Lone Star Steakhouse & Saloon, Inc. Stock Option Deferred Compensation Plan

 EXHIBIT 10.23 LONE STAR STEAKHOUSE & SALOON, INC. STOCK OPTION DEFERRED COMPENSATION PLAN INTRODUCTION PURPOSE. This Plan shall be known as the Lone Star Steakhouse & Saloon, Inc. Stock Option Deferred Compensation Plan. The purpose of the Plan is to allow one or more designated key executives of Lone Star Steakhouse & Saloon, Inc. (the "Company" or the "Corporation") to defer stock option income until certain defined distributions dates and thereby enable the Company to take a tax deduction for income realized by these key executives pursuant to the 1992 Incentive and Nonqualified Stock Option Plan of Lone Star Steakhouse & Saloon, Inc., as amended, which deduction might otherwise be limited by the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended. EFFECTIVE DATE. The Plan is established effective the date below and shall continue in effect as amended from time to time until terminated pursuant to Article VII. INTERPRETATION. Throughout the Plan, certain words and phrases have meanings that are specifically defined for purposes of the Plan. These words and phrases can be identified in that the first letter of the word or words in the phrase is capitalized. The definitions of these words and phrases are principally set forth in Article I of the Plan. Wherever appropriate, pronouns of any gender shall be deemed synonymous, as shall singular and plural pronouns. ARTICLE I. DEFINITIONS The following words and phrases, wherever capitalized, shall have the meanings set forth below, unless the context in which they appear within the Plan clearly indicates otherwise: SECTION 1.1 ADMINISTRATOR. "Administrator" shall mean the Compensation Committee of the Board of Directors of Lone Star Steakhouse & Saloon, Inc., or other person or persons appointed by the Board to serve under Section 2.1 below. SECTION 1.2 AFFILIATE. "Affiliate" shall mean any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company.  SECTION 1.3 BENEFICIARY. "Beneficiary" shall mean a person, organization, or other entity designated by a Participant to whom shall be distributed the Participant's Deferred Compensation in accordance with the terms of the Plan in the event of the Participant's death. SECTION 1.4 BOARD. "Board" shall mean the Board of Directors of Lone Star Steakhouse & Saloon, Inc. SECTION 1.5 CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended. SECTION 1.6 COMPANY. "Company" shall mean Lone Star Steakhouse & Saloon, Inc. SECTION 1.7 COMPENSATION. "Compensation" shall mean for the purposes of the Plan, Company stock obtained through the valid exercise of a stock option or the gain resulting from the valid exercise of such a stock option. SECTION 1.8 COMPENSATION COMMITTEE. The Compensation Committee shall mean the Compensation/Stock Option Committee of the Board of Directors of Lone Star Steakhouse & Saloon, Inc. SECTION 1.9 DEFERRAL ELECTION. "Deferral Election" shall mean the Participant's timely election to defer the receipt of Compensation that is otherwise payable to the Participant SECTION 1.10 DEFERRED COMPENSATION. "Deferred Compensation" shall mean Compensation which, under a Deferred Compensation Agreement, is paid to the Participant in tax years subsequent to that in which the Compensation is earned. SECTION 1.11 DEFERRED COMPENSATION AGREEMENT. "Deferred Compensation Agreement" shall mean a written agreement with the Company or an Affiliate setting forth the terms and conditions of the Deferred Compensation. SECTION 1.12 EMPLOYEE. "Employee" shall mean any employee of the Company or an Affiliate. SECTION 1.13 INCAPACITY. "Incapacity" shall mean if the Participant is unable to perform the services required of him in connection with his employment by the Company as a result of physical or mental incapacity. SECTION 1.14 PARTICIPANT. "Participant" shall mean any Employee of the Company or an Affiliate who has been selected to participate in the Plan under Article III, as evidenced by a Deferred Compensation Agreement entered into between such Employee and the Company or an Affiliate. SECTION 1.15 PLAN. "Plan" shall mean The Lone Star Steakhouse & Saloon, Inc., Stock Option Deferred Compensation Plan, as amended from time to time. SECTION 1.16 RETIREMENT. "Retirement" shall mean a voluntary or involuntary separation from service for any reason, including death, or Incapacitation preventing an Employee from performing his normal and customary duties for the Company or an Affiliate. 