NOTE 10 — EQUITY-BASED COMPENSATION

Equity-based compensation expense is recognized based on amortizing the grant-date fair value on a straight-line basis over the requisite service period, which is generally the vesting period of the award, less actual forfeitures. A summary of equity-based compensation expense recognized during the three and six months ended June 30, 2017 and June 30, 2016 is as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Class B Units	$	482	137		$	640	$	283
Restricted Stock Awards	1,150		—		1,150		—
Options	368		—		368		—
Total equity-based compensation expense	$	2,000	$	137	$	2,158	$	283

2017 Omnibus Incentive Plan

In connection with the IPO, the Company adopted the 2017 Omnibus Incentive Plan (the "2017 Incentive Plan"). Under the 2017 Incentive Plan 14.0 million shares of Class A common stock are available for issuance, which the Company may grant as stock options, stock appreciation rights, restricted stock, and other stock-based awards to employees, directors, officers and consultants. As of June 30, 2017, approximately 12.9 million shares remain available for future equity award grants.

During the three and six months ended June 30, 2017, the Company issued certain employees and consultants an aggregate of approximately 0.6 million restricted shares of Class A common stock pursuant to the terms of the 2017 Incentive Plan with a weighted-average grant-date fair value of $16.96. The Company also awarded options to purchase an aggregate of approximately 0.5 million shares of Class A common stock to employees, consultants and directors, weighted-average grant-date fair value of $8.31. The Company determined the grant-date fair value of the options using the Black-Scholes valuation model with the following weighted-average assumptions:



	Three Months Ended June 30, 2017		Six Months Ended June 30, 2017
Expected volatility⁽¹⁾	63.0	%	63.0	%
Expected dividend yield	—	%	—	%
Expected term (in years)⁽²⁾	6.25		6.25
Risk-free interest rate	1.9	%	1.9	%

(1) Measured using selected high-growth guideline companies and considering the risk factors that would influence the range of expected volatility because the Company does not have sufficient historical data to provide a reasonable basis upon which to estimate the expected volatility.

(2) Expected term represents the estimated period of time until an option is exercised and was determined using the simplified method because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Class B Units

During the three and six months ended June 30, 2017, the Company issued an aggregate of approximately 0.8 million Class B Units to executive officers and certain other employees with a participation threshold of $12.00 and a grant-date fair value of $7.04. During the three and six months ended June 30, 2016, the Company issued 0 and approximately 0.6 million Class B Units, respectively, with a per unit participation threshold of $4.878 and a grant-date fair value of $0.22. The Company determined the grant-date fair value of the Class B Units using the Black-Scholes valuation model with the following weighted-average assumptions:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Expected volatility⁽¹⁾	63.0	%	65.0	%	63.0	%	65.0	%
Expected dividend yield	—	%	—	%	—	%	—	%
Expected term (in years)⁽²⁾	6.25		2.50		6.25		2.50
Risk-free interest rate	1.9	%	1.2	%	1.9	%	1.2	%

Company Performance Plan

The Company created the Performance Plan on July 25, 2016, whereby the Company was authorized to grant up to 1.0 million performance units (the “Performance Units”) to certain employees and consultants. The Performance Units granted were subject to continued employment and were only exercisable upon a qualifying transaction, which included an initial public offering, as defined in the Performance Plan. The IPO completed on May 3, 2017 constituted a qualifying transaction under the terms of the Performance Plan. The Company chose to settle the outstanding Performance Units in equity awards of Carvana Co. and recognized compensation expense related to the vested portion of these equity awards upon completion of the IPO.

As of June 30, 2017, the total unrecognized compensation expense related to outstanding equity awards was approximately $20.1 million, which the Company expects to recognize over a weighted-average period of approximately 3.6 years. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.