Exhibit 10.1

 

PERFORMANCE UNIT AWARD AGREEMENT

January 1, 2014 - December 31, 2016 Performance Period

 

Under the

 

JONES ENERGY, INC. 2013 OMNIBUS INCENTIVE PLAN

 

THIS PERFORMANCE UNIT AWARD AGREEMENT (this “Award”) is made as of May     ,
2014 (the “Grant Date”), by and between Jones Energy, Inc., a Delaware
corporation (the “Company”), and                      (the “Grantee”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Jones Energy, Inc. 2013 Omnibus Incentive Plan,
effective as of July 29, 2013 (the “Plan”), the Compensation Committee (the
“Committee”) of the Board of Directors of the Company (the “Board”) has
determined that it would be in the interest of the Company and its stockholders
to grant a number of performance units (“Performance Units”) as provided herein,
in order to encourage the Grantee to remain in the employ of the Company or its
Subsidiaries, to encourage the sense of proprietorship of the Grantee in the
Company and to stimulate the active interest of the Grantee in the development
and financial success of the Company.

 

NOW THEREFORE, the Company awards the Performance Units to the Grantee, subject
to the following terms and conditions of this Award:

 

1.                                      Terms.  This Award and the Plan together
govern the Grantee’s rights with respect to the Performance Units and set forth
all of the conditions and limitations affecting such rights.  Terms used in this
Award that are not defined herein will have the meanings ascribed to them in the
Plan.  Pursuant to the terms and conditions of the Plan and this Award, the
Grantee has been granted Performance Units as outlined below:

 

“Performance Period”:

 

January 1, 2014 through December 31, 2016

 

 

 

“Vesting Date”:

 

December 31, 2016

 

 

 

Performance Units At “Target”:

 

[                  ]

 

 

 

Performance Goal:

 

Schedule I to this Award describes the manner in which the final number of
Performance Units that vest hereunder will be calculated, which shall be between
0% and 200% of the Target number of Performance Units and shall be based on the
total shareholder return of the Company’s Class A Common Stock, par value $0.001
per share (“Common Stock”) as compared to the total shareholder return of the
identified component companies, as described in more detail on Schedule I (the
“Performance Goal”).

 

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2.                                      Vesting.

 

(a)                                 General.  After the close of the Performance
Period, but in no event later than 45 days following the last day of the
Performance Period, the Committee shall determine and certify the extent to
which the Performance Goal has been achieved in accordance with Schedule I.  The
Performance Units will vest and become non-forfeitable on the Vesting Date in an
amount determined (if any) based on the results of the Performance Goal, as
certified by the Committee, provided the Grantee has been continuously employed
by the Company or a Subsidiary of the Company at all times from the Grant Date
until the Vesting Date.  For the avoidance of doubt, if the Committee determines
that the level of achievement of the Performance Goal does not meet the minimum
threshold requirement specified in Schedule I, then all Performance Units shall
be forfeited.  Except as provided in Sections 2(b) or 2(c) below, if the Grantee
does not remain continuously employed by the Company or a Subsidiary of the
Company until the Vesting Date, the Grantee shall have no rights under this
Award and all the Performance Units shall be forfeited as of his or her
termination date.

 

(b)                                 Vesting Due to Retirement.  Notwithstanding
any provision in this Award to the contrary, if the Grantee’s employment with
the Company and its Subsidiaries terminates due to Retirement (as defined below)
prior to the Vesting Date, then, on the Vesting Date, the Grantee will vest in
the number of Performance Units (if any) determined by multiplying (i) the
number of Performance Units that would have vested as determined in accordance
with Section 2(a) above had the Grantee’s employment not terminated and (ii) a
fraction, the numerator of which is the number of days that elapsed between the
first day of the Performance Period and the date of the Grantee’s termination of
employment due to Retirement and the denominator of which is the total number of
days in the Performance Period.  For purposes of this Award, “Retirement” means
the Grantee’s voluntary termination of employment on or after the date when the
Grantee is at least 60 years old and has at least ten years of continuous
service (based on the Grantee’s employment with the Company and its Subsidiaries
or predecessor companies); provided, however, that if the Committee determines,
in its sole discretion, at any time prior to the Vesting Date that the Grantee
has taken any action or actions that are detrimental or injurious to the Company
or any of its Subsidiaries, then the Grantee’s termination of employment shall
be treated as a voluntary termination and not Retirement, and as a result the
Grantee’s Performance Units shall be forfeited as of such determination date.

