Linking agreement

Introduction

A linking agreement is a document that is crucial when setting up a Phantom Plan. It connects the Phantom Plan with the company's share structure.

How it works

A linking agreement outlines the role of certain shareholders in forming the ESOP pool. Created at the start of the Phantom Plan, it identifies which shareholders will be involved and how the payout of Phantom Shares at an exit event will affect them. It specifies the exact percentage of shares each participating shareholder contributes to the pool.

Examples

Simple scenario

• Background: A company is equally owned by two founders, with no external investments. They've set aside 10% for the Phantom Pool.
• Cap table: Founder 1 and Founder 2 each own 50%.
• Phantom Pool: 10%.
• Participation: Both founders contribute 5% each to the Phantom Pool.

Advanced scenario

• Background: The company has two founders and two investors. Only the founders are part of the Phantom Pool.
• Cap table: Founder 1 has 50%, Founder 2 has 25%, Investor 1 has 15%, and Investor 2 has 10%.
• Phantom Pool: 15% of the total equity.
• Participation: Founder 1 adds 10%, and Founder 2 adds 5% to the Phantom Pool.

Custom scenario

• Background: In a setup with multiple founders and investors, only one founder contributes to the Phantom Pool.
• Cap table: Founder 1 holds 60%, Founder 2 and 3 each hold 10%, and Investors 1–4 each have 5%.
• Phantom Pool: 10% of the total equity.
• Participation: Founder 1 alone contributes 10% to the Phantom Pool.