VANGUARDNATURAL RESOURCES, LLC LONG-TERMINCENTIVE PLAN PHANTOMUNIT AWARD AGREEMENT

 

 

 

 

To: Richard A. Robert

Date of Grant: January 1, 2010

Number of Units: 15,000

 

THIS PHANTOM UNIT AWARD AGREEMENT (the “Agreement”) is made as of January 1, 2010 between Vanguard Natural Resources, LLC (the “Company”), and Richard A. Robert (the “Executive”) pursuant to the terms and conditions of the Company’s Long-Term Incentive Plan (the “Plan”) and that certain Second Amended and Restated Employment Agreement between Executive and the Company dated January 1, 2010 (the “Employment Agreement”).  A copy of the Plan is being furnished to the Executive concurrently with the execution of this Agreement which shall be deemed a part of this Agreement as if fully set forth herein.  By the execution of this Agreement, the Executive acknowledges receipt of a copy of the Plan.  Unless the context otherwise requires, all terms defined in the Plan shall have the same meaning when used herein.

 

WHEREAS, the Board of Directors of the Company (the “Board”) has adopted the Plan to encourage and enable certain employees and consultants of the Company to acquire Awards the value of which is tied to the performance of the common unit (a “Unit”) of the Company, thus providing them with a more direct concern in the welfare of the Company and assuring a closer identification of their interests with those of the Company; and

 

WHEREAS, the Executive is one of such eligible employees.

 

NOW THEREFORE, the parties agree as follows:

 

1. Phantom Unit Award.  The Company hereby grants to the Executive (the “Award”), effective as of January 1, 2010 (the “Date of Grant”), in accordance with the terms and conditions set forth herein and in the Plan, the right to receive a cash payment equal to the excess, if any, of (a) the Fair Market Value of a Unit on the applicable determination date, over (b) the Fair Market Value of a Unit on the Date of Grant, with respect to 15,000 shares of Units (the “Phantom Units”).  The Award is specifically made subject to execution by the Executive of this Agreement.

 

2. Dividend Equivalents.  The Executive will be entitled to receive, from the date of settlement of this Award, an additional right to dividend equivalents, or DERs, which shall be equal in value to the value of any dividends made by the Company with respect to the number of shares of Units specified in Section 1 above on and after the Date of Grant.  The Executive may choose, in his discretion, whether to (a) directly receive the DERs in the form of a cash payment at the time that all other members of the Company receive distributions in relation to Units, or (b) receive a credit to a bookkeeping account (without interest) for any DER received from the Date of Grant until the payment of the underlying Phantom Units. The Executive will notify the Committee of his choice by filing an election form with the Secretary of the Company, such form to be provided by the Committee in accordance with the rules and procedures adopted by the Committee.

 

3. Vesting of Phantom Units.  Subject to the earlier expiration of this Award as herein provided, this Award may be settled in accordance with the provisions of this Agreement in accordance with the following schedule:

 

Date of Vesting	Percentage of Rights That Become Vested
January 1,  2013 (Three Year Anniversary of the Date of Grant)	100%

Phantom Units that may be settled pursuant to the schedule above are “Vested Units.”  Phantom Units that may not be settled pursuant to the schedule above are “Unvested Units.”

 

(a) Termination of Employment for Cause.  In the event the Executive’s employment is terminated for Cause all Phantom Units (both Vested Units and Unvested Units) that have not been settled as of the date of such removal shall be forfeited.

 

(b) Termination of Employment without Cause or a Change of Control Prior to Vesting.  In the event that a settlement event described in Section 4 below occurs prior to the Unvested Units becoming Vested Units according to the schedule above in this Section 3, the Unvested Units shall be forfeited.

 

4. Settlement of Phantom Units and DERs.

 

(a) Settlement.  The Vested Units shall be settled by the Company within the earliest to occur of the following periods:  (i) except in the event that Executive is terminated for Cause as noted in Section 3 above, the period beginning on the date the Executive incurs a “separation from service” (within the meaning of Treasury Regulation § 1.409A-1(h)(1)) from the Company and ending on December 31 of the calendar year of such “separation from service,” or (ii) within 90 days following a Change in Control.  Notwithstanding Section 4(a)(i), in the event the Executive’s “separation from service” occurs on or after December 1 of a calendar year, the Vested Units settleable pursuant to Section 4(a)(i) will be settled as soon as administratively feasible following such “separation from service,” but in no event later than 60 days following such “separation from service.”  The Vested Units will be settled through a single lump-sum cash payment to the Executive.  Where applicable, settlement of the DERs credited to the Executive from the Date of Grant through the date of the settlement of the Vested Units shall also be included in the single lump-sum cash payment the Executive is entitled to receive according to this Section 4(a).

 

(b) Procedures.  Settlement of Phantom Units shall be subject to and pursuant to rules and procedures established by the Committee in its sole discretion.

 

5. Transferability and Assignment.  This Agreement and the Phantom Units granted hereunder will not be transferable by the Executive other than by will or the laws of descent and distribution. Any attempt by the Executive 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.

