and FriendCo



         C.   Documents Delivered at Closing.  The following documents shall be
delivered by the  designated party at Closing:

         1) Non-Disturbance Agreement between Lender's of F.I.C.C., FriendCo
            and DavCo Restaurants  (F.I.C.C.) 

<PAGE>

         2) Opinion of Counsel of FriendCo
 
<PAGE>

         D.   Real Estate Closing.  The Closing on all necessary Real Estate
Documents will take place at the offices of  DavCo Restaurants, Inc., 1657
Crofton Boulevard, Crofton, Maryland, 21114, at 11:00 a.m. on the Effective
Date,  or at such time and place as the parties hereto may agree.  Any documents
necessary to effectuate the Real Estate  Closing may be executed in two (2) or
more original counterparts, any one of which need not contain the  signatures of
more than one (1) party, but all such counterparts taken together will
constitute one and the same  agreed document.

         E.   Documents Executed at Real Estate Closing.  The following
documents shall be executed by all necessary parties  at the Real Estate
Closing:

         1) 13 Prime Leases between F.I.C.C. and FriendCo

         2) 21 Subleases between F.I.C.C. and FriendCo

         F.   Documents Delivered Post-Real Estate Closing.  The following
documents shall be delivered by F.I.C.C. to  FriendCo within six (6) months of
the Effective Date, pursuant to paragraph 8.G.: 

         1) 11 Landlord Consents to Sublease (F.I.C.C.) 

         2) Lease Extensions on Restaurants
            Nos. 404, 411, 751 and 813

         3) Evidence of Financing
 
<PAGE>

         4) 34 Memoranda of Lease or Sublease between F.I.C.C. and FriendCo

         5) 21 Estoppel Certificates on Subleases

         6) 21 Non-Disturbance Agreements from Lenders of Subleased Properties


    6.   CONDITIONS OF F.I.C.C.'S OBLIGATION TO CLOSE

    The obligations of F.I.C.C. to close on this Purchase and Sale Agreement
shall be subject to the  fulfillment at or prior to the Closing of each of the
following conditions: 

         A.   Board of Director Approval.  The Board of Directors of F.I.C.C.
shall have approved the transactions  contemplated  under this Purchase and Sale
Agreement and shall have authorized its execution by  F.I.C.C.

         B.   Approval of Non-Disturbance Agreement By Voting Majority of
Lending Group.  F.I.C.C. shall have  received the approval of a majority of the
votes of the Lending Group for the Non-Disturbance Agreement  between the
Lenders, FriendCo and DavCo Restaurants, as evidenced by the signature of the
Collateral  Agent on the Non-Disturbance Agreement.
 
<PAGE>

         C.   Representations and Warranties.  The representations and
warranties of FriendCo set forth in  Paragraph 9 shall be true and correct in
all material respects as of the date of this Agreement and as of the  Effective
Date.

         D.   Opinion of FriendCo's Counsel.  F.I.C.C. shall have received an
opinion of FriendCo's counsel, Mason,  Ketterman & Morgan, dated as of the
Closing Date, as to FriendCo's authority to execute the Purchase  and Sale
Agreement, DavCo Restaurants, Inc.'s authority to execute any guarantee, and the
lack of any  conflict between this transaction and any contracts with Wendy's
International, Inc., whether  executed by FriendCo, its corporate parent, or any
affiliate. 

         E.   Evidence of Payment.  F.I.C.C. shall have received by the Real
Estate Closing Date evidence of  FriendCo's ability to transfer sufficient funds
to F.I.C.C. to satisfy the purchase price set forth in Paragraph  2, supra.


    7.   CONDITIONS OF FRIENDCO'S OBLIGATION TO CLOSE

    The obligations of FriendCo to close on the Purchase and Sale Agreement
shall be subject to the  fulfillment at or prior to the Closing of each of the
following conditions:  


<PAGE>

         A.   Board of Director Approval of FriendCo and DavCo Restaurants, 
Inc.  The Boards of Directors of FriendCo  and its corporate parent, DavCo 
Restaurants, Inc., shall both have approved of this Purchase and  DavCo's 
guarantee and shall both have authorized execution. 

         B.   Receipt of Executed Non-Disturbance Agreement.  FriendCo shall 
have received an original  Non-Disturbance Agreement between F.I.C.C.'s 
Lenders, FriendCo and DavCo Restaurants, Inc., in the form  attached hereto 
as Exhibit G, executed by the Collateral Agent for F.I.C.C.'s Lenders. 

