CEO's employment agreement in <i>Cardiff v. Fincentric Corp.</i>

The text of Michael Cardiff's employment agreement as contained in an appendix to the court's decision

Below is the text from Michael Cardiff’s employment agreement with Fincentric Corp. that was signed on July 20, 1999.

The text was taken verbatim from an appendix of the court’s decision. For more information about Cardiff v. Fincentric Corp., read the original article that appeared in the March 30, 2005, issue of Canadian Employment Law Today by clicking on the related articles link at the bottom of this page.

Fincentric Corp. was known as Prologic at the time the agreement was signed.

Cardiff’s employment agreement

This Agreement contains the terms and conditions of your employment with Prologic Corporation. Your employment will commence on September 1, 1999 (the "Commencement Date"), or such other date as mutually agreed, and will continue until terminated in accordance with the provisions of this Agreement.

All dollar amounts in this Agreement are denominated in Canadian dollars.

2. Employment

The terms of your employment will be as follows:

(a) Position and Responsibilities: You will be employed by the Corporation in the position of President and Chief Executive Officer reporting to the Board. Under the overall direction and supervision of the Board, you will be responsible for the complete strategic direction and operational results of the Corporation. In addition, you will perform or fulfil such duties and responsibilities as the Board may reasonably prescribe from time to time or as are incidental to the position of President and Chief Executive Officer, subject to the Canada Business Corporations Act and the articles and by-laws of the Corporation.

You will provide the Board with such information regarding the affairs of the Group as the Board may require, and at all times you will conform to the reasonable instructions and directions of the Board.

(b) Scope of Duties: During your employment, you will devote the whole of your time, attention and abilities during normal business hours to the duties hereby granted and accepted and you will give the Corporation the full benefit of your knowledge, expertise, technical skill and ingenuity.

(c) Salary: From the Commencement Date through to March 31, 2000, you will receive an annual salary (the "Salary") in the amount of $300,000 payable in accordance with the Corporation's standard salary payment schedule. On or around April 1, 2000, and at the beginning of each fiscal year thereafter, your Salary will be reviewed by the Board, and may be adjusted by the Board in its sole discretion, provided that in no event shall your Salary be less than $300,000. Increases, if any, to your Salary will become effective as of April 1 of each fiscal year. Payment of your Salary will be subject to source deductions and other deductions required to be deducted and remitted under applicable provincial or federal laws of Canada or Corporation policy.

(d) Bonus: You will be eligible to receive a bonus (the "Bonus") for each fiscal year, payable within 30 days after the audited financial statements of the Corporation for such fiscal year are approved by the Board. The target amount of the Bonus (the "Target Amount") will be 50% of your Salary. The Corporation will pay you a Bonus equal to the Target Amount for the 12 month period following the Commencement Date (the "Guaranteed Bonus Period"). Subsequent to the Guaranteed Bonus Period, the amount of the Bonus payable in respect of each fiscal year will be determined solely by the Board, based on: a) the Board approved plan and budget for the Corporation for the fiscal year, b) calculation methods agreed by you and the Board that relate the Bonus to the plan objectives and c) the actual results achieved by the Corporation for the fiscal year, compared to the plan. The maximum Bonus payable in respect of any fiscal year will be two times the Target Amount.

Stock Options: The Corporation will grant to you non-assignable stock options (the "Stock Options") which in the aggregate will enable you to purchase up to 1,576,928 common shares of the Corporation at the prices per share set out below. The Stock Options will be evidenced by a stock option agreement in the form attached as Schedule "A" hereto, subject to the following:

(i) the right to take up 300,000 shares pursuant to the Stock Options will vest on the Commencement Date and these Stock Options will have an option exercise price of $0.01 per share;

(ii) the right to take up 1/12 of the remaining 1,276,298 shares pursuant to Stock Options will vest on the first day of each fiscal quarter of the Corporation starting on the Commencement Date until all of the remaining Stock Options are so vested and these Stock Options will have an option exercise price of $1.75 per share;

(iii) in the event of a Change of Control, all of your unvested Stock Options will vest immediately; and

(iv) if you resign your employment with the Corporation or if your employment is terminated for Cause or without Cause;

any Stock Options not vested as of the date of such termination will be cancelled immediately; and

any Stock Options vested as of the date of such termination will be cancelled on the 90th day following the date of your termination.

