**Exhibit10.2**

 

**WESTERNSIZZLIN CORPORATION**

**2004NON-EMPLOYEE DIRECTORS’**

**STOCKOPTION PLAN**

 

 

**1.****                                    NAME.**

 

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

 

**2.****                                    DEFINITIONS.**

 

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

 

(a)                                “Affiliate” means anypartnership, corporation, firm, joint venture, association, trust, limitedliability company, unincorporated organization, or other entity (other than aSubsidiary) that, directly or indirectly through one or more intermediaries, iscontrolled by the Company, where the term “controlled by” means the possession,direct or indirect, of the power to cause the direction of the management andpolicies of such entity, whether through the ownership of voting interests orvoting securities, as the case may be, by contract or otherwise,

 

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

 

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

 

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

 

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

 

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

 

(g)                               “Employee” means anindividual whose wages are subject to the withholding of federal income taxunder Section 3401 of the Code.

 

(h)                               “Exchange Act” means theSecurities Exchange Act of 1934, as amended from time to time, or any successorstatute.

 

(i)                                   “Fair Market Value”of a Share as of a specified date means the average of the highest and lowestmarket prices of a Share as quoted on the bulletin board on such date, or, ifno trading of Common Stock is reported for that day, the next preceding day onwhich trading was reported. In the event the Common Stock is not then quoted onthe bulletin board, the Fair Market Value of a Share shall be determined byreference to the principal market or exchange on which the Shares are thentraded.

 

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

 

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

 

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

 

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

 

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

 

(o)                               “Rule 16b-3” means Rule16b-3 promulgated by the Securities and Exchange Commission under the ExchangeAct, or any successor or replacement rule adopted by the Securities andExchange Commission.

 

(p)                               “Share” means one shareof 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 thatcontains the terms and conditions pertaining to the NQSO.

 

(r)                                  “Subsidiary” meansany corporation or entity of which the Company, directly or indirectly, is thebeneficial owner of fifty percent (50%) or more of the total voting power ofall classes of its stock having voting power, unless the Board shall determinethat any such corporation or entity shall be excluded hereunder from thedefinition of the term Subsidiary.

 

**3.****                                    PURPOSE.**

 

The purpose of the Plan is to enable theCompany to provide incentives, which are linked directly to increases in stockholdervalue, to Non-Employee Directors so that they will be encouraged to serve onthe 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 Boardof Directors, which shall have the authority to administer the Plan in its soleand absolute discretion to grant NQSOs, and to determine the number of Sharessubject to NQSOs and the price at which each Share covered by an NQSO may bepurchased pursuant to the Plan, all as set forth in Section 8. To thisend, the Board of Directors is authorized to construe and interpret the Planand to make all other determinations necessary or advisable for theadministration of the Plan. Subject to the foregoing, any determination,decision or action of the Board of Directors in connection with theconstruction, interpretation, administration or application of the Plan shallbe final, conclusive and binding upon all Participants and any person validlyclaiming under or through a Participant.

 

(b)                               Liability of BoardMembers.

 

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

 

(c)                                NQSO Accounts.

 

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

 

**5.****                                    EFFECTIVEDATE OF THE PLAN; TERM; PLAN YEAR.**

 

(a)                                Effective Date ofthe Plan.

 

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

 

(b)                               Term of the Plan.

 

No NQSO shall be granted pursuant to the Planon or after June 22, 2014, but NQSOs theretofore granted may extend beyondthat 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 ofthe annual meeting of stockholders of each year and end on the day prior to themeeting of the following year.

 

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**6.****                                      SHARESSUBJECT TO THE PLAN.**

 

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

 

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

 

**7.****                                    SOURCEOF SHARES ISSUED UNDER THE PLAN.**

 

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

 

**8.****                                    NON-QUALIFIEDSTOCK OPTIONS.**

 

(a)                                Grant of NQSOs.

 

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

 

(b)                               The Exercise Price.

 

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

 

(c)                                Terms and Conditions.

 

All NQSOs granted pursuant to the Plan shallbe evidenced by a Stock Option Agreement (which need not be the same for eachParticipant or NQSO), approved by the Board, which shall be subject to thefollowing express terms and conditions and to the other terms and conditionsspecified in this Section 8, and to such other terms and conditions asshall be determined by the Board in its sole and absolute discretion which arenot inconsistent with the terms of the Plan:

 

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

 

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(ii)                              the failure of an NQSO tovest for any reason whatsoever shall cause the NQSO to expire and be of nofurther force or effect;

 

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

 

(iv)                          NQSOs shall not betransferable by the Participant otherwise than by will or by the laws ofdescent and distribution, and shall be exercisable during the lifetime of theParticipant only by him or her, or by his or her guardian or legalrepresentative;

 

(v)                             no NQSO or interesttherein may be transferred, assigned, pledged or hypothecated by theParticipant during his or her lifetime whether by operation of law orotherwise, or be made subject to execution, attachment or similar process; and

 

(vi)                          payment for the Shares to bereceived upon exercise of an NQSO may be made in cash, in Shares (determinedwith reference to their Fair Market Value on the date of exercise) or anycombination thereof.

 

(d)                               Additional Means ofPayment.

 

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

 

(e)                                Exercise.

