The Phantom Share Agreement is utilized when companies wish to provide employees with equity-like incentives without altering their corporate structure or shareholding. This document type is particularly relevant in South African contexts where companies may be restricted from issuing actual shares due to regulatory requirements, BEE considerations, or group company policies. The agreement typically includes detailed provisions for grant terms, vesting conditions, valuation methodologies, and payment mechanisms, all structured to comply with South African tax and employment legislation. It's commonly used by private companies, subsidiaries of multinational corporations, and companies with complex shareholding structures that make actual share issuance impractical.
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1. Parties: Identification of the Company and the Participant (employee) entering into the phantom share agreement
2. Background: Context of the agreement, including the Company's phantom share scheme and its purpose
3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement, including 'Phantom Shares', 'Vesting Date', 'Exercise Price', etc.
4. Grant of Phantom Shares: Details of the phantom shares being granted, including number of units and grant date
5. Vesting of Phantom Shares: Vesting schedule and conditions that must be met for phantom shares to vest
6. Valuation Mechanism: Method for determining the value of phantom shares, including timing and calculation formula
7. Payment Terms: Conditions and process for payment of vested phantom share value to the Participant
8. Tax Provisions: Treatment of tax obligations and responsibilities of both parties
9. Termination Provisions: Effects of employment termination on phantom share rights
10. Confidentiality: Obligations regarding confidential information related to the phantom share scheme
11. General Terms: Standard contractual provisions including notices, amendments, and governing law
1. Change of Control: Provisions dealing with company sale, merger, or other change of control events
2. Clawback Provisions: Terms allowing the company to recoup payments in cases of fraud or misconduct
3. Non-Competition and Non-Solicitation: Restrictions on participant's activities during and after employment
4. International Tax Provisions: Additional tax considerations for international participants
5. Performance Conditions: Specific performance targets linked to vesting, if applicable
6. Dividend Equivalent Rights: Provisions for phantom dividend payments, if included in the scheme
1. Schedule 1: Phantom Share Grant Details: Specific details of the grant including number of shares, grant date, and vesting schedule
2. Schedule 2: Valuation Formula: Detailed methodology for calculating phantom share value
3. Schedule 3: Vesting Conditions: Comprehensive list of conditions that must be met for vesting
4. Schedule 4: Notice of Exercise Form: Template form for participant to exercise vested phantom shares
5. Schedule 5: Tax Calculation Examples: Illustrative examples of tax treatment in various scenarios
6. Appendix A: Company Phantom Share Plan Rules: Reference to or extract of the overall phantom share plan rules
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