EMPLOYMENT AGREEMENT

This Employment Agreement dated as of December 15, 2006 (the “Agreement Date”) and effective as of January 1, 2007 (the “Effective Date”) between Nathan’s Famous, Inc., a Delaware corporation having an address at 1400 Old Country Road, Westbury, New York 11590 (the "Company"), and Eric Gatoff, an individual having an address at 254 East 68th Street, Apt 24B, New York, NY 10021 (the "Executive").

WHEREAS, the Company desires to employ the Executive and to receive certain services from him, and the Executive is willing to continue to be employed and to render such services to the Company, all upon the terms and subject to the conditions contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.    Employment . Subject to and upon the terms and conditions contained in this Agreement, the Company hereby agrees to employ Executive and Executive agrees to be employed by the Company, for the period set forth in Paragraph 2 hereof, to render the services to the Company, its affiliates and/or subsidiaries described in Paragraph 3 hereof.

2.    Effective Date and Term . The Effective Date of this Agreement shall be January 1, 2007. The Executive's term of employment under this Agreement shall commence on the Effective Date hereof and shall continue for a period through and including the second anniversary of the Effective Date hereof (the "Initial Agreement Term"). At the end of the Initial Agreement Term, this Agreement shall be automatically extended for additional, successive periods of one year (each of which successive periods shall be considered an Additional Agreement Term and, together with the Initial Agreement Term, the “Term”) unless terminated in writing by either party no less than 180 days prior to the end of either the Initial Agreement Term or any Additional Agreement Term pursuant to the terms and conditions set forth herein.

3.    Duties . (a) The Executive shall be employed as Chief Executive Officer of the Company as of the Effective Date hereof. The Executive shall report to the Executive Chairman and Board of Directors (the “Board”) of the Company. It is agreed that Executive shall perform his services in the Company's Westbury, New York offices, or at any other facilities mutually agreeable to the parties.

(b) The Executive agrees to abide by all By-laws and applicable policies of the Company promulgated from time to time by the Board of Directors of the Company, including without limitation the normal business policies of the Company.

4.    Exclusive Services and Best Efforts . The Executive shall devote all of his working time, attention, best efforts and ability during regular business hours exclusively to the service of the Company, its affiliates and subsidiaries during the term of this Agreement.

5.    Compensation . As compensation for his services and covenants hereunder, the Company shall pay the Executive the following:

(a)    Base Salary . The Company shall pay the Executive a base salary ("Base Salary") of $225,000 per year commencing on the Effective Date of this Agreement. The Base Salary shall be subject to review and adjustment on an annual basis beginning January 1, 2008, (if this Agreement is then in effect) or, at the Company's discretion, on such earlier date as the Company may determine; provided, however, that in no event shall the Executive's Base Salary be reduced below the Base Salary specified herein.

(b)    Bonus Compensation .

(i)    For each fiscal year within the Term commencing with the fiscal year ending March 30, 2008, the Company shall pay to the Executive annual bonus compensation ("Bonus Compensation") within the range of 0% to 100% of his (then) current Base Salary based on the Company’s achievement of certain financial and operational performance objectives as are mutually agreed-upon by the Board and the Executive during the last quarter of the immediately prior fiscal year (such objectives being the “Performance Targets”); provided, however, that for each year within the Initial Agreement Term, such Bonus Compensation shall not be less than 50% of the Executive’s (then) current Base Salary (the “Minimum Bonus”). The Executive shall be eligible to receive Bonus Compensation of 75% of his (then) current Base Salary should the Company attain the Performance Targets established for the applicable fiscal year. Should the Company significantly exceed the Performance Targets for a fiscal year, the Executive shall be eligible to receive Bonus Compensation in an amount determined by the Compensation Committee and Board in their sole discretion, not to exceed 100% of his (then) current Base Salary. The foregoing Bonus Compensation shall be paid by the Company within thirty (30) days after completion of the audited financial results of the Company for the applicable fiscal year.

(ii)    For the fiscal year ending March 25, 2007, the Company shall pay to Executive a bonus in an amount determined by the Compensation Committee and Board in their sole discretion, based in part on his performance as Vice President and General Counsel during the period prior to the Effective Date.

(c)    Stock Compensation . From time to time during the Term, the Company may also grant to the Executive certain other stock compensation including additional stock options and/or other form(s) of stock awards, pursuant to the terms of any of the Company's stock incentive plans and any related stock option or stock award agreement(s) required to be executed in connection therewith. The amount and terms of any such stock options and/or other stock awards shall, in every case, be determined by the Compensation Committee and Board in their sole discretion, subject to the terms of the stock incentive plan under which the award is granted.