 

(c)                                  Vesting Due to Death or Disability.
 Notwithstanding any provision in this Award to the contrary, if the Grantee’s
employment with the Company and its Subsidiaries terminates due to death or
Disability prior to the Vesting Date, then, as of the Grantee’s termination
date, the Grantee will vest in the Target number of Performance Units.

 

3.                                      Book Entry Account.  The Company shall
establish (or shall instruct its transfer agent or stock plan administrator to
establish) a book entry account representing the Performance Units at Target in
the Grantee’s name effective as of the Grant Date, provided, however, that the
Company shall retain control of the Performance Units in such account until the
Performance Units have become vested in accordance with this Award and shares of
Common Stock have been issued, if any, in settlement of the Performance Units.

 

4.                                      Distribution of Shares.  The Grantee
shall receive one share of Common Stock as determined under Sections 2(a),
(b) or (c) above, as applicable, in satisfaction of each

 

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vested Performance Unit credited to his or her account, which shall be
registered in the Grantee’s name.  Shares of Common Stock with respect to
Performance Units that vest under Sections 2(a) and (b) of this Award shall be
paid to the Grantee as soon as practicable after the Committee determines and
certifies the extent to which the Performance Goal has been met, but in no event
later than the 70th day following the Vesting Date.  Shares of Common Stock with
respect to Performance Units that vest under Section 2(c) of this Award shall be
paid to the Grantee (or to the Grantee’s estate in the event of death) within 30
days following the Grantee’s termination date (subject to Section 9(b), if
applicable).

 

5.                                      Stockholder Rights; Dividend
Equivalents.  The Performance Units do not confer on the Grantee any rights of a
stockholder of the Company unless and until shares of Common Stock are in fact
issued to the Grantee in connection with the vested Performance Units.  However,
to the extent that cash dividends or other cash distributions are paid or
distributed with respect to the Common Stock during the Performance Period, the
Grantee shall be entitled to a payment of cash equal to the value of such
distributions on the number of Performance Units that become vested under this
Award, which amount, if any, shall be paid in cash at the same time shares of
Common Stock are delivered to the Grantee (or the Grantee’s estate in the event
of death) in settlement of vested Performance Units under this Award.

 

6.                                      Transferability.  No rights granted
under this Award can be assigned or transferred, whether voluntarily or
involuntarily, by operation of law or otherwise, except by will or the laws of
descent and distribution.  In the event of any transfer or assignment of rights
granted under this Award in accordance with this Section 6, the person or
persons, if any, to whom such rights are transferred by will or by the laws of
descent and distribution shall be treated after the Grantee’s death the same as
the Grantee under this Award.  Any attempted transfer or assignment of rights
under this Award prohibited under this Section 6 shall be null and void.

 

7.                                      Change in Control.

 

(a)                                 General.  In the event of a Change in
Control (as defined in the Plan) prior to end of the Performance Period, the
Performance Period shall be deemed to end on the date of the Change in Control
and a number of Performance Units (if any) as of date of the Change in Control
shall be determined based on the level of achievement of the Performance Goal
through the end of such adjusted Performance Period, calculated in accordance
with Schedule I.  The Performance Units determined pursuant to the foregoing
sentence, shall be become vested as of the Vesting Date, provided the Grantee
has been continuously employed by the Company (or its successor) or one of its
Subsidiaries at all times from the Grant Date until the Vesting Date.  The
Performance Units will be distributed to the Grantee as soon as practicable
after the Vesting Date, but in no event later than the 70th day following the
Vesting Date, in the same percentage of cash (if any) and equity (if any) as is
received by shareholders of the Company in connection with the Change in
Control.  In the event all or a portion of the Performance Units are paid in
cash, at the time of payment the Grantee will receive an additional amount in
cash for interest on such cash amount based on a rate of 6%, compounded
annually, from the date of the Change in Control until the Vesting Date (the
“interest rate”).

