NOTE

– STOCKHOLDERS’ EQUITY, STOCK PLANS AND OTHER EMPLOYEE BENEFIT PLANS

Dividend

March 10, 2015,

the Company’s Board of Directors declared a special cash dividend of

$25.00

per share payable to stockholders of record as of

March 20, 2015

of which approximately

$115,100

was paid on

March 27, 2015

to the stockholders. The Company also accrued

$1,000

for the expected dividends payable on unvested shares pursuant to the terms of the restricted stock agreements. As unvested restricted stock grants, the declared dividend will be paid. We have paid

$750

of the accrued dividend and estimate that an additional

$125

will also be paid during each of our fiscal years ending

March 25, 2018

and

March 31, 2019.

The ex-date for the distribution was

March 30, 2015

pursuant to NASDAQ regulations for dividend distributions that are greater than

25%

of the Company’s market capitalization.

Stock

Incentive

Plans

September 14, 2010,

the Company’s shareholders approved the Nathan’s Famous, Inc.

2010

Stock Incentive Plan (the

“2010

Plan”),

which provides for the issuance of nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other stock-based awards to directors, officers and key employees. The Company was initially authorized to issue up to

150,000

shares of common stock under the

2010

Plan, together with any shares which had

not

been previously issued under the Company’s previous stock option plans as of

July 19, 2010 (

171,000

shares), plus any shares subject to any outstanding options or restricted stock grants under the Company’s previous stock option plans that were outstanding as of

July 19, 2010

and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional

100,000

shares.

September 13, 2012,

the Company amended the

2010

Plan increasing the number of shares available for issuance by

250,000

shares. Shares to be issued under the

2010

Plan

may

be made available from authorized but unissued stock, common stock held by the Company in its treasury, or common stock purchased by the Company on the open market or otherwise.

The number of shares issuable and the grant, purchase or exercise price of outstanding awards are subject to adjustment in the amount that the Company’s Compensation Committee considers appropriate upon the occurrence of certain events, including stock dividends, stock splits, mergers, consolidations, reorganizations, recapitalizations, or other capital adjustments. In the event that the Company issues restricted stock awards pursuant to the

2010

Plan, each share of restricted stock would reduce the amount of available shares for issuance by either

3.2

shares for each share of restricted stock granted or

share for each share of restricted stock granted. As of

March 26, 2017,

there were up to

223,698

shares available to be issued for future option grants or up to

190,218

shares of restricted stock that

may

be granted

under the

2010

Plan.

In general, options granted under the Company’s stock incentive plans have terms of

five

ten

years and vest over periods of between

three

and

five

years. The Company has historically issued new shares of common stock for options that have been exercised and used the Black-Scholes option valuation model to determine the fair value of options granted at the grant date.

During the fiscal year ended

March 29, 2015,

the Company granted options to purchase

50,000

shares at an exercise price of

$53.89

per share, all of which expire

five

years from the date of grant. All such stock options vest ratably over a

four

-year period commencing

August 6, 2015.

The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the year ended

March 29, 2015

were as follows:

Weighted-average option fair values	$	11.970

Expected life (years)		4.5

Interest rate		1.66	%

Volatility		22.77	%

Dividend Yield		0	%

The expected dividend yield is based on historical and projected yields for regular dividends. The Company estimates expected volatility based primarily on historical monthly price changes of the Company’s stock equal to the expected life of the option. The risk free interest rate is based on the U.S. Treasury yield in effect at the time of the grant. The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on expected employment termination behavior.

During the fiscal year ended

March 30, 2014,

the Company granted

25,000

shares of restricted stock at a fair value of

$49.80

per share representing the closing price on the date of grant, which will be fully vested

five

years from the date of grant. The restrictions on the shares lapse ratably over a

five

-year period on the annual anniversary of the date of grant. The compensation expense related to this restricted stock award is expected to be

$1,245

and will be recognized, commencing on the grant date, over the next

five

years.

