Exhibit 10.3
RESPONSE BIOMEDICAL CORP.
NON-EMPLOYEE DIRECTORS DEFERRED
SHARE UNIT PLAN
Effective June 18, 2013
RESPONSE BIOMEDICAL CORP.
NON-EMPLOYEE DIRECTORS DEFERRED SHARE UNIT PLAN
1.1 | This Plan has been established by the Corporation to promote the interests of the Corporation by attracting and retaining qualified persons to serve on the Board and to promote a greater alignment of long term interests between such Participants and the shareholders of the Corporation. |
2. | PLAN DEFINITIONS AND INTERPRETATIONS |
In this Plan, the following terms have the following meanings:
| | (a) | “Account” means an account maintained for each Participant on the books of the Corporation which will be credited with Deferred Share Units, in accordance with the terms of the Plan. |
| | (b) | “Applicable Law”means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder and Stock Exchange Rules. |
| | (c) | “Board” means the Board of Directors of the Corporation. |
| | (d) | “Change of Control”means an occurrence when either: |
| | (i) | a Person or Entity, other than the current “control person” of the Corporation (as that term is defined in theSecurities Act (British Columbia)), becomes a “control person” of the Corporation; or |
| | (ii) | a majority of the directors elected at any annual or extraordinary general meeting of shareholders of the Corporation are not individuals nominated by the Corporation’s then-incumbent Board. |
| | (e) | “Committee” means the Compensation Committee of the Board or any other committee or person designated by the Board to administer the Plan, provided, however, if the Company does not qualify as a “foreign private issuer” (as defined in Rule 3b-4 under the U.S. Securities Exchange Act of 1934), the Committee shall be a committee of the Board comprised of not less than two directors, and each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3. |
| | (f) | “Common Shares” mean Common Shares of the Corporation and includes any securities of the Corporation into which such Common Shares may be converted, reclassified, redesignated, subdivided, consolidated, exchanged or otherwise changed, pursuant to a Reorganization or otherwise. |
| | (g) | “Corporation” means Response Biomedical Corp. and its respective successors and assigns, and any reference in the Plan to action by the Corporation means action by or under the authority of the Board or any person or committee that has been designated for the purpose by the Board including, without limitation, the Committee. |
| | (h) | “DSU” or“Deferred Share Unit” means a unit credited to a Participant by way of a bookkeeping entry in the books of the Corporation pursuant to this Plan, the value of which is equivalent in value to a Common Share. |
| | (i) | “Grant” means any Deferred Share Unit credited to the Account of a Participant. |
| | (j) | “Insider”has the meaning provided for purposes of the TSX relating to Security Based Compensation Arrangements set out in the TSX Company Manual. |
| | (k) | “Notice of Redemption” means written notice, on a prescribed form, by the Participant, or the administrator or liquidator of the estate of the Participant, to the Corporation of the Participant’s wish to redeem his or her Deferred Share Units. |
| | (l) | “Participant” means a director of the Corporation who is designated by the Committee as eligible to participate in the Plan; provided, that no person who beneficially owns, directly or indirectly, more than 10% of the issued and outstanding Shares shall be eligible to be designated by the Corporation for participation in the Plan. |
| | (m) | “Person or Entity” means an individual, natural person, corporation, government or political subdivision or agency of a government, and where two or more persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of an issuer, such partnership, limited partnership, syndicate or group shall be deemed to be a Person or Entity. |
| | (n) | “Plan”means this Non-Employee Directors Deferred Share Unit Plan. |
| | (o) | “Redemption Date” means the date that a Notice of Redemption is received by the Corporation; provided in the case of a U.S. Eligible Participant, however, the Redemption Date will be made the earlier of (i) “separation from service” within the meaning of Section 409A of the Code, or (ii) within 90 days of the U.S. Eligible Participant’s death. |
