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Phantom Unit Award Agreement

Phantom Unit Award Agreement Template for Germany

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Key Requirements PROMPT example:

Phantom Unit Award Agreement

"I need a Phantom Unit Award Agreement for our German GmbH subsidiary, granting 1,000 phantom units to our senior software engineers with a 4-year vesting period starting March 1, 2025, including specific performance metrics tied to our company's revenue growth."

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Document background
The Phantom Unit Award Agreement is utilized when companies operating in Germany wish to provide employees with equity-linked compensation without transferring actual share ownership. This approach is particularly valuable for private companies, subsidiaries of foreign corporations, or organizations seeking to maintain their current ownership structure while offering competitive incentive packages. The document outlines the complete framework for phantom unit grants, including award terms, vesting schedules, valuation methods, and payment conditions, all specifically adapted to comply with German legal requirements including employment law, tax regulations, and data protection standards. It addresses key aspects such as works council involvement where necessary and includes specific provisions required under German corporate governance structures.
Suggested Sections

1. Parties: Identification of the company and the award recipient

2. Background: Context of the phantom unit program and its establishment

3. Definitions: Definitions of key terms including 'Phantom Units', 'Fair Market Value', 'Vesting Date', 'Performance Criteria', and other program-specific terms

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

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

6. Valuation Mechanism: Method for determining the value of phantom units, including calculation formulas

7. Payment Terms: Timing and form of payments for vested phantom units

8. Termination Provisions: Treatment of phantom units upon various types of employment termination

9. Tax Obligations: Tax withholding requirements and responsibilities under German law

10. Compliance with Laws: Provisions ensuring compliance with German regulations and corporate policies

11. Data Protection: GDPR compliance provisions regarding personal data processing

12. Governing Law and Jurisdiction: Specification of German law application and jurisdiction

13. Miscellaneous: Standard provisions including severability, entire agreement, and amendments

Optional Sections

1. Performance Conditions: Additional performance-based vesting conditions (used when award includes performance metrics)

2. Change of Control: Special provisions for corporate transactions (used in companies where M&A activity is likely)

3. Non-Competition and Non-Solicitation: Restrictive covenants (used for senior executives or key employees)

4. International Provisions: Special provisions for cross-border employees (used when recipient works across multiple jurisdictions)

5. Works Council Approval: Reference to works council agreement (used when works council co-determination applies)

6. Clawback Provisions: Provisions for recoupment of payments (used for regulatory compliance or risk management)

Suggested Schedules

1. Schedule A - Grant Notice: Specific details of the grant including number of units, grant date, and vesting schedule

2. Schedule B - Vesting Schedule: Detailed timetable of vesting dates and conditions

3. Schedule C - Valuation Methodology: Detailed explanation of how phantom unit value is calculated

4. Schedule D - Tax Treatment Summary: Overview of tax implications under German law

5. Schedule E - Data Privacy Notice: Detailed GDPR-compliant privacy notice

6. Appendix 1 - Administrative Procedures: Procedures for managing the phantom unit award including payment processing

7. Appendix 2 - Form of Release: Template for release agreement upon settlement of phantom units

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
Agreement
Award
Base Price
Beneficiary
Cause
Change in Control
Company
Competitive Activity
Confidential Information
Data Protection Laws
Disability
Employee
Fair Market Value
Good Reason
Grant Date
Grant Notice
Initial Value
Notice Period
Parent Company
Payment Date
Performance Criteria
Performance Period
Phantom Unit
Plan
Plan Administrator
Program
Retirement
Settlement Amount
Settlement Date
Taxes
Termination Date
Termination of Employment
Unit Value
Valuation Date
Valuation Methodology
Vested Phantom Units
Vesting Date
Vesting Period
Vesting Schedule
Works Council
Works Council Agreement
Relevant Industries

Technology

Financial Services

Manufacturing

Professional Services

Healthcare

Retail

Telecommunications

Energy

Real Estate

Media and Entertainment

Automotive

Consulting

Relevant Teams

Human Resources

Legal

Finance

Executive Leadership

Sales

Engineering

Research and Development

Operations

Product Management

Customer Success

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Managing Director

Senior Manager

Department Head

Technical Lead

Senior Software Engineer

Key Account Manager

Sales Director

Research Scientist

Product Manager

Operations Director

Regional Manager

Principal Consultant

Senior Advisor

Industries
German Civil Code (Bürgerliches Gesetzbuch - BGB): Framework for contractual relationships and obligations between parties, particularly §§ 611-630 concerning employment contracts
German Stock Corporation Act (Aktiengesetz - AktG): Regulations concerning corporate governance and valuation methods for stock corporations, relevant for determining phantom unit values
German Securities Trading Act (Wertpapierhandelsgesetz - WpHG): Although phantom units are not securities, this law provides guidance on similar financial instruments and insider trading regulations
German Income Tax Act (Einkommensteuergesetz - EStG): Tax treatment of phantom units, particularly § 19 regarding employment income and § 3 No. 39 regarding tax exemptions
German Wage Tax Implementation Regulation (Lohnsteuer-Durchführungsverordnung - LStDV): Specific regulations on the taxation of employment-related benefits including phantom units
General Data Protection Regulation (GDPR/DSGVO): Requirements for processing personal data in connection with the phantom unit program
Works Constitution Act (Betriebsverfassungsgesetz - BetrVG): Potential co-determination rights of works councils in implementing phantom unit programs
German Commercial Code (Handelsgesetzbuch - HGB): Accounting treatment and disclosure requirements for phantom unit obligations
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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