BIGLARI HOLDINGS INC. (Form: 8-K, Received: 07/02/2013 07:59:34)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 1, 2013

BIGLARI HOLDINGS INC.
(Exact name of registrant as specified in its charter)

INDIANA	0-8445	37-0684070
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

17802 IH 10 West, Suite 400 San Antonio, Texas		78257
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (210) 344-3400

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On July 1, 2013, Biglari Holdings Inc. entered into the following agreements with Sardar Biglari, its Chairman and Chief Executive Officer: (i) a Stock Purchase Agreement, (ii) a Shared Services Agreement with Biglari Capital Corp., general partner of The Lion Fund, L.P. and the newly-formed The Lion Fund II, L.P., and (iii) a First Amendment to the Amended and Restated Incentive Bonus Agreement, dated September 28, 2010, with Mr. Biglari. The transactions contemplated thereby were unanimously approved by the independent Governance, Compensation and Nominating Committee of the Board of Directors of the Company (the “Committee”), which retained separate counsel, tax/accounting advisors, an independent compensation consultant, and a financial advisor to assist the Committee in the structuring, evaluation, and negotiation of such transactions.

Taken together, the agreements provide for the following transactions:

The contribution of investments held by BH to the Lion Fund and the Lion Fund II. In return, BH received limited partner interests in each of these investment partnerships.

Biglari Capital’s distribution of substantially all of its partnership interests in the Lion Fund (including its adjusted capital balance) to BH. As a result, Biglari Capital maintained solely a general partner interest in each of the Lion Fund and the Lion Fund II.

The sale of Biglari Capital by BH to Mr. Biglari for a purchase price of $1,700,000.

The execution of the Shared Services Agreement pursuant to which BH will provide certain services to Biglari Capital in exchange for an increase in BH’s and its subsidiaries’ hurdle rate above that of other limited partners (6% vs. 5%) with respect to BH’s and its subsidiaries’ limited partner interests in the Lion Fund and the Lion Fund II. The hurdle rate is the threshold annualized return for limited partners of each of the Lion Fund and the Lion Fund II above which Biglari Capital, as general partner of each, is entitled to receive an incentive reallocation.

The modification of the Incentive Bonus Agreement between BH and Mr. Biglari to give effect to the transactions, inter alia , by providing that Mr. Biglari’s incentive compensation will thereafter be calculated without reference to any investments by BH and its subsidiaries in investment partnerships (including the Lion Fund and the Lion Fund II), of which Biglari Capital or Mr. Biglari is the general partner.

The transactions were entered into by BH to, among other things, (a) reduce regulatory burdens related to investments, (b) improve cash management, (c) foster an enhanced understanding of BH and mitigate conflicts of interest through the separation and clear demarcation of BH from the Lion Fund, and (d) simplify the Incentive Bonus Agreement. As a result of these transactions, investments are now generally conducted through investment partnerships managed by Mr. Biglari.

Stock Purchase Agreement

Pursuant to the Stock Purchase Agreement, BH sold all the shares of Biglari Capital to Mr. Biglari for a purchase price of $1,700,000 in cash (the “Biglari Capital Transaction”). The Stock Purchase Agreement contains customary representations, warranties and indemnities.

Prior to the execution and delivery of the Stock Purchase Agreement, Biglari Capital distributed to the Company substantially all of Biglari Capital’s partnership interests in the Lion Fund (including, without limitation, Biglari Capital’s adjusted capital balance in its capacity as general partner of the Lion Fund, which totaled approximately $5.8 million). Biglari Capital thus retained solely a general partner interest in each of the Lion Fund and the Lion Fund II at the time of the Biglari Capital Transaction. In addition, BH contributed securities owned by it to the Lion Fund and the Lion Fund II in exchange for limited partner interests in each of these investment partnerships. BH will maintain an interest in the contributed securities through its limited partner interests in the Lion Fund and the Lion Fund II, but without the associated costs under the Incentive Bonus Agreement with Mr. Biglari, as explained further below. The contribution of securities to the Lion Fund and the Lion Fund II was enacted in order to achieve a clear delineation on a forward-going basis between the roles of BH – which will own companies in their entirety – and the Lion Fund and the Lion Fund II – which will own companies in part, i.e. , through their investments in securities.

The foregoing summary of the Stock Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Stock Purchase Agreement, which is filed as Exhibit 10.1 for this Current Report on Form 8-K and incorporated herein by reference.

Mr. Biglari is the Chairman and Chief Executive Officer of both the Company and of Biglari Capital. Philip L. Cooley, Vice Chairman of the Board of the Company, is an advisory director of Biglari Capital. Mr. Biglari, together with his affiliates, Dr. Cooley and Kenneth R. Cooper, a director of the Company and Chairman of the Committee, have made investments in the Lion Fund, which are not subject to special profits, interest allocations, or incentive allocations. However, Mr. Biglari, as a limited partner in the Lion Fund, does not pay an incentive allocation fee. The Lion Fund owns 203,357 shares of the Company’s common stock as of the date hereof.

Shared Services Agreement

In connection with the Biglari Capital Transaction, BH and Biglari Capital entered into the Shared Services Agreement pursuant to which BH will provide certain services to Biglari Capital, including use of space at the Company’s corporate headquarters in San Antonio, in exchange for a 6% hurdle rate for BH and its subsidiaries (as compared to a 5% hurdle rate for all other limited partners) in order to determine the incentive reallocation to Biglari Capital, as general partner of the Lion Fund and the Lion Fund II, under their respective partnership agreements. The incentive reallocation to Biglari Capital is equal to 25% of the net profits allocated to the limited partners in excess of their applicable hurdle rate. The Shared Services Agreement runs for an initial five-year term, and automatically renews for successive five-year periods, unless terminated by either party effective at the end of the initial or renewed term, as applicable. The term of the Shared Services Agreement coincides with the lock-up period for the Company’s investments in the Lion Fund and the Lion Fund II under their respective partnership agreements.

The foregoing summary of the Shared Services Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Shared Services Agreement, which is filed as Exhibit 10.2 for this Current Report on Form 8-K and incorporated herein by reference.

Incentive Agreement Amendment

Also in connection with the Biglari Capital Transaction, BH and Mr. Biglari entered into the Incentive Agreement Amendment, which amends the Amended and Restated Incentive Bonus Agreement with Mr. Biglari to reflect and give effect to the Biglari Capital Transaction and to more closely tie Mr. Biglari’s incentive compensation to the Company’s operating earnings, while excluding unrealized gains and earnings on investments held by outside investment partnerships from the calculation of the incentive bonus. The Incentive Agreement Amendment makes assertions as follows:

With respect to the Company’s fiscal year ending September 25, 2013 (“fiscal 2013”) only, provides for Mr. Biglari’s incentive compensation to be calculated by reference to the periods (i) from the beginning of fiscal 2013 to the closing of the Biglari Capital Transaction and (ii) from the closing of the Biglari Capital Transaction to the end of fiscal 2013. Any decrease in adjusted book value attributable to a decline in operating earnings during this latter period will be offset against adjusted book value for the former period in determining Mr. Biglari’s incentive compensation.

Excludes from the calculation of BH’s adjusted book value, and therefore from the calculation of Mr. Biglari’s incentive compensation, commencing with the period after the closing of the Biglari Capital Transaction, any realized or unrealized gains or losses, earnings and all other amounts attributable to any investments by BH and its subsidiaries in “Outside Investment Partnerships,” defined as investment partnerships (or the equivalent) in which BH or a subsidiary is a limited partner (or the equivalent) and Mr. Biglari or his affiliate (other than BH or a subsidiary) is the general partner (or the equivalent). As a result of the Biglari Capital Transaction, the Lion Fund and the Lion Fund II now constitute Outside Investment Partnerships and all amounts attributable to their investments in securities (including the securities contributed by BH) will be excluded from the calculation of Mr. Biglari’s incentive compensation.

Provides for the “high water mark” in the Incentive Bonus Agreement to be adjusted to give effect to the Biglari Capital Transaction, commencing with the period after the closing of the Biglari Capital Transaction. The calculation of the high water mark would thus exclude (a) BH’s and its subsidiaries’ investments in Outside Investment Partnerships, (b) gains/losses (realized or unrealized) and earnings on the securities contributed to the Outside Investment Partnerships, prior to their date of contribution, as well as the aggregate cost to acquire such securities, and (c) any other items on BH’s consolidated balance sheet related to consolidated affiliated partnerships.

The foregoing summary of the Incentive Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Incentive Agreement Amendment, which is filed as Exhibit 10.3 for this Current Report on Form 8-K and incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The information contained in Item 1.01 regarding the Stock Purchase Agreement and the Biglari Capital Transaction is incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information contained in Item 1.01 regarding the Incentive Agreement Amendment is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(b) and (d) Pro Forma Financial Information; Exhibits

Exhibit No.		Description
10.1		Stock Purchase Agreement, dated as of July 1, 2013, by and between Biglari Holdings Inc. and Sardar Biglari
10.2		Shared Services Agreement, dated as of July 1, 2013, by and between Biglari Holdings Inc. and Biglari Capital Corp.
10.3		First Amendment, dated as of July 1, 2013, to the Amended and Restated Incentive Bonus Agreement, dated as of September 28, 2010, by and between Biglari Holdings Inc. and Sardar Biglari
99.1		Unaudited Pro Forma Condensed Consolidated Financial Information

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

July 2, 2013	BIGLARI HOLDINGS INC.




	By:	/s/ Bruce Lewis
		Name:	Bruce Lewis
		Title:	Controller

Exhibit Index

Exhibit No.		Description
10.1		Stock Purchase Agreement, dated as of July 1, 2013, by and between Biglari Holdings Inc. and Sardar Biglari
10.2		Shared Services Agreement, dated as of July 1, 2013, by and between Biglari Holdings Inc. and Biglari Capital Corp.
10.3		First Amendment, dated as of July 1, 2013, to the Amended and Restated Incentive Bonus Agreement, dated as of September 28, 2010, by and between Biglari Holdings Inc. and Sardar Biglari
99.1		Unaudited Pro Forma Condensed Consolidated Financial Information

STOCK PURCHASE AGREEMENT

dated July 1, 2013

between

BIGLARI HOLDINGS INC.

and

SARDAR BIGLARI

Table of Contents

		Page


ARTICLE I SALE OF STOCK		2

Section 1.1	Sale of Shares	2
Section 1.2	Purchase Price	2
Section 1.3	Tax Elections	2

ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER		2

Section 2.1	Organization, Existence and Good Standing	2
Section 2.2	Capitalization and Ownership of Shares	3
Section 2.3	Authorization	3
Section 2.4	Approvals and Consents; No Breach	3
Section 2.5	Financial Statements	4
Section 2.6	Liabilities	4
Section 2.7	Absence of Certain Changes	5
Section 2.8	Taxes and Tax Returns	5
Section 2.9	Permits	6
Section 2.10	Legal Proceedings, Claims, Investigations	6
Section 2.11	Material Contracts	6
Section 2.12	Employee Benefit Plans	7
Section 2.13	Title to Property	8
Section 2.14	Intellectual Property	8
Section 2.15	Insurance	8
Section 2.16	Environmental Matters	8
Section 2.17	Illegal Payments	8
Section 2.18	Brokers	8

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER		9

Section 3.1	Authorization	9
Section 3.2	Approvals and Consents; No Breach	9
Section 3.3	Litigation	9
Section 3.4	Brokers	9
Section 3.5	Investment Intent	9
Section 3.6	No Knowledge of Inaccuracies	9
ARTICLE IV INDEMNIFICATION		10

Section 4.1	Survival	10
Section 4.2	Indemnification.	10
Section 4.3	Indemnification Procedures	11
Section 4.4	Subrogation	12
Section 4.5	Exclusive Remedy	12
Section 4.6	Other Limitations	12

Table of Contents

(continued)


ARTICLE V GENERAL PROVISIONS		13

Section 5.1	Entire Agreement	13
Section 5.2	Waiver	13
Section 5.3	Governing Law and Arbitration	13
Section 5.4	Binding Effect; Assignment	13
Section 5.5	Expenses	13
Section 5.6	Headings	13
Section 5.7	Counterparts.	13
Section 5.8	Notice	13

EXHIBITS

Exhibit A Defined Terms

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT (the “ Agreement ”), dated this 1st day of July, 2013, by and between Biglari Holdings Inc., an Indiana corporation (“ Seller ”), and Sardar Biglari (“ Purchaser ”).

