UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 0-27022
OPTICAL CABLE CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1237042
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
(Address of principal executive offices, including zip code)
(540) 265-0690
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (1) Yes X No (2) Yes X No
--- --- --- ---
As of March 12, 1999, 37,899,686 shares of the registrant's Common Stock,
no par value, were outstanding. Of these outstanding shares 36,000,000 shares
were held by Robert Kopstein, Chairman of the Board, President and Chief
Executive Officer of the registrant.
<PAGE>
OPTICAL CABLE CORPORATION
FORM 10-Q INDEX
THREE MONTHS ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets - January 31, 1999
and October 31, 1998.......................................................................2
Condensed Statements of Income - Three Months
Ended January 31, 1999 and 1998............................................................3
Condensed Statement of Changes in Stockholders'
Equity - Three Months Ended January 31, 1999...............................................4
Condensed Statements of Cash Flows - Three Months
Ended January 31, 1999 and 1998............................................................5
Condensed Notes to Condensed Financial Statements..........................................6-7
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................................8-11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................12
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OPTICAL CABLE CORPORATION
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,160,812 $ 1,122,277
Trade accounts receivable, net of allowance for doubtful
accounts of $262,500 at January 31, 1999 and $311,500
at October 31, 1998 8,487,598 10,012,699
Other receivables 315,451 295,199
Due from employees 4,639 5,589
Inventories 9,830,055 9,967,012
Prepaid expenses 142,566 95,766
Deferred income taxes 219,826 212,738
----------- -----------
Total current assets 24,160,947 21,711,280
Other assets, net 55,132 33,950
Property and equipment, net 10,915,958 11,083,921
----------- -----------
Total assets $35,132,037 $32,829,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,984,341 $ 1,952,360
Accrued compensation and payroll taxes 416,722 656,028
Income taxes payable 842,097 111,449
----------- -----------
Total current liabilities 4,243,160 2,719,837
Deferred income taxes 158,311 118,121
----------- -----------
Total liabilities 4,401,471 2,837,958
----------- -----------
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares;
none issued and outstanding -- --
Common stock, voting; no par value, authorized 100,000,000
shares; issued and outstanding 37,825,636 shares at January 31,
1999 and 37,879,036 shares at October 31, 1998 9,036,741 9,786,281
Paid-in capital 191,037 150,359
Retained earnings 21,502,788 20,054,553
----------- -----------
Total stockholders' equity 30,730,566 29,991,193
Commitments and contingencies
----------- -----------
Total liabilities and stockholders' equity $35,132,037 $32,829,151
=========== ===========
</TABLE>
See accompanying condensed notes to condensed financial statements.
2
<PAGE>
OPTICAL CABLE CORPORATION
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
---------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 10,841,939 $ 11,873,115
Cost of goods sold 6,119,752 6,804,207
------------ ------------
Gross profit 4,722,187 5,068,908
Selling, general and administrative expenses 2,509,772 2,283,226
------------ ------------
Income from operations 2,212,415 2,785,682
------------ ------------
Other income (expense):
Interest income 33,999 26,609
Other, net 6,249 (3,419)
------------ ------------
Other income, net 40,248 23,190
------------ ------------
Income before income tax expense 2,252,663 2,808,872
Income tax expense 804,428 985,900
------------ ------------
Net income $ 1,448,235 $ 1,822,972
============ ============
Earnings per share:
Earnings per common share $ 0.038 $ 0.047
============ ============
Earnings per common share - assuming
dilution $ 0.038 $ 0.047
============ ============
</TABLE>
See accompanying condensed notes to condensed financial statements.
3
<PAGE>
OPTICAL CABLE CORPORATION
Condensed Statement of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31, 1999
--------------------------------------------------------------------------------------
Common Stock Total
------------------------------ Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at October 31,
1998 37,879,036 $ 9,786,281 $ 150,359 $ 20,054,553 $ 29,991,193
Net income -- -- -- 1,448,235 1,448,235
Exercise of employee
stock options
($2.50 per share) 9,700 24,250 -- -- 24,250
Tax benefit of disqualifying
disposition of stock
options exercised -- -- 40,678 -- 40,678
Repurchase of common
stock (at cost) (63,100) (773,790) -- -- (773,790)
------------ ------------ ------------ ------------ ------------
Balances at January 31,
1999 37,825,636 $ 9,036,741 $ 191,037 $ 21,502,788 $ 30,730,566
============ ============ ============ ============ ============
</TABLE>
See accompanying condensed notes to condensed financial statements.
4
<PAGE>
OPTICAL CABLE CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
-----------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,448,235 $ 1,822,972
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 211,282 187,385
Bad debt recovery (49,000) (37,900)
Deferred income taxes 33,102 (31,355)
(Increase) decrease in:
Trade accounts receivable 1,574,101 1,253,863
Other receivables (20,252) (35,180)
Due from employees 950 (2,925)
Inventories 136,957 (334,424)
Prepaid expenses (46,800) (2,203)
Other assets, net (25,433)
Increase (decrease) in:
Accounts payable and accrued expenses 1,033,635 306,637
Accrued compensation and payroll taxes (239,306) (3,710)
Income taxes payable 771,326 416,255
----------- -----------
Net cash provided by operating activities 4,828,797 3,539,415
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (40,722) (334,309)
----------- -----------
Net cash used in investing activities (40,722) (334,309)
----------- -----------
Cash flows from financing activities:
Repurchase of common stock (773,790) (1,701,187)
Proceeds from exercise of employee stock options 24,250 --
----------- -----------
Net cash used in financing activities (749,540) (1,701,187)
----------- -----------
Net increase (decrease) in cash and cash equivalents 4,038,535 1,503,919
Cash and cash equivalents at beginning of period 1,122,277 985,807
----------- -----------
Cash and cash equivalents at end of period $ 5,160,812 $ 2,489,726
=========== ===========
</TABLE>
See accompanying condensed notes to condensed financial statements.
5
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED JANUARY 31, 1999
(Unaudited)
(1) GENERAL
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial reporting information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all material adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended January 31, 1999
are not necessarily indicative of the results that may be expected for
the fiscal year ending October 31, 1999. The unaudited condensed
financial statements and condensed notes are presented as permitted by
Form 10-Q and do not contain certain information included in the
Company's annual financial statements and notes. For further
information, refer to the financial statements and notes thereto
included in the Company's annual report on Form 10-K for the fiscal
year ended October 31, 1998.
