UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): May 29, 2013

 

Emerge Energy Services LP

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-35912

 

90-0832937

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation or
organization)

 

File Number)

 

Identification No.)

 

1400 Civic Place, Suite 250

Southlake, Texas 76092

(Address of principal executive office) (Zip Code)

 

(817) 488-7775
(Registrants’ telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 1.01 Entry into a Material Definitive Agreement.

 

Shearer LTIC Termination Letter

 

On May 29, 2013, the general partner of Emerge Energy Services LP (the “Partnership”), Emerge Energy Services GP LLC (the “General Partner”), entered into a letter agreement with Rick Shearer, Chief Executive Officer of the General Partner (the “Shearer Letter Agreement”).  Under the Shearer Letter Agreement, (i) the General Partner terminated a pre-existing long-term incentive compensation arrangement with Mr. Shearer and (ii) in connection therewith, the General Partner agreed to pay to Mr. Shearer an amount equal to $4,270,731, payable within ten days following May 29, 2014.  On May 30, 2013, the General Partner funded a rabbi trust with respect to its obligations under the Shearer Letter Agreement.

 

Walker LTIC Termination Letter

 

On May 29, 2013, the General Partner entered into a letter agreement with Jim Walker, Director of Operations of the General Partner (the “Walker Letter Agreement”).  Under the Walker Letter Agreement, (i) the General Partner terminated a pre-existing long-term incentive compensation arrangement with Mr. Walker and (ii) in connection therewith, the General Partner agreed to pay to Mr. Walker an amount equal to $2,135,366, payable within ten days following May 29, 2014.  On May 30, 2013, the General Partner funded a rabbi trust with respect to its obligations under the Walker Letter Agreement.

 

Amended Employment Letter of Chief Executive Officer

 

On May 29, 2013, the General Partner and Mr. Shearer entered into an amended employment letter agreement (the “Amended Shearer Letter”) pursuant to which Mr. Shearer will serve as the General Partner’s Chief Executive Officer, effective as of the date of the closing of the initial public offering (the “IPO”) of the common units of the Partnership.  The Amended Shearer Letter amends and restates the employment letter agreement between Superior Silica Sands, LLC and Mr. Shearer, dated March 23, 2010 and amended May 17, 2011, which was assigned to the General Partner in connection with the IPO.  The Amended Shearer Letter expires on December 31, 2015, unless earlier terminated, and the term of the Amended Shearer Letter is subject to automatic one-year renewals unless either the General Partner or Mr. Shearer gives written notice of termination at least 60 days prior to the end of the applicable term.

 

Under the Amended Shearer Letter, Mr. Shearer’s annual base salary is $360,000, which is subject to automatic annual increases of at least four percent, and Mr. Shearer is eligible to receive an annual discretionary cash performance bonus under the General Partner’s bonus plan or program applicable to similarly-situated employees. The Amended Shearer Letter also provides that Mr. Shearer is eligible to participate in the welfare benefit plans maintained by the General Partner on the same basis as similarly-situated employees, and is entitled to an annual physical examination, paid by the General Partner, in an amount up to $3,000 per year.

 

The Amended Shearer Letter provides that if Mr. Shearer’s employment is terminated by the General Partner without “cause” (as defined in the Amended Shearer Letter) or due to Mr. Shearer’s death or disability, he will be entitled to receive an amount equal to two times his then-current annual base salary, payable in a lump sum within sixty days following his termination date, subject to his timely execution and non-revocation of a release of claims.

 

Amendment to Employment Letter of Chief Financial Officer

 

On May 29, 2013, the General Partner entered into an amendment to the employment letter with Robert Lane, Chief Financial Officer of the General Partner (the “Lane Amendment”).  Under the Lane Amendment, Mr. Lane is eligible to participate in two long-term incentive compensation programs. Under the first program (the “Distribution LTIC”), Mr. Lane is eligible to receive a cash bonus of up to $100,000 for each of 2013, 2014 and 2015 (pro-rated in 2013 to reflect the partial year following the IPO) based on the amount by which the applicable regular annual distribution made by the Partnership exceeds $58,049,200. Under the second program (the “Unit Price LTIC”), Mr. Lane is eligible to receive a cash

 

2



 

bonus of up to $125,000 for each of 2013, 2014 and 2015 (pro-rated in 2013 to reflect the partial year following the IPO) based on the amount by which the average daily trading value of the Partnership’s common units for the applicable year exceeds the per unit equity value of the Partnership’s common units upon the completion of the IPO. Each of the Distribution LTIC and the Unit Price LTIC will be calculated on an annual basis and will be payable in a cash lump sum after December 31, 2015 (but no later than March 15, 2016), subject to Mr. Lane’s continuous employment through December 31, 2015.

