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 2021, 2020 and 2019, the Company issued 1.0 million, 1.0 million, and 1.2 million shares, respectively, under the ESPP at average per share prices of $134.26, $103.41 and $73.18, respectively. As of October 31, 2021, 12.8 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.

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. Restricted stock units granted with specific performance criteria 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, 2021, the share reserve ratio was 1.70. Options granted under this plan generally have a contractual term of seven years and generally vest over four years.

On April 8, 2021, the Company's stockholders amended the 2006 Employee Plan to, among other things, increase the number of shares of common stock reserved for future issuance under the plan by 4.7 million shares. As of October 31, 2021, an aggregate of 3.0 million stock options and 4.2 million restricted stock units were outstanding, and 13.8 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 could be granted under the 2005 Directors Plan after that date.

Under the 2005 Directors Plan, the Company granted options, which vest over a period of three to four years to non-employee directors. As of October 31, 2021, 15,000 stock options were outstanding under the 2005 Directors Plan.

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.

The Company grants restricted stock awards and options under the 2017 Directors Plan. Restricted stock awards generally vest on an annual basis and options vest over a period of three years. As of October 31, 2021, 4,690 shares of restricted stock awards were unvested and 5,998 stock options were outstanding, and a total of 384,992 shares of common stock were reserved for future issuance under the 2017 Directors Plan.

Other Assumed Stock Plans through Acquisitions. The Company has assumed certain outstanding stock awards of acquired companies, including restricted stock units and options. 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,

Restricted Stock Units. The following table contains information concerning activities related to restricted stock units granted under the 2006 Employee Plan:


	Restricted Stock Units Outstanding(1)	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, 2018	3,769	$	72.75	1.46
Granted(2)	1,844	$	119.27
Vested(3)	(1,508)	$	65.97		$	176,659
Forfeited	(248)	$	79.49
Balance at October 31, 2019	3,857	$	97.21	1.56
Granted(2)	2,041	$	168.15
Vested(3)	(1,480)	$	88.70		$	261,563
Forfeited	(288)	$	104.67
Balance at October 31, 2020	4,130	$	134.80	1.47
Granted(2)	1,901	$	258.58
Vested(3)	(1,565)	$	122.01		$	421,034
Forfeited	(279)	$	167.76
Balance at October 31, 2021	4,187	$	193.58	1.39

(1)No restricted stock units were assumed in connection with acquisitions in the last three fiscal years, but the balance at fiscal year-end includes certain restricted stock units that were previously assumed in connection with acquisitions.

(2) Includes restricted stock units granted to senior management with performance-based vesting criteria (in addition to service-based vesting criteria) (performance-based RSUs) reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied.


	Options Outstanding
	Shares Under Stock Option (1)	Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
	(in thousands, except per share)
Balance at October 31, 2018	6,291	$	55.63	4.39	$	214,432
Granted	799	$	113.17

Exercised	(1,615)	$	44.29
Canceled/forfeited/expired	(185)	$	58.02
Balance at October 31, 2019	5,290	$	65.57	4.08	$	373,112
Granted	700	$	143.44

Exercised	(1,891)	$	51.76
Canceled/forfeited/expired	(106)	$	84.14
Balance at October 31, 2020	3,993	$	85.26	4.10	$	513,845
Granted	353	$	239.46

Exercised	(1,203)	$	66.50
Canceled/forfeited/expired	(36)	$	128.49
Balance at October 31, 2021	3,107	$	109.51	3.81	$	694,921
Vested and expected to vest as of October 31, 2021	3,107	109.51		3.81	$	694,921
Exercisable at October 31, 2021	1,990	81.88		3.08	$	500,210

(1)No stock options were assumed in connection with acquisitions in the last three fiscal years, but the balance at fiscal year-end includes certain stock options that were previously assumed in connection with acquisitions.

