Document:

GEN-2015.03.31 EX10.2

            Exhibit 10.2

GENMARK DIAGNOSTICS, INC.
MARKET STOCK UNITS GRANT NOTICE 

GenMark Diagnostics, Inc., a Delaware corporation (the “Company”), pursuant to its 2010 Equity Incentive Plan, as amended, (the “Plan”), hereby grants to the holder listed below (the “Participant”), an award (the “Award”) of Market Stock Units (the “Units”), each of which is a right to receive the value of one (1) share of Stock, on the terms and conditions set forth herein and in the attached Market Stock Units Award Agreement (the “Award Agreement”) and the Plan, which are incorporated herein by reference.  This Award is intended to constitute an Award of Performance Units described in Section 10 of the Plan.  Notwithstanding anything in the Plan to the contrary, the determination of the number of Units which vest and/or become settled shall be determined based on the provisions contained in this Grant Notice and the Award Agreement and the provisions set forth in Section 10.7(a) of the Plan (relating to certain Terminations of Service) shall not apply.  Unless otherwise defined below, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Award Agreement.

	
		
	Participant:
	______________________________________

	Grant Date:
	______________________________________

	Target Number of Units:
	___________________, subject to adjustment as provided by the Award Agreement.

	Maximum Number of Units:
	___________________, which is 200% of the Target Number of Units, subject to adjustment as provided by the Award Agreement.

	Performance Periods:
	Subject to Section 9 of the Award Agreement:

	1-Year Performance Period
	The single calendar year beginning January 1, 2015 and ending December 31, 2015.

	2-Year Performance Period
	The two calendar year period beginning January 1, 2015 and ending December 31, 2016.

	3-Year Performance Period
	The three calendar year period beginning January 1, 2015 and ending December 31, 2017.

	Benchmark Index:
	The NASDAQ Composite Index (NASDAQ: IXIC)

	Performance Differential:
	The positive difference (“Positive Performance Differential”) or negative difference (“Negative Performance Differential”), measured in percentage points (rounded to the nearest 1/10th of 1%) for the applicable Performance Period, between the Company Total Stockholder Return and the Benchmark Index Total Return, both determined in accordance with Section 2 of the Award Agreement.

	Performance Multipliers:
	 

	For Positive Performance Differential
	A percentage (rounded to the nearest 1/10th of 1% and not greater than 200%) equal to the sum of (a) 100% plus (b) the product of 2.0 and the Positive Performance Differential.

	For Negative Performance Differential
	A percentage (rounded to the nearest 1/10th of 1% and not less than 0%) equal to (a) 100% reduced by (b) the product of 2.0 and the Negative Performance Differential.

	Earned Units:
	 

	1-Year Performance Period Earned Units
	The number of 1-Year Performance Period Earned Units, if any (not to exceed one-third of the Maximum Number of Units), shall equal the product of (a) one-third of the Target Number of Units and (b) the Performance Multiplier determined for the 1-Year Performance Period.

	
		
	2-Year Performance Period Earned Units
	The number of 2-Year Performance Period Earned Units, if any (not to exceed two-thirds of the Maximum Number of Units when combined with the 1-Year Performance Period Earned Units), shall equal the excess, if any, of (a) the product of (i) two-thirds of the Target Number of Units and (ii) the Performance Multiplier determined for the 2-Year Performance Period, over (b) the 1-Year Performance Period Earned Units.

	3-Year Performance Period Earned Units
	The number of 3-Year Performance Period Earned Units, if any (not to exceed the Maximum Number of Units when combined with the 1-Year Performance Period Earned Units and the 2-Year Performance Period Earned Units), shall equal the excess, if any, of (a) the product of (i) the Target Number of Units and (ii) the Performance Multiplier determined for the 3-Year Performance Period, over (b) the sum of the 1-Year Performance Period Earned Units and the 2-Year Performance Period Earned Units.

	Vesting Date:
	Except as otherwise provided by the Award Agreement, the Vesting Date for each Performance Period shall be the last day of such Performance Period.

