UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
10-K
[
X
] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
fiscal year ended September 26, 2007
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
transition period from
__________ to _________
Commission
file number 0-8445
THE
STEAK N SHAKE COMPANY
(Exact
name of registrant as specified in its
charter)
|
INDIANA
|
37-0684070
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
Identification
No.)
|
36
S. Pennsylvania Street, Suite 500
|
|
Indianapolis,
Indiana
|
46204
|
(Address
of principal executive offices)
|
(Zip
code)
|
(317)
633-4100
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Sec. 12(b) of the Act:
Title
of each class
|
Name
of each exchange on which registered
|
Common
Stock, stated value $.50 per share
|
New
York Stock Exchange
|
Securities
registered pursuant to section 12(g) of the Act:
Title
of class
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes
No
X
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
No
X
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes
X
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K.
[X]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer
__
Accelerated filer
X
Non-accelerated
filer
___
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
___ No
X
The
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of the last day of the second fiscal quarter
ended April 11, 2007 was approximately $450,885,788 based on the closing stock
price of $16.70 per share on that day.
The
number of shares of Common Stock outstanding at December 6, 2007 was
28,388,014
.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Form
10-K
Year
ended September 26, 2007
Table
of Contents
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Page
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Part
I
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3
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10
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12
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13
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13
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13
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Part
II
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14
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15
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16
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23
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24
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43
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43
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46
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Part
III
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47
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47
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47
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47
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47
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Part
IV
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48
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51
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52
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PART
I.
General
The
Steak n
Shake Company (“we”, “us” or "Steak n Shake") is engaged primarily in the
ownership, operation and franchising of Steak n Shake restaurants. Founded
in
1934 in Normal, Illinois, Steak n Shake is one of the oldest restaurant chains
in the country. As of September 26, 2007, we had 435 Company-owned
restaurants and 56 franchised restaurants located in 21 states. Most Steak
n Shake restaurants are open 24 hours a day, seven days a week, and in addition
to the core menu featuring STEAKBURGER™ sandwiches and milk shakes, offer a
breakfast menu during breakfast hours. Lunch and dinner sales account for
approximately 37% and 46% of sales, respectively, while breakfast and late
night
sales account for 6% and 11% of sales, respectively.
Our
fiscal
year ends on the last Wednesday in September. Accordingly, every five or six
years, our fiscal year contains 53 weeks. Fiscal years 2007, 2006, and 2005
each
contained 52 weeks. Our first, third, and fourth quarters contain 12 weeks
and
the second quarter contains 16 weeks (except in fiscal years when there are
53
weeks, in which case the fourth quarter contains 13 weeks).
The
Steak n Shake Concept
We
strive to
be the best restaurant in the world at providing guests a genuine, classic
community diner experience with STEAKBURGER™ sandwiches and hand-dipped milk
shakes. We occupy a distinct niche in the restaurant industry by offering
full-service dining with counter and dining room seating, as well as drive-thru
and carry-out service. Counter and dining room sales represent approximately
60% of the sales mix, while sales for off-premises dining represent
approximately 40% of the sales mix. Unlike some quick service restaurants
(“QSR”), all Steak n Shake food is freshly prepared, cooked-to-order in view of
the guest, and served promptly on china with flatware and glassware by a
friendly team of wait staff. Our prices are generally less than most casual
dining and family-style concepts, with an average check of approximately $7.10
per person. The average check during the peak lunch and dinner hours is
approximately $7.03 and $7.37, respectively.
We
believe
that Steak n Shake offers a compelling value and core menu items with a higher
level of quality than competing restaurant chains. Our menu features core items
such as STEAKBURGER™ sandwiches, thin and crispy french fries and hand-dipped
milk shakes. During fiscal 2007 we supplemented the core menu with high-quality
chicken sandwiches, low-fat Fruit n Frozen Yogurt shakes and improved entrée
salad offerings. We believe that the core items of high-quality food have built
brand loyalty with our guests, while newer menu items have met consumer demand
for healthier menu items. All menu items are prepared in accordance with our
strict specifications using high-quality ingredients, including 100% pure beef
in our STEAKBURGER™ sandwiches.
Over
the
years, we have responded to changing guest tastes by providing greater menu
variety, while maintaining the core items to ensure continued guest appeal.
While we plan to focus on our core menu items, we will periodically add
complementary items to the menu. For example, we are currently testing upgraded
coffee and new breakfast menu items in select markets.
Expanding
the Concept
Continuing
to
grow in both new and existing trade areas is an important part of our strategy
to enhance the Steak n Shake brand and increase shareholder value. During fiscal
year 2007, we opened 16 new Company-owned units and franchisees opened
six new units. The new Company-owned units and franchise
openings were in current and new markets. This level of expansion is less
than in prior years. We currently expect the opening of approximately
nine Company-owned and six franchised Steak n Shake restaurants in fiscal
year 2008. The actual number of openings will depend on many factors, including
the ability to locate appropriate sites, negotiate acceptable purchase or lease
terms, obtain necessary local governmental permits, complete construction and
recruit and train restaurant management and hourly associates. We will also
rebuild two older units and remodel four to six units utilizing an updated
restaurant design which adds the historic winged logo to the building exterior,
reduces construction costs, maximizes the use of available space and can
potentially be located on smaller parcels of land. The updated design will
be
used for new unit construction beginning in fiscal 2009.
In
fiscal
years 2005 and 2006, we acquired a total of 25 restaurants from former
franchisees. During the fourth quarter of fiscal 2006, we acquired eight
restaurants from Creative Restaurants, Inc. ("CRI"), and in fiscal 2005, we
acquired 17 restaurants from Kelley Restaurants, Inc. ("KRI"). The
purchases of franchised restaurants allow us to build on the success achieved
by
our franchisees while giving us the opportunity to further develop the markets
in which these restaurants are located.
Because
the
site selection process is critical to the success of our restaurants, our senior
management devotes significant time and resources to analyzing each prospective
site. We consider a variety of factors in the site selection process,
including local market demographics, site visibility and accessibility, highway
interchanges and proximity to significant generators of potential guests, such
as major retailers, housing communities and businesses. Our site selection
tool,
Thompson MapInfo, allows us to be more analytic in our real estate site
selections. This site selection tool provides a sophisticated view of the sales
potential for each prospective site as well as insight into markets around
the
country. In 2008 and beyond, we will continue to be selective in choosing
markets and individual sites for both Company-owned and franchise
expansion.
Our
Strategy for 2008
Our
primary
focus in fiscal 2008 is reversing our negative prior years’ same store sales
trends. In furtherance of that goal we are focused on three core activities:
simplifying business initiatives, intensifying the focus on store level
execution and critically reviewing our cost structure. We will also be
implementing a modest incremental price increase of 2% over the year to cover
some of the commodity and minimum wage cost increases we will face in fiscal
2008. In addition, during the first quarter of fiscal 2008, we will decrease
the
volume of coupon distribution in most markets as compared to the first quarter
of fiscal 2007.
Simplification
Relative
to
simplification, we have rigorously evaluated all recent initiatives and
eliminated anything that would not contribute to improved store level execution
in a cost efficient manner. Our commitment to simplification and focus on core
products is exemplified by our 2008 marketing programming, which is balanced
between product and brand focus, with primary emphasis on core STEAKBURGER™ and
milk shake messaging. This message will focus on core product
promotions that utilize existing ingredients and proven limited time
offers, such as the black peppercorn bacon premium topping STEAKBURGER™
sandwiches currently being marketed.
The
development efforts that we will undertake during the year will focus on a
few
initiatives that we believe represent the best potential to drive future sales,
including upgraded coffee and breakfast, improved milk shake fountain deployment
and menu simplification and reengineering.
Execution
We
intend to
improve store level execution and field accountability in the coming year.
Among
the initiatives in this area is the implementation of an integrated store level
execution plan which includes several core elements. The first, and perhaps
the
most important, is the “Leading from the Front” initiative, under which store
General Managers work almost exclusively within the sight of their guests.
This allows them to focus on the guest service experience and
eliminate any dissatisfaction in the dining room. Attention to and follow-up
on
the enhanced customer service program, “Seven Steps of Service,” which provides
a renewed focus on cleanliness, training and coaching, are central to making
this initiative successful.
Another
initiative tied to successful execution is the roll-out of the “Guest Recovery”
800 number capability for resolution of customer issues. This system enables
guests to alert us to complaints in real time via toll-free hotline and enables
our senior leaders to promptly address complaints and ensure that guests return.
An added benefit of this system is that it provides significant insight into
operational issues in particular restaurants or areas while creating a database
of learning and coaching material to enable focus on continuous
improvement.
Finally,
we
are simplifying the performance scorecards for store level managers and will
compensate them based on their ability to execute our strategy. Their bonus
will
be based primarily on store level improvements. We will support them in this
regard by implementing a few initiatives which will not distract them from
their
primary focus. These include implementing a new point-of-sale ("POS") system,
simplifying the milk shake fountain process, streamlining the drive-thru and
dine-in menus and enhancing the hiring and career development process to
increase the bench strength for both field leaders and associates.
Cost
Structure
We
expect a
difficult cost environment in fiscal 2008 with rapidly rising commodity costs,
especially dairy, and the incremental annual impact of minimum wage increases.
We are attempting to manage this cost environment with limited price
increases, labor management efficiencies and supply chain cost savings
initiatives. In addition, during fiscal 2007 we undertook a critical review
of
all general and administrative expenses to ensure that all expenses support
our
strategic direction. Any spending not directly related to execution of our
core
strategies was reduced or eliminated. As a result, we reduced general and
administrative spending by a net $8.1 million for fiscal 2008. This includes
reductions in staffing, salaries and outside consulting services as well as
tightening of overall general and administrative spending. We believe that
further cost reduction opportunities exist. We are also performing a critical
analysis of our new unit construction costs, which have become increasingly
expensive in the last few years. This focus is primarily on reducing
the overall development and operating costs of our building prototype, as
well as developing a new building refresh prototype. We will continue building
new stores in 2008 in existing markets and will pilot the new refresh prototype.
This new prototype is an appealing evolution of the current style that is less
expensive to build, increases the use of available space and can potentially
be
located on smaller parcels of land. In addition, retrofits to this design will
cost approximately $225,000 to $300,000 each, with significant returns expected
on this investment. The new prototype will be used in 2008 refreshes and 2009
new unit construction.
Restaurant
Locations
The
following
table lists the locations of the 491 Steak n Shake restaurants, including 56
franchised units, as of September 26, 2007:
|
Company-Owned
|
|
Franchised
|
|
Total
|
Alabama
|
5
|
|
|
|
5
|
Arkansas
|
|
|
1
|
|
1
|
Florida
|
85
|
|
|
|
85
|
Georgia
|
25
|
|
3
|
|
28
|
Illinois
|
63
|
|
6
|
|
69
|
Indiana
|
69
|
|
2
|
|
71
|
Iowa
|
4
|
|
|
|
4
|
Kansas
|
3
|
|
1
|
|
4
|
Kentucky
|
14
|
|
1
|
|
15
|
Michigan
|
20
|
|
|
|
20
|
Mississippi
|
|
|
1
|
|
1
|
Missouri
|
42
|
|
17
|
|
59
|
North
Carolina
|
6
|
|
5
|
|
11
|
Ohio
|
64
|
|
|
|
64
|
Oklahoma
|
|
|
5
|
|
5
|
Pennsylvania
|
5
|
|
1
|
|
6
|
South
Carolina
|
1
|
|
2
|
|
3
|
Tennessee
|
9
|
|
9
|
|
18
|
Texas
|
20
|
|
|
|
20
|
West
Virginia
|
|
|
1
|
|
1
|
Wisconsin
|
|
|
1
|
|
1
|
|
|
|
|
|
|
Total
|
435
|
|
56
|
|
491
|
Restaurant
Operations
The
key to
growing our customer base is ensuring our guests have an enjoyable dine-in,
carry-out or drive-thru experience. To ensure this positive guest
experience, we must have competent and skilled restaurant management at each
of
our locations. A typical Steak n Shake restaurant's management
team consists of a General Manager, a restaurant manager and from one to
four secondary managers. The number of managers varies depending upon the sales
volume of the unit. Each restaurant's General Manager has primary
responsibility for the day-to-day operations of the restaurant and is
responsible for maintaining our operating standards and procedures. The General
Manager holds the responsibility for the unit's profitability and their
bonus is partially based on meeting or exceeding the financial plan's expected
store sales and profitability. In addition to day-to-day operations, the General
Manager is involved in the planning and budgeting process for their
restaurant. An experienced, well-trained General Manager promotes compliance
with our high standards for food quality and guest service, ensures that
all health and safety requirements are met and ensures compliance with
applicable state labor laws. We seek to employ managers who focus on
delivering superior guest service.
We
foster a
"promote from within" approach. To develop the talented bench strength needed
for continued internal promotions, developing our associates into competent
managers is one of our highest priorities. As part of our commitment to
improving our standards of execution, we emphasize strengthening each management
team's skills and capabilities through innovative selection, development,
evaluation and reward systems. Associates are encouraged to learn new skills
to
aid in their professional growth and to create greater opportunities for
advancement. The management development process is designed to not only meet
our
current management needs, but to provide for our future growth needs
as well.
Guest
Satisfaction and Quality Control
Our
future success depends on our associates' consistent commitment to
exceeding the guests' expectations. This commitment is monitored at
Company-owned units through the use of guest satisfaction surveys, a
mystery shopping program, frequent on-site visits and formal inspections by
management and training personnel. In the first quarter of fiscal 2008, we
will
complete the roll-out of a new “Guest Recovery” 800 number to resolve customer
issues in a timely manner and encourage return visits. Franchised restaurants
are monitored through periodic inspections by franchise field operations
personnel, guest satisfaction surveys and a mystery shopping program, in
addition to their own internal management oversight procedures. These guest
satisfaction measurement tools provide data for both continuing and
improving our excellence in customer service.
Purchasing
and Distribution Center Operations
We
operate
one distribution center in Bloomington, Illinois from which food products
(except for items purchased by the restaurants locally such as bakery goods,
produce and dairy products) and restaurant supplies are delivered to 107
Company-owned and 10 franchised restaurants. The restaurants served by the
distribution center are located in the Midwest (primarily in Illinois, Missouri,
Iowa and Wisconsin). Our semi-trailers handle refrigerated
products, frozen products and dry goods in the same delivery trip. The
restaurants that are not serviced by the distribution center obtain
Company-approved food products and supplies from two separate independent
distributors; one with locations in Orlando, Florida and Pryor, Oklahoma, and
the other with a location in Zanesville, Ohio.
Purchases
are
negotiated centrally for most food and beverage products and supplies to ensure
uniform quality, adequate quantities and competitive prices. Short-term forward
buying contracts are utilized to facilitate the availability of products that
meet our specifications and to lessen our exposure to fluctuating prices. Food
and supply items undergo ongoing research, development and testing in an effort
to maintain the highest quality products and to be responsive to changing
consumer tastes.
Branding
Our
marketing
thrust for 2008 will be driven by a focus on our core menu items, including
STEAKBURGER™ sandwiches, french fries and milk shakes. Its goal is to build
brand loyalty and increase purchase frequency. Marketing platforms are
product directed and explain why Steak n Shake is superior to alternatives
by
using a fun, irreverent, tongue-in-cheek approach in our advertising campaigns.
This "voice of the restaurant" defines our brand personality. By coupling this
branding approach with real consumer benefits, existing guests are encouraged
to
visit more often and new guests are encouraged to give our concept a try.
Television and radio, outdoor billboards, and coupon inserts are the mediums
on
which we focus our advertising.
Franchising
Our
franchising program extends our brand name recognition to areas where we have
no
current development plans and generates additional revenues without substantial
investment. Our expansion plans include seeking qualified new franchisees and
expanding our relationships with current franchisees.
Franchisees
undergo a selection process supervised by the Vice President, Franchising,
and
require final approval by senior management. We typically seek franchisees
with both the financial resources necessary to fund successful development
and significant experience in the restaurant/retail business. We assist
franchisees with the development and ongoing operation of their restaurants.
Our
management personnel assist franchisees with site selection, approve all
restaurant sites and provide prototype plans and construction support and
specifications. Our staff provides both on-site and off-site instruction to
franchised restaurant management and associates.
All
franchised restaurants are required to serve only Steak n Shake
approved menu items. Access to services such as our distribution center and
POS system enables franchisees to benefit from our purchasing power and assists
us in monitoring compliance with our quality standards and
specifications.
The
standard
Steak n Shake unit franchise agreement has an initial term of 20 years. Among
other obligations, the standard agreement requires franchisees to pay an initial
franchise fee of $40,000 for the first restaurant in a market, $35,000 for
the
second unit and $30,000 for each subsequent unit, as well
as continuing royalty fees and service fees based on gross receipts. The
standard franchise agreement also requires the franchisee to pay 5% of gross
sales for advertising. For more information on franchising opportunities,
visit our web site at
www.steaknshake.com/franchise
.
Competition
The
restaurant business is one of the most intensely competitive industries in
the
United States, with price, menu offerings, location and service all being
significant competitive factors. Our competitors include national, regional
and
local establishments. In all of our current and proposed future market areas,
there are established competitors with financial and other resources which
are
greater than ours. We face competition for sites on which to locate new
restaurants, as well as for restaurant associates and guests. The restaurant
business is often affected by changes in consumer tastes and by national,
regional and local economic conditions and demographic trends. The performance
of individual restaurants may be affected by factors such as traffic patterns,
demographics, harsh weather conditions, and the type, number and location of
competing restaurants. Additional factors that may adversely affect the
restaurant industry in general, and our restaurants in particular, are increases
in food, labor and associate benefit costs, negative publicity surrounding
food
quality or safety issues and difficulty in attracting qualified management
personnel and hourly associates.
Seasonal
Aspects
We
have
substantial fixed costs which do not decline as a result of a decline in
sales. Our first and second fiscal quarters, which include the winter
months, usually reflect lower average weekly unit volumes as compared to the
third and fourth fiscal quarters. Additionally, sales in the first two
fiscal quarters can be adversely affected by severe winter weather. We may
also be negatively affected by potential adverse weather during the first and
fourth fiscal quarters due to hurricanes and tropical storms that
may impact the Southeastern portion of the United States, where we have a
significant number of restaurants.
Employees
As
of
September 26, 2007, we employed approximately 22,000 associates, of which
approximately two-thirds were part-time hourly associates. We consider our
employee relations to be good and believe that we are providing working
conditions and wages that compare favorably with the industry.
Trademarks
"Steak
n
Shake®", "Steak 'n Shake Famous For Steakburgers®", "Famous For Steakburgers®",
"Takhomasak®", "Faxasak®", "Original Steakburgers®", "In Sight It Must Be
Right®", "Steak n Shake It’s a Meal®", "The Original Steakburger®", "The "Wing
and Circle"® logo", "Steak n Shake In Sight it Must be Right®", "Takhomacup®",
"Takhomasak®", "Takhomacard®", "Banawberry®", "Banocolate®", "Strawnilla®",
"Vanocha®", "Sippable Sundaes®", “Side-by-Side®” and the Company’s
"storefront design"® are among the federally registered trademarks and
servicemarks we own. "Bits ‘n Pieces™", “Original Double Steakburger™”, "Exactly
The Way You Want It™”, "Food And Service Exactly The Way You Want It™" and
"Create Your Own Steakburger™" are among the trademarks and service marks
we own or for which federal registration applications are currently pending.
We
protect our trademark rights by appropriate legal action whenever
necessary.
Government
Regulation
We
are
subject to various federal, state and local laws and regulations that might
impact our business. Each of our restaurants is subject to licensing and
regulation by a number of governmental authorities, including health and safety
and fire agencies in the state and municipality in which the restaurant is
located. The development and construction of restaurants is subject to
compliance with applicable zoning, land use and environmental regulations.
Difficulties in obtaining, or failure to obtain, the required licenses or
approvals could delay or prevent the development of a new restaurant in a
particular area.
Our
restaurant operations are also subject to federal and state minimum wage laws
and laws governing such matters as working conditions, child labor, overtime
and
tip credits. Many of our restaurant associates are paid at rates related to
the
federal and state minimum wage laws, and accordingly, further increases in
the
minimum wage would increase our labor costs. During 2007 we experienced federal
and state mandated minimum wage rate increases in a number of states where
we operate numerous stores, including Florida, Georgia, Illinois, Indiana,
Missouri and Ohio, resulting in a collective fiscal 2007 impact of approximately
$3.7 million. The total impact of these federal and state minimum wage increases
for fiscal 2008 is expected to be approximately $3.5 million.
As
of
September 26, 2007, we had franchise operations in 15 states and are subject
to
certain federal and state laws controlling the offering and conduct of the
franchise business in those states. In addition, we are subject to franchise
registration requirements in several states in which we are now conducting
or
will conduct franchise business in the future.
Geographic
Concentration
During
fiscal
2007, approximately 42.1% of our net sales were derived from five defined market
areas ("DMA"): Indianapolis, Indiana (11.7%); St. Louis, Missouri (11.3%);
Orlando, Florida (7.0%); Chicago, Illinois (6.5%); and Tampa, Florida
(5.6%). As a result, operations may be materially affected by weather, economic
or business conditions within these markets. Also, given our present geographic
concentration, adverse publicity relating to Steak n Shake restaurants could
have a more pronounced overall adverse effect on our sales than might be the
case if our restaurants were more broadly dispersed.
Information
Available on our Web Site
We
make
available through our web site, free of charge, our filings with the Securities
and Exchange Commission ("SEC") as soon as reasonably practicable after we
file
them electronically with, or furnish them to, the SEC. The reports we make
available include annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy statements, registration statements and
any
amendments to those documents. In addition, corporate governance documents
such
as our Corporate Governance Guidelines, Code of Business Conduct and Ethics,
Whistleblower Policy, Nominating and Corporate Governance Committee Charter,
Compensation Committee Charter and Audit Committee Charter are posted on our
web
site and are available without charge upon written request. Our web site link
is
www.steaknshake.com
and the link to SEC filings and corporate governance
documents is
www.steaknshake.com/investing.html
. Our web site and the
information contained therein or connected thereto is not intended to be
incorporated into this report on Form 10-K.
Executive
Officers of the Registrant
The
following
table sets forth information regarding our executive officers effective as
of
September 26, 2007:
Name
|
Age
|
Position
with Company
|
Since
|
|
|
|
|
Jeffrey
A. Blade
|
46
|
Executive
Vice President, Chief Financial and Administrative Officer
-
|
|
|
|
The
Steak n Shake Company
|
2004
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
|
|
|
|
Duane
E. Geiger
|
44
|
Vice
President, Controller -
|
|
|
|
The
Steak n Shake Company
|
2000
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
|
|
|
|
Alan
B. Gilman(1)
|
77
|
Interim
President -
|
|
|
|
The
Steak n Shake Company
|
2007
|
|
|
Steak
n Shake Operations, Inc.
|
2007
|
|
|
Interim
Chief Executive Officer -
|
|
|
|
The
Steak n Shake Company
|
2007
|
|
|
Steak
n Shake Enterprises, Inc.
|
2007
|
|
|
Chairman
-
|
|
|
|
The
Steak n Shake Company
|
2003
|
|
|
Steak
n Shake Operations, Inc.
|
2003
|
|
|
Steak
n Shake Enterprises, Inc
|
2006
|
|
|
|
|
Omar
Janjua
|
49
|
Executive
Vice President, Operations -
|
|
|
|
The
Steak n Shake Company
|
2007
|
|
|
Steak
n Shake Operations, Inc.
|
2007
|
|
|
|
|
David
C. Milne
|
40
|
Vice
President -
|
|
|
|
The
Steak n Shake Company
|
2007
|
|
|
Steak
n Shake Enterprises, Inc.
|
2007
|
|
|
General
Counsel -
|
|
|
|
The
Steak n Shake Company
|
2003
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
|
|
Corporate
Secretary -
|
|
|
|
The
Steak n Shake Company
|
2004
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
|
|
|
|
Thomas
Murrill
|
58
|
Senior
Vice President, Human Resources -
|
|
|
|
The
Steak n Shake Company
|
2007
|
|
|
Steak
n Shake Operations, Inc.
|
2007
|
|
|
|
|
Gary
T. Reinwald
|
59
|
Executive
Vice President, Development -
|
|
|
|
The
Steak n Shake Company
|
2004
|
|
|
Steak
n Shake Operations, Inc.
|
2004
|
|
|
|
|
Steven
M. Schiller
|
42
|
Senior
Vice President, Chief Marketing Officer-
|
|
|
|
The
Steak n Shake Company
|
2005
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
|
|
|
|
J.
Michael Vance
|
38
|
Vice
President, Strategic Planning and Chief Information Officer
-
|
|
|
|
The
Steak n Shake Company
|
2006
|
|
|
Steak
n Shake Enterprises, Inc.
|
2006
|
(1)
Member of the Board of Directors of the Company.
Mr.
Blade joined us
as Senior Vice President and Chief Financial Officer in 2004 and was promoted
to
Executive Vice President, Chief Financial and Administrative Officer in 2007.
From 1999 to 2004, Mr. Blade was Vice President of Finance for the U.S.
operations of Cott Corporation. Prior thereto, Mr. Blade served in various
financial roles for the Kraft Foods Corporation from 1988 to 1999.
Mr.
Geiger
was appointed Vice President, Controller in 2004. Prior thereto, Mr. Geiger
was
Vice President, Information Systems, Financial Planning and Treasurer and served
in various other capacities within the Company since 1993.
Mr.
Gilman
was appointed interim President and Chief Executive Officer in 2007. Mr. Gilman
was elected Chairman during 2003 and has been a Director of the Company since
1992. He served as Chief Executive Officer from 1992 until 2004 and as President
from 1992 until 2002.
Mr.
Janjua
joined us as Executive Vice President, Operations in 2007. Prior to joining
Steak n Shake, he served in various executive positions with Yum Brands, Inc.
in
its Pizza Hut operations since joining Yum in 1989.
Mr.
Milne was
promoted to General Counsel in 2003, to Secretary in 2004 and to Vice President
in 2007 after joining us in 2000. Prior to joining Steak n Shake, Mr. Milne
was
in the private practice of law with two large Indianapolis law
firms.
Mr.
Murrill
joined us as Senior Vice President, Human Resources in 2007. Prior to joining
Steak n Shake he served as Executive Vice President of Total Access Speakers
Bureau, Inc. in 2006 and Vice President of Human Resources and Administration
at
Royal Caribbean Cruise Lines, LTD from 1995 through 2006.
Mr. Reinwald
was
appointed Executive Vice President of the Company in 2004. Prior thereto, Mr.
Reinwald was Senior Vice President, Operations and National General Manager,
and
he has served in various management and senior management capacities during
his
43-year tenure with Steak n Shake.
Mr.
Schiller
joined us as Senior Vice President and Chief Marketing Officer in 2005.
Prior to joining Steak n Shake, Mr. Schiller was the Group Director for the
Marketing Organization for The Coca-Cola Company since joining in
1996.
Mr.
Vance was
promoted to Chief Information Officer and Vice President, Strategic Planning
in
2007 after having served as Vice President, Information Technology and Director
of Information Technology since joining us in 2003. Prior to joining Steak
n Shake he served as Director of Consulting Services with Inrange Global
Consulting from 2002 through 2003 and was a Senior Manager with Arthur
Anderson/Accenture from 1997 through 2002.
Our
executive
officers are appointed annually by the Board of Directors.
An
investment
in our common stock involves a degree of risk. These risks should be considered
carefully with the uncertainties described below, and all other information
included in this Annual Report on Form 10-K, as well as other filings that
we
make from time to time with the SEC, before deciding whether to purchase our
common stock. Additional risks and uncertainties not currently known to us
or that we currently deem immaterial may also become important factors that
may
harm our business, financial condition, results of operations or cash
flows. The occurrence of any of the following risks could harm our business,
financial condition, results of operations or cash flows. The trading price
of
our common stock could decline due to any of these risks and uncertainties,
and
you may lose part or all of your investment.
This
report
includes forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.
In
general, forward-looking statements include estimates of future revenues, cash
flows, capital expenditures or other financial items, and assumptions underlying
any of the foregoing. Forward-looking statements reflect management's current
expectations regarding future events and use words such as "anticipate,"
"believe," "expect," "may," and other similar terminology. A
forward-looking statement is neither a prediction nor a guarantee of future
events or circumstances, and those future events or circumstances may not occur.
Investors should not place undue reliance on the forward-looking statements,
which speak only as of the date of this report. These forward-looking statements
are all based on currently available operating, financial and competitive
information and are subject to various risks and uncertainties. Our actual
future results and trends may differ materially depending on a variety of
factors, many beyond our control, including, but not limited to, the risks
and
uncertainties discussed below. Accordingly, such forward-looking statements
do
not purport to be predictions of future events or circumstances and may not
be
realized. We undertake no obligation to publicly update or revise them, except
as may be required by law.
Our
new stores may not perform up to expectations.
We
are
currently planning to open fewer new restaurants in fiscal 2008 than
in recent years. Our ability to open and profitably operate restaurants is
subject to risks such as identifying and securing suitable and economically
viable locations, negotiating acceptable lease or purchase terms for new
locations, obtaining required governmental permits (including zoning approvals)
on a timely basis, complying with other regulatory requirements, securing
necessary contractors, subcontractors and labor, meeting construction schedules
and budgets, increasing labor and building materials costs and adverse weather
conditions or other acts of God that could result in construction
delays. If we are unable to successfully manage these risks, we could face
increased costs and lower than anticipated revenues and earnings in future
periods.
We
face continually increasing competition in the restaurant industry for
locations, guests, staff, supplies and new products, which may prevent
us from
reversing negative same store sales trends.
Our
business
is subject to intense competition with respect to prices, services, locations,
qualified management personnel and quality of food. We compete with other
food
service operations, with locally-owned restaurants and with other national
and
regional restaurant chains that offer the same or similar types of services
and
products. Some of our competitors may be better established in the markets
where
our restaurants are or may be located. Changes in consumer tastes, national,
regional, or local economic conditions, demographic trends, traffic patterns
and
the types and numbers and locations of competing restaurants often affect
the
restaurant business. There is active competition for management personnel
and
for attractive commercial real estate sites suitable for restaurants. In
addition, factors such as inflation, increased food, labor, equipment,
fixture
and benefit costs, as well as difficulty in attracting qualified
management and hourly employees may adversely affect the restaurant industry
in
general and our restaurants in particular. We expect our first quarter
fiscal
2008 same store sales to be down more than the low end of our annual range
of
down 1% to 5%. If our strategy does not improve same store sales, our operating
results and business would be adversely affected.
The
inability of our franchises to operate profitable restaurants may negatively
impact our continued financial success.
We
operate a
franchise program and collect royalties, marketing and service fees from
the
franchisees. The ability of franchisees to generate profits impacts our overall
profitability and brand recognition.
Growth
within
the existing franchise base is dependent upon many of the same factors that
apply to our Company-owned restaurants, and sometimes the challenges of opening
profitable restaurants prove to be more difficult for our franchisees. For
example, franchisees may not have access to the financial or management
resources that they need to open or continue operating the restaurants
contemplated by their franchise agreements with us. In addition, our continued
growth is also partially dependent upon our ability to find and retain qualified
franchisees in new markets, which may include markets in which the Steak
n Shake
brand is less well known. Furthermore, the loss of any of our franchisees
due to
financial concerns and/or operational inefficiencies could impact our
profitability and brand.
Our
franchisees are required to operate their restaurants according to our
guidelines. We provide training opportunities to our franchise operators
to
fully integrate them into our operating strategy. However, since we do not
have
control over these restaurants, we cannot give assurance that there will
not be
differences in product quality or that there will be adherence to all of
our
guidelines at these franchised restaurants. In order to mitigate these risks,
we
do require that our franchisees focus on the quality of their operations,
and we
expect full compliance with our standards.
Due
to our smaller restaurant base, our operating results could be materially and
adversely affected by the negative performance of or the decision to close
a
small number of restaurants.
Our
restaurant base is smaller than many other restaurant chains. Accordingly,
poor
operating results in one or more of our markets or the decision to close even
a
relatively small number of underperforming restaurants could materially and
adversely affect our business, financial conditions, results of operations
or
cash flows.
Our
operating results could vary significantly if we are unable to attract guests
to
our restaurants and earn their repeat
business.
We
take pride
in our ability to attract and retain our guests, however if we do not deliver
an
enjoyable dining experience for our guests or are unable to provide them
with the food quality they expect, they may not return to our restaurants,
and
results may be negatively affected.
Changes
in guest preferences for casual dining styles or menu items could adversely
affect our financial
performance.
Changing
guest preferences, tastes and dietary habits can adversely impact our business
and financial performance. We offer a large variety of entrees, side dishes
and desserts, and our continued success depends, in part, on the popularity
of
our product offerings and casual style of dining. A change in guest
preferences away from this dining style or our offerings in favor of other
dining styles or offerings may have an adverse effect on our
business.
Increases
in the minimum wage rates by federal or state governments could adversely affect
our business.
Many
of our
associates are paid wages that relate to federal and state minimum wage
rates. Any increases in the minimum wage rates may significantly increase
our restaurant operating costs. In addition, since our business is
labor-intensive, shortages in the labor pool or other inflationary pressure
could increase labor costs, which could harm our financial
performance.
Ownership
and leasing of significant amounts of real estate exposes us to possible
liabilities
We
own the
land and building or lease the land and/or the building for our
restaurants. Accordingly, we are subject to all of the risks associated
with owning and leasing real estate. In particular, the value of our assets
could decrease and our costs could increase because of changes in the investment
climate for real estate, demographic trends, supply or demand for the use of
restaurants in an area, or liabilities for environmental
conditions. We generally cannot cancel our leases. If we decide
to close an underperforming existing store, or if we decide not to
open a planned future store, we may, nonetheless, be committed to perform our
obligations under the applicable lease including, among other things, paying
the
base rent for the remainder of the lease term. In addition, as each of
the leases expires, we may fail to negotiate renewals either on commercially
acceptable terms or at all, which could cause us to close stores in desirable
locations.
Labor
shortages, an increase in labor costs, or the inability to attract
qualified associates could harm our business.
Our
associates are essential to the operation of our restaurants and our ability
to
deliver an enjoyable dining experience to our guests. If we are unable to
attract and retain enough qualified restaurant personnel at a reasonable cost,
or if they do not deliver an enjoyable dining experience to our guests, our
results may be negatively affected. Additionally, competition for qualified
employees could require us to pay higher wages or provide greater benefits,
which could result in higher labor costs.
Fluctuations
in commodity and energy prices and the availability of commodities, including
beef, poultry and dairy, could affect our business.
A
significant
component of our costs is related to food commodities, including beef,
poultry and dairy products, which can be subject to significant price
fluctuations due to seasonal shifts, climate conditions, industry demand,
changes in international commodity markets and other factors. If there is a
substantial increase in prices for these food commodities, and we are unable
to
offset the increases with changes in our menu pricing, our results of operations
may be negatively affected. In addition, we are dependent on frequent deliveries
of perishable food products that meet certain specifications. Shortages or
interruptions in the supply of perishable food products caused by unanticipated
demand, problems in production or distribution, disease or food-borne illnesses,
inclement weather or other conditions could adversely affect the availability,
quality and cost of ingredients, which would likely lower revenues, damage
our
reputation and otherwise harm our business.
We
must
purchase energy-related products such as electricity, oil and natural gas for
use in each of our restaurants.Our suppliers must purchase gasoline in order
to
transport food and supplies to us. Our guests purchase energy to heat and cool
their homes and fuel their automobiles. When energy prices increase, we incur
greater costs to operate our restaurants. Likewise, our guests have lower
disposable income and thus may reduce the frequency in which they dine out
and/or feel compelled to choose more inexpensive restaurants when eating outside
the home.
Due
to our geographic locations, certain restaurants are subject to climate
conditions that could affect operations.
Many
of our
restaurants are located in the Midwest and Southeast portions of the United
States. During the first and second fiscal quarters, restaurants in the
Midwest may face harsh winter weather conditions. During the first and
fourth fiscal quarters, restaurants in the Southeast may face harsh weather
associated with hurricanes or tropical storms. These harsh weather
conditions may make it more difficult for guests to visit our restaurants or
may
necessitate the closure of our restaurants for a period of time. If guests
are
unable to visit our restaurants, or if our restaurants are closed as the result
of inclement weather, our sales and operating results may be negatively
affected.
Unfavorable
publicity could harm our business.
Restaurant
chains such as ours can be adversely affected by publicity resulting from
complaints or litigation alleging poor food quality, food-borne illness,
personal injury caused by food tampering, adverse health effects (including
obesity) or other concerns stemming from one or a limited number of restaurants.
Regardless of whether the allegations or complaints are valid, unfavorable
publicity relating to even just one of our restaurants, could adversely affect
public perception of the entire brand, which could immediately and severely
hurt
sales and accordingly, revenues and profits. If guests become ill from
food-borne illnesses, we could also be forced to temporarily close some
restaurants. In addition, instances of food-borne illnesses or food tampering,
even those occurring solely at the restaurants of competitors, could, due to
negative publicity about the restaurant industry, adversely affect
sales.
We
are subject to health, employment, environmental and other government
regulations, and failure to comply with existing or future government
regulations could expose us to litigation, damage our reputation and lower
profits.
We
are
subject to various federal, state and local laws affecting our business.
Restaurant operations are also subject to licensing and regulation by state
and
local departments relating to health, food preparation, sanitation and safety
standards, federal and state labor laws (including applicable minimum wage
requirements, overtime, working and safety conditions and citizenship
requirements), federal and state laws prohibiting discrimination and other
laws
regulating the design and operation of facilities, such as the Americans with
Disabilities Act of 1990. If we fail to comply with any of these laws, we may
be
subject to governmental action or litigation, and our reputation could be
accordingly harmed. Injury to our reputation would, in turn, likely reduce
revenues and profits.
In
recent
years, there has been an increased legislative, regulatory and consumer focus
on
nutrition and advertising practices in the food industry. As a result, we may
become subject to regulatory initiatives in the area of nutrition disclosure
or
advertising, such as requirements to provide information about the nutritional
content of our food products, which could increase expenses. The operation
of
our franchise system is also subject to franchise laws and regulations enacted
by a number of states and to rules promulgated by the U.S. Federal Trade
Commission. Any future legislation regulating franchise relationships may
negatively affect our operations, particularly our relationship with
franchisees. Failure to comply with new or existing franchise laws and
regulations in any jurisdiction or to obtain required government approvals
could
result in a ban or temporary suspension on future franchise sales.
We
may not be able to adequately protect our intellectual property, which could
decrease the value of our brand and products.
The
success
of our business depends on the continued ability to use the existing trademarks,
service marks and other components of our brand to increase brand awareness
and
further develop branded products. While we take steps to protect our
intellectual property, our rights to our trademarks could be challenged by
third
parties or our use of these trademarks may result in liability for trademark
infringement, trademark dilution or unfair competition, adversely affecting
our
profitability.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
We
currently
lease 57,066 square feet of executive office space in Indianapolis,
Indiana, under a lease expiring June 30, 2013.