         C.   Representations and Warranties.  The representations and 
warranties of F.I.C.C. set forth in Paragraph 8  shall be true and correct in 
all material respects as of the date of this Agreement and the Effective  
Date.

    8.   REPRESENTATION AND WARRANTIES OF F.I.C.C.

    F.I.C.C. hereby represents and warrants to FriendCo as follows: 

         A.   Organization.  F.I.C.C. is a corporation duly organized, 
validly existing and in good standing under  the laws of the jurisdiction of 
its incorporation and has all requisite corporate power and authority  to 
execute all documents contemplated in this transaction.

<PAGE>

           B.   Authorization.  F.I.C.C. has full corporate power and 
authority to perform its obligations under this  Agreement and the documents 
to be signed at Closing and all other transactions contemplated hereby.   The 
execution and delivery of this Agreement and the consummation of the other 
transactions contemplated hereby have been duly and validly authorized by all 
necessary corporate action by F.I.C.C.   The Board of Directors of F.I.C.C. 
has approved the execution, delivery and performance of this  Agreement and 
the consummation of all other transactions contemplated hereby.  This 
Agreement has been  duly executed and delivered by F.I.C.C. and constitutes 
the valid and binding agreement of F.I.C.C.,  enforceable against F.I.C.C. in 
accordance with its terms, subject to applicable bankruptcy, insolvency and   
other similar laws affecting the enforceability of creditors' rights 
generally, general equitable principles and the discretion of courts in 
granting equitable remedies. 

         C.   No Violations.  The execution, delivery and performance of this 
Agreement, the consummation of the  other transactions contemplated hereby 
and the fulfillment of a compliance with the terms and  conditions of this 
Agreement do not and will not violate or conflict with (i) any terms or 
provisions of the Articles of Incorporation or By-laws of F.I.C.C. or (ii) 
any judgment, decree, order, statute, rule or  regulation applicable to 
F.I.C.C. or any of its assets listed in Paragraph 1, supra, except for such 
violations  which could not reasonably be expected to materially impair or 
delay the ability of F.I.C.C. to consummate the transactions contemplated 
hereby.


<PAGE>

         D.   Title to Assets.  Title to all assets identified in Paragraph 
1, supra, which F.I.C.C. will transfer, lease  or license to FriendCo is 
valid and transferable by F.I.C.C., except as specifically excluded.  The  
trademarks and service marks to be licensed to FriendCo are validly held by 
F.I.C.C. or licensed to F.I.C.C.  for use without dispute or challenge.  
F.I.C.C. maintains current and valid Certificates of Occupancy  for each of 
the thirty-four (34) franchised restaurants and fourteen (14) managed 
restaurants, the cash  flow represented to FriendCo as the 1996 E.B.I.T.D.A. 
for the thirty-four (34) franchised restaurants is  correct and accurate to 
the best of F.I.C.C.'s knowledge and understanding, and each of the 
thirty-four  (34) franchised restaurants have valid and existing primary 
access as of the Effective Date, provided,  however, any breach of this 
warranty of access shall have as its sole remedy the rights provided under  
Paragraph 3, supra.

         E.   Joint Inspection.  Repairs reasonably determined to be 
necessary to the Restaurant and Premises to  bring them into standard 
operating condition through a Joint Inspection will be made by F.I.C.C. at 
its  sole cost and expense, in a good and workmanlike manner at a time 
mutually convenient to F.I.C.C.  and FriendCo.

         F.   No Brokers.  None of F.I.C.C., F.R.F.I., or any of their 
respective executive officers or directors has  employed any broker, finder 
or investment banker or incurred any liability for commissions or finders  
fees in connection with the transactions contemplated hereby.

<PAGE>

          G.   Post Closing.  F.I.C.C. shall employ reasonable and good faith 
efforts to expeditiously obtain and  deliver to FriendCo all third party 
landlord consents to sublet, lease extensions, estoppel certificates  and 
non-disturbance certificates for the twenty-one (21) subleased franchised 
restaurants.  A breach of  this warranty shall be deemed to have occurred 
upon any third party landlord (or its  successor-in-interest) terminating or 
attempting to terminate its lease with F.I.C.C.; however, FriendCo's sole 
remedy for a breach of this warranty shall be pursuant to Paragraph 3, supra. 

