Document:

Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AGREEMENT

 

THIS SECOND AMENDMENT
TO LOAN AGREEMENT (this "Amendment") is made and entered into this first day of February, 2019, by and between
Applied Optoelectronics, Inc., a Delaware corporation (hereinafter referred
to as "Borrower") with its chief executive office and principal place of business at 13139 Jess Pirtle Blvd.,
Sugar Land, Texas 77478, and Branch Banking and Trust Company, a North Carolina
corporation (hereinafter referred to as "Bank") with an office at 333 Clay Street, Suite 3800, Houston, Texas
77002.

 

Recitals:

 

Bank and Borrower are
parties to a certain Loan Agreement dated September 28, 2017 (as at any time amended, restated, supplemented or otherwise modified,
the "Loan Agreement"), pursuant to which Bank has made loans and other financial accommodations to Borrower.

 

Borrower has requested
that Bank amend the Loan Agreement in certain respects, and Bank is willing to do so on the terms and subject to the conditions
of this Amendment.

 

NOW, THEREFORE, for
TEN DOLLARS ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby severally
acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.      Definitions.
Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the respective meanings ascribed to
such terms in the Loan Agreement.

 

2.      Amendments
to Loan Agreement. The Loan Agreement is hereby amended as follows:

 

(a)     By
deleting in its entirety the first paragraph of the Loan Agreement after the caption "CapEx Loan" and by substituting
in lieu thereof the following:

 

CapEx Loan

 

During the period beginning on March
30, 2018, and ending on September 30, 2019 (such period is referred to herein as the "CapEx Loan Term") and subject to
the terms and conditions of this Agreement (including, without limitation, the CapEx Loan Conditions (as defined below) and the
other Loan Documents, Bank agrees to make one or more additional advances to Borrower ("CapEx Loan Advances"), the proceeds
of which may only be used for the purchase of Approved Equipment (as defined below). The aggregate amount of CapEx Loan Advances
is referred to herein as the "CapEx Loan." The CapEx Loan shall be evidenced by a Promissory Note made by Borrower payable
to the order of Bank and dated the First Amendment Date, in the maximum aggregate principal amount of the CapEx Loan, and interest
shall accrue on CapEx Loan Advances at the rate set forth in such Promissory Note.

 

(b)      By inserting in Section 3.08 of the Loan Agreement the following new paragraph immediately after the heading "Reporting
Requirements. Furnish to Bank:" and immediately before the paragraph that begins "Quarterly Financial Statements"
in such Section:

 

Monthly Financial Statements:
As soon as available and not more than thirty (30) days after the end of each calendar month, balance sheets, statements of income,
cash flow, and retained earnings for the period ended and a statement of changes in the financial position, all in reasonable detail,
and all prepared in accordance with GAAP consistently applied and certified as true and correct by an officer of the Borrower.

 

 

 

 

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(c)     By deleting in its entirety the paragraph beginning with the caption "Fixed Charge Coverage Ratio "in Section
5 of the Loan Agreement in its entirety and by substituting in lieu thereof the following:

 

Fixed Charge Coverage Ratio:
A Fixed Charge Coverage Ratio of not less than 1.5 to 1.0, measured quarterly as of the last day of each fiscal quarter. Fixed
Charge Coverage Ratio means a ratio of (i) (a) EBITDA as of the last day of the applicable fiscal quarter minus (b) dividends and
distributions to, and withdrawals by, owners during the four consecutive fiscal quarter period ending on the last day of the applicable
fiscal quarter minus (c) Unfinanced Capital Expenditures as of the last day of the applicable fiscal quarter to (ii) the sum of
interest expense and the current portion of long-term debt for the four consecutive fiscal quarter period ending on the last day
of the applicable fiscal quarter. Net Income means the net income of Borrower for the applicable fiscal period, calculated in accordance
with GAAP. EBITDA means the sum of Net Income, plus, to the extent deducted in the calculation of Net Income, (A) interest
expense, income taxes, depreciation and amortization for the four consecutive fiscal quarter period ending on the last day of the
applicable fiscal quarter (and, for the avoidance of doubt, EBITDA does not include any cash equity contributions to the capital
of Borrower), plus (B) (without duplication) (i) any equity based or non-cash compensation expense arising in such period
from grants of stock options, restricted stock or other rights to equity interests in Borrower, (ii) any net unrealized gain or
loss (after any offset) resulting in such period from foreign currency exchange transactions, to the extent such gains or loss
are non-cash items, (iii) other non-cash charges during such period (other than any accrual in respect of bonuses); provided, in
each case, that if any non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of
a prepaid cash item that was paid in a prior period), and (iv) non-recurring charges during such period to the extent that Bank
consents to such add-back. Unfinanced Capital Expenditures means, as of any date of determination, an amount equal to the greater
of (I) (A) cash expenditures made by Borrower for the purchase of property, plant and equipment and comparable items reported in
Borrower’s 10Q or 10K report, as applicable, during the four consecutive fiscal quarter period ending on such date of determination
in excess of the respective amounts set out in the chart below that are so reported as having been expended during the indicated
fiscal quarters less (B) proceeds from the issuance of notes payable and long-term debt received during the four consecutive fiscal
quarter period ending on such date of determination, in each case as determined by Bank based on Borrower’s 10Q or 10K reports,
as applicable, filed with the Securities and Exchange Commission pertaining to such four consecutive fiscal quarter period, less
(C) cash equity contributions made to the capital of Borrower during the four consecutive fiscal quarter period ending on such
date of determination, and (II) $0.00; provided that, for purposes of calculating the Unfinanced Capital Expenditures during any
four fiscal quarter period ending on such date of determination, cash expenditures as described in the foregoing clause (I)(A)
shall be included only to the extent that the aggregate amount of such cash expenditures made during the individual designated
fiscal quarter in the following chart exceeds the corresponding amount for that fiscal quarter in the chart:

 

	
        Fiscal Quarter Ending on:
	Include in Unfinanced Capital Expenditures Only Cash Expenditures in Excess of:
	 	 
	December 31, 2018	$20,000,000.00
	March 31, 2019	$40,000,000.00
	June 30, 2019	$35,000,000.00
	September 30, 2019	$20,000,000.00
	December 31, 2019	$10,000,000.00
	March 31, 2020 and the last day of each fiscal quarter thereafter	$0.00

 

(d)    By deleting in its entirety the paragraph entitled "Notice and Right to Cure" at the end of Section
8 of the Loan Agreement immediately following Section 8.25 thereof and by substituting in lieu thereof the following:

 

 

 

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Notice and Right to Cure.

