Note

- Share-Based Compensation

Successor Equity Plan - C&J Energy Services, Inc.

2017

Management Incentive Plan

Pursuant to the Restructuring Plan, the Company adopted the C&J Energy Services, Inc.

2017

Management Incentive Plan (as amended from time to time, the "MIP") as of the Plan Effective Date.

The MIP provides for the grant of share-based awards to the Company

’s employees, consultants and non-employee directors. The following types of awards are available for issuance under the MIP: incentive stock options and nonqualified stock options, share appreciation rights, restricted shares, restricted share units, dividend equivalent rights, performance awards, share awards, other share-based awards and substitute awards. As of

September

30,

2017,

only nonqualified stock options and restricted shares have been awarded under the MIP.

A total of approximately

8.0

million shares of common stock were originally authorized and approved for issuance under the MIP. The number of shares of common stock available for issuance under the MIP is subject to adjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporate event or transaction. The number of shares of common stock available for issuance

may

also increase due to the termination of an award granted under the MIP or by expiration, forfeiture, cancellation or otherwise without the issuance of the common stock.

Stock Options

The fair value of each option award granted under the MIP is estimated on the date of grant using the Black-Scholes option-pricing model. Determination of the fair value was a matter of judgment and often involved the use of significant estimates and assumptions. Additionally, due to the Company

’s lack of historical volume of option activity, the expected term of options granted was derived using the “plain vanilla” method. Expected volatilities were based on comparable public company data, with consideration given to the Company’s limited historical data. The Company makes estimates with respect to employee termination and forfeiture rates of the options within the valuation model. The risk-free rate is based on the approximate U.S. Treasury yield rate in effect at the time of grant. During the

first

quarter of

2017,

approximately

0.3

million nonqualified stock options were granted under the MIP to certain of the Company's executive officers at a fair market value of

$34.52

per nonqualified stock option. These option awards will expire on the

tenth

anniversary of the grant date and will vest over

three

years of continuous service from the grant date, with

34%

vesting immediately upon the grant date, and

22%

on each of the first,

second

and

third

anniversaries of the grant date.

As of

September

30,

2017,

the Company had approximately

0.3

million options outstanding to employees, including

0.2

million unvested options. The Company had approximately

$4.6

million of share-based compensation remaining to be expensed over a weighted average remaining service period of

2.4

years.

The following table includes the assumptions used in determining the fair value of option awards granted during the

first

three

months of

2017.

Expected volatility		96.4	%
Expected dividends	None
Exercise price	$	42.65
Expected term (in years)		5.7
Risk-free rate		2.03	%

Restricted Stock

The value of the Company

’s outstanding restricted stock is based on the closing price of the Company’s common stock on the NYSE on the date of grant. During the

nine

months ended

September 30, 2017,

approximately

0.9

million shares of restricted stock were granted to employees and non-employee directors under the MIP, at fair market values ranging from

$34.05

$44.90

per share of restricted stock. Restricted stock awards granted to employees during the

first

quarter of

2017

will vest over

three

years of continuous service from the grant date, with

34%

having vested immediately upon the grant date, and

22%

on each of the first,

second

and

third

anniversaries of the grant date. Restricted stock awards granted to non-employee directors will vest in full on the

first

anniversary of the date of grant, subject to each director's continued service.

To the extent permitted by law, the recipient of an award of restricted stock will generally have all of the rights of a stockholder with respect to the underlying common stock, including the right to vote the common stock and to receive all dividends or other distributions made with respect to the common stock. Dividends on restricted stock will be deferred until the lapsing of the restrictions imposed on the stock and will be held by the Company for the account of the recipient (either in cash or to be reinvested in restricted stock) until such time. Payment of the deferred dividends and accrued interest, if any, shall be made upon the lapsing of restrictions on the restricted stock, and any dividends deferred in respect of any restricted stock shall be forfeited upon the forfeiture of such restricted stock. As of

September

30,

2017,

the Company had

not

issued any dividends.

As of

September

30,

2017,

the Company had approximately

0.6

million shares of restricted stock outstanding to employees and non-employee directors. The Company had

$18.4

million of share-based compensation remaining to be expensed over a weighted average remaining service period of

2.4

years.

Predecessor Equity Plans

In connection with the Nabors Merger, the Company approved and adopted the C&J Energy Services

2015

Long Term Incentive Plan (the

“2015

LTIP”), effective as of

March

23,

2015.

The

2015

LTIP served as an assumption of the Old C&J

2012

Long-Term Incentive Plan, including the sub-plan titled the C&J International Middle East FZCO Phantom Equity Arrangement (the

“2012

LTIP”), with certain non-material revisions made and

increase in the number of shares remaining available for issuance under the

2012

LTIP. Prior to the adoption of the

2015

LTIP, all share-based awards granted to Old C&J employees, consultants and non-employee directors were granted under the

2012

LTIP and, following the

2015

LTIP’s adoption,

further awards were granted under the

2012

LTIP. Awards that were previously outstanding under the

2012

LTIP continued to remain outstanding under the

2015

LTIP, as adjusted to reflect the Nabors Merger. At the closing of the Nabors Merger, restricted shares and stock option awards were granted under the

2015

LTIP to certain employees of the C&P Business and approximately

0.4

million C&J common shares underlying those awards were deemed part of the consideration paid to Nabors for the Nabors Merger.

The

2015

LTIP provided for the grant of share-based awards to the Company

’s employees, consultants and non-employee directors. The following types of awards were available for issuance under the

2015

LTIP: incentive stock options and nonqualified stock options, share appreciation rights, restricted shares, restricted share units, dividend equivalent rights, performance awards and share awards.

Approximately

11.3

million shares were available for issuance under the

2015

LTIP as of

December

31,

2016.

The number of common shares available for issuance under the

2015

LTIP was subject to adjustment in the event of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants, rights or debentures, share dividend, share split or reverse share split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or any similar corporate event or transaction.

The

2015

LTIP was terminated as described in Note

- Chapter

Proceeding and Emergence, pursuant to the Restructuring Plan, the liquidation of C&J Energy Services Ltd. was completed under the laws of Bermuda, and all of the existing shares of the Predecessor's common equity were canceled as of the Effective Date. Also, on the Effective Date, the Successor issued the New Warrants to the holders of the canceled Predecessor common shares, provided that such class of holders voted to accept the Restructuring Plan.