Exhibit 10.2


 


VANGUARD NATURAL RESOURCES, LLC

CLASS B UNIT PLAN


 


SECTION 1.                                Purpose
of the Plan.


 


The Vanguard Natural Resources, LLC Class B Unit Plan
(the “Plan”) has been adopted by Vanguard Natural Resources, LLC, a Delaware limited
liability company (the “Company”). The Plan is intended to promote the
interests of the Company by providing to select Employees, Consultants and
Directors incentive compensation awards based on Units to encourage superior
performance.


 


SECTION 2.                                Definitions.


 


As used in the Plan, the following terms shall have
the meanings set forth below:


 


“Affiliate” means, with respect to any Person, any
other Person that directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with, the Person in
question. As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.


 


“Award” means a Restricted Unit or a Unit Award granted
under the Plan.


 


“Award Agreement” means the written or electronic
agreement by which an Award shall be evidenced.


 


“Board” means the Board of Directors or Managers, as
the case may be, of the Company.


 


“Change of Control” means, and
shall be deemed to have occurred upon one or more of the following events:


 


(i)                                     any “person” or “group” within the meaning of those
terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than an
Affiliate of the Company, shall become the beneficial owner, by way of merger,
consolidation, recapitalization, reorganization or otherwise, of 50% or more of
the combined voting power of the equity interests in the Company;


 


(ii)                                  the members of the Company approve, in one or a
series of transactions, a plan of complete liquidation of the Company; or


 


(iii)                               the sale or other disposition by the Company of all
or substantially all of its assets in one or more transactions to any Person
other than the Company or an Affiliate of the Company.


 


Notwithstanding the foregoing, if
an Award is subject to Section 409A of the Internal Revenue Code of 1986, as
amended, “Change of Control” shall mean a “change of control event” as defined
in the regulations and guidance issued under Section 409A.


 

















 


“Committee” means the Board, the Compensation
Committee of the Board or such other committee as may be appointed by the Board
to administer the Plan.


 


“Consultant” means an individual who renders
consulting services to the Company or an Affiliate of either.


 


“Director” means a member of the board of directors of
the Company or an Affiliate who is not an Employee or a Consultant (other than
in that individual’s capacity as a Director).


 


“Employee” means an employee of the Company or an
Affiliate of the Company.


 


“Exchange Act” means the Securities Exchange Act of
1934, as amended.


 


“Participant” means an Employee, Consultant or
Director granted an Award under the Plan.


 


“Person” means an individual or a corporation, limited
liability company, partnership, joint venture, trust, unincorporated
organization, association, governmental agency or political subdivision thereof
or other entity.


 


“Restricted Period” means the period established by
the Committee with respect to a Restricted Unit during which the Restricted
Unit remains subject to forfeiture by the Participant.


 


“Restricted Unit” means a Unit granted under the Plan
that is subject to a Restricted Period.


 


“Rule 16b-3” means Rule 16b-3 promulgated by the SEC
under the Exchange Act or any successor rule or regulation thereto as in effect
from time to time.


 


“SEC” means the Securities and Exchange Commission, or
any successor thereto.


 


“UDR” means a distribution with respect to a Unit.


 


“Unit” means a Class B Common Unit of the Company.


 


“Unit Award” means a grant of a Unit that is not
subject to a Restricted Period.


 


SECTION 3.                                Administration.


 


The Plan shall be administered by the Committee. A
majority of the Committee shall constitute a quorum, and the acts of the
members of the Committee who are present at any meeting thereof at which a
quorum is present, or acts unanimously approved by the members of the Committee
in writing, shall be the acts of the Committee. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to a Participant; (iii) determine the
number of Units to be covered by Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may 


 


2

















 


be settled, exercised,
canceled, or forfeited; (vi) interpret and administer the Plan and any
instrument or agreement relating to an Award made under the Plan; (vii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (viii) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or an Award Agreement in such manner and to such
extent as the Committee deems necessary or appropriate. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive, and binding upon all Persons, including
the Company, any Affiliate, any Participant, and any beneficiary of any Award.