 

(a)       Notwithstanding
any provision contained in this Agreement, the Note(s) or any other Loan Document to the contrary but subject to the provisions
of clauses (b) and (c) below, during the existence of any Event of Default Bank’s right to exercise its remedies as a result
of such Event of Default shall be immediate and without notice, including, without limitation, with respect to (i) any Event of
Default under Section 8.05 that arises out of a breach of any of Sections 3.01 (other than 3.01(c)), 3.03, 3.04, 3.05, 3.07, 3.08
(other than with respect to the Monthly Financial Statements, Quarterly Financial Statements, Annual Financial Statements, Loan
Base Report and Officer Compliance Certificate subsections contained therein), 3.09, 3.11, and 3.12, the Financial Covenants of
Section 5, the Negative Covenants of Section 6, (ii) any Event of Default that arises out of a breach of any covenant set forth
in Section DD.05, DD.06, DD.09(b) or DD.09(i) of Schedule DD, or in Section 4.4, 4.7, 4.9 or 6 of the Security Agreement, and (iii)
any other Event of Default under Section 8.

 

(b)       Without
any obligation of Bank to provide notice thereof, any breach of Section 3.01(c) or 3.08 (solely with respect to the Loan Base Report,
Monthly Financial Statements, Quarterly Financial Statements, Annual Financial Statements, and Officer Compliance Certificate subsections
thereof) shall not result in an Event of Default until the applicable date set forth below occurs and as of such date Borrower
has failed to cure such breach to the satisfaction of Bank: (i) with respect to a breach of Section 3.01(c), the thirtieth (30th)
day following the occurrence of such breach, (ii) with respect to a breach of the Loan Base Report subsection of Section 3.08,
the fifth (5th) day following the occurrence of such breach, and (iii) with respect to a breach for failure to timely
deliver the Monthly Financial Statements, Quarterly Financial Statements, Annual Financial Statements, or Officer Compliance Certificate
required to be delivered pursuant to Section 3.08, the earlier of (A) the thirtieth (30th) day following the occurrence
of such breach, and (B) the date on which the Borrower files the financial statements corresponding to such breach with the Securities
and Exchange Commission. During any cure period with respect to a breach described in this clause (b) (and thereafter if, and only
if, such breach is cured to the satisfaction of Bank prior to the expiration of such cure period), such breach shall not constitute
an Event of Default, but Borrower shall not be permitted to take any action that it would not be permitted to take during the existence
of an Event of Default.

 

(c)       With
respect to any Event of Default that would arise under Section 8.05 due to a breach of any section of this Agreement or any other
Loan Document (other than any section described in clause (a) or (b) of this paragraph), such breach shall not result in an Event
of Default until the thirtieth (30th) day following the earlier of the date on which Borrower (i) has knowledge thereof
or (ii) receives notice thereof from Bank (provided that Bank shall have no obligation to provide notice thereof); provided,
however, that the opportunity to cure pursuant to this clause (c) shall not apply if (A) the breach or failure to perform
is not capable of being cured within such period or is a willful breach by Borrower, or (B) an Event of Default (or cure pursuant
to this clause (c)) has occurred within the preceding twelve (12) months with respect to a breach of the same section of this Agreement
or other Loan Document. During any cure period with respect to a breach described in this clause (c) (and thereafter if, and only
if, such breach is cured to the satisfaction of Bank prior to the expiration of such cure period), such breach shall not constitute
an Event of Default, but Borrower shall not be permitted to take any action that it would not be permitted to take during the existence
of an Event of Default and Bank shall have no obligation to make any advance or other extension of credit to Borrower.

 

 

 

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(e)     By
deleting in its entirety clause (c) of the definition of "CapEx Loan Conditions" in Section 10.01 of the
Loan Agreement and by substituting in lieu thereof the following:

 

(c)       the
proceeds of each CapEx Loan Advance shall not exceed 80% of the Equipment Purchase Price of the Approved Equipment purchased between
October 1, 2017 and September 30, 2019, for which such CapEx Loan Advance is requested, and the principal amount of the CapEx Loan
Advance requested, together with the principal amount of all CapEx Loan Advances made prior to or contemporaneously with such requested
CapEx Loan Advance, shall not exceed $26,000,000.00 (i.e., the maximum aggregate principal amount of the CapEx Loan);

 

(f)     By
adding the following new definition of "Second Amendment Date" to Section 10.01 of the Loan Agreement
in proper alphabetical order:

 

"Second Amendment Date"
shall mean February 1, 2019.

 

(g)    By deleting in their entireties clauses (o) and (s) Section DD.01 of Schedule DD to the Loan Agreement, and by substituting
in lieu thereof the following new clauses in proper alphabetical order:

 

(o)       Cross
Aging Rule. Should any Account Debtor (other than a Designated Extended Terms Account Debtor) have 50% or more, or should any
Designated Extended Terms Account Debtor have 25% or more (or, upon notice by Bank to Borrower, such other percentage as Bank in
its discretion shall determine with respect to any Account Debtor) of its total aggregate Accounts aged in excess of the applicable
Eligibility Period, then all Accounts from such Account Debtor shall be deemed ineligible.

 

(q)       Eligible
Investment Grade Account. An Account which is not an Ineligible Account, as defined in Section DD.03 hereof, and which is owing
from any Person that either (i) has a rating equal to or higher than Baa3 (or the equivalent) by Moody’s or BBB- (or the
equivalent) by S&P, or if the Person is not then rated by Moody’s or S&P, an equivalent rating by any other rating
agency, or (ii) has a total market value of its outstanding publicly traded equity interests of not less than $3 billion and has
no long term debt; provided, that Borrower shall identify in each Loan Base Report each Account that constitutes an Eligible
Investment Grade Account at the time of delivery of such Loan Base Report.

