10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2001

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 1-12696

Plantronics, Inc.
(Exact name of Registrant as Specified in its Charter)

 

Delaware	77-0207692
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

345 Encinal Street
Santa Cruz, California    95060
(Address of Principal Executive Offices including Zip Code)

(831) 426-5858
(Registrant's Telephone Number, Including Area Code)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES [   ] NO [X]

    The number of shares outstanding of registrant's common stock as of February 8, 2002 was 46,374,134.

Plantronics, Inc.
FORM 10-Q
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page No.
Item 1. Financial Statements (unaudited):
Balance Sheets as of March 31, 2001 and December 31, 2001	3
Statements of Operations for the Three and            Nine Months Ended December 31, 2000 and 2001	4
Statements of Cash Flows for the Nine            Months Ended December 31, 2000 and 2001	5
Notes to Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
PART II. OTHER INFORMATION
Item 1: Legal Proceedings	26
Item 2. Changes in Securities and Use of Proceeds	26
Item 3. Defaults Upon Senior Securities	26
Item 4. Submission of Matters to a Vote of Security Holders	26
Item 5. Other Information	26
Item 6. Exhibits and Reports on Form 8-K	26
Signature	27

Part I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLANTRONICS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

                                                             March 31,   December 31,
                                                              2001          2001
                                                          ------------  ------------
ASSETS                                                                              
Current assets:
     Cash and cash equivalents ......................... $     60,544  $     74,109
     Marketable securities .............................       13,385         8,582
     Accounts receivable, net ..........................       60,203        45,569
     Inventory, net ....................................       48,235        37,995
     Deferred income taxes .............................        7,110         5,827
     Other current assets ..............................        1,449         3,897
                                                          ------------  ------------
         Total current assets ..........................      190,926       175,979
Property, plant and equipment, net .....................       32,683        34,814
Goodwill, net ..........................................        6,292         6,292
Intangibles, net .......................................          579           331
Other assets, net ......................................        2,792         2,739
                                                          ------------  ------------
         Total assets .................................. $    233,272  $    220,155
                                                          ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY                                                
Current liabilities:
     Accounts payable .................................. $     10,836  $     13,654
     Accrued liabilities ...............................       30,793        34,123
     Income taxes payable ..............................       12,519        14,506
                                                          ------------  ------------
         Total current liabilities .....................       54,148        62,283
Deferred tax liability .................................        6,077         5,071
                                                          ------------  ------------
           Total liabilities ...........................       60,225        67,354
                                                          ------------  ------------
Stockholders' equity:
     Common stock, $0.01 par value per share; 100,000
       shares authorized, 59,098 and 59,204 shares
       issued and outstanding at March 31, 2001 and
       December 31, 2001, respectively..................          591           592
     Additional paid-in capital ........................      148,188       150,399
     Accumulated other comprehensive income ............       (1,172)       (1,072)
     Retained earnings .................................      207,626       233,079
                                                          ------------  ------------
                                                              355,233       382,998
     Less: Treasury stock (common: 9,919 and 12,336
       shares outstanding at March 31, 2001 and
       December 31, 2001, respectively) at cost ........     (182,186)     (230,197)
                                                          ------------  ------------
         Total stockholders' equity ....................      173,047       152,801
                                                          ------------  ------------
         Total liabilities and stockholders' equity .... $    233,272  $    220,155
                                                          ============  ============

See Notes to Unaudited Condensed Consolidated Financial Statements

PLANTRONICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net sales ...................................... $ 106,718  $  82,211  $ 311,010  $ 239,840
Cost of sales ..................................    47,277     42,610    136,250    123,304
                                                  ---------  ---------  ---------  ---------
    Gross profit ...............................    59,441     39,601    174,760    116,536
                                                  ---------  ---------  ---------  ---------
Operating expenses:
    Research, development and engineering ......     7,097      6,895     19,544     22,839
    Selling, general and administrative ........    22,729     22,052     66,787     63,427
                                                  ---------  ---------  ---------  ---------
           Total operating expenses ............    29,826     28,947     86,331     86,266
                                                  ---------  ---------  ---------  ---------
Operating income ...............................    29,615     10,654     88,429     30,270
Interest and other income, net .................       825        354        360      1,496
                                                  ---------  ---------  ---------  ---------
Income before income taxes .....................    30,440     11,008     88,789     31,766
Income tax expense .............................     9,132        501     26,637      6,313
                                                  ---------  ---------  ---------  ---------
Net income ..................................... $  21,308  $  10,507  $  62,152  $  25,453
                                                  =========  =========  =========  =========

Basic earnings per common share (Note 5) ....... $    0.43  $    0.22  $    1.27  $    0.53
                                                  =========  =========  =========  =========

Shares used in basic per share calculations.....    49,233     46,897     49,098     47,650
                                                  =========  =========  =========  =========

Diluted earnings per common share (Note 5) ..... $    0.40  $    0.21  $    1.17  $    0.51
                                                  =========  =========  =========  =========

Shares used in diluted per share calculations...    53,357     49,120     53,272     49,554
                                                  =========  =========  =========  =========

See Notes to Unaudited Condensed Consolidated Financial Statements

PLANTRONICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

                                                                    Nine Months Ended
                                                                     December 31,
                                                                 ----------------------
                                                                     2000        2001
                                                                 ----------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $   62,152  $   25,453
      Adjustments to reconcile net income to net cash
      provided by operating activities:
           Depreciation and amortization ......................      5,958       6,505
           Deferred income taxes ..............................       (605)        277
           Income tax benefit associated with stock options ...     10,129         422
           Loss on disposal of fixed assets .....................       35         135
      Changes in assets and liabilities:
           Accounts receivable, net ...........................    (19,722)     14,634
           Inventory, net .....................................    (16,620)     10,240
           Other current assets ...............................        309      (2,197)
           Other assets .......................................       (266)        (28)
           Accounts payable ...................................     (2,477)      2,817
           Accrued liabilities ................................     (1,956)      3,330
           Income taxes payable ...............................      6,335       1,987
                                                                 ----------  ----------
Cash provided by operating activities .........................     43,272      63,575
                                                                 ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Proceeds from maturities of marketable securities .......     12,750      19,053
      Purchase of marketable securities .......................    (15,550)    (14,500)
      Capital expenditures ....................................    (11,861)     (8,442)
                                                                 ----------  ----------
Cash used for investing activities ............................    (14,661)     (3,889)
                                                                 ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Purchase of treasury stock ..............................    (25,549)    (48,412)
      Proceeds from sale of treasury stock ....................      2,260       1,303
      Proceeds from exercise of stock options .................      8,044         887
      Other ...................................................         --         101
                                                                 ----------  ----------
Cash used for financing activities ............................    (15,245)    (46,121)
                                                                 ----------  ----------
Net increase in cash and cash equivalents .....................     13,366      13,565
Cash and cash equivalents at beginning of period ..............     40,271      60,544
                                                                 ----------  ----------
Cash and cash equivalents at end of period .................... $   53,637  $   74,109
                                                                 ==========  ==========
Supplemental disclosures of cash flow information:
   Cash paid for:
           Interest ........................................... $       68  $       79
           Income taxes ....................................... $   12,716  $   10,172

See Notes to Unaudited Condensed Consolidated Financial Statements

PLANTRONICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying interim condensed consolidated financial statements of Plantronics, Inc. ("Plantronics," "we", "our", or the "Registrant") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended March 31, 2001. The interim financial information is unaudited, but reflects all normal recurring adjustments which are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Certain prior period balances have been reclassified to conform to the current period presentation. The interim financial statements should be read in connection with the financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2001.

2. PERIODS PRESENTED

Our fiscal year-end is the Saturday closest to March 31 and the third fiscal quarter-end is the last Saturday in December. For purposes of presentation, we have indicated our accounting year ending on March 31, or the month-end for interim quarterly periods. Our fiscal quarters ended December 31, 2000, and December 31, 2001, consisted of thirteen weeks each.

3. DETAILS OF CERTAIN BALANCE SHEET COMPONENTS (IN THOUSANDS)

                                                              March 31,   December 31,
                                                               2001          2001
                                                           ------------  ------------
Accounts receivable, net:
    Accounts receivable from customers .................. $     62,876  $     48,433
    Less: allowance for doubtful accounts ...............       (2,673)       (2,864)
                                                           ------------  ------------
                                                          $     60,203  $     45,569
                                                           ============  ============

Inventory, net:
    Finished goods ...................................... $     27,040  $     19,959
    Work in process .....................................        1,280           999
    Purchased parts .....................................       19,915        17,037
                                                           ------------  ------------
                                                          $     48,235  $     37,995
                                                           ============  ============

Property, plant and equipment, net:
    Land ................................................ $      4,693  $      4,693
    Buildings and improvements (useful lives: 7-30 years)       14,692        15,805
    Machinery and equipment (useful lives: 2-10 years) ..       49,891        52,072
                                                           ------------  ------------
                                                                69,276        72,570
    Less: accumulated depreciation ......................      (36,593)      (37,756)
                                                           ------------  ------------
                                                          $     32,683  $     34,814
                                                           ============  ============

Accrued liabilities:
    Employee benefits ................................... $      9,730  $     11,262
    Accrued advertising and sales and marketing .........        5,836         5,995
    Warranty accrual ....................................        6,619         6,748
    Accrued other .......................................        8,608        10,118
                                                           ------------  ------------
                                                          $     30,793  $     34,123
                                                           ============  ============

4. FOREIGN CURRENCY TRANSACTIONS

The functional currency of our foreign sales and marketing and research and development operations is the local currency of the respective operations. The functional currency of the Mexican manufacturing operations and European sales and logistics headquarters is the U.S. dollar. Accordingly all revenues and cost of sales related to foreign operations are recorded using the U.S. dollar as functional currency. The assets and liabilities of the subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars at the current exchange rate in effect at the balance sheet date. Income and expense items are translated using the average exchange rate for the period. Cumulative translation adjustments are included in accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders' equity. Foreign currency transaction gains and losses are included in the results of operations.

