EXHIBIT 10.6
LOAN AGREEMENT
FIRST UNION NATIONAL BANK
000 X. XXXXXXXXX XXXXXX
Xxxxxxx, Xxxxxxxx 00000
(Hereinafter referred to as the "Bank")
OPTICAL CABLE CORPORATION
0000 XXXXXXXXX XXXXX
XXXXXXX, XXXXXXXX 00000
(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
Xxxxxx Xxxxxxxx.
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/ Xxxxxx Xxxxxxxx
Seal ------------------------
Xxxxxx Xxxxxxxx
President
TAXPAYER IDENTIFICATION NUMBER(S):
OPTICAL CABLE CORPORATION 00-0000000
FIRST UNION NATIONAL BANK
By: /s/ Xxxxx Xxxxx
------------------------
Xxxxx Xxxxx
Senior Vice President
49548
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