Our stock-based compensation plans are broad-based, long-term retention programs intended to attract and retain talented employees and align stockholder and employee interests. For similar reasons, we also granted non-employee equity awards, which are subject to variable accounting, to ZelnickMedia in connection with their contract to provide executive management services to us. We began replacing stock option awards with restricted stock awards during the fiscal year ended October 31, 2007. We issue shares to employees on the date the restricted stock is granted and therefore shares granted have voting rights, participate in dividends and are considered issued and outstanding.

In April 2009, our stockholders approved our 2009 Stock Incentive Plan (the "2009 Plan"). The aggregate number of shares issuable under this plan is 6,409,000, representing 4,900,000 new shares available for grant approved by our stockholders and 1,509,000 shares allocated from the Incentive Stock Plan and 2002 Stock Option Plan (the "2002 Plan"). In April 2010, our stockholders approved an amendment to the 2009 Plan to increase the available shares for issuance by 2,750,000. The 2009 Plan is administered by the Compensation Committee of the Board of Directors and allows for awards of restricted stock, deferred stock and other stock-based awards of our common stock to employees and non-employees. As of March 31, 2011, there were approximately 2,244,000 shares available for issuance under the 2009 Plan.

In April 2008, our stockholders approved an increase to the number of shares available for grant under the Incentive Stock Plan from 4,500,000 to 6,500,000. The Incentive Stock Plan is administered by the Compensation Committee of the Board of Directors and allows for awards of restricted stock, deferred stock and other stock-based awards of our common stock to employees and non-employees. As of March 31, 2011, there were no shares available for issuance under the Incentive Stock Plan.

In June 2002, our stockholders approved our 2002 Plan, as previously adopted by our Board of Directors, pursuant to which officers, directors, employees and consultants may receive options to purchase shares of our common stock. The aggregate amount of shares issuable under the 2002 Plan is 11,000,000 shares. As of March 31, 2011, there were no shares available for issuance under the 2002 Plan.

Subject to the provisions of the plans, the Board of Directors or any Committee appointed by the Board of Directors, has the authority to determine the individuals to whom the equity awards are to be granted, the number of shares to be covered by each equity award, the vesting period, restrictions, if any, on the equity award, the terms and conditions of the equity award.

The following table summarizes stock-based compensation expense resulting from stock options and restricted stock included in our Consolidated Statements of Operations:

	Fiscal Year Ended March 31,				Five Months Ended March 31		Fiscal Year Ended October 31,

	2011		2010		2010		2009		2008
			(Unaudited)
Cost of goods sold	$	10,695	$	5,213	$	2,152	$	6,094	$	13,461
Selling and marketing		4,659		3,321		1,492		2,551		2,370
General and administrative		9,781		14,319		4,908		14,119		19,678
Research and development		3,630		3,650		1,927		3,169		4,878

Stock-based compensation expense		28,765		26,503		10,479		25,933		40,387
Capitalized stock-based compensation expense		11,266		13,521		4,617		11,413		8,215

Total stock-based compensation expense	$	40,031	$	40,024	$	15,096	$	37,346	$	48,602

During the fical years ended March 31, 2011 and 2010, five months ended March 31, 2010 and fiscal years ended October 31, 2009 and 2008, we recorded $3,159, $6,456, $1,588, $6,502 and $13,481, respectively, of stock-based compensation expense for non-employee awards, which was included in general and administrative expenses.

We capitalize and amortize stock-based compensation awards in accordance with our software development cost accounting policy.

Restricted stock awards granted to employees under our stock-based compensation 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 measured annually on a cumulative basis. For the fiscal years ended March 31, 2011 and 2010 and fiscal years ended October 31, 2009 and 2008, we recorded expenses of $1,594, $2,467, $2,534 and $2,227, respectively, and for the five months ended March 31, 2010, we recorded a benefit of $104 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 fiscal years ended March 31, 2011 and 2010, five months ended March 31, 2010 and fiscal years ended October 31, 2009 and 2008 was $15.36, $8.96, $9.25, $6.00 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 fiscal years ended March 31, 2011 and 2010, five months ended March 31, 2010 and fiscal years ended October 31, 2009 and 2008 the estimated value of these awards was $1.11, $3.20, $2.58, $4.67 and $9.38 per share, respectively. The following table summarizes the weighted-average assumptions used in the Monte Carlo Simulation method:

	Fiscal Year Ended												Five Months Ended

	March 31, 2011						March 31, 2010						March 31, 2010
	Employee Market-Based			Non-Employee Market-Based			Employee Market-Based			Non-Employee Market-Based			Employee Market-Based			Non-Employee Market-Based
Risk-free interest rate		1.4	%		0.5	%		1.6	%		1.4	%		1.6	%		1.1	%
Expected stock price volatility		52.6	%		55.0	%		58.0	%		66.4	%		57.2	%		69.2	%
Expected service period (years)		2.0			4.0			2.0			3.3			2.0			3.5
Dividends		None			None			None			None			None			None

	Fiscal Year Ended

	October 31, 2009						October 31, 2008
	Employee Market-Based			Non-Employee Market-Based			Employee Market-Based			Non-Employee 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 Value on Grant Date

Non-vested restricted stock at March 31, 2010	6,261		$	9.34
Granted	1,864			12.30
Vested	(2,869	)		10.77
Forfeited	(138	)		10.24

Non-vested restricted stock at March 31, 2011	5,118		$	9.68

As of March 31, 2011, the total future unrecognized compensation cost, net of estimated forfeitures, related to outstanding unvested restricted stock was approximately $45,838 and will be recognized as compensation expense on a straight-line basis over the remaining vesting period, or capitalized as software development costs.

