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Steak n Shake clears way for special meeting

June 25, 2008

The Steak n Shake Co. has rolled back a roadblock originally designed to stop an activist investor from taking control of the struggling chain.

The company's board has agreed to reduce the percentage of Steak n Shake shares needed to call a special meeting from 80 percent to 25 percent. The board had raised the requirement from 25 percent after dissident investor Sardar Biglari revealed his plan in January: Elect two members to the company's nine-member board, then ask shareholders to call a special meeting to replace the majority of the board.

Biglari was elected as the company's executive chairman this month. He will earn a salary of $80,000.

The moves, revealed in a U.S. Securities and Exchange Commission filing this week, appear to give Biglari the platform he needs to implement his plans for tighter cost controls, improved service and a shift to more franchised locations. It also puts Biglari in the driver's seat for the selection of a new CEO.

Biglari may call a special meeting of Steak n Shake shareholders to replace other members of the board - a group he has described as out-of-touch and unconcerned with the plight of shareholders. The company has reported 11 consecutive quarters with declining same-store sales, and its stock price has declined sharply to near $6.

Biglari and his San Antonio-based Lion Fund have been lobbying for the changes since they began buying Steak n Shake shares in August 2007. He 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.

The 30-year-old investor had sought to take over as chairman immediately after winning the board seats but encountered resistance from sitting board members. The company named board member Wayne Kelley interim chairman and CEO, and elevated Chief Financial Officer Jeffrey Blade to the post of interim president.

Undeterred, Biglari added former Steak n Shake executives and other investors to his dissident group and continued to buy shares, adding more than 105,000 shares in May alone.

Biglari, reached by phone this week, declined to comment on the company or his plans.

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