 

(s)       Eligibility
Period. The Eligibility Period for any Account other than an Extended Terms Eligible Account (as defined below) shall mean
not more than 90 days from the original invoice date. The Eligibility Period for any Extended Terms Eligible Account shall mean
that the Account is due or unpaid more than 30 days beyond the original invoice due date not to exceed 120 days after the original
invoice date.

 

(h)    By inserting the following new definitions of "Designated Extended Terms Account Debtor," "Eligible
Foreign Account" and "Extended Terms Eligible Account" in Section DD.01 of Schedule DD to the
Loan Agreement in proper alphabetical sequence:

 

(o)(1)   Designated Extended Terms
Account Debtor. A Designated Extended Terms Account Debtor is an Account Debtor as to which all of the following conditions
are satisfied: (A) Borrower has provided to such Account Debtor extended terms for payment of greater than 59 days, but less than
121 days, from the original invoice date, (B) Borrower has requested in writing to Bank that Bank approve such Account Debtor
as a "Designated Extended Terms Account Debtor" and (C) in its sole discretion, Bank has approved such Account Debtor
as a "Designated Extended Terms Account Debtor" in a writing to Borrower; provided that at no time shall the
number of Account Debtors that are "Designated Extended Terms Account Debtors" exceed 10, as determined by Bank in its
sole discretion.

 

(p)(1)   Eligible Foreign Account.
An Eligible Foreign Account is an Account that would be an Eligible Account but for the fact that it is a Foreign Account so long
as such Foreign Account is owing by an Account Debtor all of the equity interests of which are owned, directly or indirectly, and
controlled by a Person that is organized under the law of, and has its chief executive office and principal place of business in,
one of the fifty states comprising the United States of America, the District of Columbia or a territory of the United States of
America; and Eligible Foreign Accounts are, collectively, such Foreign Accounts.

 

 

 

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(s)(1)   Extended Terms Eligible
Account is an Account that is owing by a Designated Extended Terms Account Debtor.

 

(i)      By
deleting in its entirety Section DD.02 of Schedule DD to the Loan Agreement and by substituting in lieu thereof the following
new Section DD.02:

DD.02. Advance Rates/Advances/
Prepayment and Other Provisions.

Bank agrees that the Advance
Rates to be used to calculate the Collateral Loan Value shall be:

 

(a)       90%
against the Eligible Investment Grade Accounts.

(b)       85%
against the Eligible non-Investment Grade Accounts.

(c)       90%
against Eligible Foreign Accounts that are Eligible Investment Grade Accounts,

(d)       85%
against Eligible Foreign Accounts that are not Eligible Investment Grade Accounts,

(e)       Against the Eligible Inventory
as follows:

	 	 	 	 	Inventory Sublimits:
	 	50%	Finished Inventory	 	$N/A 
	 	50%	Raw Materials Inventory	 	$N/A
	 	50%	Work in Process Inventory	 	$N/A
	 	N/A%	In Transit Inventory	 	$N/A
	 	N/A%	Other Eligible Inventory {Describe}	 	$N/A
	 	    	                                   Subtotal	 	$N/A

 

The aggregate loan advances
against Eligible Foreign Accounts shall not exceed at any time the lesser of (i) $5,000,000, and (ii) an amount equal to 15% of
the net amount of all Eligible Accounts that are not Eligible Foreign Accounts (the "Eligible Foreign Accounts Cap").

 

Inventory values will not
exceed the lower of cost or market and, if required by Bank, will be reduced by the LIFO reserve. The aggregate loan advances against
Eligible Inventory shall not exceed at any time the foregoing Inventory Sublimits or Subtotals or an aggregate Inventory Sublimit
of the lesser of (i) $7,500,000 and (ii) 50% of Availability derived from the then outstanding Eligible Accounts (the "Inventory
Caps").

 

Other Collateral may be
included in the Collateral Loan Value as approved from time to time by Bank, together with an Advance Rate determined from time
to time by Bank.

 

Any Account due from a Person
located in the following identified countries, commonwealths, and/or possessions shall not be deemed a Foreign Account: (list)
None.

 

Notwithstanding that the
following Account Debtor(s) are ineligible pursuant to the terms hereof, such Account Debtor(s) shall nonetheless be deemed eligible
by Bank, subject to any limitations and/or advance provisions set forth below, until Bank, upon written notice, in its sole discretion,
shall provide otherwise:

 

	Account Debtor/Address	
        Limitations/Advance Provisions

	 	 
	None.	Not applicable.

 

Bank reserves the right,
upon notice, in its sole discretion, to amend the Eligibility Period, Eligible Foreign Account Cap, Inventory Caps, Advance Rates,
Reserves, or the provisions of Section DD.02(e) and (f) at any time; and, the Loan Base Report, upon receipt by Bank, shall be
subject to Bank’s satisfactory review, acceptance or correction.

 

 

 

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Borrower hereby authorizes
Bank, and Bank hereby agrees to (i) make advances under the Line of Credit automatically, without any request by Borrower upon
the presentment of items drawn against the Operating Account, provided that the Availability, as shown on a current acceptable
Loan Base Report as required herein, and otherwise determined by Bank in its sole discretion after consideration of Collections,
is sufficient to cover such advances, and/or (ii) fund the Operating Account based on request(s) for advances from Borrower to
Bank made orally or in writing, provided that the Availability is sufficient to cover such advances. Borrower shall submit a completed
Loan Base Report to Bank as required, so long as the Line of Credit shall exist, irrespective of the amount of the Line of Credit
remaining unpaid and outstanding. Borrower hereby releases Bank from any liability or obligation for and agrees to indemnify and
hold Bank harmless from and against any loss, cost, damage or expense (including, without limitation, Bank's reasonable attorneys'
fees) incurred or suffered as a result of the payment by Bank of any item drawn against Borrower's checking account that is subsequently
determined to have been improperly paid for any reason, except for the gross negligence or willful misconduct of Bank, as finally
determined by a court of competent jurisdiction. Bank also reserves the right, upon notice, in its sole discretion, to discontinue
the automatic payment of items presented to Bank, and to require written or oral advance requests to be made by Borrower, and should
Bank decide to fund any such advances ("Manual Funding") Bank shall be authorized upon written notice to Borrower to
assess Borrower a Manual Funding fee in an amount to be set forth on the Schedule of Charges.

