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  EXHIBIT 10.39    
    

 
    SEPARATION AGREEMENT    
    

        This Separation Agreement is entered into between Flextronics International USA, Inc., together with its parent company,
Flextronics International Ltd., and any predecessor, successor, or affiliated companies (collectively, the "Company") and Eslie C. Sykes ("Sykes"). In consideration of the mutual promises set
forth below, the Company and Sykes have agreed as follows: 

        1.     SEPARATION.

	a.
	Date of Separation.    Sykes's employment relationship with the Company will end on
March 31, 2013 (the "Separation Date").

	b.
	Termination Prior to Separation Date.    While employed with the Company, Sykes will not engage in
misconduct and will comply with Company policy, the provisions of this Separation Agreement, and the provisions of any other written agreements between Sykes and the Company. If Sykes violates Company
policy, the provisions of this Separation Agreement, or the provisions of any other written agreement with the Company, the Company may terminate Sykes's employment immediately provided the Company
shall afford Sykes a period of five (5) business days after providing Sykes written notice detailing a violation to cure such violation. In the event that Sykes's employment is terminated
pursuant to Section 1(b), or based on Sykes' resignation of his position prior to the Separation Date, Sykes would then only be entitled to compensation for accrued and/or vested compensation
and benefits up to the date of termination and would not be entitled to the severance compensation, bonus, and lump sum in lieu of Company paid COBRA coverage as set forth in Section 2 of this
Separation Agreement.

	c.
	Special Consultant.    For the time period between the execution of this Separation Agreement by
the parties and the Separation Date, Sykes will have no duties or reporting obligations other than to carry out transition duties as may be requested by the Company up to the Separation Date. The
execution of this Separation Agreement shall constitute an "involuntary separation from service" under Section 409A of the Internal Revenue Code of 1986, as amended, including the applicable
regulations ("Section 409A"), and the date that the Company executes this Agreement shall be the "Separation from Service Date". For all other purposes, Sykes' employment with the Company will
terminate on the Separation Date. For the twelve month period following the Separation Date, Sykes will be considered to be on "Special Consultant Duty". While on Special Consultant Duty, Sykes will
have no duties assigned to him, no reporting obligations, no access to company property or resources, and will accrue no compensation, equity, bonuses or benefits of any kind other than those
specifically set forth in Section 2 of this Separation Agreement, and then, only if Sykes complies with his obligations under this Separation Agreement. While on Special Consultant Duty, Sykes
shall owe no obligations to the Company other than his obligations in this Separation Agreement as well as any prior agreements which created obligations intended to extend beyond his employment, and
he may be employed by or perform services for any other entity, as long as such employment or services do not violate his obligations in this Separation Agreement. Should Sykes fail to comply with
this Agreement, he shall not be entitled to any unpaid portion of the holdback payments set forth in Sections 2(b) and 2(c) or the bonus payments set forth in Section 2(d).

	d.
	Compensation Upon Rejection of Agreement or Early Separation.    In accordance with its standard
practices, whether or not Sykes agrees to this Separation Agreement, on the earlier of either the actual date of the termination of his employment with the Company or the Separation Date, the Company
will issue a payment to Sykes in a gross amount, less 

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applicable
taxes and withholdings, to compensate him for any accrued and vested compensation and/or accrued but unused PTO to which he is entitled as of that date. As part of such compensation, Sykes
will be eligible to receive the quarterly bonus minus applicable taxes and withholdings for the Q3 (October-December 2012) of Fiscal Year 2013 based on the actual results of the Executive Industrial
and Emerging Industries Plan bonus scheme, if any. 

Within
thirty (30) days following the Separation Date, Sykes will submit his final documented expense reimbursement statement reflecting all unreimbursed business expenses incurred through the
Separation Date, if any, for which he seeks reimbursement. The Company will reimburse his properly documented expenses pursuant to the Company's policy and regular business practice. 

        2.     SEVERANCE.    Provided Sykes complies with his obligations under this Separation Agreement and remains employed
with the Company through the Separation Date, and diligently continues to carry out transition duties as may be requested by the Company, the Company will: 

        a.     On
December 31, 2012, issue a payment to Sykes in a gross amount equal to $393,750.00 (Three Hundred and Ninety Three Thousand Seven Hundred and Fifty Dollars)
minus applicable taxes and withholdings (the "First Severance Payment"); 

        b.     During
the third calendar quarter of 2013, on or about September 30, 2013, issue a payment to Sykes in the gross amount of $196,875.00 (One Hundred Ninety Six
Thousand Eight Hundred and Seventy Five Dollars) minus applicable taxes and withholdings (the "Second Severance Payment"); 

        c.     During
the first calendar quarter of 2014, on or about March 31, 2014, issue a payment to Sykes in a gross amount equal to $196,875.00 (One Hundred Ninety Six
Thousand Eight Hundred and Seventy Five Dollars) minus applicable taxes and withholdings (the "Third Severance Payment"); 

        d.     Sykes
will be paid the quarterly bonus minus applicable taxes and withholdings for the Q4 (January-March 2013) and the Year End payout of Fiscal Year 2013 based on the
actual results of the Executive Industrial and Emerging Industries plan. Sykes will also receive a bonus for Q1 (April-June 2013), Q2 (July-Sept 2013) and Q3 (October-December
2013) of Fiscal Year 2014. These quarterly bonus payments shall be calculated at 100% of Sykes current bonus target. 

