sec document
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 16)(1)
Friendly Ice Cream Corporation
------------------------------
(Name of Issuer)
Common Stock, $.01 Par Value
----------------------------
(Title of Class of Securities)
358497105
---------
(CUSIP Number)
STEVEN WOLOSKY, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
--------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 6, 2007
-------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
NOTE. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. SEE Rule 13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 15 Pages)
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(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, SEE the
NOTES).
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CUSIP No. 358497105 13D Page 2 of 15 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
The Lion Fund L.P.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 1,182,488
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,182,488
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,182,488
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.92%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 358497105 13D Page 3 of 15 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Biglari Capital Corp.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 1,182,488
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,182,488
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,182,488
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.92%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
---------------------- ----------------------
CUSIP No. 358497105 13D Page 4 of 15 Pages
---------------------- ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Biglari, Sardar
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 1,182,488
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,182,488
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,182,488
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.92%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
---------------------- ----------------------
CUSIP No. 358497105 13D Page 5 of 15 Pages
---------------------- ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Western Sizzlin Corp.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 1,182,488
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,182,488
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,182,488
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.92%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
---------------------- ----------------------
CUSIP No. 358497105 13D Page 6 of 15 Pages
---------------------- ----------------------
================================================================================
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Cooley, Philip L.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, WC, PF
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY - 0 -
OWNED BY -----------------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 1,182,488
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
- 0 -
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,182,488
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,182,488
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.92%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 358497105 13D Page 7 of 15 Pages
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The following constitutes Amendment No. 16 ("Amendment No. 16") to the
Schedule 13D filed by the undersigned. This Amendment No. 16 amends the
Schedule 13D as specifically set forth.
Item 2 is hereby amended to add the following:
The Reporting Persons may from time to time be referred to herein and in
other materials filed with the Securities and Exchange Commission as "The
Committee to Enhance Friendly's" (the "Committee"). The Committee is not a
business entity and has no place of organization.
Item 4 is hereby amended to add the following:
On March 6, 2007, Sardar Biglari issued a letter to the shareholders of
the Issuer, a copy of which is attached hereto and incorporated herein by
reference.
Item 7 is hereby amended to add the following exhibits:
A. Letter to Shareholders, dated March 6, 2007 (filed herewith as
Exhibit A).
B. Powers of Attorney (filed herewith as Exhibit B).
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CUSIP No. 358497105 13D Page 8 of 15 Pages
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SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, each
of the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: March 6, 2007 THE LION FUND L.P.
By: Biglari Capital Corp.
General Partner
By: /s/ Sardar Biglari
---------------------------------------
Sardar Biglari, Chief Executive Officer
BIGLARI CAPITAL CORP.
By: /s/ Sardar Biglari
---------------------------------------
Sardar Biglari, Chief Executive Officer
/s/ Sardar Biglari
-------------------------------------------
SARDAR BIGLARI
WESTERN SIZZLIN CORP.
By: /s/ Sardar Biglari
---------------------------------------
Sardar Biglari, as Attorney-In-Fact
for Western Sizzlin Corp.
/s/ Sardar Biglari
-------------------------------------------
SARDAR BIGLARI, as Attorney-In-Fact for
Philip L. Cooley
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CUSIP No. 358497105 13D Page 9 of 15 Pages
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EXHIBIT A
THE LION FUND, L.P.
9311 SAN PEDRO AVENUE, SUITE 1440
SAN ANTONIO, TEXAS 78216
TELEPHONE (210) 344-3400
FAX (210) 344-3411
SARDAR BIGLARI, CHAIRMAN
March 6, 2007
Dear Fellow Shareholder:
I want to share with you our deep concerns about Friendly Ice Cream Corp.
as misgoverned by its Chairman Donald Smith and its board of directors. My
fellow nominee Philip L. Cooley and I are seeking two seats out of six on the
company's board of directors. Now will be your first opportunity as shareholders
to vote for candidates not allied with a board that has failed to create value
since going public in 1997. After you read this entire letter outlining our
philosophy, we urge you to support us. Every vote matters.
Despite Mr. Smith's false allegation that we intend to control the board,
we CANNOT do so because we are seeking only TWO board seats out of the entire
six. Of course, we will reserve the ability to hold the board accountable in the
future, and we will not forgo the right to seek further board changes if they
are warranted and supported by shareholders. Mr. Smith also disseminates the
faulty assumption that the company possesses cash flows to divert. The reality
is that since the company's initial public offering in 1997, it, in aggregate,
has generated negative cash flows. Naturally, I wish the company WERE generating
positive cash flows. The value of an asset, including Friendly's common stock,
is derived from its future cash flows and is referred to as its intrinsic value.
