Phantom Equity Agreement

Phantom Equity Agreement Template for Denmark

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Document background

The Phantom Equity Agreement is utilized when companies wish to provide employees or contractors with equity-like incentives without altering their corporate structure or shareholding. This document, governed by Danish law, is particularly valuable for private companies, subsidiaries of international groups, or organizations with restrictions on actual share issuance. The agreement comprehensively outlines the phantom equity scheme, including grant terms, vesting conditions, valuation methodologies, and payment mechanisms. It addresses key aspects such as tax implications, termination scenarios, and corporate events while ensuring compliance with Danish legal requirements. The document is structured to protect both the company's interests and participant rights, making it an effective tool for talent retention and alignment of interests without the complexities of actual share issuance.

Suggested Sections

1. Parties: Identification of the company and the participant entering into the phantom equity arrangement

2. Background: Context of the agreement, including the company's intention to implement a phantom equity scheme

3. Definitions: Detailed definitions of key terms, including 'Phantom Units', 'Fair Market Value', 'Exit Event', and other technical terms

4. Grant of Phantom Units: Details of the phantom units being granted, including number of units and grant date

5. Economic Rights: Description of the economic rights attached to phantom units, including participation in exit proceeds and dividend equivalents

6. Vesting Provisions: Vesting schedule and conditions for the phantom units

7. Valuation: Methodology and process for determining the value of phantom units

8. Payment Terms: Timing and method of payments for vested phantom units

9. Tax Treatment: Tax implications and responsibilities regarding the phantom equity

10. Termination Provisions: Effects of various types of employment termination on phantom units

11. Confidentiality: Confidentiality obligations regarding the agreement and company information

12. Assignment and Transfer: Restrictions on transfer or assignment of phantom unit rights

13. Governing Law and Jurisdiction: Specification of Danish law as governing law and jurisdiction for disputes

Optional Sections

1. Change of Control: Specific provisions dealing with company sale, merger, or other change of control events

2. International Provisions: Additional terms for participants based outside Denmark

3. Anti-dilution Protection: Provisions protecting phantom unit holders from dilution in certain corporate events

4. Clawback Provisions: Terms allowing company to recoup payments in cases of misconduct or financial restatement

5. Alternative Dispute Resolution: Provisions for mediation or arbitration as alternatives to court proceedings

6. Data Protection: GDPR compliance provisions for handling personal data

7. Non-Competition: Restrictions on competitive activities, if not covered in employment agreement

Suggested Schedules

1. Schedule 1: Vesting Schedule: Detailed vesting timeline and conditions

2. Schedule 2: Valuation Methodology: Detailed procedures and formulas for calculating phantom unit value

3. Schedule 3: Notice Forms: Template forms for exercise notices and other formal communications

4. Schedule 4: Tax Calculations: Examples of tax calculations and withholding methodology

5. Schedule 5: Participant Information: Specific details of the participant's grant, including number of units and grant date

6. Appendix A: Corporate Events: Detailed procedures for handling various corporate events

7. Appendix B: Definitions of Good Leaver/Bad Leaver: Detailed criteria for determining leaver status and corresponding rights

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