Under the Company’s Employee Stock Purchase Plan (ESPP), participating employees are granted the right to purchase shares of common stock at a price per share that is 85% of the lesser of the fair market value of the shares at (1) the beginning of an offering period (generally, a rolling two year period) or (2) the purchase date (generally occurring at the end of each semi-annual purchase period), subject to the terms of ESPP, including a limit on the number of shares that may be purchased in a purchase period.

On April 9, 2020, the Company’s stockholders approved an amendment to the ESPP to increase the number of shares of common stock authorized for issuance under the plan by 5.0 million shares. During fiscal 2020, 2019 and 2018, the Company issued 1.0 million, 1.2 million, and 1.2 million shares, respectively, under the ESPP at average per share prices of $103.41, $73.18 and $62.52, respectively. As of October 31, 2020, 13.8 million shares of common stock were reserved for future issuance under the ESPP.

2006 Employee Equity Incentive Plan. On April 25, 2006, the Company’s stockholders approved the 2006 Employee Equity Incentive Plan (2006 Employee Plan), which provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other forms of equity compensation, including performance stock awards and performance cash awards, as determined by the plan administrator. The terms and conditions of each type of award are set forth in the 2006 Employee Plan and in the award agreements governing particular awards. Options granted under this plan generally have a contractual term of seven years and generally vest over four years. On April 9, 2020, the Company's stockholders approved an amendment to, among other things, increase the number of shares of common stock reserved for future issuance under the 2006 Employee Plan by 3.5 million shares. As of October 31, 2020, an aggregate of 3.9 million stock options and 4.1 million restricted stock units were outstanding, and 12.1 million shares were available for future issuance under the 2006 Employee Plan.

2005 and 2017 Non-Employee Directors Equity Incentive Plans. On April 6, 2017, the Company’s stockholders approved the 2017 Non-Employee Directors Equity Incentive Plan (2017 Directors Plan). In connection with stockholder approval of the 2017 Directors Plan, the 2005 Non-Employee Directors Equity Incentive Plan (2005 Directors Plan) was terminated as of April 6, 2017, and no awards can be granted under the 2005 Directors Plan after that date.

The 2017 Directors Plan provides for equity awards to non-employee directors in the form of stock options, restricted stock units, restricted stock or a combination thereof. On April 6, 2017, the Company’s stockholders approved an aggregate of 0.45 million shares of common stock reserved under the 2017 Directors Plan.

For the fiscal year ended October 31, 2020, the Company issued an aggregate of 9,412 shares of restricted stock awards with an aggregate grant date fair value of approximately $1.3 million under the 2017 Directors Plan. Restricted stock awards generally vest on an annual basis under the 2017 Directors Plan. In addition, the Company granted options to purchase 5,998 shares of common stock, which vest over a period of three years, with an aggregate grant date fair value of $1.4 million. As of October 31, 2020, 9,412 shares of restricted stock were unvested and 5,998 stock options were outstanding, and a total of 389,682 shares of common stock were reserved for future grant under the 2017 Directors Plan.

Other Assumed Stock Plans through Acquisitions. In connection with the Company’s acquisitions in fiscal 2008, fiscal 2010, fiscal 2012, fiscal 2014, fiscal 2015, fiscal 2017, and fiscal 2018 the Company assumed certain outstanding stock awards of acquired companies. If these assumed equity awards are canceled, forfeited or expire unexercised, the underlying shares do not become available for future grant. As of October 31, 2020, 0.1 million shares of the Company’s common stock remained subject to such outstanding assumed equity awards.

Restricted Stock Units. Restricted stock units are granted under the 2006 Employee Plan as part of the Company’s incentive compensation program. In general, restricted stock units vest over three to four years and are subject to the employee's continuing service with the Company. Certain restricted stock units were granted with specific performance criteria and vest to the extent performance conditions are met. For each restricted stock unit granted under the 2006 Employee Plan, a share reserve ratio is applied for the purpose of determining the remaining number of shares reserved for future grants under the plan. As of October 31, 2020, the share reserve ratio was 1.70.

