Exhibit
10.2


 


WESTERN
SIZZLIN CORPORATION


2004
NON-EMPLOYEE DIRECTORS’


STOCK
OPTION PLAN


 


 


1.                                    NAME.


 


The name of this Plan is the Western Sizzlin
Corporation 2004 Non-Employee Directors’ Stock Option Plan.


 


2.                                    DEFINITIONS.


 


For the purposes of the Plan, the following
terms shall be defined as set forth below:


 


(a)                                “Affiliate” means any
partnership, corporation, firm, joint venture, association, trust, limited
liability company, unincorporated organization, or other entity (other than a
Subsidiary) that, directly or indirectly through one or more intermediaries, is
controlled by the Company, where the term “controlled by” means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of such entity, whether through the ownership of voting interests or
voting securities, as the case may be, by contract or otherwise,


 


(b)                               “Board” means the Board
of Directors of the Company.


 


(c)                                “Code” means the
Internal Revenue Code of 1986, as amended from time to time, and the Treasury
regulations promulgated thereunder.


 


(d)                               “Common Stock” means the
common stock, $.01 par value per share, of the Company or any security of the
Company identified by the Board as having been issued in substitution or
exchange therefor or in lieu thereof.


 


(e)                                “Company” means Western
Sizzlin Corporation, a Delaware corporation.


 


(f)                                  “Effective Date”
means June 22, 2004.


 


(g)                               “Employee” means an
individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Code.


 


(h)                               “Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time, or any successor
statute.


 


(i)                                   “Fair Market Value”
of a Share as of a specified date means the average of the highest and lowest
market prices of a Share as quoted on the bulletin board on such date, or, if
no trading of Common Stock is reported for that day, the next preceding day on
which trading was reported. In the event the Common Stock is not then quoted on
the bulletin board, the Fair Market Value of a Share shall be determined by
reference to the principal market or exchange on which the Shares are then
traded.


 
















 


(j)                                   “Non-Employee
Director” means an individual who (i) is now or hereafter becomes a member of
the Board, and (ii) is not an Employee of the Company or of any Subsidiary or
Affiliate on the date of the grant of the NQSO.


 


(k)                                “NQSO” means a stock
option that is not qualified under Section 422 of the Code.


 


(l)                                   “Officer” means an
individual elected or appointed by the Board or by the board of directors of a
Subsidiary, or chosen in such other manner as may be prescribed by the bylaws
of the Company or a Subsidiary, as the case may be, to serve as such.


 


(m)                             “Participant” means a
Non-Employee Director who is granted an NQSO under the Plan.


 


(n)                               “Plan” means this 2004
Non-Employee Directors’ Stock Option Plan.


 


(o)                               “Rule 16b-3” means Rule
16b-3 promulgated by the Securities and Exchange Commission under the Exchange
Act, or any successor or replacement rule adopted by the Securities and
Exchange Commission.


 


(p)                               “Share” means one share
of Common Stock, adjusted in accordance with Section 9(b), if applicable.


 


(q)                               “Stock Option Agreement”
means the written agreement between the Company and the Participant that
contains the terms and conditions pertaining to the NQSO.


 


(r)                                  “Subsidiary” means
any corporation or entity of which the Company, directly or indirectly, is the
beneficial owner of fifty percent (50%) or more of the total voting power of
all classes of its stock having voting power, unless the Board shall determine
that any such corporation or entity shall be excluded hereunder from the
definition of the term Subsidiary.


 


3.                                    PURPOSE.


 


The purpose of the Plan is to enable the
Company to provide incentives, which are linked directly to increases in stockholder
value, to Non-Employee Directors so that they will be encouraged to serve on
the Board and exert their best efforts on behalf of the Company.


 


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4.                                    ADMINISTRATION.


 


(a)                                Board of Directors.


 


The Plan shall be administered by the Board
of Directors, which shall have the authority to administer the Plan in its sole
and absolute discretion to grant NQSOs, and to determine the number of Shares
subject to NQSOs and the price at which each Share covered by an NQSO may be
purchased pursuant to the Plan, all as set forth in Section 8. To this
end, the Board of Directors is authorized to construe and interpret the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan. Subject to the foregoing, any determination,
decision or action of the Board of Directors in connection with the
construction, interpretation, administration or application of the Plan shall
be final, conclusive and binding upon all Participants and any person validly
claiming under or through a Participant.


 


(b)                               Liability of Board
Members.


 


No member of the Board will be liable for any
action or determination made in good faith by the Board with respect to the
Plan or any grant or exercise of an NQSO thereunder.


 


(c)                                NQSO Accounts.


