A new form of Restricted stock called Dynamic Restricted StockDynamic Restricted Stock… An improvement on Traditional Restricted Stock http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470471921.html

1. Dynamic Restricted Stock… An improvement on Traditional
Restricted Stock
Questions?
Is a grant of restricted stock a performance award or is it more
a deferred cash salary or bonus where the salary or bonus is
paid in the form of shares of stock after being delayed to when
the Restricted Stock vests. How is the grant value dependent on
the employee/executive’s performance or even the stock
performance. If the stock goes down 30 % when the vesting
period expires the employee still receives the same amount of
stock, although it is worth 30% less. How can that be
considered a performance payment?
It is true that if the stock goes up 40%, the employee receives
more value but the same number of shares and that 40%
increase may be a true performance payment.
So in order to make the Restricted Stock a true performance
payment, I have created a new type of restricted stock called
Dynamic Restricted Stock.
The number of shares that the employee receives at the grant
are tied to the value of the stock at vesting.

2. For example:
If 5,000 shares are granted on the grant day, that number
either increases or decreased depending on the price of the
stock on the vesting day. If the stock is trading at $50 on the
grant day and is trading at $24.99 or less on the vesting day, the
employee receives no vested shares and the original grant is
cancelled. If the shares are trading at $50 on the vesting day,
the employee receives 5000 shares and the rest are cancelled.
If the stock is trading at $75 or higher, the employee receives
10,000 shares.

3. The Matrix below shows the amount of stock
received at vesting for various prices of the stock;
Stock price….Stock price…..# of Shares...# of Shares
Grant day…..Vesting day……..Granted…...Vesting
$50……………….$80……………….5,000……….10,000
$50……………....$75………….……5,000……….10,000
$50……………….$70………….……5,000……..….9,000
$50……………....$65……………….5,000………...8,000
$50….……………$60………………..5,000……..…7,000
$50……………….$55……………..…5,000………..6,000
$50……….……..$50………………..5,000…….…..5,000
$50……………....$45……………….5,000…………4,000
$50….……………$40………………..5,000……..…3,000
$50……………….$30……………..…5,000………..2,000
$50…………...….$25………………..5,000………..1,000
$50…………below $25…………….5,000………………0

4. If the company wished to continue the alignment beyond the
vesting day, the value of the shares that vest above 7,000 could
be granted as ESOs with current market exercise prices and 10
maximum years to expiration. Below is the Matrix
Stock price….Stock price…..# of Shares...# of Shares……Val..of
Grant day…..Vesting day……..Granted…...Vesting………New ESOs
$50……………….$80……………..….5,000…………7,000………$300,000
$50……………....$75 ……………..…5,000…..…….7,000………$250,000
$50……………….$70………….… .…5,000…………7,000……….$200,000
$50……………....$65…………….…..5,000…….....7,000….……$150,000
$50….……………$60………………...5,000……..…7,000…….…$100,000
$50……………….$55……………...…5,000………..6,000……...…$50,000
$50……….……..$50…………….……5,000…….….5,000 0
$50……………....$45…………………5000…………4,000 0
$50….……………$40………………...5,000……..…3,000 0
$50……………….$30……………..….5,000………..2,000 0
$50…………...….$25………………...5,000…….....1,000 0
$50…………below $25……………..5,000………………0 0