What is a Performance Condition?

A performance condition is any situation that can alter the exercisability or vesting of an equity-based award, or other factors that impact the award's fair value. A performance condition relates to either the time period over which an employee provides services, or the completion of a targeted performance goal.

Examples of Performance Conditions

Examples of performance conditions are working for an employer for a period of five years, or increasing the profitability of the employer by 20%, or increasing the sales in a new sales region by 50%. Another possible performance condition would be completing two successful patent applications within three years, as would obtaining $1 million of grant funding within two years.