Document:

exh10_3.htm

     

     

    
      

      

    

     

    Exhibit
10.3

    FIRST
AMENDMENT

    TO

    AGREEMENT OF PURCHASE AND
SALE OF

    LIMITED LIABILITY COMPANY
MEMBERSHIP INTERESTS

    

               THIS
FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE OF LIMITED LIABILITY COMPANY
MEMBERSHIP INTERESTS (“Agreement”) is made
and entered into this ______ day of March, 2008 by and between RESOURCE
AMERICA, INC., a Delaware corporation (“Seller”) and RSI
ASSOCIATES, LLC, a Delaware limited liability company (“Purchaser”).

     

    RECITALS

     

    A.           Seller
and Purchaser entered into an Agreement of Purchase and Sale of Limited
Liability Company Membership Interests on February 21, 2008 (the “Agreement”) wherein
Seller agreed to sell membership interests in Resource RSI Phase 1, LLC, a
Delaware limited liability company (“RSI I”) and Resource
RSI Phase II, LLC, a Delaware limited liability company (“RSI II”) to
Purchaser..

    

    B. Seller
and Purchaser desire to amend the Agreement pursuant to the terms
hereof.

    

    C. All
capitalized terms not otherwise defined herein shall have the meaning assigned
to such terms in the Agreement.

    

    AGREEMENT

    

    NOW, THEREFORE, in consideration of the
premises and the mutual covenants hereinafter set forth, Seller and Purchaser
hereby agree to amend the Agreement as follows:

    

    1.           Purchase
Price.    On the Initial Closing Date, the purchase
price for the 19.99% interest being acquired by Purchaser shall be shall be One
Million Thirty Three Thousand Nine Hundred Seventy Six and 04/100 Dollars
($1,033,976.04) which shall be paid to Seller by cash, certified or bank check
delivered at 1845 Walnut Street, Philadelphia, PA, Attn: Alan Feldman or by wire
transferred funds to such account as Seller may designate.  The
Purchase Price shall be allocated 65% to the purchase of the interest in RSI I
and 35% to the purchase of the interest in RSI II.

     

    2.           Organization
Fee.  Purchaser shall pay to Seller on the Initial Closing
Date, an organization fee equal to One Hundred Thirty Thousand One Hundred
Eighty Nine and 45/100 Dollars ($130,189.45).

     

    3.           Effectiveness of
Agreement.  Except as
modified by this Amendment, all the terms of the Agreement shall remain
unchanged and in full force and effect.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed as
of the day and year first above written.

     

    
      	
               
      

            	
              SELLER:

            	
              RESOURCE
      AMERICA, INC.,

            

    

    
      	
               
      

            	
              a
      Delaware corporation

            

    

    

    

    By               ______________________                                                 

    Name:

    Title:

    

    

    

    
      	
               
      

            	
              PURCHASER:

            	
              RSI ASSOCIATES, LLC, a
      Delaware limited liability company

            

    

    

    

    By               ______________________                                                        

                                      
Adam Kauffman, Managerexhibit4_01.htm

    EXHIBIT
      4.01

    EXECUTION
      VERSION

     

    

    May
      16,
      2008

    

    The
      Steak
      N Shake Company

    500
      Century Building

    36
      South
      Pennsylvania Street

    Indianapolis,
      Indiana 46204

    Attention:  Chief
      Financial Officer

    

    
      	
               

            	
              Re:

            	
              Amendment
                No. 7 to Amended and Restated Note Purchase and Private Shelf
                Agreement

            

    

    

    Ladies
      and Gentlemen:

    

    Reference
      is made to that certain
      Amended and Restated Note Purchase and Private Shelf Agreement dated as of
      September 20, 2002, as amended by that certain Amendment No. 1 dated December
      18, 2002, that certain Amendment No. 2 dated May 21, 2003, that certain
      Amendment No. 3 dated September 17, 2003, that certain Amendment dated November
      7, 2005, that certain Amendment No. 5 dated October 30, 2007 and that certain
      Amendment No. 6 dated December 5, 2007 (as so amended, the “Note Agreement”) among The
      Steak N Shake Company, an Indiana corporation (the “Company”), Prudential
      Investment Management, Inc., The Prudential Insurance Company of America and
      each Prudential Affiliate which has or may become a party thereto in accordance
      with the terms thereof (collectively, “Prudential”), pursuant to
      which the Company issued and sold and Prudential purchased the Company’s senior
      fixed rate notes from time to time.  Capitalized terms used herein and
      not otherwise defined herein shall have the meanings assigned to such terms
      in
      the Note Agreement.

    

    Pursuant
      to the request of the Company
      and in accordance with the provisions of paragraph 11C of the Note Agreement,
      the parties hereto agree as follows:

    

    SECTION
      1.  Amendment.  From
      and after
      the Effective Date (as defined in Section 3 below), the Note Agreement is
      amended as follows:

    

    1.1           
      Paragraph 4B of the Note Agreement is amended in its entirety as
      follows:

    

    “4B.             Required
      Prepayments of Shelf Notes
      and under Intercreditor Agreement.

    

     4B(1).        Required
      Prepayments of Shelf Notes.
Each Series of Shelf Notes shall be subject to required prepayments,
      if
      any, set forth in the Notes of such Series.

    

     4B(2).        Required
      Prepayment Pursuant to
      Intercreditor Agreement.  If any amounts are to be applied to
      the principal of the Notes on any date pursuant to the terms of the
      Intercreditor Agreement, such principal amount of the Notes, together with
      interest thereon to such date and together with the Yield-Maintenance Amount,
      if
      any, with respect to each Note, shall be due and payable on such
      date.  Any partial prepayment of the Notes pursuant to this paragraph
      4B(2) shall be applied in satisfaction of the required payments of principal
      thereof (including the required payment of principal due upon the maturity
      thereof) in the inverse order of their scheduled due dates.

     

    1.2           
      Paragraph 4E of the Note Agreement is amended in its entirety as
      follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “4E.             Application
      of
      Prepayments.  In the case of each prepayment of less than the
      entire unpaid principal amount of all outstanding Notes of any Series pursuant
      to paragraphs 4A or 4B(1), the amount to be prepaid shall be applied pro rata
      to
      all outstanding Notes of such Series (including, for the purpose of this
      paragraph 4E only, all Notes prepaid or otherwise retired or purchased or
      otherwise acquired by the Company or any of its Subsidiaries or Affiliates
      other
      than by prepayment pursuant to paragraph 4A, 4B or 4C) according to the
      respective unpaid principal amounts thereof.  In the case of each
      prepayment of less than the entire unpaid principal amount of all outstanding
      Notes pursuant to paragraph 4B(2) or 4C, the amount to be prepaid shall be
      applied pro rata to all outstanding Notes (excluding any Notes prepaid or
      otherwise retired or purchased or otherwise acquired by the Company or any
      of
      its Subsidiaries or Affiliates) according to the respective unpaid principal
      amounts thereof.”

    

    1.3           
      Paragraph 5A is amended by deleting the “and” at the end of clause (iv) thereof,
      renumbering clause (v) therein as clause (vi) and adding a new clause (v)
      thereto as follows:

    

    “(v)              Simultaneously
      with the transmission thereof, copies of all notices, reports, financial
      statements or other communications given to the Bank Agent or any Bank under
      a
      Credit Agreement, excluding routine borrowing requests; and”

     

    1.4           
      Paragraph 5G of the Note Agreement is amended in its entirety as
      follows:

     

    “5G.            Change
      in Control Put
      Option.  The Company covenants that within three Business Days
      after any Responsible Officer shall obtain knowledge of the occurrence of a
      Change in Control Event, the Company shall provide each holder of Notes written
      notice thereof, describing in reasonable detail the facts and circumstances
      constituting such Change in Control Event.  Following the occurrence
      of any Change in Control Event, if at any time prior to 15 Business Days after
      receipt of notice thereof, the holder of any Note requests in writing that
      the
      Company purchase the Note(s) held by such holder, the Company shall, on the
      20th
      Business Day after such receipt of such notice, purchase (and each such holder
      thereof shall sell) such Note(s) at a purchase price equal to the aggregate
      outstanding principal amount thereof, together with interest thereon to the
      date
      of purchase and the Yield-Maintenance Amount, if any, with respect
      thereto.

    

    No
      holder of any Note to be sold
      pursuant to the paragraph 5G shall be required to make any representation or
      warranty in connection with such sale, other than with respect to its ownership
      of its Note.”

    

    1.5           
      New paragraph 5I is added to the Note Agreement as follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5I.               Deliveries;
      Further
      Assurances.  The Company covenants to, and to cause each
      Guarantor to, at its sole expense, promptly execute and deliver, or cause to
      be
      executed and delivered, to the holders of the Notes or the Collateral Agent,
      in
      due form for filing or recording (the Company hereby agrees to pay the cost
      of
      filing or recording the same (including without limitation any and all filing
      fees and recording taxes)) in all public offices necessary or deemed necessary
      by the Required Holder(s) or the Collateral Agent, such collateral assignments,
      security agreements, pledge agreements, warehouse receipts, bailee letters,
      consents, waivers, financing statements and other instruments and documents,
      and
      do such other acts and things, including, without limitation, all acts and
      things as the Required Holder(s) or the Collateral Agent may from time to time
      reasonably request, to establish and maintain to the satisfaction of the
      Required Holder(s) and the Collateral Agent a valid and perfected first priority
      security interest in favor of the Collateral Agent in all of the present and/or
      future Collateral free of all other Liens whatsoever (subject only to the Liens
      permitted by clauses (i), (ii), (iii), (iv) and (vi) of paragraph 6C(1)), and
      to
      deliver to the Collateral Agent or the holders of the Notes such certificates,
      documents, instruments and opinions in connection therewith as may be reasonably
      requested by the Collateral Agent or the Required Holder(s), each in form and
      substance reasonably satisfactory to the Collateral Agent and the Required
      Holder(s).  The Company hereby irrevocably makes, constitutes and
      appoints the Collateral Agent (and all other persons designated by the
      Collateral Agent for that purpose) as the Company’s true and lawful agent and
      attorney-in-fact to, if the Company fails to do so as required upon the request
      of the Required Holder(s) or the Collateral Agent, sign the Company’s name on
      any such agreements, instruments and documents referred to in the preceding
      sentences and to deliver such agreements, instruments and documents to such
      Persons as the Required Holder(s) or the Collateral Agent in their sole
      discretion may elect.”

     

    1.6           
      Paragraph 6A of the Note Agreement is amended in its entirety to read as
      follows:

    

    “6A.             Debt
      Service Coverage
      Ratio.  The Company will not permit the Debt Service Coverage
      Ratio to be less than (i) 0.90 to 1.00 at any time on or prior to the fiscal
      period ending on (or nearest to) December 19, 2007, (ii) 0.70 to 1.00 at any
      time on or after the fiscal period beginning on (or nearest to)
      December 19, 2007 to the fiscal period ending on (or nearest to) March
      31, 2009 and (iii) 1.25 to 1.00 at any other time.”

