The Director Profit Sharing Agreement is a crucial document used when a company wishes to align director compensation with corporate performance through profit sharing arrangements. This agreement, governed by Canadian law, is particularly relevant for companies seeking to attract and retain high-caliber directors by offering performance-based compensation beyond standard director fees. The document addresses key aspects including profit calculation methodologies, payment schedules, tax implications, and compliance with Canadian corporate governance requirements. It's essential for both private and public companies implementing director incentive programs, and must comply with relevant provisions of the Canada Business Corporations Act, provincial securities regulations, and tax legislation. The agreement typically forms part of the company's broader corporate governance framework and should be reviewed alongside existing director compensation policies.
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1. Parties: Identification of the company and the director entering into the agreement
2. Background: Context of the agreement, director's role, and purpose of the profit sharing arrangement
3. Definitions: Key terms used throughout the agreement, including 'Profits', 'Calculation Period', 'Payment Date', etc.
4. Appointment and Term: Confirmation of director's appointment and duration of the profit sharing arrangement
5. Profit Sharing Entitlement: Core terms of the profit sharing arrangement, including percentage share and basis of entitlement
6. Calculation of Profits: Detailed methodology for calculating profits and the director's share
7. Payment Terms: Timing, method, and conditions of profit share payments
8. Taxation and Deductions: Treatment of tax obligations and other statutory deductions
9. Confidentiality: Obligations regarding confidential information and financial data
10. Termination: Circumstances under which the agreement can be terminated and consequences
11. General Provisions: Standard clauses including governing law, amendments, notices, etc.
1. Vesting Provisions: Include when profit sharing rights are subject to vesting periods or conditions
2. Non-Competition and Non-Solicitation: Include for directors with access to sensitive business information
3. International Tax Provisions: Include when director is subject to tax in multiple jurisdictions
4. Clawback Provisions: Include when company wants right to recover payments in specific circumstances
5. Corporate Governance Compliance: Include for public companies or when specific governance requirements apply
6. Change of Control: Include provisions for what happens to profit sharing in case of company sale or merger
7. Dispute Resolution: Include detailed arbitration or mediation procedures if desired
1. Schedule A - Profit Calculation Methodology: Detailed formula and accounting principles for calculating profits
2. Schedule B - Payment Schedule: Timing and frequency of profit share payments
3. Schedule C - Performance Metrics: Any specific performance criteria affecting profit share calculations
4. Schedule D - Tax Treatment Examples: Illustrations of tax implications and calculations
5. Schedule E - Reporting Requirements: Format and timing of profit reporting to director
6. Appendix 1 - Board Resolution: Copy of board resolution approving the profit sharing arrangement
7. Appendix 2 - Acceptance Form: Standard form for director's acceptance of profit share payments
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