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BREAKING: Steak n Shake activist claims victory

March 7, 2008

An activist investor in locally based Steak n Shake Co. declared victory this afternoon in a proxy battle for two board seats.

The Lion Fund of Texas released a statement after today's annual meeting saying that "an overwhelming majority" of shareholders supported its effort to turn around the struggling restaurant chain. But Steak n Shake officials said they won't release an official vote tally until next week.

Philip Cooley, one of the activists seeking a board seat, said during the meeting that if he wins election he'll nominate his colleague, Sardar Biglari, as chairman.

"He's the brightest businessman I've known in my life," Cooley said.

Biglari said he would forego stock options if elected to the board, saying that the company's leadership should buy shares with their own money.

He promised a transition from a "bureaucratic" approach to an "entrepreneurial" vision. And he promised his fund is interested in Steak n Shake long term, not for a quick profit.

"We want to make money with shareholders, not off of them," he said.

Voting ended when the meeting adjourned at 2 p.m.; the company said it expects to announce official results the morning of March 12.

After the meeting in a crowded room at the downtown Marriott, Biglari and Cooley headed to a meeting with the current board members.

Biglari, 30, heads the San Antonio-based Lion Fund, and Cooley, 65, a business professor, is an adviser to the fund. The fund owns 8.5 percent of Steak n Shake stock.

All nine Steak n Shake board seats were up for election at today's meeting. Biglari, Cooley and the nine incumbent directors were vying for the slots. The top nine vote-getters win seats.

Biglari and Cooley sought to oust
Alan Gilman, 77, and James Williamson, 76, both of whom have served stints as CEO of the Indianapolis-based restaurant chain. Gilman is the company's current chairman and acting CEO.

Steak n Shake has reported 10 consecutive quarters of declining same-store sales, and the company's stock price has declined rapidly. In late February, the stock's 10-year return was -33 percent, its five-year return was -12 percent and its three-year return was -56.5 percent.

The Lion Fund bought most of its stake for more than $15 per share. Shares were trading at about $8 this afternoon.

Biglari argued in a letter to shareholders that Steak n Shake is "handicapped by a lack of leadership, lack of execution and lack of strategic direction from headquarters." He and Cooley say the company wasted millions of dollars building new restaurants and instead should focus on franchising, improving profits at existing locations, and cutting costs.

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