Item 1.01 Entry into a Material Definitive Agreement.
The loan will have a seven month draw down period with interest payments due monthly commencing one month from the date of first draw and ending on the last day of the seven month draw down period. Thereafter, the entire outstanding principal balance shall be converted to a fifty three (53) month fully amortized term loan. The Company will make payments of equal principal plus accrued interest each month with the final monthly payment being for all principal and all accrued interest not yet paid. The Company may pay without penalty all or a portion of the amount owed earlier than due.
Under the Loan Agreements, the loan bears interest at an annual rate based on the London Interbank Offered Rate (LIBOR) for deposits in U.S. Dollars plus 2.75%.
The Company's obligations under the Loan Agreements will be secured by substantially all of the Company's tangible and intangible property, including but not limited to the Company's inventory, accounts, instruments, and equipment.
The Loan Agreements shall be subject to customary financial covenants, including the maintenance of a minimum adjusted current ratio, measured on a quarterly basis, of 1.35 to 1.00, and minimum Adjusted EBITDA, measured quarterly on a rolling-4-quarter basis, of greater than or equal to
The Loan Agreements contain customary events of default that include, among others, non-payment of principal, interest or fees, violation of certain covenants, defective collateralization, inaccuracy of representations and warranties, and insolvency events. The occurrence of an event of default will increase the applicable rate of interest by 2.00% and could result in the acceleration of the Company's obligations under the Loan Agreements.
The foregoing description of the Loan Agreements does not purport to be a complete statement of the parties' rights and obligations under the Loan Agreements and is qualified in its entirety by reference to the full text of the Loan Agreements, copies of which are attached as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K and incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits 10.1 Business Loan Agreement, dated
July 31, 2014, between Applied Optoelectronics, Inc.and East West Bank. 10.2 Commercial Security Agreement, dated July 31, 2014, between Applied Optoelectronics, Inc.and East West Bank. 10.3 Promissory Note, dated July 31, 2014, between Applied Optoelectronics, Inc.and East West Bank. 2