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The Phantom Stock Option Agreement is a strategic compensation instrument used by companies operating in the Philippines to attract, retain, and motivate key employees without diluting actual equity ownership. This document is particularly valuable for private companies, family-owned businesses, or subsidiaries of multinational corporations where actual share transfers may be restricted or undesirable. The agreement must comply with Philippine securities regulations, labor laws, and tax requirements while providing a clear framework for synthetic equity compensation. It typically includes detailed provisions on grant terms, vesting conditions, valuation methods, exercise procedures, and payment mechanisms, along with specific protections for both the company and the grantee. This type of agreement is commonly implemented as part of a broader executive compensation package or long-term incentive program.

1. Parties: Identifies the company and the employee/recipient of the phantom stock options

2. Background: Explains the context and purpose of the phantom stock option grant

3. Definitions: Defines key terms including Phantom Stock Units, Fair Market Value, Vesting Date, Exercise Price, and Payment Date

4. Grant of Phantom Stock Options: Details the number of phantom stock units granted and their initial value

5. Vesting Schedule: Specifies the vesting period and conditions for the phantom stock options

6. Valuation Methodology: Explains how the phantom stock units will be valued, including calculation methods

7. Exercise and Payment Terms: Describes the process for exercising options and receiving payments

8. Termination Provisions: Outlines what happens to the phantom stock options upon various types of employment termination

9. Tax Obligations: Addresses tax implications and responsibilities of both parties

10. Confidentiality: Requires the employee to maintain confidentiality about the agreement terms

11. Amendment and Termination: Procedures for modifying or terminating the agreement

12. Governing Law: Specifies Philippine law as governing law and jurisdiction

13. General Provisions: Standard contractual provisions including notices, assignment, and severability