WITNESSETH :

WHEREAS, on April 30, 2010, Seller purchased from Purchaser 1,000 shares of common stock, no par value (the “ Shares ”), of Biglari Capital Corp., a Texas corporation (“ Biglari Capital ”), for a purchase price equal to (i) $1.00 plus (ii) the Adjusted Capital (as such term is defined in the Amended and Restated Agreement of Limited Partnership, dated as of July 1, 2002, of Lion Fund (the “Partnership Agreement” )) balance of Biglari Capital, in its capacity as general partner of Lion Fund (as defined below), as of April 30, 2010, plus (iii) the total Incentive Reallocation (as defined in, and calculated in accordance with Section 5.02 of, the Partnership Agreement) for the period from January 1, 2010 through the close of business on the April 30, 2010;

WHEREAS, since such date, Seller has been, and currently is, the sole shareholder of Biglari Capital;

WHEREAS, Biglari Capital is the general partner of The Lion Fund, L.P., a Delaware limited partnership (“ Lion Fund ” and together with Biglari Capital, the “ Companies ”);

WHEREAS, Seller now desires to sell to Purchaser, and Purchaser now desires to purchase from Seller, the Shares, all upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, on June 1, 2013 (the “ Distribution Date ”), Biglari Capital distributed to Seller substantially all of its partnership interests in Lion Fund (including, without limitation, its Adjusted Capital balance in its capacity as general partner of Lion Fund, as of the close of business on the day prior to the Distribution Date) and retained solely a $100,000 general partner interest in Lion Fund; and

WHEREAS, the Governance, Compensation and Nominating Committee of Seller, which is comprised solely of all of the independent directors of Seller, has determined that this Agreement and the transactions contemplated hereby are advisable and in the best interests of Seller and its shareholders and has unanimously approved this Agreement and such transactions.

NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

SALE OF STOCK

Section 1.1 Sale of Shares . Upon the terms and conditions hereinafter set forth, Seller hereby sells, and Purchaser hereby purchases, the Shares. Seller is delivering to Purchaser a certificate or certificates representing the Shares, duly endorsed in blank for transfer or accompanied by a separate stock power duly executed in blank for transfer. Seller shall execute and deliver any such other certificates, instruments or documents, and to do and perform such other and further acts as shall be deemed necessary or desirable in order to effect the transfer of the Shares pursuant to this Agreement.

Section 1.2 Purchase Price . The purchase price for the Shares is $1,700,000. The purchase price is being paid in cash concurrently with the execution and delivery of this Agreement.

Section 1.3 Tax Elections . At the request of Purchaser, the parties shall make, or cause to be made, an election under Section 338(h)(10) and/or Section 336(e) of the Code (and any corresponding election under state, local, and foreign tax law) with respect to the transactions contemplated hereby and shall, in the event any such election is made and to the extent required, mutually determine the allocation of the purchase price paid pursuant to Section 1.2 to and among Biglari Capital’s and the Lion Fund’s assets. In the event of any such election, no party hereto shall file any return or take a position with any taxing authority or in connection with any tax-related litigation that is inconsistent with this Section 1.3, unless required to do so pursuant to a determination within the meaning of Section 1313(a) of the Code.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Purchaser as follows:

Section 2.1 Organization, Existence and Good Standing .

(a) Biglari Capital is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Texas. Seller has heretofore provided Purchaser with true and complete copies of Biglari Capital’s Articles of Incorporation (certified by the Secretary of State of the State of Texas) and By-laws, each as amended through the date hereof. Biglari Capital is not in default under or in violation of any provisions of its Articles of Incorporation or By-laws. Biglari Capital has all corporate power and authority to own, operate and lease its properties and to carry on its business as the same is now being conducted. Biglari Capital is duly qualified or licensed to do business and is in good standing as a foreign corporation in those jurisdictions in which the conduct of its business or the ownership or leasing of its properties requires it to be so qualified or licensed, except for such jurisdictions where the failure to be so qualified or licensed would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Biglari Capital.

(b) Lion Fund is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware. Seller has heretofore provided Purchaser with true and complete copies of Lion Fund’s Certificate of Limited Partnership (certified by the Secretary of State of the State of Delaware) and Partnership Agreement as in effect on the date hereof. Lion Fund is not in default under or in violation of any provisions of its Certificate of Limited Partnership or Partnership Agreement. Lion Fund has all partnership power and authority to own, operate and lease its properties and to carry on its business as the same is now being conducted. Lion Fund is duly qualified or licensed to do business and is in good standing as a foreign limited partnership in those jurisdictions in which the conduct of its business or the ownership or leasing of its properties requires it to be so qualified or licensed, except for such jurisdictions where the failure to be so qualified or licensed would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Lion Fund.

Section 2.2 Capitalization and Ownership of Shares . The authorized capital stock of Biglari Capital consists of 100,000 shares of common stock, no par value, of which 1,000 shares are issued and outstanding. All of Biglari Capital’s issued and outstanding capital stock is duly authorized, validly issued, fully-paid and non-assessable. There is no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, fixed or contingent, that directly or indirectly (a) calls for the issuance, sale, pledge or other disposition by Biglari Capital of any of its capital stock or any securities convertible into, or other rights to acquire, any such capital stock, (b) relates to the voting or control of such capital stock or rights or (c) obligates Biglari Capital to grant, offer or enter into any of the foregoing. There are no actions, suits, proceedings or claims pending or, to the Knowledge of Seller, threatened with respect to or in any manner affecting the ownership by Seller of the Shares or the sale of the Shares by Seller to Purchaser. The Shares are solely owned of record and beneficially by Seller and are free and clear of all Liens and subject to no options, agreements or restrictions with respect to transferability.

Section 2.3 Authorization . Seller has all requisite power, legal capacity and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and the fact that equitable remedies or relief (including without limitation, the remedy of specific performance) are subject to the discretion of the court from which such relief may be sought.

Section 2.4 Approvals and Consents; No Breach .

(a) No action, approval, consent or authorization, including, but not limited to, any action, approval, consent or authorization by any governmental or quasi-governmental agency, commission, board, bureau, or instrumentality (each, a “ Governmental Authority ”) is necessary or required as to Seller in order to constitute this Agreement as a valid, binding and enforceable obligation of Seller in accordance with its terms, except for those that have been taken or obtained or will be taken or obtained on a timely basis after the date hereof.

(b) Neither the execution and delivery of this Agreement, nor the consummation by Seller of the transactions contemplated hereby, nor compliance by Seller with any of the provisions hereof, will violate or cause a default under any statute (domestic or foreign), judgment, order, writ, decree, rule or regulation of any Governmental Authority applicable to Seller or either of the Companies or any of their respective assets or properties; breach or conflict with any of the terms, provisions or conditions of the Articles of Incorporation or By-Laws of Biglari Capital or the Certificate of Limited Partnership or Partnership Agreement of Lion Fund; or violate, conflict with or breach any agreement, contract, mortgage, instrument, indenture or license to which Seller or either of the Companies is a party or by which Seller or either of the Companies is or may be bound, or constitute a default (in and of itself or with the giving of notice, passage of time or both) thereunder, or result in the creation or imposition of any encumbrance upon, or give to any other party or parties any claim, interest or right, including rights of termination or cancellation in, or with respect to, the Shares or any of the assets or properties of either of the Companies.

Section 2.5 Financial Statements .

(a) Seller has previously provided to Purchaser the unaudited balance sheet of Biglari Capital at December 31, 2012 and the related unaudited profit and loss statement for the fiscal year then ended (collectively, the “ Biglari Capital Financial Statements ”). The balance sheet included in the Biglari Capital Financial Statements, in all material respects, fairly presents the financial position of Biglari Capital as of its date, and the profit and loss statement included in the Biglari Capital Financial Statements fairly presents the results of operations of Biglari Capital for the period presented therein, all in conformity with GAAP, applied on a consistent basis during the period involved, except as otherwise noted therein. The Biglari Capital Financial Statements, including in all cases the notes thereto, (x) are true, correct and complete, and (y) are in accordance with the books and records of Biglari Capital.

(b) Seller has previously provided to Purchaser (i) the Statement of Assets and Liabilities of Lion Fund at December 31, 2012 and the related Condensed Schedule of Investments in Securities at December 31, 2012, Statement of Operations for the Year Ended December 31, 2012, Statement of Changes in Partners’ Capital for the Year Ended December 31, 2012 and Statement of Cash Flows For the Year Ended December 31, 2012, together with the report of Deloitte & Touche LLP thereon, and (ii) the Statement of Assets and Liabilities of Lion Fund at March 31, 2013 (collectively, the “ Lion Fund Financial Statements ”). Each statement of assets and liabilities included in the Lion Fund Financial Statements, in all material respects, fairly presents the financial position of Lion Fund as of its date, and the other related statements included in the Lion Fund Financial Statements fairly present the information contained therein of Lion Fund for the periods presented therein, all in conformity with GAAP, applied on a consistent basis during the periods involved, except as otherwise noted therein. The Lion Fund Financial Statements, including in all cases the notes thereto, (x) are true, correct and complete, and (y) are in accordance with the books and records of Lion Fund.

Section 2.6 Liabilities .

(a) Biglari Capital has no liability or obligation of any nature (whether liquidated, unliquidated, accrued, absolute, contingent or otherwise and whether due or to become due) except:

(i) those set forth or reflected in the Biglari Capital Financial Statements that have not been paid or discharged since the date thereof; and

(ii) current liabilities arising in the ordinary and usual course of business subsequent to December 31, 2012 that are accurately reflected on Biglari Capital’s books and records in a manner consistent with past practice.

(b) Lion Fund has no liability or obligation of any nature (whether liquidated, unliquidated, accrued, absolute, contingent or otherwise and whether due or to become due) except:

(i) those set forth or reflected in the Lion Fund Financial Statements that have not been paid or discharged since the date thereof; and

(ii) current liabilities arising in the ordinary and usual course of business subsequent to March 31, 2013 that are accurately reflected on Lion Fund’s books and records in a manner consistent with past practice.

