Stock-Based Incentive Plan

At the December 8, 2016 annual meeting, the stockholders approved the adoption of the Evolution Petroleum Corporation 2016 Equity Incentive Plan (the “2016 Plan”), which replaced the Evolution Petroleum Corporation Amended and Restated 2004 Stock Plan (the "2004 Plan"). The 2016 Plan authorizes the issuance of 1,100,000 shares of common stock prior to its expiration on December 8, 2026. Incentives under the 2016 Plan may be granted to employees, directors and consultants of the Company in any one or a combination of the following forms: incentive stock options and non-statutory stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance share awards, performance cash awards, and other forms of incentives valued in whole or in part by reference to, or otherwise based on, our common stock, including its appreciation in value. As of June 30, 2018, 963,093 shares remained available for grant under the 2016 Plan.

At December 8, 2016, there were no shares available for future grants under the 2004 Plan. All outstanding awards granted under the 2004 Plan continue to be subject to the terms and conditions as set forth in the agreements evidencing such awards and the terms of the 2004 Plan. Under these agreements, we have outstanding grants of restricted common stock awards ("Restricted Stock") and contingent restricted common stock awards ("Contingent Restricted Stock") to employees and directors of the Company. No stock option awards that had been granted in past fiscal years remained outstanding at December 8, 2016.

Stock Options

No Stock Options have been granted since August 2008 and all compensation costs attributable to Stock Options have been recognized in prior periods. No stock options vested during the years ended June 30, 2018, 2017, and 2016. There were no unexercised Stock Options as of June 30, 2017 and no Stock Options vested during the years ended June 30, 2018, 2017, and 2016.

For the year ended June 30, 2017, there were 35,231 Stock Options exercised with an aggregate intrinsic value of $188,821.

Restricted Stock and Contingent Restricted Stock

The Company may award grants of both Restricted Stock and Contingent Restricted Stock as part of its long-term incentive plan. Such grants, which expire after a maximum of four years if unvested, contain service-based, performance-based and market-based vesting provisions. The common shares underlying the Restricted Stock grants are issued on the date of grant. Contingent Restricted Stock grants vest only upon the attainment of higher performance-based or market-based vesting thresholds and are issued only upon vesting. Shares underlying Contingent Restricted Stock awards are reserved from the Plan under which they were granted under.

Service-based awards vest with continuous employment by the Company, generally in annual installments over a four-year period. Certain awards may contain other vesting periods, including quarterly installments and one-year vesting. Restricted Stock grants which vest based on service are valued at the fair market value on the date of grant and amortized over the service period. During the year ended June 30, 2018, we granted 136,907 service-based Restricted Stock awards, including 69,963 awards to employees and 66,944 awards to directors, most of which have a one-year vesting period. We did not grant any performance-based or market-based awards, nor any Contingent Restricted Stock awards, during this period.

Performance-based grants vest upon the attainment of earnings, revenue and other operational goals and require that the recipient remain an employee or director of the Company through the vesting date. The Company recognizes compensation expense for performance-based awards ratably over the expected vesting period based on the grant date fair value when it is deemed probable, for accounting purposes, that the performance criteria will be achieved. The expected vesting period may be deemed to be shorter than the four-year term. As of June 30, 2018, certain contingent performance-based awards were not considered probable of vesting for accounting purposes and no compensation expense has been recognized with regard to these awards. If these awards are later determined to be probable of vesting, cumulative compensation expense would be recorded at that time and amortization would continue over the remaining expected vesting period.

Market-based awards vest if the three-year trailing total return on the Company’s common stock exceeds the corresponding total returns of various quartiles of indices consisting of peer company groups as designated from time to time by the Compensation Committee of the Board of Directors. The fair values and expected vesting periods of these awards are determined using a Monte Carlo simulation based on the historical volatility of the Company's total return compared to the historical volatilities of the other companies in the index. The range of assumptions used in the Monte Carlo simulation valuations for the years ended June 30, 2017 and 2016 were as follows:



	Years Ended June 30
	2017			2016
Weighted average fair value of market-based awards granted	$	4.97		$	5.50
Risk-free interest rate	1.03		%	1.46		%
Expected life in years	2.83			3.83
Expected volatility	37.8		%	34.9		%
Dividend yield	3.5		%	3.3		%

Compensation expense for market-based awards is recognized over the expected vesting period using the straight-line method, so long as the award holder remains an employee of the Company. Total compensation expense is based on the fair value of the awards at the date of grant and is independent of vesting or expiration of the awards, except for termination of service.

Unvested Restricted Stock awards at June 30, 2018 consisted of the following:



Award Type	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Service-based awards	157,906	$	7.16
Performance-based awards	21,259	5.67
Market-based awards	20,312	5.44
Unvested at June 30, 2018	199,477	$	6.83

The following table sets forth the Restricted Stock transactions for the year ended June 30, 2018:



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2018		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2017	391,624		$	6.22	$	—
Service-based awards granted	136,907		7.53
Vested	(211,960	)	6.73
Forfeited	(117,094	)	5.78
Unvested at June 30, 2018	199,477		$	6.83	$	747,204	2.0

The following is a summary of Restricted Stock vestings for the last three fiscal years:



	Year Ended June 30,
	2018		2017		2016
Vesting-date intrinsic value of Restricted Stock	$	1,622,937	$	1,478,478	$	485,580
Grant-date fair value of vested Restricted Stock	$	1,427,498	$	1,520,569	$	757,229

Unvested Contingent Restricted Stock awards at June 30, 2018 consisted of the following:



Award Type	Number of Contingent Restricted Shares	Weighted Average Grant-Date Fair Value
Performance-based awards	18,406	$	7.52
Market-based awards	10,156	3.42
Unvested at June 30, 2018	28,562	$	6.06

The following table summarizes Contingent Restricted Stock activity for fiscal 2018:



	Number of Restricted Stock Units		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2018 (1)		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2017	113,270		$	4.64
Forfeited	(38,078	)	5.17
Vested	(46,630	)	3.34
Unvested at June 30, 2018	28,562		$	6.06	$	12,251	1.0

(1) Excludes $78,159 of potential future compensation expense for performance-based awards for which vesting is not considered probable at this time for accounting purposes.

The following is a summary of Contingent Restricted Stock vestings for the last three fiscal years:



	Year Ended June 30,
	2018		2017		2016
Vest-date intrinsic value of Contingent Restricted Stock	$	347,852	$	183,572	$	—
Grant-date fair value of vested Contingent Restricted Stock	$	155,744	$	197,170	$	—

Stock-based Compensation Expense

For the years ended June 30, 2018, 2017, and 2016, we recognized stock-based compensation expense related to Restricted Stock and Contingent Restricted Stock grants of $1,366,764, $1,180,618, and $1,809,548, respectively. Expense for the year ended June 30, 2016 includes $59,339 of stock-based compensation that was incurred in a restructuring.