STEAK & SHAKE CO (Form: 10-K, Received: 12/10/2007 17:06:56)

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	)

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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.

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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.

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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.

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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)	September 28, 2005
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

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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

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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.

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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.

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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.

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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.

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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

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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

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ITEM 9B. OTHER INFORMATION

I.	Amendment of By-Laws

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

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PART III.

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.

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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).

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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).

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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.

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SIGNATURES

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)
/s/ Alan B. Gilman	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.

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THE STEAK N SHAKE COMPANY AND SUBSIDIARIES

Index to Exhibits

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.

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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.)

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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.

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:

Period

Ratio

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:

Period

Ratio

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

By:

/s/ David C. Milne

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

STATE OF INDIANA

SS:

COUNTY OF Marion

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.

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

STATE OF INDIANA

SS:

COUNTY OF Marion

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.

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

STATE OF INDIANA

SS:

COUNTY OF Marion

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

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)

Title of each class	Name of each exchange on which registered
Common Stock, stated value $.50 per share	New York Stock Exchange

		Page
Part I

Item 1	Business		3

Item 1A	Risk Factors		10

Item 1B	Unresolved Staff Comments		12

Item 2	Properties		13

Item 3	Legal Proceedings		13

Item 4	Submission of Matters to a Vote of Security Holders		13

Part II

Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		14

Item 6	Selected Financial Data		15

Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations		16

Item 7A	Quantitative and Qualitative Disclosures about Market Risk		23

Item 8	Financial Statements and Supplementary Data		24

Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		43

Item 9A	Controls and Procedures		43

Item 9B	Other Information		46

Part III

Item 10	Directors, Executive Officers and Corporate Governance		47

Item 11	Executive Compensation		47

Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		47

Item 13	Certain Relationships and Related Transactions		47

Item 14	Principal Accountant Fees and Services		47

Part IV


Item 15	Exhibits and Financial Statement Schedules		48

Signatures			51

Index to Exhibits			52

	Number of Leases Expiring
Calendar Year	SNS	SIC
2008 - 2012	1	—
2013 - 2017	3	—
2018 - 2022	17	1
2023 - 2027	11	1
2028 - 2032	23	—
Beyond	211	2
	266	4

	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

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

	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

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

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

	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

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.

(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

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

By:		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	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