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 2020, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 9.0 million. As of January 1, 2022, the total number of shares available for future issuance under the Omnibus Plan was 14.4 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 January 1, 2022, 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.


	2021		2020		2019
	(In thousands)
Stock options	$	9,051	$	8,062	$	6,806
Restricted stock	181,946		173,193		164,078
ESPP	19,093		16,013		10,663
Total stock-based compensation expense	$	210,090	$	197,268	$	181,547

Income tax benefit	$	33,958	$	31,857	$	30,118


	2021		2020		2019
	(In thousands)
Cost of product and maintenance	$	4,161	$	2,922	$	2,759
Cost of services	3,375		3,720		3,510
Marketing and sales	43,264		42,096		39,088
Research and development	131,247		124,999		114,656
General and administrative	28,043		23,531		21,534
Total stock-based compensation expense	$	210,090	$	197,268	$	181,547

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 2021, 2020 and 2019 were as follows:


	2021			2020			2019
Dividend yield	None			None			None
Expected volatility	31.7		%	25.1		%	24.4		%
Risk-free interest rate	1.02		%	1.36		%	2.47		%
Expected term (in years)	4.8			4.8			4.8
Weighted average fair value of options granted	$	46.10		$	19.38		$	14.58


		Weighted Average		Weighted Average Remaining Contractual Terms	Aggregate Intrinsic
	Shares	Exercise Price		(Years)	Value
	(In thousands)				(In thousands)
Options outstanding as of January 2, 2021	3,934	$	36.72
Granted	612	159.25
Exercised	(1,066)	22.37
Forfeited	(61)	61.38
Options outstanding as of January 1, 2022	3,419	$	62.69	3.5	$	422,830
Options vested as of January 1, 2022	2,425	$	39.16	2.7	$	356,981

Cadence had total unrecognized compensation expense related to stock option grants of $32.8 million as of January 1, 2022, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.7 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 January 1, 2022, Cadence had 1.3 million shares of unvested long-term, market-based performance stock awards outstanding.


	2021		2020		2019
	(In thousands)
Stock-based compensation expense related to performance-based restricted stock	$	16,225	$	14,859	$	12,640
Stock-based compensation expense related to market-based performance stock awards	6,453		8,335		7,019


		Weighted Average Grant Date		Weighted Average Remaining Vesting Terms	Aggregate Intrinsic
	Shares	Fair Value		(Years)	Value
	(In thousands)				(In thousands)
Unvested shares as of January 2, 2021	6,239	$	63.12
Granted	1,688	141.97
Vested	(2,570)	61.61
Forfeited	(426)	75.92
Unvested shares as of January 1, 2022	4,931	$	89.91	1.2	$	918,769

Cadence had total unrecognized compensation expense related to restricted stock grants of $341.0 million as of January 1, 2022, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.0 years.

Cadence provides an ESPP that enables eligible employees to purchase shares of its common stock. Offering periods under the plan last a duration of six months beginning on either February 1 or August 1, with the purchase dates falling on the last day of the six-month offering period. For the offering periods that commenced February 1, 2021 and August 1, 2021, 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 12% of their annual base earnings plus bonuses and commissions, and subject to a limit in any calendar year of $15,000. The ESPP may be amended from time to time. As of January 1, 2022, the total number of shares available for future issuance under the ESPP was 4.6 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 2021, 2020 and 2019 were as follows:


	2021			2020			2019
Dividend yield	None			None			None
Expected volatility	31.5		%	32.6		%	27.9		%
Risk-free interest rate	0.07		%	0.80		%	2.23		%
Expected term (in years)	0.5			0.5			0.5
Weighted average fair value of options granted	$	33.77		$	23.08		$	14.37


	2021		2020		2019
	(In thousands, except per share amounts)
Cadence shares purchased under the ESPP	624		785		988
Cash received for the purchase of shares under the ESPP	$	63,932	$	48,328	$	38,290
Weighted average purchase price per share	$	102.41	$	61.55	$	38.74

*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.