Exhibit 10.7

 

PERFORMANCE-VESTING AGREEMENT

 

EMERGE ENERGY SERVICES LP

2013 LONG-TERM INCENTIVE PLAN

PHANTOM UNIT AGREEMENT

 

Pursuant to this Phantom Unit Agreement, dated as of [              ] (the
“Agreement”), Emerge Energy Services GP, LLC (the “Company”), as the general
partner of Emerge Energy Services LP (the “Partnership”), hereby grants to
[                      ] (the “Participant”) the following award of Phantom
Units (“Phantom Units”), pursuant and subject to the terms and conditions of
this Agreement and the Emerge Energy Services LP 2013 Long-Term Incentive Plan
(the “Plan”), the terms and conditions of which are hereby incorporated into
this Agreement by reference.  Each Phantom Unit shall constitute a Phantom Unit
under the terms of the Plan and is hereby granted in tandem with a corresponding
DER, as further detailed in Section 3 below.  In the event of any conflict
between the terms of this Agreement and the Plan, the terms of the Plan shall
control.  Except as otherwise expressly provided herein, all capitalized terms
used in this Agreement, but not defined, shall have the meanings provided in the
Plan.

 

GRANT NOTICE

 

Subject to the terms and conditions of this Agreement, the principal features of
this Award are as follows:

 

Number of Phantom Units:  [                ]

 

Grant Date:  [                ]

 

Expiration Date:  [                ]

 

Vesting of Phantom Units:  The Phantom Units shall vest as set forth in
Section 4 below.

 

Termination of Phantom Units:  In the event of a termination of the
Participant’s Service for any reason, all Phantom Units that have not vested
prior to or in connection with such termination of Service shall thereupon
automatically be forfeited by the Participant without further action and without
payment of consideration therefor.  In addition, effective as of the Expiration
Date, any portion of the Phantom Units that does not become vested in accordance
with Section 4 below shall automatically be forfeited by the Participant without
further action and without payment of consideration therefor.

 

Payment of Phantom Units:  Vested Phantom Units shall be paid to the Participant
in the form of Units in accordance with Section 5 below.

 

DERs: Each Phantom Unit granted under this Agreement shall be issued in tandem
with a corresponding DER, which shall entitle the Participant to receive
payments in an amount equal to Partnership distributions in accordance with
Sections 3 and 5 below.  DERs shall entitle the Participant to receive payments,
subject to and in accordance with this Agreement, in an amount equal to any
distributions made by the Partnership in

 

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respect of the Units underlying the Phantom Units to which such DER corresponds.

 

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TERMS AND CONDITIONS OF PHANTOM UNITS

 

1.                                      Grant.  The Company hereby grants to the
Participant, as of the Grant Date, an award of Phantom Units as set forth in the
Grant Notice, subject to all of the terms and conditions contained in this
Agreement and the Plan.

 

2.                                      Phantom Units.  Subject to Section 4
below, each Phantom Unit that vests shall represent the right to receive
payment, in accordance with Section 5 below, in the form of one Unit.  Unless
and until a Phantom Unit vests, the Participant shall have no right to payment
in respect of any such Phantom Unit, or to any underlying Units.  Prior to
actual payment of any vested Phantom Unit in accordance with Section 5 below,
such Phantom Unit shall represent an unsecured obligation of the Partnership,
payable (if at all) only from the general assets of the Partnership.

 

3.                                      Grant of Tandem DERs.

 

(a)                                 Each Phantom Unit granted hereunder is
hereby granted in tandem with a corresponding DER, which DER shall remain
outstanding from the Grant Date until the earlier of (i) the payment of the
Phantom Unit or (ii) the forfeiture or termination for any reason, in each case,
of the Phantom Unit to which the DER corresponds.  Each vested DER shall entitle
the Participant to receive payments, subject to and in accordance with this
Agreement, in an amount equal to any distributions made by the Partnership in
respect of the Units underlying the Phantom Units to which such DER corresponds.

 

(b)                                 The Company shall establish, with respect to
each Phantom Unit, a separate DER bookkeeping account for such Phantom Unit (a
“DER Account”), which shall be credited (without interest) on the applicable
distribution dates with an amount equal to any distributions made by the
Partnership during the period that such Phantom Unit remains outstanding with
respect to the Unit underlying the Phantom Unit to which such DER relates.

 

(c)                              The DERs and any amounts that may become
distributable in respect thereof shall be treated separately from the Phantom
Units and the rights arising in connection therewith for purposes of
Section 409A of the Code (including for purposes of the designation of time and
form of payments required by Section 409A of the Code).