 


The Company shall maintain a journal in which
a separate account for each Participant shall be established. Whenever NQSOs
are granted to or exercised by a Participant, the Participant’s account shall
be appropriately credited or debited. Appropriate adjustment shall also be made
in the journal with respect to each account in the event of an adjustment
pursuant to Section 9(b).


 


5.                                    EFFECTIVE
DATE OF THE PLAN; TERM; PLAN YEAR.


 


(a)                                Effective Date of
the Plan.


 


The Plan was adopted by the Board and became
effective on June 22, 2004.


 


(b)                               Term of the Plan.


 


No NQSO shall be granted pursuant to the Plan
on or after June 22, 2014, but NQSOs theretofore granted may extend beyond
that date.


 


(c)                                Plan Year.


 


The initial Plan Year begins June 22,
2004 and ends on the date of the 2005 annual meeting of stockholders.  Subsequent Plan Years begin on the date of
the annual meeting of stockholders of each year and end on the day prior to the
meeting of the following year.


 


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6.                                      SHARES
SUBJECT TO THE PLAN.


 


The maximum aggregate number of Shares which
may be subject to NQSOs granted to Non-Employee Directors under the Plan shall
be five hundred thousand (500,000). The limitation on the number of Shares
which may be subject to NQSOs under the Plan shall be subject to adjustment as
provided in Section 9(b).


 


If any NQSO granted under the Plan expires,
or is terminated for any reason without having been exercised in full, the
Shares allocable to the unexercised portion of such NQSO shall again become
available for grant pursuant to the Plan. At all times during the term of the
Plan, the Company shall reserve and keep available for issuance such number of
shares as the Company is obligated to issue upon the exercise of all then
outstanding NQSOs.


 


7.                                    SOURCE
OF SHARES ISSUED UNDER THE PLAN.


 


Common Stock issued under the Plan shall be
authorized and unissued Shares. No fractional Shares shall be issued under the
Plan.


 


8.                                    NON-QUALIFIED
STOCK OPTIONS.


 


(a)                                Grant of NQSOs.


 


On the beginning date of each Plan Year,
NQSOs to purchase 10,000 Shares shall be granted automatically to each
Non-Employee Director. With respect to any Non-Employee Director who first
becomes a member of the Board after the beginning date of a Plan Year, NQSOs to
purchase 10,000 Shares shall be granted automatically on the next succeeding
business day following his or her election to the Board.


 


(b)                               The Exercise Price.


 


The exercise price of a Share shall be the
Fair Market Value of such Share on the first day of the Plan Year for which the
options are granted (or the next business day if such date falls on a weekend
or holiday), or if granted on another day then the date of such grant.


 


(c)                                Terms and Conditions.


 


All NQSOs granted pursuant to the Plan shall
be evidenced by a Stock Option Agreement (which need not be the same for each
Participant or NQSO), approved by the Board, which shall be subject to the
following express terms and conditions and to the other terms and conditions
specified in this Section 8, and to such other terms and conditions as
shall be determined by the Board in its sole and absolute discretion which are
not inconsistent with the terms of the Plan:


 


(i)                                 all NQSOs granted to a
Participant shall vest and become first exercisable immediately upon grant;


 


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(ii)                              the failure of an NQSO to
vest for any reason whatsoever shall cause the NQSO to expire and be of no
further force or effect;


 


(iii)                           unless terminated earlier
pursuant to this Plan, the term of each NQSO shall be five (5) years from the
date of grant;


 


(iv)                          NQSOs shall not be
transferable by the Participant otherwise than by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
Participant only by him or her, or by his or her guardian or legal
representative;


 


(v)                             no NQSO or interest
therein may be transferred, assigned, pledged or hypothecated by the
Participant during his or her lifetime whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process; and


 


(vi)                          payment for the Shares to be
received upon exercise of an NQSO may be made in cash, in Shares (determined
with reference to their Fair Market Value on the date of exercise) or any
combination thereof.


 


(d)                               Additional Means of
Payment.


 


Any Stock Option Agreement may, in the sole
and absolute discretion of the Board, permit payment by any other form of legal
consideration consistent with applicable law and any rules and regulations
relating thereto, including, but not limited to, the execution and delivery of
a full recourse promissory note (bearing interest at a rate not less than the
prime rate announced as then being in effect by the Company’s principal lender
and whose maturity date shall not exceed beyond ten (10) years) by the
Participant to the Company.


 


(e)                                Exercise.


 


The holder of an NQSO may exercise the same
by filing with the Corporate Secretary of the Company a written election, in
such form as the Board may determine, specifying the number of Shares with
respect to which such NQSO is being exercised. Such notice shall be accompanied
by payment in full of the exercise price for such Shares. Notwithstanding the
foregoing, the Board may specify a reasonable minimum number of Shares that may
be purchased on any exercise of an option, provided that such minimum number
will not prevent the holder from exercising the option with respect to the full
number of Shares as to which the option is then exercisable.