(2) INVENTORIES
Inventories at January 31, 1999 and October 31, 1998 consist of the
following:
JANUARY 31, OCTOBER 31,
1999 1998
----------- -----------
Finished goods $ 4,655,743 $ 4,152,094
Work in process 2,267,117 1,896,858
Raw materials 2,857,992 3,873,824
Production supplies 49,203 44,236
----------- -----------
$ 9,830,055 $ 9,967,012
=========== ===========
(3) NOTES PAYABLE
Under a loan agreement with its bank dated March 10, 1999, the Company
has a $5 million secured revolving line of credit available for general
corporate purposes and a $10 million secured line of credit to fund
potential acquisitions, mergers or joint ventures. The lines of credit
bear interest at 1.50 percent above the monthly LIBOR rate and are
equally and ratably secured by the Company's accounts receivable,
contract rights, inventory, furniture and fixtures, machinery and
equipment and general intangibles. The lines of credit will expire on
February 28, 2001, unless renewed or extended.
(Continued)
6
<PAGE>
OPTICAL CABLE CORPORATION
CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(4) STOCKHOLDERS' EQUITY
During the three months ended January 31, 1999, the Company repurchased
63,100 shares of its common stock for $773,790.
(5) EARNINGS PER SHARE
Earnings per common share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Earnings per common share
- assuming dilution reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. The following is a
reconciliation of the numerators and denominators of the earnings per
common share computations for the periods presented:
<TABLE>
<CAPTION>
NET INCOME SHARES PER SHARE
THREE MONTHS ENDED JANUARY 31, 1999 (NUMERATOR) (DENOMINATOR) AMOUNT
- ----------------------------------- ------------ ------------- ----------
<S> <C> <C> <C>
Earnings per common share $1,448,235 37,850,680 $ 0.038
==========
Effect of dilutive stock options -- 301,466
---------- ----------
Earnings per common share - assuming dilution $1,448,235 38,152,146 $ 0.038
========== ========== ==========
THREE MONTHS ENDED JANUARY 31, 1998
- -----------------------------------
Earnings per common share $1,822,972 38,607,240 $ 0.047
==========
Effect of dilutive stock options -- 311,728
---------- ----------
Earnings per common share - assuming dilution $1,822,972 38,918,968 $ 0.047
========== ========== ==========
</TABLE>
Stock options that could potentially dilute earnings per common share
in the future that were not included in the computation of earnings per
common share - assuming dilution because to do so would have been
antidilutive for the periods presented totaled 238,500 for the three
months ended January 31, 1998.
On March 1, 1999 and March 2, 1999, stock options totaling 21,500
shares of common stock were exercised.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended January 31, 1999
Net Sales
Net sales consists of gross sales of products, less discounts, refunds and
returns. Net sales decreased 8.7 percent to $10.8 million in first quarter 1999
from $11.9 million for the same period in 1998. This decrease was attributable
to decreased volume and a change in product mix. Total cable meters shipped in
first quarter 1999 decreased 1.3 percent to 34.7 million from 35.1 million cable
meters shipped for the same period in 1998. This decline in cable meters shipped
was a result of a 2.8 million decrease in multi mode cable meters shipped,
partially offset by a 2.4 million increase in single mode cable meters shipped.
This change in product mix contributed further to the overall decline in sales
because the single mode cable typically has a lower selling price than the multi
mode cable.
Gross Profit Margin
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to the Company's manufacturing operations. The Company's gross
profit margin (gross profit as a percentage of net sales) increased slightly to
43.6 percent in first quarter 1999 from 42.7 percent in first quarter 1998.
During first quarter 1999, sales from orders $50,000 or more approximated 20
percent compared to 18 percent for first quarter 1998. In addition, during first
quarter 1999 and 1998, net sales to distributors approximated 55 percent and 52
percent, respectively. Discounts on large orders and on sales to distributors
are generally greater than for sales to the Company's other customer base.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of the compensation costs
(including sales commissions) for sales and marketing personnel, travel
expenses, customer support expenses, trade show expenses, advertising, the
compensation cost for administration, finance and general management personnel,
as well as legal and accounting fees. Selling, general and administrative
expenses as a percentage of net sales were 23.1 percent in first quarter 1999
compared to 19.2 percent in first quarter 1998. This higher percentage was
primarily the result of the fact that net sales for first quarter 1999 decreased
8.7 percent compared to first quarter 1998, while selling, general and
administrative expenses increased 9.9 percent. Selling, general and
administrative expenses increased largely as a result of increased marketing
efforts.
Income Before Income Tax Expense
Income before income tax expense decreased 2.0 percent to $2.3 million for the
three months ended January 31, 1999 compared to $2.8 million for the three
months ended January 31, 1998. This decrease was primarily due to decreased
sales volume and an increase in selling, general and administrative expenses.
Income Tax Expense
Income tax expense decreased $182,000 to $804,000 for the three months ended
January 31, 1999 compared to $986,000 for the same period in 1998 due to the
decrease in income before income tax expense. The Company's effective tax rate
was 35.7 percent during the three months ended January 31, 1999 compared to 35.1
percent for the same period in 1998.
8
<PAGE>
Net Income
Net income for first quarter 1999 was $1.4 million compared to $1.8 million for
first quarter 1998. Net income decreased $374,000 due to the $556,000 decrease
in income before income tax expense partially offset by the decrease in income
tax expense of $182,000.
FINANCIAL CONDITION
Total assets at January 31, 1999 were $35.1 million, an increase of $2.3
million, or 7.0 percent from October 31, 1998. This increase was primarily due
to an increase of $4.0 million in cash and cash equivalents partially offset by
a decrease of $1.5 million in trade accounts receivable resulting from the
decreased sales volume during the quarter as compared to fourth quarter 1998.
Total stockholders' equity at January 31, 1999 increased $739,000 in first
quarter 1999 with net income retained, offset by the repurchase of common stock
in the amount of $774,000, accounting for the majority of the increase.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal years 1999 and 1998, the Company's primary
capital needs have been to fund working capital requirements and capital
expenditures as needed. The Company's primary source of financing has been cash
provided from operations. The Company maintains bank lines of credit; however,
there were no balances outstanding under the lines as of the end of fiscal year
1998 or the first quarter of fiscal year 1999.
Under a loan agreement with its bank dated March 10, 1999, the Company has a $5
million secured revolving line of credit available for general corporate
purposes and a $10 million secured line of credit to fund potential
acquisitions, mergers and joint ventures. The lines of credit bear interest at
1.50 percent above the monthly LIBOR rate and are equally and ratably secured by
the Company's accounts receivable, contract rights, inventory, furniture and
fixtures, machinery and equipment and general intangibles. The lines of credit
will expire on February 28, 2001, unless renewed or extended. As of the date
hereof, the Company has no additional material sources of financing. The Company
believes that its cash flow from operations and available lines of credit will
be adequate to fund its operations for at least the next twelve months.
