BENEFITS OF PHANTOM STOCK

BENEFITS OF PHANTOM STOCK

Phantom stock is synthetic equity, as opposed to real equity. It is a contractual agreement with key employees that provides certain benefits of common stock ownership without actual shares or voting rights. The primary benefits versus actual shares or stock options are the following:

1. No dilution of actual shares.

2. Mimics economic benefit of real stock ownership.

3. Very flexible formats, such as:

• Phantom stock units based on company valuation
• Performance units tied to select metrics, such as improvements in revenue, margins, EBITDA, etc.
• Stock appreciation rights (SARs) conscripted to an increase in company value

4. Top management compensation remains confidential and excluded from metrics of bonus calculation.

5. Virtually no say in operations and board matters and resolutions.

6. No impact on cap table and avoids any equity complications, such as preferred share coupon.

7. May include buyback clause.