DIVERSIFIED RESTAURANT HOLDINGS, INC.
FORM OF STOCK OPTION AGREEMENT
 THIS AGREEMENT, th
 WHEREAS
 NOW, THEREFORE
 Grant of Option.
 Term and Exercise of Option.
 a.
    
    The term of the Option granted herein shall commence as of the
Option Grant Date and end six years from such date (such period referred to
sometimes hereinafter as the Option Period).b.
    
    The option shall vest and be exercisable over a three year
period according to the following schedule:
 (i)
    
    10,000 of the Option Shares will become
exercisable on the first anniversary of the Option Grant Date;(ii)
    
    10,000 of the Option Shares will become
exercisable on the second anniversary of the Option Grant Date; and(iii)
    
    10,000 of the Option Shares will become
exercisable on the third anniversary of the Option Grant Date;




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a.
    
    Notwithstanding the foregoing, in the event that a change in
control of the Company should occur, whether by sale of stock, sale of
substantially all of
assets of the Company, material change in the business of the Company or
other transaction, then the option provided hereunder shall immediately vest
and become exercisable in full by the Optionee with respect to all the
Option Shares.b.
    
    Optionee may exercise the Option with respect to any number of
shares that are eligible for exercise provided, however, that the Optionee
shall have the right to exercise the Option no more than five (5) times during
the life of such Option.c.
    
    The Option hereby granted shall be exercised by Optionee
delivering to the Chairman of the Company, from time to time, on any business
day, written notice specifying the number of Option Shares Optionee then
desires to purchase and reaffirming that the representations made in Section 8
hereof are true and correct as of the date of exercising the option.
 Exercise Price.
 a.
    
    Optionee must pay Two Dollars and 50/100 Dollars ($2.50) per
share (subject to adjustment pursuant to Section 7 hereof) for the Shares
acquired pursuant to this Agreement.b.
    
    Payment of the option price of the Shares shall be made in cash
at the time an Option is exercised.c.
    
    In addition, prior to the issuance of Shares upon exercise of
this option, the Optionee shall pay or make adequate provision for the payment
of any federal or state withholding tax obligation of the Company, if
applicable.
 Restriction on Shares.




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Termination of Option.
 a.
    
    Except as otherwise provided below, all Options hereby granted
shall terminate and be of no force or effect in accordance with the following
provisions:
 i)
    
    whether an option is exercisable or not
exercisable it shall terminate on the expiration of the Option Period;ii)
    
    if an option is not exercisable then the option
shall terminate on the occurrence of either of the following
conditions:
 (A)
    
    termination of Optionees
employment or position as an officer or director of the Company,
except in the case of Optionees retirement with the consent of
the Company;(B)
    
    three months after the first day
of retirement with the consent of the Company.
 b.
    
    The Option evidenced hereby is nontransferable, and shall be
exercisable during the lifetime of Optionee only by Optionee.c.
    
    If Optionee ceases to be an employee, officer or director of
the Company or its affiliate by reason of death, or if Optionee dies within
three months of retirement with consent of the Company, then the Option shall
terminate whether the Option is exercisable or not.
 Rights As a Shareholder
 Change in Capitalization
 Covenants and Representations of Optionee
 a.
    
    The Option is being received for Optionees own account without
the participation of any other person, with the intent of holding the Option
and the Shares issuable pursuant thereto for investment and without the intent
of
participating, directly or indirectly, in a distribution of the Shares and
not with a view to, or for resale in connection with, any distribution of
the Shares or any portion thereof;




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b.
    
    Optionee is not acquiring the Option based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Shares subject to this Option, but rather upon an
independent examination and judgment as to the prospects of the Company;c.
    
    Optionee has had the opportunity to ask questions of and
receive answers from the Company and any person acting on its behalf and has
received all information and data with respect to the Company that he has
requested and which he has deemed relevant in connection with his receipt of
the Option and the Shares subject thereto;d.
    
    Optionee is able to bear the economic risk of the investment,
including the risk of a complete loss of his investment, and Optionee
acknowledges that he must continue to bear the economic risk of the investment
in the Shares received upon Option exercise for an indefinite period;e.
    
    Optionee understands and agrees that the Shares subject to the
Option may be issued and sold to Optionee without registration under any state
or federal law relating to the registration of securities for sale, and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws;f.
    
    The Shares issued to Optionee upon exercise of the option will
not be offered for sale, sold or transferred by Optionee other than pursuant
to:
 i)
    
    an effective registration under applicable
state securities laws or in a transaction which is otherwise in
compliance with those laws;ii)
    
    an effective registration under the Securities
Act of 1933 (the 1933 Act) or a transaction otherwise in compliance
with the 1933 Act; andiii)
    
    evidence satisfactory to the Company of
compliance with the applicable securities laws. The Company shall be
entitled to rely upon an opinion of counsel satisfactory to it with
respect to compliance with the foregoing laws;
 g.
    
    The Company will be under no obligation to register the Shares
issuable pursuant to the Option or to comply with any exemption available for
sale of the Shares by the Optionee without registration, and the Company is
under no obligation to act in any manner so as to make Rule 144 promulgated
under the 1933 Act available with respect to sale of the Shares by the
Optionee;




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h.
    
    A legend indicating that the Shares issued pursuant to the
Option has not been registered under the applicable securities laws and
referring to any applicable restrictions on transferability and sale of the
Shares may be placed on the certificate or certificates delivered to Optionee,
and any transfer agent of the Company may be instructed to require compliance
therewith;i.
    
    The agreements, representations, warranties, and covenants made
by Optionee herein with respect to the Option shall also extend to and apply to
all of the Shares of the Company issued to Optionee from time to time pursuant
to this Option. Acceptance by Optionee of the certificate(s) representing
Shares shall constitute a confirmation by Optionee that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at that time.
 Compliance with Securities Laws.
 Resolution of Disputes.
 Notice.
 Successors.




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Severability.
 Entire Agreement.
 IN WITNESS WHEREOF
 DIVERSIFIED RESTAURANT HOLDINGS, INC.By:Authorized Officer[CORPORATE SEAL]OPTIONEE:(SEAL)