Phantom Stock Plan

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This Phantom Stock Plan is for use when giving a valued employee benefits of stock ownership without actually granting the stock. This plan is used by companies who desire to retain key personnel.

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This Phantom Stock Plan gives a valued employee the benefits of stock ownership without the actual grant of company stock. In other words, this "phantom" stock, even though not real, follows the company's actual stock and pays out profits as if it were "real.” The phantom stock, like stock options or restricted stock, are subject to vesting requirements.

This plan sets forth: i) that the board of directors will administer the plan; ii) the vesting policy; and iii) how phantom stock benefits will be paid. In addition, this plan contains a comprehensive list of definitions for ease of reference by the parties.

This Phantom Stock Plan contains:
  • Purpose: Sets out that the purpose is to enable the company to retain its valued employees and key personnel;
  • Definitions: List of plan definitions for ease of reference;
  • Vesting: Sets forth the period in which the employee will be fully vested in the plan;
  • Payment of Benefits: Upon termination the participant will be paid the value of the units;
  • Amendment or Termination: The Board of Directors may amend or terminate this plan at any time;
  • Signatures: This document must be signed by the secretary of the company offering the stock.

Protect yourself and your rights by using our attorney-prepared forms.

This attorney-prepared packet contains:
  1. General Information
  2. Instructions and Checklist
  3. Phantom Stock Plan
State Law Compliance: This form complies with the laws of all states
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Phantom Stock Plan
 

 

 
1.   Purpose.
 
The purpose of this Plan is to enable __________________________ [company], a ______________ [state] corporation to attract and retain in its employ persons of outstanding competence, and to promote an entrepreneurial attitude among key employees of the Company.
 
2. Definitions.
 
(a) Book Value” means the consolidated net book value of the Company, as shown on the most recent balance sheet.
 
(b) Commencement Date” means the date on which the Company awards one or more Phantom Stock Participation Units to a Participant. If a Participant is awarded Units on different dates, the particular date of each award will be deemed the Commencement Date for that particular award.
 
(c) Company” means __________________________ [company], or any company successor thereto by merger, consolidation, liquidation, or other reorganization which has made provision for adoption of this Plan and the assumption of the Companys obligations thereunder, as well as any subsidiary 51 percent or more of the outstanding common stock of which is owned by the Company.
 
(d) Employee” means any person, including an officer of the Company (whether or not a director thereof), who is employed by the Company on a full-time basis, who is compensated for such employment by a regular salary, and who, in the opinion of the Board of Directors is one of the key personnel of the Company in a position to contribute materially to its continued growth and development and to its future financial success. The term does not include persons who are retained by the Company as consultants only.
 
(e) Fair Market Value” shall mean that amount denominated “Shareholder Equity” on the Companys annually prepared fiscal year end unaudited balance sheet as prepared by the Companys independent public accountants in accordance with generally accepted accounting principles.
 
(f) Participant” means an Employee who is awarded Phantom Stock Participation Units by the Board of Directors hereunder. Each Participant shall be set forth on Exhibit A hereto.
 
(g) Phantom Stock Participation Unit” or Unit” means a right equal to ____ [number] % of the Fair Market Value of the Company.
 
(h) Retirement” means a severance from the Companys employment upon or after attainment of age 65, or earlier retirement due to Total Disability.
 
(i) Termination” shall mean a Participants severance from employment with the Company by reason of death, Retirement, Total Disability, voluntary resignation, discharge for other than cause, sale of all or substantially all of the Companys assets, or a merger, consolidation, reorganization or sale of the Companys stock, any of which result in the transfer of 51% or more of the Companys stock, if after the merger, consolidation, reorganization or sale of the Companys stock, the new owner does not assume the Companys obligations hereunder. Discharge for cause” shall mean discharge of the Participant by reason of the fact that he or she has been convicted of a felony or has been discharged from employment for theft, dishonesty, misconduct or any other act or omission on his part which is recognized by the courts of the State of [state] as constituting just cause for an employer to terminate an employees specified term contract of employment prior to its specified expiration date.
 
(j) Termination Date” shall mean the date of a Participants Termination.
 
(k) Total Disability” means the inability of the Employee, by reason of any physical or mental disability, confirmed in writing by a doctor chosen by the Company, to perform his/her assigned duties for any period of 180 consecutive days.
 