Beginning in the first quarter of fiscal year 2002, we entered into foreign currency forward-exchange contracts, which typically mature in one month, to hedge the exposure to foreign currency fluctuations of expected foreign currency-denominated receivables, payables and cash balances. We record on the balance sheet at each reporting period the fair value of our forward-exchange contracts and record any fair value adjustments in results of operations. Gains and losses associated with currency rate changes on the contracts are recorded in results of operations, as other income (expense), offsetting transaction gains and losses on the related assets and liabilities.

During the first quarter of fiscal year 2002, we adopted SFAS No. 133 (Accounting for Derivative Instruments and Hedging Activities), as amended by SFAS No. 138 (Accounting for Certain Derivative Instruments and Certain Hedging Activities), which did not have a material impact on our financial position.

As of December 31, 2001, we had approximately $1.8 million of foreign currency forward-exchange contracts outstanding, denominated in the Euro, as a hedge against our forecasted foreign currency-denominated receivables, payables and cash balances. The following table summarizes our net currency position, and approximate U.S. dollar equivalent (in thousands), at December 31, 2001:

           Local Currency    Equivalent   Position
          ----------------  ------------ -----------
EUR                 2,042  $      1,800     Sell

Foreign currency transactions, net of the effect of hedging activity, resulted in a net loss of $0.2 million for the fiscal quarter ended December 31, 2001, included in other income (expense) in the results of operations, compared to net gains of approximately $0.1 million in the quarter ended December 31, 2000.

5. COMPUTATION OF EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist only of stock options.

In computing diluted earnings per common share, the average stock price for the period is used in determining the number of shares assumed to be purchased from exercise of stock options.

Following is a reconciliation of the numerators and denominators of the basic and diluted EPS:

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
(In thousands, except earnings per share)            2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net income...................................... $  21,308  $  10,507  $  62,152  $  25,453
                                                  =========  =========  =========  =========

Weighted average shares - basic.................    49,233     46,897     49,098     47,650
Effect of dilutive securities - employee
   stock options................................     4,124      2,223      4,174      1,904
                                                  ---------  ---------  ---------  ---------
Weighted average shares - diluted...............    53,357     49,120     53,272     49,554
                                                  =========  =========  =========  =========

Net earnings per common share - basic........... $    0.43  $    0.22  $    1.27  $    0.53
                                                  =========  =========  =========  =========

Net earnings per common share - diluted......... $    0.40  $    0.21  $    1.17  $    0.51
                                                  =========  =========  =========  =========

6. COMPREHENSIVE INCOME

Comprehensive income includes charges or credits to equity that are not the result of transactions with owners. The components of comprehensive income, net of tax, are as follows (in thousands):

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net income...................................... $  21,308  $  10,507  $  62,152  $  25,453
Other comprehensive income (loss):
  Change in accumulated translation adjustments.        --       (191)        --        100
                                                  ---------  ---------  ---------  ---------
Total........................................... $  21,308  $  10,316  $  62,152  $  25,553
                                                  =========  =========  =========  =========

7. SEGMENTS AND ENTERPRISE-WIDE DISCLOSURES

SEGMENTS. We are engaged in the design, manufacture, marketing and sales of telecommunications equipment including headsets, telephone headset systems, and other specialty telecommunications products. We consider ourselves to operate in one business segment. We have organized our operations to focus on three principal markets: call center and office products, mobile and computer products, and other specialty products. The following table presents net revenue by market (in thousands):

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net revenues from unaffiliated customers:
   Call center and office....................... $  83,542  $  56,009  $ 250,818  $ 180,009
   Mobile and computer..........................    19,381     23,058     48,258     52,576
   Other specialty products.....................     3,795      3,144     11,934      7,255
                                                  ---------  ---------  ---------  ---------
                                                 $ 106,718  $  82,211  $ 311,010  $ 239,840
                                                  =========  =========  =========  =========

MAJOR CUSTOMERS. No one customer accounted for 10% or more of total revenue from consolidated sales for the quarters ended December 31, 2000 and 2001.

GEOGRAPHIC INFORMATION. In geographical reporting, revenues are attributed to the geographical location of the sales and service organizations. The following table presents net revenues and long lived assets by geographic area (in thousands):

                                      Three Months Ended         Nine Months Ended
                                         December 31,              December 31,
                                    ------------------------  -----------------------
                                       2000         2001         2000        2001
                                    -----------  -----------  ----------  -----------
Net revenues from unaffiliated
customers:
   United States.................. $    75,801  $    58,413  $  214,768  $   165,765
   International..................      30,917       23,798      96,242       74,075
                                    -----------  -----------  ----------  -----------
                                   $   106,718  $    82,211  $  311,010  $   239,840
                                    ===========  ===========  ==========  ===========



                                       March 31,  December 31,
                                        2001         2001
                                    -----------  -----------
Long lived assets:
   United States.................. $    19,980  $    22,336
   International..................      12,703       12,478
                                    -----------  -----------
                                   $    32,683  $    34,814
                                    ===========  ===========

8. RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001, eliminates the pooling-of-interests method, and changes the criteria to recognize intangible assets apart from goodwill. The adoption of SFAS 141 did not have a significant impact on our financial position and results of operations.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS 142 requires, among other things, the discontinuance of goodwill amortization and the testing for impairment of goodwill at least annually. The adoption of SFAS 142 in the first quarter of the year ending March 30, 2002 did not have a material effect on our financial position and results of operations.

In April 2001, the FASB's Emerging Issues Task Force released Issue No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" ("EITF 00-25"), which will apply to us beginning in our fourth fiscal quarter. EITF 00-25 requires that consideration paid by a vendor to a reseller should be classified on the vendor's income statement as a reduction of revenue unless a separate identifiable benefit is received by the vendor, the fair value of the benefit can be reasonably estimated and the consideration does not exceed such value. We typically give various promotional consideration to our retailers and distributors, which we currently classify as sales and marketing expense. Because we are unable to clearly separate the benefits received from most of the promotional consideration we pay to our distributors and retailers, the majority of such consideration will be reclassified as a reduction of revenue, and financial statements for prior periods presented for comparative purposes will be reclassified to comply with the new requirements.  For our fourth fiscal quarter we estimate that the effect on revenues will be approximately $2.4 million offset by an equivalent reduction in selling, general and administrative expense. On a year-to-date basis through the end of our third fiscal quarter of 2002, we estimate the effects on revenue to be a reduction of $7.3 million offset by the same reduction in selling, general and administrative expense. There is no impact on operating margin, net income or EPS for this accounting change. 

On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, "Reporting Results of Operations Reporting the Effects of Disposal of a Segment of a Business". SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. We do not expect the adoption of SFAS 144 to have a significant impact on its financial statements.

9. GOODWILL AND INTANGIBLES

During the first quarter of fiscal year 2002, we early-adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". In accordance with SFAS 142, we discontinued goodwill amortization and tested goodwill for impairment as of April 1, 2001. No impairment loss appeared necessary. We will continue to test goodwill for impairment at least annually. Other intangible assets continue to be amortized over their expected useful life of three to five years.

The following table presents net income on a comparable basis, after adjustment for goodwill amortization (in thousands):

                                      Three Months Ended         Nine Months Ended
                                         December 31,              December 31,
                                    ------------------------  -----------------------
                                       2000         2001         2000        2001
                                    -----------  -----------  ----------  -----------
Reported net income............... $    21,308  $    10,507  $   62,152  $    25,453
 Add back : goodwill amortization.         174           --         521           --
                                    -----------  -----------  ----------  -----------
 Adjusted net income.............. $    21,482  $    10,507  $   62,673  $    25,453
                                    ===========  ===========  ==========  ===========
Basic earnings per share:
 As reported...................... $      0.43  $      0.22  $     1.27  $      0.53
 As adjusted...................... $      0.44  $      0.22  $     1.28  $      0.53

Diluted earnings per share:
 As reported...................... $      0.40  $      0.21  $     1.17  $      0.51
 As adjusted...................... $      0.40  $      0.21  $     1.18  $      0.51

10. SUBSEQUENT EVENTS

Subsequent to the end of the quarter we acquired Ameriphone, a leading supplier of amplified telephones and other solutions to address the needs of individuals with hearing impairment and other special needs. The sum of net assets, including goodwill and intangibles, less cash acquired was approximately $10.5 million, and was fully paid in cash. We have not yet finalized the allocation of purchase price.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CERTAIN FORWARD-LOOKING INFORMATION:

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may generally be identified by the use of such words as "expect," "anticipate," "believe," "intend," "plan," "will," or "shall," and include, but are not necessarily limited to, all of the statements marked below with an asterisk ("*"). In addition, we may from time to time make oral forward-looking statements. These forward-looking statements are based on current expectations and entail various risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth below under "Risk Factors Affecting Future Operating Results." The following discussions titled "Results of Operations" and "Financial Condition" should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere herein, our annual report on Form 10-K, as well as the section below entitled "Risk Factors Affecting Future Operating Results." We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this Quarterly Report.

RESULTS OF OPERATIONS:

The following table sets forth items from the Unaudited Condensed Consolidated Statements of Operations as a percentage of net sales.

                                                    Three Months Ended     Nine Months Ended
                                                       December 31,          December 31,
                                                  --------------------  --------------------
                                                     2000       2001       2000       2001
                                                  ---------  ---------  ---------  ---------
Net sales ......................................     100.0 %    100.0 %    100.0 %    100.0 %
Cost of sales ..................................      44.3       51.8       43.8       51.4
                                                  ---------  ---------  ---------  ---------
    Gross profit ...............................      55.7       48.2       56.2       48.6
                                                  ---------  ---------  ---------  ---------
Operating expenses:
    Research, development and engineering ......       6.7        8.4        6.3        9.5
    Selling, general and administrative ........      21.2       26.8       21.5       26.5
                                                  ---------  ---------  ---------  ---------
           Total operating expenses ............      27.9       35.2       27.8       36.0
                                                  ---------  ---------  ---------  ---------
Operating income ...............................      27.8       13.0       28.4       12.6
Interest and other income, net .................       0.7        0.4        0.1        0.6
                                                  ---------  ---------  ---------  ---------
Income before income taxes .....................      28.5       13.4       28.5       13.2
Income tax expense .............................       8.5        0.6        8.5        2.6
                                                  ---------  ---------  ---------  ---------
Net income .....................................      20.0 %     12.8 %     20.0 %     10.6 %
                                                  =========  =========  =========  =========

Net Sales. Net sales for the quarter ended December 31, 2001, decreased by 23% to $82.2 million, compared to $106.7 million for the quarter ended December 31, 2000. Net sales for the nine months ended December 31, 2001 were $239.8 million compared to $311.0 million for the nine months ended December 31, 2000, a decrease of 23%. Compared to the prior year, quarterly revenues declined in all major geographies and channels, with the exception of our OEM and Mobile businesses. The growth in our Mobile business was the result of a strong seasonal effect, media publicity associated with carrier safety campaigns, and strong orders from carriers. We believe, however, that the level of orders from our carriers was higher than the level of underlying demand, and that our fourth quarter mobile revenues will therefore be down sequentially. The overall decrease in quarterly revenues versus a year ago was driven by the continuing recession in the U.S. and the general economic slowdown in other countries in which we do business.