    

    1.7           
      Paragraph 6C(1) (Liens) of the Note Agreement is amended by deleting the “and”
at the end of clause (iv) thereof, amending clause (v) therein in its entirety
      as follows and adding a new clause (vi) thereto as follows:

    

    “(v)
      Liens in favor of the Collateral Agent securing the Senior Indebtedness (as
      defined in the Intercreditor Agreement); provided that the Intercreditor
      Agreement is in full force and effect; and

    

    (vi)              other
      Liens of the Company or Subsidiaries, so long as Priority Debt at no time
      exceeds $750,000 (notwithstanding the foregoing in this clause (vi), the basket
      provided in this clause (vi) shall not be used to provide credit enhancements
      (in any form, including Liens and Guarantees) to the lenders under a Credit
      Agreement);”.

    

    1.8           
      Clauses (i), (ii) and (v) of paragraph 6C(2) (Debt) of the Note Agreement are
      amended and restated to read in their entirety as follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “(i)
      Debt
      of any Subsidiary to the Company or a Wholly-Owned Subsidiary and Debt of the
      Company to any Wholly-Owned Subsidiary;

    

    (ii)
      Debt
      of any Subsidiary under a Guarantee of Indebtedness or other obligations of
      the
      Company under a Credit Agreement, provided that such Subsidiary is party to
      the
      Guaranty Agreement and the Intercreditor Agreement is in full force and effect
      and applicable to such Guarantee;”

    

    ....

    

    (v)
      other
      Debt of the Company or Subsidiaries, so long as Priority Debt at no time exceeds
      $750,000 (notwithstanding the foregoing clause (v), the Debt basket provided
      in
      this clause (v) shall not be used to provide credit enhancements (in any form,
      including Guarantees or Liens) to the lenders under a Credit
      Agreement);”

    

    1.9           
      The proviso appearing at the end of paragraph 6C(2) (Debt) of the Note Agreement
      is amended in its entirety and the following is hereby substituted
      therefore:

    

    “provided
      that for each period of four
      (4) consecutive fiscal quarters, the Company shall, at all times, maintain
      a
      ratio of Consolidated Debt to consolidated EBITDA (the “Leverage Ratio”) not exceeding
      (i) 3.75 to 1.00 for the four (4) consecutive fiscal quarter periods ending
      on
      (or nearest to) December 30, 2007, (ii) 4.75 to 1.00 for the four (4)
      consecutive fiscal quarter periods ending on (or nearest to) March 30, 2008,
      June 29, 2008 and September 30, 2008, (iii) 4.00 to 1.00 for the four
      consecutive fiscal quarter periods ending on (or nearest to) December 31, 2008,
      (iv) 3.50 to 1.00 for the four consecutive fiscal quarter periods ending on
      (or
      nearest to) March 31, 2009, and (v) 2.75 to 1.00 at any other time; further
      provided that for purposes of the Leverage Ratio, all current and future
      Capitalized Lease Obligations shall, for so long as the underlying leases are
      in
      effect, at all times be included in the computation of Consolidated Debt of
      the
      Company notwithstanding any subsequent reclassification of such Capitalized
      Lease Obligations as operating leases under generally accepted accounting
      principles (and with respect to such rental obligations that are reclassified
      as
      operating leases, the amount of such rental obligations included in the
      computation of Consolidated Debt shall be the amount that would otherwise be
      required to be capitalized in accordance with generally accepted accounting
      principles if such rental obligations were in fact Capitalized Lease Obligations
      (it being understood and agreed that if the Company and/or its Subsidiaries
      has
      Capitalized Lease Obligations at the time of calculating the capitalized amount
      of such operating leases, such calculation of the capitalized amount of such
      operating leases shall be performed consistent with the methodology used to
      calculate the capitalized amount of such Capitalized Lease
      Obligations)).  Together with the delivery of financial statements
      required by paragraphs 5A(i) and (ii), for each Capitalized Lease Obligation
      reclassified as an operating lease the Company will deliver to each Significant
      Holder an Officer’s Certificate demonstrating the computation (including
      disclosing the discount rate used in each such computation) of the capitalized
      portion of such operating lease required to be included in the computation
      of
      Consolidated Debt for purposes of the Leverage Ratio pursuant to the immediately
      preceding proviso.”

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.10                      
      Paragraph 6C(2A) is amended in its entirety to read as follows:

    

    “6C(2A).    Leverage
      Fee.  In
      addition to interest accruing on the Notes, the Company agrees to pay to the
      holders of the Notes a fee (the “Leverage Fee”) with respect
      to each fiscal quarter of the Company, beginning with the fiscal quarter ending
      on (or nearest to) March 31, 2008, on the last day of which the Leverage Ratio
      for the four most recent fiscal quarters then ended is equal to or greater
      than
      3.00 to 1.00.  The Leverage Fee payable with respect to each Note
      shall be a dollar amount equal to (a) the product obtained by multiplying (i) (A)
      .010 if the Leverage Ratio is less than 4.00 to 1.00, and (B) .025 if the
      Leverage Ratio is equal to or greater than 4.00 to 1.00, in either case times (ii) the
      Weighted Dollar Average (as defined below) of the principal balance of such
      Note
      during the fiscal quarter to which the Leverage Fee relates and (b) dividing
      the
      product thus obtained by four.  The Leverage Fee for each applicable
      fiscal quarter shall be payable in arrears on the date upon which the financial
      statements for such fiscal quarter are to be delivered under paragraph 5A(i)
      (or
      paragraph 5A(ii), if the applicable fiscal quarter is the last fiscal quarter
      in
      a fiscal year).  If the Company fails to deliver financial statements
      under paragraphs 5A(i) or 5A(ii) for any fiscal quarter or fiscal year by the
      date such delivery is due, and fails to provide such financial statements within
      five (5) days of written notice of such failure given to the Company, then
      the
      Company shall be deemed to owe the Leverage Fee for such fiscal quarter and
      shall make the payment required for such fiscal quarter on the date due pursuant
      to the preceding sentence.  Payment of the Leverage Fee shall be made
      pursuant to the terms of paragraph 11A.

    

    The
      acceptance of the Leverage Fee by any holder of a Note shall not constitute
      a
      waiver of any Default or Event of Default, including, without limitation, any
      Default or Event of Default under paragraph 6C(2).  The consequences
      for the failure to pay the Leverage Fee when due shall be governed by paragraph
      7A(ii) hereof, treating the Leverage Fee, for such purposes and for the purpose
      of determining the amount payable upon acceleration of the Notes, as
      interest.

    

    As
      used
      in this paragraph 6C(2A), “Weighted Dollar Average”
      shall mean, with respect to any Note, during any fiscal quarter of the Company,
      a dollar amount determined by adding together the daily outstanding principal
      balance of such Note during such fiscal quarter and dividing the amount thus
      obtained by the total number of days in such fiscal quarter.”

    

    1.11                      
      Paragraph 6C(3) of the Note Agreement is amended in its entirety to read as
      follows:

    

    “6C(3).       Consolidated
      Net
      Worth.  The Company will at all times keep and maintain
      Consolidated Net Worth at an amount not less than $270,000,000.”

    

    1.12                      
      Paragraph 6C(4)(vi) of the Note Agreement is amended in its entirety to read
      as
      follows:

    

    “(vi)
      [Intentionally Omitted]; and”

     

    1.13                      
      Clause (ii) of paragraph 6C(6) is amended in its entirety as
      follows:

    

    “(ii)             any
      Guarantor may merge or consolidate with or into another Guarantor and any
      Subsidiary that is not a Guarantor may merge or consolidate with or into a
      Wholly-Owned Subsidiary, and”

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.14                      
      Paragraph 6C(7) of the Note Agreement is amended by amending clauses (ii) and
      (iii) thereof in their entirety as follows:

    

    “(ii)             any
      Guarantor may Transfer assets to the Company or another Guarantor and any
      Subsidiary that is not a Guarantor may Transfer assets to the Company or a
      Wholly-Owned Subsidiary, and

    

    (iii)             the
      Company and Subsidiaries may otherwise Transfer assets for fair market value
      (as
      determined in good faith by the Company); provided that (a) the aggregate
      proceeds realized for all Transfers of assets pursuant to this clause (iii)
      does
      not exceed $50,000,000, (b) the proceeds from any such Transfer are used for
      working capital purposes or applied to reduce the Indebtedness outstanding
      under
      the Credit Agreement or to prepay the Notes pursuant to paragraph 4C and (c)
      the
      aggregate amount of proceeds from all such Transfers that are used for working
      capital purposes and are not used to reduce Indebtedness outstanding under
      the
      Credit Agreement or prepay Notes pursuant to paragraph 4C does not exceed
      $10,000,000.”

    

    1.15                      
      A new paragraph 6C(11) is added to the Note Agreement as follows:

    

    “6C(11).     Restricted
      Payments.  At any time declare or make, or become obligated to
      declare or make, any Restricted Payment, except that the Company may repurchase
      outstanding shares of its common stock so long as, at the time of any such
      repurchase and after giving effect thereto (i) the Leverage Ratio for the four
      (4) consecutive fiscal quarter periods ending on the fiscal quarter most
      recently ended (assuming for this purpose that such share repurchase had
      occurred on the last day of such fiscal quarter) is not greater than 2.75 to
      1.00, (ii) the Debt Service Coverage Ratio (assuming for this purpose that
      such
      share repurchase had occurred on the last day of the fiscal quarter most
      recently ended) is not less than 1.25 to 1.00, and (iii) no Default or Event
      of
      Default shall exist.”

     

    1.16                      
      A new paragraph 6D is added to the Note Agreement as follows:

    

    “6D.            Availability
      under Credit
      Agreement.  The Company shall not permit at any time there not
      to be in full force and effect a commitment by the Banks under a Credit
      Agreement to make revolving loans to the Company in an aggregate outstanding
      principal amount of up to at least $30,000,000.”

     

    1.17                      
      Paragraph 7A of the Note Agreement is amended by amending clauses (iv) and
      (vi)
      in their entirety, adding “or” at the end of clause (xiv) thereof and adding a
      new clause (xv) as follows:

    

    “(iv)            
      any representation or warranty made by the Company or any Guarantor herein
      or in
      any other Transaction Document or by the Company or any Guarantor or any of
      its
      respective officers in any writing furnished in connection with or pursuant
      to
      this Agreement or any other Transaction Document shall be false or misleading
      in
      any material respect on the date as of which made; or”

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ...

    

    “(vi)           
       the Company fails to perform or observe any other agreement, term or
      condition contained herein and such failure shall not be remedied within 30
      days
      after any Responsible Officer obtains actual knowledge thereof, or the Company
      or any Guarantor fails to perform or observe any agreement contained in any
      other Transaction Document and such failure shall not be remedied within the
      grace period, if any, provided therefor in such Transaction Document;
      or”

    

    ...

