EQUITY-BASED COMPENSATION (Successor)

Certain of our employees are eligible to participate in the Alta Mesa Resources, Inc. 2018 Long Term Incentive Plan (the “LTIP”). A total of 50,000,000 shares of AMR’s Class A Common Stock are reserved for issuance under the LTIP. The LTIP provides for the grant of stock awards, including incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other awards in AMR’s Class A Common Stock. Prior to the Business Combination, we had no equity-based compensation programs. During the Successor Period, the Company recognized stock-based compensation expense of $20.0 million in general and administrative expense including accelerated vesting for separated executives related to the LTIP.

Stock options

Stock options expire seven years from the grant date and generally vest in one-third increments each year, based on continued employment. Employees have 90 days after termination to exercise vested stock options, unless extended by an employment agreement.

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	Successor
	Stock Options		Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of February 9, 2018	—		$	—	$	—	—	$	—
Granted	4,840,799		8.90		4.37		—	—
Exercised	—		—		—		—	—
Forfeited or expired	(134,956	)	9.37		4.55		—	—
Outstanding as of December 31, 2018	4,705,843		8.89		4.36		5.2	—
Vested at December 31, 2018 or expected to vest in future	4,705,843		8.89		4.36		5.2	—
Exercisable as of December 31, 2018	1,509,434		$	9.54	$	4.62	3.0	$	—

The following assumptions were used to determine the fair value of the 2018 option grants:

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	Successor
	February 9, 2018 Through December 31, 2018
Expected term (in years)	4.5
Expected stock volatility	64.6	%
Dividend yield	—
Risk-free interest rate	2.5	%

Unrecognized compensation cost related to non-vested stock options at December 31, 2018 was $9.8 million, which we expect to recognize over a weighted average remaining period of 2.2 years.

Restricted stock

Restricted stock granted to employees generally vests in one-third increments each year based on continued employment. Prior to vesting, unvested restricted stock may not be traded.

The following table provides information about restricted stock awards granted during the Successor Period:

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	Successor
	Restricted Stock Awards		Weighted Average Grant Date Fair Value per share
Outstanding as of February 9, 2018	—		$	—
Granted	1,720,949		7.61
Vested ⁽¹⁾	(286,214	)	8.38
Forfeited or expired	(59,980	)	8.80
Outstanding as of December 31, 2018	1,374,755		$	7.39

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(1) To satisfy minimum tax withholding, 94,576 shares were withheld.

Unrecognized compensation cost related to unvested restricted shares at December 31, 2018 was $7.3 million, which we expect to recognize over a weighted average remaining period of 2.2 years.

Restricted stock units

Employees were also granted performance-based restricted stock units (“PSUs”) under the LTIP. PSUs granted in 2018 generally vest over three years at 20% during the first year, 30% during the second year and 50% during the third year. The number of PSUs vesting each year will be based on the achievement of annual company-specified performance goals and objectives applicable to each respective year of vesting. Based on achievement of those goals and objectives, the number of PSUs that vest can range from 0% to 200% of the target grant applicable to each vesting period. We only recognize expense for PSUs when the specified performance thresholds for future periods have been established. For PSUs granted during the Successor Period only the performance goals and objectives for 2018 had been established as of December 31, 2018. Those 2018 performance goals were not attained, and the 2018 award tranche was forfeited, except with respect to separations involving employment agreements whereby the separated employee was eligible to receive the award granted. No amounts will be recognized for the 2019 and 2020 performance periods until the specific targets have been established and probability of attainment can be measured.

The following summary provides information about the target number of PSUs granted during the Successor Period:



	Successor
	Restricted Stock Units			Weighted Average Grant - Date Fair Value per unit
Outstanding as of February 9, 2018	—			$	—
Granted	2,049,105			3.99
Vested ⁽¹⁾	(1,559,749	)		2.53
Forfeited or expired	(489,356	)		(8.61		)
Outstanding as of December 31, 2018	—		—	$	—

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(1) To satisfy minimum tax withholding, 388,655 shares were withheld.

As of December 31, 2018, there was no unrecognized compensation cost related to unvested PSUs.