This intrinsic value is computed by taking all future cash flows into and out of
a business and then discounting the resultant number at an appropriate interest
rate. Mr. Smith must cope with our guarantee: Phil and I will strenuously lobby
the board to focus on cash flows to increase the intrinsic value of the company.
If we can increase intrinsic value per share, the stock price will eventually
follow suit.
CAPITAL STRUCTURE. Part of the reason Friendly's cash flows have been
negative is that the corporation must service an enormous debt, which is akin to
a dagger pointed at the heart of the business. With one small bump, we could
return to the grim scenario of a few years ago when the company was near
insolvency and its stock below $2 per share. I believe the company will become
bankrupt if it does not attempt to delever the balance sheet. Friendly's has
paid more than $230 million in interest over the past decade and $620 million
since 1988, when Mr. Smith took over the company. The debt constrains
possibilities for growth and the ability to execute a viable business strategy.
In direct contrast, we will champion a disciplined financial structure to
increase shareholder wealth.
Currently the enterprise value (total market value of stock plus total
debt less cash) of Friendly's is about $300 million. The channeling of free cash
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CUSIP No. 358497105 13D Page 10 of 15 Pages
---------------------- ----------------------
flow to reduce debt will result either in stock appreciation (if enterprise
value remains constant) or improvement of the value of the stock relative to its
price. Historically, capital investments have yielded the company sub-par
returns whereas debt reduction locks in a positive return. I would prefer a
certain good return over a possibly forlorn anticipation of a great but unknown
one.
STRATEGY. We believe the future of Friendly's lies in its franchisees. The
initiative to accelerate refranchising would yield several long-term strategic
advantages. By lowering the number of company-owned and operated units,
Friendly's could distribute more of its resources to the creation of better
products, better quality control, shrewder, more effective marketing practices,
more effective franchisee training -- all with the objective of becoming a
forceful franchisor capable of efficiently enhancing the brand. A franchisee
with experience in operating multiple units can more efficaciously manage a
profit-producing restaurant than the company can. Presently, Friendly's
resources are overburdened and misdirected by the chore of overseeing and
managing an excessive number of company-run outlets. Because returns on invested
capital are higher from franchising than from ownership, the brand would be
better supported by a focused strategy. Simply stated, the company should be in
the real estate, franchise, and foodservice business for the very good reason
that it would achieve high profit margins, take less risk, and require very
little in capital expenditures -- all strategic moves leading to healthy cash
flows and high returns on capital. We are persuaded, therefore, that
company-operated restaurants would be best run by franchisees. Manifestly, the
company not only wastes scarce resources -- namely, time, energy, and money --
on the demands of proprietorship but also winds up less successful than its
franchisees. Operating restaurants, as a result, leads to substantially lower
profit margins, higher risks (e.g., sensitivity to food costs), a high degree of
operating leverage, higher cost of capital, and significant capital expenditures
to maintain the business -- all culminating in the generation of poor free cash
flow.
Historically, the company has taken a haphazard approach to refranchising
without a compensating reduction in debt. Unfortunately, Friendly's has taken a
good idea and executed it shoddily because cash generated from refranchising
should have been used exclusively to lower debt and improve the capital
structure.
DISCIPLINE IN CAPITAL ALLOCATION AND EXPENSES. That the company has spent
over $230 million in capital expenditures since 1997 with a loss to show for its
outlay is a demonstrable illustration of poor operational and financial
management. The unfit leadership of Chairman Smith has been the prime cause of
the corporation's poor performance. A few years ago when the company's
performance was deteriorating, Mr. Smith inappropriately and irresponsibly paid
for a Learjet instead of following the alternative we would have recommended:
reduce debt. Nero may have fiddled while Rome was burning, but at least he did
not throw fuel on the fire. If Mr. Smith is obviously behaving so extravagantly,
we wonder what other wasteful, self-serving decisions he has made behind the
scenes. According to the cockroach theory, there is seldom only one in the
kitchen. The private jet symbolizes an ongoing culture, one that doesn't care
about its shareholders. An absolute business essential is an ethos with firm
self-control involving capital allocation and company expenses. Furthermore, the
company must allocate capital only when returns compensate for relevant risks.
