LONE STAR STEAKHOUSE & SALOON INC.
 
 
                             2004 STOCK OPTION PLAN
 
 
     1.     Purpose of the Plan.
            --------------------
 
            This 2004 Stock Option Plan (the "Plan") is intended as an
incentive, to retain a valuable workforce now in the employ of the Company (as
hereinafter defined) and recruit in the employ and as directors, consultants and
advisors to Lone Star Steakhouse & Saloon Inc. a Delaware corporation (the
"Company") with its principal office at 224 East Douglas, Suite 700, Wichita,
Kansas 67202 and any Subsidiary of the Company, within the meaning of Section
424(f) of the United States Internal Revenue Code of 1986, as amended (the
"Code") and 50% or more owned partnerships of the Company and its Subsidiaries,
persons of training, experience and ability, and to attract new employees,
directors, consultants and advisors whose services are considered valuable. In
addition, the Plan is intended to encourage the sense of proprietorship and to
stimulate the active interest of such persons in the development and financial
success of the Company and its Subsidiaries.
 
            The Company intends that certain options granted under the Plan
constitute incentive stock options within the meaning of Section 422 of the Code
(the "Incentive Options"), while certain other options granted under the Plan
shall be nonqualified stock options (the "Nonqualified Options"). Incentive
Options and Nonqualified Options are hereinafter referred to collectively as
"Options."
 
            The Company further intends that the Plan meet the requirements of
Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company under the Plan be exempt from the operation of Section 16(b) of the
Exchange Act. The Plan is intended to (i) satisfy the performance-based
compensation exception to the limitation on the Company's tax deductions imposed
by Section 162(m) of the Code with respect to those Options for which
qualification for such exception is intended and (ii) comply with the rules
applicable to non-qualified deferred compensation plans as set forth in Section
409(A) of the Code to the extent such rules are applicable. In all cases, the
terms, provisions, conditions and limitations of the Plan shall be construed and
interpreted consistent with the Company's intent as stated in this Section 1.
 
     2.     Administration of the Plan.
            --------------------------
 
            The Board of Directors of the Company (the "Board") shall appoint
and maintain as administrator of the Plan the Compensation/Stock Option
Committee (the "Committee") consisting of three or more members of the Board who
are (i) "Non-Employee Directors" within the meaning of sub paragraph (b) of Rule
16b-3, (ii) "Outside Directors" within the meaning of Section 162(m) of the Code
and (iii) independent under the standards set forth in Rule 4350 of the Rules of
the National Association of Securities Dealers, Inc. The fact that a member of
the Committee shall fail to qualify under the provisions of the preceding
sentence shall not invalidate any Option granted by the Committee that is
otherwise validly granted under the Plan. The members of the Committee shall
 
 
 
 
 
 
 
serve at the pleasure of the Board. The Committee, subject to Sections 3 and 6
hereof, shall have full power and authority to designate recipients of Options,
to determine the terms and conditions of respective Option agreements (which
need not be identical) and to interpret the provisions and supervise the
administration of the Plan. The Committee shall have the authority, without
limitation, to designate which Options granted under the Plan shall be Incentive
Options and which shall be Nonqualified Options. To the extent that any Option
does not qualify as an Incentive Option, it shall constitute and be considered a
Nonqualified Option.
 
            Subject to the provisions of the Plan, the Committee shall interpret
the Plan and the terms of all Options granted under the Plan, shall make such
rules as it deems necessary for the proper administration of the Plan, shall
make all other determinations necessary or advisable for the administration of
the Plan and shall correct any defects or supply any omission or reconcile any
inconsistency in the Plan or in any Options granted under the Plan in the manner
and to the extent that the Committee deems desirable to carry into effect the
Plan or any Options. The act or determination of a majority of the Committee
shall be the act or determination of the Committee and any decision reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority at a meeting duly held. Subject
to the provisions of the Plan, any action taken or determination made by the
Committee pursuant to this and the other Sections of the Plan shall be
conclusive on all parties.
 