Cash flows from operations were approximately $4.8 million and $3.5 million in
first quarter 1999 and 1998, respectively. Cash flows from operations in first
quarter 1999 were primarily provided by operating income and a decrease in trade
accounts receivable of $1.6 million. For first quarter 1998, cash flows from
operations were primarily provided by operating income and a decrease in trade
accounts receivable of $1.3 million.
Net cash used in investing activities was for expenditures related to facilities
and equipment and was $41,000 and $334,000 in first quarter 1999 and 1998,
respectively. As of January 31, 1999, there are no material commitments for
additional capital expenditures.
Net cash used in financing activities was $750,000 and $1.7 million in first
quarter 1999 and 1998, respectively. The net cash used in financing activities
is primarily related to the Company's common stock repurchase program.
9
<PAGE>
During the period from October 1997 through January 1999, the Company has
repurchased $9.8 million of the Company's common stock in the open market or in
privately negotiated transactions. The repurchases were funded through cash
flows from operating activities. The Company intends to use excess working
capital and other sources as appropriate to finance the remaining share
repurchase program.
DERIVATIVES
The Company does not use derivatives or off-balance sheet instruments such as
future contracts, forward obligations, interest rate swaps or option contracts.
YEAR 2000
The "Year 2000" problem will affect many computers and other electronic devices
that are not programmed to properly recognize a year that begins with "20"
instead of "19." Some devices may recognize dates on or after January 1, 2000 as
a date during the 1900s, or may not recognize the date at all. If not corrected,
many devices could fail or create erroneous results.
Since 1997, the Company has been actively assessing, planning and responding to
the risks to the Company created by the Year 2000 problem. In assessing the
risks, the Company has focused on both (i) its internal information technology
("IT") and non-IT systems, including, but not limited to, computer hardware and
software, manufacturing equipment, printers, facsimile machines, and other
control and accounting devices, and (ii) its interfaces with third parties with
which the Company has material relationships, such as suppliers, customers and
financial institutions.
The Company has completed its assessment and response planning with respect to
its internal IT and non-IT systems. Additionally, the Company has substantially
completed necessary remediation measures with respect to those internal systems.
The Company's remediation has included updating various computer hardware and
software and printers to be Year 2000 compliant. The Company has also determined
that the Year 2000 problem will not have a material adverse affect on its
manufacturing machinery. To date, the Company has expended less than $100,000 on
its remediation measures and believes future remediation expenditures with
respect to its internal systems to be less than $50,000. With respect to the
Company's internal systems, the Company believes it will complete its planned
remediation and any testing in time to ensure the Year 2000 problem will not
have a material adverse affect on the Company or its business. The Company does
not believe contingency plans are necessary for its internal systems at this
time.
The Company has completed its assessment of potential Year 2000 problems which
may arise from failures of third parties to be Year 2000 compliant. However,
many of the Company's suppliers and customers are still engaged in executing
their Year 2000 readiness efforts and, as a result, the Company cannot fully
evaluate the Year 2000 risks to its supply chain and its distribution channels
at this time. The Company's assessment efforts included sending questionnaires
to major third party suppliers and reviewing responses, and taking other steps
to assess risks as deemed appropriate.
The Company has not been made aware of any Year 2000 issues of third parties
that are expected to be unresolved prior to December 31, 1999 and that would
have a material adverse effect on the Company. Nonetheless, the Company is
considering contingency plans, as appropriate, including relying on raw material
inventory on hand and identification of alternative suppliers. The Company will
continue to monitor the Year 2000 status of third parties with which it has
material relationships to minimize its risk from failures of such parties to be
Year 2000 compliant.
10
<PAGE>
The most likely worst case scenario for the Company with respect to the Year
2000 problem is the failure of a supplier, including an energy supplier, to be
Year 2000 compliant such that its supply of needed products or services to the
Company's manufacturing facility is interrupted temporarily. This could result
in the Company not being able to produce fiber optic cable for a period of time,
which in turn could result in lost sales and gross profit.
While the Company believes that it is taking the necessary steps to resolve its
Year 2000 issues in a timely manner, there can be no assurance that the Company
will not have any Year 2000 problems. If any such problems occur, the Company
will work to solve them as quickly as possible. At present, the Company does not
expect that such problems related to the Company's internal IT and non-IT
systems will have a material adverse affect on its business. The failure,
however, of one or more of the Company's major suppliers, customers or financial
institutions to be Year 2000 compliant could have a material adverse effect on
the Company.
NEW ACCOUNTING STANDARDS
SFAS No. 131
- ------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated, unless it is impracticable to do so. SFAS
No. 131 need not be applied to interim financial statements in the initial year
of its application, but comparative information for interim periods in the
initial year of application shall be reported in financial statements for
interim periods in the second year of application. The Company adopted SFAS No.
131 as of November 1, 1998; however, interim disclosures are not required during
the initial year of application.
FORWARD LOOKING INFORMATION
This Form 10-Q may contain certain "forward-looking" information within the
meaning of the federal securities laws. The forward-looking information may
include, among other information, (i) statements concerning the Company's
outlook for the future, (ii) statements of belief, (iii) future plans,
strategies or anticipated events, and (iv) similar information and statements
concerning matters that are not historical facts. Such forward-looking
information is subject to risks and uncertainties that may cause actual events
to differ materially from the expectations of the Company. Factors that could
cause or contribute to such differences include, but are not limited to, the
level of sales to key customers, actions by competitors, fluctuations in the
price of raw materials (including optical fiber), the Company's dependence on a
single manufacturing facility, the ability of the Company to protect its
proprietary manufacturing technology, the Company's dependence on a limited
number of suppliers, technological changes and introductions of new competing
products, and market and economic conditions in the areas of the world in which
the Company operates or markets its products.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K for the three
months ended January 31, 1999.
10.6 Loan Agreement, dated March 10, 1999, between Optical Cable
Corporation and First Union National Bank (the "Loan
Agreement").
10.8 Promissory Note, dated March 10, 1999, issued by Optical
Cable Corporation to First Union National Bank in the amount
of $5 million in connection with the Loan Agreement, and
Promissory Note, dated March 10, 1999, issued by Optical
Cable Corporation to First Union National Bank in the amount
of $10 million in connection with the Loan Agreement.
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the three months ended January
31, 1999.
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPTICAL CABLE CORPORATION
(Registrant)
Date: March 17, 1999 /s/Robert Kopstein
---------------------------------
Robert Kopstein
Chairman of the Board, President and
Chief Executive Officer
Date: March 17, 1999 /s/Kenneth W. Harber
---------------------------------
Kenneth W. Harber
Vice President of Finance, Treasurer
and Secretary
(principal financial and accounting officer)
<PAGE>
INDEX TO ATTACHED EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.6 Loan Agreement, dated March 10, 1999,
between Optical Cable Corporation and
First Union National Bank (the "Loan
Agreement").
