Document:

Exhibit 10.5

Vanguard
Natural Resources, LLC

Long-Term Incentive Plan

Grant of Phantom Options

	
  Grantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  

 

1.                                       Grant of Phantom Options.  Effective as of the Grant Date, Vanguard
Natural Resources, LLC (the “Company”) has granted you           
Phantom Options under the Vanguard Natural Resources, LLC Long-Term Incentive
Plan (the “Plan”).  Each Phantom Option
represents the right to receive a payment equal to the excess, if any, of (a)
the sum of (i) the Fair Market Value of a Unit on the Determination Date and
(ii) the amount of cash distributions made by the Company with respect to a
Unit during the period beginning on the Grant Date and ending on the
Determination Date over (b) 108% of the Fair Market Value of a Unit on the
Grant Date (the “Payment Amount”).  The
terms and conditions of this grant are set forth below.

2.                                       Definitions.  As used in this Agreement, the following
words and phrases shall have the meanings indicated:

(a)                                  “Determination
Date” is the first to occur of (i) the last day of the Company’s fiscal year in
which the Grant Date occurs, (ii) the date of a Qualifying Termination and
(iii) the date of a Change of Control.

(b)                                 “Employment
Agreement” means that certain Employment Agreement between you and the Company
dated as of October 9, 2006, as the same may be amended from time to time.

(c)                                  “Qualifying
Termination” means a termination of your employment with the Company that (i)
entitles you to a Severance Payment pursuant to the Employment Agreement or
(ii) is due to your death or a “disability,” as defined in the Employment
Agreement.

Capitalized terms
used in this Agreement but not defined herein shall have the meanings ascribed
to such terms in the Plan or the Employment Agreement, as the case may be,
unless the context requires otherwise.

3.                                       Vesting.

(a)                                  Vesting.  Subject to paragraph 3(b) below, your Phantom
Options will become 100% vested on the Determination Date.

(b)                                 Forfeitures.  If your employment with the Company is
terminated prior to the Determination Date for any reason other than a
Qualifying Termination, your 

Phantom Options automatically shall be forfeited in
full without payment upon such termination of employment.

For purposes of
this Agreement, (i) “a termination of employment with the Company” shall not
include any change in your status between any of the following: an employee or
a director of, or a consultant to, the Company, except to the extent provided
otherwise by Section 409A of the Internal Revenue Code or regulations
thereunder, to the extent applicable to the grant of the Phantom Options, and
(ii) “employment with the Company” includes your employment with a subsidiary
or parent of the Company and membership on the Board.

4.                                       Payment of Vested Phantom Options.  In cancellation of your Phantom Options that
become vested, the Company shall pay you, on or not later than 10 business days
following the Determination Date, an amount equal to the Payment Amount.  Such payment shall be made in Units, cash, or
any combination of cash and Units as the Committee may choose in its
discretion.  If the Payment Amount is
zero, your Phantom Options shall automatically be cancelled without payment on
the Determination Date.

5.                                       Withholding of Taxes.  To the extent that the Company has a tax
withholding obligation pursuant to applicable law with respect to the Payment
Amount, such withholding shall be made by the Company first withholding such
amount from any Payment Amount made in cash, and then with respect to any
payment made in Units, unless other advance arrangements have been made by you
that are acceptable to the Company, the Company shall withhold a number of
Units having a value equal to the amount the Company requires to meet its tax
withholding obligations under such applicable law.

6.                                       Limitations Upon Transfer.  All rights under this Agreement shall belong
to you alone and may not be transferred, assigned, pledged, or hypothecated by
you in any way (whether by operation of law or otherwise), other than by will
or the laws of descent and distribution and shall not be subject to execution,
attachment, or similar process.  Upon any
attempt by you to transfer, assign, pledge, hypothecate, or otherwise dispose
of such rights contrary to the provisions in this Agreement or the Plan, or
upon the levy of any attachment or similar process upon such rights, such
rights shall immediately become null and void.

7.                                       Binding Effect. This Agreement
shall be binding upon and inure to the benefit of any successor or successors
of the Company and upon any person lawfully claiming under you.

8.                                       Modifications.  Any modification of this Agreement that is
adverse to you shall be effective only if it is in writing and signed by both
you and an authorized individual on behalf of the Company.

9.                                       Governing Law.  This grant shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to conflicts of laws principles thereof.

 2
 

 

10.                                 Plan Controls.  In the event of any conflict between the
terms of this Agreement and the Plan, which is incorporated herein by reference
as a part of this Agreement, the terms of the Plan shall control.

	
  

  	
   

  	
  VANGUARD
  NATURAL RESOURCES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 3Exhibit 10.6

 

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 profits interests in the Company 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.

“Company Agreement” means the Amended and Restricted
Limited Liability Company Agreement of Vanguard Natural Resources, LLC, as the
same may be amended from time to time.

“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.

 “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)

 2
 

 

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 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.

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.

(i)            Unit Distributions.  Distribution on Units shall be paid to the
holder of the Restricted Unit in accordance with the terms of the Company
Agreement.

(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

 3
 

 

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 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

 4
 

 

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.

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, 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, if any, 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 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,

 5
 

 

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.

(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

 6
 

 

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 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.

 7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00122-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00122-of-00352.parquet"}]]