            In the event that for any reason the Committee is unable to act or
if the Committee at the time of any grant, award or other acquisition under the
Plan of Options or Stock as hereinafter defined does not meet the requirements
of the first sentence of Section 2 hereof, or if there shall be no such
Committee, then the Plan shall be administered by the Board, and references
herein to the Committee (except in the proviso to this sentence) shall be deemed
to be references to the Board, and any such grant, award or other acquisition
may be approved or ratified in any other manner contemplated by subparagraph (d)
of Rule 16b-3; provided, however, that options granted to the Company's five (5)
most highly compensated officers that are intended to qualify as
performance-based compensation under Section 162(m) of the Code may only be
granted as provided herein.
 
            A consultant shall not be eligible for the grant of an option if, at
the time of grant, a Registration Statement on Form S-8 (a "Form S-8") under the
Securities Act of 1933, as amended (the "Securities Act"), is not available to
register either the offer or the sale of the Company's securities to such
consultant because of the nature of the services that such consultant is
providing to the Company, or because the consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Registration Statement on Form S-3)
or (B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
 
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     3.     Designation of Optionees.
            ------------------------
 
            Except as set forth in Section 4 below relating to Option grants to
Non-Employee Directors, the persons eligible for participation in the Plan as
recipients of Options (the "Optionees") shall include employees, consultants and
advisors to the Company or any Subsidiary and 50% or more owned partnerships of
the Company and its Subsidiaries; provided that Incentive Options may only be
granted to employees of the Company and the Subsidiaries. In selecting
recipients of Options, and in determining the number of shares to be covered by
each Option granted to Optionees, the Committee may consider, among other
criteria deemed pertinent, the office or position held by the Optionee or the
Optionee's relationship to the Company, the Optionee's degree of responsibility
for and contribution to the growth and success of the Company or any Subsidiary,
the Optionee's length of service, promotions potential and any other factors
that the Committee may consider relevant. An Optionee who has been granted an
Option hereunder may be granted an additional Option or Options, if the
Committee shall so determine.
 
     4.     Option Grants to Directors.
            --------------------------
 
            a. GRANTS UPON EFFECTIVENESS. Upon stockholder approval of this
Plan, each Non-Employee Director of the Company on such date will receive the
grant of a Nonqualified Option to purchase 15,000 shares of Stock.
 
            b. INITIAL GRANTS. If a Non-Employee Director is first elected or
appointed to the Board after the adoption of the Plan, then on such date such
Non-Employee Director shall receive the grant of a Nonqualified Option to
purchase 40,000 shares of Stock. In addition, to the extent that any
Non-Employee Director was elected or appointed to the Board after the
termination of the 1992 Directors' Stock Option Plan and prior to stockholder
approval of the Plan, then on the date of stockholder approval of this Plan,
such Non-Employee Director shall receive (in addition to the Options set forth
in Section 4(a) hereof) the grant of a Nonqualified Option to purchase 40,000
shares of stock.
 
            c. SUBSEQUENT GRANTS. Subsequent to stockholder approval of this
Plan, on each first day after the end of the Company's fiscal year, all
Non-Employee Directors who are serving on the Board on such dates shall receive
the grant of a Nonqualified Option to purchase 7,500 shares of Stock.
 
            d. AUDIT COMMITTEE CHAIRMAN GRANTS. Upon stockholder approval of the
Plan, the current Chairman of the Audit Committee of the Company on such date
will receive the grant of a Nonqualified Option to purchase 2,500 shares of
Stock. In addition, such person will receive the grant of a Nonqualified Option
to purchase 2,500 shares of Stock on each first day after the end of the
Company's fiscal year provided that such person continues to be Chairman of the
Audit Committee on such dates. Subsequently, on the date any Non-Employee
Director is appointed Chairman of the Audit Committee, and on each first day
after the end of the Company's fiscal year that he remains Chairman of the Audit
Committee, such Chairman shall receive the grant of a Nonqualified Option to
purchase 2,500 shares of Stock.
 
