On May 14, 2021, our stockholders approved the ANSYS, Inc. 2021 Equity and Incentive Compensation Plan (the 2021 Plan). The 2021 Plan is a long-term incentive plan pursuant to which awards may be granted to directors, officers, other employees and certain consultants of Ansys and its subsidiaries. These awards include stock option rights, stock appreciation rights, restricted stock, restricted stock units, cash incentives, performance shares, performance units and other awards. The 2021 Plan authorizes 4.4 million shares of common stock for issuance, plus 1.6 million shares that remained available for issuance under the Fifth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan (the Predecessor Plan) as of the effective date of the 2021 Plan plus any shares relating to the outstanding awards under the Predecessor Plan or the 2021 Plan that are subsequently forfeited. As of the effective date of the 2021 Plan, grants were no longer made under the Predecessor Plan.

The 2021 Plan requires a minimum vesting period or performance period of one year for most award types and a maximum period for options to be exercisable as ten years from the grant date. Upon the death or disability of a participant, performance awards are vested pro-rata, subject to any performance target requirements, and all other awards become fully vested. The Compensation Committee of the Board of Directors may, at its sole discretion, accelerate the date or dates on which an award granted under the 2021 Plan may vest in the event of a change in control or an employee's termination of employment. A change in control will result in awards either being assumed by the acquirer or the pre-existing awards becoming immediately vested and earned at target award levels. In the event an employee is terminated without cause within 18 months after the change in control, any assumed awards will become immediately vested.

We currently issue shares related to exercised stock options or vested awards from our existing pool of treasury shares and have no specific policy to repurchase treasury shares as stock options are exercised or as awards vest. If the treasury pool is depleted, we will issue new shares.


	Year Ended December 31,
(in thousands, except per share amounts)	2021		2020		2019
Cost of sales:
Maintenance and service	12,390		13,626		8,494
Operating expenses:
Selling, general and administrative	91,772		73,491		60,639
Research and development	62,176		58,498		47,057
Stock-based compensation expense before taxes	166,338		145,615		116,190
Related income tax benefits	(75,241)		(56,485)		(47,454)
Stock-based compensation expense, net of taxes	$	91,097	$	89,130	$	68,736
Net impact on earnings per share:
Basic earnings per share	$	(1.05)	$	(1.04)	$	(0.82)
Diluted earnings per share	$	(1.03)	$	(1.02)	$	(0.80)

As of December 31, 2021, total unrecognized estimated compensation expense related to awards granted prior to that date was $180.0 million, which is expected to be recognized over a weighted average period of 1.4 years. Forfeitures of awards are accounted for as they occur.

Prior to 2017, we granted stock option awards. The value of each stock option award was estimated on the date of grant, or date of acquisition for options issued in a business combination, using the Black-Scholes option pricing model (Black-Scholes model). The determination of the fair value of stock-based payment awards using an option pricing model was affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables included our stock volatility during the preceding six years, actual and projected employee stock option exercise behaviors, interest rate assumptions using the five-year U.S. Treasury Note yield on the date of grant or acquisition date, and expected dividends. The stock-based compensation expense for options was recorded ratably over the requisite service period.


	Year Ended December 31,
	2021			2020			2019
(options in thousands)	Options	Weighted- Average Exercise Price		Options	Weighted- Average Exercise Price		Options	Weighted- Average Exercise Price
Outstanding, beginning of year	648	$	74.26	984	$	67.49	1,484	$	62.80
Granted	—	$	—	—	$	—	—	$	—
Exercised	(270)	$	61.42	(336)	$	54.43	(495)	$	53.53
Forfeited	(3)	$	55.46	—	$	—	(5)	$	64.21
Outstanding, end of year	375	$	83.67	648	$	74.26	984	$	67.49
Vested and Exercisable, end of year	375	$	83.67	648	$	74.26	924	$	65.71
Nonvested	—	$	—	—	$	—	60	$	94.77


	2021		2020		2019
Weighted Average Remaining Contractual Term (in years)
Outstanding	3.09		2.93		3.18
Vested and Exercisable	3.09		2.93		2.95
Nonvested	0.00		0.00		6.71
Aggregate Intrinsic Value (in thousands)
Exercised	$	82,790	$	78,269	$	72,098
Outstanding	$	118,995	$	187,679	$	186,926
Vested and Exercisable	$	118,995	$	187,679	$	177,111
Nonvested	$	—	$	—	$	9,815
Compensation Expense - Stock Options (in thousands)	$	—	$	1,030	$	1,709


(options in thousands)	Options Outstanding & Exercisable
Range of Exercise Prices	Options	Weighted- Average Remaining Contractual Life (years)	Weighted- Average Exercise Price
$12.26 - $24.42	1	1.86	$	20.50
$67.44	146	0.86	$	67.44
$78.56 - $94.15	19	2.84	$	85.93
$95.09	209	4.67	$	95.09


Award	Vesting Period	Vesting Condition
Restricted stock units with a service condition only	Three years	Continued employment through the vesting period. One third vests annually.
Restricted stock units with an operating performance and service condition	Three years	Operating performance metrics as defined at the beginning of each sub-performance period and subject to continued employment through the vesting period.
Restricted stock units with a market and service condition	Three years	Our performance measured by total stockholder return relative to the Nasdaq Composite Index for the performance period and subject to continued employment through the vesting period.

The fair value of RSUs with operating performance metrics is based on the fair market value of our stock on the date of the grant and is recognized from the grant date through the vesting period based on management's estimates concerning the probability of operating performance metric achievement.

