NOTE N

– LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	September 24,			March 26,
	2017			2017

10.000% Senior secured notes due 2020	$	135,000		$	135,000
Less: unamortized debt issuance costs		(2,926	)		(3,525	)
Long-term debt, net of issuance costs	$	132,074		$	131,475

March 10, 2015,

the Company completed the issuance of

$135,000,000

10.000%

Senior Secured Notes due

2020

(“the

2020

Notes”) in a Rule

144A

transaction. The

2020

Notes were issued pursuant to an indenture, dated

March 10, 2015 (

the “Indenture”), by and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, a national banking association, as trustee and collateral trustee. The Company used the proceeds to pay a special cash dividend of approximately

$116,100,000

(see Note

M.1

) with the remaining net proceeds for general corporate purposes, including working capital. Debt issuance costs of approximately

$5,985,000

were incurred, which were being amortized into interest expense over the remaining

-year term of the

2020

Notes, or until redeemed.

The

2020

Notes bear interest at

10.000%

per annum, payable semi-annually on

March 15

and

September 15

. An interest payment of

$6,750,000

was paid on

September 14, 2017.

The

2020

Notes have

scheduled principal amortization payments prior to its final maturity on

March 10, 2020.

November 1, 2017,

the Company completed the issuance of

$150,000,000

6.625%

Senior Secured Notes due

2025

(the

"2025

Notes") in a private offering in accordance with Rule

144A

under the Securities Act of

1933,

as amended (the “Securities Act”) and outside the United States in accordance with Regulation S under the Securities Act. Nathan's intends to use the net proceeds of the

2025

Notes offering to satisfy and discharge the Indenture relating to the

2020

Notes and redeem the

2020

Notes (the "Redemption"), to pay a portion of a special

$5.00

per share cash dividend to Nathan's stockholders of record and to use any remaining net proceeds for general corporate purposes, including working capital. Nathan's estimates that the redemption payment in connection with the Redemption will be approximately

$144,000,000.

Nathan's will also fund the majority of the special dividend through its existing cash. Nathan's has issued a notice of redemption with respect to the full aggregate principal amount of the

2020

Notes. The Redemption will occur on

November 16, 2017.

November 1, 2017,

the Board of Directors declared the special

$5.00

per share cash dividend. The cash dividend is payable on

January 4, 2018

to stockholders of record at the close of business on

December 22, 2017

The

2025

Notes will have

scheduled principal amortization payments prior to its final maturity on

November 1, 2025.

At the time of Redemption,

the Company will incur expenses in connection with the refinancing, including a

call premium of

$6,750,000

along with expensing the unamortized debt issuance costs of approximately,

$2,725,000

associated with the

2020

Notes. The Company also expects to incur additional interest expense of approximately

$562,500

from the closing of the

2025

Notes offering on

November 1, 2017

until the Redemption on

November 16, 2017.

The

2025

Notes bear interest at

6.625%

per annum, payable semi-annually on

May

1st

and

November 1

of each year, beginning on

May 1, 2018.

Semi-annual interest payments are expected to be

$4,968,750.

The Company expects to reduce its annual interest expense by approximately

$3,562,500

per annum.

The terms and conditions of the

2025

Notes are similar to the

2020

Notes as follows:

There are

financial maintenance covenants associated with

either the

2020

Notes or the

2025

Notes. As of

September 24, 2017,

Nathan’s was in compliance with all covenants associated with the

2020

Notes.

The Indenture

for both the

2020

Notes and the

2025

Notes contain certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the (Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger. Certain Restricted Payments which

may

be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries

may

require compliance with the following financial ratios:

Fixed Charge Coverage Ratio

: the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period, currently set at

2.0

1.0

in the Indenture for both the

2020

Notes and the

2025

Notes.

The Fixed Charge Coverage Ratio applies to determining whether additional Restricted Payments

may

be made, certain additional debt

may

be incurred and acquisitions

may

be made.

Priority Secured Leverage Ratio

: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate; currently set at

0.40

1.00

in the Indenture for both the

2020

Notes and the

2025

Notes.

Secured Leverage Ratio

: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under the Indenture for both the

2020

Notes and the

2025

Notes is

3.75

1.00

and applies if Nathan’s wants to incur additional debt on the same terms as the

2020

Notes or

2025

Notes, as the case

may

be.

The Indenture

for the

2020

Notes and the

2025

Notes also contain customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least

25%

in principal amount of the

2020

Notes or the

2025

Notes

may

declare the respective Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the

2020

Notes or

2025

Notes, as the case

may

be will become immediately due and payable.

The

2025

Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank

pari passu

in right of payment with all of the Company’s existing and future indebtedness that is

not

subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do

not

guarantee the

2025

Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the

2025

Notes.

Pursuant to the terms of a collateral trust agreement, the liens securing the

2025

Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility.

The

2025

Notes and the guarantees will be the Company and the guarantors’ senior secured obligations and will rank:

	●	senior in right of payment to all of the Company and the guarantors ’ future subordinated indebtedness;

	●	effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the Notes and the guarantees;

	●	pari passu with all of the Company and the guarantors’ other senior indebtedness;

	●	effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the Notes and the guarantees and certain other assets;

	●	effectively junior to any of the Company and the guarantors ’ existing and future indebtedness that is secured by assets other than the collateral securing the Notes and the guarantees to the extent of the value of any such assets; and

	●	structurally subordinated to the indebtedness of any of the Company ’s current and future subsidiaries that do not guarantee the Notes.

The Company

may

redeem the

2025

Notes in whole or in part prior to

November 1, 2020,

at a redemption price of

100%

of the principal amount of the

2025

Notes redeemed plus the Applicable Premium as of, plus accrued and unpaid interest. An Applicable Premium is the greater of

of the principal amount of the

2025

Notes; or the excess of the present value at such redemption date of (i) the redemption price of the

2025

Notes at

November 1, 2020

plus (ii) all required interest payments due on the Notes through

November 1, 2020 (

excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus

basis points; over the then outstanding principal amount of the Notes.

Prior to

November 1, 2020,

if using the net cash proceeds of certain equity offerings, the Company has the option to redeem up to

35%

of the aggregate principal amount of the

2025

Notes at a redemption price equal to

106.625%

of the principal amount of the

2025

Notes redeemed, plus accrued and unpaid interest and any additional interest.

On or after

November 1, 2020,

the Company

may

redeem some or all of the

2025

Notes at a decreasing premium over time, plus accrued and unpaid interest as follows:

YEAR	PERCENTAGE
On or after November 1, 2020 and prior to November 1, 2021		103.313	%
On or after November 1, 2021 and prior to November 1, 2022		101.656	%
On or after November 1, 2022		100.000	%

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder

’s option, any part, of each holder’s

2025

Notes pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to

101%

of the aggregate principal amount of

2025

Notes repurchased plus accrued and unpaid interest, to the date of purchase.

If the Company sells certain assets and does

not

use the net proceeds as required, the Company will be required to use such net proceeds to repurchase the

2025

Notes at

100%

of the principal amount thereof, plus accrued and unpaid interest and additional interest penalty, if any, to the date of repurchase.

The

2025

Notes

may

be traded between qualified institutional buyers pursuant to Rule

144A

of the Securities Act of

1933.

We expect to record the

2025

Notes at cost. There are

SEC registration requirements for the

2025

Notes.