All
bonus payments shall be made at the same time as when such payments are regularly made pursuant to Flextronics policy and practice as follows: 

FY
2013 Q4 Bonus to be paid in the second calendar quarter of 2013 but not later than June 15, 2013, 

Year
End payout of Fiscal Year 2013 to be paid in the second calendar quarter of 2013 but not later than June 15, 2013, 

FY
2014 Q1 Bonus to be paid in the third calendar quarter of 2013, 

FY2014
Q2 Bonus to be paid in the fourth calendar quarter of 2013, and 

FY2014
Q3 Bonus to be paid in the first calendar quarter of 2014. 

        e.     On
the Separation Date, issue a payment to Sykes in the gross amount of $54,116.74 (Fifty-Four Thousand One Hundred and Sixteen Dollars with Seventy-Four
Cents) minus applicable taxes and withholdings, in lieu of 18 months of premiums for continuation of Company provided medical, dental and vision benefits for Sykes and his eligible dependents
under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended ("COBRA"). 

2

 

IT
SHALL BE SYKES' RESPONSIBILITY TO SIGN UP FOR AND MAKE APPROPRIATE PAYMENTS TO ENSURE COBRA COVERAGE. FAILURE TO SIGN UP FOR AND MAKE PAYMENTS FOR COBRA COVERAGE COULD RESULT IN LOSS OF HEALTH
BENEFITS FOR SYKES AND HIS FAMILY AS WELL AS DIFFICULTY IN OBTAINING FUTURE COVERAGE. 

Nothing
in this Separation Agreement is intended to extend the length or scope of Sykes's COBRA rights beyond those provided by statute. Sykes will be provided with a separate notice of his COBRA
rights and obligations. Sykes will be responsible for any and all tax liability, if any, for any COBRA
payments made by the Company or health benefit received by Sykes pursuant to this Separation Agreement. 

        f.      Reimburse
Sykes for his attorneys fees incurred in the negotiation of this Agreement in a sum not to exceed the maximum amount of $7,000.00 (Seven Thousand Dollars). 

Sykes
acknowledges and agrees that the foregoing Severance set forth in Section 2 of the Separation Agreement is more than Sykes is otherwise legally entitled to receive and constitutes good
and valuable consideration. 

Each
severance payment and each bonus payment shall, for purposes of Section 409A, be deemed a separate payment under this Separation Agreement. Notwithstanding any other provision in this
Separation Agreement, no payments shall be paid after the end of the second year following the year of the Separation from Service Date. 

In
the event that any of the payments and taxable benefits due within the six month period following the Separation from Service Date are determined to constitute deferred compensation subject to
Section 409A and to the extent that such deferred compensation is subject to the "six-month delay" required by Section 409A(a)(2)(B)(i), as determined in good faith by the
Company, any such payments otherwise due within such six month period shall, notwithstanding such other specified payment date, be delayed such that the payments are paid in a lump sum immediately
following the end of such six month period (or the date of Sykes' death if earlier), and any payments due after such six month period shall be paid as set forth in this Separation Agreement. 

        3.     EQUITY COMPENSATION.    Sykes has been granted share bonus awards as provided in the applicable option grant
forms issued to Sykes during his employment with the Company. The plans governing such options and awards control and are incorporated herein by reference. Sykes's share bonus awards that will be
vested as of the Separation Date are listed on Exhibit A, which is attached hereto and incorporated herein by reference. Sykes acknowledges that
he is not entitled to any additional grants of stock options or share bonus awards other than those set forth in Exhibit A

        Sykes
acknowledges and agrees that by their terms, the options will no longer be exercisable after the last date to exercise as indicated in  Exhibit A. Sykes further acknowledges and agrees that upon
release of the share bonus awards as provided in this Section 5, unless
Flextronics withholds payroll taxes, Sykes will be responsible for payroll taxes, which will be due and payable to Flextronics by Sykes within three (3) business days of the vesting occurrence. 

        Sykes
understands and agrees Sykes will not receive any grants of stock, restricted stock, stock units, stock options, or other forms of equity from the Company in the future unless
mutually agreed to by the parties and that any current stock, restricted stock, stock units, stock options, or other forms of
equity will expire or be exercisable in accordance with the terms and provisions of the applicable agreement(s) and plan(s). 

        4.     DEFERRED COMPENSATION.    Sykes is a participant in the Company's Amended and Restated Senior Management
Deferred Compensation Plan in return for services to be performed in the future 

3

 

and
subject to the terms and conditions outlined in a Letter Agreement dated as of June 30, 2006 by and between Sykes and the Company. Company contributions in the Deferred Compensation plans
were credited to a brokerage account, and have been invested in various funds based on Sykes' elections. As of October 14, 2012, 100% of Sykes account was vested with a balance of $816,981.56.
Distribution of these funds will be made six months after the Separation from Service Date, as set forth in the Plan documents, which are controlling. 

        Sykes
is also a participant in the Flextronics International USA, Inc. 2010 Deferred Compensation Plan. However, Sykes has not made any elective participant deferrals into this
plan and Company contributions in this plan are 100% unvested. Sykes acknowledges that is he is not entitled to any amounts under the Flextronics International USA, Inc. 2010 Deferred
Compensation Plan. 

        Sykes
acknowledges that he is not a participant in any other deferred compensation plan with the Company and that he is not entitled to any additional deferred compensation other than as
stated in this Agreement. 