6.    Business Expenses . During the Term, the Executive shall be entitled to prompt reimbursement by the Company for all reasonable out-of-pocket expenses incurred by him in the performance of his duties under this Agreement, upon his submission of such accounts and records as may be reasonably required by the Company, in accordance with the related policies established from time to time by the Company.

7.    Executive Benefits . The Company may withhold from any benefits payable to the Executive all federal, state, local and other taxes and amounts as shall be permitted or required pursuant to law, rule or regulation.

(a) During the Term, the Executive shall be entitled to such insurance, disability and health and medical benefits and be entitled to participate in such retirement plans or programs as are generally made available to executive officers of the Company pursuant to the policies of the Company in effect from time to time during the Term; provided that the Executive shall be required to comply with the conditions attendant to coverage by such plans and shall comply with and be entitled to benefits only in accordance with the terms and conditions of such plans.

(b) Executive shall be entitled to four weeks paid vacation each year during the Term at such times as does not, in the reasonable opinion of the Board of Directors, interfere with Executive's performance of his duties hereunder.

(c) The Executive shall be entitled to receive the sum of $1,250 per month during the Term as an automobile allowance for payment of automotive and related expenses (e.g., insurance, repairs and maintenance for any such automobile). Executive acknowledges that some or all of the foregoing may be deemed compensation to him.

8.    Death and Disability .

(a)    The Term shall terminate on the date of the Executive's death, in which event the Executive's estate shall be entitled to receive a lump sum equal to his (then) current Base Salary, Bonus Compensation (as determined pursuant to Paragraph 8(c)) and reimbursable expenses and benefits owing to the Executive through the end of the Term then in effect. The Executive's estate will not be entitled to any other compensation upon termination of this Agreement pursuant to this Paragraph 8(a).

(b)    If, during the Term, in the opinion of a duly licensed physician selected by the Executive and reasonably acceptable to the Company, the Executive, because of physical or mental illness or incapacity, shall become substantially unable to perform the duties and services required of him under this Agreement for a period of six consecutive months [or a period of an aggregate six months in any twelve-month period] the Company may, upon at least twenty (20) days' prior written notice to the Executive of its intention to do so (given at any time after the expiration of such six-month period), terminate this Agreement as of the date set forth in the notice. In case of such termination, the Executive shall be entitled to receive a lump sum equal to his (then) current Base Salary and Bonus Compensation (as determined pursuant to Paragraph 8(c)). The Executive will not be entitled to any other compensation upon termination of this Agreement pursuant to this Paragraph 8(b).

(c)    For the purposes of this Paragraph 8, the amount of the Executive’s Bonus Compensation shall be (i) in the event of termination during the Initial Agreement Term, the Minimum Bonus and (ii) in the event of termination during any Additional Agreement Term, the Bonus Compensation paid or payable to the Executive for the preceding fiscal year.

9.    Termination for Cause . (a) The Company may terminate the employment of the Executive for Cause (as hereinafter defined) immediately upon the delivery of written notice. Upon such termination, the Company shall be released from any and all further obligations under this Agreement, except that the Company shall be obligated to pay the Executive his Base Salary, reimbursable expenses and benefits owing to the Executive through the date of termination. Executive will not be entitled to any other compensation upon termination of this Agreement pursuant to this Paragraph 9(a).

(b)    As used herein, the term "Cause" shall mean: (i) the willful failure of the Executive to perform his duties pursuant to Paragraph 3 hereof, which failure is not cured by the Executive within thirty days following written notice thereof from the Company; (ii) any other material breach of this Agreement by the Executive, including any of the material representations or warranties made by the Executive; (iii) any act, or failure to act, by the Executive in bad faith or intentionally to the detriment of the Company; (iv) the commission by the Executive of an act involving moral turpitude, dishonesty, theft, unethical business conduct, or any other conduct which significantly impairs the reputation of, or harms, the Company, its subsidiaries or affiliates; or (v) any misrepresentation, concealment or omission by the Executive of any material fact in seeking employment hereunder.

10.    Termination without Cause . Notwithstanding anything to the contrary herein, the Company may terminate the employment of the Executive without Cause. Upon any termination without cause, the Company shall be released from any and all further obligations under this Agreement, except that in case of such termination without Cause, subject to the penultimate sentence of this Paragraph 10(a), the Company shall pay to the Executive, as severance compensation, his Base Salary through the end of the Term then in effect, which amount shall be paid in the form of salary continuation on a monthly installment basis. It is explicitly understood and agreed that non-renewal of this Agreement by the Company at the end of the Initial Agreement Term or any Additio