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Exhibit 10.34


                              SILVER DINER, INC.
                               STOCK OPTION PLAN
                          (AS AMENDED MARCH 4, 1998)

     1.   PURPOSE

     This Stock Option Plan (the "Plan") for Silver Diner, Inc. (the "Company")
is intended to provide incentive to officers and other key employees of the
Company by providing those persons with opportunities to purchase shares of the
Company's Common Stock under (a) incentive stock options ("Incentive Stock
Options") as such term is defined under Section 422 of the Internal Revenue Code
of 1986, as amended and (b) other stock options ("Non-Qualified Options").

     2.   DEFINITIONS

     As used in this Plan, the following words and phrases shall have the
meanings indicated:

     (a)  "Board" shall mean the Board of Directors of the Company.

     (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (c)  "Common Stock" shall mean the Common Stock, $0.01 par value, of the
Company.

     (d)  "Company" shall mean Silver Diner, Inc., a Delaware corporation.

     (e)  "Disability" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months.

     (f)  "Fair Market Value" per share as of a particular date shall mean (i)
the closing sales price per share of Common Stock on the principal national
securities exchange, if any, on which the shares of Common Stock shall then be
listed for the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are not then
listed on a national securities exchange, the last sales price per share of
Common Stock entered on a national inter-dealer quotation system for the last
preceding date on which there was a sale of such Common Stock on such national
inter-dealer quotation system, or (iii) if no closing or last sales price per
share of Common Stock is entered on a national inter-dealer quotation system,
the average of the closing bid and asked prices for the shares of Common Stock
in the over-the-counter market for the last preceding date on which there was a
quotation for such Common Stock in such market, or (iv) if no price can be
determined under the preceding alternatives, then the price per share as most
recently determined by the Board, which shall make such determinations of value
at least once annually.

     (g)  "Incentive Stock Option" means one or more options to purchase Common
Stock which, at the time such options are granted under this Plan or any other
such plan of the Company, qualify as incentive stock options under Section 422
of the Code.

     (h)  "Non-Qualified Option" shall mean any Option that is not an Incentive
Stock Option.

     (i)  "Option Price" shall mean the purchase price of shares of Common Stock
covered by an Option.

     (j)  "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting an Option, each of the corporations other than the 
<PAGE>
 
Company owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.

     (k)  "Plan" shall mean this Stock Option Plan.

     (l)  "Option" shall mean any option issued pursuant to this Plan.

     (m)  "Optionee" shall mean any person to whom an Option is granted under
this Plan.

     (n)  "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting an Option, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

     (o)  "Ten Percent Shareholder" shall mean an Optionee who, at the time an
Option is granted, owns directly or indirectly (within the meaning of section
425(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, its Parent or a
Subsidiary.

     3.   GENERAL ADMINISTRATION.

     (a)  The Plan shall be administered by the Board or a committee consisting
of three or more members of the Board (the "Committee") as shall be established
by the Board.

     (b)  The Board (or Committee, if applicable), shall have the authority in
its discretion, subject to and not inconsistent with the express provisions of
the Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to the Board (or Committee, if applicable) under the
Plan or necessary or advisable in the administration of the Plan, including,
without limitation, the authority to grant Options; to determine the Option
Price; to determine the persons to whom, and the time or times at which, Options
shall be granted; to determine the number of shares to be covered by each
Option; to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
Option Agreements (which need not be identical) entered into in connection with
Options granted under the Plan; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.  All powers granted
to the Board under the Plan shall be deemed granted to the Committee if the
Committee is established.

     (c)  No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Option
granted hereunder.

     4.   GRANTING OF OPTIONS

     Options may be granted under the Plan at any time prior to September 11,
2006.

     5.   ELIGIBILITY

     (a)  Options may be granted to any director, officer key employee or
outside consultant of the Company. In determining from time to time the officers
and employees to whom Options shall be granted and the number of shares to be
covered by each Option, the Board shall take into account the duties of the
respective officers and employees, their present and potential contributions to
the success of the Company and such other factors as the Board shall deem
relevant in connection with accomplishing the purposes of the Plan.

     (b)  At the time of the grant of each Option under the Plan, the Board
shall determine whether such Option is to be designated an Incentive Stock
Option. Incentive Stock Options shall not be granted to a director who is not an
employee of the Company. The length of the exercise period of Incentive Stock
Options shall be governed by Section 7(e)(1) of the Plan; the exercise period of
all other Options will be governed by Section 7(e)(2).
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     (c)  An Option designated an Incentive Stock Option can, prior to its
exercise, be changed to a Non-Qualified Option if the Optionee consents to amend
his Option Agreement to provide that the exercise period of such Option will be
governed by Section 7(e)(2) of the Plan.