COMPENSATION. Friendly's Compensation Committee is composed of Chairman
Michael J. Daly, Burton J. Manning, and Perry D. Odak. As stated in the
company's proxy statement, "The Compensation Committee annually recommends to
the Board of Directors the base salary, incentive compensation and other
compensation of the Chairman of the Board, Chief Executive Officer and elected
officers of Friendly's." We are disappointed by the Committee's unwise
recommendations. To begin with, we find it reprehensible that Mr. Smith, who is
Chairman of the Board, receives an additional compensation of $100,000 over and
above his director fees. Up to a few years ago, Mr. Smith was rewarded with a
salary and bonus of $493,000 during a period in which as he put during a taped
meeting: "I don't spend hardly any time at Friendly's anymore. I go in two days
a month, I go in to board meetings, I'm available and we talk once or twice a
week on the phone, but make no doubt about it -- I really do not run Friendly's
anymore" (WALL STREET JOURNAL, 6/9/06). We don't understand the rationale behind
Mr. Smith's compensation, especially since he admits that he hardly spends any
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CUSIP No. 358497105 13D Page 11 of 15 Pages
---------------------- ----------------------
time at the company. His is not only an inappropriate policy but just another
marker of a self-interested culture, which sets the wrong tone at the top.
Moreover, the Committee has designed a faulty compensation structure.
According to the company's Annual Incentive Plan, "Each year, the Compensation
Committee establishes company financial objectives. The financial objectives are
based on Friendly's achievement of specified levels of earnings as measured by
EBITDA (i.e., earnings before interest, taxes, depreciation and amortization)."
There are many unintended consequences to linking bonus to EBITDA. For instance,
doing so can encourage the use of leverage (an encouragement the company clearly
does not need) to increase EBITDA at any cost without regard to attaining an
appropriate return on invested capital. Setting the incentive around EBITDA can
lead to poor capital allocation decisions, as evidenced by the company's
troubling capital allocation record. Thus, free cash flow generation would be
more apropos for bonus eligibility than relying on EBITDA. Furthermore, capital
does not come free. Thus, the bonus calculation must be symmetrical. Management
must be assessed for incremental capital employed. If incremental investment
produces a below-minimum rate, the pain suffered by shareholders must be shared
by management. The implication is that no addition to shareholder value results
in no bonus. An absolute essential in sensible compensation structure is to
align management performance with shareholders' interests.
Two of the directors, Messrs. Daly and Manning, will be up for election at
the next annual stockholder meeting. In addition to their inability to create
shareholder value since they became directors in 1997, they have failed as
Compensation Committee members. As two-thirds of the Compensation Committee,
they had the opportunity to think and act rationally. It is imperative to be as
sensible about compensation as about capital allocation. It is time to replace
Messrs. Daly and Manning.
CORPORATE GOVERNANCE. Representation by very significant shareholders is
the best way to fill a board, to think about improving the governance of the
company, and to produce shareholder wealth. We believe a board of directors
should participate in the future of a company by making a substantial financial
commitment on the same basis as other shareholders do. Presently, five of the
six board members have virtually no stake in the company, while our stock
ownership exceeds the aggregate of all six directors. As consequential
shareholders on the board, we would be in the preeminent position to think about
value creation over the long term.
We would espouse superior corporate governance by promoting ideas that
would benefit the true owners of the company, the shareholders, and hold board
members responsible for their actions. To start, we believe the company's board
election should be held annually. The staggered board entrenches incumbent board
members and insulates them from accountability.
We believe that the poison pill, courtesy of the board, is holding back
the stock. There is no reason for Mr. Smith to be exempt from swallowing the
poison pill, which effectively limits other shareholders from purchasing over
15% of the company. The company also has other anti-takeover prohibitions, such
us the caveat against the shareholders calling a special meeting. The current
entrenchment scheme must end because it provides board members immunity, not
accountability, and in doing so disenfranchises shareholders.
FRIENDLY'S STOCK PRICE. Since disclosing our initial position in
Friendly's on August 7, 2006, the day our group filed its first 13D, the stock
has appreciated by more than 50%. This increment has been achieved during a
period in which the company's operating performance has been dismal. We believe
the reason for Friendly's strong absolute and relative stock performance is
that, despite the lackluster operational performance of the company, the market
expects that positive changes are in the offing. Notwithstanding the recent
run-up in stock price, we believe the current market value does not reflect the
full potential of the company, a potential that can be reached only with changes
at the board level.
