Exhibit 10.6

 

JONES ENERGY, INC.
2013 OMNIBUS INCENTIVE PLAN

 

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JONES ENERGY, INC.

2013 OMNIBUS INCENTIVE PLAN

 

Table of Contents

 

 

 

Page

1.

Plan

1

2.

Objectives

1

3.

Definitions

1

4.

Eligibility

5

5.

Common Stock Available for Awards

5

6.

Administration

7

7.

Delegation of Authority

8

8.

Employee Awards

8

9.

Consultant and Director Awards

12

10.

Award Payment; Dividends and Dividend Equivalents

12

11.

Option Exercise

13

12.

Taxes

13

13.

Amendment, Modification, Suspension or Termination

13

14.

Assignability

13

15.

Adjustments

14

16.

Restrictions

15

17.

Unfunded Plan

15

18.

Code Section 409A

15

19.

Awards to Foreign Nationals and Employees Outside the United States

16

20.

Governing Law

16

21.

Right to Continued Service or Employment

16

22.

Clawback Right

17

23.

Usage

17

24.

Headings

17

25.

Effectiveness

17

 

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JONES ENERGY, INC.

2013 OMNIBUS INCENTIVE PLAN

 

1.                                       Plan.  Jones Energy, Inc., a Delaware
corporation (the “Company”), established this Jones Energy, Inc. 2013 Omnibus
Incentive Plan (this “Plan”), effective as of July 29, 2013 (the “Effective
Date”)  This Plan shall continue in effect for a term of 10 years after the
Effective Date unless sooner terminated by action of the Board of Directors of
the Company.

 

2.                                       Objectives.  This Plan is designed to
attract and retain employees and consultants of the Company and its Subsidiaries
(as defined herein), to attract and retain qualified non-employee directors of
the Company, to encourage the sense of proprietorship of such employees,
consultants and directors and to stimulate the active interest of such persons
in the development and financial success of the Company and its Subsidiaries. 
These objectives are to be accomplished by making Awards under this Plan and
thereby providing Participants (as defined herein) with a proprietary interest
in the growth and performance of the Company and its Subsidiaries.

 

3.                                       Definitions.  As used herein, the terms
set forth below shall have the following respective meanings:

 

“Authorized Officer” means the Chairman of the Board, the Chief Executive
Officer of the Company (or any other senior officer of the Company to whom any
of such individuals shall delegate the authority to execute any Award
Agreement).

 

“Award” means the grant of any Option, Stock Appreciation Right, Stock Award, or
Cash Award, any of which may be structured as a Performance Award, whether
granted singly, in combination or in tandem, to a Participant pursuant to such
applicable terms, conditions, and limitations as the Committee may establish in
accordance with the objectives of this Plan.

 

“Award Agreement” means the document (in written or electronic form)
communicating the terms, conditions and limitations applicable to an Award.  The
Committee may, in its discretion, require that the Participant execute such
Award Agreement, or may provide for procedures through which Award Agreements
are made effective without execution.  Any Participant who is granted an Award
and who does not affirmatively reject the applicable Award Agreement shall be
deemed to have accepted the terms of Award as embodied in the Award Agreement.

 

“Board” means the Board of Directors of the Company.

 

“Cash Award” means an Award denominated in cash.

 

“Change in Control” means a Change in Control as defined in Attachment A to this
Plan.

 

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“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Committee” means the Compensation Committee of the Board, and any successor
committee thereto or such other committee of the Board as may be designated by
the Board to administer this Plan in whole or in part including any subcommittee
of the Board as designated by the Board.

 

“Common Stock” means the Class A Common Stock, par value $0.001 per share, of
the Company.

 

“Company” means Jones Energy, Inc., a Delaware corporation, or any successor
thereto.

 

“Consultant” means an individual providing services to the Company or any of its
Subsidiaries, other than an Employee or a Director, and an individual who has
agreed to become a consultant of the Company or any of its Subsidiaries and
actually becomes such a consultant following such date of agreement.

 

“Consultant Award” means the grant of any Award (other than an Incentive Stock
Option), whether granted singly, in combination, or in tandem, to a Participant
who is a Consultant pursuant to such applicable terms, conditions, and
limitations established by the Committee.

 

“Covered Employee” means any Employee who is or may be a “covered employee,” as
defined in Code Section 162(m).

 

“Director” means an individual serving as a member of the Board who is not an
Employee or a Consultant and an individual who has agreed to become a director
of the Company or any of its Subsidiaries and actually becomes such a director
following such date of agreement.

 

“Director Award” means the grant of any Award (other than an Incentive Stock
Option), whether granted singly, in combination, or in tandem, to a Participant
who is a Director pursuant to such applicable terms, conditions, and limitations
established by the Board.

 

“Disability” means (1) if the Participant is an Employee, a disability that
entitles the Employee to benefits under the Company’s long-term disability plan,
as may be in effect from time to time, as determined by the plan administrator
of the long-term disability plan or (2) if the Participant is a Director or a
Consultant, a disability whereby the Director or Consultant is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months. 
Notwithstanding the foregoing, if an Award is subject to Code Section 409A, the
definition of Disability shall conform to the requirements of Treasury
Regulation § 1.409A-3(i)(4)(i).

 

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“Dividend Equivalents” means, in the case of Restricted Stock Units or
Performance Units, an amount equal to all dividends and other distributions (or
the economic equivalent thereof) that are payable to stockholders of record
during the Restriction Period or performance period, as applicable, on a like
number of shares of Common Stock that are subject to the Award.

 

“Employee” means an employee of the Company or any of its Subsidiaries and an
individual who has agreed to become an employee of the Company or any of its
Subsidiaries and actually becomes such an employee following such date of
agreement.

 

“Employee Award” means the grant of any Award, whether granted singly, in
combination, or in tandem, to an Employee pursuant to such applicable terms,
conditions, and limitations established by the Committee.

