Cadence’s Omnibus Plan provides for the issuance of both incentive and non-qualified options, restricted stock awards, restricted stock units, stock bonuses and the rights to acquire restricted stock to both executive and non-executive employees. During fiscal 2019, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 4.0 million. As of December 28, 2019, the total number of shares available for future issuance under the Omnibus Plan was 9.4 million. Options granted under the Omnibus Plan have an exercise price not less than the fair market value of the stock on the date of grant. Options and restricted stock generally vest over a period of three years to four years. Options granted under the Omnibus Plan expire seven years from the date of grant. Vesting of restricted stock awards granted under the Omnibus Plan may require the attainment of specified performance criteria.

Cadence’s 1995 Directors Stock Incentive Plan (the “Directors Plan”) provides for the issuance of non-qualified options, restricted stock awards and restricted stock units to its non-employee directors. Options granted under the Directors Plan have an exercise price not less than the fair market value of the stock on the date of grant. As of December 28, 2019, the total number of shares available for future issuance under the Directors Plan was 0.5 million. Options granted under the Directors Plan expire after ten years, and options, restricted stock awards and restricted stock units vest one year from the date of grant.

Cadence has assumed certain options granted to employees of acquired companies (“Acquired Options”). The Acquired Options were assumed by Cadence outside of its stock option plans, and each option is administered under the terms of the respective original plans of the acquired companies. All of the Acquired Options have been adjusted for the price conversion under the terms of the acquisition agreement between Cadence and the relevant acquired company. If the Acquired Options are canceled, forfeited or expire, they do not become available for future grant.



	2019		2018		2017
	(In thousands)
Stock options	$	6,806	$	5,581	$	5,417
Restricted stock	164,078		153,348		117,797
ESPP	10,663		8,786		6,809
Total stock-based compensation expense	$	181,547	$	167,715	$	130,023

Income tax benefit	$	30,118	$	32,830	$	36,664



	2019		2018		2017
	(In thousands)
Cost of product and maintenance	$	2,759	$	2,631	$	2,218
Cost of services	3,510		3,714		3,232
Marketing and sales	39,088		34,665		26,838
Research and development	114,656		104,353		77,222
General and administrative	21,534		22,352		20,513
Total stock-based compensation expense	$	181,547	$	167,715	$	130,023

The exercise price of each stock option granted under Cadence’s employee equity incentive plans is equal to or greater than the closing price of Cadence’s common stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average grant date fair value of options granted and the weighted-average assumptions used in the model for fiscal 2019, 2018 and 2017 were as follows:



	2019			2018			2017
Dividend yield	None			None			None
Expected volatility	24.4		%	24.3		%	21.2		%
Risk-free interest rate	2.47		%	2.54		%	2.01		%
Expected term (in years)	4.8			4.8			4.8
Weighted-average fair value of options granted	$	14.58		$	10.24		$	6.86



			Weighted- Average		Weighted- Average Remaining Contractual Terms	Aggregate Intrinsic
	Shares		Exercise Price		(Years)	Value
	(In thousands)					(In thousands)
Options outstanding as of December 29, 2018	5,414		$	20.51
Granted	595		56.57
Exercised	(1,076	)	13.52
Forfeited	—		—
Options outstanding as of December 28, 2019	4,933		$	26.38	3.4	$	216,599
Options vested as of December 28, 2019	3,772		$	21.00	2.8	$	185,923

Cadence had total unrecognized compensation expense related to stock option grants of $12.7 million as of December 28, 2019, which will be recognized over the remaining vesting period. The remaining weighted-average vesting period of unvested awards is 2.3 years.

Generally, restricted stock, which includes restricted stock awards and restricted stock units, vests over three years to four years and is subject to the employee’s continuing service to Cadence. Stock-based compensation expense is recognized ratably over the vesting term. The vesting of certain restricted stock grants is subject to attainment of specified performance criteria. Each fiscal quarter, Cadence estimates the probability of the achievement of these performance goals and recognizes any 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.

Certain long-term, market-based performance stock awards granted to executives vest over three to five years and are subject to certain market conditions and the executive’s continuing service to Cadence. Stock-based compensation expense is recognized straight-line over the vesting term. If the market-based performance conditions are not ultimately met, compensation expense previously recognized is not reversed. As of December 28, 2019, Cadence had 2.2 million shares of unvested long-term, market-based performance stock awards outstanding.



	2019		2018		2017
	(In thousands)
Stock-based compensation expense related to performance-based restricted stock	$	12,640	$	12,868	$	8,224
Stock-based compensation expense related to market-based performance stock awards	7,019		2,300		1,979



			Weighted- Average Grant Date		Weighted- Average Remaining Vesting Terms	Aggregate Intrinsic
	Shares		Fair Value		(Years)	Value
	(In thousands)					(In thousands)
Unvested shares as of December 29, 2018	9,702		$	32.67
Granted	4,028		53.11
Vested	(4,799	)	31.75
Forfeited	(538	)	39.66
Unvested shares as of December 28, 2019	8,393		$	42.55	1.1	$	589,937

Cadence had total unrecognized compensation expense related to restricted stock grants of $287.7 million as of December 28, 2019, which will be recognized over the remaining vesting period. The remaining weighted-average vesting period of unvested awards is 2.1 years.

Cadence provides an ESPP, as amended from time to time. A majority of Cadence employees are eligible to participate in the ESPP. Under the terms of the ESPP, for the offering period that commenced August 1, 2018, eligible employees may purchase Cadence’s common stock at a price equal to 85% of the lower of the fair market value at the beginning or the end of the applicable offering period, in an amount not to exceed 10% of their annual base earnings plus bonuses and commissions, and subject to a limit in any calendar year of $10,000. Each offering period has a duration of six months beginning on either February 1 or August 1. The purchase dates fall on the last days of the six-month offering periods. Under the ESPP and through the July 31, 2018 purchase date, participating employees could contribute up to 7% of their annual base earnings plus bonuses and commissions, subject to a limit in any calendar year of $8,000. As of December 28, 2019, the total number of shares available for future issuance under the ESPP was 6.0 million.

Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes option pricing model. The weighted-average grant date fair value of purchase rights granted under the ESPP and the weighted-average assumptions used in the model for fiscal 2019, 2018 and 2017 were as follows:



	2019			2018			2017
Dividend yield	None			None			None
Expected volatility	27.9		%	21.1		%	20.4		%
Risk-free interest rate	2.23		%	2.05		%	0.92		%
Expected term (in years)	0.5			0.5			0.5
Weighted-average fair value of options granted	$	14.37		$	9.24		$	6.64



	2019		2018		2017
	(In thousands, except per share amounts)
Cadence shares purchased under the ESPP	988		892		1,270
Cash received for the purchase of shares under the ESPP	$	38,290	$	29,160	$	26,709
Weighted-average purchase price per share	$	38.74	$	32.69	$	21.04

*Includes shares reserved for: (i) issuance upon exercise of future option grants, (ii) issuance upon vesting of future restricted stock grants, (iii) outstanding but unexercised options to purchase common stock, or (iv) unvested restricted stock units.