Steak n Shake defends bylaws change, invites Biglari, Cooley to join board

By Lisa Kerner

Charlotte, N.C., Feb. 5 - Steak n Shake Co.'s board of directors reiterated its offer to include Sardar Biglari and Philip L. Cooley for election as directors at its 2008 annual meeting.

However, the board defended a change it made to its bylaws that effectively prevents Biglari and Cooley from calling a special meeting to replace the majority of the company's board immediately following the annual meeting.

Biglari and Cooley had demanded the board repeal the recent amendment to the company's bylaws that increased the number of shares needed to call special meetings of shareholders to 80% from 25%.

"The board believes this is not the time to make the wholesale turnover of the board or subject the company to the expense and distraction of the special meeting you propose," lead director James Williamson Jr. wrote in a letter to Biglari and Cooley. The Feb. 5 letter was included in a form 8-K filing with the Securities and Exchange Commission.

Biglari and Cooley's "short-slate contest" will detract from Steak n Shake's focus on operational excellence, core products and expense reductions, as well as suspend the company's search for a permanent chief executive office, the letter stated.

In closing, Williamson asked the pair to reconsider its decision not to join the board's slate and asked for a response by Feb. 6.

On Feb. 4, Biglari and Cooley accepted the two seats on Steak n Shake's board on the condition that the company restore "the shareholders' prerogative to call a special meeting," a prior SEC filing stated.

In addition, Biglari and Coley want the Steak n Shake's board to adopt an additional provision that future revisions to this particular bylaw require shareholder approval.

On Jan. 23, Biglari outlined his plans to create value in an open letter to fellow Steak n Shake shareholders.

It was previously reported that as part of the plan, Biglari would obtain two board seats and then call a special meeting to vote on replacing most of the board.

The investor also disagreed with chairman and CEO Alan Gilman's plan to open nine new restaurants at a cost of up to $22.5 million.

Biglari, chairman and CEO of Western Sizzlin Corp. and the Lion Fund, LP, would like to replace Gilman and Williamson.

Western Sizzlin and its affiliates reported owning 2,423,945 shares, or 8.5%, of the Indianapolis-based casual dining restaurant franchisor.

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