 

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

 

“Exercise Price” means the price at which a Participant may exercise his right
to receive cash or Common Stock, as applicable, under the terms of an Award.

 

“Fair Market Value” of a share of Common Stock means, as of a particular date,
(1) if shares of Common Stock are listed on a national securities exchange, the
closing sales price per share of Common Stock on the consolidated transaction
reporting system for the principal national securities exchange on which shares
of Common Stock are listed on that date, or, if there shall have been no such
sale so reported on that date, on the last preceding date on which such a sale
was so reported, (2) if the Common Stock is not so listed, the average of the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by an inter-dealer quotation system, (3) if
shares of Common Stock are not publicly traded, the most recent value determined
by an independent appraiser appointed by the Committee for such purpose, or
(4) if none of the above are applicable, the Fair Market Value of a share of
Common Stock as determined in good faith by the Committee; provided, however,
that with respect to any Awards granted on the date of the initial public
offering of the Common Stock, Fair Market Value shall mean the opening sales
price per share price of the Common Stock offered in connection with such
initial public offering.

 

“Grant Date” means the date an Award is granted to a Participant pursuant to
this Plan.

 

“Incentive Stock Option” means an Option that is intended to comply with the
requirements set forth in Code Section 422.

 

“Nonqualified Stock Option” means an Option that is not intended to comply with
the requirements set forth in Code Section 422.

 

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“Option” means a right to purchase a specified number of shares of Common Stock
at a specified Exercise Price, which is either an Incentive Stock Option or a
Nonqualified Stock Option.

 

“Participant” means an Employee, Consultant or Director to whom an Award has
been made under this Plan.

 

“Performance Award” means an Award made pursuant to this Plan to a Participant
which is subject to the attainment of one or more Performance Goals.

 

“Performance Goal” means one or more standards established by the Committee to
determine in whole or in part whether a Performance Award shall be earned.

 

“Performance Unit” means a unit evidencing the right to receive in specified
circumstances one share of Common Stock or equivalent value in cash, the value
of which at the time it is settled is determined as a function of the extent to
which established performance criteria have been satisfied.

 

“Performance Unit Award” means an Award in the form of Performance Units.

 

“Qualified Performance Awards” has the meaning set forth in Paragraph
8(a)(vii)(B).

 

“Restricted Stock” means a share of Common Stock that is restricted or subject
to forfeiture provisions.

 

“Restricted Stock Award” means an Award in the form of Restricted Stock.

 

“Restricted Stock Unit” means a unit evidencing the right to receive in
specified circumstances one share of Common Stock or equivalent value in cash
that is restricted or subject to forfeiture provisions.

 

“Restricted Stock Unit Award” means an Award in the form of Restricted Stock
Units.

 

“Restriction Period” means a period of time beginning as of the date upon which
a Restricted Stock Award or Restricted Stock Unit Award is made pursuant to this
Plan and ending as of the date upon which such Award is no longer restricted or
subject to forfeiture provisions.

 

“Stock Appreciation Right” or “SAR” means a right to receive a payment, in cash
or Common Stock, equal to the excess of the Fair Market Value of a specified
number of shares of Common Stock on the date the right is exercised over a
specified Exercise Price.

 

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“Stock Award” means an Award in the form of shares of Common Stock, including a
Restricted Stock Award, and a Restricted Stock Unit Award or Performance Unit
Award that may be settled in shares of Common Stock, and excluding Options and
SARs.

 

“Stock-Based Award Limitations” has the meaning set forth in Paragraph 5.

 

“Subsidiary” means (1) in the case of a corporation, any corporation of which
the Company directly or indirectly owns shares representing 50% or more of the
combined voting power of the shares of all classes or series of capital stock of
such corporation which have the right to vote generally on matters submitted to
a vote of the stockholders of such corporation, and (2) in the case of a
partnership or other business entity not organized as a corporation, any such
business entity of which the Company directly or indirectly owns 50% or more of
the voting, capital or profits interests (whether in the form of partnership
interests, membership interests or otherwise).

 

4.                                       Eligibility.

 

(a)                                  Employees.  All Employees are eligible for
Employee Awards under this Plan, provided, however, that if the Committee makes
an Employee Award to an individual whom it expects to become an Employee
following the Grant Date of such Award, such Award shall be subject to (among
other terms and conditions) the individual actually becoming an Employee.

 

(b)                                 Consultants.  All Consultants are eligible
for Consultant Awards under this Plan, provided, however, that if the Committee
makes a Consultant Award to an individual whom it expects to become a Consultant
following the Grant Date of such Award, such Award shall be subject to (among
other terms and conditions) the individual actually becoming a Consultant.

 

(c)                                  Directors.  All Directors are eligible for
Director Awards under this Plan, provided, however, that if the Board makes a
Director Award to an individual whom it expects to become a Director following
the Grant Date of such Award, such Award shall be subject to (among other terms
and conditions) the individual actually becoming a Director.

 

The Committee (or the Board, in the case of Director Awards) shall determine the
type or types of Awards to be made under this Plan and shall designate from time
to time the Employees, Consultants or Directors who are to be granted Awards
under this Plan.

 

5.                                       Common Stock Available for Awards. 
Subject to the provisions of Paragraph 15 hereof, there shall be available for
Awards under this Plan granted wholly or partly in Common Stock (including
rights or Options that may be exercised for or settled in Common Stock) an
aggregate of 3,850,000 shares of Common Stock (the “Maximum Share Limit”), all
of which shall be available for Incentive Stock Options.