Section 2.7 Absence of Certain Changes . Except as contemplated by this Agreement, since December 31, 2012, (a) the Companies have conducted their businesses in the ordinary course and consistent with past practices; and (b) there has not been:

(i) any change in their business, operations, prospects or financial position, except such changes that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on either of the Companies considered separately;

(ii) any change in the Companies’ financial or accounting practices or policies, except as required by law;

(iii) any agreement by either of the Companies (in writing or otherwise) to take any action that, if taken, would render any of the representations set forth in this Section 2.7 untrue;

(iv) other than in the usual and ordinary course of business, any increase in amounts payable by either of the Companies to or for the benefit of, or committed to be paid by either of the Companies to or for the benefit of, any officer, consultant, agent or employee of either of the Companies, in any capacity, or in any benefits granted under any bonus, profit sharing, pension, retirement, deferred compensation, insurance, or other direct or indirect benefit plan with respect to any such person; or

(v) any transaction entered into or carried out other than in the ordinary and usual course of the business of the Companies including, without limitation, any transaction resulting in the incurrence of liabilities or obligations.

Section 2.8 Taxes and Tax Returns .

(a) The Companies have timely filed all material Tax Returns required to be filed by either of them since April 30, 2010 and have paid all Taxes of any kind shown to be due on such tax returns or otherwise required to be paid.

(b) Since April 30, 2010, the Companies have complied in all material respects with all applicable laws relating to information reporting with respect to payments made to third parties and the withholding of and payment of withheld taxes and have timely withheld from employee wages and other payments and paid over to the proper governmental authority all amounts required to be so withheld and paid over for all periods under all applicable laws.

Section 2.9 Permits . With such exceptions as are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on the Companies as a whole, (a) all Permits that are presently required for the operation of either of the Companies’ businesses, as currently conducted, have been duly obtained and are in full force and effect; and (b) there is no Action pending or, to the Knowledge of Seller, overtly threatened against either of the Companies to terminate the rights of either of the Companies under any such Permits.

Section 2.10 Legal Proceedings, Claims, Investigations . With such exceptions as are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on the Companies as a whole, (a) there is no Action pending, or to the Knowledge of Seller, threatened against (i) either of the Companies or their respective assets and properties, or (ii) any director, officer or employee thereof or Seller relating to either of the Companies; (b) neither of the Companies is in violation of or default under any laws, ordinances, regulations, judgments, injunctions, orders or decrees (including without limitation, any immigration laws or regulations) of any court, governmental department, commission, agency, instrumentality or arbitrator applicable to it; and (c) neither of the Companies is currently subject to any judgment, order, injunction or decree of or settlement enforceable by any court, arbitral authority, administrative agency or governmental authority.

Section 2.11 Material Contracts .

(a) The following contracts of either of the Companies as of the date of this Agreement are referred to as the “Material Contracts” :

(i) all management and employment contracts and contracts with independent contractors or consultants (or similar arrangements) that are not cancelable without penalty or further payment and without more than 90 days’ notice;

(ii) all contracts that expressly limit the ability of either of the Companies to compete in any line of business or with any Person in any geographic area;

(iii) any contract pursuant to which either of the Companies makes or receives payments in an amount in excess of $25,000 per year;

(iv) contracts to which either of the Companies is a party relating to loans or advances to, or investments in, any other Person;

(v) credit agreements, notes, indentures, security agreements, pledges, guarantees of or agreements to assume any debt or obligation of others, or similar documents relating to indebtedness for borrowed money (including interest rate or currency swaps, hedges or straddles or similar transactions), to which either of the Companies is a party;

(vi) severance or termination contracts or any other agreement or employee benefit plan that contain any severance or termination pay liability or obligation for employees of either of the Companies;

(vii) any contract pursuant to which either of the Companies has a power of attorney outstanding or any obligation or liability (whether absolute, accrued, contingent or otherwise) as surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the obligation of any person, corporation, partnership, joint venture, association, organization or other entity;

(viii) any contract that has or would be expected to have a Material Adverse Effect on the Companies or the conduct of their businesses;

(ix) any contract between the Companies, or either of them, and Seller or any affiliate of Seller (other than Purchaser and his affiliates);

(x) any contract that is otherwise material to the Companies and not previously disclosed pursuant to this Section 2.11.

(b) Neither the Companies nor, to the Knowledge of Seller, any other party to any Material Contract is in breach thereof or default thereunder.

(c) Each Material Contract is the legal, valid and binding obligation of the Company party thereto and, to the Knowledge of Seller, each other party thereto, enforceable against them in accordance with their respective terms, subject to applicable laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar legal requirement relating to or affecting creditors’ rights generally and except as such enforceability is subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

Section 2.12 Employee Benefit Plans .

(a) All material employee benefit plans, arrangements and policies maintained by Biglari Capital for employees who perform services solely for Biglari Capital (the “ Employees ”) are collectively referred to as the “ Benefit Plans .”

(b) With such exceptions as are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on Biglari Capital, since April 30, 2010: (i) each Benefit Plan has been established and administered substantially in accordance with its terms and in compliance with all applicable laws; and (ii) no audit or investigation by any Governmental Authority is pending, or to the Knowledge of Seller, threatened with respect to any Benefit Plan.

Section 2.13 Title to Property .

(a) Biglari Capital does not own or lease any real property.

(b) The Companies have good title to, or valid leasehold interests in, all material properties and assets owned or leased by the Companies, except for those that are no longer used or useful in the conduct of their businesses, in each case free of all Liens.

Section 2.14 Intellectual Property . To the Knowledge of Seller, Seller owns or has the right to use all Intellectual Property used in the conduct of Biglari Capital’s business without any conflict with the rights of others, in each case with such exceptions as are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on Biglari Capital and subject to limitations contained in any applicable license agreement; provided, however, that no representation or warranty is made as to the extent to which ownership of or right to use any particular Intellectual Property includes the exclusive right to use such Intellectual Property.

Section 2.15 Insurance . Biglari Capital is not in default with respect to any provision contained in any insurance policy, and to the Knowledge of Seller has not failed to give any notice or present any claim under any insurance policy in due and timely fashion. Each such policy is in full force and effect. All payments with respect to such policies are current and Biglari Capital has not received any notice threatening a suspension, revocation, modification or cancellation of any such policy.

Section 2.16 Environmental Matters . Biglari Capital is not the subject of, or, to the Knowledge of Seller, being threatened to be the subject of (i) any enforcement proceeding, or (ii) any investigation, brought in either case under any Environmental Laws, or (iii) any third party claim relating to environmental conditions on or off the properties of Biglari Capital. Biglari Capital is not aware and has not been notified of any conditions on or off the properties of Biglari Capital that will give rise to any liabilities, known or unknown, under any Environmental Laws, or as the result of any claim of any third party. For the purposes of this Section 2.17, an investigation shall include, but is not limited to, any written notice received by Biglari Capital that relates to the onsite or offsite disposal, release, discharge or spill of any Hazardous Material.

Section 2.17 Illegal Payments . Since April 30, 2010, Biglari Capital has not, directly or indirectly, paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent, government official or other party, in the United States of America or any other country, that is in any manner related to the business or operations of Biglari Capital, which Biglari Capital knows or has reason to believe to have been illegal under any federal, state or local laws or the laws of any other country having jurisdiction.

Section 2.18 Brokers . All negotiations relative to the Agreement and the transactions contemplated hereby have been carried on by or on behalf of Seller in such a manner as not to give rise to any claim against Purchaser or the Shares for a finder’s fee, brokerage commission, advisory fee or other similar payment.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows:

Section 3.1 Authorization . Purchaser has all requisite power, legal capacity and authority to enter into this Agreement and to perform his obligations thereunder. This Agreement constitutes the legal, valid and binding obligation of Purchaser, enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and the fact that equitable remedies or relief (including without limitation, the remedy of specific performance) are subject to the discretion of the court form which such relief may be sought.

Section 3.2 Approvals and Consents; No Breach . (a) No action, approval, consent or authorization, including, but not limited to, any action, approval, consent or authorization by any Governmental Authority is necessary or required as to Purchaser in order to constitute this Agreement as a valid, binding and enforceable obligation of Purchaser in accordance with its terms, except for those that have been taken or obtained or will be taken or obtained on a timely basis after the date hereof.

(b) Neither the execution and delivery of this Agreement, nor the consummation by Purchaser of the transactions contemplated hereby, nor compliance by Purchaser with any of the provisions hereof, will violate or cause a default under any statute (domestic or foreign), judgment, order, writ, decree, rule or regulation of any Governmental Authority applicable to Purchaser or any of his material properties; or violate, conflict with or breach any agreement, contract, mortgage, instrument, indenture or license to which Purchaser is a party or by which Purchaser is or may be bound, or constitute a default (in and of itself or with the giving of notice, passage of time or both) thereunder.

Section 3.3 Litigation . There is no Action pending or, to the Knowledge of Purchaser, threatened against Purchaser, at law or in equity, before any Governmental Authority, that would have an adverse effect on Purchaser’s ability to perform any of its obligations under this Agreement or upon the consummation of the transactions contemplated hereby.

Section 3.4 Brokers . All negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by or on behalf of Purchaser in such a manner as not to give rise to any claim against Seller for a finder’s fee, brokerage commission, advisory fee or other similar payment.

Section 3.5 Investment Intent .

(a) The Shares are being acquired for Purchaser’s own account, and not for the account of any other Person, and not with a view to, or for sale in connection with, any distribution or resale to others within the meaning of Section 2(11) or Rule 502(d) promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”). The sale of the Shares is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) thereof. Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

(b) Seller has provided to Purchaser all documents and information that Purchaser has requested relating to Biglari Capital. Purchaser has not relied on Seller or any of its affiliates or representatives for any tax or legal advice in connection with the purchase of the Shares.

Section 3.6 No Knowledge of Inaccuracies . As of the date hereof, Purchaser does not have any Knowledge that any of Seller’s representations and warranties set forth in Article II of this Agreement are inaccurate.

ARTICLE IV

INDEMNIFICATION

Section 4.1 Survival . The representations and warranties contained in this Agreement and the indemnity obligations for the inaccuracy or breach of such representations and warranties contained in Sections 4.2(a) and 4.2(b) shall terminate on, and no claim or Action with respect thereto may be brought after, the day that immediately precedes the first anniversary of this Agreement, except that such obligation of indemnity provided herein with respect to the representations and warranties contained in Sections 2.8 and 2.12 shall not terminate until the expiration of the statute of limitations applicable to the items contained therein. If, prior to the termination of any obligation to indemnify as provided for herein, written notice of a claimed inaccuracy or breach is given by the party seeking indemnification including in detail the basis therefor (the “ Indemnified Party ”) to the party from whom indemnification is sought (the “ Indemnifying Party ”) or an Action based upon a claimed inaccuracy or breach is commenced against the Indemnified Party, the Indemnified Party shall not be precluded from pursuing such claimed breach or Action, or from recovering from the Indemnifying Party (whether through the courts or otherwise) on the claim or Action, by reason of the termination otherwise provided for above.

Section 4.2 Indemnification .

(a) Seller shall indemnify and hold harmless Purchaser from, and reimburse Purchaser for, any Losses as a result of the inaccuracy or breach of any representation or warranty of Seller contained in Article II of this Agreement. Except as provided in the next succeeding sentence, Seller shall not be responsible for any Losses under Section 4.2(a) until the cumulative aggregate amount of such Losses exceeds $100,000 (the “ Basket Amount ”), in which case Seller shall then be liable only for such Losses in excess of the Basket Amount. Notwithstanding the provisions of the previous sentence, Seller shall indemnify and hold harmless Purchaser from, and reimburse Purchaser for, any Losses that are the direct and proximate result of any inaccuracy or breach of any representation of Seller contained in Sections 2.2 and 2.6 without regard for the Basket Amount.