We
also have
a complex of three buildings located in Bloomington, Illinois, where we own
38,900 square feet of office/warehouse space in two separate buildings (one
of
which has cold storage facilities), and we lease a 26,300 square foot
distribution center and division office facility. We lease division offices
in
Orlando, Florida; Cincinnati, Ohio; Columbus, Ohio; Chicago, Illinois; and
Indianapolis, Indiana. We own division office facilities in St. Louis, Missouri.
At September 26, 2007, we owned one restaurant location that had been leased
to
a third party. In addition, there were six restaurants under construction and
we
owned four parcels of land that are being held for future development at
September 26, 2007.
As
of
September 26, 2007, we operated 266 leased and 169 owned
restaurants. Restaurant leases for land and building typically are
non-cancelable, have an initial term of 18 to 25 years, renewal terms
aggregating twenty years or more and require us to pay real estate taxes,
insurance and maintenance costs. Of our leases, 185 contain clauses
requiring the payment of a percentage of sales in excess of a certain
threshold as rent in addition to base rent requirements. Restaurants
are generally 3,900 square feet and seat approximately 100 customers, while
a
minimal percentage of restaurants have a similar style but seat 54 to 198
customers and occupy between 1,000 and 6,000 square feet. We have lease
obligations on three former restaurants which have been subleased to others
as
of September 26, 2007. These obligations primarily relate to restaurant
locations disposed of in the late 1970's and the sublease rentals cover
substantially all of our obligations under the primary leases.
Our
wholly
owned subsidiary, SNS Investment Company ("SIC"), assists qualified franchisees
with financing by purchasing or leasing land, constructing the restaurant and
then leasing or subleasing the land and building to the franchisee. SIC leases
the land and building for these properties as the primary lessee. These leases
typically have an initial term of 18 years, renewal options aggregating 20
years
or more and require SIC to pay real estate taxes, insurance and maintenance
costs. As of September 26, 2007, SIC had three land and building leases for
properties located in Chattanooga, Tennessee; Columbia, Missouri; and Topeka,
Kansas; which are being operated by franchisees pursuant to sublease agreements.
All lease and sublease agreements between SIC and its franchisees specifically
include triple net lease provisions whereby the franchisee is responsible for
all real estate taxes, insurance and maintenance costs. Additionally, SIC has
a
ground lease for a property in Bloomington, Indiana, which is
subleased to a third party.
Restaurant
Lease Expirations
Restaurant
leases are scheduled to expire as follows, assuming the exercise of all renewal
options:
|
Number
of Leases Expiring
|
Calendar
Year
|
SNS
|
SIC
|
2008
- 2012
|
1
|
|
2013
- 2017
|
3
|
|
2018
- 2022
|
17
|
|
2023
- 2027
|
11
|
1
|
2028
- 2032
|
23
|
|
Beyond
|
211
|
2
|
|
266
|
4
|
ITEM
3. LEGAL PROCEEDINGS
We
are
engaged in various legal proceedings and have certain unresolved claims pending.
The ultimate liability, if any, for the aggregate amounts claimed cannot be
determined at this time. However, management believes, based on examination
of
these matters and experiences to date, that the ultimate liability, if any,
in
excess of amounts already provided in our consolidated financial statements
is
not likely to have a material adverse effect on our financial position,
results of operations or cash flows.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No
matters
were submitted to a vote of shareholders during the fourth quarter of the fiscal
year covered by this Report.
PART
II
.
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market
Price Range/Stock Trading
Our common
stock is traded on the New York Stock Exchange ("NYSE") under the symbol
SNS. Stock price quotations can be found in major daily newspapers, in
The
Wall Street Journal
and on our web site. The high and low closing sales
prices for our common stock, as reported on the NYSE for each quarter of the
past two fiscal years, are shown below:
|
|
2007
|
|
|
2006
|
|
|
|
High
|
|
Low
|
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
19.25
|
|
$
|
16.53
|
|
|
$
|
19.39
|
|
$
|
16.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
$
|
18.08
|
|
$
|
16.43
|
|
|
$
|
21.10
|
|
$
|
16.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
$
|
17.13
|
|
$
|
14.78
|
|
|
$
|
20.08
|
|
$
|
14.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
|
$
|
17.22
|
|
$
|
13.46
|
|
|
$
|
17.41
|
|
$
|
13.46
|
|
We
did not
pay cash dividends on our common stock during the last two fiscal years and
do
not expect to pay cash dividends in the near future. As of December 5, 2007,
there were approximately 8,000 record holders of our common
stock.
Share
Repurchases
The
following
table presents a summary of share repurchases made by us:
Period
|
|
Total
Number of Shares Purchased
|
|
Average
Price Paid per Share
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans
or
Programs
|
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or
Programs
|
|
|
|
|
|
|
|
|
|
|
|
July
5, 2007-August 1, 2007
|
|
|
|
—
|
|
|
|
2,979,600
|
|
August
2, 2007-August 29, 2007
|
|
|
|
|
|
|
|
2,979,600
|
|
August
30, 2007-September 26, 2007
|
|
|
|
|
|
|
|
2,979,600
|
|
The
share
repurchase program previously authorized by the Board of Directors was announced
on November 16, 2005. The program allowed for the repurchase of up
to three million shares for a period of two years. There were no further
repurchases of shares subsequent to year-end through the expiration of the
program on November 16, 2007.
See
Item 12
for the "Equity Compensation Plan Information" required by Item 201(d) of
Regulation S-K.
ITEM
6. SELECTED FINANCIAL DATA
SELECTED
FINANCIAL AND OPERATING DATA
|
The
Steak n Shake Company
|
(Amounts
in 000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
Statement
of Earnings Data:
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
$
|
654,142
|
|
$
|
638,822
|
|
$
|
606,912
|
|
$
|
553,692
|
|
$
|
499,104
|
|
Net
Earnings (1)
|
|
$
|
11,808
|
|
$
|
28,001
|
|
$
|
30,222
|
|
$
|
27,591
|
|
$
|
20,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share (1)
|
|
$
|
0.42
|
|
$
|
1.01
|
|
$
|
1.10
|
|
$
|
1.01
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Common and
Common
Equivalent Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share (1)
|
|
$
|
0.42
|
|
$
|
1.00
|
|
$
|
1.08
|
|
$
|
1.00
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Weighted Average Shares
(in
thousands)
|
|
|
28,018
|
|
|
27,723
|
|
|
27,500
|
|
|
27,385
|
|
|
27,010
|
|
Diluted
Weighted Average Shares and
Share
Equivalents (in thousands)
|
|
|
28,216
|
|
|
28,039
|
|
|
28,059
|
|
|
27,711
|
|
|
27,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Financial Position Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
565,214
|
|
$
|
542,521
|
|
$
|
474,657
|
|
$
|
435,853
|
|
$
|
417,174
|
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
under leases
|
|
|
139,493
|
|
|
143,996
|
|
|
147,615
|
|
|
144,647
|
|
|
147,957
|
|
Other
long-term debt
|
|
|
16,522
|
|
|
18,802
|
|
|
6,315
|
|
|
9,429
|
|
|
16,203
|
|
Shareholders'
equity
|
|
$
|
303,864
|
|
$
|
287,035
|
|
$
|
252,975
|
|
$
|
218,932
|
|
$
|
187,903
|
|
SELECTED
FINANCIAL AND OPERATING DATA
|
The
Steak n Shake Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
Other
Data:
|
|
|
|
|
|
|
|
|
|
|
Number
of Restaurants:
|
|
|
|
|
|
|
|
|
|
|
Company-owned
|
|
435
|
|
429
|
|
399
|
|
365
|
|
356
|
Franchised
|
|
56
|
|
48
|
|
49
|
|
60
|
|
57
|
|
|
491
|
|
477
|
|
448
|
|
425
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
Number of Employees
|
|
22,000
|
|
23,000
|
|
21,500
|
|
20,000
|
|
20,000
|
Approximate
Number of Shareholders
|
|
8,000
|
|
12,000
|
|
13,500
|
|
13,500
|
|
13,500
|
(1)
Fiscal 2007 and 2006 net income and earnings per share include the impact of
the
adoption of Statement of Financial Accounting Standards No. 123 (Revised
2004), "Share Based Payment" ("SFAS 123(R)"). Net after-tax effect was
$0.04 and $0.07 per diluted share, respectively.
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
Steak
n Shake Company
(Years
ended September 26, 2007, September 27, 2006 and September 28,
2005)
(Amounts
in $000s, except per share data)
In
the
following discussion, the term "same store sales" refers to the sales of only
those units open eighteen months as of the beginning of the current fiscal
period being discussed and which remained open through the end of the fiscal
period.
We
have a
52/53 week fiscal year ending on the last Wednesday in September. Fiscal years
2007, 2006 and 2005, which ended on September 26, 2007, September 27, 2006
and
September 28, 2005, respectively, each contained 52 weeks.
For
an
understanding of the significant factors that influenced our performance during
the past three fiscal years, the following discussion should be read in
conjunction with the consolidated financial statements and related notes found
elsewhere in this Annual Report.
Overview
Business
Profile
In
fiscal
2007, we opened 16 new Company-owned restaurants, closed eight
underperforming restaurants and sold two restaurants to franchisees, which
brings the total Company-owned restaurants to 435. Additionally, six new
franchised units were opened during fiscal 2007, bringing the total number
of franchised restaurants to 56.
Company
Performance
We
reported
higher revenues and lower net earnings and diluted earnings per share in the
year ended September 26, 2007 as compared to the prior year. Total revenues
increased by 2.4% to $654,142, compared to $638,822 for the same period last
year. Net earnings decreased 57.8% to $11,808 from $28,001 in the prior year,
while diluted earnings per share decreased to $0.42 from $1.00. Included
in 2007 earnings per share is a charge of $5,369 ($3,329 or $0.12 per
diluted share, net of tax) primarily related to the impairment of 14
Company-owned restaurants. During the fourth quarter of fiscal 2007, we
closed eight of these impaired restaurants. We do not anticipate any material
Company-owned store closures during 2008. Also included in 2007 earnings per
share was a charge of $1,900 ($1,178 or $0.04 per diluted share, net of tax)
related to restructuring and severance expenses.
The
keys to
revenue growth in fiscal 2007 were the addition of 16 new Company-owned
stores and a full year of revenues earned from eight stores acquired from
CRI at the beginning of the fourth quarter of fiscal 2006. These increased
revenues were offset by a decline in same store sales of 3.8% for the full
year. The decrease in same store sales was the result of a decrease in guest
counts of 5.6% offset by an increase in average guest expenditure of
1.8%, aided by a 2.0% weighted average menu price increase in the
current year.
We
believe
the decline in guest counts is due to a number of factors, including
the impact of rising fuel prices, rising interest rates, high home
foreclosure rates in some of our core markets, poor store level execution,
the underperformance of stores opened in recent years and falling consumer
confidence that diverted these guests to more traditional QSR. We are
committed to improving both our execution and the concept to enable us to gain
same store sales, even in difficult environments. We understand that the
outlook for several external environmental factors that affect casual dining
trends (such as gas prices, foreclosures and interest rates) remains
uncertain.
Fiscal
2008
We
anticipate
full-year diluted earnings per share in the range of $0.32 to $0.42. The
earnings per share estimate is based on a same store sales decline of 1.0%
to
5.0%, given the continued difficult operating environment and the resulting
impact on same store sales performance. This estimate includes a 2% incremental
price increase taken in November 2008. We expect first quarter fiscal 2008
same store sales to be down potentially more than the low end of the annual
range, reflecting the current challenging business environment and the impact
of
a decrease in the volume of coupon distribution in most markets as compared
to
the first quarter of fiscal 2007.
We
anticipate
opening approximately nine new Company-owned stores in established markets
during fiscal 2008 with the expectation that at least two-thirds of
the openings will be completed in the first half of the fiscal year. This
represents fewer openings than in recent years, which will permit us to focus
on
improving execution and same store sales. Fiscal 2008 capital spending is
anticipated to be in a range of $37,000 to $45,000. Relative to franchising,
we
expect franchisees to open approximately six units during fiscal
2008.
Critical
Accounting Estimates
Management’s
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared
in
accordance with accounting principles generally accepted in the United
States of America. The preparation of our financial statements requires us
to
make estimates and judgments that affect the reported amounts of assets,
liabilities, expenses and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate these estimates and our
assumptions based on historical experience and other factors that are believed
to be relevant under the circumstances. Actual results may differ from these
estimates under different assumptions or circumstances.
We
believe
the following critical accounting estimates represent our more significant
judgments and estimates used in preparation of our consolidated financial
statements.
Long-lived
Assets - Impairment and Classification as Held for Sale
We
review our restaurants for impairment on a restaurant-by-restaurant basis
when events or circumstances indicate a possible impairment. We test for
impairment by comparing the carrying value of the asset to the undiscounted
future cash flows expected to be generated by the asset. If the total estimated
future cash flows are less than the carrying amount of the asset, the carrying
amount is written down to the estimated fair value, and a loss is recognized
in
earnings.
We
sell
restaurants that have been closed due to underperformance and land parcels
that
we do not intend to develop in the future. We classify an asset as held for
sale
in the period during which each of the following conditions is met: (a)
management has committed to a plan to sell the asset; (b) the asset is available
for immediate sale in its present condition; (c) an active search for a buyer
has been initiated; (d) completion of the sale of the asset within one year
is
probable; (e) the asset is being marketed at a reasonable price; and (f) no
significant changes to the plan of sale are expected.
Because
depreciation and amortization expense is based upon useful lives of assets
and
the net salvage value at the end of their lives, significant judgment is
required in estimating this expense. Additionally, determining the future
cash flows expected to be generated by an asset requires significant judgment
regarding future performance of the asset, fair market value if the asset were
to be sold and other financial and economic assumptions. There is also judgment
involved in estimating the timing of completing the sale of an asset.
Accordingly, we believe that accounting estimates related to long-lived assets
are critical.
Insurance
Reserves
We
self-insure a significant portion of expected losses under our workers'
compensation, general liability and auto liability insurance programs. In 2006,
we began to self-insure our group health insurance risk. We purchase
reinsurance for individual and aggregate claims that exceed predetermined
limits. We record a liability for all unresolved claims and our estimates of
incurred but not reported ("IBNR") claims at the anticipated cost to us. The
liability estimate is based on information received from insurance companies,
combined with management's judgments regarding frequency and severity of claims,
claims development history and settlement practices. Significant judgment is
required to estimate IBNR claims as parties have yet to assert a claim and
therefore, the degree to which injuries have been incurred and the related
costs
have not yet been determined. Additionally, estimates about future costs involve
significant judgment regarding legislation, case jurisdictions and other
matters. Accordingly, management believes that estimates related to
self-insurance reserves are critical. Our reserve for self-insured liabilities
at September 26, 2007 and September 27, 2006 were $7,037 and $10,521,
respectively. The reduction in insurance liability is the result of
favorable claims experience over prior years, timing of payments made due to
our
efforts to close claims related to prior years and a shift in our prepayment
of
estimated reserves from the fourth quarter of fiscal 2006 to the first quarter
of fiscal 2007.
Income
Taxes
We
record
deferred tax assets or liabilities based on differences between financial
reporting and tax basis of assets and liabilities using currently enacted rates
and laws that will be in effect when the differences are expected to reverse.
We
record deferred tax assets to the extent we believe there will be sufficient
future taxable income to utilize those assets prior to their expiration. To
the
extent deferred tax assets would be unable to be utilized, we would record
a
valuation allowance against the unrealizable amount and record that amount
as a
charge against earnings. Due to changing tax laws and state income tax rates,
significant judgment is required to estimate the effective tax rate expected
to
apply to tax differences that are expected to reverse in the future. We must
also make estimates about the sufficiency of taxable income in future periods
to
offset any deductions related to deferred tax assets currently recorded.
Accordingly, we believe estimates related to income taxes are critical. Based
on
2007 results, a change of 1% in the annual effective tax rate would have an
impact of $149 on net earnings.
Goodwill
and Other Intangible Assets
We
evaluate
goodwill and other indefinite life intangible assets annually, or more
frequently if indicators of impairment are present. If the determined fair
values of these assets are less than the related carrying amounts an impairment
loss is recognized. The methods used to estimate fair value may include future
cash flow assumptions, which may differ from actual cash flows due to, among
other things, economic conditions or changes in operating
performance. Determining the future cash flows expected to be generated by
an asset requires significant judgment regarding future performance of the
asset and other financial and economic assumptions. Accordingly, we believe
that accounting estimates related to goodwill and other intangible assets are
critical.
Leases
We
lease
certain properties under operating leases. We also have many lease
agreements that contain rent holidays, rent escalation clauses and/or contingent
rent provisions. We recognize rent expense on a straight-line basis over
the expected lease term, including cancelable option periods when failure to
exercise such options would result in an economic penalty. We use a time
period for our straight-line rent expense calculation that equals or exceeds
the
time period used for depreciation. In addition, the rent commencement date
of the lease term is the earlier of the date when we become legally obligated
for the rent payments or the date when we take access to the grounds for
buildout. As the assumptions inherent in determining lease commencement and
lease expiration dates and other related complexities of accounting for leases
involve significant judgment, management has determined that lease accounting
is
critical.
Results
of Operations
In
the
following table is set forth the percentage relationship to total revenues,
unless otherwise noted, of items included in consolidated statements of earnings
for the periods indicated:
|
2007
|
|
|
2006
|
|
|
2005
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Net
sales
|
99.4
|
%
|
|
99.4
|
%
|
|
99.4
|
%
|
Franchise
fees
|
0.6
|
|
|
0.6
|
|
|
0.6
|
|
Total
Revenues
|
100
|
|
|
100
|
|
|
100
|
|
Costs
and Expenses:
|
|
|
|
|
|
|
|
|
Cost
of sales (1)
|
23.1
|
|
|
22.6
|
|
|
23.2
|
|
Restaurant
operating costs (1)
|
51.8
|
|
|
50.3
|
|
|
49.0
|
|
General
and administrative
|
8.8
|
|
|
8.3
|
|
|
7.9
|
|
Depreciation
and amortization
|
4.9
|
|
|
4.5
|
|
|
4.4
|
|
Marketing
|
4.4
|
|
|
4.3
|
|
|
4.4
|
|
Interest
|
2.1
|
|
|
1.8
|
|
|
2.1
|
|
Rent
|
2.1
|
|
|
1.9
|
|
|
1.7
|
|
Pre-opening
costs
|
0.4
|
|
|
0.6
|
|
|
0.5
|
|
Provision
for restaurant closings
|
0.8
|
|
|
—
|
|
|
0.2
|
|
Other
income, net
|
(0.3)
|
|
|
(0.4)
|
|
|
(0.3)
|
|
|
|
|
|
|
|
|
|
|
Earnings
Before Income Taxes
|
2.3
|
|
|
6.6
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
0.5
|
|
|
2.2
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
Net
Earnings
|
1.8
|
%
|
|
4.4
|
%
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
(1)
Cost of sales and restaurant operating costs are expressed as a
percentage
of net sales.
|
(Amounts
in $000s)
Fiscal
2007 compared with Fiscal
2006
Net
Earnings
Net
earnings
decreased in the current year by 57.8% or $16,193 to $11,808, or $0.42 per
diluted share compared with $28,001 or $1.00 per diluted share, for fiscal
2006. The decrease was primarily driven by the decline in same store sales
noted below, a $5,369 ($3,329, net of tax) non-cash impairment charge which
had an impact of $0.12 per diluted share and $1,900 ($1,178, net of tax) of
restructuring and severance expenses which had an impact of $0.04 per diluted
share.
Net
Sales
For
the year,
net sales increased 2.4% from $634,941 to $650,416. The net
sales gains were due to the opening of 16 new Company-owned stores,
partially offset by a 3.8% same store sales decline. That decrease in same
store
sales was due to a declining guest count of 5.6% partially offset by a 1.8%
increase in average guest expenditure. As noted, fiscal 2007 net sales also
benefited from a full year of sales relating to the acquisition of eight
franchised restaurants from CRI in the fourth quarter of fiscal 2006. CRI sales
during 2007 and 2006 were $15,842 and $3,990, respectively.
Cost
and Expenses
In
2007, cost
of sales was $150,286 or 23.1% of net sales, compared with $143,360 or
22.6% of net sales in fiscal 2006. The increase as a percentage of net
sales was primarily due to new menu items with higher percentage food cost,
including improved entrée salads, chicken sandwiches and Fruit n Frozen
yogurt shakes, and to operational inefficiencies from implementing the new
product mix.
Restaurant
operating costs were $336,955 or 51.8% of net sales compared to $319,070 or
50.3% of net sales in the prior year. The largest portion of
the increase related to labor and fringes, which increased $10,144 or
0.7% as a percentage of net sales over the prior year. The increase in labor
costs was primarily due to federal and state mandated minimum wage rate
increases in states where we operate numerous stores,
including Florida, Georgia, Illinois, Indiana, Missouri and Ohio, resulting
in a collective fiscal 2007 impact of $3,722. Other restaurant operating costs
including utilities and repairs and maintenance increased as a percentage of
net
sales due to the impact of negative same store sales on fixed
costs.
General
and
administrative expenses for fiscal 2007 were $57,525 or 8.8% of total
revenues compared to $52,949 or 8.3% of total revenues in fiscal 2006. The
increase in general and administrative expenses as a percentage of
revenues was attributable to $1,900 of restructuring and severance expenses
not incurred in fiscal 2006 and to approximately $1,600 of compensation and
$1,400 of incremental consulting expenses including "Guest Winning Promise"
research. Planned general and administrative spending for fiscal 2008 is
anticipated to be approximately $8.1 million lower than in fiscal 2007 due
to
decreases in staffing, salaries, outside consulting services and overall
general and administrative spending.
Depreciation
and amortization expense for fiscal 2007 was $32,185 or 4.9% of total revenues,
versus $28,967 or 4.5% of total revenues in the prior year. The increase was
primarily due to the addition of units, including the eight restaurants
acquired from CRI in the fourth quarter of fiscal 2006, to software placed
in
service during fiscal 2007 and to the impact of negative same store sales on
fixed costs.
Rent
expense
increased slightly as a percentage of total revenues primarily as a result
of the decline in same store sales, as well as increases in rental rates
for new unit leases.
Interest
expense in fiscal 2007 was $14,015 or 2.1% of total revenues, versus
$11,373 or 1.8% of total revenues in the prior year. The increase in
interest expense was due to increased borrowings under the Senior Note Agreement
and Private Shelf Facility ("Senior Note Agreement") and to lower capitalized
interest from decreased land acquisition and unit construction, partially offset
by lower average borrowings under leases.
In
fiscal
2007, provision for restaurant closings was $5,176, which represented a
charge of $5,369 for impairment of assets and store closure reserve related
to 14 underperforming units, offset by the gain on the sale of two units that
had been closed during a prior year. Fiscal 2006 provision was a
credit of $103 as a result of the gain on the sale of one unit that
had been closed during a prior year.
Pre-opening
expense was $2,689 or 0.4% of total revenues, versus $3,579 or 0.6% of
total revenues in the prior year. The reduction was driven by a decrease in
new units from 26 last year to 16 in fiscal year 2007. Pre-opening costs per
restaurant increased slightly over the prior year due to differences in the
timing of when pre-opening costs are incurred compared to when the stores are
opened.
Income
tax
expense was recorded at an effective tax rate of 20.6%, versus 33.8% in the
prior year. The decrease in the tax rate in the current year is due primarily
to
the proportionate effect of federal income tax credits when compared to annual
pre-tax earnings and the impact of the extension of the Work Opportunity and
Welfare to Work tax credits retroactive to January 1, 2006. The benefit recorded
related to the tax credit extension totaled approximately $650.
Fiscal
2006 compared with Fiscal
2005
Net
Earnings
Net
earnings
decreased in fiscal 2006 by 7.3% or $2,221 to $28,001, or $1.00 per diluted
share compared with $30,222 or $1.08 per diluted share, for fiscal
2005. The decrease was primarily driven by the impact of the adoption of
SFAS 123(R), which had an impact of $0.07 per diluted share coupled with the
decrease in same stores sales as noted below.
Net
Sales
For
2006, net
sales increased 5.3% from $603,068 to $634,941. The net sales gains
were due to new Company-owned stores and the acquisition of
franchise units partially offset by a 2.1% same store sales decline.
That decline in same store sales was due to a declining guest count of 6.2%
partially offset by a 4.1% increase in average guest expenditure. In 2006,
we
opened 26 new Company-owned stores and acquired eight restaurants in the
fourth quarter from CRI, a franchisee. Fiscal 2006 net sales also benefited
from
a full year of sales relating to the acquisition of 17 franchised restaurants
from KRI during December 2004. KRI sales during 2006 and 2005 were $37,765
and $29,750, respectively. CRI sales during the fourth quarter and full
year of 2006 were $3,990.
Cost
and Expenses
In
2006, cost
of sales were $143,360 or 22.6% of net sales, compared with $140,078 or 23.2%
of
net sales in fiscal 2005. The decrease as a percentage of sales was
due primarily to lower commodity costs, the positive impact of pricing actions
and food cost control measures. These reductions were partially offset by
unfavorable mix for premium topping STEAKBURGER™ sandwiches and premium
milk shakes.
Restaurant
operating costs were $319,070 or 50.3% of net sales compared to $295,202 or
49.0% of net sales in 2005. The increase in absolute dollars for
labor and fringes was $13,867 or 0.4% as a percentage of net sales over 2005, an
increase in utilities of $3,131 or 0.3% as a percentage of net sales over
2005 and an increase in repairs and maintenance of $1,898 or 0.2% as a
percentage of net sales over 2005.
General
and
administrative expenses for fiscal 2006 were $52,949 or 8.3% of total
revenues compared to $47,902 or 7.9% of total revenues in 2005. The increase
in general and administrative expenses as a percentage of sales was
attributable to the $2,200 expense related to the expensing of stock options
and
shares issued from our employee stock purchase plan pursuant to SFAS
123(R).
Occupancy
costs including depreciation and rent expense increased slightly as a percentage
of total revenues primarily as a result of the decline in same store sales
as well as the addition of capital assets owned, which increased
depreciation expense. Rental rates for new unit leases also increased,
which affected overall rent expense.
Interest
expense as a percentage of revenues in fiscal 2006 was $11,373
or 1.8%, versus $12,641 or 2.1% in 2005. The decrease in interest
expense was due to reduced debt under the Senior Note Agreement, lower capital
lease balances and higher capitalized interest from increased land acquisition
and unit construction.
In
fiscal
2006, provision for restaurant closings was a credit of $103 as a
result of the gain on the sale of one unit that had been closed during a
prior year. The fiscal 2005 provision of $1,400 was charged as a result of
the decision to close two restaurants.
Pre-opening
expense was $3,579 or 0.6% of total revenues versus $3,247 or 0.5% of
revenues in 2005. The fluctuation is driven by an increase in new
units from 19 in fiscal 2005 to 26 in fiscal year 2006. Pre-opening costs per
restaurant continued to average approximately $150.
Income
tax
expense was recorded at an effective tax rate of 33.8%, versus 32.0% in the
prior year. The increase in the tax rate in 2006 is due to a benefit recorded
in
the fourth quarter of 2005 of $900 due primarily to the favorable resolution
of
state income tax amounts accrued in prior years. In addition, the increase
in the effective tax rate over prior year was also due to the tax effects of
the
adoption of SFAS 123(R) and an increase in state income tax
expense.
Restaurant
Closings
During
the
fourth quarter of fiscal 2007, we permanently closed eight Company-owned
restaurants. The net book value of these assets was transferred to Assets
held for sale in the Statement of Financial Position during the quarter
ended September 26, 2007.
Six
of the
closed restaurants were located near other Company-owned stores that will
continue to operate, and we expect significant sales to transfer to the other
existing locations. Therefore, the results of operations of these six
restaurants are not presented as discontinued operations and continue to be
included in continuing operations in the Statement of Earnings. The assets
of
the other two restaurants were not located near other Company-owned stores,
and
we do not expect to have significant continuing involvement in the operations
after disposal. Although these restaurants meet the definition of "discontinued
operations" as defined in Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (“SFAS
144”), we have not segregated the results of operations as the amounts are
immaterial. Net loss after tax related to the two restaurants totaled
approximately $582, $151 and $116 for fiscal years 2007, 2006 and 2005,
respectively. The after-tax loss in fiscal 2007 includes $515 after-tax of
asset
impairment charges.
Effects
of Governmental Regulations and Inflation
Most
Steak n
Shake employees are paid hourly rates related to federal and state minimum
wage
laws. Any increase in the legal minimum wage would directly increase our
operating costs. We are also subject to various federal, state and local laws
related to zoning, land use, safety standards, working conditions and
accessibility standards. Any changes in these laws that require improvements
to
our restaurants would increase our operating costs. In addition, we are subject
to franchise registration requirements and certain related federal and state
laws regarding franchise operations. Any changes in these laws could affect
our
ability to attract and retain franchisees.
Inflation
in
food, labor, fringe benefits, energy costs, transportation costs and other
operating costs directly affect our operations. Our results of operations have
not been significantly affected by inflation during the last three fiscal
years.
Liquidity
and Capital Resources
We
generated
$43,431 and $69,578 in cash flows from operations during fiscal 2007 and fiscal
2006, respectively, based upon timing of receipts and payment of disbursements
related to operating activities.
Net
cash used
in investing activities of $60,110 during fiscal 2007 resulted primarily from
capital expenditures of $68,643. We opened 16 new restaurants in
2007. Additionally, we rebuilt three restaurants and replaced two
restaurants during 2007. Net cash used in investing activities of $87,314
during 2006 resulted primarily from capital expenditures of $80,840 and the
acquisition of CRI, a franchisee, for $9,598. During 2006, there were
26 new restaurants opened, eight restaurants that were acquired and two
restaurants that were rebuilt. We expect to open approximately nine
Company-owned Steak n Shake restaurants during fiscal 2008 at an average cost
of
approximately $2,000 to $2,500, which includes the land, site improvements,
building, equipment and pre-opening costs. Additionally, we plan to rebuild
two older restaurants and remodel four to six restaurants utilizing an
updated restaurant design. The new design is an appealing evolution of the
current design with the potential to reduce building costs and to build on
smaller plots of land. The updated store design will be used for new restaurant
construction beginning in fiscal 2009. We intend to fund future capital
expenditures and meet our working capital needs from a variety of sources
including cash flows from operations, borrowings on our existing credit
facilities and proceeds from possible sale-leaseback transactions. We
currently own the land and buildings of approximately one-third of our
restaurant sites.
As
of
September 26, 2007 and September 27, 2006, we had one remaining mortgage that
we
assumed upon acquisition of KRI in fiscal 2005 with a balance of $659 and $742,
respectively, at a fixed interest rate of 5%.
We
had
outstanding borrowings under our Senior Note Agreement of $18,143 at an average
fixed rate of 6.1% as of September 26, 2007, and $5,572 at an average fixed
rate
of 7.6% at September 27, 2006. Our Senior Note Agreement was amended in the
prior fiscal year to allow us to extend the term of the remaining
borrowing capacity of $75,000 through September 30, 2008. We plan to request
another extension of the term of this facility.
We
also
maintain a $50,000 Revolving Credit Agreement that, as of September 26, 2007,
bore interest based on LIBOR plus 55 basis points, or the prime rate minus
100 basis points, at our election, and was scheduled to mature on
January 30, 2008. As of September 26, 2007, we had borrowings under the
Revolving Credit Agreement of $27,185 at an interest rate of 5.4%. As of
September 27, 2006, we had borrowings under the Revolving Credit Agreement
of $25,065 at a blended borrowing rate of 5.9%. On December 7, 2007, we
amended our Revolving Credit Agreement to extend the term through January 30,
2009 and change the interest rate. We had $3,327 in standby letters of
credit outstanding as of September 26, 2007 and September 27, 2006.
Our
debt
agreements contain restrictions, which, among other things, require us to
maintain certain financial ratios. During 2007 and 2006, we were in
compliance with the covenants and anticipate compliance in future periods based
on expected earnings and debt repayment terms. Subsequent to year-end, we
amended our Senior Note Agreement to lessen the restrictions on
our covenants through the next fiscal year.
Contractual
Obligations
Our
significant contractual obligations and commitments as of September 26, 2007
are
shown in the following table.
|
|
Payments
due by period
|
Contractual
Obligations
|
|
Less
than 1 year
|
|
1-3
years
|
|
3-5
years
|
|
More
than 5 years
|
|
Total
|
|
Long-term
debt(1)
|
|
$
|
30,670
|
|
$
|
8,074
|
|
$
|
10,396
|
|
$
|
8
|
|
$
|
49,148
|
|
Capital
leases and finance obligations(1)
|
|
|
14,990
|
|
|
31,827
|
|
|
30,137
|
|
|
69,634
|
|
|
146,588
|
|
Operating
leases(2)
|
|
|
10,749
|
|
|
20,210
|
|
|
18,124
|
|
|
63,288
|
|
|
112,371
|
|
Purchase
commitments(3)
|
|
|
3,420
|
|
|
463
|
|
|
—
|
|
|
—
|
|
|
3,883
|
|
Other
Long-term liabilities(4)
|
|
|
|
|
|
|
|
|
|
|
|
2,660
|
|
|
2,660
|
|
Total
|
|
$
|
59,829
|
|
$
|
60,574
|
|
$
|
58,657
|
|
$
|
135,590
|
|
$
|
314,650
|
|
(1)
Payments include principal and interest for long-term debt and exclude interest
for the Revolving Credit Agreement.
(2)
Payments exclude amounts to be paid for contingent rents.
(3)
Includes agreements to purchase goods or services that are enforceable and
legally binding on us and that specify all significant terms. Excludes
agreements that are cancelable without penalty.
(4)
Includes liabilities for our Non-Qualified Deferred Compensation
Plan.
Off
Balance Sheet Arrangements
We
have no
off-balance sheet arrangements other than operating leases entered into in
the
normal course of business.
New Accounting
Standards
In
May 2005,
the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 154, “Accounting Changes and Error Corrections – a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS
154 was effective in our current fiscal year. There was no impact of adoption
in
fiscal 2007 as there were no accounting changes or corrections of
errors.
In
June 2006,
the Emerging Issues Task Force reached a consensus on Issue No. 06-3, "How
Taxes
Collected from Customers and Remitted to Governmental Authorities Should be
Presented in the Income Statement" ("EITF 06-3"). The scope of EITF 06-3
includes sales, use, value added and some excise taxes that are assessed by
a
governmental authority on specific revenue-producing transactions between a
seller and customer. EITF 06-3 states that a company should disclose its
accounting policy (i.e., gross or net presentation) regarding the presentation
of taxes within its scope, and if significant, these disclosures should be
applied retrospectively to the financial statements for all periods
represented. EITF 06-3 was effective in our second fiscal quarter. We
have historically presented, and will continue to present, such taxes on a
net
basis.
In
July 2006,
the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes" ("FIN 48") which prescribes a recognition threshold and
measurement process for recording in the financial statements uncertain tax
positions taken or expected to be taken in a tax return. This
Interpretation requires that we recognize in our financial statements the impact
of a tax position if that position is more likely than not of being sustained
on
audit, based on the technical merits of the position. The accounting
provisions of FIN 48 will be effective for us as of the beginning of fiscal
2008. We estimate that the cumulative effect of the change in accounting
principle upon adoption will be between $250 and $1,000 and will be recorded
as
an adjustment to opening retained earnings. We continue to evaluate the
estimated liability.
In
September
2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”), which
provides interpretive guidance on how the effects of the carryover or reversal
of prior year misstatements should be considered in quantifying a current year
misstatement. SAB 108 was effective in our current fiscal year. The adoption
of
this statement did not have a material impact on our financial position or
results of operations in fiscal 2007.
In
September
2006, the FASB issued Statement of Financial Accounting Standards No. 157,
“Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes
a formal framework for measuring fair value and expands disclosures about fair
value measurements. The Statement is effective beginning in fiscal 2009. We
are in the process of determining the effect, if any, that the adoption of
SFAS 157 will have on our financial statements.
In
February
2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets
and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an
option to report selected financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option
has
been elected are reported in earnings at each subsequent reporting date. SFAS
159 is effective for fiscal years beginning after November 15, 2007, our
fiscal 2009. We are in the process of determining the effect, if any, that
the adoption of SFAS 159 will have on our financial statements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Our
primary
market risk exposure with regard to financial instruments is to changes in
interest rates. We invest excess cash primarily in cash equivalents due to
their relatively low credit risk. Interest rates on these securities are based
upon market rates at the time of purchase and remain fixed until
maturity.
Pursuant
to
the terms of our Senior Note Agreement, we may from time to time borrow in
increments of at least $5,000. The interest rate on the notes is based upon
market rates at the time of the borrowing. Once the interest rate is established
at the time of the initial borrowing, the interest rate remains fixed over
the
term of the underlying note. The Revolving Credit Agreement bears interest
at a
rate based upon LIBOR plus 55 basis points or the prime rate minus 100 basis
points, at our election. Historically, we have not used derivative financial
instruments to manage exposure to interest rate changes. At September 26, 2007,
a hypothetical 100 basis point increase in short-term interest rates would
have
an impact of approximately $169 on our earnings.
We purchase
certain food products which may be affected by volatility in commodity prices
due to weather conditions, supply levels, and other market conditions. We
utilize various purchasing and contract pricing techniques to minimize
volatility, but do not enter into financial derivative contracts.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
The
Steak
n Shake Company
Indianapolis,
Indiana
We
have
audited the accompanying consolidated statements of financial position of The
Steak n Shake Company and subsidiaries (the "Company") as of September 26,
2007
and September 27, 2006, and the related consolidated statements of earnings,
shareholders’ equity, and cash flows for the years ended September 26, 2007,
September 27, 2006, and September 28, 2005. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We
conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In
our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of The Steak n Shake Company and subsidiaries
as of September 26, 2007 and September 27, 2006, and the results of their
operations and their cash flows for the years ended September 26, 2007,
September 27, 2006, and September 28, 2005, in conformity with accounting
principles generally accepted in the United States of
America.
As
discussed
in Note 1 to the consolidated financial statements, effective September 29,
2005, the Company changed its method of accounting for share-based payments
as
required by Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment.
We
have also
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company's internal control over financial
reporting as of September 26, 2007, based on the criteria established in
Internal Control—Integrated Framework
issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated
December 7, 2007 expressed an unqualified opinion on the Company's internal
control over financial reporting.