| | (p) | “Regulatory Approvals” means any necessary approvals of the Regulatory Authorities as may be required from time to time for the implementation, operation or amendment of this Plan or for the DSUs granted from time to time hereunder. |
| | (q) | “Regulatory Authorities” means all organized trading facilities on which the Shares are listed, including the TSX, and all securities commissions or similar securities regulatory authorities having jurisdiction over the Corporation, this Plan or the DSUs granted from time to time hereunder. |
| | (r) | “Reorganization” means any (i) capital reorganization, (ii) merger, (iii) amalgamation, or (iv) arrangement or other scheme of reorganization. |
| | (s) | “Section 409A” means Section 409A of theU.S. Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder as in effect from time to time. |
| | (t) | “Security Based Compensation Arrangement” has the meaning defined in the provisions of the TSX Company Manual relating to security based compensation arrangements. |
| | (u) | “Share Price”means, as of any determination date: |
| | (i) | for each organized trading facility on which the Shares are listed, the closing price of the Shares on such organized trading facility on the trading day immediately preceding the determination date; |
| | (ii) | if the Shares are listed on more than one organized trading facility, the Share Price shall be the Share Price as determined in accordance with subparagraph (i) above for the primary organized trading facility on which the Shares are listed, which shall be deemed to be the organized trading facility on which the greatest number of Shares are traded over the five consecutive trading days immediately preceding the date of determination of Share Price, subject to any adjustments as may be required to secure all necessary Regulatory Approvals; |
| | (iii) | if the Shares are listed on one or more organized trading facilities but have not traded during the ten trading days immediately preceding the date of determination, then the Share Price will be, subject to any adjustments as may be required to secure all necessary Regulatory Approvals, such value as is determined by the Committee; and |
| | (iv) | if Shares are not listed on any organized trading facility, then the Share Price will be, subject to any adjustments as may be required to secure all necessary Regulatory Approvals, such value as is determined by the Committee to be the fair value of the Shares, taking into consideration all factors that the Committee deems appropriate, including, without limitation, recent sale and offer prices of the Shares in private transactions negotiated at arms’ length. |
Notwithstanding anything else contained herein, in no case will the Share Price determined on any Grant Date be less than the minimum prescribed by each of the organized trading facilities that would apply to the Corporation on the Grant Date in question.
| | (v) | “Termination Date” means the date of a Participant’s death, or retirement from, or loss of office or employment with the Corporation, within the meaning of paragraph 6801(d) of the regulations under theIncome Tax Act(Canada), including the Participant’s resignation, retirement, removal from the Board, death or otherwise. |
| | (w) | “U.S. Eligible Participant” refers to a Participant who, at any time during the period from the date Deferred Share Units are granted to the Participant to the date such Deferred Share Units are redeemed by the Participant, is subject to income taxation in the United States on the income received for his or her services as a director of the Corporation and who is not otherwise exempt from U.S. income taxation under the relevant provisions of theU.S. Internal Revenue Code of 1986,as amended, or theCanada-U.S. Income Tax Convention, as amended from time to time. |
3. | NON-EMPLOYEE DIRECTOR COMPENSATION |
3.1 | Establishment of Annual Base Compensation |
An annual compensation amount (the “Annual Base Compensation”) payable to non-employee Directors (hereafter “Directors”) of the Corporation shall be established from time-to-time by the Board. The amount of Annual Base Compensation will be reported annually in the Corporation’s management information circular.