(b) Purchaser shall indemnify and hold harmless Seller from, and reimburse Seller for, any Losses as a result of the inaccuracy or breach of any representation or warranty of Purchaser contained in Article III of this Agreement.

Section 4.3 Indemnification Procedures .

(a) As promptly as practicable, and in any event within 30 days, after Purchaser or Seller shall receive any notice of, or otherwise become aware of, the commencement of any Action, the assertion of any claim, the occurrence of any event, the existence of any fact or circumstance, or the incurrence of any Loss, for which indemnification is provided (assuming, only for the purposes of this Section 4.3(a) , that the Basket Amount was zero) by Section 4.2(a) or (b) hereof (an “ Indemnification Event ”), the Indemnified Party shall give written notice (an “ Indemnification Claim ”) to the Indemnifying Party describing in reasonable detail the Indemnification Event and the basis on which indemnification is sought. If the Indemnifying Party is not so notified by the Indemnified Party within 30 days after the date of the receipt by the Indemnified Party of notice of, or of the Indemnified Party otherwise becoming aware of, any particular Indemnification Event, the Indemnifying Party shall be relieved of all liability hereunder in respect of such Indemnification Event (or the facts or circumstances giving rise thereto) to the extent that such Indemnifying Party is prejudiced or harmed as a consequence of such failure in any material respect (and, to such extent, all Losses resulting from such Indemnification Event shall thereafter be disregarded for purposes of determining whether the Basket Amount has been exceeded), and in any event the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnified Party was overdue in giving, and had not given, such notice.

(b) If any Indemnification Event involves the claim of a third party (a “ Third-Party Claim ”), the Indemnifying Party shall (whether or not the Indemnified Party is entitled to claim indemnification under Section 4.2(a) or (b), as the case may be) be entitled to, and the Indemnified Party shall provide the Indemnifying Party with the right to, participate in, and assume sole control over, the defense and settlement of such Third-Party Claim (with counsel reasonably satisfactory to the Indemnified Party); provided , however , that: (i) the Indemnified Party shall be entitled to participate in the defense of such Third-Party Claim and to employ counsel at its own expense to assist in the handling of such Third-Party Claim; and (ii) the Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any settlement of such Third-Party Claim or ceasing to defend against such Third-Party Claim if the Indemnified Party would not thereby receive from the claimant an unconditional release from all further liability in respect of such Third-Party Claim. After written notice by the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of any such Third-Party Claim, the Indemnifying Party shall not be liable hereunder to indemnify any Person for any legal or other expenses subsequently incurred in connection therewith. If the Indemnifying Party does not assume sole control over the defense or settlement of such Third-Party Claim as provided in this Section 4.3(b) within a reasonable period of time, or, after assuming such control, fails to defend against such Third-Party Claim (it being agreed that settlement of such Third-Party Claim does not constitute such a failure to defend), the Indemnified Party shall have the right (as to itself) to defend and, upon obtaining the written consent of the Indemnifying Party, settle the claim in such manner as it may deem appropriate, and the Indemnifying Party shall promptly reimburse the Indemnified Party therefor in accordance with (and to the extent provided in) Section 4.2(a) or (b), as appropriate.

(c) The Indemnified Party and the Indemnifying Party shall each cooperate fully with the other in the defense of any Third-Party Claim pursuant to Section 4.3(b). Without limiting the generality of the foregoing, each such Person shall furnish the other such Person (at the expense of the Indemnifying Party) with such documentary or other evidence as is then in its or any of its affiliates’ possession as may reasonably be requested by the other Person for the purpose of defending against any such Third-Party Claim.

Section 4.4 Subrogation . Upon payment of any amount pursuant to any Indemnification Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all of the Indemnified Party’s rights of recovery (and, if Seller is the Indemnifying Party, the Indemnified Party shall cause Seller to be subrogated to all of the rights of recovery of Purchaser and the Companies) against any third party with respect to the matters to which such Indemnification Claim relates.

Section 4.5 Exclusive Remedy . The rights and remedies of Purchaser and Seller under this Article IV are exclusive and in lieu of any and all other rights and remedies that Purchaser or Seller, as the case may be, may have against the other, under this Agreement or otherwise. All claims for indemnification must be asserted, if at all, in good faith and in accordance with the provisions of Section 4.3(a) and, to the extent applicable to such claims, within the relevant time period set forth in Section 4.1(a).

Section 4.6 Other Limitations .

(a) If at any time subsequent to the receipt by an Indemnified Party of an indemnity payment hereunder, such Indemnified Party receives any recovery, settlement or other similar payment with respect to the Loss for which it received such indemnity payment (the “ Recovery ”), such Indemnified Party shall promptly pay to the Indemnifying Party an amount equal to the amount of such Recovery, less any expense incurred by such Indemnified Party in connection with such Recovery, but in no event shall any such payment exceed the amount of such indemnity payment.

(b) The Indemnified Party shall use reasonable efforts to minimize and mitigate any Losses for which indemnification is sought hereunder. Each party hereto agrees that, for so long as such party has any right of indemnification under this Article IV, it shall not voluntarily or by discretionary action accelerate the timing or increase the cost of any obligation of any other party under this Article IV, except to the extent that such action is taken (x) for a reasonable legitimate purpose and not with a purpose of discovering a condition that would constitute an inaccuracy or breach of any representation, warranty, covenant or agreement of any other party hereto or (y) in response to a discovery by such party, without violation of the immediately preceding clause (x), of meaningful evidence of a condition that constitutes an inaccuracy or breach of any representation, warranty, covenant or agreement of any other party hereunder. Notwithstanding anything to the contrary herein, the Indemnifying Party shall not be obligated to indemnify an Indemnified Party for any Losses to the extent arising from any such voluntary or discretionary action, other than as so excepted.

ARTICLE V

GENERAL PROVISIONS

Section 5.1 Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter contained herein and supersedes all prior oral or written agreements, if any, between the parties hereto with respect to such subject matter and is not intended to confer upon any other person any rights or remedies hereunder. Any amendments hereto or modifications hereof must be made in writing and executed by each of the parties hereto.

Section 5.2 Waiver . Any failure by Seller or Purchaser to enforce any rights hereunder shall not be deemed a waiver of such rights.

Section 5.3 Governing Law and Arbitration . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Indiana, without giving effect to that body of law relating to choice of laws. Any controversy, dispute or claim between the parties relating to this Agreement shall be resolved by binding arbitration in Indiana, in accordance with the rules of the American Arbitration Association.

Section 5.4 Binding Effect; Assignment . This Agreement and the various rights and obligations arising hereunder shall inure to the benefit of and be binding upon Seller and Purchaser and their respective successors and assigns. This Agreement may not be assigned by either party without the prior written consent of the other party, provided , that Purchaser may assign any of his rights under this Agreement to an affiliate without such prior written consent, provided , however , that no such assignment shall relieve Purchaser of his obligations hereunder.

Section 5.5 Expenses . All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

Section 5.6 Headings . The headings or captions contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 5.7 Counterparts . This Agreement may be executed (including by facsimile and .pdf) in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

Section 5.8 Notice . Any notice hereunder by either party to the other shall be given in writing by personal delivery, or certified mail, return receipt requested, or overnight courier, or facsimile, in any case delivered to the applicable address set forth below:

(a) To Seller:

Biglari Holdings Inc.

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Attention: Controller

Facsimile: (210) 344-3411

(b) To Purchaser:

Sardar Biglari

c/o Biglari Capital Corp.

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Facsimile: (210) 344-3411

or to such other persons or other addresses as either party may specify to the other in writing. Any such notice shall be deemed to have been given upon receipt.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the day and year first above written.

BIGLARI HOLDINGS INC.


By:	/s/ Bruce Lewis
Name:		Bruce Lewis
Title:		Controller




/s/ Sardar Biglari
SARDAR BIGLARI

EXHIBIT A

DEFINED TERMS

For purposes of the Agreement to which this Exhibit A is attached, the following terms shall have the respective meanings specified below.

“Action” means an action, arbitration, audit, hearing, suit or proceeding, at law or in equity.

“Code” means the Internal Revenue Code of 1986, as amended.

“GAAP” means generally accepted United States accounting principles, consistently applied and consistent with past practice.

“Hazardous Material” means solid waste disposal, toxic substances, hazardous substances, hazardous materials, hazardous waste, toxic chemicals, pollutants and contaminants.

“Intellectual Property” means trademarks, trade names, service marks, domain names, patents, copyrights, applications therefor and licenses or other rights in respect thereof.

“Knowledge” of any Person means the actual knowledge of such Person without investigation.

“Lien” means any lien, pledge, mortgage, security interest or encumbrance.

“Losses” means all losses, damages, liabilities and claims, and fees, costs and expenses related thereto. Notwithstanding anything to the contrary contained in the Agreement: (a) Losses shall not include lost profits or consequential, incidental, special, indirect or punitive damages and no “multiple of profits” or “multiple of cash flow” or similar valuation methodology shall be used in calculating the amount of any Losses; and (b) the amount of any Losses under Article IV shall be determined: (i) on a Net After-Tax Basis; and (ii) net of any amounts recovered or recoverable by the Indemnified Party under any contract with a third party or under any insurance policies, indemnities or other reimbursement arrangements with respect to such Losses.

“Material Adverse Effect” means any event, circumstance, change in or effect, individually or in the aggregate, that is or is reasonably likely to be materially adverse to the results of operations or the financial condition of an entity or entities, as applicable; provided, however, that none of the following or the results thereof, either alone or in combination, shall be considered in determining whether there has been a “Material Adverse Effect”: (a) events, circumstances, changes or effects that generally affect the industries in which the entity or entities operate (including legal and regulatory changes), (b) any change or modification in law or interpretation thereof, (c) general economic or political conditions or events, circumstances, changes or effects affecting the securities markets generally, (d) changes in GAAP after the date of this Agreement, (f) changes arising from the consummation of the transactions contemplated by, or the announcement of, this Agreement, (g) any circumstance, change or effect that results from any action taken pursuant to or in accordance with this Agreement or at the request of Purchaser or (h) changes caused by a material worsening of current conditions caused by acts of terrorism or war (whether or not declared) occurring after the date of this Agreement.

A-1

“Net After-Tax Basis” means, with respect to the calculation of any indemnification payment owed to any party pursuant to the Agreement, calculation thereof in a manner taking into account any Taxes owing by the Indemnified Party as a result of receipt or accrual of the indemnity payment and any savings in Taxes realized or reasonably realizable by the Indemnified Party as a result of the indemnified liability.

“Permits” means all licenses, permits, orders, consents, approvals, registrations, authorizations, qualifications and filings which are required to be made with or required under applicable law.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.

“Taxes” means all taxes, charges, fees, levies and other assessments, including, without limitation, income, gross receipts, excise, property, sales, use, license, payroll and franchise taxes, imposed by the United States, or any state, local or foreign government or subdivision or agency thereof whether computed on a unitary, combined or any other basis; and such term shall include any interest and penalties or additions to tax.

“Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

A-2

SHARED SERVICES AGREEMENT

This Shared Services Agreement (this “Agreement”) is made and entered into as of July 1, 2013 by and between Biglari Holdings Inc., an Indiana corporation (“BH”) and Biglari Capital Corp., a Texas corporation (“BCC”).

RECITALS

A. As of the date hereof, BH and Sardar Biglari, Chairman and Chief Executive Officer of each of BH and BCC (“Mr. Biglari”), are entering into a Stock Purchase Agreement, pursuant to which Mr. Biglari is purchasing from BH all of the outstanding shares of capital stock of BCC.