 

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Awards settled in cash shall not reduce the Maximum Share Limit under the Plan. 
If an Award expires or is terminated, cancelled or forfeited, the shares of
Common Stock associated with the expired, terminated, cancelled or forfeited
Award shall again be available for Awards under the Plan, and the Maximum Share
Limit shall be increased by the number of shares subject to such Award.  The
following shares of Common Stock shall also become available again for Awards
under the Plan other than Awards of Incentive Stock Options:

 

(i)                                     Shares of Common Stock that are tendered
by a Participant or withheld as full or partial payment of minimum withholding
taxes or as payment for the Exercise Price of an Award; and

 

(ii)                                  Shares of Common Stock reserved for
issuance upon grant of an SAR, to the extent the number of reserved shares of
Common Stock exceeds the number of shares of Common Stock actually issued upon
exercise or settlement of such SAR.

 

The foregoing notwithstanding, subject to New York Stock Exchange listing
requirements, the Maximum Share Limit shall not be reduced by (x) shares of
Common Stock issued under Awards granted in assumption, substitution or exchange
for previously granted awards of a company acquired by the Company and
(y) available shares under a stockholder approved plan of an acquired company
(as appropriately adjusted to reflect the transaction) and such shares shall be
available for Awards under the Plan.

 

The Board and the appropriate officers of the Company shall from time to time
take whatever actions are necessary to file any required documents with
governmental authorities, stock exchanges and transaction reporting systems to
ensure that shares of Common Stock are available for issuance pursuant to
Awards.

 

Notwithstanding anything to the contrary contained in this Plan, the following
limitations shall apply to any Awards made hereunder:

 

(a)                                  No Employee may be granted during any
calendar year Awards consisting of Options or SARs that are exercisable for more
than 1,000,000 shares of Common Stock;

 

(b)                                 No Employee may be granted during any
calendar year Qualified Performance Awards that are Stock Awards covering or
relating to more than 1,000,000 shares of Common Stock (the limitation set forth
in this clause (b), together with the limitation set forth in clause (a) above,
being hereinafter collectively referred to as the “Stock-Based Award
Limitations”);

 

(c)                                  No Employee may be granted during any
calendar year Qualified Performance Awards that are (1) Cash Awards or
(2) Restricted Stock Unit Awards or Performance Unit Awards that may be settled
solely in cash having a value determined on the Grant Date in excess of
$5,000,000; and

 

(d)                                 No Director may be granted during any
calendar year Awards having a value determined on the Grant Date in excess of
$500,000.

 

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Shares delivered by the Company in settlement of Awards may be authorized and
unissued shares of Common Stock, shares of Common Stock held in the treasury of
the Company, shares of Common Stock purchased on the open market or by private
purchase or any combination of the foregoing.

 

6.                                       Administration.

 

(a)                                  Authority of the Committee.  Except as
otherwise provided in this Plan with respect to actions or determinations by the
Board, this Plan shall be administered by the Committee; provided, however, that
(i) any and all members of the Committee shall satisfy any independence
requirements prescribed by any stock exchange on which the Company lists its
Common Stock; (ii) Awards may be granted to individuals who are subject to
Section 16(b) of the Exchange Act only if the Committee is comprised solely of
two or more “Non-Employee Directors” as defined in Securities and Exchange
Commission Rule 16b-3 (as amended from time to time, and any successor rule,
regulation or statute fulfilling the same or similar function); and (iii) any
Award intended to qualify for the “performance-based compensation” exception
under Code Section 162(m) shall be granted only if the Committee is comprised
solely of two or more “outside directors” within the meaning of Code
Section l62(m) and regulations pursuant thereto.  Subject to the provisions
hereof, the Committee shall have full and exclusive power and authority to
administer this Plan and to take all actions that are specifically contemplated
hereby or are necessary or appropriate in connection with the administration
hereof.  The Committee shall also have full and exclusive power to interpret
this Plan and to adopt such rules, regulations and guidelines for carrying out
this Plan as it may deem necessary or proper, all of which powers shall be
exercised in the best interests of the Company and in keeping with the
objectives of this Plan.  Subject to Paragraph 6(c) hereof, the Committee may,
in its discretion, (x) provide for the extension of the exercisability of an
Award, or (y) in the event of death, Disability, retirement or Change in
Control, accelerate the vesting or exercisability of an Award, eliminate or make
less restrictive any restrictions contained in an Award, waive any restriction
or other provision of this Plan or an Award or otherwise amend or modify an
Award in any manner that is, in either case, (1) not materially adverse to the
Participant to whom such Award was granted, (2) consented to by such Participant
or (3) authorized by Paragraph 15(c) hereof; provided, however, that except as
expressly provided in Paragraph 8(a)(i) or 8(a)(ii) hereof, no such action shall
permit the term of any Option or SAR to be greater than 10 years from its Grant
Date.  The Committee may correct any defect or supply any omission or reconcile
any inconsistency in this Plan or in any Award Agreement in the manner and to
the extent the Committee deems necessary or desirable to further this Plan’s
purposes.  Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute discretion
and shall be final, conclusive and binding on all parties concerned.  The Board
shall have the same powers as the Committee with respect to Director Awards.

 

(b)                                 Indemnity.  No member of the Board or the
Committee or officer of the Company to whom the Committee has delegated
authority in accordance with the provisions of Paragraph 7 of this Plan shall be
liable for anything done or omitted to be done by him, by any member of the
Board or the Committee or by any officer of the

 

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Company in connection with the performance of any duties under this Plan, except
for his own willful misconduct or as expressly provided by statute.

 

(c)                                  Prohibition on Repricing of Awards. 
Subject to the provisions of Paragraph 15 hereof, the terms of outstanding Award
Agreements may not be amended without the approval of the Company’s stockholders
so as to (i) reduce the Exercise Price of any outstanding Options or SARs or
(ii) cancel any outstanding Options or SARs in exchange for cash or other
Awards, or Options or SARs with an Exercise Price that is less than the Exercise
Price of the original Options or SARs.