Our business continues to be impacted by a slowdown in global telecom and IT spending. We are also concerned that the recession that began in March of 2001 will continue or last longer than originally anticipated and may continue to adversely affect product demand. The December 2001, sales level reported by our distributors declined more steeply than is typical and now represents the lowest single month in the last several years. In addition to the lagging economy, we anticipate that our fourth quarter revenues will be affected by a number of factors, including the effect of an accounting change mandated by the Emerging Issues Task Force of the Financial Accounting Standards Board, "EITF 00-25" (Note 8), the acquisition of Ameriphone (Note 10), and the timing of certain orders that may have benefited us in our third quarter. We currently believe that our revenues and earnings in the fourth fiscal quarter of 2002 are likely to be lower than the third fiscal quarter.

Gross Profit. Gross profit for the quarter ended December 31, 2001, decreased 33% to $39.6 million (48.2% of net sales), compared to $59.4 million (55.7% of net sales) for the quarter ended December 31, 2000. Gross profit for the first three quarters of fiscal 2002 was $116.5 million, a decrease of 33% over the comparable period of fiscal 2001. The decline in gross margin percent from the prior year was due to a combination of factors. The largest factor was our product mix as we sold more of products that have lower gross margins than the corporate average, particularly our mobile products. Fixed overhead spending as a percent of revenue increased, driven by lower sales compared to the prior year's quarter. As a percent of total revenues, our retail channel has grown, especially revenues for mobile products. Warranty costs are higher in this sales channel due to the typically higher returns from consumers in particular. We anticipate that gross margins will continue to be affected by these factors in the fourth quarter.

Research, Development and Engineering. Research, development and engineering expenses for the quarter ended December 31, 2001, decreased 3% to $6.9 million (8.4% of net sales), compared to $7.1 million (6.7% of net sales) for the quarter ended December 31, 2000. Expenses for nine months ended December 31, 2001, were $22.8 million compared to $19.5 million for the nine months ended December 31, 2000. We have focused on broadening our product lines and continuing our investment in Bluetooth™ and other wireless technologies.

Selling, General and Administrative. Selling, general and administrative expenses for the quarter ended December 31, 2001, decreased 3% to $22.1 million (26.8% of net sales), compared to $22.7 million (21.2% of net sales) for the quarter ended December 31, 2000. For the nine months ended December 31, 2001, expenses were $63.4 million, a decrease of $3.4 million over the nine months ended December 31, 2000. The overall dollar decrease in the level of spending between years was due to a number of factors. Marketing spending increased compared to the prior year's quarter for marketing campaigns designed to help increase the sales of cellular headsets given the hands-free legislation which went into effect in New York in December, as well as other marketing campaigns organized around driver safety primarily in the U.S. This increase was offset by a decrease in sales spending, primarily as a result of lower revenues. General and administrative expenses increased as a percentage of net sales from the year ago quarter, mainly driven by the decline in revenues.

Operating Income. Operating income for the quarter ended December 31, 2001, decreased 64% to $10.7 million (13.0% of net sales), compared to $29.6 million (27.8% of net sales) for the quarter ended December 31, 2000. For the nine months ended December 31, 2001, operating income was $30.3 million compared to $88.4 million for the nine months ended December 31, 2000. The decrease was primarily driven by a decrease in revenues and gross margin. Management decided to hold operating expenses at approximately the same levels as they had been to focus on expanding our wireless product portfolio in anticipation of demand for these products when the economy recovers. This led to higher operating expenses as a percent of revenue, which contributed to lower operating margins and profit.

Interest and Other Income, Net. Interest and other income for the quarter ended December 31, 2001, was $0.4 million in income compared to $0.8 million in income for the quarter ended December 31, 2000. The net $0.4 million decrease in income was primarily due to reductions in interest income of $0.3 million and foreign exchange losses due to declining foreign exchange rates. Interest and other income for the nine months ended December 31, 2001, was $1.5 million in income compared to $0.4 million in income for the nine months ended December 31, 2000. The net $1.1 million increase in income was primarily due to a $0.8 million reduction of foreign exchange loss due to implementation of a hedging program in fiscal 2002 and to a $0.4 million expense in the prior year in connection with a secondary offering of stock by one of our stockholders.

Interest expense for fiscal 2002 is expected to be minimal.* In November 1999, we entered into a credit agreement with a major bank. In November 2001, we renewed this agreement at $75 million with a new expiration date of January 15, 2003. We currently have no borrowings under this agreement.

Income Tax Expense. Income tax expense for the quarter ended December 31, 2001, was $0.5 million compared to $9.1 million for the quarter ended December 31, 2000. During our third fiscal quarter of 2002, we successfully completed a routine state tax audit which resulted in a favorable tax adjustment. Excluding this favorable tax adjustment, our overall tax rate decreased from 30% to 28% due to declining profits in higher tax jurisdictions.

FINANCIAL CONDITION:

Operating Activities. During the nine months ended December 31, 2001, we generated $63.6 million of cash from operating activities, due primarily to $25.5 million in net income, decreases of $14.6 and $10.2 million in accounts receivable and inventory, respectively, increases of $2.8 and $3.3 million in accounts payable and accrued liabilities, respectively, and an increase of $2.0 million in income taxes payable. In comparison, we generated $43.3 million in cash from operating activities for the nine months ended December 31, 2000, due primarily to $62.2 million in net income, a tax benefit on stock options exercised of $10.1 million and an increase in income taxes payable of $6.3 million, offset by increases of $19.7 and $16.6 million in accounts receivable and inventory, respectively, and decreases of $2.5 and $2.0 million in accounts payable and accrued liabilities, respectively.

Investing Activities. During the nine months ended December 31, 2001, we purchased marketable securities of $14.5 million and received proceeds from maturities of marketable securities of $19.1 million. Capital expenditures of $8.4 million in the nine months ended December 31, 2001, were incurred principally in tooling and equipment for new products, furniture and fixtures and leasehold improvements for facilities expansion.

Financing Activities. In the nine months ended December 31, 2001, we repurchased 2,482,621 shares of our common stock for $48.4 million and reissued through employee benefit plans 66,269 shares of our treasury stock for $1.3 million. As of December 31, 2001, 239,000 shares remained under the repurchase plan authorized during the quarter. We received $0.9 million in proceeds from the exercise of stock options during the nine months ended December 31, 2001.

Subsequent to the end of the quarter, we completed the repurchase of all remaining shares under the plan. On January 25, 2002, we announced a new 1,000,000 share stock repurchase program.

Liquidity. As of December 31, 2001, we had working capital of $113.7 million, including $82.7 million of cash and cash equivalents and marketable securities, compared with working capital of $136.8 million, including $73.9 million of cash and cash equivalents and marketable securities, at March 31, 2001. Subsequent to the end of the quarter, we purchased Ameriphone, a leading supplier of amplified telephones and other solutions to address the needs of individuals with hearing impairment and other special needs. The sum of net assets, including goodwill and intangibles, less cash acquired was approximately $10.5 million. The consideration net of cash acquired, was fully paid in cash. We believe this acquisition will not have a material impact on our liquidity.

In November 2001, we renewed our revolving credit facility with a major bank at $75 million, including a letter of credit subfacility. The renewed facility and subfacility both expire on January 15, 2003. As of February 8, 2002, we have no cash borrowings under the revolving credit facility and $0.7 million outstanding under the letter of credit subfacility. The amounts outstanding under the letter of credit subfacility were principally associated with purchases of inventory. The terms of the credit facility contain covenants that materially limit our ability to incur debt and pay dividends, among other matters. These covenants may adversely affect us to the extent we cannot comply with them. We are currently in compliance with the covenants under this agreement.

We believe that our current cash balance and cash provided by operations, together with available borrowing capacity under our revolving credit facility and letter of credit subfacility, will be sufficient to fund operations for at least the next twelve months.*

RISK FACTORS AFFECTING FUTURE OPERATING RESULTS

Investors or potential investors in our stock should carefully consider the risks described below. The performance of our stock will reflect the performance of our business relative to, among other things, our competition, general economic and market conditions, and industry conditions. You should carefully consider the following factors in connection with any investment in our stock. Our business, financial condition and results of operations could be materially adversely affected if any of the risks occur. Should any or all of the following risks materialize, the trading price of our stock could decline and an investor could lose all or part of his or her investment.

THE CONTINUING GLOBAL ECONOMIC SLOWDOWN COULD RESULT IN A FURTHER REDUCTION IN OVERALL DEMAND FOR OUR PRODUCTS AND POTENTIAL UNCOLLECTABLE CUSTOMER RECEIVABLES, BOTH OF WHICH WOULD MATERIALLY ADVERSELY AFFECT OUR RESULTS.

While our markets have not exhibited highly cyclical behavior historically, our sales are affected by overall economic activity. If these trends are worse or longer than presently anticipated, this could cause us not to meet the levels of sales required to achieve our projected financial results, which could in turn materially adversely affect the market price of our stock. Also, if the overall economy continues to slow further this could affect the financial health of certain purchasers of our products, potentially resulting in the failure of such purchasers to pay amounts that they owe to us. Due to the current slowdown in the economy, the credit risks relating to these resellers/customers have increased. We are in the process of implementing programs to assist us in monitoring and mitigating these risks, but there can be no assurance that such programs will be effective in reducing our credit risks. We also continue to monitor credit exposures from weakened financial conditions in certain geographic regions and the impact that such conditions may have on the worldwide economy. We have recently experienced some losses due to customers failing to meet their obligations. Although these losses have not been significant, future payment defaults by customers could harm our business and have a material adverse effect on our operating results and financial condition.