2  SECTION 1.17 STOCK OPTION. "Stock Option" shall mean an option granted by the Compensation Committee pursuant to the 1992 Incentive and Non-Qualified Stock Option Plan, as amended, effective January 1992 to purchase one or more shares of Company stock. SECTION 1.18 VALUATION DATE. "Valuation Date" shall mean any day the Nasdaq National Market or other nationally recognized exchange is open for business, or any other date chosen by the Board. In the event the Company's stock is no longer traded, the fair market value of any Company stock deferred pursuant to the Plan will be determined as of the last Valuation Day the stock was traded. The value of stock options vested, but not yet exercised will be determined by utilizing the Black-Scholes valuation method. ARTICLE II. ADMINISTRATION SECTION 2.1 PLAN ADMINISTRATION. The Compensation Committee, in its sole discretion, is authorized to select the Employees who will be eligible to participate in the Plan. The Compensation Committee, or the person or persons appointed by the Compensation Committee to serve as Administrator, shall be the Administrator of the Plan. The Administrator, in its sole discretion, is authorized to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make such other determinations and exercise such other power and authority as may be necessary or advisable for the administration of the Plan. No fee or compensation shall be paid to any person for services as the Administrator (but this does not prevent the payment of salary otherwise payable to an employee of the Company for other services as an employee of the Company). The Administrator in its sole discretion may delegate and pay compensation for services rendered relating to the ministerial duties of plan administration including, but not limited to, selection of investments available under the Plan. Any determination made by the Administrator pursuant to the powers set forth herein are final, binding and conclusive upon each Participant and upon any other person affected by such decision, subject to the claims procedure hereinafter set forth. The Administrator shall decide any question which may arise regarding the rights of Participants and Beneficiaries, and the amounts of their respective interests, adopt such rules and exercise such powers as the Administrator may deem necessary for the administration of the Plan, and exercise any other rights, powers or privileges granted to the Administrator by the terms of the Plan. The Administrator shall maintain full and complete records of its decisions. Its records shall contain all relevant data pertaining to the Participant and his rights and duties under the Plan. The Administrator shall have the duty to maintain account records for all Participants. The Administrator shall cause the principal provisions of the Plan to be communicated to the Participants, and a copy of the Plan and other documents shall be available at the principal office of the Company for inspection by the Participants at reasonable times determined by the Administrator. SECTION 2.2 POWER AND AUTHORITY OF THE ADMINISTRATOR. The Administrator shall have full power and authority, subject to all the applicable provisions of the Plan and applicable law, to (a) establish, amend, suspend, terminate or waive such rules and regulations and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (b) 3  construe, interpret and administer the Plan and any instrument or agreement relating to, or Deferral Election made under, the Plan, and (c) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Administrator pursuant to the Plan or any instrument or agreement relating to, or Deferred Compensation Agreement ("Agreement") made under, the Plan (a) shall be within the sole discretion of the Administrator, (b) may be made at any time and (c) shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, holders of Agreements, and their legal representatives and beneficiaries, and employees of the Company or of any Affiliate of the Company. ARTICLE III. ELIGIBILITY AND PARTICIPATION SECTION 3.1 ELIGIBILITY. The Plan is unfunded and is maintained by the Company for a select group of management or highly compensated employees. In order to be eligible to participate in the Plan, an employee must be selected by the Compensation Committee. In determining the employees who will participate in the Plan, the Compensation Committee may take into account the nature of the services rendered by the respective employees, their present and potential contributions to the success of the Company and such other factors as the Compensation Committee, in its sole and absolute discretion, shall deem relevant. Employees of subsidiaries or affiliated corporations shall be eligible to participate in the Plan provided that such subsidiary or affiliated corporation, by action of its Board of Directors and with the approval of the Compensation Committee, agrees to adopt the provisions of the Plan for the benefit of its eligible Employees. SECTION 3.2 PARTICIPATION. The Compensation Committee shall determine the employees who will participate in the Plan, the amount of Deferred Compensation, the time or times when the employees