Stock-Based Incentive Plan

Under the terms of the Evolution Petroleum Corporation Amended and Restated 2004 Stock Plan (the "Plan"), we have granted option awards to purchase common stock (the "Stock Options"), restricted common stock awards ("Restricted Stock"), contingent restricted common stock awards ("Contingent Restricted Stock") and/or unrestricted fully vested common stock, to employees, directors, and consultants of the Company. The Plan authorizes the issuance of 6,500,000 shares of common stock and 542,529 shares remain available for grant as of September 30, 2015.

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.

The following summary presents information regarding outstanding Stock Options as of September 30, 2015, and the changes during the period:



	Number of Stock Options and Incentive Warrants		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Weighted Average Remaining Contractual Term (in years)
Stock Options outstanding at July 1, 2015	91,061		$	2.50
Exercised	—
Expired	(5,830	)	4.02
Stock Options outstanding at September 30, 2015	85,231		2.40		$	268,376	1.2
Vested or expected to vest at September 30, 2015	85,231		2.40		$	268,376	1.2
Exercisable at September 30, 2015	85,231		$	2.40	$	268,376	1.2

(1) Based upon the difference between the market price of our common stock on the last trading date of the period ($5.55 as of September 30, 2015) and the Stock Option exercise price of in-the-money Stock Options.

Restricted Stock and Contingent Restricted Stock

Prior to August 28, 2014 all Restricted Stock grants contained a four-year vesting period based solely on service. Restricted Stock which vests based solely on service is valued at the fair market value on the date of grant and amortized over the service period.

In August 2015, the Company awarded grants of both Restricted Stock and Contingent Restricted Stock as part of its long-term incentive plan. Such grants, which expire after four years if unvested, contain service-based, performance-based and market-based vesting provisions. The common shares underlying the Restricted Stock grants were issued on the date of grant, whereas the Contingent Restricted Stock will be issued only upon the attainment of specified performance-based or market-based vesting provisions.

Performance-based grants vest upon the attainment of earnings, revenue and other operational goals and require that the recipient remain an employee of the Company upon vesting. The Company recognizes compensation expense for performance-based awards ratably over the expected vesting period 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 remainder of the four- year term. As of September 30, 2015, the Company does not consider the vesting of these performance-based grants to be probable and no compensation expense has been recognized.

Market-based awards entitle employees to vest in a fixed number of shares when the three-year trailing total return on the Company’s common stock exceeds the corresponding total returns of various quartiles of companies comprising the SIG Exploration and Production Index (NASDAQ EPX) during defined measurement periods. The fair value and expected vesting period of these awards were 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. Fair values for these market-based awards ranged from $4.26 to $8.40 with expected vesting periods of 3.30 to 2.55 years, based on the various quartiles of comparative market performance. 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 September 30, 2015 consisted of the following:



Award Type	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Service-based awards	119,747	9.53
Performance-based awards	76,642	10.05
Market-based awards	35,914	7.59
Unvested at September 30, 2015	232,303	$	9.40

The following table sets forth the Restricted Stock transactions for the three months ended September 30, 2015:



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at September 30, 2015 (1)		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2015	262,227		$	9.37
Vested	(29,924	)	9.08
Unvested at September 30, 2015	232,303		$	9.40	$	1,094,721	2.2

(1) Excludes $770,252 of potential future compensation expense for performance-based awards for which vesting is not considered probable at this time for accounting purposes.

Unvested Contingent Restricted Stock awards at September 30, 2015 consisted of the following:



Award Type	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Performance-based awards granted	38,325	$	10.05
Market-based awards granted	17,961	4.26
Unvested at September 30, 2015	56,286	$	8.20

There were no changes in unvested Contingent Restricted Stock for the three months ended September 30, 2015:



	Number of Restricted Stock Units	Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at September 30, 2015 (1)		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2015	56,286	$	8.20
Unvested at September 30, 2015	56,286	$	8.20	$	51,158	2.2

(1) Excludes $385,166 of potential future compensation expense for performance-based awards for which vesting is not considered probable at this time for accounting purposes.

Stock-based compensation expense related to Restricted Stock and contingent Restricted Stock grants for the three months ended September 30, 2015 and 2014 was $221,947 and $243,337, respectively. For the three months ended September 30, 2015, this expense includes $3,832 for cash dividends paid on unvested performance-based awards for which vesting is not considered probable for accounting purposes and are not currently being amortized to expense.