 

7.                                       Delegation of Authority.  The Committee
may delegate any of its authority to grant Awards to Employees who are not
subject to Section 16(b) of the Exchange Act and Consultants, subject to
Paragraph 6(a) above, to the Board or to any other committee of the Board,
provided such delegation is made in writing and specifically sets forth such
delegated authority.  The Committee may also delegate to an Authorized Officer
authority to execute on behalf of the Company any Award Agreement.  The
Committee and the Board, as applicable, may engage or authorize the engagement
of a third party administrator to carry out administrative functions under this
Plan.  Any such delegation hereunder shall only be made to the extent permitted
by applicable law.

 

8.                                       Employee Awards.

 

(a)                                  The Committee shall determine the type or
types of Employee Awards to be made under this Plan and shall designate from
time to time the Employees who are to be the recipients of such Awards.  Each
Award shall be embodied in an Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee, in its sole
discretion, and, if required by the Committee, shall be signed by the
Participant to whom the Award is granted and by an Authorized Officer for and on
behalf of the Company.  Awards may consist of those listed in this
Paragraph 8(a) hereof and may be granted singly, in combination or in tandem. 
Awards may also be made in combination or in tandem with, in replacement of, or
as alternatives to, grants or rights under this Plan or any other plan of the
Company or any of its Subsidiaries, including the plan of any acquired entity;
provided, however, that, except as contemplated in Paragraph 15 hereof, no
Option or SAR may be issued in exchange for the cancellation of an Option or SAR
with a higher Exercise Price nor may the Exercise Price of any Option or SAR be
reduced.  All or part of an Award may be subject to conditions established by
the Committee.  Upon the termination of employment by a Participant who is an
Employee, any unexercised, unvested or unpaid Awards shall be treated as set
forth in the applicable Award Agreement or in any other written agreement the
Company has entered into with the Participant.

 

(i)                                     Options.  An Employee Award may be in
the form of an Option.  An Option awarded pursuant to this Plan may consist of
either an Incentive Stock Option or a Nonqualified Stock Option.  The price at
which shares of Common Stock may be purchased upon the exercise of an Option
shall be not less than the Fair Market Value of the Common Stock on the Grant
Date, subject to adjustment as provided in Paragraph 15 hereof.  The term of an
Option shall not exceed 10

 

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years from the Grant Date; provided, however, if the term of a Nonqualified
Option (but not an Incentive Option) expires when trading in the Common Stock is
prohibited by law or the Company’s insider trading policy, then the term of such
Nonqualified Option shall expire on the 30th day after the expiration of such
prohibition.  Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Option, including, but not limited to, the term of
any Option and the date or dates upon which the Option becomes vested and
exercisable, shall be determined by the Committee.

 

(ii)                                  Stock Appreciation Rights.  An Employee
Award may be in the form of an SAR.  The Exercise Price for an SAR shall not be
less than the Fair Market Value of the Common Stock on the Grant Date, subject
to adjustment as provided in Paragraph 15 hereof.  The holder of a tandem SAR
may elect to exercise either the Option or the SAR, but not both.  The exercise
period for an SAR shall extend no more than 10 years after the Grant Date;
provided, however, if the term of an SAR expires when trading in the Common
Stock is prohibited by law or the Company’s insider trading policy, then the
term of such SAR shall expire on the 30th day after the expiration of such
prohibition.  Subject to the foregoing provisions, the terms, conditions, and
limitations applicable to any SAR, including, but not limited to, the term of
any SAR and the date or dates upon which the SAR becomes vested and exercisable,
shall be determined by the Committee.

 

(iii)                               Stock Awards.  An Employee Award may be in
the form of a Stock Award.  The terms, conditions and limitations applicable to
any Stock Award, including, but not limited to, vesting or other restrictions,
shall be determined by the Committee, and subject to the minimum Restriction
Period and performance period requirements and any other applicable requirements
described in this Paragraph 8(a) hereof.

 

(iv)                              Restricted Stock Unit Awards.  An Employee
Award may be in the form of a Restricted Stock Unit Award.  The terms,
conditions and limitations applicable to a Restricted Stock Unit Award,
including, but not limited to, the Restriction Period, shall be determined by
the Committee.  Subject to the terms of this Plan, the Committee, in its sole
discretion, may settle Restricted Stock Units in the form of cash or in shares
of Common Stock (or in a combination thereof) equal to the value of the vested
Restricted Stock Units.

 

(v)                                 Performance Unit Awards.  An Employee Award
may be in the form of a Performance Unit Award.  Each Performance Unit shall
have an initial value that is established by the Committee on the Grant Date. 
Subject to the terms of this Plan, after the applicable performance period has
ended, the Participant shall be entitled to receive settlement of the value and
number of Performance Units earned by the Participant over the performance
period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.  Settlement of earned Performance Units
shall be as determined by the Committee and as evidenced in an Award Agreement. 
Subject

 

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to the terms of this Plan, the Committee, in its sole discretion, may settle
earned Performance Units in the form of cash or in shares of Common Stock (or in
a combination thereof) equal to the value of the earned Performance Units as
soon as practicable after the end of the performance period and following the
Committee’s determination of actual performance against the performance measures
and related goals established by the Committee.

 

(vi)                              Cash Awards.  An Employee Award may be in the
form of a Cash Award.  The terms, conditions and limitations applicable to a
Cash Award, including, but not limited to, vesting or other restrictions, shall
be determined by the Committee.

 

(vii)                           Performance Awards.  Without limiting the type
or number of Awards that may be made under the other provisions of this Plan, an
Employee Award may be in the form of a Performance Award.  The terms, conditions
and limitations applicable to an Award that is a Performance Award shall be
determined by the Committee.  The Committee shall set Performance Goals in its
discretion which, depending on the extent to which they are met, will determine
the value and/or amount of Performance Awards that will be paid out to the
Participant and/or the portion of an Award that may be exercised.

