Note 10: Deferred compensation

Restricted Stock Unit Plan

Prior to our emergence from bankruptcy, we had a Non-Officer Restricted Stock Unit Plan (the “RSU Plan”) in effect as an incentive plan for nonexecutive employees. The provisions under our RSU Plan are discussed in “Note 11 — Deferred compensation” in Item 8. Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016. As of January 1, 2017, there were 98,596 unvested and outstanding Restricted Stock Units with a weighted average grant date fair value of $7.18 per unit.

Due to the severe decline in commodity pricing, which has resulted in a steep decline in our estimated proved reserves, the estimated fair value per RSU as of January 1, 2017, was $0.00. All remaining unvested awards were cancelled upon our emergence from bankruptcy on the Effective Date.

2015 Cash Incentive Plan

We adopted the Long-Term Cash Incentive Plan (the “2015 Cash LTIP”) on August 7, 2015. The 2015 Cash LTIP provides additional cash compensation to certain employees of the Company in the form of awards that generally vest in equal annual increments over a four year period. Since the awards do not vary according to the value of the Company’s equity, the awards are not considered “stock-based compensation” under accounting guidance. We accrue for the cost of each annual increment over the period service is required to vest.

A summary of compensation expense for the 2015 Cash LTIP is presented below:

	Successor		Predecessor
	Three months		Three months
	ended		ended
	September 30, 2017		September 30, 2016
2015 Cash LTIP expense (net of amounts capitalized)	$	493	$	201
2015 Cash LTIP payments		1,285		624

Successor

Predecessor

Period from

March 22, 2017

January 1, 2017

Nine months

through

ended

September 30, 2017

March 21, 2017

September 30, 2016

2015 Cash LTIP expense (net of amounts capitalized)

1,100

586

2015 Cash LTIP payments

1,285

666

During 2017, the Company awarded an additional $5,637 under the 2015 Cash LTIP. As of September 30, 2017, the outstanding liability accrued for our 2015 Cash LTIP, based on requisite service provided, was $1,224.

2010 Equity Incentive Plan

We adopted the Chaparral Energy, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) on April 12, 2010. The 2010 Plan reserved a total of 86,301 shares of our class A common stock for awards issued under the 2010 Plan. All of our or our affiliates’ employees, officers, directors, and consultants, as defined in the 2010 Plan, were eligible to participate in the 2010 Plan.

The awards granted under the 2010 Plan consisted of shares that were subject to service vesting conditions (the “Time Vested” awards) and shares that are subject to market and performance vested conditions (the “Performance Vested” awards). The material provisions under the 2010 Plan are discussed in “Note 11—Deferred compensation” in Item 8. Financial Statement and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2016.

As of result of our bankruptcy, the estimated fair value of our Time Vested restricted awards was $0.00 per share since the Petition Date. Furthermore, during the third quarter of 2016, we recorded a cumulative catch up adjustment of to reverse the aggregate compensation cost associated with our Performance Vested awards in order to reflect a decrease in the probability that requisite service would be achieved for these awards. Pursuant to our Reorganization Plan, all outstanding restricted shares were cancelled. As this cancellation was not accompanied by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration, it was accounted for as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost was recognized at the cancellation date.

A summary of our restricted stock activity for the Predecessor period in 2017 is presented below:

	Time Vested							Performance Vested
	Weighted average grant date fair value		Restricted shares			Vest date fair value		Weighted average grant date fair value		Restricted shares
	($ per share)							($ per share)
Unvested and outstanding at January 1, 2017 - Predecessor	$	790.91		6,667				$	277.33		21,475
Granted	$	—		—				$	—		—
Vested	$	812.91		(2,602	)	$	—	$	—		—
Forfeited	$	785.70		(468	)			$	195.75		(986	)
Cancelled	$	775.66		(3,597	)			$	281.26		(20,489	)
Unvested and outstanding at March 21, 2017 - Predecessor	$	—		—				$	—		—

2017 Management Incentive Plan

As discussed in “Note 3—Chapter 11 reorganization,” our Reorganization Plan authorized the issuance of seven percent of outstanding Successor common shares on a fully diluted basis toward a new management incentive plan. On August 9, 2017, we adopted the Chaparral Energy, Inc. Management Incentive Plan (the “MIP”). The MIP provides for the following types of awards: options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other incentive awards. The aggregate number of shares of Class A common stock, par value $0.01 per share, reserved for issuance pursuant to the MIP was initially set at 3,388,832 subject to changes in the event additional shares of common stock are issued under our Reorganization Plan. The MIP contemplates that any award granted under the plan may provide for the earlier termination of restrictions and acceleration of vesting in the event of a Change in Control, as may be described in the particular award agreement.

Pursuant to the MIP, in August 2017, 1,796,943 shares of restricted stock were granted to employees and members of our Board of Directors (the “Board”). Of the grants awarded to employees, 75% were comprised of shares that are subject to service vesting conditions (the “Time Shares”) and 25% were comprised of shares that are subject to performance vested conditions (the “Performance Shares”). All grants to the Board were Time shares.