 

Appointment of Chief Accounting Officer

 

On May 29, 2013, the General Partner appointed Richard DeShazo as its Chief Accounting Officer, and entered into a letter agreement embodying the terms of his employment with the General Partner (the “DeShazo Letter”).

 

Under the DeShazo Letter, Mr. DeShazo’s annual base salary is $225,000 and he is eligible to receive an annual cash bonus targeted at 45% of his base salary. With respect to 2013, Mr. DeShazo’s bonus, if any, will be determined based on 55%, 35% and 10% of what he would have earned had he participated in the Allied Energy Company LLC, Superior Silica Sands, LLC and Direct Fuels LLC bonus plans, respectively, for the entire year.  In addition, under the DeShazo Letter, Mr. DeShazo is eligible to participate in the welfare benefit plans maintained by the General Partner on the same basis as similarly-situated employees.

 

The DeShazo Letter provides that if his employment is terminated by the General Partner without “cause” or Mr. DeShazo terminates his employment for “good reason”, in each case, within six months following a “change of control” (each, as defined in the DeShazo Letter), then Mr. DeShazo will be entitled to receive (i) an amount equal to his annual base salary and (ii) an amount equal to his target bonus, pro-rated to reflect the partial year of service, in each case payable in a cash lump sum on the sixtieth day following Mr. DeShazo’s termination date, subject to his timely execution and non-revocation of a release of claims.

 

The foregoing descriptions of the Shearer Letter Agreement, the Walker Letter Agreement, the Amended Shearer Letter, the Lane Amendment and the DeShazo Letter do not purport to be complete and are qualified in their entirety by reference to the Shearer Letter Agreement, Walker Letter Agreement, the Amended Shearer Letter, the Lane Amendment and the DeShazo Letter, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1, 10.2, 10.3, 10.4  and 10.5, respectively, and incorporated by reference herein.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the Shearer Letter Agreement, the Amended Shearer Letter, the Lane Amendment and the DeShazo Letter is incorporated by reference into this Item 5.02. The descriptions set forth in Item 1.01 and this Item 5.02 are qualified in their entirety by the full text of the Shearer Letter Agreement, the Amended Shearer Letter, the Lane Amendment and the DeShazo Letter.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit

 

 

Number

 

Description

10.1

 

Letter Agreement, dated May 29, 2013, between Emerge Energy Services GP LLC and Rick Shearer

10.2

 

Letter Agreement, dated May 29, 2013, between Emerge Energy Services GP LLC and Jim Walker

10.3

 

Amended Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Rick Shearer

10.4

 

Amendment to Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Robert Lane

10.5

 

Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Dick DeShazo

 

3



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Emerge Energy Services LP

 

 

 

 

 

 

 

By:

Emerge Energy Services GP LLC,

 

 

its general partner

 

 

 

 

 

 

Dated: June 4, 2013

By:

/s/ Rick Shearer

 

 

Name:

Rick Shearer

 

 

Title:

Chief Executive Officer

 

4



 

EXHIBIT INDEX

 

Exhibit
Number

 

Description

10.1

 

Letter Agreement, dated May 29, 2013, between Emerge Energy Services GP LLC and Rick Shearer

10.2

 

Letter Agreement, dated May 29, 2013, between Emerge Energy Services GP LLC and Jim Walker

10.3

 

Amended Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Rick Shearer

10.4

 

Amendment to Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Robert Lane

10.5

 

Employment Letter, dated May 29, 2013, between Emerge Energy Services GP LLC and Dick DeShazo

 

5


Exhibit 10.1

 

 

May 29, 2013

 

Rick Shearer
1400 Civic Place, Suite 250

Southlake, Texas 76092

 

Dear Rick:

 

Reference is hereby made to that certain letter agreement, dated November 11, 2010 (the “ Letter ”), pursuant to which Superior Silica Sands, LLC, a Texas limited liability company granted you certain rights to incentive compensation under a long-term incentive compensation program (the “ LTIC ”), which has been assigned to Emerge Energy Services GP, LLC, a Delaware limited liability company (the “ Company ”).