The aggregate intrinsic value in the preceding table represents the pre-tax intrinsic value based on stock options with an exercise price less than the Company’s closing stock price of $333.18 as of October 31, 2021. The pre-tax intrinsic value of options exercised and their average exercise prices were:

Restricted Stock Units and Stock Options. The following table contains additional information concerning activities related to stock options and restricted stock units that were granted under the 2006 Employee Plan and assumed from acquisitions:


			Available for Grant (1)(2) (3)

			(in thousands, except per share and life amounts)
Balance at October 31, 2018			12,439
Options granted(2)			(799)


Options canceled/forfeited/expired(2)			129
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
Options granted(2)			(694)


Options canceled/forfeited/expired(2)			102
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
Options granted(2)			(353)


Options canceled/forfeited/expired(2)			36
Restricted stock units granted(1)			(3,232)
Restricted stock units forfeited(1)			471
Additional shares reserved			4,700
Balance at October 31, 2021			13,751

(1)Restricted stock units include awards granted under the 2006 Employee Plan and assumed through acquisitions. The number of RSUs reflects the application of the award multiplier of 1.70x as described above.

Restricted Stock Awards. The following table summarizes restricted stock award activities during fiscal 2021 under the 2005 Directors Plan and 2017 Directors Plan:


	Restricted Shares	Weighted-Average Grant Date Fair Value
	(in thousands, except per share)
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
Granted	5	$	261.01
Vested	(9)	$	140.97
Forfeited	—	$	—
Unvested at October 31, 2021	5	$	261.01

Valuation and Expense of Stock-Based Compensation. The Company estimates the fair value of stock options and employee stock purchase rights under the ESPP 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 and employee stock purchase plan rights. 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 employee stock purchase rights 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 such awards, which 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.

The assumptions presented in the following table were used to estimate the fair value of stock options and employee stock purchase rights granted under the Company’s stock plans or stock plans assumed from acquisitions:


	Year Ended October 31,
	2021	2020	2019
Stock Options
Expected life (in years)	4.1	4.1	4.1
Risk-free interest rate	0.35%- 1.00%	0.26% - 1.71%	1.28% - 2.73%
Volatility	29.19% -32.28%	23.05% - 32.80%	23.16%- 24.76%
Weighted average estimated fair value	$61.58	$33.02	$22.86
ESPP
Expected life (in years)	0.5 - 2.0	0.5 - 2.0	0.5 - 2.0
Risk-free interest rate	0.00% - 0.19%	0.09% - 1.24%	1.54% - 2.60%
Volatility	28.02% - 39.68%	25.59% - 43.06%	23.73% - 27.86%
Weighted average estimated fair value	$89.82	$47.69	$35.18


	Year Ended October 31,
	2021		2020		2019
	(in thousands)
Cost of products	$	38,345	$	27,193	$	17,193
Cost of maintenance and service	13,817		9,327		6,385
Research and development expense	171,013		125,814		75,853
Sales and marketing expense	61,940		43,205		28,834
General and administrative expense	60,157		43,045		26,736
Stock-based compensation expense before taxes	345,272		248,584		155,001
Income tax benefit	(53,483)		(39,077)		(26,226)
Stock-based compensation expense after taxes	$	291,789	$	209,507	$	128,775

As of October 31, 2021, the Company had $680.8 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 2.2 years. As of October 31, 2021, the Company had $49.3 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.

Deferred plan assets and liabilities are as follows:


	As of October 31, 2021		As of October 31, 2020
	(in thousands)
Plan assets recorded in other long-term assets	$	343,820	$	269,737
Plan liabilities recorded in other long-term liabilities(1)	$	343,820	$	269,737

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:


	Year Ended October 31,
	2021		2020		2019
	(in thousands)
Increase (reduction) to cost of revenue and operating expense	$	71,603	$	21,469	$	27,759
Other income (expense), net	71,603		21,469		27,759
Net increase (decrease) to net income	$	—	$	—	$	—

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 $68.8 million, $54.7 million, and $50.7 million in fiscal 2021, 2020, and 2019, respectively. For employees in the United States and Canada, the Company matches pre-tax employee contributions up to a maximum of U.S. $3,000 and Canadian $4,000, respectively, per participant per year.