will defer Compensation, the type of asset subject to the deferral, the period of time over which such deferrals are intended to be made, and all other terms and conditions of each deferral. SECTION 3.3 DEFERRED COMPENSATION AGREEMENT. Any employee selected for participation by the Compensation Committee shall, as a condition of participation, enter into a written agreement with the Company or an Affiliate setting forth the terms and conditions of the Deferred Compensation ("Deferred Compensation Agreement"). A separate Deferred Compensation Agreement will be provided to each Participant for each Deferral Election. SECTION 3.4 VALUATION OF DEFERRED COMPENSATION. The Deferral Election shall be made in the form of shares of Company stock obtained through the exercise of an option. Any shares so deferred shall be valued at their fair market value on the date of exercise. In the event the Company's stock is no longer traded, the fair market value of any Company stock deferred pursuant to the Plan will be determined as of the last Valuation Day the stock was traded. The Administrator shall provide the Participant with periodic statements. 4  ARTICLE IV. VESTING AND DISTRIBUTION SECTION 4.1 VESTING. A Participant's interest in the Deferred Compensation shall be non-forfeitable. Notwithstanding the foregoing, even though a Participant's interests in this Plan shall be non-forfeitable, he shall still remain a general creditor of the Corporation with respect to such deferral and shall not have any security or other interests in any assets of the Corporation, or any other Employer, due to or arising from the fact that the Deferred Compensation is non-forfeitable. SECTION 4.2 DISTRIBUTION. Each Deferred Compensation Agreement shall include provisions governing the distribution of the Deferred Compensation. Distributions of non-forfeitable amounts reserved for a Participant shall be made no later than 30 days after the Participant's termination of service with Company (or any Affiliate of the Company) for any reason. The value of the Participant's non-forfeitable account under this Plan shall be determined as set forth in the Deferred Compensation Agreement. SECTION 4.3 FORM OF DISTRIBUTION. Distributions shall be made in the form of cash or Company stock. Notwithstanding any provision of the Plan to the contrary, the Company shall have no obligation or liability to deliver any Shares under the Plan unless such delivery would comply with all applicable laws and all applicable requirements of any securities exchange or similar entity. SECTION 4.4 METHOD OF PAYMENT. At the time a Participant's non-forfeitable account is to be distributed in accordance with Section 4.2, the Administrator shall determine the value of the Participant's non-forfeitable account balance. The Administrator shall direct distribution of the value of the Participant's non-forfeitable balance in accordance with the Deferred Compensation Agreement. ARTICLE V. DESIGNATION OF BENEFICIARY SECTION 5.1 DESIGNATION OF BENEFICIARY. A Participant, by filing the prescribed form with the Administrator may designate one or more Beneficiaries and successor Beneficiaries to whom shall be distributed the Participant's Deferred Compensation in accordance with the terms of the Plan in the event of the Participant's death. In the event the Participant does not file a form designating one or more Beneficiaries, or no designated Beneficiary survives the Participant, the Deferred Compensation shall be distributed to the individual to whom such right passes by will or the laws of descent and distribution. 5  ARTICLE VI. LIMITATIONS ON PAYMENTS SECTION 6.1 LIMITATIONS ON PAYMENTS. Except as may be required by the federal income tax withholding provisions of the Code, by an applicable state's income tax act, or by an applicable city, county, or municipality's earnings or income tax act, the interests of Participants and their designated Beneficiaries under this Plan are not subject to claims of their creditors and may not be voluntarily or involuntarily sold, transferred, alienated, assigned, pledged, hypothecated, anticipated or encumbered. Any attempt by a Participant, his beneficiary, or any other person or entity to sell, transfer, alienate, assign, pledge, anticipate, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. The Company may cancel and refuse to pay any portion of a benefit that is sold, transferred, alienated, assigned, pledged, anticipated or encumbered. ARTICLE VII. AMENDMENT AND TERMINATION SECTION 7.1 AMENDMENTS TO AND TERMINATION OF PLAN. