Document:

PURCHASE AND SALE AGREEMENT

                                       by

                                       and

                                     between

                         NATHANS FAMOUS OPERATING CORP.,
                             A Delaware corporation

                                    "Seller"

                                       and

                                THOR REALTY, LLC,
                      A New York limited liability company

                                   "Purchaser"

                                   Dated as of
                                February 23, 2005

<PAGE>

                                      INDEX
                                      -----

1.       IDENTIFICATION OF PARTIES............................................1

2.       DESCRIPTION OF THE PROPERTY..........................................1

3.       THE PURCHASE PRICE...................................................1

4.       TITLE; VIOLATIONS.....................................................2

5.       INSPECTION...........................................................3

6.       REPRESENTATIONS AND WARRANTIES OF SELLER ............................4

7.       PREPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER..............6

8.       INTENTIONALLY OMITTED

9.       CONFIDENTIALITY......................................................8

10.      CONDITIONS PRECEDENT TO CLOSING.....................................8

11.      COVENANTS OF SELLER.................................................10

12.      SELLER'S CLOSING DELIVERIES.........................................10

13.      PURCHASER'S CLOSING DELIVERIES.......................................11

14.      PRORATIONS AND ADJUSTMENTS..........................................11

15.      CLOSING.............................................................12

16.      CLOSING COSTS.......................................................12

17.      RISK OF LOSS........................................................13

18.      DEFAULT.............................................................14

19.      BROKER'S COMMISSION.................................................14

20.      1314 BOWERY ASSIGNMENT AND ASSUMPTION OF LEASE...................

21.      INDEMNIFICATION.....................................................15

22.      MISCELLANEOUS.....................................................15

<PAGE>

TABLE OF EXHIBITS
-----------------

Exhibit A         Legal Description of the Land
Exhibit B         Permitted Exceptions
Exhibit C         Service Contracts
Exhibit D         Form of Bill of Sale
Exhibit E         Form of General Assignment
Exhibit F         Lease
Exhibit G         Nathan's Lease

<PAGE>

                          PURCHASE AND SALE AGREEMENT

         1.       IDENTIFICATION OF PARTIES.
                  -------------------------

     THIS PURCHASE AND SALE AGREEMENT  (this  "Agreement") is entered into as of
February 23, 2005, by and between NATHANS FAMOUS OPERATING CORP., formerly known
as Nathan's Famous,  Inc., a Delaware  corporation having an address of 1400 Old
Country Road, Ste. 400, Westbury,  NY 11590 ("Seller"),  and THOR REALTY, LLC, a
New York limited  liability  company having an address of 139 Fifth Avenue,  New
York, NY 10010 ("Purchaser").

         2.       DESCRIPTION OF THE PROPERTY.
                  ---------------------------

     Seller hereby agrees to sell, assign and convey to Purchaser, and Purchaser
hereby agrees to purchase from Seller, all of Seller's right, title and interest
in and to the following:

     (a) That certain real property  located at 1219 Bowery,  in the City of New
York, County of Kings, State of New York, more particular1y described on Exhibit
                                                                         -------
A attached  hereto  and  incorporated  herein by this  reference  (the  "Land"),
--
together  with the  building  and any other  improvements  located  thereon (the
"Building");

     (b) All rights, privileges, easements and appurtenances to the Land and the
Building,  if any, including,  without limitation,  all of Seller's right, title
and  interest  in and  to all  mineral  and  water  rights  and  all  easements,
rights-of-way and other  appurtenances used or connected with the beneficial use
or enjoyment of the Land and the Building  (the Land,  the Building and all such
easements and appurtenances are sometimes  collectively  hereinafter referred to
as the "Real Property");

     (c) All of the interest of Seller in all assignable commission, management,
maintenance,  service and supply  agreements  and  contracts  affecting the Real
Property  ("Service  Contracts") (a schedule of all presently  existing  Service
Contracts for the Real Property is attached hereto as Exhibit C and incorporated
                                                      ---------
herein).

     (d) All of the  interests of Seller in all  assignable  permits,  licenses,
certificates and approvals ("Permits") relating to the Real Property.

     (e) Seller's interest (if any) in and to any service contracts, guarantees,
licenses,  approvals,  certificates,  permits  and  warranties  relating  to the
Property, to the extent assignable  (collectively,  the "Intangible  Property").
(The Real  Property,  the Service  Contracts,  the  Permits  and the  Intangible
Property are sometimes collectively hereinafter referred to as the "Property").

3.       THE PURCHASE PRICE.
         ------------------

     The purchase  price for the Property is Three Million One Hundred  Thousand
Dollars ($3,100,000.00) (the "Purchase Price") and shall be paid by Purchaser to
Seller at the Closing (as that term is defined in Section 15 below) as follows:
                                                  ----------

     (a) Within two (2) business days after  execution of this  Agreement by all
parties,  Purchaser  shall  deposit in escrow with  Kramer,  Coleman,  Wactlar &
Lieberman, P.C. ("Escrow Agent") an initial earnest money deposit in immediately
available   funds  in  the  amount  of  Three   Hundred  Ten  Thousand   Dollars
($310,000.00) (the "Deposit").

<PAGE>

     (b) The Deposit  paid by  Purchaser  pursuant to the terms  hereof shall be
held by Escrow Agent,  pursuant to a separate escrow  agreement,  in an interest
bearing account insured by the federal  government in an institution  reasonably
acceptable  to Seller.  In the event the  purchase  and sale of the  Property is
consummated as contemplated  hereunder,  the Deposit (plus all interest  accrued
thereon)  shall be paid to  Seller.  In the event the  purchase  and sale of the
Property is not consummated because of the failure of any Purchaser's  Condition
Precedent  (as  defined in Section  10 below),  except for a default  under this
Agreement  on the part of  Purchaser,  the Deposit  (plus all  interest  accrued
thereon) shall be immediately  refunded to Purchaser.  In the event the purchase
and sale of the  Property  is not  consummated  because of a default  under this
Agreement  on the part of  Purchaser,  the Deposit  (plus all  interest  accrued
thereon) shall be paid to and retained by Seller pursuant to Section 18(b).

     (c) The  balance  of the  Purchase  Price  shall be paid to  Seller by wire
transfer of immediately available funds at the Closing, net of all prorations as
provided herein.

     (d) (i) The duties  and  obligations  of the Escrow  Agent are only such as
herein  specifically  provided,  being purely  ministerial in nature. The Escrow
Agent shall incur no liability  for any error in  judgment,  for any act done or
step taken or omitted to be taken by it in good  faith,  for any mistake of fact
or law or for any reason whatsoever except for its own willful misconduct.

     (ii) Seller and Purchaser hereby release the Escrow Agent from any act done
or  omitted  to be done by it in good  faith in the  performance  of its  duties
hereunder.  Seller and Purchaser hereby agree to indemnify and hold harmless the
Escrow Agent from and against any and all losses, costs, claims, liabilities and
expenses (including without limitation  reasonable  attorneys' fees) incurred by
the Escrow  Agent in  connection  with the Deposit or in its  capacity as Escrow
Agent hereunder.

     (iii) The Escrow  Agent is also  counsel to Seller and shall have the right
to continue such representation in all events or circumstances.