3.2 | Payment of Annual Base Compensation |
| | (a) | The Board may elect to pay all or a portion of each Director’s Annual Base Compensation in DSUs by delivering a written notice to the Director. To the extent any deferral of a Director’s Annual Base Compensation occurs, such deferral shall occur pursuant to a policy developed by the Board in compliance with the rules of this Plan and, as applicable for U.S. Eligible Participants, Section 409A. |
| | (b) | All DSUs granted with respect to Annual Base Compensation will be credited to the Director’s Account when such Annual Base Compensation is payable (the "GrantDate"). |
| | (c) | The Director’s Account will be credited with the number of DSUs calculated to the nearest thousandths of a DSU, determined by dividing the dollar amount of compensation payable in DSUs on the Grant Date by the Share Price. Fractional Common Shares will not be issued and any fractional entitlements will be rounded down to the nearest whole number. |
3.3 | Additional Deferred Share Units |
In addition to DSUs granted pursuant to Section 3.2, the Board may award such number of DSUs to a Participant as the Board deems advisable to provide the Participant with appropriate equity-based compensation for the services he or she renders to the Corporation. The Board shall determine the date on which such DSUs may be granted and the date as of which such DSUs shall be credited to a Participant’s Account. The Corporation and a Participant who receives an award of DSUs pursuant to this Section 3.3 shall enter into a DSU award agreement to evidence the award and the terms applicable thereto.
4. | ADMINISTRATION OF DSU ACCOUNTS |
4.1 | Administration of Plan |
The Committee shall have the power, where consistent with the general purpose and intent of the Plan and subject to the specific provisions of the Plan:
| | (a) | to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan and to amend and rescind such rules and regulations from time to time; |
| | (b) | to interpret and construe the Plan and to determine all questions arising out of the Plan and any such interpretation, construction or determination made by the Committee shall be final, binding and conclusive for all purposes; |
| | (c) | to prescribe the form of the instruments used in conjunction with the Plan; and |
| | (d) | to determine which members of the Board are eligible to participate in the Plan. |
4.2 | Redemption of Deferred Share Units |
| | (a) | Each Participant shall be entitled to redeem his or her Deferred Share Units during the period commencing on the business day immediately following the Termination Date and ending on the 90th day following the Termination Date by providing a written Notice of Redemption to the Corporation. In the event of death of a Participant, the Notice of Redemption shall be filed by the legal representative of the Participant. In the case of a U.S. Eligible Participant, however, the redemption will be deemed to be made the earlier of (i) “separation from service” within the meaning of Section 409A, or (ii) within 90 days of the U.S. Eligible Participant’s death. |
| | (b) | Upon redemption, the Participant shall be entitled to receive, and the Corporation shall issue or provide: |
| | (i) | subject to shareholder approval of this Plan and the limitations set forth in Section 6.2 below, a number of Common Shares issued from treasury equal to the number of DSUs in the Participant’s Account, subject to any applicable deductions and withholdings; |
| | (ii) | subject to and in accordance with any Applicable Law, a number of Common Shares purchased by an independent administrator of the Plan in the open market for the purposes of providing Common Shares to Participants under the Plan equal in number to the DSUs in the Participant’s Account, subject to any applicable deductions and withholdings; |
| | (iii) | the payment of a cash amount to a Participant equal to the number of DSUs multiplied by the Share Price, subject to any applicable deductions and withholdings; or |
| | (iv) | any combination of the foregoing, |
as determined by the Corporation, in its sole discretion.
4.3 | Payment Notwithstanding |
Notwithstanding any other provision of this Plan, all amounts payable to, or in respect of, a Participant hereunder shall be paid on or before December 31 of the calendar year commencing immediately after the Participant’s Termination Date.
5. | ALTERATION OF NUMBER OF SHARES SUBJECT TO THE PLAN |
5.1 | Subdivisions or Consolidations |
In the event that the Common Shares shall be subdivided or consolidated into a different number of Common Shares or a distribution shall be declared upon the Common Shares payable in Common Shares, the number of DSUs then recorded in the Director’s Account shall be adjusted by replacing such number by a number equal to the number of Common Shares which would be held by the Director immediately after the distribution, subdivision or consolidation, should the Director have held a number of Common Shares equal to the number of DSUs recorded in the Director’s Account on the record date fixed for such distribution, subdivision or consolidation.