/s/ Deloitte & Touche LLP
Indianapolis,
Indiana
December
7, 2007
Consolidated
Statements of Earnings
|
|
|
|
|
|
|
|
|
|
The
Steak n Shake Company
|
|
|
|
|
|
|
|
|
|
(Years
ended September 26, 2007, September 27, 2006, and September 28,
2005)
|
|
|
|
|
|
|
|
(Amounts
in $000s except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
2007
(52
Weeks)
|
|
|
2006
(52
Weeks)
|
|
|
2005
(52
Weeks)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
650,416
|
|
|
$
|
634,941
|
|
|
$
|
603,068
|
|
Franchise
fees
|
|
|
3,726
|
|
|
|
3,881
|
|
|
|
3,844
|
|
Total
revenues
|
|
|
654,142
|
|
|
|
638,822
|
|
|
|
606,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
150,286
|
|
|
|
143,360
|
|
|
|
140,078
|
|
Restaurant
operating costs
|
|
|
336,955
|
|
|
|
319,070
|
|
|
|
295,202
|
|
General
and administrative
|
|
|
57,525
|
|
|
|
52,949
|
|
|
|
47,902
|
|
Depreciation
and amortization
|
|
|
32,185
|
|
|
|
28,967
|
|
|
|
26,945
|
|
Marketing
|
|
|
28,644
|
|
|
|
27,473
|
|
|
|
26,771
|
|
Interest
|
|
|
14,015
|
|
|
|
11,373
|
|
|
|
12,641
|
|
Rent
|
|
|
13,961
|
|
|
|
12,233
|
|
|
|
10,250
|
|
Pre-opening
costs
|
|
|
2,689
|
|
|
|
3,579
|
|
|
|
3,247
|
|
Asset
impairments and provision for restaurant closings
|
|
|
5,176
|
|
|
|
(103
|
)
|
|
|
1,400
|
|
Other
income, net
|
|
|
(2,165
|
)
|
|
|
(2,371
|
)
|
|
|
(1,968
|
)
|
Total
costs and expenses
|
|
|
639,271
|
|
|
|
596,530
|
|
|
|
562,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Before Income Taxes
|
|
|
14,871
|
|
|
|
42,292
|
|
|
|
44,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Taxes
|
|
|
3,063
|
|
|
|
14,291
|
|
|
|
14,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Earnings
|
|
$
|
11,808
|
|
|
$
|
28,001
|
|
|
$
|
30,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Common and
Common
Equivalent Share
|
|
$
|
0.42
|
|
|
$
|
1.01
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Common and
Common
Equivalent Share
|
|
$
|
0.42
|
|
|
$
|
1.00
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares and Equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,018,014
|
|
|
|
27,723,282
|
|
|
|
27,499,982
|
|
Diluted
|
|
|
28,215,647
|
|
|
|
28,038,545
|
|
|
|
28,059,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Financial Position
|
|
|
|
|
|
|
The
Steak n Shake Company
|
|
|
|
|
|
|
(As
of September 26, 2007 and September 27, 2006)
|
|
|
|
|
|
|
(Amounts
in $000s except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
Assets:
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,497
|
|
|
$
|
4,820
|
|
Receivables,
net
|
|
|
6,289
|
|
|
|
5,858
|
|
Inventories
|
|
|
7,226
|
|
|
|
7,018
|
|
Deferred
income taxes
|
|
|
3,616
|
|
|
|
3,873
|
|
Assets
held for sale
|
|
|
18,571
|
|
|
|
4,514
|
|
Other
current assets
|
|
|
10,998
|
|
|
|
4,837
|
|
Total
current assets
|
|
|
48,197
|
|
|
|
30,920
|
|
Net
property and equipment
|
|
|
492,610
|
|
|
|
490,142
|
|
Goodwill
|
|
|
14,503
|
|
|
|
14,485
|
|
Other
intangible assets, net
|
|
|
1,959
|
|
|
|
2,152
|
|
Other
assets
|
|
|
7,945
|
|
|
|
4,822
|
|
Total
assets
|
|
$
|
565,214
|
|
|
$
|
542,521
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
28,195
|
|
|
$
|
28,262
|
|
Accrued
expenses
|
|
|
32,624
|
|
|
|
38,023
|
|
Current
portion of long-term debt
|
|
|
2,390
|
|
|
|
2,512
|
|
Line
of credit
|
|
|
27,185
|
|
|
|
10,065
|
|
Current
portion of obligations under leases
|
|
|
4,180
|
|
|
|
4,221
|
|
Total
current liabilities
|
|
|
94,574
|
|
|
|
83,083
|
|
Deferred
income taxes
|
|
|
5,060
|
|
|
|
5,800
|
|
Other
long-term liabilities
|
|
|
5,701
|
|
|
|
3,805
|
|
Obligations
under leases
|
|
|
139,493
|
|
|
|
143,996
|
|
Long-term
debt
|
|
|
16,522
|
|
|
|
18,802
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
Shareholders'
Equity:
|
|
|
|
|
|
|
|
|
Common
stock - $0.50 stated value, 50,000,000 shares authorized -
shares
issued: 30,332,839 in 2007 and 2006
|
|
|
15,166
|
|
|
|
15,166
|
|
Additional
paid-in capital
|
|
|
126,415
|
|
|
|
123,860
|
|
Retained
earnings
|
|
|
185,024
|
|
|
|
173,216
|
|
Treasury
stock - at cost: 1,959,931 shares in 2007;
2,170,332
shares in 2006
|
|
|
(22,741
|
)
|
|
|
(25,207
|
)
|
Total
shareholders' equity
|
|
|
303,864
|
|
|
|
287,035
|
|
Total
liabilities and shareholders'equity
|
|
$
|
565,214
|
|
|
$
|
542,521
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
The
Steak n Shake Company
|
|
|
|
|
|
|
|
|
|
(Years
ended September 26, 2007, September 27, 2006, and September 28,
2005)
|
|
|
|
|
|
|
|
(Amounts
in $000s)
|
|
|
|
|
|
|
|
|
|
|
|
2007
(52
Weeks)
|
|
|
2006
(52
Weeks)
|
|
|
2005
(52
Weeks)
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
11,808
|
|
|
$
|
28,001
|
|
|
$
|
30,222
|
|
Adjustments
to reconcile net earnings
to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
32,185
|
|
|
|
28,967
|
|
|
|
26,945
|
|
Provision
for deferred income taxes
|
|
|
(483
|
)
|
|
|
(956
|
)
|
|
|
1,769
|
|
Provision
for restaurant closings
|
|
|
5,176
|
|
|
|
(103
|
)
|
|
|
1,400
|
|
Non-cash
expense for stock-based compensation
and
deferred rent
|
|
|
3,322
|
|
|
|
4,560
|
|
|
|
1,798
|
|
Loss
on disposal of property
|
|
|
601
|
|
|
|
911
|
|
|
|
650
|
|
Changes
in receivables and inventories
|
|
|
(639
|
)
|
|
|
(3,773
|
)
|
|
|
1,575
|
|
Changes
in other assets
|
|
|
(265
|
)
|
|
|
(259
|
)
|
|
|
(935
|
)
|
Changes
in accounts payable and accrued expenses
|
|
|
(8,274
|
)
|
|
|
12,230
|
|
|
|
855
|
|
Net
cash provided by operating activities
|
|
|
43,431
|
|
|
|
69,578
|
|
|
|
64,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
of property and equipment
|
|
|
(68,643
|
)
|
|
|
(80,840
|
)
|
|
|
(63,622
|
)
|
Purchase
of franchisees
|
|
|
|
|
|
|
(9,598
|
)
|
|
|
(16,082
|
)
|
Proceeds
from property and equipment disposals
|
|
|
8,533
|
|
|
|
3,124
|
|
|
|
4,365
|
|
Proceeds
from sale of short-term investments
|
|
|
|
|
|
|
|
|
|
|
466
|
|
Net
cash used in investing activities
|
|
|
(60,110
|
)
|
|
|
(87,314
|
)
|
|
|
(74,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from line of credit facility
|
|
|
2,120
|
|
|
|
25,065
|
|
|
|
|
|
Proceeds
from issuance of long-term debt
|
|
|
15,000
|
|
|
|
—
|
|
|
|
|
|
Principal
payments on long-term debt
|
|
|
(2,511
|
)
|
|
|
(3,941
|
)
|
|
|
(9,910
|
)
|
Proceeds
from equipment and property sale-leasebacks
|
|
|
800
|
|
|
|
700
|
|
|
|
650
|
|
Principal
payments on lease obligations
|
|
|
(4,149
|
)
|
|
|
(4,082
|
)
|
|
|
(4,494
|
)
|
Proceeds
from exercise of stock options
|
|
|
660
|
|
|
|
646
|
|
|
|
688
|
|
Stock
repurchases
|
|
|
|
|
|
|
(312
|
)
|
|
|
|
|
Excess
tax benefits from stock-based awards
|
|
|
202
|
|
|
|
72
|
|
|
|
|
|
Proceeds
from employee stock purchase plan
|
|
|
1,234
|
|
|
|
1,345
|
|
|
|
1,573
|
|
Net
cash provided by (used in) financing activities
|
|
|
13,356
|
|
|
|
19,493
|
|
|
|
(11,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
Increase in Cash and Cash Equivalents
|
|
|
(3,323
|
)
|
|
|
1,757
|
|
|
|
(22,087
|
)
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
4,820
|
|
|
|
3,063
|
|
|
|
25,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at End of Year
|
|
$
|
1,497
|
|
|
$
|
4,820
|
|
|
$
|
3,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Steak n Shake Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Years
ended September 26, 2007, September 27, 2006, and September 28,
2005)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts
in $000s except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In
|
|
|
Retained
|
|
Unamortized
Value of Restricted
|
|
|
Treasury
Stock
|
|
|
|
Common
Stock
|
|
Capital
|
|
|
Earnings
|
|
Shares
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 29, 2004
|
|
$
|
15,166
|
|
$
|
123,787
|
|
|
$
|
114,993
|
|
$
|
(1,393
|
)
|
|
2,846,560
|
|
|
$
|
(33,621
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
30,222
|
|
|
|
|
|
|
|
|
|
|
|
Shares
exchanged to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156,280
|
|
|
|
(3,120
|
)
|
Shares
reissued to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(314,284
|
)
|
|
|
3,808
|
|
Shares
granted under Capital Appreciation
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,478
|
)
|
|
(139,700
|
)
|
|
|
2,478
|
|
Shares
forfeited under Capital Appreciation
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
224
|
|
|
14,000
|
|
|
|
(224
|
)
|
Changes
in unamortized value of shares
granted
under Capital Appreciation Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
1,347
|
|
|
|
|
|
|
|
|
Tax
effect relating to stock awards
|
|
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for Employee Stock
Purchase
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,830
|
)
|
|
|
1,573
|
|
Balance
at September 28, 2005
|
|
|
15,166
|
|
|
124,000
|
|
|
|
145,215
|
|
|
(2,300
|
)
|
|
2,460,026
|
|
|
|
(29,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
28,001
|
|
|
|
|
|
|
|
|
|
|
|
Reclass
of unamortized value of
restricted
shares
|
|
|
|
|
|
(2,300
|
)
|
|
|
|
|
|
2,300
|
|
|
|
|
|
|
|
|
Compensation
expense for share-based
payments
|
|
|
|
|
|
3,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
exchanged to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,547
|
|
|
|
(1,345
|
)
|
Shares
reissued to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(165,532
|
)
|
|
|
1,991
|
|
Shares
repurchased under stock buyback
program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,400
|
|
|
|
(312
|
)
|
Shares
granted under Capital Appreciation
Plan
|
|
|
|
|
|
(2,381
|
)
|
|
|
|
|
|
|
|
|
(135,500
|
)
|
|
|
2,381
|
|
Shares
forfeited under Capital Appreciation
Plan
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
|
|
9,700
|
|
|
|
(161
|
)
|
Tax
effect relating to stock awards
|
|
|
|
|
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for Employee Stock
Purchase
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93,309
|
)
|
|
|
1,345
|
|
Balance
at September 27, 2006
|
|
|
15,166
|
|
|
123,860
|
|
|
|
173,216
|
|
|
—
|
|
|
2,170,332
|
|
|
|
(25,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
11,808
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
expense for share-based
payments
|
|
|
|
|
|
2,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
exchanged to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,477
|
|
|
|
(2,087
|
)
|
Shares
reissued to exercise stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205,355
|
)
|
|
|
2,747
|
|
Shares
granted under Capital Appreciation
Plan
|
|
|
|
|
|
(3,023
|
)
|
|
|
|
|
|
|
|
|
(178,050
|
)
|
|
|
3,023
|
|
Shares
forfeited under Capital Appreciation
Plan
|
|
|
|
|
|
2,451
|
|
|
|
|
|
|
|
|
|
138,300
|
|
|
|
(2,451
|
)
|
Tax
effect relating to stock awards
|
|
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for Employee Stock
Purchase
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,773
|
)
|
|
|
1,234
|
|
Balance
at September 26, 2007
|
|
$
|
15,166
|
|
$
|
126,415
|
|
|
$
|
185,024
|
|
$
|
|
|
|
1,959,931
|
|
|
$
|
(22,741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
The
Steak
n Shake Company
(Years
ended September 26, 2007, September 27, 2006, and September 28,
2005)
(Amounts
in $000s except share and per share data)
1.
Summary of Significant Accounting Policies
Description
of
Business
The
Steak n
Shake Company's principal business is the operation, development and franchising
of full service, casual dining restaurants. As of September 26, 2007, we
operated 435 Steak n Shake restaurants through our wholly owned subsidiary,
Steak n Shake Operations, Inc., and franchisees operated 56
restaurants.
Fiscal
Year
Our
fiscal
year ends on the last Wednesday in September. Fiscal years 2007, 2006
and 2005 contain 52 weeks.
Principles
of Consolidation
The
consolidated financial statements include the accounts of The Steak n Shake
Company (parent) and its wholly owned subsidiaries. All intercompany accounts
and transactions have been eliminated in consolidation.
Cash
and Cash Equivalents
Our
policy is
to invest cash in excess of operating requirements in income-producing
investments. Cash equivalents primarily consist of bank repurchase agreements,
U.S. Government securities and money market accounts, all of which have
maturities of three months or less. Cash equivalents are carried at cost,
which approximates market value due to their short
maturities.
Receivables
We
carry our accounts receivable at cost less an allowance for doubtful
accounts, which is based on a history of past write-offs and collections
and
current credit conditions. The allowance for doubtful accounts was $68 at
September 26, 2007 and $74 at September 27, 2006.
Inventories
Inventories
are valued at the lower of cost (first-in, first-out method) or market, and
consist primarily of restaurant food items and supply inventory.
Assets
Held for Sale
Assets
held
for sale consists of property and equipment related to underperforming
restaurants and land that is currently being marketed for disposal. Assets
held for sale are reported at the lower of carrying value or estimated fair
value less costs to sell.
Property
and Equipment
Property
and
equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are recognized using the straight-line method
over the estimated useful lives of the assets (10 to 25 years for buildings
and
land improvements, and 3 to 10 years for equipment). Leasehold improvements
are
amortized using the straight-line method over the shorter of the estimated
useful lives of the improvements or the terms of the related
leases.
Interest costs associated with the construction of
new restaurants are capitalized. Major improvements are also capitalized,
while
repairs and maintenance are expensed as incurred. We review our long-lived
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. For purposes
of
this assessment, assets are evaluated on a restaurant-by-restaurant basis,
the lowest level for which there are identifiable cash flows. If the future
undiscounted cash flows of an asset are less than the recorded value, an
impairment is recorded for the difference between the carrying value and
the
estimated fair value of the asset. During fiscal 2007, we recorded a pre-tax,
non-cash impairment of $5,369, which was offset by a $193 gain on the sale
of
two units that had been closed during a prior year. The current year impairment
charge related primarily to 14 underperforming restaurants, including eight
restaurants permanently closed during the fourth quarter of fiscal 2007.
Of the
total charge of $5,369 in fiscal 2007, $1,916 was recorded as an adjustment
to
Property and equipment for assets held and used, and $3,453 has been recorded
as
an adjustment to Assets held for sale. No impairments were recorded during
fiscal 2006. In fiscal 2005, we recorded a pre-tax, non-cash impairment of
$1,400 related to two underperforming restaurants.
Goodwill
and Purchased Intangible Assets
Goodwill
and
indefinite life intangibles are not amortized, but are tested for potential
impairment on an annual basis, or more often if events or circumstances change
that could cause goodwill or indefinite life intangibles to become impaired.
Other purchased intangible assets are amortized on a straight-line basis
over
their estimated useful lives. We perform reviews for impairment of other
intangible assets whenever events or changes in circumstances indicate that
the
carrying value of an asset may not be recoverable. An impairment loss is
recognized when estimated future cash flows expected to result from the use
of
the asset and its eventual disposition are less than its carrying amount.
When
an impairment is identified, we reduce the carrying amount of the asset to
its estimated fair value. No impairments were recorded on goodwill or intangible
assets during fiscal 2007, 2006 or 2005.
Capitalized
Software
Internal-use
software is stated at cost less accumulated amortization and is amortized
using
the straight-line method over its estimated useful life ranging from three
to five years. Software assets are reviewed for impairment when events or
circumstances indicate that the carrying value may not be recoverable over
the
remaining lives of the assets. During the software application development
stage, capitalized costs include external consulting costs, cost of software
licenses and internal payroll and payroll-related costs for employees who
are
directly associated with a software project. Upgrades and enhancements are
capitalized if they result in added functionality which enables the software
to
perform tasks it was previously incapable of performing. Software maintenance,
training, data conversion and business process reengineering costs are expensed
in the period in which they are incurred. Capitalized software is included
in the balance of Other assets in the Statement of Financial
Position.
Revenue
Recognition
We
record
revenues from restaurant sales at the time of sale, net of discounts. Revenues
from the sale of gift cards are deferred at the time of sale and recognized
upon
redemption by the customer, or at expiration of the gift cards. Sales revenues
are presented net of sales taxes. Cost of sales primarily includes the cost
of
food used in preparing menu items and excludes depreciation and amortization,
which is presented as a separate line item on the Statement of
Earnings.
Franchise
Fees
Unit
franchise fees and area development fees are recorded as revenue when the
related restaurant begins operations. Royalty fees and administrative services
fees are based on franchise sales and are recognized as revenue as
earned.
Insurance
Reserves
We
self-insure a significant portion of expected losses under our
workers’compensation, general liability, medical and auto liability insurance
programs, and we record a reserve for our estimated losses on all
unresolved open claims and our estimated incurred but not reported claims
at the
anticipated cost to us. Insurance reserves are recorded in the balance of
Accrued expenses in the Statement of Financial Position.
Earnings
Per Share
Earnings
per
share of common stock is based on the weighted average number of shares
outstanding during the year. The following table presents a reconciliation
of
basic and diluted weighted average common shares as required by Statement
of
Financial Accounting Standards No. 128,
Earnings Per
Share
.
|
2007
|
|
2006
|
|
2005
|
Basic
earnings per share:
|
|
|
|
|
|
Weighted
average common shares
|
28,018,014
|
|
27,723,282
|
|
27,499,982
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
Weighted
average common shares
|
28,018,014
|
|
27,723,282
|
|
27,499,982
|
Dilutive
effect of stock options
|
197,633
|
|
315,263
|
|
559,170
|
Weighted
average common and incremental shares
|
28,215,647
|
|
28,038,545
|
|
28,059,152
|
|
|
|
|
|
|
Number
of share-based awards excluded from the calculation of
earnings
per share as the awards' exercise prices were greater than
the
average market price of the Company's common stock
|
1,030,051
|
|
792,193
|
|
280,929
|
Stock-Based
Compensation
We
adopted
Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share Based
Payment” ("SFAS 123(R)") on September 29, 2005. This Statement requires that all
stock-based compensation, including grants of employee stock options and
shares
issued under our employee stock purchase plan, be accounted for using the
fair
value-based method. We elected to adopt SFAS 123(R) using the modified
prospective method. Refer to Note 15 for additional information
regarding our stock-based compensation.
Employees’
401(k) and Profit Sharing Plan
The
Steak n
Shake Company's 401(k) and Profit Sharing Plan (the "Plan") is a defined
contribution plan covering substantially all employees after they have
attained
age 21 and completed one year of service and allows employees to defer
up to 20%
of their salaries. Additionally, Company profit sharing contributions are
subject to the discretion of the Board of Directors. We contributed $1,500
in
2005. There were no discretionary profit sharing contributions in 2007 or
2006. We must match 50% of the participants' first 6% of eligible
compensation deferred. Matching contributions paid in fiscal 2007, 2006 and
2005 were $1,231, $1,266 and $1,497, respectively.
Marketing
Expense
Advertising
costs are charged to expense at the latter of the date the expenditure
is
incurred, or the date the promotional item is first communicated.
Non-Qualified
Deferred Compensation Plan
We
maintain a
self-directed Non-Qualified Deferred Compensation Plan (the "Non-Qualified
Plan”) for executive employees. The Non-Qualified Plan is structured as a rabbi
trust; therefore, assets in the Non-Qualified Plan are subject to creditor
claims in the event of bankruptcy. We recognize investment assets on the
Statement of Financial Position at current fair value. A liability of the
same
amount is recorded on the Statement of Financial Position representing
our
obligation to distribute funds to participants. The investment assets are
classified as trading, and accordingly, realized and unrealized gains and
losses
are recognized in income.
Segments
Our
business,
operating and franchising Steak n Shake restaurants, constitutes a single
reportable segment pursuant to the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosure About Segments of an Enterprise
and
Related Information" ("SFAS No 131").
Use
of Estimates
Preparation
of the consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in
the consolidated financial statements and accompanying notes. Actual results
could differ from the estimates.
New Accounting
Standards
In
May 2005,
the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 154, “Accounting Changes and Error Corrections – a
replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS
154 was effective in our current fiscal year. There was no impact of adoption
in
fiscal 2007 as there were no accounting changes or corrections of
errors.
In
June 2006,
the Emerging Issues Task Force reached a consensus on Issue No. 06-3, "How
Taxes
Collected from Customers and Remitted to Governmental Authorities Should
be
Presented in the Income Statement" ("EITF 06-3"). The scope of EITF 06-3
includes sales, use, value added and some excise taxes that are assessed
by a
governmental authority on specific revenue-producing transactions between
a
seller and customer. EITF 06-3 states that a company should disclose its
accounting policy (i.e., gross or net presentation) regarding the presentation
of taxes within its scope, and if significant, these disclosures should
be
applied retrospectively to the financial statements for all periods
represented. EITF 06-3 was effective in our second fiscal quarter. We
have historically presented, and will continue to present, such taxes on
a net
basis.
In
July 2006,
the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes" ("FIN 48") which prescribes a recognition threshold and
measurement process for recording in the financial statements uncertain
tax
positions taken or expected to be taken in a tax return. This
Interpretation requires that we recognize in our financial statements the
impact
of a tax position if that position is more likely than not of being sustained
on
audit, based on the technical merits of the position. The accounting
provisions of FIN 48 will be effective for us as of the beginning of fiscal
2008. We estimate that the cumulative effect of the change in accounting
principle upon adoption will be between $250 and $1,000 and will be recorded
as
an adjustment to opening retained earnings. We continue to evaluate the
estimated liability.
In
September
2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting
Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on how the
effects of the carryover or reversal of prior year misstatements should
be
considered in quantifying a current year misstatement. SAB 108 was effective
in
our current fiscal year. The adoption of this statement did not have a
material
impact on our financial position or results of operations in fiscal
2007.
In
September
2006, the FASB issued Statement of Financial Accounting Standards No. 157,
“Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes
a formal framework for measuring fair value and expands disclosures about
fair
value measurements. The Statement is effective beginning in fiscal 2009. We
are in the process of determining the effect, if any, that the adoption of
SFAS 157 will have on our financial statements.
In
February
2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets
and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an
option to report selected financial assets and financial liabilities at
fair
value. Unrealized gains and losses on items for which the fair value option
has
been elected are reported in earnings at each subsequent reporting date.
SFAS
159 is effective for fiscal years beginning after November 15, 2007, our
fiscal 2009. We are in the process of determining the effect, if any, that
the adoption of SFAS 159 will have on our financial statements.
2.
Restaurant Closings
During
the
fourth quarter of fiscal 2007, we permanently closed eight Company-owned
restaurants. The net book value of these assets was transferred to Assets
held for sale in the Statement of Financial Position during the quarter
ended September 26, 2007.
Six
of the
closed restaurants were located near other Company-owned stores that will
continue to operate, and we expect significant sales to transfer to the
other
existing locations. Therefore, the results of operations of these six
restaurants are not presented as discontinued operations and continue to
be
included in continuing operations in the Statement of Earnings. The assets
of
the other two restaurants were not located near other Company-owned stores,
and
we do not expect to have significant continuing involvement in the operations
after disposal. Although these restaurants meet the definition of "discontinued
operations," as defined in Statement of Financial Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" (“SFAS 144”), we have not
segregated the results of operations as the amounts are immaterial. Net
loss
after tax related to the two restaurants totaled approximately $582, $151
and $116 for fiscal years 2007, 2006 and 2005, respectively. The after-tax
loss
in fiscal 2007 includes $515 after-tax of asset impairment charges.
3.
Other Current Assets
Other
current
assets are comprised of the following:
(amounts
in $000s)
|
|
2007
|
|
2006
|
|
Prepaid
marketing
|
|
$
|
847
|
|
$
|
620
|
|
Prepaid
rent
|
|
|
2,265
|
|
|
2,710
|
|
Prepaid
taxes
|
|
|
5,977
|
|
|
634
|
|
Other
|
|
|
1,909
|
|
|
873
|
|
Total
other current assets
|
|
$
|
10,998
|
|
$
|
4,837
|
|
4.
Assets Held for Sale
Assets
held
for sale is comprised of the following:
(amounts
in $000s)
|
|
2007
|
|
2006
|
|
Land
and buildings
|
|
$
|
17,494
|
|
$
|
4,197
|
|
Land
and leasehold improvements
|
|
|
592
|
|
|
190
|
|
Equipment
|
|
|
485
|
|
|
127
|
|
Total
assets held for sale
|
|
$
|
18,571
|
|
$
|
4,514
|
|
The
2007
balances include eight restaurants permanently closed during fiscal 2007, two
closed during a prior year and 19 parcels of land. We expect to sell these
properties within the next 12 months. The 2007 balances also reflect the
impact of an impairment of $3,453, which represents the portion of the total
fiscal 2007 impairment charge of $5,369 that relates to Assets held for
sale.
The
2006
balances include five restaurants closed prior to 2006 and five parcels of
land.
5.
Property and Equipment
Property
and
equipment is comprised of the following:
(amounts
in $000s)
|
|
2007
|
|
|
2006
|
|
Land
|
|
$
|
171,631
|
|
|
$
|
184,741
|
|
Buildings
|
|
|
166,982
|
|
|
|
165,411
|
|
Land
and leasehold improvements
|
|
|
156,687
|
|
|
|
139,603
|
|
Equipment
|
|
|
200,775
|
|
|
|
184,223
|
|
Construction
in progress
|
|
|
16,555
|
|
|
|
15,460
|
|
|
|
|
712,630
|
|
|
|
689,438
|
|
Less
accumulated depreciation and amortization
|
|
|
(220,020
|
)
|
|
|
(199,296
|
)
|
Net
property and equipment
|
|
$
|
492,610
|
|
|
$
|
490,142
|
|
Depreciation
and amortization expense for Property and equipment for fiscal 2007, 2006
and 2005 was $30,000, $27,491 and $24,702, respectively. The 2007
balances reflect the impact of an impairment of $1,916, which represents
the
portion of the total fiscal 2007 impairment charge of $5,369 that relates
to
assets held and used.
6.
Goodwill and Other Intangibles
Goodwill
Goodwill
consists of the excess of the purchase price over the fair value of the net
assets acquired in connection with the acquisitions of Creative
Restaurants, Inc. ("CRI") and Kelley Restaurants, Inc. ("KRI") on July 6, 2006
and December 29, 2004, respectively. Goodwill increased by $18 during fiscal
2007 relating to an adjustment to the assumed liabilities recorded at the
acquisition date of CRI. During the third quarter of fiscal 2007, we
completed our process for reviewing our fair value estimates and finalized
our
adjustments to Goodwill as it relates to the purchase of CRI.
Other
Intangibles
Other
intangibles are comprised of the following:
(amounts
in $000s)
|
|
2007
|
|
|
2006
|
|
Gross
value of intangible assets subject to amortization
|
|
$
|
2,291
|
|
|
$
|
2,291
|
|
Accumulated
amortization
|
|
|
(832
|
)
|
|
|
(639
|
)
|
Intangible
assets subject to amortization, net
|
|
|
1,459
|
|
|
|
1,652
|
|
Intangible
assets with indefinite lives
|
|
|
500
|
|
|
|
500
|
|
Total
intangible assets
|
|
$
|
1,959
|
|
|
$
|
2,152
|
|
Intangible
assets subject to amortization consist of a right to operate, as well
as favorable leases acquired in connection with prior acquisitions. These
assets are being amortized over their estimated weighted average useful lives
of
12 years and 8 years, respectively. Amortization expense for 2007, 2006 and
2005 was $193, $187 and $167, respectively. Total annual amortization
expense for each of the next five years is $193.
Intangible
assets with indefinite lives consist of reacquired franchise rights assumed
in connection with the acquisitions of CRI and KRI and were recorded in
accordance with the provisions of Emerging Issues Task Force Issue No. 04-1,
"Accounting for Pre-existing Relationships between the Parties to a Business
Combination" ("EITF 04-1").
7. Other
Assets
Other
assets
include capitalized software costs, investments related to our Non-Qualified
Plan and deposits. Capitalized software costs are amortized over their
estimated useful lives and related amortization is included in depreciation
and
amortization expense. Depreciation and amortization expense related
to capitalized software in 2007, 2006 and 2005 was $1,992, $1,289 and
$2,076, respectively.
8. Accrued
Expenses
Accrued
expenses are comprised of the following:
(amounts
in $000s)
|
|
2007
|
|
2006
|
|
Salaries
and wages
|
|
$
|
6,970
|
|
$
|
7,983
|
|
Taxes
payable
|
|
|
11,875
|
|
|
14,291
|
|
Insurance
accruals
|
|
|
7,037
|
|
|
10,521
|
|
Severance
|
|
|
2,321
|
|
|
32
|
|
Other
|
|
|
4,421
|
|
|
5,196
|
|
Total
accrued expenses
|
|
$
|
32,624
|
|
$
|
38,023
|
|
9.
Other Long-term Liabilities
Other
long-term liabilities includes deferred amounts related to our Non-Qualified
Plan. The Non-Qualified Plan allows highly compensated employees to defer
amounts from their salaries for retirement savings. The Non-Qualified Plan
includes an employer match equal to the amount of the match the employee
would have received as a participant in our 401(k) plan. Total
liabilities for the Non-Qualified Plan at September 26, 2007 and September
27, 2006 were $2,660 and $1,736, respectively. In addition, other long-term
liabilities includes the balance of deferred rent expense for escalating rent
payments.
10. Income
Taxes
The
components of the provision for income taxes consist of the
following:
(amounts
in $000s)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,036
|
|
|
$
|
13,433
|
|
|
$
|
12,088
|
|
State
|
|
|
1,510
|
|
|
|
1,814
|
|
|
|
365
|
|
Deferred
|
|
|
(483
|
)
|
|
|
(956
|
)
|
|
|
1,769
|
|
Total
income taxes
|
|
$
|
3,063
|
|
|
$
|
14,291
|
|
|
$
|
14,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
reconciliation of effective income tax is:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Tax
at U.S. statutory rates
|
|
$
|
5,205
|
|
|
$
|
14,802
|
|
|
$
|
15,555
|
|
State
income taxes, net of federal benefit
|
|
|
967
|
|
|
|
1,135
|
|
|
|
270
|
|
Employer's
FICA tax credit
|
|
|
(1,894
|
)
|
|
|
(1,417
|
)
|
|
|
(1,138
|
)
|
Jobs
tax credit
|
|
|
(1,840
|
)
|
|
|
(631
|
)
|
|
|
(482
|
)
|
Share-based
payments
|
|
|
608
|
|
|
|
563
|
|
|
|
|
|
Other
|
|
|
17
|
|
|
|
(161
|
)
|
|
|
17
|
|
Total
income taxes
|
|
$
|
3,063
|
|
|
$
|
14,291
|
|
|
$
|
14,222
|
|
Income
taxes
paid totaled $11,686 in 2007, $14,796 in 2006 and $13,066 in 2005.
Deferred
tax
assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are
measured using the currently enacted tax rates, as well as laws that
will be in effect when the differences are expected to reverse. Our net deferred
tax liability consists of the following:
(amounts
in $000s)
|
|
2007
|
|
|
2006
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Insurance
reserves
|
|
$
|
1,739
|
|
|
$
|
2,671
|
|
Share-based
payments
|
|
|
1,786
|
|
|
|
1,982
|
|
Compensation
accruals
|
|
|
1,431
|
|
|
|
958
|
|
Gift
card accrual
|
|
|
283
|
|
|
|
38
|
|
Other
|
|
|
198
|
|
|
|
287
|
|
Total
deferred tax assets
|
|
|
5,437
|
|
|
|
5,936
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed
asset basis difference
|
|
|
6,668
|
|
|
|
7,697
|
|
Other
|
|
|
213
|
|
|
|
166
|
|
Total
deferred tax liabilities
|
|
|
6,881
|
|
|
|
7,863
|
|
Net
deferred tax liability
|
|
|
(1,444
|
)
|
|
|
(1,927
|
)
|
Less
current portion
|
|
|
3,616
|
|
|
|
3,873
|
|
Long-term
liability
|
|
$
|
(5,060
|
)
|
|
$
|
(5,800
|
)
|
11. Leased
Assets and Lease Commitments
We
lease
certain physical facilities under non-cancelable lease agreements. Steak n
Shake restaurant leases typically have initial terms of 18 to 25 years and
renewal terms aggregating 20 years or more. These leases require us to pay
real
estate taxes, insurance and maintenance costs. Certain leased facilities,
which
we no longer operate but were subleased to third parties, are classified
below
as non-operating properties. Minimum future rental payments for non-operating
properties have not been reduced by minimum sublease rentals of $65 related
to
operating leases receivable under non-cancelable subleases. The property
and
equipment cost related to the finance obligations and capital leases as of
September 26, 2007, is as follows: $79,235 buildings, $63,667 land, $31,808
land
and leasehold improvements, $607 equipment and $46,213 accumulated
depreciation. At September 26, 2007, obligations under non-cancelable
finance obligations, capital leases and operating leases (excluding real
estate
taxes, insurance and maintenance costs) require the following minimum future
rental payments:
(amounts
in $000s)
|
|
|
|
|
|
|
|
Operating
Leases
|
|
|
|
Financial
|
|
Capital
|
|
|
|
Operating
|
|
Non-Operating
|
|
|
|
Obligations
|
|
Leases
|
|
Total
|
|
Property
|
|
Property
|
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
14,899
|
|
$
|
91
|
|
$
|
14,990
|
|
$
|
10,749
|
|
$
|
116
|
|
2009
|
|
|
16,038
|
|
|
64
|
|
|
16,102
|
|
|
10,378
|
|
|
61
|
|
2010
|
|
|
15,661
|
|
|
64
|
|
|
15,725
|
|
|
9,832
|
|
|
61
|
|
2011
|
|
|
15,261
|
|
|
21
|
|
|
15,282
|
|
|
9,285
|
|
|
|
|
2012
|
|
|
14,855
|
|
|
|
|
|
14,855
|
|
|
8,839
|
|
|
|
|
After
2012
|
|
|
69,634
|
|
|
|
|
|
69,634
|
|
|
63,288
|
|
|
|
|
Total
minimum future rental payments
|
|
|
146,348
|
|
|
240
|
|
|
146,588
|
|
$
|
112,371
|
|
$
|
238
|
|
Less
amount representing interest
|
|
|
89,914
|
|
|
18
|
|
|
89,932
|
|
|
|
|
|
|
|
Total
principal obligations under leases
|
|
|
56,434
|
|
|
222
|
|
|
56,656
|
|
|
|
|
|
|
|
Less
current portion
|
|
|
4,099
|
|
|
81
|
|
|
4,180
|
|
|
|
|
|
|
|
Non-current
principal obligations under leases
|
|
|
52,335
|
|
|
141
|
|
|
52,476
|
|
|
|
|
|
|
|
Residual
value at end of lease term
|
|
|
87,017
|
|
|
|
|
|
87,017
|
|
|
|
|
|
|
|
Obligations
under leases
|
|
$
|
139,352
|
|
$
|
141
|
|
$
|
139,493
|
|
|
|
|
|
|
|
During
2007,
2006 and 2005, we received net proceeds from sale-leaseback transactions
aggregating $800, $700 and $650, respectively. As the underlying
leases included certain provisions that resulted in our continuing involvement
in the assets sold, we have accounted for the transactions as
financings.
Contingent
rent totaling $900 in 2007, $927 in 2006 and $1,045 in 2005 is recorded in
rent
expense in the accompanying Statements of Earnings.
12. Debt
Revolving
Credit Agreement
The
Revolving
Credit Agreement allows us to borrow up to $50,000. As of September 26, 2007,
the agreement was scheduled to expire on January 30, 2008 and bore interest
at a rate based on LIBOR plus 55 basis points, or the prime rate minus 100
basis
points, at our election. At September 26, 2007, outstanding borrowings were
$27,185 at an interest rate of 5.4%. As of September 27, 2006, we
had borrowings under the Revolving Credit Agreement of $25,065 at a blended
borrowing rate of 5.9%.On December 7, 2007, we amended the Revolving Credit
Agreement to extend the term through January 30, 2009 and change the interest
rate.
Senior
Note Agreement
Our
amended
and restated Senior Note Agreement and Private Shelf Facility (the "Senior
Note
Agreement") allows for borrowing of up to $75,000 until September 30, 2008.
We
had outstanding borrowings under our Senior Note Agreement of $18,143 at
an
average fixed rate of 6.1% as of September 26, 2007, and $5,572 at an average
fixed rate of 7.6% at September 27, 2006. Interest rates are fixed based
upon
market rates at the time of borrowing. Amounts maturing in fiscal years 2008
through 2012 are as follows: $1,714, $714, $5,714, $5,000 and
$5,000, respectively. We plan to request an extension to the term
of the $75,000 borrowing capacity.
Other Debt
We
assumed
four mortgages on properties in connection with the KRI acquisition,
three of which were paid off during fiscal 2005. The amount outstanding
under the remaining mortgage as of September 26, 2007 and September 27, 2006
is
$659 and $742, respectively, and bears interest at a fixed rate of
5%. The principal payments due in 2008 are $70, with the remaining
principal balance of $589 due at maturity in August 2008. Additionally, we
have
one note in the amount of $109 outstanding as of September 26, 2007 on a
property in Jonesboro, Arkansas. Regular principal payments during fiscal
years
2008 through 2012 are as follows: $16, $19, $20, $22 and $24, respectively.
$8
is due beyond 2012.
The
Revolving
Credit Agreement and Senior Note Agreement are unsecured and contain
restrictions, which among other things, require us to maintain certain financial
ratios. We were in compliance with all restrictive covenants under these
borrowing agreements at September 26, 2007. The carrying amounts for debt
reported in the Statement of Financial Position do not differ materially
from
their fair market values at September 26, 2007. Subsequent to year-end, we
amended our Senior Note Agreement to lessen the restrictions on
our covenants through the next fiscal year.
Interest
capitalized in connection with financing additions to property and equipment
amounted to $660, $2,057 and $906 in 2007, 2006 and 2005 respectively. Interest
paid on debt amounted to $2,418 in 2007, $1,276 in 2006 and $1,887 in
2005. Interest paid on obligations under leases was $11,962,
$11,980 and $11,600 in 2007, 2006 and 2005, respectively.