B. BCC is the general partner of each of The Lion Fund I, L.P., a Delaware limited partnership (“TLF I”), and The Lion Fund II, L.P., a Delaware limited partnership (“TLF II” and, together with TLF I, “TLF”), and provides certain services to TLF in such capacity.

C. BH is a limited partner of each of TLF I and TLF II.

D. In connection with its role as general partner of TLF, BCC desires to receive from BH, and BH desires to provide to BCC, the Services.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, together with other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions . As used in this Agreement, the following terms shall have the following meanings:

(a) “ Affiliates ” shall mean (solely for purposes of this Agreement and for no other purpose) (i) with respect to BH, its subsidiaries, and (ii) with respect to BCC, Mr. Biglari and TLF.

(b) “ Effective Date ” shall mean the date hereof.

(c) “ Representatives ” shall mean, with respect to any person or entity, the members, partners, officers, directors, employees, agents and representatives (including attorneys, accountants, consultants and other advisors) of such person or entity.

2. Services .

(a) BH shall provide or cause to be provided to BCC the services described in Exhibit A hereto (the “Services”).

(b) The parties agree that there shall be no material change in the scope or level of the Services provided by BH during the Term (as hereinafter defined) without the mutual written agreement of the parties; provided , however , that (i) BH may make changes from time to time in the manner of performing Services without obtaining BCC’s prior written consent if (A) it is making similar changes in performing or the performance of the same or substantially similar services for itself or any of its Affiliates (other than changes pursuant to which BH ceases to provide or cause to be provided the Services), (B) such changes are reasonably necessary in BH’s reasonable judgment to comply with applicable laws, rules, regulations and orders or (C) such changes are to address an emergency and are on a temporary and short-term basis and (ii) if BH reasonably believes it is unable to provide any Service because of a failure to obtain any third-party contractor consents or because the provision of such Service would, in BH’s reasonable judgment, require BH to violate any applicable law, rule, regulation or order, BH will notify BCC promptly after BH becomes aware of such fact and the parties will cooperate to determine the best alternative approach to be provided by BH.

(c) The parties agree to use commercially reasonable efforts to reach agreement on any additional services which BCC may require of BH beyond the scope of the Services (and, in such event, such additional services shall be deemed to be “Services” hereunder), and any amendments to this Agreement with respect thereto.

3. Consideration . In consideration for the provision of the Services by BH to BCC hereunder, during the Term, the “Hurdle Rate,” as defined and provided in each of the partnership agreements of TLF I and TLF II, by which the Incentive Reallocation (as defined in such partnership agreements) to BCC is determined shall be 6% per annum, in lieu of 5% per annum, with respect to the limited partner interests of BH and its subsidiaries in each of TLF I and TLF II.

4. Performance of Services .

(a) Standard of Care . BH shall provide the Services in accordance with this Agreement and shall exercise the same care and skill as it exercises in performing similar services for itself.

(b) Compliance with Law . Each party shall comply with all applicable laws, rules, regulations and governmental orders, now or hereafter in effect, relating to its performance under this Agreement. For the avoidance of doubt, neither this Agreement nor BH’s performance of Services for BCC hereunder is intended to cause BH to become subject to, or render BH responsible for compliance with, any laws, rules and regulations, including, without limitation, the federal securities laws, applicable to BCC and as to which BH is not otherwise subject.

(c) Cooperation . BH and BCC will, and will cause their respective Affiliates and Representatives to, use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of the Services, including (i) exchanging information and (ii) obtaining any required third-party contractor consents, licenses, sublicenses and approvals reasonably necessary to permit each party to perform its obligations hereunder.

(d) Use of Third Parties . BH may use any Affiliate or any unaffiliated third-party contractor to provide the Services to the extent the Affiliate or the unaffiliated third-party contractor provides comparable services to BH or, if not, if BCC gives its prior written consent (which consent BCC will not unreasonably withhold or delay).

(e) Assets of BCC . During the Term, (i) BH and its Affiliates and third-party contractors may use, at no charge, all of the software and other assets, tangible and intangible, identified on Exhibit B hereto (together, the “Assets”) of BCC to the extent necessary to perform the Services, and (ii) BCC will consult with BH prior to upgrading or replacing any of its Assets that are necessary for BH to provide the Services.

(f) Ownership of Data and Other Assets . Neither party will acquire any right, title or interest in or to any Asset that is owned or licensed by the other and used in connection with the provision of the Services. All data provided by or on behalf of a party to the other party for the purpose of providing the Services will remain the property of the providing party. To the extent the provision of any Service involves intellectual property, including software or patented or copyrighted material, or material constituting trade secrets, neither party will copy, modify, reverse engineer, decompile or in any way alter any of such material, or otherwise use such material in a manner inconsistent with the terms and provisions of this Agreement, without the express written consent of the other party. Without limiting the generality of the foregoing, all specifications, tapes, software, programs, services, manuals, materials, and documentation developed or provided by BH and utilized in performing this Agreement will be and remain the property of BH and may not be sold, transferred, disseminated or conveyed by BCC to any other person or entity or used other than in performance of this Agreement without the express written permission of BH.

5. Space Sharing .

(a) Use by BCC . BH shall permit BCC to use a portion of its corporate headquarters (the “Facility”) for the purposes permitted under the lease agreement (the “Lease”) pursuant to which BH leases the Facility, subject to the terms and conditions set forth in this Agreement and in such Lease and in a manner that does not interfere with the operation of BH’s business.

(b) Compliance with Lease . BH has provided BCC with a copy of the Lease and BCC acknowledges receipt thereof. BCC hereby agrees not to take any action or fail to take any action in connection with its use of a portion of the Facility that would cause BH to be in violation of any of the terms or conditions of the Lease. BCC acknowledges and agrees that BH has the right to modify or otherwise amend the Lease without the consent of BCC. BH will provide BCC with a copy of any such amendment.

6. Limitations on Liability and Indemnification .

(a) Limitations on Liability . Neither party shall have any liability under this Agreement (including any liability for its own negligence) for claims, liabilities, damages, losses or expenses suffered by the other party or any of its Affiliates or Representatives as a result of the performance or non-performance of such party’s obligations hereunder, unless such claims, liabilities, damages, losses or expenses are caused by or arise out of the willful misconduct or gross negligence of such party or a material breach by such party of any of the express provisions hereof. In no event shall either party have any liability to the other party for indirect, incidental, punitive, special or consequential damages (including, without limitation, business interruption, lost business, lost profits or lost savings) that such other party or any third party may incur or experience on account of the performance or non-performance of such party’s obligations hereunder, even if it has been advised of the possible existence thereof. Notwithstanding anything in this Agreement to the contrary, each party and its Affiliates and Representatives may reasonably rely in good faith on (i) any instructions of the other party or any person or entity designated by such other party and (ii) any document of any kind prima facie properly executed and submitted by the other party or any person or entity designated by such other party respecting any matters arising hereunder and which it reasonably believes in good faith to be genuine. Notwithstanding anything to the contrary contained herein, neither party shall have any liability under this Agreement to any person or entity other than to the other party and its Affiliates and Representatives.

(b) Indemnification . Subject to the limitations on liability set forth in Section 6(a) hereof, each party shall indemnify, defend and hold harmless the other party from and against any and all claims, liabilities, damages, losses and expenses (including reasonable attorneys’ fees and expenses) incurred by the other party or any of its Affiliates or Representatives caused by or arising out of the willful misconduct or gross negligence of such indemnifying party in the performance or non-performance of its obligations hereunder or the breach by such indemnifying party of any of the express provisions hereof. The Affiliates and Representatives of each of the parties shall be express and intended third-party beneficiaries of this Section 6(b). Notwithstanding anything to the contrary contained herein, the liability of either party under this Section 6(b) shall not exceed an amount equal to the aggregate benefit to BH of the increase in its “Hurdle Rate” from 5% per annum to 6% per annum during the Term with respect to BH’s limited partner interests in each of TLF I and TLF II, as provided in Section 3 hereof.

7. Term of Agreement . This Agreement shall commence on the Effective Date, shall continue through March 31, 2019, and shall automatically renew for successive five-year periods ending on March 31 unless and until terminated by either party, effective on March 31, 2019 or on the last day of any such five-year period, as applicable, upon written notice to the other given not less than 60 days prior thereto (the “Term”).

8. Confidentiality .

(a) Each party will hold in trust and maintain confidential and, except as otherwise expressly permitted in this Section 8 or required by applicable law, rule, regulation, court order, subpoena or other compulsory process, or stock exchange requirement, not disclose to others without the prior written approval of the other party, any non-public information received by it from the other party or otherwise obtained by it in connection with the performance of this Agreement (the “Information”). BH may disclose Information of BCC to third-party contractors that need to know such Information in order to perform Services pursuant to the terms hereof, provided that BH shall advise any such third-party contractors of the provisions of this Section 8 and shall be responsible for a breach of this Section 8 by any such third-party contractors.

(b) Promptly after the termination of this Agreement, each party will return to the other party or destroy all documents, data and other materials of whatever nature containing Information or otherwise relating to the businesses of the other that it obtained in connection with the performance of this Agreement, provided that the parties may retain any Information to the extent reasonably necessary to comply with applicable tax, accounting, regulatory or financial reporting requirements or to resolve any legal issues identified at the time of termination. Without limiting the generality of the foregoing, BH will return, and cause its Affiliates, Representatives and third-party contractors to return, any Assets of BCC in its possession to BCC.

(c) Nothing contained herein will prevent the use (subject, to the extent possible, to a protective order) of Information in connection with the assertion or defense of any claim by or against the other party.

(d) The provisions of this Section 8 shall survive any expiration or termination of this Agreement.

9. Independent Contractor Relationship .

(a) In performing its duties and obligations under this Agreement, BH shall at all times be an independent contractor. Nothing contained in this Agreement shall be construed to (i) give either BH or BCC the power to direct and control the day-to-day activities of the other party or any of such other party’s Affiliates, or (ii) treat the parties hereto as partners, joint venturers, co-owners, agents or the like. Each party hereto agrees that it will not be treated as an employee of the other party for federal, state or local tax purposes, including but not limited to unemployment compensation or workers’ compensation taxes, or for any other purpose.

(b) For the avoidance of doubt, nothing in this Agreement shall be construed as (i) imposing any fiduciary duty on either of the parties hereunder as a result of the terms and conditions of this Agreement, (ii) imposing any additional duty, obligation or liability whatsoever on any other parties other than as provided hereunder, or (iii) imposing any additional duties, obligations or liabilities on BH pursuant to the partnership agreement of TLF I or TLF II as a limited partner or otherwise.

10. Representations and Warranties . Each of the parties, on behalf of itself, represents and warrants to the other party as follows.

(a) Power and Authority . Such party is duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization and has full legal capacity, power and authority to enter into this Agreement and to perform its obligations hereunder.

(b) Authority; Execution and Delivery; Valid and Binding Agreement . The execution, delivery and performance of this Agreement by such party and the performance by such party of its obligations hereunder have been duly and validly authorized by all requisite action on the part of such party and no other proceedings on the part of such party are necessary to authorize the execution, delivery or performance of this Agreement. This Agreement has been duly executed and delivered by such party, and, assuming due authorization, execution and delivery by the other party hereto, constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, or moratorium laws, other similar laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies.