As of March 31, 2011 and 2010 and October 31, 2009, there were outstanding stock options granted under our stock-based compensation plans to purchase in the aggregate approximately 2,317,000, 3,514,000 and 3,803,000 shares of our common stock, respectively. As of March 31, 2011, the outstanding stock options are exercisable and expire at various times to the fiscal year ending March 31, 2018. Options granted generally vest over a period of three to four years and expire within a period of five to ten years.

Pursuant to the Management Agreement, in August 2007, we issued stock options to ZelnickMedia to acquire 2,009,075 shares of our common stock at an exercise price of $14.74 per share, which vested over 36 months and expire 10 years from the date of grant. Each month, we remeasured the fair value of the unvested portion of such options and recorded compensation expense for the difference between total earned compensation at the end of the period and total earned compensation at the beginning of the period. As a result, changes in the price of our common stock impacted compensation expense or benefit recognized from period to period. For the fiscal years ended March 31, 2011 and 2010, five months ended March 31, 2010 and fiscal years ended October 31, 2009 and 2008 we recorded $1,565, $3,989, $1,692, $3,968 and $11,254 respectively, of stock-based compensation related to this option grant.

The following table summarizes the activity in stock options awarded to employees and ZelnickMedia under our stock-based compensation plans and also includes non-plan options:

		Fiscal Year Ended					Five Months Ended					Fiscal Year Ended

		March 31, 2011					March 31, 2010					October 31, 2009					October 31, 2008
(options in thousands)		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of period			3,514		$	18.17		3,803		$	18.45		4,347		$	18.92		5,914		$	19.72
	Exercised		(65	)		11.30		—			—		(2	)		10.42		(1,236	)		21.00
	Forfeited		(1,132	)		24.30		(289	)		21.89		(542	)		22.24		(331	)		19.36

Outstanding at end of period			2,317		$	15.37		3,514		$	18.17		3,803		$	18.45		4,347		$	18.92

Exercisable at period-end			2,317		$	15.37		3,183		$	18.43		3,133		$	19.08		2,588		$	20.84
Remaining weighted average contractual life of options exercisable (years)						5.7					4.3					4.1					3.8

The total estimated fair value of options vested during the fiscal years ended March 31, 2011 and 2010, five months ended March 31, 2010 and fiscal years ended October 31, 2009 and 2008 was $1,880, $5,225, $1,928, $7,848 and $19,376, respectively.

The following summarizes information about stock options outstanding and exercisable at March 31, 2011 (options in thousands):

			Options Outstanding and Exercisable

					Weighted Average Remaining Contractual Life
Exercise Price Ranges							Weighted Average Exercise Price
Exercise Price Ranges			Number of Options Outstanding						Aggregate Intrinsic Value
From	To		Number of Options Outstanding						Aggregate Intrinsic Value
$10.42	$	15.39		2,033		6.3	$	14.70
15.50		20.68		184		1.0		19.68
20.70		24.51		100		1.0		21.03

				2,317		5.7		15.37	$	1,354

The fair value of our stock options was estimated using the Black-Scholes option-pricing model. This model requires the input of assumptions regarding a number of complex and subjective variables that would usually have a significant impact on the fair value estimate. These variables included, but were not limited to, the volatility of our common stock price, the current market price of our common stock, the risk-free interest rate and expected exercise term. The following table summarizes the weighted average assumptions used in the Black- Scholes option-pricing model to value outstanding stock options awarded to ZelnickMedia in 2007 and employee stock options, which were last granted in 2007:

	Fiscal Year Ended March 31,						Five Months Ended March 31			Fiscal Year Ended October 31,

	2011			2010			2010			2009			2008
Risk-free interest rate		3.4	%		3.4	%		3.6	%		3.2	%		3.9	%
Expected stock price volatility		57.2	%		62.3	%		59.6	%		67.4	%		58.8	%
Expected term until exercise (years)		7.3			8.0			7.7			8.4			9.4
Dividends		None			None			None			None			None

For the fiscal years ended March 31, 2011 and 2010, five months ended March, 31, 2010 and fiscal years ended October 31, 2009 and 2008, we estimated stock price volatility of all stock-based compensation awards using a combination of historical volatility and implied volatility for publicly traded options on our common stock. In addition, stock-based compensation expense is calculated based on the number of awards that are ultimately expected to vest, and therefore has been reduced for estimated forfeitures. Our estimate of expected forfeitures is based on our historical annual forfeiture rate of 5%. The estimated forfeiture rate, which is evaluated at each balance sheet date throughout the life of the award, provides a time-based adjustment of forfeited shares. The estimated forfeiture rate is reassessed at each balance sheet date and may change based on new facts and circumstances.