(l) Value of a Unit” means the Fair Market Value at the fiscal year ended which immediately precedes the Commencement Date or the Termination Date, as the case may be, multiplied by __________ [number] ([number]%). The Value of a Unit shall be separately determined for each Unit held by a Participant unless the Participant was awarded these Units on the same Commencement Date.
 
3. Administration.
 
(a) The Board of Directors of the Company shall administer, construe, and interpret this Plan. No member of the Board of Directors shall be liable for any act done or determination made in good faith.
 
(b) The construction and interpretation by the Board of Directors of any provision of this Plan shall be final and conclusive. It shall determine, subject to the provisions of this Plan:
 
(1) The employees who shall participate in the Plan from time to time;
 
(2) The number of Phantom Stock Participation Units (sometimes hereinafter called Units”), to be awarded for each Participant;
 
(3) The effective date of the award of the Units, which date may be prior to the adoption of this Plan (Effective Date”);
 
(4) The scheduled vesting of the Phantom Stock Participation Units, if any;
 
(5) The Fair Market Value and the date of its determination under this Plan; and
 
(6) Payment provisions upon termination.
4. Establishment of Phantom Stock Participation Units.  
 
The Company shall set up an appropriate record (hereinafter called the Special Ledger”), which may from time to time be attached hereto as Exhibit A, and thereafter from time to time enter therein the name of each Participant, the number of Units awarded to him/her by the Board of Directors, and an amount equivalent to the Value of the Units so awarded, the Commencement Date, and the vesting date for such Units.
 
5. Vesting.  
 
No Participant shall be entitled to any amounts credited to his/her account under Section 7(a) hereof or to payment therefore upon Termination unless such Participant shall have been an Employee of the Company continuously for a period of ______ [number] years from the Commencement Date as set forth on the Special Ledger.
 
6. Aggregate Number of Units.  
 
The aggregate number of Units standing in the Special Ledger to the credit of all Participants at any one time shall not exceed an amount equal to _____ [percentage] of the Book Value of the Company or [percentage] of the outstanding shares of the Company, whichever is less.
 
7. Credits to Account of Participants.
 
(a) So long as this Plan remains in effect, from time to time as of the date of the Companys most recent annual fiscal year end balance sheet, there shall be credited to each Participants account in the Special Ledger an amount which shall be equal to the excess, if any, of the aggregate Value of his/her Phantom Stock Participation Units then standing in his/her account over the aggregate Value of such Units on the Commencement Date or dates the Units were awarded, all subject, however, to the provisions of subparagraphs (b), (c) and (d), inclusive, of this Section 7.
 
(b) When a Participants employment with the Company is severed by discharge for cause, Participant shall cease to be a Participant, he shall forfeit all of his/her rights in any Units reflected in his/her name on the Special Ledger, and shall have no rights therein, or hereunder.
 
(c) When a Participants employment with the Company is severed by Termination, Participant or Participants Beneficiary or Beneficiaries designated pursuant to subparagraph (b) of paragraph 8 hereof shall have the option, exercisable in writing filed with the Secretary of the Company within 60 days after his Termination Date to have his/her credit under the provisions of subparagraph (a) of this paragraph 7 determined, and to exercise any other rights hereunder. If such option is not timely exercised as herein provided, Participant shall not have the right to receive payment of any amounts under paragraph 8(a) hereof, or of any other amounts or to exercise any other rights or be entitled to any other benefits hereunder and any and all rights and benefits to which Participant may be entitled hereunder shall be forfeited and terminated.
 
(d) If the Board of Directors of the Company shall terminate this Plan at any time after its effective date, no credit under the provisions of subparagraph (a) of this paragraph 7 shall be made thereafter to the account of any Participant; provided, however, that if the date of such termination occurs after a Participant is vested under paragraph 5 hereof or after a Participants Termination Date, then such Participant shall be entitled to any credit resulting under the provisions of subparagraph (a) as of the date of termination of this Plan.
 