13. Related
Party Transactions
Sale
of Restaurants to Related Party
On
September
21, 2005, our wholly owned subsidiary, Steak n Shake Operations, Inc., entered
into a Multiple Uniform Franchise Agreement (the "Agreement") and a Personal
Property Sales Agreement with Reinwald Enterprises Emory, LLC, and Reinwald
Enterprises Wild Geese, LLC (collectively "Franchisee"). Gary T. Reinwald,
Executive Vice President of the Company, is a member of both limited
liability companies and holds the majority of the equity in the
Franchisee. The aggregate consideration paid by the Franchisee for the
Agreements was $1,800 for the purchase of two Company-owned restaurants in
the
Knoxville, Tennessee market. We did not participate in any of the
financing related to this transaction. Under the Agreement, the Franchisee
will operate these two existing restaurants. We have transferred our
ownership and leasehold rights in the restaurants, as well as all personal
property located in the restaurants to the Franchisee. We recorded
revenues from the Franchisee totaling $121 in fiscal 2007 and $118 in fiscal
2006. The balance in accounts receivable from the Franchisee was $41 as of
September 26, 2007 and $132 as of September 27, 2006.
Acquisition
of Kelley Restaurants, Inc.
We
acquired
KRI on December 29, 2004. The President of KRI is a member of our Board of
Directors. See Note 14 for further discussion. Prior to the
acquisition, we collected initial franchise fees, royalty fees and
advertising fees from KRI. We recorded revenues from KRI totaling $390
in fiscal 2005.
1
4
.
Acquisitions
Creative
Restaurants, Inc.
We
acquired
CRI on July 6, 2006 for $9,598, after adjustments. At the acquisition
date, CRI operated eight Steak n Shake restaurants in Louisville,
Kentucky. This acquisition will allow us to further develop the
Louisville market, which is consistent with our long term growth
plans.
The
transaction is being accounted for using the purchase method of accounting
as
required by Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141"). The purchase price has been allocated to
tangible and identifiable intangible assets acquired and liabilities assumed
based on their estimated fair values at the date of the acquisition. The
excess of the purchase price over the fair value of net assets acquired was
recorded as goodwill. See Note 6 for further discussion of "Goodwill
and Other Intangibles." The allocation of the purchase price to specific
assets and liabilities is based, in part, upon third party appraisals
and internal estimates of assets and liabilities. Based on the final
purchase price allocation, the following table summarizes the fair value
of the
assets acquired and liabilities assumed at the acquisition date.
(amounts
in $000s)
|
|
|
|
Current
assets
|
|
$
|
169
|
|
Property
and equipment
|
|
|
2,648
|
|
Goodwill
(tax deductible)
|
|
|
6,700
|
|
Intangible
assets
|
|
|
260
|
|
Total
assets acquired
|
|
|
9,777
|
|
|
|
|
|
|
Current
liabilities
|
|
|
106
|
|
Long-term
debt
|
|
|
73
|
|
Total
liabilities assumed
|
|
|
179
|
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
9,598
|
|
Pro
forma
disclosures have been omitted as the acquisition was not
significant.
Kelley
Restaurants,
Inc.
We
acquired
KRI on December 29, 2004 for approximately $16,082 after adjustments. This
acquisition included 17 Steak n Shake restaurants in Atlanta, Georgia, and
Charlotte, North Carolina. The President of KRI is a member of our
Board of Directors.
The
transaction was accounted for using the purchase method of accounting as
required by SFAS 141. The purchase price has been allocated to tangible and
identifiable intangible assets acquired and liabilities assumed based on
their
estimated fair values at the date of the acquisition. The excess of the
purchase price over the fair value of net assets acquired was recorded as
goodwill. See Note 6 for further discussion of "Goodwill and Other
Intangibles." The allocation of the purchase price to specific assets and
liabilities is based, in part, upon third party appraisals and internal
estimates of assets and liabilities. Based on the final purchase price
allocation, the following table summarizes the fair value of the assets acquired
and liabilities assumed at the acquisition date.
(amounts
in $000s)
|
|
|
|
Current
assets
|
|
$
|
617
|
|
Property
and equipment
|
|
|
21,660
|
|
Goodwill
(not deductible for tax purposes)
|
|
|
7,803
|
|
Intangible
assets
|
|
|
1,051
|
|
Other
assets
|
|
|
46
|
|
Total
assets acquired
|
|
|
31,177
|
|
|
|
|
|
|
Current
liabilities
|
|
|
3,723
|
|
Deferred
income taxes
|
|
|
925
|
|
Obligations
under lease
|
|
|
6,486
|
|
Long-term
debt
|
|
|
3,961
|
|
Total
liabilities assumed
|
|
|
15,095
|
|
|
|
|
|
|
Net
assets acquired
|
|
$
|
16,082
|
|
Pro
forma
disclosures have been omitted as the acquisition was not
significant.
15. Common
Stock Plans
We
maintain
stock-based compensation plans which allow for the issuance of incentive
stock
options, non-qualified stock options and restricted stock to officers, other
key
employees and members of the Board of Directors. We also maintain an Employee
Stock Purchase Plan (the "ESPP") that allows all eligible employees to
purchase shares of stock at a discounted price. We generally use
treasury shares to satisfy the issuance of shares under these stock-based
compensation plans. Prior to fiscal year 2006, we accounted for the
plans under the recognition and measurement provisions of APB Opinion No.
25,
"Accounting for Stock Issued to Employees", and related Interpretations ("APB
25"). Accordingly, because all stock options granted had an exercise price
equal
to the market value of the underlying common stock on the date of the grant,
no
expense related to employee stock options was recognized. Also, as the ESPP
was
considered noncompensatory, no expense related to this plan was recognized.
However, expense related to the grant of restricted stock had been recognized
in
the income statement under APB 25. As discussed in Note 1, effective September
29, 2005, we adopted the fair value recognition provisions of SFAS 123(R).
This
statement applies to all awards granted after the effective date and to
modifications, repurchases or cancellations of existing awards. Additionally,
under the modified prospective method of adoption, we recognize compensation
expense for the portion of awards outstanding on the adoption date for which
the
requisite service period has not yet been rendered based on the grant-date
fair
value of those awards calculated under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," and Statement
of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123," for pro forma disclosures. Compensation expense in
fiscal year 2005 related to stock options and the employee stock purchase
plan
continues to be disclosed on a pro forma basis only. In accordance with the
modified prospective transition method, we also eliminated the balance of
Unamortized Value of Restricted Shares, which represented unrecognized
compensation cost for non-vested stock awards. Financial statements for prior
periods have not been restated.
SFAS
123(R)
requires that forfeitures be estimated over the vesting period of an award,
rather than being recognized as a reduction of compensation expense when
the
forfeiture actually occurs. The cumulative effect of the use of the estimated
forfeiture method for prior periods upon adoption of SFAS 123(R) was not
material.
Certain
of
our stock-based compensation plans allow early vesting when an employee reaches
retirement age and ceases continuous service. Under SFAS 123(R), awards granted
after September 28, 2005 require acceleration of compensation expense through
an
employee's retirement age, whether or not the employee is expected to cease
continuous service on that date. For awards granted on or before September
28,
2005, we accelerate compensation expense only in cases where a retirement
eligible employee is expected to cease continuous service prior to an award's
vesting date. If the new provisions of SFAS 123(R) had been in effect for
awards
granted prior to September 29, 2005, compensation expense would not have
been
materially affected during the year ended September 28,
2005.
The
following
table illustrates the effect on net earnings and earnings per share if we
had
applied the fair value recognition provisions to stock-based employee
compensation in fiscal year 2005.
(amounts
in $000s, except per share data)
|
|
|
|
Net
earnings as reported
|
|
$
|
30,222
|
|
Less
pro forma compensation expense, net of tax
|
|
|
(2,172
|
)
|
Pro
forma net earnings
|
|
$
|
28,050
|
|
|
|
|
|
|
Basic
earnings per share as reported
|
|
$
|
1.10
|
|
Pro
forma basic earnings per share
|
|
$
|
1.02
|
|
|
|
|
|
|
Diluted
earnings per share as reported
|
|
$
|
1.08
|
|
Pro
forma diluted earnings per share
|
|
$
|
1.00
|
|
The
weighted average
fair value of shares granted during the years ended September 26, 2007,
September 27, 2006 and September 28, 2005 was $6.12, $6.05 and $6.19,
respectively. We estimate the fair value of each grant using the
Black-Scholes option pricing model. Expected volatilities are generally
based on historical volatility of our stock. We use historical data to
estimate the expected life, and groups of employees that have similar historical
behaviors are considered separately for valuation purposes. The risk-free
rate for periods within the expected life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. The Black-Scholes option
pricing model was developed for use in estimating the fair value of traded
options, which have no vesting restrictions and are fully transferable. In
addition, option pricing models require the input of highly subjective
assumptions including the expected stock price volatility. Because our stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models
do
not necessarily provide a reliable single measure of the fair value of our
stock options. The fair value estimates are based on the following weighted
average assumptions:
|
2007
|
|
2006
|
|
2005
|
Risk-free
interest rate
|
5.3%
|
|
4.5%
|
|
3.7%
|
Dividend
yield
|
0.0%
|
|
0.0%
|
|
0.0%
|
Expected
volatility
|
28.1%
|
|
28.0%
|
|
31.0%
|
Expected
life in years
|
5.3
years
|
|
5.4
years
|
|
5
years
|
Capital
Appreciation Plans
The
1997
Capital Appreciation Plan provides for tandem awards of Common Stock (restricted
shares) and book units of up to 1,067,187 shares and related units. These
awards
are restricted for a period of three years and are forfeited to us if the
grantee is not employed by us at the end of the period (except for reasons
of
retirement, permanent disability or death). The stock is valued at 100% of
market value at the date of grant, and the book units, which are granted
in an
equal number to the shares of stock, provide for a cash payment at the end
of
the three-year period equal to the sum of the net change in book value per
share of the common stock and dividends paid per share during the period,
as adjusted for stock dividends/splits. The total value of the stock grant
(based upon market value at the date of the grant) is amortized to compensation
expense ratably over the three-year period. The total number of shares and
book
units granted under the 1997 Plan for which restrictions have not lapsed
was
299,750 at September 26, 2007 and 374,500 at September 27, 2006. At
September 26, 2007, 238,372 shares were reserved for future grants. The
total fair value of shares vested during the years ended September 26,
2007, September 27, 2006 and September 28, 2005 was $1,739, $362
and $54, respectively. The average remaining period for which
restrictions have not lapsed at September 26, 2007 was 1.47 years.
The
2007
Non-Employee Director Restricted Stock Plan provides for tandem awards of
Common
Stock (restricted shares) and book units of up to 20,000 shares and related
units. These awards are restricted for a period of three years and are
returnable to us if the grantee is not serving as a Director of the Company
at
the end of the period (except for reasons of retirement, permanent disability
or
death). The stock is valued at 100% of market value at the date of grant,
and the book units, which are granted in an equal number to the shares of
stock
provide for a cash payment at the end of the three-year period equal to the
sum
of the net change in book value per share of the common stock and dividends
paid
per share during the period, as adjusted for stock dividends/splits. The
total value of the stock grant (based upon market value at the date of the
grant) is amortized to compensation expense ratably over the three-year
period. The total number of shares and book units granted under the 2007
Plan for which restrictions have not lapsed was 3,000 at September 26,
2007. At September 26, 2007, 17,000 shares were reserved for future
grants. No shares have vested under this Plan to date. The average
remaining period for which restrictions have not lapsed at September 26,
2007
was 2.43 years.
The
amount
charged to expense under the Plans was $779 (net of tax, $483) in fiscal
2007,
$2,044 (net of tax, $1,330) in fiscal 2006 and $1,634 (net of tax, $1,062)
in fiscal 2005. Total unrecognized compensation cost at September 26, 2007
was $2,509. Compensation expense was lower in fiscal 2007 due to
significant forfeitures of restricted shares resulting from several senior
leaders leaving the Company during the fourth quarter. These forfeitures
caused
a $1,495 (net of tax, $927) reversal in the related previously recognized
compensation expense and had not been contemplated in our estimated forfeiture
rate.
The
following
table summarizes the activity under the Capital Appreciation Plans, as
amended:
|
|
Number
of Shares
|
|
|
Weighted
Average Grant Date Fair Value
|
|
Nonvested
shares at September 27, 2006
|
|
|
374,500
|
|
|
$
|
17.05
|
|
Granted
|
|
|
178,050
|
|
|
|
16.98
|
|
Forfeitures
|
|
|
(138,300
|
)
|
|
|
17.72
|
|
Vested
|
|
|
(111,500
|
)
|
|
|
15.60
|
|
Nonvested
shares at September 26, 2007
|
|
|
302,750
|
|
|
$
|
17.24
|
|
Employee
Stock Option Plans
On
February
8, 2006, our shareholders approved the 2006 Employee Stock Option Plan (the
"2006 Plan"). The 2006 Plan provides for the granting of up to 750,000
shares of common stock plus the number of shares that are subject to awards
granted thereunder that terminate or expire or are cancelled, forfeited,
exchanged or surrendered during the term of the 2006 Plan without being
exercised or fully vested. Options granted under the 2006 Plan are
exercisable as to 25% on each anniversary of the date of grants until fully
exercisable. The options expire ten years from the date of the grant and
are issued with an exercise price equal to the fair market value of a
share of common stock on the date of grant. Options are granted under the
2006 Plan to officers and key employees selected by the Compensation
Committee of the Board of Directors. As of September 26, 2007, 505,950
options have been granted under the 2006 Plan, and 244,050 shares are available
for future issuance.
The
1997
Employee Stock Option Plan as amended (the "1997 Plan") provides for the
granting of up to 1,745,313 stock options. Options granted under
the 1997 Plan through 2005 are exercisable as to 20% on the date of
grant and 20% on each anniversary of the date of grant thereafter until fully
exercisable. The options expire either five or ten years from the date of
grant
and are issued with an exercise price equal to the fair market value of the
underlying stock on the date of grant. Options are granted under the 1997
Plan
to officers and key employees selected by the Compensation Committee of the
Board of Directors. As of September 26, 2007, 1,272,440 options have been
granted under the 1997 Plan, and 472,873 shares are available for
future issuance.
Non-Employee
Director Stock Option Plans
Our
Non-Employee Director Stock Option Plans provide for the grant of non-qualified
stock options at a price equal to the fair market value of the common stock
on
the date of grant. Options outstanding under each plan through fiscal 2005
are
exercisable as to 20% on the date of grant and 20% on each anniversary of
the
date of grant thereafter until fully exercisable. Options outstanding that
were
issued in fiscal 2006 or later are exercisable as to 25% on each anniversary
of
the date of grant until fully exercisable. The options expire five
years from the date of grant. At September 26, 2007, 247,000 options have
been granted under the Non-Employee Director Stock Option Plans, and 27,000
shares are available for future issuance.
The
following
table summarizes the options activity under all of our Stock Option
Plans:
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
Weighted
Average Remaining Contractual Life
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
at September 27, 2006
|
|
|
1,551,802
|
|
|
$
|
16.79
|
|
|
|
|
|
Granted
|
|
|
515,538
|
|
|
|
17.17
|
|
|
|
|
|
Exercised
|
|
|
(205,355
|
)
|
|
|
13.38
|
|
|
|
|
|
Canceled
or forfeited
|
|
|
(507,123
|
)
|
|
|
16.90
|
|
|
|
|
|
Outstanding
at September 26, 2007
|
|
|
1,354,862
|
|
|
$
|
17.31
|
|
4.78
years
|
|
$
|
232
|
|
Vested
or expected to vest at September 26, 2007
|
|
|
1,292,604
|
|
|
|
17.29
|
|
4.64
years
|
|
|
229
|
|
Exercisable
at September 26, 2007
|
|
|
704,154
|
|
|
$
|
17.04
|
|
2.48
years
|
|
$
|
200
|
|
During
fiscal
2007 and fiscal 2006, $1,735 ($1,076, net of tax) and $1,791 ($1,589, net
of
tax), respectively, was charged to expense related to the stock option
plans. The total intrinsic value of options exercised during the years
ended September 26, 2007, September 27, 2006 and September 28, 2005 was $771,
$978 and $2,372, respectively. Total unrecognized stock option compensation
cost
at September 26, 2007 was $2,502 and is expected to be recognized
over a weighted average period of 2.87 years. Prior to the adoption of
SFAS 123(R), we did not record any compensation expense for stock
options.
Employee
Stock Purchase Plan
Under
the
ESPP, a maximum of 1,852,545 shares of Common Stock are available for issuance
to all eligible employees as determined by the Board of Directors subject
to a
limitation of 150,000 shares per year. Unissued shares in any given calendar
year are available to increase the annual maximum number of shares issuable
in
subsequent years. Employees may purchase shares of Common Stock through payroll
deductions ranging from 2% to 10% of compensation up to a maximum fair market
value of $10 or a maximum purchase of 1,000 shares per year, whichever is
less,
within the limitations of the offering. Shares are purchased at a 15%
discount on the lesser of the share price on the first or last day of the
calendar year. Shares purchased under the plan were 86,773 in fiscal 2007,
93,309 in fiscal 2006 and 102,830 in fiscal 2005. During fiscal years
2007 and 2006, $441 and $395 were charged to expense related to the Plan,
respectively. Total unrecognized compensation cost at September 26, 2007
was $110 and is expected to be recognized over a weighted average period
of 0.25
years. Prior to the adoption of SFAS 123(R), we were not required to record
compensation expense for the ESPP.
16. Restructuring
During
the
current fiscal year, same store sales declined while certain restaurant
operating costs, such as food costs and labor rates, increased. As a result,
management undertook a review of its current operations that led to a
comprehensive cost reduction plan. This plan includes group market and district
consolidations, as well as general and administrative cost reductions. The
majority of planned cost reductions will be achieved by
lowering headcount in the field and at the corporate offices. Also
included in these amounts are costs related to the resignation of our former
Chief Executive Officer. In order to execute the comprehensive plan, we incurred
approximately $2,221 in severance, relocation costs and outplacement services.
We also reversed $1,495 of previously recognized compensation expense related
to
the Capital Appreciation Plan and Employee Stock Option Plan for stock awards
that will not vest in the future. During fiscal 2007, we recorded $2,040
of
severance costs, $80 of relocation costs and $101 of outplacement services
in
General and administrative expense on the Statement of Earnings. Of the amount
recorded, $46 of the severance, relocation costs and outplacement services
was
paid in the fourth quarter of fiscal 2007. The remaining $2,175 is expected
to
be paid in fiscal 2008.
17. Commitments
and Contingencies
We
are
involved in various legal proceedings and have certain unresolved claims
pending. We believe, based on examination of these matters and experiences
to date, that the ultimate liability, if any, in excess of amounts already
provided in our consolidated financial statements is not likely to have a
material effect on our financial position, results of operations or cash
flows.
18. Supplemental
Disclosures of Cash Flow Information
During
fiscal
2007, we issued 178,050 shares of restricted stock totaling $3,023, had
lease retirements of $1,282 and had $1,585 of capital expenditures in accounts
payable at year-end. During fiscal 2006, we issued 135,500 shares of
restricted stock totaling $2,381, entered into capital leases of $275, had
retirements of $190 and had $3,000 of capital expenditures in accounts payable
at year-end. During 2005 we issued 139,700 shares valued at $2,478 and had
$1,081 of capital expenditures in accounts payable at
year-end.
19. Stock
Repurchase
During
fiscal
2006, we repurchased a total of 20,400 shares of our common stock for
a total of $312. The share repurchase program previously authorized by the
Board of Directors was announced on November 16, 2005. The program allowed
for
the repurchase of up to three million shares for a period of two years. As
of September 26, 2007, there were 2,979,600 shares that could still be purchased
under the share repurchase program. However, there were no repurchases made
subsequent to year-end through the expiration of the program on November
16,
2007.
20. Quarterly
Financial Data (Unaudited)
(amounts
in $000s except per share data)
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
(3)
|
|
Fourth
Quarter
(4)
|
|
For
the year ended September 26, 2007 (52 weeks)
(1)
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
$
|
147,266
|
|
$
|
202,151
|
|
$
|
153,586
|
|
$
|
151,139
|
|
Gross
Profit
(2)
|
|
|
37,920
|
|
|
53,084
|
|
|
37,500
|
|
|
34,671
|
|
Costs
and Expenses
|
|
|
142,389
|
|
|
193,138
|
|
|
154,433
|
|
|
149,311
|
|
Earnings
(Loss) Before Income Taxes
|
|
|
4,877
|
|
|
9,013
|
|
|
(847
|
)
|
|
1,828
|
|
Net
Earnings
|
|
|
4,165
|
|
|
5,992
|
|
|
124
|
|
|
1,527
|
|
Diluted
Earnings per Common and Common Equivalent Share
|
|
$
|
0.15
|
|
$
|
0.21
|
|
$
|
0.00
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the year ended September 27, 2006 (52 weeks)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
$
|
138,741
|
|
$
|
197,657
|
|
$
|
150,400
|
|
$
|
152,024
|
|
Gross
Profit
(2)
|
|
|
36,541
|
|
|
53,636
|
|
|
42,138
|
|
|
40,196
|
|
Costs
and Expenses
|
|
|
131,876
|
|
|
184,471
|
|
|
139,330
|
|
|
140,853
|
|
Earnings
Before Income Taxes
|
|
|
6,865
|
|
|
13,186
|
|
|
11,069
|
|
|
11,172
|
|
Net
Earnings
|
|
|
4,659
|
|
|
8,531
|
|
|
7,315
|
|
|
7,496
|
|
Diluted
Earnings per Common and Common Equivalent Share
|
|
$
|
0.17
|
|
$
|
0.30
|
|
$
|
0.26
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Our fiscal year includes quarters consisting of 12, 16, 12 and
12
weeks, respectively.
|
(2) We
define gross profit as net sales less cost of sales and restaurant
operating costs, which excludes depreciation
and amortization.
|
(3)
In the third quarter of fiscal 2007, we recognized a $5,369 pre-tax
impairment charge ($3,329, net of tax), which had an impact of
$0.12 per
diluted share.
|
(4)
In the fourth quarter of fiscal 2007, we recognized $1,100 of
severance
and restructuring expenses ($682, net of tax), which had an impact
of
$0.02 per diluted share.
|
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not
Applicable.
ITEM
9A. CONTROLS AND PROCEDURES
Based
on an
evaluation of our disclosure controls and procedures (as defined in Exchange
Act
Rules 13a-15(e) and 15d-15(c)), our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures were
effective as of September 26, 2007.
There
have
been no changes in our internal control over financial reporting that occurred
during the current quarter ended September 26, 2007 that have materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders of
The
Steak
n Shake Company
Indianapolis,
Indiana
We
have
audited the internal control over financial reporting of The Steak n Shake
Company and subsidiaries (the "Company") as of September 26, 2007, based
on
criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company's internal control
over
financial reporting based on our audit.
We
conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A
company's
internal control over financial reporting is a process designed by, or under
the
supervision of, the company's principal executive and principal financial
officers, or persons performing similar functions, and effected by the company's
board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary
to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company
are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or
timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
Because
of
the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected
on
a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future
periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies
or
procedures may deteriorate.
In
our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of September 26, 2007, based on the criteria
established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We
have also
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as
of and
for the year ended September 26, 2007 of the Company and our report dated
December 7, 2007 expressed an unqualified opinion on those financial statements
and included an explanatory paragraph regarding the adoption of Statement
of
Financial Accounting Standards No. 123(R), Share-Based Payment on September
29, 2005.
/s/ Deloitte & Touche LLP
Indianapolis,
IN
December
7, 2007
Management’s
Report on Internal Control Over Financial Reporting
The
management of The Steak n Shake Company is responsible for establishing and
maintaining adequate internal control over financial reporting as defined
in
Rule 13a-15(f) under the Securities Exchange Act of 1934. Pursuant to the
rules
and regulations of the Securities and Exchange Commission, internal control
over
financial reporting is a process designed by, or under the supervision of,
the
Company’s board of directors, principal executive and principal financial
officers, and effected by management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and
the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America
and
includes those policies and procedures that:
•
|
Pertain
to the maintenance of
records that in reasonable detail accurately and fairly reflect
the
transactions and dispositions of assets of the
company;
|
•
|
Provide
reasonable assurance that
transactions are recorded as necessary to permit preparation of
the
financial statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company;
and
|
•
|
Provide
reasonable assurance
regarding prevention or timely detection of unauthorized acquisition,
use
or disposition of the company’s assets that could have a material impact
on the financial statements.
|
•
|
Ensure
that material information
relating to the company, including its consolidated subsidiaries,
is made
known to management by others within those entities, particularly
during
the period which this report is being
prepared.
|
Because
of
inherent limitations, a system of internal control over financial reporting
may
not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management
has evaluated the effectiveness of its internal control over financial reporting
as of September 26, 2007 based on the criteria set forth in a report entitled
Internal Control - Integrated Framework
, issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on this
evaluation, we have concluded that, as of September 26, 2007, our internal
control over financial reporting is effective based on those
criteria.
The
Company’s
independent registered public accounting firm, Deloitte & Touche LLP, has
issued an audit report on the Company’s internal control over financial
reporting and their report is included herein.
/s/
Alan B.
Gilman
/s/ Jeffrey A. Blade
Alan
B. Gilman
Jeffrey
A.
Blade
Interim
President
and
Executive
Vice
President,
Chief
Executive
Officer
Chief
Financial and Administrative Officer
ITEM
9B. OTHER INFORMATION
On
December 7, 2007, our Board of Directors amended Article V of our
Restated By-Laws with respect to the number of directors. A copy of the
Restated By-Laws, as amended, is included as Exhibit 3.02 to this
Report.
II.
|
Comparison
of Five-Year Cumulative Total
Return
|
In
accordance
with General Instruction G(3) of Form 10-K, we have omitted certain information
required by Part III from this Form 10-K. We will file an amendment to this
Form
10-K on Form 10-K/A containing such information not later than 120 days after
the end of the fiscal year covered by this Report, as permitted by General
Instruction G(3) of Form 10-K. As permitted by instruction G(3), certain
information on executive officers called for by Part III, Item 10 is included
in
Part I, Item 1 of this Annual Report on Form 10-K under the caption “Executive
Officers of the Registrant.”
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Plan
Category
|
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
|
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in First
Column)
|
|
Equity
compensation plans approved by shareholders
(1)
|
|
|
1,660,612
|
|
$
|
14.12
|
|
|
1,526,680
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by shareholders
(3)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,660,612
|
|
$
|
14.12
|
|
|
1,526,680
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Consists of
1997 and 2006 employee stock option Plans, 2003, 2004 and 2005
Director
Stock Option Plans, 1997 Capital Appreciation Plan, as amended
and
restated, 2007 Non-Employee Director Capital Appreciation Plan
and the
1992 and 2006 Employee Stock Purchase Plans.
|
(2)
The
Capital Appreciation Plan provides for tandem awards of restricted
stock
and book units. As of September 26, 2007, 238,372 shares remained
available for issuance pursuant to awards under that plan and
17,000
remained available for issuance under the Non-Employee Director
Capital
Appreciation Plan.
|
PART
IV.
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a)
Documents filed as a part of this report
:
1.
Financial Statements.
The
following
table sets forth the financial statements filed as a part of this
report:
Consolidated
Statements of Financial Position at September 26, 2007 and September 27,
2006
For
the years
ended September 26, 2007, September 27, 2006, and September 28,
2005:
Consolidated
Statements of Earnings
Consolidated
Statements of Cash Flows
Consolidated
Statements of Shareholders' Equity
Notes
to
Consolidated Financial Statements
Reports
of Independent Registered Public Accounting Firm
Management's
Reports on Internal Control over Financial Reporting
2.
Financial Statement Schedules.
All
schedules
for the years ended September 26, 2007, September 27, 2006 and September
28,
2005 have been omitted for the reason that they are not required, are not
applicable or the required information is set forth in the financial statements
or notes thereto.
3.
Exhibits.
The
following
exhibits are filed as a part of this Annual Report on Form 10-K.
*
Indicates management contract or compensatory plans or arrangements required
to
be filed as an Exhibit.
3.01
|
|
Amended
and Restated Articles of Incorporation of The Steak n Shake Company,
filed
March 27, 2002. (Incorporated by reference to the Registrant's
definitive
Proxy Statement dated December 19, 2001, related to the 2002
Annual
Meeting of Shareholders).
|
|
|
|
3.02
|
|
Restated
By-Laws of The Steak n Shake Company, as amended on December
7,
2007.
|
|
|
|
4.01
|
|
Specimen
certificate representing Common Stock of The Steak n Shake Company.
(Incorporated by reference to Exhibit 4.01 to the Registrant's
Quarterly
Report on Form 10-Q for the fiscal quarter ended April 11,
2001).
|
|
|
|
4.02
|
|
Amended
and Restated Note Purchase and Private Shelf Agreement by and
between The
Steak n Shake Company and The Prudential Insurance Company of
America
dated as of September 20, 2002 related to the $75,000,000 senior
note
agreement and private shelf facility. (Incorporated by reference
to
Exhibit 4.02 to the Registrant's Annual Report on Form 10-K for
the year
ended September 25, 2002).
|
|
|
|
4.03
|
|
Amendment
No. 1 to Amended and Restated Note Purchase Agreement by and
between The
Steak n Shake Company and The Prudential Insurance Company of
America
dated as of December 18, 2002 related to the $75,000,000 senior
note
agreement and private shelf facility. (Incorporated by reference
to
Exhibit 4.03 to the Registrant's Annual Report on Form 10-K for
the year
ended September 25, 2002).
|
|
|
|
4.05
|
|
Credit
Agreement by and between The Steak n Shake Company and Fifth
Third Bank,
Indiana (Central) dated November 16, 2001, relating to a $30,000,000
revolving line of credit. (Incorporated by reference to Exhibit
10.17 to
the Registrant's Annual Report on Form 10-K for the year ended
September
26, 2001).
|
|
|
|
4.06
|
|
First
Amendment to Credit Agreement by and Between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated October 17, 2002 relating
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.15 to the Registrant's Annual Report on Form 10-K
for the year
ended September 25, 2002).
|
|
|
|
4.07
|
|
Second
Amendment to Credit Agreement by and Between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 18, 2002 relating
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.16 to the Registrant's Annual Report on Form 10-K
for the year
ended September 25, 2002).
|
|
|
|
4.08
|
|
Amendment
No. 2 dated May 21, 2003 to the Amended and Restated Note Purchase
and
Private Shelf Agreement dated September 20, 2002. (Incorporated
by
reference to Exhibit 10.16 to the Registrant's Quarterly Report
on Form
10-Q for the fiscal quarter ended April 9, 2003).
|
|
|
|
4.09
|
|
Third
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated May 22, 2003 related
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the
fiscal quarter ended April 9,
2003).
|
|
|
|
4.10
|
|
Amendment
No. 3 dated September 17, 2003 to the Amended and Restated Note
Purchase
and Private Shelf Agreement dated September 20, 2002. (Incorporated
by
reference to Exhibit 4.10 to the Registrant's Annual Report on
Form 10-K
for the year ended September 29, 2004 filed on December 16,
2004).
|
|
|
|
4.11
|
|
Fourth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 29, 2004 related
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January
26, 2005.
|
|
|
|
4.12
|
|
Fifth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 29, 2004 related
to a
$50,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated January
26, 2005.
|
|
|
|
4.13
|
|
Amendment
No. 4 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated October 27, 2006. (Incorporated by reference
to Exhibits
to the Registrant's Current Report on Form 8-K, dated November
2,
2006).
|
|
|
|
4.14
|
|
Sixth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated September 11, 2006.
(Incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K dated September 15, 2006.
|
|
|
|
4.15
|
|
Amendment
to Note Purchase and Private Shelf Agreement to extend maturity
date to
September 30, 2008 (Incorporated by reference to Exhibit 10.1
to the
Registrant's Current report on Form 8-K filed November 17,
2005).
|
|
|
|
4.16
|
|
Senior
Note Agreement with Prudential Insurance Company of America dated
October
27, 2006. (Incorporated by reference to Exhibits to the
Registrant's Current Report on Form 8-K, dated November 2,
2006).
|
|
|
|
4.17
|
|
Senior
Note Agreement with Pruco Life Insurance Company dated October
27, 2006.
(Incorporated by reference to Exhibits to the Registrant's Current
Report
on Form 8-K, dated November 2, 2006).
|
|
|
|
4.18
|
|
Senior
Note Agreement with United Omaha Life Insurance Company dated
October 27,
2006. (Incorporated by reference to Exhibits to the
Registrant's Current Report on Form 8-K, dated November 2,
2006).
|
|
|
|
4.19
|
|
Amendment
No. 5 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated October 30, 2007.
|
|
|
|
4.20
|
|
Amendment
No. 6 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated December 5, 2007.
|
|
|
|
4.21
|
|
Seventh
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 5,
2007.
|
|
|
|
10.01*
|
|
Letter
from the Registrant to Alan B. Gilman dated June 27, 1992. (Incorporated
by reference to Exhibit 19.13 to the Registrant's Quarterly Report
on Form
10-Q for the fiscal quarter ended July 1, 1992.
|
|
|
|
10.02*
|
|
Retirement
Agreement by and between S. Sue Aramian and the Registrant dated
August
15, 2001. (Incorporated by reference to Exhibit 10.05 to the
Registrant's
Annual Report on Form 10-K for the year ended September 26,
2001).
|
|
|
|
10.04*
|
|
Consolidated
Products, Inc. 1997 Employee Stock Option Plan. (Incorporated
by reference
to the Appendix to the Registrant's definitive Proxy Statement
dated
December 24, 1996 related to the 1997 Annual Meeting of
Shareholders).
|
|
|
|
10.05*
|
|
Amendment
No. 1 to The Steak n Shake Company's (formerly Consolidated Products,
Inc.) 1997 Employee Stock Option Plan. (Incorporated by reference
to the
Appendix to the Registrant's definitive Proxy Statement dated
December 19,
2001 related to the 2002 Annual Meeting of
Shareholders).
|
|
|
|
10.06*
|
|
Form
of option agreement related to 2000 Non-employee Director Stock
Option
Program and schedule relating thereto. (Incorporated by reference
to
Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended July 5, 2000).
|
|
|
|
10.07*
|
|
Form
of option agreement related to 2002 Non-employee Director Stock
Option
Program and schedule relating thereto. (Incorporated by reference
to
Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended December 19, 2001).
|
|
|
|
10.09*
|
|
The
Steak n Shake Company’s 2003 Director Stock Option Plan. (Incorporated by
reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K
for the year ended September 24, 2003).
|
|
|
|
10.10*
|
|
The
terms of severance arrangements with Peter M. Dunn are set forth
in and
incorporated by reference to the Registrant's Current Report on
Form 8-K,
dated August 22, 2007.
|
|
|
|
10.11*
|
|
The
Steak n Shake Company Amended and Restated 1997 Capital Appreciation
Plan.
(Incorporated by reference to the Appendix to the Registrant’s definitive
Proxy Statement dated December 19, 2003 related to the 2004 Annual
Meeting
of Shareholders).
|
|
|
|
10.12*
|
|
The
Steak n Shake Company 2004 Director Stock Option Plan. (Incorporated
by
reference to the Appendix to the Registrant’s definitive Proxy Statement
dated December 19, 2003 related to the 2004 Annual Meeting of
Shareholders).
|
|
|
|
10.13*
|
|
Form
of The Steak n Shake Company Capital Appreciation Agreement.
(Incorporated
by reference to Exhibit 10.13 to the Registrant's Annual Report
on Form
10-K for the year ended September 29, 2004 filed on December
16,
2004).
|
|
|
|
10.14*
|
|
Form
of The Steak n Shake Company Stock Option Agreement. (Incorporated
by
reference to Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K
for the year ended September 29, 2004 filed on December 16,
2004).
|
|
|
|
10.16*
|
|
The
Steak n Shake Non Qualified Savings Plan (Incorporated by reference
to
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended December 22, 2004.)
|
|
|
|
10.17
|
|
Multiple
Unit Franchise Agreement (Incorporated by reference to Exhibit
10.1 to the
Registrant's Current Report on Form 8-K filed September 27,
2005.)
|
|
|
|
10.18
|
|
Contract
for Purchase and Sale of Real Estate (Incorporated by reference
to Exhibit
10.2 to the Registrant's Current Report on Form 8-K filed September
27,
2005).
|
|
|
|
10.19
|
|
Personal
Property Sales Agreement (Incorporated by reference to Exhibit
10.3 to the
Registrant's Current Report on Form 8-K filed September 27,
2005.)
|
|
|
|
10.20
|
|
Assignment
and Assumption Agreement (Incorporated by reference to Exhibit
10.4 to the
Registrant's Current Report on Form 8-K filed September 27,
2005).
|
|
|
|
10.21*
|
|
The
Steak n Shake 2005 Director Stock Option Plan (Incorporated by
reference
to Appendix B to 2004 Proxy Statement dated December 20, 2004
related to
the 2005 Annual Meeting of Shareholders).
|
|
|
|
10.22*
|
|
Employment
Agreement for Wayne Kelley (Incorporated by reference to Exhibit
10.1 to
the Registrant's Current Report on Form 8-K filed December 29,
2004).
|
|
|
|
10.24*
|
|
2006
Employee Stock Option Plan (Incorporated herein by reference
to Exhibit
10.1 to the Registrant's Current Report on Form 8-K dated February
8,
2006).
|
|
|
|
10.25*
|
|
2006
Incentive Bonus Plan (Incorporated herein by reference to Exhibit
10.2 to
the Registrant's Current Report on Form 8-K dated February 8,
2006).
|
|
|
|
10.26*
|
|
Form
of Incentive Stock Option Agreement (Incorporated herein by reference
to
Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated
February
8, 2006).
|
|
|
|
10.27*
|
|
Amendment
to Employment Agreement between Wayne Kelley and Steak n Shake
Operations,
Inc. (Incorporated herein by reference to Exhibit 10.4 to the
Registrant's
Current Report on Form 8-K dated March 24, 2006).
|
|
|
|
10.31*
|
|
Form
of Change in Control Benefits Agreement dated November 7, 2007
with
Jeffrey A. Blade.
|
|
|
|
10.32*
|
|
Severance
and General Release Agreement dated September 17, 2007 with Gary
Walker.
|
|
|
|
10.33*
|
|
Change
in Control Agreement dated November 7, 2007 with Gary T.
Reinwald.
|
|
|
|
10.34*
|
|
Amendment
to 1997 Capital Appreciation Plan, as Revised in 2002 and
2007.
|
|
|
|
10.35*
|
|
Form
of Indemnity Agreement entered into on October 9, 2007 with the
following
Officers and Directors of the Company: Jeffrey A. Blade, Duane
E. Geiger,
Alan B. Gilman, Omar Janjua, David C. Milne, Thomas Murrill,
Gary T.
Reinwald, Steven M. Schiller, J. Michael Vance, Geoff Ballotti,
Wayne
Kelley, Charles Lanham, Ruth Person, John W. Ryan, J. Fred Risk,
Steven M.