        5.     RELOCATION.    As additional consideration for this Agreement the Company will make available to Sykes the
following: 

	a.
	Relocation.    The
Company will pay on behalf of Sykes relocation costs as set forth in the EXECUTIVE LEVEL CORE
RELOCATION PACKAGE DOCUMENT dated October 11, 2012, attached hereto as Exhibit "B" to this Agreement. Relocation costs are not to exceed the maximum amount of Seventy Eight Thousand
Dollars ($78,000.00) gross, minus all appropriate deductions and withholdings and inclusive of tax gross up, if any.

	b.
	Sale
of House—Closing Costs.    If Sykes relocates and sells his home, located at 1201 Via Di Salerno,
Pleasanton, CA 94566, within twelve (12) months of the Separation Date and in strict compliance with the procedures set forth in the Home Sale Assistance Buyer Value Option Flextronics Process
Guide (attached as Exhibit "C") and/or the directions of his AIReS Program Manager and/or Flextronics' then Preferred Relocation Management Company (collectively "Program Manager"), the Company
will relieve Sykes of his closing costs obligations as set forth in Exhibit C. Should Sykes fail to comply with the requirements set forth in Exhibit C or with the instructions of his
Program Manager, the Company will be relieved of its obligations under this section. If for any reason the transaction results in tax liability being imposed on the Company, the Company's obligation
to relieve Sykes for his closing costs will be limited to One Hundred and Forty Thousand Dollars ($175,000.00) gross, inclusive of the Company's tax liability and minus all appropriate deductions and
withholdings and inclusive of tax gross up, if any.

	c.
	All
reimbursements of expenses shall be made at a time and in a manner intended to be consistent with the requirements of Treasury Regulation
Section 1.409A-3(i)(1)(iv). The reimbursement provisions in this section shall not apply to any expense incurred after the last day of the second year following the year in which
the termination occurred, and any reimbursement payment must be paid before the end of the third year following the year in which the termination occurred. Any in-kind benefits that are
provided by the Company or a third party shall not require that such benefits be provided after the last day of the second year following the year in which the termination occurred. 

4

 

 

        6.     COMPLETE RELEASE.    In consideration for and expressly conditioned on the receipt of payment of the Severance
Payment, Sykes hereby releases the Company, together with the employees, partners, agents, directors, officers, contractors, insurers and attorneys of any of them, (the "Releasees") from any and all
claims or demands, whether known or unknown, and whether asserted on an individual or class basis, which Sykes has, may have, or may claim to have against any of them. This complete release of all
claims includes but is not limited to a complete release of any claims (including claims for attorneys' fees) Sykes has, may have, or may claim to have based on Sykes's employment with Company or
separation from that employment, as well as any claims arising out of any contract, express or implied, any covenant of good faith and fair dealing, express or implied, any tort (including negligence
by the Company or anyone else), and any federal, state or other governmental statute, regulation or ordinance relating to employment, employment discrimination, or the payment of wages or benefits
including, but not limited to, those relating to qui tam, employment discrimination, termination of employment, payment of wages or provision of
benefits, housing costs, costs relating to relocation and the purchase or sale of housing, Title VII of the Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, the Americans with
Disabilities Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Age Discrimination in Employment Act, the Older Workers Benefit
Protection Act ("OWBPA"), the Worker Adjustment and Retraining Notification Act, the Consolidated Omnibus Budget Reconciliation Act, and the Occupational Safety and Health Act and/or their state law
or local law equivalents. Sykes specifically waives any entitlement to any bonus, equity plan or other compensation not specifically set forth in this Separation Agreement. Sykes represents that he
has not assigned to any other person any of such claims and that Sykes has the full right to grant this release. Notwithstanding any other provision herein, Sykes is not waiving any claims that may
arise under the Age Discrimination in Employment Act after this Separation Agreement is executed or any future claims based on the provisions set forth in this Separation Agreement. This Separation
Agreement shall not modify, expand or reduce any obligation of the Company to indemnify Sykes from any claims arising out of the performance of Sykes's services as an employee or officer of the
Company as provided by applicable law and in accordance with the Company's by-laws. Nothing herein is intended to expand, reduce or limit the Company's obligations to provide the benefit
of insurance coverage maintained by the Company (including D&O coverage) for Sykes in connection with claims based on actions or omissions of Sykes during the period of Sykes's employment with the
Company. Excluded from this release are a) any claims arising under the terms of this Agreement; and b) any claims that may not be waived by law. 

        7.     CALIFORNIA RELEASE.    Sykes acknowledges that he has read Section 1542 of the Civil Code of the State of
California, which states in full: 

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him
or her must have materially affected his or her settlement with the debtor.

        Despite
the language of Section 1542, Sykes waives any rights Sykes has or may have under Section 1542 (or any similar provision of the laws of any other jurisdiction) to
the full extent Sykes may lawfully waive such rights pertaining to this general release of claims and affirms that Sykes is releasing all known and unknown claims that he has or may have against the
Releasees. 

        8.     INSTITUTING ARBITRATION OR SUIT.    Sykes agrees not to institute any arbitration proceeding or lawsuit based on
any claim stated to be released by Sykes in this Separation Agreement. If Sykes or anyone on Sykes's behalf institutes any arbitration proceeding or lawsuit based on any claim stated to be released by
Sykes in this Separation Agreement, Sykes will: (a) immediately take any and all actions necessary to effectuate the immediate dismissal of the lawsuit or arbitration proceeding; and
(b) pay Company and the other Releasees for any and all reasonable attorney's fees and costs incurred as a result of or in connection with the lawsuit or arbitration proceeding. 

