Lion Fund Steps Up Heat on Friendly Ice Cream (FRN) to Get on Board
In a 13D filing after the close on Friendly Ice Cream Corp. (AMEX: FRN), 12.7% holder The Lion Fund said, absent action from the company, they intend to nominate Mr. Biglari and Dr. Cooley for election to the company's board of director at the company's annual meeting to be held in 2007. The firm intends to solicit proxies to be voted in favor of its nominees.
The Lion Fund said it is concerned with the current status of the board of directors as all but one of the Issuer's current directors, including the chairman of the board, are defendants in a pending shareholder derivative lawsuit in which one of the founders of the Issuer's business and a substantial stockholder, S. Prestley Blake, is the plaintiff.
The firm said because of its large holdings (more than all current directors combined) and because their interest are aligned with other stockholders, Mr. Biglari and Dr. Cooley would be constructive contributors to the board.
Sardar Biglari is the portfolio manager of the Lion Fund and models his investment philosophy after Warren Buffett. Dr. Philip L. Cooley is the Prassel Distinguished Professor of Finance at Trinity University and sits of the Board of Directors of the Lion Fund. The fund's website is http://lionfundmanagement.com
From the Purpose of Transaction section of the Filing:
The Reporting Persons have consulted with the chairman of the board ofdirectors and management of the Issuer concerning the business, operations and future plans of the Issuer. Such consultation included a meeting on September 20, 2006, whereby the Reporting Persons requested two seats on the Issuer'sboard of directors for Mr. Sardar Biglari and Dr. Philip L. Cooley. By letter toMr. Biglari dated October 3, 2006, the Issuer's Vice President and GeneralCounsel, Gregory Pastore, requested information regarding Mr. Biglari and Dr.Cooley. A law firm representing the Reporting Persons provided such information to Mr. Pastore by letter dated October 5, 2006. On October 16, 2006, a law firm representing the Issuer responded by letter to the October 5 letter stating that the Company would respond "in due course".
The Reporting Persons prefer to obtain the requested board seats through action by the Issuer's board of directors, but absent such action, the Reporting Persons intend to nominate Mr. Biglari and Dr. Cooley for election at the Issuer's annual meeting of stockholders to be held in 2007, in accordance with the Issuer's by-laws providing for such nominations. In such case, the ReportingPersons intend to solicit proxies to be voted in favor of the nominees. Accordingly, on November 8, 2006, The Lion Fund sent notice to the Issuer's Secretary, in accordance with the Issuer's by-laws, of its intention to nominate Mr. Biglari and Dr. Cooley for election as directors at the next meeting of stockholders at which directors are to be elected. In addition, on November 8,2006, Mr. Biglari sent to the Issuer a demand to inspect and copy the Issuer' srecord of its stockholders, as permitted by the Massachusetts Business Corporation Act.
If the Reporting Persons engage in solicitation of proxies, and are successful in the election of one or both of Mr. Biglari and Dr. Cooley to theIssuer's board of directors, the Reporting Persons will seek reimbursement of their expenses from the Issuer.
The Reporting Persons are concerned with the current status of the board of directors as all but one of the Issuer's current directors, including the chairman of the board, are defendants in a pending shareholder derivativelawsuit in which one of the founders of the Issuer's business and a substantial stockholder, S. Prestley Blake, is the plaintiff. Copies of two court decisionsin this litigation, dated May 24, 2006, and August 25, 2006, are attached hereto as Exhibits B and C.
As set forth herein, the Reporting Persons have beneficial ownership of12.73% of the Issuer's common stock. The Reporting Persons believe such holdings are more than the amount beneficially owned by any other stockholder or group and more than all such stock owned by all of the Issuer's current directors combined. Accordingly, the Reporting Persons believe that their interests are aligned with those of other stockholders and that Mr. Biglari and Dr. Cooley would be constructive contributors to the Issuer's board of directors.