 


(f)                                    Termination of
NQSOs.


 


NQSOs granted under the Plan shall be subject
to the following events of termination:


 


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(i)                                     in the event a
Participant is removed from the Board for cause (as contemplated by the Company’s
bylaws), all unexercised NQSOs held by such Participant on the date of such
removal (whether or not vested) will expire immediately;


 


(ii)                                  in the event a
Participant is no longer a member of the Board, other than by reason of removal
for cause, all NQSOs which have vested prior to such time shall expire twelve
(12) months thereafter unless by their terms they expire sooner; and


 


(iii)                               in the event a
Participant becomes an Officer or Employee of the Company or a Subsidiary
(whether or not such Participant remains a member of the Board) all NQSOs which
have vested prior to such time shall expire twelve (12) months thereafter
unless by their terms they expire sooner.


 


9.                                    RECAPITALIZATION.


 


(a)                                Corporate
Flexibility.


 


The existence of the Plan and the NQSOs
granted hereunder shall not affect or restrict in any way the right or power of
the Board or the stockholders of the Company, in their sole and absolute
discretion, to make, authorize or consummate any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, common stock, preferred or prior preference stocks ahead of or
affecting the Company’s capital stock or the rights thereof, the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other grant of rights, issuance of securities,
transaction, corporate act or proceeding, notwithstanding the fact that any such
activity, proceedings, action, transaction or other event may have, or be
expected to have, an impact (whether positive or negative) on the value of any
NQSO.


 


(b)                               Adjustments Upon
Changes in Capitalization.


 


Except as otherwise provided in
Section 10 below and subject to any required action by the stockholders of
the Company, in the event of any change in capitalization affecting the Common
Stock of the Company, such as a stock dividend, stock split or
recapitalization, the Board shall make proportionate adjustments with respect
to:


 


(i)                                 the aggregate number
of Shares available for issuance under the Plan;


 


(ii)                              the number of Shares
subject to each grant under the Plan;


 


(iii)                           the number and exercise
price of Shares subject to outstanding NQSOs; and


 


(iv)                          such other matters as shall
be appropriate in light of the circumstances; provided, however, that the
number of Shares subject to any NQSO shall always be a whole


 


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number and that no such adjustment shall be made if the adjustment
would cause the Plan to fail to comply with the “formula award” exception, as
set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants of NQSOs to
Non-Employee Directors.


 


10.                             CHANGE
OF CONTROL.


 


In the event of a Change of Control (as
defined below), all options not vested on or prior to the effective time of any
such Change of Control shall immediately vest as of such effective time. The
Board in its discretion may make provisions for the assumption of outstanding options,
or the substitution for outstanding options of new incentive awards covering
the stock of a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices so as to
prevent dilution or enlargement of rights; provided, however, that no such
adjustment shall be made if the adjustment would cause the Plan to fail to
comply with the “formula award” exception, as set forth in Rule 16b-3(c)(2)(ii)
of the Exchange Act, for grants of NQSOs to Non-Employee Directors.


 


A “Change of Control” will be deemed to occur
on the date any of the following events occur:


 


(a)                                any person or persons
acting together which would constitute a “group” for the purpose of
Section 13(d) of the Exchange Act (other than the Company, any Subsidiary
and any entity beneficiary owned by any of the foregoing), beneficially owns
(as defined in Rule 13d-3 under the Exchange Act) without Board approval,
directly or indirectly, at least 30% of the total voting power of the Company
entitled to vote generally in the election of the Board;


 


(b)                               either (i) the Current
Directors (as herein defined) cease for any reason to constitute at least a
majority of the members of the Board (for these purposes, a Current Director
means any member of the Board as of June 22, 2004, and any successor of a
Current Director, and any additional director filling a vacancy created by an
expansion of the size of the Board, whose election, or nomination for election
by the Company’s shareholders, was approved by at least a majority of the
Current Directors then on the Board), or (ii) at any meeting of the
stockholders of the Company called for the purpose of electing directors, a
majority of the persons nominated by the Board for election as directors fail
to be elected;


 


(c)                                the stockholders of the
Company approve (i) a plan of complete liquidation of the Company, or (ii) an
agreement providing for the merger or consolidation of the Company (A) in which
the Company is not the continuing or surviving corporation (other than
consolidation or merger with a wholly-owned subsidiary of the Company in which
all Shares outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration), or (B) pursuant to which
the Shares are converted into cash, securities or other property, except a
consolidation or merger of the Company in which the holders of the Shares
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the common stock of the continuing or surviving
corporation immediately after such consolidation or merger, or in which the
Board immediately prior to the merger or consolidation


 


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would, immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving corporation;
or


 


(d)                               the stockholders of the
Company approve an agreement (or agreements) providing for the sale or other
disposition (in one transaction or a series of transactions) of all or
substantially all of the assets of the Company.


