6. LONG-TERM DEBT.

Long-term debt consists of the following:

	2012		2011
Revolving line of credit	$	14,089,063	$	11,653,460

Capital lease obligation under a sale / leaseback transaction, fixed rate of 5.5%, payable in monthly installments, collateralized by real estate	—		3,528,374

Obligation under industrial development revenue bonds, variable rates, collateralized by real estate	—		700,000

Term loan, payable in monthly installments including interest at a fixed rate of 2.75%, with final maturity in May 2013, collateralized by specific equipment	16,934		66,825

Total	14,105,997		15,948,659

Less, current maturities	16,934		246,192
Long-term debt	$	14,089,063	$	15,702,467

Revolving Line of Credit

On October 18, 2010, Supreme Industries, Inc. entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank (“JPMC”) which agreement was effective as of September 30, 2010. Under the terms of the agreement, JPMC agreed to provide the Company with a revolving line of credit of up to $30.0 million through December 31, 2011. Interest on outstanding borrowings under the revolving line of credit was based on the JPMC prime rate or certain basis points above LIBOR depending on the pricing option selected and the Company’s leverage ratio, as defined.

On September 14, 2011, Supreme Industries, Inc., as Parent (the “Parent”), Supreme Indiana Operations, Inc. (“Supreme Indiana”), and certain of its subsidiaries who are signatories to the Credit Agreement (collectively, the “2011 Borrowers”) entered into a Credit Agreement (the “2011 Credit Agreement”) with Wells Fargo.

Under the terms of the 2011 Credit Agreement, Wells Fargo agreed to provide to the 2011 Borrowers a revolving line of credit of up to $45.0 million, subject to a monthly borrowing base calculation. The term of this revolving line of credit was for a period ending on September 14, 2015. Upon the occurrence of certain events of default or the failure to maintain the defined minimum percentage of availability, the Company was required to comply with two financial covenants. These financial covenants consisted of a minimum fixed charge coverage ratio and limitations on annual capital expenditures. No events of default existed, and the Company’s availability was in excess of the required amount as of December 31, 2011.

The loan proceeds received in conjunction with the 2011 Credit Agreement were used to repay in full all of the obligations of Borrowers owing to JPMC under a certain Amended and Restated Credit Agreement dated as of September 30, 2010.

In connection with the 2011 Credit Agreement, certain mortgages and deeds of trust covering real property were given as collateral to secure the revolving line of credit. As additional collateral for the repayment of the revolving line of credit, the 2011 Borrowers, and certain additional subsidiaries, signed and delivered to Wells Fargo a Security Agreement, dated as of September 14, 2011, granting to Wells Fargo security interests in all personal property owned by them.

On September 14, 2011, in connection with the 2011 Credit Agreement, Parent and certain of its subsidiaries (collectively, the “2011 Guarantors”) entered into a General Continuing Guaranty in favor of Wells Fargo whereby the 2011 Guarantors agreed to guarantee the obligations of the 2011 Borrowers owing under the 2011 Credit Agreement.

As of December 31, 2011, the outstanding balance under the 2011 Credit Agreement was approximately $11.7 million, and the Company had unused credit capacity of approximately $12.3 million. Interest on outstanding borrowings under the 2011 Credit Agreement was based on the Wells Fargo prime rate, or LIBOR, depending on the pricing option selected and the Company’s leverage ratio, resulting in an effective rate of 3.04% at December 31, 2011.

In conjunction with the 2011 Credit Agreement, the Company incurred approximately $1.0 million of additional deferred financing costs which were capitalized and are being amortized over the term of the facility. The net book value of deferred financing costs associated with the JPMC credit agreement was written off in the amount of $0.8 million in the third quarter of 2011.

On December 19, 2012, Supreme Industries, Inc. (the “2012 Borrower”) entered into a revised Credit Agreement (the “2012 Credit Agreement”) with Wells Fargo (the “Lender” and the “Administrative Agent”).