8. Payment of Benefits.
 
(a) Upon Termination of any vested Participant there shall be paid to him/her, or in the event of Participants death, to the person or persons designated under the provisions of Section 8(b), the aggregate amounts by which the Value of Participants Units as of the Termination Date exceed the Value of the Units as of the Commencement Date. The amount as determined pursuant to this Section 8(a) shall be payable in quarter-annual installments over a ten-year period immediately following his/her Termination Date, the first such payment to be made within three months immediately following his/her Termination Date.
 
(b) Each person upon becoming a Participant shall file with the Secretary of the Company a notice in writing designating one or more Beneficiaries to whom payments otherwise due the Participant shall be made in the event of Participants death while in the employment of the Company or after severance therefrom subject, however, to the provisions of Section 8(c). Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Secretary of the Company.
 
(c) The Board of Directors in its absolute discretion, but without obligation, may accelerate the payment of benefits under this Section 8 to the Beneficiary or Beneficiaries of a Participant.
 
9. Non-Competition Provisions. [Optional Provision]  
 
As a condition to the receipt of benefits hereunder, each Participant, agrees to execute an Employee Invention and Secrecy Agreement (if one has not already been executed by Employee at any time prior to the date of the adoption of this Plan). In the event of any such breach of the Employee Invention and Secrecy Agreement by the Participant, the Board of Directors of the Company, by written notice to such Participant, may cause his/her benefits to be suspended. Thereafter, if the Board of Directors shall find that the Participant has continued to violate the Employee Invention and Secrecy Agreement for a period of one month following such suspension, the Board may permanently cancel Participants benefits hereunder and thereupon all rights of such Participant under this Plan shall terminate. Electing to suspend or cancel a Participants benefits for violation of the Employee Invention and Secrecy Agreement shall not limit the other remedies of the Company at law or equity to enforce the terms of the Employee Invention and Secrecy Agreement. If a court shall find the Employee Invention and Secrecy Agreement void, invalid or unenforceable, it shall not invalidate any other provision of this Plan.
 
10. Limitation of Rights.
(a) The Board of Directors may at any time prior to a Participants becoming vested pursuant to Section 5 or if Participant ceases to be an Employee for reasons other than as provided in Section 2 (i), cancel all Units standing to his credit in the Special Ledger.
 
(b) Nothing in this Plan contained shall be construed to:
 
(1) Give any Employee of the Company any right to be awarded the Units other than in the sole discretion of the Board of Directors;
 
(2) Give a Participant any rights whatsoever with respect to the shares of common stock of the Company or cause the Participant to be a shareholder of the Company;
 
(3) Cause the Phantom Stock Participation Units to be deemed shares of the Company;
 
(4) Limit in any way the right of the Company to terminate a Participants employment with the Company at any time; or
 
(5) Be evidence of any agreement or understanding, express or implied, that the Company will employ a Participant in any particular position or at any particular rate of remuneration or for any particular period of time.
 
11. Non-alienation of Benefits.  
 
Except for a transfer by Participant to a living trust in which either Participant or his/her spouse, or both, are the trustees, no right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge or encumber, or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If any Participant or Beneficiary hereunder shall become a bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit hereunder, then such right or benefit shall, in the discretion of the Board of Directors, cease and in such event, the Company may hold or apply the same or any part thereof for the benefit of Participant or Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner and in such proportion as the Board of Directors may deem proper.
 
12. Amendment or Termination of Plan.
 
(a) The Board of Directors may terminate this Plan at any time.
 
(b) The Board of Directors may amend this Plan at any time.
 
(c) Any amendment or termination of this Plan shall not affect the vested rights of Participants or Beneficiaries to payments in accordance with Section 8 of amounts standing to the credit of Participants in the Special Ledger at the time of such amendment or termination.
 
13. Interpretation and Disputes.
 
(a) Interpretation. If any question shall arise in regard to the interpretation of any provision of this Plan or any agreement between the Company and Participant pursuant to this Plan, the question shall be referred to the Board of Directors and, if the Board of Directors shall reach a determination with respect to such question that is recorded in writing and signed on behalf of both the Company and the Participant, then such determination shall be conclusive.
 
(b) Conciliation. Any dispute or difference between the Company and Participant arising out of or in connection with this Plan or any agreement between the Company and Participant pursuant to this Plan or as to the rights or liabilities of either such party may, if it shall not fall within and have been resolved pursuant to Section 13(a) hereof, be referred to the Board of Directors for resolution between the Company and Participant, if possible. The Board of directors may, if they so desire, consult outside experts for assistance in arriving at such a resolution.
 
