In 2010, the Company adopted the 2010 Equity Incentive Plan, as amended from time to time (“Amended 2010 Equity Incentive Plan”, or “2010 Plan”). The 2010 Plan permitted the granting of incentive stock options (“ISOs”),

non-statutory

stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, RSUs, and growth units to eligible participants. Under the 2010 Plan, the exercise price of options granted generally was at least equal to the fair market value of the applicable class of the Company’s common stock on the date of grant. Options and other equity awards become vested and, if applicable, exercisable based on terms determined by the Board of Directors or other plan administrator on the date of grant (or per later modification). Under the 2010 Plan, unless provided otherwise for an applicable award, the vesting and exercisability of awards accelerates by 25% on a change in control, if the award holder remains a service provider as of or immediately prior to such event.

The 2010 Plan was terminated prior to the Company’s Direct Listing, and no additional awards will be granted under the 2010 Plan. However, the 2010 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the 2010 Plan.

In August 2020, the Company’s Board of Directors approved the 2020 Executive Equity Incentive Plan (the “Executive Equity Plan”). The Executive Equity Plan permitted the granting of NSOs and RSUs to the Company’s employees, consultants, and directors. A total of 165,900,000 shares of the Company’s Class B common stock were reserved for issuance under the Executive Equity Plan. During August 2020, options to purchase 162,000,000 shares of Class B common stock and restricted stock units covering 3,900,000 shares of the Company’s Class B common stock were granted to certain officers.

The Executive Equity Plan was terminated prior to the Company’s Direct Listing, and no additional awards will be granted under the Executive Equity Plan. However, the Executive Equity Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the Executive Equity Plan.

In September 2020, prior to the Direct Listing, the Company’s Board of Directors approved the 2020 Equity Incentive Plan (“2020 Plan”). The 2020 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, SARs, and performance awards to the Company’s employees, directors, and consultants. A total of 150,000,000 shares of the Company’s Class A common stock were initially reserved for issuance pursuant to the 2020 Plan. In addition, the number of shares of Class A common stock reserved for issuance under the 2020 Plan includes certain shares of common stock subject to awards under the 2010 Plan and Executive Equity Plan, in the case of certain occurrences such as expirations, terminations, exercise and

tax-related

withholding, or failures to vest. Shares of Class B common stock added to the 2020 Plan from the 2010 Plan or Executive Equity Plan are reserved for issuance under the Company’s 2020 Plan as Class A common stock. The number of shares of Class A common stock available for issuance under the 2020 Plan will also include an annual increase on the first day of each fiscal year beginning on January 1, 2022, equal to the least of:

Under the 2020 Plan, the exercise price of options granted is generally at least equal to the fair market value of the Company’s Class A common stock on the date of grant. The term of an ISO generally may not exceed ten years. Additionally, the exercise price of any ISO granted to a 10% stockholder shall not be less than 110% of the fair market value of the common stock on the date of grant, and the term of such option grant shall not exceed five years. Options and other equity awards become vested and, if applicable, exercisable based on terms determined by the Board of Directors or another plan administrator on the date of grant, which is typically four years for new employees and varies for subsequent grants.

The aggregate intrinsic value of options outstanding, exercisable, and vested and exercisable is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock as of December 31, 2020. The aggregate intrinsic value of options exercised during the years ended December 31, 2020, 2019, and 2018 was $974.2 million, $90.7 million, and $49.0 million, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.

The weighted average grant-date fair value of options granted during the years ended December 31, 2020, 2019, and 2018 was $2.57, $3.67, and $3.81 per share, respectively. The total grant-date fair value of options that vested during the years ended December 31, 2020, 2019, and 2018 was $214.7 million, $229.4 million, and $221.2 million, respectively.

Fair value of common stock

– Prior to the Direct Listing, the fair value of the common stock underlying the options had historically been determined by the Company’s Board of Directors given the absence of a public trading market. The Board of Directors determined the fair value of the common stock by considering a number of objective and subjective factors, including: (i) third-party valuations of common stock and secondary market trading information; (ii) the prices, rights, preferences, and privileges of the preferred stock relative to those of the common stock; (iii) the lack of marketability of the common stock; (iv) the actual operating and financial results; (v) the Company’s current business conditions and projections; and (vi) the likelihood of various potential liquidity events, such as an initial public offering or sale of the Company, given prevailing market conditions. After the Direct Listing, the fair value of the common stock underlying the options was the Company’s closing stock price on the NYSE on the grant date.

Expected volatility

– As the Company recently completed its Direct Listing on September 30, 2020 and there is no sufficient stock volatility historical data, the expected volatility was based on the average historical stock price volatility of comparable publicly-traded companies in its industry peer group.

Expected term

– The expected term represents the period of time the options are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise period, and contractual lives of the options.

During the year ended December 31, 2018, the Company modified 158,646,785 options held by then-current employees. In September 2018, the Company repriced options held by then-current employees with an exercise price greater than $6.03 per share. As part of the repricing, the original options were canceled and new options were granted with an exercise price of $6.03 per share and a remaining contractual term of ten years. The new options were subject to the same service-based vesting schedule as the original options. The repricing was recorded as a stock option modification whereby the incremental fair value of each option was determined at the date of the modification and $43.7 million was immediately recognized related to vested options. During the years ended December 31, 2020, 2019, and 2018, the Company recognized total stock-based compensation expense of $11.9 million, $18.2 million, and $44.6 million, respectively, related to these repriced options. As of December 31, 2020, there was remaining incremental fair value of $7.8 million which will be recognized over the remaining requisite service period.