 


SECTION 4.                                Units.


 


(a)                                  Limits
on Units Deliverable. Subject to adjustment as provided in Section 4(c),
the number of Units that may be delivered with respect to Awards under the Plan
is 360,000. If any Award is forfeited, cancelled, paid, or otherwise terminates
or expires without the delivery of Units pursuant to such Award, the Units
subject to such Award shall not again be available for Awards under the Plan.


 


(b)                                 Sources
of Units Deliverable Under Awards. Any Units delivered pursuant to an Award
shall consist of Units acquired from the Company.


 


(c)                                  Anti-dilution
Adjustments. With respect to any “equity restructuring” event that could
result in an additional compensation expense to the Company pursuant to the
provisions of FAS 123R if adjustments to Awards with respect to such event were
discretionary, the Committee shall equitably adjust the number and type of
Units covered by each outstanding Award and the terms and conditions of such
Award to equitably reflect such restructuring event and shall adjust the number
and type of Units (or other securities or property) with respect to which
Awards may be granted after such event. With respect to any other similar event
that would not result in a FAS 123R accounting charge if the adjustment to
Awards with respect to such event were subject to discretionary action, the
Committee shall have complete discretion to adjust Awards in such manner as it
deems appropriate with respect to such other event.


 


SECTION 5.                                Eligibility.


 


Any Employee, Consultant or Director shall be eligible
to be designated a Participant by the Committee and receive an Award under the
Plan. No Award may be granted on or after the date of the initial public
offering of Common Units of the Company.


 


SECTION 6.                                Awards.


 


(a)                                  Restricted
Units. The Committee shall have the authority to determine the Employees,
Consultants and Directors to whom Restricted Units shall be granted, the number
of Restricted Units to be granted to each such Participant, the Restricted Period,
the conditions under which the Restricted Units may become vested or forfeited
and such other terms and conditions as the Committee may establish with respect
to such Awards.


 


3

















 


(i)                                     UDRs. To the extent provided by the Committee,
in its discretion, a grant of Restricted Units may provide that the
distributions made by the Company with respect to the Restricted Units shall be
subject to the same forfeiture and other restrictions as the Restricted Unit and,
if restricted, such distributions shall be held, without interest, until the
Restricted Unit vests or is forfeited with the UDR being paid or forfeited at
the same time, as the case may be. Absent such a restriction on the UDRs in the
grant agreement, UDRs shall be paid promptly to the holder of the Restricted
Unit without vesting restrictions.


 


(ii)                                  Forfeitures.
Except as otherwise provided in the terms of the Restricted Units grant
agreement, upon termination of a Participant’s employment with or consulting
services to the Company and its Affiliates or membership on the Board,
whichever is applicable, for any reason during the applicable Restricted
Period, all outstanding, unvested Restricted Units awarded the Participant
shall be automatically forfeited on such termination. The Committee may, in its
discretion, waive in whole or in part such forfeiture with respect to a
Participant’s Restricted Units.


 


(iii)                               Lapse
of Restrictions. Upon or as soon as reasonably practical following the
vesting of each Restricted Unit, subject to satisfying the tax withholding
obligations of Section 8(b), the Participant shall be entitled to have the
restrictions removed from his or her Unit certificate so that the Participant
then holds an unrestricted Unit.


 


(b)                                 Unit Awards. Unit Awards may be granted under
the Plan to such Employees, Consultants and/or Directors and in such amounts as
the Committee, in its discretion, may select.


 


(c)                                  General.


 


(i)                                     Awards
May Be Granted Separately or Together. Awards may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with, or in
substitution for any other Award granted under the Plan or any award granted
under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards or awards granted under any other
plan of the Company or any Affiliate may be granted either at the same time as
or at a different time from the grant of such other Awards or awards.


 


(ii)                                  Limits
on Transfer of Awards. No Award and no right under any such Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant, 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 or any Affiliate.