The fair values of RSUs with a market condition were estimated using a Monte Carlo simulation model and are recognized over the vesting period. The determination of the fair values of the awards was affected by the grant date and several variables, each of which has been identified in the chart below:


	Year Ended December 31,
Assumptions used in Monte Carlo lattice pricing model	2021	2020	2019
Risk-free interest rate	0.3%	0.7%	2.5%
Expected dividend yield	—%	—%	—%
Expected volatility—Ansys stock price	36%	25%	23%
Expected volatility—Nasdaq Composite Index	26%	18%	16%
Expected term	2.8 years	2.8 years	2.8 years
Correlation factor	0.84	0.77	0.71
Weighted average fair value per share	$238.87	$245.08	$238.99


	Year Ended December 31,
	2021			2020			2019
(RSUs in thousands)	RSUs	Weighted- Average Grant Date Fair Value		RSUs	Weighted- Average Grant Date Fair Value		RSUs	Weighted- Average Grant Date Fair Value
Nonvested, beginning of year	1,323	$	201.98	1,618	$	165.26	1,522	$	129.96
Granted(1)	501	$	333.50	501	$	256.47	843	$	192.37
Performance adjustment - awards with market condition(2)	17	$	238.99	18	$	191.76	12	$	120.96
Performance adjustment - awards with performance condition(2)	63	$	376.48	(10)	$	279.08	62	$	176.89
Vested	(793)	$	194.50	(742)	$	158.13	(704)	$	125.84
Forfeited	(43)	$	263.13	(62)	$	193.28	(117)	$	140.43
Nonvested, end of year	1,068	$	277.71	1,323	$	201.98	1,618	$	165.26

(1) Includes all RSUs granted during the year. RSUs with operating performance conditions are issued annually and have one performance cycle or three sub-performance cycles. Performance conditions are assigned near the beginning of each performance cycle or sub-performance cycle, as applicable, and awards are reflected as grants at the target number of units at that time.

(2) RSUs with a market or performance condition are granted at target and vest based on achievement of the market or operating performance and service conditions. The actual number of RSUs issued may be more or less than the target RSUs depending on the achievement of the market or operating performance conditions.

Prior to 2016, we granted deferred stock awards to non-employee Directors, which are rights to receive shares of common stock upon termination of service as a Director. Associated with these awards, we established a non-qualified 409(a) deferred compensation plan with assets held under a rabbi trust to provide Directors an opportunity to diversify their vested awards. During open trading windows and at their elective option, the Directors may convert their Ansys shares into a variety of non-Ansys-stock investment options in order to diversify a portion of their holdings, subject to meeting ownership guidelines.


	Year Ended December 31, 2021
	Diversified	Undiversified	Total
Deferred Awards Outstanding, beginning of year	6,998	58,681	65,679
Shares Diversified	—	—	—
Shares Issued Upon Retirement	—	(1,857)	(1,857)
Deferred Awards Outstanding, end of year	6,998	56,824	63,822


	Year Ended December 31, 2020
	Diversified	Undiversified	Total
Deferred Awards Outstanding, beginning of year	5,598	60,081	65,679
Shares Diversified	1,400	(1,400)	—

Deferred Awards Outstanding, end of year	6,998	58,681	65,679


	Year Ended December 31, 2019
	Diversified	Undiversified	Total
Deferred Awards Outstanding, beginning of year	12,250	120,449	132,699
Shares Diversified	13,348	(13,348)	—
Shares Issued Upon Retirement	(20,000)	(47,020)	(67,020)
Deferred Awards Outstanding, end of year	5,598	60,081	65,679


	Year Ended December 31,
	2021			2020			2019
	BOD RSUs	Weighted- Average Grant Date Fair Value		BOD RSUs	Weighted- Average Grant Date Fair Value		BOD RSUs	Weighted- Average Grant Date Fair Value
Nonvested, beginning of year	8,071	$	253.93	9,688	$	187.53	13,632	$	165.71
Granted	6,576	$	329.78	9,664	$	253.40	11,259	$	187.53
Vested	(8,219)	$	255.06	(10,704)	$	193.35	(14,287)	$	166.71
Forfeited	—	$	—	(577)	$	253.93	(916)	$	187.53
Nonvested, end of year	6,428	$	330.08	8,071	$	253.93	9,688	$	187.53

The RSUs to non-employee Directors vest in full upon the earlier of one year from the date of grant or the date of the next regular meeting of stockholders. If a non-employee Director retires prior to the vest date, the non-employee Director receives a pro-rata portion of the RSUs. Total compensation expense associated with the awards recorded for the years ended December 31, 2021, 2020 and 2019 was $2.1 million, $2.2 million and $2.5 million, respectively.

Our 1996 Employee Stock Purchase Plan (the “Purchase Plan”) was adopted by the Board of Directors on April 19, 1996 and was subsequently approved by our stockholders. The stockholders approved an amendment to the Purchase Plan in May 2016 to increase the number of shares available for offerings to 1.8 million shares of which 0.1 million shares are available for future purchases as of December 31, 2021. The Purchase Plan is administered by the Compensation Committee. Offerings under the Purchase Plan commence on each February 1 and August 1, and have a duration of six months. An employee who owns or is deemed to own shares of stock representing in excess of 5% of the combined voting power of all classes of our stock may not participate in the Purchase Plan.

During each offering, an eligible employee may purchase shares under the Purchase Plan by authorizing payroll deductions of up to 10% of his or her cash compensation during the offering period. The maximum number of shares that may be purchased by any participating employee during any offering period is limited to 3,840 shares (as adjusted by the Compensation Committee from time to time). Unless the employee has previously withdrawn from the offering, his or her accumulated payroll