(c) No Conflict . Such party’s execution and delivery of this Agreement and its performance of its obligations hereunder does not conflict with or result in a breach or violation of the terms, conditions or provisions of, constitute a default under, or require any consent of or other action by, or notice or declaration to, or filing with, any third party or any governmental or regulatory authority pursuant to (i) the organizational documents of such party or (ii) any material law, rule, regulation or governmental order to which such party is subject.

(d) No Other Representations of BH . BH makes no other guarantee, representation or warranty of any kind (whether express or implied) regarding any of the Services provided hereunder, and expressly disclaims all other guarantees, representations and warranties of any nature whatsoever, whether statutory, oral, written, express or implied, including any warranties of merchantability or fitness for a particular purpose and any warranties arising from course of dealing or usage of trade.

11. Miscellaneous .

(a) Successors and Assigns . This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by either party hereto to any other person or entity without the prior written consent of the other party hereto; provided , that notwithstanding the foregoing, BH may retain third-party vendors to perform certain of the Services in accordance with Section 4(d) hereof.

(b) No Third-Party Beneficiaries . Except for the persons and entities entitled to indemnification pursuant to Section 6 hereof, each of whom is an intended third-party beneficiary hereunder, nothing expressed or implied in this Agreement shall be construed to give any person or entity other than the parties hereto any legal or equitable rights hereunder.

(c) Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.

(d) Amendment . This Agreement may not be amended except by an instrument in writing signed by the parties hereto and, in the case of BH, with the approval of the Governance, Compensation and Nominating Committee.

(e) Waivers . Either party hereto may (i) extend the time for the performance of any of the obligations or other acts of the other party or (ii) waive compliance with any of the agreements contained herein. No waiver of any term shall be construed as a waiver of the same term, or a waiver of any other term, of this Agreement. The failure of any party to assert any of its rights hereunder will not constitute a waiver of any such rights.

(f) Severability . If any provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, such provision shall be deemed severable and all other provisions of this Agreement shall nevertheless remain in full force and effect.

(g) Headings . Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

(h) Notices . All notices given in connection with this Agreement shall be in writing and shall be hand delivered, sent by certified or registered mail, postage prepaid, return receipt requested, sent by overnight courier service, or sent by facsimile or e-mail, and in each case shall be effective upon receipt. Such notices shall be addressed to the parties at the following addresses or at such other address for a party as shall be specified by like notice:

If to BH

Biglari Holdings Inc.

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Attention:

Controller

Facsimile:

(210) 344-3411

If to BCC:

Biglari Capital Corp.

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Attention:

Sardar Biglari

Facsimile:

(210) 344-3411

(i) Governing Law; Jurisdiction; Waiver of Jury Trial .

(A) This Agreement shall be governed by, and construed in accordance with, the law of the State of Indiana, without giving effect to the principles of conflict of laws of such State.

(B) Each party acknowledges that each controversy that may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, it irrevocably and unconditionally waives all rights it may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated hereby. Each party certifies and acknowledges that (i) it understands and has considered the implications of such waivers, (ii) it makes such waivers voluntarily, and (iii) it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 11(i).

(j) Expenses . Except as otherwise provided herein in connection with the provision of the Services, each party will bear its own expenses in connection with the negotiation, execution and delivery of this Agreement.

(k) Force Majeure . Neither party will be responsible to the other for any delay in or failure of performance of its obligations under this Agreement, to the extent such delay or failure is attributable to any act of God, act of terrorism, fire, accident, war, embargo or other governmental act, or riot; provided , however , that the affected party will use its commercially reasonable efforts to expeditiously overcome the effects of that event and resume performance

(l) Specific Performance . Each party acknowledges that, in view of the uniqueness of the subject matter hereof, if it breaches or does not perform in accordance with the terms hereof its obligations under this Agreement, the other party would not have an adequate remedy at law for money damages. Accordingly, such other party, in addition to any other remedy to which it may be entitled at law or in equity, is entitled to pursue any injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to compel specific performance of this Agreement, without the need for proof of actual damages or the requirement to post bond or other security.

(m) Counterparts . This Agreement may be executed in counterparts (including by facsimile and .pdf), each of which shall be an original, but all of which together shall constitute one and the same instrument.

[ Signature page follows ]

IN WITNESS WHEREOF, BH and BCC have caused this Agreement to be executed as of the date first above written.

BIGLARI HOLDINGS INC.


By:	/s/ Bruce Lewis
	Name:	Bruce Lewis
	Title:	Controller

BIGLARI CAPITAL CORP.


By:	/s/ Sardar Biglari
	Name:	Sardar Biglari
	Title:	Chairman and Chief Executive Officer

EXHIBIT A

SERVICES 1

1. legal, tax (including preparation and review of tax returns), accounting, auditing, administrative, marketing, human resources (including payroll and benefits), travel and other similar services;

2. information technology services, including maintenance of computer equipment, data storage and back-up services, and sharing of office software;

3. use of corporate headquarters in accordance with Section 5 hereof, including use of office space, furniture and equipment, and common area space and equipment;

4. services related to compliance with all federal, state and local laws, rules and regulations and with the registration, reporting and other requirements or requests of any governmental or regulatory agency;

5. services related to investments in publicly traded companies, including, without limitation, in connection with any proxy, consent or other similar solicitation, and assistance in preparing, filing, printing and mailing any solicitation materials and other required filings, under the federal securities laws;

6. assistance in preparing, printing and mailing annual reports for TLF I and TLF II (and other investment partnerships and similar investment vehicles as to which BCC serves as general partner, investment manager or in a similar capacity) and other materials in connection with their annual meetings, offering and subscription documents, and other communications to limited partners;

7. services related to the calling, convening and holding of the annual meetings of limited partners of TLF I and TLF II (and other investment partnerships and similar investment vehicles as to which BCC serves as general partner, investment manager or in a similar capacity).

1 Includes time and services of outside advisors (including counsel, auditors and accountants) and employees of BH and its affiliates. Legal, accounting and reporting fees are paid by TLF I and TLF II pursuant to their respective limited partnership agreements.

FIRST AMENDMENT

AMENDED AND RESTATED INCENTIVE AGREEMENT

This First Amendment, dated as of July 1, 2013 (this “First Amendment” ), to the Amended and Restated Incentive Bonus Agreement, dated as of September 28, 2010 (the “Agreement” ), is by and between Biglari Holdings Inc., an Indiana corporation ( “Company” ), and Sardar Biglari ( “Executive” ). All capitalized terms used and not otherwise defined herein have the respective meanings ascribed to them in the Agreement.

W I T N E S S E T H:

WHEREAS, on April 30, 2010, Company and Executive entered into a Stock Purchase Agreement pursuant to which Executive sold to Company all of the outstanding shares of capital stock of Biglari Capital Corp., a Texas corporation ( “Biglari Capital” ), the general partner of The Lion Fund, L.P. ( “TLF I” ), for a purchase price of $1.00 plus (i) an amount equal to Biglari Capital’s adjusted capital balance in its capacity as general partner of TLF I as of April 30, 2010, and (ii) an amount equal to the total incentive reallocation allocable to Biglari Capital for the period from January 1, 2010 through April 30, 2010;

WHEREAS, in connection with the foregoing transaction, Company and Executive entered into the Agreement;

WHEREAS, as of the date hereof, Company and Executive are entering into a Stock Purchase Agreement pursuant to which Executive is purchasing from Company all of the outstanding shares of capital stock of Biglari Capital for a purchase price of $1,700,000 in cash;

WHEREAS, prior to such transaction, (i) Biglari Capital distributed to Company substantially all of the partnership interests held by it (other than the interest described in clause (ii)) in TLF I (including, without limitation, its then adjusted capital balance in its capacity as general partner of TLF I) and (ii) Biglari Capital retained a $100,000 general partner interest in each of TLF I and TLF II;

WHEREAS, concurrently with such transaction, Company contributed securities to each of TLF I and The Lion Fund II, L.P., a newly formed limited partnership of which Biglari Capital is the general partner ( “TLF II” and, together with TLF I, “TLF” ), in exchange for limited partnership interests in each of TLF I and TLF II (the “Contribution” );

WHEREAS, in connection with the foregoing transactions, the parties hereto desire to amend the Agreement to exclude from the calculation of the Incentive Compensation Amount, with respect to any period from and after the date hereof, any realized or unrealized gains or losses and other amounts attributable to investments by Company and its subsidiaries in investment partnerships (or equivalent) in which Company or any of its subsidiaries is a limited partner (or equivalent) and Executive (or an affiliate of Executive other than Company or any of its subsidiaries) is the general partner (or equivalent), including, without limitation, TLF I and TLF II to the extent they satisfy the foregoing criteria (“ Outside Investment Partnerships ”), and to make certain other changes described below.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to amend the Agreement as follows:

Section 1.01. Amendment to Section 2(a)(i) . Section 2(a)(i) of the Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

(i) Company shall pay to Executive, determined as of the last day of each fiscal year of Company (including any fiscal year in which any of the events set forth in Section 5(a) occur) and also, solely with respect to Company’s fiscal year ending September 25, 2013 ( “Fiscal 2013” ), as of June 30, 2013 (each, an “Incentive Compensation Calculation Date” ), incentive compensation equal to the Incentive Compensation Amount (as defined below) as of such Incentive Compensation Calculation Date; provided , however , that no duplicate Incentive Compensation Amount shall be paid to Executive in any fiscal year. The Incentive Compensation Amount shall be paid to Executive as promptly as practicable after each Incentive Compensation Calculation Date, and in no event later than 75 days after the end of each fiscal year (the “Payment Date” ), subject to Section 6(c). The “Incentive Compensation Amount” means the amount computed (subject to proration (A) with respect to any fiscal year during the term of this Agreement in which any of the events set forth in Section 5(a) occurs, determined based on the date of such event, and (B) with respect to Fiscal 2013, determined based upon the periods from September 27, 2012 through June 30, 2013 (the “First Fiscal 2013 Period” ) and from July 1, 2013 through September 25, 2013 (the “Second Fiscal 2013 Period” )) using the following formula where “x” equals 1.06 (subject to proration for the 2010 fiscal year, Fiscal 2013 (as described above) and any short fiscal year during the term of this Agreement with respect to which the Incentive Compensation Amount is determined), provided that in no event shall the Incentive Compensation Amount payable to the Executive with respect to any fiscal year exceed $10 million:

(0.25)(New Book Value - ((High Water Mark)(x)))

Section 1.02. Amendment to Section 2(a)(ii) . The first two sentences of Section 2(a)(ii) of the Agreement are hereby amended by deleting such sentences in their entirety and replacing them with the following:

(ii) “Book Value” equals the amount of Total Shareholders’ Equity as set forth in the Consolidated Statement of Financial Position of Company, prepared in accordance with the accounting principles adopted by Company (as set forth in Company’s Annual Report on Form 10-K for the applicable fiscal year or, in the case of the First Fiscal 2013 Period, Company’s Annual Report on Form 10-K for Company’s fiscal year ended September 26, 2012), as of the applicable Incentive Compensation Calculation Date; provided , however , that Book Value as of the applicable Incentive Compensation Calculation Date shall be determined by reference to the consolidated net income and other comprehensive income of Company, but, commencing with respect to the Second Fiscal 2013 Period, shall be calculated without reference to any investments by Company and its subsidiaries in any Outside Investment Partnerships, and appropriate adjustments to such Book Value shall be made for any dividends, shares issuances or buybacks and other factors in accordance with Exhibit A hereto (but Book Value for the next succeeding Incentive Compensation Calculation Date shall not reflect such prior adjustments); provided , however , that Book Value with respect to the First Fiscal 2013 Period shall be subject to offset to the extent of any decrease in Book Value that occurs with respect to the Second Fiscal 2013 Period (and, for purposes of determining any such offset, Book Value with respect to each such period shall be calculated without reference to (x) any investments by Company and its subsidiaries in any Outside Investment Partnerships and (y) any CAP Items related to any Outside Investment Partnerships, which, for purposes hereof, shall expressly include CAP Items related to the partnerships included within such definition prior to their becoming Outside Investment Partnerships).

