PROMISSORY NOTE
 

$2,400,000
 Westbury, New York
 
 June 7, 2007

 

FOR VALUE RECEIVED, MIAMI SUBS CAPITAL PARTNERS I, INC., a Florida corporation
with an office at 6300 NW 31st Avenue, Fort Lauderdale, Florida (the “Maker”),
promises to pay to the order of NATHAN’S FAMOUS, INC., a Delaware corporation
(the “Payee”), the principal amount of TWO MILLION FOUR HUNDRED THOUSAND DOLLARS
($2,400,000), on or before June 6, 2011 (the “Maturity Date”), in lawful money
of the United States of America, together with interest on the unpaid principal
amount hereof, from time to time outstanding, from the date hereof through and
including the date that this Note is paid in full, at a rate of eight percent
(8%) per annum.   

The Maker promises to pay to the Payee monthly installments of $16,000.00 each
for the first four months and $63,116.33 each for the next forty-four months,
subject to adjustment upon any prepayment made by Maker in accordance with the
terms hereof. Each installment shall be paid on the last day of each calendar
month commencing June 30, 2007, with a final installment to be paid on the
Maturity Date. Interest hereunder shall be computed on the actual number of days
elapsed over a year comprised of 365 days. Nothing herein shall be deemed to
require Maker to make payments of interest which exceed the maximum permitted by
law. In any such event, this Note shall be deemed automatically amended to
require payment of interest at the maximum amount permitted by law.

All amounts payable hereunder shall be made in lawful money of the United States
of America at such place as may be designated to the Maker in writing by the
Payee from time to time. If any payment hereunder becomes due and payable on a
day other than a Business Day (hereafter defined), such payment shall be
extended to the next succeeding Business Day. “Business Day” shall mean a day
other than a Saturday, Sunday or other day on which commercial banks in New York
State are authorized or required by law to close. Upon the occurrence of an
Event of Default, as that term is defined below, interest payable on this Note
shall be at the rate of twelve percent (12%) per annum or the maximum rate
allowed to be charged by law, whichever is lower.

This Note may be prepaid at the option of the Maker in whole or in part at any
time without penalty or premium. All prepayments shall be accompanied by accrued
interest on the principal amount repaid to the date of repayment.

This Note shall be subject to mandatory prepayment (i) upon the settlement or
the adjudication of the litigation entitled Ontario Superior Court of
Justice-Commercial Litigation, Court File No. 06-00CL6270, Lawrence B. Austin,
Plaintiff v. Michael Overs, Tesari Holdings, Ltd., & Pizza Pizza, Ltd.,
Defendants, in an amount equal to the amount payable to Lawrence Austin or any
affiliate in settlement or by award of the court having jurisdiction over such
action, after deduction of attorneys’ fees paid by Lawrence Austin in connection
with such action and (ii) in an amount equal to any liability of the Payee in
respect of an indemnification claim made by Maker against Payee pursuant to
Article V of the Stock Purchase Agreement dated as of June 7, 2007 by and among
the Maker, the Payee and Miami Subs Corporation upon a final determination of
liability by Maker and Payee or by final judicial proceeding. In the event of
any partial prepayment, whether or not mandatory, the amount of the monthly
payment payable by Maker hereunder shall be reduced to the amount obtained by
fully amortizing the unpaid principal balance following such prepayment over the
balance of the term remaining until the Maturity Date. In the event that the
Maker shall pay in full all amounts due under this Note on or before June 6,
2008, in cash in immediately available funds, the Payee hereby agrees that the
Maker shall be entitled to deduct Two Hundred Fifty Thousand ($250,000) Dollars
from such aggregate amount and, notwithstanding such deduction, the Note will be
fully paid and Maker will have no further obligations hereunder.
 

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Payee may declare the entire unpaid principal balance of the Note, together with
interest accrued thereon, to be immediately due and payable upon the occurrence
of any of the following events (each an “Event of Default”): (a) the failure of
Maker to pay the principal of, or interest on, this Note when due, and such
failure shall continue unremedied for a period of ten (10) days; (b) any
petition in bankruptcy being filed by or against the Maker, or any proceedings
in bankruptcy, or under any law relating to the relief of debtors, being
commenced for the relief or readjustment of any indebtedness of the Maker;
provided, with respect to any such petition filed against Maker, such petition
shall continue undismissed for a period of 30 days from the date of entry
thereof; (c) the making by the Maker of an assignment for the benefit of
creditors; (d) the appointment of a receiver of all or substantially all of the
property of the Maker; (e) the merger, consolidation, or sale of all or
substantially all of the assets of the Maker to any third party; (f) any breach
of any representation, warranty or covenant of the Maker contained in the
Security Agreement, of even date herewith, between Maker and Payee, which
breach, if capable of cure, shall not have been cured within twenty (20) days
following delivery of written notice to Maker; or (g) the guaranty executed by
Lawrence Austin or Bruce Galloway (each, a “Guarantor”) with respect to Maker’s
obligations hereunder shall cease to be in full force and effect or any
Guarantor shall so assert in writing.

Maker agrees that whenever an attorney is used to collect or enforce this Note
or to enforce, declare or adjudicate any rights or obligations under this Note
whether by suit or any other means whatsoever, the Maker shall pay all of the
legal fees of the attorneys for the Payee, together with all costs and expenses
of such collection, enforcement or adjudication, which obligation shall
constitute part of the principal obligation hereunder.

Maker hereby waives diligence, presentment, protest, demand and notice of every
kind except as otherwise expressly required herein. This Note may not be
modified orally.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES.

 

        MIAMI SUBS CAPITAL PARTNERS I, INC.,  
   
   
    By:   /s/  George Herman  

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Name:  George Herman   Title:    President