2K Sports 2009 Annual Report Download - page 104

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Restricted Stock
Restricted stock awards granted to employees under our equity incentive plans generally vest over 3 years
from the date of grant. Certain restricted stock awards granted to key officers, senior-level employees, and
key employees vest based on market conditions, primarily related to the performance of the price of our
common stock
On June 13, 2008, pursuant to an amendment to our Management Agreement, we granted 600,000 shares
of restricted stock to ZelnickMedia that vest annually over a three year period and 900,000 shares of
market-based restricted stock that vest over a four year period through 2012, provided that the price of our
common stock outperforms 75% of the companies in the NASDAQ Industrial Index. For the years ended
October 31, 2009 and 2008, we recorded $2,534 and $2,227, respectively, of stock-based compensation (a
component of general and administrative expenses) related to these grants of restricted stock.
We measure the fair value of our market-based awards to employees and non-employees using the Monte
Carlo Simulation method, which takes into account assumptions such as the expected volatility of our
common stock, the risk-free interest rate based on the contractual term of the award, expected dividend
yield, vesting schedule and the probability that the market conditions of the award will be achieved.
The estimated value of market-based restricted stock awards granted to employees during the years ended
October 31, 2009 and 2008 was $6.00 per share and $16.37 per share, respectively. Each reporting period,
we remeasure the fair value of the unvested portion of the market-based restricted stock awards granted to
ZelnickMedia during 2008. For the years ended October 31, 2009 and 2008 the estimated value of these
awards was $4.67 per share and $9.38 per share, respectively. The following table summarizes the
weighted-average assumptions used in the Monte Carlo Simulation valuation method:
Year Ended October 31, 2009 Year Ended October 31, 2008
Employee Non-Employee Employee Non-Employee
Market-Based Market-Based Market-Based Market-Based
Risk-free interest rate 1.2% 1.5% 3.1% 2.3%
Expected stock price volatility 60.8% 61.4% 51.8% 52.1%
Expected service period (years) 2.0 2.9 2.0 2.6
Dividends None None None None
The following table summarizes the activity in non-vested restricted stock awarded to employees and
ZelnickMedia under our stock-based compensation plans:
Weighted
Average Fair
Shares Value on
(in thousands) Grant Date
Non-vested restricted stock at October 31, 2008 3,131 $23.23
Granted 4,245 9.49
Vested (1,798) 14.55
Forfeited (258) 15.49
Non-vested restricted stock at October 31, 2009 5,320 $ 9.98
As of October 31, 2009, the total future unrecognized compensation cost, net of estimated forfeitures,
related to outstanding unvested restricted stock was approximately $42,372 and will be recognized as
compensation expense on a straight-line basis over the remaining vesting period, or capitalized as software
development costs.
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