 

(b)                                 Termination of Employment; Forfeiture. 
Section 7(a) notwithstanding, if the Grantee’s employment is involuntarily
terminated by the Company or its successor for any

 

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reason other than Cause (as defined below) or the Grantee terminates employment
for Good Reason (as defined below) after the date of the Change in Control but
prior to the Vesting Date, then the Performance Units determined under
Section 7(a) will be distributed to the Grantee within 30 days following the
Grantee’s termination date (subject to Section 9(b), if applicable).  In the
event all or a portion of the Performance Units are paid in cash, at the time of
payment the Grantee will receive an additional amount in cash interest on such
cash amount for the period beginning on the date of the Change in Control and
ending on the Grantee’s termination based on the interest rate.  If prior to the
Vesting Date the Grantee’s employment is (i) involuntarily terminated by the
Company or its successor for Cause or (ii) voluntarily terminated by the Grantee
for any reason other than Good Reason, then the Grantee shall have no rights
under this Award and all the Performance Units shall be forfeited as of his or
her termination date.

 

(c)                                  Cause.  For purposes of Section 7(b),
“Cause” shall mean, if not otherwise defined in an employment agreement between
the Grantee and the Company or its successor in effect as of the date of his or
her termination, the Grantee’s (i) failure to reasonably and substantially
perform his or her duties (other than as a result of physical or mental illness
or injury); (ii) willful misconduct or gross negligence that has caused or is
reasonably expected to result in material injury to the Company’s or successor’s
business, reputation or prospects; or (iii) conviction or plea of nolo
contendere with respect to the commission of a felony or other serious crime
involving moral turpitude.

 

(d)                                 Good Reason.  For purposes of Section 7(b),
“Good Reason” shall mean the occurrence of any of the following events:  (i) a
material diminution in the Grantee’s base salary; (ii) a material diminution in
the Grantee’s position, authority, duties or responsibilities immediately prior
to the date of the Change in Control; or (iii) the involuntary relocation of the
geographic location of the Grantee’s principal place of employment by more than
50 miles from the location of the Grantee’s principal place of employment as of
the Grant Date.  Notwithstanding the foregoing, any assertion by the Grantee of
a termination of employment for Good Reason shall not be effective unless all of
the following requirements are satisfied:  (1) the condition described in clause
(i), (ii) or (iii) above giving rise to the Grantee’s termination of employment
must have arisen without the Grantee’s consent; (2) the Grantee must provide
written notice to the Company of such condition in accordance with Section 12
within 30 days of the initial existence of the condition; (3) the condition
specified in such notice must remain uncorrected for 30 days after receipt of
such notice by the Company (“cure period”); and (4) the Grantee’s termination of
employment must occur within 30 days after the end of the cure period.  If the
Grantee does not provide the notice described in clause (2) above, or if the
Company corrects the event during the cure period as described in clause
(3) above, or the Grantee does not terminate employment as described in clause
(4) above, then the event shall not constitute Good Reason.

 

(e)                                  Retirement.  Notwithstanding any provision
hereof to the contrary, if the Grantee’s employment with the Company or its
successor is terminated due to Retirement after the date of a Change in Control
but prior to the Vesting Date, the Grantee will vest in the number of
Performance Units (if any) determined by multiplying (i) the number of
Performance Units determined in accordance with Section 7(a) and (ii) a
fraction, the numerator of which is the number of days that elapsed between the
first day of the Performance Period and the date of the Grantee’s termination of
employment due to Retirement and the denominator of which is the total number of
days in the original Performance Period without taking into account any shorter

 

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deemed Performance Period under Section 7(a).  The Performance Units determined
under this Section 7(e) will be distributed to the Grantee within 30 days
following the Grantee’s termination date (subject to Section 9(b), if
applicable).  Notwithstanding Section 2(b), if a Change in Control occurs after
the Grantee’s Retirement but before the Vesting Date, then the determination of
Performance Units under Section 7(a), and not Section 2(a), shall apply for
purposes of determining the number of Performance Units subject to pro-ration.