5

 

        9.     WARRANTIES.    Apart from payments due hereunder, Sykes warrants and agrees that the Company has paid Sykes all
wages, forms of compensation, and other monies due to Sykes as of the date of execution of this Agreement. Sykes further warrants and agrees that all forms of compensation, wages, and other monies
paid to Sykes by the Company through the date of Sykes's execution of this Agreement have been accurately calculated, have represented the proper amounts due to Sykes, and have been based on the
Company's merit-based compensation system. If Sykes or someone on Sykes's behalf claims any entitlement to further compensation from the Company for any reason, Sykes agrees that the Company is
entitled to full offset of the amounts paid to Sykes under this Agreement. 

        10.   NON-DISPARAGEMENT AND THIRD PARTY ASSISTANCE.    In consideration for and expressly conditioned on
the receipt of payment of the Severance Payment, Sykes agrees that Sykes will not, directly or indirectly, in any individual or representative capacity, make any statement, oral or written, or perform
any act or omission which is detrimental in any material respect to the reputation or goodwill of the Company. The Company agrees that it will instruct its executives and Sykes's managers not to
directly or indirectly, in any individual or representative capacity, make any statement, oral or written, or perform any act or omission which is detrimental in any material respect to the reputation
or goodwill of Sykes. Sykes agrees that Sykes will not voluntarily counsel, assist, participate in, or encourage any persons in the presentation or prosecution of any disputes, differences,
grievances, claims, charges, or complaints by any third party against the Company without first providing written notice to the Company's General Counsel at Flextronics, 847 Gibraltar Drive, Milpitas,
California 95035. Sykes and the Company agree that Sykes's compliance with a subpoena or other legally compulsive process, disclosure required pursuant to the Company's Code of Business Conduct and
Ethics, or participation as a witness in a lawsuit shall not violate the terms of this paragraph but further agree Sykes will nevertheless provide the Company's General Counsel written notice of such
subpoena, other legally compulsive process, disclosure pursuant to the Company's Code of Business Conduct and Ethics, or potential participation as a witness promptly after receiving notice of same. 

        11.   COOPERATION.    Sykes will make himself reasonably available to the Company in connection with any claim,
lawsuit, or proceeding that relates to Sykes's conduct or duties at the Company or that are based on facts about which Sykes obtained personal knowledge while employed at the Company. In return, the
Company agrees to reimburse Sykes for direct and reasonable out of pocket expenses incurred in connection with cooperation provided by Sykes pursuant to this Section. 

        12.   RETURN OF PROPERTY.    Sykes agrees that, prior to the Separation Date, Sykes will return to the Company any
and all documents relating to the Company or its business operations (and any and all copies thereof, whether in paper form or electronic form), computer equipment, badges, credit cards, and any other
Company property in Sykes's possession, care, custody, or control. Sykes represents and agrees that Sykes will not take any such documents or property from the control or premises of Company. If Sykes
should come into possession of any Company documents or property at any time in the future, Sykes agrees to return such documents or property to the Company immediately. Notwithstanding the above,
Sykes may retain his laptop computer upon following this procedure: Sykes will remove his personal information from the laptop, the Company will copy and retain the remaining Company related
information from the laptop and then delete all Company information from the laptop and return the clean laptop to Sykes for his personal use. 

        13.   NO FUTURE RIGHT TO ACCESS.    Sykes agrees that as of the earlier of the date of termination of his employment
or the Separation Date Sykes has no right of access to any Company site or personnel, whether as a contractor, assigned worker, partner representative, client representative, or in any other capacity,
and Sykes represents Sykes has no interest in such access. Sykes agrees Company may decide any request by or on behalf of Sykes for access to any Company site or personnel in its sole and absolute
discretion and may consider Sykes's representation in this paragraph that he has no interest in access, and any other consideration not prohibited by law in making that decision. 

6

 

        14.   CONFIDENTIALITY.    Sykes and the Company represent they have not disclosed the existence of, the terms of, or
any other information regarding this Separation Agreement to anyone other than their attorneys or tax advisors, or to Sykes' immediate family members. The Parties agree that they will not disclose the
existence of, the terms of, or any other information regarding this Separation Agreement to anyone other than, their attorneys and tax advisors and Sykes' immediate family members, provided the
parties agree that their respective attorneys, tax advisors and immediate family members (as applicable) first agree to be bound by the foregoing confidentiality obligation prior to any such
disclosure. Nothing in this provision is intended to prevent the Parties from complying with a subpoena or other compulsory legal process, responding truthfully to any inquiry by a government agency,
or providing truthful testimony in a court of law or other formal legal proceeding. 

        15.   NON-DISCLOSURE.  

	a.
	Sykes
acknowledges and agrees the Company has provided Sykes with valuable confidential information relating to the Company's business, technology, plans,
customers, potential customers, relationships, and personnel. Sykes acknowledges and agrees that he will remain bound by the confidentiality obligations set forth below (the "Confidentiality
Agreement"). Sykes agrees that any original works of authorship, products, software, or applications that Sykes created or developed while employed by the Company is the sole property of the Company.
Sykes further acknowledges and agrees that Sykes shall not disclose or use for any purpose any Confidential Information. Confidential Information shall mean any and all proprietary or confidential
information of the Company or any of its vendors, customers, or partners, including without limitation the following: (i) any and all technical information, including, without limitation,
product data and specifications, know-how, formulae, source code, or other software information, test results, processes, inventions, research projects or product development;
(ii) any and all business information, including, without limitation, cost information, profits, profit margins, sales information, costs, overhead, accounting and unpublished financial
information, business plans, markets, marketing methods, vendor or customer lists, including without limitation, a vendor's or customer's specific needs, advertising and operating strategies; and
(iii) any and all employee information, including, without limitation, salaries, and specific strengths, weaknesses and skills of Company employees.

	b.
	If
Sykes is subject to any subpoena or other form of legally compulsive process seeking to require Sykes to disclose any information protected by this
Separation Agreement, any other written agreement between Sykes and the Company, any statute, or the common law, Sykes will immediately provide written notice of same to the Company's General Counsel
at Flextronics, 847 Gibraltar Drive, Milpitas, California 95035. 