 

As we’ve discussed, the Company has determined to terminate and liquidate the LTIC as of the date hereof in a manner compliant with Treasury Regulation section 1.409A-3(j)(4)(ix)(C).

 

Consequently, effective as of the date hereof, the LTIC is hereby terminated and canceled and will be of no further force or effect.  As your LTIC termination amount, the Company shall pay you (or, if at such time you are deceased, your estate) a lump-sum cash payment of $4,270,731, less applicable tax withholding as required by law (the “ LTIC Payment ”), payable within ten days following the one year anniversary of the date hereof.

 

The Company’s obligation to pay you the LTIC Payment, less applicable tax withholding as required by law, is as of the date of this letter, fully vested, absolute, and not subject to any right of offset or set-off for any claim of any sort that the Company or any of its affiliates may otherwise have against you now or at any time in the future, whether known or unknown as of the date of this Letter or at any time in the future, and whether sounding in contract or in tort, or pursuant to any agreement in existence now or at any time in the future, and whether enforceable at law or in equity.

 

To ensure timely payment of the LTIC Payment in accordance with this letter, and to compensate you for the one-year delay in payment, the Company shall, within two days of the date hereof,  place an amount of cash equal to the LTIC Payment in a rabbi trust that is intended to constitute a grantor trust within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Rev. Proc. 92-64.  You (or your estate, should you be deceased at the time of payment) shall be the sole beneficiary of such rabbi trust and the rabbi trust shall be obligated to pay the LTIC Payment in full as set forth in the preceding paragraphs of this Letter, but the Company shall remain secondarily liable to make the LTIC Payment if for some reason the rabbi trust does not timely

 



 

make it in its entirety, including on account of any investment loss of the rabbi trust.  The trustee of the rabbi trust shall be PNC Bank.  The assets of the rabbi trust shall be invested in U. S. Treasury obligations with remaining durations of no more than 90 days or such other investments as the Company and the Trustee may mutually agree upon.  Interest or other earnings of the rabbi trust, to the extent not used to pay the fees of the rabbi trustee or other administrative expenses of the rabbi trust, shall become part of the LTIC Payment and shall be paid to you when the rabbi trust pays the LTIC Payment.

 

Effective as of the termination of the LTIC, you will have no right or interest under or with respect to the LTIC or the Letter, other than the right to receive the LTIC Payment as set forth above.

 

You acknowledge and agree that, although as of the date of this letter both you and the Company have endeavored to structure the LTIC Payment in a way that complies with any applicable requirement of Section 409A of the Code, nevertheless in the event that any tax is imposed under Section 409A of the Code in respect to any compensation or benefits payable to you, including the LTIC Payment or any other payment under the LTIC, this letter or otherwise, then (i) the payment and/or contest of such tax shall be solely your responsibility(ies), and (ii) neither the Company, its affiliates, its successors nor any of their respective past, present or future directors, officers, employees or agents shall have any liability for any such tax.

 

 

 

Sincerely,

 

 

 

Emerge Energy Services GP, LLC, a Delaware limited liability company

 

 

 

By:

/s/ Ted Beneski

 

Name: Ted Beneski

 

Title: Chairman of the Board

 

 

 

 

Accepted, Acknowledged and Agreed,

 

as of this 29 day of May, 2013

 

 

 

 

 

/s/ Rick Shearer

 

 

Rick Shearer

 

 

 


Exhibit 10.2

 

 

May 29, 2013

 

Jim Walker
18818 Via Hermosa
Rio Verde, Arizona 85263

 

Dear Jim:

 

Reference is hereby made to that certain letter agreement, dated December 16, 2010 (the “ Letter ”), pursuant to which Superior Silica Sands, LLC, a Texas limited liability company granted you certain rights to incentive compensation under a long-term incentive compensation program (the “ LTIC ”), which has been assigned to Emerge Energy Services GP, LLC, a Delaware limited liability company (the “ Company ”).