A SUBSTANTIAL PORTION OF OUR SALES COME FROM THE CALL CENTER MARKET AND A DECREASE OF DEMAND IN THAT MARKET COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS.

We have historically derived, and continue to derive, a substantial portion of our net sales from the call center market. This market has grown significantly in recent years as new call centers have proliferated and existing call centers have expanded. In the third quarter of fiscal 2002, our sales in the call center market were below the level of sales in that market in comparable prior year periods. We do not believe that our decreasing sales are a result of market share gains by our competitors but, instead, believe that the sales slowdown is due to reduction in the level of overall market demand. While we believe that the call center market will grow in future periods, this growth could slow or revenues from this market could continue to decline in response to various factors. For example, consumer resistance to telemarketing could materially adversely affect growth in the call center market. A continued deterioration in general economic conditions could result in a reduction in the establishment of new call centers and in capital investments to expand or upgrade existing centers, and we believe this is in fact negatively affecting our business. Because of our reliance on the call center market, we will be affected more by changes in the rate of call center establishment and expansion and the communications products that call center agents use than would a company serving a broader market. Any decrease in the demand for call centers and related headset products could cause a decrease in the demand for our products, which would materially adversely affect our business, financial condition and results of operations.

WE ARE COUNTING ON THE OFFICE, MOBILE, COMPUTER AND RESIDENTIAL MARKETS TO DEVELOP, AND WE COULD BE MATERIALLY ADVERSELY AFFECTED IF THEY DO NOT DEVELOP AS WE EXPECT.

While the call center market is still a substantial portion of our business, we believe that our future prospects will depend in large part on the growth in demand for headsets in the office, mobile, computer and residential markets. These communications headset markets are relatively new and undeveloped. Moreover, we do not have extensive experience in selling headset products to customers in these markets. If the demand for headsets in these markets fails to develop, or develops more slowly than we currently anticipate, or if we are unable to effectively market our products to customers in these markets, it would have a material adverse effect on the potential demand for our products and on our business, financial condition and results of operations. These headset markets are also subject to general economic conditions and if there is a continued slowing of national or international economic growth and the recession continues longer than we anticipated, these markets may not materialize to the levels we require to achieve our anticipated financial results, which could in turn materially adversely affect the market price of our stock.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO A NUMBER OF CAUSES OUTSIDE OUR CONTROL.

Our quarterly results of operations may vary significantly in the future for a variety of reasons, including the following:

• general economic conditions, compounded by the events on and following September 11^th and the war in Afghanistan;
• changes in demand for our products;
• insolvency of purchasers of our products or failure of purchasers of our products to pay amounts due to us;
• timing and size of orders from customers;
• price erosion;
• cancellations, inability to ramp production or delays in deliveries of components and subassemblies by our suppliers;
• variances in the timing and amount of engineering and operating expenses;
• distribution channel mix variations;
• changes in the levels of cooperative advertising or market development funding required by retail resellers of our products;
• delays in shipments of our products;
• material product returns and customer credits;
• new product introductions by us or our competitors;
• entrance of new competitors;
• changes in actual or target inventory levels of our channel partners;
• increases in the costs of our raw materials, components and subassemblies;
• changes in the mix of products sold by us; and
• seasonal fluctuations in demand and linearity of sales within the quarter (historically our fourth fiscal quarter has been back-end loaded, impairing our visibility to accurately forecast revenues based on run rates).

Each of the above factors is difficult to forecast and thus could have a material adverse effect on our business, financial condition and results of operations.

We generally ship most orders during the quarter in which they are received, and, consequently, we do not have a significant backlog of orders. As a result, quarterly net sales and operating results depend primarily on the volume and timing of orders received during the quarter. It is difficult to forecast orders for a given quarter. Since a large portion of our operating expenses, including rent, salaries and certain manufacturing expenses, are fixed and difficult to reduce or modify, if net sales do not meet our expectations, our business, financial condition and results of operations could be materially adversely affected.

Our operating results can also vary substantially in any period depending on the mix of products sold and the distribution channels through which they are sold. In the event that sales of lower margin products or sales through lower margin distribution channels in any period represent a disproportionate share of total sales during such period, our operating results would be materially adversely affected.

We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indicative of future operating results. In addition, our operating results in a future quarter or quarters may fall below the expectations of securities analysts or investors, and, as a result, the price of our Common Stock might fall.

IF WE DO NOT MATCH PRODUCTION TO DEMAND WE WILL BE AT RISK OF LOSING BUSINESS OR OUR GROSS MARGINS COULD BE MATERIALLY ADVERSELY AFFECTED.

Historically, we have generally been able to increase production to meet increasing demand. However, the demand for our products is dependent on many factors and such demand is inherently difficult to forecast. We have experienced sharp fluctuations in demand, especially for headsets for wireless and cellular phones. In addition, current global events, such as the war in Afghanistan, the terrorist scare in the U.S., and the anthrax concerns may cause the economy to be more volatile, making it more difficult to match supply and demand in the marketplace. Significant unanticipated fluctuations in demand could cause the following operating problems, among others:

• If forecasted demand does not develop, we could have excess production or excess capacity. Excess production could result in higher inventories of finished products, components and subassemblies. If we were unable to sell these inventories, we would have to write off some or all of our inventories of obsolete products and unusable components and subassemblies. Excess manufacturing capacity could lead to higher production costs and lower margins.
• Significant reduction in production levels to address decreases in demand may leave us unprepared to meet a rapid increase in demand for our products.
• If demand increases beyond that forecasted, we would have to rapidly increase production. We depend on suppliers to provide additional volumes of components and subassemblies, and, therefore, might not be able to increase production rapidly enough to meet unexpected demand. This could cause us to fail to meet customer expectations. There could be short-term losses of sales while we are trying to increase production. If customers turn to competitive sources of supply to meet their needs, there could be a long-term impact on our revenues.
• Rapid increases in production levels to meet unanticipated demand could result in higher costs for components and subassemblies, increased expenditures for freight to expedite delivery of required materials, and higher overtime costs and other expenses. These higher expenditures could lower our profit margins. Further, if production is increased rapidly, there may be decreased manufacturing yields, which may also lower our margins.

Any of the foregoing problems could materially adversely affect our business, financial condition and results of operations.

WE DEPEND ON OUR SUPPLIERS AND FAILURE OF OUR SUPPLIERS TO PROVIDE QUALITY COMPONENTS OR SERVICES IN A TIMELY MANNER COULD ADVERSELY AFFECT OUR RESULTS.

Our growth and ability to meet customer demands depend in part on our capability to obtain timely deliveries of raw materials, components, subassemblies and products from our suppliers. We buy raw materials, components and subassemblies from a variety of suppliers and assemble them into finished products. We also have certain of our products manufactured for us by third party suppliers. The cost, quality, and availability of such goods are essential to the successful production and sale of our products. Obtaining raw materials, components, subassemblies and finished products entails various risks, including the following:

• We obtain certain raw materials, subassemblies, components and products from single suppliers, and alternate sources for these items are not readily available. To date, we have experienced only minor interruptions in the supply of these raw materials, subassemblies, components and products, none of which has significantly affected our results of operations. Current adverse economic conditions could lead to a higher risk of failure of our suppliers to remain in business or to be able to purchase the raw materials, subcomponents and parts required by them to produce and provide to us the parts we need. An interruption in supply from any of our single source suppliers in the future would materially adversely affect our business, financial condition and results of operations.
• Prices of raw materials, components and subassemblies may rise. If this occurs and we are not able to pass these increases on to our customers or to achieve operating efficiencies that would offset the increases, it would have a material adverse effect on our business, financial condition and results of operations.
• Due to the lead times required to obtain certain raw materials, subassemblies, components and products from certain foreign suppliers, we may not be able to react quickly to changes in demand, potentially resulting in either excess inventories of such goods or shortages of the raw materials, subassemblies, components and products. Relative to sales, inventory levels remained high through the first quarter of fiscal 2002, but have been on the decline since that time. Failure in the future to match the timing of purchases of raw materials, subassemblies, components and products to demand would materially adversely affect our business, financial condition and results of operations.
• Most of our suppliers are not obligated to continue to provide us with raw materials, components and subassemblies. Rather, we buy most raw materials, components and subassemblies on a purchase order basis. If our suppliers experience increased demand or shortages, it could affect deliveries to us. In turn, this would affect our ability to manufacture and sell products that are dependent on those raw materials, components and subassemblies. This would materially adversely affect our business, financial condition and results of operations.
• Although we generally use standard raw materials, parts and components for our products, the high development costs associated with emerging wireless technologies permits us to work with only a single source supplier of silicon chip-sets. We, or our chosen supplier of chip-sets, may experience challenges in designing, developing and manufacturing components in these new technologies which could affect our ability to meet time to market schedules and could materially adversely affect our business, operating results and financial condition.

WE SELL OUR PRODUCTS THROUGH VARIOUS CHANNELS OF DISTRIBUTION AND A FAILURE OF THOSE CHANNELS TO OPERATE AS WE EXPECT COULD DECREASE OUR REVENUES.

We sell substantially all of our products through distributors, retailers, OEMs and telephony service providers. Our existing relationships with these parties are not exclusive and can be terminated by either party without cause. Our channel partners also sell or can potentially sell products offered by our competitors. To the extent that our competitors offer our channel partners more favorable terms, such partners may decline to carry, de-emphasize or discontinue carrying our products. In the future, we may not be able to retain or attract a sufficient number of qualified channel partners. Further, such partners may not recommend, or continue to recommend, our products. In the future, our OEM customers or potential OEM customers may elect to manufacture their own products, similar to those we currently sell to them. The inability to establish or maintain successful relationships with distributors, OEMs, retailers and telephony service providers or to expand our distribution channels could materially adversely affect our business, financial condition or results of operations.

Our distribution channels generally hold inventories of our products, determined in their own business judgment to be sufficient to meet their customer's delivery requirements. Such inventory levels are subject to market conditions, business judgment by the reseller and our ability to meet their time-to-ship needs. Rapid reductions by our distributors, OEMs, retailers and other customers in the levels of inventories held in our products could materially adversely affect our business, financial condition or results of operations.

