Corporation 1, which is wholly-owned by Parentco (a société anonyme, i.e., SA or public limited company), established two phantom stock plans (Plans 1 and 2) for five key employees under which, on the occurrence of a Triggering Event, an employee will receive a cash payment equal to the excess of the Market Value of Shares of Corporation at the date of the Triggering Event over their initial Market Value on grant. Except where the Triggering Event is one which discloses a value (namely, an acquisition of control, amalgamation, business sale or IPO), the Market Value was computed as nine times the average adjusted EBITDA for the previous two fiscal years plus working capital, as adjusted, and minus long-term debt. In addition to the “Material Change” Triggering Events referenced mostly noted above, a Triggering Event references the employee’s death, departure or retirement, and termination of employment for any reason other than termination for a listed delict such as theft.
Ruling respecting the phantom plans not being a salary deferral arrangement (with qualifier that this is a question of fact).