Texas investor enlists former Steak n Shake exec in quest to revive chain

Two executives with longtime ties to The Steak n Shake Co. have joined a dissident Texas investor in his quest to overhaul
the Indianapolis-based restaurant chain.

Shareholders who have agreed to work with Sardar Biglari include a former board member the company once described as a "modern-day
founder" of the restaurant chain, along with a former partner in Kelley & Partners Ltd., the investment firm led
by company patriarch E.W. Kelley before his 2003 death. The dissident group also includes a former top executive at Whataburger
and Pizza Inn, two restaurant chains headquartered in Texas.

The group, which is led by Biglari's The Lion Fund, said in an April 15 Securities and Exchange Commission filing that
it now controls more than 3 million shares, or 11 percent, of the company's stock–up from 8.5 percent a month earlier.
The addition of new investors to the group means the hedge fund now is the largest holder of Steak n Shake shares, surpassing
New York-based MSD Capital LP, the family investment vehicle for computer entrepreneur Michael Dell.

Biglari and an adviser overwhelmingly won two of Steak n Shake's nine board seats in a proxy fight that culminated at
the annual meeting in March. Voted off the board were then-Chairman Alan Gilman, who also was acting CEO; and James Williamson,
another former CEO.

But after the vote, the board selected board member Wayne Kelley–E.W. Kelley's 63-year-old son–as interim chairman
and CEO and Jeff Blade as interim president, essentially snubbing Biglari, who had sought the chairmanship.

Disappointments

The investors who agreed to join Biglari's effort to turn around the struggling 500-restaurant chain say in the SEC filing
that the board's immediate appointments of Kelley and Blade were a disappointment. The group–dubbed The Committee to
Enhance Steak n Shake–plans to push for "management and operational changes."

Biglari wants tighter cost controls, improved service, a shift to more franchised locations, and a more entrepreneurial mind-set.
He's been making the case since late 2007 that investors deserve better, mostly through a barrage of letters, billboards
and individual shareholder meetings.

Biglari, 30, declined to comment to IBJ, as did a company spokesman.

Steak n Shake officials have argued that they are well on their way to correcting problems that led to 10 straight quarters
of declining same-store sales and a sharp decline in the company's stock price, which has sunk below $8. Both sides agree
a top priority is finding a new CEO to replace Peter Dunn, who stepped down in August.

Among the investors joining Biglari is S. Sue Aramian, 75, who left Steak n Shake's board in 2004 after serving in various
company roles since 1983, including vice president, secretary and board vice chairwoman.

In her retirement agreement, Steak n Shake thanked Aramian for "faithful and distinguished service" and "significant
contributions to the company's growth and success, as a modern-day founder of the company, in conjunction with Mr. E.W.
Kelley."

The company agreed to pay her an $84,000 annual pension and health insurance premiums. Aramian did not return a phone message
left at her home in New York. She and a family member own more than 120,000 shares.

The Lion Fund's new group also includes Charles E. Arnett, who had been a partner in Kelley & Partners Ltd.–the
investment vehicle E.W. Kelley used to purchase the then-ailing chain in 1981. Kelley served as chairman of the company for
nearly two decades, a span in which the company's performance rebounded and the number of locations doubled.

Another investor who joined the dissident group is Shawn Sedaghat, who owns more than 101,000 shares in Steak n Shake. And
three of his family members own another 330,000 shares.

Sedaghat also is a top shareholder with Biglari in Virginia-based Western Sizzlin Corp., a chain of 130 restaurants that
serves as a holding company for many of Biglari's investments.

CEO in waiting?

The filing also suggests Biglari may have a CEO in mind. The investment group includes Tim Taft, a former top executive at
Whataburger and Pizza Inn.

Taft told IBJ he hasn't had conversations with the company or anyone else about leading Steak n Shake, but he
would be interested. He said it has been painful to watch "a cultural icon" struggle.

"I'm looking at Steak n Shake from an investor standpoint, but I do want to be part of a team dedicated to breathing
life back into the brand," said Taft, who began buying in February and now owns more than 34,000 shares. "It's
an incredible brand that needs help."

During Taft's 10-year tenure at Whataburger, the chain more than doubled in size, to 745 restaurants. He also grew per-restaurant
sales from $750,000 to $1.4 million and strung together a 47-quarter streak of same-store sales growth, according to an article
in Pizza Marketplace, a trade publication.

Taft, 49, took the helm at Pizza Inn in 2005 amid circumstances similar to those of Steak n Shake. The trouble at Pizza Inn
began after another Texas hedge fund, Newcastle, bought more than 2 million shares from a former CEO. That led to a protracted
proxy battle between an entrenched board and Newcastle, a skirmish the hedge fund won by a sizable margin.

Taft took a salary of $1 and vowed to earn a payday by turning around the 350-store chain and boosting its share price. If
Pizza Inn's share price is any indication, he hasn't earned much. Shares are trading at about $2.90, only about 20
cents more than when Taft took over. But the company has shown signs of progress, turning same-store sales positive for the
first time in six years and reporting its first quarterly profit in three years at the end of 2007.

In August 2007, Taft abruptly resigned from Pizza Inn, telling a Dallas Morning News reporter that he planned to
pursue "other opportunities that have presented themselves."

That was the same month Biglari launched his quest for Steak n Shake board seats.

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