 

As we’ve discussed, the Company has determined to terminate and liquidate the LTIC as of the date hereof in a manner compliant with Treasury Regulation section 1.409A-3(j)(4)(ix)(C).

 

Consequently, effective as of the date hereof, the LTIC is hereby terminated and canceled and will be of no further force or effect.  As your LTIC termination amount, the Company shall pay you (or, if at such time you are deceased, your estate) a lump-sum cash payment of $2,135,366, less applicable tax withholding as required by law (the “ LTIC Payment ”), payable within ten days following the one year anniversary of the date hereof.

 

The Company’s obligation to pay you the LTIC Payment, less applicable tax withholding as required by law, is as of the date of this letter, fully vested, absolute, and not subject to any right of offset or set-off for any claim of any sort that the Company or any of its affiliates may otherwise have against you now or at any time in the future, whether known or unknown as of the date of this Letter or at any time in the future, and whether sounding in contract or in tort, or pursuant to any agreement in existence now or at any time in the future, and whether enforceable at law or in equity.

 

To ensure timely payment of the LTIC Payment in accordance with this letter, and to compensate you for the one-year delay in payment, the Company shall, within two days of the date hereof, place an amount of cash equal to the LTIC Payment in a rabbi trust that is intended to constitute a grantor trust within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Rev. Proc. 92-64.  You (or your estate, should you be deceased at the time of payment) shall be the sole beneficiary of such rabbi trust and the rabbi trust shall be obligated to pay the LTIC Payment in full as set forth in the preceding paragraphs of this Letter, but the Company shall remain

 



 

secondarily liable to make the LTIC Payment if for some reason the rabbi trust does not timely make it in its entirety, including on account of any investment loss of the rabbi trust.  The trustee of the rabbi trust shall be PNC Bank.  The assets of the rabbi trust shall be invested in U. S. Treasury obligations with remaining durations of no more than 90 days or such other investments as the Company and the Trustee may mutually agree upon.  Interest or other earnings of the rabbi trust, to the extent not used to pay the fees of the rabbi trustee or other administrative expenses of the rabbi trust, shall become part of the LTIC Payment and shall be paid to you when the rabbi trust pays the LTIC Payment.

 

Effective as of the termination of the LTIC, you will have no right or interest under or with respect to the LTIC or the Letter, other than the right to receive the LTIC Payment as set forth above.

 

You acknowledge and agree that, although as of the date of this letter both you and the Company have endeavored to structure the LTIC Payment in a way that complies with any applicable requirement of Section 409A of the Code, nevertheless in the event that any tax is imposed under Section 409A of the Code in respect to any compensation or benefits payable to you, including the LTIC Payment or any other payment under the LTIC, this letter or otherwise, then (i) the payment and/or contest of such tax shall be solely your responsibility(ies), and (ii) neither the Company, its affiliates, its successors nor any of their respective past, present or future directors, officers, employees or agents shall have any liability for any such tax.

 

 

 

Sincerely,

 

 

 

Emerge Energy Services GP, LLC, a Delaware limited liability company

 

 

 

By:

/s/ Ted W. Beneski

 

Name: Ted Beneski

 

Title: Chairman of the Board

 

 

 

 

 

 

Accepted, Acknowledged and Agreed,

 

 

as of this 29 day of May, 2013

 

 

 

 

 

 

 

 

/s/ Jim Walker

 

 

 

Jim Walker

 

 

 

 


Exhibit 10. 3

 

 

STRICTLY CONFIDENTIAL

 

May 29, 2013

 

Rick Shearer
1400 Civic Place, Suite 250

Southlake, Texas 76092

 

Dear Rick:

 

As you know, you and Superior Silica Sands LLC, a subsidiary of Emerge Energy Services GP, LLC (including any successors or assigns, the “Company”), have previously entered into an employment letter dated March 23, 2010, as amended May 17, 2011 (the “Prior Letter”), which was assigned to the Company in connection with the transfer of your employment to the Company effective as of the initial public offering of common units of Emerge Energy Services LP (the “IPO Date”).  In addition, as of the date of this letter (the “Effective Date”), this letter will amend, restate and replace the Prior Letter and your employment will be on the terms and conditions set forth in this letter.

