Long-Term Debt and Capital Leases

Long-term debt and

capital lease obligations consist of the following (in thousands):

	February 28, 2017			May 31 , 2016
Senior unsecured notes	$	212,546		$	212,546
Unamortized discount		( 1,476	)		(1,771	)
Unamortized debt issuance costs		( 2,497	)		(2,995	)
Senior unsecured notes less unamortized discount and
debt issuance costs		208,573			207,780
Senior credit facility		–			–
Mortgage loan obligations		5,135			15,745
Unamortized (discount)/premium - mortgage loan obligations		(2	)		75
Unamortized debt issuance costs - mortgage loan obligations		(31	)		(74	)
Capital lease obligations		207			211
Total long-term debt and capital leases		213,882			223,737
Less current maturities		349			9,934
Long-term debt and capital leases, less current maturities	$	213 ,533		$	213,803

May

14,

2012,

we entered into an indenture (the “Indenture”) among Ruby Tuesday, Inc., certain subsidiaries of the Company as guarantors and Wells Fargo Bank, National Association as trustee, governing the Company

’s

$250.0

million aggregate principal amount of

7.625%

senior notes due

2020

(the “Senior Notes”). The Senior Notes were issued at a discount of

$3.7

million, which is being amortized to interest expense, net using the effective interest method over the

eight

-year term of the notes.

The Senior Notes are guaranteed on a senior unsecured basis by our existing and future domestic restricted subsidiaries, subject to certain exceptions. They rank equal in right of payment with our existing and future senior indebtedness and senior in right of payment to any of our future subordinated indebtedness. The Senior Notes are

effectively subordinated to all of our secured debt, including borrowings outstanding under our revolving credit facility, to the extent of the value of the assets securing such debt and structurally subordinated to all of the liabilities of our existing and future subsidiaries that do not guarantee the Senior Notes.

Interest on the Senior Notes is calculated at

7.625%

per annum, payable semiannually on each

May

and

November

to holders of record on the

May

November

immediately preceding the interest payment date.

Accrued interest on the Senior Notes and our other long-term debt and capital lease obligations was

$4.9

million and

$1.0

million as of

February

28,

2017

and

May

31,

2016,

respectively, and is included in Accrued liabilities:– Rent and other in our Condensed Consolidated Balance Sheets.

may

redeem the Senior Notes, in whole or in part, at the redemption prices specified in the Indenture plus accrued and unpaid interest. There is

sinking fund for the Senior Notes, which mature on

May

15,

2020.

The Indenture contains covenants that limit, among other things, our ability and the ability of certain of our subsidiaries to (i) incur or guarantee additional indebtedness; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make certain investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of their assets; (vi) enter into transactions with affiliates;

and (vii) sell or transfer certain assets.

These covenants are subject to a number of important exceptions and qualifications, as described in the Indenture, and certain covenants will not apply at any time when the Senior Notes are rated investment grade by the Rating Agencies, as defined in the Indenture.

The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Senior Notes to be due and payable immediately.

December

2013,

we entered into a

four

-year revolving credit agreement (the “Senior Credit Facility”). Under the terms of the Senior Credit Facility, we are required to comply with financial covenants relating to the maintenance of a maximum leverage ratio and a minimum fixed charge coverage ratio. As of

November

30,

2016,

we did not attain the minimum fixed charge coverage ratio as required under the terms of the Senior Credit Facility. While we obtained a waiver of this covenant violation through

January

31,

2017

from our lenders, we believed, without certain modifications, that it was possible at some point during the next

twelve

months that we would again be in violation of the minimum fixed charge coverage ratio covenant. Accordingly, on

January

31,

2017,

we entered into a

seventh

amendment and waiver to the Senior Credit Facility (the "Seventh Amendment and Waiver").

Among other things, the Seventh Amendment and Waiver reduces the amount the Company

may

borrow pursuant to the revolving loan commitment under the Senior Credit Facility from

$50.0

million (including a

$25.0

million sublimit for standby letters of credit), to

$30.0

million (including a

$15.0

million sublimit for standby letters of credit), amends the termination date of the Senior Credit Facility from

December

2017

June

2017,

and increases the flexibility of the financial covenants under the Senior Credit Facility. Additionally, the Senior Credit Facility and the Seventh Amendment and Waiver contain a number of customary affirmative and negative covenants that, among other things, limit or restrict our ability to incur liens, engage in mergers or other fundamental changes, make acquisitions, investments, loans and advances, pay dividends or other distributions, sell or otherwise dispose of certain

assets, engage in certain transactions with affiliates, enter into burdensome agreements or certain hedging agreements, amend organizational documents, change accounting practices, incur additional indebtedness, guarantee indebtedness, and prepay other indebtedness.