 

6. Recapitalization or Reorganization.

 

(a) Existence of Plan and Award. The existence of the Plan and the Award shall not affect in any way the right or power of the Board or the members of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Units or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

 

(b) Subdivision or Consolidation of Units.  The terms of this Award shall be subject to adjustment from time to time, in accordance with the following provisions:

 

(i) If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a unit split, by the issuance of a dividend on Units payable in Units, or otherwise) the number of shares of Units then outstanding into a greater number of shares of Units, then the number of shares of Phantom Units specified in Section 1 above shall be increased proportionately.

 

(ii) If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, reverse unit split, or otherwise) the number of shares of Units then outstanding into a lesser number of shares of Units, the number of shares of Phantom Units specified in Section 1 above shall be decreased proportionately.

 

(iii) Whenever the number of shares of Units subject to this Award are required to be adjusted as provided in this Section 6(b), the Committee shall promptly prepare and deliver to the Executive a notice setting forth, in reasonable detail, the event requiring adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the change in the number of shares of Phantom Units specified in Section 1 above after giving effect to the adjustments.  The Committee shall promptly give the Executive such a notice.

 

(iv) Adjustments under Sections 6(b)(i) and (ii) shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive.

 

7. No Multiple Payments.  Settlement of the Phantom Units shall not occur under more than one provision of this Agreement.

 

8. Information Confidential.  As partial consideration for the granting of the Phantom Units hereunder, the Executive hereby agrees with the Company that the Executive will keep confidential all information and knowledge that the Executive has relating to the terms and conditions of this Agreement; provided, however, that such information may be disclosed as required by law and may be given in confidence to the Executive’s spouse, tax and financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan.  In the event any breach of this promise comes to the attention of the Company, it shall take into consideration that breach in determining whether to recommend the grant of any future similar award to the Executive, as a factor militating against the advisability of granting any such future award to the Executive.

 

9. No Right to Continued Employment.  This Agreement shall not be construed to confer upon the Executive any right to continue as an employee of the Company.  Any question as to whether there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee or the Board and its determination shall be final and binding.

 

10. Payment of Taxes.  The Company may from time to time, in its discretion, require the Executive to pay the Company the amount that the Company deems necessary to satisfy the Company’s current or future obligation to withhold federal, state or local income or other taxes incurred by the Executive as a result of the Award.  With respect to any required tax withholding, (a) the Company may withhold from the cash payment to be paid to the Executive the amount necessary to satisfy the Company’s obligation to withhold taxes, (b) with the Company’s consent, the Executive may deliver sufficient cash to the Company to satisfy its tax withholding obligations, or (c) the withholding obligations may be met by any such other arrangement that is acceptable to the Company and the Executive.  In the event that the Company subsequently determines that the amount withheld as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then the Executive shall pay to the Company, immediately upon the Company’s request, the amount of that deficiency.

 

11. 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 decisions of a majority of the Committee with respect thereto and this Agreement shall be final and binding upon the Executive 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.

 

12. Unfunded Arrangement.  This Agreement and the Plan shall not give a Executive any security or other interest in any assets of the Company; rather the Executive’s right to the Award is that of a general unsecured creditor of the Company.

 

13. No Liability for Good Faith Determinations.  The Company, the Committee and the members of the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Phantom Units granted hereunder.

 

14. No Guarantee of Interests.  The Company, the Committee and the members of the Board do not guarantee the Units from loss or depreciation.

 

15. Company Records.  Records of the Company regarding the Executive’s period of service, termination of service and the reason therefor, leaves of absence, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

16. Company Action.  Any action required of the Company shall be by resolution of its Board or by a person authorized to act by resolution of the Board.

 

17. 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, 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.

 

18. Notices.  All notices required or permitted under this Agreement must be in writing and personally delivered or sent by mail and shall be deemed to be delivered on the date on which it is actually received by the person to whom it is properly addressed.  A notice shall be effective when actually received by the Company in writing and in conformance with this Agreement and the Plan.

 

19. Waiver of Notice.  Any person entitled to notice hereunder may waive such notice.

 

20. Successors.  This Agreement shall be binding upon the Executive, the Executive’s legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.

 

21. 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.

 

22. Governing Law.  All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of Delaware without regard to choice of law provisions thereunder, except to the extent Delaware law is preempted by federal law.

 

23. Word Usage.  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.

 

24. Amendment.  This Agreement may be amended by the Committee or the Board; provided, however, that no amendment may decrease Executive’s rights inherent in this Agreement prior to such amendment without Executive’s express written consent.  Notwithstanding the provisions of this Section 24, this Agreement may be amended by the Committee, without the consent of the Executive, to the extent necessary to comply with applicable laws and regulations and to conform the provisions of this Agreement to any changes thereto or to settle the Award pursuant to all applicable provisions of the Plan.

 

25. Nonqualified Deferred Compensation Rules.  In the event this Award fails to meet the limitations, requirements or exemptions of or from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or the laws, rules, and regulations promulgated in connection with Section 409A of the Code, then this Award shall be modified by the Committee, in its sole discretion, to the limited extent necessary to satisfy such nonqualified deferred compensation rules.

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer effective as of January 1, 2010.

 

VANGUARD NATURAL RESOURCES, LLC

 

By: /s/ Scott W. Smith

Name: Scott W. Smith

Title: President and Chief Executive Officer

EXECUTIVE

Richard A. Robert