 

4.                                      Vesting and Termination of Phantom Units
and DERs.

 

(a)                                 Vesting.  Subject to Section[s] 4(b) [and
4(c)] below, the Phantom Units shall vest as follows: subject to the
Participant’s continued Service, [upon the occurrence of each Qualifying
Disposition (as defined below) during the period beginning on the Grant Date and
ending on the Expiration Date, a Pro Rata Percentage (as defined below) of the
total number of Phantom Units awarded hereunder shall vest; provided, however,
that in no event shall this award of Phantom Units be deemed vested with respect
to a greater number of Phantom Units than 100% of the number of Phantom Units
issued pursuant to Section 1 of this Agreement].  DERs shall vest on the same
basis as the

 

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applicable corresponding Phantom Unit.

 

(i)                                     [“Qualifying Disposition” shall mean the
sale or disposition, in one or a series of transactions, of Units held by
Insight Fund I, Insight Mezz Fund, and any affiliate thereof or any other fund
or investment vehicle managed or advised by Insight Equity Management Company
LLC (collectively, “Insight”) to an unrelated third party or in the open
market.]

 

(ii)                                  [“Pro Rata Percentage” shall mean the
fraction, expressed as a percentage, equal to (a) the total number of Units sold
or disposed of by Insight in a Qualifying Disposition, divided by (b) the total
number of Units held by Insight immediately following the initial public
offering of the Units.]

 

(b)                                 Accelerated Vesting.  [Subject to
Section 4(c) below and notwithstanding Section 7(c) of the Plan, if a Change in
Control occurs prior to the Expiration Date and the Participant remains an
Employee, Director or Consultant at least until immediately prior to the Change
in Control, then the Phantom Units (and the DERs) shall vest in full immediately
prior to the occurrence of such Change in Control.]

 

(c)                              Forfeiture.

 

(i)                                     Notwithstanding the foregoing, in the
event of a termination of the Participant’s Service for any reason, all Phantom
Units that have not vested prior to or in connection with such termination of
Service shall thereupon automatically be forfeited by the Participant without
further action and without payment of consideration therefor.  No portion of the
Phantom Units which has not become vested at the date of the Participant’s
termination of Service shall thereafter become vested.  Upon the forfeiture of a
Phantom Unit, the DER (and the DER Account) with respect to such forfeited
Phantom Unit shall also be forfeited.  DERs shall not entitle the Participant to
any payments relating to distributions occurring after the earlier to occur of
the applicable Phantom Unit payment date or the forfeiture of the Phantom Unit
underlying such DER.

 

(ii)                                  Any portion of the Phantom Units that does
not become vested in accordance with Section 4(a) [or 4(b)] above prior to the
Expiration Date shall, upon the Expiration Date, automatically be forfeited by
the Participant without further action and without payment of consideration
therefor.

 

5.                                      Payment of Phantom Units and DERs.

 

(a)                                 Phantom Units.  Unpaid, vested Phantom Units
shall be paid to the Participant in the form of Units in a lump-sum as soon as
reasonably practical, but not later than forty-five (45) days, following the
date on which such Phantom Units vest.  Payments of any Phantom Units that vest
in accordance herewith shall be made to the Participant (or in the event of the
Participant’s death, to the Participant’s estate) in whole Units in accordance
with this Section 5 and Section 8(l) of the Plan.

 

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(b)                                 DERs.  Unpaid, vested DERs shall be paid to
the Participant as follows: as soon as reasonably practical, but not later than
forty-five (45) days, following the date on which a Phantom Unit and
corresponding DER vests, the Participant shall be paid an amount in cash equal
to the amount then credited to the DER Account maintained with respect to such
Phantom Unit.

 

(c)                                  Potential Six-Month Delay.  Notwithstanding
anything to the contrary in this Agreement, no amounts payable under this
Agreement shall be paid to the Participant prior to the expiration of the six
(6)-month period following his “separation from service” (within the meaning of
Treasury Regulation Section 1.409A-1(h)) (a “Separation from Service”) to the
extent that the Company determines that paying such amounts prior to the
expiration of such six (6)-month period would result in a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code.  If the payment of any
such amounts is delayed as a result of the previous sentence, then on the first
business day following the end of the applicable six (6)-month period (or such
earlier date upon which such amounts can be paid under Section 409A of the Code
without resulting in a prohibited distribution, including as a result of the
Participant’s death), such amounts shall be paid to the Participant.

 

6.                                      Determinations by the Committee. 
Notwithstanding anything contained herein, all determinations, interpretations
and assumptions relating to the vesting of the Phantom Units (and corresponding
DERs) shall be made by the Committee.  In making such determinations, the
Committee may employ attorneys, consultants, accountants, appraisers, brokers,
or other persons, and the Committee, the Board, the Company, the Partnership and
their officers and directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons.  All actions taken and all interpretations
and determinations made by the Committee or the Board in good faith shall be
final and binding upon the Participant, the Company and all other interested
persons.