In addition, on December 19, 2012, in connection with the 2012 Credit Agreement, Supreme Indiana and certain other subsidiaries of the 2012 Borrower (collectively, the “2012 Guarantors”) entered into a Subsidiary Guaranty Agreement in favor of Lender whereby the 2012 Guarantors agreed to guarantee the obligations of the 2012 Borrower owing under the 2012 Credit Agreement (the “Subsidiary Guaranty Agreement”).

Under the terms of the 2012 Credit Agreement, Lender agrees to provide to the 2012 Borrower a revolving line of credit of up to $45.0 million. The term of this revolving line of credit is for a period ending on December 19, 2017. The revolving line of credit bears interest at (i) LIBOR plus a margin which varies from 1.50% to 2.50% based upon a leverage ratio of total indebtedness to trailing four quarter EBITDA or (ii) the higher of (a) the prime rate and (b) the federal funds rate plus 0.50% plus a margin which varies from 0.50% to 1.50% based upon the debt to EBITDA leverage ratio.

Pursuant to the terms of the 2012 Credit Agreement, the 2012 Borrower, Administrative Agent, and one or more Lenders (if there are additional lenders other than the initial Lender) intend to establish a secured term loan facility which (i) must be secured by real property and improvements reasonably satisfactory to Administrative Agent, and (ii) must provide, pursuant to documentation in form and substance reasonably satisfactory to Administrative Agent, for one or more term loan commitments to make one or more term loans in an aggregate original principal amount of at least $10.0 million. If the parties to the 2012 Credit Agreement do not establish the secured term loan facility before March 29, 2013, then the revolving credit commitment shall be permanently reduced by $10.0 million effective as of March 29, 2013. The Company expects to establish the secured term loan facility by March 29, 2013.

A portion of the amounts received in conjunction with the 2012 Credit Agreement were used to repay in full all of the obligations of the 2011 Borrower and certain of the 2011 Guarantors owing to Wells Fargo under the 2011 Credit Agreement.

A portion of the amounts received in conjunction with the 2012 Credit Agreement were used to terminate a lease by exercising an option on December 19, 2012 to purchase certain real estate and improvements located in the State of California which a subsidiary of Borrower had previously leased under a Lease Agreement, dated May 12, 2011, from BFG2011 Limited Liability Company, a New Jersey limited liability company (“BFG”). The option purchase price was $4.1 million. Supreme Indiana held a 35.48% interest in BFG. Messrs. William J. Barrett, Edward T. Flynn, and Herbert M. Gardner, all of whom are directors of the Company, held a combined ownership interest in BFG in the amount of 64.52% (see “Other Long-Term Debt”).

A portion of the amounts received in conjunction with the 2012 Credit Agreement were used to terminate a lease by exercising options on December 19, 2012 to purchase certain real estate and improvements located in the States of Indiana and Georgia which a subsidiary of the Company had previously leased under two separate Lease Agreements, both dated July 25, 1988, from G-2 Ltd., a Texas limited partnership (“G-2”). The option purchase prices were $3.6 million and $1.8 million for the Indiana and Georgia properties, respectively. Supreme Indiana was the general partner of G-2 holding a one percent interest. Messrs. Barrett, Robert J. Campbell, and Gardner, all of whom are directors of the Company, each held ownership interests in G-2 in the amount of 12.375%, respectively.

The Company’s cash management system and revolving line of credit are designed to maintain zero cash balances and, accordingly, checks outstanding in excess of bank balances are classified as additional borrowings under the revolving line of credit. Checks outstanding in excess of bank balances were $0.4 million and $0.2 million at December 29, 2012 and December 31, 2011. The revolving line of credit also requires a quarterly commitment fee ranging from 0.20% to 0.50% per annum depending on the Company’s financial ratios and based upon the average daily unused portion.

Outstanding letters of credit related to the Company’s workers’ compensation insurance policies, aggregated $3.1 million and $3.5 million at December 29, 2012 and December 31, 2011. Under separate agreements, the Company had irrevocable letters of credit aggregating $0.9 million at December 31, 2011 in favor of bond trustees as a credit enhancement for bondholders of two industrial development revenue bonds.

