Nathan’s Famous, Inc.
2001 Stock Option Plan, as amended

SECTION 1. GENERAL PROVISIONS

1.1
Name and General Purpose

The name of this plan is the Nathan’s Famous, Inc. 2001 Stock Option Plan
(hereinafter called the “Plan”). The Plan is intended to be a broadly-based
incentive plan which enables Nathan’s Famous, Inc. (the “Company”) and its
subsidiaries and affiliates to foster and promote the interests of the Company
by attracting and retaining officers, directors and employees of, and
consultants to, the Company who contribute to the Company’s success by their
ability, ingenuity and industry, to enable such officers, directors, employees
and consultants to participate in the long-term success and growth of the
Company by giving them a proprietary interest in the Company and to provide
incentive compensation opportunities competitive with those of competing
corporations.

1.2
Definitions

 
a.
“Affiliate” means any person or entity controlled by or under common control
with the Company, by virtue of the ownership of voting securities, by contract
or otherwise.

 
b.
“Board” means the Board of Directors of the Company.

 
c.
“Change in Control” means a change of control of the Company, or in any person
directly or indirectly controlling the Company, which shall mean:

 
(a)
a change in control as such term is presently defined in Regulation 240.12b-(2)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or

 
(b)
if any “person” (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) other than the Company or any “person” who on the date of this Agreement is
a director or officer of the Company, becomes the “beneficial owner” (as defined
in Rule 13(d)-3 under the Exchange Act) directly or indirectly, of securities of
the Company representing twenty percent (20%) or more of the voting power of the
Company’s then outstanding securities; or

 
(c)
if during any period of two (2) consecutive years during the term of this Plan,
individuals who at the beginning of such period constitute the Board of
Directors, cease for any reason to constitute at least a majority thereof.

 
d.
“Committee” means the Committee referred to in Section 1.3 of the Plan.

 
e.
“Common Stock” means shares of the Common Stock, par value $.01 per share, of
the Company.

--------------------------------------------------------------------------------

 
f.
“Company” means Nathan’s Famous, Inc., a corporation organized under the laws of
the State of Delaware (or any successor corporation).

 
g.
“Fair Market Value” means the market price of the Common Stock on the Nasdaq
Stock Market on the on the date of the grant or on any other date on which the
Common Stock is to be valued hereunder. If no sale shall have been reported on
the Nasdaq Stock Market on such date, Fair Market Value shall be determined by
the Committee.

 
h.
“Non-Employee Director” shall have the meaning set forth in Rule 16(b)
promulgated by the Securities and Exchange Commission (“Commission”), or any
successor provision.

 
i.
“Option” means any option to purchase Common Stock under Section 2 of the Plan.

 
j.
“Option Agreement” means the option agreement described in Section 2.4 of the
Plan.

 
k.
“Participant” means any officer, director, employee or consultant of the
Company, a Subsidiary or an Affiliate who is selected by the Committee to
participate in the Plan.

 
l.
“Subsidiary” means any corporation in which the Company possesses directly or
indirectly 50% or more of the combined voting power of all classes of stock of
such corporation.

 
m.
“Total Disability” means accidental bodily injury or sickness which wholly and
continuously disabled an optionee. The Committee, whose decisions shall be
final, shall make a determination of Total Disability.

1.3
Administration of the Plan

The Plan shall be administered by the Board or by the Committee appointed by the
Board consisting of two or more members of the Board all of whom shall be
Non-Employee Directors. The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.

Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan;
provided, that the foregoing shall not be construed to permit the Committee to
amend the restriction on Option repricing contained in Section 1.10(b) hereof.

The Committee shall keep minutes of its meetings and of action taken by it
without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.

1.4
Eligibility

Stock Options may be granted only to officers, directors, employees or
consultants of the Company or a Subsidiary or Affiliate. All employees are
eligible to receive Stock Options under the Plan. Any person who has been
granted any Option may, if he is otherwise eligible, be granted an additional
Option or Options.