We generally offer our customers certain credit terms, allowing them to pay for products purchased from us between thirty and sixty days or more after we ship the products. Our receipt of payment for our products depends on the financial liquidity of those customers. If significant customers or a significant number of customers experience liquidity problems, this could affect our ability to collect our accounts receivable, which could materially adversely affect our business, financial condition or results of operations.

WE HAVE STRONG COMPETITORS AND WILL LIKELY FACE ADDITIONAL COMPETITION IN THE FUTURE.

The markets for our products are highly competitive. We compete with a variety of companies in the various markets for communications headsets. Our single largest competitor is GN Netcom, a subsidiary of GN Great Nordic Ltd., a Danish telecommunications conglomerate. GN Great Nordic reported revenues of 1.68 billion Danish Krone (approximately U.S. $200 million) in the quarter ending September 30, 2001, while GN Netcom's revenues for the same period were 471 million Danish Krone (approximately U.S. $56 million). GN Netcom has made several acquisitions over the years. We believe the acquisitions of Hello Direct and Jabra have provided GN Netcom with a broader mobile product line and greater marketing presence than they had prior to these acquisitions.

We currently operate principally in a multilevel distribution model - we sell most of our products to distributors who, in turn, resell to dealers or end-customers. GN Netcom's acquisitions indicate it may be moving towards a direct sales model. While we believe that our business and our customers benefit from our current distribution structure, if GN Netcom or other competitors sell directly, they may offer lower prices which could materially adversely affect our business and results of operations. In the face of current economic downturn, we are seeing lower prices from our competitors, particularly GN Netcom.

Logitech International S.A., a manufacturer and seller of computer accessory products, acquired Labtec Inc., a Vancouver, Washington-based provider of, among other products, headsets for use with computers, in March 2001. Following this acquisition, Labtec gained greater resources with which to compete with us than it had prior to its being acquired by Logitech.

We anticipate that we will face additional competition from companies that currently do not offer communications headsets. This is particularly true in the office, mobile computer and residential markets. In fact, on September 11, 2001, Sony Corporation and Telefonaktiebolaget LM Ericsson announced that their respective boards approved the merger of their mobile business worldwide including telephone accessories such as telephone headsets and adapters. Recently, this Joint Venture announced the launch of its first product, a BluetoothÔ communications device which shipped in November 2001. We anticipate other competition from consumer electronics companies that currently manufacture and sell mobile phones or computer peripheral equipment. These new competitors are likely to be larger, offer broader product lines, bundle or integrate with other products communications headset tops and bases manufactured by them or others, offer products containing bases that are incompatible with our headset tops and have substantially greater financial, marketing and other resources than we do.

We anticipate that we will also face additional competition from companies, principally located in the Far East, which offer very low cost headset products, including products which are modeled on or direct copies of our products. These new competitors are likely to offer very low cost products which may result in price pressure in the market. If market prices are substantially reduced by such new entrants into the headset market, our business, financial condition or results of operations could be materially adversely affected.

We believe that the market for lightweight communication headsets is showing some signs of commoditization. In particular, we believe that our competitors, especially GN Netcom, are increasingly choosing to compete on price. While this has long been true of competitors from the Far East, we think the trend is accelerating and that customers are also more receptive to lower cost products, even when the quality, service or total value of the offer may be notably lower as well.

Historically, our expertise in acoustics and design has allowed us to design, develop and manufacture products with the levels of sound quality enabling us to meet the needs of our customers. Due to technological advances, including but not limited to better digital signal processing, our current and future competitors may be able to develop products with the same or better audio quality at lower costs. These technological advances may allow current and future competitors to compete more effectively in terms of product quality or price that could materially adversely affect our business and results of operations.

We believe that important competitive factors for us are product reliability, product features, customer service and support, reputation, distribution, ability to meet delivery schedules, warranty terms, product life and price. If we do not compete successfully with respect to any of these or other factors it could materially adversely affect our business, financial condition and results of operations. Further, if we do not successfully develop and market products that compete successfully with those of our competitors, it would materially adversely affect our business, financial condition and results of operations.

NEW PRODUCT DEVELOPMENT IS RISKY AND WE WILL BE MATERIALLY ADVERSELY AFFECTED IF WE DO NOT RESPOND TO CHANGING CUSTOMER REQUIREMENTS AND NEW TECHNOLOGIES.

Our product development efforts historically have been directed toward enhancement of existing products and development of new products that capitalize on our core capabilities. The success of new product introductions is dependent on a number of factors, including the proper selection of new product features, timely completion and introduction of new product designs, cost-effective manufacture of such products, quality of new products and market acceptance. To be successful in the future, we must develop new products, qualify these new products, successfully introduce these products to the market on a timely basis, and commence and sustain low-cost, volume production to meet customers' demands. Although we attempt to determine the specific needs of headset users in our target markets, because almost all of our sales are indirect, we may not always be able to timely and accurately predict end-user requirements. As a result, our products may not be timely developed, designed to address current or future end-user requirements, offered at competitive prices or accepted, which could materially adversely affect our business, financial condition and results of operations. Moreover, we generally incur substantial research and development costs before the technical feasibility and commercial viability of a new product can be ascertained. Accordingly, revenues from new products may not be sufficient to recover the associated development costs.

Historically, the technology used in lightweight communications headsets has evolved slowly. New products have primarily offered stylistic changes and quality improvements, rather than significant new technologies. The technology used in hands free communications devices, including our products, is evolving more rapidly now than it has historically and we anticipate that this trend may accelerate. We believe this is particularly true for our newer emerging technology products especially in the mobile, computer markets, residential and certain parts of the office market. We believe products designed to serve these markets generally exhibit shorter lifecycles and are increasingly based on open standards and protocols. The end markets served are much larger than the traditional call center market. This combination of factors may lead to increased commoditization, as a greater number of competitors attempt to introduce products, or reverse engineer our products and offer similar but lower quality products at lower price points.

Our success depends upon our ability to enhance existing products, to respond to changing market requirements, and to develop and introduce in a timely manner new products that keep pace with technological developments. If we are unable to develop and introduce enhanced products or new products in a timely manner in response to changing market conditions or customer requirements, it will materially adversely affect our business, financial condition and results of operations.

Due to the historically slow evolution of our products, we have generally been able to phase out obsolete products without significant impact to our operating margins. However, as we develop new generations of products more quickly, we expect that the pace of product obsolescence will increase concurrently. The disposition of inventories of obsolete products may result in reductions to our operating margins and materially adversely affect our earnings and results of operations.

CHANGES IN REGULATORY REQUIREMENTS MAY ADVERSELY IMPACT OUR GROSS MARGINS AS WE COMPLY WITH SUCH CHANGES OR REDUCE OUR ABILITY TO GENERATE REVENUES IF WE ARE UNABLE TO COMPLY.

Our products must meet the requirements set by regulatory authorities in the numerous jurisdictions in which we sell them. As regulations and local laws change, we must modify our products to address those changes. Regulatory restrictions may increase the costs to design and manufacture our products, resulting in a decrease in demand for our products if the costs are passed along or a decrease in our margins. Compliance with regulatory restrictions may impact the technical quality and capabilities of our products, reducing their marketability.

WE HAVE SIGNIFICANT FOREIGN OPERATIONS AND THERE ARE INHERENT RISKS IN OPERATING ABROAD.

In the first nine months of fiscal 2002, approximately 30.9% of our net sales were derived from customers outside the United States. Approximately 31.2% of our net sales in fiscal 2001 were derived from customers outside the United States, compared with approximately 33.5% of our net sales in fiscal 2000. In addition, we conduct the majority of our headset assembly operations in our manufacturing facility located in Mexico, and we obtain most of the components and subassemblies used in our products from various foreign suppliers. We also purchase a growing number of turn-key products directly from Asia. The inherent risks of international operations, either in Mexico or in Asia, could materially adversely affect our business, financial condition and results of operations. The types of risks faced in connection with international operations and sales include:

• cultural differences in the conduct of business;
• greater difficulty in accounts receivable collection;
• unexpected changes in regulatory requirements;
• tariffs and other trade barriers;
• economic and political conditions in each country;
• management and operation of an enterprise spread over various countries; and
• the burden of complying with a wide variety of foreign laws.

OUR FOREIGN OPERATIONS PUT US AT RISK OF LOSS IF THERE ARE MATERIAL CHANGES IN CURRENCY VALUES AS COMPARED TO THE U.S. DOLLAR.

A significant portion of our business is conducted in currencies other than the U.S. dollar. Substantially all of our sales throughout Europe are transacted in local currencies. We are therefore exposed to risks associated with fluctuations in exchange rates that can affect our revenue and gross margins and can also generate currency transaction gains and losses. In our prior fiscal year, the value of major European currencies dropped against the U.S. dollar, which adversely impacted our revenue and gross margin and also resulted in currency transaction losses. To date, we have partially but not fully reflected that change in currency value in our selling prices. In order to maintain a competitive price for our products in Europe, we expect to reduce our current prices further, resulting in a lower margin on products sold in Europe. Continued change in the values of European currencies or changes in the values of other foreign currencies could have a material adverse effect on our business, financial condition and results of operations.

In our current fiscal year we have introduced programs designed to reduce our foreign currency net asset exposure and have successfully reduced transaction gains and losses that are accounted for in other income/expense. However, there can be no assurance that our hedging policy will be effective in continuing to reduce transaction gains and losses. Moreover, our economic exposure to foreign currency fluctuations has not changed and revenues and margins can be adversely impacted by such fluctuations. There can be no assurance that we will not continue to experience currency losses in the future, nor can we predict the effects of future exchange rate fluctuations on future operating results. To the extent that sales to our foreign customers increase or transactions in foreign currencies increase, our business, financial condition and results of operations could be materially adversely affected by exchange rate fluctuations.

THE TERRORIST ATTACKS ON NEW YORK CITY ON SEPTEMBER 11, 2001 MARKED A TURNING POINT IN CURRENT U.S. POLITICAL, MILITARY AND SECURITY STRATEGIES WHICH WE BELIEVE HAS AND MAY CONTINUE TO ADVERSELY IMPACT OUR BUSINESS, BOTH DIRECTLY AND INDIRECTLY.

