Plantronics 2012 Annual Report Download - page 38

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Other Guarantees and Obligations
The Company sells substantially all of its products to end users through distributors, retailers, OEMs, and telephony service
providers (collectively "customers"). As is customary in the Company’s industry and as provided for in local law in the U.S. and
other jurisdictions, Plantronics’ standard contracts provide remedies to its customers, such as defense, settlement, or payment of
judgment for intellectual property claims related to the use of its products. From time to time, the Company indemnifies customers
against combinations of loss, expense, or liability arising from various trigger events relating to the sale and use of its products
and services. In addition, Plantronics also provides protection to customers against claims related to undiscovered liabilities,
additional product liability, or environmental obligations. In the Company’s experience, claims made under these indemnifications
are rare and the associated estimated fair value of the liability is not material.
Claims and Litigation
The Company is involved in various legal proceedings arising in the normal course of conducting business. For such legal
proceedings, where applicable, the Company has accrued an amount that reflects the aggregate liability deemed probable and
estimable, but this amount is not material to the Company's financial condition, results of operations or cash flows. The Company
is not able to estimate an amount or range of any reasonably possible additional losses because of the preliminary nature of many
of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment
of claims made in many of these proceedings and the difficulty of predicting the settlement value of many of these
proceedings;however, based upon the Company's historical experience, the resolution of these proceedings is not expected to have
a material effect on the Company's financial condition, results of operations or cash flows.
11. CREDIT AGREEMENT
In May 2011, the Company entered into a credit agreement ("Credit Agreement") with Wells Fargo Bank, National Association
("Bank"). The Credit Agreement provides for a $100.0 million unsecured revolving line of credit ("line of credit") and, if requested
by the Company, the Bank may increase its commitment thereunder by up to $100.0 million, for a total facility size of up to $200.0
million. As of March 31, 2012, the Company had outstanding borrowings of $37.0 million under the line of credit.
Loans under the Credit Agreement bear interest at the election of the Company (i) at the Bank's announced prime rate less 1.50%
per annum, (ii) at a daily one month LIBOR rate plus 1.10% per annum or (iii) at an adjusted LIBOR rate, for a term of one, three
or six months, plus 1.10% per annum. Interest on the loans is payable quarterly in arrears. In addition, the Company pays a fee
equal to 0.20% per annum on the average daily unused amount of the line of credit, which is payable quarterly in arrears.
Principal, together with accrued and unpaid interest, is due on the maturity date, May 9, 2014. The Company may prepay the
loans and terminate the commitments in whole at any time, without premium or penalty, subject to reimbursement of certain costs
in the case of LIBOR loans.
The Company's obligations under the Credit Agreement are guaranteed by the Company's domestic subsidiaries, subject to certain
exceptions.
The line of credit requires the Company to comply with a maximum ratio of funded debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA") and a minimum EBITDA coverage ratio, in each case at each fiscal quarter end and
determined on a rolling four-quarter basis. In addition, the Company and its subsidiaries are required to maintain unrestricted
cash, cash equivalents and marketable securities plus availability under the Credit Agreement at the end of each fiscal quarter of
at least $200.0 million.
The line of credit contains affirmative covenants, including covenants regarding the payment of taxes and other liabilities,
maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. The line of credit also
contains negative covenants, among other things, limiting, subject to certain monetary thresholds, the ability of the Company to
incur debt, make capital expenditures, grant liens, make acquisitions and make investments. The events of default under the line
of credit include payment defaults, cross defaults with certain other indebtedness, breaches of covenants, judgment defaults and
bankruptcy and insolvency events involving the Company or any of its subsidiaries. The Company was in compliance with all
covenants at March 31, 2012.