 

(A)                              Nonqualified Performance Awards.  Performance
Awards granted to Employees that are not intended to qualify as qualified
performance-based compensation under Code Section 162(m) shall be based on
achievement of such Performance Goals and be subject to such terms, conditions
and restrictions as the Committee or its delegate shall determine.

 

(B)                                Qualified Performance Awards.  Performance
Awards granted to Employees under this Plan that are intended to qualify as
qualified performance-based compensation under Code Section 162(m) shall be
paid, vested or otherwise deliverable solely on account of the attainment of one
or more pre-established, objective Performance Goals established by the
Committee prior to the earlier to occur of (1) 90 days after the commencement of
the period of service to which the Performance Goal relates and (2) the lapse of
25% of the period of service (as scheduled in good faith at the time the goal is
established), and in any event while the outcome is substantially uncertain.  A
Performance Goal is objective if a third party having knowledge of the relevant
facts could determine whether the goal is met.  One or more of such goals may
apply to the Employee, one or more business units, divisions or sectors of the
Company, or the Company as a whole, and if so desired by the Committee, by
comparison with a peer group of companies.  A Performance Goal shall include one
or more of the following:  (1) earnings per share; (2) base production;
(3) increase in cash flow; (4) increase in cash flow from operations;
(5) increase in cash flow return; (6) return on net assets; (7) return on
assets; (8) return on investment; (9) return on

 

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capital; (10) return on equity; (11) economic value added; (12) operating
margin; (13) increase in production; (14) net income; (15) net income per share;
(16) pretax earnings; (17) pretax earnings before interest, depreciation and
amortization; (18) pretax operating earnings after interest expense and before
incentives, service fees, and extraordinary or special items; (19) total
stockholder return; (20) debt reduction; (21) finding and development costs;
(22) operating income; (23) internal rate of return; (24) safety; (25) operating
expenses per barrel of oil equivalent; (26) capital efficiency; (27) barrels of
oil equivalent produced per day; and (28) any of the above goals determined on
an absolute or relative basis or as compared to the performance of a published
or special index deemed applicable by the Committee including, but not limited
to, the Standard & Poor’s 500 Stock Index or a group of comparable companies.

 

Unless otherwise stated, such a Performance Goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business criteria).  In
interpreting Plan provisions applicable to Qualified Performance Awards, it is
the intent of this Plan to conform with the standards of Code Section 162(m) and
Treasury Regulation § 1.162-27(e)(2)(i), as to grants to Covered Employees and
the Committee in establishing such goals and interpreting this Plan shall be
guided by such provisions.  Prior to the payment of any compensation based on
the achievement of Performance Goals applicable to Qualified Performance Awards,
the Committee must certify in writing that applicable Performance Goals and any
of the material terms thereof were, in fact, satisfied.  For this purpose,
approved minutes of the Committee meeting in which the certification is made
shall be treated as such written certification.  Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Qualified
Performance Awards made pursuant to this Plan shall be determined by the
Committee.  The Committee may provide in any such Performance Award that any
evaluation of performance may include or exclude any of the following events
that occurs during a Performance Period: (a) asset write-downs, (b) litigation
or claim judgments or settlements, (c) the effect of changes in tax laws,
accounting principles, or other laws or provisions affecting reported results,
(d) any reorganization and restructuring programs, (e) extraordinary
nonrecurring items as described in Accounting Principles Board Opinion No. 30
and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to stockholders
for the applicable year, (f) acquisitions or divestitures, (g) foreign exchange
gains and losses and (h) settlement of hedging activities.

 

(C)                                Adjustment of Performance Awards. Awards that
are intended to be Qualified Performance Awards may not be adjusted

 

11

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upward. The Committee may retain the discretion to adjust such Performance
Awards downward, either on a formula or discretionary basis or any combination,
as the Committee determines.

 

9.                                       Consultant and Director Awards.

 

(a)                                  Consultant Awards.  The Committee has the
sole authority to grant Consultant Awards from time to time in accordance with
this Paragraph 9(a).  Consultant Awards may consist of the forms of Award
described in Paragraph 8, with the exception of Incentive Stock Options, may be
granted singly, in combination, or in tandem and shall be granted subject to
such terms and conditions as specified in Paragraph 8.  Each Consultant Award
shall be embodied in an Award Agreement, which shall contain such terms,
conditions, and limitations as shall be determined by the Committee, in its sole
discretion.

 

(b)                                 Director Awards.  The Board has the sole
authority to grant Director Awards from time to time in accordance with this
Paragraph 9(b).  Director Awards may consist of the forms of Award described in
Paragraph 8, with the exception of Incentive Stock Options, may be granted
singly, in combination, or in tandem and shall be granted subject to such terms
and conditions as specified in Paragraph 8.  Each Director Award may, in the
discretion of the Board, be embodied in an Award Agreement, which shall contain
such terms, conditions, and limitations as shall be determined by the Board, in
its sole discretion.

 

10.                                 Award Payment; Dividends and Dividend
Equivalents.

 

(a)                                  General.  Payment of Awards may be made in
the form of cash or Common Stock, or a combination thereof, and may include such
restrictions as the Committee (or the Board, in the case of Director Awards)
shall determine, including, but not limited to, in the case of Common Stock,
restrictions on transfer and forfeiture provisions.  For a Restricted Stock
Award, the certificates evidencing the shares of such Restricted Stock (to the
extent that such shares are so evidenced) shall contain appropriate legends and
restrictions that describe the terms and conditions of the restrictions
applicable thereto.  For a Restricted Stock Unit Award that may be settled in
shares of Common Stock, the shares of Common Stock that may be issued at the end
of the Restriction Period shall be evidenced by book entry registration or in
such other manner as the Committee may determine.