         4.       TITLE; VIOLATIONS.
                  -----------------

     (a) Promptly  after the execution  hereof,  Purchaser  shall order from any
title  insurance  or abstract  company  licensed in New York and  acceptable  to
Purchaser  ("Title  Company"),  and shall  deliver or cause to be  delivered  to
Seller's  attorney  within  thirty  (30)  days  after  its  receipt  thereof,  a
commitment for an a title insurance policy  pertaining to the Real Property (the
"Commitment"), all at Purchaser's sole cost and expense.

     (b) Seller shall remove all title exceptions  delineated on the Commitment,
except the  Permitted  Exceptions  listed on  Exhibit B. In the event  Seller is
unable to remove the title exceptions  listed in the Commitment,  other than the
Permitted  Exceptions,  then Purchaser shall have the right and option to cancel
the Contract. In the event Purchaser elects to cancel the Contract, Seller shall
immediately  return the Deposit to Purchaser  together with the aggregate amount
of Purchaser's  third party costs as identified in Section 4(c). Seller shall be
entitled to reasonable adjournments of the Closing, not to exceed 60 days in the
aggregate for the purpose of eliminating  any  objections to title,  but nothing
herein  contained  shall require  Seller to bring any action or  proceeding,  or
incur  any  expenses  that are  reasonably  expected  to exceed  $25,000  in the
aggregate  (the  "Maximum  Amount")  (except to the extent  provided in the next
succeeding  sentence) in order to render the title to be in accordance with this
Agreement.  In the case of any  exceptions  to title  which  can be  removed  or
insured  against by the Title Company  solely by the payment of a liquidated sum
of money, (i.e. unpaid taxes, assessments,  water charges, sewer

<PAGE>

rents and other liquidated liens),  Seller shall be obligated to pay, or deposit
with the Title Company at the Closing,  such  liquidated  sum for the removal of
such title exceptions.

     (c) If, as of the Closing Date, title to the Land or the Building shall not
be as provided in this Agreement,  Purchaser shall have the option of either (i)
terminating  this  Agreement,  in which  event the  Escrow  Agent  shall pay the
Deposit to Purchaser and Seller shall reimburse  Purchaser for Purchaser's third
party  costs,   whereupon  neither  party  shall  have  any  further  rights  or
obligations  hereunder,  or (ii) accepting such title as Seller shall be able to
convey,  without any reduction of the Purchase  Price or any credit or allowance
against the same,  except that if there shall be an  encumbrance  which is not a
Permitted  Encumbrance  and which can be removed by the payment of a  liquidated
sum of money,  Purchaser  shall be  entitled to an offset  against the  Purchase
Price in an amount equal to such sum. The term  "Purchaser's  third party costs"
shall mean the expense actually incurred by Purchaser for title search (when not
obtaining a title policy) and survey preparation.

     (d) If on the  Closing  Date the Real  Property  is subject to any notes or
notices of  violation of law or municipal  ordinances,  orders or  requirements,
that have been noted in or issued by any federal,  state or municipal department
having  jurisdiction,  and which have not been fully  remedied and discharged of
record  ("Violations"),  Seller, at its expense,  shall be obligated to cure and
discharge  each  Violation  prior to the  Closing  and pay any fines  associated
therewith.

     5. Intentionally omitted.

     6. REPRESENTATIONS AND WARRANTIES OF SELLER.
        ----------------------------------------

     Seller  represents and warrants to Purchaser that the following matters are
true and correct in all material  respects as of the execution of this Agreement
and will also be true and correct in all material respects as of the Closing:

     (a) Seller is a corporation,  duly organized,  validly existing and in good
standing  under the laws of the State of  Delaware,  and has the full  power and
authority  to execute  and  deliver  this  Agreement  and all  documents  now or
hereafter to be executed and  delivered by its pursuant to this  Agreement  (the
"Seller's  Documents")  and  to  perform  all  obligations  arising  under  this
Agreement and under the Seller's Documents.

     (b) This  Agreement  constitutes,  and the  Seller's  Documents  will  each
constitute,  the legal, valid, and binding obligation of Seller,  enforceable in
accordance with their respective terms, covenants, and conditions (except to the
extent  that  such  enforcement  may be  limited  by  applicable  bankruptcy  or
insolvency laws). This Agreement and the Seller's  Documents do not and will not
contravene any provision of the by laws of Seller, any judgment,  order, decree,
writ or  injunction,  or any provision of any existing law or regulation  and do
not and will not violate any  provisions  of any  agreement to which Seller is a
party or to which it is subject.

     (c) There are no pending legal proceedings or administrative actions of any
kind or character  materially  and adversely  affecting the Property or Seller's
interest therein.

     (d)  There are no  violations  of any  federal,  state or  municipal  laws,
ordinances  with regard to any portion of the Property and no written  notice of
any such  violation has been issued by any  governmental  authority;  no heating
equipment, garbage disposal,  compactor,  incinerator or other burning equipment
at the  Property  violates  any  applicable  federal,  state or  municipal  law,
ordinance, order, regulation or requirement.

<PAGE>

     (e) Seller has no knowledge of and has received no written  notice from any
city, county,  state or other government authority (i) of any order or directive
requiring any work of repair,  maintenance  or  improvement  be performed on the
Property,   or  (ii)  relating  to  defects  in  the  Building  or  relating  to
noncompliance with any applicable building code or restriction that has not been
corrected, or relating to any threat of impending condemnation.

     (f)  Seller  has no  knowledge  of:  (i)  the  presence  of  any  Hazardous
Substances  (as defined  below) at, on or under the  Property;  (ii) any spills,
releases,  discharges, or disposal of Hazardous Substances that have occurred or
are presently occurring on or onto the Property;  or (iii) any failure to comply
with all applicable local, state and federal  environmental  laws,  regulations,
ordinances and administrative  and judicial orders relating to the Property.  As
used in this  Contract,  "Hazardous  Substances"  shall mean (i) any  "hazardous
substance"  defined both as of the date of this agreement as such in (or for the
purpose of) the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C.A.  ss.9601(14) or any so-called  "superfund" or "superlien"  law;
(ii) any  "pollutant  or  contaminant"  now defined in 42 U.S.C.A.  ss.9601(33);
(iii) any material now defined as "hazardous  waste" pursuant to 40 C.F.R.  Part
260; (iv) any petroleum,  including crude oil or any fraction  thereof;  (v) any
"hazardous  chemical"  now  defined in 29 C.F.R.  Part 1910;  and (vi) any other
substance,  regardless of physical form that is currently  subject to: any other
applicable local, state and/or federal  environmental laws, rules,  regulations,
ordinances,  administrative  and  judicial  orders  relating to the  generation,
recycling,  reuse, storage,  handling,  transport and disposal of such Hazardous
Substances  including without limitation PCBs,  asbestos and asbestos containing
materials.

     (g) Except for that certain  Lease,  dated December __, 1994 annexed hereto
as  Exhibit  F,  there are no leases,  tenancies,  licenses  or other  occupancy
agreements  to which  Seller is a party or by which  Seller may be bound for any
portion of the Land or Building.

     (h) There are no Service Contracts affecting the Property.

     (i) Intentionally omitted.

