As of September 30, 2020, the Company has outstanding equity-based awards under the GWG Holdings 2013 Stock Incentive Plan, the Beneficient Management Partners, L.P. (“BMP”) Equity Incentive Plan, and the Ben Equity Incentive Plan, as more fully described in the sections below.

GWG Holdings adopted the 2013 Stock Incentive Plan in March 2013, as amended on June 1, 2015, May 5, 2017 and May 8, 2018. Participants under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. Option awards generally expire 10 years from the date of grant. As of September 30, 2020, the Company has granted stock options, stock appreciation rights (“SAR”), and restricted stock units (“RSU”) under this plan.

During the nine months ended September 30, 2020, a total of 84,018 stock options held by employees vested. Additionally, as a result of stock option exercises, 3,688 shares of common stock were issued to employees, net of shares forfeited to satisfy tax withholding obligations.

Upon the exercise of SARs, the Company is obligated to make cash payments equal to the positive difference between the market value of the Company’s common stock on the date of exercise less the market value of the common stock on the date of grant. The liability for the SARs as of September 30, 2020 and December 31, 2019 was $0.7 million and $0.6 million, respectively, and was recorded within accounts payable and accrued expenses in the condensed consolidated balance sheets.

The Board of Directors of Beneficient Management, Ben LP’s general partner, adopted the BMP Equity Incentive Plan in 2019. Under the BMP Equity Incentive Plan, certain directors and employees of Ben are eligible to receive equity units in BMP, an entity affiliated with the board of directors of Beneficient Management, in return for their services to Ben. The BMP equity units eligible to be awarded to employees are comprised of BMP’s Class A Units and/or BMP’s Class B Units (collectively, the “BMP Equity Units”). The BMP Equity Units awarded in 2019 and during the three and nine months ended September 30, 2020, included some awards that were fully vested upon grant date, and some awards that are subject to service-based vesting over a four-year period from the date of hire. Expense recognized for these awards is specially allocated to certain holders of redeemable noncontrolling interests.

As BMP’s equity is not publicly traded, the fair value of the BMP Equity Units is determined on each grant date using a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The resultant probability-weighted cash flows are then discounted using a rate that reflects the uncertainty surrounding the expected outcomes, which the Company believes is appropriate and representative of a market participant assumption.

During second quarter 2020, 1,963,969 vested units were forfeited and returned as a result of an agreement allowing Beneficient to recover the aforementioned units held by one former director of Beneficient (see further discussion below).

The Board of Directors of Beneficient Management adopted the Ben Equity Incentive Plan in September 2018. Under the Ben Equity Incentive Plan, Ben is permitted to grant equity awards, in the form of restricted equity units (“REUs”) representing ownership interests in Common Units. Settled awards under the Ben Equity Incentive Plan dilute Ben’s Common Unitholders. The total number of Common Units that may be issued under the Ben Equity Incentive Plan is equivalent to 15% of the number of fully diluted Common Units outstanding, subject to annual adjustment.

All REUs are subject to two performance conditions, both of which were met during 2019. Additionally, if a change-of-control event occurs prior to July 1, 2021, then all units, vested and unvested, will settle within 60 days. Any transaction where GWG Holdings obtains the right to appoint a majority of the members of Beneficient Management’s Board of Directors is expressly excluded from the definition of change-of-control for the REUs. Awards will generally be subject to service-based vesting over a multi-year period from the recipient’s date of hire, though some awards fully vest upon grant date. While providing services to Ben, if applicable, certain of these awards are subject to minimum retained ownership rules requiring the award recipient to continuously hold Common Unit equivalents equal to at least 15% of their cumulatively granted awards that have the minimum retained ownership requirement.

As Ben LP’s equity is not publicly traded, the fair value of the REUs is estimated on the grant date using recent equity transactions involving third parties, which provides the Company with observable fair value information sufficient for estimating the grant date fair value.