2

--------------------------------------------------------------------------------

1.5
Shares

The aggregate number of shares reserved for issuance pursuant to the Plan shall
be 625,000 shares of Common Stock, or the number and kind of shares of stock or
other securities which shall be substituted for such shares or to which such
shares shall be adjusted as provided in Section 1.6. No individual may be
granted options to purchase more than an aggregate of 125,000 shares of Common
Stock pursuant to the Plan.

Such number of shares may be set aside out of the authorized but unissued shares
of Common Stock or out of issued shares of Common Stock acquired for and held in
the Treasury of the Company, not reserved for any other purpose. Shares subject
to, but not sold or issued under, any Option terminating or expiring for any
reason prior to its exercise in full will again be available for Options
thereafter granted during the balance of the term of the Plan.

1.6
Adjustments Due to Stock Splits, Mergers, Consolidation, Etc.

If, at any time, the Company shall take any action, whether by stock dividend,
stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.

Likewise, in the event of any change in the outstanding shares of Common Stock
by reason of any recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common Stock or other securities which are
reserved for issuance under the Plan and the number of shares or other
securities which, at such time are subject to Options.

In the event of a Change in Control, at the option of the Board or Committee,
(a) all Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation any Option or portion of an Option which was granted
more than six (6) months prior to the date of such surrender, to the extent not
yet exercised, and to receive a cash payment in an amount equal to the excess,
if any, of the Fair Market Value (on the date of surrender) of the shares of
Common Stock subject to the Option or portion thereof surrendered, over the
aggregate purchase price for such Shares under the Option.

1.7
Non-Alienation of Benefits

Except as herein specifically provided, no right or unpaid benefit under the
Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.

3

--------------------------------------------------------------------------------

1.8
Withholding or Deduction for Taxes

If, at any time, the Company or any Subsidiary or Affiliate is required, under
applicable laws and regulations, to withhold, or to make any deduction for any
taxes, or take any other action in connection with any Option exercise, the
Participant shall be required to pay to the Company or such Subsidiary or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company, the Company or such Subsidiary or Affiliate may
accept a sufficient number of shares of Common Stock to cover the amount
required to be withheld.

1.9
Administrative Expenses

The entire expense of administering the Plan shall be borne by the Company.

1.10
General Conditions

 
a.
The Board or the Committee may, from time to time, amend, suspend or terminate
any or all of the provisions of the Plan, provided that, without the
Participant’s approval, no change may be made which would alter or impair any
right theretofore granted to any Participant; provide further, that the
foregoing shall not be construed to permit the Committee to amend the
restriction on Option repricing contained in Section 1.10(b) hereof.

 
b.
With the consent of the Participant affected thereby, the Committee may amend or
modify any outstanding Option in any manner not inconsistent with the terms of
the Plan, including, without limitation, and irrespective of the provisions of
Section 2.3(c) below, to accelerate the date or dates as of which an installment
of an Option becomes exercisable; provided, that the Committee shall not have
the right to reprice any outstanding Options.

 
c.
Nothing contained in the Plan shall prohibit the Company or any Subsidiary or
Affiliate from establishing other additional incentive compensation arrangements
for employees of the Company or such Subsidiary or Affiliate.

 
d.
Nothing in the Plan shall be deemed to limit, in any way, the right of the
Company or any Subsidiary or Affiliate to terminate a Participant’s employment
or service with the Company (or such Subsidiary or Affiliate) at any time.

 
e.
Any decision or action taken by the Board or the Committee arising out of or in
connection with the construction, administration, interpretation and effect of
the Plan shall be conclusive and binding upon all Participants and any person
claiming under or through any Participant.

 
f.
No member of the Board or of the Committee shall be liable for any act or
action, whether of commission or omission, (i) by such member except in
circumstances involving actual bad faith, nor (ii) by any other member or by any
officer, agent or employee.

4

--------------------------------------------------------------------------------

1.11
Compliance with Applicable Law

Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock, or grant any Option with respect
thereto, unless it is advised by counsel of its selection that it may do so
without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.

1.12
Effective Dates

The Plan was adopted by the Board on June 14, 2001, subject to stockholder
approval. The Plan shall terminate on June 13, 2011.