                                       3
 
 
 
 
 
            e. COMPLIANCE WITH RULE 16b-3. The terms for the grant of
Nonqualified Options to a Non-Employee Director may only be changed if permitted
under Rule 16b-3 of the Exchange Act.
 
     5.     Stock Reserved for the Plan.
            ---------------------------
 
     Subject to adjustment as provided in Section 8 hereof, a total of three
million (3,000,000) shares of the Company's Common Stock, $0.01 par value per
share (the "Stock"), shall be subject to the Plan, of which five hundred
thousand (500,000) shall be available for the grants of Options to Non-Employee
Directors as set forth in Section 4. The maximum number of shares of Stock that
may be subject to options granted under the Plan to any individual shall not
exceed 600,000 (subject to adjustment under Section 8 hereof) and the method of
counting such shares shall conform to any requirements applicable to
performance-based compensation under Section 162(m) of the Code. The shares of
Stock subject to the Plan shall consist of unissued shares, treasury shares or
previously issued shares held by the Company or any Subsidiary of the Company,
and such amount of shares of Stock shall be and is hereby reserved for such
purpose. Any of such shares of Stock that may remain unsold and that are not
subject to outstanding Options at the termination of the Plan shall cease to be
reserved for the purposes of the Plan, but until termination of the Plan, the
Company shall at all times reserve a sufficient number of shares of Stock to
meet the requirements of the Plan. Should any Option expire or be cancelled
prior to its exercise in full or should the number of shares of Stock to be
delivered upon the exercise in full of an Option be reduced for any reason, the
shares of Stock theretofore subject to such Option may be subject to future
Options under the Plan, except where such reissuance is inconsistent with the
provisions of Section 162(m) of the Code.
 
     6.     Terms and Conditions of Options.
            -------------------------------
 
     Options granted under the Plan shall be subject to the following conditions
and shall contain such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Committee shall deem desirable:
 
            a. OPTION PRICE. The purchase price of each share of Stock
purchasable under an Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; provided,
however, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The exercise
price for each Option shall be subject to adjustment as provided in Section 8
below. "Fair Market Value" means the closing price of publicly traded shares of
Stock on the principal national securities exchange on which shares of Stock are
listed (if the shares of Stock are so listed), or on the Nasdaq Stock Market (if
the shares of Stock are regularly quoted on the Nasdaq Stock Market), or, if not
so listed or regularly quoted, the mean between the closing bid and asked prices
of publicly traded shares of Stock in the over-the-counter market, or, if such
bid and asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by the
 
                                       4
 
 
 
 
 
Committee in a manner consistent with the provisions of the Code. Anything in
this Section 6(a) to the contrary notwithstanding, in no event shall the
purchase price of a share of Stock be less than the minimum price permitted
under the rules and policies of any national securities exchange on which the
shares of Stock are listed.
 
            b. OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten (10) years after the
date such Option is granted and in the case of an Incentive Option granted to an
Optionee who, at the time such Incentive Option is granted, owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of any Subsidiary, no
such Incentive Option shall be exercisable more than five years after the date
such Incentive Option is granted.
 
            c. EXERCISABILITY. Subject to Section 6(j) hereof and unless
otherwise determined by the Committee on the date of grant, Options shall be
exercisable as follows: one-fourth of the aggregate shares of Stock purchasable
under an Option shall be exercisable commencing one year after the date of
grant, an additional one-fourth of the aggregate shares of Stock purchasable
under an Option shall be exercisable commencing two years after the date of
grant, an additional one-fourth of the aggregate shares of Stock purchasable
under an Option shall be exercisable commencing three years after the date of
grant, and the remaining one-fourth of the aggregate shares of Stock purchasable
under an Option shall be exercisable commencing four years after the date of
grant.
 