During second quarter 2020, 507,500 vested units were forfeited as a result of an agreement allowing Beneficient to recover the aforementioned units held by one former director of Beneficient. Beneficient recognized $36.3 million of other income as a result of this recovery of equity-based compensation, including both BMP Equity Units and REUs. A substantial majority of the former director's equity-based compensation units were fully vested, and the majority of the related expense was allocated to certain holders of noncontrolling interests and recorded in prior periods. The provisions of the award agreements related to the forfeiture of vested units resulted in the previous expense being recorded to other income in the year-to-date period, accordingly.

During third quarter 2020, 515,000 units were granted to a senior partner director subject to a performance condition. The performance condition has not been met as of September 30, 2020. As the performance condition of the grant is based on a liquidity event, recognition of the related compensation cost is deferred until the condition has been met. Total unrecognized compensation cost related to this award is approximately $6.4 million as of September 30, 2020.


	Balance at December 31, 2019	Granted	Vested	Exercised	Forfeited	Recovery of Vested Awards	Balance at September 30, 2020
Vested
Stock Options	673,341	—	84,018	(20,136)	(109,671)	—	627,552
SAR	200,745	18,556	45,529	(1,284)	(4,541)	—	259,005
RSU	—	—	57,183	—	—	—	57,183
BMP Equity Units	7,980,037	4,580,888	496,142	—	(31,618)	(1,963,969)	11,061,480
REUs	2,164,742	3,033,956	341,223	—	(14,000)	(507,500)	5,018,421
Unvested
Stock Options	232,040	—	(84,018)	—	(66,625)	—	81,397
SAR	174,880	125,269	(45,529)	—	(27,067)	—	227,553
RSU	244,083	—	(57,183)	—	(57,183)	—	129,717
BMP Equity Units	180,000	2,963,800	(496,142)	—	(347,599)	—	2,300,059
REUs	246,500	2,682,072	(341,223)	—	(282,400)	—	2,304,949
Total
Stock Options	905,381	—	—	(20,136)	(176,296)	—	708,949
SAR	375,625	143,825	—	(1,284)	(31,608)	—	486,558
RSU	244,083	—	—	—	(57,183)	—	186,900
BMP Equity Units	8,160,037	7,544,688	—	—	(379,217)	(1,963,969)	13,361,539
REUs	2,411,242	5,716,028	—	—	(296,400)	(507,500)	7,323,370

The holders of certain of the units issued under the BMP Equity Incentive Plan and the Ben Equity Incentive Plan, upon vesting, have the right to convert the units to shares of GWG Holdings common stock per the Exchange Agreement discussed in Note 1. As such, units vested and issued under Beneficient’s equity incentive plans may result in dilution of the common stock of GWG Holdings.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Stock options	$	53	$	74	$	140	$	319
Stock appreciation rights	282		327		171		323
Restricted stock units	—		263		(38)		687
BMP equity units	12,392		—		51,515		—
REUs	10,831		—		44,830		—
Total equity-based compensation	$	23,558	$	664	$	96,618	$	1,329

Unrecognized equity-based compensation expense, excluding the expense related to the performance award discussed above, totaled approximately $38.3 million as of September 30, 2020. We currently expect to recognize equity-based compensation expense of $4.1 million during the remainder of 2020, and the remainder thereafter based on scheduled vesting of awards outstanding as of September 30, 2020. The following table presents the equity-based compensation expense expected to be recognized over the next five years based on scheduled vesting of awards outstanding, excluding the award subject to the performance condition discussed above, as of September 30, 2020 (in thousands):


	Stock Options		SAR		REUs		BMP Equity Units		Total
Three months ending 2020	$	42	$	55	$	1,947	$	2,012	$	4,056
2021	109		200		7,818		7,982		16,109
2022	19		153		5,729		5,851		11,752
2023	—		56		2,889		2,517		5,462
2024	—		—		567		396		963
Total	$	170	$	464	$	18,950	$	18,758	$	38,342