    

    “(xv)            any
      Guaranty Agreement or any Collateral Document shall cease to be in full force
      and effect, or the Company or any Guarantor shall contest or deny the validity
      or enforceability of, or deny that it has any liability or obligations under,
      any Guaranty Agreement or any Collateral Document, or the Collateral Agent
      does
      not have or ceases to have a valid first priority perfected security interest
      (subject only to Liens permitted by clauses (i), (ii), (iii), (iv) and (vi)
      of
      paragraph 6C(1)) in any Collateral for the benefit of the holders of the
      Notes;”

     

    1.18                      
      Paragraph 7D of the Note Agreement is amended in its entirety as
      follows:

    

    “7D.            Other
      Remedies.  If
      any Event of Default or Default shall occur and be continuing, the holder of
      any
      Note may proceed to protect and enforce its rights under this Agreement, the
      other Transaction Documents and such Note by exercising such remedies as are
      available to such holder in respect thereof under applicable law, either by
      suit
      in equity or by action at law, or both, whether for specific performance of
      any
      covenant or other agreement contained in this Agreement or the other Transaction
      Documents or in aid of the exercise of any power granted in this Agreement
      or
      any Transaction Document.  No remedy conferred in this Agreement or
      the other Transaction Documents upon the holder of any Note or the Collateral
      Agent is intended to be exclusive of any other remedy, and each and every such
      remedy shall be cumulative and shall be in addition to every other remedy
      conferred herein or now or hereafter existing at law or in equity or by statute
      or otherwise.”

     

    1.19                      
      Paragraph 8A(1) of the Note Agreement is amended by adding the following
      sentence to the end thereof:

    

    “Schedule
      8A(1) hereto sets forth, as of the Seventh Amendment Effective Date, a correct
      list of each Subsidiary, its jurisdiction of incorporation and its ownership,
      and whether such Subsidiary is a guarantor or otherwise Guarantees any of the
      Indebtedness or other obligations of the Company or any Guarantor under the
      Credit Agreement.”

    

    1.20                      
      New paragraphs 8R and 8S are added to the Note Agreement as
      follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “8R.            Absence
      of Financing Statements,
      Etc.  Except with respect to the Liens permitted by paragraph
      6C(1) hereof, there is no financing statement, security agreement, chattel
      mortgage, real estate mortgage or other document filed or recorded with any
      filing records, registry or other public office, that purports to cover, affect
      or give notice of any present or possible future Lien on, or security interest
      in, any assets or property of the Company or any Subsidiary or any rights
      relating thereto.

     

    8S.             
      Establishment of Security
      Interest.  Schedule 8S sets forth as of the Seventh Amendment
      Effective Date a complete and accurate list of (i) the name, jurisdiction of
      organization and organizational identification number of the Company and each
      of
      its Subsidiaries, (ii) if the Company or any Subsidiary is not a “registered
      organization” (as defined in the UCC) organized under that law of a “State” (as
      defined in the UCC), the location of its place of business (if it has only
      one
      place of business) or its chief executive office (if it has more than one place
      of business), (iii) all real property owned or leased by the Company or any
      of
      its Subsidiaries, and (iv) all patents, trademarks, trade names, service marks,
      services names or copyrights owned or licensed by the Company or any of its
      Subsidiaries.  As of the Seventh Amendment Effective Date, all
      filings, assignments, pledges and deposits of documents or instruments have
      been
      made, and all other actions have been taken, that are necessary or advisable
      under applicable law and are required to be made or taken on or prior to the
      Seventh Amendment Effective Date under the provisions of this Agreement and
      the
      other Transaction Documents to create and perfect a security interest in the
      Collateral in favor of the Collateral Agent to secure the Notes, the Company’s
      obligations under the Credit Agreement and each Guarantor’s obligations under
      its Guaranty Agreement, subject to no Liens other than Liens permitted under
      clauses (i), (ii), (iii), (iv) and (vi) of paragraph 6C(1).  The
      Collateral and the Collateral Agent’s rights with respect to the Collateral are
      not subject to any setoff, claims, withholdings or other defenses (except any
      such setoff, claim or defense which could not, individually or in the aggregate,
      materially impair the rights of the Collateral Agent with respect to the
      Collateral).  The Company or a Subsidiary is the owner of the
      Collateral described in the Collateral Documents free from any Lien, security
      interest, encumbrance and any other claim or demand, except for Liens permitted
      under paragraph 6C(1).”

    

    1.21                      
      Paragraph 10A of the Note Agreement is amended by amending the following defined
      terms therein in their entirety as follows:

    

    “Called
      Principal” shall mean,
      with respect to any Note, the principal of such Note that is to be prepaid
      pursuant to paragraph 4B(2), 4C, is put to the Company pursuant to paragraph
      5G
      or is declared to be immediately due and payable pursuant to paragraph 7A,
      as
      the context requires.

    

    “Settlement
      Date” shall mean,
      with respect to the Called Principal of any Note, the date on which such Called
      Principal is to be prepaid pursuant to paragraph 4B(2) or 4C, is put to the
      Company pursuant to paragraph 5G or is declared to be immediately due and
      payable pursuant to paragraph 7A, as the context requires.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.22                      
      Paragraph 10B of the Note Agreement is amended by adding, or amending and
      restating, as applicable, the following defined terms:

    

    “Banks”
      shall mean Fifth Third
      Bank, and its respective successors and assigns, and any other lender from
      time
      to time party to a Credit Agreement.

     

    “Bank
      Agent” shall mean any
      Person which may from time to time be an agent for the Banks under a Credit
      Agreement.

     

    “Collateral”
      shall mean all
      accounts, accounts receivable, inventory, machinery, equipment, general
      intangibles, fixtures and all other tangible or intangible personal property
      of
      the Company and its Subsidiaries, whether now owned or hereafter acquired and
      whether now or hereafter existing.

     

    “Collateral
      Agent” shall mean
      Fifth Third Bank, in its capacity as collateral agent under the Intercreditor
      Agreement, and its successor and assigns in that capacity.

     

    “Collateral
      Documents” shall
      mean the Security Agreement and any other agreement, document or instrument
      in
      effect on the Seventh Amendment Effective Date or executed by the Company or
      any
      Subsidiary after the Seventh Amendment Effective Date under which the Company
      or
      such Subsidiary has granted a lien upon or security interest in any property
      or
      assets to the Collateral Agent to secure all or any part of the obligations
      of
      the Company under this Agreement or the Notes or of any Guarantor under any
      Guaranty Agreement, and all financing statements, certificates, documents and
      instruments relating thereto or executed or provided in connection therewith,
      each as amended, restated, supplemented or otherwise modified from time to
      time.

     

    “Credit
      Agreement” shall mean
      the Credit Agreement dated as of November 16, 2001 between the Company and
      the
      Fifth Third Bank, N.A., as amended, restated, supplemented or otherwise modified
      from time to time, or any agreement under which the Company refinances or
      replaces the loan facility under any Credit Agreement with a loan facility
      obtained from one or more financial institutions.

     

    “Debt
      Service Coverage Ratio”
      shall mean the ratio of (i) consolidated net income of the Company and
      Subsidiaries plus, to the extent deducted in determining the same, interest
      expense and rental expense to (ii) the sum of interest expense, rental expense,
      the current portion of all lease obligations and the current portion of Debt,
      in
      each case for the period of four consecutive fiscal quarters (or in the case
      of
      the current portion of Debt, as of the last day of the fiscal quarter) of the
      Company most recently ended as of any time of determination.

     

    “Distribution”
      shall mean, in
      respect of any corporation, association or other business entity,
      (i) dividends or other distributions or payments on capital stock or other
      equity interest of such corporation, association or other business entity
      (except distributions in such stock or other equity interest); and (ii) the
      redemption or acquisition of such stock or other equity interests or of
      warrants, rights or other options to purchase such stock or other equity
      interests (except when solely in exchange for such stock or other equity
      interests) unless made, contemporaneously, from the net proceeds of a sale
      of
      such stock or other equity interests.  Notwithstanding the foregoing,
      a Distribution shall not occur as a result of a participant in one of the
      Company’s shareholder-approved equity plans (an “Equity Plan”) paying any tax
      obligation associated with the vesting of restricted stock thereunder with
      shares pursuant to the terms of any such Equity Plan.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Guarantor”
      shall mean each
      Subsidiary of the Company which may at any time be a party to a Guaranty
      Agreement.

     

    “Guaranty
      Agreement” shall
      mean that certain Guaranty Agreement, dated as of May 16, 2008, by certain
      Subsidiaries in favor of the holders of the Notes, together with each joinder
      thereto, as the same may be amended, modified or supplemented from time to
      time
      in accordance with the provisions thereof.

     

    “Intercreditor
      Agreement”
      shall mean that certain Intercreditor and Collateral Agency Agreement, dated
      as
      of May 16, 2008, among Prudential, the holders of the Notes, the Banks and
      the
      Collateral Agent, as the same may be amended, modified or supplemented from
      time
      to time in accordance with the provisions thereof.

     

    “Priority
      Debt’ shall mean, as
      of any time of determination thereof, the aggregate amount of (i) Debt of the
      Company which is secured by any Lien (other than Liens permitted by paragraph
      6C(1)(v)) and (ii) Debt of Subsidiaries (including any Debt of a Subsidiary
      which consists of a Guarantee of Debt of the Company), excluding in each case
      any Debt described in clause (i), (ii) or (iv) of paragraph 6C(2).”

     

    “Restricted
      Payment” shall
      mean any Distribution in respect of the Company or any Subsidiary of the Company
      (other than on account of capital stock or other equity interests of a
      Subsidiary of the Company owned legally and beneficially by the Company or
      another Subsidiary of the Company), including, without limitation, any
      Distribution resulting in the acquisition by the Company of securities which
      would constitute treasury stock.  Notwithstanding the foregoing, a
      Restricted Payment shall not occur as a result of a participant in one of the
      Company’s shareholder-approved equity plans (an “Equity Plan”) paying any tax
      obligation associated with the vesting of restricted stock thereunder with
      shares pursuant to the terms of any such Equity Plan.

     

    “Security
      Agreement” shall
      mean that certain Security Agreement, dated as of May 16, 2008, by the Company
      and the Guarantors in favor of the Collateral Agent for the benefit of the
      Banks
      and the holders of the Notes, as the same may be amended, modified or
      supplemented from time to time in accordance with the provisions
      thereof.

     

    “Seventh
      Amendment” shall mean
      Amendment No. 7 to this Agreement, dated as of May 16, 2008, among the Company,
      Prudential and the holders of the Notes.

     

    “Seventh
      Amendment Effective
      Date” shall mean the “Effective Date”, as defined in the Seventh
      Amendment.

     

    “Transaction
      Documents” shall
      mean this Agreement, the Notes, the Intercreditor Agreement, the Company’s
      Acknowledgment to Intercreditor Agreement, the Guaranty Agreement, the
      Collateral Documents and the other agreements, documents, certificates and
      instruments now or hereafter executed or delivered by the Company or any
      Subsidiary or Affiliate in connection with this Agreement.