 

Bank is authorized (without
any further request from Borrower) to advance on behalf of Borrower as a borrowing under the Line of Credit all sums required to
be paid by Borrower to Bank in respect of any Letter of Credit pursuant to the terms of any Application for Letter of Credit (including,
without limitation, all fees associated therewith), but Bank shall have no obligation to make such an advance.

 

Bank may debit the amount
of any payment due pursuant to the Loan Agreement, this Schedule DD or any other Loan Document from the Operating Account, any
deposit account or other account of Borrower maintained with Bank, but Bank shall have no obligation to do so.

 

If, at any time during any
reporting period and pursuant to the most recent Loan Base Report received by Bank, the principal balance outstanding under the
Line of Credit exceeds the lesser of the approved maximum amount of the Line of Credit Commitment Amount or the Collateral Loan
Value reduced by the Reserves (herein an "Overadvance"), Borrower shall immediately prepay the Line of Credit to the
extent necessary to eliminate such excess. For so long as the Overadvance shall exist, and without prejudice to any other rights
Bank may have hereunder, Bank is hereby authorized upon written notice to Borrower to assess an Overadvance fee determined by Bank
in its discretion in an amount to be set forth on the Schedule of Charges.

 

(j)      By deleting in its entirety clause (f) of Section DD.03 of Schedule DD to the Loan Agreement in its entirety, and
by substituting in lieu thereof the following:

 

(f)       Any
Foreign Account, unless such Account shall be insured by Credit Insurance, or such Account shall be supported by a letter of credit
for the benefit of and acceptable to Bank, or such Account shall be eligible pursuant to a duly executed Loan Authorization Agreement
issued by the Small Business Administration of the United States Government in favor of Bank, or such Account is eligible pursuant
to a duly executed Borrower Agreement issued by the Export-Import Bank of the United States in favor of Bank, or such Account is
an Eligible Foreign Account, or such Account is otherwise expressly approved in writing by Bank.

 

 

 

 

 

 

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(k)               
By deleting from Section DD.06 of Schedule DD to the Loan Agreement the description of Financial Statements consisting
of the Required Information, and by substituting in lieu thereof the following new description of such Financial Statements:

 

	Daily	Weekly	Quarterly	Annually	Month-End	 
	 		[X]	 	[X]	Financial Statements,
which shall be due on the forty-fifth (45th) day of each quarter and the thirtieth (30th) day of each month,
as indicated.

 

3.      Ratification
and Reaffirmation. Borrower hereby ratifies and reaffirms the indebtedness under the Loan Agreement and the other Loan
Documents, each of the Loan Documents, and all of Borrower’s covenants, duties, indebtedness and liabilities under the Loan
Documents.

 

4.     Acknowledgments
and Stipulations. Borrower acknowledges and stipulates that each of the Loan Documents executed by Borrower creates legal,
valid and binding obligations of Borrower that are enforceable against Borrower in accordance with the terms thereof; all of the
indebtedness under the Loan Agreement, the Notes and the other Loan Documents is owing and payable without defense, offset or counterclaim
(and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby knowingly and voluntarily
waived by Borrower); the security interests and liens granted by Borrower in favor of Bank are duly perfected, first priority security
interests and liens; and at the beginning of business on January 31, 2019, the unpaid principal amount of the Line of Credit totaled
$0.00 and the unpaid principal amount of the CapEx Loan totaled $18,842,973.01.

 

5.      Representations
and Warranties. Borrower represents and warrants to Bank, to induce Bank to enter into this Amendment, that no Event of
Default or event which, with the passage of time or giving of notice, would become an Event of Default exists on the date hereof;
the execution, delivery and performance of this Amendment have been duly authorized by all requisite corporate action on the part
of Borrower and this Amendment has been duly executed and delivered by Borrower; and all of the representations and warranties
made by Borrower in the Loan Agreement are true and correct on and as of the date hereof.

 

6.      Reference
to Loan Agreement. Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement",
"hereunder", or words of like import shall mean and be a reference to the Loan Agreement, as amended by this Amendment.
Upon the effectiveness of this Amendment, each reference in the Security Agreement to "this Security Agreement", "hereunder",
or words of like import shall mean and be a reference to the Security Agreement, as amended by this Amendment.

 

7.      Breach
of Amendment. This Amendment shall be part of the Loan Agreement and the Security Agreement, and a breach of any representation,
warranty or covenant herein shall constitute an Event of Default.

 

8.      Conditions
Precedent. The amendments contained in Section 2 hereof shall be effective as of the date of this Amendment, subject to
Bank’s receipt of each of the following on or before the date of this Amendment, in form and substance satisfactory to Bank,
together with all originals of the same to the extent requested by Bank in its sole discretion; provided that the amendments
contained in Section 2(c) and Section 2(g) (solely with respect to the new clause DD.01(q) of Schedule DD to the Loan Agreement)
shall be deemed effective as of September 30, 2018, upon such receipt of the following:

 

(a)     A counterpart of this Amendment, duly executed by Borrower;

 

(b)     Resolutions
of Borrower authorizing Borrower to enter into this Amendment and the other documents executed in connection herewith, certified
by an authorized officer of Borrower, and substantially in the form attached hereto as Exhibit A;

 

(c)     All other approvals, opinions or documents as Bank may reasonably request.

 

 

 

 

 

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9.      Expenses
of Bank. In consideration of Bank’s willingness to enter into this Amendment as set forth herein, Borrower agrees
to pay, on demand, all costs and expenses incurred by Bank in connection with the preparation, negotiation and execution
of this Amendment and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements
thereto, including, without limitation, the costs and fees of Bank’s legal counsel and any taxes, filing fees and other expenses
associated with or incurred in connection with the execution, delivery or filing of any instrument or agreement referred to herein
or contemplated hereby.