        16.   NON-SOLICITATION.
 

	a.
	Sykes
recognizes the highly competitive nature of the business of the Company and acknowledges that Sykes has been exposed to confidential information
regarding the Company's employees. Sykes agrees the relationship between the Company and each of its employees constitutes a valuable asset of the Company and that information related to employees'
skills and compensation is kept confidential and may not be disclosed or used by Sykes or any third party for any reason whatsoever. In consideration for and expressly conditioned on the receipt of
payment of the Severance Payments, for a period of one (1) year commencing on the date of termination of Sykes's employment with the Company (the "Standstill Period"), Sykes will not, either
directly or indirectly, recruit, solicit, or assist others in recruiting, attempt to recruit, any person who is an employee of the Company, or induce or attempt to induce any such employee to
terminate his or her employment with the Company. 

7

 

	b.
	Sykes
acknowledges that the Standstill Period and the scope and period of restrictions are fair and reasonable and are reasonably required for the protection
of Flextronics. Sykes and the Company intend that the provisions of this Section shall be enforced to the fullest extent permissible under applicable law. If any particular provision or portion of
this Section shall be held to be invalid or unenforceable, this Separation Agreement shall be deemed amended to revise those provisions or portions to the minimum extent necessary to render them
enforceable. Such amendment shall apply only with respect to the operation of this Section for purposes of the law under which such holding was made.

	c.
	Sykes
acknowledges that any breach of the covenants of this Section will result in immediate and irreparable injury to the Company. Accordingly, Sykes
consents to the application for injunctive relief and such other equitable remedies for the benefit of Flextronics as may be appropriate in the event such a breach occurs or is threatened. The
foregoing remedies shall be in addition to all other remedies to which the Company may be entitled hereunder, including, without limitation, monetary damages. 

        17.   BINDING AGREEMENT.    This Agreement will be binding upon Sykes and Company and their respective heirs,
administrators, trustees, representatives, executors, successors, and assigns. 

        18.   REVIEW.    Sykes understands that Sykes has twenty-one (21) days in which to review and
consider this Agreement before signing it. Sykes understands Sykes may use as much or as little of this 21-day period as Sykes wishes. Sykes is encouraged to consult an attorney before
signing this Agreement. Sykes agrees that any changes Sykes and the Company agree to make to this Agreement, whether material or not, do not restart or extend this 21-day review period. If
Sykes does not accept this Agreement within the 21-day review period, this offer will expire. By executing this Agreement, Sykes acknowledges Sykes was afforded a period of at least
21 days in which to review and consider this Agreement. 

        19.   REVOCATION.    If Sykes decides to accept and sign this Separation Agreement, Sykes will have seven
(7) days from the date of execution in which to revoke his acceptance. Sykes understands any such revocation will not be effective unless Sykes delivers a written notice of such revocation to
Flextronics, c/o Michel Duquella, 847 Gibraltar Drive, Milpitas, California 95035, prior to the expiration of seven days after Sykes executes this Agreement. Sykes understands this Agreement will not
become effective or enforceable until the seven days have elapsed without Sykes having revoked Sykes's acceptance of this Separation Agreement. 

        20.   ENTIRETY.    This is the entire agreement between the Sykes and the Company regarding Sykes's separation from
the Company and the other matters addressed herein and supersedes all prior agreements between them regarding same, other than those agreements referenced herein. In executing this Separation
Agreement, Sykes is not relying on any representations or promises not explicitly contained in this Separation Agreement. 

        21.   ARBITRATION.    Sykes and Company agree that any and all disputes between them, including but not limited to
any disputes arising out of or relating to this Agreement, the claims purported to be released by Sykes in this Agreement, Sykes's employment with Company, or the termination of any such employment
shall be settled by binding arbitration in San Jose, California administered by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, and that
judgment upon the award rendered by the arbitrator(s) may be entered in any court with jurisdiction. Notwithstanding any of the foregoing, any other provision of this Agreement, or any provision of
any other agreement: 

	a.
	A
court of competent jurisdiction shall have the power to maintain the status quo pending the arbitration of any dispute, and neither this Section nor any
other agreement shall require the arbitration of an application for emergency or temporary injunctive relief by either party 

8

 

pending
arbitration; provided, however, that the remainder of any such dispute beyond the resolution of any application for emergency or application for
temporary injunctive relief, if such applications are made, shall be subject to arbitration; and  

	b.
	This
Section shall not require the arbitration of: (i) claims by Sykes for workers' compensation or unemployment insurance (an exclusive
government-created remedy exists for these claims); or (ii) claims which could not have been litigated in court or before any administrative proceeding under applicable federal, state, or local
law (e.g., claims barred by limitations). 

        22.   CHOICE OF LAW, VENUE, MODIFICATION, AND EXECUTION.    This Separation Agreement will be construed in accordance
with and governed by the laws of the State of California. Sykes and Company agree that the exclusive venue for resolving any dispute not submitted to arbitration for any reason shall be the state and
federal courts located in San Jose, California, unless a different venue is required by applicable law. Sykes understands that once this Agreement is executed, only Mike McNamara, Chief Executive
Officer, will have the authority to modify this Agreement on behalf of the Company, and that Mr. McNamara will have such authority only when acting in writing. In this connection, the parties
agree this Agreement will not be modified or amended except by a written instrument(s), signed by both parties, with Mr. McNamara signing for the Company. This Agreement may be executed in
multiple counterparts. 

