The Lion Fund Responds Coolly To Friendly's Recent Shareholder Letter

In an amended 13D filing on Friendly Ice Cream Corp (FRN), 14.9% holder The Lion Fund/Sardar Biglari disclosed a new letter to the company in response to a recent shareholder letter from the Chairman of the company, Donald Smith.

Biglari said:

"In his letter, Mr. Smith neglects to tell shareholders that we recently proposed just one change to Friendly's corporate governance -- to declassify the staggered board -- but the board rejected our idea of putting the suggestion to shareholder vote; instead it opted to protect its interests, not yours."

Biglari said he is still seeking two board seats with 'equal' footing, nothing that Chairman Smith is permitted to purchase more than 15% of the company without triggering the company's "poison pill" rights plan.

A Copy of the Letter:

Dear Fellow Shareholder:

On January 2, 2007, Donald Smith, Chairman of Friendly Ice Cream Corp., issued another letter that we believe was intended to misinform you. I am not surprised: Mr. Smith and the board will take any action necessary that would divert your attention from the company's dismal performance. Mr. Smith, alongwith the board, has failed to create shareholder value since Friendly's went public a decade ago at $18 per share.

In his letter, Mr. Smith neglects to tell shareholders that we recently proposed just one change to Friendly's corporate governance -- to declassify the staggered board -- but the board rejected our idea of putting the suggestion to shareholder vote; instead it opted to protect its interests, not yours. Shareholders are the true owners of Friendly's; consequently, they should decide whether or not an entrenched board is good policy. Clearly, the board does notwant to be held accountable.

We believe the board will continue to make decisions to protect its ownbest interests at the expense of the shareholders' well-being. The cost of anentrenched board imposes a heavy burden on Friendly's value. Since we disclosed our large ownership in the company, its stock price has risen to a level reflecting the expectation that positive change is in the offing. While we cannot promise future returns, we can guarantee we will do our best to create shareholder value by seeking to institute corporate governance reform, improved operational performance, and improved financial performance -- all revisions which promote the right behavior -- thereby putting the shareholders first.

Furthermore, we are seeking just two board seats to serve the best interests of all shareholders. We don't want unequal footing with othershareholders. Mr. Smith does. For instance, he is permitted to purchase morethan 15% of the company without triggering the company's "poison pill" rightsplan. We will continue to share with you other decisions made by the boarddesigned to provide immunity not accountability, and in the process to disenfranchise us shareholders.

We lack confidence in the current board but have confidence that you will support our position when we seek your votes to bring much needed independent thought and demanding, impartial financial discipline.

Sincerely,

Sardar Biglari