 

10.    Release
of Claims. To induce Bank to enter into this Amendment, Borrower hereby releases, acquits
and forever discharges Bank, and all officers, directors, agents, employees, successors and assigns of Bank, from any and
all liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any), whether absolute or contingent,
disputed or undisputed, at law or in equity, or known or unknown, that Borrower now has or ever had against Bank arising under
or in connection with any of the Loan Documents or otherwise. Borrower represents and warrants to Bank that Borrower has not transferred
or assigned to any Person any claim that Borrower ever had or claimed to have against Bank.

 

11.    Governing
Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Texas.

 

12.    No Novation,
etc. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision
of the Loan Agreement, the Security Agreement or any of the other Loan Documents, each of which shall remain in full force and
effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the
Loan Agreement and the Security Agreement as herein modified shall continue in full force and effect.

 

13.    Successors
and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors
and assigns.

 

14.    Further
Assurances. Borrower agrees to take such further actions as Bank shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby.

 

15.    Miscellaneous.
This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement.
Any manually executed signature page to this Amendment delivered by a party by facsimile or other electronic transmission shall
be deemed to be an original signature hereto. Section titles and references used in this Amendment shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto. This Amendment expresses
the entire understanding of the parties with respect to the subject matter hereof and may not be amended except in a writing signed
by the parties.

 

16.   Waiver
of Jury Trial. To the fullest extent permitted by applicable law, each party hereby waives the right to trial by jury in any
action, suit, counterclaim or proceeding arising out of or related to this Amendment.

 

[Remainder of page intentionally left blank;

signatures appear on following page.]

 

 

 

 

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IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on
the date first written above.

 

	WITNESS:	 	APPLIED OPTOELECTRONICS, INC.
	 	 	(“Borrower”)
	 	 	 
	__________________________	 	By: /s/ Stefan Murry                               
	 	 	  Stefan Murry,
    Chief Financial Officer 
	 	 	 
	__________________________	 	By: /s/ David Kuo                                   
	 	 	  David Kuo,
    Vice President, General Counsel and Secretary
	 	 	 
	 	 	 
	 	 	 
	WITNESS:	 	BRANCH BANKING AND TRUST COMPANY
	 	 	(“Bank”)
	 	 	 
	__________________________	 	By: /s/ Brannon E. Fitch                    
	 	 	  Brannon E. Fitch, Senior Vice
President
	 	 	 
	 	 	 

 

 

 

 

 

 

 

 

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EXHIBIT A

 

Resolutions

 

(See attached.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SECRETARY’S CERTIFICATE

OF

BOARD OF DIRECTORS RESOLUTIONS

 

I, David Kuo, DO HEREBY
CERTIFY, that I am the Vice President, General Counsel and Secretary of APPLIED OPTOELECTRONICS, INC. (the "Corporation"),
a corporation duly organized and existing under the laws of the State of Delaware, and am keeper of the records and seal thereof;
that the following is a true, correct and complete copy of the resolutions duly adopted by the unanimous consent of all members
of the Board of Directors of said Corporation effective as of March 30, 2018; and that said resolutions are still in full force
and effect:

 

RESOLVED, that
the Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, any Vice President, Secretary, Assistant
Secretary, Treasurer, Assistant Treasurer, General Counsel and any other officer or board member of this Corporation (or the designee
of any of them), each be, and each hereby is, authorized and empowered (either alone or in conjunction with any one or more of
the other officers of the Corporation) to take, from time to time, all or any part of the following actions on or in behalf of
the Corporation: (i) to make, execute and deliver to BRANCH BANKING AND TRUST ("Bank") (1) a
Second Amendment to Loan Agreement (the "Amendment") providing for the amendment of certain terms of that certain
Loan Agreement dated September 28, 2017, between the Corporation and Bank (as at any time amended, the "Loan Agreement"),
and (2) all other agreements, documents and instruments contemplated by or referred to in the Amendment or executed by the Corporation
in connection therewith; said Amendment and other agreements, documents and instruments to be substantially in the form presented
by Bank with such additional, modified or revised terms as may be acceptable to any officer or director of the Corporation, as
conclusively evidenced by his or her execution thereof; and (ii) to carry out, modify, amend or terminate any arrangements
or agreements at any time existing between the Corporation and Bank.

 

RESOLVED, that
any arrangements, agreements, security agreements, or other instruments or documents referred to in or executed pursuant to the
Amendment by Dr. Stefan Murry, David Kuo, Fred Chang, any other officer or director of the Corporation, or by an employee of the
Corporation acting pursuant to delegation of authority, may be attested by such person and may contain such terms and provisions
as such person shall, in his or her sole discretion, determine.

 

RESOLVED, that
the Loan Agreement and each amendment to the Loan Agreement heretofore executed by any officer or director of the Corporation and
any actions taken under the Loan Agreement as thereby amended are hereby ratified and approved.

 

I DO FURTHER CERTIFY
that Dr. Stefan Murry is the Chief Financial Officer of the Corporation, David Kuo is the Vice President, General Counsel and Secretary
of the Corporation and Fred Chang is the Senior Vice President of the Corporation, and each is duly elected, qualified and acting
as such, respectively.

 

I DO FURTHER CERTIFY
that the Corporation’s Amended and Restated Certificate of Incorporation and By-Laws certified to Bank on September 28, 2017,
have not been amended, supplemented or otherwise modified in any manner since such date and remain in full force and effect as
of the date hereof.

 

IN WITNESS WHEREOF,
I have hereunto set my hand and affixed the Seal of the Corporation this first day of February, 2019.

 

	 	/s/ David Kuo                                    
	 	David Kuo, Vice President, General Counsel
    and Secretary
	 	 

 

I, Dr. Stefan Murry,
Chief Financial Officer of said Corporation, do hereby certify that the foregoing is a correct copy of the resolutions passed by
the Board of Directors of the Corporation and that David Kuo is Vice President, General Counsel and Secretary of the Corporation
and is duly authorized to attest to the passage of said resolutions.