     (j) The Property  constitutes  a separate tax lot(s) which are not owned in
common with any other party, and ad valorem real estate taxes have been assessed
against each of such  portion of the  Property as a separate tax lot(s)  without
regard to property owned by any other party;

     (k) Neither the entry into nor the performance of, or compliance with, this
Agreement  (A) has resulted,  or will result,  in any violation of, or (B) is or
will be in conflict with, or (C) has resulted,  or will result,  in the creation
of any mortgage,  lien,  encumbrance  or other charge upon the Property,  or (D)
constitutes  or  will   constitute  a  default  under  any  corporate   charter,
certificate of incorporation, by-law, partnership agreement, mortgage indenture,
contract,   permit,  judgment,  decree,  order,  statute,  rule  or  regulation,
applicable to Seller, or any entity constituting Seller or to the Property;

     (l) No  approval,  consent,  order or  authorization  of,  or  designation,
registration  or  declaration  with, any  governmental  authority is required in
connection  with the valid  execution and delivery of the  compliance  with this
Agreement by Seller.

     (m) There is no condemnation  proceeding pending with regard to all or part
of the  Property  and,  to the  best of  Seller's  knowledge,  there  is no such
proceeding contemplated by any governmental authority;

     (n) All certificates,  permits and licenses from any governmental authority
having  jurisdiction  over the Property which are necessary to permit the lawful
use and  operation of the

<PAGE>

buildings and  improvements on the Property as they presently  exist,  have been
obtained (or will be obtained  prior to the Closing Date,  and are now, and will
continue to be at all times before the Closing  Date,  in full force and effect,
and,  to  the  best  of  Seller's  knowledge,  there  is no  pending  threat  of
modification,  cancellation,  termination or expiration of any such certificate,
permit, approval or license.

     (o)  There is no  violation  of any  restriction,  condition  or  agreement
contained in any  instrument  affecting  the Property and Seller has received no
notices  of  default  from any third  party who shall be  benefited  by any such
restriction, condition or agreements. No covenants or restrictions, easements or
other agreements,  if any, to which Purchaser takes title subject to provide for
forfeiture or reverter in the event of violation thereof, nor do they impose any
restriction on alteration or demolition of any  improvements  constructed on the
Premises;

     (p) Intentionally omitted;

     (q) Seller is not a foreign  person  within the meaning of Section  1445 of
the Internal  Revenue  Code of 1986,  as amended.  At the Closing,  Seller shall
deliver an executed  certificate  in the  applicable  form set forth in Treasury
Regulation Section 1.1445-2(b)(2);

     (r) Seller  represents  and warrants to  Purchaser  that it has received no
notice, and has no knowledge,  of any unconfirmed or pending assessments against
the  Property.  If on the Closing Date the Property or any part thereof shall be
or shall have been  affected by an assessment  or  assessments  which are or may
become payable in annual installments,  of which the first installment is then a
charge or lien, or has been paid, then for the purposes of this Agreement, those
unpaid  installments of such  assessment  which are then a charge or lien on the
Property, shall be paid and discharged by Seller upon the Closing;

     (s)  Seller has no notice of any  pending  actions,  applications,  orders,
protests, proceedings or complaints against or affecting title to the Premises;

     The  representations  and  warranties  contained  in this Article 6 and any
                                                               ---------
other  provision of this Agreement shall be true and correct on the Closing Date
as if made on that date and shall not survive the Closing.

     At Closing,  Seller shall deliver a certificate to Purchaser disclosing any
material changes to the foregoing representations,  or stating that there are no
such material changes.

         7.       PURCHASER'S; REPRESENTATIONS,
                  WARRANTIES AND COVENANTS.
                  ------------------------

     Purchaser hereby represents and warrants to Seller, as follows:

     (a)  Purchaser is a limited  liability  company,  duly  organized,  validly
existing  and in good  standing  under the laws of the State of New York and has
the full power and  authority  to execute and  deliver  this  Agreement  and all
documents  now or hereafter to be executed and delivered by its pursuant to this
Agreement (the "Purchaser's  Documents") and to perform all obligations  arising
under this Agreement and under the Seller's Documents.

     (b) This Agreement  constitutes,  and the  Purchaser's  Documents will each
constitute,  the legal, valid, and binding obligation of Purchaser,  enforceable
in accordance with their respective terms, covenants,  and conditions (except to
the extent that such  enforcement  may be limited by  applicable  bankruptcy  or
insolvency laws). This Agreement and the Seller's  Documents do not and will not
contravene any provision of the operating agreement of

<PAGE>

Purchaser, any judgment,order,  decree, writ or injunction,  or any provision of
any existing law or regulation and do not and will not violate any provisions of
any agreement to which Purchaser is a party or to which it is subject.

     (c)  Purchaser is not an employee  benefit  plan (a "Plan")  subject to the
Employee Retirement Income Security Act of 1974, as amended "ERISA"), or Section
4975 of the.  Internal  Revenue  Code of 1986,  as amended (the  "Code"),  nor a
person or entity acting, directly or indirectly,  on behalf of any Plan or using
the assets of any Plan to acquire  the  Property,  Purchaser  is not a "party in
interest"  (as that term is defined in Section  3(14)) of ERISA with  respect to
any Plan that is an  investor  in Seller,  and  Purchaser's  acquisition  of the
Property will not constitute or result in a prohibited transaction under Section
406 of ERISA or Section 4975 of the Code.

     (d) Purchaser is not a tax exempt, non profit organization,  institution or
church.

     8. INTENTIONALLY OMITTED.

     9. EXCLUSIVITY.
        -----------

     Seller  acknowledges  that Purchaser will be expending funds and managerial
time in  connection  with the further  study of the  purchase  of the  Property.
Seller shall not  solicit,  advertise,  enter into any contract or  negotiations
therefor  regarding  the Property  with any other party  commencing  on the date
hereof and continuing thereafter until the termination of this Contract.

     10. CONDITIONS PRECEDENT TO CLOSING.
         -------------------------------

     The following  shall be conditions  precedent to Purchaser's  obligation to
consummate  the  purchase  and  sale   transaction   contemplated   herein  (the
"Conditions Precedent"):

     (i) Purchaser  shall not have  terminated this Agreement in accordance with
Section 4,  Section  17(a) or Section  17(b) of this  Agreement  within the time
---------   -------------     --------------
periods described in said Sections.

     (ii) Title Company shall stand ready to issue, at the Closing, an ALTA Form
B owner's policy of title  insurance on the standard form issued in the State of
New York (the "Title  Policy"),  insuring that Purchaser has insurable  title to
the Real  Property  as  herein  provided,  dated  the day of the  Closing,  with
liability in the amount of the  Purchase  Price,  subject only to the  Permitted
Exceptions,  and such  other  matters  as the Title  Company  shall be  willing,
without  premium,  to omit as exceptions to coverage or to except with insurance
against collection out of or enforcement against the Property.

     (iii) There shall be no breach, in any material respect, of any of Seller's
representations,  warranties or covenants set forth in Section 6 and Section 11,
as of the Closing.

     (iv) Seller  shall have  delivered  to  Purchaser  the items  described  in
Section 12.

The  conditions  set forth in this  Section  10 are  solely  for the  benefit of
                                    -----------
Purchaser and may be waived only by  Purchaser.  Purchaser  shall,  at all times
prior to the termination of this Agreement, have the right to waive any of these
conditions.