    9.   REPRESENTATIONS AND WARRANTIES OF FRIENDCO

    FriendCo hereby represents and warrants to F.I.C.C. as follows: 

         A.   Organization.  FriendCo is a corporation duly organized, 
validly existing and in good standing  under the laws of the jurisdiction of 
its incorporation and has all requisite corporate power and authority  to 
execute all documents contemplated in this transaction. 

         B.   Authorization.  FriendCo has full corporate power and authority 
to perform its obligations under this  Agreement and the documents to be 
signed at Closing and all other transactions contemplated  hereby.  The 
execution and delivery of this Agreement and the consummation of the other 
transactions contemplated hereby have been duly and validly authorized by all 
necessary corporate action by  FriendCo.  The Board of Directors of FriendCo 
has approved the execution, delivery and performance of this  Agreement and


<PAGE>

the consummation of all other transactions contemplated hereby.  This 
Agreement has been duly  executed and delivered by FriendCo and constitutes 
the valid and binding agreement of FriendCo,  enforceable against FriendCo in 
accordance with its terms, subject to applicable bankruptcy, insolvency and   
other similar laws affecting the enforceability of creditors' rights 
generally, general equitable principles and the discretion of courts in 
granting equitable remedies. 

         C.   No Violations.  The execution, delivery and performance of this 
Agreement, the consummation of the  other transactions contemplated hereby 
and the fulfillment of a compliance with the terms and  conditions of this 
Agreement do not and will not violate or conflict with (i) any terms or 
provisions of the Articles of Incorporation or By-laws of FriendCo or (ii) 
any judgment, decree, order, statute, rule or  regulation applicable to 
FriendCo or any of its assets listed in Paragraph 1, supra, except for such  
violations which could not reasonably be expected to materially impair or 
delay the ability of FriendCo to consummate the transactions contemplated 
hereby.

         D.   No Conflict with Wendy's International.  The execution, 
delivery and performance of this Agreement and  the consummation of the other 
transactions contemplated hereby will not violate or conflict with  any 
agreements, contracts or obligations between FriendCo or its corporate 
parent, DavCo Restaurants,  Inc. and Wendy's International, Inc.


<PAGE>

         E.   No Brokers.  Neither FriendCo nor its respective executive 
officers or directors has employed any  broker, finder or investment banker 
or incurred any liability for commissions or finders fees in  connection with 
the transactions contemplated hereby.

         F.   Offer of Employment.  FriendCo agrees to make an offer of 
employment to the restaurant level  employees at the thirty-four (34) 
Friendly's Restaurants identified in Schedule A upon substantially the  same 
terms as each employee is presently employed.  For purposes of this Paragraph 
9F only, restaurant  level employees shall include waiter/waitress, 
host/hostess, guest services, supervisor, grill workers,  fountain worker,  
dish washer, district manager, general manager and assistant manager. 

    10.  INDEMNIFICATION

         A.   Pre-Effective Date Expenses.  Except as provided in 
subparagraph 10.D. infra, F.I.C.C. will indemnify  and hold FriendCo harmless 
for any and all expenses of restaurant occupation or operation which  arise 
or are fully due prior to the Effective Date hereof.  Further, F.I.C.C. will 
indemnify and hold FriendCo harmless for F.I.C.C.'s pro rata portion of any 
expenses of restaurant occupation or operation which  do not become due until 
after the Effective Date hereof.


<PAGE>

         B.   Post-Effective Date Expenses.  Except as provided in 
subparagraph 10.D., infra, FriendCo will  indemnify and hold F.I.C.C. 
harmless for any and all expenses of restaurant occupation or operation which 
 arise or are fully due after the Effective Date hereof.  Further, FriendCo 
will indemnify and hold F.I.C.C.  harmless for FriendCo's pro rata portion of 
any expenses of restaurant occupation or operation which  become due prior to 
the Effective Date hereof.

         C.   General Indemnification.  Except as otherwise provided in this 
Paragraph 10, F.I.C.C. and FriendCo  will indemnify, defend, and hold each 
other harmless from claims, demands and causes of action  asserted against 
the indemnitee by any person (including, without limitation, F.I.C.C.'s and 
FriendCo's  employees, agents, contractors or any third party) for personal 
injury or death or for loss of or damage to  property and resulting from the 
indemnitor's active or passive negligence or willful misconduct.  Where 
personal injury, death, or loss of or damage to property is a result of the 
joint active or passive  negligence or willful misconduct of F.I.C.C. 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. 