(c) Arbitration. Any such dispute or difference as is referred to in Section 13(b) hereof which shall not have been resolved pursuant to the foregoing provisions of this Section 13, or otherwise by agreement between the parties, shall, except as otherwise provided in the final sentence of this Section 13(c), be referred to and finally settled by arbitration. The arbitration shall be held at _______________ County, _______________ [state], and conducted in accordance with the Rules of the American Arbitration Association. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
 
(d) Special Rules for Arbitration. The arbitrators shall observe the following procedural rules:
 
(i) Arbitrators must be members of the ___________ [state] State Bar actively engaged in the practice of law with expertise in the process of deciding disputes and interpreting contracts (in the particular field of law involving the subject controversy). If the parties cannot agree on an arbitrator after having been presented with three lists of potential candidates by the American Arbitration Association, however, the American Arbitration Association shall select an arbitrator from among its Commercial Arbitration Panel members who are retired judges.
 
(ii) The parties may resort to the courts for injunctive relief pending arbitrations, without thereby waiving arbitration.
 
(iii) The arbitration shall be conducted in the English language in __________________________ [place], according to the rules of evidence contained in the ______________ [state] Evidence Code.
 
(iv) In rendering the award, the arbitrator(s) shall determine the rights and obligations of the parties according to the substantive and procedural laws of ____________ [state], as though the arbitrator(s) were a court of competent jurisdiction in _______________ [state].
 
(v) The award must be based on, and accompanied by, a written statement of decision explaining the factual and legal basis for the award as to each of the principal controverted issues at the hearing. The award shall be confirmed and entered as a judgment by the Superior Court of this state. The award may be appealed under the same standards specified in _______________ [state] law applicable to appeals from the Superior Court.
 
(vi) The prevailing party is entitled to recover costs and expenses (which shall include reasonable attorneys fees, as well as the fees and expenses of the arbitrators and the American Arbitration Associations administrative fees). A prevailing party” shall be a party in whose favor any portion of the award is rendered.
 
14. Effective Date.  
 
This Plan shall become operative and in effect on the date as shall be fixed by the Board of Directors of the Company, in its discretion.
 
The foregoing Phantom Stock Plan was duly adopted and approved by the Board of Directors on ________________ [date] [Optional: and approved by the shareholders of the Corporation effective ______________ [date]].
 
 
 
_______________ ,
  Secretary
EXHIBIT A
SPECIAL LEDGER 
 
Participant
Units Awarded
Commencement Date
Vesting Date
Excess of Value of Units at Commencement Date
Current Value
Current Value Over Value at Commencement Date    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Pages12
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#43683
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Phantom Stock Plan
 

 

 
1.   Purpose.
 
The purpose of this Plan is to enable __________________________ [company], a ______________ [state] corporation to attract and retain in its employ persons of outstanding competence, and to promote an entrepreneurial attitude among key employees of the Company.
 
2. Definitions.
 
(a) Book Value” means the consolidated net book value of the Company, as shown on the most recent balance sheet.
 
(b) Commencement Date” means the date on which the Company awards one or more Phantom Stock Participation Units to a Participant. If a Participant is awarded Units on different dates, the particular date of each award will be deemed the Commencement Date for that particular award.
 
(c) Company” means __________________________ [company], or any company successor thereto by merger, consolidation, liquidation, or other reorganization which has made provision for adoption of this Plan and the assumption of the Companys obligations thereunder, as well as any subsidiary 51 percent or more of the outstanding common stock of which is owned by the Company.
 
(d) Employee” means any person, including an officer of the Company (whether or not a director thereof), who is employed by the Company on a full-time basis, who is compensated for such employment by a regular salary, and who, in the opinion of the Board of Directors is one of the key personnel of the Company in a position to contribute materially to its continued growth and development and to its future financial success. The term does not include persons who are retained by the Company as consultants only.
 
(e) Fair Market Value” shall mean that amount denominated “Shareholder Equity” on the Companys annually prepared fiscal year end unaudited balance sheet as prepared by the Companys independent public accountants in accordance with generally accepted accounting principles.
 