10.8 Promissory Note, dated March 10, 1999,
issued by Optical Cable Corporation to
First Union National Bank in the amount
of $5 million in connection with the
Loan Agreement, and Promissory Note,
dated March 10, 1999, issued by Optical
Cable Corporation to First Union
National Bank in the amount of $10
million in connection with the Loan
Agreement.
27 Financial Data Schedule
EXHIBIT 10.6
LOAN AGREEMENT
FIRST UNION NATIONAL BANK
201 S. JEFFERSON STREET
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")
OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
(Individually and collectively, "Borrower")
This Loan Agreement ("Agreement") is entered into this 10th day of March, 1999,
by and between Bank and OPTICAL CABLE CORPORATION, a corporation organized under
the laws of the State of Virginia.
Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan") evidenced by one or more promissory note (whether one or more, the
"Note:) as follows:
* Working Capital Line of Credit - in the principal amount of
$10,000,000.00 which is evidenced by the Promissory Note of even date
herewith (the "Line of Credit Note"), under which Borrower may borrow,
repay, and reborrow, from time to time, so long as the total indebtedness
outstanding at any one time does not exceed the principal amount. The Loan
proceeds are to be used by Borrower solely for financing working capital.
Bank's obligation to advance or readvance under the Line of Credit Note
shall terminate if Borrower is in Default under the Line of Credit Note.
* Line of Credit/Sweep + - in the principal amount of $5,000,000.00 which
is evidenced by the Promissory Note of even date herewith (the "Line of
Credit Note"), under which Borrower may borrow, repay, and reborrow, from
time to time, so long as the total indebtedness outstanding at any one time
does not exceed the principal amount. The Loan proceeds are to be used by
Borrower solely for financing working capital. Bank's obligation to advance
or readvance under the Line of Credit Note shall terminate if Borrower is
in Default under the Line of Credit Note.
The Agreement also amends and restates in its entirety that certain Loan
Agreement dated April 25, 1997.
This Agreement applies to the loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this Agreement as to Borrower, "Subsidiary" shall mean any corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. ss. 101, except that the term "debtor' therein shall be
substituted by term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: ACCURATE INFORMATION. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type, and Borrower further
represents that its financial condition has not changed materially or
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adversely since the date(s) of such documents. AUTHORIZATION; NON-CONTRAVENTION.
The execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and if necessary, by
making appropriate filings with any governmental agency or unit and are the
legal, binding, valid and enforceable obligations of Borrower and any
guarantors; and do not (i) contravene, or constitute (with or without the giving
of notice or lapse of time or both) a violation of any provision of applicable
law, a violation of the organizational documents of Borrower or any guarantor,
or a default under any agreement, judgment, injunction, order, decree or other
instrument binding upon or affecting Borrower or any guarantor, (ii) result in
the creation or imposition of any lien (other than the lien(s) created by the
Loan Documents) on any of Borrower's or guarantor's assets, or (iii) give cause
for the acceleration of any obligations of Borrower or any guarantor to any
other creditor. ASSET OWNERSHIP. Borrower has good and marketable title to all
of the properties and assets reflected on the balance sheets and financial
statement supplied Bank by Borrower, and all such properties and assets are free
and clear of mortgages, security deeds, pledges, liens, charges, and all other
encumbrances, except as otherwise disclosed to Bank by Borrower in writing
("Permitted Liens"). To Borrower's knowledge, no default has occurred under any
Permitted Liens and no claims or interest adverse to Borrower's present rights
in its properties and assets have arisen. DISCHARGE OF LIENS AND TAXES. Borrower
has duly filed, paid and/or discharged all taxes or other claims which may
become a lien on any of its property or assets, except to the extent that such
items are being appropriately contested in good faith and an adequate reserve
for the payment thereof is being maintained. SUFFICIENCY OF CAPITAL. Borrower is
not, and after consummation of this Agreement and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the Loan,
will not be insolvent within the meaning of 11 U.S.C. ss. 101(32). COMPLIANCE
WITH LAWS. Borrower is in compliance in all respects with all federal, state and
local laws, rules and regulations applicable to its properties, operations,
business, and finances, including, without limitation, any federal or state laws
relating to liquor (including 18 U.S.C. ss. 3617 et seq.) or narcotics
(including 21 U.S.C. ss. 801 et seq.) and/or any commercial crimes; all
applicable federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if applicable. ORGANIZATION AND AUTHORITY. Each corporate or limited
liability company Borrower and any guarantor, as applicable, is duly created,
validly existing and in good standing under the laws of the state of its
organization, and has all powers, governmental licenses, authorizations,
consents and approvals required to operate its business as now conducted. Each
corporate or limited liability company Borrower and any guarantor, if any, is
duly qualified, licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers, and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate,
could have a material adverse effect on the business, financial position,
results of operations, properties or prospects of Borrower or any such
guarantor. NO LITIGATION. There are no pending or threatened suits, claims or
demands against Borrower or any guarantor that have not been disclosed to Bank
by Borrower in writing.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing: BUSINESS CONTINUITY. Borrower shall conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. MAINTAIN PROPERTIES. Borrower shall maintain,
preserve and keep its property in good repair, working order and conditions,
making all needed replacements, additions and improvements thereto, to the
extent allowed by this Agreement. ACCESS TO BOOKS & RECORDS. Borrower shall
allow Bank, or its agents, during normal business hours, access to the books,
records and such other documents of Borrower as Bank shall reasonably require,
and allow Bank to make copies thereof at Bank's expense. INSURANCE. Borrower
shall maintain adequate insurance coverage with respect to its properties and
business against loss or damage of the kinds and in the amounts customarily
insured against by companies of established reputation engaged in the same or
similar businesses including, without limitation, commercial general liability
insurance, workmen's compensation insurance, and business interruption
insurance, and upon all Collateral (as defined in the Loan Documents) securing
the Obligations, such insurance as specified in the Loan Documents; all acquired
in such amounts and from such companies as Bank may reasonably require. NOTICE
OF DEFAULT AND OTHER NOTICES. (a) Notice of Default. Borrower shall furnish to
Bank immediately upon becoming aware of the existence of
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any condition or event which constitutes a Default (as defined in the Loan
Documents) or any event which, upon the giving of notice or lapse of time or
both, may become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to take
with respect thereto. (b) Other Notices. Borrower shall promptly notify Bank in
writing of (i) any material adverse change in its financial condition or its
business; (ii) any default under any material agreement, contract or other
instrument to which it is a party or by which any of its properties are bound,
or any acceleration of the maturity of any indebtedness owed by Borrower; (iii)
any material adverse claim against or affecting Borrower; or any part of its
properties; (iv) the commencement of, any material determination in, any
litigation with any third party or any proceeding before any governmental agency
or unit affecting Borrower; and (v) at least thirty (30) days prior thereto, any
change in Borrower's name or address as shown above, and/or any change in
Borrower's structure. COMPLIANCE WITH OTHER AGREEMENTS. Borrower shall comply
with all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreements, if applicable, as defined in the Note. Payments
of Debts. Borrower shall pay and discharge when due, and before subject to
penalty or further charge, and otherwise satisfy before maturity or delinquency,
all obligations, debts, taxes, and liabilities of whatever nature or amount,
except those which Borrower in good faith disputes. REPORTS AND PROXIES.
