Minnesota Proposed book value phantom stock plan with appendices for First Florida Bank, Inc.
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How to fill out Proposed Book Value Phantom Stock Plan With Appendices For First Florida Bank, Inc.?
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FAQ
If a business is sold, employees that own phantom stock receive money that is equal to the amount they would have received had they owned actual stock in the company. For that reason, it's financially beneficial to employees to own phantom stock, as they don't need to worry about dilution.
Phantom stock plans are considered ?liability awards? for accounting purposes (assuming they will be settled in cash rather than stock). As such, the sponsoring company must recognize the plan expense ratably over the vesting period. Varying accrual schedules can be found in the market.
For example, suppose an employee received 10 phantom shares with a starting value of $7, and assume the shares are valued on the payment date at $15. At the date of payment the employee would receive $150 under a ?full value? plan and $80 under an ?appreciation only? plan.
The answer involves two variables: (a) the presumed value of the company, and (b) the number of shares to be used in the plan. Once these two answers are known, the phantom share price is calculated as the former (the value) divided by the latter (the number of shares).
It is possible to create a phantom stock plan that avoids the application of 409A rules. The key requirement would be to (a) use cliff vesting (any incremental vesting must trigger immediate payment), and (b) pay benefits within 2½ months of the end of the year in which the awards vest.
A cash payment from Company A as the difference between the current common share price and phantom stock issue price: ($70 ? $50) x 500 = $10,000; or. A cash payment from Company A equal to the current common share price: $50 x 500 = $25,000.
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).
Phantom stock plans are considered ?liability awards? for accounting purposes (assuming they will be settled in cash rather than stock).