Long-Term Debt and Capital Leases

Long-term debt and capital lease obligations consist of the following (in thousands):

	2017			2016

Senior unsecured notes	$	212,546		$	212,546
Unamortized discount		(1,366	)		(1,771	)
Unamortized debt issuance costs		(2,311	)		(2,995	)
Senior unsecured notes less unamortized discount and debt issuance costs		208,869			207,780
Revolving credit facility		–			–
Mortgage loan obligations		4,650			15,745
Unamortized ( discount) premium - mortgage loan obligations		(1	)		75
Unamortized debt issuance costs - mortgage loan obligations		(27	)		(74	)
Capital lease obligations		218			211
Total long-term debt and capital leases		213,709			223,737
Less current maturities		368			9,934
Long-term debt and capital leases, less current maturities	$	213,341		$	213,803

Estimated annual maturities of long-term debt and capital lease obligations at

June 6, 2017

are as follows (in thousands):

2018	$	1,535
2019		1,483
2020		213,591
2021		488
2022		99
Subsequent years		218
Total estimated annual maturities of long-term debt and capital lease obligations	$	217,414

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 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 15

and

November 15

to holders of record on the

May 1

November 1

immediately preceding the interest payment date. Accrued interest on the Senior Notes and our other long-term debt and capital lease obligations was

$1.2

million and

$1.0

million as of

June 6, 2017

and

May 31, 2016,

respectively, and is included in Accrued liabilities

– Rent and other in our 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; (vii) sell or transfer certain assets; and (viii) repurchase outstanding common stock. 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.

May 26, 2017,

we entered into a

364

-day

senior secured revolving credit agreement (the “Senior Credit Facility”) with UBS AG, Stamford Branch, under which we

may

borrow up to

$20.0

million. We entered into the Senior Credit Facility to replace our previous

$30

million revolving credit facility (the "Prior Credit Facility") which was paid in full on

May 26, 2017.

The terms of the Senior Credit Facility provide for a

$15.0

million sublimit for the issuance of standby letters of credit.

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

, in each case, 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 LIBO rate (as defined in the Senior Credit Facility) plus

1.0%.

The applicable margin for the LIBO rate-based option is

4.00%

and for the Base Rate option is

3.00%.

We pay commitment fees of

0.50%

on the unused portion of the Senior Credit Facility.

As security for the Senior Credit Facility, we

have granted the lenders security interests in and liens on substantially all of the Company’s personal property, including equity interest in certain of its 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 an approximate value of

$31.3

million as of

February

2017

and have a

June 6, 2017

net book value of

$34.8

million.

We had

borrowings outstanding under the Senior Credit Facility at

June 6, 2017.

After consideration of letters of credit outstanding, we had

$5.2

million available under the Senior Credit Facility as of

June 6, 2017.

The Senior Credit Facility contains 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 and prepay other indebtedness.

Under the terms of the Senior Credit Facility we are allowed, under certain circumstances, to repurchase up to

$20.0

million of the Senior Notes in any fiscal year. During the fiscal year ended

June 6, 2017,

we did

not

repurchase any Senior Notes.

During the fiscal year ended

May 31, 2016,

we repurchased

$2.5

million of the Senior Notes for

$2.4

million plus accrued interest. We realized a negligible gain on these transactions.

Under the Senior Credit Facility, we are required to comply with financial covenants relating to the maintenance of a minimum appraised value of eligible restaurants and a maximum leverage ratio. The terms of the Senior Credit Facility require us to maintain a minimum appraised value of eligible restaurants of

less than

$30

million and maximum leverage ratio of

more than

5.00

1.0

starting with the fiscal quarter ending on or around

September

2017.

The Senior Credit Facility terminates

later than

May 25,

2018.

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.

May 25, 2017,

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.

Our

$4.6

million in mortgage loan obligations as of

June 6, 2017

consist of various loans a

ssumed upon franchise acquisitions. These loans, which mature between

February 2019

and

October 2021,

have balances that range from

$0.5

million to

$0.9

million and interest rates of

7.78%

10.17%.

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

During fiscal year

2016,

we prepaid and retired

mortgage loan obligations with an aggregate balance of

$13.3

million using cash on hand. Included within Interest expense, net in our Consolidated Statement of Operations for the fiscal year ended

May 31, 2016

were

$1.6

million in prepayment premiums and

$0.1

million of accrued interest paid in connection with the retirement of these obligations. The prepayment of this debt eliminated

one

mortgage lender and allowed for the release of

properties which had served as collateral.