In the event there shall be any change, other than as specified in Section 5.1, in the number or kind of outstanding Common Shares or of any shares or other securities into which such Common Shares shall have been changed or for which they shall have been exchanged, pursuant to a Reorganization or otherwise, then there shall be substituted for each Common Share referred to in the Plan or for each share into which such Common Share shall have been so changed or exchanged, the kind of securities into which each outstanding Common Share shall be so changed or exchanged and an equitable adjustment shall be made, if required, in the number of DSUs then recorded in the Director’s Account, such adjustment, if any, to be reasonably determined by the Committee and to be effective and binding for all purposes.
In the case of any such substitution, change or adjustment as provided for in this Section 5, the variation shall generally require that the number of DSUs then recorded in the Director’s Account prior to such substitution, change or adjustment will be proportionately and appropriately varied.
6. | RESTRICTIONS ON ISSUANCES |
6.1 | Maximum Number of DSUs |
DSUs may be granted by the Corporation in accordance with this Plan provided the aggregate number of DSUs outstanding pursuant to the Plan from time to time shall not exceed 2.5% of the number of issued and outstanding Common Shares from time to time. Subject to adjustment as provided for herein, any unissued Common Shares in respect of which DSUs are granted but that are subject to issuance on the Redemption Date but cease to be issuable under such DSUs for any reason, including expiry of the DSU or surrender of the DSU, will again be available for grant and issuance in connection with future DSUs granted under this Plan.
7. | AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN |
Until such time as the Corporation receives shareholder approval of the issuances from treasury contemplated in Section 4.2(b)(i), the Plan may be amended, suspended or terminated at any time by the Board in whole or in part. No amendment of the Plan shall, without the consent of the Participants affected by the amendment, or unless required by Applicable Law, adversely affect the rights accrued to such Participants with respect to DSUs granted prior to the date of the amendment.
Following shareholder approval of any issuances from treasury as contemplated in Section 4.2(b)(i), the Board may at any time, and from time to time, and without shareholder approval, amend any provision of the Plan, subject to any regulatory or stock exchange requirement at the time of such amendment, including, without limitation:
| | (b) | for the purposes of making formal minor or technical modifications to any of the provisions of the Plan including amendments of a “clerical” or “housekeeping” nature; |
| | (c) | to correct any ambiguity, defective provision, error or omission in the provisions of the Plan; |
| | (d) | amendments to the termination provisions of Section 7.2; |
| | (e) | amendments necessary or advisable because of any change in applicable securities laws; |
| | (f) | amendments to the transferability of Deferred Share Units provided for in Section 9.2 and 9.10; |
| | (g) | amendments to Section 4.1 relating to the administration of the Plan; and |
| | (h) | any other amendment, fundamental or otherwise, not requiring shareholder approval under applicable laws or the rules of the Toronto Stock Exchange; |
provided, however, that:
| | (i) | no such amendment of the Plan may be made without the consent of each affected Participant in the Plan if such amendment would adversely affect the rights of such affected Participant(s) under the Plan; and |
| | (j) | shareholder approval shall be obtained in accordance with the requirements of the Toronto Stock Exchange for any amendment: |
| | (i) | to Section 6.1 in order to increase the maximum number of Deferred Share Units which may be issued under this Plan (other than pursuant to Section 5); |
| | (iii) | to the definition of “Participant”. |
The Committee may decide to discontinue granting awards under the Plan at any time in which case no further Deferred Share Units shall be awarded or credited under the Plan. Any Deferred Share Units which remain outstanding in a Participant’s Account at that time shall continue to be dealt with according to the terms of the Plan. The Plan shall terminate when all payments owing pursuant to Section 4.2 of the Plan have been made and all Deferred Share Units have been cancelled in all Participants’ Accounts.
