The Phantom Equity Agreement serves as a crucial instrument for Indonesian companies seeking to provide performance-linked incentives without diluting actual shareholding. This document is particularly relevant for companies operating under Indonesian law who wish to attract and retain key talent while maintaining their existing corporate structure. The agreement outlines the terms of phantom equity grants, including vesting conditions, valuation methods, and payment triggers, all while ensuring compliance with Indonesian corporate, employment, and tax regulations. It is commonly used by startups, growing companies, and established businesses looking to implement alternative compensation structures. The Phantom Equity Agreement provides a flexible solution that aligns with both Indonesian legal requirements and international best practices in employee incentivization.
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1. Parties: Identification of the company and the recipient of phantom equity rights
2. Background: Context of the agreement and purpose of granting phantom equity rights
3. Definitions: Key terms including Phantom Units, Fair Market Value, Trigger Events, and Vesting Period
4. Grant of Phantom Equity: Details of the phantom equity units granted, including number of units and percentage they represent
5. Vesting Schedule: Timeline and conditions for vesting of phantom equity rights
6. Valuation Methodology: Process and formula for determining the value of phantom equity units
7. Payment Terms: Conditions triggering payment and method of payment calculation
8. Rights and Limitations: Clear statement that phantom equity does not constitute actual equity ownership
9. Tax Obligations: Tax treatment and responsibilities of both parties under Indonesian law
10. Confidentiality: Protection of company information and trade secrets
11. Termination: Circumstances under which the agreement can be terminated and consequences
12. Governing Law and Dispute Resolution: Specification of Indonesian law as governing law and dispute resolution procedures
1. Change of Control Provisions: Additional terms that apply in case of company sale or merger - include if company anticipates such events
2. Non-Competition: Restrictions on competing activities - include if recipient is in senior position
3. International Tax Provisions: Additional tax considerations - include if recipient is foreign national or expatriate
4. Clawback Provisions: Terms for recovering payments - include if company wants additional protection
5. Good Leaver/Bad Leaver Provisions: Different treatment based on circumstances of employment termination - include if company wants to differentiate termination scenarios
6. Anti-dilution Provisions: Protection against value dilution - include if company anticipates capital structure changes
1. Schedule A - Grant Notice: Specific details of phantom equity grant including number of units and grant date
2. Schedule B - Vesting Schedule: Detailed breakdown of vesting timeline and milestones
3. Schedule C - Valuation Methodology: Detailed formula and examples for calculating phantom equity value
4. Schedule D - Payment Calculation Examples: Sample calculations showing how payments will be determined in various scenarios
5. Appendix 1 - Trigger Event Definitions: Comprehensive list and definitions of events triggering payment
6. Appendix 2 - Tax Treatment Summary: Overview of tax implications under Indonesian law
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