Section 2. OPTION GRANTS

2.1
Authority of Committee

Subject to the provisions of the Plan, the Committee shall have the sole and
complete authority to determine (i) the Participants to whom Options shall be
granted; (ii) the number of shares to be covered by each Option; and (iii) the
conditions and limitations, if any, in addition to those set forth in Sections 2
and 3 hereof, applicable to the exercise of an Option, including without
limitation, the nature and duration of the restrictions, if any, to be imposed
upon the sale or other disposition of shares acquired upon exercise of an
Option.

Stock Options granted under the Plan shall be non-qualified stock options.

The Committee shall have the authority to grant Options.

2.2
Option Exercise Price

The exercise price set forth in the Option Agreement at the time of grant shall
not be less than the Fair Market Value of the Common Stock at the time that the
Option is granted.

The consideration to be paid for the Shares to be issued upon exercise of an
Option may consist of (i) cash, (ii) check, (iii) other shares of the Company’s
Common Stock which have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised, or (iv) consideration received by the Company under any cashless
exercise program implemented by the Company in connection with the Plan. Stock
certificates will be delivered only against such payment.

2.3
Option Grants

Each Option will be subject to the following provisions:

 
a.
Term of Option

An Option will be for a term of not more than five years from the date of grant.

5

--------------------------------------------------------------------------------

 
b.
Exercise

 
(i)
By an Employee:

Unless otherwise provided by the Committee and except in the manner described
below upon the death of the optionee, an Option may be exercised only in
installments as follows: up to one-half of the subject shares on and after the
first anniversary of the date of grant, up to all of the subject shares on and
after the second such anniversary of the date of the grant of such Option but in
no event later than the expiration of the term of the Option.

An Option shall be exercisable during the optionee’s lifetime only by the
optionee and shall not be exercisable by the optionee unless, at all times since
the date of grant and at the time of exercise, such optionee is an employee of
or providing services to the Company, any parent corporation of the Company or
any Subsidiary or Affiliate, except that, upon termination of all such
employment or provision of services (other than by death, Total Disability, or
by Total Disability followed by death in the circumstances provided below), the
optionee may exercise an Option at any time within three months thereafter but
only to the extent such Option is exercisable on the date of such termination.

Upon termination of all such employment by Total Disability, the optionee may
exercise such Options at any time within one year thereafter, but only to the
extent such Option is exercisable on the date of such termination.

In the event of the death of an optionee (i) while an employee of or providing
services to the Company, any parent corporation of the Company or any Subsidiary
or Affiliate, or (ii) within three months after termination of all such
employment or provision of services (other than for Total Disability) or (iii)
within one year after termination on account of Total Disability of all such
employment or provision of services, such optionee’s estate or any person who
acquires the right to exercise such option by bequest or inheritance or by
reason of the death of the optionee may exercise such optionee’s Option at any
time within the period of two years from the date of death. In the case of
clauses (i) and (iii) above, such Option shall be exercisable in full for all
the remaining shares covered thereby, but in the case of clause (ii) such Option
shall be exercisable only to the extent it was exercisable on the date of such
termination of employment or service.

 
(ii)
By Persons other than Employees:

If the optionee is not an employee of the Company or the parent corporation of
the Company or any Subsidiary or Affiliate, the vesting of such optionee’s right
to exercise his Options shall be established and determined by the Committee in
the Option Agreement covering the Options granted to such optionee.

Notwithstanding the foregoing provisions regarding the exercise of an Option in
the event of death, Total Disability, other termination of employment or
provision of services or otherwise, in no event shall an Option be exercisable
in whole or in part after the termination date provided in the Option Agreement.

6

--------------------------------------------------------------------------------

 
c.
Transferability

An Option granted under the Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution, or as may be permitted by the
Board or the Committee.

2.4
Agreements

In consideration of any Options granted to a Participant under the Plan, each
such Participant shall enter into an Option Agreement with the Company
providing, consistent with the Plan, such terms as the Committee may deem
advisable.

FFDOCS1\752646.03
 
 
7

--------------------------------------------------------------------------------