Note 7 - Note Receivable Held for Sale

12 Months Ended

Mar. 25, 2012

NOTE G – NOTE RECEIVABLE HELD FOR SALE

In connection with Nathan’s sale of its then wholly-owned subsidiary Miami Subs Corporation (“Miami Subs”) on June 7, 2007, to Miami Subs Capital Partners I, Inc. (“Purchaser”), Nathan’s accepted Purchaser’s promissory note in the principal amount of $2,400 (the “MSC Note”) as part of the consideration. The MSC Note originally bore interest at 8% per annum and was secured by a lien on all of the assets of Miami Subs and by the personal guarantees of two principals of the Purchaser.

Effective August 31, 2008, Nathan’s and the Purchaser agreed to extend the due date of the MSC Note from its initial four-year term until April 2014, to reduce the monthly payment and to settle certain claims between Nathan’s and the Purchaser. At that time, management evaluated the restructured MSC Note for impairment by comparing the present value of the future cash flows on the MSC Note to the current carrying value and determined that no impairment existed.

Effective April 1, 2010, Nathan’s and the Purchaser agreed to further modify the terms of the MSC Note (the “Amended MSC Note”) by extending the due date of the MSC Note until June 2015, reducing the monthly payments, increasing the interest rate to 8.5% and reducing the balance of the note by $250 if the MSC Note is paid in full on or before the June 2015 maturity date. At that time, management evaluated the restructured MSC Note for impairment by comparing the then-present value of the expected future cash flows on the MSC Note to the then-current carrying value and recorded an impairment charge of $250 in the fiscal year ended March 28, 2010.

As of March 27, 2011, management further evaluated the Amended MSC Note for impairment by comparing the present value of the expected future cash flows on the Amended MSC Note to the current carrying value and recorded an impairment charge of $263. On May 4, 2011, Nathan’s entered into a Note Purchase and Sale Agreement with Y & Y Capital Co, LLC (“Note Purchaser” and such agreement, the “Purchase Agreement”) pursuant to which Nathan’s has agreed to sell to the Note Purchaser the Amended MSC Note, for $900 in cash. Simultaneously with the execution of the Purchase Agreement, the Note Purchaser paid to Nathan’s $450 to be applied to the purchase price payable under the Purchase Agreement. The sale of the Amended MSC Note was completed on June 29, 2011 and Nathan’s received the $450 balance of the sale proceeds. In connection with the sale of the Amended MSC Note, simultaneously with the closing of such sale, Nathan’s also assigned to the Note Purchaser all of its rights under certain related agreements which secure the obligation of the Purchaser under the Amended MSC Note, including a security agreement dated as of June 7, 2007, two personal guaranties and an irrevocable direction for the payment of funds under certain circumstances. Nathan’s retained certain rights under the irrevocable direction. On October 24, 2011, Nathan’s executed a Release and Direction among the parties agreeing to accept $125 in cash, in full satisfaction of Nathan’s rights under the irrevocable direction. In November 2011, Nathan’s received these proceeds which have been recorded as other income, net in the fiscal year ended March 25, 2012.

Following is a summary of the impaired note receivable:

	March 27, 2011

Total recorded investment in impaired note receivable	$	1,434
Allowance for impaired note receivable		( 513	)
Recorded investment in impaired note receivable, net		921
Less current portion		( 921	)
	$	-

Interest income recognized	$	87

Average recorded investment in impaired notes receivable	$	1,179