Friendly Ice Cream Corp. (AMEX:FRN) may find itself in hot water soon after The Lion Fund stepped up its efforts to obtain some seats on the company's board. The fund had requested seats on the board twice now, but has failed to receive any response from the company. As a result, The Lion Fund announced today in a 13D filing with the SEC that they would actively seek spots on the board by soliciting proxies. According to the filing:

"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 Reporting Persons intend to solicit proxies to be voted in favor of the nominees.

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 derivative lawsuit 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 decisions in this litigation, dated May 24, 2006, and August 25, 2006, are attached hereto as Exhibits B and C." (Read More)

Clearly there are problems at Friendly Ice Cream Corp., and The Lion Fund may be the answer. After all, the fund's large ownership stake in the company gives them a very high vested interest in seeing the company turn around. The company's stock is currently trading at $10.24, down almost 2.5% on the news.

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