     6.   STOCK

     (a)  The stock subject to the Options shall be shares of the Common Stock.
Such shares may, in whole or in part, be authorized but unissued shares
contributed directly by the Company or shares which shall have been or which may
be acquired by the Company. The aggregate number of shares of Common Stock as to
which Options may be granted from time to time under the Plan shall be 1,200
shares. The limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 7(i) hereof.

     (b)  If any outstanding Option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares of Common Stock
allocable to the unexercised portion of such Option shall (unless the Plan shall
have been terminated) become available for subsequent grants of Options under
the Plan.

     7.   TERMS AND CONDITIONS OF OPTIONS

     Each Option granted pursuant to the Plan shall be evidenced by Option
Agreements in such forms as the Board may from time to time approve. Options
shall comply with and be subject to the following terms and conditions:

     (a)  Option Price. Each Option shall state the Option Price, which in the
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case of Incentive Stock Options shall be not less than one hundred percent
(100%) of the Fair Market Value of the shares of Common Stock on the date of
grant of the Option; provided, however, that in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder, the Option Price shall not be less
than one hundred ten percent (110%) of such fair market value. The Option Price
per share for Non-Qualified Options shall not be less than the par value of a
share of Common Stock on the date of grant of the Option. The Option Price shall
be subject to adjustment as provided in Section 7 (i) hereof. The date on which
the Board adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted.

     (b)  Restrictions. Any Common Stock issued under the Plan may contain
          ------------                                                    
restrictions including, but not limited to, limitations on transferability that
may constitute substantial risks of forfeiture, as the Board may determine.

     (c)  Value of Shares. Options may be granted to any eligible person for
          ---------------                                                   
shares of Common Stock of any value, provided that the aggregate Fair Market
Value (determined at the time the Option is granted) of the stock with respect
to which Incentive Stock Options are exercisable for the first time by the
Optionee during any calendar year (under all the plans of the Company, its
Parent and its Subsidiaries) shall not exceed $100,000.

     (d)  Medium and Time of Payment. The Option Price shall be paid in full, at
          --------------------------                                            
the time of exercise, in cash or, with the approval of the Board, in shares of
Common Stock having a fair market value in the aggregate equal to such Option
Price or in a combination of cash and such shares.
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     (e)  Term and Exercise of Options.
          ---------------------------- 

          (1)  Unless the applicable Option Agreement otherwise provides, each
Option shall become vested and first exercisable in the following installments:

<TABLE>
<CAPTION>
 
              Year                 Percentage Exercisable
              ----                 ----------------------
       <S>                         <C> 
       Less than Two Years                   0%                   

           Two Years                        20%                   

           Three Years                      20%                   

           Four Years                       25%                   

           Five Years                       35%                    
</TABLE>

          (2)  Incentive Stock Options shall be exercisable over the exercise
period specified by the Board in the Option Agreement, but in no event shall
such period exceed ten (10) years from the date of the grant of each such
Incentive Stock Option; provided, however, that in the case of an Incentive
Stock Option granted to a Ten Percent Shareholder, the exercise period shall not
exceed five (5) years from the date of grant of such Option. The exercise period
shall be subject to earlier termination as provided in Section 7(f) and 7(g)
hereof. An Incentive Stock Option may be exercised, as to any or all full shares
of Common Stock as to which the Incentive Stock Option has become exercisable,
by giving written notice of such exercise to the Board; provided that an
Incentive Stock Option may not be exercised at any one time as to less than 100
shares (or such number of shares as to which the Incentive Stock Option is then
exercisable if such number of shares is less than 100).

          (3)  Non-Qualified Options shall be exercisable over a period not to
exceed ten (10) years.

     (f)  Termination of Employment. Except as provided in this Section 7(f) and
          -------------------------                                             
Section 7(g) hereof, an Option may not be exercised by persons who are not
outside consultants to the Company unless the Optionee is then a director of or
in the employ of the Company or any Parent or Subsidiary of the Company (or a
corporation or a Parent or Subsidiary of such corporation issuing or assuming
the Option in a transaction to which Section 425(a) of the Code applies), and
unless the Optionee has remained continuously a director or so employed since
the date of grant of the Option. In the event all association of an Optionee
(other than an outside consultant) with the Company (as an employee, or director
or both) shall terminate (other than by reason of death or Disability), all
Options or unexercised portions thereof granted to such Optionee which are then
exercisable may, unless earlier terminated in accordance with their terms, be
exercised within thirty (30) days after such termination; provided, however,
that if the association of the Optionee with the Company shall terminate for
"cause" (as determined by the Board), all Options theretofore granted to such
Optionee shall, to the extent not theretofore exercised, terminate forthwith. A
bona fide leave of absence shall not be considered a termination or break in
continuity of employment for any purpose of the Plan so long as the period of
such leave does not exceed ninety (90) days or such longer period during which
the Optionee's right to reemployment is guaranteed by statute or by contract.
Where the period of such leave exceeds ninety (90) days and the Optionee's right
to reemployment is not guaranteed, the Optionee's employment will be deemed to
have terminated on the ninety-first (91st) day of such leave. Nothing in the
Plan or in any Option granted pursuant hereto shall confer upon an employee any
right to continue in the employ of the Company or any of its divisions or Parent
or Subsidiaries or interfere in any way with the right of the Company or any
such divisions or Parent or Subsidiary to terminate or change the terms of such
employment at any time.

