EXHIBIT 10.7
LOAN AGREEMENT
FIRST UNION NATIONAL BANK
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(Hereinafter referred to as the "Bank")
OPTICAL CABLE CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(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
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
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/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Seal ------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
TAXPAYER IDENTIFICATION NUMBER(S):
OPTICAL CABLE CORPORATION ▇▇-▇▇▇▇▇▇▇
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇
Senior Vice President
49548
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December 15, 1999
▇▇. ▇▇▇ ▇▇▇▇▇▇, Vice President
Optical Cable Corporation
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Loan Agreement Dated April 25, 1997
Dear ▇▇▇:
Per your phone conversation with ▇▇▇▇▇ ▇▇▇▇▇, you have advised First Union
of your desire to repurchase additional shares of common stock from working
capital and other sources deemed appropriate by the officers of the corporation.
Whereas the current loan agreement, as amended, limits the purchase to
$15,000,000, you have requested an amendment to the loan agreement to increase
this limit to $20,000,000. Our consent to this increase is hereby granted.
We will follow up this letter with a formal amendment to the loan
agreement. Please have ▇▇. ▇▇▇▇▇▇▇▇ sign the acknowledgement line below and
return to First Union. A return envelope is provided for your convenience.
Should you have any questions, please feel free to contact me at ▇▇▇-▇▇▇▇.
Sincerely,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
ACKNOWLEDGEMENT OF AMENDMENT:
Optical Cable Corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Date: 12/23/99
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cc: ▇▇▇▇▇ ▇. ▇▇▇▇▇
October 3, 2001
▇▇. ▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Chief Financial Officer
Optical Cable Corporation
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Loan Agreement Dated March 10, 1999, $5,000,000 and $10,000,000 Promissory
Notes Dated March 10, 1999, Security Agreements Dated March 13, 1996 and
April 25, 1997 respectively, as renewed and amended (collectively, the
"First Union Loan Documents")
Dear ▇▇▇▇:
Thank you for meeting with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and me last
Tuesday, September 25, 2001. Prior to and during our meeting, we discussed
several important business and financial points concerning the financial
performance of Optical Cable Corporation ("Optical Cable") and compliance with
the First Union Loan Documents.
You asked us to amend or waive two Events of Default that occurred and
remain outstanding since filing your 10Q on September 14, 2001 for the period
ending July 31, 2001. First, by letter dated December 15, 1999, the limits of
repurchase of common stock were raised from $15,000,000 to $20,000,00. It has
come to our attention the $20,000,000 limit was exceeded. Second, the Loan
Agreement specifies the use of loan proceeds be limited to working capital
purposes. Working capital purposes are limited to short term uses in the
ordinary course of business of Optical Cable, and do not include purchase of
common stock of the Company for the Treasury. These Events of Default remain
outstanding.
During our meeting we asked for information that would help us respond to
your request to waive the Events of Default. Included in our information
request is a financial forecast for the quarter ending October 31, 2001, budget
for the first half of fiscal 2002 and year end, if possible, plus a precise
final count of the repurchased shares. We have also determined that we need
monthly financial statements for August and September as well as for succeeding
months on an ongoing basis.
Through the close of business October 1, 2001 the combined balance
outstanding on the $5 million and $10 million loans is $7,112,000.00. The
balance of the $5 million Sweep+ line is $2,612,000.00 after transferring
$4,500,000 to the $10 million line. The transfer was effective September 5,
2001. Also, during our meeting you indicated the need for minimal additional
usage under the lines as the last stock redemption occurred on Friday, September
21, 2001. According to our records there was a wire transfer in the amount of
$272,800 to First Star Bank on September 26, which appears to be settlement of
the September 21, 2001 stock purchase.
Since Events of Default remain outstanding, we are limiting the
availability under Optical Cable's lines to a level consistent with its working
capital needs. Effective Thursday, October 4, 2001, the combined, total
outstanding under the two lines of credit is limited to $9,500,000.
Notwithstanding the outstanding defaults, First Union National Bank ("FUNB")
will permit a one time only use of up to $500,000 under the lines of credit for
purposes other than working capital purposes. This non-working capital advance
shall be repaid as soon as possible. We reserve all other rights under and in
connection with the First Union Loan Documents including the right to accelerate
obligations under the First Union Loan Documents.
In consideration of First Union's agreement to permit continued usage of
the line as described above, please execute this letter to confirm that Optical
Cable does not have any defenses to the obligations under the First Union Loan
Documents, that Optical Cable does not hold any claims against First Union or
its officers, directors, employees or affiliates, and that Optical Cable waives
any claims it may have against First Union or its officers, directors, employees
or affiliates.
