COMPRESSCO PARTNERS, L.P. PERFORMANCE PHANTOM UNIT AGREEMENT
Exhibit 99.3
2011 LONG TERM INCENTIVE PLAN
|
Employee:
|
Date of Grant:
|
||||
|
Number of Performance Phantom Units:
|
Performance Period:
|
||||
This Performance Phantom Unit Agreement (this “Agreement”) is made as of _____________, between Compressco Partners GP Inc., a Delaware corporation (the “Company”), as the general partner of Compressco Partners, L.P. (the “Partnership”), and __________________________ (the “Employee”) pursuant to the terms and conditions of the Compressco Partners, L.P. 2011 Long Term Incentive Plan (the “Plan”). The Employee acknowledges receipt of a copy of the Plan, and agrees that the terms and provisions of the Plan, including any future amendments thereto, shall be deemed a part of this Agreement as if fully set forth herein. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan, unless the context requires otherwise.
WHEREAS, the Board of Directors of the Company (the “Board”), has adopted the Plan to, among other things, attract, retain and motivate certain employees, directors and consultants of the Company, the Partnership and their respective Affiliates (each, a “Company Entity” and, collectively, the “Company Entities”); and
WHEREAS, the Company desires to grant to the Employee on the terms and conditions set forth herein and in the Plan, and the Employee desires to accept on such terms and conditions, the number of Phantom Units set forth herein.
NOW, THEREFORE, in consideration of the Employee’s agreement to provide or to continue providing services for the benefit of the Company Entities, the Company and the Employee agree as follows:
1. Grant of Phantom Units. The Company hereby grants to the Employee, effective as of _____________ (the “Date of Grant”), _____________ Phantom Units (individually, a “Phantom Unit” and collectively, the “Phantom Units”), subject to all of the terms and conditions set forth in the Plan and in this Agreement including, without limitation, the achievement of the Performance Measures (as herein defined). Such number of Phantom Units represents the maximum number of Phantom Units that may be earned by the Employee in accordance with Section 4 below. The number of Phantom Units that are earned will be determined based upon the achievement of the Performance Measures, employment status and any other relevant provisions of the Plan.
2. Grant of Dividend Equivalents (or “DERs”). The Company hereby grants to the Employee, effective as of the Date of Grant, a Dividend Equivalent Right (or “DER”) in
1
tandem with each Phantom Unit and such DER shall be subject to the same restrictions as, and shall be earned and settled or forfeited along with, the Phantom Unit with respect to which such DER was granted in tandem. The effect of a DER is as follows: in the event the Partnership pays any cash distributions in respect of its outstanding Units and, on the record date for such cash distribution, the Employee holds Phantom Units granted pursuant to this Agreement that have not both been earned and settled, the Company shall credit to the Employee’s benefit (whether in a book keeping account or such other method determined by the Company) an amount equal to the cash distributions the Employee would have received if the Employee were the record owner, as of such record date, of the number of Units related to the portion of the Employee’s Phantom Units that have not been settled as of such record date. Such amounts shall accumulate for each Phantom Unit, without interest or other imputed income, and shall be earned and settled (as provided in Section 5) if and when the Phantom Unit with respect to which the DER was granted in tandem is earned and settled, or shall be forfeited if the Phantom Unit with respect to which the DER was granted in tandem is forfeited.
3. Forfeiture Restrictions. In the event of the termination of the Employee’s employment with the Company Entities for any reason or no reason whatsoever, the Employee shall upon such termination automatically forfeit to the Company, for no consideration, every Phantom Unit (and the DER granted in tandem with such Phantom Unit and accumulated but unpaid distributions with respect to such DER) that has not both previously become an Earned Phantom Unit in accordance with Section 4 and settled in accordance with Section 5. The Employee’s rights with respect to the Phantom Units and the DERs granted in tandem with such Phantom Units shall remain forfeitable at all times prior to the date on which such rights both are earned in accordance with Section 4 and are settled in accordance with Section 5.
4. Determination of Phantom Units Earned.
(a) Except as otherwise provided in this Agreement and the Plan, the number of Phantom Units earned will be based upon performance relative to following Performance Measures, provided that the Employee remains continuously employed by a Company Entity from the Date of Grant through the Settlement Date (as herein defined).
(b) The performance measure (“Performance Measure”) for the Phantom Units shall be Distributable Cash Flow (as herein defined) and the “Performance Period” shall be January 1, 2012 through December 31, 2012. “Distributable Cash Flow” or “DCF” is defined as the Partnership’s earnings before interest, taxes, and depreciation and amortization for the Performance Period plus (i) the non-cash cost of compressors sold, and (ii) the non-cash equity compensation expenses, minus (x) interest expense, (y) income tax and withholding, and (z) maintenance capital expenditures.