 

(b)                                 Dividends and Dividend Equivalents.  Rights
to (1) dividends will be extended to and made part of any Restricted Stock Award
and (2) Dividend Equivalents may be extended to and made part of any Restricted
Stock Unit Award and Performance Unit Award, subject in each case to such terms,
conditions and restrictions as the Committee may establish; provided, however,
that no such dividends or Dividend Equivalents shall be paid with respect to
unvested Stock Awards, including Stock Awards subject to Performance Goals. 
Dividends or Dividend Equivalents paid with respect to unvested Stock Awards
may, in the discretion of the Committee, be

 

12

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accumulated and paid to the Participant at the time that such Stock Award
vests.  Dividends and/or Dividend Equivalents shall not be made part of any
Options or SARs.

 

11.                                 Option Exercise.  The Exercise Price shall
be paid in full at the time of exercise in cash or, if permitted by the
Committee and elected by the Participant, the Participant may purchase such
shares by means of the Company withholding shares of Common Stock otherwise
deliverable on exercise of the Award or tendering Common Stock valued at Fair
Market Value on the date of exercise, or any combination thereof.  The
Committee, in its sole discretion, shall determine acceptable methods for
Participants to tender Common Stock or other Awards.  The Committee may provide
for procedures to permit the exercise or purchase of such Awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Award (including cashless exercise procedures approved by the Committee
involving a broker or dealer approved by the Committee).  The Committee may
adopt additional rules and procedures regarding the exercise of Options from
time to time, provided that such rules and procedures are not inconsistent with
the provisions of this Paragraph 11.

 

12.                                 Taxes.  The Company shall have the right to
deduct applicable taxes from any Award payment and withhold, at the time of
delivery or vesting of cash or shares of Common Stock under this Plan, an
appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of required withholding taxes or to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes; provided, however, that the number of shares of
Common Stock withheld for payment of required withholding taxes must equal no
more than the required minimum withholding taxes.  The Committee may also permit
withholding to be satisfied by the transfer to the Company of shares of Common
Stock theretofore owned by the holder of the Award with respect to which
withholding is required.  If shares of Common Stock are used to satisfy tax
withholding, such shares shall be valued based on the Fair Market Value when the
tax withholding is required to be made.

 

13.                                 Amendment, Modification, Suspension or
Termination.  The Board may amend, modify, suspend or terminate this Plan (and
the Committee may amend an Award Agreement) for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that (1) no amendment or alteration that would materially
adversely affect the rights of any Participant under any Award previously
granted to such Participant shall be made without the consent of such
Participant and (2) no amendment or alteration shall be effective prior to its
approval by the stockholders of the Company to the extent stockholders approval
is otherwise required by applicable legal requirements or the requirements of
the securities exchange on which the Company’s stock is listed, including any
amendment that expands the types of Awards available under this Plan, materially
increases the number of shares of Common Stock available for Awards under this
Plan, materially expands the classes of persons eligible for Awards under this
Plan, materially extends the term of this Plan, materially changes the method of
determining the Exercise Price of Options, deletes or limits any provisions of
this Plan that prohibit the repricing of Options or SARs.

 

14.                                 Assignability.  Unless otherwise determined
by the Committee (or the Board in the case of Director Awards) or expressly
provided for in an Award Agreement, no Award or any other benefit under this
Plan shall be assignable or otherwise transferable except

 

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(1) by will or the laws of descent and distribution or (2) pursuant to a
domestic relations order issued by a court of competent jurisdiction that is not
contrary to the terms and conditions of this Plan or applicable Award and in a
form acceptable to the Committee.  The Committee may prescribe and include in
applicable Award Agreements other restrictions on transfer.  Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
Paragraph 14 shall be null and void.  Notwithstanding the foregoing, no Award
may be transferred for value or consideration.

 

15.                                 Adjustments.

 

(a)                                  The existence of outstanding Awards shall
not affect in any manner the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue is prior to, on a
parity with or junior to the Common Stock) or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding of any kind, whether or not
of a character similar to that of the acts or proceedings enumerated above.

 

(b)                                 In the event of any subdivision or
consolidation of outstanding shares of Common Stock, declaration of a dividend
payable in shares of Common Stock or other stock split, then (1) the number of
shares of Common Stock reserved under this Plan, (2) the number of shares of
Common Stock covered by outstanding Awards in the form of Common Stock or units
denominated in Common Stock, (3) the Exercise Price or other price in respect of
such Awards, (4) the Stock-Based Award Limitations, and (5) the appropriate Fair
Market Value and other price determinations for such Awards shall each be
proportionately adjusted by the Committee as appropriate to reflect such
transaction.  In the event of any other recapitalization or capital
reorganization of the Company, any consolidation or merger of the Company with
another corporation or entity, the adoption by the Company of any plan of
exchange affecting the Common Stock or any distribution to holders of Common
Stock of securities or property (other than normal cash dividends or dividends
payable in Common Stock), the Committee shall make appropriate adjustments to
(i) the number and kind of shares of Common Stock covered by Awards in the form
of Common Stock or units denominated in Common Stock, (ii) the Exercise Price or
other price in respect of such Awards, (iii) the appropriate Fair Market Value
and other price determinations for such Awards, and (iv) the Stock-Based Award
Limitations to reflect such transaction; provided that such adjustments shall
only be such as are necessary to maintain the proportionate interest of the
holders of the Awards and preserve, without increasing, the value of such
Awards.