<PAGE>

         11.      COVENANTS OF SELLER.
                  -------------------

     Seller hereby covenants with Purchaser, as follows:

     (a)  After  the  date  hereof  and  prior  to the  Closing,  no part of the
Property,  or any  interest  therein,  will  be sold  or  otherwise  transferred
(including,  without  limitation,  by entering into a new lease, or modifying or
extending  an existing  lease,  or creating a right of occupancy by operation of
law) without Purchaser's consent.

     (b) Until the Closing,  Seller,  as commercially  reasonable and consistent
with past practices,  shall keep the Property insured, (or cause the Property to
be insured)  against  fire,  vandalism and other loss,  damage and  destruction,
provided,  however,  that Seller's  insurance  policies shall not be assigned to
Purchaser at the  Closing,  and  Purchaser  shall be obligated to obtain its own
insurance coverage from and after the Closing.

     (c) Until the Closing,  Seller  shall  operate and maintain the Property in
the manner being operated and maintained on the date of this Agreement.

     (d) Intentionally omitted.

     (e) Seller shall not withdraw,  settle or otherwise  compromise any protest
or  reduction  proceeding  affecting  real  estate  taxes  assessed  against the
Property  for any  fiscal  period  in  which  the  Closing  is to  occur  or any
subsequent  fiscal period without the prior written consent of Purchaser,  which
consent shall not be unreasonably withheld.  Real estate tax refunds and credits
received  after the Closing Date which are  attributable  to the fiscal tax year
during  which the Closing Date occurs shall be  apportioned  between  Seller and
Purchaser,  after deducting the expenses of collection thereof, which obligation
shall survive the Closing.

     (f) Without first  obtaining  Purchaser's  consent,  Seller shall not enter
into any  contracts  or other  agreements  which  could  bind  Purchaser  or the
Property after the Closing.

     (g) Seller  shall not alter the  Property  or  consent  to such  alteration
except to complete any improvements or non-structural changes, installations, or
decorations which may be required by law.

     (h) Seller shall cause the Property to be maintained in its condition as of
the date hereof, normal and reasonable wear and tear excepted.

         12.      SELLER'S CLOSING DELIVERIES.
                  ---------------------------

     At the Closing,  Seller shall deliver or cause to be delivered to Purchaser
the following:

     (a) A statutory  form of Bargain and Sale Deed  without  covenants  against
Grantor's  Acts,  executed by Seller,  conveying  the Real Property to Purchaser
free and  clear of all  claims,  liens and  encumbrances  except  the  Permitted
Exceptions and matters arising by or through Purchaser (the "Deed").

     (b) An affidavit of title, acceptable to the title company,  subject to the
Permitted Exceptions and any other matters provided not in violation of Seller's
obligations hereunder.

<PAGE>

     (c) A Bill of Sale  executed  by Seller,  in the form of Exhibit D attached
hereto,  conveying to the Purchaser title to the Personal Property,  if any (the
"Bill of Sale").

     (d) An affidavit  certifying  that Seller is not a "foreign  person" within
the meaning of Section  1445(f)(3) of the Code (the  "Certificate of Non-Foreign
Status").

     (e) A General  Assignment  executed  by  Seller,  in the form of  Exhibit E
attached hereto,  assigning to Purchaser the Service Contracts,  the Permits and
any  warranties,  guaranties and  indemnities  relating to the Property,  to the
extent that such items are assignable (the "General Assignment").

     (f) The Certificate of no change in Seller's  representations  set forth in
Section 6.

     (g) Such other  documents,  instruments  and items  that may be  reasonably
required by Purchaser and the Title Company in connection with the Closing;

     (h) Any other documents,  instruments or agreements reasonably necessary to
effectuate the transaction contemplated by this Agreement.

         13.      PURCHASER'S CLOSING DELIVERIES.
                  ------------------------------

     At the Closing, Purchaser shall deliver to Seller:

     (a) The balance of the  Purchase  Price,  together  with such other sums as
shall be required to pay  Purchaser's  share of the Closing  costs,  prorations,
reimbursements  and  adjustments  as set forth in Sections 14 and 20 herein,  in
immediately available funds.

     (b) An executed  counterpart of the General  Assignment  whereby  Purchaser
shall  assume  the  obligations  relating  to the  matters  set  forth  in  such
documents.

     (c) Any other documents,  instruments or agreements reasonably necessary to
effectuate the transaction contemplated by this Agreement.

         14.      PRORATIONS AND ADJUSTMENTS.
                  --------------------------

     (a) The  following  shall be  prorated  and  adjusted  between  Seller  and
Purchaser as of the day of the Closing, except as otherwise specified:

          (i) Ad valorem  taxes and  similar  taxes/assessments  relating to the
Property  for the most  recently  ascertainable  ad  valorem  taxes and  similar
taxes/assessments  shall be prorated  between  Seller and  Purchaser as of 11:59
p.m. on the day prior to the Closing  Date.  Adjustments  shall be made promptly
after the issuance of such ad valorem taxes and  assessments for the fiscal year
in which the Closing Date occurs and in the fiscal year prior to the fiscal year
of the Closing if applicable, and a final adjustment shall be made no later than
the last date of the next  fiscal  year when the  actual  taxes are  known.  Any
assessments after the Closing Date for prior years due to a change in land usage
or  ownership  or other  change  in tax  status of the Real  Property,  shall be
prorated  between  Seller and Purchaser as of 11:59 p.m. on the day prior to the
Closing Date, and a final  adjustment  shall be made no later than the last date
of the fiscal year in which any such assessment shall be issued.

          (ii) All  ordinary  operating  expenses  and  charges of the  Property
including, without limitation, public utility charges,  maintenance,  management
and other service charges

<PAGE>

(including  ad valorem tax appeal  contracts),  expenses  and charges  under any
service agreements (including,  without limitation,  the Service Contracts), and
all other  normal  operating  charges  with  respect  to the  Property  shall be
prorated at Closing  effective  as of 11:59 p.m. on the day prior to the Closing
Date.  If the  exact  amount of any item to be  prorated  is not known as of the
Closing Date, the proration  shall be based upon a reasonable  estimate  thereof
made by Seller and as soon after the Closing as the exact  amount of the item is
known,  the proration  shall be adjusted,  if necessary,  and  appropriate  cash
adjustments shall be made by Purchaser and Seller if necessary.

          (iii) If any refund of ad valorem  taxes or similar  taxes/assessments
relating to the  Property is made after the Closing  Date for a period  prior to
the Closing,  the same shall be applied to the costs  incurred in obtaining same
and the balance to Seller.

          Except  as set forth in this  Section  14,  all  items of  income  and
                                        -----------
expense  which  accrue  for,  the period  prior to the  Closing  will be for the
account  of Seller  and all items of income  and  expense  which  accrue for the
period  on and after the  Closing  will be for the  account  of  Purchaser.  The
provisions of this Section 14 shall survive the Closing.
                   ----------

         15.      CLOSING.
                  -------

     The purchase and sale contemplated herein shall close (the "Closing") on or
about one hundred twenty (120) days after the execution hereof, or on such other
specific date and time  mutually  agreed to by the parties;  provided,  however,
that  Purchaser  shall be entitled  to extend the  Closing  Date for a period of
thirty (30) days by  depositing an additional  sum of Fifty  Thousand  ($50,000)
Dollars  with the Escrow  Agent and  delivering  notice  thereof to Seller on or
before the then  scheduled  Closing Date. If Purchaser  shall so elect to extend
the Closing Date,  such  additional  deposit shall be deemed part of the Deposit
for all purposes hereof. As used herein,  the term "Closing Date" means the date
and time that Seller  delivers the Deed to Purchaser  and  Purchaser  tenders to
Seller the balance of the Purchase Price as required hereby.