        23.   NON-ADMISSION OF LIABILITY.    By entering into this Agreement, neither party admits they have done
anything wrong. 

 

			
	ACCEPTED AND AGREED:	 	Flextronics International USA, Inc.
	

 	
 	
/s/ Michael McNamara

  Michael McNamara,

Chief Executive Officer
	

 	
 	
11/26/2012

  Date

 

 I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, THAT I UNDERSTAND ALL OF ITS TERMS, THAT I UNDERSTAND THAT IT CONTAINS A COMPLETE RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS, AND THAT I AM ENTERING INTO IT VOLUNTARILY.

 

			
	 	 	/s/ Eslie C. Sykes

  Eslie C. Sykes
	

 	
 	
20-Nov-2012

  Date

 

 9

 

 
 

  Exhibit A    
    

 

					
	Eslie C. Sykes	 	Closing Statement as of:	 	 3/31/2013
	513088	 	Estimated Stock Price:	 	 $6.50

 

  Options  

 

																					
	Grant ID 	 	Grant 	 	Pla 	 	Type 	 	Price 	 	Granted 	 	 
	 	Exercisable 	 	Cancell 	 	Value 	 	Expiration 
	 X024991
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	4	 	0	 	4	 	0	 	$4	 	6/30/2013
	 X011635
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	10	 	0	 	10	 	0	 	$9	 	6/30/2013
	 X000000000038
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	20	 	0	 	20	 	0	 	$19	 	6/30/2013
	 X007366
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	53	 	0	 	53	 	0	 	$49	 	6/30/2013
	 X000000000037
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	149	 	0	 	149	 	0	 	$139	 	6/30/2013
	 X026177
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	156	 	0	 	156	 	0	 	$145	 	6/30/2013
	 X015349
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	235	 	0	 	235	 	0	 	$219	 	6/30/2013
	 X000000000039
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	443	 	0	 	443	 	0	 	$412	 	6/30/2013
	 X007367
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	682	 	0	 	682	 	0	 	$634	 	6/30/2013
	 X15350
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	987	 	0	 	987	 	0	 	$918	 	6/30/2013
	 X023649
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	2,083	 	0	 	2,083	 	0	 	$1,937	 	6/30/2013
	 X023550
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	2,083	 	0	 	2,083	 	0	 	$1,937	 	6/30/2013
	 X021555
	 	8/11/2009	 	2002	 	NQ	 	$5.57	 	6,666	 	0	 	6,666	 	0	 	$6,199	 	6/30/2013
	 X017840
	 	8/11/2009	 	2002	 	NQ	 	$5.57	 	8,333	 	0	 	8,333	 	0	 	$7,750	 	6/30/2013
	 X027828
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	16,666	 	0	 	16,666	 	0	 	$15,499	 	6/30/2013
	 X027086
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	16,666	 	0	 	16,666	 	0	 	$15,499	 	6/30/2013
	 020941
	 	2/13/2003	 	2002	 	NQ	 	$7.53	 	30,000	 	0	 	30,000	 	0	 	$0	 	6/30/2013
	 33021
	 	12/5/2008	 	2001	 	NQ	 	$2.26	 	515,000	 	386,250	 	128,750	 	0	 	$545,900	 	6/30/2013
	 X029125
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	133,333	 	0	 	133,333	 	0	 	$124,000	 	6/30/2013
	 X31250
	 	8/11/2009	 	2001	 	NQ	 	$5.57	 	233,333	 	0	 	233,333	 	0	 	$217,000	 	6/30/2013
	 
	 	 	 	 TOTALS:	 	966,902	 	386,250	 	580,652	 	0	 	$938,269	 	 

 

  Restricted Stock  

 

																					
	Grant ID 	 	Grant 	 	Pla 	 	Type 	 	Price 	 	Granted 	 	Vested 	 	Will Vest 	 	Cancell 	 	Value 	 	 

	 33218
	 	6/15/2010	 	2001	 	RSU	 	$0.00	 	65,000	 	0	 	0	 	65,000	 	$0	 	 
	 2011ES
	 	6/3/2011	 	2010	 	RSU	 	$0.00	 	90,000	 	9,000	 	0	 	81,000	 	$0	 	 
	 RS0517120004
	 	5/17/2012	 	2010	 	RSU	 	$0.00	 	135,000	 	0	 	0	 	135,000	 	$0	 	 
	 
	 	 	 	 TOTALS:	 	 	 	290,000	 	9,000	 	0	 	281,000	 	$0	 	 

 

  Market and Performance Awards  

 

																					
	Grant ID 	 	Grant 	 	Pla 	 	Type 	 	Price 	 	Granted 	 	Vested 	 	Eligible to 	 	Cancell 	 	Value 	 	 

	 M2010ES
	 	6/15/2010	 	2001	 	RSU	 	$0.00	 	65,000	 	0	 	0	 	0	 	$0	 	 
	 M2011ES
	 	6/3/2011	 	2010	 	RSU	 	$0.00	 	90,000	 	0	 	0	 	0	 	$0	 	 
	 MRS051712004
	 	5/17/2012	 	2010	 	RSU	 	$0.00	 	135,000	 	0	 	0	 	0	 	$0	 	 
	 
	 	 	 	 TOTALS:	 	 	 	290,000	 	0	 	0	 	0	 	$0	 	 
	 
	 	 TOTAL INTRINSIC VALUE:	 	$938,269

 

 10

  

EXHIBIT B

October 11,
2012 

Eslie
Sykes 

1201
Via Di Salerno 

Pleasanton,
CA 94566 

        Flextronics
International USA, Inc. recognizes that you will receive the Executive Level Core Relocation Package program. 

