What is the primary purpose of these new stock option awards?

The primary purpose is to align the interests of senior executive leaders with those of ServiceNow's shareholders by incentivizing significant outperformance, driving strategic direction, and creating long-term shareholder value. The awards are designed to motivate executives to achieve aggressive growth targets in stock price and subscription revenue over a five-year period.

How will these stock options vest?

The stock options will vest in eight equal tranches. Each tranche's vesting is contingent upon the achievement of pre-determined quantitative goals for both stock price and subscription revenue for that specific tranche. Additionally, the recipient must remain employed by ServiceNow through the certification of the tranche's performance and the "Two-Year Cliff" date (December 13, 2023). No portion of the awards will vest prior to this two-year anniversary.

What happens to the awards in the event of a change of control?

In the event of a change of control, the subscription revenue metric will be disregarded. The stock price metric will be measured based on the per-share price received by shareholders in the change of control transaction. Any shares that would have vested based on the stock price metric will vest at the time of the change of control. For previously achieved shares, the "Two-Year Cliff" will not apply in cases of the recipient's death or permanent disability.

Are these awards guaranteed to vest?

No, these awards are not guaranteed to vest. Vesting is entirely dependent on the achievement of specific, aggressive stock price and subscription revenue performance metrics within the defined Performance Period (ending September 30, 2026). Furthermore, recipients must remain employed by the company through specific vesting dates and certification events.

NOW 8-K SEC Disclosure — Dec 17, 2021

Summary

ServiceNow, Inc. (NOW) announced on December 16, 2021, the approval of significant long-term, performance-based stock option awards to its senior executive leaders. These awards, with an aggregate approximate value of $97.5 million upon achievement of all performance conditions, are designed to strongly align executive incentives with shareholder value creation over a multi-year period. The structure emphasizes rigorous performance metrics and long-term commitment, aiming to drive strategic growth and ensure leadership continuity. Key features of these awards include their 100% performance-based nature, contingent on achieving specific stock price and subscription revenue targets across eight vesting tranches. A "Two-Year Cliff" provision means no awards vest before the second anniversary of the grant date, and all performance must be achieved within a defined five-year window ending September 30, 2026. The company has also implemented provisions for adjustments in the event of material acquisitions or divestitures, and restricted sale periods for awarded shares, further reinforcing a long-term, value-driven approach.

Key Highlights

1Approval of $97.5 million in performance-based stock option awards for senior executives.
2Awards are 100% performance-based, tied to specific stock price and subscription revenue goals.
3Vesting occurs in eight equal tranches, each requiring achievement of both stock price and revenue metrics.
4Includes a "Two-Year Cliff" vesting provision, delaying any vesting until the second anniversary of the grant date.
5Performance Period for achieving goals spans from October 29, 2021, to September 30, 2026.
6Restrictions on selling shares issued upon exercise until after the Performance Period ends (except for cashless exercises/taxes).
7Provisions for adjustments to performance metrics in case of material acquisitions or divestitures.

ServiceNow, Inc. 8-K Report, Corporate Update (Dec 17, 2021)

Summary

Key Highlights

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