AAOI Applied Optoelectronics Inc

On April 17, 2020, Applied Optoelectronics, Inc. (the “Company”) executed a promissory note in the principal amount of $6,228,895.00 as part of the Paycheck Protection Program (the “PPP Loan”) administered by the Small Business Administration (the "SBA") and authorized under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Company applied for the PPP Loan, through its financial institution Truist Bank (the “Lender”).

The PPP Loan is evidenced by an unsecured promissory note issued by the Company (the “Promissory Note”) which matures 24 months after the date of funding, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness, discussed below, will commence on November 17, 2020. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the PPP Loan at any time without incurring any prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the SBA and Lender upon application by the Company and documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities during the eight week period beginning on the date of loan approval. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the Paycheck Protection Program, the amount forgiven is applied to outstanding principal.

The foregoing description of the PPP Loan does not purport to be a complete statement of the parties’ rights and obligations under the agreement and is qualified in its entirety by reference to the full text of the Paycheck Protection Program Loan Promissory Note which is attached as Exhibit 10.1 to this Current Report on Form 8-K and are incorporated by reference herein.