 

(c)                                  In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Committee may make such adjustments to Awards or other
provisions for the disposition of Awards as it deems equitable, and shall be
authorized, in its discretion, (1) to provide for the substitution of a new
Award or other arrangement (which, if applicable, may be exercisable for such
property or stock as the Committee determines) for an Award or the assumption of
the

 

14

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Award, regardless of whether in a transaction to which Code
Section 424(a) applies, (2) to provide, prior to the transaction, for the
acceleration of the vesting and exercisability of, or lapse of restrictions with
respect to, the Award and, if the transaction is a cash merger, provide for the
termination of any portion of the Award that remains unexercised at the time of
such transaction, or (3) to cancel any such Awards and to deliver to the
Participants cash in an amount that the Committee shall determine in its sole
discretion is equal to the Fair Market Value of such Awards on the date of such
event, which in the case of Options or Stock Appreciation Rights shall be the
excess (if any) of the Fair Market Value of Common Stock on such date over the
Exercise Price of such Award.

 

(d)                                 No adjustment or substitution pursuant to
this Paragraph 15 shall be made in a manner that results in noncompliance with
the requirements of Code Section 409A, to the extent applicable.

 

16.                                 Restrictions.  No Common Stock or other form
of payment shall be issued with respect to any Award unless the Company shall be
satisfied based on the advice of its counsel that such issuance will be in
compliance with applicable federal and state securities laws.  Certificates
evidencing shares of Common Stock delivered under this Plan (to the extent that
such shares are so evidenced) may be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the Common
Stock is then listed or to which it is admitted for quotation and any applicable
federal or state securities law.  The Committee may cause a legend or legends to
be placed upon such certificates (if any) to make appropriate reference to such
restrictions.

 

17.                                 Unfunded Plan.  This Plan is unfunded. 
Although bookkeeping accounts may be established with respect to Participants
who are entitled to cash, Common Stock or rights thereto under this Plan, any
such accounts shall be used merely as a bookkeeping convenience.  The Company
shall not be required to segregate any assets that may at any time be
represented by cash, Common Stock or rights thereto, nor shall this Plan be
construed as providing for such segregation, nor shall the Company, the Board or
the Committee be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under this Plan.  Any liability or obligation of the
Company to any Participant with respect to an Award of cash, Common Stock or
rights thereto under this Plan shall be based solely upon any contractual
obligations that may be created by this Plan and any Award Agreement, and no
such liability or obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.  None of the
Company, the Board or the Committee shall be required to give any security or
bond for the performance of any obligation that may be created by this Plan. 
With respect to this Plan and any Awards granted hereunder, Participants are
general and unsecured creditors of the Company and have no rights or claims
except as otherwise provided in this Plan or any applicable Award Agreement.

 

18.                                 Code Section 409A.

 

(a)                                  Awards made under this Plan are intended to
comply with or be exempt from Code Section 409A, and ambiguous provisions
hereof, if any, shall be construed

 

15

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and interpreted in a manner consistent with such intent.  No payment, benefit or
consideration shall be substituted for an Award if such action would result in
the imposition of taxes under Code Section 409A.  Notwithstanding anything in
this Plan to the contrary, if any Plan provision or Award under this Plan would
result in the imposition of an additional tax under Code Section 409A, that Plan
provision or Award shall be reformed, to the extent permissible under Code
Section 409A, to avoid imposition of the additional tax, and no such action
shall be deemed to adversely affect the Participant’s rights to an Award.

 

(b)                                 Unless the Committee provides otherwise in
an Award Agreement, each Restricted Stock Unit Award, Performance Unit Award or
Cash Award (or portion thereof if the Award is subject to a vesting schedule)
shall be settled no later than the 15th day of the third month after the end of
the first calendar year in which the Award (or such portion thereof) is no
longer subject to a “substantial risk of forfeiture” within the meaning of Code
Section 409A.  If the Committee determines that a Restricted Stock Unit Award,
Performance Unit Award or Cash Award is intended to be subject to Code
Section 409A, the applicable Award Agreement shall include terms that are
designed to satisfy the requirements of Code Section 409A.

 

(c)                                  If the Participant is identified by the
Company as a “specified employee” within the meaning of Code
Section 409A(a)(2)(B)(i) on the date on which the Participant has a “separation
from service” (other than due to death) within the meaning of Treasury
Regulation § 1.409A-1(h), any Award payable or settled on account of a
separation from service that is deferred compensation subject to Code
Section 409A shall be paid or settled on the earliest of (1) the first business
day following the expiration of six months from the Participant’s separation
from service, (2) the date of the Participant’s death, or (3) such earlier date
as complies with the requirements of Code Section 409A.

 

19.                                 Awards to Foreign Nationals and Employees
Outside the United States.  The Committee may, without amending this Plan,
(1) establish special rules applicable to Awards granted to Participants who are
foreign nationals, are employed or otherwise providing services outside the
United States, or both, including rules that differ from those set forth in this
Plan, and (2) grant Awards to such Participants in accordance with those rules.

 

20.                                 Governing Law.  This Plan and all
determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by mandatory provisions of the Code or the securities laws of
the United States, shall be governed by and construed in accordance with the
laws of the State of Delaware.

 

21.                                 Right to Continued Service or Employment. 
Nothing in this Plan or an Award Agreement shall interfere with or limit in any
way the right of the Company or any of its Subsidiaries to terminate any
Participant’s employment or other service relationship with the Company or its
Subsidiaries at any time, nor confer upon any Participant any right to continue
in the capacity in which he is employed or otherwise serves the Company or its
Subsidiaries.

 

16

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22.                                 Clawback Right.  Notwithstanding any other
provisions in this Plan, any Award shall be subject to recovery or clawback by
the Company under any clawback policy adopted by the Company whether before or
after the date of grant of the Award.

 

23.                                 Usage.  Words used in this Plan in the
singular shall include the plural and in the plural the singular, and the gender
of words used shall be construed to include whichever may be appropriate under
any particular circumstances of the masculine, feminine or neuter genders.

 

24.                                 Headings.  The headings in this Plan are
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Plan.