Borrower shall deliver to Bank, promptly, a copy of all financial statements,
reports, notices, and proxy statements sent by Borrower to stockholders, and all
regular or periodic reports required to be filed by Borrower with any
governmental agency or authority. Other Financial Information. Borrower shall
deliver promptly such other information regarding the operation, business
affairs, and financial condition of Borrower which Bank may reasonably request.
ESTOPPEL CERTIFICATE. Borrower, within fifteen (15) days after request by Bank,
will furnish a written statement duly acknowledged of the amount due under the
Loan and whether offsets or defenses exist against the Obligations. DEPOSIT
RELATIONSHIP. Borrower will maintain its primary depository relationship with
Bank. LIFE INSURANCE. Maintain no less than $2,000,000.00 of life insurance on
Robert Kopstein.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing: GOVERNMENT INTERVENTION. Borrower shall not permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective business or such
business is curtailed or materially impaired. PREPAYMENT OF OTHER DEBT. Borrower
shall not retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. DEFAULT ON
OTHER CONTRACTS OR OBLIGATIONS. Borrower shall not default on any material
contract with or obligations when due to a third party or default in the
performance of any obligation to a third party incurred for money borrowed in an
amount in excess of $100,000.00. JUDGMENT ENTERED. Borrower shall not permit the
entry of any monetary judgment or the assessment against, the filing of any tax
lien against, or the issuance of any writ of garnishment or attachment against
any property of or debts due Borrower in an amount in excess of $50,000.00 and
that is not discharged or execution is not stayed within 30 days of entry.
CHANGE OF CONTROL. Borrower shall not make a material change of ownership that
effectively changes control of Borrower. GUARANTEES. Borrower shall not
guarantee or otherwise become responsible for obligations of any other person or
entity. ENCUMBRANCES. Borrower shall not create, assume, or permit to exist any
mortgage, security deed, deed of trust, pledge, lien, change or other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than: (i) security interests required by the Loan Documents; (ii) liens for
taxes contested in good faith; (iii) liens accruing by law for employee
benefits; or (iv) Permitted Liens. RETIRE OR REPURCHASE CAPITAL STOCK. Retire or
otherwise acquire its capital stock in an amount greater than $15,000,000.00.
Any such acquisition of capital stock may be paid for from working capital or
other sources deemed appropriate by the officers of the corporation.
FINANCIAL REPORTS. Borrower agrees to the following provisions(s) from the date
of this Agreement and until final payment in full of the Obligations, unless
Bank shall otherwise consent in writing: ANNUAL FINANCIAL STATEMENTS. Borrower
shall deliver to Bank, within 120 days after the close of each fiscal year,
audited financial statements reflecting its operations during such fiscal year,
including, without limitation, a balance sheet, profit and loss statement and
statement of cash flows, with supporting schedules; all in reasonable detail,
prepared in conformity with generally accepted accounting principles, applied on
a
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basis consistent with that of the preceding year. All such statements shall be
examined by an independent certified public accountant acceptable to Bank. The
opinion of such independent certified public accountant shall not be acceptable
to Bank if qualified due to any limitation in scope imposed by Borrower. Any
other qualification of the opinion by the accountant shall render the
acceptability of the financial statements subject to Bank's approval. PERIODIC
FINANCIAL STATEMENTS. Borrower shall deliver to Bank quarterly unaudited
management-prepared financial statements, including, without limitation, a
balance sheet, profit and loss statement, and statement of cash flows, with
supporting schedules, as soon as available and in any event within 60 days after
the close of each such period; all in reasonable detail. Such statements shall
be certified as to their correctness by a principal financial officer of
Borrower.
CONDITONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.
IN WITNESS WHEREOF, Borrower, on the day and year first written above, has
caused this Agreement to be executed under seal.
OPTICAL CABLE CORPORATION
Corporate By: /s/ Robert Kopstein
Seal ------------------------
Robert Kopstein
President
TAXPAYER IDENTIFICATION NUMBER(S):
OPTICAL CABLE CORPORATION 54-1237042
FIRST UNION NATIONAL BANK
By: /s/ Susan Doyle
------------------------
Susan Doyle
Senior Vice President
49548
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EXHIBIT 10.8
PROMISSORY NOTE
$5,000,000.00 March 10, 1999
Optical Cable Corporation, a Virginia Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(Individually and collectively, "Borrower")
First Union National Bank of Virginia
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")
IMPORTANT NOTICE
THIS NOTE CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER
OF IMPORTANT RIGHTS YOU MAY HAVE AS A BORROWER AND ALLOWS BANK TO OBTAIN A
JUDGMENT AGAINST YOU WITHOUT FURTHER NOTICE.
RENEWAL/MODIFICATION. This Promissory Note renews, extends and/or modifies that
certain Promissory Note dated April 25, 1997, evidencing an original principal
indebtedness of Five Million Dollars and No Cents ($5,000,000.00). The
Promissory Note is not a novation.
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Five Million and No/100 Dollars ($5,000,000.00) or such sum
as may be advanced and outstanding from time to time with interest on the unpaid
principal balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement dated March 13,
1996.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of each
Advance (defined herein) under this Note from the date such Advance is made
available to the Borrower at the LIBOR Market Index rate plus 1.50% as that rate
may change from day to day in accordance with changes in the LIBOR Market Index
rate ("Interest Rate"). "LIBOR Market Index Rate", for any day, is the rate for
1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by Bank from another recognized source or Interbank quotation).
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360
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Computation"). The Actual/360 Computation determines the annual effective
interest yield by taking the stated (nominal) interest rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the applicable period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only commencing on April 1, 1999, and on the same
day of each month thereafter until fully paid. In any event, all principal and
accrued interest shall be due and payable on February 28, 2001.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and may include, without limitation,
a commitment letter that survives closing, a loan agreement, this Note, guaranty
agreements, security agreements, security instruments, financing statements,
mortgage instruments, letters of credit and any renewals or modifications,
whenever any of the foregoing are executed, but does not include swap agreements
(as defined in 11 U.S.C. ss. 101).
