The ordinary shares of the Company confer upon the holders the right to receive notices of and to participate and vote in general meetings of the Company, rights to receive dividends and rights to participate in distribution of assets upon liquidation.

Under the Company's 2014 share incentive plan (the "2014 Plan"), options, RSU, PSU and other share-based awards may be granted to employees, officers, non-employee consultants and directors of the Company.

Under the 2014 Plan, as of December 31, 2019, an aggregate number of 817,511 ordinary shares were reserved for future grant. Any share underlying an award that is cancelled, terminated or forfeited for any reason without having been exercised will automatically be available for grant under the 2014 Plan.

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CYBERARK SOFTWARE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 12: SHAREHOLDERS' EQUITY (Cont.)

The total share-based compensation expense related to all of the Company's equity-based awards, recognized for the years ended December 31, 2017, 2018 and 2019 is comprised as follows:

	Year ended December 31,
	2017		2018		2019

Cost of revenues	$	2,289	$	3,350	$	5,690
Research and development		6,110		7,922		10,960
Sales and marketing		8,642		12,708		20,976
General and administrative		8,196		11,984		17,891

Total share-based compensation expense	$	25,237	$	35,964	$	55,517

The total unrecognized compensation cost amounted to $141,029 as of December 31, 2019 and is expected to be recognized over a weighted average period of 2.51 years.

d.Options granted to employees:

A summary of the activity in options granted to employees for the year ended December 31, 2019 is as follows:

	Amount of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Balance as of December 31, 2018		1,476,610		$	46.40		7.30	$	40,968

Granted		87,600		$	115.26
Exercised		(618,917	)	$	39.66
Forfeited		(28,780	)	$	54.03

Balance as of December 31, 2019		916,513		$	57.29		6.96	$	54,762

Exercisable as of December 31, 2019		590,891		$	51.50		6.32	$	38,523

Starting October 1, 2018, the expected volatility of the Company’s common stock is based on the Company’s historical volatility. Prior to October 1, 2018, the computation of expected volatility was based on actual historical share price volatility of comparable companies and the Company's historical equity volatility. The expected option term represents the period of time that options granted are expected to be outstanding. For stock-option awards which were at the money when granted (plain vanilla stock-options), it is determined based on the simplified method in accordance with SAB No. 110, as adequate historical experience is not available to provide a reasonable estimate.. The Company has historically not paid dividends and has no foreseeable plans to pay dividends and, therefore, uses an expected dividend yield of zero in the option pricing model. The risk-free interest rate is based on the yield of U.S. treasury bonds with equivalent terms.

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CYBERARK SOFTWARE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 12: SHAREHOLDERS' EQUITY (Cont.)

The following table sets forth the parameters used in computation of the options compensation to employees for the years ended December 31, 2017, 2018 and 2019:

	Year ended December 31,
	2017		2018		2019

Expected volatility		45%-48%		47%-48%		48%
Expected dividends		0%		0%		0%
Expected term (in years)		5.25-6.25		5.00-6.20		5.90-6.10
Risk free rate		1.77%- 2.05%		2.38%- 3.12%		1.49%- 2.49%

A summary of options data for the years ended December 31, 2017, 2018 and 2019, is as follows:

	Year ended December 31,
	2017		2018		2019

Weighted-average grant date fair value of options granted	$	21.81	$	28.26	$	55.43
Total intrinsic value of the options exercised	$	33,614	$	53,398	$	45,326

The aggregate intrinsic value is calculated as the difference between the per-share exercise price and the fair value of an ordinary share for each share subject to an option multiplied by the number of shares subject to options at the date of exercise.

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CYBERARK SOFTWARE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data and unless otherwise indicated)

NOTE 12: SHAREHOLDERS' EQUITY (Cont.)

The following tables summarize information about the Company's outstanding and exercisable options granted to employees as of December 31, 2019:

Exercise price		Options outstanding as of December 31, 2019		Weighted average remaining contractual term		Options exercisable as of December 31, 2019		Weighted average remaining contractual term
				(years)				(years)

$	1.06 – 14.00		40,055		3.77		40,055		3.77
$	37.44 – 47.29		164,875		6.96		85,404		6.61
$	47.40 – 51.86		309,557		7.09		211,097		6.85
$	52.48 – 64.65		285,726		6.34		241,978		6.03
$	64.93 – 131.65		116,300		9.22		12,357		9.15

			916,513		6.96		590,891		6.32

e.A summary of RSUs and PSUs activity for the year ended December 31, 2019 is as follows:

	Amount of RSUs and PSUs			Weighted average grant date fair value

Unvested as of December 31, 2018		1,721,620		$	56.15

Granted		918,850		$	119.93
Vested		(586,076	)	$	57.00
Forfeited		(94,750	)	$	72.85

Unvested as of December 31, 2019		1,959,644		$	85.00

The total fair value of RSUs and PSUs vested (based on fair value of the Company's ordinary shares at vesting date) during the years ended December 31, 2017, 2018 and 2019 was $12,547, $23,762 and $67,737, respectively.