2
(c) The number of Phantom Units earned (“Earned Phantom Units”) will be determined based upon actual DCF for the Performance Period relative to the following performance objectives (the “Performance Objectives”):
|
DCF per
Limited Partner Unit
|
Percentage of
Phantom Units Earned
|
|
Less than $1.55
|
0%
|
|
$1.55 to $1.599
|
25%
|
|
$1.60 to $1.649
|
50%
|
|
$1.65 to $1.699
|
75%
|
|
$1.70 or greater
|
100%
|
Notwithstanding the foregoing, in the event Employee’s employment with the Company Entities terminates for any reason or no reason whatsoever following the end of the Performance Period and prior to the Settlement Date, the Employee shall upon such termination automatically forfeit to the Company, for no consideration, every Phantom Unit (and all DERs granted in tandem with such Phantom Units and accumulated but unpaid distributions with respect to such DERs) regardless of the number of any such Phantom Units (and associated DERs) earned in accordance with the foregoing provisions.
(d) Once the Performance Period has been completed, the Distributable Cash Flow of the Partnership for the Performance Period shall be calculated and evaluated to determine the extent to which the Performance Objectives have been achieved. In making such determination, the Committee may make such adjustments to the Distributable Cash Flow and/or the Performance Objectives as the Committee may determine to be appropriate. The Committee shall make such determination no later than January 25 of the calendar year immediately following the Performance Period (the date of such determination being referred to as the “Determination Date”).
5. Settlement of Phantom Units and DERs.
(a) Settlement Date. Earned Phantom Units (and accumulated but unpaid distributions with respect to DERs) shall be settled on a date determined by the Company (the “Settlement Date”), which date shall be within ten days following the Determination Date and in any event be between January 1 and March 15 of the calendar year immediately following the Performance Period.
(b) Settlement of Earned Phantom Units. Upon settlement of the Earned Phantom Units, the Employee shall receive that number of Units equal to the number of Earned Phantom Units.
(c) Settlement of DERs. Upon settlement of any DERs, the Employee shall receive the number of Units equal to the aggregate dollar amount of the accumulated but unpaid distributions with respect to such DERs divided by the Fair Market Value of a Unit on the day the corresponding Phantom Units with respect to which such DER was granted in tandem are
3
settled. Partial Units will be paid in cash. Payment of any DERs shall be made at the same time the corresponding Phantom Units with respect to which such DER was granted in tandem are paid pursuant to Section 5(b).
(d) Procedures. Settlement of Phantom Units and DERs shall be subject to and pursuant to rules and procedures established by the Committee in its sole discretion.
6. Transferability and Assignment. Neither this Agreement, the Phantom Units nor the DERs granted hereunder may be sold, assigned, pledged, exchanged, hypothecated, or otherwise transferred, encumbered, or disposed of by the Employee. Any purported transfer, assignment, alienation, pledge, hypothecation, attachment, sale, transfer or encumbrance shall be null, void and unenforceable against the Company Entities.
7. Status of Units. The Phantom Units granted pursuant to this Agreement do not and shall not entitle the Employee to any rights of a holder of Units and the Employee shall not have any rights of a holder of Units hereunder unless and until the Phantom Units are settled and the Units received by the Employee. The Employee agrees that any Units that he acquires upon the settlement of Earned Phantom Units and DERs will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws, the Plan or the rules, regulations and other requirements of the U.S. Securities and Exchange Commission and any stock exchange upon which the Units are then listed. Notwithstanding any provision of this Agreement to the contrary, the grant of the Phantom Units and the DERs granted in tandem therewith, and issuance of any Units in settlement thereof, will also be subject to compliance with all applicable requirements of federal, state, or foreign law with respect to such securities and with the requirements of any stock exchange upon which the Units may then be listed. No Units will be issued hereunder if such issuance would constitute a violation of any applicable federal, state, or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Units may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any Units subject to this Agreement will relieve the Company of any liability in respect of the failure to issue such Units as to which such requisite authority has not been obtained. From time to time, the Board and appropriate officers of the Company are authorized to take the actions necessary and appropriate to file required documents with governmental authorities, stock exchanges, and other appropriate persons to make Units available for issuance. The Employee agrees that (a) any certificates representing the Units acquired in settlement of Earned Phantom Units and DERs under this Agreement may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (b) the Company and the Partnership may refuse to issue or deliver the Units acquired in settlement of Earned Phantom Units and DERs under this Agreement if such proposed issuance or delivery would, in the opinion of counsel satisfactory to the Partnership, constitute a violation of any applicable securities law, and (c) the Partnership may give appropriate instructions to its transfer agent or the Company, as applicable, to stop the issuance or delivery of the Units to be acquired in settlement of Earned Phantom Units and DERs under this Agreement. In addition to the terms and conditions provided herein, the Company may require that the Employee make such covenants, agreements, and representations as the Committee, in its sole discretion, deems advisable in order to comply with any such laws, rules, regulations, or requirements.