Section 1.03. Amendment to Section 2(a)(iv) . The first sentence of Section 2(a)(iv) of the Agreement is hereby amended by deleting such sentence in its entirety and replacing it with the following:

(iv) “High Water Mark” equals the highest Book Value after reduction for the Incentive Compensation Amount then paid (including, in the case of the Second Fiscal 2013 Period, the Incentive Compensation Amount with respect to the First Fiscal 2013 Period even though not then paid), as of any preceding Incentive Compensation Calculation Date (but without giving effect to any adjustments made with respect to such Incentive Compensation Calculation Date and, commencing with respect to the Second Fiscal 2013 Period, calculated without reference to (x) any investments by Company and its subsidiaries in any Outside Investment Partnerships and (y) any CAP Items related to any Outside Investment Partnerships, which, for purposes hereof, shall expressly include CAP Items related to the partnerships included within such definition prior to their becoming Outside Investment Partnerships).

Section 1.04 Amendment to Section 2(a) . Section 2(a) of the Agreement is hereby amended by adding a new subsection (v) as follows:

(v) “CAP Items” means (A) any gains/losses (realized or unrealized) and earnings (including, without limitation, dividends) on securities, prior to the date of the Contribution, that were contributed to such Outside Investment Partnerships pursuant to the Contribution, (B) the aggregate cost to acquire such securities and (C) any other items on Company’s consolidated balance sheet related to consolidated affiliated partnerships.

Section 1.05. Amendment to Section 2(b) . The second sentence of Section 2(b) of the Agreement is hereby amended by deleting such sentence in its entirety and replacing it with the following:

Company shall deliver to Executive, following approval by the Committee and within forty-five (45) days after the applicable Incentive Compensation Calculation Date (in the case of Fiscal 2013, September 25, 2013), a statement (the “Incentive Compensation Statement” ) setting forth the New Book Value and Incentive Compensation Amount with respect to such Incentive Compensation Calculation Date (in the case of Fiscal 2013, with respect to both the First Fiscal 2013 Period and the Second Fiscal 2013 Period) and showing its calculations in reasonable detail.

Section 1.06. Amendment to Section 4 . Section 4 of the Agreement is hereby amended by deleting the text in each of paragraphs (a), (e), (f), (g) and (h) thereof and replacing such text with “Intentionally Omitted.” and by changing the heading of such section to “Definitions.”

Section 1.07. Amendment to Section 5(a) . Section 5(a) of the Agreement is hereby amended by deleting the words “If the Purchase Option is not exercised by Executive pursuant to Section 4 on or prior to, and expires on, the Option Expiration Date, then, upon the occurrence of any of the events set forth in Section 4(a),” and replacing them with the following:

“Following the third anniversary of the date of this Agreement, if (i) there is a Change of Control, (ii) Executive is terminated by Company without Cause or (iii) Executive resigns from his employment with Company for Good Reason,”

Section 1.08 Amendment to Section 6(d) . Section 6(d) of the Agreement is hereby amended by deleting the addresses for notice provided therein and replacing them with the following addresses for notice:

(i) To Company:

Biglari Holdings Inc.

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Attention: Controller

Chairman of Governance, Compensation and

Nominating Committee

Facsimile: (210) 344-3411

(ii) To Executive:

Sardar Biglari

17802 IH 10 West, Suite 400

San Antonio, Texas 78257

Facsimile: (210) 344-3411

Section 1.09. Amendment to Exhibit A . The third bullet point of Exhibit A to the Agreement is hereby amended by deleting such bullet point in its entirety and replacing it with the following:

Gains/losses (realized or unrealized) from investments (other than investments held by any Outside Investment Partnerships) are included in Book Value

Section 1.10. Amendment to Exhibit A . The last row of the table in Exhibit A to the Agreement is hereby amended by deleting such row in its entirety and replacing it with the following:

	Include in Book Value Calculation	Exclude from Book Value Calculation
o Unrealized and realized gains/losses on the mark to market of certain investments and derivatives classified as hedges (other than such investments and derivatives held by any Outside Investment Partnerships)	X

Section 2 General Provisions .

(a) Governing Law . This Amendment shall be governed by, construed and enforced in accordance with the laws of the State of Indiana without regard to the conflict of laws principles thereof.

(b) Counterparts . This Amendment may be executed and delivered (including by facsimile or .pdf transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

(c) No Other Amendments . Other than as set forth above, the Agreement shall remain in full force and effect. On or after the date of this First Amendment, each reference in the Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to the Agreement shall mean and be a reference to the Agreement as amended by this First Amendment, and this First Amendment shall be deemed to be a part of the Agreement. Notwithstanding the foregoing, references to the date of the Agreement, “the date hereof,” “the date of this Agreement” and similar references shall continue to refer to September 28, 2010, and references to the date of the First Amendment, “the date of the First Amendment” and similar references shall refer to July 1, 2013.

[ Signature page follows ]

IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the day and year first written above.

	BIGLARI HOLDINGS INC.

	By:	/s/ Bruce Lewis
		Bruce Lewis
		Controller

	EXECUTIVE

	/s/ Sardar Biglari
	Sardar Biglari

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On July 1, 2013, Biglari Holdings Inc., an Indiana corporation (the “Company” or “BH”), sold all of the outstanding shares of Biglari Capital Corp., a Texas corporation (“Biglari Capital”) and the general partner of The Lion Fund, L.P. and the newly-formed The Lion Fund II, L.P., Delaware limited partnerships that operate as private investment funds (respectively, “TLF I” and “TLF II” and, collectively, the “Lion Fund”), to Sardar Biglari, Chairman and Chief Executive Officer of the Company, pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) for a purchase price of $1,700,000. The Company also contributed securities owned by it having a value of approximately $2,845,000 to TLF I and approximately $315,638,000 to TLF II in exchange for limited partner interests in each of these investment partnerships. Prior to the execution and delivery of the Stock Purchase Agreement, Biglari Capital distributed to the Company substantially all of Biglari Capital’s partnership interests in TLF I and retained solely a general partner interest in each of TLF I and TLF II. In addition, the Company amended the Incentive Agreement between BH and Mr. Biglari to give effect to the sale of Biglari Capital and the contributions to TLF I and TLF II, among other things, by providing that Mr. Biglari’s incentive compensation will thereafter be calculated without reference to any investments by BH and its subsidiaries in investment partnerships (including TLF I and TLF II) of which Biglari Capital or Mr. Biglari is the general partner. The foregoing transactions are collectively referred to as the “Transactions.”

The following unaudited pro forma condensed consolidated financial statements are based upon the historical financial statements of the Company, adjusted to reflect and give effect to the Transactions. The unaudited pro forma condensed consolidated financial statements of the Company should be read in conjunction with the historical consolidated financial statements of the Company and the related notes included in its Quarterly Report on Form 10-Q for the quarterly period ended April 10, 2013, and its Annual Report on Form 10-K for the fiscal year ended September 26, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions as if they had occurred on April 10, 2013, while the unaudited pro forma condensed consolidated statements of earnings for the twenty-eight weeks ended April 10, 2013 and fiscal year ended September 26, 2012, respectively, give effect to the Transactions as if they had occurred on September 29, 2011 (the beginning of fiscal 2012). The pro forma adjustments described in the accompanying notes are based on currently available information and certain estimates and assumptions that the Company’s management believes to be reasonable.

The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what the Company’s actual financial position and results of operations would have been had the Transactions occurred on the dates indicated. In addition, these unaudited pro forma condensed consolidated financial statements should not be considered to be indicative of the Company’s future financial performance. Actual results could differ materially.

BIGLARI HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In thousands, except share and per share data)
	April 10, 2013 (As Reported)			Deconsolidation				Asset Contribution				April 10, 2013 (Pro Forma)

Assets
Current assets:
Cash and cash equivalents	$	19,031			1,700		a					$	20,731
Investments		386,080							(315,826	)	j		70,254
Receivables, net of allowance of $703 and $703, respectively		7,842			(42	)	b						7,800
Inventories		6,294											6,294
Deferred income taxes		—							138		k		138
Assets held for sale		461											461
Other current assets		3,929											3,929
Total current assets		423,637											109,607
Property and equipment, net		351,648											351,648
Goodwill		27,529											27,529
Other intangible assets, net		8,104											8,104
Other assets		8,580											8,580
Investment partnerships		—			12,873		c		315,264		l		328,137
Investments held by consolidated affiliated partnerships		26,384			(26,384	)	d						—
Total assets	$	845,882										$	833,605
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Accounts payable	$	37,787										$	37,787
Accrued expenses		47,671			567		e		(1,582	)	m		46,656
Revolving credit		6,000											6,000
Deferred income taxes		46,366							(46,366	)	n		—
Current portion of obligations under leases		6,243											6,243
Current portion of long-term debt		9,763											9,763
Total current liabilities		153,830											106,449
Deferred income taxes		6,912							46,504		o		53,416
Obligations under leases		108,544											108,544
Long-term debt		115,375											115,375
Other long-term liabilities		9,307											9,307
Total liabilities		393,968											393,091
Commitments and contingencies

Redeemable noncontrolling interests of consolidated affiliated partnerships		52,671			(52,671	)	f						—
Shareholders’ equity
Common stock – $0.50 stated value, 2,500,000 shares authorized – 1,511,174 shares issued at April 10, 2013		756											756
Additional paid-in capital		142,158			7,555		g						149,713
Retained earnings		258,725			1,054		h		77,809		p		337,588
Accumulated other comprehensive income		88,140							(76,227	)	q		11,913
Treasury stock		(90,536	)		31,642		i		(562	)	r		(59,456	)
Biglari Holdings Inc. shareholders’ equity		399,243											440,514
Total liabilities and shareholders’ equity	$	845,882										$	833,605

BIGLARI HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(Unaudited)

(In thousands, except share and per share data)	Twenty-Eight Weeks Ended
	April 10, 2013 (As Reported)			Deconsolidation				Asset Contribution				April 10, 2013 (Pro Forma)

Net revenues
Restaurant Operations :
Net sales	$	382,476										$	382,476
Franchise royalties and fees		5,755											5,755
Other revenue		1,322											1,322
Total		389,553											389,553
Consolidated Affiliated Partnerships :
Investment gains/losses		1,937			(1,937	)	s						—
Other income		231			(231	)	t						—
Total		2,168											—
Total net revenues		391,721											389,553

Costs and expenses
Cost of sales		112,791											112,791
Restaurant operating costs		182,737											182,737
General and administrative		37,201							(2,552	)	x		34,649
Depreciation and amortization		13,693											13,693
Marketing		21,999											21,999
Rent		9,497											9,497
Pre-opening costs		5											5
Provision for restaurant closings		286											286
Impairment of intangible assets		1,244											1,244
Loss on disposal of assets		839											839
Other operating (income) expense		(505	)										(505	)
Total costs and expenses, net		379,787											377,235