         16.      CLOSING COSTS.
                  -------------

     Seller  shall  pay any  realty  transfer  tax due in  connection  with  the
consummation of the  transaction  contemplated  herein.  Purchaser shall pay all
costs and expenses  incurred in connection  with obtaining any financing for the
purchase of the Property,  including  title,  documentation  and appraisal costs
relating  thereto,  any title  insurance  premium  payable  in  connection  with
Purchaser  obtaining  an ALTA owner's  policy and any  lender's  policy of title
insurance,  the fee for  recording the Deed and all other  closing  costs.  Each
party shall bear the expense of its own counsel.

         17.      RISK OF LOSS.
                  ------------

     (a) If  prior to the  Closing,  the  Building,  or any  part  thereof,  are
materially  damaged (as set forth in Section  17(d)),  Purchaser  shall have the
                                     --------------
right,  exercisable  by giving  notice to Seller  within  twenty (20) days after
receiving  written notice of such damage or destruction  (but in any event prior
to the Closing),  either (i) to terminate this Agreement,  in which case neither
party  shall have any further  rights or  obligations  hereunder,  and any money
(including, without limitation, the Deposit and all interest accrued thereon) or
documents delivered hereunder shall be returned to the party delivering the same
and  Purchaser  shall be  responsible  for any title fee,  or (ii) to accept the
Property  in its then  condition  and to proceed  with the  Closing  without any
abatement or reduction in the Purchase Price and receive an assignment of all of
Seller's  right to any  insurance  proceeds  (and pay to Purchaser  any proceeds
already  received)  payable by reason of such damage or destruction and a credit
for the amount of any  deductible.  If Purchaser  elects to proceed under clause
                                                                          ------
(ii) above,  Seller  shall not  compromise,  settle or adjust any claims to
----

<PAGE>

such  proceeds  without  Purchaser's  prior  written  consent,  but Seller shall
cooperate with Purchaser in such  settlement or adjustment and any legal actions
in connection with same.

     (b) If prior to the Closing,  all or any material  portion (as set forth in
Section  17(d)) of the  Property  is  subject  to a taking by public  authority,
--------------
Purchaser  shall have the right,  exercisable  by giving notice to Seller within
twenty (20) days after receiving written notice of such taking (but in any event
prior to the Closing),  either (i) to terminate  this  Agreement,  in which case
neither party shall have any further  rights or obligations  hereunder,  and any
money  (including,  without  limitation,  the Deposit and all  interest  accrued
thereon)  or  documents  delivered  hereunder  shall be  returned  to the  party
delivering  the same, and Purchaser  shall be responsible  for any title fee, or
(ii) to accept the  Property in its then  condition,  without any  abatement  or
reduction in the Purchase  Price,  and receive an  assignment of all of Seller's
rights to any  condemnation  award  payable by reason of such taking (and pay to
Purchaser any proceeds already  received).  If Purchaser elects to proceed under
clause (ii) above,  Seller shall not compromise,  settle or adjust any claims to
-----------
such award without Purchaser's prior written consent, but Seller shall cooperate
with  Purchaser  in such  settlement  or  adjustment  and any legal  actions  in
connection  with  same.  As used in this  Section  17,  "taking"  shall mean any
                                          -----------
transfer  of the  Property or any portion  thereof to a  governmental  entity or
other  party with  appropriate  authority,  by  exercise of the power of eminent
domain.

     (c) In the event that prior to the Closing, any non-material portion of the
Property is damaged or subject to a taking,  Purchaser shall accept the Property
in its then  condition  (without any  abatement  or  reduction in the  Purchaser
Price) and proceed with the Closing,  in which case Purchaser  shall be entitled
to an  assignment of all of Seller's  rights to any  insurance  proceeds and the
amount of any  deductible  or any award in connection  with such taking,  as the
case  may be (and to a  payment/credit  for any  proceeds  already  received  by
Seller).  In the event of any such non-material  damage or taking,  Seller shall
not compromise,  settle or adjust any claims to such insurance  proceeds or such
award, as the case may be, without Purchaser's prior written consent.

     (d) For the purpose of this Section 17,  damage to the Property or a taking
                                 ----------
of a portion  thereof shall be deemed to involve a material  portion  thereof if
the  reasonably  estimated  cost of  restoration or repair of such damage or the
amount of the  condemnation  award with  respect to such taking shall exceed One
Hundred Thousand ($100,000) Dollars.

     (e) Seller shall promptly notify Purchaser of any casualty or any actual or
threatened  condemnation  affecting  the Property.  Any such notice  relating to
casualty shall be accompanied by Seller's  selection of an architect or engineer
to determine the cost of repair and/or replacement.

         18.      DEFAULT.
                  -------

     In the event  Seller  willfully  defaults  in its  obligations  under  this
Agreement,  Purchaser  shall,  at Purchaser's  sole option,  either (i) have the
right to  terminate  this  Agreement  and  receive  the  return of the  deposit,
interest and  third-party  costs, or (ii) have the right to have all remedies at
law and in equity, including,  without limitation,  specific performance. In the
event Purchaser defaults in failing to close under this Agreement,  Seller shall
be entitled to retain the Deposit as its sole and exclusive remedy.

         19.      BROKER'S COMMISSION.
                  -------------------

     Purchaser  and Seller  each  represents  and  warrants to the other that no
brokerage commission,  finder's fee or other compensation is due or payable with
respect to the  transaction

<PAGE>

contemplated  hereby.  Purchaser  hereby agrees to indemnify,  defend,  and hold
Seller  harmless  from and  against  any  losses,  damages,  costs and  expenses
(including,  but not limited to, reasonable  attorneys' fees and costs) incurred
by  Seller  by  reason  of  any  breach  or   inaccuracy   of  the   Purchaser's
representations  and  warranties  contained  in this Section 19.  Seller  hereby
                                                     ----------
agrees to indemnify,  defend,  and hold Purchaser  harmless from and against any
losses,  damages, costs and expenses (including,  but not limited to, attorneys'
fees and costs)  incurred by Purchaser by reason of any breach or  inaccuracy of
Seller's  representations  and  warranties  contained  in this  Section  19. The
                                                                -----------
provisions of this Section 19 shall survive the Closing.
                   ----------

         20.      1314 BOWERY ASSIGNMENT AND ASSUMPTION OF LEASE.
                  ----------------------------------------------

     (a) Seller and Purchaser hereby agree that  simultaneous  with the Closing,
Seller shall assign to  Purchaser,  and Purchaser  shall assume from Seller,  in
accordance with the terms of an assignment of lease,  all rights and obligations
of tenant under that certain lease (the  "Nathan's  Lease"),  dated November 17,
1967, as amended on September  30, 1988,  by and between Ida's Realty Corp.,  as
landlord  ("Landlord"),  and Namasil  Realty Corp.,  an affiliate of Seller,  as
tenant  ("Tenant"),  with respect to the property located at 1314 Bowery,  a/k/a
Block 7074, Lot 310, Brooklyn, New York (the "Ida's Property"),  a copy of which
is annexed  hereto as Exhibit G, which Nathan's Lease is subject to that certain
Lease by and between  Seller,  as  successor  in  interest  to Tenant,  and Luna
Operating  Corp.,  dated December __, 1994, as amended,  a copy which is annexed
hereto as Exhibit F (the  "Sublease")  (Note:  the  Sublease is part of the same
document  which  contains the direct  lease  between  Seller and Luna  Operating
Corp.).  Notwithstanding anything to the contrary contained herein, Seller shall
not request  that the Nathan's  Lease be assigned to  Purchaser  until Seller is
directed to do so by Purchaser.