Sincerely,
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
By execution of this letter, Optical Cable Corporation acknowledges and agrees
to all terms of the foregoing letter.
Optical Cable Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: VP Finance
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Date: 10/4/2001
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October 30, 2001
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President, Finance
▇▇. ▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President & CFO
Optical Cable Corporation
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Loan Agreement Dated March 10, 1999, a letter modification to the Loan
Agreement dated December 15, 1999; letter agreement dated October 3, 2001,
$5,000,000 and $10,000,000 Promissory Notes Dated March 10, 1999; and Security
Agreements Dated March 13, 1996 and April 25, 1997 respectively, all as renewed
and amended (collectively, the "First Union Loan Documents")
Dear ▇▇▇ and ▇▇▇▇:
Reference is made to the First Union Loan Documents cited above between Optical
Cable Corporation (the "Borrower") and First Union National Bank (the "Bank").
The First Union Loan Documents and all other documents executed and delivered in
connection therewith are collectively referred to herein as the "Loan
Documents". All capitalized terms used but not defined herein shall have the
meanings assigned in the Loan Documents.
(1) The Loan Agreement dated March 10, 1999 provides:
Borrower shall not "Retire or otherwise acquire its capital stock
in an amount greater than $15,000,000." This limitation was
subsequently increased to $20,000,000 in a letter dated December
15, 1999.
Based on information provided by the Borrower, stock repurchased
amounted to $24,179,403.26 through September 20, 2001, exceeding the
$20,000,000 limitation on August 16, 2001. The Borrower has requested
the Bank's waiver of this violation and amendment of the limitation to
$25,000,000. The Bank does hereby waive the Borrower's defaults under
this provision, subject to Borrower's execution of and return of this
letter confirming its consent to the terms contained herein. The Loan
Agreement will be modified to provide that the Retire or Repurchase
Capital Stock section in the Negative Covenants paragraph will be
deleted in its entirety and replaced with the following:
October 30, 2001
Page 2
Retire or Repurchase Capital Stock. Borrower shall not retire or
otherwise acquire any of its capital stock at any time following
September 20, 2001. If Borrower reduces the combined outstanding
obligations under both the $5,000,000 line of credit and the
$10,000,000 line of credit to $0.00 for a period of 30 consecutive
days, then Borrower may spend up to $820,596.74 to retire or acquire
its capital stock.
(2) The Loan Agreement dated March 10, 1999 also provides the following
requirement for each Line of Credit:
"The Loan proceeds are to be used by Borrower solely for
financing working capital."
Based on the schedule of purchases provided by the Borrower, stock
repurchased during the Borrower's third and fourth quarters of fiscal
2001 (from July 11, 2001 through and including September 20, 2001)
amounted to $7,711,164.62. These purchases were largely financed
through borrowings under the $10,000,000 line of credit and the
$5,000,000 line of credit. Borrower acknowledges that this is not a
permitted use of the loan proceeds. The Borrower has requested the
Bank's waiver, and the Bank does hereby waive the Borrower's default
under this provision, subject to Borrower's execution of and return of
this letter.
These waivers are limited to the defaults recited above and shall not be
construed to be a waiver of any subsequent default under the referenced
provisions, or of any existing or future defaults under any other provision of
any Loan Document.
First Union will continue to limit the availability under Optical Cable's lines
to a level consistent with its working capital needs. The limitation of the
combined availability under the $10,000,000 line of credit and the $5,000,000
line of credit to a maximum combined amount of $9,500,000 will continue for the
balance of the term of the lines of credit unless otherwise agreed to by Bank in
writing. The purpose of each facility will continue to be Working Capital.
Working capital purposes are limited to short term uses in the ordinary course
of business of Optical Cable, and do not include purchase of common stock of the
Company for the Treasury.
The foregoing modifications will be incorporated in an amended and restated loan
agreement which will be executed by Bank and Borrower.
The Borrower, by signature below, represents and warrants that there exist no
defaults or event of default under the Loan Documents other than those
specifically waived herein, that the Loan Documents are in full force and
effect, and that Borrower does not have any defenses to its obligations under
the Loan Documents nor any claims against Bank.
October 30, 2001
Page 3
Please evidence your acceptance of the terms of this waiver by signing and
returning to the Bank a copy of this letter bearing original authorized
signature of each of the parties indicated.
Sincerely,
▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
By execution of this letter, Optical Cable Corporation acknowledges and agrees
to all terms of the foregoing letter.
Optical Cable Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: VP Finance
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Date: 11/13/01
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