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Phantom Unit Award Agreement

Phantom Unit Award Agreement Template for Philippines

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Key Requirements PROMPT example:

Phantom Unit Award Agreement

"I need a Phantom Unit Award Agreement under Philippine law for our tech startup's senior executives, with quarterly vesting over 4 years starting March 2025, and special provisions for accelerated vesting in case of an IPO."

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Document background
The Phantom Unit Award Agreement is utilized when companies operating in the Philippines wish to provide employees with equity-like incentives without transferring actual ownership rights. This approach is particularly valuable for private companies, subsidiaries of multinational corporations, or organizations with restricted ownership structures. The document complies with Philippine regulatory requirements while outlining the synthetic equity program's terms, including grant details, vesting schedules, valuation methods, and payment mechanisms. It's designed to align with Philippine labor laws, securities regulations, and tax requirements while providing flexibility in implementing compensation strategies that mirror equity ownership benefits.
Suggested Sections

1. Parties: Identifies the company granting the phantom units and the recipient employee

2. Background: Explains the context of the agreement and the company's phantom unit award program

3. Definitions: Defines key terms including 'Phantom Unit', 'Fair Market Value', 'Vesting Date', and other program-specific terminology

4. Grant of Phantom Units: Specifies the number of phantom units granted and their initial reference value

5. Vesting Schedule: Details the timing and conditions under which phantom units will vest

6. Valuation Methodology: Explains how the value of phantom units will be calculated

7. Payment Terms: Describes when and how payments will be made upon vesting of phantom units

8. Tax Withholding: Addresses tax implications and withholding requirements under Philippine law

9. Termination Provisions: Specifies what happens to phantom units upon various types of employment termination

10. Confidentiality: Requires the recipient to maintain confidentiality of agreement terms and program details

11. Amendment and Administration: Explains how the agreement can be modified and who administers the program

12. Governing Law and Jurisdiction: Specifies Philippine law as governing law and defines jurisdiction for disputes

Optional Sections

1. Change in Control Provisions: Used when company wants to specify different treatment of phantom units in case of merger, acquisition, or other corporate transactions

2. Non-Competition and Non-Solicitation: Include when company wishes to tie phantom unit awards to restrictive covenants

3. Clawback Provisions: Include when company wants right to recoup payments under specific circumstances

4. International Tax Provisions: Include when recipient may be subject to tax laws of multiple jurisdictions

5. Data Privacy Consent: Include detailed data privacy provisions when extensive personal data processing is required

6. Performance Conditions: Include when vesting is tied to specific performance metrics or conditions

Suggested Schedules

1. Schedule A - Vesting Schedule: Detailed breakdown of vesting dates and conditions

2. Schedule B - Valuation Methodology: Detailed formula and procedures for calculating phantom unit value

3. Schedule C - Notice Requirements: Forms and procedures for various notices under the agreement

4. Schedule D - Tax Treatment Summary: Summary of tax implications and calculations under Philippine law

5. Appendix 1 - Phantom Unit Award Program Rules: Complete rules and regulations of the phantom unit program

6. Appendix 2 - Beneficiary Designation Form: Form for designating beneficiaries in case of recipient's death

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Clauses
Grant Provisions
Vesting Conditions
Valuation
Payment Terms
Performance Conditions
Termination Rights
Change of Control
Confidentiality
Non-Competition
Non-Solicitation
Tax Compliance
Withholding Rights
Administration
Amendment
Assignment
Beneficiary Designation
Clawback
Data Protection
Dispute Resolution
Electronic Notices
Force Majeure
Governing Law
Intellectual Property
Notices
Representations and Warranties
Severability
Successors and Assigns
Term and Termination
Third Party Rights
Waiver
Relevant Industries

Financial Services

Technology

Manufacturing

Professional Services

Healthcare

Retail

Telecommunications

Real Estate

Energy

Consumer Goods

Education

Transportation and Logistics

Relevant Teams

Human Resources

Legal

Finance

Executive Management

Compensation and Benefits

Corporate Governance

Payroll

Tax

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Human Resources Director

Legal Counsel

Compensation and Benefits Manager

Finance Manager

Department Head

Senior Executive

Executive Director

Managing Director

Country Manager

Regional Director

Senior Manager

Key Employee

High-Potential Employee

Industries
Labor Code of the Philippines (Presidential Decree No. 442): Primary legislation governing employment relationships and compensation in the Philippines, relevant for establishing the legal framework for phantom unit awards as a form of employee compensation
Securities Regulation Code (Republic Act No. 8799): Regulates securities and synthetic equity instruments; although phantom units are not actual securities, this law provides guidance on similar financial instruments
National Internal Revenue Code of the Philippines: Governs the taxation of phantom unit awards, including when and how they should be taxed as income or benefits
Corporation Code of the Philippines (Republic Act No. 11232): Provides the legal framework for corporate actions, including the authority to issue phantom unit awards and other equity-based compensation
Foreign Investments Act of 1991 (Republic Act No. 7042): Relevant if the phantom units are tied to foreign entities or if foreign ownership restrictions need to be considered
Civil Code of the Philippines (Republic Act No. 386): Provides general principles of contract law that apply to the agreement structure and enforcement
Data Privacy Act of 2012 (Republic Act No. 10173): Relevant for handling personal and financial information of phantom unit award recipients
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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