The events of September 11^th and the U.S. military efforts in Afghanistan have contributed to a further slowing in the economy with additional layoffs in other industries resulting in a negative effect on our business. We believe that one direct impact of the attacks is the reduction of call center agents in the travel and leisure industries. We are indirectly affected by the continuing concern on future terrorist attacks on U.S. soil, as well as concerns of the anthrax infection on the American and international public. We are unable to estimate the impact these events and their consequences have on our business, however, given the magnitude of these unprecedented events and the possible subsequent effects, we expect that there has been and may continue to be an adverse impact to our financial condition, our operations and our prospects as these events adversely affect the global economy in general.

IF THERE ARE PROBLEMS THAT AFFECT OUR PRINCIPAL MANUFACTURING FACILITY IN MEXICO, WE COULD FACE LOSSES IN REVENUES OR MATERIAL INCREASES IN COSTS OF OUR OPERATIONS.

The majority of our manufacturing operations are currently performed in a single facility in Tijuana, Mexico. A fire, flood or earthquake, political unrest or other disaster or condition affecting our facility could have a material adverse effect on our business, financial condition and results of operations. While we have developed a disaster recovery plan and believe we are adequately insured with respect to this facility, we may not be able to implement the plan effectively or on a timely basis or recover under applicable insurance policies.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR BUSINESS OPERATIONS AND ANOTHER ENERGY CRISIS IN CALIFORNIA COULD DISRUPT OR MAKE SUBSTANTIALLY MORE EXPENSIVE THE OPERATIONS AT OUR HEADQUARTERS FACILITY.

In the event of an acute power shortage, California has, on some occasions, implemented, and may in the future continue to implement, rolling blackouts throughout the state. We have emergency back-up generators which keep our business information systems in operation but we do not have sufficient back-up generating capacity or alternate sources of power to keep our headquarters in full operation in the event of a blackout. If blackouts interrupt our power supply, we would be temporarily unable to continue full operations at our headquarters.

Our operations are also vulnerable to interruption by fire, earthquake, telecommunications failure and other events beyond our control. Our corporate headquarters are located near major earthquake faults. We do not carry business interruption insurance or carry financial reserves against business interruptions arising from electrical blackouts, although we do carry it for other causes. Any such interruption could damage our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in lost revenue, any of which could substantially harm our business and results of operations.

WE HAVE INTELLECTUAL PROPERTY RIGHTS THAT COULD BE INFRINGED BY OTHERS AND WE ARE POTENTIALLY AT RISK OF INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

Our success will depend in part on our ability to protect our proprietary technology. We rely primarily on a combination of nondisclosure agreements and other contractual provisions as well as patent, trademark, trade secret, and copyright laws to protect our proprietary rights. We currently hold thirty-three United States patents and additional foreign patents and will continue to seek patents on our inventions when we believe it to be appropriate. The process of seeking patent protection can be lengthy and expensive. Patents may not be issued in response to our applications, and patents that are issued may be invalidated, circumvented or challenged by others. If we are required to enforce our patents or other proprietary rights through litigation, the costs and diversion of management's attention could be substantial. In addition, the rights granted under any patents may not provide us competitive advantages or be adequate to safeguard and maintain our proprietary rights. Moreover, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. If we do not enforce and protect our intellectual property rights, it could materially adversely affect our business, financial condition and results of operations.

From time to time, third parties, including our competitors, may assert patent, copyright and other intellectual property rights against us. Such claims, if they are asserted, could result in costly litigation and diversion of management's attention. In addition, we may not ultimately prevail in any such litigation or be able to license any valid and infringed patents from such third parties on commercially reasonable terms, if at all. Any infringement claim or other litigation against us could materially adversely affect our business, financial condition and results of operations.

WE ARE EXPOSED TO POTENTIAL LAWSUITS ALLEGING DEFECTS IN OUR PRODUCTS.

The use of our products exposes us to the risk of product liability claims. Product liability claims have in the past been, and are currently being, asserted against us. None of the previously resolved claims have materially affected our business, financial condition or results of operations, nor do we believe that any of the pending claims will have such an effect.* Although we maintain product liability insurance, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability claims brought against us could have a material adverse effect upon our business, financial condition and results of operations.

Our mobile headsets are used with mobile telephones. There has been continuing public controversy over whether the radio frequency emissions from mobile telephones are harmful to users of mobile phones. We believe that there is no conclusive proof of any health hazard from the use of mobile telephones but that research in this area is incomplete. We have tested our headsets through independent laboratories and have found that use of our headsets reduces radio frequency emissions at the user's head to virtually zero. However, if research was to establish a health hazard from the use of mobile telephones or public controversy grows even in the absence of conclusive research findings, there could be an adverse impact on the demand for our mobile headsets.

There is also continuing and increasing public controversy over the use of mobile telephones by operators of motor vehicles. While we believe that our products enhance driver safety by permitting a motor vehicle operator to generally be able to keep both hands free to operate the vehicle, there is no certainty that this is the case and we may be subject to claims arising from allegations that use of a mobile telephone and headset contributed to a motor vehicle accident. We maintain product liability insurance and general liability insurance that we believe would cover any such claims. However, the coverage provided under our policies could be unavailable or insufficient to cover the full amount of any such claim. Therefore, successful product liability claims brought against us could have a material adverse effect upon our business, financial condition and results of operations.

WHILE WE BELIEVE WE COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, WE ARE STILL EXPOSED TO POTENTIAL RISKS FROM ENVIRONMENTAL MATTERS.

We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, environmental legislation has been enacted and may in the future be enacted or interpreted to create environmental liability with respect to our facilities or operations. We have included in our financial statements a reserve of $1.5 million for possible environmental remediation of the site of one of our previous businesses. While no claims have been asserted against us in connection with this matter, such claims could be asserted in the future and any liability that might result could exceed the amount of the reserve.

WE HAVE ACQUIRED A COMPANY AND EXPECT TO MAKE FUTURE ACQUISITIONS AND ACQUISITIONS INVOLVE MATERIAL RISKS

On January 2, 2002, we acquired Ameriphone, Inc., a California corporation, in a cash transaction. We may in the future, in order to address the need to develop new products and technologies, and enter new markets, acquire other companies. There are inherent risks in the acquisition of another company that could materially adversely affect our business, financial condition and results of operations. The types of risks faced in connection with acquisitions include:

• cultural differences in the conduct of business;
• difficulties in integration of the operations, technologies, and products of the acquired company;
• the risk of diverting management's attention from normal daily operations of the business;
• potential difficulties in completing projects associated with purchased in- process research and development;
• risks of entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;
• the abilities of representatives, distributors, OEM customers and other resellers which are retained by the acquired company or customers of the acquired company;
• differences in the business information systems of the companies;
• difficulties in integrating the operations, technologies, transactions and business information systems of the company; and
• the potential loss of key employees of the acquired company.

Mergers and acquisitions, particularly those of high-technology companies, are inherently risky, and no assurance can be given that the Ameriphone or future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. We must also manage any such growth effectively. Failure to manage growth effectively and successfully integrate acquisitions made by us could materially harm our business and operating results.

OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED IF WE LOSE THE BENEFIT OF THE SERVICES OF KEN KANNAPPAN OR OTHER KEY PERSONNEL.

Our success depends to a significant extent upon the services of a limited number of executive officers and other key employees. The unanticipated loss of the services of our president and chief executive officer, Mr. Kannappan, or one or more of our other executive officers or key employees could have a material adverse effect upon our business, financial condition and results of operations.

We also believe that our future success will depend in large part upon our ability to attract and retain additional highly skilled technical, management, sales and marketing personnel. Competition for such personnel is intense. We may not be successful in attracting and retaining such personnel, and our failure to do so could have a material adverse effect on our business, operating results or financial condition.

OUR STOCK PRICE MAY BE VOLATILE AND YOUR INVESTMENT IN PLANTRONICS STOCK COULD BE LOST.

The market price for our Common Stock may continue to be affected by a number of factors, including the announcement of new products or product enhancements by us or our competitors, the loss of services of one or more of our executive officers or other key employees, quarterly variations in our or our competitors' results of operations, changes in our published forecasts of future results of operations, changes in earnings estimates or recommendations by securities analysts, developments in our industry, sales of substantial numbers of shares of our Common Stock in the public market, general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors. Stock prices for many companies, particularly in the technology sector, have experienced wide fluctuations that have often been unrelated to the operating performances of such companies. Such factors and fluctuations, as well as general economic, political and market conditions, such as recessions, could materially adversely affect the market price of our Common Stock.

ANTI-TAKEOVER PROVISIONS IN OUR CURRENT BY-LAWS OR WHICH COULD BE PUT INTO PLACE BY OUR BOARD OF DIRECTORS COULD AFFECT MARKET PRICES OF OUR STOCK.

Our board of directors has the authority to issue preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of those shares without any further vote or action by the stockholders. The issuance of our preferred stock could have the effect of making it more difficult for a third party to acquire us. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which could also have the effect of delaying or preventing our acquisition by a third party. Further, certain provisions of our Certificate of Incorporation and bylaws could delay or make more difficult a merger, tender offer or proxy contest, which could adversely affect the market price of our Common Stock.

CITICORP VENTURE CAPITAL HAS SIGNIFICANT CONTROL OVER OUR BUSINESS.

Our largest stockholder, Citicorp Venture Capital, Ltd. ("CVC"), beneficially owns 5,454,257 shares of our Common Stock (excluding any shares that may be owned by employees of CVC or its affiliates), which represents approximately 11.6% of our outstanding Common Stock as of December 31, 2001. We also have an agreement with CVC under which it is entitled to have up to three of its designees serve on our Board of Directors, depending on the level of CVC's continuing stock ownership. Based on its current ownership of our outstanding Common Stock, CVC is entitled to designate two nominees. Messrs. M. Saleem Muqaddam and John M. O'Mara are currently serving as CVC's designees pursuant to that agreement.

WE HAVE SEVERAL SIGNIFICANT STOCKHOLDERS AND, GIVEN THE LOW TRADING VOLUME OF OUR STOCK, IF THEY SELL THEIR SHARES IN A SHORT PERIOD OF TIME, WE COULD SEE AN ADVERSE EFFECT ON THE MARKET PRICES OF OUR STOCK.