	Vested Units:
	Except as otherwise provided by the Award Agreement or an Employment Agreement, provided that the Participant’s Service has not terminated prior to the Vesting Date for the applicable Performance Period, the Earned Units for such Performance Period, if any, shall become Vested Units on the Vesting Date.  Except as provided by an Employment Agreement, if the Participant’s Service terminates prior to a Vesting Date, no Units shall become Earned Units with respect to such Performance Period, and all remaining Units shall be forfeited.

	Settlement Date:
	Except as otherwise provided by the Award Agreement, for each Vested Unit, the day of, or as soon as practicable following, the Certification Date (as defined in Section 4.1 of the Award Agreement), but in any event no later than the 15th day of the third calendar month following the end of the calendar year in which the Vesting Date occurs.  In addition, if in the event the date on which a Unit becomes a Vested Unit falls on a date on which a sale by the Participant of the shares of Stock to be issued on settlement of Vested Units would violate the Company’s Trading Compliance Policy, then the Settlement Date shall be deferred until the first to occur of (a) the next business day on which a sale by the Participant of such shares of Stock would not violate the Trading Compliance Policy; and (b) March 15th of the calendar year following the year in which such Units become Vested Units.

	Employment Agreement:
	An employment or other service agreement between the Participant and a Participating Company to the extent the terms of such Employment Agreement are applicable to this Award.

By his or her signature below or by electronic acceptance or authentication in a form authorized by the Company, the Participant agrees to be bound by the terms and conditions of the Plan, the Award Agreement and this Grant Notice.  The Participant has reviewed the Award Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Award Agreement, and the Plan.

	
					
	GENMARK DIAGNOSTICS, INC.
	 
	PARTICIPANT

	By:
	________________________
	 
	By:
	________________________

	Print Name:
	________________________
	 
	Print Name:
	________________________

	Title:
	________________________
	 
	 
	 

	Address:
	________________________
	 
	Address:
	________________________

	 
	________________________
	 
	 
	________________________

GENMARK DIAGNOSTICS, INC.
MARKET STOCK UNITS AWARD AGREEMENT

GenMark Diagnostics, Inc. (the “Company”) has granted to the Participant named in the Market Stock Units Grant Notice (the “Grant Notice”) to which this Market Stock Units Award Agreement (this “Award Agreement”) is attached an Award consisting of Market Stock Units (each a “Unit”) subject to the terms and conditions set forth in the Grant Notice and this Award Agreement.  The Award has been granted pursuant to and shall in all respects be subject to the terms conditions of the GenMark Diagnostics, Inc. 2010 Equity Incentive Plan, as amended, (the “Plan”), as amended to the Grant Date, the provisions of which are incorporated herein by reference.  By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Award Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Award Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Award Agreement, or the Plan.
Unless otherwise defined in this Agreement or in the Grant Notice, capitalized terms shall have the meanings assigned by the Plan.
1.The Award.

The Company has granted to the Participant the Award set forth in the Grant Notice, which, depending on the extent to which a performance goal is attained during the Performance Periods, may result in the Participant earning as little as zero (0) Units or as many as the Maximum Number of Units.  Subject to the terms of this Award Agreement and the Plan, each Unit, to the extent it is earned and becomes a Vested Unit, represents a right to receive on the applicable Settlement Date one (1) share of Stock.  Unless and until a Unit has been determined to be an Earned Unit and has vested and become a Vested Unit as set forth in the Grant Notice and this Award Agreement, the Participant will have no right to settlement of such Unit.  Prior to settlement of any earned and vested Units, such Units will represent an unfunded and unsecured obligation of the Company.

2.ADMINISTRATION.

All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee.  All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award.  Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.

3.Measurement of Components of Performance Differential.

The components of the Performance Differential shall be determined for each of the Performance Periods in accordance with the following:

3.1    “Company Total Stockholder Return” means the percentage point increase or decrease in (a) the Average Per Share Closing Price for the 30 market trading days ending on the last market trading day of the applicable Performance Period over (b) the Average Per Share Closing Price for the 30 market trading days ending on the last market trading day immediately preceding the first day of the applicable Performance Period.

