This Phantom Share Agreement is designed for use by Australian companies seeking to implement employee incentive arrangements without diluting actual equity ownership. It is particularly valuable for private companies, subsidiaries of international organizations, or entities with restricted share structures. The document provides a comprehensive framework for granting phantom shares that track the value of actual company shares, including detailed provisions for vesting conditions, valuation methodologies, and payment terms. This type of agreement is commonly implemented when traditional equity arrangements are impractical due to corporate structure, shareholder restrictions, or regulatory requirements. The agreement ensures compliance with Australian corporate, employment, and tax laws while offering flexibility in structuring incentive compensation.
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1. Parties: Identifies the company and the participant entering into the phantom share agreement
2. Background: Explains the context and purpose of the phantom share arrangement
3. Definitions and Interpretation: Defines key terms including 'Phantom Shares', 'Vesting Date', 'Valuation Date', and interpretation rules
4. Grant of Phantom Shares: Details the number of phantom shares granted and confirmation that these do not constitute actual equity
5. Vesting Conditions: Specifies the conditions and timeline for vesting of phantom shares
6. Valuation Mechanism: Defines how the value of phantom shares will be calculated
7. Payment Terms: Specifies when and how payments will be made upon vesting or exercise
8. Term and Termination: Duration of the agreement and circumstances for termination
9. Confidentiality: Obligations regarding confidential information
10. Tax Obligations: Addresses tax implications and responsibilities
11. General Provisions: Standard boilerplate clauses including governing law, notices, and amendments
1. Change of Control Provisions: Include when specific provisions are needed for company sale or merger scenarios
2. Good/Bad Leaver Provisions: Include when different treatment is desired based on circumstances of employment termination
3. Non-Competition and Non-Solicitation: Include when additional restrictive covenants are desired
4. Clawback Provisions: Include when the company wants right to recoup payments in certain circumstances
5. International Tax Provisions: Include for participants subject to foreign tax jurisdictions
6. Administrator Provisions: Include when a third party will administer the phantom share scheme
7. Dispute Resolution: Include when specific dispute resolution procedures are desired beyond court jurisdiction
1. Schedule 1 - Grant Notice: Details of specific phantom share grant including number of shares and grant date
2. Schedule 2 - Vesting Schedule: Detailed timeline and conditions for vesting of phantom shares
3. Schedule 3 - Valuation Methodology: Detailed formula and procedures for calculating phantom share value
4. Schedule 4 - Exercise Notice: Form for participant to exercise vested phantom shares
5. Schedule 5 - Tax Worked Examples: Examples of tax calculations and implications
6. Appendix A - Consent Form: Participant's acknowledgment and acceptance of terms
7. Appendix B - Beneficiary Designation Form: Form for designating beneficiaries in case of participant's death
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