Schmidt, Edward Wilhelm, and James Williamson, Jr.
|
|
|
|
14.01
|
|
Code
of Business Conduct and Ethics. (Incorporated by reference to
Exhibit
10.01 to the Registrant’s Current Report on Form 8-K dated March 24,
2006).
|
|
|
|
21.01
|
|
Subsidiaries
of the Registrant.
|
|
|
|
23.01
|
|
Consent
of Independent Registered Public Accounting Firm.
|
|
|
|
31.01
|
|
Rule
13(a)-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
|
|
|
31.02
|
|
Rule
13(a)-14(a)/15d-14(a) Certification of Chief Financial
Officer.
|
|
|
|
32.01
|
|
Section
1350 Certifications.
|
|
|
|
*
Indicates management contract or compensatory plans or arrangements
required to be filed as an
Exhibit.
|
Pursuant
to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934,
the registrant has duly caused this report to be signed on its behalf by
the
undersigned, thereunto duly authorized, on December 7, 2007.
THE
STEAK
N SHAKE COMPANY
By:
/s/
Jeffrey A.
Blade
Jeffrey
A. Blade
Executive
Vice President,
Chief
Financial and Administrative Officer
Pursuant
to
the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in
the
capacities indicated, on December 7, 2007.
/s/
Jeffrey A. Blade
|
Executive
Vice President, Chief Financial and Administrative
Officer
|
Jeffrey
A. Blade
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
Interim
Chief Executive Officer and President, Chairman and
Director
|
Alan
B. Gilman
|
(Principal
Executive Officer)
|
|
|
/s/
Geoffrey Ballotti
|
Director
|
Geoffrey
Ballotti
|
|
/s/
Wayne L. Kelley
|
Director
|
Wayne
L. Kelley
|
|
|
|
/s/
Dr. Ruth J. Person
|
Director
|
Dr.
Ruth J. Person
|
|
|
|
/s/
J. Fred Risk
|
Director
|
J.
Fred Risk
|
|
|
|
/s/
Dr. John W. Ryan
|
Director
|
Dr.
John W. Ryan
|
|
|
|
/s/
Stephen M. Schmidt
|
Director
|
Stephen
M. Schmidt
|
|
|
|
/s/
Edward W. Wilhelm
|
Director
|
Edward
W. Wilhelm
|
|
|
|
/s/
James Williamson, Jr.
|
Director
|
James
Williamson, Jr.
|
|
THE
STEAK N SHAKE COMPANY AND SUBSIDIARIES
Exhibit
Number
|
|
Description
|
3.01
|
|
Amended
and Restated Articles of Incorporation of The Steak n Shake Company,
filed
March 27, 2002. (Incorporated by reference to the Registrant's
definitive
Proxy Statement dated December 19, 2001, related to the 2002
Annual
Meeting of Shareholders).
|
|
|
|
3.02
|
|
Restated
By-Laws of The Steak n Shake Company, as amended on December
7,
2007.
|
|
|
|
4.01
|
|
Specimen
certificate representing Common Stock of The Steak n Shake Company.
(Incorporated by reference to Exhibit 4.01 to the Registrant's
Quarterly
Report on Form 10-Q for the fiscal quarter ended April 11,
2001).
|
|
|
|
4.02
|
|
Amended
and Restated Note Purchase and Private Shelf Agreement by and
between The
Steak n Shake Company and The Prudential Insurance Company of
America
dated as of September 20, 2002 related to the $75,000,000 senior
note
agreement and private shelf facility. (Incorporated by reference
to
Exhibit 4.02 to the Registrant's Annual Report on Form 10-K for
the year
ended September 25, 2002).
|
|
|
|
4.03
|
|
Amendment
No. 1 to Amended and Restated Note Purchase Agreement by and
between The
Steak n Shake Company and The Prudential Insurance Company of
America
dated as of December 18, 2002 related to the $75,000,000 senior
note
agreement and private shelf facility. (Incorporated by reference
to
Exhibit 4.03 to the Registrant's Annual Report on Form 10-K for
the year
ended September 25, 2002).
|
|
|
|
4.05
|
|
Credit
Agreement by and between The Steak n Shake Company and Fifth
Third Bank,
Indiana (Central) dated November 16, 2001, relating to a $30,000,000
revolving line of credit. (Incorporated by reference to Exhibit
10.17 to
the Registrant's Annual Report on Form 10-K for the year ended
September
26, 2001).
|
|
|
|
4.06
|
|
First
Amendment to Credit Agreement by and Between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated October 17, 2002 relating
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.15 to the Registrant's Annual Report on Form 10-K
for the year
ended September 25, 2002).
|
|
|
|
4.07
|
|
Second
Amendment to Credit Agreement by and Between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 18, 2002 relating
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.16 to the Registrant's Annual Report on Form 10-K
for the year
ended September 25, 2002).
|
|
|
|
4.08
|
|
Amendment
No. 2 dated May 21, 2003 to the Amended and Restated Note Purchase
and
Private Shelf Agreement dated September 20, 2002. (Incorporated
by
reference to Exhibit 10.16 to the Registrant's Quarterly Report
on Form
10-Q for the fiscal quarter ended April 9, 2003).
|
|
|
|
4.09
|
|
Third
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated May 22, 2003 related
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.17 to the Registrant’s Quarterly Report on Form 10-Q for the
fiscal quarter ended April 9, 2003).
|
|
|
|
4.10
|
|
Amendment
No. 3 dated September 17, 2003 to the Amended and Restated Note
Purchase
and Private Shelf Agreement dated September 20, 2002. (Incorporated
by
reference to Exhibit 4.10 to the Registrant's Annual Report on
Form 10-K
for the year ended September 29, 2004 filed on December 16,
2004).
|
|
|
|
4.11
|
|
Fourth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 29, 2004 related
to a
$30,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated January
26, 2005.
|
|
|
|
4.12
|
|
Fifth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 29, 2004 related
to a
$50,000,000 revolving line of credit. (Incorporated by reference
to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated January
26, 2005.
|
|
|
|
4.13
|
|
Amendment
No. 4 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated October 27, 2006. (Incorporated by reference
to Exhibits
to the Registrant's Current Report on Form 8-K, dated November
2,
2006).
|
|
|
|
4.14
|
|
Sixth
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated September 11, 2006.
(Incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K dated September 15,
2006.
|
|
|
|
4.15
|
|
Amendment
to Note Purchase and Private Shelf Agreement to extend maturity
date to
September 30, 2008 (Incorporated by reference to Exhibit 10.1
to the
Registrant's Current report on Form 8-K filed November 17,
2005).
|
|
|
|
4.16
|
|
Senior
Note Agreement with Prudential Insurance Company of America dated
October
27, 2006. (Incorporated by reference to Exhibits to the
Registrant's Current Report on Form 8-K, dated November 2,
2006).
|
|
|
|
4.17
|
|
Senior
Note Agreement with Pruco Life Insurance Company dated October
27, 2006.
(Incorporated by reference to Exhibits to the Registrant's Current
Report
on Form 8-K, dated November 2, 2006).
|
|
|
|
4.18
|
|
Senior
Note Agreement with United Omaha Life Insurance Company dated
October 27,
2006. (Incorporated by reference to Exhibits to the
Registrant's Current Report on Form 8-K, dated November 2,
2006).
|
|
|
|
4.19
|
|
Amendment
No. 5 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated October 30, 2007.
|
|
|
|
4.20
|
|
Amendment
No. 6 to the Amended and Restated Note Purchase and Private Shelf
Agreement dated December 5, 2007.
|
|
|
|
4.21
|
|
Seventh
Amendment to Credit Agreement by and between The Steak n Shake
Company and
Fifth Third Bank, Indiana (Central) dated December 5,
2007.
|
|
|
|
10.01*
|
|
Letter
from the Registrant to Alan B. Gilman dated June 27, 1992. (Incorporated
by reference to Exhibit 19.13 to the Registrant's Quarterly Report
on Form
10-Q for the fiscal quarter ended July 1, 1992.
|
|
|
|
10.02*
|
|
Retirement
Agreement by and between S. Sue Aramian and the Registrant dated
August
15, 2001. (Incorporated by reference to Exhibit 10.05 to the
Registrant's
Annual Report on Form 10-K for the year ended September 26,
2001).
|
|
|
|
10.04*
|
|
Consolidated
Products, Inc. 1997 Employee Stock Option Plan. (Incorporated
by reference
to the Appendix to the Registrant's definitive Proxy Statement
dated
December 24, 1996 related to the 1997 Annual Meeting of
Shareholders).
|
|
|
|
10.05*
|
|
Amendment
No. 1 to The Steak n Shake Company's (formerly Consolidated Products,
Inc.) 1997 Employee Stock Option Plan. (Incorporated by reference
to the
Appendix to the Registrant's definitive Proxy Statement dated
December 19,
2001 related to the 2002 Annual Meeting of
Shareholders).
|
|
|
|
10.06*
|
|
Form
of option agreement related to 2000 Non-employee Director Stock
Option
Program and schedule relating thereto. (Incorporated by reference
to
Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended July 5, 2000).
|
|
|
|
10.07*
|
|
Form
of option agreement related to 2002 Non-employee Director Stock
Option
Program and schedule relating thereto. (Incorporated by reference
to
Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended December 19, 2001).
|
|
|
|
10.09*
|
|
The
Steak n Shake Company’s 2003 Director Stock Option Plan. (Incorporated by
reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K
for the year ended September 24, 2003).
|
|
|
|
10.10*
|
|
The
terms of severance arrangements with Peter M. Dunn are set forth
in and
incorporated by reference to the Registrant's Current Report
on Form 8-K,
dated August 22, 2007.
|
|
|
|
10.11*
|
|
The
Steak n Shake Company Amended and Restated 1997 Capital Appreciation
Plan.
(Incorporated by reference to the Appendix to the Registrant’s definitive
Proxy Statement dated December 19, 2003 related to the 2004 Annual
Meeting
of Shareholders).
|
|
|
|
10.12*
|
|
The
Steak n Shake Company 2004 Director Stock Option Plan. (Incorporated
by
reference to the Appendix to the Registrant’s definitive Proxy Statement
dated December 19, 2003 related to the 2004 Annual Meeting of
Shareholders).
|
|
|
|
10.13*
|
|
Form
of The Steak n Shake Company Capital Appreciation Agreement.
(Incorporated
by reference to Exhibit 10.13 to the Registrant's Annual Report
on Form
10-K for the year ended September 29, 2004 filed on December
16,
2004).
|
|
|
|
10.14*
|
|
Form
of The Steak n Shake Company Stock Option Agreement. (Incorporated
by
reference to Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K
for the year ended September 29, 2004 filed on December 16,
2004).
|
|
|
|
10.16*
|
|
The
Steak n Shake Non Qualified Savings Plan (Incorporated by reference
to
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
for the
fiscal quarter ended December 22,
2004.)
|
|
|
|
10.17
|
|
Multiple
Unit Franchise Agreement (Incorporated by reference to Exhibit
10.1 to the
Registrant's Current Report on Form 8-K filed September 27,
2005.)
|
|
|
|
10.18
|
|
Contract
for Purchase and Sale of Real Estate (Incorporated by reference
to Exhibit
10.2 to the Registrant's Current Report on Form 8-K filed September
27,
2005).
|
|
|
|
10.19
|
|
Personal
Property Sales Agreement (Incorporated by reference to Exhibit
10.3 to the
Registrant's Current Report on Form 8-K filed September 27,
2005.)
|
|
|
|
10.20
|
|
Assignment
and Assumption Agreement (Incorporated by reference to Exhibit
10.4 to the
Registrant's Current Report on Form 8-K filed September 27,
2005).
|
|
|
|
10.21*
|
|
The
Steak n Shake 2005 Director Stock Option Plan (Incorporated by
reference
to Appendix B to 2004 Proxy Statement dated December 20, 2004
related to
the 2005 Annual Meeting of Shareholders).
|
|
|
|
10.22*
|
|
Employment
Agreement for Wayne Kelley (Incorporated by reference to Exhibit
10.1 to
the Registrant's Current Report on Form 8-K filed December 29,
2004).
|
|
|
|
10.24*
|
|
2006
Employee Stock Option Plan (Incorporated herein by reference
to Exhibit
10.1 to the Registrant's Current Report on Form 8-K dated February
8,
2006).
|
|
|
|
10.25*
|
|
2006
Incentive Bonus Plan (Incorporated herein by reference to Exhibit
10.2 to
the Registrant's Current Report on Form 8-K dated February 8,
2006).
|
|
|
|
10.26*
|
|
Form
of Incentive Stock Option Agreement (Incorporated herein by reference
to
Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated
February
8, 2006).
|
|
|
|
10.27*
|
|
Amendment
to Employment Agreement between Wayne Kelley and Steak n Shake
Operations,
Inc. (Incorporated herein by reference to Exhibit 10.4 to the
Registrant's
Current Report on Form 8-K dated March 24, 2006).
|
|
|
|
10.31*
|
|
Form
of Change in Control Benefits Agreement dated November 7, 2007
with
Jeffrey A. Blade.
|
|
|
|
10.32*
|
|
Severance
and General Release Agreement dated September 17, 2007 with Gary
Walker.
|
|
|
|
10.33*
|
|
Change
in Control Agreement dated November 7, 2007 with Gary T.
Reinwald.
|
|
|
|
10.34*
|
|
Amendment
to 1997 Capital Appreciation Plan, as Revised in 2002 and
2007.
|
|
|
|
10.35*
|
|
Form
of Indemnity Agreement entered into on October 9, 2007 with the
following
Officers and Directors of the Company: Jeffrey A. Blade, Duane
E. Geiger,
Alan B. Gilman, Omar Janjua, David C. Milne, Thomas Murrill,
Gary T.
Reinwald, Steven M. Schiller, J. Michael Vance, Geoff Ballotti,
Wayne
Kelley, Charles Lanham, Ruth Person, John W. Ryan, J. Fred Risk,
Steven M.
Schmidt, Edward Wilhelm, and James Williamson, Jr.
|
|
|
|
14.01
|
|
Code
of Business Conduct and Ethics. (Incorporated by reference to
Exhibit
10.01 to the Registrant’s Current Report on Form 8-K dated March 24,
2006).
|
|
|
|
21.01
|
|
Subsidiaries
of the Registrant.
|
|
|
|
23.01
|
|
Consent
of Independent Registered Public Accounting Firm.
|
|
|
|
31.01
|
|
Rule
13(a)-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
|
|
|
31.02
|
|
Rule
13(a)-14(a)/15d-14(a) Certification of Chief Financial
Officer.
|
|
|
|
32.01
|
|
Section
1350 Certifications.
|
|
|
|
*
Indicates management contract or compensatory plans or arrangements
required to be filed as an
Exhibit.
|
54
EXHIBIT
21.01
THE
STEAK N SHAKE COMPANY
Wholly-owned
Subsidiaries
|
State
of Incorporation or Organization
|
Steak
n Shake Operations, Inc.
|
Indiana
|
Steak
n Shake, LLC *
|
Indiana
|
Steak
n Shake Enterprises, Inc. *
|
Indiana
|
Consolidated
Specialty Restaurants, Inc.
|
Indiana
|
SNS
Investment Company
|
Indiana
|
*
Wholly-owned subsidiary of Steak n Shake Operations,
Inc.
EXHIBIT
23.01
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in Registration Statements No.
333-115727 on Form S-3 and Nos. 333-115728 and 333-136941 on Form S-8 of
our
reports dated December 7, 2007, relating to the financial statements of The
Steak n Shake Company (which report expresses an unqualified opinion and
includes an explanatory paragraph regarding the adoption of Statement of
Financial Accounting Standard No. 123(R), Share-Based Payment on September
29,
2005), and management's report on the effectiveness of internal control over
financial reporting, appearing in this Annual Report on Form 10-K of The
Steak n
Shake Company for the year ended September 26, 2007.
/s/ Deloitte
&
Touche
LLP
Indianapolis,
Indiana
December
10, 2007
EXHIBIT
31.01
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I,
Alan
B. Gilman, certify that:
1.
I have
reviewed this annual report on Form 10-K of The Steak n Shake
Company;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant's other certifying officer and I are responsible for establishing
and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
|
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
Designed such internal control over financial reporting, or caused
such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
(c)
Evaluated the effectiveness of the registrant's disclosure controls
and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of
the period covered by this report based on such evaluation;
and
|
|
(d)
Disclosed in this report any change in the registrant's internal
control
over financial reporting that occurred during the registrant's most
recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
5.
The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
|
(a)
All significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
|
|
(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
Date
December 7, 2007
/s/
Alan B.
Gilman
Alan
B. Gilman
Interim
President and Chief Executive Officer
EXHIBIT
31.02
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I,
Jeffrey A. Blade, certify that:
1.
I have
reviewed this annual report on Form 10-K of The Steak n Shake
Company;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant's other certifying officer and I are responsible for establishing
and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15 (e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
|
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
report
is being prepared;
|
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(b)
Designed such internal control over financial reporting, or caused
such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
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(c)
Evaluated the effectiveness of the registrant's disclosure controls
and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of
the period covered by this report based on such evaluation;
and
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(d)
Disclosed in this report any change in the registrant's internal
control
over financial reporting that occurred during the registrant's most
recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
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5.
The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
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(a)
All significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record,
process, summarize and report financial information;
and
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(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
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Date
December 7, 2007
/s/
Jeffrey A.
Blade
Jeffrey
A. Blade
Executive
Vice President, Chief Financial and Administrative
Officer
EXHIBIT
32.01
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of The Steak n Shake Company (the "Company")
on Form 10-K for the period ending September 26, 2007 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each
of
the undersigned certify, pursuant to 18 U.S.C. Sec. 1350, as adopted
pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
/s/
Alan B.
Gilman
Alan
B.
Gilman, Interim President and Chief Executive Officer
December
7, 2007
Jeffrey
A. Blade, Executive Vice President,
Chief
Financial and Administrative Officer
December
7, 2007
EXHIBIT
3.02
RESTATED
BY-LAWS
OF
THE
STEAK N SHAKE COMPANY
Article
I
Section
1.
Name
. The name of the corporation
is
The Steak n Shake Company (“Corporation”).
Section
2.
Principal Office and Resident
Agent
. The post-office address of the principal office
of the Corporation is 500 Century Building, 36 South Pennsylvania Street,
Indianapolis, Indiana 46204, and the name and post-office address of its
Resident Agent in charge of such office is C T Corporation System, 36 South
Pennsylvania Street, Suite 700, Indianapolis, Indiana 46204.
Section
3.
Seal
. The seal of the Corporation
shall be circular in form and mounted upon a metal die, suitable for impressing
the same upon paper. About the upper periphery of the seal shall
appear the words “The Steak n Shake Company” and about the lower periphery
thereof the word “Indiana”. In the center of the seal shall appear
the word “Seal”.
Article
II
The
fiscal year of the Corporation
shall end on the last Wednesday in September of each calendar year.
Article
III
Capital
Stock
Section
1.
Number of Shares and Classes
of Capital Stock
.
The total number of shares of
common stock which the Corporation shall have authority to issue is 50,000,000
shares, which shall consist of 50,000,000 common shares without par
value. In addition, the Corporation shall have the authority to issue
10,000,000 shares of Preferred Stock on the terms and conditions set forth
in
the amendment to the Articles of Incorporation adopted May 16,
2001.
Section
2.
Consideration for No Par
Shares
.
The shares of stock of the Corporation
without par value shall be issued or sold in such manner and for such amount
of
consideration as may be fixed from time to time by the Board of Directors,
such
shares of stock shall be fully paid and nonassessable.
Section
3.
Consideration for Treasury
Shares
.
Treasury shares may be disposed of by the
Corporation for such consideration as may be determined from time to time by
the
Board of Directors.
Section
4.
Payment for
Shares
.
The consideration for the issuance of
shares of capital stock of the Corporation may be paid, in whole or in part,
in
money, in other property, tangible or intangible, or in labor actually performed
for, or services actually rendered to the Corporation which is transferred
to
stated capital upon the issuance of shares as a share dividend shall be deemed
to be the consideration for the issuance of such shares. When
payment of the consideration for which a share was authorized to be issued
shall
have been received by the Corporation, or when surplus shall have been
transferred to stated capital upon the issuance of a share dividend, such share
shall be declared and taken to be fully paid and not liable to any further
call
or assessment, and the holder thereof shall not be liable for any further
payments thereon. In the absence of actual fraud in the transaction,
the judgment of the Board of Directors as to the value of such property, labor
or services received as consideration, or the value placed by the Board of
Directors upon the corporate assets in the event of a share dividend, shall
be
conclusive. Promissory notes, uncertified checks, or future services
shall not be accepted in payment or part payment of the capital stock of the
Corporation, except as permitted by The Indiana Business Corporation
Law.
Section
5.
Certificates for
Shares
.
Each holder of capital stock of the
Corporation shall be entitled to a stock certificate, signed by the Chairman
or
a Vice President and the Secretary or any Assistant Secretary of the
Corporation, with the seal of the Corporation thereto affixed, stating the
name
of the registered holder, the number of shares represented by such certificate,
the par value of each share of stock or that such shares of stock are without
par value, and that such shares are not fully paid and
nonassessable. If such shares are not fully paid, and as further
payments are made, the certificate shall be stamped accordingly.
If
the Corporation is authorized to
issue shares of more than one class, every certificate shall state the kind
and
class of shares represented thereby, and the relative rights, interests,
preferences and restrictions of such class, or a summary thereof, provided,
that
such statement may be omitted from the certificate if it shall be set forth
upon
the face or back of the certificate that such statement, in full, will be
furnished by the Corporation to any shareholder upon written request and without
charge.
Section
6.
Facsimile
Signatures
.
If a certificate is countersigned by
the written signature of a transfer agent other than the Corporation or its
employee, the signatures of the officers of the Corporation may be
facsimiles. If a certificate is countersigned by the written
signature of a registrar other than the Corporation or its employee, the
signatures of the transfer agent and the officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of its
issue.
Section
7.
Transfer of
Shares
.
The share of capital stock of the
Corporation shall be transferable only on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney or
accompanied by proper evidence of succession, assignment or authority to
transfer.
Section
8.
Cancellation
.
Every
certificate surrendered to the Corporation for exchange or transfer shall be
canceled, and no new certificate or certificates shall be issued in exchange
for
any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 10 of this Article
III.
Section
9.
Transfer Agent and
Registrar
.
The Board of Directors may appoint a
transfer agent and a registrar for each class of capital stock of the
Corporation and may require all certificates representing such shares to bear
the signature of such transfer agent and registrar. Shareholders
shall be responsible for notifying the transfer agent and registrar for the
class of stock held by such shareholder in writing of any changes in their
addresses from time to time, and failure so to do shall relieve the Corporation,
its shareholders, directors, officers, transfer agent and registrar of liability
for failure to direct notices, dividends, or other documents or property to
an
address other than the one appearing upon the records of the transfer agent
and
registrar of the Corporation.
Section
10.
Lost, Stolen or Destroyed
Certificates.
The Board of Directors may authorize the
transfer agent and a registrar to issue replacement shares for Corporation
stock
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or
certificates, the Corporation may, in its discretion and as a condition of
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
the
Corporation a bond in such sum and in such form as it may direct to indemnify
against any claim that may be made against the Corporation with respect to
the
certificate alleged to have been lost, stolen or destroyed or the issuance
of
such new certificate. The Corporation, at its discretion, may
authorize the issuance of such new certificates without any bond when in its
judgment it is proper to do so.
Section
11.
Registered
Shareholders
.
The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of such shares to receive dividends, to vote as such owner, to hold liable
for calls and assessments, and to treat as owner in all other respects, and
shall not be bound to recognize any equitable or other claims to or interest
in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Indiana.
Section
12.
Options to Officers and
Employees
.
The issuance, including the
consideration of rights or options to officers or employees of the Corporation,
and not to the shareholders generally, to purchase from the Corporation shares
of its capital stock shall be approved by the affirmative vote of the holders
of
a majority of the shares entitled to vote thereon or shall be authorized by
and
consistent with a plan approved by such a vote of the
shareholders. The price to be received for any shares having a par
value other than treasury shares to be issued upon the exercise of such rights
or options, shall not be less than the par value thereof.
Article
IV
Meetings
of Shareholders
Section
1.
Place of
Meeting
.
Meetings of shareholders of the
Corporation shall be held at such place, within or without the State of Indiana,
as may from time to time be designated by the Board of Directors, or as may
be
specified in the notices or waivers of notice of such meetings.
Section
2.
Annual
Meeting
.
The annual meeting of shareholders for
the election of Directors, and for the transaction of such other business as
may
properly come before the meeting, shall be held on the second Wednesday of
February of each year, unless in any year the Board of Directors establishes
a
different date as the date of the annual meeting. Failure to hold the
annual meeting at the designated time shall not work any forfeiture or
dissolution of the Corporation, and shall not affect otherwise valid corporate
acts.
Section
3.
Special
Meetings
.
Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the Board of Directors or the
Chairman and shall be called by the Chairman or the Secretary at the request
in
writing of a majority of the Board of Directors, or at the request in writing
of
shareholders holding of record not less than one-fourth of all the shares
outstanding and entitled by the Articles of Incorporation to vote on the
business for which the meeting is being called.
Section
4.
Notice of
Meetings
.
A written or printed notice, stating
the place, day and hour of the meeting, and in case of a special meeting, or
when required by any other provision of the Indiana Business Corporation Law,
or
of the Articles of Incorporation, as now or hereafter amended, or these By-Laws,
the purpose or purposes for which the meeting is called, shall be
delivered or mailed by the Secretary, or by the officers or persons calling
the
meeting, to each shareholder of record entitled by the Articles of
Incorporation, as now or hereafter amended, and by The Indiana Business
Corporation Law to vote at such meeting, at such address as appears upon the
records of the Corporation, at least ten (10) days before the date of the
meeting. Notice of any such meeting may be waived in writing by any
shareholder, if the waiver sets forth in reasonable detail the purpose or
purposes for which the meeting is called, and the time and place
thereof. Attendance at any meeting in person, or by proxy, shall
constitute a waiver of notice of such meeting. Each shareholder, who
has in the manner above provided waived notice of shareholders’ meeting, or who
personally attends a shareholders’ meeting, or is conclusively presumed to have
been given due notice of such meeting. Notice of any adjourned
meeting of stockholders shall not be required to be given if the time and place
thereof are announced at the meeting at which the adjournment is taken, except
as may be expressly required by law.
Section
5.
Addresses of
Shareholders
.
The address of any shareholder
appearing upon the records of the Corporation shall be deemed to be the latest
address of such shareholder for the class of stock held by such
shareholder.
Section
6.
Voting at
Meetings
.
(a)
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Quorum.
The
holders of record of a majority of the issued and outstanding stock
of the
Corporation entitled to vote at such meeting, present in person or
by
proxy, shall constitute a quorum at all meetings of stockholders
for the
transaction of business, except where otherwise provided by law,
the
Certificate of Incorporation or these By-Laws. In the absence
of a quorum, any officer entitled to preside at, or act as Secretary
of,
such meeting shall have the power to adjourn the meeting from time
to time
until a quorum shall be constituted. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the original meeting, but only
those
stockholders entitled to vote at the original meeting shall be entitled
to
vote at any adjournment or adjournments thereof unless a new record
date
is fixed by the Board of Directors for the adjourned
meeting.
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(b)
|
Voting
Rights
. Except as otherwise provided by law or by the
provisions of the Articles of Incorporation, every shareholder shall
have
the right at every shareholders’ meeting to one vote for each share of
stock having voting power, registered in his name on the books of
the
Corporation on the date for the determination of shareholders entitled
to
vote, on all matters coming before the meeting including the election
of
directors. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person,
or by proxy executed in writing by the shareholder or a duly authorized
attorney in fact and bearing a date not more than eleven months prior
to
its execution, unless a longer time is expressly provided
therein.
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(c)
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Required
Vote
. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present
in
person or represented by proxy shall decide any question brought
before
such meeting, unless the question is one upon which, by express provision
of The Indiana Business Corporation Law or the Articles of Incorporation
or by these By-Laws, a greater vote is required, in which case such
express provision shall govern and control the decision of such
question.
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Section
7.
Voting
List.
The Transfer Agent of the Corporation shall make,
at least five days before each election of directors, a complete list of the
shareholders entitled by the Articles of Incorporation, as now or hereafter
amended, to vote at such election, arranged in alphabetical order, with the
address and number of shares so entitled to vote held by each, which list shall
be on file at the principal office of the Corporation and subject to inspection
by any shareholder. Such list shall be produced and kept open at the
time and place of election and subject to the inspection of any shareholder
during the holding of such election. The original stock registrar or
transfer book, or a duplicate thereof kept in the State of Indiana, shall be
the
only evidence as to who are the shareholders entitled to examine such list
or
the stock ledger or transfer book or to vote at any meeting of the
shareholders.
Section
8.
Fixing of Record Date to
Determine Shareholders Entitled to Vote.
The Board of
Directors may prescribe a period not exceeding 70 days prior to meetings of
the
shareholders, during which stock on the books of the Corporation may not be
transferred; or, in lieu of prohibiting the transfer of stock may set a date
and
time as the time at which shareholders entitled to notice of, and to vote at,
such meeting shall be determined, and all persons who are holders of record
of
voting stock at such time, and no others, shall be entitled to notice of, and
to
vote at, such meeting. Said date and time shall not be more than 70
days prior to any shareholders’ meeting. In the absence of such
determination, such date shall be 10 days prior to the date of such
meeting.
Section
9.
Shareholder Proposals and
Nominations
. For any shareholder proposal to be
presented in connection with an annual meeting of shareholders of the Company,
including any proposal relating to the nomination of a director to be elected
to
the Board of Directors of the Company, the shareholder must have given timely
notice thereof in writing to the Secretary of the Company (the “Notice”) and
must have been a shareholder of record entitled to vote at the meetings at
the
time of giving of such notice. To be timely, a Notice must be
delivered to or, if mailed, received at the principal executive offices of
the
Company not less than one hundred twenty (120) calendar days in advance of
the
date the Company's proxy statement was released to shareholders in connection
with the annual meeting of shareholders; provided, however, that in the event
that no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than thirty (30) days from the date of the
previous year's meeting, to be timely, Notice must be received by the Company’s
Secretary at the principal office of the Company not later than the close of
business on the later of one hundred twenty (120) calendar days in advance
of
such annual meeting or ten (10) calendar days following the date on which public
announcement of the date of the meeting is first made.
Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or reelection as a director, (i) a statement
of the qualifications of such person, (ii) all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation
14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) a description of all arrangements or understandings among the shareholder
and such person and (iv) the written consent of such person to being named
in
the proxy statement as a nominee and to serving as a director if elected; (b)
as
to any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and of the beneficial owner,
if
any, on whose behalf the proposal is made; and (c) as to the shareholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination
or
proposal is made, (i) the name and address of such shareholder, as they appear
on the Company's books, and of such beneficial owner and (ii) the class and
number of shares of stock of the Company which are owned beneficially and of
record by such shareholders and such beneficial
owner. Notwithstanding the foregoing, in order to include information
with respect to a shareholder proposal in the proxy statement and form of proxy
for a shareholder's meeting, shareholders must provide notice as required by
the
regulations promulgated under the Exchange Act.
Article
V
Board
of Directors
Section
1.
Election, Number and Term of
Office
.
Directors shall be elected at the annual
meeting of shareholders, or, if not so elected, at a special meeting of
shareholders for that purpose, by the holders of the shares of stock entitled
by
the Articles of Incorporation to elect Directors.
The
Board of Directors shall consist of
nine (9) directors, which number may be hereafter increased or reduced by
resolution adopted by not less than a majority of the directors then in office;
provided that no reduction in number shall have the effect of shortening the
term of any incumbent director.
All
Directors elected by the holders of
such shares; except in the case of earlier resignation, removal or death, shall
hold office until their respective successors are chosen and
qualified. Directors need not be shareholders of the
Corporation.
Any
vacancy on the Board of Directors
caused by an increase in the number of Directors shall be filled by a majority
of the members of the Board of Directors, until the next annual or special
meeting of shareholders or, at the discretion of the Board of Directors, such
vacancy may be filled by vote of the shareholders at a special meeting called
for that purpose. No decrease in the number of Directors shall have
the effect of shortening the term of any incumbent Director.
Section
2.
Vacancies
.
Any vacancy
occurring in the Board of Directors caused by resignation, death or other
incapacity shall be filled by a majority vote of the remaining members of the
Board of Directors, until the next annual meeting of shareholders. If
the vote of the remaining members of the Board shall result in a tie, such
vacancy, at the discretion of the Board of Directors, may be filled by vote
of
the shareholders at a special meeting for that purpose.
Section
3.
Annual Meeting of
Directors
.
The Board of Directors shall meet each
year, at the place where such meeting of the shareholders has been held either
within or without the State of Indiana, for the purpose of organization,
election of officers, and consideration of any other business that may properly
come before the meeting. No notice of any kind to either old or new
members of the Board of Directors for such meeting shall be
necessary.
Section
4.
Regular
Meetings
.
Regular meetings of the Board of
Directors shall be held at such times and places, either within or without
the
State of Indiana, as may be fixed by the Directors. Such regular
meetings of the Board of Directors may be held without notice or upon such
notice as may be fixed by the Directors.
Section
5.
Special
Meetings
.
Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or by
not
less than a majority of the members of the Board of Directors. Notice
of the time and place, either within or without the State of Indiana, of a
special meeting shall be served upon or telephoned to each Director at least
twenty-four hours, or mailed, telegraphed or cabled to each Director at his
usual place of business or residence at least forty-eight hours, prior to the
tie of the meeting. Directors, in lieu of such notice, may sign a
written waiver of notice either before the time of the meeting, at the meeting
or after the meeting. Attendance by a director in person at any such
special meeting shall constitute a waiver of notice.
Section
6.
Quorum
.
A majority
of the
actual number of Directors elected and qualified, from time to time, shall
be
necessary to constitute a quorum for the transaction of any business except
the
filing of vacancies, and the act of a majority of the Directors present at
the
meeting, at which a quorum is present, shall be the act of the Board of
Directors, unless the act of a greater number is required by The Indiana
Business Corporation Law, by the Articles of Incorporation, or these
By-Laws. A Director, who is present at a meeting of the Board of
Directors, at which action on any corporate matter is taken, shall be deemed
to
have voted in favor of the action, unless (a) his dissent shall be affirmatively
stated by him at and before the adjournment of such meeting (in which event
the
fact of such dissent shall be entered by the secretary of the meeting in the
minutes of the meeting), or (b) he shall forward such dissent by registered
mail
to the Secretary of the Corporation immediately after the adjournment of the
meeting. The right of dissent provided for by either clause (a) or
clause (b) of the immediately preceding sentence shall not be available, in
respect of any matter, if the Director did not change his vote prior to the
time
the result of the vote on such matter was announced by the Chairman of such
meeting.
Section
7.
Consent Action by
Directors
.
Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof
may
be taken without a meeting, if a written consent to such action is
signed by all members of the Board of Directors or such committee, as the case
may be, and such written consent is filed with the minutes of the proceedings
of
the Board of Directors or committee.
Section
8.
Removal of
Directors
.
Any or all members of the Board of
Directors may be removed, with or without cause, at a meeting of shareholders
called expressly for that purpose by a vote of the holders of not less than
a
majority of the outstanding shares of capital stock then entitled at an election
of directors.
Section
9.
Dividends
.
The Board
of
Directors shall have power, subject to any restrictions contained in The Indiana
Business Corporation Law or in the Articles of Incorporation and out of funds
legally available therefor, to declare and pay dividends upon the outstanding
capital stock of the Corporation as and when they deem
expedient. Before declaring any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as
the
Board of Directors from time to time in their absolute discretion deem proper
for working capital, or as a reserve or reserves to meet contingencies or for
such other purposes as the Board of Directors shall deem conducive to the
interests of the Corporation and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section
10.
Fixing of Record Date to
Determine Shareholders Entitled to Receive Corporate
Benefits
.
The Board of Directors may fix a day
and hour not exceeding 50 days preceding the date fixed for payment of any
dividend or for the delivery of evidence of rights, or for the distribution
or
other corporate benefits, or for a determination of shareholders entitled to
receive any such dividend, rights or distribution, and in such case only
shareholders of record at the time so fixed shall be entitled to receive such
dividend, rights or distribution. If no record date is fixed for the
determination of shareholders entitled to receive payment of a dividend, the
end
of the day on which the resolution of the Board of Directors declaring such
dividend is adopted shall be the record date for such
determination.
Section
11.
Interest of Directors in
Contracts
.
Any contract or other transaction
between the Corporation of any corporation which this Corporation owns a
majority of the capital stock shall be valid and binding, notwithstanding that
the directors and officers of this Corporation are identical or that some or
all
of the directors or officers, or both, are also directors or officers of such
other corporation.
Any
contract or other transaction between the Corporation and one or more of its
directors or members or employees, or between the Corporation and any firm
of
which one or more of its directors are members or employees or in which they
are
interested, or between the Corporation and any corporation or association of
which one or more of its directors are stockholders, members, directors,
officers or employees or in which they are interested, shall be valid for all
purposes, notwithstanding the presence of such director or directors at the
meeting of the Board of Directors of the Corporation which acts upon, or in
reference to, such contract or transaction and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed
or
known to the Board of Directors and the Boards of Directors shall authorize,
approve and ratify such contract or transaction by a vote of a majority of
the
directors present, such interested director or directors to be counted in
determining whether a quorum is present, but not to be counted in calculating
the majority of such quorum necessary to carry such vote. This
Section shall not be construed to invalidate any contract or other transaction,
which would otherwise be valid under the common and statutory law applicable
thereto.
Section
12.
Committees.
The Board of Directors
may, by resolution adopted by a majority of the actual number of Directors
elected and qualified, from time to time designate from among its members,
an
executive committee and one or more other committees and may delegate to each
such committee such authority and power of the Board of Directors as shall
be
specified in such resolution, but no such committee shall have the authority
of
the Board of Directors in reference to amending the Articles of Incorporation,
adopting an agreement or plan of merger or consolidation proposing a special
corporate transaction, recommending to the shareholders a voluntary dissolution
of the Corporation or a revocation thereof, or amending these
By-Laws. No member of any such committee shall continue to be a
member thereof after he ceases to be a Director of the
Corporation. The calling and holding of meetings of such committee
and its method of procedure shall be as determined by the Board of
Directors.
Article
VI
Officers
Section
1.
Principal
Officers
.
The principal officers of the
Corporation shall be a Chairman, a President, one or more Vice Presidents,
a
Treasurer and a Secretary. The Corporation may also have, at the
discretion of the Board of Directors; such other subordinate officers as may
be
appointed in accordance with the provisions of these By-Laws. Any two
or more offices may be held by the same person, except the office of Chairman
shall not be given to an individual who is not a Director of the
Corporation.
Section
2.
Chief Executive
Officer
.
The Board of Directors shall designate a
Chief Executive Officer who shall be either the Chairman or
President. The Chief Executive Officer shall hold
those powers and authorities normally accorded such position and
shall be the senior officer accountable to the Board for principles and policies
of the Corporation.
Section
3.
Election and Term of
Office
.
The principal officers of the Corporation
shall be chosen annually by the Board of Directors at the annual meeting
thereof. Each such officer shall hold office until his successor
shall have been duly chosen and qualified, or until his death, or he shall
resign, or shall have been removed in the manner hereinafter
provided.
Section
4.
Removal
.