     (b) In connection with the assignment and assumption of the Nathan's Lease,
Purchaser agrees to pay to Seller the sum of $500,000 (the "Assignment  Price").
The Assignment Price shall be paid as follows:

          (i) In the event  Purchaser (or Purchaser's  affiliate)  purchases the
     Ida's Property on or before the Closing Date, Purchaser shall pay to Seller
     the full Assignment Price on the Closing Date; or

          (ii) In the event  Purchaser has not  purchased the Ida's  Property by
     the Closing Date,  Purchaser shall pay to Seller the sum of $100,000 on the
     Closing Date, and the balance of the  Assignment  Price shall be payable by
     Purchaser to Seller on or before the earlier of the following to occur: (1)
     3 years after the Closing  Date;  or (2) 6 months  after the closing on the
     purchase of the Ida's Property.

     (c) Seller  represents  and warrants to Purchaser  that: (i) neither Seller
nor Tenant has in any manner  encumbered  Tenant's  leasehold  estate  under the
Nathan's Lease, (ii) Tenant has good title to and has not previously assigned or
otherwise transferred its interest in the Nathan's Lease, except as set forth in
the  Sublease,  and (iii)  there are no existing  defaults  by Tenant  under the
Nathan's  Lease,  or event of default by Tenant or a condition  or event  which,
with the giving of notice,  the passage of time,  or both,  would  constitute  a
default under the Nathan's Lease.

     (d) Seller covenants that after the date hereof,  neither Seller nor Tenant
shall  exercise any right that it may have as tenant  under the  Nathan's  Lease
(except  to  collect  rent from  Luna  Operating  Corp.,  the  subtenant)  or to
otherwise  modify,  terminate,  surrender or extend the Nathan's  Lease  without
first obtaining  Purchaser's prior written consent;  provided however,  they may
collect  rent and  otherwise  derive the  economic  benefits  under the Nathan's
Lease. Until the Closing,  Seller shall perform all covenants and obligations of
tenant under the Nathan's lease,  and shall comply with all conditions  required
by the Nathan's  Lease to be  performed  or complied

<PAGE>

with prior to the  Closing.  Seller  shall  deliver to  Purchaser  copies of any
notice or other communication delivered by Landlord or otherwise relating to the
Ida's  Property.  Further,  Seller shall deliver to Landlord any notice or other
communication  requested  by  Purchaser.  Seller and  Tenant  shall not grant or
withhold  any consent or approval  which it is  required  or  permitted  to give
pursuant  to the  Nathan's  Lease or waive or refuse to waive any  condition  or
provision thereof or take or fail to take any other action with respect thereto,
without  first  giving  Purchaser  written  notice of any  proposed  consent  or
approval  or  waiver  or  other  action,  and  Seller  shall  grant  or deny any
reasonable consent or approval or waiver or take or forbear taking any action as
Purchaser shall direct.

     (e) In the  event,  for  any  reason,  Landlord  does  not  approve  of the
assignment of the Nathan's  Lease to Purchaser,  Seller shall,  at the direction
and cost of Purchaser  (and using counsel  directed by  Purchaser),  commence an
action to pursue the rights of Seller to assign the Nathan's Lease to Purchaser.
Seller shall use its best efforts to obtain the  assignment  under the direction
of Purchaser.  Seller does not warrant that it will be successful in its efforts
to assign the  Nathan's  Lease,  and  Seller's  degree of success  shall have no
bearing on Purchaser's obligation to pay the Assignment Price and to comply with
the terms of subsection (f) hereunder.

     (f) Purchaser agrees that after the Closing:

          (i)  Purchaser  and its  affiliates  shall not permit any  occupant or
tenant of the Premises or Ida's Property to sell frankfurters or hot dogs except
for Seller;

          (ii) Upon the completion of development  plans for the stuctures to be
built upon the Land and the Ida's Property (the "Development"), and prior to the
commencement of any leasing activities in connection therewith,  Purchaser shall
offer Seller the first opportunity to lease space within the Development for the
purpose of operating one or more  "Nathan's  Famous"  restaurants  therein.  The
rights granted to Seller in this subparagraph  shall be on a one-time only basis
(i.e., should Seller fail to accept to lease such offered space, Purchaser shall
have no further  obligation to continue to offer Seller the right to lease space
within the Development).

          (iii)  Purchaser will assume,  pay and discharge all  liabilities  and
obligations of the tenant under the Nathan's Lease,  whether or not the Nathan's
Lease has been assigned to Purchaser.

     (g) Seller agrees that as of the Closing,  all benefits  under the Sublease
shall  be  assigned  to  Purchaser,  including  the  right to  collect  rent and
additional rent.

     (h) The provisions of this Section 20 shall survive the Closing.

     21. INDEMNIFICATION.
         ---------------

     Seller shall defend,  indemnify, and hold harmless Purchaser from all loss,
expense  (including  reasonable counsel fees),  damage, and liability  resulting
from (a) claims of mechanics and  materialmen  based on work  performed on or at
the Property  prior to the Closing,  (b) claims of whatever  nature  (including,
without  limitation,  for bodily injury,  wrongful  death,  or property  damage)
against  Purchaser  or the  Property  based on causes of action  which  arose or
accrued prior to the Closing, and (c) claims by Tenants, employees,  contractors
under  Service  Contracts,

<PAGE>
or utility companies, with respect to matters that occurred or obligations which
accrued prior to the Closing.

     22. MISCELLANEOUS.
         -------------

     22.1 Each individual and entity executing this Agreement hereby  represents
and  warrants  that he, she or it has the  capacity  set forth on the  signature
pages hereof with full power and authority to bind the party on whose behalf he,
she or it is executing this Agreement to the terms hereof.

     22.2 This Agreement is the entire Agreement between the parties hereto with
respect to the subject  matter hereof and  supersedes  all prior  agreements and
understandings, whether oral or written, between the parties with respect to the
matters  contained  in this  Agreement  Any  waiver,  modification,  consent  or
acquiescence  with respect to any provision of this Agreement shall be set forth
in writing and duly  executed by or in behalf of the party to be bound  thereby.
No waiver by any party of any breach  hereunder  shall be deemed a waiver of any
other or subsequent breach.

     22.3 This Agreement may be executed in any number of counterparts,  each of
which shall be deemed an original.  but all of which when taken  together  shall
constitute one and the same  instrument.  The signature page of any  counterpart
may be detached therefrom without impairing the legal effect of the signature(s)
thereon  provided  such  signature  page is  attached  to any other  counterpart
identical  thereto except having  additional  signature  pages executed by other
parties to this Agreement attached thereto.