3.2    “Average Per Share Closing Price” means the average of the daily closing prices per share of Stock as reported on the securities exchange constituting the primary market for the Stock for all trading days falling within an applicable 30 market trading day period described in Section 3.1.

3.3    “Benchmark Index Total Return” means the percentage point increase or decrease in (a) the Average Closing Index Value for the 30 market trading days ending on the last market trading day of the applicable Performance Period over (b) the Average Closing Index Value for the 30 market trading days ending on the last market trading day immediately preceding the first day of the applicable Performance Period.

3.4    “Average Closing Index Value” means the average of the daily closing index values of the Benchmark Index for all trading days falling within an applicable 30 market trading day period described in Section 3.3.

4.Committee Certification of Earned Units.

4.1    Certification of Performance Differential Attained.  As soon as practicable following completion of each Performance Period, but no later than thirty (30) days following such completion except as provided in Section 9.1, the Committee shall determine and certify in writing the Performance Differential attained for such Performance Period, the resulting Performance Multiplier and the number of Units which have become Earned Units for such Performance Period (the date of such certification being the “Certification Date”).

4.2    Adjustment for Leave of Absence or Part-Time Work.  Unless otherwise required by law, Company policy, or any Employment Agreement, if the Participant takes a leave of absence or commences working on a part-time basis during the Performance Period, the Committee may, in its discretion, reduce on a pro rata basis (reflecting the portion of the Performance Period worked by the Participant on a full-time equivalent basis) the number of Units which would otherwise become Earned Units, or provide that the number of Units which would otherwise become Earned Units shall be reduced as provided by the terms of an agreement between the Participant and the Company pertaining to the Participant’s leave of absence or part-time schedule.

5.Vesting of Earned Units.

5.1    Normal Vesting.  Except as otherwise provided by this Award Agreement, Earned Units shall vest and become Vested Units as provided by the Grant Notice.

5.2    Effect of Termination of Service upon Vesting.  Except as provided by an Employment Agreement, if the Participant’s Service terminates for any reason, all Units subject to the Award which have not become Vested Units as of the time of such termination of Service shall be subject to the Company Reacquisition Right (as defined by Section 6.1).

5.3    Vesting Upon a Change in Control.  In the event of a Change in Control, the vesting of Earned Units shall be determined in accordance with Section 9.

6.Company Reacquisition Right.

6.1    Grant of Company Reacquisition Right.  Except as may be provided in an Employment Agreement, in the event that the Participant’s Service terminates for any reason or no reason, with or without cause, the Participant shall forfeit and the Company shall automatically reacquire all Units which are not, as of the time of such termination of Service, Vested Units (“Unvested Units”), and the Participant shall not be entitled to any payment therefor (the “Company Reacquisition Right”).

6.2    Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments.  Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 10, any and all new, substituted or additional securities or other property (other than regular, 

periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms “Units” and “Unvested Units” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be.  For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.

7.Settlement of the Award.

7.1    Issuance of Shares of Stock.  Subject to the provisions of Section 7.3, the Company shall issue to the Participant on the Settlement Date with respect to each Vested Unit to be settled on such date one (1) share of Stock.  Shares of Stock issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 7.3, Section 8 or the Company’s Trading Compliance Policy.

7.2    Beneficial Ownership of Shares; Certificate Registration.  The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice.  Except as provided by the foregoing, a certificate for the shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.

7.3    Restrictions on Grant of the Award and Issuance of Shares.  The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained.  As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

7.4    Fractional Shares.  The Company shall not be required to issue fractional shares upon the settlement of the Award.

8.Tax Withholding.

8.1    In General.  At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of Units or the issuance of shares of Stock in settlement thereof.  The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.

8.2    Assignment of Sale Proceeds.  Subject to compliance with applicable law and the Company’s Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved 

by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares being acquired upon settlement of Units.

8.3    Withholding in Shares.  The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of the Award a number of whole shares having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.