         D.   Environmental Indemnification.  In the event of any leak, 
spill, discharge, seepage or other  contamination which occurred or was first 
present in any of the thirty-four (34) franchised restaurants or the  
surrounding leased or subleased premises prior to the Effective Date, or 
which occurred or was present in  any of the fourteen (14) managed


<PAGE>

restaurants at any time prior to their conversion to the status of a 
franchised restaurant, F.I.C.C. shall  indemnify  and hold FriendCo harmless 
from any and all claims, losses, demands, remediation, testing  or clean-up 
arising from such leak, spill, discharge, seepage or other contamination.  In 
the event of  any leak, spill, discharge, seepage or other contamination 
which occurred or was first present in any of  the thirty-four (34) 
franchised restaurants after the Effective Date, FriendCo shall indemnify and 
hold  F.I.C.C. harmless from any and all claims, losses, demands, 
remediation, testing or clean-up, unless  such leak, spill, discharge, 
seepage or other contamination first occurs or is first present after the  
reversion of control over such property to F.I.C.C.

    11.  DEFINITIONS

    A.   As used in this Agreement, the following terms shall have the 
following meanings:

1)  "Certificate of Occupancy" 

shall mean all documentation issued from the appropriate state or county 
authorities which permit the occupation and use of the restaurant as a  
retail food service establishment.

2)"Closing"  

shall mean the execution of all documents set forth in Paragraph 5B of this 
Agreement 

3)"Closing Date"  

shall mean the date of execution of all documents set forth in Paragraph 5B 
of this Agreement.  

<PAGE>

4)"Effective Date"

shall mean the date of transfer of operational control, title to all assets 
and right to receive all income of the thirty-four (34) franchised Friendly's 
Restaurants  purchased by FriendCo from F.I.C.C. and the receipt of the 
purchase price by F.I.C.C. 

5)"Escrow Agent" 

shall mean First National Bank of Maryland or such affiliated banking entity 
as may be designed by First National Bank of Maryland. 

6)  "Inventory"  

shall mean all saleable food products, merchandise, supplies, flatware, 
dishes or other items maintained as restaurant inventory by F.I.C.C. 

7)  "Inventory Losses"  

shall mean any damaged, missing or unsaleable food products, merchandise, 
unusable, missing or unservicable supplies.  

8)  "Joint Inspection" 

shall mean F.I.C.C. and FriendCo shall jointly inspect each Restaurant and 
Premises to determine what if any repairs are necessary to the Building, the 
Outside  Areas, the Systems, the Trade Fixtures or the Equipment to bring the 
foregoing into standard operable condition. 

9)  "Lending Group" or "Lenders"  

shall mean those financial institutions identified in the Second Amended and 
Restated Revolving Credit. 

10) "Restaurant Cash"  

shall mean all cash maintained at any individual restaurant. 

<PAGE>

11) "Restaurant Cash Losses"  

shall mean any shortfall or negative discrepancy between the amount of 
Restaurant Cash determined to be present upon the Joint Inspection and paid 
for by  FriendCo, and the amount of Restaurant Cash determined to be present 
upon the opening of the restaurant for business by FriendCo's employees. 


<PAGE>

    12.  CHOICE OF LAW AND JURISDICTION

         A.   Governing Law and Forum.  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  unless the sole and exclusive forum for such claim lies in another 
jurisdiction.  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.

         B.   Arbitration of Minor Disputes.  For any action or dispute in 
which the damages claimed, less  costs and attorneys fees, do not exceed Two 
Hundred Fifty Thousand Dollars ($250,000.00),  the parties expressly agree 
that the sole and exclusive forum shall be in arbitration before the  
American Arbitration Association, pursuant to its rules in effect at the time 
the action or  dispute is brought, with the situs of the arbitration in 
Wilmington, Delaware. 

         C.   Award of Costs and Attorney's Fees.  For any action or dispute 
between the parties, the forum  court or arbitration panel shall have the 
power to award costs and attorneys fees incurred  along with a judgment in 
favor of the prevailing party.