        We
are pleased to provide you with the following relocation benefits. The benefits stated in this letter supersede any other written or verbal agreements, and there will be no
substitution or cash equivalent payments granted for any unused benefit or portion thereof.  

	•
	Homefinding Trip:  One trip reimbursed, up to
7 days, 6 nights, hotel, round-trip airfare (economy/Saturday night stay if possible) spouse/partner included. Meals and incidentals per Flex standard per diem rate will be
reimbursed at $50/day for adult. Home finding trip should be taken prior to final move.   

	•
	Buyer Value Package:  (BVO) Includes Home Sale Assistance
(as outlined in the attached Home Sale Assistance BVO process guide).   

	•
	Marketing Assistance:  If you own a home at origin, you are
eligible to receive Marketing Assistance from our relocation service provider to assist you with properly listing your home, establishing a proactive selling strategy as well as broker management
throughout the process.   

	•
	Household Goods Transportation:  Provided through our
relocation service provider using Flextronics negotiated contracts up to 20,000 lbs. Full pack and custom unpack and valuation insurance.   

	•
	Household Goods Storage:  Up to 30 days storage at
new destination location.   

	•
	Automobile Transportation:  One car if single, two cars if
family. If less than 400 miles, car must be driven during final trip. Exceptions must be approved by HR. Advance shipment available upon request.   

	•
	Temporary Living:  Up to 60 days in company approved
Corporate Housing at new destination location. Meal per diems are not applicable for standard corporate housing options which contain a kitchen in the unit.   

	•
	Return Visit Trips:  1 trip up three days for employee and
spouse round trip airfare and standard reimbursables (auto rental, lodging and meals).   

	•
	Rental Car:  Up to 30 days in new destination or
until auto arrives (if applicable). Rental car will be based on Flextronics Travel and Entertainment policy guideline. Please note GPS is not covered under policy and would be an out of pocket
expense should you require it. 

  

	•
	Final Move Departure to Destination:  

Air
Travel:    If move over 400 miles, one way economy class airfare and ground transportation to and from airports, for you and your eligible dependents (if applicable), via the most direct
route, to the host location. Travel must be arranged through Flextronics' current travel provider. 

Driving:    If
less than 400 miles, mileage reimbursement is per current IRS guidelines. Individuals who chose to drive (if under 400 miles) would be reimbursed up to $100 per day lodging
(should be booked at the standard corporate business rate-avg. $100). Daily per diem (incidentals) is US$50 per day for adults, and US$30 per day per child (under age 15) and is
non-receipted. If the employee elects to drive, the employee is required to take the most direct route and average approximately 400 miles per day.  

	•
	Misc. Expense Allowance:  You will be provided a
one-time relocation allowance in the amount equivalent to USD 5,000 if single / USD 8,000 if relocating with eligible dependents (grossed up for applicable taxes) to cover
move related incidental expenses. This allowance will be processed by the relocation vendor. There is no specific list of items allowed or not allowed to be covered by the relocation allowance but you
should understand that no additional funds will be provided for incidental expenses.   

	•
	Tax Gross-Up:  Yes, compounded calculation
based on approved taxable items only. 

        If
you have any questions pertaining to the above-mentioned information, please contact Paul Onitsuka at 408-576-5096. 

 

			
	Sincerely,	 	 
	
 FLEXTRONICS	
 	

 
	
 Name	
 	

 
	Title	 	 
	

  	
 	

  
	Signature	 	Today's Date

 

         Relocation
benefits provided in this addendum are valid for one year upon initiation of benefits with our relocation service provider. 

 

 
 

  Exhibit C    
    

 

			
	

 

 	 	

 

 

 

  
 

  Home Sale Assistance
  Buyer Value Option
  Flextronics Process Guide    
    

        In order to qualify for the Buyer Value Option Program, the home that you are selling under the program must be your primary residence.
The home must be a single family residence, condominium or town home and it must be situated on a parcel of land typical to the neighborhood where the residence is located. 

 Ineligible Properties Include:  

	•
	Vacation homes 

	•
	Mobile homes 

	•
	Income-producing properties 

	•
	Farms, ranches or any other property exceeding 5 acres 

	•
	Undeveloped real estate 

 Pros:  

	•
	The realtor's commission and normal seller's closing costs the company will be paying on your behalf is tax protected  

	•
	You will not need to attend the actual closing with the buyer 

	•
	Equity proceeds may be available to you prior to the final sale 

  

 Listing Your Property:  

        Your AIReS Program Manager will work closely with you to select a qualified real estate agent to market your home. It is highly
suggested that you use a preferred agent that is relocation trained—but not mandatory. If you have an agent that you would like to refer to AIReS, your AIReS Program Manager can contact
that agent to get them registered. The agent will need to understand and agree to the commission sharing, periodic reporting requirements and follow the Buyer Value Option home sale program procedures
as directed by AIReS. 

        As
a part of the process, AIReS will order two (2) Broker Market Analysis Reports of your home. Your Program Manager will carefully review these reports and will use them in order
to help you decide which realtor may be best to market your home. 

        Your
Program Manager will work with you and the realtor you select to determine a competitive listing price for your home. You will need to sign the Listing Agreement, as you would in
any other normal real estate transaction. Be sure to include AIReS' Listing Exclusion Clause as apart of the Listing Agreement. 