     

    “UCC”
      shall mean the Uniform
      Commercial Code as in effect in the State of Illinois.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.23                      
      The first sentence of paragraph 11B of the Note Agreement is amended by deleting
      the “and” at the end of clause (i) thereof, amending clause (ii) therein in its
      entirety as follows and adding a new clause (iii) thereto as
      follows:

    

    “(ii)                      
      the costs and expenses, including attorneys’ and financial advisory fees,
      incurred by such Purchaser or such Transferee in enforcing (or determining
      whether or how to enforce or cause the Collateral Agent to enforce) any rights
      under this Agreement, the Notes or any other Transaction Document (including,
      without limitation, to protect, collect, lease, sell, take possession of,
      release or liquidate any of the Collateral) or in responding to any subpoena
      or
      other legal process or informal investigative demand issued in connection with
      this Agreement or any other Transaction Document or the transactions
      contemplated hereby or thereby or by reason of your or such Transferee’s having
      acquired any Note, including without limitation costs and expenses incurred
      in
      any workout, restructuring or renegotiation proceeding or bankruptcy case;
      and
      (iii) all costs and expenses, including without limitation reasonable attorneys’
fees, preparing, recording and filing all financing statements, instruments
      and
      other documents to create, perfect and fully preserve and protect the Liens
      granted in the Collateral Documents and the rights of the holders of the Notes
      or of the Collateral Agent for the benefit of the holders of the Notes;
      and”

    

    1.24                      
      The Note Agreement is amended by adding new Schedules 8A(1) and 8S thereto
      in
      the form of Schedules 8A(1) and 8S attached hereto.

    

    SECTION
      2.  Representations
      and Warranties.  The Company
      represents and warrants that  (a) each representation and warranty set
      forth in paragraph 8 of the Note Agreement is true and correct as of the date
      of
      execution and delivery of this letter by the Company with the same effect as
      if
      made on such date (except to the extent such representations and warranties
      expressly refer to an earlier date, in which case they were true and correct
      as
      of such earlier date); (b) after giving effect to the amendments set forth
      in
      Section 1 hereof, no Event of Default or Default exists or has occurred and
      is
      continuing on the date hereof and (c) neither the Company nor any of its
      Subsidiaries has paid or agreed to pay, and neither the Company nor any of
      its
      Subsidiaries will pay or agree to pay, any fees or other consideration to any
      Bank or any other Person in connection with the amendment referenced in Section
      3.4 hereof except as set forth therein.

    

    SECTION
      3.  Conditions
      Precedent.  This letter
      shall
      be deemed effective on the date (the “Effective Date”) each of the
      following conditions shall have been satisfied:

    

    3.1           
      Documents.  Prudential
      shall have received original counterparts or, if satisfactory to Prudential,
      certified or other copies of all of the following, each duly executed and
      delivered by the party or parties thereto, in form and substance satisfactory
      to
      Prudential, dated the Effective Date unless otherwise indicated, and on the
      Effective Date in full force and effect with no event having occurred and being
      then continuing that would constitute a default thereunder or constitute or
      provide the basis for the termination thereof:

    

    (i)                 this
      letter;

     

    (ii)               
the
      Intercreditor Agreement;

     

    (iii)                      the
      Guaranty Agreement, in the form of Exhibit A attached
      hereto;

     

    (iv)                      
      the Security Agreement;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (vi)                      
      all chattel paper, instruments and documents of title in which the Collateral
      Agent has been granted a security interest and are then required under the
      Collateral Documents to be delivered to the Collateral Agent, together with
      the
      related transfer documents executed in blank, in each case received by the
      Collateral Agent, all Uniform Commercial Code financing statements perfecting
      the security interests and liens granted to the Collateral Agent, ready to
      be
      filed in all offices necessary to perfect such security interests and liens
      or
      deemed by Prudential to be advisable, and all such other certificates,
      documents, agreements, recording and filings necessary to establish a valid
      and
      perfected first priority lien and security interest (subject only to Liens
      described in clauses (i), (ii), (iii), (iv) and (vi) of paragraph 6C(1)) in
      favor of the Collateral Agent in all of the Collateral or deemed by Prudential
      to be advisable;

     

    (vii)                      a
      Secretary’s Certificate signed by the Secretary or an Assistant Secretary and
      one other officer of the Company and each Guarantor certifying, among other
      things, (a) as to the names, titles and true signatures of the officers of
      the
      Company or such Guarantor, as the case may be, authorized to sign the
      Transaction Documents to be delivered on the Effective Date to which the Company
      or such Guarantor, as the case may be, is a party, (b) that attached thereto
      is
      a true, accurate and complete copy of the certificate of incorporation or other
      formation document of the Company or such Guarantor, as the case may be,
      certified by the Secretary of State of the state of organization of the Company
      or such Guarantor, as the case may be, as of a recent date, (c) that attached
      thereto is a true, accurate and complete copy of the by-laws, operating
      agreement, partnership agreement or other organizational document of the Company
      or such Guarantor, as the case may be, which were duly adopted and are in effect
      as of the Effective Date and have been in effect immediately prior to and at
      all
      times since the adoption of the resolutions referred to in clause (d), below,
      (d) that attached thereto is a true, accurate and complete copy of the
      resolutions of the board of directors or other managing body of the Company
      or
      such Guarantor, as the case may be, duly adopted at a meeting or by unanimous
      written consent of such board of directors or other managing body, authorizing
      the execution, delivery and performance of such Transaction Documents to which
      the Company or such Guarantor, as the case may be, is a party, and that such
      resolutions have not been amended, modified, revoked or rescinded, are in full
      force and effect and are the only resolutions of the shareholders, partners
      or
      members of the Company or such Guarantor, as the case may be, or of such board
      of directors or other managing body or any committee thereof relating to the
      subject matter thereof, (e) that such Transaction Documents executed and
      delivered to Prudential by the Company or such Guarantor, as the case may be,
      are approved by its board of directors or other managing body in the resolutions
      referred to in clause (d), above, and (f) that no dissolution or liquidation
      proceedings as to the Company or any Subsidiary have been commenced or are
      contemplated;

     

    (viii)                    a
      certificate of corporate or other type of entity and tax good standing for
      the
      Company and each Guarantor from the Secretary of State of the state of
      organization of the Company and each Guarantor and of each state in which the
      Company or any Guarantor is required to be qualified to transact business as
      a
      foreign organization, in each case dated as of a recent date;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ix)                      Certified
      copies of Requests for Information or Copies (Form UCC-11) or equivalent reports
      listing all effective financing statements which name the Company, any
      Subsidiary or any Guarantor (under its present name and previous names) as
      debtor and which are filed in the office of the Secretary of State in any state
      in which the Company, any Subsidiary or any Guarantor is located (as determined
      under the UCC), and lien and judgment search reports from the county recorder
      of
      any county in which the Company, any Subsidiary or any Guarantor maintains
      an
      office or in which any assets of the Company, any Subsidiary or any Guarantor
      are located; and

     

    (x)           
      such other certificates, documents and agreements as Prudential may reasonably
      request.

     

    3.2           
      Certificates of
      Insurance.  The Company shall have delivered from insurance
      carriers acceptable to Prudential certificates of insurance in such forms and
      amounts acceptable to Prudential evidencing insurance required to be maintained
      under paragraph 5E of the Note Agreement or under any of the Collateral
      Documents under insurance policies with loss payable clauses in favor of the
      Collateral Agent and acceptable to Prudential.

     

    3.3           
      Amendment to Credit
      Agreement.  Prudential shall have received a copy of the
      executed amendment to Credit Agreement, in form and substance satisfactory
      to
      Prudential, and such amendment shall be in full force and effect.

     

    3.4           
      Proceedings.  All
      corporate and other proceedings taken or to be taken in connection with the
      transactions contemplated hereby and all documents incident thereto shall be
      satisfactory in substance and form to Prudential, and Prudential shall have
      received all such counterpart originals or certified or other copies of such
      documents as it may reasonably request.

     

    Upon
      execution hereof by the Company, this letter and each of the
      other  foregoing documents should be returned to: Prudential Capital
      Group, Two Prudential Plaza, Suite 5600, Chicago, Illinois 60601,
      Attention:  Scott B. Barnett.

    

    SECTION
      4.  Reference
      to and Effect on Note Agreement.  Upon the
      effectiveness of this letter, each reference to the Note Agreement and the
      Notes
      in any other document, instrument or agreement shall mean and be a reference
      to
      the Note Agreement and the Notes as modified by this letter.  Except
      as specifically set forth in Section 1 hereof, each of the Note Agreement and
      the Notes shall remain in full force and effect and each is hereby ratified
      and
      confirmed in all respects.  The execution, delivery and effectiveness
      of this letter shall not be construed as a course of dealing or other
      implication that Prudential or any holder of any Note has agreed to or is
      prepared to grant any consents or agree to any amendments to the Note Agreement
      in the future, whether or not under similar circumstances.

    

    SECTION
      5.  Expenses.  The
      Company
      hereby confirms its obligations under the Note Agreement, whether or not the
      transactions hereby contemplated are consummated, to pay, promptly after request
      by Prudential or any holder of any Note, all reasonable out-of-pocket costs
      and
      expenses, including attorneys’ fees and expenses, incurred by Prudential or any
      holder of any Note in connection with this letter agreement or the transactions
      contemplated hereby, in enforcing any rights under this letter, or in responding
      to any subpoena or other legal process or informal investigative demand issued
      in connection with this letter or the transactions contemplated
      hereby.  The obligations of the Company under this Section 5 shall
      survive transfer by any holder of any Note and payment of any Note.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      6.  Governing
      Law.  THIS
      LETTER SHALL BE CONSTRUED AND
      ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
      BY,
      THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH
      WOULD OTHERWISE CAUSE THIS LETTER TO BE CONSTRUED OR ENFORCED IN ACCORDANCE
      WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
      JURISDICTION).

    

    SECTION
      7.  Counterparts;
      Section Titles.  This letter
      may
      be executed in any number of counterparts and by different parties hereto in
      separate counterparts, each of which when so executed and delivered shall be
      deemed to be an original and all of which taken together shall constitute but
      one and the same instrument.  Delivery of an executed counterpart of a
      signature page to this letter by facsimile or other electronic transmission
      shall be effective as delivery of a manually executed counterpart of this
      letter.  The section titles contained in this letter are and shall be
      without substance, meaning or content of any kind whatsoever and are not a
      part
      of the agreement between the parties hereto.

    

    [signature
      page follows]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Very
      truly yours,

    

    PRUDENTIAL
      INVESTMENT MANAGEMENT, INC.

    

    By:
/s/
      David Quackenbush

           Vice
      President                                  

    

    

    THE
      PRUDENTIAL INSURANCE COMPANY

         OF
      AMERICA

    

    By: 
      /s/ David
      Quackenbush

          
      Vice
      President                                           

    

    

    PRUCO
      LIFE INSURANCE COMPANY

    

    
      By: 
        /s/ David
        Quackenbush

            
        Vice
        President                             

      
 

    

    UNITED
      OF OMAHA LIFE INSURANCE

    COMPANY

    

    By:         Prudential
      Private Placement Investors,

    L.P.
      (as Investment
      Advisor)

    

    By:         Prudential
      Private Placement Investors, Inc.

