Phantom Equity Ownership Agreement

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PHANTOM EQUITY OWNERSHIP AGREEMENT This Agreement is entered into this _____ day of _________, 2011 by and between ________________________________, LLC (________________________________________________) and ____________________(Consultant). WHEREAS, ____________________ desires to have Consultant have a phantom equity ownership position in ____________________ so that Consultant may have an interest in ____________________s continued success. WHEREAS, ____________________ has agreed to grant to Consultant a phantom equity position in the net value of ____________________, if it is ever sold or if there is a significant change in control of ____________________, subject to the terms and conditions of this Agreement. WHEREAS, in exchange for the phantom equity of ____________________, Consultant has agreed to enter into that Consultant Services Agreement of even date. NOW, THEREFORE, for and in consideration of Consultants signing the agreement, Consultant Services Agreement and the Phantom Equity Ownership Agreement of even date, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, ____________________ and Consultant, intending to be legally bound, hereby agree as follows: SECTION 1. GRANTING OF EQUITY (Grant). Subject to the terms and conditions of this Agreement, ____________________ hereby grants to Consultant a phantom equity position as follows:
1.

The Company shall provide Consultant with two percent (2%) of phantom equity of the Company provided that the Consultant is still employed or engaged to provide services to the Company on a full-time basis through ______________________. The Company shall provide Consultant with an additional two percent (2%) of phantom equity of the Company provided that the Consultant is still employed or engaged to provide services to the Company on a full-time basis through __________________. Such phantom equity shall entitle Consultant with up to 4% (as indicated in subparagraphs 1 and 2 above) of ____________________s net proceeds, after taxes and expenses, in the event of a sale, merger of part or all of the company or other significant change in control of ____________________. If Consultants consulting relationship with the Company is terminated by the Company for cause as defined in this subparagraph (3), or Consultant terminates such consulting relationship with the Company, to the extent the Grant has not vested

2.

3.

4..

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as of the date of termination of such consulting relationship, the Grant shall lapse and be of no further force and effect. For purposes of this Agreement, cause shall mean (i) the failure or refusal by Consultant to comply with the policies, standards and regulations of the Company as established from time to time by the Officers to whom Consultant reports or by the Board of Directors of the Company, or (ii) engaging in conduct which is demonstrably and materially injurious to the financial condition or business reputation of the Company. To the extent the Grant is not vested within the foregoing period, the Grant shall lapse and be of no further force and effect. SECTION 2. TERM AND TERMINATION. This Agreement shall be effective as of the date of execution. This Agreement shall terminate upon the payment to Consultant the accrued phantom value or by mutual agreement of the parties. SECTION 3. NONTRANSFERABILITY. Section 3.1 Restriction. This Agreement is not transferable by Consultant other than by testamentary will or the laws of descent and distribution and, during Consultants lifetime, may be exercised only by Consultant or Consultants guardian or legal representative. Except as permitted by the preceding sentence, neither this Agreement nor any of the rights and privileges shall be subject to execution, attachment, or similar process. Upon any attempt to transfer this Agreement, or of any right or privilege conferred thereby, contrary to the provisions hereof, or upon the levy of any attachment or similar process upon such option, right or privilege, this Agreement and any such rights and privileges shall immediately become null and void. Section 3.2 Rights as Shareholders Prior to Exercise. Except as otherwise provided hereto, Consultant shall not, by virtue hereof, be entitled to any rights of a shareholder in ____________________, either at law or equity. The rights of Consultant are limited to those expressed in the Agreement and are not enforceable against ____________________ except to the extent set forth herein. SECTION 4. NO EFFECT ON POWERS OF CORPORATION. The existence of the Agreement shall not affect in any way the right or power of ____________________ or its shareholders to make or authorize any adjustments, recapitalization, reorganization, or other changes in ____________________s capital structure or its business, or any merger of consolidation of ____________________, or any issue of bonds, debentures, preferred shares with rights greater than or affecting the Shares, or the dissolution or liquidation of ____________________, or any sale or transfer of all or any part of its assets or business, or any other corporate act or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. SECTION 5. CHANGE IN CONTROL. The term change in control shall be defined as a change in ownership or effective control of the corporation, including a sale or transfer of eighty percent (80%) or more of the issued and outstanding voting stock of ____________________ (unless to another entity, trust or person under and subject to the control and/or direction of ____________________).

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SECTION 6. NOTICES. Any notices permitted or required under this Agreement shall be deemed given upon the date of personal delivery of 48 hours after deposit in the United States mail, postage prepaid, return receipt requested, addressed to the Corporation at: ____________________, LLC __________________ __________________ __________________

or at any other address as any party may, from time to time, designate by notice given compliance with this Section. SECTION 7. LAW GOVERNING. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. SECTION 8. TITLES AND CAPTIONS. All section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context of the interpretation of this Agreement. SECTION 9. ENTIRE AGREEMENT. This Agreement contains the entire understanding between and among the parties and superseded any prior understandings and agreements among them respecting the subject matter of this Agreement. SECTION 10. AGREEMENT BINDING. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. SECTION 11. PRESUMPTION. This Agreement or any section thereof shall not be construed against any part due to the fact that said Agreement or any section thereof was drafted by said party. SECTION 12. FURTHER ACTION. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. SECTION 13. PARTIES IN INTEREST. Nothing herein shall be construed to be to the benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. SECTION 14. SAVINGS CLAUSE. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this

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Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. SECTION 15. REPRESENTATION OF CONSULTANT. Section 15.1 Unregistered Shares. Consultant represents that he understands that the phantom equity interest is not now registered under any state securities law and that the phantom equity interest will not be so registered in the foreseeable future. Section 15.2 Representation by Counsel. Consultant represents that he has been advised to seek appropriate legal counsel and that he is not being represented in this transaction by ____________________s attorneys. SECTION 16. ARBITRATION. Any controversy or claim arising out of this Agreement, whether based on contract, tort, or other legal theory arising out of or related to this Agreement shall be resolved by arbitration pursuant to this Paragraph and the current rules and supervision of the American Arbitration Association. The arbitration shall be held in the Minneapolis metropolitan area and shall be heard before a single arbitrator who is knowledgeable in the business of ____________________ or as is appropriate to the issues in dispute. The arbitrators decision and award shall be final and binding and may be entered in any court having jurisdiction thereof. The arbitrator shall not have the power to award punitive or exemplary damages. Issues of arbitration as well as all other aspects of the arbitration process shall be interpreted in accordance with the laws of the State of Minnesota. Each party shall bear its own attorneys fees associated with the arbitration and other costs and expenses of the arbitration shall be borne as provided by the rules of the American Arbitration Association. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above. Dated: ________________ ____________________, LLC _____________________ _____________________ By: Consultant Its: President/CEO