            Upon the occurrence of a "Change in Control" (as hereinafter
defined), the Committee shall accelerate the vesting and exercisability of
outstanding Options, in whole or in part, as determined by the Committee in its
sole discretion. In its sole discretion, the Committee may also determine that,
upon the occurrence of a Change in Control, each outstanding Option shall
terminate within a specified number of days after notice to the Optionee
thereunder, and each such Optionee shall receive, with respect to each share of
Company Stock subject to such Option, an amount equal to the excess of the Fair
Market Value of such shares immediately prior to such Change in Control over the
exercise price per share of such Option; such amount shall be payable in cash,
in one or more kinds of property (including the property, if any, payable in the
transaction) or a combination thereof, as the Committee shall determine in its
sole discretion.
 
            For purposes of the Plan, a Change in Control shall be deemed to
have occurred if:
 
                i. a tender offer (or series of related offers) shall be made
and consummated for the ownership of 50% or more of the outstanding voting
securities of the Company, unless as a result of such tender offer more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to the commencement of such offer), any employee benefit
plan of the Company or its Subsidiaries, and their affiliates;
 
                ii. the Company shall be merged or consolidated with another
corporation, unless as a result of such merger or consolidation more than 50% of
the outstanding voting securities of the surviving or resulting corporation
 
                                       5
 
 
 
 
 
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to such transaction), any employee benefit plan of the
Company or its Subsidiaries, and their affiliates;
 
                iii. the Company shall sell substantially all of its assets to
another corporation that is not wholly owned by the Company, unless as a result
of such sale more than 50% of such assets shall be owned in the aggregate by the
shareholders of the Company (as of the time immediately prior to such
transaction), any employee benefit plan of the Company or its Subsidiaries and
their affiliates; or
 
                iv. a Person (as defined below) shall acquire 50% or more of the
outstanding voting securities of the Company (whether directly, indirectly,
beneficially or of record), unless as a result of such acquisition more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to the first acquisition of such securities by such
Person), any employee benefit plan of the Company or its Subsidiaries, and their
affiliates.
 
            For purposes of this Section 6(c), ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under
the Exchange Act. In addition, for such purposes, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not include (A) the
Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (D) a corporation owned, directly or indirectly,
by the shareholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
 
            d. METHOD OF EXERCISE. An option, to the extent then exercisable,
may be exercised in whole or in part at any time during the option period, by
giving written notice to the Company specifying the number of shares of Stock to
be purchased, accompanied by payment in full of the exercise price, in cash, or
by check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may be made at the election of the Optionee (i) in the form
of Stock owned by the Optionee (based on the Fair Market Value of the Stock on
the trading day before the Option is exercised) that is not the subject of any
pledge or security interest, (ii) in the form of Stock withheld by the Company
from the shares of Stock otherwise to be received with such withheld shares of
Stock having a Fair Market Value on the date of exercise equal to the exercise
price of the Option, or (iii) by a combination of the foregoing, provided that
the combined value of all cash and cash equivalents and the Fair Market Value of
any shares surrendered to the Company is at least equal to such exercise price
and except with respect to (ii) above, such method of payment will not cause a
disqualifying disposition of all or a portion of the Stock received upon
exercise of an Incentive Option. An Optionee shall have the right to dividends
and other rights of a stockholder with respect to shares of Stock purchased upon
exercise of an Option after (i) the Optionee has given written notice of
exercise and has paid in full for such shares and (ii) the Optionee has
satisfied such conditions that may be imposed by the Company with respect to the
withholding of taxes.
 