(f) Participant” means an Employee who is awarded Phantom Stock Participation Units by the Board of Directors hereunder. Each Participant shall be set forth on Exhibit A hereto.
 
(g) Phantom Stock Participation Unit” or Unit” means a right equal to ____ [number] % of the Fair Market Value of the Company.
 
(h) Retirement” means a severance from the Companys employment upon or after attainment of age 65, or earlier retirement due to Total Disability.
 
(i) Termination” shall mean a Participants severance from employment with the Company by reason of death, Retirement, Total Disability, voluntary resignation, discharge for other than cause, sale of all or substantially all of the Companys assets, or a merger, consolidation, reorganization or sale of the Companys stock, any of which result in the transfer of 51% or more of the Companys stock, if after the merger, consolidation, reorganization or sale of the Companys stock, the new owner does not assume the Companys obligations hereunder. Discharge for cause” shall mean discharge of the Participant by reason of the fact that he or she has been convicted of a felony or has been discharged from employment for theft, dishonesty, misconduct or any other act or omission on his part which is recognized by the courts of the State of [state] as constituting just cause for an employer to terminate an employees specified term contract of employment prior to its specified expiration date.
 
(j) Termination Date” shall mean the date of a Participants Termination.
 
(k) Total Disability” means the inability of the Employee, by reason of any physical or mental disability, confirmed in writing by a doctor chosen by the Company, to perform his/her assigned duties for any period of 180 consecutive days.
 
(l) Value of a Unit” means the Fair Market Value at the fiscal year ended which immediately precedes the Commencement Date or the Termination Date, as the case may be, multiplied by __________ [number] ([number]%). The Value of a Unit shall be separately determined for each Unit held by a Participant unless the Participant was awarded these Units on the same Commencement Date.
 
3. Administration.
 
(a) The Board of Directors of the Company shall administer, construe, and interpret this Plan. No member of the Board of Directors shall be liable for any act done or determination made in good faith.
 
(b) The construction and interpretation by the Board of Directors of any provision of this Plan shall be final and conclusive. It shall determine, subject to the provisions of this Plan:
 
(1) The employees who shall participate in the Plan from time to time;
 
(2) The number of Phantom Stock Participation Units (sometimes hereinafter called Units”), to be awarded for each Participant;
 
(3) The effective date of the award of the Units, which date may be prior to the adoption of this Plan (Effective Date”);
 
(4) The scheduled vesting of the Phantom Stock Participation Units, if any;
 
(5) The Fair Market Value and the date of its determination under this Plan; and
 
(6) Payment provisions upon termination.
4. Establishment of Phantom Stock Participation Units.  
 
The Company shall set up an appropriate record (hereinafter called the Special Ledger”), which may from time to time be attached hereto as Exhibit A, and thereafter from time to time enter therein the name of each Participant, the number of Units awarded to him/her by the Board of Directors, and an amount equivalent to the Value of the Units so awarded, the Commencement Date, and the vesting date for such Units.
 
5. Vesting.  
 
No Participant shall be entitled to any amounts credited to his/her account under Section 7(a) hereof or to payment therefore upon Termination unless such Participant shall have been an Employee of the Company continuously for a period of ______ [number] years from the Commencement Date as set forth on the Special Ledger.
 
6. Aggregate Number of Units.  
 
The aggregate number of Units standing in the Special Ledger to the credit of all Participants at any one time shall not exceed an amount equal to _____ [percentage] of the Book Value of the Company or [percentage] of the outstanding shares of the Company, whichever is less.
 
7. Credits to Account of Participants.
 
(a) So long as this Plan remains in effect, from time to time as of the date of the Companys most recent annual fiscal year end balance sheet, there shall be credited to each Participants account in the Special Ledger an amount which shall be equal to the excess, if any, of the aggregate Value of his/her Phantom Stock Participation Units then standing in his/her account over the aggregate Value of such Units on the Commencement Date or dates the Units were awarded, all subject, however, to the provisions of subparagraphs (b), (c) and (d), inclusive, of this Section 7.
 
