THE STEAK N SHAKE COMPANY

 

SENIOR SERIES I NOTE

No. 2006 I-1         PPN: 857873 A@ 2

ORIGINAL PRINCIPAL AMOUNT: $4,300,000.00

ORIGINAL ISSUE DATE: October 27, 2006

INTEREST RATE: 5.66% per annum

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

October 27, commencing January 27, 2007

FINAL MATURITY DATE: October 27, 2011

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: $1,433,333.33 annually on

October 27^th of each year, commencing

October 27, 2009.

FOR VALUE RECEIVED, the undersigned, Steak N Shake Company (herein called the "Company"), a corporation organized and existing under the laws of the State of Indiana, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, or registered assigns, the principal sum of FOUR MILLION THREE HUNDRED THOUSAND DOLLARS ($4,300,000.00), payable on the Princi-pal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal here-of, with interest (computed on the basis of a 360-day year--30-day month) (a) on the unpaid balance thereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and pay-able, and (b) on any overdue payment (including any overdue prepayment) of principal, any overdue payment of Yield Maintenance Amount and any overdue payment of interest, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Com-pany of New York from time to time in New York City as its Prime Rate.

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

 

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

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

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

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

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

             By: /s/ Jeffrey A. Blade   

   Name: Jeffrey A. Blade

Title: Senior Vice President, Chief Financial Officer