 

	 	/s/ Stefan Murry                                    
	 	Stefan Murry, Chief Financial Officer
	 	 

 

 

 

 

 

 

 

    	 	11Exhibit

Exhibit 10.1

FORM OF CHANGE IN CONTROL AGREEMENT

This CHANGE IN CONTROL AGREEMENT ("Agreement") is made as of _____, between UGI Utilities, Inc. (the "Company") and _____ (the "Employee").

WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management to their assigned duties without distraction arising from the possibility of a Change in Control (as defined below), although no such change is now contemplated;

WHEREAS, in order to induce the Employee to remain in the employ of the Company, the Company agrees that the Employee shall receive the compensation set forth in this Agreement in the event the Employee's employment with the Company is terminated in connection with a Change in Control as a cushion against the financial and career impact on the Employee of any such Change in Control;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereby agree as follows:

1.    Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires:

(a)    "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of Regulation 12B under the Exchange Act and shall include, without
limitation, UGI Corporation and its subsidiaries.

(b)    A Person shall be deemed the "Beneficial Owner" of any securities: (i) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of Regulation 13D-G under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of any security under this clause (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and 

in accordance with, the applicable provisions of the Proxy Rules under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to clause (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this Section 1(b) shall cause a Person engaged in business as an underwriter of securities to be the "Beneficial Owner" of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition.

(c)    "Board" shall mean the Board of Directors of the Company.

(d)    "Cause" shall mean (i) misappropriation of funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime involving moral turpitude, or (iv) gross negligence in the performance of duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company. The determination of Cause shall be made by an affirmative vote of at least two-thirds of the members of the Board at a duly called meeting of the Board.

(e)    "Change in Control" shall have the meaning set forth in the attached Exhibit A to this Agreement.

(f)    "COBRA Cost" shall mean 100% of the "applicable premium" under section 4980B(f)(4) of the Code for continued medical and dental COBRA Coverage under the
Company's benefit plans.

(g)    "COBRA Coverage" shall mean continued medical and dental coverage under the Company's benefit plans, as determined under section 4980B of the Code.

(h)    "Code" shall mean the Internal Revenue Code of 1986, as amended.

(i)    "Compensation Committee" shall mean the Compensation and Management Development Committee of the Board.

(j)    "Continuation Period" shall mean the ___-year period beginning on the Employee's Termination Date.

(h)    "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

(i)    "Executive Severance Plan" shall mean the Company's Senior Executive Employee Severance Pay Plan, as in effect from time to time.

(j)    "Good Reason Termination" shall mean a Termination of Employment initiated by the Employee upon one or more of the following occurrences:

(i)    a material breach by the Company of any terms of this Agreement, including without limitation a material breach of Section 2 or 13 of this Agreement;

(ii)    a material diminution in the authority, duties or responsibilities held by the Employee immediately prior to the Change in Control;

(iii)    a material diminution in the Employee's base compensation as in effect immediately prior to the Change in Control; or

(iv)    a material change in the geographic location at which the Employee must perform services (which, for purposes of this Agreement, means the Employee is required to report, other than on a temporary basis (less than 12 months), to a location which is more than 50 miles from the Employee's principal place of business immediately preceding the Change in Control, without the Employee's express written consent).

Notwithstanding the foregoing, the Employee shall be considered to have a Good Reason Termination only if the Employee provides written notice to the Company, pursuant to Section 3, specifying in reasonable detail the events or conditions upon which the Employee is basing such Good Reason Termination and the Employee provides such notice within 90 days after the event that gives rise to the Good Reason Termination. Within 30 days after notice has been provided, the Company shall have the opportunity, but shall have no obligation, to cure such events or conditions that give rise to the Good Reason Termination. If the Company does not cure such events or conditions within the 30-day period, the Employee may terminate employment with the Company based on Good Reason Termination within 30 days after the expiration of the cure period.

(n)    "Key Employee" shall mean an employee who, at any time during the 12-month period ending on the identification date, is a "specified employee" under section 409A of the Code, as determined by the Compensation Committee or its delegate. The determination of Key Employees, including the number and identity of persons considered specified employees and the identification date, shall be made by the Compensation Committee or its delegate in accordance with the provisions of section 409A of the Code and the regulations issued thereunder.

(o)    "Postponement Period" shall mean, for a Key Employee, the period of six months after separation from service (or such other period as may be required by section 409A of the Code), during which severance payments may not be paid to the Key Employee under section 409A of the Code.

(p)    "Release" shall mean a release of any and all claims against the Company, its Affiliates, its Subsidiaries and all related parties with respect to all matters arising out of the Employee's employment by the Company and its Affiliates and Subsidiaries, or the termination 

thereof (other than claims relating to amounts payable under this Agreement or benefits accrued under any plan, program or arrangement of the Company or any of its Subsidiaries or Affiliates) and shall be in the form required by the Company of its terminating executives immediately prior to the Change in Control.
(q)    "Subsidiary" shall mean any corporation in which the Company, directly or indirectly, owns at least a 50% interest or an unincorporated entity of which the Company, directly or indirectly, owns at least 50% of the profits or capital interests.

(r)    "Termination Date" shall mean the effective date of the Employee's Termination of Employment, as specified in the Notice of Termination.

(s)    "Termination of Employment" shall mean the termination of the Employee's actual employment relationship with the Company and its Subsidiaries and Affiliates.

2.    Employment. After a Change in Control, during the term of the Agreement, Employee shall continue to serve in the same or a comparable executive position with the  Company as in effect immediately before the Change in Control, and with the same or a greater target level of annual and long-term compensation as in effect immediately before the Change in Control.

3.    Notice of Termination. Any Termination of Employment upon or following a Change in Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for the Employee's Termination of Employment under the provision so indicated, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice) except as provided in Section 1(m) above.