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements as defined in 11
U.S.C. ss. 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to five percent (5%) of each payment past due for eight
(8) or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note and the late charge shall be the highest amount allowable under such
laws. If no amount is stated thereunder, the late charge shall be five percent
(5%) of each payment past due for ten (10) or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
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DEFAULT. If any of the following occurs, a Default ("Default") under this Note
shall exist: NONPAYMENT; NONPERFORMANCE. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. FALSE WARRANTY. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. CROSS DEFAULT. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor' therein shall be substituted by the term
"Borrower" herein; "Subsidiary" shall mean any corporation of which more than
50% of the issued or outstanding voting stock is owned directly or indirectly by
Borrower). CESSATION; BANKRUPTCY. The death of, appointment of guardian for,
dissolution of, termination of existence of, loss of good standing status by,
appointment of a receiver for, assignment for the benefit of creditors of, or
commencement of any bankruptcy or insolvency proceeding by or against Borrower,
its Subsidiaries or Affiliates, if any, or any general partner of or the
holder(s) of the majority ownership interests of Borrower, or any party to the
Loan Documents. MATERIAL CAPITAL STRUCTURE OR BUSINESS ALTERATION. Without prior
written consent of Bank, (i) a material alteration in the kind or type of
Borrower's business or that of Borrower's Subsidiaries or Affiliates, if any;
(ii) the sale of substantially all of the business or assets of Borrower, any of
Borrower's Subsidiaries or Affiliates or any guarantor, or a material portion
(10% or more) of such business or assets if such a sale is outside the ordinary
course of business of Borrower, or any of Borrower's Subsidiaries or Affiliates
or any guarantor, or more than 50% of the outstanding stock or voting power of
or in a single transaction or a series of transactions; (iii) the acquisition of
substantially all of the business or assets or more than 50% of the outstanding
stock or voting power of any other entity; or (iv) should any Borrower, or any
of borrower's Subsidiaries or Affiliates, or any guarantor enter into any merger
or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: BANK
LIEN. Foreclose its security interest or lien against Borrower's accounts
without notice. ACCELERATION UPON DEFAULT. Accelerate the maturity of this Note
and all other of the Obligations shall be immediately due and payable.
CUMULATIVE. Exercise any rights and remedies as provided under the Note and
other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Bank,
Borrower shall provide Bank assurance acceptable to Bank of Borrower's Year 2000
compatibility.
CONFESSION OF JUDGMENT. Each Borrower hereby duly constitutes and appoints Keith
M. Northern, Gregory A. Baugher (each of whom is an officer of Bank), and Bank
through an officer duly authorized by Bank, (any of the foregoing may act), as
the true and lawful attorneys-in-fact for them, in any and all of their names,
place and stead, and upon the occurrence of a Default in the payment of the
Obligations due under this Note, at maturity, or upon acceleration, to confess
judgment against them or any of them, in favor of Bank, before the Clerk of the
Circuit Court for City of Roanoke, Virginia, in accordance with 1950 Code of
Virginia Section 8.01-431 et seq., and any successor statute, for all amounts
owed with respect to the Obligations under and pursuant to this Not including,
without limitation, all costs of collection and attorneys' fees in an amount
equal to 15% of the Obligations then outstanding (which shall be deemed
reasonable attorneys' fees for the purposes of this paragraph), and court costs,
hereby ratifying and confirming the acts of said attorney-in-fact as if done by
themselves. Upon request of Bank, each Borrower will execute an amendment or
other agreement substituting attorneys-in-fact appointed to act for each
Borrower hereunder.
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WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
demand for payment notices of any kind. Further, each agrees that Bank may
extend, modify or renew this Note or make a novation of the loan evidenced by
this Note for any period and grant any releases, compromises or indulgences with
respect to any collateral securing this Note, or with respect to any other
Borrower or any other person liable under this Note or other Loan Documents, all
without notice to or consent of each Borrower or each person who may be liable
under this Note or other Loan Documents and without affecting the liability of
Borrower or any person who may be liable under this Note or other Loan
Documents.
MISCELLANEOUS PROVISIONS. ASSIGNMENT. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. In addition, nothing in this Note or any of the Loan
Documents shall prohibit Bank from pledging or assigning this Note or any of the
Loan Documents or any interest therein to any Federal Reserve Bank. Borrower
shall not assign its rights and interest hereunder without the prior written
consent of Bank, and any attempt by Borrower to assign without Bank's prior
written consent is null and void. Any assignment shall not release Borrower from
the Obligations. APPLICATION LAW; CONFLICT BETWEEN DOCUMENTS. This Note and
other Loan Documents shall be governed by and construed under the laws of the
state where Bank first shown above is located without regard to that state's
conflict of laws principles. If the terms of this Note should conflict with the
terms of the Loan Agreement or any commitment letter that survives closing, the
terms of this Note shall control. BORROWER'S ACCOUNTS. Except as prohibited by
law, Borrower grants Bank a security interest in all of Borrower's accounts with
Bank and any of its affiliates. JURISDICTION. Borrower irrevocably agrees to
non-exclusive personal jurisdiction in the state in which the office of Bank
first shown above is located. SEVERABILITY. If any provision of this Note or of
the other Loan Documents shall be prohibited or invalid under applicable law,
such provision shall be ineffective but only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note or other such document. NOTICES. Any notices
to Borrower shall be sufficiently given, if in writing and mailed or delivered
to the Borrower's address shown above or such other address as provided
hereunder, and to Bank, if in writing and mailed or delivered to Bank's office
address shown above or such other address as Bank may specify in writing from
time to time. In the event that Borrower changes Borrower's address at any time
prior to the date the Obligations are paid in full, Borrower agrees to promptly
give written notice of said change of address by registered or certified mail,
return receipt requested, all charges prepaid. PLURAL; CAPTIONS. All references
in the Loan Documents to Borrower, guarantor, person, document or other nouns of
reference mean both the singular and plural form, as the case may be, and the
term "person" shall mean any individual, person or entity. The captions
contained in the Loan Documents are inserted for convenience only and shall not
affect the meaning or interpretation of the Loan Documents. BINDING CONTRACT.
Borrower by execution of and Bank by acceptance of this Note agree that each
party is bound to all terms and provisions of this Note. ADVANCES. Bank in its
sole discretion may make other Advances under this Note pursuant hereto. POSTING
OF PAYMENTS. All payments received during normal banking hours after 2:00 p.m.
local time at the office of Bank first shown above shall be deemed received at
the opening of the next banking day. JOINT AND SEVERAL OBLIGATIONS. Each
Borrower is jointly and severally obligated under this Note. FEES AND TAXES.