     (g)  Death or Disability of Optionee. If an Optionee who was an outside
          -------------------------------                                   
consultant when his Option was granted shall die or if an Optionee shall die
while a director of or employed by the Company or any Parent or Subsidiary of
the Company, or if the Optionee's employment shall terminate by reason of
Disability, all Options theretofore granted to such Optionee may, unless earlier
terminated in accordance with their terms, be exercised by the Optionee or by
the personal representative of the Optionee's estate or by a person who acquired
the right to exercise such Option by bequest or inheritance or otherwise by
reason of death of the Optionee, at any time within 
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nine (9) months after the date of death or Disability of the Optionee, but in no
event later than the date of expiration of the Option, provided that during the
lifetime of the Optionee any Option granted to him may be exercised only by the
Optionee.

     (h)  Nontransferability of Options. Options granted under the Plan shall
          -----------------------------
not be transferable other than by will or by the laws of descent and
distribution, and Options may be exercised, during the lifetime of the Optionee,
only by the Optionee. Notwithstanding the preceding sentence, the Board, in its
sole discretion, permit the assignment or transfer of a Non-Qualified Option and
the exercise thereof by a person other than an Optionee, on such terms and
conditions as the Board in its sole discretion may determine. Any such terms
shall be determined at the time the Non-Qualified Option is granted, and shall
be set forth in the Option Agreement.

     (i)  Effect of Certain Changes.
          ------------------------- 

          (1)  If there is any change in the number of shares of Common Stock
through the declaration of stock dividends, recapitalization resulting in stock
splits, or combinations or exchanges of such shares, then the number of shares
of Common Stock available for Options, the number of such shares covered by
outstanding Options, and the price per share of such Options shall be
proportionately adjusted to reflect any increase or decrease in the number of
issued shares of Common Stock; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated.

          (2)  In the event of a proposed dissolution or liquidation of the
Company, or in the event of any corporate separation or division, including but
not limited to, a split-up, a split-off or spin-off, the Board may provide that
the holder of each Option then exercisable shall have the right to exercise such
Option (at its then Option Price) solely for the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such dissolutions or liquidation, or corporate separation or division; or
the Board may provide, in the alternative, that each Option granted under the
Plan shall terminate as of a date to be fixed by the Board, provided, however,
that no less than thirty (30) days' written notice of the date so fixed shall be
given to each Optionee, who shall have the right, during the period of thirty
(30) days preceding such termination, to exercise the Options as to all or any
part of the shares of Common Stock covered thereby, including shares as to which
such Options would not otherwise be exercisable.

          (3)  If while unexercised Options remain outstanding under the Plan
(i) the Company executes a definitive agreement to merge or consolidate with or
into another corporation or to sell or otherwise dispose of substantially all
its assets, (ii) more than 50% of the Company's then outstanding voting stock is
acquired by any person or group or (iii) Robert T. Giaimo ceases to be President
of the Company (any such event being an "Accelerating Event") then from and
after the date of any such agreement or the date on which public announcement of
the acquisition of such percentage shall have been made or the date on which Mr.
Giaimo ceases to be President of the Company (any such date being referred to
herein as the "Acceleration Date"), all Options shall be exercisable in full,
whether or not otherwise exercisable. Following the Acceleration Date, (a) the
Board shall, in the case of a merger, consolidation or sale or disposition of
assets, promptly make an appropriate adjustment to the number and class of
shares of Common Stock available for Options, and to the amount and kind of
shares or other securities or property receivable upon exercise of any
outstanding Options after the effective date of such transaction, and the price
thereof, and (b) the Board may, in its discretion, permit the cancellation of
outstanding Options in exchange for a cash payment in an amount per share
subject to any such option determined by the Board in its sole discretion, but
not less than the difference between the Option Price per share and the Fair
Market Value per share of Common stock on the Acceleration Date.