 


(iii)                               Term
of Awards. The term of each Award shall be for such period as may be
determined by the Committee.


 


(iv)                              Unit
Certificates. All certificates for Units or other securities of the Company
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the Plan or the rules, regulations, and other
requirements of the SEC, any 


 


4

















 


stock exchange upon which such Units or other securities are then
listed, and any applicable federal or state laws, and the Committee may cause a
legend or legends to be inscribed on any such certificates to make appropriate
reference to such restrictions.


 


(v)                                 Consideration
for Grants. Awards may be granted for such consideration, including
services, as the Committee shall determine.


 


(vi)                              Delivery
of Units or other Securities and Payment by Participant of Consideration. Notwithstanding
anything in the Plan or any grant agreement to the contrary, delivery of Units
pursuant to the exercise or vesting of an Award may be deferred for any period
during which, in the good faith determination of the Committee, the Company is
not reasonably able to obtain Units to deliver pursuant to such Award without
violating applicable law or the applicable rules or regulations of any
governmental agency or authority or securities exchange. No Units or other
securities shall be delivered pursuant to any Award until payment in full of
any amount required to be paid pursuant to the Plan or the applicable Award
grant agreement (including, without limitation, any exercise price or tax
withholding) is received by the Company.


 


SECTION 7.                                Amendment and
Termination.


 


Except to the extent prohibited by applicable law:


 


(a)                                  Amendments
to the Plan. The Board or the Committee may amend, alter, suspend,
discontinue, or terminate the Plan in any manner, including increasing the
number of Units available for Awards under the Plan, without the consent of any
Participant, other holder or beneficiary of an Award, or any other Person.


 


(b)                                 Amendments
to Awards. The Committee may waive any conditions or rights under, amend
any terms of, or alter any Award theretofore granted, provided no change, other
than pursuant to Section 7(c), in any Award shall materially reduce the rights
or benefits of a Participant with respect to an Award without the consent of
such Participant.


 


(c)                                  Actions
Upon the Occurrence of Certain Events. Upon the occurrence of a Change of
Control, any change in applicable law or regulation affecting the Plan or
Awards thereunder, or any change in accounting principles affecting the
financial statements of the Company, the Committee, in its sole discretion,
without the consent of any Participant or holder of the Award, and on such
terms and conditions as it deems appropriate, may take any one or more of the
following actions in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan or an
outstanding Award:


 


(A)                              provide
for either (i) the termination of any Award in exchange for an amount of cash,
if any, equal to the amount that would have been attained upon the exercise of
such Award or realization of the Participant’s rights (and, for the avoidance
of doubt, if as of the date of the occurrence of such transaction or event the
Committee determines in good faith that no amount would have been attained upon
the exercise of such Award or realization of the Participant’s rights, then 


 


5

















 


such Award may
be terminated by the Company without payment) or (ii) the replacement of such
Award with other rights or property selected by the Committee in its sole
discretion;


 


(B)                                provide
that such Award be assumed by the successor or survivor entity, or a parent or
subsidiary thereof, or be exchanged for similar options, rights or awards
covering the equity of the successor or survivor, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of equity
interests and prices;


 


(C)                                make
adjustments in the number and type of Units (or other securities or property)
subject to outstanding Awards, and in the number and kind of outstanding Awards
or in the terms and conditions of (including the exercise price), and the
vesting and performance criteria included in, outstanding Awards, or both;


 


(D)                               provide
that such Award shall be exercisable or payable, notwithstanding anything to
the contrary in the Plan or the applicable Award Agreement; and


 


(E)                                 provide
that the Award cannot be exercised or become payable after such event, i.e., shall terminate upon such event.


 


Notwithstanding
the foregoing, with respect to an above event that is an “equity restructuring”
event that would be subject to a compensation expense pursuant FAS 123R,
the provisions in Section 4c shall control to the extent they are in conflict
with the discretionary provisions of this Section 7.