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CUSIP No. 358497105 13D Page 12 of 15 Pages
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You might think Mr. Smith, who owns 12.8% of the company, would have his
interests aligned with yours. History has proven otherwise. Mr. Smith has used
his board control to extract handsome profits for HIMSELF. We believe he has
viewed Friendly's as HIS company. Friendly's is not a private firm; therefore,
public shareholders' interests should come first. We, as the largest
stockholders of the company, promise to protect your interests, and, unlike the
incumbents, we will not rubber-stamp Mr. Smith's wishes.
Many of the issues raised in this letter -- from badly designed
compensation systems to the costly, unneeded use of a private jet -- are
symptoms of a broader set of problems. Unaddressed problems will continue to
wash away shareholder value. Mr. Smith has been sending the wrong messages to
Friendly's employees: that incurring expenses for luxuries like his purchasing a
corporate jet is acceptable behavior and a worthwhile expenditure. In contrast,
the company would send a positive message if it announced that Mr. Smith's
$100,000 remuneration would be terminated. It would strongly signify to all
employees that everyone associated with the company must begin scrutinizing
company expenses to cut unnecessary overhead, a move which would help
rehabilitate the firm's potential for aggrandized profitability.
We encourage you to visit our website, www.enhancefriendlys.com, to access
articles and court filings that shed light on Mr. Smith's and the board's
inappropriate and, in the final analysis, inexcusable behavior. The board has
been careless with the company's cash flows and balance sheet as well as
insensitive to shareholder value and proper treatment of shareholders.
Shareholders have given Mr. Smith and the board plenty of time, that is, a
decade, to create shareholder value and to substantiate the merits of any of
their so-called canny strategies. Clearly, they have failed. It is time that we
join the board and begin creating value for you -- AND with a sense of urgency.
We appreciate your support, and we will value your confidence and trust in
us as we attempt to rectify the company's problems.
Sincerely,
/s/ Sardar Biglari
Sardar Biglari
---------------------- ----------------------
CUSIP No. 358497105 13D Page 13 of 15 Pages
---------------------- ----------------------
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
The Lion Fund L.P. (the "Lion Fund") and Western Sizzlin Corp. ("Western
Sizzlin"), together with the other participants named herein, intend to make a
preliminary filing with the Securities and Exchange Commission ("SEC") of a
proxy statement and an accompanying proxy card to be used to solicit votes for
the election of its director nominees at the 2007 annual meeting of stockholders
of Friendly Ice Cream Corporation, a Massachusetts corporation (the "Company").
THE LION FUND AND WESTERN SIZZLIN ADVISE ALL STOCKHOLDERS OF THE COMPANY TO READ
THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE
AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE
PARTICIPANTS IN THE PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY
STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO
THE PARTICIPANTS' PROXY SOLICITOR, MORROW & CO., AT ITS TOLL-FREE NUMBER: (800)
607-0088.
The participants in the proxy solicitation are anticipated to be The Lion
Fund L.P., a Delaware limited partnership, Biglari Capital Corp., a Texas
corporation, Western Sizzlin Corp., a Delaware corporation, Sardar Biglari
and Philip L. Cooley (the "Participants").
Each of the Participants may be deemed to be the beneficial owner of 1,182,488
shares of Common Stock of the Company. The Participants specifically disclaim
beneficial ownership of such shares of Common Stock except to the extent of
their pecuniary interest therein.