                                       6
 
 
 
 
 
            e. NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution. The Committee, in its sole discretion, may permit a transfer
of a Nonqualified Option to (i) a trust for the benefit of the Optionee or (ii)
a member of the Optionee's immediate family (or a trust for his or her benefit).
Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject
to execution, attachment or similar process, any Option contrary to the
provisions hereof shall be void and ineffective and shall give no right to the
purported transferee.
 
            f. TERMINATION BY DEATH. Except as otherwise provided in Section
6(i), unless otherwise determined by the Committee if any Optionee's employment
with or service to the Company or any Subsidiary terminates by reason of death,
any Option held by such Optionee may thereafter be exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
Optionee under the will of the Optionee, for a period of one year after the date
of such death or until the expiration of the stated term of such Option as
provided under the Plan, whichever period is shorter.
 
            g. TERMINATION BY REASON OF DISABILITY. Except as otherwise provided
in Section 6(i), unless otherwise determined by the Committee, if any Optionee's
employment with or service to the Company or any Subsidiary terminates by reason
of disability, any Option held by such Optionee may thereafter be exercised, to
the extent it was exercisable at the time of termination due to disability (or
on such accelerated basis as the Committee shall determine at or after grant),
for a period of one year after the date of such termination of employment or
service or the expiration of the stated term of such Option, whichever period is
shorter; provided, however, that, if the Optionee dies within such one year
period, any unexercised Option held by such Optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of death for a
period of one year after the date of such death or for the stated term of such
Option, whichever period is shorter. In the case of an Optionee employed under
an employment agreement with the Company or any Subsidiary, the term disability
as used herein shall have the meaning set forth in such employment agreement. In
all other cases, the term disability shall have the meaning given it in any
long-term disability plan of the Company, or if the Company maintains no such
plan, such term shall mean the Optionee's inability to engage in any substantial
gainful activity by reason of a physical or mental impairment that can
reasonably be expected to result in death or that has lasted or can reasonably
be expected to last for a continuous period of not less than 180 days; provided,
that when used in connection with the exercise of an Incentive Option following
termination of employment, such term shall mean a disability within the meaning
of Section 22(e)(3) of the Code.
 
            h. OTHER TERMINATION. Except as otherwise provided in Section 6(i),
unless otherwise determined by the Committee if any Optionee's employment with
or service to the Company or any Subsidiary terminates for any reason other than
death or disability, the Option shall thereupon terminate, except that the
portion of any Option that was exercisable on the date of such termination of
employment may be exercised for the lesser of three months after the date of
termination or the balance of such Option's term, if the Optionee's employment
or service with the Company or any Subsidiary is terminated by the Company or
such Subsidiary without cause (the determination as to whether termination was
 
                                       7
 
 
 
 
 
for cause to be made by the Committee). The transfer of an Optionee from the
employ of the Company to a Subsidiary, or vice versa, or from one Subsidiary to
another, shall not be deemed to constitute a termination of employment for
purposes of the Plan.
 
            i. NON-EMPLOYEE DIRECTOR OPTIONS. Notwithstanding anything else
contained herein, if a Non-Employee Director's service on the Board of Directors
terminates, any Options held by the Non-Employee Director may be exercised until
the expiration of the stated term of such Option.
 
            j. FIVE YEAR EMPLOYEES. Notwithstanding anything contained in the
Plan to the contrary in sections 6(f), 6(g) and 6(h), to the extent that an
Optionee has been continuously employed by the Company or any Subsidiary in the
five-year period immediately preceding the date of termination, then in the
event of termination for any reason other than cause (as defined in Section 6
(h)) all Options held by the Optionee which are exercisable on the date of
termination may be exercised by the Optionee for a period equal to the same term
as originally granted (i.e., as if the Optionee remained employed by the Company
to the full option term), or in the case of death of the Optionee, by the legal
representative of the estate or by the legatee of the Optionee under the will of
the Optionee; provided, however, to the extent that any Option which was an
Incentive Option is exercised at a time when it no longer qualifies as an
Incentive Option, then, without further action on the part of the Committee or
the option holder, such Incentive Option shall be deemed a Nonqualified Option.
 
            k. LIMIT ON VALUE OF INCENTIVE OPTION. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000, unless otherwise
changed by the Code.
 