9.Change in Control.

In the event of a Change in Control, this Section 9 shall determine the treatment of the Units which have not otherwise become Vested Units.

9.1    Effect of Change in Control Following Completion of Performance Period.  In the event of a Change in Control, the number of Earned Units for each Performance Period that has ended on or before the day immediately preceding the Change in Control in accordance with the schedule for such Performance Period set forth in the Grant Notice (a “Completed Performance Period”) shall, if not previously certified by the Committee in accordance with Section 4.1 and settled in accordance with Section 7, be determined and certified by the Committee in accordance with Section 4.1 and settled in accordance with Section 7 prior to the effective time of the Change in Control; and 

9.2    Effect of a Change in Control Prior to the End of a Performance Period.  Each Performance Period that is not a Completed Performance Period shall be deemed to end on the day immediately preceding the Change in Control (in each case, an “Adjusted Performance Period”), and the number of Earned Units and the vesting thereof shall be determined for each Adjusted Performance Period in accordance with the following:

(a)Earned Units.  The Committee shall determine and certify in writing no later than the day immediately preceding the Change in Control the number of Earned Units for the Adjusted Performance Period, taking into account the following modifications to the components of the Performance Differential:

(i)The Company Total Stockholder Return shall be determined as provided by Section 3.1, except that the Average Per Share Closing Price for the 30 market trading days ending on the last market trading day of the Adjusted Performance Period shall be replaced with the fair market value of cash and other property received per share of Stock to be paid to the holder thereof in accordance with the definitive agreement governing the transaction constituting the Change in Control (or, in the absence of such agreement, the closing price per share of Stock on the last trading day of the Adjusted Performance Period as reported on the securities exchange constituting the primary market for the Stock).

(i)The Benchmark Index Total Return shall be determined as provided by Section 3.3, except that for the purposes of clause (a) thereof, the Average Closing Index Value shall be determined for the 30 market trading days ending on the last market trading day of the Adjusted Performance Period.

Immediately following the Committee’s determination pursuant to this Section 9.2(a), all Units subject to the Award which are not Earned Units (the “Unearned Units”) shall terminate and the Award, to the extent of the Unearned Units, shall cease to be outstanding.

(b)Vested Units.  As of the last day of the Adjusted Performance Period and provided that the Participant’s Service has not terminated prior to such date, except as otherwise provided by an Employment Agreement, all of the Earned Units determined in accordance with Section 9.2(a) shall become Vested Units (the “Accelerated Units”).  The Accelerated Units shall be settled in accordance Section 7 immediately prior to the effective time of the Change in Control.

10.Adjustments for Changes in Capital Structure.

Subject to any required action by the stockholders of the Company and the requirements of Section 409A of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number of Units subject to the Award and/or the number and kind of shares or other property to be issued in settlement of the Award, in order to prevent dilution or enlargement of the Participant’s rights under the Award.  For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.”  Any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of ownership of Units acquired pursuant to this Award will be immediately subject to the provisions of this Award on the same basis as all Units originally acquired hereunder.  Any fractional Unit or share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number.  Such adjustments shall be determined by the Committee, and its determination shall be final, binding and conclusive.

11.Rights as a Stockholder, Director, Employee or Consultant.

The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 10.  If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term.  Nothing in this Award Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.

12.Legends.

The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock issued pursuant to this Award Agreement.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.

13.Compliance with Section 409A.

It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award that may result in Section 409A Deferred Compensation shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non‐compliance.  In connection with effecting such compliance with Section 409A, the following shall apply:
13.1    Separation from Service; Required Delay in Payment to Specified Employee.  Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Award Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations.  Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 

409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service.  All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
        
13.2    Other Changes in Time of Payment.  Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Award Agreement in any manner which would not be in compliance with the Section 409A Regulations.
        
13.3    Amendments to Comply with Section 409A; Indemnification.  Notwithstanding any other provision of this Award Agreement to the contrary, the Company is authorized to amend this Award Agreement, to void or amend any election made by the Participant under this Award Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant.  The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
        
13.4    Advice of Independent Tax Advisor.  The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Award Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award.  The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Award Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Award Agreement.