As of February 8, 2002, we had 46,374,134 shares of Common Stock outstanding and in the public market. All of these shares are freely tradable except for approximately 9,080,064 shares held by affiliates of Plantronics (including CVC and the directors and officers of Plantronics). These approximately 9,080,064 shares may be sold in reliance on Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an effective registration statement filed with the Securities and Exchange Commission.

Some of our current stockholders, including CVC and certain of our directors, also have certain contractual rights to require us to register their shares for public sale. Approximately 9,694,924 additional shares are subject to outstanding stock options as of February 8, 2002. As of February 8, 2002, Ms. Louise Cecil, the widow of our former CEO and Chairman, Robert S. Cecil, held options on approximately 433,000 shares of our Common Stock, transferred to her by Mr. Cecil during his life. She has registered those shares for resale and can sell any or all of those shares at any time.

Our stock is not heavily traded. The average daily trading volume of our stock in the third quarter of fiscal 2002 was approximately 277,255 shares per day with a median volume in that period of 222,800 shares per day. Sales of a substantial number of shares of our Common Stock in the public market by CVC or any of our officers, directors or other stockholders could adversely affect the prevailing market price of our Common Stock and impair our ability to raise capital through the sale of equity securities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors including those set forth in "Risk Factors Affecting Future Operating Results".

INTEREST RATE RISK

At December 31, 2001, we had cash and cash equivalents totaling $74.1 million, compared to $60.5 million at March 31, 2001. At December 31, 2001, we had marketable securities totaling $8.6 million compared to $13.4 million at March 31, 2001. Cash equivalents have an original maturity of ninety days or less; marketable securities have an original maturity of greater than ninety days, but less than one year. We believe we are not currently exposed to significant interest rate risk as the majority of our combined cash and marketable securities balances were invested in securities or interest bearing accounts with maturities of less than ninety days. The average maturity period for our investments at December 31, 2001, was less than two months. The interest rates locked in on those investments ranged from 2.1% to 4.8%. Our investment policy requires that we only invest in deposit accounts, certificates of deposit or commercial paper with minimum ratings of A1/P1 and money market mutual funds with minimum ratings of AAA.

In November 2001, we renewed our revolving credit facility, including a letter of credit subfacility, with a major bank at $75 million. The renewed facility and subfacility both expire on January 15, 2003. As of February 8, 2002, we have no cash borrowings under the current revolving credit facility. If we choose to borrow under this facility in the future, and market interest rates rise, then our interest payments would increase accordingly.

FOREIGN CURRENCY EXCHANGE RATE RISK

In the first nine months of fiscal 2002, approximately 30.9% of our net sales were derived from customers outside the United States, with approximately 19% of total revenues denominated in foreign currencies, predominately the Great British Pound and the Euro. Beginning in the first quarter of fiscal 2002, we entered into foreign currency forward exchange contracts to hedge the foreign exchange exposure of certain forecasted receivables, payables and cash balances denominated in Great British Pounds and Euros. Gains and losses associated with currency rate changes on the contracts are recorded in results of operations, as other income (expenses), offsetting gains and losses on the related assets and liabilities. The success of the hedging program depends on forecasts of transaction activity in the various currencies. We have no assurance that exchange rate fluctuations will not materially adversely affect our business in the future.

At December 31, 2001, we had $1.8 million of forward-exchange contracts outstanding, denominated in Euros, as a hedge against forecasted foreign currency-denominated receivables, payables and cash balances.

PART II. -- OTHER INFORMATION

ITEM 1. NONE.

ITEM 2. NONE.

ITEM 3. NONE.

ITEM 4. NONE.

ITEM 5. NONE.

ITEM 6. EXHIBITS & REPORTS ON FORM 8-K

(a) Exhibits. The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number	Description
3.1	Amended and Restated By-Laws
10.15	Second Amendment dated November 1, 2001 to Credit Agreement dated as of November 29, 1999 between Registrant and Wells Fargo Bank N.A., as amended by the First Amendment to the Credit Agreement dated as of November 27, 2000.

(b) Reports on Form 8-K. No reports on Form 8-K were filed by Registrant during the fiscal quarter ended December 31, 2001.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PLANTRONICS, INC.

(Registrant)

By:  /s/ Barbara V. Scherer

Barbara V. Scherer

Senior Vice President - Finance and Administration and Chief Financial Officer

(Principal Financial Officer and Duly Authorized Officer of the Registrant)

Date: February 12, 2002

EXHIBIT INDEX

Exhibit Number	Description
3.1	Amended and Restated By-Laws
10.15	Second Amendment dated November 1, 2001 to Credit Agreement dated as of November 29, 1999 between Registrant and Wells Fargo Bank N.A., as amended by the First Amendment to the Credit Agreement dated as of November 27, 2000.

EX-3

AMENDED AND RESTATED

BY-LAWS

OF

PLANTRONICS, INC.

a Delaware corporation

1. OFFICES
1. Registered Office. Registered office of the corporation in the State of Delaware shall be located at 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of the corporation's registered agent at such address shall be The Corporation Trust Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors.
2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require.
2. MEETINGS OF STOCKHOLDERS
1. Place and Time of Meetings. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting.
2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors, the chairman of the board of directors, the president or the holders of twenty percent (20%) or more of the outstanding Common Stock of the corporation. No business may be conducted at a special meeting other than the business brought before the meeting by the Board of Directors, the chairman of the board of directors, the president or the holders of twenty percent (20%) or more of the outstanding Common Stock of the corporation, as the case may be.
3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation.
4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the board of directors, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation.
5. Stockholders List. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
6. Quorum. The holders of the outstanding shares of capital stock representing a majority of the voting power of the corporation, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by law or by the certificate of incorporation. If a quorum is not present, the holders of the shares representing a majority of the voting power present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a specified item of business requires a vote by a class or series (if the corporation shall then have outstanding shares of more than one class or series) voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business. When a quorum is once present to commence a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholder or their proxies.
7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record day is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
8. Vote Required. When a quorum is present, the affirmative vote of the holders of the shares representing a majority of the voting power present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Where a separate vote by class may be required, the affirmative vote of the majority of shares of such class present in person or represented by proxy at the meeting shall be the act of such class.
9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article 6 hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of Common Stock held by such stockholder.
10. Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
11. Prohibitions on Action by Written Consent. Unless otherwise provided in the certificate of incorporation, no action may be taken by the stockholders of the corporation pursuant to a written consent in lieu of an annual or special meeting of the stockholders of the corporation.
12. Advance Notice of Stockholder Nominations Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than twenty (20) days prior to the meeting; provided, however, that in the event less than thirty (30) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the corporation which are beneficially owned by such person, (iv) any other information relating to such person that is required by law to be disclosed in solicitations of proxies for election of directors, and (v) such person's written consent to being named as a nominee and to serving as a director if elected; and (b) as to the stockholder giving the notice: (i) the name and address, as they appear on the corporation's books, of such stockholder, (ii) the class and number of shares of the corporation which are beneficially owned by such stockholder, and (iii) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) relating to the nomination. At the request of the board of directors any person nominated by the board of directors for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these bylaws, and if he should so determine, he shall so declare at the meeting and the defective nomination shall be disregarded.
13. Advance Notice of Stockholder Business. At the annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (a) as specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. Business to be brought before the meeting by a stockholder shall not be considered properly brought if the stockholder has not given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to the principal executive offices of the corporation not less than forty five (45) days prior to the date on which the corporation first mailed proxy materials for the prior year's annual meeting; provided, however, that if the corporation's annual meeting of stockholders occurs on a date more than thirty (30) days earlier or later than the corporation's prior year's annual meeting, then the corporation's board of directors shall determine a date a reasonable period prior to the corporation's annual meeting of stockholders by which date the stockholders notice must be delivered and publicize such date in a filing pursuant to the Securities Exchange Act of 1934, as amended, or via press release. Such publication shall occur at least ten (10) days prior to the date set by the Board of Directors. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address of the stockholder proposing such business, (iii) the class and number of shares of the corporation, which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business, and (v) any other information that is required by law to be provided by the stockholder in his capacity as proponent of a stockholder proposal. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
3. DIRECTORS
1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors.
2. Number, Election and Term of Office. The authorized number of directors constituting the board of directors shall be nine (9). This number may be changed by an amendment to these by-laws adopted by (a) the vote of 66-2/3% of the outstanding Common Stock of the corporation or (b) by a resolution of the board of directors adopted by the affirmative vote of at least 66-2/3% of such authorized number of directors. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term expires. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article 3. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.
3. Removal and Resignation. Any director or the entire board of directors may be removed at any time, with or without cause, by the holders of the shares representing a majority of the voting power of the corporation then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as whole. Any director may resign at any time upon written notice to the corporation.
4. Vacancies.
1. Vacancies in the unexpired term of any directorship shall be filled as follows:
1. If such vacancy has resulted from the death, resignation or removal of a director that was designated by Citicorp Venture Capital, Ltd. ("CVC") to serve on the Board of Directors pursuant to the terms of that certain Board Designation Agreement between the Company and CVC (a "CVC Designee"), such vacancy shall be filled by a majority of the remaining CVC Designees then in office, though such directors may constitute less than a quorum; or
2. If such vacancy has resulted from the death, resignation or removal of a director that is not a CVC Designee, such vacancy shall be filled by a majority of those remaining directors then in office that are neither (x) a CVC Designee or (y) the Chief Executive Officer of the corporation, though such directors may constitute less than a quorum; provided, however, that if the Chief Executive Officer of the corporation is the sole remaining director that is not a CVC Designee, the Chief Executive Officer shall fill any such vacancy.
2. Newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office.
3. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided.
5. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
6. Special Meetings and Notice. Special meetings of the board of directors for any purpose or purposes may be called at any time by the president or any two (2) directors. Notice of the date, time and place of special meetings shall be delivered personally, by telephone, facsimile, telegram, electronic mail or other comparable communication equipment to each director or sent by first-class mail, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone, facsimile, telegram, electronic mail or other comparable communication equipment, it shall be delivered at least twenty-four (24) hours before the time of the holding of the meeting. Any notice give personally or by telephone, facsimile, telegram, electronic mail or other comparable communication equipment may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting.
7. Quorum, Required Vote and Adjournment. A majority of the total number of directors shall constitute a quorum for the transaction of business. Except as otherwise set forth in clause (b), the vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
1. The affirmative vote of at least 66 2/3% of the directors then in office shall be required to adopt a resolution necessary to:
1. amend, alter or repeal any provisions of the certificate of incorporation or by-laws of the corporation;
2. sell, lease or convey all or substantially all of the property or business of the corporation or permit any Subsidiary to sell, lease or convey all or substantially all of the property or business of such Subsidiary (other than to the corporation or another Subsidiary in a consolidation or merger in which the corporation is the surviving person) or permit any Subsidiary to consolidate or merge with any other corporation (other than the corporation or a Subsidiary in a consolidation or merger in which the corporation or such Subsidiary is the surviving person), or voluntarily liquidate, dissolve or wind up the corporation;
3. issue or sell, or agree to issue or sell, or permit any Subsidiary to issue or sell, its capital stock or any securities consisting of or containing any options or rights to acquire any shares of capital stock or any securities convertible or exchangeable or exercisable for any of its capital stock, other than any issuance of capital stock (A) pursuant to any stock split or dividend effected by the corporation on a pro-rata basis to all stockholders, (B) pursuant to a dividend on shares of Common Stock that is paid in shares of capital stock of the corporation on a pro-rata basis to all stockholders or (C) upon the exercise of rights or options under the 1993 Option Plan.
4. enter into any stock option plan, other than the 1993 Stock Option Plan dated as of September 25, 1993 or amend any stock option plan to increase the number of shares issuable thereunder; or
5. acquire the business or assets of, or enter into any joint venture or partnership with, any Person (except the corporation may acquire the business or assets of, or enter into any joint venture or partnership with, any Subsidiary) or permit any Subsidiary to acquire the business or assets of, or enter into any joint venture or partnership with, any Person (except any Subsidiary may acquire the business or assets of any other Subsidiary or enter into any joint venture or partnership with the Corporation or any other Subsidiary) if the aggregate amount of all expenditures incurred by the corporation (on a consolidated basis) in its then current fiscal year in connection with acquisitions or investments in joint ventures or partnerships would, after giving effect to expenditures to be incurred by the corporation (on a consolidated basis) in such fiscal year in connection with such proposed acquisition or investment in joint venture or partnership, exceed $10 million.
2. For purposes of this clause (b), the following terms shall have the following respective meanings:
1. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.
2. "Subsidiary" shall mean any corporation, at least a majority of the total combined voting power of all classes of stock having general voting power of which shall, at the time as of which any determination is being made, be owned by the corporation either directly or through one or more Subsidiaries.
8. Committees. Subject to the voting requirements set forth in Article 3, the board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
9. Committee Rules. Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article 3, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member.
10. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.
11. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.
12. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
4. OFFICERS
1. Number. The officers of the corporation shall be elected by the board of directors and shall consist of a president, one or more vice-presidents, a secretary, a treasurer, and such other offices and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible.
2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.
3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office.
5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation.
6. The President. The president shall be the chief executive officer of the corporation; shall preside at all meetings of the stockholders and board of directors at which he or she is present; subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws.
7. Vice-Presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the president or these by-laws, from time to time, prescribe.
8. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the president, or secretary may, from time to time, prescribe.
9. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the president or treasurer may, from time to time, prescribe.
10. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors.
11. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select.
5. INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article 5 shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.
2. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the corporation under Section 1 of this Article 5 or advance of expenses under Section 5 of this Article 5 shall be made promptly, and in any event within thirty (30) days, upon the written request of the director or officer. If a determination by the corporation that the director or officer is entitled to indemnification pursuant to this Article 5 is required, and the corporation fails to respond within sixty (60) days to a written request for indemnity, the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, of if payment in full pursuant to such request is not made within thirty (30) days, the right to indemnification or advances as granted by this Article 5 shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
3. Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article 5 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article 5.
5. Expenses. Expenses incurred by any person described in Section 1 of this Article 5 in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.
6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article 5 and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors.
7. Contract Rights. The provisions of this Article 5 shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article 5 and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article 5 or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing.
8. Merger or Consolidation. For purposes of this Article 5, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article 5 with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.
6. CERTIFICATES OF STOCK
1. Form. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the president or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such president, vice- president, secretary or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate of certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation.
2. Lost Certificate. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.
3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjournment meeting.
4. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to written action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
5. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner.
6. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares all be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation.
7. GENERAL PROVISIONS
1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.
2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof.
3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. No loans shall be made or contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by resolution of the board of directors. Such authority may be general or confined to specific instances.
5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
6. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president or the secretary, unless the board of directors specifically confers authority to vote with respect there to, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.
7. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business.
8. Section Headings. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.
9. Inconsistent Provisions. In the event that any provision of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by- laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.
8. AMENDMENTS
1. Except as set forth in the next sentence, these by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The provisions set forth in Article 3, Section 2, Article 3, Section 7(b) and this Article 8 may only be amended, altered or repealed upon the affirmative of at least 66 2/3% of the directors then in office. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers.