 

8.                                      Adjustments.  As provided in Section 15
of the Plan, certain adjustments may be made to the Common Stock related to the
Performance Units upon the occurrence of events or circumstances described in
Section 15 of the Plan.  Without limiting the generality of the foregoing, and
except as otherwise provided in the Plan, in the event of any merger,
consolidation, reorganization, recapitalization, reclassification or other
capital or corporate structure change of the Company, for all purposes
references herein to Common Stock or to Performance Units shall mean and include
all securities or other property (other than cash) that holders of Common Stock
are entitled to receive in respect of Common Stock by reason of each such
successive event, which securities or other property (other than cash) shall be
treated in the same manner and shall be subject to the same restrictions as the
underlying Performance Units.

 

9.                                      Tax Withholding; Code Section 409A.

 

(a)                                 The obligation of the Company to issue and
deliver to the Grantee (in certificate or electronic form) shares of Common
Stock as provided in Section 4 or 7 hereof shall be subject to the receipt by
the Company from the Grantee of any withholding taxes required as a result of
such issuance or delivery.  Unless the Committee or the Board shall determine
otherwise at any time after the date hereof, the Grantee may satisfy all or part
of such withholding tax requirement by electing to sell to the Company a
designated number of unrestricted shares of Common Stock held by the Grantee at
a price per share equal to the Fair Market Value of such shares, provided that
the aggregate value of the shares sold does not exceed the minimum required tax
withholding obligation.

 

(b)                                 The Performance Units granted under this
Award are intended to comply with or be exempt from Code Section 409A, and
ambiguous provisions of this Award, if any, shall be construed and interpreted
in a manner consistent with such intent.  If the Participant is Retirement
eligible and 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), and his or her vested Performance Units are
“deferred compensation” payable or settled on account of a separation from
service, then such vested Performance Units shall be paid or settled on the
earliest of (i) the first business day following the expiration of six months
from the Grantee’s separation from service, (ii) the date of the Grantee’s
death, or (iii) such earlier date as complies with the requirements of Code
Section 409A.

 

10.                               Incorporation of Plan Provisions.  This Award
and the award of Performance Units hereunder are made pursuant to the Plan and
are subject to all of the terms and provisions of the Plan as if the same were
fully set forth herein. In the event that any provision of this Award conflicts
with the Plan, the provisions of the Plan shall control.  The Grantee
acknowledges receipt of a copy of the Plan and agrees that all decisions under
and

 

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interpretations of the Plan by the Committee shall be final, binding and
conclusive upon the Grantee.

 

11.                               No Rights to Employment.  Nothing contained in
this Award shall confer upon the Grantee any right to continued employment by
the Company or any Subsidiary of the Company, or limit in any way the right of
the Company or any Subsidiary to terminate or modify the terms of the Grantee’s
employment at any time.

 

12.                               Notice.  Unless the Company notifies the
Grantee in writing of a different procedure, any notice or other communication
to the Company with respect to this Award shall be in writing and shall be
delivered personally or sent by courier or first class mail, postage prepaid to
the following address:

 

Jones Energy, Inc.

807 Las Cimas Parkway, Suite 350

Austin, Texas 78746

Attn: Corporate Secretary

 

Any notice or other communication to the Grantee with respect to this Award
shall be in writing and shall be delivered personally, or shall be sent by
courier or first class mail, postage prepaid, to the Grantee’s address as listed
in the records of the Company on the Grant Date, unless the Company has received
written notification from the Grantee of a change of address.

 

13.                               Requirements of Law.  The granting of
Performance Units and the issuance of shares of Common Stock under the Plan will
be subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.

 

14.                               Compliance with Recoupment Policy.  Any
amounts payable, paid or distributed under this Award are subject to the
recoupment policy of the Company as in effect from time to time.

 

15.                               Miscellaneous.

 

(a)                                 THIS AWARD SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS.

 

(b)                                 This Award shall be binding upon and inure
to the benefit of the Company and its successors and assigns.