14.Miscellaneous Provisions.

14.1    Administration.  All questions of interpretation concerning the Grant Notice, this Award Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee.  All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award.  Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.

14.2    Termination or Amendment.  The Committee may terminate or amend the Plan or this Award Agreement at any time; provided, however, that except as provided in Section 9 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Award Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A.  No amendment or addition to this Award Agreement shall be effective unless in writing.

14.3    Nontransferability of the Award.  Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect 

to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.

14.4    Further Instruments.  The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Award Agreement.

14.5    Binding Effect.  This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.

14.6    Delivery of Documents and Notices.  Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a)Description of Electronic Delivery.  The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Award Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically.  In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery.  The Participant acknowledges that the Participant has read Section 14.6(a) of this Award Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 14.6(a).  The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing.  The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails.  Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent to the electronic delivery of documents described in Section 14.6(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail.  Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 14.6(a).

14.7    Integrated Agreement.  The Grant Notice, this Award Agreement and the Plan, together with the Change in Control Plan and an Employment Agreement, if applicable to the Participant, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein or therein, the provisions of the Grant Notice, this Award Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.

1.Applicable Law.  This Award Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.
2.Counterparts.  The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.ChangeinControlAgreement-Nester0415

Exhibit 10.1

CHANGE IN CONTROL AGREEMENT 

THIS AGREEMENT (the "Agreement") made as of the 1st of May, 2015 between RGC Resources, Inc. ("the Corporation") and Paul W. Nester ("Executive"),

 - W I T N E S S E T H -

WHEREAS the Corporation desires for the Executive to be able to perform his executive duties and functions on an impartial and objective basis in the event of activities preceding, associated with, or resulting from a change in control of the Corporation as hereinafter defined ("Change in Control");

NOW, THEREFORE, the parties agree as follows:

1.  TERM.  This Agreement is effective as of the date hereof and shall terminate, except to the extent that any obligation remains unpaid as of such time, upon the earliest of the following:

(i)  the termination of the Executive's employment with the Corporation prior to or simultaneously with a Change in Control; or

(ii)  two years from the date of a Change in Control; or 

(iii) May 1, 2018, but only if no Change in Control has occurred as of such date.

2.  CHANGE IN CONTROL.  For purposes of the Agreement, a Change in Control shall be deemed to have occurred if (i) any person (individual, corporation, partnership or other entity) is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 50 percent or more of the combined voting power of the outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors ("Voting Securities"), (ii) in the event that following a merger, recapitalization, reorganization, consolidation or sale of assets by the Corporation, or any combination thereof, any person becomes the beneficial owner, directly or indirectly, of 50% or more of the Voting Securities of the surviving entity, or (iii) the shareholders of the Corporation shall liquidate or sell substantially all of the Corporation’s assets.  The first day upon which there exists a Change in Control shall be referred to herein as the "Operative Date."

- 1 -

3.  TERMINATION FOLLOWING CHANGE IN CONTROL.  If a Change in Control shall have occurred, the Executive will be entitled to the benefits provided in Paragraph 4 hereof if, within 90 day prior to the Operative Date or within the two-year period beginning on the Operative Date, the Executive's employment with the Corporation (hereinafter defined) is terminated unless such termination is (a) because of his death, (b) by the Corporation for Cause or Disability, or (c) by the Executive other than for Good Reason, all as hereinafter more particularly defined.

(i)  Disability.  If, as a result of the Executive's incapacity due to physical or mental illness, he shall have been absent from his duties with the Corporation on a full-time basis for six (6) months and within thirty (30) days after written notice of termination is given he shall not have returned to the full-time performance of his duties, the Corporation may terminate the Agreement for "Disability."