4.    Severance Compensation upon Termination of Employment.

(a)    In the event of the Employee's involuntary Termination of Employment by the Company or a Subsidiary or Affiliate for any reason other than Cause or in the event of a Good Reason Termination, in either event upon or within two years after a Change in Control, the Employee will receive the following amounts in lieu of any severance compensation and benefits under the Executive Severance Plan or any other severance plan of the Company or a Subsidiary or Affiliate:

(i)    The Company shall pay to the Employee a lump sum cash payment equal to the greater of (A) or (B) as set forth below:

(A)    The Separation Pay and Paid Notice as calculated under the terms of the Executive Severance Plan based on the Employee's compensation and service as of the Termination Date, or

(B)    ____ multiplied by the sum of (1) the Employee's annual base salary plus (2) the Employee's annual bonus. The annual base salary for this purpose shall be the Employee's annual base salary in effect as of the Employee's Termination Date. The annual bonus shall be calculated for this purpose as the greater of (x) the average annual cash bonus paid to the Employee for the three full fiscal years of the Company preceding the fiscal year in which the Termination Date occurs or (y) the Employee's target annual cash bonus for the fiscal year in which the Termination Date occurs. For purposes of the preceding sentence, if the Employee has not received an annual cash bonus for three full fiscal years, the Employee's average annual cash bonus shall be determined by dividing the total annual cash bonuses received by the Employee during the preceding three full fiscal years by the number of full and fractional years for which the Employee received an annual cash bonus during such three-year period.

(ii)    The Company shall pay to the Employee a single lump sum payment equal to the COBRA Cost that the Employee would incur if the Employee continued medical and dental coverage under the Company's benefit plans during the Continuation Period, based on the benefits in effect for the Employee (and, if applicable, his or her spouse and dependents) at the Termination Date, less the amount that the Employee would be required to contribute for medical and dental coverage if the Employee were an active employee. The cash payment shall include a tax gross up payment equal to 75% of the lump sum amount described in the preceding sentence. The Employee may elect continuation coverage under the Company's applicable medical and dental plans during the Continuation Period by paying the COBRA Cost of such coverage. COBRA Coverage shall run concurrently with the Continuation Period, and nothing in this Section shall limit the Employee's right to elect COBRA Coverage for the full period permitted by law.

(iii)    The Employee's benefit under the Company's executive retirement plan in which the Employee participates shall be calculated as if the Employee had continued in employment during the Continuation Period, earning base salary and bonus at the annual rate calculated under subsection (i)(B) above.

(iv)    The Company shall pay to the Employee an amount equal to the Employee's target annual cash bonus amount for the Company's fiscal year in which the Termination Date occurs, multiplied by the number of months (with a partial month counting as a full month) elapsed in the fiscal year to the Termination Date and divided by 12, as well as any amounts due but not yet paid from the prior year under such plan.

(b)    Notwithstanding the foregoing, no payments shall be made to the Employee under this Section 4 unless the Employee signs and does not revoke a Release. The amounts described in subsections (a) (i), (ii) and (iv) above shall be paid on the 30th day after the Termination Date subject to the Company's receipt of a Release and expiration of the revocation 

period for the Release. Payments under this Agreement shall be made by mail to the last address provided for notices to the Employee pursuant to Section 14 of this Agreement.

5.    Other Payments.

Upon any Termination of Employment entitling the Employee to payments under this Agreement, the Employee shall receive all accrued but unpaid salary and all benefits accrued and payable under any plans, policies and programs of the Company and its Subsidiaries or Affiliates, provided that the Employee shall not receive severance benefits under the Executive Severance Plan or any other severance plan of the Company or a Subsidiary or Affiliate. 

6.    Interest; Enforcement.

(a)    If the Company shall fail or refuse to pay any amounts due the Employee under Section 4 on the applicable due date, the Company shall pay interest at the rate described below on the unpaid payments from the applicable due date to the date on which such amounts are paid. Interest shall be credited at an annual rate equal to the rate listed in the Wall Street Journal as the "prime rate" as of the Employee's Termination Date, plus 1%, compounded annually.

(b)    It is the intent of the parties that the Employee not be required to incur any expenses associated with the enforcement of the Employee's rights under this Agreement by arbitration, litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the Company shall pay the Employee on demand the amount necessary to reimburse the Employee in full for all reasonable expenses (including all attorneys' fees and legal expenses) incurred by the Employee in enforcing any of the obligations of the Company under this Agreement. The Employee shall notify the Company of the expenses for which the Employee demands reimbursement within 60 days after the Employee receives an invoice for such expenses, and the Company shall pay the reimbursement amount within 15 days after receipt of such notice.

7.    No Mitigation. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise.

8.    Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company, or any of its Subsidiaries or Affiliates, and for which the Employee may qualify.

9.    No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any 

circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others.

10.    Taxation. All payments under this Agreement shall be subject to all requirements of the law with regard to tax withholding and reporting and filing requirements, and the Company shall use its best efforts to satisfy promptly all such requirements.

11.    Effect of Section 280G on Payments.

(a)    Notwithstanding any other provisions of this Agreement to the contrary, in the event that it shall be determined that any payment or distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), would constitute an "excess parachute payment" within the meaning of section 280G of the Code, the Company shall reduce (but not below zero) the aggregate present value of the Payments under the Agreement to the Reduced Amount (as defined below), if reducing the Payments under this Agreement will provide the Employee with a greater net after-tax amount than would be the case if no reduction was made. The Payments shall be reduced as described in the preceding sentence only if (A) the net amount of the Payments, as so reduced (and after subtracting the net amount of federal, state and local and payroll income taxes on the reduced Payments), is greater than or equal to (B) the net amount of the Payments without such reduction (but after subtracting the net amount of federal, state and local and payroll income taxes on the Payments and the amount of Excise Tax (as defined below) to which the Employee would be subject with respect to the unreduced Payments). Only amounts payable under this Agreement shall be reduced pursuant to this subsection (a). The "Reduced Amount" shall be an amount expressed in present value that maximizes the aggregate present value of Payments under this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax, determined in accordance with section 280G(d)(4) of the Code. The term "Excise Tax" means the excise tax imposed under section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

(b)    All determinations to be made under this Section 11 shall be made by an independent registered public accounting firm or consulting firm selected by the Company immediately prior to the Change in Control, which shall provide its determinations and any supporting calculations both to the Company and the Employee within 10 days of the Change in Control. Any such determination by such firm shall be binding upon the Company and the Employee.