<PAGE>


    13.  SURVIVAL OF TERMS, REPRESENTATIONS AND WARRANTIES

    None of the terms, obligations, representations or warranties contained 
in this Agreement  shall be deemed merged with the Closing of this Agreement 
or the execution of any documents  contemplated hereunder but rather shall 
survive the Closing until the expiration or  termination of such terms, 
obligations, representations and warranties by the written action of all  
parties hereto.

    14.  SEVERABILITY

    Any provision hereof which is prohibited or unenforceable in any 
jurisdiction will, as to  such jurisdiction, be ineffective to the extent of 
such prohibition or unenforceability without  invalidating the remaining 
provisions hereof, and any such prohibition or unenforceability in  any 
jurisdiction will not invalidate or render unenforceable such provision in 
any other  jurisdiction.  To the extent permitted by law, the parties hereto 
waive any provision of law  which renders any such provision prohibited or 
unenforceable in any respect. 


<PAGE>

    15.  NOTICES

    All notices, communications and deliveries hereunder shall be made in 
writing signed by  the party making the same, shall specify the Paragraph of 
this Agreement pursuant to which it  is being made or given, and shall be 
deemed given or made on (a) the date delivered if  delivered in person or 
sent by telecopier, (b) the first business day after the date it is sent by a 
nationally recognized courier, or (c) the third business day after the date 
it is mailed if mailed by  registered or certified mail, return receipt 
requested, with all postage and other fees prepaid, as  follows:

To F.I.C.C.:

Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts   01095

Attention:    Donald N. Smith
              Chairman and President

Telecopier:  (413)543-3186


with a copy to:

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

Telecopier:  (410)543-3282

<PAGE>

To FriendCo:

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

Attention:    Ronald D. Kirstien
              Chairman and President

Telecopier:  (410)793-0754


with a copy to:

David J. Norman, Esquire
Mason, Ketterman and Morgan
1657 Crofton Boulevard
Suite 100
Crofton, Maryland   21114

Telecopier:  (410)7930522



    IN WITNESS WHEREOF, the parties hereto have caused their hands and seals 
to be subscribed on the day and date first  set forth above.

ATTEST:                 FRIENDLY ICE CREAM CORPORATION



______________________  By:_______________________ (Seal)
Name:                   Name:

Title:                  Title:



<PAGE>

                        FRIENDCO RESTAURANTS, INC.



______________________  By:_______________________ (Seal)
Name:                   Name:

Title:                  Title:

<PAGE>

                                 E X H I B I T   H


                                       GUARANTY



    As an inducement to FRIENDLY ICE CREAM CORPORATION ("Friendly's") to 
execute the Purchase and Sale Agreement  and all Exhibits thereto, dated July 
10, 1997 between Friendly's and FRIENDCO  RESTAURANTS, INC. ("FriendCo") and 
all addenda and amendments thereto (collectively the  "Agreement"), the 
undersigned, jointly and severally, hereby unconditionally warrant to 
Friendly's  and its successors and assigns that all FriendCo's 
representations in the Agreement are true  and guarantee that all of 
FriendCo's obligations and covenants under the Agreement will be  punctually 
paid and performed.

    Upon notice by Friendly's of a default by FriendCo the undersigned will 
within the  applicable cure period make each payment and perform each 
obligation required of FriendCo under  the Agreement.  Without affecting the 
obligations of the undersigned, Friendly's may extend,  modify or release any 
indebtedness or obligation of FriendCo or any of the undersigned or  settle, 
adjust or compromise any claims against FriendCo of any of the undersigned.  
The undersigned waive notice of amendment of the Agreement, notice of demand 
for payment or  performance by FriendCo, and all other notices or demands of 
any nature whatsoever. 

    The undersigned further agrees that this Guaranty shall continue to be 
effective or be  reinstated as the case may be, if at any time payment of any 
of the guaranteed obligations is


<PAGE>

rescinded or must otherwise be restored or returned by Friendly's upon the 
insolvency,  bankruptcy, or reorganization of FriendCo, all as though such 
payment has not been made. 

    The Guarantor specifically waives any obligation of Friendly's to proceed 
against FriendCo  on any other money or held by FriendCo or any other person 
as collateral security, by way  of set-off or otherwise.

    IN WITNESS WHEREOF,  the undersigned has signed this Guaranty as of the 
date of the  Agreement.

ATTEST:                                 GUARANTOR:

________________________________________
         DavCo Restaurants, Inc.


    By:

    Name:

    Title:

<PAGE>

                                S C H E D U L E   B


                     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