Maturities of long-term debt for each of the next five years are as follows: 2013-$16,934; and 2017-$14,089,063.

Other Long-Term Debt

On March 24, 2011, Supreme Indiana entered into an Option Agreement (the “Option Agreement”) pursuant to which Supreme Indiana granted Barrett Gardner Associates, Inc. (“Barrett Gardner”), an entity which is owned by Messrs. William J. Barrett and Herbert M. Gardner, each a director of the Company, the right to purchase the Company’s California manufacturing facility (the “California Real Estate”). This transaction was required by the Company’s former bank as a condition of the former credit agreement. On May 12, 2011, Barrett Gardner assigned the Option Agreement to BFG2011 Limited Liability Company (“a related party”) (“Purchaser”). Then, Purchaser exercised its rights under the Option Agreement and purchased the California Real Estate following which it leased such California Real Estate back to Supreme Indiana. As part of the purchase price of the sale segment of the sale\leaseback transaction, Supreme Indiana received a 35.48% ownership interest (4,950 Common Units) in Purchaser, and Messrs. William J. Barrett, Herbert M. Gardner, and Edward L. Flynn (together) contributed $900,000 in cash for a (combined) 64.52% ownership interest in Purchaser (9,000 Preferred Units).

In accordance with the Option Agreement, Supreme Indiana and Purchaser entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated May 3, 2011 (as amended by that certain Amendment to Escrow Instructions dated as of the closing date, the “Purchase Agreement”) in which Purchaser agreed to purchase the California Real Estate for $4,100,000 comprised of the following amounts: (a) a $100,000 deposit made pursuant to the Option Agreement, (b) $3,000,000 paid in cash at the closing, (c) a grant to Supreme Indiana of the 34% equity interest in Purchaser described above valued at $495,000 (included in other assets on the October 1, 2011 balance sheet), and (d) a credit in the amount of $505,000 based on the lack of brokerage commissions and the nature of the transaction. Supreme Indiana paid the closing costs associated with the transaction including the escrow fees, transfer taxes, title policies, and other transaction costs. Supreme Indiana has provided Purchaser with an agreement to indemnify Purchaser from losses, damages, and claims arising from the condition of the California Real Estate at closing and a breach by Supreme Indiana of its representations and warranties. Supreme Indiana’s indemnity obligations survive the closing of the sale.

Concurrently with the closing of the sale of the California Real Estate to Purchaser, Supreme Indiana leased from Purchaser the California Real Estate (the “Sale Leaseback Transaction”) for a term of twenty years pursuant to that certain Air Commercial Real Estate Association Standard Industrial/Commercial Single-Tenant Lease dated as of the closing date (the “Lease”). The base rent for the first five years of the term was $24,000 per month. The Lease was a triple net lease, and Supreme Indiana was responsible for payment of all costs relating to the leased premises, including state income taxes on rental income received. Supreme Indiana had a purchase option and right of first refusal with respect to the California Real Estate through April 30, 2016. In addition, Supreme Indiana had a one-time right of first offer with respect to the California Real Estate that continued until the expiration of the term of the Lease. In connection with the Sale Leaseback Transaction, the Company received a fairness opinion issued by a third party valuation consultant stating that the proposed transactions were fair from a financial point of view to the Company (and its stockholders).

Due to the Company’s continuing involvement in the California Real Estate, the Sale Leaseback Transaction was not recognized as a sale of the property. It was instead being accounted for as a financing transaction, and the Company had recorded the receipt of cash, the equity interest in the Purchaser, and the related obligation.

A portion of the amounts received in conjunction with the 2012 Credit Agreement has been used to terminate the lease by exercising an option to purchase. The option purchase price was $4.1 million.

The outstanding principal amount of the obligation as of December 31, 2011 was $3.5 million, at an interest rate of 5.5%. Of this amount, $0.1 million and $3.4 million were included in current maturities of long term debt and long term debt, respectively, in the accompanying balance sheet at December 31, 2011.