For the purposes of this paragraph, the date of your termination of employment will be: in the case of your resignation, the date on which you deliver notice to the Corporation of your resignation; or in the case of termination by the Corporation of your employment for Cause or without Cause, the last day of your employment with the Corporation.

You agree that if the Corporation undertakes a public offering you will, if required by the Board or any securities regulatory authority enter into an escrow or pooling agreement in respect of any or all of the common shares of the Corporation held by you or which may be acquired by you upon the exercise of the Stock Options, on such terms as are substantially the same as those to which the other major shareholders of the Corporation are subject.

(e) Vacation Entitlement: You will receive paid vacation equal to four weeks per annum, pro-rated for any partial year of employment. Any unused vacations days may be carried forward for a maximum of one year and thereafter will be forfeited. Your vacation must be taken in accordance with the Corporation's vacation policy in effect from time to time.

(f) Medical Insurance and Other Benefits: You will have the same rights as all other employees to participate in any medical insurance, health insurance, life and accident insurance programs or other benefit programs as are described in the booklet attached as Schedule "B" hereto or as may hereafter be established by the Corporation for the benefit of its employees.

You will be covered by the British Columbia Medical Services Plan after a three month qualifying period. Prior to the expiry of this period, the Corporation will reimburse you for expenses paid by you to maintain basic medical coverage under the Ontario Health Insurance Plan.

(g) Expenses: The Corporation will reimburse you for all reasonable travelling and other out-of-pocket expenses actually and properly incurred by you in connection with your duties under this Agreement in accordance with the Corporation's expense policy in effect from time to time.

(h) Relocation Expenses: You will work out of the Corporation's office in Richmond, British Columbia or such other head office as the Corporation may establish. The Corporation will reimburse you for all reasonable relocation expenses actually and properly incurred by you provided that you first furnish statements and vouchers for all such expenses to the Corporation. Reasonable relocation expenses will include, without limiting the forgoing:

(i) the cost of a visit for yourself and your wife to Vancouver to view real estate;

legal costs related to the sale of your house in Toronto and purchase of a house in Vancouver;

direct expenses to move your household furnishings and effects from Toronto to Vancouver;

real estate commission on the sale of your house in Toronto;

(v) the cost of temporary accommodation for you and your family for up to three months, if necessary; and

other incidental costs incurred during the relocation process.

In addition to the foregoing, and without backup by receipts, the Corporation will provide you with a $25,000 allowance for other costs related to relocation.

In the event that you resign your employment with the Corporation within 12 months from the Commencement Date, you will reimburse the Corporation for all relocation expenses and the relocation allowance that the Corporation has paid to you or paid on your behalf.

(i) Loan: The Corporation will provide you with an interest free loan (the "Loan") of up to $200,000. The amount of the Loan will be determined by an independent assessment of market price differentials between your current resident in Toronto and a similar residence in Vancouver. The Loan will be secured by a first or second mortgage on your residence. The Loan will be repayable at the earlier of: a) two years from the Commencement Date, b) the 90th day following the termination of your employment with the Corporation for any reason, or c) a Change of Control. The documentation evidencing the loan will be in form and content satisfactory to the Corporation.

(j) Automobile Allowance: The Corporation will pay you an automobile allowance of $833.33 per month.

(k) Payment in Exchange for Stock Option: If prior to the third anniversary of the Commencement Date there is a Change of Control under which all of the Corporation's shares are acquired by a third party, you may require the Corporation to purchase from you all, but not less than all, of the Stock Options (including any unvested Stock Options) and the common shares acquired by you upon the exercise of any Stock Options, for an aggregate purchase price (the "Option Purchase Price") as set forth below.:

(i) the "Option Purchase Price" shall be equal to the net proceeds paid to the Corporation's shareholders in connection with the transaction which constituted the Change of Control multiplied by the "Percentage" (defined below);

(ii) the Percentage is initially 7.0% and will be reduced by 0.1944% at the end of each month following the Commencement Date, with the result that upon the third anniversary of the Commencement Date the Percentage will be zero and the Option Purchase Price will be zero; and

The Option Purchase Price will be paid to you in the same form and at the same time as the purchase price is paid to the Corporation's other shareholders. The foregoing right may only be exercised by you if at the time of the Change of Control the Corporation's shares are not listed or quoted on a stock exchange and if the payment of the Option Purchase Price is permitted under applicable laws. In order to exercise the foregoing right you must notify the Corporation in writing of your intention to do so within five days of your learning of an upcoming Change of Control.