    (as
      its
      General Partner)

     

    
      By: 
        /s/ David
        Quackenbush

            
        Vice
        President                                           

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    Agreed
      and Accepted:

    

    THE
      STEAK N SHAKE COMPANY

    

    

    

    By: /s/
      David C.
      Milne                                                                                    

    Name:
      David C. Milne

    Title:
      Vice President, General Counsel and Corporate Secretary

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    [FORM
      OF
      GUARANTY AGREEMENT]

     

    GUARANTY
      AGREEMENT

    

     

    This
      GUARANTY AGREEMENT (the
“Guaranty”),
      dated as of
      May 16, 2008, is made by the guarantors named in the Guarantor
      Schedule attached hereto and each guarantor that may become a party to this
      Guaranty by executing a joinder hereto (herein referred to, individually, as
      a
“Guarantor” and,
      collectively, as “Guarantors”), in favor of
      Prudential Investment Management, Inc. (“Prudential”) and the holders
      of the Notes (as defined below) from time to time (the “Holders”).

     

    WITNESSETH:

     

    WHEREAS,
      The Steak N Shake
      Company, an Indiana corporation (the “Company”) has entered into
      that certain Amended and Restated Note Purchase and Private Shelf Agreement
      dated as of September 20, 2002, as amended by that certain Amendment dated
      December 18, 2002, that certain Amendment dated May 21, 2003, that certain
      Amendment dated September 17, 2003, that certain Amendment dated November 7,
      2005, that certain Amendment dated October 30, 2007, that certain Amendment
      dated December 5, 2007 and that certain Amendment (the “Seventh  Amendment”)
      dated as of the date hereof (as so amended, the “Note Agreement”) among the
      Company, Prudential Investment Management, Inc., The Prudential Insurance
      Company of America and each Prudential Affiliate which has or may become a
      party
      thereto in accordance with the terms thereof, pursuant to which the Company
      issued and sold and the Company’s senior fixed rate notes from time to time
      (collectively, the “Notes”); and

     

    WHEREAS,
      each Guarantor is a
      Subsidiary of the Company and derives substantial value and benefit from the
      issuance of the Notes pursuant to the Note Agreement and the amendments being
      made to the Note Agreement pursuant to the Seventh Amendment; and

     

    WHEREAS,
      as a condition to the
      effectiveness of the Seventh Amendment, the Prudential has required that the
      Guarantors execute and deliver this Guaranty for the benefit of Prudential
      and
      the Holders.

     

    NOW
      THEREFORE, for value
      received, to satisfy one of the conditions precedent to the effectiveness of
      the
      Seventh Amendment, for the reasons set forth above, for and in consideration
      of
      the premises and mutual covenants herein contained, and for other good and
      valuable consideration, the receipt and adequacy of which are hereby
      acknowledged, each Guarantor, intending to be legally bound, does hereby
      covenant and agree as follows:

     

    1.  DEFINITIONS;
      RECITALS.  Capitalized terms that are used in this Guaranty and
      not defined in this Guaranty shall have the meaning ascribed to them in the
      Note
      Agreement.  The recitals in this Guaranty are incorporated into this
      Guaranty.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.  THE
      GUARANTY.

     

    2A.              Guaranty
      of Payment and Performance
      of Obligations.  Each Guarantor, jointly and severally with
      each other Guarantor, absolutely, unconditionally and irrevocably guarantees
      the
      full and prompt payment in United States currency when due (whether at maturity,
      a stated prepayment date or earlier by reason of acceleration or otherwise)
      and
      at all times thereafter, and the due and punctual performance, of all of the
      indebtedness, obligations and liabilities existing on the date hereof or arising
      from time to time hereafter, whether direct or indirect, joint or several,
      actual, absolute or contingent, matured or unmatured, liquidated or
      unliquidated, secured or unsecured, arising by contract, operation of law or
      otherwise, of the Company to Prudential or any Holder under or in respect of
      the
      Note Agreement, the Notes, the other Transaction Documents or any other
      agreements, documents, certificates and instruments now or hereafter executed
      or
      delivered by the Company, any Guarantor or any other guarantor in connection
      with the Note Agreement, including, without limitation, the principal of and
      interest (including, without limitation, interest accruing before, during or
      after any bankruptcy, insolvency, reorganization, arrangement, readjustment
      of
      debt, liquidation or dissolution proceeding, and, if interest ceases to accrue
      by operation of law by reason of any such proceeding, interest which otherwise
      would have accrued in the absence of such proceeding, whether or not allowed
      as
      a claim in such proceeding) on the Notes and any Yield-Maintenance Amount with
      respect to any of the Notes (collectively, the “Guarantied
      Obligations”).  This is a continuing guaranty of payment and
      performance and not of collection.  Notwithstanding the foregoing, the
      aggregate amount of any Guarantor’s liability under this Guaranty shall not
      exceed the maximum amount that such Guarantor can guaranty without violating,
      or
      causing this Guaranty or such Guarantor’s obligations under this Guaranty to be
      void, voidable or otherwise rendered unenforceable under, any fraudulent
      conveyance or fraudulent transfer law, including Section 548(a)(2) of the
      Bankruptcy Code.  Each Guarantor hereby agrees to pay and to indemnify
      and save each Holder harmless from and against any damage, loss, cost or expense
      (including attorneys’ fees and expenses) which such Holder may incur or be
      subject to as a consequence of endeavoring to enforce this Guaranty or to
      collect all or any part of the Guarantied Obligations from, or in pursuing
      any
      action against the Company or any other Guarantor or enforcing any rights of
      any
      Holder in any security for the Guarantied Obligations or the liabilities of
      any
      Guarantor hereunder, including, without limitation the Collateral, and any
      taxes, fees or penalties which may be paid or payable in connection
      therewith.  Notwithstanding any provision of this Guaranty, all
      covenants, obligations, waivers and agreements of the Guarantors under this
      Guaranty shall be joint and several.

     

    Upon
      an
      Event of Default, Prudential or any Holder may, at its sole election and without
      notice, proceed directly and at once against any Guarantor to seek and enforce
      performance of, and to collect and recover, the Guarantied Obligations, or
      any
      portion thereof, without first proceeding against the Company, any other
      Guarantor, any other guarantor of the Guarantied Obligations or any other Person
      or the Collateral, or any other security for the Guarantied Obligations or
      for
      the liability of any such other Person or any Guarantor hereunder. Prudential
      and each Holder shall have the exclusive right to determine the application
      of
      payments and credits, if any, from any Guarantor, the Company or from any other
      Person on account of the Guarantied Obligations or otherwise. This Guaranty
      and
      all covenants and agreements of each Guarantor contained herein shall continue
      in full force and effect and shall not be discharged until such a time as all
      of
      the Guarantied Obligations shall be indefeasibly paid in full in
      cash.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2B.           
      Obligations
      Unconditional.  The obligations of each Guarantor under this
      Guaranty shall be continuing, absolute and unconditional, irrespective of (i)
      the invalidity or unenforceability of the Note Agreement, the Notes, the other
      Transaction Documents or any other agreements, documents, certificates and
      instruments now or hereafter executed or delivered by the Company, any other
      Guarantor or any other Person in connection with the Note Agreement or any
      other
      Transaction Document or any provision thereof; (ii) the absence of any attempt
      by Prudential or any Holder to collect the Guarantied Obligations or any portion
      thereof from the Company, any other Guarantor, any other guarantor of any
      portion of the Guarantied Obligations or any other Person or other action to
      enforce the same; (iii) any action taken by Prudential or any Holder whether
      or
      not authorized by this Guaranty; (iv) any failure by Prudential or any Holder
      or
      the Collateral Agent to acquire, perfect or maintain any security interest
      or
      lien in, or take any steps to preserve its rights to, the Collateral or any
      other security for the Guarantied Obligations or any portion thereof or for
      the
      liability of such Guarantor hereunder or the liability of any other Guarantor
      or
      any other Person or any or all of the Guarantied Obligations; (v) any defense
      arising by reason of any disability or other defense (other than a defense
      of
      payment, unless the payment on which such defense is based was or is
      subsequently invalidated, declared to be fraudulent or preferential, otherwise
      avoided and/or required to be repaid to the Company or any Guarantor, as the
      case may be, or the estate of any such party, a trustee, receiver or any other
      Person under any bankruptcy law, state or federal law, common law or equitable
      cause, in which case there shall be no defense of payment with respect to such
      payment) of the Company or any other Person liable on the Guarantied Obligations
      or any portion thereof; (vi) Prudential’s or any Holder’s election, in any
      proceeding instituted under Chapter 11 of Title 11 of the Federal Bankruptcy
      Code (11 U.S.C. §101 et seq.) (the “Bankruptcy Code”), of the
      application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any borrowing
      or
      grant of a security interest to Prudential or any Holder or the Collateral
      Agent
      by the Company as debtor-in-possession, or extension of credit, under Section
      364 of the Bankruptcy Code; (viii) the disallowance or avoidance of all or
      any
      portion of Prudential’s or any Holder’s claim(s) for repayment of the Guarantied
      Obligations under the Bankruptcy Code or any similar state law or the avoidance,
      invalidity or unenforceability of any Lien securing the Guarantied Obligations
      or the liability of any Guarantor hereunder or under any of the other
      Transaction Documents or of the Company or any other guarantor of all or any
      part of the Guarantied Obligations; (ix) any amendment to, waiver or
      modification of, or consent, extension, indulgence or other action or inaction
      under or in respect of the Note Agreement, the Notes, the other Transaction
      Documents or any other agreements, documents, certificates and instruments
      now
      or hereafter executed or delivered by the Company or any Guarantor or any other
      guarantor in connection with the Note Agreement (including, without limitation,
      the issuance of Notes from time to time under the Note Agreement and any
      increase in the interest rate on the Notes); (x) any change in any provision
      of
      any applicable law or regulation; (xi) any order, judgment, writ, award or
      decree of any court, arbitrator or governmental authority, domestic or foreign,
      binding on or affecting any Guarantor, the Company or any other guarantor or
      any
      of their assets; (xii) the articles of incorporation, certificate of formation
      or other formation document, or the by-laws, limited liability company
      agreement, partnership agreement or similar formation documents of any
      Guarantor, the Company or any other guarantor; (xiii) any mortgage, indenture,
      lease, contract, or other agreement (including without limitation any agreement
      with stockholders, partners or members of such Guarantor, as applicable),
      instrument or undertaking to which any Guarantor or the Company is a party
      or
      which purports to be binding on or affect any such Person or any of its assets;
      (xiv) any bankruptcy, insolvency, readjustment, composition, liquidation or
      similar proceeding with respect to the Company, any Guarantor or any other
      guarantor of all or any portion of any Guarantied Obligations or any such
      Person’s property and any failure by Prudential or any Holder to file or enforce
      a claim against any Guarantor or any such other Person in any such proceeding;
      (xv) any failure on the part of the Company for any reason to comply with or
      perform any of the terms of any other agreement with any Guarantor; or (xvi)
      any
      other circumstance which might otherwise constitute a legal or equitable
      discharge or defense of a guarantor.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2C.             Obligations
      Unimpaired.  Prudential and each Holder is authorized, without
      demand or notice, which demand and notice are hereby waived, and without
      discharging or otherwise affecting the obligations of any Guarantor hereunder
      (which shall remain absolute and unconditional notwithstanding any such action
      or omission to act), from time to time to (i) renew, extend, accelerate or
      otherwise change the time for payment of, or other terms relating to, the
      Guarantied Obligations or any portion thereof, or otherwise modify, amend or
      change the terms of the Note Agreement, the Notes, any other Transaction
      Documents or any other agreements, documents, certificates and instruments
      now
      or hereafter executed or delivered by the Company. any Guarantor or any other
      guarantor of all or any of the Guarantied Obligations in connection with the
      Note Agreement; (ii) accept partial payments on the Guarantied Obligations;
      (iii) take and hold security for the Guarantied Obligations or any portion
      thereof or any other liabilities of the Company, the obligations of any
      Guarantor under this Guaranty and the obligations under any other guaranties
      and
      sureties of all or any of the Guarantied Obligations, and exchange, enforce,
      waive, release, sell, transfer, assign, abandon, fail to perfect, subordinate
      or
      otherwise deal with any such security (including, without limitation, the
      Collateral); (iv) apply such security and direct the order or manner of sale
      thereof as Prudential or any Holder may determine in its sole discretion; (v)
      settle, release, compromise, collect or otherwise liquidate the Guarantied
      Obligations or any portion thereof and any security therefor or guaranty thereof
      in any manner; (vi) extend additional loans, credit and financial accommodations
      to the Company or any other Guarantor and otherwise create additional Guarantied
      Obligations, including, without limitation, by the purchase of Notes from time
      to time under the Note Agreement; (vii) waive strict compliance with the terms
      of the Note Agreement, the Notes, any other Transaction Document or any other
      agreements, documents, certificates and instruments now or hereafter executed
      or
      delivered by the Company, any Guarantor or any other guarantor of all or any
      of
      the Guarantied Obligations in connection with the Note Agreement and otherwise
      forbear from asserting Prudential’s or any Holder’s rights and remedies
      thereunder; (viii) take and hold additional guaranties or sureties and enforce
      or forbear from enforcing any guaranty or surety of any other guarantor or
      surety of the Guarantied Obligations, any portion thereof or release or
      otherwise take any action (or omit to take any action) with respect to any
      such
      guarantor or surety; (ix) assign this Guaranty in part or in whole in connection
      with any assignment of the Guarantied Obligations or any portion thereof; (x)
      exercise or refrain from exercising any rights against the Company or any
      Guarantor; and (xi) apply any sums, by whomsoever paid or however realized,
      to
      the payment of the Guarantied Obligations as Prudential or any Holder in its
      sole discretion may determine.