(b) When a Participants employment with the Company is severed by discharge for cause, Participant shall cease to be a Participant, he shall forfeit all of his/her rights in any Units reflected in his/her name on the Special Ledger, and shall have no rights therein, or hereunder.
 
(c) When a Participants employment with the Company is severed by Termination, Participant or Participants Beneficiary or Beneficiaries designated pursuant to subparagraph (b) of paragraph 8 hereof shall have the option, exercisable in writing filed with the Secretary of the Company within 60 days after his Termination Date to have his/her credit under the provisions of subparagraph (a) of this paragraph 7 determined, and to exercise any other rights hereunder. If such option is not timely exercised as herein provided, Participant shall not have the right to receive payment of any amounts under paragraph 8(a) hereof, or of any other amounts or to exercise any other rights or be entitled to any other benefits hereunder and any and all rights and benefits to which Participant may be entitled hereunder shall be forfeited and terminated.
 
(d) If the Board of Directors of the Company shall terminate this Plan at any time after its effective date, no credit under the provisions of subparagraph (a) of this paragraph 7 shall be made thereafter to the account of any Participant; provided, however, that if the date of such termination occurs after a Participant is vested under paragraph 5 hereof or after a Participants Termination Date, then such Participant shall be entitled to any credit resulting under the provisions of subparagraph (a) as of the date of termination of this Plan.
 
8. Payment of Benefits.
 
(a) Upon Termination of any vested Participant there shall be paid to him/her, or in the event of Participants death, to the person or persons designated under the provisions of Section 8(b), the aggregate amounts by which the Value of Participants Units as of the Termination Date exceed the Value of the Units as of the Commencement Date. The amount as determined pursuant to this Section 8(a) shall be payable in quarter-annual installments over a ten-year period immediately following his/her Termination Date, the first such payment to be made within three months immediately following his/her Termination Date.
 
(b) Each person upon becoming a Participant shall file with the Secretary of the Company a notice in writing designating one or more Beneficiaries to whom payments otherwise due the Participant shall be made in the event of Participants death while in the employment of the Company or after severance therefrom subject, however, to the provisions of Section 8(c). Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Secretary of the Company.
 
(c) The Board of Directors in its absolute discretion, but without obligation, may accelerate the payment of benefits under this Section 8 to the Beneficiary or Beneficiaries of a Participant.
 
9. Non-Competition Provisions. [Optional Provision]  
 
As a condition to the receipt of benefits hereunder, each Participant, agrees to execute an Employee Invention and Secrecy Agreement (if one has not already been executed by Employee at any time prior to the date of the adoption of this Plan). In the event of any such breach of the Employee Invention and Secrecy Agreement by the Participant, the Board of Directors of the Company, by written notice to such Participant, may cause his/her benefits to be suspended. Thereafter, if the Board of Directors shall find that the Participant has continued to violate the Employee Invention and Secrecy Agreement for a period of one month following such suspension, the Board may permanently cancel Participants benefits hereunder and thereupon all rights of such Participant under this Plan shall terminate. Electing to suspend or cancel a Participants benefits for violation of the Employee Invention and Secrecy Agreement shall not limit the other remedies of the Company at law or equity to enforce the terms of the Employee Invention and Secrecy Agreement. If a court shall find the Employee Invention and Secrecy Agreement void, invalid or unenforceable, it shall not invalidate any other provision of this Plan.
 
10. Limitation of Rights.
(a) The Board of Directors may at any time prior to a Participants becoming vested pursuant to Section 5 or if Participant ceases to be an Employee for reasons other than as provided in Section 2 (i), cancel all Units standing to his credit in the Special Ledger.
 
(b) Nothing in this Plan contained shall be construed to:
 
(1) Give any Employee of the Company any right to be awarded the Units other than in the sole discretion of the Board of Directors;
 
(2) Give a Participant any rights whatsoever with respect to the shares of common stock of the Company or cause the Participant to be a shareholder of the Company;
 
(3) Cause the Phantom Stock Participation Units to be deemed shares of the Company;
 
(4) Limit in any way the right of the Company to terminate a Participants employment with the Company at any time; or
 
(5) Be evidence of any agreement or understanding, express or implied, that the Company will employ a Participant in any particular position or at any particular rate of remuneration or for any particular period of time.
 