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12. STOCK PLANS AND STOCK-BASED COMPENSATION
Stock Plans
Stock options granted subsequent to September 2007 generally vest over a three-year period. Options granted from September
2004 to September 2007 generally vested over a four-year period. Restricted stock grants generally have vesting periods over
three or four years, depending on the size of the grant. The Management Equity Committee is authorized to make option and
restricted stock grants to employees who are not senior executives pursuant to guidelines approved by the Compensation Committee
and subject to quarterly reporting to the Compensation Committee. The Company currently grants options and restricted stock
from only the 2003 Stock Plan. The Company settles stock option exercises and releases of vested restricted stock with newly
issued common shares.
2003 Stock Plan
In June 2003, the Board of Directors ("Board") and stockholders approved the Plantronics Inc. Parent Corporation 2003 Stock
Plan (the "2003 Stock Plan"). The 2003 Stock Plan, which has a term of 10 years (unless amended or terminated earlier by the
Board) and is due to expire in September 2013, provides for incentive stock options, non-qualified stock options, restricted stock
awards, stock appreciation rights, and restricted stock units. As of March 31, 2012, there have been 11,900,000 shares of common
stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization or certain corporate
reorganizations) cumulatively reserved since inception under the 2003 Stock Plan for issuance to employees, directors and
consultants of Plantronics.
Under the 2003 Stock Plan, all stock options may not be granted at less than 100% of the estimated fair market value of the
Company's common stock at the date of grant. Incentive stock options may not be granted at less than 100% of the estimated fair
market value of the Company's common stock at the date of grant, as determined by the Board, and the option term may not exceed
7 years. Incentive stock options granted to a 10% stockholder may not be granted at less than 110% of the estimated fair market
value of the common stock at the date of grant and the option term may not exceed five years.
Awards of restricted stock and restricted stock units with a per share or per unit purchase price less than the fair market value on
the grant date that were granted from July 26, 2006 through August 4, 2011 are counted against the total number of shares issuable
under the Plan as 2.5 shares for every 1 share subject thereto. No participant shall receive restricted stock awards in any fiscal
year having an aggregate initial value greater than $2.0 million, and no participant shall receive restricted stock units in any fiscal
year having an aggregate initial value greater than $2.0 million.
At March 31, 2012, options to purchase 2,828,087 shares of common stock and unvested restricted stock of 815,440 were
outstanding, and there were 2,608,941 shares available for future grant under the 2003 Stock Plan which takes into account the
2.5 ratio for grants of restricted stock during the specific time period as noted above.
1993 Stock Option Plan
In September 1993, the Board approved the Plantronics Inc. Parent Corporation 1993 Stock Option Plan (the "1993 Stock Option
Plan"). Under the 1993 Stock Option Plan, there were 22,927,726 shares of common stock (which number is subject to adjustment
in the event of stock splits, reverse stock splits, recapitalization, or certain corporate reorganizations) cumulatively reserved since
inception for issuance to employees and consultants of Plantronics. The 1993 Stock Option Plan, which provided for incentive
stock options as well as nonqualified stock options to purchase shares of common stock, had a term of 10 years; therefore, the
ability to grant new options under this 1993 Stock Option Plan expired in September 2003. At March 31, 2012, options to purchase
475,788 shares of common stock were outstanding under the 1993 Stock Option Plan.
2002 Employee Stock Purchase Plan ("ESPP")
On June 10, 2002, the Board approved the 2002 ESPP, which was approved by the stockholders on July 17, 2002, to provide
certain employees with an opportunity to purchase Plantronics' common stock through payroll deductions. The plan qualifies
under Section 423 of the Internal Revenue Code. Under the 2002 ESPP, which is effective through June 2012, the purchase price
of Plantronics' common stock is equal to 85% of the lesser of the fair market value closing price of Plantronics' common stock on
(i) the first day of the offering period, or (ii) the last day of the offering period. Each offering period is generally six months
long. There were 182,209, 170,376 and 281,598, shares issued under the 2002 ESPP in fiscal years 2012, 2011 and 2010,
respectively. At March 31, 2012, there were 317,810 shares reserved for future issuance under the 2002 ESPP.
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