     

    2D.              Waivers
      of
      Guarantors.  Each Guarantor waives for the benefit of
      Prudential and the Holders:

     

    (i)              
      any right to require Prudential or any Holder, as a condition of payment or
      performance by such Guarantor or otherwise to (a) proceed against the Company,
      any Guarantor, any other guarantor of the Guarantied Obligations or any other
      Person, (b) proceed against or exhaust any security given to or held by
      Prudential or any Holder or the Collateral Agent in connection with the
      Guarantied Obligations or any other guaranty, or (c) pursue any other remedy
      available to Prudential or any Holder whatsoever;

     

    (ii)             
      any defense arising by reason of (a) the incapacity, lack of authority or any
      disability or other defense of the Company, including, without limitation,
      any
      defense based on or arising out of the lack of validity or the unenforceability
      of the Guarantied Obligations or any agreement or instrument relating thereto,
      (b) the cessation of the liability of the Company from any cause other than
      indefeasible payment in full of the Guarantied Obligations in cash or (c) any
      act or omission of Prudential or any Holder or the Collateral Agent or any
      other
      Person which directly or indirectly, by operation of law or otherwise, results
      in or aids the discharge or release of the Company or any security given to
      or
      held by Prudential or any Holder or the Collateral Agent in connection with
      the
      Guarantied Obligations or any other guaranty;

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)             any
      defense based upon any statute or rule of law which provides that the obligation
      of a surety must be neither larger in amount nor in other respects more
      burdensome than that of the principal;

     

    (iv)              any
      defense based upon Prudential’s any Holder’s errors or omissions in the
      administration of the Guarantied Obligations;

     

    (v)           
      (a) any principles or provisions of law, statutory or otherwise, which are
      or
      might be in conflict with the terms of this Guaranty and any legal or equitable
      discharge of such Guarantor’s obligations hereunder, (b) the benefit of any
      statute of limitations affecting the Guarantied Obligations or such Guarantor’s
      liability hereunder or the enforcement hereof, (c) any rights to set-offs,
      recoupments and counterclaims, and (d) promptness, diligence and any requirement
      that Prudential or any Holder or the Collateral Agent protect, maintain, secure,
      perfect or insure any Lien or any property subject thereto;

     

    (vi)              notices
      (a) of nonperformance or dishonor, (b) of acceptance of this Guaranty by
      Prudential or any Holder or by such Guarantor, (c) of default in respect of
      the
      Guarantied Obligations or any other guaranty, (d) of the existence, creation
      or
      incurrence of new or additional indebtedness, arising either from additional
      loans extended to the Company or otherwise, including without limitation, as
      a
      result of the issuance of any Notes, (e) that the principal amount, or any
      portion thereof, and/or any interest on any document or instrument evidencing
      all or any part of the Guarantied Obligations is due, (f) of any and all
      proceedings to collect from the Company, any Guarantor or any other guarantor
      of
      all or any part of the Guarantied Obligations, or from anyone else, (g) of
      exchange, sale, surrender or other handling of any security or collateral given
      to Prudential or any Holder or the Collateral Agent to secure payment of the
      Guarantied Obligations or any guaranty therefor, (h) of renewal, extension
      or
      modification of any of the Guarantied Obligations, (i) of assignment, sale
      or
      other transfer of any Note to a Transferee, or (j) of any of the matters
      referred to in paragraph 2B and any right to consent to any
      thereof;

     

    (vii)             presentment,
      demand for payment or performance and protest and notice of protest with respect
      to the Guarantied Obligations or any guaranty with respect thereto;
      and

     

    (viii)           
      any defenses or benefits that may be derived from or afforded by law which
      limit
      the liability of or exonerate guarantors or sureties, or which may conflict
      with
      the terms of this Guaranty.

     

    Each
      Guarantor agrees that neither Prudential nor any Holder nor the Collateral
      Agent
      shall be under any obligation to marshall any assets in favor of such Guarantor
      or against or in payment of any or all of the Guarantied
      Obligations.

     

    No
      Guarantor will exercise any rights which it may have acquired by way of
      subrogation under this Guaranty, by any payment made hereunder or otherwise,
      or
      accept any payment on account of such subrogation rights, or any rights of
      exoneration, reimbursement or indemnity or contribution or any rights or
      recourse to any security for the Guarantied Obligations or this Guaranty unless
      at the time of such Guarantor’s exercise of any such right there shall have been
      performed and indefeasibly paid in full in cash all of the Guarantied
      Obligations.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2E.           
      Revival.  Each
      Guarantor agrees that, if any payment made by the Company or any other Person
      is
      applied to the Guarantied Obligations and is at any time annulled, set aside,
      rescinded, invalidated, declared to be fraudulent or preferential or otherwise
      required to be refunded or repaid, or the proceeds of Collateral or any other
      security are required to be returned by Prudential or any Holder to the Company,
      its estate, trustee, receiver or any other Person, including, without
      limitation, any Guarantor, under any bankruptcy law, state or federal law,
      common law or equitable cause, then, to the extent of such payment or repayment,
      such Guarantor’s liability hereunder (and any lien, security interest or other
      collateral securing such liability) shall be and remain in full force and
      effect, as fully as if such payment had never been made, or, if prior thereto
      this Guaranty shall have been canceled or surrendered (and if any lien, security
      interest or other collateral securing such Guarantor’s liability hereunder shall
      have been released or terminated by virtue of such cancellation or surrender),
      this Guaranty (and such lien, security interest or other collateral) shall
      be
      reinstated and returned in full force and effect, and such prior cancellation
      or
      surrender shall not diminish, release, discharge, impair or otherwise affect
      the
      obligations of any Guarantor in respect of the amount of such payment (or any
      lien, security interest or other collateral securing such
      obligation).

     

    2F.           
      Obligation to Keep
      Informed.  Each Guarantor shall be responsible for keeping
      itself informed of the financial condition of the Company and any other Persons
      primarily or secondarily liable on the Guarantied Obligations or any portion
      thereof, and of all other circumstances bearing upon the risk of nonpayment
      of
      the Guarantied Obligations or any portion thereof, and each Guarantor agrees
      that neither Prudential nor any Holder shall have any duty to advise such
      Guarantor of information known to Prudential or such Holder regarding such
      condition or any such circumstance.  If Prudential or any Holder, in
      its discretion, undertakes at any time or from time to time to provide any
      such
      information to any Guarantor, neither Prudential nor such Holder shall be under
      any obligation (i) to undertake any investigation, whether or not a part of
      its
      regular business routine, (ii) to disclose any information which Prudential
      or
      such Holder wishes to maintain confidential, or (iii) to make any other or
      future disclosures of such information or any other information to any
      Guarantor.

     

    2G.             Bankruptcy.  If
      any
      Event of Default specified in clauses (viii), (ix) or (x) of paragraph 7A of
      the
      Note Agreement shall occur and be continuing, then each Guarantor agrees to
      immediately pay to the Holders the full outstanding amount of the Guarantied
      Obligations without notice.

     

    3.  REPRESENTATIONS
      AND WARRANTIES.

     

    Each
      Guarantor represents, covenants and warrants as follows:

     

    3A.              Organization.  Such
      Guarantor is duly organized and existing in good standing under the laws of
      its
      state of formation and is qualified to do business and in good standing in
      every
      jurisdiction where the ownership of its property or the nature of the business
      conducted by it makes such qualification necessary and in which the failure
      to
      be so qualified could be reasonably likely to result in a material adverse
      effect.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3B.           
      Power and
      Authority.  Such Guarantor and each Subsidiary of such
      Guarantor has all requisite power to conduct its business as currently conducted
      and as currently proposed to be conducted.  Such Guarantor has all
      requisite power to execute, deliver and perform its obligations under this
      Guaranty and the other Transaction Documents to which it is a
      party.  The execution, delivery and performance of this Guaranty and
      the other Transaction Documents to which it is a party have been duly authorized
      by all requisite action and this Guaranty and the other Transaction Documents
      to
      which it is a party have been duly executed and delivered by authorized officers
      of such Guarantor and are valid obligations of such Guarantor, legally binding
      upon and enforceable against such Guarantor in accordance with their terms,
      except as such enforceability may be limited by (i) bankruptcy, insolvency,
      reorganization or other similar laws affecting the enforcement of creditors’
rights generally and (ii) general principles of equity (regardless of whether
      such enforceability is considered in a proceeding in equity or at
      law).