11. Non-alienation of Benefits.  
 
Except for a transfer by Participant to a living trust in which either Participant or his/her spouse, or both, are the trustees, no right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge or encumber, or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefits. If any Participant or Beneficiary hereunder shall become a bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit hereunder, then such right or benefit shall, in the discretion of the Board of Directors, cease and in such event, the Company may hold or apply the same or any part thereof for the benefit of Participant or Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner and in such proportion as the Board of Directors may deem proper.
 
12. Amendment or Termination of Plan.
 
(a) The Board of Directors may terminate this Plan at any time.
 
(b) The Board of Directors may amend this Plan at any time.
 
(c) Any amendment or termination of this Plan shall not affect the vested rights of Participants or Beneficiaries to payments in accordance with Section 8 of amounts standing to the credit of Participants in the Special Ledger at the time of such amendment or termination.
 
13. Interpretation and Disputes.
 
(a) Interpretation. If any question shall arise in regard to the interpretation of any provision of this Plan or any agreement between the Company and Participant pursuant to this Plan, the question shall be referred to the Board of Directors and, if the Board of Directors shall reach a determination with respect to such question that is recorded in writing and signed on behalf of both the Company and the Participant, then such determination shall be conclusive.
 
(b) Conciliation. Any dispute or difference between the Company and Participant arising out of or in connection with this Plan or any agreement between the Company and Participant pursuant to this Plan or as to the rights or liabilities of either such party may, if it shall not fall within and have been resolved pursuant to Section 13(a) hereof, be referred to the Board of Directors for resolution between the Company and Participant, if possible. The Board of directors may, if they so desire, consult outside experts for assistance in arriving at such a resolution.
 
(c) Arbitration. Any such dispute or difference as is referred to in Section 13(b) hereof which shall not have been resolved pursuant to the foregoing provisions of this Section 13, or otherwise by agreement between the parties, shall, except as otherwise provided in the final sentence of this Section 13(c), be referred to and finally settled by arbitration. The arbitration shall be held at _______________ County, _______________ [state], and conducted in accordance with the Rules of the American Arbitration Association. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
 
(d) Special Rules for Arbitration. The arbitrators shall observe the following procedural rules:
 
(i) Arbitrators must be members of the ___________ [state] State Bar actively engaged in the practice of law with expertise in the process of deciding disputes and interpreting contracts (in the particular field of law involving the subject controversy). If the parties cannot agree on an arbitrator after having been presented with three lists of potential candidates by the American Arbitration Association, however, the American Arbitration Association shall select an arbitrator from among its Commercial Arbitration Panel members who are retired judges.
 
(ii) The parties may resort to the courts for injunctive relief pending arbitrations, without thereby waiving arbitration.
 
(iii) The arbitration shall be conducted in the English language in __________________________ [place], according to the rules of evidence contained in the ______________ [state] Evidence Code.
 
(iv) In rendering the award, the arbitrator(s) shall determine the rights and obligations of the parties according to the substantive and procedural laws of ____________ [state], as though the arbitrator(s) were a court of competent jurisdiction in _______________ [state].
 
(v) The award must be based on, and accompanied by, a written statement of decision explaining the factual and legal basis for the award as to each of the principal controverted issues at the hearing. The award shall be confirmed and entered as a judgment by the Superior Court of this state. The award may be appealed under the same standards specified in _______________ [state] law applicable to appeals from the Superior Court.
 
(vi) The prevailing party is entitled to recover costs and expenses (which shall include reasonable attorneys fees, as well as the fees and expenses of the arbitrators and the American Arbitration Associations administrative fees). A prevailing party” shall be a party in whose favor any portion of the award is rendered.
 
14. Effective Date.  
 
This Plan shall become operative and in effect on the date as shall be fixed by the Board of Directors of the Company, in its discretion.
 
The foregoing Phantom Stock Plan was duly adopted and approved by the Board of Directors on ________________ [date] [Optional: and approved by the shareholders of the Corporation effective ______________ [date]].
 
 
 
_______________ ,
  Secretary
EXHIBIT A
SPECIAL LEDGER 
 
Participant
Units Awarded
Commencement Date
Vesting Date
Excess of Value of Units at Commencement Date
Current Value
Current Value Over Value at Commencement Date    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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