4
8. Tax Withholding. The Company Entities shall have the authority and the right to deduct or withhold, or to require the Employee to remit to a Company Entity, an amount sufficient to satisfy all applicable federal, state and local taxes (including the Employee’s employment tax obligations) required by law to be withheld with respect to any taxable event arising in connection with the Phantom Units and the DERs thereon. In satisfaction of the foregoing requirement, unless other arrangements have been made that are acceptable to the Committee, the Board or a committee of the Board that is composed solely of two or more “Non-Employee Directors” within the meaning of Rule 16b-3, the Employee shall either (i) pay to the applicable Company Entity, or make arrangements satisfactory to the applicable Company Entity for the payment of, an amount equal to the sums required to be withheld by the applicable Company Entity, or (ii) surrender the number of Units otherwise issuable to him having a Fair Market Value equal to the sums required to be withheld by the applicable Company Entity. In the event that Units that would otherwise be issued in settlement of Earned Phantom Units and/or DERs are surrendered to satisfy such withholding obligations, the number of Units that shall be so surrendered shall be limited to the number of Units that have a Fair Market Value on the date of such surrender 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.
9. General Provisions.
(a) Administration. This Agreement shall at all times be subject to the terms and conditions of the Plan. The Committee shall have sole and complete discretion with respect to all matters reserved to it by the Plan and all decisions of the Committee with respect thereto and this Agreement shall be final and binding upon the Employee and the Company. In the event of any conflict between the terms and conditions of this Agreement and the Plan, the provisions of the Plan shall control.
(b) No Effect on Service. Nothing in this Agreement or in the Plan shall be construed as giving the Employee the right to be retained in the employ or service of the Company Entities. Furthermore, the Company Entities may at any time dismiss the Employee from employment free from any liability or any claim under the Plan or this Agreement, unless otherwise expressly provided in the Plan, this Agreement or other written agreement.
(c) Tax Consultation. None of the Board, the Committee or the Company Entities have made any warranty or representation to the Employee with respect to the income tax consequences of the grant or settlement of the Phantom Units or the transactions contemplated by this Agreement, and the Employee represents that he is in no manner relying on such entities or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences. The Employee represents that he has consulted with any tax consultants that the Employee deems advisable in connection with the Phantom Units.
(d) Severability. If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof,
5
but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.
(e) Successors. This Agreement shall be binding upon the Employee, the Employee’s legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.
(f) Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the Phantom Units granted hereby. Without limiting the scope of the preceding sentence, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.
(g) Headings. The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.
(h) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflicts of law principles thereof.
(i) Gender. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.
(j) Amendments, Suspension and Termination. 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 applicable (i) to the extent permitted by the Plan, (ii) to the extent necessary to comply with applicable laws and regulations or to conform the provisions of this Agreement to any changes thereto or (iii) to settle the Phantom Units pursuant to all applicable provisions of the Plan. Except as provided in the preceding sentence, this Agreement cannot be modified, altered or amended, except by a written agreement signed by both the Company and the Employee.
(k) Xxxxxxx Xxxxxxx Policy. The terms of the Company’s xxxxxxx xxxxxxx policy with respect to Units are incorporated herein by reference.
(l) Clawback. Notwithstanding any provisions in the Plan or this Agreement to the contrary, any portion of the payments and benefits provided under this Agreement or the sale of the Units granted hereunder shall be subject to a clawback or other recovery by the Company Entities to the extent necessary to comply with applicable law including, without limitation, the requirements of the Xxxx-Xxxxx Xxxx Street Reform and Consumer Protection Act of 2010 or any SEC rule.
(m) Community Interest of Spouse. The Employee’s spouse shall be required to execute the spousal consent set forth on the signature page attached hereto to evidence such spouse’s agreement and consent to be bound by the terms and conditions of this Agreement and
6
the Plan as to such spouse’s interest, whether as community property or otherwise, if any, in the Phantom Units granted to the Employee hereunder.
(n) Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Employee agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, without limitation, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports, and all other forms of communications) in connection with this and any other award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Employee has access. The Employee hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
[Signature Page Follows]
7
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, effective for all purposes as provided above.
COMPRESSCO PARTNERS GP INC.
By:
Name:
Title:
EMPLOYEE
__________________________________________
SPOUSAL CONSENT
The Employee’s spouse, if any, is fully aware of, understands and fully consents and agrees to the provisions of this Agreement and the Plan and their binding effect upon any marital or community property interests he or she may now or hereafter own, and agrees that the termination of his or her and the Employee’s marital relationship for any reason shall not have the effect of removing any Units otherwise subject to this Agreement from coverage hereunder and that his or her awareness, understanding, consent and agreement are evidenced by his or her signature below.
8
