NOTE

–

Long-Term Debt:

	September 30,		December 31,
	2017		2016
Term loan payable to Fifth Third Bank, paid February 28, 2017	$	-	$	39,643,000

Note payable to Fifth Third Bank, pursuant to revolving credit agreement, paid February 28, 2017		-		2,540,000

Term loan payable to BB&T maturing February 26, 2024		39,000,000		-

Note payable to BB&T, pursuant to revolving credit agreement, maturing February 25, 2022		-		-

	$	39,000,000	$	42,183,000
Less:
Payments due within one year included in current liabilities	$	6,000,000	$	5,893,000

Debt issuance costs		44,000		63,000

Long-term debt less current maturities	$	32,956,000	$	36,227,000

Effective

July 1, 2013,

the Company entered into an amended and restated

-year credit agreement with Fifth Third Bank that made available to the Company up to

$15,000,000

on a revolving credit basis in addition to a

$30,000,000

term loan utilized to finance the acquisition of substantially all of the assets of HPI Direct, Inc.

Effective

March 8, 2016,

the Company entered into an amended and restated

-year credit agreement with Fifth Third Bank (the “Amended Credit Agreement”) that increased its revolving credit facility from

$15,000,000

$20,000,000

(the “Amended Credit Facility”) and refinanced its then-existing term loan with a new

$45,000,000

term loan to help finance the acquisition of substantially all of the assets of BAMKO, Inc. Both loans were based upon the

one

-month LIBOR rate for U.S. dollar based borrowings. Interest was payable on the term loan at LIBOR plus

0.85%

and on the revolving credit facility at LIBOR (rounded up to the next

1/8

) plus

0.85%.

The Company paid a commitment fee of

0.10%

per annum on the average unused portion of the commitment under the Amended Credit Facility. This credit agreement was paid in full on

February 28, 2017

with the proceeds from a new loan agreement with Branch Banking and Trust Company (“BB&T”).

Effective

February 28, 2017,

the Company entered into a new

-year credit agreement with BB&T (the “Credit Agreement”) that provides a new revolving credit facility of

$35,000,000

(the “Credit Facility”) which terminates on

February 25, 2022

and provides a new term loan of

$42,000,000

(the “Term Loan”) which matures on

February 26, 2024.

Both loans are based upon the

one

-month LIBOR rate for U.S. dollar based borrowings. Interest is payable for each loan at LIBOR (rounded up to the next

1/100

) plus

0.75%

(

1.98%

September 30, 2017).

The Company pays a commitment fee of

0.10%

per annum on the average unused portion of the commitment under the Credit Facility. The available balance under the Credit Facility is reduced by outstanding letters of credit. As of

September 30, 2017,

there were

amounts due under the Credit Facility and

outstanding letters of credit.

The remaining scheduled amortization for the

Term Loan is as follows:

2017

$1,500,000;

2018

through

2023

6,000,000

per year; and

2024

$1,500,000.

The Term Loan does

not

include

a prepayment penalty. In connection with the Credit Agreement, the Company incurred approximately

$48,000

of debt financing costs, which primarily consisted of legal fees. These costs are being amortized over the life of the Credit Agreement as additional interest expense.

The Company

’s obligations under the Credit Agreement are secured by substantially all of the operating assets of Superior Uniform Group, Inc. and are guaranteed by all domestic subsidiaries of Superior Uniform Group, Inc. The agreement contains restrictive provisions concerning a maximum funded indebtedness to EBITDA ratio

not

to exceed (

4.0:1

) as defined in the agreement and a fixed charge coverage ratio of at least (

1.25:1

). The Company is in full compliance with all terms, conditions and covenants of the Credit Agreement.

Effective

July 1, 2013,

in order to reduce interest rate risk on its debt, the Company entered into an interest rate swap agreement with Fifth Third Bank, N.A. that was designed to effectively convert or hedge the variable interest rate on a portion of its borrowings to achieve a net fixed rate of

2.53%

per annum, beginning

July 1, 2014

with a notional amount of

$14,250,000.

The notional amount of the interest rate swap

was reduced by the scheduled amortization of the principal balance of the original term loan of

$187,500

per month through

July 1, 2015

and

$250,000

per month through

June 1, 2018

with the remaining notional balance of

$3,250,000

to be eliminated on

July 1, 2018.

Effective

March 8, 2016,

the fixed rate on the notional amount was reduced to

2.43%.

Effective

February 24, 2017,

this interest rate swap agreement was terminated. On this date the swap agreement had

$65,000

in cumulative gains in OCI which was reversed to earnings.

Effective

March 3, 2017,

in order to reduce the interest rate risk on its future debt, the Company entered into an interest rate swap agreement with BB&T that was designed to effectively convert or hedge the variable interest rate on a portion of its future borrowings to achieve a net fixed rate of

3.12%

per annum, beginning

March 1, 2018

with a notional amount of

$18,000,000.

The notional amount of the interest rate swap is reduced by

$250,000

per month beginning

April 1, 2018

through

February 26, 2024.

Under the terms of the interest rate swap, the Company will receive variable interest rate payments and make fixed interest rate payments on an amount equal to the notional amount at that time. Changes in the fair value of the interest rate swap designated as the hedging instrument that effectively offset the variability of cash flows associated with the variable rate, long-term debt obligation are recorded in OCI, net of related income tax effects. As of

September 30, 2017,

the swap agreement had a negative fair value of

$261,000

which is presented within other current liabilities on the consolidated balance sheet.