 

Subject to earlier termination as hereinafter provided, your employment hereunder will be for a period (the “Employment Period”) commencing on the Effective Date and ending on December 31, 2015 (the “Initial Termination Date”).  If not previously terminated, the Employment Period will automatically be extended for one (1) additional year on the Initial Termination Date and on each subsequent anniversary of the Initial Termination Date, unless either you or the Company elects not to so extend the Employment Period by notifying the other party, in writing, of such election not less than sixty (60) days prior to the last day of the then current Employment Period.

 

As of the IPO Date, you will serve as the Chief Executive Officer of the Company and your starting monthly base salary will be $30,000 ($360,000 annualized), less payroll deductions and all required withholdings, payable in installments in accordance with the Company’s normal payroll practices (but in no event less often than monthly).  At the Company’s request, you will also serve the Company and/or its affiliates (including Superior Silica Sands LLC) in such additional capacities as the Company shall designate.  In the event that you serve in such additional capacities, your compensation will not be increased on account of such additional service beyond that specified in this letter.  Subject to satisfactory execution of Emerge Energy Services LP’s and its subsidiaries business plans, your base salary will be increased annually by at least 4%.

 

You will be eligible to earn, for each fiscal year of the Company during your employment period (starting with 2013), an annual cash performance bonus under the Company’s bonus plan or

 



 

program applicable to similarly situated employees, provided that you remain employed by the Company through the last day of the applicable fiscal year.  Any annual bonus will be paid to you, to the extent any such annual bonus becomes payable, as soon as administratively practical following the completion of the audit of Emerge Energy Services LP’s financial statements for the just-completed calendar year, in the calendar year following the calendar year with respect to which the annual bonus is earned.

 

Also, you will be eligible to participate in all health, welfare and retirement plans maintained by the Company from time to time on the same basis as other similarly situated employees, subject to the terms and conditions thereof, but nothing contained in this letter will, or will be construed so as to, obligate the Company or its affiliates to adopt, sponsor, maintain or continue any benefit plans or programs at any time.  In addition, during the Employment Period you will be entitled to receive an annual Company-paid physical examination in an amount not to exceed $3,000 per year.  Your reasonable and documented business expenses incurred while performing your duties as Chief Executive Officer will be reimbursed by the Company in accordance with the Company’s policies as in effect from time to time.

 

In the event that your employment with the Company is terminated by the Company without “cause” or due to your death or disability and you execute a general release of claims (in a form prescribed by the Company) within twenty-one (21) days (or forty-five (45) days to the extent required to comply with applicable law) after the termination date and you do not revoke such release within seven (7) days thereafter, then the Company will pay you, as a severance payment, an amount equal to two times your annual base salary as in effect on the termination date, payable in a single lump sum payment within sixty (60) days after the termination date.

 

For purposes of this agreement, “cause” means any of the following as determined by the Company in the exercise of good faith and reasonable judgment:  (i) willful and continued refusal to perform your duties, other than by reasons of disability, (ii) committing an act constituting a felony under state or federal law, (iii) engaging in an act of fraud, dishonesty or gross misconduct in connection with the business of the Company or its affiliates, (iv) theft or misappropriation, or attempted theft or misappropriation, of funds, property or a business opportunity from the Company or its affiliates, or (v) violation of any express policy or procedure of the Company or its affiliates, or any law or regulation applicable to the Company, its affiliates or its business; provided, however, that in the case of clauses (i) and (v) of the preceding portion of this sentence the Company shall have given you at least 30 days’ notice of its initial determination that your conduct may provide the Company with a basis for terminating your employment for “cause,” and you shall be provided with a reasonable opportunity during the 30-day period following such notice to cure the conditions that are the alleged basis for terminating your employment for “cause.”

 

Although as of the date of this letter the Company and you do not believe that any of the payments that may be paid pursuant to the provisions of this letter will constitute nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), nevertheless to the extent that in the future any payment under this letter is reasonably determined by the Company to constitute nonqualified deferred compensation for purposes of Section 409A of the Code, and such payment would otherwise be payable hereunder by reason of a termination of your employment, then, to the extent required by Section 409A of

 

2



 

the Code, all references to your termination of employment will be construed to mean a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) of the Code and Treasury Regulation Section 1.409A-1(h) (“Separation from Service”), and such amounts will only be paid upon or by reference to your Separation from Service.  Notwithstanding anything to the contrary in this letter, no compensation or benefits will be paid to you prior to the expiration of the six (6)-month period following your Separation from Service to the extent that the Company reasonably determines that paying such amounts at the time or times indicated in this letter 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 day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of your death), the Company will pay a lump-sum amount equal to the cumulative amount that would have otherwise been payable to you during such period.