8.1 | Notwithstanding that a Participant’s Termination Date, all outstanding DSUs shall become immediately redeemable on any Change of Control, except as otherwise provided in Section 9.11 hereof, and the Corporation shall, as soon as practicable following such Change of Control, issue or provide Shares or make payments to such Participants with respect to DSUs in accordance with Section 4.2. |
8.2 | If and to the extent that DSUs would otherwise become redeemable upon a Change of Control as defined in the Plan, such redemption will occur at that time only if such change of control also constitutes a “change in ownership”, a “change in effective control” or a “change in the ownership of a substantial portion of the assets of the Corporation” as defined under Section 409A and applicable regulations (a “409A Change in Control”). If a Change of Control as defined in the Plan is not also a 409A Change in Control, unless otherwise permitted under Section 409A the time for the redemption of DSUs will not be accelerated and will be payable pursuant to the terms of the Plan and applicable grant agreement as if such Change of Control had not occurred. |
The Corporation may withhold from any amount payable to a Participant, either under this Plan, or otherwise, such amount as may be necessary so as to ensure that the Corporation will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions, including on the amount, if any, includable in the income of a Participant. The Corporation shall also have the right in its discretion to satisfy any such withholding tax liability by retaining, acquiring or selling on behalf of a Participant any Common Shares which would otherwise be issued or provided to a Participant hereunder.
No right to receive payment of DSUs and other benefits under the Plan shall be transferable or assignable by a Participant except by will or laws of descent and distribution.
Unless otherwise determined by the Committee,the Plan shall be unfunded. To the extent any Participant or his or her estate holds any rights by virtue of a grant of Deferred Share Units under the Plan, such rights (unless otherwise determined by the Committee)shall be no greater than the rights of an unsecured creditor of the Corporation.
Any determination or decision by or opinion of the Committee made or held pursuant to the terms of the Plan shall be final, conclusive and binding on all parties concerned. All rights, entitlements and obligations of Participants under the Plan are set forth in the terms of the Plan and cannot be modified by any other documents, statements or communications, except by Plan amendments referred to in Section 7.1 of the Plan.
9.5 | No Right to Employment |
Participation in the Plan shall not be construed to give any Participant a right to be retained as a Director.
No amount will be paid to, or in respect of, a Participant under the Plan to compensate for a downward fluctuation in the price of Common Shares nor will any other form of benefit be conferred upon, or in respect of, a Participant for such purpose.
Under no circumstances shall Deferred Share Units be considered Common Shares nor shall they entitle any Participant to exercise voting rights or any other rights attaching to the ownership of Common Shares nor shall any Participant be considered the owner of Common Shares by virtue of the award of Deferred Share Units.
9.8 | Reorganization of the Corporation |
The existence of any Deferred Share Units shall not affect in any way the right or power of the Corporation or its shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Corporation’s capital structure or its business, or any amalgamation, combination, merger or consolidation involving the Corporation or to create or issue any bonds, debentures, shares or other securities of the Corporation or the rights and conditions attaching thereto or to affect the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise.
9.9 | Successors and Assigns |
The Plan shall be binding on all successors and assigns of the Corporation.
9.10 | General Restrictions and Assignment |
Except as required by law, the rights of a Participant under the Plan are not capable of being anticipated, assigned, transferred, alienated, sold, encumbered, pledged, mortgaged or charged and are not capable of being subject to attachment or legal process for the payment of any debts or obligations of the Participant.