     22.4 Any  communication,  notice  or demand  of any kind  whatsoever  which
either  party may be  required  or may desire to give to or serve upon the other
shall be in writing and  delivered  by personal  service  (including  nationally
recognized  overnight courier (e.g.,  Federal Express) or courier  service),  by
                               ----
electronic communication,  whether by telex, telegram or facsimile (if confirmed
in writing sent by registered or certified mail, postage prepaid, return receipt
requested),  or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:

Purchaser:                     Thor Realty, LLC
                               139 Fifth Avenue
                               New York, NY 10010
                               Attention:  Joseph J. Sitt
                               Telephone: (212) 529-5055
                               Facsimile: (212) 460-9200

With a copy to:                Morris Missry, Esq.
                               Wachtel & Masyr, LLP
                               110 East 59th Street
                               New York, New York  10022
                               Telephone: (212) 909-9500
                               Facsimile:  (212) 909-9448

<PAGE>

Seller:                        Nathan's Famous Operating Corp.
                               1400 Old Country Road, Ste. 400
                               Westbury, NY 11590
                               Attention: Eric Gatoff
                               Telephone:  516-338-8500
                               Facsimile:  516-338-7220

With a copy to:                Kramer, Coleman, Wactlar & Lieberman, P.C.
                               100 Jericho Quadrangle
                               Jericho, New York 11753
                               Attention: Edward I. Kramer, Esq.
                               Telephone: (516) 822-4820
                               Facsimile:  (516) 822-4824

Any party may change its address for notice by written notice given to the other
in the manner provided in this Section. Any such communication, notice or demand
shall be deemed to have been duly given or served on the date personally served,
if by personal  service,  on the date of confirmed  dispatch,  if by  electronic
communication, or three (3) days after being placed in the U.S. Mail, if mailed.

     22.5 The parties  agree to execute such  instructions  to Title Company and
such  other  instruments  and to do  such  further  acts  as  may be  reasonably
necessary to carry out the provisions of this Agreement.

     22.6 The making,  execution  and delivery of this  Agreement by the parties
hereto  has  been  induced  by no  representations,  statements,  warranties  or
agreements other than those expressly set forth herein.

     22.7  Wherever  possible,   each  provision  of  this  Agreement  shall  be
interpreted  in such a manner as to be valid under  applicable  law, but, if any
provision of this  Agreement  shall be invalid or  prohibited  thereunder,  such
invalidity  or  prohibition  shall be construed as if such invalid or prohibited
provision  had not been  inserted  herein and shall not affect the  remainder of
such provision or the remaining provisions of this Agreement.

     22.8 The  language  in all  parts of this  Agreement  shall be in all cases
construed  simply  according to its fair meaning and not strictly for or against
any of the parties  hereto.  Section  headings of this  Agreement are solely for
convenience of reference and shall not govern the  interpretation  of any of the
provisions of this  Agreement.  References to "Sections" are to Sections of this
Agreement, unless otherwise specifically provided.

     22.9 This Agreement  shall be governed by and construed in accordance  with
the laws of the State of New York.

     22.10 If any action is brought by either  party  against  the other  party,
relating to or arising out of this Agreement,  the transaction  described herein
or the  enforcement  hereof,  the prevailing  party shall be entitled to recover
from the other party reasonable  attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action.  For purposes of this
Agreement,  the term "attorneys' fees" or "attorneys' fees and costs" shall mean
the fees and  expenses  of  counsel to the  parties  hereto,  which may  include
printing, photostating, duplicating and other expenses, air freight charges, and
fees billed for law clerks, paralegals and

<PAGE>

other  persons  not  admitted  to the  bar but  performing  services  under  the
supervision of an attorney,  and the costs and fees incurred in connection  with
the enforcement or collection of any judgment  obtained in any such  proceeding.
The  provisions  of this Section  22.11 shall survive the entry of any judgment,
                         --------------
and shall not merge, or be deemed to have merged, into any judgment.

     22.11 This Agreement shall be binding upon and inure to the benefit of each
of the  parties  hereto and to their  respective  transferees,  successors,  and
assigns.  Neither this  Agreement nor any of the rights or obligations of Seller
or Purchaser  hereunder  shall be transferred or assigned by Seller or Purchaser
without  the prior  written  consent of the  non-assigning  party,  except  that
Purchaser may assign its interest  hereunder to any affiliate  without  Seller's
consent.

     22.12  Exhibits A through G  inclusive,  attached  hereto are  incorporated
            ----------         -
herein by reference.

     22.13  Notwithstanding  anything to the  contrary  contained  herein,  this
Agreement  shall not be deemed or construed to make the parties hereto  partners
or joint  venturers,  or to render  either  party liable for any of the debts or
obligations of the other, it being the intention of the parties to merely create
the  relationship  of Seller and  Purchaser  with  respect to the Property to be
conveyed as contemplated hereby.

     22.14 A memorandum of this Agreement may be recorded or filed in the public
land or other public records of any  jurisdiction by either party and each party
agrees to execute such memorandum upon the request of the other party.

     22.15  Each  party  agrees  that  except  as  otherwise  set  forth in this
Agreement or provided by law or unless compelled by an order of a court it shall
keep  the  contents  of  this  Agreement  and  any  information  related  to the
transaction contemplated hereby confidential (except that Purchaser may disclose
such,  matters in accordance with the provisions of Section 9 above) and further
                                                    ---------
agrees to  refrain  from or  participating  in any  publicity  statement,  press
release,  or other public notice  regarding this  transaction  without the prior
written consent of the other party unless required under  applicable law or by a
court order.

     22.16 Seller and Purchaser  agree that it is their specific  intent that no
broker shall be a party to or a third party  beneficiary of this Agreement;  and
further that the consent of a broker  shall not be  necessary to any  agreement,
amendment,  or document  with respect to the  transaction  contemplated  by this
Agreement.

     22.18 In the event that any of the dates  specified in this Agreement shall
fall on a Saturday,  a Sunday, or a holiday,  then the date of such action shall
be deemed to be extended to the next business day.

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  by their duly  authorized  representatives  as of the date first above
written.

SELLER:                                     NATHAN'S FAMOUS OPERATING CORP.
                                            A Delaware corporation

                                            By: \s\Wayne Norbitz, Pres.
                                               -------------------------------
                                            Name:  Wayne Norbitz
                                                 -----------------------------
                                            Its: President
                                                 -----------------------------

PURCHASER:                                  THOR REALTY, LLC
                                            A New York limited liability company

                                            By: \s\Joseph J. Sitt
                                                ------------------------------
                                            Name: Joseph J. Sitt
                                                 -----------------------------
                                            Its:  President
                                                 -----------------------------

<PAGE>EXHIBIT 10.1

 

Exhibit 10.1

Exhibit A

MONTPELIER RE HOLDINGS LTD.

LONG-TERM INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

     This Award Agreement (the “Award Agreement”) is made and entered into as of January 1st, 2005
between Montpelier Re Holdings Ltd. (the “Company”) and                                          (the “Participant”).

     The Company hereby grants to the Participant Performance Shares (the “Award”) on the terms and
conditions as set forth in this Award Agreement and in the Montpelier Long-Term Incentive Plan (the
“Plan”).