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as follows:

	March 26, 2017		March 27, 2016		March 29, 2015

Stock options	$	150	$	181	$	318
Restricted stock		432		541		541
	$	582	$	722	$	859

The tax benefit on stock-based compensation expense was

$213,

$298

and

$350

for the years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

respectively. As of

March 26, 2017,

there was

$549

of unamortized compensation expense related to stock-based incentive awards. The Company expects to recognize this expense over approximately

one

year and

four

months, which represents the weighted average remaining requisite service periods for such awards.

A summary of the status of the Company’s stock options at

March 26, 2017,

March 27, 2016

and

March 29, 2015

and changes during the fiscal years then ended is presented in the tables below:

	2017					2016					2015
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Options outstanding – beginning of year		124,030		$	26.29		142,964		$	24.36		279,500		$	15.22

Granted		-			-		-			-		50,000		$	53.89

Expired		-			-		(3,787	)		11.72		-			-

Exercised		(48,285	)		11.72		(15,147	)		11.72		(235,125	)		14.74

Options outstanding - end of year		75,745		$	35.58		124,030		$	26.29		94,375		$	36.90

Options exercisable - end of year		37,873		$	35.58		67,221		$	18.44		-		$	-

Weighted-average fair value of options granted		-			-		-			-		50,000		$	11.97

During the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

options to purchase

48,285,

15,147

and

235,125

shares were exercised which aggregated proceeds of

$44,

$89

and

$880,

respectively, to the Company. The aggregate intrinsic values of the stock options exercised during the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015

was

$1,555,

$486

and

$13,040,

respectively.

The following table summarizes information about outstanding stock options at

March 26, 2017:

			Weighted-		Weighted-
			Average		Average		Aggregate
			Exercise		Remaining		Intrinsic
	Shares		Price		Contractual Life		Value

Options outstanding at March 26, 2017		75,745	$	35.58		2.36	$	1,899

Options exercisable at March 26, 2017		37,873	$	35.58		2.36	$	950

Exercise price is $ 35 . 576

eplacement

stock

options:

March 30, 2015,

was the ex-dividend date for the Nathan’s dividend distribution that was paid on

March 27, 2015.

Pursuant to the mandatory anti-dilution provisions of the option plan, the Company issued replacement options for the unvested stock options that were outstanding as of

March 29, 2015.

Nathan’s performed its evaluation based on the closing price of its common stock on Friday,

March 27, 2015

$73.56

per share, or

$48.56

per share excluding the dividend of

$25.00

per share.

other terms or conditions of the outstanding options were modified. The anti-dilution provisions of the original award granted to the

optionees were structured to equalize the award’s fair value before and after the modification and as a result there was

resulting incremental fair value after the modification to equalize value.

The following table summarizes information about the replacement stock options outstanding after the conversion, effective

March 30, 2015:

			Weighted-		Weighted-
			Average		Average		Aggregate
			Exercise		Remaining		Intrinsic
	Shares		Price		Contractual Life		Value

Options outstanding at March 30, 2015		142,964	$	24.36		2.87	$	3,460

Options exercisable at March 30, 2015		-	$	-		-	$	-

Exercise prices range from $11.72 to $35.576

Restricted stock:

Transactions with respect to restricted stock for the fiscal year ended

March 26, 2017

are as follows:

				Weighted-
				Average
				Grant-date Fair value

	Shares			Per share
Unvested restricted stock at March 27, 2016		25,000		$	41.59

Granted		-			-

Vested		(15,000	)	$	36.13

Unvested restricted stock at March 26, 2017		10,000		$	49.80

The aggregate fair value of restricted stock vested during the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015

was

$736,

$683

and

$965,

respectively.

Common Stock Purchase Rights

June 5, 2013,

Nathan’s adopted a new stockholder rights plan (the

“2013

Rights Plan”) under which all stockholders of record as of

June 17, 2013

received rights to purchase shares of common stock (the

“2013

Rights”) and the previously existing “New Rights Plan” was terminated.