     7.     Term of Plan.
            ------------
 
     No Option shall be granted under the Plan on or after December 20, 2014,
but the term of Options theretofore granted may extend beyond that date.
 
     8.     Assumption of Options by Successors; Adjustments Upon Changes in
Capitalization.
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            a. Except as otherwise provided in Section 6(c) hereof, in the event
of (i) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company), (ii) the sale of all or substantially all of the assets of the
Company, or (iii) any other merger, consolidation, acquisition of property or
stock, separation or reorganization of or from the Company wherein the
stockholders of the Company give up all of their equity interest in the Company,
except for the acquisition, sale or transfer of all or substantially all of the
 
 
                                       8
 
 
 
 
 
outstanding shares of the Company (each of the foregoing, a "Corporate
Transaction"), all outstanding Options shall be assumed by the successor
corporation, which assumption shall be binding on all Optionees. In the
alternative, the successor corporation may substitute equivalent options or
provide the same consideration to Optionees as was provided to stockholders in
the Corporate Transaction (after taking into account the existing provisions of
the Options). Should the successor corporation fail to assume all outstanding
Options or to substitute equivalent options or provide similar consideration,
the vesting of all outstanding Options shall be accelerated in full and all
Options shall become immediately exercisable and the Options shall terminate if
not exercised at or prior to the Corporate Transaction. If the exercise of the
foregoing right by the holder of an Incentive Option would be deemed to result
in a violation of the provisions of Subsection 6(k) of the Plan, then, without
further act on the part of the Committee or the option holder, such Incentive
Option shall be deemed a Nonqualified Option to the extent necessary to avoid
any such violation.
 
            b. The existence of outstanding Options shall not affect in any way
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of Stock or subscription rights thereto, or any
merger or consolidation of the Company, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Stock or the
rights thereof, or 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 corporate
act or proceeding, whether of a similar character or otherwise; provided,
however, that if the outstanding Stock or the number of shares thereof
outstanding shall at any time be changed or exchanged by or in connection with a
stock dividend, stock split, reverse split or combination of shares,
recapitalization, or similar change in the capital structure of the Company
without consideration, or if a substantial portion of the assets of the Company
is distributed to the stockholders of the Company without consideration in a
spin-off or other similar transaction, the number and kind of Stock subject to
the Plan and subject to any Options theretofore granted, and the Option prices,
shall be appropriately and equitably adjusted. Any adjustment affecting an
Incentive Option shall satisfy the requirements of Section 424 of the Code.
 
            c. Adjustments under this Section 8 shall be made by the Committee
whose determination as to what adjustments, if any, shall be made, and the
extent thereof, shall be final.
 
     9.     Purchase for Investment.
            -----------------------
 
     Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Company has determined that such registration is unnecessary, each person
exercising an Option under the Plan may be required by the Company to give a
representation in writing that he is acquiring the shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
 
                                       9
 
 
 
 
 
     10.    Taxes.
            -----
 
     The Company may make such provisions as it may deem appropriate, consistent
with applicable law, in connection with any Options granted under the Plan with
respect to the withholding of any taxes (including income or employment taxes)
or any other tax matters. As a condition of exercise of an Option, each Optionee
agrees that (i) no later than the date of exercise of such Option, such Optionee
shall pay to the Company or make arrangements satisfactory to the Company
regarding payment of all federal, state and local taxes of any kind required by
law to be withheld upon the exercise of such Option; and (ii) the Company shall,
to the extent required or permitted by law, have the right to deduct federal,
state and local and employment taxes required or permitted by law to be withheld
upon the exercise of such Option from payment of any kind otherwise due to such
Optionee.
 
     11.    Effective Date of Plan.
            -----------------------
 
     The Plan shall be effective on December 20, 2004, but no Options shall be
granted under the Plan until such time that the Plan shall be approved by
majority vote of the Company's stockholders.
 