        Throughout
the marketing of your home, your realtor will be required to submit marketing reports to AIReS on a regular basis. Your Program Manager will discuss the feedback provided in
the reports with you. It is AIReS' goal to stay well informed and to keep you well informed of the marketing efforts for your home. 

 

        As a part of the process, your Program Manager will send you several documents to complete. These documents include, but are not limited
to:

	•
	AIReS Seller's Disclosure Statement

	•
	Mortgage Information Sheets,

	•
	Legal deed documents (many of these documents will need to be notarized and are crucial in order
to transfer title).

        If the documents are not returned timely, it will affect AIReS' ability to effectively administer the Buyer Value Option Program and could jeopardize the sale.  Your immediate attention to these documents is a
must!

 

 Offer/Contract Process:  

        Once an offer is received on your property, your realtor will send the offer to both you and your Program Manager. Your Program Manager
will review and discuss the offer with you to ensure that you are agreeable with the terms as well as advise you of any costs that are being requested in the contract that may not be in your best
interest to accept or are not covered under the company's relocation policy. You may verbally negotiate the terms of the contract (price, concessions,
close date, etc.) with the assistance of your Realtor and Program Manager. 

        Once
the contract terms of the contract have been agreed to by you and the buyer, AIReS will send you an offer to purchase your home based on the same general terms and conditions as the
buyer's offer. Ultimately AIReS will be purchasing the property from you, and then will sell it to the buyer who presented the offer. It is important that you do not sign any documents associated with
the buyer's offer; doing so, will make you ineligible for the Buyer Value Option Program. AIReS should be reflected as the seller of the home on the
contract.

 

DO NOT SIGN ANY SALE AGREEMENTS.

AIReS must sign the sale agreement in lieu of you, the seller. Do not

sign any documents associated with the buyer's offer to purchase or

you will not be eligible for tax assistance on the sale of your home.

 

        You
will need to sign the AIReS Offer and return it to your Program Manager. After receiving the signed document from you, your Program Manager will execute the contract with the buyer. 

        After
the contract with the buyer is executed, the buyer will typically have 7-10 days to order any and all inspections on the home and submit for repair requests. Any
repairs requested by the buyer will be negotiated and/or repaired by you. Please ensure that your Program Manager is included in these communications to help ensure that all proper documentation is
completed for closing purposes. Do not sign any contractual documentation in regards to the repairs. Your Program Manager will sign these after confirming your
agreement.

        AIReS
will execute their contract with you after the inspection contingency has been removed and a mortgage commitment has been obtained by the buyer. 

 Receiving Your Equity:  

        AIReS will be purchasing the home from you, and you will receive your equity proceeds from AIReS. Your equity will be based on the
AIReS offer price less any buyer's concessions (home warranty, credits, closing costs, etc.), liens, taxes, outstanding repairs or any other costs you would normally be responsible for as a seller.  You will not be
responsible for the realtor's commission or normal and customary seller's closing costs. Your equity will be paid to you after your sale
has been executed with AIReS and you have vacated your home. AIReS will send you an equity statement, which will show how your equity was calculated. 

 Frequently asked questions:  

 Will Flextronics pay for staging or for de-clutter?  

        A miscellaneous allowance is provided to offset any expenses not covered specifically by the relocation policy. You may use this
allowance to de-clutter and to pay for storage while you wait for your home to sell. 

 Do I need to reduce my listing price based on agent or AIReS advice?  

        Your realtor and AIReS will periodically review marketing activity on your home and may recommend a price reduction as part of a
targeted plan to competitively market your property. You will not be required to reduce your price based on that advice but it is recommended that you critically evaluate all recommendations and
determine if the price reduction will bring in an offer on the home. If you do not reduce your listing price and your home does not sell, you may be responsible for all duplicate living costs. 

 Is there a time limit to use the home sale assistance?  

        There is a general time limit of one year to sell your home through the BVO program. This can be extended with Flextronics management
approval. 

 What if something happens to the buyer prior to AIReS executing the contract on my home?  

        If the contract with the buyer is terminated prior to the inspection contingency being removed and a mortgage commitment being
obtained, the home will go back on the market and get relisted. 

 When should I stop making mortgage and insurance payments?  

        AIReS will begin making mortgage payments on your behalf once AIReS purchases your home from you. You should be certain to maintain
insurance coverage through the possession date. If you are vacating prior to executing documents enabling AIReS to purchase your home, continue to make mortgage and insurance payments. It is also
recommended to keep your gas and electricity on, though telephone and cable can be disconnected. However, if you have a monitored security system, you may want to keep your telephone connected. 

 How should I handle house keys when I move out?  

        Please leave your keys with your listing agent. If arrangements have not been made by the time you vacate, please contact your Program
Manager immediately. 

QuickLinks

EXHIBIT 10.39

SEPARATION AGREEMENT

Exhibit A

Exhibit C

Home Sale Assistance Buyer Value Option Flextronics Process GuideExhibit 10.1

 

JONES ENERGY, INC.
 2013 OMNIBUS INCENTIVE PLAN

 

 

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
    

 

i

 

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                               , 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.

 

1

 

“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).

 

2

 

“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.

 

3

 

“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.

 

4

 

“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 [                  ] shares of Common Stock (the “Maximum Share Limit”), all of which shall be available for Incentive Stock Options.

 

5

 

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.

 

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

 

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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

 

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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

 

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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

 

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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.

 

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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                                   , 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                                     , 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.

 

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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

 

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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

 

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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.

 

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