Borrower shall promptly pay all documentary, intangible recordation and/or
similar taxes on this transaction whether assessed at closing or arising from
time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding any claim or controversy arising out of,
or relating to the Loan Documents between the parties hereto (a "Dispute")shall
be resolved by binding arbitration conducted and governed by the
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Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association (the "AAA") and the Federal Arbitration
Act. Disputes may include, without limitation, tort claims, counterclaims,
disputes as to whether a matter is subject to arbitration, claims brought as
class actions, or claims arising from documents executed in the future. A
judgment upon the award may be entered in any court having jurisdiction.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
SPECIAL RULES. All arbitration hearings shall be conducted in the city in which
the office of Bank first stated above is located. A hearing shall begin within
90 days of demand for arbitration and all hearings shall be concluded within 120
days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. These parties do not waive applicable Federal or
state substantive law except as provided herein.
PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the preceding binding
arbitration provisions, the parties agree to preserve, without diminution,
certain remedies that any party may exercise before or after an arbitration
proceeding is brought. The parties shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property, (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute. Each party agrees that it
shall not have a remedy of punitive and exemplary damages against the other in
any Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute,
whether the Dispute is resolved by arbitration or judicially.
WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL
WITH REGARD TO A DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first written above, has
caused this Note to be executed under seal.
OPTICAL CABLE CORPORATION
CORPORATE By: /s/ Robert Kopstein
SEAL -----------------------------
Robert Kopstein
President
TAXPAYER INDENTIFICATION NUMBER(S):
OPTICAL CABLE CORPORATION 54-1237042
49548
Page 5 of 5
<PAGE>
PROMISSORY NOTE
$10, 000,000.00 March 10, 1999
Optical Cable Corporation, a Virginia Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(Individually and collectively,"Borrower")
First Union National Bank of Virginia
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")
IMPORTANT NOTICE
THIS NOTE CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER
OF IMPORTANT RIGHTS YOU MAY HAVE AS A BORROWER AND ALLOWS BANK TO OBTAIN A
JUDGMENT AGAINST YOU WITHOUT FURTHER NOTICE.
RENEWAL/MODIFICATION. This Promissory Note renews, extends and/or modifies that
certain Promissory Note dated April 25, 1997, evidencing an original principal
indebtedness of Ten Million Dollars and No Cents ($10,000,000.00). The
Promissory Note is not a novation.
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Ten Million and No/100 Dollars ($10,000,000.00) or such sum
as may be advanced and outstanding from time to time with interest on the unpaid
principal balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement dated March 13,
1996.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of each
Advance (defined herein) under this Note from the date such Advance is made
available to the Borrower at the LIBOR Market Index rate plus 1.50% as that rate
may change from day to day in accordance with changes in the LIBOR Market Index
rate ("Interest Rate"). "LIBOR Market Index Rate", for any day, is the rate for
1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by Bank from another recognized source or Interbank quotation).
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective interest yield by taking the
Page 1 of 6
<PAGE>
stated (nominal) interest rate for a year's period and then dividing said rate
by 360 to determine the daily periodic rate to be applied for each day in the
applicable period. Application of the Actual/360 Computation produces an
annualized effective interest rate exceeding that of the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only commencing on April 1, 1999, and on the same
day of each month thereafter until fully paid. In any event, all principal and
accrued interest shall be due and payable on February 28, 2001.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and may include, without limitation,
a commitment letter that survives closing, a loan agreement, this Note, guaranty
agreements, security agreements, security instruments, financing statements,
mortgage instruments, letters of credit and any renewals or modifications,
whenever any of the foregoing are executed, but does not include swap agreements
(as defined in 11 U.S.C. ss. 101).
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements as defined in 11
U.S.C. ss. 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to five percent (5%) of each payment past due for eight
(8) or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note and the late charge shall be the highest amount allowable under such
laws. If no amount is stated thereunder, the late charge shall be five percent
(5%) of each payment past due for ten (10) or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
Page 2 of 6
<PAGE>
DEFAULT. If any of the following occurs, a Default ("Default") under this Note
shall exist: NONPAYMENT; NONPERFORMANCE. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. FALSE WARRANTY. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. CROSS DEFAULT. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor' therein shall be substituted by the term
"Borrower" herein; "Subsidiary" shall mean any corporation of which more than
50% of the issued or outstanding voting stock is owned directly or indirectly by
Borrower). CESSATION; BANKRUPTCY. The death of, appointment of guardian for,
dissolution of, termination of existence of, loss of good standing status by,
appointment of a receiver for, assignment for the benefit of creditors of, or
commencement of any bankruptcy or insolvency proceeding by or against Borrower,
its Subsidiaries or Affiliates, if any, or any general partner of or the
holder(s) of the majority ownership interests of Borrower, or any party to the
Loan Documents. MATERIAL CAPITAL STRUCTURE OR BUSINESS ALTERATION. Without prior
written consent of Bank, (i) a material alteration in the kind or type of
Borrower's business or that of Borrower's Subsidiaries or Affiliates, if any;
(ii) the sale of substantially all of the business or assets of Borrower, any of
Borrower's Subsidiaries or Affiliates or any guarantor, or a material portion
(10% or more) of such business or assets if such a sale is outside the ordinary
course of business of Borrower, or any of Borrower's Subsidiaries or Affiliates
or any guarantor, or more than 50% of the outstanding stock or voting power of
or in a single transaction or a series of transactions; (iii) the acquisition of
substantially all of the business or assets or more than 50% of the outstanding
stock or voting power of any other entity; or (iv) should any Borrower, or any
of borrower's Subsidiaries or Affiliates, or any guarantor enter into any merger
or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: BANK
LIEN. Foreclose its security interest or lien against Borrower's accounts
without notice. ACCELERATION UPON DEFAULT. Accelerate the maturity of this Note
and all other of the Obligations shall be immediately due and payable.
CUMULATIVE. Exercise any rights and remedies as provided under the Note and
other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Bank,
Borrower shall provide Bank assurance acceptable to Bank of Borrower's Year 2000
compatibility.
CONFESSION OF JUDGMENT. Each Borrower hereby duly constitutes and appoints Keith
M. Northern, Gregory A. Baugher (each of whom is an officer of Bank), and Bank
through an officer duly authorized by Bank, (any of the foregoing may act), as
the true and lawful attorneys-in-fact for them, in any and all of their names,
place and stead, and upon the occurrence of a Default in the payment of the
Obligations due under this Note, at maturity, or upon acceleration, to confess
judgment against them or any of them, in favor of Bank, before the Clerk of the
Circuit Court for City of Roanoke, Virginia, in accordance with 1950 Code of
Virginia Section 8.01-431 et seq., and any successor statute, for all amounts
owed with respect to the Obligations under and pursuant to this Not including,
without limitation, all costs of collection and attorneys' fees in an amount
equal to 15% of the Obligations then outstanding (which shall be deemed
reasonable attorneys' fees for the purposes of this paragraph), and court costs,
hereby ratifying and confirming the acts of said attorney-in-fact as if done by
themselves. Upon request of Bank, each Borrower will execute an amendment or
other agreement substituting attorneys-in-fact appointed to act for each
Borrower hereunder.