 

Except with the prior written approval of the Board of Directors of the Company (the “Board”) (which the Board may grant or withhold in its sole and absolute discretion), during the Employment Period, you will devote your entire working time, attention and energies to the business of the Company and will not (i) accept any other employment or consultancy, (ii) serve on the board of directors or similar body of any other entity (except you may maintain your existing position on the board of BlackBull Resources or other such entities in which you had a board position existing as of your May 1, 2010 start date), or (iii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place you in a competing position to, that of the Company or any of its subsidiaries or affiliates.

 

The Company may assign or transfer your employment and this letter to any of its affiliates or to any successor to its business or assets at any time. This letter may not be amended except by a signed writing executed by the parties hereto.

 

[ Signature page follows ]

 

3



 

 

Sincerely yours,

 

 

 

 

 

/s/ Ted Beneski

 

Ted Beneski

 

Chairman of the Board

 

 

 

 

Accepted, acknowledged and agreed:

 

 

 

/s/ Rick Shearer

 

 

Rick Shearer

 

 

 

 

 

5/29/13

 

 

Date

 

 

 


Exhibit 10.4

 

AMENDMENT TO LETTER AGREEMENT

 

This Amendment to Letter Agreement (this “Amendment”) is made as of May 29, 2013, by and between Robert Lane (“Employee”) and Emerge Energy Services GP, LLC.  Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Employment Agreement (as defined below).

 

The parties hereto acknowledge the following facts:

 

1.                                       Employee and Emerge Energy Services LP (the “MLP”) have entered into an employment offer letter, dated October 24, 2012 (the “Employment Agreement”).

 

2.                                       Pursuant to an Assignment and Assumption Agreement, dated as of March 4, 2013, the MLP assigned the Employment Agreement to Emerge Energy Services GP, LLC, effective as of the Effective Date (as defined therein).

 

3.                                       The parties hereto wish to amend certain terms of the Employment Agreement to revise the terms and conditions of the long-term incentive programs.

 

In connection therewith, the parties hereto hereby amend the Employment Agreement as follows, effective as of the date hereof:

 

1.                                       The fourth and fifth paragraphs of the Employment Agreement are hereby deleted and replaced in their entirety with the following:

 

“You will be eligible to participate in two long-term incentive programs (“LTICs”). The first LTIC will be based upon the actual amount of cash distributed by the MLP to its investors. Subject to your continued employment, in each of 2013, 2014 and 2015, you will be eligible to earn an annual cash bonus of up to $100,000 as long as the MLP’s regular annual distribution to unitholders for such year is at least equal to $58,049,200 (the “Threshold Distribution”), as may be adjusted by the Board of Directors in its discretion in the event of a change in capitalization or change in control transaction involving the MLP. This cash incentive will be calculated as soon as practicable following the end of each year and will vest in full, subject to your continued employment, on December 31, 2015, and will be paid in a single lump sum by March 15, 2016; provided that the 2013 Threshold Distribution level and any distribution incentive bonus earned with respect to calendar year 2013 will be pro-rated to reflect the partial year following the IPO.  The distribution incentive will be calculated according to the following schedule.

 

Actual MLP Annual Distribution Compared to Threshold Distribution

 

Annual Incentive

 

MLP annual distribution below Threshold Distribution

 

$

0

 

0% to 15% greater than Threshold Distribution

 

$

50,000

 

> 15% to 30% greater than Threshold Distribution

 

$

75,000

 

> 30% greater than Threshold Distribution

 

$

100,000

 

 

The second LTIC will be based on equity appreciation compared to MLP equity value at IPO.  Subject to your continued employment, in each of 2013, 2014 and 2015, you will be eligible to

 



 

earn an annual cash bonus of up to $125,000 as long as the value of the common units trades at or above the IPO level. For each year, we will calculate the average daily trading value of the MLP common units for such year. This will be compared to the IPO value to determine the annual incentive. Unit values will be adjusted for splits, consolidations and other similar transactions.  This cash incentive will be calculated as soon as practicable following the end of each year and will vest in full, subject to your continued employment, on December 31, 2015, and will be paid in a single lump sum by March 15, 2016; provided that any equity value incentive bonus earned with respect to calendar year 2013 will be pro-rated to reflect the partial year following the IPO. The equity value incentive will be calculated according to the following schedule.