 

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

 

(f)                                    Termination ofNQSOs.

 

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

 

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

 

(ii)                                  in the event aParticipant is no longer a member of the Board, other than by reason of removalfor 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 aParticipant becomes an Officer or Employee of the Company or a Subsidiary(whether or not such Participant remains a member of the Board) all NQSOs whichhave vested prior to such time shall expire twelve (12) months thereafterunless by their terms they expire sooner.

 

**9.****                                    RECAPITALIZATION.**

 

(a)                                CorporateFlexibility.

 

The existence of the Plan and the NQSOsgranted hereunder shall not affect or restrict in any way the right or power ofthe Board or the stockholders of the Company, in their sole and absolutediscretion, to make, authorize or consummate any adjustment, recapitalization,reorganization or other change in the Company’s capital structure or itsbusiness, any merger or consolidation of the Company, any issue of bonds,debentures, common stock, preferred or prior preference stocks ahead of oraffecting the Company’s capital stock or the rights thereof, the dissolution orliquidation of the Company, or any sale or transfer of all or any part of itsassets or business, or any other grant of rights, issuance of securities,transaction, corporate act or proceeding, notwithstanding the fact that any suchactivity, proceedings, action, transaction or other event may have, or beexpected to have, an impact (whether positive or negative) on the value of anyNQSO.

 

(b)                               Adjustments UponChanges in Capitalization.

 

Except as otherwise provided inSection 10 below and subject to any required action by the stockholders ofthe Company, in the event of any change in capitalization affecting the CommonStock of the Company, such as a stock dividend, stock split orrecapitalization, the Board shall make proportionate adjustments with respectto:

 

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

 

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

 

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

 

(iv)                          such other matters as shallbe appropriate in light of the circumstances; provided, however, that thenumber 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 adjustmentwould cause the Plan to fail to comply with the “formula award” exception, asset forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants of NQSOs toNon-Employee Directors.

 

**10.****                             CHANGEOF CONTROL.**

 

In the event of a Change of Control (asdefined below), all options not vested on or prior to the effective time of anysuch Change of Control shall immediately vest as of such effective time. TheBoard in its discretion may make provisions for the assumption of outstanding options,or the substitution for outstanding options of new incentive awards coveringthe stock of a successor corporation or a parent or subsidiary thereof, withappropriate adjustments as to the number and kind of shares and prices so as toprevent dilution or enlargement of rights; provided, however, that no suchadjustment shall be made if the adjustment would cause the Plan to fail tocomply 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 occuron the date any of the following events occur:

 

(a)                                any person or personsacting together which would constitute a “group” for the purpose ofSection 13(d) of the Exchange Act (other than the Company, any Subsidiaryand 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 Companyentitled to vote generally in the election of the Board;

 

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

 

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

 

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

 

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

 

**11.****                             SECURITIESLAW REQUIREMENTS.**

 

No Shares shall be issued under the Planunless and until: (i) the Company and the Participant have taken all actionsrequired to register the Shares under the Securities Act of 1933, as amended,or perfect an exemption from the registration requirements thereof; (ii) anyapplicable requirement of Nasdaq or any stock exchange on which the CommonStock is listed has been satisfied; and (iii) any other applicable provisionsof state or federal law have been satisfied. The Company shall be under noobligation to register the Shares under the Securities Act of 1933, as amended,or to effect compliance with the registration or qualification requirements ofany state securities laws.

 

**12.****                             AMENDMENTAND TERMINATION.**

 

(a)                                Modifications to thePlan.

 

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), reviseor amend the Plan in any respect whatsoever. However, unless the Boardspecifically otherwise provides, any revision or amendment that would cause thePlan to fail to comply with Rule l6b-3 or any other requirement of applicablelaw or regulation if such amendment were not approved by the stockholders ofthe Company, shall not be effective unless and until such approval is obtained.

 

(b)                               Rights of Participant.

 

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

 

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**13.****                               MlSCELLANEOUS.**

 

(a)                                  Stockholders’Rights.

 

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

 

(b)                               Other CompensationArrangements.

 

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

 

(c)                                Treatment ofProceeds.

 

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

 

(d)                               Costs of the Plan.

 

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

 

(e)                                No Right to Continueas Director.

 

Nothing contained in the Plan or in anyinstrument executed pursuant to the Plan will confer upon any Participant anyright 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 anyParticipant at any time with or without cause.

 

(f)                                  Severability.

 

The provisions of the Plan shall be deemedseverable and the validity or unenforceability of any provision shall notaffect the validity or enforceability of the other provisions hereof.

 

(g)                               Binding Effect ofPlan.

 

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

 

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(h)                               No Waiver of Breach.

 

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

 

(i)                                   Governing Law.

 

The Plan and all actions taken thereundershall be enforced, governed and construed by and interpreted under the laws ofthe State of Delaware applicable to contracts made and to be performed whollywithin such State without giving effect to the principles of conflict of lawsthereof.

 

(j)                                   Headings.

 

The headings contained in the Plan are forreference purposes only and shall not affect in any way the meaning orinterpretation of the Plan.

 

**14.****                               EXECUTION.**

 

To record the adoption of the Plan to read asset forth herein, the Company has caused the Plan to be signed by its Presidentand 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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