 

25.                                 Effectiveness.  This Plan, as approved by
the Board on July 10, 2013, shall be effective as of the Effective Date.  This
Plan shall continue in effect for a term of 10 years commencing on the Effective
Date, unless earlier terminated by action of the Board.  Notwithstanding the
foregoing, the adoption of this Plan is expressly conditioned upon the approval
by the holders of a majority of shares of Common Stock present, or represented,
and entitled to vote at a meeting of the Company’s stockholders on or before
July 29, 2013.  If the stockholders of the Company should fail to so approve
this Plan on or before such date, (i) this Plan shall not be of any force or
effect and (ii) any grants of Awards hereunder shall be null and void.

 

17

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ATTACHMENT A

 

JONES ENERGY, INC. 2013 OMNIBUS INCENTIVE PLAN

 

DEFINITION OF
CHANGE IN CONTROL

 

Except as otherwise provided in an Award Agreement, for purposes of this Plan, a
“Change in Control” shall be deemed to have occurred upon the occurrence of any
of the following after the date hereof:

 

(a)                                 40% Ownership Change:  Any Person, the
Company, or an Affiliate, other than the Jones Family Entities or Metalmark
Capital, makes an acquisition of Outstanding Voting Stock and is, immediately
thereafter, the beneficial owner of 40% or more of the then Outstanding Voting
Stock, unless such acquisition is made directly from the Company in a
transaction approved by a majority of the Incumbent Directors; or any group is
formed that is the beneficial owner of 40% or more of the Outstanding Voting
Stock; or

 

(b)                                 Major Mergers and
Acquisitions:  Consummation of a Business Combination unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities that were the beneficial owners of the Outstanding
Voting Stock immediately before such Business Combination beneficially own,
directly or indirectly, more than 50% of the then outstanding shares of voting
stock of the parent corporation resulting from such Business Combination in
substantially the same relative proportions as their ownership, immediately
before such Business Combination, of the Outstanding Voting Stock, (ii) no
Person (other than any corporation resulting from such Business Combination or
Jones Family Entities or Metalmark Capital) beneficially owns, directly or
indirectly, 40% or more of the then outstanding shares of voting stock of the
parent corporation resulting from such Business Combination and (iii) a majority
of the members of the board of directors of the parent corporation resulting
from such Business Combination were Incumbent Directors of the Company
immediately before consummation of such Business Combination; or

 

(c)                                  Major Asset Dispositions:  Consummation of
a Major Asset Disposition unless, immediately following such Major Asset
Disposition, (i) individuals and entities that were beneficial owners of the
Outstanding Voting Stock immediately before such Major Asset Disposition
beneficially own, directly or indirectly, more than 70% of the then outstanding
shares of voting stock of the Company (if it continues to exist) and of the
entity that acquires the largest portion of such assets (or the entity, if any,
that owns a majority of the outstanding voting stock of such acquiring entity)
and (ii) a majority of the members of the Board (if it continues to exist) and
of the entity that acquires the largest portion of such assets (or the entity,
if any, that owns a majority of the outstanding voting stock of such

 

A-1

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acquiring entity) were Incumbent Directors of the Company immediately before
consummation of such Major Asset Disposition.

 

Anything in this definition to the contrary notwithstanding, no Change in
Control shall be deemed to have occurred unless such event constitutes an event
specified in Code Section 409A(a)(2)(A)(v) and the Treasury Regulations
promulgated thereunder.

 

For purposes of the definition of a “Change in Control”,

 

(1)                                 “Affiliate” means an Affiliate within the
meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

 

(2)                                 “beneficial owner” is used as it is defined
for purposes of Rule 13d-3 under the Exchange Act;

 

(3)                                 “Business Combination” means

 

(x)                                 a merger or consolidation involving the
Company or its stock or

 

(y)                                 an acquisition by the Company, directly or
through one or more subsidiaries, of another entity or its stock or assets;

 

(4)                                 “election contest” is used as it is defined
for purposes of Rule 14a-11 under the Exchange Act;

 

(5)                                 “group” is used as it is defined for
purposes of Section 13(d)(3) of the Exchange Act;

 

(6)                                 “Incumbent Director” means a director of the
Company (x) who was a director of the Company on the effective date of the Plan
or (y) who becomes a director after such date and whose election, or nomination
for election by the Company’s stockholders, was approved by a vote of a majority
of the Incumbent Directors at the time of such election or nomination, except
that any such director will not be deemed an Incumbent Director if his or her
initial assumption of office occurs as a result of an actual or threatened
election contest or other actual or threatened solicitation of proxies by or on
behalf of a Person other than the Board;

 

(7)                                 “Jones Family Entities” means entities
directly or indirectly controlled by Jonny Jones, Chairman and Chief Executive
Officer of the Company, and/or his immediate family.

 

(8)                                 “Major Asset Disposition” means the sale or
other disposition in one transaction or a series of related transactions of 80%
or more of the assets of the Company and its subsidiaries on a consolidated
basis; and any specified percentage or portion of the assets of the Company will
be based

 

A-2

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on fair market value, as determined by a majority of the Incumbent Directors.

 

(9)                                 “Metalmark Capital” means Metalmark Capital
Partners (C) II, L.P. and its affiliated investment funds.

 

(10)                          “Outstanding Voting Stock” means outstanding
voting securities of the Company entitled to vote generally in the election of
directors; and any specified percentage or portion of the Outstanding Voting
Stock (or of other voting stock) is determined based on the combined voting
power of such securities;

 

(11)                          “parent corporation resulting from a Business
Combination” means the Company if its stock is not acquired or converted in the
Business Combination and otherwise means the entity which as a result of such
Business Combination owns the Company or all or substantially all the Company’s
assets either directly or through one or more subsidiaries; and

 

(12)                          “Person” means an individual, entity or group.

 

A-3

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