 

7.                                      Tax Withholding.  The Company and/or its
Affiliates shall have the authority and the right to deduct or withhold, or to
require the Participant to remit to the Company and/or its Affiliates, an amount
sufficient to satisfy all applicable federal, state, local and foreign taxes
(including the Participant’s employment tax obligations) required by law to be
withheld with respect to any taxable event arising in connection with the
Phantom Units and/or the DERs.  In satisfaction of the foregoing requirement,
unless otherwise determined by the Committee, the Company and/or its Affiliates
shall withhold Units otherwise issuable in respect of such Phantom Units having
a fair market value equal to the sums required to be withheld.  In the event
that Units that would otherwise be issued in payment of the Phantom Units are
used to satisfy such withholding obligations, the number of Units which shall be
so withheld shall be limited to the number of Units which have a fair market
value (which, in the case of a broker-assisted transaction, shall be determined
by the Committee, consistent with applicable provisions of the Code) on the date
of withholding equal to the aggregate amount of such liabilities based on the
minimum statutory withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such supplemental taxable
income.

 

8.                                      Rights as Unit Holder.  Neither the
Participant nor any person claiming under or through the Participant shall have
any of the rights or privileges of a holder of Units in respect

 

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of any Units that may become deliverable hereunder unless and until certificates
representing such Units shall have been issued or recorded in book entry form on
the records of the Partnership or its transfer agents or registrars, and
delivered in certificate or book entry form to the Participant or any person
claiming under or through the Participant.

 

9.                                      Non-Transferability.  Neither the
Phantom Units nor any right of the Participant under the Phantom Units may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by the Participant (or any permitted transferee) other than by will
or the laws of descent and distribution and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company, the Partnership or any of their Affiliates.

 

10.                               Distribution of Units.  Unless otherwise
determined by the Committee or required by any applicable law, rule or
regulation, neither the Company nor the Partnership shall deliver to the
Participant certificates evidencing Units issued pursuant to this Agreement and
instead such Units shall be recorded in the books of the Partnership (or, as
applicable, its transfer agent or equity plan administrator).  All certificates
for Units issued pursuant to this Agreement and all Units issued pursuant to
book entry procedures hereunder shall be subject to such stop transfer orders
and other restrictions as the Company may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities Exchange
Commission, any securities exchange upon which such Units are then listed, and
any applicable federal or state laws, and the Company may cause a legend or
legends to be inscribed on any such certificates or book entry to make
appropriate reference to such restrictions.  In addition to the terms and
conditions provided herein, the Company may require that the Participant make
such covenants, agreements, and representations as the Company, in its sole
discretion, deems advisable in order to comply with any such laws, regulations,
or requirements.  No fractional Units shall be issued or delivered pursuant to
the Phantom Units and the Committee shall determine whether cash, other
securities, or other property shall be paid or transferred in lieu of fractional
Units or whether such fractional Units or any rights thereto shall be canceled,
terminated, or otherwise eliminated.

 

11.                               Partnership Agreement.  Units issued upon
payment of the Phantom Units shall be subject to the terms of the Plan and the
terms of the Partnership Agreement.  Upon the issuance of Units to the
Participant, the Participant shall, automatically and without further action on
his or her part, (a) be admitted to the Partnership as a Limited Partner (as
defined in the Partnership Agreement) with respect to the Units, and (b) become
bound, and be deemed to have agreed to be bound, by the terms of the Partnership
Agreement.

 

12.                               No Effect on Service.  Nothing in this
Agreement or in the Plan shall be construed as giving the Participant the right
to be retained in the continued service of the Company or any of its
Affiliates.  Furthermore, the Company and its Affiliates may at any time
terminate the Participant’s Service free from any liability or any claim under
the Plan or this Agreement, unless otherwise expressly provided in the Plan,
this Agreement or any other written agreement between the Participant and the
Company, the Partnership or any Affiliate thereof.

 

13.                               Severability.  If any provision of this
Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction, such provision shall be construed or

 

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deemed amended to conform to the applicable law or, if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of this Agreement, such provision shall be stricken as to
such jurisdiction, and the remainder of this Agreement shall remain in full
force and effect.

 

14.                               Tax Consultation.  None of the Board, the
Committee, the Company nor the Partnership has made any warranty or
representation to the Participant with respect to the tax consequences of the
issuance or disposition of the Phantom Units, the DERs, the Units or the
transactions contemplated by this Agreement, and the Participant represents that
he or she is in no manner relying on such entities or their representatives for
tax advice or an assessment of such tax consequences.  The Participant
represents that the Participant has consulted with any tax consultants that the
Participant deems advisable in connection with the Phantom Units and DERs.