          (4)  Paragraphs (2) and (3) of this Section 7(i) shall not apply to a
merger or consolidation in which the Company is the surviving corporation and
shares of Common Stock are not converted into or exchanged for stock, securities
or any other corporation, cash or any other thing of value. Notwithstanding the
preceding sentence, in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value 
<PAGE>
 
to no par value, or as a result of a subdivision or combination, but including
any change in such shares into two or more classes or series of shares), the
Board may provide that the holder of each Option then exercisable shall have the
right to exercise such Option solely for the kind and amount of shares of stock
and other securities (including those of any new direct or indirect parent of
the Company), property, cash or any combination thereof receivable by the holder
of the number of shares of Common Stock for which such Option might have been
exercised upon such reclassification, change, consolidation or merger.

          (5)  In the event of a change in the Common Stock as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.

          (6)  To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive, provided
that each Option granted pursuant to this Plan and designated an Incentive Stock
Option shall not be adjusted in a manner that causes the Option to fail to
continue to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code.

          (7)  Except as hereinbefore expressly provided in this Section 7(i),
the Optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation, and any issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Option Price of shares of
Common Stock subject to an Option. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.

     (j)  Rights as a Shareholder. An Optionee or a transferee of an Option
          -----------------------
shall have no rights as a shareholder with respect to any shares covered by his
Option until the date of the issuance of a stock certificate to him for such
shares. No adjustments shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 7(i) hereof.

     (k)  Other Provisions.  The Option Agreements authorized under the Plan
          ----------------                                                  
shall contain such other provisions, including, without limitation, (i) the
imposition of restrictions upon the exercise of an Option and (ii) the inclusion
of any condition not inconsistent with an Option designated by the Board as an
Incentive Stock Option qualifying as an Incentive Stock Option, as the Board
shall deem advisable, including provisions with respect to compliance with
federal and applicable state securities laws.

     8.   AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES

     (a)  No later than the date of exercise of any Option granted hereunder,
the Optionee will pay to the Company or make arrangements satisfactory to the
Board regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Option, and

     (b)  The Company shall, to the extent permitted or required by law, have
the right to deduct from any payment of any kind otherwise due to the Optionee
any federal, state or local taxes of any kind required by law to be withheld
upon the exercise of such Option.
<PAGE>
 
     9.   TERM OF PLAN

     Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date on which the Plan is adopted by the
Board, provided that no Options granted under the Plan shall become exercisable
unless and until the Plan shall have been approved by the Company's
shareholders.

     10.  SAVINGS CLAUSE

     Notwithstanding any other provision hereof, this Plan is intended to
qualify as a plan pursuant to which Incentive Stock Options may be issued under
Section 422 of the Code. If this Plan or any provision of this Plan shall be
held to be invalid or to fail to meet the requirements of Section 422 of the
Code or the regulations promulgated thereunder, such invalidity or failure shall
not affect the remaining parts of this Plan, but rather it shall be construed
and enforced as if the Plan or the affected provision thereof, as the case may
be, complied in all respects with the requirements of Section 422 of the Code.

     11.  AMENDMENT AND TERMINATION OF THE PLAN

     The Board may at any time and from time to time suspend, terminate, modify
or amend the Plan, provided that any amendment that would materially increase
the aggregate number of shares of Common Stock as to which Options may be
granted under the Plan, materially increase the benefits accruing to
participants under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock voting at a meeting at which a
quorum is present, except that any such increase or modification that may result
from adjustments authorized by Section 7 (i) hereof shall not require such
approval. Except as provided in Section 7 hereof, no suspension, termination,
modification or amendment of the Plan may adversely affect any Option previously
granted unless the written consent of the Optionee is obtained.

     12.  NONEXCLUSIVITY OF THE PLAN

     Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Subsidiary now has lawfully put into effect, including,
without limitation, any retirement, pension, savings and stock purchase plan,
insurance, death and disability benefits and executive short-term incentive
plans.

     13.  NATURE OF PAYMENTS

     (a)  All Options granted shall be in consideration of services performed
for the Company by the Optionee.

     (b)  All Options granted shall constitute a special incentive benefit to
the Optionee and shall not be taken into account in computing the amount of
salary or compensation of the Optionee for the purpose of determining any
benefits under any pension, retirement, profit-sharing, bonus, life insurance or
other benefit plan of the Company or under any agreement between the Company and
the Optionee, unless such plan or agreement specifically otherwise provides.
<PAGE>
 
     14.  NONUNIFORM DETERMINATIONS

     The Board's determinations under this Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Options (whether or not such persons are similarly situated). Without limiting
the generality of the foregoing, the Board shall be entitled, among other
things, to make nonuniform and selective determinations which may, INTER ALIA,
reflect the specific terms of individual employment agreements, and to enter
into nonuniform and selective Option Agreements, as to the persons to receive
Options and the terms and conditions of Options.

     15.  SECTION HEADINGS

     The section headings contained herein are for the purpose of convenience
only and are not intended to define or limit the contents of said sections.


Adopted by the Board of Directors on September 11, 1996.

Attest:

________________________________        _______________________________________ 
                                             Secretary

Date:_____________