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or a Deferred Compensation Agreement, the Administrator, in its sole discretion, may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that notwithstanding any other provision of the Plan or any Deferred Compensation Agreement, no such amendment, alteration, suspension, discontinuation or termination shall impair the rights of any Participant. SECTION 7.2 CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan or a Deferred Compensation Agreement, the Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Deferred Compensation Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect. ARTICLE VIII. GENERAL PROVISIONS SECTION 8.1 ABSENCE OF GUARANTY. The Company does not in any way guarantee the payment of deferred compensation to any person. SECTION 8.2 EMPLOYMENT. In the absence of any specific agreement to the contrary, no Deferred Compensation Agreement with a Participant under the Plan shall affect any right of the Company, or of any Affiliate of the Company, to terminate, with or without cause, the Participant's employment with the Company or any Affiliate at any time. Neither the establishment of the Plan, nor the entering into the Deferred Compensation Agreement hereunder, shall give any Participant (a) any rights to remain employed by the Company or any Affiliate; (b) any benefits not specifically provided for herein or in any Deferred 6  Compensation Agreement granted hereunder; or, (c) any rights to prevent the Company or any Affiliate from modifying, amending or terminating any of its other benefit plans of any nature whatsoever. SECTION 8.3 ADMINISTRATOR DECISIONS FINAL. Any decision of the Administrator with respect to matters within its jurisdiction shall be final, binding, and conclusive upon the Company and upon each Employee, Participant, former Participant, Beneficiary, and every other person or party interested or concerned. SECTION 8.4 GENDER AND NUMBER. Where the context permits, words denoting the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular. SECTION 8.5 NON-TRANSFERABILITY. Except as otherwise determined by the Administrator, no Deferred Compensation Agreement shall be sold, assigned, transferred, pledged, hypothecated or otherwise alienated by the Participant. The Deferred Compensation Agreement shall not be subject to, in whole or in part, the debts, contracts, liabilities, or torts of the Participant, nor shall they be subject to attachment, execution, levy or other legal or equitable process. SECTION 8.6 TAXES. In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require a Participant to take such action, as it deems appropriate to ensure that all applicable federal or state income, social security, payroll, withholding, or other taxes, are withheld or collected from such Participant. SECTION 8.7 GOVERNING LAW. This Plan and any Deferred Compensation Agreement referenced herein shall be governed by and construed in accordance with the laws of the State of Delaware, except to the extent superseded by federal law. SECTION 8.8 SEVERABILITY. If any provision of the Plan or any Deferred Compensation Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Deferred Compensation Agreement under any law deemed applicable by the Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the purpose or intent of the Plan or the Deferred Compensation Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan and any such Deferred Compensation Agreement shall remain in full force and effect. SECTION 8.9 INTENT. The Plan is intended to be unfunded and maintained by the Company solely to provide choices to a select group of management or highly compensated employees as such group is described under Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA") as interpreted by the U.S. Department of Labor. The Plan is not intended to be a plan described in Sections 401(a) or 457 of the Code. The obligation of the Company under this Plan constitutes nothing more than an unsecured promise of the Company to fulfill such obligations and any property of the Company that may be set aside to permit it to fulfill such obligations under the Plan shall, in the event of the Company's bankruptcy or 7  insolvency, remain subject to the claims of the Company's general creditors until such are exercised. SECTION 8.10 NO ILLEGAL TRANSACTIONS. The Plan and any Deferred Compensation Agreement entered into hereunder are subject to all laws and regulations of any governmental authority which may be applicable thereto; and, notwithstanding any provision of the Plan or any Deferred Compensation Agreement, Participants shall not be entitled to receive the benefit of any Deferred Compensation Agreement, and the Company and any Affiliate shall not be obligated to pay any such benefits to a Participant, if such receipt or payment of benefits would constitute a violation by the Participant or the Company or any Affiliate of any provision of any such law or regulation. SECTION 8.11 HEADINGS. Headings are given to the Articles and Sections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. LONE STAR STEAKHOUSE & Saloon, Inc. September 30, 2002 8