     12.    Amendment and Termination.
            -------------------------
 
     The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendments
shall be made which, without the approval of the stockholders of the Company
would:
 
            a. except as otherwise provided in Sections 8(b) and 13 hereof,
reduce the exercise price of outstanding Options or effect repricing through
cancellation and re-grants of new Options;
 
            b. increase the number of shares that may be issued under the Plan,
except as is provided in Sections 8 and 13;
 
            c. materially increase the benefits accruing to the Optionees under
the Plan;
 
            d. materially modify the requirements as to eligibility for
participation in the Plan;
 
            e. decrease the exercise price of an Option to less than 100% of the
Fair Market Value per share of Stock on the date of grant thereof; or
 
            f. extend the term of any Option beyond that provided for in Section
6(b).
 
            Subject to the foregoing, the Committee may amend the terms of any
Option theretofore granted, prospectively or retroactively, but no such
amendment shall impair the rights of any Optionee without his consent.
 
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     13.    Dividend Equivalents.
            --------------------
 
            Simultaneously with the grant of any Option and under such terms and
conditions as the Committee deems appropriate, the Committee may grant special
dividend equivalent rights ("Dividend Equivalents") which amount shall be
determined by multiplying the number of shares of Stock subject to an Option by
the per-share cash dividend, or the per-share fair market value (as determined
by the Committee) of any dividend in consideration other than cash, paid by the
Company on its Stock on a dividend payment date (other than the regular
quarterly cash dividends of the Company). Unless otherwise determined by the
Committee at grant, the Dividend Equivalents (i) shall have the same vesting
schedule, if any, as the Options to which the Dividend Equivalents relate and
(ii) shall be payable upon exercise of the Options to which the Dividend
Equivalents relate. At the discretion of the Committee, Dividend Equivalents
shall be credited to accounts on the Company's records for purposes of the Plan.
Dividend Equivalents may be accrued as a cash obligation, or may be converted to
shares of Stock for the Participant. The Committee shall determine whether any
deferred Dividend Equivalents will accrue interest. The Committee may provide
that an Optionee may use Dividend Equivalents to pay the Exercise Price.
Dividend Equivalents may be payable in cash or shares of Stock or in a
combination of the two, as determined by the Committee.
 
     14.    Government Regulations.
            ----------------------
 
            The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver Stock under such Options, shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies, or national securities exchanges and interdealer
quotation systems as may be required.
 
     15.    General Provisions.
            ------------------
 
            a. CERTIFICATES. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities laws, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.
 
            b. CONTINUED SERVICE. The adoption of the Plan shall not confer upon
any Optionee who is an employee of the Company or any Subsidiary any right to
continued employment or, in the case of an Optionee who is a director, continued
service as a director, with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees, the service of any of its
directors or the retention of any of its consultants or advisors at any time.
 
            c. LIMITATION OF LIABILITY. No member of the Board or the Committee,
or any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
 
                                       11
 
 
 
 
 
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
 
            d. REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or is, in the opinion of counsel to the Company, exempt
therefrom. The Company shall not be under any obligation to register under
applicable federal or state securities laws any Stock to be issued upon the
exercise of an Option granted hereunder in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such Option, although
the Company may in its sole discretion register such Stock at such time as the
Company shall determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the transfer or
pledge of the Stock represented thereby, and the Company may also give
appropriate stop transfer instructions with respect to such Stock to the
Company's transfer agent.
 
            e. GOVERNING LAW. The laws of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation of the Plan,
without regard to such State's choice of law rules.
 
            f. INTERNAL REVENUE CODE OF 1986. All references herein to the Code
shall be deemed references to the Code and to all Treasury Regulations
promulgated thereunder.
 
 
                                   LONE STAR STEAKHOUSE & SALOON, INC.
 
 
                                   December 20, 2004