     

    3C.             
      Conflicting Agreements and
      Other Matters.  The execution and delivery of this Guaranty and
      the other Transaction Documents to which it is a party, the offering, issuance
      and sale of the Notes, and the fulfillment of or the compliance with the terms
      and provisions hereof will not conflict with, or result in a breach of the
      terms, conditions or provisions of, or constitute a default under, or result
      in
      any violation of, or result in the creation of any Lien upon any of the
      properties or assets of such Guarantor or any of its Subsidiaries pursuant
      to,
      the certificate of incorporation or certificate of formation or similar
      formation document, the by-laws, partnership agreement, limited liability
      company agreement or similar organizational document of such Guarantor or any
      of
      its Subsidiaries, any award of any arbitrator or any agreement (including any
      agreement with stockholders, members or partners of such Guarantor or Persons
      with direct or indirect ownership interests in stockholders, members or partners
      of such Guarantor), instrument, order, judgment, decree, statute, law, rule
      or
      regulation to which such Guarantor or any of its Subsidiaries is
      subject.  Neither such Guarantor nor any of its Subsidiaries is a
      party to, or otherwise subject to any provision contained in, any instrument
      evidencing any Indebtedness of such Guarantor or such Subsidiary, any agreement
      relating thereto or any other contract or agreement (including its charter,
      bylaws, partnership agreement or operating agreement) which limits the amount
      of, or otherwise imposes restrictions on the incurring of, obligations of such
      Guarantor of the type to be evidenced by this Guaranty.

     

    3D.              ERISA.  The
      execution and delivery of this Guaranty will be exempt from, or will not involve
      any transaction which is subject to, the prohibitions of section 406 of ERISA
      and will not involve any transaction in connection with which a penalty could
      be
      imposed under section 502(i) of ERISA or a tax could be imposed pursuant to
      section 4975 of the Code.

     

    3E.           
      Governmental
      Consent.  Neither the nature of such Guarantor or of any
      Subsidiary of such Guarantor nor any of their respective businesses or
      properties, nor any relationship between such Guarantor or any Subsidiary of
      such Guarantor and any other Person, nor any circumstance in connection with
      the
      execution, delivery and performance of this Guaranty, nor the offering,
      issuance, sale or delivery of the Notes is such as to require any authorization,
      consent, approval, exemption or other action by or notice to or filing with
      any
      court or administrative or governmental body (excluding routine filings after
      the Seventh Amendment Effective Date with the Securities and Exchange Commission
      and/or state Blue Sky authorities and filings and recordings necessary to
      perfect the Liens in the Collateral intended to be created by the Collateral
      Documents).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3F.           
      Regulatory
      Status.  Neither such Guarantor nor any Subsidiary of such
      Guarantor is (i) an “investment company” or a company “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
      as amended, (ii) a “holding company” or a “subsidiary company” or an “affiliate”
of a “holding company” or a “subsidiary company” of a “holding company”, within
      the meaning of the Energy Policy Act of 2005, as amended, or (iii) a “public
      utility” within the meaning of the Federal Power Act, as amended.

     

    3G.             Actions
      by the Guarantor and its
      Subsidiaries.  Each Guarantor covenants that it will not take
      any action that would directly or indirectly result in an Event of Default
      or
      Default.

     

    4.  MISCELLANEOUS.

     

    4A.              Successors,
      Assigns and
      Participants.  This Guaranty shall be binding upon each
      Guarantor and its successors and assigns and shall inure to the benefit of
      Prudential and each Holder and their respective successors, transferees and
      assigns; all references herein to each Guarantor shall be deemed to include
      its
      successors and assigns, and all references herein to Prudential or any Holder
      shall be deemed to include their respective successors and
      assigns.  This Guaranty shall be enforceable by Prudential and each
      Holder and any of Prudential’s or such Holder’s successors, assigns and
      participants, and any such successors and assigns shall have the same rights
      and
      benefits with respect to each Guarantor under this Guaranty as Prudential or
      such Holder hereunder.

     

    4B.           
      Consent to
      Amendments.  This Guaranty may be amended, and each Guarantor
      may take any action herein prohibited, or omit to perform any act herein
      required to be performed by it, if such Guarantor shall obtain the written
      consent to such amendment, action or omission to act, of the Required Holder(s)
      of the Notes, except that, without the written consent of all of the Holders,
      (i) no amendment to or waiver of the provisions of this Guaranty shall change
      or
      affect the provisions of this paragraph 4B insofar as such provisions relate
      to
      proportions of the principal amount of the Notes, or the rights of any
      individual Holder, required with respect to any consent, (ii) no Guarantor
      shall
      be released from this Guaranty, and (iii) no amendment, consent or waiver with
      respect to paragraph 2A or the definition of “Guarantied Obligations” (except to
      add additional obligations of the Companies) shall be effective.  Each
      Holder at the time or thereafter outstanding shall be bound by any consent
      authorized by this paragraph 4B, whether or not the Notes held by such Holder
      shall have been marked to indicate such consent, but any Notes issued thereafter
      may bear a notation referring to any such consent.  No course of
      dealing between any Guarantor and Prudential or any Holder, nor any delay in
      exercising any rights hereunder or under any Note shall operate as a waiver
      of
      any rights of Prudential or any Holder.  As used herein, the term
“this Guaranty” and references thereto shall mean this Guaranty as it may from
      time to time be amended or supplemented.  Notwithstanding the foregoing,
      this
      Guaranty may be amended by the addition of additional Guarantors pursuant to
      a
      Guaranty Joinder in the form of Exhibit
      A hereto without any
      consent by any Guarantor, Prudential or any Holder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4C.              Survival
      of Representations and
      Warranties; Entire Agreement.  All representations and
      warranties contained herein or made in writing by or on behalf of each Guarantor
      in connection herewith shall survive the execution and delivery of this
      Guaranty, the transfer by any Holder of any Note or portion thereof or interest
      therein and the payment of any Note, and may be relied upon by any Transferee,
      regardless of any investigation made at any time by or on behalf of Prudential,
      any Holder or any Transferee.  Subject to the two preceding sentences,
      this Guaranty and the other Transaction Documents embody the entire agreement
      and understanding between the parties hereto with respect to the subject matter
      hereof and supersedes all prior agreements and understandings relating to the
      subject matter hereof.

     

    4D.              Notices.  All
      written communications provided for hereunder shall be sent by first class
      mail
      or telegraphic notice or nationwide overnight delivery service (with charges
      prepaid) or by hand delivery or telecopy and addressed:

     

    (i)           
      in the case of any Guarantor, to:

     

    c/o
      The
      Steak N Shake Company

    500
      Century Building

    36
      South
      Pennsylvania Street

    Indianapolis,
      Indiana  46204

    Attention:  Chief
      Financial Officer

     

    CC:
      General Counsel

     

    Phone:
      (317) 633-4100

     

    Fax:  (317)
      633-4106

     

    (ii)           
      in the case of Prudential or any Holder, to the address specified for notices
      to
      Prudential or such Holder under the Note Agreement;

     

    or,
      in
      either case, at such other address as shall be designated by such Person in
      a
      written notice to the other parties hereto.

     

    4E.            
      Descriptive Headings;
Advice
      of Counsel;
      Interpretation.  The descriptive headings of the several
      sections of this Guaranty are inserted for convenience only and do not
      constitute a part of this Guaranty.  Each Guarantor represents to
      Prudential and the Holders that such Guarantor has been represented by counsel
      in connection with this Guaranty, that such Guarantor has discussed this
      Guaranty with its counsel and that any and all issues with respect to this
      Guaranty have been resolved as set forth herein.  No provision of this
      Guaranty shall be construed against or interpreted to the disadvantage of
      Prudential or any Holder by any court or other governmental or judicial
      authority by reason of Prudential or such Holder having or being deemed to
      have
      structured, drafted or dictated such provision.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4F.           
      Satisfaction
      Requirement.  If any agreement, certificate or other writing,
      or any action taken or to be taken, is by the terms of this Guaranty required
      to
      be satisfactory to Prudential, any Holder or the Required Holder(s) of the
      Notes, the determination of such satisfaction shall be made by Prudential,
      such
      Holder or such Required Holder(s), as the case may be, in the sole and exclusive
      judgment (exercised in good faith) of the Person or Persons making such
      determination.

     

    4G.             Governing
      Law. THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
      THE
      RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS
      (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS GUARANTY
      TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES
      TO
      BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

     

    4H.              Counterparts;
      Facsimile
      Signatures.  This Guaranty may be executed in any number of
      counterparts, each of which shall be an original but all of which together
      shall
      constitute one and the same agreement.  It shall not be necessary in
      making proof of this Guaranty to produce or account for more than one such
      counterpart.  Delivery of an executed counterpart of a signature page
      to this Guaranty by facsimile or electronic transmission shall be effective
      as
      delivery of a manually executed counterpart of this Guaranty.

     

    4I.             
      Counsel’s
      Opinion.  Each Guarantor requests directs the counsel referred
      to in Section 3.2 of the Seventh Amendment to deliver the opinion referred
      to in
      such paragraph.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4J.           
      SUBMISSION TO JURISDICTION;
      WAIVER OF JURY TRIAL.  ANY LEGAL ACTION OR
      PROCEEDING WITH
      RESPECT TO THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT
      IN
      THE COURTS OF THE STATE OF ILLINOIS IN COOK COUNTY, ILLINOIS, OR OF THE UNITED
      STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS AND, BY EXECUTION
      AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS,
      UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY
      SUCH ACTION OR PROCEEDING.  EACH GUARANTOR FURTHER IRREVOCABLY
      CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS
      IN
      ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
      OR
      CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN PARAGRAPH
      4D(i), SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT.  EACH GUARANTOR
      AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON SUCH
      JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING HEREIN SHALL
      AFFECT THE RIGHT OF PRUDENTIAL OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER
      MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
      AGAINST ANY GUARANTOR IN ANY OTHER JURISDICTION.  EACH GUARANTOR
      HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
      TO
      THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING
      OUT
      OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT IN ANY OF THE AFORESAID COURTS
      AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
      SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
      BEEN
      BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GUARANTOR HAS OR MAY
      HEREAFTER ACQUIRE IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
      PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
      ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE WITH RESPECT TO ITSELF
      OR
      ITS PROPERTY, SUCH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT
      OF ITS OBLIGATIONS UNDER THIS GUARANTY.  EACH GUARANTOR HEREBY
      IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
      ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
      THEREBY.

     

    4K.              Independence
      of
      Covenants.  All covenants hereunder shall be given independent
      effect so that if a particular action or condition is prohibited by any one
      of
      such covenants, the fact that it would be permitted by an exception to, or
      otherwise be in compliance within the limitations of, another covenant shall
      not
      avoid the occurrence of a Default or an Event of Default if such action is
      taken
      or such condition exists.

     

    4L.           
      Severability.  Any
      provision of this Guaranty which is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability in any
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction.