(ii)  Cause.  The Corporation may terminate the Executive's employment for Cause.  For purposes of the Agreement, the Corporation shall have "Cause" to terminate the Executive's employment hereunder upon (A) the willful and continued failure by the Executive to substantially perform his duties with the Corporation (other than any such failure resulting from his/her incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the Executive by the Corporation which specifically identifies the manner that the Executive has not substantially performed his duties or (B) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Corporation.  For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interests of the Corporation.  Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause based upon clauses (A) or (B) above unless and until there shall have been delivered to him a copy of a resolution, duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at meeting of the Board called and held for the purpose (after reasonable notice to the Executive and an opportunity for him, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth above in clauses (A) or (B) and specifying the particulars thereof in detail.

(iii)  Good Reason.  The Executive may terminate his employment for Good Reason within ninety (90) days of the occurrence of any of the events specified below.  For purposes of the Agreement, "Good Reason" shall mean:

(A)  Without the Executive's express written consent, the assignment to him of any duties materially inconsistent with his duties and responsibilities with the Corporation immediately prior to a Change in Control;

(B)  A reduction by the Corporation in the Executive's annual base compensation below his total base compensation applicable to the 12 months preceding the Operative Date or as increased after such date;

- 2 -

(C)  The failure by the Corporation to provide the Executive with benefits whose aggregate value is at least as favorable as the aggregate value of benefits enjoyed by him under any thrift, incentive or compensation plan, or any pension, life insurance, health and accident or disability plan in which he is participating at the time of a Change in Control, or the taking of any action by the Corporation which would adversely affect his participation in or materially reduce his benefits under any of such plans at the time of a Change in Control, unless such reduction relates to a reduction in benefits applicable to all employees generally;

(D)  The failure by the Corporation to provide the Executive with any other material fringe benefit enjoyed by him at the time of the Change in Control;

(E)  Any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of subparagraph (iv) below (and, if applicable, subparagraph (ii) above) and, for purposes of the Agreement, no such purported termination shall be effective; 

(F)  Breach by the Corporation of its obligations under this Agreement; or 
(G)  The Corporation’s requiring the Executive to be based at an office that is both more than 50 miles from where his office is located immediately prior to the Change in Control and further from his then current residence, except for required travel on the Corporation’s business to an extent substantially consistent with the business travel obligations which the Executive undertook on behalf of the Corporation prior to the Change in Control.

If any of the events occur which would entitle the Executive to terminate his employment for Good Reason hereunder and he does not so exercise his right to terminate his employment, any such failure shall not operate to waive his right to terminate his employment for that or any subsequent action or actions, whether similar or dissimilar, which would constitute Good Reason.

(iv)  Notice of Termination.  Any termination by the Corporation pursuant to subparagraphs (i) or (ii) above or by the Executive pursuant to subparagraph (iii) above shall be communicated by written Notice of Termination.  For purposes of the Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in the Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.

(v)  Date of Termination.  "Date of Termination" shall mean (a) if the Agreement is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such thirty-day period), (b) if his employment is terminated pursuant to subparagraph (iii) above, the date specified in the Notice of Termination, and (c) if his employment is terminated for any other reason, the date on which a Notice of Termination is given.  Notwithstanding any provision herein to the contrary, the Date of Termination shall not occur, and the Executive’s employment 

- 3 -

with the Corporation shall not be deemed to have occurred, until the Executive shall have a Separation from Service.  The following definitions shall apply for purposes of this Agreement:

