Exhibit 10.3
 
FIRST AMENDMENT
 
TO
 
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.
 
 
 

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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).
 
 
 

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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.
 
 
 

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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

 
 
 

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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]
 
 
 

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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