Under the Seventh Amendment and Waiver, we are required to comply with financial covenants relating to the maintenance of a maximum leverage ratio and a minimum fixed charge coverage ratio. The terms of the Seventh Amendment and Waiver require us to maintain a maximum leverage ratio of no more than

4.65

1.0

and a minimum fixed charge coverage ratio of no less than

1.25

1.0

for the quarter ended

February

28,

2017.

We were in compliance with our maximum leverage ratio and minimum fixed charge coverage ratio as of

February

28,

2017.

Under the terms of the Senior Credit Facility, interest rates charged on borrowings can

vary depending on the interest rate option we choose to utilize. Our options for the rate are a Base Rate or LIBOR plus an applicable margin, provided that the rate shall not be less than

zero.

The Base Rate is defined as the highest of the issuing bank’s prime rate, the Federal Funds rate plus

0.50%,

or the Adjusted LIBOR (as defined in the Senior Credit Facility) plus

1.0%.

The applicable margin for the LIBOR-based option is a percentage ranging from

3.00%

3.50%

and for the Base Rate option is a percentage ranging from

2.00%

2.50%.

We pay commitment fees quarterly ranging from

0.50%

0.75%

on the unused portion of the Senior Credit Facility.

As security for the Senior Credit Facility, we granted the lenders liens and security interests in substantially all of the shares of capital stock of the Company and each of our present and future subsidiaries, substantially all of the personal property of substantially all of our present and future subsidiaries, and the real property, improvements, and fixtures of

Ruby Tuesday restaurants. The real property, improvements, and fixtures of the

restaurants pledged as collateral appraised at

$101.4

million at the time of the transaction and have a

February

28,

2017

net book value of

$80.0

million.

The Senior Credit Facility terminates no later than

June

2017.

Aside from the

$11.1

million letters of credit outstanding as of

February

28,

2017,

we had no borrowings under the Senior Credit Facility. Upon the occurrence of an event of default, the lenders

may

terminate the loan commitments, accelerate all loans and exercise any of their rights under the Senior Credit Facility and any ancillary loan documents. There are no assurances that our lenders will provide any future waivers of covenant violations or agree to any future amendments of our Senior Credit Facility.

December

2013,

in connection with our entry into the Senior Credit Facility, the Company and certain of its subsidiaries entered into loan modification agreements (the “Loan Modification Agreements”) with certain mortgage lenders to, among other things, provide waivers and consents under certain of our mortgage loan obligations to enter into the Senior Credit Facility. The Loan Modification Agreements also amended certain financial reporting requirements under the specified loans and modified and/or provided for certain financial covenants for the specified loans, including the maximum leverage ratio and the minimum fixed charge coverage ratio.

Additionally, as of

November

29,

2016,

we did not attain the minimum fixed charge coverage ratio required under the terms of the mortgage loan obligations.

While we obtained a waiver of the covenant violation through

January

31,

2017

from our lender, we believed without certain modifications, that it was possible at some point during the next

twelve

months,

that we would again be in violation of the minimum fixed charge coverage ratio covenant under our mortgage loan obligations.

Accordingly, on

January

31,

2017,

we entered into a loan modification and waiver (the "Mortgage Loan Modification and Waiver").

Among other things, the Mortgage Loan Modification and Waiver increases the flexibility of the financial covenants under the mortgage loan obligations, restricts the Company to make certain acquisitions, and requires additional certain monthly financial reporting to the lender.

While we were in compliance with the financial covenants under the mortgage loan obligations as of

February

28,

2017,

there are no assurances that our lender will provide any future waivers of covenant violations or agree to any future amendments of our mortgage loan agreements.

Our $

5.1

million in mortgage loan obligations as of

February

28,

2017

consists of various loans acquired upon franchise acquisitions. These loans, which mature between

February

2019

and

October

2021,

have balances which range from

$0.5

million to

$1.0

million and interest rates of

7.78%

10.17%.

Many of the properties acquired from franchisees collateralize the loans outstanding.