The

2013

Rights were distributed as a dividend. Initially, the

2013

Rights will attach to, and trade with, the Company’s common stock. Subject to the terms, conditions and limitations of the

2013

Rights Plan, the

2013

Rights will become exercisable if (among other things) a person or group acquires

15%

or more of the Company’s common stock (“triggering event”). Upon such triggering event and payment of the purchase price of

$100.00

(the

“2013

Right Purchase Price”), each

2013

Right (except those held by the acquiring person or group) will entitle the holder to acquire

one

share of the Company’s common stock (or the economic equivalent thereof) or, if the then-current market price is less than the then current

2013

Right Purchase Price, a number of shares of the Company’s common stock which at the time of the transaction has a market value equal to the then current

2013

Right Purchase Price at a purchase price per share equal to the then current market price of the Company’s Common Stock.

The Company’s Board of Directors

may

redeem the

2013

Rights prior to the time they are triggered. Upon adoption of the

2013

Rights Plan, the Company reserved

10,188,600

shares of common stock for issuance upon exercise of the

2013

Rights. The

2013

Rights will expire on

June 17, 2018

unless earlier redeemed or exchanged by the Company.

March 26, 2017,

the Company has reserved

7,396,439

shares of common stock for issuance upon exercise of the Common Stock Purchase Rights approved by the Board of Directors on

June 5, 2013.

Stock Repurchase Programs

September 11, 2015,

Nathan’s Board of Directors authorized the commencement of a modified Dutch Auction tender offer to repurchase up to

500,000

shares of its common stock at a price

not

less than

$33.00

nor greater than

$36.00

per share. On

November 13, 2015,

the Pricing Committee authorized the Company to extend the expiration date of the modified Dutch Auction tender offer until

5:00PM

EST on

December 2, 2015

and increase the price range of the modified Dutch Auction tender offer to a price per share of

not

less than

$41.00

nor greater than

$44.00.

Based on the final count by American Stock Transfer and Trust Company, the depositary of the tender,

88,672

shares of common stock were tendered and

not

withdrawn at or below the final purchase price of

$44.00

per share. The tender offer was

not

fully subscribed, and all shares validly tendered and

not

withdrawn were accepted for purchase. All of such shares purchased in the tender offer were purchased at the same price of

$44.00

per share, for a total cost of

$4,056,

including fees and expenses related to the modified Dutch Auction tender offer.

During the period from

October 2001

through

March 26, 2017,

Nathan’s purchased a total of

5,127,373

shares of common stock at a cost of approximately

$77,303

pursuant to the various stock repurchase plans previously authorized by the Board of Directors. During the fiscal year ended

March 26, 2017,

the Company repurchased

30,616

shares of common stock at a cost of

$1,272.

November 9, 2009,

Nathan’s Board of Directors authorized its

sixth

stock repurchase plan for the purchase of up to

500,000

shares of its common stock on behalf of the Company. On

February 1, 2011,

Nathan’s Board of Directors increased the authorization to purchase its common stock by an additional

300,000

shares. On

February 1, 2016,

Nathan’s Board of Directors increased the authorization to purchase its common stock by an additional

200,000

shares. On

March 11, 2016,

Nathan’s Board of Directors increased the authorization to purchase its common stock by an additional

200,000

shares increasing the aggregate authorization under the Sixth Securities Repurchase Program to

1.2

million shares. The Company has repurchased

939,742

shares at a cost of

$29,641

under the

sixth

stock repurchase plan through

March 26, 2017.

March 11, 2016,

the Company and Mutual Securities, Inc. (“MSI”) entered into an agreement (the “Agreement”) pursuant to which MSI has been authorized on the Company’s behalf to purchase up to

175,000

shares of the Company’s common stock,

$.01

par value, commencing on

March 21, 2016.

The Agreement was adopted under the safe harbor provided by Rule

10b5

and Rule

10b

of the Securities Exchange Act of

1934,

as amended, in order to assist the Company in implementing its stock purchase plans and terminated in

August 2016.

September 9, 2016,

the Company and MSI entered into an agreement pursuant to which MSI was authorized on the Company’s behalf to purchase up to

100,000

shares of the Company’s common stock, commencing

September 19, 2016.

This Agreement was adopted under the safe harbor provided by Rule

10b5

and Rule

10b

of the Securities Exchange Act of

1934,

as amended, to assist the Company in implementing its stock purchase plans.

As of

March 26, 2017,

an aggregate of

260,258

shares can still be purchased under Nathan’s existing stock buy-back program.