 

Equity Value Change

 

Annual Incentive

 

Below the IPO Value

 

$

0

 

0% growth to 10%

 

$

50,000

 

>10% to 20%

 

$

75,000

 

>20% to 30%

 

$

100,000

 

>30%

 

$

125,000

 

2.                                       This Amendment shall be and, as of the date hereof, is hereby incorporated in and forms a part of, the Employment Agreement.

 

3.                                       Except as expressly provided herein, all terms and conditions of the Employment Agreement shall remain in full force and effect.

 

( Signature page follows )

 



 

IN WITNESS WHEREOF , the parties hereto have executed this Amendment as of the date first written above.

 

 

 

EMERGE ENERGY SERVICES GP, LLC

 

 

 

 

 

By:

/s/ Ted W. Beneski

 

 

Name: Ted Beneski

 

 

Title: Chairman of the Board

 

 

 

 

 

EMPLOYEE

 

 

 

 

 

/s/ Robert Lane

 

Robert Lane

 


Exhibit 10. 5

 

 

Ted W. Beneski

Chairman of the Board

817.488.7720 direct

tbeneski@insightequity.com

 

May 29, 2013

 

Mr. Richard L. DeShazo

 

Dear Dick:

 

We are very pleased to offer you the position of Chief Accounting Officer of Emerge Energy Services GP LLC (the “GP” and, including any successors or assigns, the “Company”). Your annual salary will be $225,000, less payroll deductions and all required withholdings, payable in installments in accordance with the Company’s normal payroll practices (but in no event less often than monthly).  At the Company’s request, you will also serve the Company and/or its affiliates (including Emerge Energy Services LP, the “MLP”) in such additional capacities as the Company may designate.  In the event that you serve in such additional capacities, your compensation will not be increased on account of such additional service beyond that specified in this letter.

 

Beginning in fiscal year 2013 and for each fiscal year of the Company during your employment, you will be eligible to receive an annual cash bonus at a target rate of 45% of the salary you actually receive during the applicable fiscal year, provided that you remain employed by the Company through the applicable payment date. With respect to 2013, your bonus will be determined based on 55% of what you would have earned had you participated in the Allied Energy Company LLC (“AEC”) bonus plan for the entire year with a target payout of 45% of your base salary. Similarly, you will participate at a rate of 35% of what you would have earned under the Superior Silica Sands, LLC bonus plan and at 10% of what you would have earned under the Direct Fuels LLC f/k/a/ Insight Equity Acquisition Partners LP bonus plan, in each case based on a target payout of 45% of your base salary. Your actual bonus rate may be higher than 45% if company performance exceeds the applicable performance targets but there may also be no payout if performance does not meet minimum hurdles. Following 2013, the performance targets will be determined at the discretion of the Company’s Board of Directors. The 2013 annual bonus will be paid (to the extent such annual bonus becomes payable) as soon as administratively practicable in the calendar year following the calendar year with respect to which the annual bonus is earned, following the completion of the audit for the applicable year. You will also be considered for future long-term equity incentive awards at the discretion of the Board of Directors.

 

Finally, you will also be eligible to participate in all health, welfare and retirement plans maintained by the Company from time to time on the same basis as other similarly situated employees, subject to the terms and conditions thereof, but nothing contained in this letter will, or will be construed so as to, obligate the Company or its affiliates to adopt, sponsor, maintain or continue any benefit plans or programs at any time.

