Exhibit 10.3


    Exhibit 10.3

    
 

    THE
      STEAK N SHAKE COMPANY

    


     

    


    SENIOR
      SERIES I NOTE 

    


    


    No.
      2006
      I-3         PPN:
      857873
      A@
      2

    ORIGINAL
      PRINCIPAL AMOUNT: $3,200,000.00

    ORIGINAL
      ISSUE DATE: October 27, 2006

    INTEREST
      RATE: 5.66% per annum

    INTEREST
      PAYMENT DATES: January
      27, April 27, July 27 and

    
      	
               

            	 	 	 	 	
              October
                27, commencing January 27, 2007

            


    

    FINAL
      MATURITY DATE: October 27, 2011

    PRINCIPAL
      PREPAYMENT DATES AND AMOUNTS: $1,066,666.67
      annually on

    October
      27th
      of each
      year, commencing 

    October
      27, 2009.

    


    


    FOR
      VALUE
      RECEIVED, the undersigned, Steak N Shake Company (herein called the "Company"),
      a corporation organized and existing under the laws of the State of Indiana,
      hereby promises to pay to UNITED OF OMAHA LIFE INSURANCE COMPANY, or registered
      assigns, the principal sum of THREE MILLION TWO HUNDRED THOUSAND DOLLARS
      ($3,200,000.00), payable on the Princi-pal Prepayment Dates and in the amounts
      specified above, and on the Final Maturity Date specified above in an amount
      equal to the unpaid balance of the principal here-of, with interest (computed
      on
      the basis of a 360-day year--30-day month) (a) on the unpaid balance thereof
      at
      the Interest Rate per annum specified above, payable on each Interest Payment
      Date specified above and on the Final Maturity Date specified above, commencing
      with the Interest Payment Date next succeeding the date hereof, until the
      principal hereof shall have become due and pay-able, and (b) on any overdue
      payment (including any overdue prepayment) of principal, any overdue payment
      of
      Yield Maintenance Amount and any overdue payment of interest, payable on each
      Interest Payment Date as aforesaid (or, at the option of the registered holder
      hereof, on demand), at a rate per annum from time to time equal to the greater
      of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of
      interest publicly announced by Morgan Guaranty Trust Com-pany of New York from
      time to time in New York City as its Prime Rate.

    


    Payments
      of principal, Yield Maintenance Amount, if any, and interest are to be made
      at
      the main office of Morgan Guaranty Trust Company of New York in New York City
      or
      at such other place as the holder hereof shall designate to the Company in
      writing, in lawful money of the United States of America.


    


    This
      Note
      is one of a series of Senior Notes (herein called the "Notes") issued pursuant
      to the Amended and Restated Note Purchase and Private Shelf Agreement, dated
      as
      of September 20, 2002 (as amended from time to time, the "Agree-ment"), between
      the Company, on the one hand, and The Prudential Insurance Company of America
      and each Prudential Affiliate (as defined in the Agreement) which becomes party
      thereto, on the other hand, and is entitled to the benefits
      thereof.

    


    This
      Note
      is subject to optional prepayment, in whole or from time to time in part, on
      the
      terms specified in the Agreement. 

    


    This
      Note
      is a registered Note and, as provided in the Agreement, upon surrender of this
      Note for registration of transfer, duly endorsed, or accompanied by a written
      instrument of transfer duly executed, by the registered holder hereof or such
      holder's attorney duly authorized in writing, a new Note for the then
      outstanding principal amount will be issued to, and registered in the name
      of,
      the transferee. Prior to due presentment for registration of transfer, the
      Company may treat the person in whose name this Note is registered as the owner
      hereof for the purpose of receiving payment and for all other purposes, and
      the
      Company shall not be affected by any notice to the contrary.

    


    In
      case
      an Event of Default shall occur and be continuing, the principal of this Note
      may be declared or otherwise become due and payable in the manner and with
      the
      effect provided in the Agreement.

    


    Capitalized
      terms used and not otherwise defined herein shall have the meanings (if any)
      provided in the Agreement.

    


    THIS
      NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF ILLINOIS AND SHALL BE CONSTRUED
      AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS (AS OPPOSED
      TO
      THE CONFLICTS OF LAW PROVISIONS) OF SUCH STATE.

    


    


    STEAK
      N SHAKE COMPANY

    


    


    


                  By: /s/
      Jeffrey A. Blade   

       
Name: Jeffrey
      A. Blade

                    Title:
      Senior Vice President, Chief Financial Officer