Lexington restaurant franchise company Thomas & King is asking a judge to allow the company to raise money by selling shares despite the objections of one of its founding partners.
Documents filed in Fayette Circuit Court on Tuesday show that Thomas & King had planned to issue 3 million shares of non-voting stock for $1 a share in a meeting Monday.
However, the meeting has been canceled while the company awaits a directed verdict from the court, which could take several weeks, or even months.
The documents reveal a rift between Ronald T. Reynolds, a founding partner in the business, and its other founders, Mike Scanlon and Douglas Wilson. The three men own more than 90 percent of the shares in Thomas & King, which has grown to become the nation's eighth-largest restaurant franchise company, according to its Web site. Scanlon, the president and chief executive, and Wilson, senior executive vice president of development, each lent Thomas & King $1 million in 2008 as the economic downturn took its toll on the restaurant business.
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Reynolds retired from Thomas & King 10 years ago. For several years, Reynolds has been critical of company management, according to court filings by Thomas & King, but has declined to take an active role in running the company. He has sent a proxy to shareholder meetings rather than attending in person, and has declined to accept a position on the company's board of directors.
In a letter dated Jan. 12, Reynolds' attorney, Marshall Dosker, said if Scanlon insisted on proceeding with the stock sale, Reynolds "will have no choice" but to initiate action to take control of the company. This is to make sure Scanlon and Wilson "do not further enrich themselves to the detriment of the company."
Reynolds further alleges in the letter that Scanlon and Wilson have mismanaged the company, wasted corporate assets and committed acts of fraud.
Dosker further stated that he planned to file a complaint in Fayette Circuit Court to stop the planned meeting from being held.
Dosker and Reynolds could not be reached for comment Wednesday.
Thomas & King's lawsuit is asking the court to declare that the company has the right to issue stock, and also to determine that officers are not doing anything crooked.
In a statement issued late Wednesday, Scanlon said Reynolds' recent "threats and other actions" were distracting and disruptive to the company. He expressed confidence that the court would affirm the company has the right to issue the sale of stock and will affirm management's actions in running the company.
If the judge allows the stock sale to proceed, it would be open only to those within the privately held company.
Thomas and King, with 7,500 employees, operates 90 Applebee's and seven Carino's Italian Grill restaurants in Arizona, Indiana, Kentucky, Ohio and Pennsylvania. Twelve of the Applebee's and three Carino's are in Central Kentucky.