 

15.                               Amendments, Suspension and Termination.  To
the extent permitted by the Plan, this Agreement may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee, as long as such modification, suspension,
or termination does not materially reduce the rights or benefits of the
Participant.  Except as provided in the preceding sentence, this Agreement
cannot be modified, altered or amended, except by an agreement, in writing,
signed by both the Partnership and the Participant.

 

16.                               Lock-Up Agreement.  The Participant shall
agree, if so requested by the Company or the Partnership and any underwriter in
connection with any public offering of securities of the Partnership or any of
its Affiliates, not to directly or indirectly offer, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant for the sale of or otherwise dispose of
or transfer any Units held by him or her for such period, not to exceed one
hundred eighty (180) days following the effective date of the relevant
registration statement filed under the Securities Act in connection with such
public offering, as such underwriter shall specify reasonably and in good
faith.  The Company or the Partnership may impose stop-transfer instructions
with respect to securities subject to the foregoing restrictions until the end
of such 180-day period.  Notwithstanding the foregoing, the 180-day period may
be extended for up to such number of additional days as is deemed necessary by
such underwriter or the Company or Partnership to continue coverage by research
analysts in accordance with FINRA Rule 2711 or any successor rule.

 

17.                               Conformity to Securities Laws.  The
Participant acknowledges that the Plan and this Agreement are intended to
conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act, any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, and all applicable state
securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Phantom Units and DERs are
granted, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

18.                               Code Section 409A.  None of the Phantom Units,
the DERs or any amounts paid

 

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pursuant to this Agreement are intended to constitute or provide for a deferral
of compensation that is subject to Section 409A of the Code.  Nevertheless, to
the extent that the Committee determines that the Phantom Units or DERs may not
be exempt from (or compliant with) Section 409A of the Code, the Committee may
(but shall not be required to) amend this Agreement in a manner intended to
comply with the requirements of Section 409A of the Code or an exemption
therefrom (including amendments with retroactive effect), or take any other
actions as it deems necessary or appropriate to (a) exempt the Phantom Units
and/or DERs from Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Phantom Units and/or
DERs, or (b) comply with the requirements of Section 409A of the Code.  To the
extent applicable, this Agreement shall be interpreted in accordance with the
provisions of Section 409A of the Code.  Notwithstanding anything in this
Agreement to the contrary, to the extent that any payment or benefit hereunder
constitutes non-exempt “nonqualified deferred compensation” for purposes of
Section 409A of the Code, and such payment or benefit would otherwise be payable
or distributable hereunder by reason of the Participant’s termination of
Service, all references to the Participant’s termination of Service shall be
construed to mean a Separation from Service, and the Participant shall not be
considered to have a termination of Service unless such termination constitutes
a Separation from Service with respect to the Participant.

 

19.                               Adjustments; Clawback.  The Participant
acknowledges that the Phantom Units are subject to modification and termination
in certain events as provided in this Agreement and Section 7 of the Plan.  The
Participant further acknowledges that the Phantom Units, DERs and Units issuable
hereunder are subject to clawback as provided in Section 8(o) of the Plan.

 

20.                               Successors and Assigns.  The Company or the
Partnership may assign any of its rights under this Agreement to single or
multiple assignees, and this Agreement shall inure to the benefit of the
successors and assigns of the Company and the Partnership.  Subject to the
restrictions on transfer contained herein, this Agreement shall be binding upon
the Participant and his or her heirs, executors, administrators, successors and
assigns.

 

21.                               Governing Law.  The validity, construction,
and effect of this Agreement and any rules and regulations relating to this
Agreement shall be determined in accordance with the laws of the State of
Delaware without regard to its conflicts of laws principles.

 

22.                               Headings.  Headings are given to the sections
and subsections of this Agreement solely as a convenience to facilitate
reference.  Such headings shall not be deemed in any way material or relevant to
the construction or interpretation of this Agreement or any provision hereof.

 

[Signature page follows]

 

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The Participant’s signature below indicates the Participant’s agreement with and
understanding that this Award is subject to all of the terms and conditions
contained in the Plan and in this Agreement, and that, in the event that there
are any inconsistencies between the terms of the Plan and the terms of this
Agreement, the terms of the Plan shall control.  The Participant further
acknowledges that the Participant has read and understands the Plan and this
Agreement, which contains the specific terms and conditions of this grant of
Phantom Units.  The Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Committee upon any questions
arising under the Plan or this Agreement.

 

 

 

EMERGE ENERGY SERVICES GP, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

EMERGE ENERGY SERVICES LP,

 

a Delaware limited partnership

 

 

 

By:

Emerge Energy Services GP, LLC

 

Its:

General Partner

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

“PARTICIPANT”

 

 

 

 

 

 

 

[Name]

 

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