Illinois Phantom Stock Plan of Hercules, Inc.
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How to fill out Phantom Stock Plan Of Hercules, Inc.?
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FAQ
Summary. A phantom stock plan refers to a type of deferred employee compensation plan where plan participants benefit from the upside of a company's share price without actually receiving company shares. In a phantom stock plan, upon redemption of phantom stock, the plan participant receives cash compensation.
Phantom stock is a contract between an employer and an employee that grants the employee the right to receive a payment based on the value of the employer's stock. When granting phantom stock, the employer does not grant the employee any shares of the employer's stock.
On redemption, in a phantom stock plan, the plan participant receives a cash payment. This is in comparison to a stock option plan, where the plan participant receives common stock. As a result, a phantom stock plan allows the participant to reap the benefits of an increasing share price without shareholder dilution.
However, phantom stocks come with a considerable amount of disadvantages that can diminish participants' perceived control and influence, strain company liquidity, require extensive administrative efforts, introduce tax complexities, create disagreements, and subject participants to volatility in financial benefits ...
Phantom shares usually get liquid when the company gets acquired or goes public or if the company decides to do a buyback. Any gains from the assets must be reported to tax authorities as ordinary income upon vesting.
As a default, this form plan provides for forfeiture of all unvested phantom stock units upon a participant's termination of employment (subject to the terms of the award agreement).
Providing phantom stock allows the company to reward employees for their hard work without worrying about those big problems. Phantom shares are typically used to encourage senior leadership to produce better results for the company.
As described, phantom shares are usually redeemed in cash?the payment being treated like a bonus. However, should the plan agreement allow it, the payment obligation may be satisfied by distributing actual stock to the employees. A phantom stock plan must be supported by more than a verbal commitment.
