Phantom Stock Agreement Template for Saudi Arabia

A Phantom Stock Agreement is utilized when companies in Saudi Arabia wish to provide key employees with the economic benefits of stock ownership without transferring actual equity, which may be restricted due to regulatory, Sharia, or corporate structure considerations. This document is particularly relevant for private companies, family businesses, and subsidiaries of international corporations operating in Saudi Arabia. The agreement must comply with Saudi Arabian laws, including labor regulations, capital market rules, and Sharia principles. It typically includes detailed provisions on grant terms, vesting conditions, valuation methodologies, payment procedures, and termination scenarios. The document is designed to align employee interests with company performance while respecting local legal and religious requirements.

1. Parties: Identification of the company and the participant receiving the phantom stock rights

2. Background: Context of the agreement and purpose of the phantom stock plan

3. Definitions: Key terms including Phantom Stock Units, Fair Market Value, Vesting Date, and other relevant terminology

4. Grant of Phantom Stock Units: Details of the number of units granted and basic terms of the grant

5. Vesting Schedule: Timing and conditions for vesting of the phantom stock units

6. Valuation Mechanism: Method for determining the value of phantom stock units at various events

7. Payment Terms: Procedures and timing for payments upon vesting or other trigger events

8. Term and Termination: Duration of the agreement and circumstances leading to termination

9. Effect of Termination of Employment: Treatment of phantom stock units upon various types of employment termination

10. Restrictions and Limitations: Limitations on transfer, assignment, and other restrictions on phantom stock units

11. Administration: Details on plan administration and decision-making authority

12. Tax Matters: Tax implications and responsibilities of both parties

13. Confidentiality: Obligations regarding confidential information

14. Governing Law and Jurisdiction: Specification of Saudi law as governing law and relevant jurisdiction

15. General Provisions: Standard clauses including amendments, notices, and entire agreement