"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.  A reference to any section or provision of the Code shall also be deemed to be a reference to any applicable regulations and rulings thereunder, as well as to comparable provisions of future laws.
"Leave of Absence" means a military leave, sick leave or other bona fide leave of absence of the Executive which does not exceed six months (or such longer period for which the Executive retains a right to reemployment with the Corporation or a Related Entity under an applicable statute or by contract), but only if there is a reasonable expectation that the Executive will return to perform services for the Corporation or a Related Entity.
"Related Entity" means any entity which is aggregated with the Corporation pursuant to Section 414(b) or 414(c) of the Code or would be so aggregated if the language "at least 50 percent" were used instead of "at least 80 percent" each place it appears in Section 1563(a)(1), (2) and (3) of the Code and Treasury Regulations Section 1.414(c)-2.
"Separation from Service" means the Executive’s separation from service (as such term is used for purposes of Section 409A of the Code) with the Corporation and any Related Entities.  The Executive shall be deemed to have a Separation from Service on a date only if the Corporation and the Executive reasonably anticipate that (a) no further services will be performed for the Corporation or any Related Entities after such date or (b) the level of bona fide services the Executive will perform for the Corporation or any Related Entities after such date (whether as an employee or as an independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed (whether as an employee or as an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Corporation and any Related Entities if the Executive has then been providing services to the Corporation and any Related Entities for less than 36 months).  For purposes of this section, for periods during which the Executive is on a paid Leave of Absence and has not otherwise terminated employment, the Executive shall be treated as providing bona fide services at a level equal to the level of services that he would have been required to perform to receive the compensation paid with respect to such Leave of Absence.  Also for purposes of this section, periods during which the Executive is on an unpaid Leave of Absence and has not otherwise terminated employment shall be disregarded (including for purposes of determining the 36-month, or shorter, period).

4.  COMPENSATION UPON TERMINATION.  Upon termination of the Executive's employment within 90 day prior to the Operative Date or within twenty-four (24) months following the Operative Date, unless such termination is because of the Executive's death, or by the Corporation for Cause or Disability or by the Executive other than for Good Reason, the Corporation shall pay to the Executive the following:
  
(i)  The Corporation shall pay the Executive his full salary (whether such salary has been paid by the Corporation or by any of its subsidiaries) through the Date of Termination at the rate in effect at the time Notice of Termination is given and all other unpaid amounts, if any, 

- 4 -

to which the Executive is entitled as of the Date of Termination under any plan or other arrangement of the Company, at the time such payments are due (and in any event within 90 days after the Separation from Service);

(A)  The Corporation shall pay to the Executive an amount equal to 1.5 multiplied by the Executive's annualized includable compensation for the base period, within the meaning of Section 280G(d)(1) of the Code, provided, however, that if any of such payment is or will be subject to the excise tax imposed by Section 4999 of the Code or any similar tax that may hereafter be imposed ("Excise Tax"), such payment shall be reduced to a smaller amount, even to zero, which smaller amount shall be the largest amount payable under this paragraph that would not be subject in whole or in part to the Excise Tax after considering all other payments to the Executive required to be considered under Sections 4999 or 280G of the Code.  Such payment shall be referred to as the "Severance Payment."  The Severance Payment shall be made in a lump sum within 90 days after the Separation from Service.

(B)  In the event that the Severance Payment is subsequently determined to be less than the amount actually paid hereunder, the Executive shall repay the excess to the Corporation at the time that the proper amount is finally determined, plus interest on the amount of such repayment at the Applicable Federal Rate.  In the event that the Severance Payment is determined to exceed the amount actually paid hereunder, the Corporation shall pay the Executive such difference plus interest on the amount of such additional payment at the Applicable Federal Rate at the time that the amount of such difference is finally determined. 

(C)  In the event that the amount of the Severance Payment exceeds or is less than the amount initially paid, such difference shall constitute a loan by the Corporation to the Executive, or by the Executive to the Corporation, as the case may be, payable on the fifth (5th) day after demand (together with interest at the Applicable Federal Rate).

(D)  The amount of any payment provided for in this subparagraph shall not be reduced, offset or subject to recovery by the Company or the Company's Successor by reason of any compensation earned by the Executive as the result of employment by another Corporation after the Date of Termination, or otherwise.

(ii)  The Corporation shall also pay to the Executive all legal fees and related expenses incurred by the Executive in connection with this Agreement, whether or not the Executive prevails (including, without limitation, all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

(iii)    If the Executive employment with the Corporation is terminated or the Executive resigns for Good Reason within 90 days prior to the Operative Date or within 24 months following the Operative Date, the Corporation shall provide him with reasonable outplacement services for up to 12 months following the Date of Termination of the Executive.