Any principal
officer may be removed either with or without cause, at any time by resolution
adopted at any meeting of the Board of Directors elected and qualified from
time
to time.
Section
5.
Subordinate
Officers
.
In addition to the principal officers
enumerated in Section 1 of this Article VI, the Corporation may have a
Controller, one or more Assistant Controllers, one or more Assistant Secretaries
and such other officers, agents and employees as the Board of Directors may
deem
necessary, each of whom shall hold office for such period, may be removed with
or without cause, have such authority and perform such duties as Chairman,
the
President, or the Board of Directors may from time to time
determine. The Board of Directors may delegate to any principal
officer the power to appoint and to remove any such subordinate officers, agents
or employees.
Section
6.
Resignations
.
Any officer may resign at any time
by giving written notice to the Chairman, the Board of Directors, the President
or to the Secretary. Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section
7.
Vacancies
.
Any vacancy
in any
office for any cause may be filled for the unexpired portion of the term in
the
manner prescribed in these By-Laws for election or appointment to such office
for such term.
Section
8.
Chairman
.
The Chairman,
who
shall be chosen from among the Directors, shall have general supervision of
the
affairs of the Corporation, subject to the control of the Board of
Directors. He shall be an ex officio member of all standing
committees. The Chairman shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors. Subject
to the control and direction of the Board of Directors, the Chairman may enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. In general, he shall perform all duties
and have all powers as, from time to time may be herein defined, and all such
other duties and powers as, from time to time may be assigned to him by the
Board of Directors.
Section
9.
President
.
The President
shall be responsible to the Chairman in the performance of his duties, and
shall, in the absence or disability of the Chairman, perform the duties and
exercise the power of the Chairman. The President shall perform such
duties and have such powers as the Board of Directors may, from time to time
assign.
Section
10.
Vice
Presidents
.
The other Vice Presidents in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President. They shall perform such other
duties and have such other powers as the Chairman and President and the Board
of
Directors may, from time to time assign.
Section
11.
Treasurer
.
The Treasurer
shall have charge and custody of, and be responsible for, all funds and
securities of the Corporation and shall deposit all such funds and securities
of
the Corporation in such banks or other depositories as shall be selected by
the
Board of Directors. He shall, upon request, exhibit at all reasonable
times, his books of account and records to any of the directors of the
Corporation where such books and records shall be kept; shall render upon
request by the Board of Directors, a statement of the condition of the finances
of the Corporation at any time requested by the Board of Directors or at the
annual meeting of shareholders; shall receive, and give receipt for moneys
due
and payable to the Corporation from any source whatsoever; and in general,
shall
perform all duties incident to the office of Treasurer and such other duties
as
from time to time may be assigned to him by the Chairman, the President or
the
Board of Directors.
Section
12.
Secretary
.
The Secretary
shall keep or cause to be kept in the books provided for that purpose, the
minutes of the meetings of the Shareholders and of the Board of Directors;
shall
duly give and serve all notices required to be given in accordance with the
provisions of these By-Laws and by the Indiana Business Corporation Law; shall
be custodian of the records and of the seal of the Corporation and see that
the
seal is affixed to all documents, the executing of which on behalf of the
Corporation under its seal is duly authorized in accordance with the provisions
of these By-Laws; and, in general, shall perform all duties incident to the
office of Secretary and such other duties as may, from time to time, be assigned
to him by the Chairman, the President or the Board of Directors.
Section
13.
Salaries
.
The salaries
of the
principal officers shall be fixed from time to time by the Board of Directors
and the salaries of any subordinate officers may be fixed by the
President.
Section
14.
General Powers of
Officers
.
The Chairman and the President and each
are authorized and empowered for and on behalf of the Corporation and in its
name, singly and without the joinder of any other officer, to execute and
deliver any and all contracts, leases, notes, mortgages, receipts, deeds,
commitments, power of attorney, authorizations and any and all documents in
addition to, but not limited to the ones therefore described which said offices,
or any of them believe to be necessary and advisable in carrying on the business
of the Corporation. The Treasurer and the Secretary of the
Corporation are hereby authorized to execute and deliver any and all documents
which relate to the routine discharge of the responsibilities of each of said
offices and such other documents as either the Chairman or the President shall
specifically authorize said officers to execute or deliver only such documents,
or general types of classes of documents, with respect to which they have
received specific authorization from either the Chairman, the President or
the
Board of Directors.
Section
15.
Voting Corporation’s
Securities
.
Unless otherwise ordered by the Board
of Directors, the Chairman, President and Secretary and each of them, are
appointed attorneys and agents of the Corporation, and shall have full power
and
authority in the securities entitled to be voted at any meetings of security
holders of corporations, or associations in which the Corporation may hold
securities, in person, or by proxy, as a stockholder or otherwise and at such
meetings shall possess and may exercise any and all rights and powers incident
to the ownership of such securities, and which as the owner thereof of the
Corporation might have possessed and exercised, if present, or to consent in
writing to any action by and such other corporation or
association. The Board of Directors by resolution from time to time,
may confer like powers upon any other person or persons.
Article
VII
Indemnification
INDEMNIFICATION
Section
1
.
Rights to Indemnification and
Advancement of Expenses
.
(a)
|
The
Corporation shall indemnify as a matter of right every person made
a party
to a proceeding because such person is or
was
|
|
(i)
|
a
member of the Board of Directors of the
Corporation,
|
|
(ii)
|
an
officer of the Corporation, or
|
|
(iii)
|
while
a director or officer of the Corporation, serving at the Corporation's
request as a director, officer, partner, member, manager, trustee,
employee, or agent of another foreign or domestic corporation,
partnership, limited liability company, joint venture, trust, employee
benefit plan, or other enterprise, whether for profit or not, (each
an
"Indemnitee") against all liability incurred by such person in connection
with the proceeding; provided that it is determined in the specific
case
that indemnification of such person is permissible in the circumstances
because such person has met the standard of conduct for indemnification
specified in the Act. The Corporation shall pay for or
reimburse the reasonable expenses incurred by an Indemnitee in connection
with any such proceeding in advance of final disposition thereof
in
accordance with the procedures and subject to the conditions specified
in
the Act. The Corporation shall indemnify as a matter of right
an Indemnitee who is wholly successful, on the merits or otherwise,
in the
defense of any such proceeding, against reasonable expenses incurred
by
the Indemnitee in connection with the proceeding without the requirement
of a determination as set forth in the first sentence of this
paragraph.
|
(b)
|
Upon
demand by a person for indemnification or advancement of expenses,
as the
case may be, the Corporation shall expeditiously determine whether
the
person is entitled thereto in accordance with this Article and the
procedures specified in the Act.
|
(c)
|
The
indemnification provided under this Article shall apply to any
proceeding
arising from acts or omissions occurring before or after the adoption
of
this Article.
|
Section
2
.
Other
Rights Not Affected
. Nothing contained in this Article shall
limit or preclude the exercise or be deemed exclusive of any right under the
law, by contract or otherwise, relating to indemnification of or advancement
of
expenses to any individual who is or was a director, officer, employee or agent
of the Corporation, or the ability of the Corporation to otherwise indemnify
or
advance expenses to any such individual. It is the intent of this
Article to provide indemnification to directors and officers to the fullest
extent now or hereafter permitted by law consistent with the terms and
conditions of this Article. Therefore, indemnification shall be
provided in accordance with this Article irrespective of the nature of the
legal
or equitable theory upon which a claim is made, including without limitation
negligence, breach of duty, mismanagement, corporate waste, breach of contract,
breach of warranty, strict liability, violation of federal or state securities
laws, violation of the Employee Retirement Income Security Act of 1974, as
amended, or violation of any other state or federal laws.
Section
3
.
Definitions
. For purposes of this
Article:
The
term
"director" means an individual who is or was a member of the Board of Directors
of the Corporation or an individual who, while a director of the Corporation,
is
or was serving at the Corporation's request as a director, officer, partner,
member, manager, trustee, employee, or agent of another foreign or domestic
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan, or other enterprise, whether for profit or
not. A director is considered to be serving an employee benefit plan
at the Corporation's request if the director's duties to the Corporation also
impose duties on, or otherwise involve services by, the director to the plan
or
to participants in or beneficiaries of the plan. The term "director"
includes, unless the context requires otherwise, the estate or personal
representative of a director.
The
term
"expenses" includes all direct and indirect costs (including without limitation
counsel fees, retainers, court costs, transcripts, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, all other disbursements or
out-of-pocket expenses) actually incurred in connection with the investigation,
defense, settlement or appeal of a proceeding or establishing or enforcing
a
right to indemnification under this Article, applicable law or
otherwise.
The
term
"liability" means the obligation to pay a judgment, settlement, penalty, fine,
excise tax (including an excise tax assessed with respect to an employee benefit
plan), or reasonable expenses incurred with respect to a
proceeding.
(d)
|
The
term "party" includes an individual who was, is or is threatened
to be
made a named defendant or respondent in a
proceeding.
|
(e)
|
The
term "proceeding" means any threatened, pending or completed action,
suit
or proceeding, whether civil, criminal, administrative or investigative
and whether formal or
informal.
|
Article
VIII
Amendments
The
power
to make, alter, amend or repeal these By-Laws is invested in the Board of
Directors, but the affirmative vote of a majority of the actual number of
directors elected and qualified, from time to time, shall be necessary to effect
any alteration, amendment or repeal of the By-Laws.
7
EXHIBIT
4.19
EXECUTION
VERSION
October
30, 2007
The
Steak
N Shake Company
500
Century Building
36
South
Pennsylvania Street
Indianapolis,
Indiana 46204
Attention: Chief
Financial Officer
|
Re:
|
Amendment
No. 5 to Amended and Restated Note Purchase and Private Shelf
Agreement
|
Ladies
and Gentlemen:
Reference
is made to that certain
Amended and Restated Note Purchase and Private Shelf Agreement dated as of
September 20, 2002, as amended by that certain Amendment dated December 18,
2002, that certain Amendment dated May 21, 2003, that certain Amendment dated
September 17, 2003 and that certain Amendment dated November 7, 2005 (as so
amended, the “
Note Agreement
”) among The Steak N Shake Company,
an Indiana corporation (the “
Company
”), Prudential Investment
Management, Inc., The Prudential Insurance Company of America and each
Prudential Affiliate which has or may become a party thereto in accordance
with
the terms thereof (collectively, “
Prudential
”), pursuant to
which the Company issued and sold and Prudential purchased the Company’s senior
fixed rate notes from time to time. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms
in
the Note Agreement.
Pursuant
to the request of the Company
and in accordance with the provisions of paragraph 11C of the Note Agreement,
the parties hereto agree as follows:
SECTION
1
.
Amendment
.
From
and after the date this letter becomes effective in accordance with its terms,
the Note Agreement is amended as follows:
1.1 Paragraph
6A of the Note Agreement is amended in its entirety to read as
follows:
“6A.
Debt
Service Coverage
Ratio
. The Company will not permit the Debt Service Coverage
Ratio to be less than (i) 1.05 to 1.00 at any time during the period beginning
September 26, 2007 and ending July 2, 2008 and (ii) 1.25 to 1.00 at
any other time.”
1.2 The
proviso appearing at the end of paragraph 6C(2) (Debt) of the Note Agreement
is
amended in its entirety and the following is hereby substituted
therefor:
“provided
that for each period of four
(4) consecutive fiscal quarters commencing with the period of four (4)
consecutive fiscal quarters ending on (or nearest to) September 30, 2002, the
Company shall, at all times maintain a ratio of Consolidated Debt to
consolidated EBITDA (the “
Leverage Ratio
”) not exceeding (i)
3.25 to 1.00 for the four (4) consecutive fiscal quarter periods ending on
(or
nearest to) September 30, 2007, December 31, 2007, March 30, 2008 and
June 30, 2008 and (ii) 2.75 to 1.00 for each other period of four (4)
consecutive fiscal quarters; further provided that for purposes of the Leverage
Ratio, all current and future Capitalized Lease Obligations shall, for so long
as the underlying leases are in effect, at all times be included in the
computation of Consolidated Debt of the Company notwithstanding any subsequent
reclassification of such Capitalized Lease Obligations as operating leases
under
generally accepted accounting principles (and with respect to such rental
obligations that are reclassified as operating leases, the amount of such rental
obligations included in the computation of Consolidated Debt shall be the amount
that would otherwise be required to be capitalized in accordance with generally
accepted accounting principles if such rental obligations were in fact
Capitalized Lease Obligations (it being understood and agreed that if the
Company and/or its Subsidiaries has Capitalized Lease Obligations at the time
of
calculating the capitalized amount of such operating leases, such calculation
of
the capitalized amount of such operating leases shall be performed consistent
with the methodology used to calculate the capitalized amount of such
Capitalized Lease Obligations)). Together with the delivery of
financial statements required by paragraphs 5A(i) and (ii), for each Capitalized
Lease Obligation reclassified as an operating lease the Company will deliver
to
each Significant Holder an Officer’s Certificate demonstrating the computation
(including disclosing the discount rate used in each such computation) of the
capitalized portion of such operating lease required to be included in the
computation of Consolidated Debt for purposes of the Leverage Ratio pursuant
to
the immediately preceding proviso.”
SECTION
2
.
Representations and
Warranties
.
The Company represents and
warrants that (a) each representation and warranty set forth in
paragraph 8 of the Note Agreement is true and correct as of the date of
execution and delivery of this letter by the Company with the same effect as
if
made on such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they were true and correct
as
of such earlier date); and (b) after giving effect to the amendments set forth
in Section 1 hereof, no Event of Default or Default exists or has occurred
and
is continuing on the date hereof.
SECTION
3
.
Conditions
Precedent
.
This letter shall be deemed
effective as of September 26, 2007 upon the return to Prudential on or before
November 9, 2007 of a counterpart hereof duly executed by the Company and the
undersigned holders of the Notes. Upon execution hereof by the
Company, this letter should be returned to: Prudential Capital Group,
Two Prudential Plaza, Suite 5600, Chicago, Illinois 60601,
Attention: Scott B. Barnett.
SECTION
4
.
Reference to and Effect on Note
Agreement
.
Upon the effectiveness of
this letter, each reference to the Note Agreement and the Notes in any other
document, instrument or agreement shall mean and be a reference to the Note
Agreement and the Notes as modified by this letter. Except as
specifically set forth in Section 1 hereof, each of the Note Agreement and
the
Notes shall remain in full force and effect and each is hereby ratified and
confirmed in all respects. The execution, delivery and effectiveness
of this letter shall not be construed as a course of dealing or other
implication that Prudential or any holder of any Note has agreed to or is
prepared to grant any consents or agree to any amendments to the Note Agreement
in the future, whether or not under similar circumstances.
SECTION
5.
Expenses
.
The
Company hereby confirms its obligations under the Note Agreement, whether or
not
the transactions hereby contemplated are consummated, to pay, promptly after
request by Prudential or any holder of any Note, all reasonable out-of-pocket
costs and expenses, including attorneys’ fees and expenses, incurred by
Prudential or any holder of any Note in connection with this letter agreement
or
the transactions contemplated hereby, in enforcing any rights under this letter,
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this letter or the transactions
contemplated hereby. The obligations of the Company under this
Section 5 shall survive transfer by any holder of any Note and payment of any
Note.
SECTION
6
.
Governing Law
.
THIS LETTER SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF
ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE
THIS
LETTER TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE
PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).
SECTION
7.
Counterparts; Section
Titles
.
This letter may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature
page to this letter by facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this
letter. The section titles contained in this letter are and shall be
without substance, meaning or content of any kind whatsoever and are not a
part
of the agreement between the parties hereto.
Very
truly yours,
PRUDENTIAL
INVESTMENT MANAGEMENT, INC.
By:
/s/ P. Scott von
Fischer
Name: P.
Scott von Fischer
Title:
Vice
President
THE
PRUDENTIAL INSURANCE COMPANY
OF
AMERICA
By:
/s/ P. Scott von
Fischer
Name: P.
Scott von Fischer
Title:
Vice
President
PRUCO
LIFE INSURANCE COMPANY
By:
/s/ P. Scott von
Fischer
Vice
President
UNITED
OF OMAHA LIFE INSURANCE
COMPANY
By: Prudential
Private Placement Investors,
L.P.
(as Investment
Advisor)
By: Prudential
Private Placement Investors, Inc.
(as
its
General Partner)
By:
/s/ P. Scott von
Fischer
Vice
President
Agreed
and Accepted:
THE
STEAK N SHAKE COMPANY
By:
/s/ Jeffrey
A. Blade
Name:
Jeffrey A. Blade
Title:
Executive Vice President, Chief Financial and Administrative
Officer
EXHIBIT
4.20
EXECUTION
VERSION
December
5, 2007
The
Steak
N Shake Company
500
Century Building
36
South
Pennsylvania Street
Indianapolis,
Indiana 46204
Attention: Chief
Financial Officer
|
Re:
|
Amendment
No. 6 to Amended and Restated Note Purchase and Private Shelf
Agreement
|
Ladies
and Gentlemen:
Reference
is made to that certain
Amended and Restated Note Purchase and Private Shelf Agreement dated as of
September 20, 2002, as amended by that certain Amendment dated December 18,
2002, that certain Amendment dated May 21, 2003, that certain Amendment dated
September 17, 2003, that certain Amendment dated November 7, 2005 and that
certain Amendment dated October 30, 2007 (as so amended, the “
Note
Agreement
”) among The Steak N Shake Company, an Indiana corporation
(the “
Company
”), Prudential Investment Management, Inc., The
Prudential Insurance Company of America and each Prudential Affiliate which
has
or may become a party thereto in accordance with the terms thereof
(collectively, “
Prudential
”), pursuant to which the Company
issued and sold and Prudential purchased the Company’s senior fixed rate notes
from time to time. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Note
Agreement.
Pursuant
to the request of the Company
and in accordance with the provisions of paragraph 11C of the Note Agreement,
the parties hereto agree as follows:
SECTION
1
.
Amendment
.
From
and after the date this letter becomes effective in accordance with its terms,
the Note Agreement is amended as follows:
1.1 Paragraph
6A of the Note Agreement is amended in its entirety to read as
follows:
“6A.
Debt
Service Coverage
Ratio
. The Company will not permit the Debt Service Coverage
Ratio to be less than (i) 1.25 to 1.00 at any time during the period beginning
on (or nearest to) March 31, 2007 and ending on (or nearest to) June 29, 2007,
(ii) 1.05 to 1.00 at any time during the period beginning on (or nearest to)
June 30, 2007 and ending on (or nearest to) September 29, 2007, (iii) 0.95
to
1.00 for the period beginning on (or nearest to) September 30, 2007 and ending
on (or nearest to) December 30, 2007, (iv) 0.90 to 1.00 for the period beginning
December 31, 2007 and ending on (or nearest to) March 30, 2008, (v) 0.95 to
1.00
for the period beginning on (or nearest to) March 31, 2008 and ending on (or
nearest to) June 29, 2008, (vi) 1.05 to 1.00 for the period beginning on (or
nearest to) June 30, 2008 and ending on (or nearest to) September 29, 2008
and
(vii) 1.25 to 1.00 at any other time.”
1.2 The
proviso appearing at the end of paragraph 6C(2) (Debt) of the Note Agreement
is
amended in its entirety and the following is hereby substituted
therefor:
“provided
that for each period of four
(4) consecutive fiscal quarters commencing with the period of four (4)
consecutive fiscal quarters ending on (or nearest to) September 30, 2002, the
Company shall, at all times maintain a ratio of Consolidated Debt to
consolidated EBITDA (the “
Leverage Ratio
”) not exceeding (i)
2.75 to 1.00 for the four (4) consecutive fiscal quarter periods ending on
(or
nearest to) June 29, 2007, (ii) 3.25 to 1.00 for the four (4) consecutive fiscal
quarter periods ending on (or nearest to) September 29, 2007,
(iii)
3.75 to 1.00 for the four (4) consecutive fiscal quarter periods ending on
(or
nearest to) December 30, 2007, (iv) 4.00 to 1.00 for the four (4) consecutive
fiscal quarter periods ending on (or nearest to) March 30, 2008, (v) 3.75 to
1.00 for the four (4) consecutive fiscal quarter periods ending on (or nearest
to) June 29, 2008, (vi) 3.50 to 1.00 for the four (4) consecutive fiscal quarter
periods ending on (or nearest to) September 29, 2008 and (vii) 2.75 to 1.00
for
each other period of four (4) consecutive fiscal quarters; further provided
that
for purposes of the Leverage Ratio, all current and future Capitalized Lease
Obligations shall, for so long as the underlying leases are in effect, at all
times be included in the computation of Consolidated Debt of the Company
notwithstanding any subsequent reclassification of such Capitalized Lease
Obligations as operating leases under generally accepted accounting principles
(and with respect to such rental obligations that are reclassified as operating
leases, the amount of such rental obligations included in the computation of
Consolidated Debt shall be the amount that would otherwise be required to be
capitalized in accordance with generally accepted accounting principles if
such
rental obligations were in fact Capitalized Lease Obligations (it being
understood and agreed that if the Company and/or its Subsidiaries has
Capitalized Lease Obligations at the time of calculating the capitalized amount
of such operating leases, such calculation of the capitalized amount of such
operating leases shall be performed consistent with the methodology used to
calculate the capitalized amount of such Capitalized Lease
Obligations)). Together with the delivery of financial statements
required by paragraphs 5A(i) and (ii), for each Capitalized Lease Obligation
reclassified as an operating lease the Company will deliver to each Significant
Holder an Officer’s Certificate demonstrating the computation (including
disclosing the discount rate used in each such computation) of the capitalized
portion of such operating lease required to be included in the computation
of
Consolidated Debt for purposes of the Leverage Ratio pursuant to the immediately
preceding proviso.”
1.3 The
following new paragraph 6C(2A) is added to the Note Agreement after paragraph
6C(2) (Debt) and before paragraph 6C(3) (Consolidated Net Worth):
“6C(2A).
Leverage
Fee.
In addition to interest accruing on the Notes, the
Company agrees to pay to the holders of the Notes a fee (the
“Leverage
Fee”
) with respect to each fiscal quarter of the Company, beginning
with the fiscal quarter ending on (or nearest to) December 30, 2007, on the
last
day of which the Leverage Ratio for the four most recent fiscal quarters then
ended is equal to or greater than 3.00 to 1.00. The Leverage Fee
payable with respect to each Note shall be a dollar amount equal to (a) the
product obtained by
multiplying
(i) .005
times
(ii) the Weighted
Dollar Average (as defined below) of the principal balance of such Note during
the fiscal quarter to which the Leverage Fee relates and (b) dividing the
product thus obtained by four. The Leverage Fee for each applicable
fiscal quarter shall be payable in arrears on the date upon which the financial
statements for such fiscal quarter are to be delivered under paragraph 5A(i)
(or
paragraph 5A(ii), if the applicable fiscal quarter is the last fiscal quarter
in
a fiscal year). If the Company fails to deliver financial statements
under paragraphs 5A(i) or 5A(ii) for any fiscal quarter or fiscal year by the
date such delivery is due, then the Company shall be deemed to owe the Leverage
Fee for such fiscal quarter and shall make the payment required for such fiscal
quarter on the date due pursuant to the preceding sentence. Payment
of the Leverage Fee shall be made pursuant to the terms of paragraph
11A.
The
acceptance of the Leverage Fee by any holder of a Note shall not constitute
a
waiver of any Default or Event of Default, including, without limitation, any
Default or Event of Default under paragraph 6C(2). The consequences
for the failure to pay the Leverage Fee when due shall be governed by paragraph
7A(ii) hereof, treating the Leverage Fee, for such purposes and for the purpose
of determining the amount payable upon acceleration of the Notes, as
interest.
As
used
in this paragraph 6C(2A),
“Weighted Dollar Average”
shall mean,
with respect to any Note, during any fiscal quarter of the Company, a dollar
amount determined by adding together the daily outstanding principal balance
of
such Note during such fiscal quarter and dividing the amount thus obtained
by
the total number of days in such fiscal quarter.”
SECTION
2
.
Representations and
Warranties
.
The Company represents and
warrants that (a) each representation and warranty set forth in
paragraph 8 of the Note Agreement is true and correct as of the date of
execution and delivery of this letter by the Company with the same effect as
if
made on such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they were true and correct
as
of such earlier date); and (b) after giving effect to the amendments set forth
in Section 1 hereof, no Event of Default or Default exists or has occurred
and
is continuing on the date hereof.
SECTION
3
.
Conditions
Precedent
.
This letter shall be deemed
effective as of December 5, 2007 upon the return to Prudential on or before
December 12, 2007 of a counterpart hereof duly executed by the Company and
the
undersigned holders of the Notes. Upon execution hereof by the
Company, this letter should be returned to: Prudential Capital Group,
Two Prudential Plaza, Suite 5600, Chicago, Illinois 60601,
Attention: Scott B. Barnett.
SECTION
4
.
Reference to and Effect on Note
Agreement
.
Upon the effectiveness of
this letter, each reference to the Note Agreement and the Notes in any other
document, instrument or agreement shall mean and be a reference to the Note
Agreement and the Notes as modified by this letter. Except as
specifically set forth in Section 1 hereof, each of the Note Agreement and
the
Notes shall remain in full force and effect and each is hereby ratified and
confirmed in all respects. The execution, delivery and effectiveness
of this letter shall not be construed as a course of dealing or other
implication that Prudential or any holder of any Note has agreed to or is
prepared to grant any consents or agree to any amendments to the Note Agreement
in the future, whether or not under similar circumstances.
SECTION
5.
Expenses
.
The
Company hereby confirms its obligations under the Note Agreement, whether or
not
the transactions hereby contemplated are consummated, to pay, promptly after
request by Prudential or any holder of any Note, all reasonable out-of-pocket
costs and expenses, including attorneys’ fees and expenses, incurred by
Prudential or any holder of any Note in connection with this letter agreement
or
the transactions contemplated hereby, in enforcing any rights under this letter,
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this letter or the transactions
contemplated hereby. The obligations of the Company under this
Section 5 shall survive transfer by any holder of any Note and payment of any
Note.
SECTION
6
.
Governing Law
.
THIS LETTER SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF
ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE
THIS
LETTER TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE
PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).
SECTION
7.
Counterparts; Section
Titles
.
This letter may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature
page to this letter by facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this
letter. The section titles contained in this letter are and shall be
without substance, meaning or content of any kind whatsoever and are not a
part
of the agreement between the parties hereto.
Very
truly yours,
PRUDENTIAL
INVESTMENT MANAGEMENT, INC.
By:
/s/ David Quackenbush
Name:
David Quackenbush
Title: Vice
President
THE
PRUDENTIAL INSURANCE COMPANY
OF
AMERICA
By:
/s/ David Quackenbush
Name:
David Quackenbush
Title: Vice
President
PRUCO
LIFE INSURANCE COMPANY
By:
/s/ David Quackenbush
Vice
President
UNITED
OF OMAHA LIFE INSURANCE
COMPANY
By: Prudential
Private Placement Investors,
L.P.
(as Investment
Advisor)
By: Prudential
Private Placement Investors, Inc.
(as
its
General Partner)
By:
/s/ David Quackenbush
Vice
President
Agreed
and Accepted:
THE
STEAK N SHAKE COMPANY
By:
/s/ Jeffrey
A.
Blade
Name:
Jeffrey A. Blade
Title:
Executive Vice President, Chief Financial and Administrative
Officer
EXHIBIT
4.21
EXECUTION
VERSION
SEVENTH
AMENDMENT TO CREDIT AGREEMENT
THE
STEAK N SHAKE
COMPANY
, an Indiana corporation (the “Company”) and
FIFTH THIRD
BANK,
a Michigan banking corporation, formerly known as Fifth Third
Bank (Central Indiana), and Fifth Third Bank, Indiana (Central) (the “Bank”),
being parties to that certain Credit Agreement dated as of November 16, 2001,
as
previously amended (collectively, the “Agreement”), agree to further amend the
Agreement by this Seventh Amendment to Credit Agreement (this “Amendment”) as
follows.
1.
DEFINITIONS
. All
defined terms used herein not otherwise defined in this Amendment shall have
their respective meanings set forth in the Agreement.
|
(a)
|
Amended Definitions
. The following definitions
appearing under Section 1 of the Agreement are hereby amended and
restated
in their respective entireties as
follows:
|
·
|
"
Applicable
Spread
" means that number of Basis Points to be taken into account
in
determining the per annum at which the LIBOR-based Rate of interest
on the
Revolving Loan shall be calculated, and which shall be 70 Basis
Points at
all times on and after the date of the Seventh
Amendment.
|
·
|
"
Revolving
Loan Maturity Date
" means January 30,
2009.
|
|
(b)
|
New Definition
. The following new definition is
hereby added to Section 1 of the Agreement as
follows:
|
·
|
“
Seventh
Amendment
” means that certain agreement entitled “Seventh Amendment to
Credit Agreement” entered into by and between the Company and the Bank
dated as of December 7, 2007, for the purpose of amending this
Agreement.
|
2.
RENEWAL
OF THE LOAN
. In order to document the renewal of the
Loan, the first sentence of Section 2(a)(ii) of the Agreement is hereby amended
and restated in its entirety as follows:
|
(ii)
|
Method of Borrowing
. The obligation of the Company to
repay the Revolving Loan shall be evidenced by a Promissory Note
of the
Company in the form of
Exhibit “A”
attached to the Seventh
Amendment (the “Revolving Note”).
|
3.
UNUSED
FEE
. Section 2(a)(iv) of the Agreement is hereby amended
and restated in its entirety as follows:
|
(iv)
|
Unused Fee
. The Company shall pay to the Bank
a facility or unused fee for each partial or full calendar
quarter during which the Commitment is outstanding equal to, effective
as
of the date of the Seventh Amendment, ten (10) Basis Points per
annum of
the average daily excess of the Commitment over the aggregate outstanding
principal balance of the Revolving Loan. For purposes of calculating
the
unused fee, the aggregate amount available to be drawn under all
outstanding Letters of Credit shall be added to the aggregate outstanding
principal balance of the Revolving Loan for the same
period. Unused fees for each calendar quarter shall be due and
payable within ten (10) days following the Bank's submission of
a
statement of the amount due. Such fees may be debited by the
Bank when due to any demand deposit account of the Company carried
with
the Bank without further authority. Such fees shall be
calculated on the basis of a year of 360 days and actual days
elapsed.
|
4.
FINANCIAL
COVENANTS
. Section 5(g)(i) is hereby amended and
restated in its entirety and a new Section 5(g)(ii) is hereby added to the
Agreement as follows:
(i)
|
Maximum Ratio of Funded Debt to EBITDA
. As of the end of each
period of four (4) consecutive fiscal quarters ending as of the
last day
of each fiscal quarter shown in the table below, commencing with
the
period of four (4) consecutive fiscal quarters ending on December
19,
2007, the Company shall maintain a ratio of Funded Debt to EBITDA
of not
more than that shown opposite such fiscal
quarter:
|
first
fiscal quarter of fiscal year 2008
|
3.75
to 1.00
|
second
fiscal quarter of fiscal year 2008
|
4.00
to 1.00
|
third
fiscal quarter of fiscal year 2008
|
3.75
to 1.00
|
fourth
fiscal quarter of fiscal year 2008
|
3.50
to 1.00
|
first
fiscal quarter of fiscal year 2009, and as of the end of each fiscal
quarter thereafter
|
2.75
to 1.00
|
(ii)
|
Debt
Service Coverage Ratio
. As of the end of each period of
four (4) consecutive fiscal quarters ending as of the last day
of each
fiscal quarter shown in the table below, commencing with the period
of
four (4) consecutive fiscal quarters ending on December 19, 2007,
the
Company shall maintain a debt service coverage ratio of not less
than that
shown opposite such fiscal quarter:
|
first
fiscal quarter of fiscal year 2008
|
.95
to 1.00
|
second
fiscal quarter of fiscal year 2008
|
.90
to 1.00
|
third
fiscal quarter of fiscal year 2008
|
.95
to 1.00
|
fourth
fiscal quarter of fiscal year 2008
|
1.05
to 1.00
|
first
fiscal quarter of fiscal year 2009, and as of the end of each fiscal
quarter thereafter
|
1.25
to 1.00
|
For
purposes of this covenant, the phrase "debt service coverage ratio" means
the
ratio of: (A) the sum of net income, interest expense, plus rent expense,
to (B)
the sum of interest expense, rent expense, the Current Portion of all lease
obligations, plus the Current Portion of all long term debt. The term “Current
Portion” means all payments scheduled to be paid over the twelve (12) month
period immediately following the date of determination.
5.
REPRESENTATIONS
AND WARRANTIES
. In order to induce the Bank to enter
into this Amendment, the Company affirms that the representations and warranties
contained in the Agreement are correct as of the date of this Amendment,
except
that (i) they shall be deemed to also refer to this Amendment as well as
all
documents named herein and, (ii) Section
3(d) of the Agreement shall be deemed also to
refer to the most recent audited and unaudited financial statements of the
Company delivered to the Bank.
6.
EVENTS
OF DEFAULT
. The Company certifies to the Bank that no
Event of Default or Unmatured Event of Default under the Agreement, as amended
by this Amendment, has occurred and is continuing as of the date of this
Amendment.
7.
CONDITIONS
PRECEDENT
. As conditions precedent to the effectiveness
of this Amendment, the Bank shall have received the following contemporaneously
with execution and delivery of this Amendment, each duly executed, dated
and in
form and substance satisfactory to the Bank:
|
(i)
|
This Amendment duly executed by the
Company.
|
|
(ii)
|
The Revolving Note in the form of
Exhibit "A"
attached hereto duly
executed by the Company.
|
|
(iii)
|
The Reaffirmation of Guaranty Agreement in the form attached hereto
as
Exhibit "B"
duly executed by Steak n Shake Operations,
Inc.
|
|
(iv)
|
The Reaffirmation of Guaranty Agreement in the form attached hereto
as
Exhibit "C"
duly executed by Steak n Shake Enterprises,
Inc.
|
|
(v)
|
The Reaffirmation of Guaranty Agreement in the form attached hereto
as
Exhibit "D"
duly executed by SnS Investment
Company.
|
|
(vi)
|
Resolutions of the Board of Directors of the Company authorizing
the
execution, delivery and performance, respectively, of this Amendment
and
all other Loan Documents provided for in this Amendment to which
the
Company is a party certified by the Secretary of the Board of Directors
of
the Company as being in full force and effect and duly adopted
as of the
date hereof.
|
(vii)
|
The Certificate of the Secretary of the Board of Directors of the
Company
certifying the names of the officer or officers authorized to execute
this
Amendment and all other Loan Documents provided for in this Amendment
to
which the Company is a party, together with a sample of the true
signature
of each such officer, dated as of the date of this
Amendment.
|
(viii)
|
Resolutions of the Board of Directors of Steak n Shake Operations,
Inc.,
an Indiana corporation, authorizing the execution, delivery and
performance, respectively, of its Reaffirmation of Guaranty Agreement
and
all other Loan Documents provided for in this Amendment to which
Steak n
Shake Operations, Inc. is a party certified by the Secretary of
the Board of Directors of Steak n Shake Operations, Inc. as being
in full
force and effect and duly adopted as of the date
hereof.
|
|
(ix)
|
The Certificate of the Secretary of the Board of Directors of Steak
n
Shake Operations, Inc. certifying the names of the officer or officers
authorized to execute its Reaffirmation of Guaranty Agreement and
all
other Loan Documents provided for in this Amendment to which Steak
n Shake
Operations, Inc. is a party, together with a sample of the true
signature
of each such officer, dated as of the date of this
Amendment.
|
|
(x)
|
Resolutions of the Board of Directors of Steak n Shake Enterprises,
Inc.,
an Indiana corporation, authorizing the execution, delivery and
performance, respectively, of its Reaffirmation of Guaranty Agreement
and
all other Loan Documents provided for in this Amendment to which
Steak n
Shake Enterprises, Inc. is a party certified by the Secretary of
the Board
of Directors of Steak n Shake Enterprises, Inc. as being in full
force and
effect and duly adopted as of the date
hereof.
|
|
(xi)
|
The Certificate of the Secretary of the Board of Directors of Steak
n
Shake Enterprises, Inc. certifying the names of the officer or
officers
authorized to execute its Reaffirmation of Guaranty Agreement and
all
other Loan Documents provided for in this Amendment to which Steak
n Shake
Enterprises, Inc. is a party, together with a sample of the true
signature
of each such officer, dated as of the date of this
Amendment.
|
|
(xii)
|
Resolutions of the Board of Directors of SnS Investment Company,
an
Indiana corporation, authorizing the execution, delivery and performance,
respectively, of its Reaffirmation of Guaranty Agreement and all
other
Loan Documents provided for in this Amendment to which SnS Investment
Company is a party certified by the Secretary of the Board of Directors
of
SnS Investment Company as being in full force and effect and duly
adopted
as of the date hereof.
|
(xiii)
|
The Certificate of the Secretary of the Board of Directors of SnS
Investment Company certifying the names of the officer or officers
authorized to execute its Reaffirmation of Guaranty Agreement and
all
other Loan Documents provided for in this Amendment to which SnS
Investment Company is a party, together with a sample of the true
signature of each such officer, dated as of the date of this
Amendment.
|
8.
PRIOR
AGREEMENTS
.
The Agreement, as amended
by this Amendment, supersedes all previous agreements and commitments made
or
issued by the Bank with respect to the Loans and all other subjects of this
Amendment, including, without limitation, any oral or written proposals which
may have been made or issued by the Bank.
9.
EFFECT
OF AMENDMENT
.
The provisions contained
herein shall serve to supplement and amend the provisions of the
Agreement. To the extent that the terms of this Amendment conflict
with the terms of the Agreement, the provisions of this Amendment shall control
in all respects.
10.
REAFFIRMATION
. Except
as expressly amended by this Amendment, all of the terms and conditions of
the
Agreement shall remain in full force and effect as originally written and
as
previously amended.
11.
COUNTERPARTS
.
This Amendment may be executed in any number of counterparts, each of which
shall be an original and all of which when taken together shall be one and
the
same agreement.
IN
WITNESS WHEREOF
,
the Company and the Bank have executed and delivered in Indiana this Seventh
Amendment Credit Agreement by their respective duly authorized officers as
of
December 7, 2007.
|
THE
STEAK N SHAKE COMPANY
, an Indiana
corporation
|
|
David C. Milne, Vice President, General Counsel and Corporate
Secretary
|
FIFTH
THIRD BANK,
a Michigan banking corporation, formerly known as Fifth
Third Bank (Central Indiana), and Fifth Third Bank, Indiana
(Central)
|
By:
|
/s/ Andrew M. Cardimen
|
|
Andrew M. Cardimen, VicePresident and Senior
RelationshipManager
|
SCHEDULE
OF EXHIBITS
Exhibit
"A"
|
|
Promissory
Note (Revolving Loan)($50,000,000.00) (The Steak n Shake
Company)
|
Exhibit
"B"
|
|
Reaffirmation
of Guaranty Agreement (Steak n Shake Operations,
Inc.)
|
Exhibit
"C"
|
|
Reaffirmation
of Guaranty Agreement (Steak n Shake Enterprises,
Inc.)
|
Exhibit
"D"
|
|
Reaffirmation
of Guaranty Agreement (SnS Investment
Company)
|
Exhibit
A
PROMISSORY
NOTE
(Revolving
Loan)
Indianapolis,
Indiana
$50,000,000.00 Dated:
December 7, 2007
Final
Maturity: January 30,
2009
On
or before January 30, 2009 (“Final
Maturity”),
THE STEAK N SHAKE COMPANY
, an Indiana corporation
(the “Maker”) promises to pay to the order of
FIFTH THIRD BANK,
a Michigan banking corporation, formerly known as Fifth
Third Bank
(Central Indiana), and Fifth Third Bank, Indiana (Central) (the “Bank”) at the
principal office of the Bank at Indianapolis, Indiana, the principal sum
of
Fifty Million and 00/100 Dollars ($50,000,000.00), or so much of the principal
amount of the Loan represented by this Note as may be disbursed by the Bank
under the terms of the Credit Agreement described below, and to pay interest
on
the unpaid principal balance outstanding from time to time as provided in
this
Note.