It is intended that the provisions of this Plan comply with Section 409A, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. Notwithstanding anything in the Plan to the contrary, the following will apply with respect to the rights and benefits of U.S. Eligible Participants under the Plan:
| | (a) | Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to or for the benefit of a U.S. Eligible Participant may not be reduced by, or offset against, any amount owing by the U.S. Eligible Participant to the Corporation or any of its affiliates. |
| | (b) | If a U.S. Eligible Participant becomes entitled to receive payment in respect of any Deferred Share Units as a result of his or her “separation from service” (within the meaning of Section 409A), and the U.S Eligible Participant is a “specified employee” (within the meaning of Section 409A) at the time of his or her separation from service, and the Committee makes a good faith determination that (i) all or a portion of the Deferred Share Units constitute “deferred compensation” (within the meaning of Section 409A) and (ii) any such deferred compensation that would otherwise be payable during the six-month period following such separation from service is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then payment of such “deferred compensation” shall not be made to the U.S Eligible Participant before the date which is six months after the date of his or her separation from service (and shall be paid in a single lump sum on the first day of the seventh month following the date of such separation from service) or, if earlier, the U.S Eligible Participant’s date of death. |
| | (c) | A U.S. Eligible Participant’s status as a specified employee shall be determined by the Corporation as required by Section 409A on a basis consistent with the regulations under Section 409A and such basis for determination will be consistently applied to all plans, programs, contracts, agreements, etc. maintained by the Corporation that are subject to Section 409A. |
| | (d) | Each U.S Eligible Participant, any beneficiary or the U.S Eligible Participant’s estate, as the case may be, is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of such U.S Eligible Participant in connection with this Plan (including any taxes and penalties under Section 409A), and neither the Corporation nor any affiliate shall have any obligation to indemnify or otherwise hold such U.S Eligible Participant or beneficiary or the U.S Eligible Participant’s estate harmless from any or all of such taxes or penalties. |
| | (f) | In the event that the Committee determines that any amounts payable hereunder will be taxable to a Participant under Section 409A prior to payment to such Participant of such amount, the Corporation may (i) adopt such amendments to the Plan and Deferred Share Units and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Committee determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Deferred Share Units hereunder and/or (ii) take such other actions as the Committee determines necessary or appropriate to avoid or limit the imposition of an additional tax under Section 409A. |
| | (g) | In the event the Corporation terminates the Plan in accordance with Section 7, the time and manner of payment of amounts that are subject to 409A will be made in accordance with the rules under 409A. The Plan will not be terminated except as permitted under 409A. |
If a Participant is subject to tax under theIncome Tax Act (Canada) and also is a U.S. Eligible Participant with respect to DSUs, the following special rules regarding forfeiture of such Share Units will apply if the Participant’s DSUs are subject to Section 409A. For greater clarity, these forfeiture provisions are intended to avoid adverse tax consequences under Section 409A and/or under paragraph 6801(d) of the regulations under theIncome Tax Act(Canada), that may result because of the different requirements as to the time of settlement of Share Units with respect to a Participant’s “separation from service” (within the meaning of Section 409A) (“Separation From Service”) and his retirement or loss of office (under tax laws of Canada). If a Participant otherwise would be entitled to payment of DSUs in any of the following circumstances, such DSUs shall instead be immediately and irrevocably forfeited (for greater certainty, without any compensation therefore):
| | (a) | a Participant experiences a Separation From Service as a result of a permanent decrease in the level of services provided to less than 20% of his past service in circumstances that do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under theIncome Tax Act (Canada); or |
| | (b) | a Participant experiences a Separation From Service upon ceasing to be a director while continuing to provide services as an employee in circumstances that do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under theIncome Tax Act (Canada); or |
| | (c) | a Participant experiences a serious disability that continues for more than 29 months in circumstances that constitute a Separation from Service and do not constitute a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under theIncome Tax Act (Canada); or |
| | (d) | a Participant experiences a retirement from, or loss of office or employment with, the Corporation or an affiliate thereof, within the meaning of paragraph 6801(d) of the regulations under theIncome Tax Act (Canada) by virtue of ceasing employment as both an employee and as a director, but he continues to provide services as an independent contractor such that he has not experienced a Separation From Service. |
In this text, words importing the singular meaning shall include the plural and vice versa, and words importing the masculine shall include the feminine and neuter genders.
The validity, construction and effect of the Plan and any actions taken or relating to the Plan shall be governed by the laws of the Province of British Columbia and the federal laws of Canada applicable therein.
The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision and any invalid or unenforceable provision shall be severed from the Plan.
The effective date of this Plan shall be June 18, 2013.
