2/24/2018 S-1 Table of Contents Co­Founder Grants In December 2017, the Board of Directors approved a grant to our co­founders of restricted stock awards, or RSAs, with respect to 22.1 million shares of Class A Common Stock in the aggregate, or collectively, the Co­Founder Grants, of which 15.5 million RSAs were granted to Mr. Houston, the Company’s co­founder and Chief Executive Officer, and 6.6 million RSAs were granted to Mr. Ferdowsi, the Company’s co­founder and Director. These Co­Founder Grants have service­based, market­based, and performance­based vesting conditions. While the Co­Founder Grants have certain stockholder rights, such as the right to vote the shares with the other holders of our Class A common stock, the Co­Founder Grants will be excluded from Class A common stock issued and outstanding until the satisfaction of these vesting conditions. The Co­Founder Grants are eligible to vest over the ten­year period following the closing of this offering. The Co­Founder Grants comprise nine tranches that are eligible to vest based on the achievement of stock price goals, or, each, a Stock Price Target, measured over a consecutive thirty­day trading period during the Performance Period, as follows: Company Stock Price Shares Eligible to Vest for Shares Eligible to Vest Target Mr. Houston for Mr. Ferdowsi $20.00 3,100,000 1,320,000 $25.00 1,550,000 660,000 $30.00 1,550,000 660,000 $35.00 1,550,000 660,000 $40.00 1,550,000 660,000 $45.00 1,550,000 660,000 $50.00 1,550,000 660,000 $55.00 1,550,000 660,000 $60.00 1,550,000 660,000 The Performance Period begins on the first trading day following the later of (a) the expiration of the lock­up period following the first date the Company’s shares are traded on an established national securities exchange or automated quotation system, or the IPO Date, and (b) January 1, 2019, and ends on the earliest to occur of: (i) the date on which all shares subject to the Co­Founder Grants vest, (ii) the date the applicable co­founder ceases to satisfy the service­based vesting condition, (iii) the tenth anniversary of the IPO Date, and (iv) the occurrence of an acquisition of the Company prior to the IPO Date. During the first four years of the Performance Period, no more than 20% of the shares subject to each Co­Founder Grant would be eligible to vest in any calendar year. After the first four years, all shares are eligible to vest based on the achievement of the Company Stock Price Targets. The Co­Founder Grants contain an implied performance­based vesting condition satisfied upon the IPO Date, because no shares subject to the Co­ Founder Grants will vest unless the IPO Date occurs. Accordingly, as of December 31, 2017, all compensation expense related to the Co­Founder Grants remained unrecognized because the performance­based vesting condition was not deemed probable of being achieved. We estimated the grant date fair value of the Co­Founder Grants using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the Stock Price Targets may not be satisfied. The average grant date fair value of each Co­Founder Grant was estimated to be $7.07 per share, and we will recognize total stock­based compensation expense of $156.2 million over the requisite service period of each tranche, which ranged from 2.9 to 6.9 years, using the accelerated attribution method. If the Stock Price Targets are met sooner than the derived service period, we will adjust our stock­based compensation to reflect the cumulative expense associated with the vested awards. We will recognize stock­based compensation expense if the requisite service period is provided, regardless of whether the market conditions are achieved. 82 https://www.sec.gov/Archives/edgar/data/1467623/000119312518055809/d451946ds1.htm 90/235