 

(c)                                  The granting of this Award shall not give
the Grantee any rights to similar grants in future years.

 

(d)                                 If any term or provision of this Award
should be invalid or unenforceable, such provision shall be severed from this
Award, and all other terms and provisions hereof shall remain in full force and
effect.

 

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(e)                                  This Award, including the relevant
provisions of the Plan, constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, with respect to the subject hereof. 
This Award may not be amended, except by an instrument in writing signed by the
Company and the Grantee.

 

(f)                                   This Award may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

 

 

 

JONES ENERGY, INC.

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

The Grantee acknowledges receipt of a copy of the Plan, represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Award subject to all of the terms and provisions hereof and thereof.

 

 

 

GRANTEE

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

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SCHEDULE I

 

JONES ENERGY, INC. 2013 OMNIBUS INCENTIVE PLAN

 

PERFORMANCE UNIT AWARD AGREEMENT

January 1, 2014 - December 31, 2016 Performance Period

 

Definitions

 

(i)                                     “Adjustment Factor” means the adjustment
factor calculated in accordance with this Schedule I as provided below.

 

(ii)                                  “Beginning Price” means the average
closing price of a share of Common Stock for the 10 consecutive trading day
period including and prior to the first day of the Performance Period.

 

(iii)                               “Comparison Companies” means each company in
the Peer Group as of the last day of the Performance Period; provided, however,
that such company has continuously been a publicly traded company on a national
securities exchange during the Performance Period.  If a Peer Group company
files for bankruptcy protection during the Performance Period, such company
shall be deemed to have a TSR of negative 100%.

 

(iv)                              “Dividends” means the sum of all ordinary and
extraordinary dividends paid during the Performance Period with respect to the
applicable share of Common Stock.

 

(v)                                 “Ending Price” means the average closing
price of a share of common stock for the 10 consecutive trading day period
including and prior to the last day of the Performance Period.

 

(vi)                              “Peer Group” means the following 19
companies:  Approach Resources Inc.; Bill Barrett Corporation; Bonanza Creek
Energy, Inc.; Carrizo Oil & Gas, Inc.; Clayton Williams Energy, Inc.; Comstock
Resources, Inc.; Diamondback Energy, Inc.; Goodrich Petroleum Corporation;
Laredo Petroleum, Inc.; Magnum Hunter Resources Corporation; Matador Resources
Company; Midstates Petroleum Company, Inc.; PDC Energy, Inc.; PetroQuest
Energy, Inc.; Resolute Energy Corporation; Rex Energy Corporation; Rosetta
Resources Inc.; Stone Energy Corporation; and Swift Energy Company.  The Peer
Group is a “closed group” meaning there shall be no substitution for any company
listed above that is not a publicly traded company on a national securities
exchange at end of the Performance Period.

 

(vii)                           “Total Shareholder Return” means a fraction, the
numerator of which is the Ending Price plus Dividends minus the Beginning Price,
and the denominator of which is the Beginning Price.

 

Calculation of Performance Unit Adjustment

 

The number of Performance Units that shall vest as of the Vesting Date shall be
equal to the product of (i) the Target Units multiplied by (ii) the Adjustment
Factor.

 

The Total Shareholder Return of the Company and of the Comparison Companies
shall be calculated and certified by the Committee.  The percentile ranking of
the Company’s

 

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Total Shareholder Return as compared to the Total Shareholder Return of each
Comparison Company shall determine the Adjustment Factor using the chart below. 
In no event shall the Adjustment Factor exceed 200%.  If the performance ranking
is below the 40th percentile, the Adjustment Factor shall be zero.  The
Adjustment Factor for performance rankings between points on the chart shall be
determined by linear interpolation between the values listed.  Regardless of the
actual Adjustment Factor determined in accordance with this Schedule I, if the
Company’s Total Shareholder Return during the Performance Period is negative,
the Adjustment Factor shall not be greater than 100%.

 

Performance Ranking

 

Adjustment Factor

80th percentile or above

 

200%

60th percentile (“Target”)

 

100%

40th percentile

 

50%

Below 40th percentile

 

0%

 

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