Other income (expenses)
Interest, dividend and other investment income		4,980							(4,335	)	y		645
Interest on obligations under leases		(5,199	)										(5,199	)
Interest expense		(3,796	)										(3,796	)
Realized investment gains/losses		1							(1	)	z		—
Other than temporary impairment losses on investments		(570	)						570		aa		—
Total other income (expenses)		(4,584	)										(8,350	)

Operating earnings before income tax		7,350											3,968

Income tax from operating earnings		(422	)		(702	)	u		970		bb		(154	)

Net operating earnings		7,772											4,122

Earnings of investment partnerships		—							49,930		cc		49,930
Income tax from earnings of investment partnerships		—							17,897		dd		17,897
Net earnings from investment partnerships		—											32,033

Net earnings		7,772											36,155
Earnings attributable to redeemable noncontrolling interest:
Income allocation		(1,051	)		1,051		v						—
Incentive fee		21			(21	)	w						—
Net earnings attributable to Biglari Holdings Inc.	$	6,742										$	36,155


Earnings per share attributable to Biglari Holdings Inc.
Basic earnings per common share	$	5.06										$	27.01
Diluted earnings per common share	$	5.05										$	26.96

Weighted average shares and equivalents
Basic		1,333,225							5,207		ee		1,338,432
Diluted		1,335,888							5,207		ee		1,341,095

BIGLARI HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except share and per share data)	Fifty-Two Weeks Ended

	September 26, 2012 (As Reported)			Deconsolidation				Asset Contribution				September 26, 2012 (Pro Forma)
				(Unaudited)				(Unaudited)				(Unaudited)
Net revenues
Restaurant Operations:
Net sales	$	721,754										$	721,754
Franchise royalties and fees		9,631											9,631
Other revenue		2,520											2,520
Total		733,905											733,905
Consolidated Affiliated Partnerships:
Investment gains/losses		5,942			(5,942	)	s						—
Other income		360			(360	)	t						—
Total		6,302											—
Total net revenues		740,207											733,905

Costs and expenses
Cost of sales		207,234											207,234
Restaurant operating costs		337,905											337,905
General and administrative		64,286							(7,374	)	x		56,912
Depreciation and amortization		26,424											26,424
Marketing		42,531											42,531
Rent		17,638											17,638
Pre-opening costs		430											430
Asset impairments and provision for restaurant closings		901											901
Loss on disposal of assets		611											611
Other operating (income) expense		(934	)										(934	)
Total costs and expenses, net		697,026											689,652

Other income (expenses)
Interest, dividend and other investment income		4,000							(3,910	)	y		90
Interest on obligations under leases		(10,073	)										(10,073	)
Interest expense		(8,155	)										(8,155	)
Loss on debt extinguishment		(1,955	)										(1,955	)
Realized investment gains/losses		4,200							(4,152	)	z		48
Total other income (expenses)		(11,983	)										(20,045	)

Operating earnings before income tax		31,198											24,208

Income tax from operating earnings		6,453			(3,213	)	u		2,802		bb		6,042

Net operating earnings		24,745											18,166

Earnings of investment partnerships		—							68,291		cc		68,291
Income tax from earnings of investment partnerships		—							24,936		dd		24,936
Net earnings from investment partnerships		—											43,355

Net earnings		24,745											61,521
Earnings attributable to redeemable noncontrolling interest:
Income allocation		(3,188	)		3,188		v						—
Incentive fee		36			(36	)	w						—
Net earnings attributable to Biglari Holdings Inc.	$	21,593										$	61,521


Earnings per share attributable to Biglari Holdings Inc.
Basic earnings per common share	$	16.19										$	45.94
Diluted earnings per common share	$	16.15										$	45.83

Weighted average shares and equivalents
Basic		1,334,007							5,207		ee		1,339,214
Diluted		1,337,268							5,207		ee		1,342,475

Basis of Presentation

The unaudited pro forma condensed consolidated financial statements present the impact on our financial position and the results of the operations of our sale and deconsolidation of Biglari Capital Corp. (“Biglari Capital”) to Sardar Biglari, our Chairman and Chief Executive Officer, for a purchase price of $1,700,000. Biglari Capital is the general partner of The Lion Fund, L.P. (“TLF I”) and the newly-formed The Lion Fund II, L.P. (“TLF II” and, together with TLF I, the “Lion Fund”). Prior to the sale the Company consolidated the affiliated partnerships in its financial statements. Because of our retained limited partner interests in the Lion Fund, our interests are accounted for prospectively as equity method investments.

The unaudited pro forma financial statements also present the impact of our contribution of securities to TLF I and TLF II in exchange for limited partner interests in each of these investment partnerships. The adjustments are based on the assumption that the contribution of securities occurred on April 10, 2013 (for purposes of preparing the pro forma balance sheet) or September 29, 2011 (for purposes of preparing the pro forma statements of earnings). Prior to the contributions, the securities were accounted for as available for sale securities with unrealized gains and losses recorded as a component of Accumulated Other Comprehensive Income on the balance sheet. Prospectively, the Company will record earnings from investment partnerships (inclusive of the investment partnerships’ unrealized gains and losses from the securities) on the statement of earnings from our proportional ownership interest in the Lion Fund’s total earnings.

The pro forma adjustments in the column labeled “Deconsolidation” principally give effect to the sale and deconsolidation of Biglari Capital and TLF I, as a result of the sale of Biglari Capital to Mr. Biglari.

The pro forma adjustments in the column labeled “Asset Contribution” principally give effect to the contribution of securities by the Company to TLF I and TLF II in exchange for limited partner interests and the impact of the amendment to the Incentive Agreement between the Company and Mr. Biglari.

The unaudited pro forma condensed consolidated balance sheet gives effect to the Transactions as if they had occurred on April 10, 2013, while the unaudited pro forma condensed consolidated statements of earnings for the twenty-eight weeks ended April 10, 2013 and fiscal year ended September 26, 2012, respectively, give effect to the Transactions as if they had occurred on September 29, 2011 (the beginning of fiscal 2012).

For purposes of the Asset Contribution pro forma adjustments, it was assumed that securities consistent with those contributed in the Transactions were contributed in the historical periods, including any purchases of such securities during the periods presented. The pro forma impact to the statement of earnings is based on the actual investment gains and losses of such securities during the periods presented. As no predictive value exists with respect to investment earnings, the unaudited pro forma condensed consolidated statement of earnings should not be considered indicative of the Company’s future performance. Actual results could differ materially.

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of Earnings

Adjustments to Balance Sheet Relating to Deconsolidation

Reflects the cash consideration received from Sardar Biglari, our Chairman and Chief Executive Officer, for the sale of Biglari Capital .

Reflects the deconsolidation of previously recorded receivables of Biglari Capital and TLF I.

Reflects the recording of the Company’s retained limited partner interest in TLF I subsequent to the Transactions. Such amount is accounted for as an equity method investment.

Reflects the deconsolidation of investments held by consolidated affiliated partnerships.

Reflects the deconsolidation of previously recorded accrued expenses of Biglari Capital and TLF I and the increase in taxes payable for the gain on sale of Biglari Capital.

Reflects the deconsolidation of the previously recorded non-controlling interests in TLF I.

Reflects an adjustment for shares of Company common stock held by TLF I (and recorded as treasury stock) from the fair value of the Company’s stock at the time of the initial consolidation to the fair value of the Company’s stock at the time of deconsolidation.

Reflects the increase in net earnings due to the gain on sale of Biglari Capital.

Reflects the net decrease in treasury stock as a result of the deconsolidation of TLF I and recording of the Company’s retained limited partner interest in TLF I as an equity method investment. Prior to the transaction, all shares of Company common stock held by TLF I were recorded as treasury stock in the Company’s balance sheet. Prospectively, only the Company’s proportional share of Company common stock held by TLF I will recorded as treasury stock (based on the Company’s interest in TLF I) .

Adjustments to Balance Sheet Relating to Asset Contribution

Reflects the impact of the Company’s contribution of securities to TLF I and TLF II at fair value as of April 10, 2013 in exchange for equity method investments in the investment partnerships. The adjustment is based on the assumption that securities consistent with those contributed in the Transactions were contributed on April 10, 2013 .

Reflects the impact to deferred taxes of the Company’s contribution of securities to TLF I and TLF II.

Reflects the contribution of certain of the Company’s available for sale securities to TLF I and TLF II (see note j). Also reflects the impact of a related adjustment to treasury stock for the Company’s increased proportional ownership in TLF I, which holds shares of the Company’s common stock (see note r). The investments in TLF I and TLF II will be accounted for as equity method investments.

Reflects the decrease in accrued expenses as a result of the amendment to the Incentive Agreement between the Company and Mr. Biglari, net of the related impact on income taxes payable.

Reflects the impact to deferred taxes of the Company’s contribution of securities to TLF I and TLF II consisting primarily of a reclassification of the current deferred tax liability for unrealized gains on available for sale securities to non-current.

Reflects the impact to retained earnings relating to the recognition of the unrealized gain on available for sale securities (see note q) and the decrease to Mr. Biglari’s accrued incentive compensation (see note m), net of tax.

Reflects the recognition of the unrealized gain on available for sale securities recorded in Accumulated other comprehensive income, upon the contribution of such securities by the Company to TLF I and TLF II, based on the fair values of such securities on April 10, 2013 .

Reflects the increase in the Company’s proportional ownership of shares of Company stock held by TLF I. The increase results from additional limited partner interests issued to the Company in exchange for its contribution of securities to TLF I.

Adjustments to Statement of Earnings Relating to Deconsolidation

Reflects the removal of investment gains and losses from consolidated affiliated partnerships due to the deconsolidation of Biglari Capital and TLF I.

Reflects the removal of income from consolidated affiliated partnerships due to the deconsolidation of Biglari Capital and TLF I.

Reflects the impact to income tax expenses resulting from the adjustments for the items discussed in notes s, t, v, and w due to the deconsolidation of Biglari Capital and TLF I.

Reflects the removal of earnings attributable to redeemable noncontrolling interest due to the deconsolidation of Biglari Capital and TLF I.

Reflects the removal of the incentive fee received by Biglari Capital due to the deconsolidation of Biglari Capital and TLF I.

Adjustments to Statement of Earnings Relating to Asset Contribution

Reflects the decrease in Mr. Biglari’s accrued incentive compensation due to the contribution of securities by the Company to TLF I and TLF II and the amendment to the Incentive Agreement between the Company and Mr. Biglari.

Reflects the removal of interest, dividend and other investment income directly relating to the available for sale securities contributed by the Company to TLF I and TLF II.

Reflects the removal of realized investment gains directly relating to the available for sale securities contributed by the Company to TLF I and TLF II.

aa)

Reflects the removal of other than temporary impairment losses on investments directly relating to the available for sale securities contributed by the Company to TLF I and TLF II.

bb)

Reflects the impact to income tax expense resulting from the adjustments for items discussed in note x due to the deconsolidation of Biglari Capital and TLF I.

cc)

Reflects earnings from investment partnerships under the equity method of accounting due to the contribution of available for sale securities by the Company to TLF I and TLF II. The adjustment is calculated based on the actual investment earnings during the periods presented for the assumed securities contributed. Unrealized investment gains and losses for the securities had previously been recorded in other comprehensive income because the specific securities contributed by the Company were classified as available for sale .

dd)

Reflects the impact to income tax expense resulting from the adjustments for items discussed in notes y, z, aa and cc due to the deconsolidation of Biglari Capital and TLF I.

ee)

Reflects the net increase in weighted average shares and equivalents outstanding as a result of changes to the Company’s retained limited partner interest in TLF I as an equity method investment .