The following table contains information concerning activities related to restricted stock units:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (In Years)	Aggregate Fair Value
	(in thousands, except per share and life amounts)
Balance at October 31, 2017	3,843		$	57.26	1.54
Granted⁽²⁾	1,679		$	89.35
Vested⁽¹⁾	(1,495	)	$	52.55		$	136,417
Forfeited	(258	)	$	67.04
Balance at October 31, 2018	3,769		$	72.75	1.46
Granted	1,844		$	119.27
Vested⁽¹⁾	(1,508	)	$	65.97		$	176,659
Forfeited	(248	)	$	79.49
Balance at October 31, 2019	3,857		$	97.21	1.56
Granted	2,041		$	168.15
Vested⁽¹⁾	(1,480	)	$	88.70		$	261,563
Forfeited	(288	)	$	104.67
Balance at October 31, 2020	4,130		$	134.80	1.47



	Available for Grant⁽³⁾		Options(2)
	Available for Grant⁽³⁾		Options Outstanding		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
	(in thousands, except per share and life amounts)
Balance at October 31, 2017	12,583		6,530		$	46.83	4.60	$	263,555
Options granted	(1,134	)	1,134		$	89.52
Options assumed⁽²⁾			141		$	18.66
Options exercised			(1,336	)	$	38.18
Options canceled/forfeited/expired	157		(178	)	$	51.82
Restricted stock units granted⁽¹⁾	(2,541	)
Restricted stock units forfeited⁽¹⁾	374
Additional shares reserved	3,000
Balance at October 31, 2018	12,439		6,291		$	55.63	4.39	$	214,432
Options granted	(799	)	799		$	113.17
Options exercised			(1,615	)	$	44.29
Options canceled/forfeited/expired	129		(185	)	$	58.02
Restricted stock units granted⁽¹⁾	(3,134	)
Restricted stock units forfeited⁽¹⁾	373
Additional shares reserved	3,200
Balance at October 31, 2019	12,208		5,290		$	65.57	4.08	$	373,112
Options granted	(694	)	700		$	143.44
Options exercised			(1,891	)	$	51.76
Options canceled/forfeited/expired	102		(106	)	$	84.14
Restricted stock units granted⁽¹⁾	(3,469	)
Restricted stock units forfeited⁽¹⁾	482
Additional shares reserved	3,500
Balance at October 31, 2020	12,129		3,993		$	85.26	4.10	$	513,845
Exercisable at October 31, 2020			2,311		$	65.36	3.23	$	343,230

The aggregate intrinsic value in the preceding table represents the pretax intrinsic value based on stock options with an exercise price less than the Company’s closing stock price of $213.86 as of October 31, 2020. The pretax intrinsic value of options exercised and their average exercise prices were:

Restricted stock award activities during fiscal 2020 under the 2005 Directors Plan and 2017 Directors Plan are summarized as follows:



	Restricted Shares		Weighted-Average Grant Date Fair Value
	(in thousands, except per share)
Unvested at October 31, 2017	38		$	59.89
Granted	15		$	82.96
Vested	(32	)	$	62.09
Forfeited	(1	)	$	48.27
Unvested at October 31, 2018	20		$	73.95
Granted	11		$	116.43
Vested	(20	)	$	73.95
Forfeited	—		$	—
Unvested at October 31, 2019	11		$	116.43
Granted	9		$	140.97
Vested	(11	)	$	116.43
Forfeited	—		$	—
Unvested at October 31, 2020	9		$	140.97