     

    4M.             Contribution
      with Respect to Guaranty
      Obligations.  At all times when there is more than one
      Guarantor party hereto, each Guarantor party hereto agrees as
      follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     (i)  
To
      the
      extent any Guarantor shall make a payment of all or any of the Guarantied
      Obligations (a “Guarantor
      Payment”) that exceeds the amount that such Guarantor would otherwise
      have paid, taking into account all other Guarantor Payments then previously
      or
      concurrently made by any other Guarantor, if each Guarantor had paid the
      aggregate Guarantied Obligations satisfied by all such Guarantor Payments in
      the
      same proportion that such Guarantor’s Allocable Amount (as determined
      immediately prior to such Guarantor Payment) bore to the aggregate Allocable
      Amounts of all Guarantors (as determined immediately prior to such Guarantor
      Payment), then, after the Guarantied Obligations shall be indefeasibly paid
      in
      full in cash and no Holder shall have any commitment under the Note Agreement,
      such Guarantor shall be entitled to receive contribution and indemnification
      payments from and be reimbursed by each other Guarantor for the amount of such
      excess, pro rata based upon their respective Allocable Amounts in effect
      immediately prior to such Guarantor Payment.

     

    (ii)  
As
      of any
      date of determination, the “Allocable Amount” of any Guarantor shall be equal to
      the maximum amount of the claim that could then be recovered from such Guarantor
      under this Section 4M without rendering such claim void, voidable or otherwise
      unenforceable under, any fraudulent conveyance or fraudulent transfer law,
      including Section 548 of the Bankruptcy Code.

     

                  (iii)  
This
      Section 4M is intended only to define the relative rights of Guarantors, and
      nothing in this Section 4M is intended to or shall impair the obligations of
      Guarantors, jointly and severally, to pay any amounts as and when the same
      shall
      become due and payable in accordance with this Guaranty.

     

    (iv)  
The
      rights of contribution and indemnification hereunder shall constitute assets
      of
      the Guarantor to which such contribution and indemnification is
      owing.

     

     (v)  
The
      rights of the indemnifying Guarantors against other Guarantors under this
      Section 4M shall be exercisable once the Guarantied Obligations shall be
      indefeasibly paid in full in cash and no Holder shall have any commitment under
      the Note Agreement.

     

    [signature
      pages follow]

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each
      Guarantor has caused this Guaranty Agreement to be duly executed as of the
      date
      first above written.

     

    

    STEAK
      N SHAKE OPERATIONS, INC.,
an Indiana corporation

     

    
      By: /s/
        David C.
        Milne                                                                                    

      Vice
        President, General Counsel and Corporate Secretary

    

                                                               
      

    SNS
      INVESTMENT COMPANY, an
      Indiana Corporation

     

    By: /s/
      David C. Milne

    Vice
      President, General Counsel and Corporate Secretary                                                         
      

     

    STEAK
      N SHAKE ENTERPRISES, INC.,
an Indiana corporation

     

    By: /s/
      David C.
      Milne                                                                                    

    
      Vice
        President, General Counsel and Corporate Secretary                                                         
        

    

    
      
        
        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    GUARANTOR
      SCHEDULE

     

    

    STEAK
      N
      SHAKE OPERATIONS, INC., an Indiana corporation

    

    SNS
      INVESTMENT COMPANY, an Indiana corporation

    

    STEAK
      N
      SHAKE ENTERPRISES, INC., an Indiana corporation

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    [FORM
      OF JOINDER AGREEMENT TO GUARANTY
      AGREEMENT]

     

    JOINDER
      AGREEMENT NO. ____ TO GUARANTY
      AGREEMENT

     

    RE:
THE
      STEAK N SHAKE
      COMPANY

     

    

     

    This
      Joinder Agreement is made as of
      ______________, in favor of Prudential Investment Management, Inc. (“Prudential”)
      and the Holders(as such term is defined
      in the
      Guaranty, as hereinafter defined).

     

               
      A.           
 Reference
      is made to the
      Guaranty Agreement made as of May 16, 2008 (as such
      guarantee may be
      supplemented, amended, restated or consolidated from time to time, the
“Guaranty”)
      by certain Persons in favor of
      Prudential and the Holders, under which such Persons have guaranteed to
      Prudential and the Holders the due payment and performance by The Steak N Shake
      Company, an Indiana corporation (the “Company”) of
      the Guarantied Obligations (as
      defined in the Guaranty).

     

               
      B.            
Capitalized
      terms used but not
      otherwise defined in this Joinder Agreement have the respective meanings given
      to such terms in the Guaranty, including the definitions of terms incorporated
      in the Guaranty by reference to other agreements.

     

               
      C.            
Section
      4B of the Guaranty
      provides that additional Persons may from time to time after the date of the
      Guaranty become Guarantors under the Guaranty by executing and delivering to
      Prudential and the Holders a supplemental agreement to the Guaranty in the
      form
      of this Joinder Agreement.

     

    For
      valuable consideration, each of the
      undersigned (each a “New Guarantor”) severally
      (and not jointly, or jointly
      and severally) agrees as follows:

     

    1.            Each
      of the New Guarantors has received
      a copy of, and has reviewed, the Guaranty and the Transaction Documents in
      existence on the date of this Joinder Agreement and is executing and delivering
      this Joinder Agreement to Prudential and the Holders pursuant to paragraph
      4B of
      the Guaranty.

     

    2.            Effective
      from and after the date this
      Joinder Agreement is executed and delivered to Prudential and the Holders by
      any
      one of the New Guarantors (and irrespective of whether this Joinder Agreement
      has been executed and delivered by any other Person), such New Guarantor is,
      and
      shall be deemed for all purposes to be, a Guarantor under the Guaranty with
      the
      same force and effect, and subject to the same agreements, representations,
      guarantees, indemnities, liabilities and obligations, as if such New Guarantor
      was, effective as of the date of this Joinder Agreement, an original signatory
      to the Guaranty as a Guarantor.  In furtherance of the foregoing, each
      of the New Guarantors jointly and severally guarantees to Prudential and the
      Holders in accordance with the provisions of the Guaranty the due and punctual
      payment and performance in full of each of the Guarantied Obligations as each
      such Guarantied Obligation becomes due from time to time (whether because of
      maturity, default, demand, acceleration or otherwise) and understands, agrees
      and confirms
      that Prudential and the Holders
      may enforce the Guaranty and this Joinder Agreement against such New Guarantor
      for the benefit of Prudential and the Holders up to the full amount of
      the Guarantied Obligations without
      proceeding against any other Guarantor, the Company, any other
      Person, or any collateral securing
      the Guarantied Obligations.  The terms and provisions of the Guaranty
      are incorporated by reference in this Joinder Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.            Upon
      this Joinder Agreement bearing the
      signature of any Person claiming to have authority to bind any New Guarantor
      coming into the hands of Prudential or any Holder, and irrespective of whether
      this Joinder Agreement or the Guaranty has been executed by any other Person,
      this Joinder Agreement will be deemed to be finally and irrevocably executed
      and
      delivered by, and be effective and binding on, and enforceable against, such
      New
      Guarantor free from any promise or condition affecting or limiting the
      liabilities of such New Guarantor and such New Guarantor shall be, and shall
      be
      deemed for all purposes to be, a Guarantor under the Guaranty.  No
      statement, representation, agreement or promise by any officer, employee or
      agent of Prudential or any Holder forms any part of this Joinder Agreement
      or
      the Guaranty or has induced the making of this Joinder Agreement or the Guaranty
      by any of the New Guarantors or in any way affects any of the obligations or
      liabilities of any of the New Guarantors in respect of the Guarantied
      Obligations.

     

    4.            This
      Joinder Agreement may be executed
      in counterparts.  Each executed counterpart shall be deemed to be an
      original and all counterparts taken together shall constitute one and the same
      Joinder Agreement.  Delivery of an executed counterpart of a signature
      page to this Joinder Agreement by facsimile or electronic transmission shall
      be
      effective as delivery of a manually executed counterpart of this Joinder
      Agreement.

     

    5.            This
      Joinder Agreement is a contract
      made under, and will for all purposes be governed by and interpreted and
      enforced according to, the internal laws of the State of Illinois excluding
      any
      conflict of laws rule or principle which might refer these matters to the laws
      of another jurisdiction.

     

    6.            This
      Joinder Agreement and the Guaranty
      shall be binding upon each of the New Guarantors and the successors of each
      of
      the New Guarantors.   None of the New Guarantors may assign any
      of its obligations or liabilities in respect of the Guarantied
      Obligations.

     

    IN
      WITNESS OF WHICH
this Joinder Agreement
      has
      been duly executed and delivered by each of the New Guarantors as of the date
      indicated on the first page of this Joinder Agreement.

     

    [NEW
      GUARANTOR]

    

    

    By:                                                                           
      

    Name:                                                                           
      

    Title:                                                                           
      

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      8A(1)

     

    SUBSIDIARIES

     

     

    EXHIBIT
      8A(1)

    

    
      	
              Name
                of Entity

            	
              State
                of Incorporation

            	
              EIN

            	
              Owner

            	
              Guarantor
                of Indebtedness

            
	
              The
                Steak n Shake Company

            	
              IN

            	
              37-0684070

            	
              Public
                Company

            	
              YES

            
	
              Steak
                n Shake Enterprises, Inc.

            	
              IN

            	
              20-3757648

            	
              Steak
                n Shake Operations, Inc.

            	
              YES

            
	
              Steak
                n Shake Operations, Inc.

            	
              IN

            	
              35-1604308

            	
              The
                Steak n Shake Company

            	
              YES

            
	
              SNS
                Investment Company, Inc.

            	
              IN

            	
              35-1853143

            	
              The
                Steak n Shake Company

            	
              YES

            
	
              Consolidated
                Specialty Restaurants, Inc.

            	
              IN

            	
              35-1637905

            	
              The
                Steak n Shake Company

            	
              NO

            
	
              Steak
                n Shake LLC

            	
              IN

            	
              30-0342951

            	
              Steak
                n Shake Operations, Inc.

            	
              NO

            

    

    

    

     

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      8S

     

    

     

    

     

    EXHIBIT
      8(S)

    

    
      	
              Name
                of Entity

            	
              State
                of Incorporation

            	
              EIN

            	
              Owner

            	
              Guarantor
                of Indebtedness

            
	
              The
                Steak n Shake Company

            	
              IN

            	
              37-0684070

            	
              Public
                Company

            	
              YES

            
	
              Steak
                n Shake Enterprises, Inc.

            	
              IN

            	
              20-3757648

            	
              Steak
                n Shake Operations, Inc.

            	
              YES

            
	
              Steak
                n Shake Operations, Inc.

            	
              IN

            	
              35-1604308

            	
              The
                Steak n Shake Company

            	
              YES

            
	
              SNS
                Investment Company, Inc.

            	
              IN

            	
              35-1853143

            	
              The
                Steak n Shake Company

            	
              YES

            
	
              Consolidated
                Specialty Restaurants, Inc.

            	
              IN

            	
              35-1637905

            	
              The
                Steak n Shake Company

            	
              NO

            
	
              Steak
                n Shake LLC

            	
              IN

            	
              30-0342951

            	
              Steak
                n Shake Operations, Inc.

            	
              NO

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