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CUSIP No. 358497105 13D Page 14 of 15 Pages
---------------------- ----------------------
EXHIBIT B
POWER OF ATTORNEY
Know all by these presents, that the undersigned hereby constitutes and
appoints SARDAR BIGLARI, signing singly, the undersigned's true and lawful
attorney-in-fact to take any and all action in connection with the investment by
The Lion Fund L.P., Western Sizzlin Corp., the undersigned or any of their
affiliates in the voting securities of Friendly Ice Cream Corporation
("Friendlys"), including, without limitation, relating to the formation of a
Group (as defined below) whose members include The Lion Fund L.P., Western
Sizzlin Corp. and the undersigned, all filings on Schedule 13D (as defined
below), all filings on Forms 3, 4 and 5 (as defined below), any solicitation of
proxies or written consents in support of the election of directors of Friendlys
or other proposal(s) and all other matters related, directly or indirectly, to
Friendlys (together, the "Friendlys Investment"). Such action shall include, but
not be limited to:
1. executing for and on behalf of the undersigned all Schedules 13D
("Schedule 13D") required to be filed under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules thereunder
in connection with the Friendlys Investment;
2. executing for and on behalf of the undersigned all Forms 3, 4 and 5
("Forms 3, 4 and 5") required to be filed under Section 16(a) of the Exchange
Act and the rules thereunder in connection with the Friendlys Investment;
3. executing for and on behalf of the undersigned all Joint Filing and
Solicitation Agreements or similar documents pursuant to which the undersigned
shall agree to be a member of a group, as contemplated by Rule 13d-1(k)
promulgated under the Exchange Act (a "Group"), in connection with the Friendlys
Investment;
4. performing any and all acts for and on behalf of the undersigned that
may be necessary or desirable to complete and execute any such document,
complete and execute any amendment or amendments thereto, and timely file such
form with the United States Securities and Exchange Commission and any stock
exchange or similar authority; and
5. taking any other action of any type whatsoever in connection with the
Friendlys Investment which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the undersigned, it
being understood that the documents executed by such attorney-in-fact on behalf
of the undersigned pursuant to this Power of Attorney shall be in such form and
shall contain such terms and conditions as such attorney-in-fact may approve in
such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might or
could do if personally present, with full power of substitution or revocation,
hereby ratifying and confirming all that such attorney-in-fact, or such
attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be
done by virtue of this Power of Attorney and the rights and powers herein
granted. The undersigned acknowledges that the foregoing attorney-in-fact, in
serving in such capacity at the request of the undersigned, is not assuming any
of the undersigned's responsibilities to comply with Section 13(d), Section 16
or Section 14 of the Exchange Act.
This Power of Attorney shall remain in full force and effect until
December 31, 2007 unless earlier revoked by the undersigned in a signed writing
delivered to the foregoing attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to
be executed as of this 23rd day of January, 2007.
/s/ Philip L. Cooley
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Philip L. Cooley
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CUSIP No. 358497105 13D Page 15 of 15 Pages
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POWER OF ATTORNEY
Know all by these presents, that the undersigned hereby constitutes and
appoints SARDAR BIGLARI, signing singly, the undersigned's true and lawful
attorney-in-fact to take any and all action in connection with the investment by
The Lion Fund L.P., the undersigned or any of their affiliates in the voting
securities of Friendly Ice Cream Corporation ("Friendlys"), including, without
limitation, relating to the formation of a Group (as defined below) whose
members include The Lion Fund L.P. and the undersigned, all filings on Schedule
13D (as defined below), all filings on Forms 3, 4 and 5 (as defined below), any
solicitation of proxies or written consents in support of the election of
directors of Friendlys or other proposal(s) and all other matters related,
directly or indirectly, to Friendlys (together, the "Friendlys Investment").
Such action shall include, but not be limited to:
1. executing for and on behalf of the undersigned all Schedules 13D
("Schedule 13D") required to be filed under Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules thereunder
in connection with the Friendlys Investment;
2. executing for and on behalf of the undersigned all Forms 3, 4 and 5
("Forms 3, 4 and 5") required to be filed under Section 16(a) of the Exchange
Act and the rules thereunder in connection with the Friendlys Investment;
3. executing for and on behalf of the undersigned all Joint Filing and
Solicitation Agreements or similar documents pursuant to which the undersigned
shall agree to be a member of a group, as contemplated by Rule 13d-1(k)
promulgated under the Exchange Act (a "Group"), in connection with the Friendlys
Investment;
4. performing any and all acts for and on behalf of the undersigned that
may be necessary or desirable to complete and execute any such document,
complete and execute any amendment or amendments thereto, and timely file such
form with the United States Securities and Exchange Commission and any stock
exchange or similar authority; and
5. taking any other action of any type whatsoever in connection with the
Friendlys Investment which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the undersigned, it
being understood that the documents executed by such attorney-in-fact on behalf
of the undersigned pursuant to this Power of Attorney shall be in such form and
shall contain such terms and conditions as such attorney-in-fact may approve in
such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might or
could do if personally present, with full power of substitution or revocation,
hereby ratifying and confirming all that such attorney-in-fact, or such
attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be
done by virtue of this Power of Attorney and the rights and powers herein
granted. The undersigned acknowledges that the foregoing attorney-in-fact, in
serving in such capacity at the request of the undersigned, is not assuming any
of the undersigned's responsibilities to comply with Section 13(d), Section 16
or Section 14 of the Exchange Act.
This Power of Attorney shall remain in full force and effect until
December 31, 2007 unless earlier revoked by the undersigned in a signed writing
delivered to the foregoing attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to
be executed as of this 5th day of March, 2007.
WESTERN SIZZLIN CORP.
By: /s/ Robyn B. Mabe
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Name: Robyn B. Mabe
Title: Chief Financial Officer