Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events

Capital Lease Agreement

On January 24, 2020, we entered into an additional capital lease agreement with the equipment provider for $1.0 million in network equipment at an annual interest rate of 5.42% over a term of three years. The agreement provides for a bargain purchase price at the end of the term. The amortization of leased assets is included in depreciation and amortization expense. Please refer to Note 7, "Debt Instruments", for more information on our capital lease agreements.

Executive Leadership Change

On February 18, 2020, Artur Bergman ceased to be our Chief Executive Officer and was appointed as our Chief Architect and Executive Chairperson. Mr. Bergman will continue to serve as a member of our Board of Directors, and was appointed as Chairperson of the Board on February 18, 2020.

In connection with Mr. Bergman's appointment as Chief Architect and Executive Chairperson, we and Mr. Bergman entered into a Modification to his Offer Letter Agreement (the “Bergman Employment Agreement”). Under the Bergman Employment Agreement, Mr. Bergman will receive an initial annual base salary of $35,568. Starting as of January 1, 2021, Mr. Bergman’s base salary will be increased to an annual rate of $504,000 per year. However, on or before the last day of November, he may make an irrevocable election to reduce his salary for the following year (but in any case no lower than the applicable minimum wage), and instead receive restricted stock units covering shares of the Company’s Class A Common Stock with a value based on the amount of such reduction (each, an “Annual RSU”). Any Annual RSU will be granted in February of the applicable year and the number of RSUs subject to each Annual RSU will be based on the average trading price of the Company’s Class A common stock in January of that year. Each Annual RSU will vest in four equal quarterly installments following the date of grant commencing on February 15th and quarterly thereafter (May, August, and November), in each case subject to Mr. Bergman’s continued service with the Company.

Pursuant to the Bergman Employment Agreement, we granted Mr. Bergman the following restricted stock unit awards to acquire up to an aggregate of 170,009 shares of our Class A common stock (each, an “RSU”) under our 2019 Equity Incentive Plan, which will vest and settle in the following manner:


•	The first award for 109,027 shares will vest as to 12.5% of the total RSUs on the 15th of August 2020 and thereafter in 14 equal quarterly installments (i.e. 6.25% of the total RSUs will vest per quarter), in each case subject to Mr. Bergman’s continued service with us;

•

The second award for 43,959 shares will vest following the Board’s (or a committee thereof) determination that Mr. Bergman has achieved Company and individual performance targets for 2020, with a performance target of 100% and a maximum performance target of 200%. Following such determination, the shares will vest, based on the extent such targets were achieved, in four equal quarterly installments on the 15th of February, May, August, and November 2021, in each case subject to Mr. Bergman’s continued service with us; and


•	The third award for 17,023 shares will vest as to 50% of the RSUs on the 15th of August 2020 and thereafter as to 25% of the RSUs on November 15, 2020 and February 15, 2021, in each case subject to Mr. Bergman’s continued service with us.

On February 18, 2020, the Board concurrently appointed Joshua Bixby as our Chief Executive Officer. In connection with Mr. Bixby’s appointment, the Board also expanded the size of the Board from six (6) to seven (7) members and appointed Mr. Bixby to serve as a Class I director. Mr. Bixby’s term as a member of the Board will expire at the meeting of stockholders to be held in 2020. Mr. Bixby will not serve on any committees of the Board.

In connection with Mr. Bixby's appointment, our subsidiary, Fastly International (Holdings) Ltd., and Mr. Bixby entered into an Employment Agreement (the “Bixby Employment Agreement”). Under the Bixby Employment Agreement, Mr. Bixby will receive an initial annual base salary of $35,568. Starting as of January 1, 2021, Mr. Bixby’s base salary will be increased to an annual rate of $504,000 per year. However, on or before the last day of November, he may make an irrevocable election to reduce his salary for the following year (but in any case no lower than the applicable minimum wage). We have separately entered into an Equity Offer Letter with Mr. Bixby (the “Equity Offer Letter”), which provides that, if he makes such an election to reduce his salary, he will receive an Annual RSU. Each Annual RSU will be granted in February of the applicable year and the number of RSUs subject to each Annual RSU will be based on the average trading price of the Company’s Class A

common stock in January of such year. Each Annual RSU will vest in 4 equal quarterly installments following the date of grant commencing on February 15th and quarterly thereafter (May, August, and November), in each case subject to Mr. Bixby’s continued service with the Company.

Pursuant to the Equity Offer Letter, we granted Mr. Bixby the following RSUs to acquire up to an aggregate of 235,425 shares of our Class A common stock under our Plan, which will vest and settle in the following manner:


•	The first award for 174,443 shares will vest as to 12.5% of the total RSUs on the 15th of August 2020 and thereafter in 14 equal quarterly installments (i.e. 6.25% of the total RSUs will vest per quarter), in each case subject to Mr. Bixby’s continued service with us;

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The second award for 43,959 shares will vest following the Board’s (or a committee thereof) determination that Mr. Bixby has achieved Company and individual performance targets for 2020, with a performance target of 100% and a maximum performance target of 200%. Following such determination, the shares will vest, based on the extent such targets were achieved, in four equal quarterly installments on the 15th of February, May, August, and November 2021, in each case subject to Mr. Bixby’s continued service with us; and


•	The third award for 17,023 shares will vest as to 50% of the RSUs on the 15th of August 2020 and thereafter as to 25% of the RSUs on November 15, 2020 and February 15, 2021, in each case subject to Mr. Bixby’s continued service with us.

The number of shares of Class A common stock granted to both Mr. Bergman and Mr. Bixby pursuant to each RSU was determined in accordance with the Company’s standard practice by the Board based on the average trading price of the Company’s Class A common stock in January 2020. Each RSU will be subject to the provisions of our Plan and each related award agreement.