Purchases

may

be made from time to time, depending on market conditions, in open market or privately-negotiated transactions, at prices deemed appropriate by management. There is

set time limit on the repurchases to be made under the stock-repurchase plan.

Employment Agreements

Effective

January 1, 2007,

Howard M. Lorber, previously Chairman of the Board and Chief Executive Officer, assumed the newly-created position of Executive Chairman of the Board of Nathan’s and Eric Gatoff, previously Vice President and Corporate Counsel, became Chief Executive Officer of Nathan’s.

In connection with the foregoing, the Company entered into an employment agreement with each of Messrs. Lorber (as amended, the “Lorber Employment Agreement”) and Gatoff (as amended, the “Gatoff Employment Agreement”). Under the terms of the Lorber Employment Agreement, Mr. Lorber will serve as Executive Chairman of the Board from

January 1, 2007

until

December 31, 2012,

unless his employment is terminated in accordance with the terms of the Lorber Employment Agreement. On

November 1, 2012,

the Company amended its employment agreement with Mr. Lorber, extending the term of the employment agreement to

December 31, 2017

and increasing the base compensation of Mr. Lorber to

$600

per annum. In addition, Mr. Lorber received a grant of

50,000

shares of restricted stock subject to vesting as provided in a Restricted Stock Agreement between Mr. Lorber and the Company. Mr. Lorber will

not

receive a contractually-required bonus. The Lorber Employment Agreement provides for a

three

-year consulting period after the termination of employment during which Mr. Lorber will receive a consulting fee of

$200

per year in exchange for his agreement to provide

less than

days of consulting services per year, provided, Mr. Lorber is

not

required to provide more than

days of consulting services per year.

The Lorber Employment Agreement provides Mr. Lorber with the right to participate in employment benefits offered to other Nathan’s executives. During and after the contract term, Mr. Lorber is subject to certain confidentiality, non-solicitation and non-competition provisions in favor of the Company.

In the event that Mr. Lorber’s employment is terminated without cause, he is entitled to receive his salary and bonus for the remainder of the contract term. The Lorber Employment Agreement further provides that in the event there is a change in control, as defined in the agreement, Mr. Lorber has the option, exercisable within

one

year after such event, to terminate the agreement. Upon such termination, he has the right to receive a lump sum cash payment equal to the greater of (A) his salary and annual bonuses for the remainder of the employment term (including a prorated bonus for any partial fiscal year), which bonus shall be equal to the average of the annual bonuses awarded to him during the

three

fiscal years preceding the fiscal year of termination; or (B)

2.99

times his salary and annual bonus for the fiscal year immediately preceding the fiscal year of termination, in each case together with a lump sum cash payment equal to the difference between the exercise price of any exercisable options having an exercise price of less than the then current market price of the Company’s common stock and such then current market price. In addition, Nathan’s will provide Mr. Lorber with a tax gross-up payment to cover any excise tax due.

In the event of termination due to Mr. Lorber’s death or disability, he is entitled to receive an amount equal to his salary and annual bonuses for a

three

-year period, which bonus shall be equal to the average of the annual bonuses awarded to him during the

three

fiscal years preceding the fiscal year of termination.

Under the terms of the Gatoff Employment Agreement, Mr. Gatoff initially served as Chief Executive Officer from

January 1, 2007

until

December 31, 2008,

which period automatically extends for additional

one

-year periods unless either party delivers notice of non-renewal

less than

180

days prior to the end of the term then in effect. Consequently, the Gatoff Employment Agreement is expected to be extended through

December 31, 2018,

based on the original terms, and

non-renewal notice has been given.

Pursuant to the agreement, Mr. Gatoff will receive a base salary, currently

$500

effective

June 1, 2016,

and an annual bonus based on his performance measured against the Company’s financial, strategic and operating objectives as determined by the Compensation Committee pursuant to the terms of the

2017

Management Incentive Plan approved by shareholders on

September 14, 2016.