Page 3 of 6
<PAGE>
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time (each an
"Advance" and together the "Advances"), so long as the total indebtedness
outstanding at any one time does not exceed the principal amount stated on the
face of this Note. Bank's obligation to make Advances under this Note shall
terminate if Borrower is in Default under this Note. As of the date of each
proposed Advance, Borrower shall be deemed to represent that each representation
made in the Loan Documents is true as of such date.
If Borrower subscribes to Bank's cash management services and such services are
applicable to this line of credit, the terms of such service shall control the
manner in which funds are transferred between the applicable demand deposit
account and the line of credit or debit to the line of credit.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
demand for payment notices of any kind. Further, each agrees that Bank may
extend, modify or renew this Note or make a novation of the loan evidenced by
this Note for any period and grant any releases, compromises or indulgences with
respect to any collateral securing this Note, or with respect to any other
Borrower or any other person liable under this Note or other Loan Documents, all
without notice to or consent of each Borrower or each person who may be liable
under this Note or other Loan Documents and without affecting the liability of
Borrower or any person who may be liable under this Note or other Loan
Documents.
MISCELLANEOUS PROVISIONS. ASSIGNMENT. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. In addition, nothing in this Note or any of the Loan
Documents shall prohibit Bank from pledging or assigning this Note or any of the
Loan Documents or any interest therein to any Federal Reserve Bank. Borrower
shall not assign its rights and interest hereunder without the prior written
consent of Bank, and any attempt by Borrower to assign without Bank's prior
written consent is null and void. Any assignment shall not release Borrower from
the Obligations. APPLICATION LAW; CONFLICT BETWEEN DOCUMENTS. This Note and
other Loan Documents shall be governed by and construed under the laws of the
state where Bank first shown above is located without regard to that state's
conflict of laws principles. If the terms of this Note should conflict with the
terms of the Loan Agreement or any commitment letter that survives closing, the
terms of this Note shall control. BORROWER'S ACCOUNTS. Except as prohibited by
law, Borrower grants Bank a security interest in all of Borrower's accounts with
Bank and any of its affiliates. JURISDICTION. Borrower irrevocably agrees to
non-exclusive personal jurisdiction in the state in which the office of Bank
first shown above is located. SEVERABILITY. If any provision of this Note or of
the other Loan Documents shall be prohibited or invalid under applicable law,
such provision shall be ineffective but only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note or other such document. NOTICES. Any notices
to Borrower shall be sufficiently given, if in writing and mailed or delivered
to the Borrower's address shown above or such other address as provided
hereunder, and to Bank, if in writing and mailed or delivered to Bank's office
address shown above or such other address as Bank may specify in writing from
time to time. In the event that Borrower changes Borrower's address at any time
prior to the date the Obligations are paid in full, Borrower agrees to promptly
give written notice of said change of address by registered or certified mail,
return receipt requested, all charges prepaid. PLURAL; CAPTIONS. All references
in the Loan Documents to Borrower, guarantor, person, document or other nouns of
reference mean both the singular and plural form, as the case may be, and the
term "person" shall mean any individual, person or entity. The captions
contained in the Loan Documents are inserted for convenience only and shall not
affect the meaning or interpretation of the Loan Documents.
Page 4 of 6
<PAGE>
BINDING CONTRACT. Borrower by execution of and Bank by acceptance of this Note
agree that each party is bound to all terms and provisions of this Note.
ADVANCES. Bank in its sole discretion may make other Advances under this Note
pursuant hereto. POSTING OF PAYMENTS. All payments received during normal
banking hours after 2:00 p.m. local time at the office of Bank first shown above
shall be deemed received at the opening of the next banking day. JOINT AND
SEVERAL OBLIGATIONS. Each Borrower is jointly and severally obligated under this
Note. FEES AND TAXES. Borrower shall promptly pay all documentary, intangible
recordation and/or similar taxes on this transaction whether assessed at closing
or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding any claim or controversy arising out of,
or relating to the Loan Documents between the parties hereto (a "Dispute")shall
be resolved by binding arbitration conducted and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, disputes as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements.
SPECIAL RULES. All arbitration hearings shall be conducted in the city in which
the office of Bank first stated above is located. A hearing shall begin within
90 days of demand for arbitration and all hearings shall be concluded within 120
days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. These parties do not waive applicable Federal or
state substantive law except as provided herein.
PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the preceding binding
arbitration provisions, the parties agree to preserve, without diminution,
certain remedies that any party may exercise before or after an arbitration
proceeding is brought. The parties shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property, (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute. Each party agrees that it
shall not have a remedy of punitive and exemplary damages against the other in
any Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute,
whether the Dispute is resolved by arbitration or judicially.
WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL
WITH REGARD TO A DISPUTE.
Page 5 of 6
<PAGE>
IN WITNESS WHEREOF, Borrower, on the day and year first written above, has
caused this Note to be executed under seal.
OPTICAL CABLE CORPORATION
CORPORATE By: /s/ Robert Kopstein
SEAL -----------------------------
Robert Kopstein
President
TAXPAYER IDENTIFICATION NUMBER(S):
OPTICAL CABLE CORPORATION 54-1237042
49548
Page 6 of 6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
Amounts inapplicable or not disclosed as a separate line on the Balance Sheet or
Statement of Income are reported as 0 herein.
</LEGEND>
<CIK> 0001000230
<NAME> Optical Cable Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,161
<SECURITIES> 0
<RECEIVABLES> 8,750
<ALLOWANCES> 263
<INVENTORY> 9,830
<CURRENT-ASSETS> 24,161
<PP&E> 15,479
<DEPRECIATION> 4,563
<TOTAL-ASSETS> 35,132
<CURRENT-LIABILITIES> 4,243
<BONDS> 0
0
0
<COMMON> 9,037
<OTHER-SE> 21,694
<TOTAL-LIABILITY-AND-EQUITY> 35,132
<SALES> 10,842
<TOTAL-REVENUES> 10,882
<CGS> 6,120
<TOTAL-COSTS> 8,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (49)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,253
<INCOME-TAX> 804
<INCOME-CONTINUING> 1,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,448
<EPS-PRIMARY> 0.038
<EPS-DILUTED> 0.038
</TABLE>