This
Note evidences indebtedness (the
“Loan”) incurred or to be incurred by the Maker under a revolving line of credit
extended to the Maker by the Bank under a Credit Agreement dated as of November
16, 2001, as amended. All references in this Note to the Credit
Agreement shall be construed as references to that Agreement as it may be
amended from time to time. The Loan is referred to in the Credit
Agreement as the “Revolving Loan.” Subject to the terms and
conditions of the Credit Agreement, the proceeds of the Loan may be advanced
and
repaid and re-advanced until Final Maturity. The principal amount of
the Loan outstanding from time to time shall be determined by reference to
the
books and records of the Bank on which all Advances under the Loan and all
payments by the Maker on account of the Loan shall be recorded. Such
books and records shall be deemed
prima
facie
to be correct as to
such matters. The terms “Advance” and “Banking Day” are used in this Note as
defined in the Credit Agreement.
Interest
on the unpaid principal
balance of the Loan outstanding from time to time prior to and after maturity
will accrue at the rate or rates provided in the Credit
Agreement. Prior to maturity, accrued interest shall be due and
payable on the last Banking Day of each month commencing on the last Banking
Day
of December, 2007. After maturity, interest shall be due and payable
as accrued and without demand. Interest will be calculated by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number
of days the principal balance is outstanding.
The
entire outstanding principal
balance of this Note shall be due and payable, together with accrued interest,
at Final Maturity. Reference is made to the Credit Agreement for
provisions requiring prepayment of principal under certain
circumstances. Principal may be prepaid, but only as provided in the
Credit Agreement.
If
any installment of interest due
under the terms of this Note is not paid when due, then the Bank or any
subsequent holder of this Note may, subject to the terms of the Credit
Agreement, at its option and without notice, declare the entire principal
amount
of the Note and all accrued interest immediately due and
payable. Reference is made to the Credit Agreement which provides for
acceleration of the maturity of this Note upon the happening of other “Events of
Default” as defined therein.
If
any installment of interest due
under the terms of this Note prior to maturity is not paid in full within
ten
(10) days when due, then the Bank at its option and without prior notice
to the
Maker, may assess a late payment fee in an amount equal to the greater of
$20.00
or five percent (5%) of the amount past due. Each late payment fee
assessed shall be due and payable on the earlier of the next regularly scheduled
interest payment date or the maturity of this Note. Waiver by the
Bank of any late payment fee assessed, or the failure of the Bank in any
instance to assess a late payment fee shall not be construed as a waiver
by the
Bank of its right to assess late payment fees thereafter.
All
payments on account of this Note
shall be applied first to expenses of collection, next to any late payment
fees
which are due and payable, next to interest which is due and payable, and
only
after satisfaction of all such expenses, fees and interest, to
principal.
The
Maker and any endorsers severally
waive demand, presentment for payment and notice of nonpayment of this Note,
and
each of them consents to any renewals or extensions of the time of payment
of
this Note without notice. All amounts payable under the terms of this Note
shall
be payable with expenses of collection, including attorneys' fees, and without
relief from valuation and appraisement laws.
This
Note supersedes and replaces that
certain Promissory Note (Revolving Loan) made by the Maker payable to the
order
of the Bank dated January 30, 2005, in the principal amount of $50,000,000.00
and maturing on January 30, 2008.
This
Note is made under and will be
governed in all cases by the substantive laws of the State of Indiana,
notwithstanding the fact that Indiana conflicts of law rules might otherwise
require the substantive rules of law of another jurisdiction to
apply.
|
THE
STEAK N SHAKE COMPANY
, an Indiana
corporation
|
By:
/s/ David C.
Milne
|
David
C. Milne, Vice President, General Counsel and Corporate
Secretary
|
Exhibit B
REAFFIRMATION
OF GUARANTY AGREEMENT
(Steak
n
Shake Operations, Inc.)
The
undersigned (the “Guarantor”), being the Guarantor under that certain Guaranty
Agreement dated as of November 16, 2001 (the “Guaranty”), pursuant to which the
undersigned guaranteed the obligations of
THE STEAK N SHAKE
COMPANY
, an Indiana corporation (the “Company”) to
FIFTH THIRD
BANK,
a Michigan banking corporation, formerly known as Fifth Third
Bank (Central Indiana),and Fifth Third Bank, Indiana (Central) (the
“Bank”) under the terms of that certain Credit Agreement (the
“Agreement”) dated as of November 16, 2001, entered into by and between the
Company and the Bank, as previously amended, hereby consents to the execution
of
that certain Seventh Amendment to Credit Agreement to be entered into by
and
between the Company and the Bank dated as of even date herewith (the
“Amendment”), and hereby agrees that the Obligations (as defined in the
Guaranty) shall include the obligations of the Company to the Bank under
the
Agreement as amended by the Amendment, which Amendment, among other things,
renews the maturity date of that certain Revolving Loan (as described in
the
Agreement) to January 30, 2009, and the undersigned reaffirms its
Obligations under, and agrees to be bound by, the terms of the
Guaranty.
Further,
the Guarantor acknowledges that while it may be the present practice of the
Bank
to obtain the undersigned’s consent to the execution and delivery of the
Amendment, the Bank may discontinue any such practice in the future and such
discontinuance shall not be construed as a waiver of the Bank’s right, in its
discretion, to enter into any further amendments to or grant any further
waivers
of any of the terms and conditions of the Agreement without the consent of
the
undersigned, and the Bank’s failure to request or obtain the consent of the
undersigned to any such amendment or waiver shall not affect the liability
of
the undersigned to the Bank under the Guaranty.
IN
WITNESS WHEREOF
, the undersigned has executed this Reaffirmation of
Guaranty Agreement as of December 7, 2007.
STEAK
N SHAKE OPERATIONS, INC.
, an Indiana corporation
By:
/s/ David C.
Milne
|
David
C. Milne, Vice President, General Counsel and Corporate
Secretary
|
SS:
Before
me, a Notary Public in and for said County and State, personally
appeared
David C. Milne
, the
Vice President, General Counsel and
Corporate Secretary
of
STEAK N SHAKE OPERATIONS, INC.
, an
Indiana corporation, who as such authorized officer acknowledged execution
of
the foregoing Reaffirmation of Guaranty Agreement on behalf of said corporation
this
10th
day of
December
, 2007.
Signature:
/s/ Donna
Haynes
Printed:
Donna
Haynes
Notary Public
My
Commission Expires:
2-17-2008
My
County
of Residence:
Marion
Exhibit
C
REAFFIRMATION
OF GUARANTY AGREEMENT
(Steak
n
Shake Enterprises, Inc.)
The
undersigned (the “Guarantor”), being the Guarantor under that certain Guaranty
Agreement dated as of August 21, 2006 (the “Guaranty”), pursuant to which the
undersigned guaranteed the obligations of
THE STEAK N SHAKE
COMPANY
, an Indiana corporation (the “Company”) to
FIFTH THIRD
BANK,
a Michigan banking corporation, formerly known as Fifth Third
Bank (Central Indiana), and Fifth Third Bank, Indiana (Central) (the “Bank”)
under the terms of that certain Credit Agreement (the “Agreement”)
dated as of November 16, 2001, entered into by and between the Company and
the
Bank, as previously amended, hereby consents to the execution of that certain
Seventh Amendment to Credit Agreement to be entered into by and between the
Company and the Bank dated as of even date herewith (the “Amendment”), and
hereby agrees that the Obligations (as defined in the Guaranty) shall include
the obligations of the Company to the Bank under the Agreement as amended
by the
Amendment, which Amendment, among other things, renews the maturity date
of that
certain Revolving Loan (as described in the Agreement) to January 30, 2009,
and
the undersigned reaffirms its Obligations under, and agrees to be bound by,
the
terms of the Guaranty.
Further,
the Guarantor acknowledges that while it may be the present practice of the
Bank
to obtain the undersigned’s consent to the execution and delivery of the
Amendment, the Bank may discontinue any such practice in the future and such
discontinuance shall not be construed as a waiver of the Bank’s right, in its
discretion, to enter into any further amendments to or grant any further
waivers
of any of the terms and conditions of the Agreement without the consent of
the
undersigned, and the Bank’s failure to request or obtain the consent of the
undersigned to any such amendment or waiver shall not affect the liability
of
the undersigned to the Bank under the Guaranty.
IN
WITNESS WHEREOF
, the undersigned has executed this Reaffirmation of
Guaranty Agreement as of December 7, 2007.
STEAK
N SHAKE ENTERPRISES, INC.
, an Indiana corporation
By:
/s/ David C.
Milne
|
David C. Milne, Vice President, General Counsel and Corporate
Secretary
|
SS:
Before
me, a Notary Public in and for said County and State, personally appeared
David C. Milne
, the
Vice President, General Counsel and Corporate
Secretary
of
STEAK N SHAKE ENTERPRISES, INC.
, an Indiana
corporation, who as such authorized officer acknowledged execution of the
foregoing Reaffirmation of Guaranty Agreement on behalf of said corporation
this
10th
day of
December
, 2007.
Signature:
/s/ Donna
Haynes
Printed:
Donna
Haynes
Notary Public
My
Commission Expires:
2-17-2008
My
County
of Residence:
Marion
Exhibit
D
REAFFIRMATION
OF GUARANTY AGREEMENT
(SnS
Investment Company)
The
undersigned (the “Guarantor”), being the Guarantor under that certain Guaranty
Agreement dated as of November 16, 2001 (the “Guaranty”), pursuant to which the
undersigned guaranteed the obligations of
THE STEAK N SHAKE
COMPANY
, an Indiana corporation (the “Company”) to
FIFTH THIRD
BANK,
a Michigan banking corporation, formerly known as Fifth Third
Bank (Central Indiana), a Michigan banking corporation and formerly known
as
Fifth Third Bank, Indiana (Central) (the “Bank”) under the terms of
that certain Credit Agreement (the “Agreement”) dated November 16, 2001, entered
into by and between the Company and the Bank, as previously amended, hereby
consents to the execution of that certain Seventh Amendment to Credit Agreement
to be entered into by and between the Company and the Bank dated as of even
date
herewith (the “Amendment”), and hereby agrees that the Obligations (as defined
in the Guaranty) shall include the obligations of the Company to the Bank
under
the Agreement as amended by the Amendment, which Amendment, among other things,
renews the maturity date of that certain Revolving Loan (as described in
the
Agreement) to January 30, 2009, and the undersigned reaffirms its Obligations
under, and agrees to be bound by, the terms of the Guaranty.
Further,
the Guarantor acknowledges that while it may be the present practice of the
Bank
to obtain the undersigned’s consent to the execution and delivery of the
Amendment, the Bank may discontinue any such practice in the future and such
discontinuance shall not be construed as a waiver of the Bank’s right, in its
discretion, to enter into any further amendments to or grant any further
waivers
of any of the terms and conditions of the Agreement without the consent of
the
undersigned, and the Bank’s failure to request or obtain the consent of the
undersigned to any such amendment or waiver shall not affect the liability
of
the undersigned to the Bank under the Guaranty.
IN
WITNESS WHEREOF
, the undersigned has executed this Reaffirmation of
Guaranty Agreement as of December 7, 2007.
SnS
INVESTMENT COMPANY
, an Indiana corporation
By:
/s/ David C.
Milne
|
David
C. Milne, Vice President, General Counsel and Corporate Secretary
|
SS:
Before
me, a Notary Public in and for said County and State, personally appeared
David C. Milne
, the
Vice President, General Counsel and Corporate
Secretary
of
SnS INVESTMENT COMPANY
, an Indiana
corporation, who as such authorized officer acknowledged execution of the
foregoing Reaffirmation of Guaranty Agreement on behalf of said corporation
this
10th
day of
December
, 2007.
Signature:
/s/ Donna
Haynes
Printed:
Donna
Haynes
Notary Public
My
Commission Expires:
2-17-2008
My
County
of Residence:
Marion
9
EXHIBIT
10
.
3
1
CHANGE
IN CONTROL BENEFITS AGREEMENT
This
Change in Control Benefits Agreement (“Agreement”) is made and entered into as
of November 7, 2007, by and between The Steak N Shake Company, an Indiana
corporation (hereinafter referred to as the “Company”), and Jeffrey A. Blade
(hereinafter referred to as “Executive”).
W
I
T
N
E
S
S
E
T
H
WHEREAS,
Executive is an executive officer of the Company and/or its subsidiaries;
and
WHEREAS,
the Company believes that Executive has made and will continue to make valuable
contributions to the productivity and profitability of the Company;
and
WHEREAS,
the Company desires to encourage Executive to continue to make such
contributions and not to seek or accept employment elsewhere; and
WHEREAS,
the Company, therefore, desires to assure Executive of certain benefits in
the
event there is a Change in Control of the Company or in the case of any
termination or significant redefinition of the terms of his employment with
the
Company subsequent to any Change in Control of the Company;
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants herein
contained and the mutual benefits herein provided, the Company and Executive
hereby agree as follows:
1. The
term of this Agreement shall be from the date hereof through December 31,
2010; provided, however, that such term shall be automatically extended for
an
additional year each year thereafter unless either party hereto gives written
notice to the other party not to so extend prior to June 30 of the final
year of the Agreement prior to such extension, in which case no further
automatic extension shall occur.
2. As
used in this Agreement, “Change in Control” of the Company means:
(A) The
acquisition, within a 12-month period ending on the date of the most recent
acquisition, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act as in effect from
time to time) of fifty percent (50%) or more of the combined voting power of
the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors; provided, however, that the following acquisitions
shall not constitute an acquisition of control: (i) any
acquisition by a Person who, immediately before the commencement of the 12-month
period, already held beneficial ownership of fifty percent (50%) or more of
that
combined voting power; (ii) any acquisition directly from the Company
(excluding an acquisition by virtue of
the exercise of a
conversion privilege), (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(v) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this definition are satisfied;
(B) The
replacement of a majority of members of the Board of Directors during any
12-month period, by members whose appointment or election is not endorsed by
a
majority of the members of the Board of Directors prior to the date of the
appointment or election;
(C) A
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company common stock and outstanding Company voting securities immediately
prior
to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger
or consolidation, of the outstanding Company stock and outstanding Company
voting securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan or related trust of the Company or such
corporation resulting from such reorganization, merger or consolidation and
any
Person beneficially owning, immediately prior to such reorganization, merger
or
consolidation, directly or indirectly, twenty-five percent (25%) or more of
the
outstanding Company common stock or outstanding voting securities, as the case
may be) beneficially owns, directly or indirectly, twenty-five percent (25%)
or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation;
(D) A
complete liquidation or dissolution of the Company; or
(E) The
sale or other disposition of all or substantially all of the assets of the
Company, other than any of the following dispositions: (i) to a corporation
with
respect to which following such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to such sale or other disposition
in
substantially the same proportion as their ownership, immediately prior to
such
sale or other disposition, of the outstanding Company common stock and
outstanding Company voting securities, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Company common stock or outstanding
Company voting securities, as the case may be) beneficially owns, directly
or
indirectly, twenty-five percent (25%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors and (3) at least a majority of
the members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company; (ii) to a shareholder of the Company in exchange for or with
respect to its stock; (iii) to a Person that owns, directly or indirectly,
fifty percent (50%) or more of the total value or voting power of all
outstanding stock of the Company; or (iv) to an entity, at least fifty
percent (50%) or more of the total value or voting power of which is owned,
directly or directly, by the Company or by a Person described in
(iii).
Despite
any other provision of this definition to the contrary, an occurrence shall
not
constitute a Change in Control if it does not constitute a change in the
ownership or effective control, or in the ownership of a substantial portion
of
the assets of, the Company within the meaning of Section 409A(a)(2)(A)(v) of
the
Internal Revenue Code of 1986, as amended (the “Code”) and its interpretive
regulations.
3. The
Company shall provide Executive with the benefits set forth in Section 6 of
this Agreement upon any termination of Executive’s employment by the Company
within twelve (12) months following a Change in Control for any reason except
the following:
(A) Termination
by reason of Executive’s death.
(B) Termination
by reason of Executive’s “disability.” For purposes hereof,
“disability” shall be defined as Executive’s inability by reason of illness or
other physical or mental disability to perform the duties required by his
employment for any consecutive ninety (90) day period.
(C) Termination
for “Cause.” As used in this Agreement, the term “Cause” shall mean
the occurrence of one or more of the following
events: (i) Executive’s conviction for a felony or of any crime
involving moral turpitude; (ii) Executive’s engaging in any fraudulent or
dishonest conduct in his dealings with, or on behalf of, the Company (or its
affiliates); (iii) Executive’s gross or habitual negligence in the
performance of his employment duties for the Company (or its affiliates);
(iv) Executive’s material violation of the Company’s business ethics or
conflict-of-interest policies, as such policies currently exist or as they
may
be amended or implemented during Executive’s employment with the Company; or
(v) Executive’s misuse of alcohol or illegal drugs which interferes with
the performance of Executive’s employment duties for the Company or which
compromises the reputation or goodwill of the Company.
4. Subject
to the procedural conditions prescribed below, the Company shall also provide
Executive with the benefits set forth in Section 6 of this Agreement upon
any voluntary resignation of Executive if any one of the following events occurs
within twelve (12) months following a Change in Control:
(A) A
material diminution in Executive’s base compensation from the level of such base
compensation immediately prior to the Change in Control;
(B) A
material diminution in Executive's authority, duties, or responsibilities from
his authority, duties, or responsibilities immediately prior to the Change
in
Control;
(C) A
material change in the geographic location at which Executive is assigned to
perform his duties and responsibilities on behalf of the Company from such
geographic location immediately prior to the Change in Control;
(D) A
material diminution in the budget over which Executive has authority from such
budget immediately prior to the Change in Control; or
(E) Any
other material breach by the Company of its obligations to Executive under
this
Agreement or any other agreement prescribing the terms and conditions of his
employment.
For
the
Executive to be entitled to benefits because of his resignation following the
occurrence of one of the listed events, each of the following procedural
conditions must be satisfied: (i) within ninety (90) days of the initial
occurrence of the event, the Executive must give written notice to the Company
of such occurrence; (ii) the Company must have failed to remedy that occurrence
within thirty (30) days after receiving such notice, and (iii) the Executive
must resign no later than one hundred eighty (180) days after the initial
occurrence of the event.
5. Any
termination by Company of Executive’s employment as contemplated by
Section 3 hereof (except subsection 3(A)) or any resignation by
Executive as contemplated by Section 4 hereof shall be communicated by a
written notice to the other party hereto. Any notice given by
Executive in connection with a voluntary resignation pursuant to Section 4
or given by the Company in connection with a termination as to which the Company
believes it is not obligated to provide Executive with benefits set forth in
Section 6 hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination.
6. Subject
to the conditions and exceptions set forth in Section 3 and Section 4
hereof, the following benefits, less any amounts required to be withheld
therefrom under any applicable federal, state or local income tax, other tax,
or
social security laws or similar statutes, shall be paid to
Executive:
(A) On
the next regular payday following such a termination, Executive shall be paid,
at his then-effective salary, for services performed through the date of his
termination. In addition, any earned but unpaid amount of any bonus
or incentive payment (which, for purposes of this Agreement, shall mean that
amount computed in a fashion consistent with the manner in which Executive’s
bonus or incentive plan for the year preceding the year of termination was
computed, if Executive received a bonus or incentive payment during such
preceding year in accordance with a plan or program of the Company, or, if
not,
then the total bonus or incentive payment received by the Executive during
such
preceding year, in either case prorated through the date of termination) shall
be paid to Executive within thirty (30) days following the termination of his
employment.
(B)
Within
thirty (30) days following such a termination, Executive shall be paid a lump
sum payment of an amount equal of Executive’s current base salary (which shall
not be lower than the Executive’s base salary on the date of this
Agreement).
(C)
Within
thirty (30) days following the last day of any computation period under an
incentive bonus plan or similar plan following such a termination, Executive
shall be paid a lump sum payment equal to any bonus to which Executive would
have been entitled had all requirements for earning the bonus been met,
multiplied by a fraction, the denominator of which will be the number of days
in
any such computation period and the numerator of which shall be the number
of
days during the computation period the Executive was employed by the
Company. By way of example, should the computation period be one
year, during which the Executive worked 75 days before the termination, then
the
fraction would be 75/365.
(D)
Should
Executive be provided with the use of an automobile owned or leased by the
Company, Executive shall be entitled to continue to use such automobile on
the
same terms and conditions as he/she did prior to the termination for a period
of
up to sixty (60) days following such termination.
(E)
For
up to
twelve (12) months following such a termination, the Company shall reimburse
Executive for any amounts paid by Executive for COBRA insurance continuation
coverage, reduced by an amount equal to the payments Executive made for such
coverage immediately prior to such termination;
(F) At
any time within the first twelve (12) months following such a termination,
the
Company shall, upon request, either pay for directly or reimburse Executive
for
up to $15,000 for outplacement services on Executive’s behalf.
(G) If
as of the date his employment terminates, Executive is a “key employee” within
the meaning of Section 416(i) of the Code, without regard to paragraph 416(i)(5)
thereof, and the Company has stock that is publicly traded on an established
securities market or otherwise, any payment that constitutes deferred
compensation because of employment termination will be suspended until, and
will
be paid to Executive on, the first day of the seventh month following the month
in which Executive’s last day of employment occurs. For purposes of
this Section 6, “deferred compensation” means compensation provided under a
nonqualified deferred compensation plan as defined in, and subject to,
Section 409A of the Code.
7. Should
Executive be employed by Company on the date of any Change in Control of the
Company that occurs on or prior to November 7, 2008 then Company shall pay
to
Executive in a lump sum on the date of the Change in Control or as soon
thereafter as is reasonably practical, an amount equal to 30% of Executive’s
then-current annual salary (the “Salary”) on the date of the Change in
Control. In computing the amount to be paid, the Salary shall not be
less than Executive’s annual salary on the date of this
Agreement. The payment contemplated in this Section 7 shall be
reduced by any tax or other withholdings required by law or elected by
Executive.
8. Executive
acknowledges and agrees that the Company’s payment of the severance compensation
pursuant to Sections 6 and/or 7 of this Agreement shall be deemed to constitute
a full settlement and discharge of any and all obligations of the Company to
Executive arising out of this Agreement, Executive’s employment with the Company
and/or the termination of Executive’s employment with the Company, except for
any vested rights Executive may have under any insurance, stock option or equity
compensation plan or any other employee benefit plans sponsored by the
Company. Executive further acknowledges and agrees that as a
condition to receiving any of the severance compensation pursuant to
Section 6 or 7 of this Agreement, Executive will execute and deliver to the
Company a release agreement in form and substance reasonably satisfactory to
the
Company pursuant to which Executive will release and waive any and all claims
against the Company (and its officers, directors, shareholders, employees and
representatives) arising out of this Agreement, Executive’s employment with the
Company, and/or the termination of Executive’s employment with the Company (as
applicable under the relevant Section above), including without limitation
claims under all federal, state and local laws; provided, however, that such
Release Agreement shall not affect or relinquish (a) any vested rights
Executive may have under any insurance, stock option or equity compensation
plan, or other employee benefit plan sponsored by the Company, (b) any
claims for reimbursement of business expenses incurred prior to the employment
termination date, or (c) any rights to severance compensation under
Section 6 of this Agreement.
9. Executive
is not required to mitigate the amount of benefit payments to be made by the
Company pursuant to this Agreement by seeking other employment or otherwise,
nor
shall the amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Executive as a result of employment by
another employer or which might have been earned by Executive had Executive
sought such employment, after the date of termination of his employment with
the
Company or otherwise.
10. In
order to induce the Company to enter into this Agreement, Executive hereby
agrees as follows:
(A) He
will keep confidential and not improperly divulge for the benefit of any other
party any of the Company’s confidential information and business secrets
including, but not limited to, confidential information and business secrets
relating to such matters as the Company’s finances and
operations. All of the Company’s confidential information and
business secrets shall be the sole and exclusive property of the
Company.
(B) For
a period of one year after Executive’s employment with the Company ceases,
Executive shall not either on his own account or for any other person, firm
or
company solicit or endeavor to cause any employee of the Company to leave his
employment or to induce or attempt to induce any such employee to breach any
employment agreement with the Company.
In
the
event of a breach or threatened breach by Executive of the provisions of this
Section 9, the Company shall be entitled to an injunction restraining
Executive from committing or continuing such breach. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach including the
recovery of damages from Executive. The covenants of this
Section 9 shall run not only in favor of the Company and its successors and
assigns, but also in favor of its subsidiaries and their respective successors
and assigns and shall survive the termination of this Agreement.
11. Should
Executive die while any amounts are payable to him hereunder, this Agreement
shall inure to the benefit of and be enforceable by Executive’s executors,
administrators, heirs, distributees, devisees and legatees and all amounts
payable hereunder shall be paid in accordance with the terms of this Agreement
to Executive’s devisee, legatee or other designee or if there be no such
designee, to his estate.
12. For
purposes of this Agreement, notices and all other communications provided for
herein shall be in writing and shall be deemed to have been given when delivered
or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If
to
Executive:
If
to the
Company:
The
Steak
N Shake Company
500
Century Building
36
South
Pennsylvania Street
Indianapolis,
Indiana 46204
Attention: Chief
Executive Officer
Copy
to: General Counsel
or
to
such other address as any party may have furnished to the other party in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. The
validity, interpretation, and performance of this Agreement shall be governed
by
the laws of the State of Indiana. The parties agree that all legal
disputes regarding this Agreement will be resolved in Indianapolis, Indiana,
and
irrevocably consent to service of process in such City for such
purpose.
14. No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Executive
and the Company. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not set forth expressly in this
Agreement.
15. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
16. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
Agreement.
17. This
Agreement is personal in nature and neither of the parties hereto shall, without
the consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 10
above. Without limiting the foregoing, Executive’s right to receive
payments hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by will
or
by the laws of descent and distribution as set forth in Section 10 hereof,
and in the event of any attempted assignment or transfer contrary to this
Section 16, the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.
18. Any
benefits payable under this Agreement shall be paid solely from the general
assets of the Company. Neither Executive nor Executive’s beneficiary
shall have interest in any specific assets of the Company under the terms of
this Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind or a
fiduciary relationship between Executive and the Company.
19.
This
Agreement shall be interpreted and applied in a manner consistent with any
applicable standards for nonqualified deferred compensation plans established
by
Section 409A of the Code and its interpretive regulations and other regulatory
guidance. To the extent that any terms of this Agreement would
subject Executive to gross income inclusion, interest, or additional tax
pursuant to Section 409A of the Code, those terms are to that extent superseded
by, and shall be adjusted to the minimum extent necessary to satisfy, the
applicable Section 409A of the Code standards.
20.
This
Agreement completely supersedes and replaces any other employment agreement
or
other agreement covering the same terms and conditions of this Agreement whether
written or oral, between Company and Executive which was entered into prior
to
the date of this Agreement.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the day and year first above set forth.
THE
STEAK
N SHAKE COMPANY
|
Alan
B. Gilman, Interim Chief Executive
Officer
|
/s/ Jeffrey A.
Blade
Executive
Vice President, Chief Financial and Administrative Officer
EXHIBIT
10.32
SEVERANCE
AND GENERAL RELEASE AGREEMENT
This
Severance and General Release Agreement ("Agreement") is entered into this
17th
day of September, 2007, by and between The Steak n Shake Company and its
subsidiaries or related companies (collectively, the "Company") and Gary Walker
("Employee").
Recitals
A.
Employee
was employed by the Company until his employment terminated on September 17,
2007 (the "Separation Date").
B.
Employee
understands and agrees that his coverage under Company’s insurance plans
including, but not limited to, health insurance, life insurance, dental
insurance, short-term disability insurance and long-term disability insurance,
and participation in Company’s group medical plan, group life insurance plan,
employee stock purchase plan, 401k plan, and any other Company-sponsored
benefits plan (collectively, the “Benefit Plans”) shall all terminate on the
Separation Date.
C.
Employee's
employment relationship with the Company is covered by numerous state and
federal statutes and common laws, including the Age Discrimination in Employment
Act of 1967, as amended (29 U.S.C. § 621
et
seq.
), and
other anti-discrimination laws, which prohibit, among other things,
discrimination on the basis of age, race, sex, religion, national origin, color,
disability and citizenship status (collectively, the "Age and Other
Discrimination Laws").
D.
To
obtain
certain special benefits upon termination of employment with the Company,
Employee wishes to waive any and all rights or claims against the Company that
have arisen or may arise on or before the date Employee executes this Agreement,
to release and discharge the Company from any and all possible liability and
to
covenant not to sue the Company. To obtain Employee's waiver and
release and covenant not to sue, the Company is prepared to provide certain
special benefits to him.
Agreement
1.
Benefits
The
Company agrees to provide Employee with the following severance
benefits:
(a)
The
Company will pay Employee a severance benefit equal to a total of fifty-two
(52)
weeks of salary (the “Severance Amount”). Each week of salary equals
the weekly compensation regularly paid to Employee immediately prior to
Employee's termination of employment, excluding any bonuses. All
payments to Employee will be subject to all applicable payroll withholdings
and
deductions. Employee warrants that all monies and/or benefits payable
under this Agreement are monies and/or benefits to which Employee is not
otherwise entitled. The Severance Amount will be paid to Employee in
equal installments on Company’s normal and customary paydays until the Severance
Amount is paid in full.
(b)
Within
ten (10) days of the end of the revocation period, the Company will
pay Employee an additional severance benefit, in a lump sum amount, equal to
One
Hundred and Seven Thousand One Hundred Seventy Dollars ($107,170), reduced
by
applicable payroll withholdings and deductions (the “Lump Sum
Amount”).
(c)
Employee’s
eligibility to collect the Severance Amount and the Lump Sum Amount will begin
upon expiration of the revocation period described in Section 4
below.
(d)
Company
will not contest Employee’s pursuit of unemployment benefits. Company
makes no representation of any kind regarding Employee’s eligibility for such
benefits.
(e)
Company
will provide Employee “executive job outplacement” services through Right
Management (or a comparable outplacement service) for a period of six (6)
months.
(f)
Company
will provide Employee with an explanation of coverage available pursuant to
the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any other
applicable state or federal law.
(g)
Employee
may use his Company vehicle in accordance with the current terms for the ninety
(90) day period following the Separation Date.
All
payments or provision of benefits to Employee will be subject to and reduced
by
all applicable payroll withholdings and deductions.
2.
General
Release and Covenant Not To Sue
By
signing this Agreement, Employee generally, irrevocably and unconditionally
releases and forever discharges and covenants not to sue the Company and all
of
its affiliated entities and all of its present and former employees, partners,
officers, directors, employee benefit plans, trustees, administrators,
fiduciaries, agents, and all persons acting for or on behalf of the Company,
both individually and in their representative capacities (collectively,
including the Company, the "Released Parties") from any and all claims, charges,
complaints, demands, liabilities, obligations, injuries, actions or rights
of
action of any nature whatsoever (including claims for attorneys' fees, interest
and costs), whether known or unknown, disclosed or undisclosed, administrative
or judicial, suspected or unsuspected, arising out of or in any manner connected
with any act, omission or event occurring in whole or in part on or before
the
date Employee signs this Agreement, including but not limited to any and all
claims arising from Employee's employment with the Company or the termination
of
Employee's employment with the Company and specifically includes, but is not
limited to, and constitutes a complete waiver of, any and all possible claims
under the Age and Other Discrimination Laws through the date Employee signs
this
Agreement. The Company and Employee agree that the foregoing
release/covenant not to sue is to be construed as broadly as possible and is
meant to include all possible claims of any kind that Employee may have against
any of the Released Parties as of the date Employee signs this
Agreement.
3.
Return
of Company Property
Employee
represents and agrees that he has delivered, or immediately will deliver, to
the
Company all property and materials belonging to the Company which are in
Employee's possession or subject to Employee's control, including, but not
limited to, any equipment, keys, access cards, files, computer disks and all
other documents and materials supplied by or belonging to the
Company.
4.
Knowing
and Voluntary Waiver
Because
the arrangements discussed in this Agreement affect important rights and
obligations, the Company advises Employee to consult with an attorney before
he
agrees to the terms of this Agreement and Employee acknowledges that he has
been
so advised.
Employee
acknowledges that the Company provided him with this Agreement on September
17,
2007. Employee is advised that he has up to forty-five (45) days from
the date he receives this Agreement within which to consider it, and Employee
may take as much of that time as he wishes before signing. If
Employee decides to accept this Agreement, he must sign this Agreement and
return it to Human Resources Senior Vice President Tom Murrill at the Company
on
or before the expiration of the forty-five (45) days.
Employee
is advised that if he signs this Agreement, thereby accepting its terms and
conditions, Employee will have a period of seven (7) days following the date
Employee signs this Agreement to change his mind and revoke this
Agreement. If Employee decides to revoke this Agreement, then
Employee must deliver written notice of such revocation to Human Resources
Senior Vice President Tom Murrill at the Company within such 7-day
period. This Agreement will not become binding and enforceable until
the 7-day revocation period has expired.
Employee's
employment is being terminated as part of an employment termination
program. Employee acknowledges that the Company has informed Employee
of the group of individuals covered by the program, the eligibility factors
for
the program and the time limits within which Employee may participate in the
program. A list of the job titles and ages of employees who are
eligible and who are not eligible for the benefits of this program is attached
as
Exhibit A
for Employee's review.
5.
Non-Reliance
Employee
acknowledges that in entering this Agreement he has not relied on any
representations or statements made by the Company or any of the Released Parties
other than those specifically stated in this Agreement.
6.
Representations
and Indemnification
Employee
represents that, as of the date of execution of this Agreement, he has not
filed
with any agency or court any charges, complaints or legal actions against the
Released Parties.
Employee
agrees that he will not, directly or indirectly, file or pursue any charge,
complaint or legal action against the Released Parties based on any acts,
omissions or events occurring up through the date Employee signs this
Agreement. Should any administrative agency or other person bring a
complaint, charge or legal action on Employee's behalf against any of the
Released Parties based on any acts, omissions or events occurring up through
the
date Employee executes this Agreement, Employee will notify such agency or
person promptly that the matter has been resolved to his satisfaction and that
he does not wish to have the matter pursued. If such agency or other
person independently determines to initiate or pursue a complaint, charge or
legal action on Employee's behalf against any of the Released Parties based
on
any acts, omissions or events occurring up through the date Employee signs
this
Agreement, Employee hereby waives any rights to, and will not accept, any remedy
obtained through the efforts of such agency or person.
Employee
agrees to indemnify the Released Parties from all claims, costs and expenses,
including all attorneys' fees, arising out of any misrepresentation made by
Employee in this Agreement. In the event Employee initiates, pursues
or maintains any claim, charge, complaint, action or proceeding against any
of
the Released Parties based on any claim, charge, complaint, action, injury
or
right of action for which Employee has released and agreed not to sue the
Released Parties in this Agreement, or in the event Employee otherwise breaches
any term or condition of this Agreement, all of which are material terms and
conditions, then in such event Employee agrees to repay to Company the entire
Severance Amount and Lump Sum Amount and, to the fullest extent permitted by
law, to pay all costs and attorneys' fees incurred by any of the Released
Parties in defending any claim, charge, complaint, action or proceeding that
Employee pursues.
7.
Nondisparagement
Employee
understands and agrees that this Agreement is a confidential agreement between
himself and the Company. Employee agrees that, except as required by
law or provided herein, Employee shall keep the terms and subject matter of
this
Agreement strictly confidential and shall not disclose any term or condition
of
the Agreement to any other individual or organization unless there is a breach
of the Agreement in which event the Agreement may be disclosed solely for the
purposes of enforcement. Employee agrees that Employee will not do or
say anything that a reasonable person would expect at the time would have the
effect of diminishing or injuring the goodwill and reputation of the Released
Parties.
8.
Raiding
of Employees
Employee
agrees that for a period of two (2) years after the date of this Agreement,
Employee will not directly or indirectly, on his own behalf or on behalf of
any
other person or entity, do any of the following: (1) hire, solicit, recruit,
or
otherwise attempt to hire or enter into any employment relationship with any
individual employed by the Company, (2) share the names, addresses, telephone
numbers, e-mail addresses or other means of contacting any Company employee
with
any other person or entity, or (3) share information regarding the salaries,
benefits or other renumeration paid by the Company to any of its employees
with
any other person or entity.
9.
Non-Admission
Neither
this Agreement nor any action pursuant to it constitutes an admission by any
of
the Released Parties of any wrongdoing or of any liability to Employee arising
under any law, including the Age and Other Discrimination Laws.
10.
Successors
and Assigns
This
Agreement shall be binding upon Employee and the Company, and upon their heirs,
administrators, representatives, executors, successors and assigns, and shall
inure to the benefit of Employee and the Company, and to their heirs,
administrators, representatives, executors, successors and assigns.
11.
Language
Construed as a Whole
The
language of this Agreement shall in all cases be construed as a whole, according
to its fair meaning, and not strictly for or against any of the
parties.
12.
Applicable
Law; Choice of Forum
This
Agreement shall be construed and enforced in accordance with the laws of the
State of Indiana. The Company and Employee agree that any legal
action relating to this Agreement shall be commenced and maintained exclusively
before an appropriate state court of record in Marion County, Indiana or in
the
United States District Court for the Southern District of Indiana, Indianapolis
Division, and the parties hereby submit to the jurisdiction of such courts
and
waive any right to challenge or otherwise raise questions of personal
jurisdiction or venue in any action commenced or maintained in such
courts.
13.
Entire
Agreement
This
Agreement
constitutes the entire agreement between the parties with respect to the
subjects addressed in this Agreement and supersedes any prior agreements,
understandings or representations, oral or written, on the subjects addressed
in
this Agreement.
IN
WITNESS WHEREOF, the Company and Employee have executed this Agreement on the
dates indicated below, intending it to become effective on the eighth (8
th
) day after
the
date Employee signs the Agreement.
"EMPLOYEE" "COMPANY"
/s/
Gary
Walker
By:
/s/ Alan B.
Gilman
Gary
Walker
Alan
B. Gilman,
Interim Chief Executive Officer
Printed
Name
Date
Date
EXHIBIT
10.33
CHANGE
IN CONTROL BENEFITS AGREEMENT
This
Change in Control Benefits Agreement (“Agreement”) is made and entered into as
of November 7, 2007, by and between The Steak N Shake Company, an Indiana
corporation (hereinafter referred to as the “Company”), and Gary T.