During the year ended December 31, 2019, the Company recognized stock-based compensation expense of $9.2 million related to the modification of 13,401,568 options held by certain of its directors. As part of the repricing, the original options were canceled and new options were granted with an exercise price of $6.03 per share, the then-current fair market value of the Company’s common stock, and a remaining contractual term of ten years. The new options were subject to the same vesting schedule as the original options. During the year ended December 31, 2020, the Company recognized total stock-based compensation expense of $2.0 million. As of December 31, 2020, there was remaining incremental fair value of $0.9 million which will be recognized over the remaining requisite service period.

During the year ended December 31, 2019, the Company also modified 26,040,393 fully vested and outstanding options which were approaching expiration. The extension of the original options was recorded as a stock option modification whereby the incremental fair value of each option was determined at the date of the modification and $5.6 million was immediately recognized related to vested options. The weighted average extended term for the modified options was approximately 0.9 years.

In June 2020, the Company repriced 235,885,337 stock options. As part of the repricing, the original options were canceled and new options were granted with an exercise price of $4.72 per share and a remaining contractual term of ten years. The new options were generally subject to the same service-based vesting schedule as the original options. The repricing was recorded as a stock option modification whereby the incremental fair value of each option was determined at the date of the modification and $74.0 million was immediately recognized related to vested options in June 2020 and an additional $8.3 million was recognized during the year ended December 31, 2020. As of December 31, 2020, there was remaining incremental fair value of $22.9 million which will be recognized over the remaining requisite service period.

During the year ended December 31, 2020, the Company also modified 57,659,626 fully vested and outstanding options that were approaching expiration. The extension of the original options was recorded as a stock option modification whereby the incremental fair value of each option was determined at the date of the modification and $9.9 million was immediately recognized related to vested options. The weighted average extended term for the modified options was approximately 0.47 years.

During the year ended December 31, 2019, the Company granted RSUs with both a service-based vesting condition and a liquidity event-related performance condition which was considered a performance-based vesting condition. The stock-based compensation expense related to such RSUs will be recognized using the accelerated attribution method from the grant date. The service-based vesting period for these awards varies across service providers and is up to five years. The performance-based vesting condition for the RSUs was satisfied upon the Company’s Direct Listing, which occurred on September 30, 2020. Additionally, subsequent to September 30, 2020 the Company granted RSUs with only a service based-based vesting condition. The stock-based compensation expense related to such RSUs will be recognized ratably over the service period.

During the year ended December 31, 2020, the Company recognized $940.0 million in stock-based compensation expense related to RSUs, of which $769.5 million was recognized upon the Company’s Direct Listing which satisfied the performance-based vesting condition. No compensation expense was recognized for the year ended December 31, 2019 as the performance-based vesting condition was not achieved.

The total grant-date fair value of RSUs vested during the year ended December 31, 2020 was $531.9 million. As of December 31, 2020, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $873.5 million, which the Company expects to recognize over 3.2 years.

In May 2019, the Company granted growth units which vest upon the satisfaction of both a performance-based vesting condition, which was satisfied upon the Company’s Direct Listing, and a service-based vesting condition. The growth units have a formula used to calculate the number of shares of the Company’s common stock that would be earned by the holder upon the satisfaction of all vesting criteria. The Company did not grant any additional growth units during the year ended December 31, 2020.

During the year ended December 31, 2020, the Company recognized $9.6 million of stock-based compensation expense related to the growth units, of which $8.4 million was recognized upon the Company’s Direct Listing which satisfied the performance-based vesting condition. As of December 31, 2020, the total unrecognized stock-based compensation expense related to the 3,582,674 growth units outstanding was $1.2 million, which the Company expects to recognize through March 2021 at which point the outstanding growth units will fully vest and convert into 1.5 million shares of common stock. No compensation expense was recognized for the year ended December 31, 2019 as the performance-based vesting condition was not achieved.

In November 2016, the Company entered into a

non-recourse

promissory note to lend an employee director $25.9 million, which was secured by 10,500,000 shares of the Company common stock held by the employee director (“pledged collateral”). Such arrangement was accounted for as a stock option issued to the employee, and the Company recorded the related stock-based compensation expense upon the issuance of the note. The promissory note accrued interest at a rate of 1.5% per annum, compounded semi-annually.

In August 2020, the Company received a payment of $26.6 million for a portion of the principal and accrued interest on the outstanding

non-recourse

promissory note in the form of 3,500,000 shares of common stock based on the fair market value of the common stock on the date of repayment. The Company forgave the remaining $0.8 million owed under the note, guaranteed the employee director a tax neutrality payment to cover his additional tax liability associated with the transaction, and terminated its security interest in the remaining shares of common stock that were originally pledged as collateral. The forgiveness of the remaining debt and the provision of the tax neutrality payment was accounted for as a modification to the original stock option, and the Company recorded additional stock-based compensation expense of $4.5 million during the year ended December 31, 2020. As of December 31, 2020, the Company paid $0.8 million in tax neutrality payments and accrued a $4.0 million liability for its estimate of the remaining amount to be paid to the employee director.