Valuation and Expense of Stock-Based Compensation. The Company estimates the fair value of stock-based awards in the form of stock options and employee stock purchase rights under employee stock purchase plans on the grant date. The value of awards expected to vest is recognized as expense over the applicable service periods. The Company uses the straight-line attribution method to recognize stock-based compensation costs over the service period of the award except for performance grants with specific performance criteria. With respect to such performance grants in each reporting period, the Company estimates the probability of achievement of applicable performance goals and recognizes related stock-based compensation expense using the graded-vesting method. The amount of stock-based compensation expense recognized in any one period can vary based on the attainment or expected attainment of the various performance goals. If such performance goals are not ultimately met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options, stock appreciation rights and employee stock purchase plan awards. The Black-Scholes option-pricing model incorporates various subjective assumptions including expected volatility, expected term and interest rates. The expected volatility for both stock options and stock purchase rights under the ESPP is estimated by a combination of implied volatility for publicly traded options of the Company’s common stock with a term of six months or longer and the historical stock price volatility over the estimated expected term of the Company’s stock-based awards. The expected term of the Company’s stock-based awards is based on historical experience. Restricted stock units are valued based on the closing price of the Company’s common stock on the grant date.



	Year Ended October 31,
	2020	2019	2018
Stock Options
Expected life (in years)	4.1	4.1	4.1
Risk-free interest rate	0.26% - 1.71%	1.28% - 2.73%	2.10% - 2.95%
Volatility	23.05% - 32.80%	23.16% - 24.76%	20.22% - 21.04%
Weighted average estimated fair value	$33.02	$22.86	$23.55
ESPP
Expected life (in years)	0.5 - 2.0	0.5 - 2.0	0.5 - 2.0
Risk-free interest rate	0.09% - 1.24%	1.54% - 2.60%	1.80% - 2.73%
Volatility	25.59% - 43.06%	23.73% - 27.86%	19.99% - 21.54%
Weighted average estimated fair value	$47.69	$35.18	$23.34



	Year Ended October 31,
	2020			2019			2018
	(in thousands)
Cost of products	$	27,193		$	17,193		$	14,648
Cost of maintenance and service	9,327			6,385			5,467
Research and development expense	125,814			75,853			67,355
Sales and marketing expense	43,205			28,834			28,069
General and administrative expense	43,045			26,736			24,493
Stock-based compensation expense before taxes	248,584			155,001			140,032
Income tax benefit	(39,077		)	(26,226		)	(26,578		)
Stock-based compensation expense after taxes	$	209,507		$	128,775		$	113,454

As of October 31, 2020, the Company had $488.6 million of total unrecognized stock-based compensation expense relating to options and restricted stock units and awards, which is expected to be recognized over a weighted average period of 2.3 years. As of October 31, 2020, the Company had $55.8 million of total unrecognized stock-based compensation expense relating to the ESPP, which is expected to be recognized over a period of 2.0 years.

Deferred Compensation Plan. The Company maintains the Synopsys Deferred Compensation Plan (Deferred Plan), which permits eligible employees to defer up to 50% of their annual cash base compensation and up to 100% of their eligible cash variable compensation. Amounts may be withdrawn from the Deferred Plan pursuant to elections made by the employees in accordance with the terms of the plan. Since the inception of the Deferred Plan, the Company has not made any matching or discretionary contributions to the Deferred Plan. There are no Deferred Plan provisions that provide for any guarantees or minimum return on investments. Undistributed amounts under the Deferred Plan are subject to the claims of the Company’s creditors. The securities held by the Deferred Plan are classified as trading securities.

Income or loss from the change in fair value of the Deferred Plan assets is recorded in other income (expense), net. The increase or decrease in the fair value of the undistributed Deferred Plan obligation is recorded in total cost of revenue and operating expense. The following table summarizes the impact of the Deferred Plan:

Other Retirement Plans. The Company sponsors various retirement plans for its eligible U.S. and non-U.S. employees. Total contributions to these plans were $54.7 million, $50.7 million, and $56.5 million in fiscal 2020, 2019, and 2018, respectively. For employees in the United States and Canada, the Company matches pretax employee contributions up to a maximum of U.S. $3,000 and Canadian $4,000, respectively, per participant per year.