Reinwald (hereinafter referred to as “Executive”).
W
I
T
N
E
S
S
E
T
H
WHEREAS,
Executive is an executive officer of the Company; and
WHEREAS,
the Company believes that Executive has made and will continue to make valuable
contributions to the productivity and profitability of the Company;
and
WHEREAS,
the Company desires to encourage Executive to continue to make such
contributions and not to seek or accept employment elsewhere; and
WHEREAS,
the Company, therefore, desires to assure Executive of certain benefits in
the
event there is a Change in Control of the Company;
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants herein
contained and the mutual benefits herein provided, the Company and Executive
hereby agree as follows:
1. The
term of this Agreement shall be from the date hereof through November 7,
2008.
2. As
used in this Agreement, “Change in Control” of the Company means:
(A) The
acquisition, within a 12-month period ending on the date of the most recent
acquisition, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act as in effect from
time to time) of fifty percent (50%) or more of the combined voting power of
the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors; provided, however, that the following acquisitions
shall not constitute an acquisition of control: (i) any
acquisition by a Person who, immediately before the commencement of the 12-month
period, already held beneficial ownership of fifty percent (50%) or more of
that
combined voting power; (ii) any acquisition directly from the Company
(excluding an acquisition by virtue of
the exercise of a
conversion privilege), (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(v) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this definition are satisfied;
(B) The
replacement of a majority of members of the Board of Directors during any
12-month period, by members whose appointment or election is not endorsed by
a
majority of the members of the Board of Directors prior to the date of the
appointment or election;
(C) A
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company common stock and outstanding Company voting securities immediately
prior
to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger
or consolidation, of the outstanding Company stock and outstanding Company
voting securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan or related trust of the Company or such
corporation resulting from such reorganization, merger or consolidation and
any
Person beneficially owning, immediately prior to such reorganization, merger
or
consolidation, directly or indirectly, twenty-five percent (25%) or more of
the
outstanding Company common stock or outstanding voting securities, as the case
may be) beneficially owns, directly or indirectly, twenty-five percent (25%)
or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation;
(D) A
complete liquidation or dissolution of the Company; or
(E) The
sale or other disposition of all or substantially all of the assets of the
Company, other than any of the following dispositions: (i) to a corporation
with
respect to which following such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to such sale or other disposition
in
substantially the same proportion as their ownership, immediately prior to
such
sale or other disposition, of the outstanding Company common stock and
outstanding Company voting securities, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Company common stock or outstanding
Company voting securities, as the case may be) beneficially owns, directly
or
indirectly, twenty-five percent (25%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors and (3) at least a majority of
the members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company; (ii) to a shareholder of the Company in exchange for or with
respect to its stock; (iii) to a Person that owns, directly or indirectly,
fifty percent (50%) or more of the total value or voting power of all
outstanding stock of the Company; or (iv) to an entity, at least fifty
percent (50%) or more of the total value or voting power of which is owned,
directly or directly, by the Company or by a Person described in
(iii).
Despite
any other provision of this definition to the contrary, an occurrence shall
not
constitute a Change in Control if it does not constitute a change in the
ownership or effective control, or in the ownership of a substantial portion
of
the assets of, the Company within the meaning of Section 409A(a)(2)(A)(v) of
the
Internal Revenue Code of 1986, as amended (the “Code”) and its interpretive
regulations.
3.
Should Executive be employed by Company on the date of any Change in Control
of
the Company that occurs on or prior to November 7, 2008 then Company shall
pay
to Executive in a lump sum on the date of the Change in Control or as soon
thereafter as is reasonably practical, an amount equal to 30% of Executive’s
then-current annual salary (the “Salary”) on the date of the Change in
Control. In computing the amount to be paid, the Salary shall not be
less than Executive’s annual salary on the date of this
Agreement. The payment contemplated in this Section 7 shall be
reduced by any tax or other withholdings required by law or elected by
Executive.
4. Executive
acknowledges and agrees that the Company’s payment of the severance compensation
pursuant to Section 3 of this Agreement shall be deemed to constitute a full
settlement and discharge of any and all obligations of the Company to Executive
arising out of this Agreement, Executive’s employment with the Company and/or
the termination of Executive’s employment with the Company, except for any
vested rights Executive may have under any insurance, stock option or equity
compensation plan or any other employee benefit plans sponsored by the
Company. Executive further acknowledges and agrees that as a
condition to receiving any of the severance compensation pursuant to
Section 3 of this Agreement, Executive will execute and deliver to the
Company a release agreement in form and substance reasonably satisfactory to
the
Company pursuant to which Executive will release and waive any and all claims
against the Company (and its officers, directors, shareholders, employees and
representatives) arising out of this Agreement, Executive’s employment with the
Company, and/or the termination of Executive’s employment with the Company,
including without limitation claims under all federal, state and local laws;
provided, however, that such Release Agreement shall not affect or relinquish
(a) any vested rights Executive may have under any insurance, stock option
or equity compensation plan, or other employee benefit plan sponsored by the
Company, (b) any claims for reimbursement of business expenses incurred
prior to the employment termination date, or (c) any rights to severance
compensation under Section 6 of this Agreement.
5. In
order to induce the Company to enter into this Agreement, Executive hereby
agrees he will keep confidential and not improperly divulge for the benefit
of
any other party any of the Company’s confidential information and business
secrets including, but not limited to, confidential information and business
secrets relating to such matters as the Company’s finances and
operations. All of the Company’s confidential information and
business secrets shall be the sole and exclusive property of the
Company. In the event of a breach or threatened breach by Executive
of the provisions of this Section 5, the Company shall be entitled to an
injunction restraining Executive from committing or continuing such
breach. Nothing herein contained shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach
or
threatened breach including the recovery of damages from
Executive. The covenants of this Section 5 shall run not only in
favor of the Company and its successors and assigns, but also in favor of its
subsidiaries and their respective successors and assigns and shall survive
the
termination of this Agreement.
6. Should
Executive die while any amounts are payable to him hereunder, this Agreement
shall inure to the benefit of and be enforceable by Executive’s executors,
administrators, heirs, distributees, devisees and legatees and all amounts
payable hereunder shall be paid in accordance with the terms of this Agreement
to Executive’s devisee, legatee or other designee or if there be no such
designee, to his estate.
7. For
purposes of this Agreement, notices and all other communications provided for
herein shall be in writing and shall be deemed to have been given when delivered
or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If
to
Executive:
If
to the
Company:
The
Steak
N Shake Company
500
Century Building
36
South
Pennsylvania Street
Indianapolis,
Indiana 46204
Attention: Chief
Executive Officer
Copy
to: General Counsel
or
to
such other address as any party may have furnished to the other party in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. The
validity, interpretation, and performance of this Agreement shall be governed
by
the laws of the State of Indiana. The parties agree that all legal
disputes regarding this Agreement will be resolved in Indianapolis, Indiana,
and
irrevocably consent to service of process in such City for such
purpose.
9. No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Executive
and the Company. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not set forth expressly in this
Agreement.
10. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
11. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
Agreement.
12. This
Agreement is personal in nature and neither of the parties hereto shall, without
the consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 6
above. Without limiting the foregoing, Executive’s right to receive
payments hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by will
or
by the laws of descent and distribution as set forth in Section 6 hereof,
and in the event of any attempted assignment or transfer contrary to this
Section 12, the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.
13.
Any
benefits payable under this Agreement shall be paid solely from the general
assets of the Company. Neither Executive nor Executive’s beneficiary
shall have interest in any specific assets of the Company under the terms of
this Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind or a
fiduciary relationship between Executive and the Company.
14.
This
Agreement shall be interpreted and applied in a manner consistent with any
applicable standards for nonqualified deferred compensation plans established
by
Section 409A of the Code and its interpretive regulations and other regulatory
guidance. To the extent that any terms of this Agreement would
subject Executive to gross income inclusion, interest, or additional tax
pursuant to Section 409A of the Code, those terms are to that extent superseded
by, and shall be adjusted to the minimum extent necessary to satisfy, the
applicable Section 409A of the Code standards.
15.
This
Agreement completely supersedes and replaces any other employment agreement
or
other agreement covering the same terms and conditions of this Agreement whether
written or oral, between Company and Executive which was entered into prior
to
the date of this Agreement.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the day and year first above set forth.
THE
STEAK
N SHAKE COMPANY
|
Alan
B. Gilman, Interim Chief Executive
Officer
|
/s/
Gary T.
Reinwald
Executive
Vice President, Development
EXHIBIT
10
.
34
THE
STEAK N SHAKE COMPANY AMENDED AND RESTATED
1997
CAPITAL APPRECIATION PLAN
The
purpose of the Amended and Restated 1997 Capital Appreciation Plan (the “Plan”)
is to foster and enhance the long-term profitability of The Steak n Shake
Company (the “Company”) for the benefit of its shareholders by offering the
incentive of long-term rewards to those corporate officers and key executives
who have principal responsibility for long-term profitability.
Eligibility
for grants under the Plan shall be limited to those key executive employees,
whether or not such employees are officers or directors of the Company, or
its
subsidiaries, recommended by the Compensation Committee and selected by the
Board of Directors from among those who are in a position to contribute
materially to the success of the Company and who have significant opportunities
to influence long-term profit performance. Subject to such selection,
these would normally include key employees in executive, administrative,
professional, operating and technical positions. The Board of
Directors may, in its discretion, also make an award to any other employee
who
has made an unusual contribution outside the ordinary course of their
duties.
3.
|
Restricted
Stock Grants.
|
(a)
|
The
Board of Directors may grant shares of the Common Stock of the Company
which are subject to restrictions (“Restricted Shares”) to participating
employees (“Participants”) pursuant to the Plan over a period ending
December 31, 2007. The number of Restricted Shares, if any,
granted hereunder to Participants shall be within the discretion
of the
Board of Directors; provided, however, that the number of Restricted
Shares which may be granted after November 11, 2003 shall not exceed
an
aggregate of 514,122 shares except as may be adjusted pursuant to
Section
5 below. Restricted Shares which are forfeited or canceled
under 3(d) or (e) hereof shall be available for further
grants. In making grants, the Board of Directors shall take
into account such factors as the Participant’s level of responsibility,
previous performance, rate of compensation and the potential value
of the
grant.
|
(b)
|
Grants
made by the Board of Directors may consist in whole or in part of
authorized but unissued or treasury shares, and shall be subject
to the
provisions of the Plan and to such other terms and conditions, not
inconsistent with the Plan, as the Board of Directors
determine.
|
(c)
|
Subject
to the provisions contained in 3(d) and (e) hereof, the Restricted
Shares
granted hereunder shall be conditionally owned by the Participant
as of
the grant date, and such Participant shall be entitled to the receipt
of
cash dividends and voting rights with respect
thereto.
|
(d)
|
In
the event of termination of Participant’s employment with the Company for
any reason other than death, retirement under the normal or disability
provisions of a retirement plan of the Company, or retirement under
the
early retirement provisions of such retirement plan with the consent
of
the Company, during a period of three (3) years following the grant
date,
subject to adjustment pursuant to paragraph 5 hereof (“Forfeiture
Period”), the Restricted Shares so granted shall be thereupon forfeited
by
Participant and transferred to the Company as of the date of
termination. The Restricted Shares granted hereunder may not be
sold, transferred or pledged by the Participant during the Forfeiture
Period.
|
(e)
|
If
a Participant’s employment has terminated because of death, or because of
disability or normal or early retirement under a retirement plan
of the
Company as set out in 3(d) above prior to the end of the Forfeiture
Period, the number of Restricted Shares such Participant or such
Participant’s beneficiary or estate would be entitled to retain shall be
the number of Restricted Shares determined as though such Participant’s
employment had not been terminated, multiplied by a fraction, the
numerator of which is the number of months such Participant was employed
during the Forfeiture Period (including the month during which employment
terminated) and the denominator of which is the number of months
in the
Forfeiture Period. The balance of Restricted Shares shall be
transferred to the Company as of the termination
date.
|
(a)
|
In
conjunction with the Restricted Share grants, the Board of Directors
shall
simultaneously grant each Participant an equivalent number of book
value
units (“Book Units”) which are equal to the book value per share of the
Common Stock of the Company. The aggregate number of Book Units
granted hereunder after November 11, 2003 shall not exceed 514,122
units
as adjusted for splits and stock dividends. Units forfeited or
canceled under paragraphs 4 (c) or (d) hereof shall be thereafter
available for further grants.
|
(b)
|
Book
Units shall be valued on the basis of book value of the Common Stock
of
the Company, as determined in accordance with 5 (c) hereof on the
last day
of the fiscal quarter next preceding the date of grant (“Value Date”) and
again on the third anniversary of the Value Date, subject to adjustment
pursuant to paragraph 5 hereof, said three (3) year period, as adjusted,
hereafter referred to as the “Accumulation Period”. The
increase, if any, in book value during the Accumulation Period plus
an
amount equal to the dividends paid during the Accumulation Period
on an
equal number of shares of Common Stock of the Company, shall be paid
to
such Participant in cash within ninety (90) days following the expiration
of the Accumulation Period; provided, however, the Book Units have
not
been forfeited under paragraph 4 (c)
hereof.
|
(c)
|
In
the event of termination of Participant’s employment with the Company for
any reason other than death, retirement under the normal or disability
provisions of a retirement plan of the Company, or retirement under
the
early retirement provisions of such retirement plan with the consent
of
the Company during the Accumulation Period, the appreciation and
dividend
equivalents shall be forfeited by the
Participant.
|
(d)
|
If
a Participant’s employment has terminated because of death, disability or
retirement under a retirement plan of the Company as set out in 4
(c)
above prior to the end of the Accumulation Period, the number of
Book
Units such Participant or such Participant’s beneficiary or estate shall
be entitled to receive shall be the number of Book Units determined
as
though such Participant’s employment had not been terminated, multiplied
by a fraction, the numerator of which is the number of months such
Participant was employed during the Accumulation Period (including
the
month during which employment terminated) and the denominator of
which is
the number of months in the Accumulation Period. In such event,
the Board of Directors shall determine the book value as of the last
day
of the quarter next preceding the date of
termination.
|
(e)
|
Any
payment made with respect to a Participant who has died shall be
paid to
the beneficiary designated by the Participant to receive the proceeds
of
any group life insurance coverage provided for the Participant by
the
Company. A Participant who has not designated such beneficiary,
or who desires to designate a different beneficiary, may file with
the
Secretary of the Company, a written designation of a beneficiary
under the
Book Unit plan, which designation may be changed or revoked only
by the
participant. If no designation of a beneficiary has been made
under such life insurance coverage or filed with the Secretary of
the
Company, distribution shall be made to the Participant’s spouse, if
surviving, and if not, to the Participant’s
estate.
|
(a)
|
In
the event that there are changes in the capitalization of the Company
affecting in any manner the number or kind of outstanding shares of
Common
Stock, whether such changes have been occasioned by declaration of
stock
dividends, stock splits, reclassification or recapitalization, or because
the Company has merged or consolidated with another corporation, or
for
any reason whatsoever, then the number and kind of shares then subject
to
Restricted Share grants and thereafter to become subject to such grants,
and the Book Unit values, shall be proportionally adjusted by the Board
of
Directors of the Company to whatever extent the Board of Directors
determines, in its sole and absolute discretion, that any such change
equitably requires an adjustment.
|
(b)
|
The
Board of Directors shall determine book value of the Common Stock
under 4
above based on generally accepted accounting principles, and shall
have
the right, in its sole and absolute authority, to proportionally
adjust
such book values for sales or purchases by the Company of Common
Stock,
acquisitions or divestitures, accounting changes or other actions
of the
Company taken during the Accumulation Period affecting book value,
to
whatever extent the Board of Directors determines that any such action
reasonably requires an
adjustment.
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(c)
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In
the event there is a Change in Control (as defined below) of the
Company,
the applicable Forfeiture Periods and Accumulation Periods on all
outstanding Restricted Shares and Book Units shall be accelerated
and all
such outstanding Restricted Shares and Book Units shall be fully
vested.
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(d)
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As
used in this Plan, "Change in Control" of the Company
means:
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(i) The
acquisition, within a 12-month period ending on the date of the most recent
acquisition, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of beneficial ownership (within
the
meaning of Rule 13d-3 promulgated under the Exchange Act as in effect from
time to time) of fifty percent (50%) or more of the combined voting power of
the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors; provided, however, that the following acquisitions
shall not constitute an acquisition of control: (A) any
acquisition by a Person who, immediately before the commencement of the 12-month
period, already held beneficial ownership of fifty percent (50%) or more of
that
combined voting power; (B) any acquisition directly from the Company
(excluding an acquisition by virtue of
the exercise of a
conversion privilege), (C) any acquisition by the Company, (D) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(E) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (A), (B) and (C) of
subsection (iii) of this paragraph 5(e) are satisfied;
(ii) The
replacement of a majority of members of the Board of Directors during any
12-month period, by members whose appointment or election is not endorsed by
a
majority of the members of the Board of Directors prior to the date of the
appointment or election;
(iii) A
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (A) more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company common stock and outstanding Company voting securities immediately
prior
to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger
or consolidation, of the outstanding Company stock and outstanding Company
voting securities, as the case may be, (B) no Person (excluding the
Company, any employee benefit plan or related trust of the Company or such
corporation resulting from such reorganization, merger or consolidation and
any
Person beneficially owning, immediately prior to such reorganization, merger
or
consolidation, directly or indirectly, twenty-five percent (25%) or more of
the
outstanding Company common stock or outstanding voting securities, as the case
may be) beneficially owns, directly or indirectly, twenty-five percent (25%)
or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(C) at least a majority of the members of the Board of Directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation;
(iv) A
complete liquidation or dissolution of the Company; or
(v) The
sale or other disposition of all or substantially all of the assets of the
Company, other than any of the following dispositions: (A) to a corporation
with
respect to which following such sale or other disposition (x) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to such sale or other disposition
in
substantially the same proportion as their ownership, immediately prior to
such
sale or other disposition, of the outstanding Company common stock and
outstanding Company voting securities, as the case may be, (y) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Company common stock or outstanding
Company voting securities, as the case may be) beneficially owns, directly
or
indirectly, twenty-five percent (25%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors and (z) at least a majority of
the members of the board of directors of such corporation were members of the
Board at the time of the execution of the initial agreement or action of the
Board providing for such sale or other disposition of assets of the Company;
(B) to a shareholder of the Company in exchange for or with respect to its
stock; (C) to a Person that owns, directly or indirectly, fifty percent
(50%) or more of the total value or voting power of all outstanding stock of
the
Company; or (D) to an entity, at least fifty percent (50%) or more of the
total value or voting power of which is owned, directly or directly, by the
Company or by a Person described in (C).
(e)
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Despite
any other provision of this paragraph 5 to the contrary, an occurrence
shall not constitute a Change in Control if it does not constitute
a
change in the ownership or effective control, or in the ownership
of a
substantial portion of the assets of, the Company within the meaning
of
Section 409A(a)(2)(A)(v) of the Code and its interpretive
regulations.
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(f)
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If
as of the date a Participant's employment terminates because of retirement
under paragraph 3(e), Participant is a "key employee" within the
meaning
of Section 416(i) of the Code, without regard to paragraph 416(i)(5)
thereof, and the Company has stock that is publicly traded on an
established securities market or otherwise, any deferred compensation
payments otherwise payable because of such retirement will be suspended
until, and will be paid to Participant on, the first day of the seventh
month following the month in which Participant's last day of employment
occurs. For purposes of this paragraph 5(g) "deferred
compensation" means compensation provided under a nonqualified deferred
compensation plan as defined in, and subject to, Section 409A of the
Code.
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6.
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Amendment
and Termination.
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The
Board
of Directors shall have the power to amend, suspend or terminate the Plan at
any
time except that, subject to the conditions of 5 above, (i) no such action
shall
cancel, reduce or adversely affect any grant theretofore made without the
consent of the Participant or the Participant’s beneficiary or estate; or (ii)
without the approval of the shareholders of the Company, the Board of Directors
may not increase the aggregate number of Restricted Shares and Book Units to
be
granted.
7.
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Restricted
Share and Book Unit
Agreement.
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Each
grant of Restricted Shares and Book Units under the Plan shall be evidenced
by a
written agreement executed by the Company and accepted by the Participant,
and
shall contain such terms and conditions as the Board of Directors may deem
desirable which are not inconsistent with the Plan.
8.
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Finality
of Determination.
|
The
Compensation Committee of the Board of Directors shall have the power to
interpret the Plan, and all interpretations, determinations and actions by
the
Compensation Committee shall be final, conclusive and binding upon all
parties.
9.
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Termination
of Employment.
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Nothing
in the Plan or any grant made under the Plan, shall confer upon any Participant
any right to continue in the employ of the Company or affect in any way the
right of the Company to terminate the Participant’s employment at any
time.
This
Plan
became effective on December 31, 1996 and will continue to December 31, 2007,
subject to approval of the amendment and restatement of the Plan by the holders
of a majority of the shares of Common Stock of the Company which are represented
in person or by proxy at the 2004 Annual Meeting of Shareholders.
This
Plan
shall be interpreted and applied in a manner consistent with the applicable
standards for nonqualified deferred compensation plans established by Section
409A of the Code and its interpretive regulations and other regulatory
guidance. To the extent that any terms of this Agreement would
subject Participants to gross income inclusion, interest, or additional tax
pursuant to Section 409A of the Code, those terms are to that extent superseded
by, and shall be adjusted to the minimum extent necessary to satisfy, the
applicable Section 409A of the Code standards.
EXHIBIT
10.35
INDEMNITY
AGREEMENT
This
AGREEMENT is made as of October 9, 2007, by and between The Steak n Shake
Company, an Indiana corporation (the "Corporation"), and (See listing
below) (the "Indemnitee"), a director and/or executive officer of the
Corporation.
WHEREAS,
it is essential to the Corporation to retain and attract as directors and/or
executive officers of the Corporation the most capable persons available and
persons who have significant experience in business, corporate and financial
matters; and
WHEREAS,
the Corporation has identified the Indemnitee as a person possessing the
background and abilities desired by the Corporation and desires the Indemnitee
to continue to serve as a director and/or an executive officer; and
WHEREAS,
the Corporation and the Indemnitee recognize that serving as a director and/or
executive officer of a corporation at times calls for subjective evaluations
and
judgments upon which reasonable men may differ and that the good faith exercise
of their corporate duties and responsibilities may subject directors
and/or executive officers to burdensome litigation; and
WHEREAS,
it is now the express policy of the Corporation to indemnify its directors
and/or executive officers to the fullest extent not prohibited by law;
and
WHEREAS,
the Amended and Restated Articles of Incorporation, and the Restated By-Laws
of
the Corporation (collectively, the "Constituent Documents") require
indemnification of the directors and/or executive officers of the Corporation
pursuant to the Indiana Business Corporation Law (the "IBCL") and the IBCL
expressly provides that the indemnification provisions set forth therein are
not
exclusive, and thereby contemplates that contracts may be entered into between
the Corporation and directors and/or executive officers of the Corporation
with
respect to indemnification; and
WHEREAS,
the Corporation and the Indemnitee desire to articulate clearly in contractual
form their respective rights and obligations with regard to the Indemnitee's
service on behalf of the Corporation and with regard to claims for loss,
liability, expense or damage which, directly or indirectly, may arise out of
or
relate to such service.
NOW
THEREFORE, the Corporation and the Indemnitee agree as follows:
1.
Agreement
to Serve.
The Indemnitee shall serve as a director and/or
executive officer of the Corporation for so long as the Indemnitee is duly
elected or appointed or until the Indemnitee resigns or is removed from such
offices.
2.
Definitions.
As
used in this Agreement:
(a) The
term "Proceeding" includes, without limitation, any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative,
legislative or investigative nature, formal or informal, internal or external,
in which the Indemnitee may be or may have been involved as a party, witness
or
otherwise, by reason of the fact that the Indemnitee is or was a director and/or
executive officer of the Corporation or any of its subsidiaries, or is or was
serving at the request of the Corporation as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or other
enterprise, whether or not serving in such capacity at the time any liability
or
expense is incurred for which exculpation, indemnification or reimbursement
can
be provided under this Agreement.
(b) The
term "Expenses" includes, without limitation thereto, expenses of
investigations, "Proceedings" or appeals, attorney, accountant and other
professional fees and disbursements, any other expenses or disbursements
incurred in connection with any Proceeding, and any expenses of establishing
a
right to indemnification under Section 11 of this Agreement, but shall not
include amounts paid in settlement by the Indemnitee or the amount of judgments
or fines against the Indemnitee.
(c) References
to "other enterprise" include, without limitation, employee benefit plans;
references to "fines" include, without limitation, any excise tax assessed
with
respect to any employee benefit plan; references to "serving at the request
of
the Corporation" include, without limitation, any service as a director,
officer, employee or agent which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or its beneficiaries; and a person who acted in good
faith and in a manner reasonably believed to be in the interest of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best
interests of the Corporation."
3.
Indemnity
in Third-Party Proceedings.
The Corporation shall indemnify
the Indemnitee in accordance with the provisions of this Section 3, if the
Indemnitee is made a party to any Proceeding (other than a Proceeding by or
in
the right of the Corporation to procure a judgment in its favor), against all
Expenses, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by the Indemnitee in connection with such Proceeding if
the
conduct of the Indemnitee was in good faith and the Indemnitee reasonably
believed that the Indemnitee's conduct was in the best interests of the
Corporation, or at least not opposed to its best interests, and, in the case
of
a criminal proceeding, the Indemnitee, in addition, had no reasonable cause
to
believe that the Indemnitee's conduct was unlawful. However, the
Indemnitee shall not be entitled to indemnification under this Section 3 in
connection with any Proceeding charging improper personal benefit to the
Indemnitee in which the Indemnitee was adjudged liable on the basis that
personal benefit was improperly received by the Indemnitee unless and only
to
the extent that the court conducting such Proceeding or any other court of
competent jurisdiction determines upon application that despite the adjudication
of liability, the Indemnitee is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances.
4.
Indemnity
in Proceedings by or in the Right of the Corporation.
The
Corporation shall indemnify the Indemnitee in accordance with the provisions
of
this Section 4, if the Indemnitee is made a party to any Proceeding by or
in the right of the Corporation to procure a judgment in its favor, against
all
Expenses actually and reasonably incurred by the Indemnitee in connection with
such Proceeding if the conduct of the Indemnitee was in good faith and the
Indemnitee reasonably believed that the Indemnitee's conduct was in the best
interests of the Corporation, or at least not opposed to its best
interests. However, the Indemnitee shall not be entitled to
indemnification under this Section 4 in connection with any Proceeding in
which the Indemnitee has been adjudged liable to the Corporation unless and
only
to the extent that the court conducting such Proceeding or any other court
of
competent jurisdiction determines upon application that, despite the
adjudication of liability, the Indemnitee is fairly and reasonably entitled
to
indemnification in view of all the relevant circumstances.
5.
Indemnification
of Expenses of Successful Party.
Notwithstanding any other
provisions of this Agreement, to the extent that the Indemnitee has been
successful, on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, the Corporation shall indemnify the Indemnitee against
all Expenses incurred in connection therewith.
6.
Additional
Indemnification.
(a) Notwithstanding
any limitation in Sections 3, 4 or 5, the Corporation shall indemnify the
Indemnitee to the fullest extent not prohibited by law with respect to any
Proceeding (including a Proceeding by or in the right of the Corporation to
procure a judgment in its favor) against all Expenses, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by the
Indemnitee in connection with such Proceeding.
(b) For
purposes of this Agreement, the meaning of the phrase "to the fullest extent
not
prohibited by law" shall include, but not be limited to:
(i) to
the fullest extent authorized or not prohibited by any changes in the law,
including but not limited to any amendments to or replacements of the IBCL
adopted after the date of this Agreement that increase the extent to which
a
corporation may indemnify its directors; and
(ii) to
the fullest extent authorized by the provision of the IBCL that authorizes
or
contemplates additional indemnification by agreement, or the corresponding
provision of any amendment to or replacement of the IBCL.
7.
Exclusions
. Notwithstanding
any provision in this Agreement, the Corporation shall not be obligated under
this Agreement to make any indemnification:
(a) for
which payment is made to or on behalf of the Indemnitee under any insurance
policy, except with respect to any excess amount to which the Indemnitee is
entitled under this Agreement beyond the amount of payment under such
insurance policy;
(b) for
any liability for profits made from the purchase and sale by the Indemnitee
of
securities of the Corporation, which liability arises under Section 16(b) of
the
Securities Exchange Act of 1934, as amended, or any similar provision of any
state statutory or common law;
(c) if
a court having jurisdiction in the matter shall finally determine that such
indemnification is not lawful under any applicable statute or public
policy; or
(d) in
connection with any Proceeding (or part of any Proceeding) initiated by the
Indemnitee, or any Proceeding by the Indemnitee against the Corporation or
its
directors, officers, employees or other persons entitled to be indemnified
by
the Corporation, unless (i) the Corporation is expressly required by
law to make the indemnification, (ii) the Proceeding was authorized by
the Board of Directors of the Corporation, or (iii) the Indemnitee
initiated the Proceeding pursuant to Section 11 of this Agreement and the
Indemnitee is successful in whole or in part in the Proceeding.
8.
Advancement
of Expenses.
The Corporation shall pay the Expenses incurred
by the Indemnitee in any Proceeding in advance of the final disposition of
the
Proceeding at the written request of the Indemnitee, if the
Indemnitee:
(a) furnishes
the Corporation a written affirmation of the Indemnitee's good faith belief
that
the Indemnitee is entitled to be indemnified under this Agreement;
and
(b) furnishes
the Corporation a written undertaking to repay the advance to the extent that
it
is ultimately determined that the Indemnitee is not entitled to be indemnified
by the Corporation. Such undertaking shall be an unlimited general
obligation of the Indemnitee but need not be secured.
Advances
pursuant to this Section 8 shall be made no later than 10 days after
receipt by the Corporation of the affirmation and undertaking described in
Sections 8(a) and 8(b) above, and shall be made without regard to the
Indemnitee's ability to repay the amount advanced and without regard to the
Indemnitee's ultimate entitlement to indemnification under this
Agreement.
9.
Nonexclusivity
and Continuity of Rights
. The indemnification and
advancement of Expenses provided by this Agreement shall not be deemed exclusive
of any other rights to which the Indemnitee may be entitled under the
Constituent Documents, any other agreement, any vote of shareholders or
directors, the IBCL, or otherwise, both as to action in the Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification under this Agreement shall continue as to
the Indemnitee even though the Indemnitee may have ceased to be a director
and/or executive officer of the Corporation or a director, officer, employee
or
agent of an enterprise related to the Corporation and shall inure to the benefit
of the heirs, executors, administrators and personal representatives of the
Indemnitee.
10.
Procedure
Upon Application for Indemnification.
Any indemnification
under Sections 3, 4, 5 or 6 shall be made no later than 45 days after
receipt of the written request of the Indemnitee, unless a determination is
made
within such 45-day period by (a) the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to the applicable
Proceeding, or (b) legal counsel (who may be counsel to the Corporation
with respect to other matters) in a written opinion, that the Indemnitee is
not
entitled to indemnification under this Agreement.
11.
Enforcement.
The
Indemnitee may enforce any right to indemnification or advances provided by
this Agreement in any court of competent jurisdiction if (a) the
Corporation denies the claim for indemnification or advances, in whole or in
part, or if the Corporation does not dispose of such claim within the time
period required by this Agreement. It shall be a defense to any such
enforcement action (other than an action brought to enforce a claim for
advancement of expenses pursuant to, and in compliance with, Section 8 of
this Agreement) that the Indemnitee is not entitled to indemnification under
this Agreement. However, except as provided in Section 12 of
this Agreement, the Corporation shall have no defense to an action brought
to enforce a claim for advancement of expenses pursuant to Section 8
of this Agreement if the Indemnitee has tendered to the Corporation the
affirmation and undertaking required thereunder. The burden of
proving by clear and convincing evidence that indemnification is not appropriate
shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors or legal counsel) to have made a determination
prior to the commencement of such action that indemnification or advancement
of
Expenses is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct nor an actual determination by the
Corporation (including its Board of Directors or legal counsel) that
indemnification is improper because the Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee is not entitled to indemnification under
this Agreement or otherwise. The Indemnitee's expenses incurred in
connection with successfully establishing the Indemnitee's right to
indemnification or advances, in whole or in part, in any Proceeding shall also
be indemnified by the Corporation, whether or not an action to enforce these
rights is commenced.
The
termination of any Proceeding by judgment, order of court, settlement,
conviction or upon a plea of
nolo contendere
or its equivalent, shall
not, of itself, create a presumption that the Indemnitee is not entitled to
indemnification under Sections 3, 4 or 6 of this Agreement.
12.
Notification
and Defense of Claim.
Not later than 45 days after receipt
by the Indemnitee of notice of the commencement of any Proceeding, the
Indemnitee shall, if a claim in respect of the Proceeding is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
of the Proceeding. The omission to notify the Corporation shall not
relieve the Corporation from any liability which it may have to the Indemnitee
otherwise than under this Agreement, and shall not relieve the Corporation
from
any liability under this Agreement, unless the Corporation can demonstrate
that
its rights have been actually prejudiced by the failure to give timely
notice. With respect to any Proceeding as to which the Indemnitee
notifies the Corporation of the commencement:
(a) The
Corporation will be entitled to participate in the Proceeding at its own
expense.
(b) Except
as otherwise provided below, the Corporation may, at its option and jointly
with
any other indemnifying party similarly notified and electing to assume such
defense, assume the defense of the Proceeding with legal counsel reasonably
satisfactory to the Indemnitee. The Indemnitee shall have the right
to use separate legal counsel in the Proceeding, but the Corporation shall
not
be liable to the Indemnitee under this Agreement, including Section 8
above, for the fees and expenses of separate legal counsel incurred after notice
from the Corporation of its assumption of the defense, unless (i) the
Indemnitee reasonably concludes that there may be a conflict of interest between
the Corporation and the Indemnitee in the conduct of the defense of the
Proceeding, or (ii) the Corporation does not use legal counsel to assume
the defense of such Proceeding. The Corporation shall not be entitled
to assume the defense of any Proceeding brought by or on behalf of the
Corporation or as to which the Indemnitee shall have made the conclusion
provided for in (i) above.
(c) If
two or more persons who may be entitled to indemnification from the Corporation,
including the Indemnitee, are parties to any Proceeding, the Corporation may
require the Indemnitee to use the same legal counsel as the other
parties. The Indemnitee shall have the right to use separate legal
counsel in the Proceeding, but the Corporation shall not be liable to the
Indemnitee under this Agreement, including Section 8 above, for the fees
and expenses of separate legal counsel incurred after notice from the
Corporation of the requirement to use the same legal counsel as the other
parties, unless the Indemnitee reasonably concludes that there may be a conflict
of interest between the Indemnitee and any of the other parties required by
the
Corporation to be represented by the same legal counsel.
(d) The
Corporation shall not be liable to indemnify the Indemnitee under this Agreement
for any amounts paid in settlement of any Proceeding effected without its
written consent, which shall not be unreasonably withheld. The
Indemnitee shall permit the Corporation to settle any Proceeding that the
Corporation assumes the defense of, except that the Corporation shall not settle
any action or claim in any manner that would impose any penalty or limitation
on
the Indemnitee or be otherwise prejudicial to his or her best interests without
the Indemnitee's written consent.
13.
Partial
Indemnification
. If the Indemnitee is entitled under any
provisions of this Agreement to indemnification by the Corporation for some
or a
portion of the Expenses, judgments, fines or amounts paid in settlement,
actually and reasonably incurred by the Indemnitee in connection with such
Proceeding, but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify the Indemnitee for the portion of such Expenses,
judgments, fines or amounts paid in settlement to which the Indemnitee is
entitled.
14.
Severability.
If
this Agreement or any portion thereof shall be invalidated on any ground by
any
court of competent jurisdiction, then the remainder of this Agreement shall
continue to be valid and the Corporation shall nevertheless indemnify the
Indemnitee as to Expenses, judgments, fines and amounts paid in settlement,
with
respect to any Proceeding, to the fullest extent permitted by any
applicable portion of this Agreement that shall not have been invalidated or
by
any other applicable law.
15.
Subrogation.
In
the event of payment under this Agreement, the Corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the
Indemnitee. The Indemnitee shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
the
Corporation effectively to bring suit to enforce such rights.
16.
Notices.
All
notices, requests, demands and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (a) upon
delivering by hand to the party to whom the notice or other communication shall
have been directed, or (b) on the third business day after the date on
which it is mailed by certified or registered mail with postage prepaid,
addressed as follows:
(i) If
to the Indemnitee, to the address indicated on the signature page of this
Agreement.
(ii) If
to the Corporation, to
The
Steak
n Shake Company
36
South
Pennsylvania Street, Suite 500
Indianapolis,
IN 46204
Attention: General
Counsel
or
to any
other address as either party may designate to the other in
writing.
17.
Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
constitute the original.
18.
Applicable
Law.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Indiana without regard to
the
principles of conflict of laws.
19.
Successors
and Assigns.
This Agreement shall be binding upon the
Corporation and its successors and assigns.
IN
WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly
executed and signed as of the day and year first above written.
THE
STEAK
N SHAKE
COMPANY:
By
/s/ Alan B.
Gilman
Chairman,
Interim President and Chief Executive
Officer
Title
INDEMNITEE:
By:
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Title
|
/s/
Alan B. Gilman
|
Alan
B. Gilman
|
Chairman,
Interim President and Chief Executive Officer
|
/s/
Jeffrey A. Blade
|
Jeffrey
A. Blade
|
Executive
Vice President, Chief Financial and Administrative
Officer
|
/s/
Gary T. Reinwald
|
Gary
T. Reinwald
|
Executive
Vice President, Development
|
/s/
Omar Janjua
|
Omar
Janjua
|
Executive
Vice President, Operations
|
/s/
Steven Schiller
|
Steven
Schiller
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Senior
Vice President, Chief Marketing Officer
|
/s/
Thomas Murrill
|
Thomas
Murrill
|
Senior
Vice President, Human Resources
|
/s/
Duane Geiger
|
Duane
Geiger
|
Vice
President, Controller
|
/s/
Michael Vance
|
Michael
Vance
|
Vice
President, Strategic Planning and Chief Information
Officer
|
/s/
David C. Milne
|
David
C. Milne
|
Vice
President, General Counsel and Corporate Secretary
|
|
|
|
/s/
Geoff Ballotti
|
Geoff
Ballotti
|
Director
|
/s/
Wayne Kelley
|
Wayne
Kelley
|
Director
|
/s/
Charles Lanham
|
Charles
Lanham
|
Director
|
/s/
Ruth Person
|
Ruth
Person
|
Director
|
/s/
John W. Ryan
|
John
W. Ryan
|
Director
|
/s/
J. Fred Risk
|
J.
Fred Risk
|
Director
|
/s/
Steven M. Schmidt
|
Steven
M. Schmidt
|
Director
|
/s/
Edward Wilhelm
|
Edward
Wilhelm
|
Director
|
/s/
James Williamson, Jr.
|
James
Williamson, Jr.
|
Director
|
4