     In accordance with this grant, and as a condition thereto, the Company and the Participant
agree as follows:

     SECTION 1 . Target Award; Performance Period; Date of Grant:

	 	 	 
	Target Award:

	 	                     Performance Shares (the “Target Award”)
	 
	 	 
	Performance Period:

	 	January 1, 2005 through and ending on December 31,
2007 (the “Performance Period”)
	 
	 	 
	Date of Grant:

	 	January 1, 2005

     SECTION 2 . Nature of Award. The Target Award represents the opportunity to receive a future
payment equal to the fair market value of such number of shares of Company common stock, $0.001666
par value per share (“Shares”), as are earned in accordance with Section 3 of this Award Agreement
as more fully set forth in Section 4 of this Award Agreement.

     SECTION 3 . Determination of Number of Shares Earned. The number of Performance Shares
earned as of the end of a Performance Period, if any, shall be determined as follows:

# of Shares = Payout Percentage x Target Award

The “Payout Percentage” shall be determined by the Committee in its sole discretion based on the
Performance Criteria and Harvest Scale set out in Appendix 1 hereto.

 

 

     SECTION 4 . Payment of Performance Shares. The amount payable to a Participant under this
Award Agreement shall be equal to the fair market value (to be issued fully paid in consideration
of the Particpant’s services to the Company)
of a Share, as determined by the Committee by reference to the average of the daily closing
price of the Company’s common shares on the New York Stock Exchange, as reported in the Wall Street
Journal, for each of the five consecutive trading days preceding and including, as the last day,
December 31, 2007 multiplied by the number of Performance Shares earned with respect to the
Performance Period, as determined pursuant to Section 3 of this Award Agreement. Payment in
respect of an Award shall be made in cash, in Shares of equivalent value or in some combination
thereof, as determined by the Committee in its sole discretion. Subject to Section 6 of this Award
Agreement, payment shall be made as soon as reasonably practicable following the close of the
Performance Period and the Committee’s determination of the Payout Percentage.

     SECTION 5 . Termination of Employment.

     (a) Unless otherwise determined by the Committee at the time of termination, if the
Participant’s employment with the Company or one of its subsidiaries is terminated by the Company
or the subsidiary for any reason other than Cause (as defined in Section 8 of the Plan), death or
disability(as determined in accordance with Section 8 of the Plan), or is terminated by the
Participant on account of a Constructive Termination (as defined in Section 8 of the Plan) or
Retirement (as defined below): (i) during the first year of the Performance Period, all
Performance Shares shall be forfeited; (ii) during the second year of the Performance Period, the
determination of the Payout Percentage for the Performance Period will be made by the Committee at
the end of the Performance Period, and Performance Shares earned, if any, will be paid based on the
Payout Percentage, prorated for the number of full months elapsed from and including the month in
which the Performance Period began to and including the month in which the termination of
employment occurs; and (iii) during the third year of the Performance Period, the determination of
the Payout Percentage for the Performance Period will be made by the Committee at the end of the
Performance Period, and Performance Shares earned, if any, will be paid based on the Payout
Percentage without prorating.

     For purposes of this Award Agreement, “Retirement” means a termination of the Participant’s
employment or service constituting retirement under an approved retirement program of the Company
(or such other plan as may be approved by the Committee).

     (b) Unless otherwise determined by the Committee at the time of termination, if the
Participant’s employment is terminated by the Company or one of its subsidiaries for Cause or by
the Participant not on account of a Constructive Termination, Retirement, death or disability (as
determined in accordance with Section 8 of the Plan) during the Performance Period, all Performance
Shares shall be forfeited.

2

 

     (c) For purposes of the Plan and the Award Agreement, a transfer of employment from the
Company to any subsidiary of the Company or vice versa,
or from one subsidiary to another, shall not be considered a termination of employment.

     SECTION 6 . Change in Control. Notwithstanding the provisions of Section 5 above, if within
twenty four months following the occurrence of a Change in Control (as defined in the Plan), the
employment of the Participant with the Company or one of its subsidiaries is terminated by the
Company or the subsidiary for any reason other than for Cause, death or disability (as determined
in accordance with Section 8 of the Plan) or is terminated by the Participant on account of a
Constructive Termination, upon such termination the Target Award shall be deemed to have been
earned with respect to the full Performance Period and payment with respect to the Performance
Shares shall be made to the Participant in cash as soon as reasonably practicable after such
termination.

     SECTION 7 . Tax Withholding. Pursuant to paragraph 17(c) of the Plan, the Committee shall
have the power and the right to deduct or withhold, or require the Participant to remit to the
Company, an amount sufficient to satisfy any federal, state, local or other taxes required by
applicable law to be withheld with respect to payment of the Award. The Committee may condition
the payment hereunder upon the Participant’s satisfaction of such withholding obligations.

     SECTION 8 . Rights As A Shareholder. The Participant shall have no rights as shareholder
with respect to any Shares underlying the Award until and unless the Participant’s name is entered
in the Company’s Register of Members as the holder of such shares and a Share certificate is issued
to the Participant upon payment with respect to the Award, except that the Participant shall be
entitled to receive dividend equivalents with respect to Shares underlying the Award.

     SECTION 9 . Transferability. Pursuant to paragraph 14 of the Plan the Participant may
designate a beneficiary or beneficiaries to receive any payment to which he or she may be entitled
in respect of Awards under the Plan in the event of his or her death on a form to be provided by
the Committee; Except as provided herein, the Participant may not sell, transfer, pledge, assign or
otherwise alienate or hypothecate the Performance Shares, other than by his or her last Will and
Testament or by the laws of descent and distribution.

     SECTION 10 . Ratification of Actions. By accepting the Award or other benefit under the
Plan, the Participant and each person claiming under or through him or her shall be conclusively
deemed to have indicated the Participant’s acceptance and ratification of, and consent to, any
action taken under the Plan or the Award by the Company, the Board or the Committee. All decisions
or interpretations of the Company, the Board and the Committee upon any questions arising under the
Plan and/or this Award Agreement shall be binding, conclusive and final on all parties. In the
event of any conflict between any provision of the

3

 

Plan and this Award Agreement, the terms and
provisions of the Plan shall control.

     SECTION 11 . Notices. Any notice hereunder to the Company shall be addressed to its office,
Mintflower Place, 8 Par-La-Ville Road, Hamilton HM08, Bermuda; Attention: Corporate Secretary, and
any notice hereunder to the Participant shall be addressed to him or her at the address specified
on the Award Agreement, subject to the right of either party to designate at any time hereafter in
writing some other address.

     SECTION 12 . Definitions. Capitalized terms not otherwise defined herein shall have the
meanings given them in the Plan.

     SECTION 13 . Governing Law and Severability. This Award Agreement will be governed by and
construed in accordance with the laws of Bermuda, without regard to conflicts of law provisions. In
the event any provision of the Award Agreement shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Award Agreement, and the Award
Agreement shall be construed and enforced as if the illegal or invalid provision had not been
included.

     SECTION 14 . No Rights to Continued Employment. This Award Agreement is not a contract of
employment. Nothing in the Plan or in this Award Agreement shall interfere with or limit in any
way the right of the Company or any subsidiary to terminate the Participant’s employment at any
time, for any reason or no reason, or confer upon the Participant the right to continue in the
employ of the Company or a subsidiary.

     SECTION 15 . Counterparts. This Award Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.

4

 

     IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be duly executed as of
the date first written above.

	 	 	 	 	 
	 	MONTPELIER RE HOLDINGS LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	PARTICIPANT

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

5

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