 


11.                             SECURITIES
LAW REQUIREMENTS.


 


No Shares shall be issued under the Plan
unless and until: (i) the Company and the Participant have taken all actions
required to register the Shares under the Securities Act of 1933, as amended,
or perfect an exemption from the registration requirements thereof; (ii) any
applicable requirement of Nasdaq or any stock exchange on which the Common
Stock is listed has been satisfied; and (iii) any other applicable provisions
of state or federal law have been satisfied. The Company shall be under no
obligation to register the Shares under the Securities Act of 1933, as amended,
or to effect compliance with the registration or qualification requirements of
any state securities laws.


 


12.                             AMENDMENT
AND TERMINATION.


 


(a)                                Modifications to the
Plan.


 


The Board may, insofar as permitted by law,
from time to time, with respect to any Shares at the time not subject to NQSOs,
suspend or terminate the Plan or, subject to Sections 8(a) through 8(c), revise
or amend the Plan in any respect whatsoever. However, unless the Board
specifically otherwise provides, any revision or amendment that would cause the
Plan to fail to comply with Rule l6b-3 or any other requirement of applicable
law or regulation if such amendment were not approved by the stockholders of
the Company, shall not be effective unless and until such approval is obtained.


 


(b)                               Rights of Participant.


 


No amendment, suspension or termination of the
Plan that would adversely affect the right of any Participant with respect to
an NQSO previously granted under the Plan will be effective without the written
consent of the affected Participant.


 


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13.                               MlSCELLANEOUS.


 


(a)                                  Stockholders’
Rights.


 


Neither a Participant, nor a beneficiary, nor
other person claiming under or through such Participant shall acquire any
rights as a stockholder of the Company by virtue of such Participant having
been granted an NQSO under the Plan. No Participant and no beneficiary or other
person claiming under or through such Participant will have any right, title or
interest in or to any Shares allocated or reserved under the Plan or subject to
any NQSO except as to Shares, if any, that have been issued or transferred to
such Participant. No adjustment shall be made for cash dividends for which the
record date is prior to the date of exercise.


 


(b)                               Other Compensation
Arrangements.


 


Nothing contained in the Plan shall prevent
the Board from adopting other compensation arrangements, subject to stockholder
approval if such approval is required. Such other arrangements may be either
generally applicable or applicable only in specific cases.


 


(c)                                Treatment of
Proceeds.


 


Proceeds realized from the exercise of NQSOs
under the Plan shall constitute general funds of the Company.


 


(d)                               Costs of the Plan.


 


The costs and expenses of administering the
Plan shall be borne by the Company.


 


(e)                                No Right to Continue
as Director.


 


Nothing contained in the Plan or in any
instrument executed pursuant to the Plan will confer upon any Participant any
right to continue as a member of the Board or affect the right of the Company,
the Board or the stockholders of the Company to terminate the directorship of any
Participant at any time with or without cause.


 


(f)                                  Severability.


 


The provisions of the Plan shall be deemed
severable and the validity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.


 


(g)                               Binding Effect of
Plan.


 


The Plan shall inure to the benefit of the
Company, its successors and assigns.


 


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(h)                               No Waiver of Breach.


 


No waiver by any party hereto at any time of
any breach by another party hereto of, or compliance with, any condition or
provision of the Plan to be performed by such other party shall be deemed a
waiver of the same, any similar or any dissimilar provisions of conditions at
the same or at any prior or subsequent time.


 


(i)                                   Governing Law.


 


The Plan and all actions taken thereunder
shall be enforced, governed and construed by and interpreted under the laws of
the State of Delaware applicable to contracts made and to be performed wholly
within such State without giving effect to the principles of conflict of laws
thereof.


 


(j)                                   Headings.


 


The headings contained in the Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan.


 


14.                               EXECUTION.


 


To record the adoption of the Plan to read as
set forth herein, the Company has caused the Plan to be signed by its President
and attested by its Secretary as of June 22, 2004.


 


 


	
   

  	
  WESTERN SIZZLIN CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James C. Verney

  
	
   

  	
   

  	
  James C.
  Verney, President

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Robyn B. Mabe

  	
   

  	
   

  
	
  Robyn B. Mabe, Secretary

  	
   

  
				



 


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