 



 

This will be an at-will employment arrangement, so either you or the Company may end your employment at any time for any reason with or without notice, at which point this letter will terminate in its entirety subject to subsections (a) and (b) below to the extent any such subsection is applicable:

 

(a)                      In the event the Company terminates your employment without “cause” (other than due to your death or “disability” (within the meaning of Section 409A of the Code)) or you terminate your employment for “good reason”, in each case, within six months following a “change of control,” you will be entitled to receive (i) a severance payment in an amount equal to 12 months of your then current base salary plus (ii) an amount equal to your target bonus for the year in which the termination occurs, pro-rated through the date of your separation from the Company, each paid as a single cash lump sum payment.  All payments described in this subsection (a) will be made on the 60th day following your termination date, subject to your timely execution and non-revocation of a general release of claims in a form that is satisfactory to the Company and its affiliates.

 

(b)                      As used in subsection (a) above, the term “cause” means any of the following as determined by the Company in the exercise of good faith and reasonable judgment:  (i) willful and continued refusal to perform your duties, other than by reasons of disability; (ii) committing an act constituting a felony under state or federal law; (iii) engaging in an act of fraud, dishonesty or gross misconduct in connection with the business of the Company or its affiliates; (iv) theft or misappropriation, or attempted theft or misappropriation, of funds, property or a business opportunity from the Company or its affiliates; or (v) violation of any express policy or procedure of the Company or its affiliates, or any law or regulation applicable to the Company, its affiliates or its business; provided, however, that in the case of clauses (i) and (v) of the preceding portion of this sentence the Company will have given you at least 30 days’ notice of its initial determination that your conduct may provide the Company with a basis for terminating your employment for “cause,” and you will be provided with a reasonable opportunity during the 30-day period following such notice to cure the conditions that are the alleged basis for terminating your employment for “cause.”

 

(c)                       As used in subsection (a) above, the term “change of control” means the acquisition by any person other than the current owners (or their affiliates) of the GP of more than 50% of the voting equity interests of the GP.

 

(d)                      As used in subsection (a) above, the term “good reason” will mean your resignation from service with the Company within 90 days after the occurrence of one of the following events without your express written consent, provided, however , that you must provide written notice to the Company within 60 days after the initial occurrence of the event allegedly constituting “good reason”, and the Company will have 30 days after such notice is given to cure:  (i) a material diminution in your title, authority or responsibility with the Company and its subsidiaries, excluding for this purpose any isolated, insubstantial or inadvertent actions not taken in bad faith and which are remedied by the Company promptly after receipt of notice thereof given by you; (ii) a material reduction in your then-current annual base salary; provided, however , that in no event will a reduction of less than 15% be deemed material if such reduction occurs as part of an across-the-board reduction in salary level of all other employees in positions similar to yours as part of a general salary level reduction, or (iii) a material relocation of your current principal place of business, it being understood that travel to other locations may be required for extended periods of time, and such travel will in no event constitute a relocation of your principal place of business, and provided that in no event will either a relocation to a location within a sixty (60)-mile radius of your current business location.

 



 

To the extent that any payment under this letter constitutes nonqualified deferred compensation for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and such payment would otherwise be payable hereunder by reason of a termination of your employment, then, to the extent required by Section 409A, all references to your termination of employment will be construed to mean a “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Code and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), and such amounts will only be paid upon or by reference to your Separation from Service.  Notwithstanding anything to the contrary in this letter, no compensation or benefits will be paid to you prior to the expiration of the six (6)-month period following your Separation from Service to the extent that the Company determines that paying such amounts at the time or times indicated in this letter 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 day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of your death), the Company will pay you a lump-sum amount equal to the cumulative amount that would have otherwise been payable to you during such period.  For purposes of Section 409A of the Code, each payment made under this letter will be treated as a separate payment

 

The Company may assign or transfer your employment and this letter to any of its affiliates or to any successor to its business or assets at any time. This letter may not be amended except by a signed writing executed by the parties hereto.

 

We hope that you find this employment offer to be compelling. It is a package that can generate significant personal value for you as long as there is significant value created for the MLP.

 

We would very much enjoy having you as part of the team and are confident that you can help us create something special here. In order for us to achieve our current timetable, we need to move this process along fairly quickly. As a result, this offer of employment will expire on 5 pm on        , 2013.  Also, we ask that you treat the terms of this offer in confidence.  We all look forward to the possibility of working with you.

 

Best Regards,

 

Ted Beneski

Chairman of the Board

 

 

Acknowledged, Accepted and Agreed:

 

 

 

 

 

/s/ Richard L. Deshazo

 

Richard L. DeShazo, individually

 

Date:

May 29,2013