(c)    All of the fees and expenses of the firm in performing the determinations referred to in this Section shall be borne solely by the Company.

12.    Term of Agreement. The term of this Agreement shall be for three years from the date hereof and shall be automatically renewed for successive one-year periods unless the Company notifies the Employee in writing that this Agreement will not be renewed at least 60 days prior to the end of the then current term; provided, however, that (i) if a Change in Control 

occurs during the term of this Agreement, this Agreement shall remain in effect for two years following such Change in Control or until all of the obligations of the parties hereunder are satisfied or have expired, if later, and (ii) this Agreement shall terminate if the Employee's employment with the Company terminates for any reason before a Change in Control (regardless of whether the Employee is thereafter employed by a Subsidiary or Affiliate of the Company).

13.    Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to notify the Employee in writing as to such successorship, to provide the Employee the opportunity to review and agree to the successor's assumption of this Agreement or to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as defined above and any such successor or successors to its business or assets, jointly and severally.

14.    Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows:

If to the Company, to:

460 North Gulph Road
King of Prussia, PA 19406
Attention: Corporate Secretary

If to the Employee, to the most recent address provided by the Employee to the Company or a Subsidiary or Affiliate for payroll purposes,

or to such other address as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change in Control, notice at the last address of the Company or any successor pursuant to Section 13 shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service.

15.    Section 409A of the Code.

(a)    This Agreement is intended to meet the requirements of the "short-term deferral exception," "separation pay exception" and other exceptions under section 409A of the Code, as applicable. However, if the Employee is a Key Employee and if required by section 409A of the Code, no payments or benefits under this Agreement shall be paid to the Employee during the Postponement Period. If payment is required to be delayed for the Postponement Period pursuant to section 409A, the accumulated amounts withheld on account of section 409A, with interest as described in Section 6 above, shall be paid in a lump sum payment within 15 days after the end of the Postponement Period. If the Employee dies during the Postponement Period prior to the payment of benefits, the amounts withheld on account of section 409A, with interest as described above, shall be paid to the Employee's estate within 60 days after the Employee's death.

(b)    Notwithstanding anything in this Agreement to the contrary, if required by section 409A, payments may only be made under this Agreement upon an event and in a manner permitted by section 409A, to the extent applicable. As used in the Agreement, the term  "termination of employment" shall mean the Employee's separation from service with the Company and its Subsidiaries and Affiliates within the meaning of section 409A and the regulations promulgated thereunder. For purposes of section 409A, each payment under the Agreement shall be treated as a separate payment. In no event may the Employee designate the year of payment for any amounts payable under the Agreement. All reimbursements and in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of section 409A of the Code.

16.    Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions.

17.    Contents of Agreement; Amendment. This Agreement supersedes all prior agreements with respect to the subject matter hereof (including without limitation any other change in control agreement in effect between the Company or a Subsidiary or Affiliate and the Employee) and sets forth the entire understanding between the parties hereto with respect to the subject matter hereof. This Agreement cannot be amended except pursuant to approval by the Board and a written amendment executed by the Employee and the Chair of the Compensation Committee. The provisions of this Agreement may require a variance from the terms and conditions of certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof in order to obtain the maximum benefits for the Employee. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board.

18.    No Right to Continued Employment. Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company or a Subsidiary or Affiliate.

19.    Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part.

20.    Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application.

21.    Remedies Cumulative; No Waiver. No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof.

22.    Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. 

23.    Arbitration. In the event of any dispute under the provisions of this Agreement other than a dispute in which the sole relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Montgomery County, Pennsylvania, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before one arbitrator who shall be an executive officer or former executive officer of a publicly traded corporation, selected by the parties. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. The Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrator and any expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses).

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. By executing this Agreement, the undersigned acknowledge that this Agreement replaces and supersedes any other understanding regarding the matters described herein.

UGI Utilities, Inc.

By: _______________________
        

___________________________

EXHIBIT A
UGI UTILITIES, INC.
CHANGE IN CONTROL

For purposes of this Agreement, "Change in Control" shall mean:

(i)    Any Person (except the Employee, his Affiliates and Associates, UGI Corporation ("UGI"). any Subsidiary of UGI, any employee benefit plan of UGI or of any Subsidiary of UGI, or any Person or entity organized, appointed or established by UGI or any Subsidiary of UGI for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner in the aggregate of 20% or more of either (i) the then outstanding shares of common stock of UGI (the "Outstanding UGI Common Stock") or (ii) the combined voting power of the then outstanding voting securities of UGI entitled to vote generally in the election of directors (the "UGI Voting Securities"); or

(ii)    Individuals who, as of the beginning of any 24-month period, constitute the UGI Board of Directors (the "Incumbent UGI Board") cease for any reason to constitute at least a majority of the Incumbent UGI Board, provided that any individual becoming a director of UGI subsequent to the beginning of such period whose election or nomination for election by the UGI  stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent UGI Board shall be considered as though such individual were a member of the Incumbent UGI Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of UGI; or

(iii)    Consummation by UGI of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such Business Combination do not, following such Business Combination, Beneficially Own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be;

(iv)    (A)    Consummation of a complete liquidation or dissolution of UGI or (B) sale or other disposition of all or substantially all of the assets of UGI other than to a corporation with respect to which, following such sale or disposition, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding UGI Common Stock and UGI Voting Securities immediately prior to such sale or disposition in substantially the same proportion as 

their ownership of the Outstanding UGI Common Stock and UGI Voting Securities, as the case may be, immediately prior to such sale or disposition; or

(v)    UGI and its Subsidiaries fail to own more than 50% of the then outstanding shares of common stock of the Company or more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; or

(vi)    Consummation by the Company of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Company's outstanding common stock and voting securities immediately prior to such Business Combination do not, following such Business Combination, Beneficially Own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Company's outstanding common stock and voting securities, as the case may be; or

(vii)    Consummation of a complete liquidation or dissolution of the Company or sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Company's outstanding common stock and voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Company's outstanding common stock and voting securities, as the case may be, immediately prior to such sale or disposition.

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