 


SECTION 8.                                General
Provisions.


 


(a)                                  No
Rights to Award. No Person shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of
Participants. The terms and conditions of Awards need not be the same with
respect to each recipient.


 


(b)                                 Tax
Withholding. Unless other arrangements have been made that are acceptable
to the Company, the Company or any Affiliate is authorized to withhold from any
Award, from any payment due or transfer made under any Award or from any
compensation or other amount owing to a Participant the amount (in cash, Units,
Units that would otherwise be issued pursuant to such Award or other property)
of any applicable taxes payable in respect of the grant of an Award, its
exercise, the lapse of restrictions thereon, or any payment or transfer under
an Award or under the Plan and to take such other action as may be necessary in
the opinion of the Company to satisfy its withholding obligations for the
payment of such taxes.


 


(c)                                  No
Right to Employment or Services. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, continue consulting services or to remain on the
Board, as applicable. Furthermore, the Company or an Affiliate may at any time
dismiss a Participant from employment or consulting 


 


6

















 


free from any liability
or any claim under the Plan, unless otherwise expressly provided in the Plan,
any Award agreement or other agreement.


 


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


 


(e)                                  Severability.
If any provision of the Plan or any Award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to any Person or
Award, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or 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 the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.


 


(f)                                    Other
Laws. The Committee may refuse to issue or transfer any Units or other
consideration under an Award if, in its sole discretion, it determines that the
issuance or transfer of such Units or such other consideration might violate
any applicable law or regulation, the rules of the principal securities
exchange on which the Units are then traded, or entitle the Company or an
Affiliate to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary
in connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.


 


(g)                                 No
Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any participating Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any participating Affiliate pursuant to
an Award, such right shall be no greater than the right of any general
unsecured creditor of the Company or any participating Affiliate.


 


(h)                                 No
Fractional Units. No fractional Units shall be issued or delivered pursuant
to the Plan or any Award, and the Committee shall determine whether cash, other
securities, or other property shall be paid or transferred in lieu of any
fractional Units or whether such fractional Units or any rights thereto shall
be canceled, terminated, or otherwise eliminated.


 


(i)                                     Headings.
Headings are given to the Sections and subsections of the Plan 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 the Plan or
any provision thereof.


 


(j)                                     Facility
Payment. Any amounts payable hereunder to any person under legal disability
or who, in the judgment of the Committee, is unable to manage properly his
financial affairs, may be paid to the legal representative of such person, or
may be applied for the benefit of such person in any manner that the Committee
may select, and the Company shall be relieved of any further liability for
payment of such amounts.


 


7

















 


(k)                                  Gender
and Number. Words in the masculine gender shall include the feminine
gender, the plural shall include the singular and the singular shall include
the plural.


 


(l)                                     Compliance with Section 409A. Nothing in the
Plan or any Award Agreement shall operate or be construed to cause the Plan or
an Award to fail to comply with the requirements of Section 409A of the
Internal Revenue Code. The applicable provisions of Section 409A and the
regulations thereunder are hereby incorporated by reference and shall control
over any Plan or Award Agreement provision in conflict therewith.


 


(m)                               LLC
Agreement. Notwithstanding anything in the Plan or any Award Agreement to
the contrary, the terms of the Amended and Restated Limited Liability Company
Agreement of Vanguard Natural Resources, LLC shall control in the event of any
conflict with the Plan or this Award Agreement and shall control with respect
to any matter concerning Class B units that is not addressed in the Plan or the
Award Agreement.


 


SECTION 9.                                Term
of the Plan.


 


The Plan shall be effective on the date it is approved
by the Board and shall continue until the earlier of the date (i) terminated by
the Board or (ii) all Units available under the Plan have been paid to
Participants or forfeited. However, any Award granted prior to such termination,
and the authority of the Board or the Committee to amend, alter, adjust,
suspend, discontinue, or terminate any such Award or to waive any conditions or
rights under such Award, shall extend beyond such termination date.


 


8