The Gatoff Employment Agreement provides for an automobile allowance and the right of Mr. Gatoff to participate in employment benefits offered to other Nathan’s executives. The employment agreement automatically extends for successive

one

-year periods unless notice of non-renewal is provided in accordance with the agreement. During and after the contract term, Mr. Gatoff is subject to certain confidentiality, non-solicitation and non-competition provisions in favor of the Company. On

June 4, 2013,

Mr. Gatoff received a grant of

25,000

shares of restricted stock at a fair value of

$49.80

per share representing the closing price on the date of grant, subject to vesting as provided in a Restricted Stock Agreement between Mr. Gatoff and the Company. The compensation expense related to this restricted stock award is expected to be

$1,245

and will be recognized, commencing of the grant date, over the next

five

years.

June 10, 2015,

the Company and Wayne Norbitz entered into a Transition Agreement (the “Transition Agreement”) relating to the retirement of Mr. Norbitz as President and Chief Operating Officer of the Company. Under the Transition Agreement, Mr. Norbitz continued to serve as President and Chief Operating Officer of the Company through

August 7, 2015

at which time he became a Consultant to the Company pursuant to the terms of a

one

year Consulting Agreement between him and the Company (the “Consulting Agreement”). The Consulting Agreement provides that Mr. Norbitz would receive a consulting fee of

$16.3

per month. The Transition Agreement further provided that Mr. Norbitz would receive a severance payment of

$289

and under the terms of the Transition Agreement, the Company purchased from Mr. Norbitz

56,933

shares of the Company’s common stock,

$.01

par value (the “Common Stock”) at a purchase price of

$40.28

which was the closing price of the Common Stock as reported on the Nasdaq Global Market on

June 10, 2015.

Effective

August 4, 2016,

the Company and Wayne Norbitz executed an Amendment to the Consulting Agreement (the “Amendment”), whereas the Term of the Agreement was originally extended to expire

August 10, 2017

which has been further extended to expire on

December 31, 2017.

Pursuant to the terms of the Amendment, Mr. Norbitz shall provide consulting services

one

(

) day a week, as directed by the Board of Directors of the Company and/or Eric Gatoff, Chief Executive Officer of the Company. The Amendment provides that Mr. Norbitz will receive a consulting fee of

$8.1

per month for services rendered.

The Company and

one

employee of Nathan’s entered into a change of control agreement effective

May 31, 2007

for annual compensation of

$136

per year. The agreement additionally includes a provision under which the employee has the right to terminate the agreement and receive payment equal to approximately

three

times his annual compensation upon a change in control, as defined.

Each employment agreement terminates upon death or voluntary termination by the respective employee or

may

be terminated by the Company on up to

-days’ prior written notice by the Company in the event of disability or “cause,” as defined in each agreement.

Defined Contribution and Union Pension Plans

The Company has a defined contribution retirement plan under Section

401

(k) of the Internal Revenue Code covering all nonunion employees over age

21,

who have been employed by the Company for at least

one

year. Employees

may

contribute to the plan, on a tax-deferred basis, up to

20%

of their total annual salary. Historically, the Company has matched contributions at a rate of

$.25

per dollar contributed by the employee on up to a maximum of

of the employee’s total annual salary. Employer contributions for the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015

were

$41

$35

and

$30,

respectively.

The Company participates in a noncontributory, multi-employer, defined benefit pension plan (the “Union Plan”) covering substantially all of the Company’s union-represented employees. The risks of participating in the Union Plan are different from a single-employer plan in the following aspects (a) assets contributed to the Union Plan by

one

employer

may

be used to provide benefits to employees of other participating employers; (b) if a participating employer stops contributing to the plan, the unfunded obligations of the plan

may

be borne by the remaining participating employers; and (c) if the Company chooses to stop participating in the Union Plan, the Company

may

be required to pay the Union Plan an amount based on the underfunded status of the Union Plan, referred to as a withdrawal liability. The Company has

plans or intentions to stop participating in the plan as of

March 26, 2017

and does

not

believe that there is a reasonable possibility that a withdrawal liability will be incurred. Contributions to the Union Plan were

$10

and

$10

for the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

respectively.

Other Benefits

The Company provides, on a contributory basis, medical benefits to active employees. The Company does

not

provide medical benefits to retirees.