ARTICLE · 23 FEBRUARY 2001

Retaining Key Employees

Frankfurt Garbus Kurnit Klein & Selz PC

Explore more from Frankfurt Garbus Kurnit Klein & Selz PC

United StatesEmployment and HR

Richard Kurnit

Establishing a phantom equity plan is one of the most popular ways to incentivize and retain key talent while permitting the founders/owners to retain ownership and control. Equity Participation Units or Equity Appreciation Units give employees a stake in the growth and eventual sale of an Agency -Equity Participation Units (EPU s) have been used on a fairly widespread basis in the Advertising Industry.

What Exactly Is An EPU?

EPU s are a contractual right to receive a cash payment on the occurrence of an event -normally a sale or merger of the Agency or the increase in the net worth of the Agency over time on the termination of an employee's employment. EPUs enable key talent to share in the upside growth of an Agency by contract rather than by being granted stock or stock options. EPU agreements often contain restrictive covenants that prevent employees from raiding clients or other employees and provide an incentive for employees to agree to these restrictions.

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