3. Obligations of Employment

You covenant and agree as follows:

(b) Business of the Corporation: You will not, during your employment with the Corporation, engage in any other business, enterprise or activity, whether as a director, officer, employee or agent, or hold any position or office with any other corporation, firm or person other than with the Corporation, without the prior written consent of the Board. You may continue to be a director of each of Visible Genetics and Spectra Security Software, provided that the Board, in its sole discretion, continues to be satisfied that the discharge of your duties as a director of each of such corporations is not detrimental in any way to your duties to the Corporation and provided that further that you are not required to attend more than one board meeting per quarter for each such corporation. You are currently also a director of SolCorp., The Toronto Film Festival and Visible Decisions and you agree to resign as a director of each of these corporations as soon as possible and in any event no later than 90 days following the Commencement Date, in the case of SolCorp. and the Toronto Film Festival, and no later than 180 Days following the Commencement Date, in the case of Visible Decisions.

(d) Confidentiality and Proprietary Rights and Non-Competition Agreements: As further consideration for your employment with the Corporation, you will concurrently execute a confidentiality and proprietary rights agreement in the form attached as Schedule "C" hereto and a non-competition agreement in the form attached as Schedule "D" hereto.

4. Termination

(c) Without Cause: The Corporation may terminate your employment at any time without Cause immediately after delivery by the Corporation to you of a notice of termination of your employment without Cause. In the event your employment is terminated pursuant to this subsection 4(c), the Corporation will pay to you an amount (the "Severance Amount") equal to:

(i) two times your Salary in effect immediately prior to such termination, plus

(ii) if your employment is terminated before April 1, 2001 two times the Target Amount, or if you [sic] employment is terminated on or after April 1, 2001, two times the Bonus paid for the previous fiscal year.

The Severance Amount will be payable on or before the 90th day of your termination of employment. You understand that you will be limited to the aforesaid Severance Amount and that upon providing you with such Severance Amount the Corporation will have satisfied all of its contractual, common law and statutory obligations and that your employment shall have been terminated effective on the date specified in the notice. You will not be entitled to receive any further severance, notice, payment in lieu of notice or damages of any kind and you will not be entitled to receive any further Salary, Bonus, stock options or benefits (except for amounts, if any, specifically accrued under this Agreement up to the date of termination of your employment and unpaid at the date of such termination) and you will have thereupon released all claims and entitlements thereto including, without limitation, any claims and entitlements under the Employment Standards Act (British Columbia). Payment of the Severance Amount will be subject to all source deductions and other deductions required to be deducted and remitted under applicable provincial or federal laws of Canada or Corporation policy.

(d) Incapacity: In the event that you, by reason of illness or mental or physical disability, are unable to perform your duties and responsibilities under this Agreement for a period of six consecutive months, or for a total of six months in any twenty-four month period, the Corporation may terminate your employment with such further payments, if any, as the Corporation may deem appropriate.

5. Agreement Voluntary and Equitable

The parties agree that you each have carefully considered and understand the terms of employment contained in this Agreement, that the terms are mutually fair and equitable, and that you each have executed this Agreement voluntarily and of your own free will.

7. Severability

If any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, then that provision or portion will be severed from this Agreement. The rest of the Agreement will remain in full force and effect.

8. Entire Agreement

This Agreement contains the whole agreement between you and the Corporation with respect to your employment by the Corporation, and there are no representations, warranties, collateral terms or conditions, express or implied, other than as set forth in this Agreement. This Agreement supersedes any written or oral agreement or understanding between you and the Corporation. No change or modification of this Agreement will be valid unless it is in writing and initialled by all parties.

10. Non-Waiver

No failure or delay by you or the Corporation in exercising any power or right under this Agreement will operate as a waiver of such power or right. Any consent or waiver by you or by the Corporation to any breach or default under this Agreement will be effective only in the specific instance and for the specific purpose for which it was given.

11. Survival of Terms

The provisions of sections 1 and 4 and of subsections 2(d), 2(e), 2(i) and 2(j) of this Agreement will survive the termination of your employment and this Agreement.

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