- 5 -

(iv)    The Executive shall not be eligible to receive any benefits provided in this Section 4 (other than payments under Section 4(i) unless the Executive first executes a written release and agreement provided by the Corporation releasing the Corporation of any and all claims the Executive might have against the Corporation. 
  
(v)  The Corporation shall maintain in full force and effect, for the Executive's continued benefit until the earlier of  (A) the death of the Executive; (B) the Executive's commencement of full-time employment with a new Corporation; or (C) within 90 days prior to the Operative Date or twenty-four (24) months following the Operative Date,  all life insurance, medical, health and accident, and disability plans, programs or arrangements in which the Executive was entitled to participate immediately prior to the Operative Date, provided that the Executive's continued participation is possible under the general terms and provisions of such plans and programs.  In the event that the Executive's participation in any such plan or program is barred, the Company shall arrange to provide the Executive with benefits substantially similar to those which the Executive is entitled to receive under such plans and programs.  In the case of any insurance provided the Executive pursuant to this subparagraph (iii), each premium therefor shall be paid after, but no later than 30 days after, the Corporation’s receipt of the invoice for such premium.  No coverage shall be provided to the Executive under a self-insured medical plan of the Corporation after the Separation from Service; provided that such coverage may be provided during the period of time during which the Executive would be entitled to continuation coverage under such plan pursuant to Section 4980A of the Code if the Executive elected such continuation coverage and paid the applicable premiums.  Except for coverage permitted by the preceding sentence, no benefits shall be provided pursuant to this subparagraph (iii) other than through the purchase of insurance by the Corporation.

(vi)  The Executive shall not be required to mitigate the amount of any payment provided under the Agreement by seeking other employment or otherwise.  It is specifically understood that any compensation the Executive receives from the Corporation or any other person for services rendered prior to or after termination of employment, such as a payment under any deferred compensation plan maintained by the Corporation, will not reduce or offset the benefits to which he is entitled hereunder.

(E)  The Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Agreement to his devisee, legatee, or other designee or, if there be no such designee, to his estate.

(F)  If a Change of Control occurs during the term of this Agreement, (1) the unexercised portions, if any, of all Options as defined under the RGC Resources Amended and Restated Key Employee Stock Option Plan or the RGC Resources, Inc. Amended and Restated Stock Bonus Plan (the “Plans”) granted to the Executive under the Plans that have not expired or been forfeited pursuant to their terms shall automatically accelerate and become fully exercisable.

- 6 -

5.  AGREEMENT BINDING ON SUCCESSORS.  The Corporation will require any successor (whether direct or indirect, by purchase, merger, share exchange, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, to expressly assume and agree to perform this Agreement.  Failure of the Corporation to obtain such agreement prior to or simultaneously with a Change of Control shall be a breach of the Agreement which shall entitle the Executive to terminate his employment for Good Reason under Paragraph 3(iii) on or after the Operative Date, except that, for purposes of implementing the foregoing, the date of his Notice of Termination shall be deemed the Date of Termination.

6.  NOTICE.  For the purposes of the Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given on the date hand delivered or the date mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Executive at his residence address and to the Corporation directed to the attention of the Chief Executive Officer of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.  MODIFICATION AND WAIVER.  No provisions of the Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Corporation.  No waiver by any party hereto at any time or the breach by the other party hereto or of compliance with any condition or provision of the Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements of representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in the Agreement.  The validity, interpretation, construction and performance of the Agreement shall be governed by the laws of the Commonwealth of Virginia.

8.  VALIDITY.  The invalidity or unenforceability of any provisions of the Agreement shall not affect the validity or enforceability of any other provisions of the Agreement and such other provisions shall remain in full force and effect.

9.  COUNTERPARTS AND GOVERNING LAW.  The Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.  The Agreement shall be governed by the laws of the Commonwealth of Virginia, excepting its principles of conflict of laws.

IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first above written.

RGC Resources, Inc.                Paul W. Nester

By: /s/ John S. D'Orazio            /s/ Paul W. Nester                 
      Its: President and CEO     

- 7 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00244-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00244-of-00352.parquet"}]]