SETTLEMENT AGREEMENT AND RELEASE

This SETTLEMENT AGREEMENT AND RELEASE (this “Agreement”) is made as of the date set forth below, by and between MIAMI SUBS CAPITAL PARTNERS I, INC. , a Florida corporation with an office at 6300 NW 31 ^st Street, Fort Lauderdale, Florida (“Miami Subs ”) and NATHAN’S FAMOUS, INC. , a Delaware corporation (“Nathan’s”). Miami Subs and Nathan’s are collectively referred to herein as the “Parties.”

WHEREAS , on or about June 7, 2007, the Parties entered into a Stock Purchase Agreement (“SPA”), pursuant to which Nathan’s sold all of the issued and outstanding shares of stock of Miami Subs Corporation to Miami Subs for an aggregate purchase price of Three Million Two Hundred Fifty Thousand Dollars ($3,250,000.00), consisting of a cash payment of Eight Hundred Fifty Thousand Dollars ($850,000.00) and the balance of Two Million Four Hundred Thousand Dollars ($2,400,000.00) to be paid pursuant to the terms of a Nonnegotiable Promissory Note (the “Note”); and

WHEREAS , Bruce Galloway (“Galloway”) and Lawrence Austin (“Austin”) each personally guaranteed Miami Subs’ performance under the Note, pursuant to separate written guarantees dated on or about June 7, 2007 (the “Galloway Personal Guaranty” and the “Austin Personal Guaranty”); and

WHEREAS , a dispute has arisen between the Parties concerning the SPA (the “Dispute”); and

WHEREAS , due to the significant cost, expense, and uncertainty in connection with potentially litigating the Dispute, the Parties desire to resolve and settle in full all past, present or future claims that Miami Subs had, has or may have against Nathan’s arising out of the SPA through the date of execution of this Agreement;

NOW, THEREFORE , the Parties hereby agree to settle the Dispute upon the following terms and conditions:

1.   Delivery of Amended Note : Upon the execution of this Agreement by all Parties, Miami Subs shall deliver to Nathan’s an Amended and Restated Promissory Note in the form annexed hereto as Exhibit “A” (the “Amended Note”), pursuant to which the term of the Note is extended and the monthly installment amount thereunder reduced, as set forth in the Amended Note.

2.   Delivery of Reaffirmation of Guaranty : Upon the execution of this Agreement by all Parties, Galloway and Austin shall deliver to Nathan’s a Reaffirmation of Guaranty in the form annexed hereto as Exhibit “B” (the “Reaffirmation of Guaranty”), pursuant to which Galloway and Austin personally guaranty the performance of Miami Subs under the Amended Note, as set forth in the Reaffirmation of Guaranty.

3.   General Release to Nathan’s : For   and in consideration of the good and valuable consideration identified herein, the sufficiency of which Miami Subs hereby acknowledges, Miami Subs does hereby forever release and discharge Nathan’s, its past, present and future shareholders, officers, directors, representatives, agents, employees, affiliated companies, related companies, subsidiaries, parents, predecessors, successors, assigns (collectively, “RELEASEES”), and any other entities in which the RELEASEES have or had any interest, from all claims, demands, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, and liabilities of any kind whatsoever (upon any legal or equitable theory, whether contractual, common law, statutory, federal, state, local or otherwise), that Miami Subs and each of its past, present and future shareholders, officers, directors, representatives, agents, employees, affiliated companies, related companies, subsidiaries, parents, predecessors, successors and assigns, (collectively “RELEASORS”) ever had, now have or hereafter can, shall or may have against RELEASEES, including any and all past, present or future claims arising out of the SPA up to and including the date of execution of this Agreement; provided, however, that this Release is not intended to release the obligations set forth in this Agreement.

4.   Miami Subs Acknowledgment of Counsel : Miami Subs acknowledges that for purposes of this settlement it has had the opportunity to be represented by legal counsel of its own choice throughout all of the negotiations preceding the execution of this Agreement; that it has had the opportunity to consult with its attorneys prior to executing this Agreement; that it has executed this Agreement only after it has had the opportunity to consult with above-described independent legal counsel; that it has carefully read this Agreement in its entirety; that it has had the opportunity to have the provisions of this Agreement explained to it by counsel and has had the opportunity to have answered to its satisfaction any questions it has had with regard to the meaning of any of the provisions of this Agreement; that it fully understands the terms, conditions and significance of this Agreement, and that it voluntarily consents to all of the terms and conditions contained in this Agreement and is signing this Agreement voluntarily and of its own force and will; and that it intends to abide by all the provisions of this Agreement.

5.   Nathan’s Acknowledgment of Counsel : Nathan’s acknowledges that for purposes of this settlement it has been represented by Farrell Fritz, P.C., legal counsel of its own choice, throughout all of the negotiations preceding the execution of this Agreement; that it has consulted with its attorneys prior to executing this Agreement; that it executed this Agreement only after consultation with above-described independent legal counsel; that it has carefully read this Agreement in its entirety; that it had the provisions of this Agreement explained to it by counsel who answered to its satisfaction any questions asked with regard to the meaning of any of the provisions of this Agreement; that it fully understand the terms, conditions and significance of this Agreement, and that it voluntarily consent to all of the terms and conditions contained in this Agreement and is signing this Agreement voluntarily and of its own force and will; and that it intends to abide by all the provisions of this Agreement.

6.   No Admission of Wrongdoing : The Parties have entered into this Agreement for the purpose of avoiding the