Upon evaluating the provisions of both Time and Performance Shares, we classified both awards as equity-based awards. Compensation cost will be recognized and measured according to the grant date fair value of the awards which are based on the market price of our common stock currently trading on the OTCQB tier of the OTC Markets Group, Inc.

The Time Shares vest in equal annual installments over the three -year vesting period beginning on April 1, 2018 and each anniversary thereafter. The Performance Shares vest in three tranches over each of the next three years beginning on December 31, 2017, and each anniversary thereafter, according to performance conditions established each year. The performance conditions for a given year are unique to that year and vesting with respect to performance conditions for a given year is independent of the vesting with respect to other years. As a result, the requisite service period for each of the three tranches of Performance Shares relate to the individual year for which performance is measured and do not overlap. Performance conditions have not been established for 2018 and 2019 and hence a grant date has not been established for accounting purposes. Furthermore, since the requisite service period for Performance Shares related to 2018 and 2019 performance conditions will not commence until fiscal 2018 and 2019, no expense will be recognized in connection with those awards in 2017. Performance Shares related to 2017 performance conditions will vest based on accomplishment of multiple conditions that generally relate to drilling results and strategic goals. The accomplishment of an individual condition will result in vesting of shares that is independent of vesting with respect to the other conditions (i.e. simultaneous accomplishment of multiple conditions is not required for vesting). The number of shares vesting with respect to certain 2017 performance conditions is primarily at the discretion of the Board; hence a grant date for the related shares has not been established for accounting purposes. Requisite service on Performance Shares subject to these discretionary 2017 performance conditions is being rendered in 2017 and therefore expense is recognized in the current fiscal year.

A summary of our restricted stock activity pursuant to our MIP for the Successor period in 2017 is presented below:

	Time Shares				Performance Shares
	Weighted average grant date fair value		Restricted shares		Weighted average grant date fair value		Restricted shares
	($ per share)				($ per share)
Unvested and outstanding at March 21, 2017 - Successor	$	—		—	$	—		—
Granted (1)	$	20.05		1,376,481	$	20.05		420,462
Unvested and outstanding at September 30, 2017 - Successor	$	20.05		1,376,481	$	20.05		420,462

________________________________________________________

(1)	Includes 280,308 Performance Shares attributable to 2018 and 2019 performance conditions and 70,077 Performance Shares attributable to 2017 conditions where determination of accomplishment is discretionary. Under accounting guidance, a grant date has not been established for all these awards.

As none of the MIP awards have vested to date, there have been no repurchases of vested shares in 2017. We have the ability to repurchase shares for tax withholding or pursuant to certain share repurchase provisions in our MIP award agreements. However, our employees also have the ability to sell shares on the open market to cover employee tax withholdings.

Stock-based compensation cost

Compensation cost is calculated net of forfeitures. As allowed by recent accounting guidance, we will recognize the impact of forfeitures due to employee terminations on expense as they occur instead of incorporating an estimate of such forfeitures. For awards with performance conditions, we will assess the probability that a performance condition will be achieved at each reporting period to determine whether and when to recognize compensation cost.

A portion of stock-based compensation cost associated with employees involved in our acquisition, exploration, and development activities has been capitalized as part of our oil and natural gas properties. The remaining cost is reflected in lease operating and general and administrative expenses in the consolidated statements of operations. Stock-based compensation expense is as follows for the periods indicated:

	Successor			Predecessor
	Three months ended September 30, 2017			Three months ended September 30, 2016
Stock-based compensation cost (credit)	$	3,577		$	(5,705	)
Less: stock-based compensation cost capitalized		(801	)		1,167
Stock-based compensation expense (credit)	$	2,776		$	(4,538	)
Payments for stock-based compensation	$	—		$	—

	Successor			Predecessor
	Period from March 22, 2017 through September 30, 2017			Period from January 1, 2017 through March 21, 2017			Nine months ended September 30, 2016
Stock-based compensation cost (credit)	$	3,577		$	194		$	(6,220	)
Less: stock-based compensation cost capitalized		(801	)		(39	)		965
Stock-based compensation expense (credit)	$	2,776		$	155		$	(5,255	)
Payments for stock-based compensation	$	—		$	—		$	49

The credit for stock-based compensation for the nine months ended September 30, 2016, was primarily a result of forfeitures from our workforce reduction in January 2016, lower valuations of our liability-based awards and the cumulative catch up adjustment on the 2010 Plan discussed above. Based on a quarter end market price of $23.25 per share of our common stock, the aggregate intrinsic value of all restricted shares outstanding was $41,779 as of September 30, 2017. As of September 30, 2017, and December 31, 2016, accrued payroll and benefits payable included $0 and $0, respectively, for stock-based compensation costs expected to be settled within the next twelve months. Unrecognized stock-based compensation cost of approximately $25,805 as of September 30, 2017, is expected to be recognized over a weighted-average period of 1.5 years.