EX-10

SECOND AMENDMENT TO CREDIT AGREEMENT

This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of November 1, 2001, is entered into between PLANTRONICS, INC., a Delaware corporation (the "Company"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

WHEREAS, the Company and the Bank have previously entered into that certain Credit Agreement, dated as of November 29, 1999 (as amended by that certain First Amendment to Credit Agreement, dated as of November 27, 2000, the "Credit Agreement"), pursuant to the terms of which the Bank has made various financial accommodations available to the Company; and

WHEREAS, the Company and the Bank have agreed to amend the Credit Agreement on the terms and conditions contained herein;

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Defined Terms. Each capitalized term used but not otherwise defined herein has the meaning ascribed thereto in the Credit Agreement.
2. Amendments to Credit Agreement.
1. Schedule 2.01 to the Credit Agreement is hereby amended and restated in full in the form of Schedule 2.01 attached hereto.
2. Section 1.01 of the Credit Agreement is hereby amended by amending and restating the terms "Applicable Commitment Fee Percentage" and "Revolving Termination Date" contained therein to read in full as follows:

"Applicable Commitment Fee Percentage" means, on any date, one hundred seventy-five thousandths of one percent (0.175%) per annum.

"Revolving Termination Date" means the earlier to occur of: (a) January 15, 2003; and (b) the date on which the Commitment terminates in accordance with the provisions of this Agreement.

3. Section 1.01 of the Credit Agreement is hereby amended by inserting the following terms therein in alphabetical order:

"Consolidated Current Liabilities" means, as of any date of determination, for the Company and its Subsidiaries on a consolidated basis, the amount of all liabilities which have been or properly should be classified as current liabilities in accordance with GAAP.

"Quick Ratio" means, as of any date of determination for any period, the ratio of (a) the sum of all cash, marketable securities and trade accounts receivable of the Company and its Subsidiaries on such date of determination (the foregoing determined on a consolidated basis in accordance with GAAP) to (b) Consolidated Current Liabilities.

4. Section 2.09(a) of the Credit Agreement is hereby amended to delete the reference to "five-eighths of one percent (0.625%)" contained therein and to substitute therefor a reference to "seven-eighths of one percent (0.875%)."
5. Section 8.04(g)(iv) of the Credit Agreement is hereby amended and restated to read in full as follows:

if such Acquisition involves a dollar amount of $10,000,000 or more, the Company has obtained the Bank's express prior written consent prior to the consummation of such Acquisition;

6. Section 8.07 of the Credit Agreement is hereby amended and restated to read in full as follows:

8.07 Use of Proceeds.

The Company shall not, and shall not suffer or permit any of its Subsidiaries to, use: (a) any portion of the proceeds of any Loan or Letter of Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock or (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock; or (b) more than $350,000,000 of proceeds of Loans or Letters of Credit to pay cash dividends to its common stock shareholders or to repurchase or redeem its common stock, in each case to the extent otherwise permitted under Section 8.09(c).

7. Section 8.09(c) of the Credit Agreement is hereby amended and restated to read in full as follows:

(c) declare or pay cash dividends to its common stock shareholders or repurchase or redeem its common stock; provided that the aggregate amount of all such dividends declared or paid and common stock repurchased or redeemed in any four consecutive fiscal quarter period (including the quarter in which any such cash dividends are declared or paid or any such common is repurchased or redeemed) shall not exceed: (i) if the date of any declaration or payment of any such cash dividends or the repurchase or redemption of any such common stock (any such date, a "Threshold Date") occurs during the Company's fiscal year ending 2002, $75,000,000; and (ii) if any Threshold Date occurs thereafter, 50% of the amount of the cumulative consolidated net income of the Company and its Subsidiaries (net of cumulative losses) reported in the eight consecutive fiscal quarter period ending with the fiscal quarter immediately preceding such Threshold Date;

8. Sections 8.11 and 8.12 of the Credit Agreement are hereby amended and restated to read in full as follows:

8.11 Net Funded Debt to EBITDA Ratio.

The Company shall not permit as of the last day of any fiscal quarter the Net Funded Debt to EBITDA Ratio to be greater than 1.25 to 1.00.

8.12 Interest Coverage Ratio; Quick Ratio.

(a) The Company shall not permit as of the last day of any fiscal quarter the Interest Coverage Ratio to be less than 6.00 to 1.00.

(b) The Company shall not permit as of the last day of any fiscal quarter the Quick Ratio to be less than 1.00 to 1.00.

3. Representations, Warranties and Covenants. As of the date hereof, the Company hereby remakes all of the representations and warranties made by it in the Credit Agreement (except to the extent such representations and warranties expressly relate solely to an earlier date) and reaffirms all of its covenants and other obligations contained in the Credit Agreement. The Company further certifies that: (a) as of the date hereof, there exists no Default or Event of Default; and (b) no Default or Event of Default will result from the effectiveness of this Amendment.
4. General Provisions.
1. Except as otherwise expressly provided herein, all of the terms and conditions of the Credit Agreement shall remain unchanged and in full force and effect.
2. This Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. This Amendment is a Credit Document.
3. This Amendment is made pursuant to Section 10.01 of the Credit Agreement and shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment.
4. This Amendment shall become effective as of the date first written above upon the execution and delivery of this Amendment by each of the parties hereto. This Amendment may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of such counterparts taken together shall be deemed to constitute but one and the same instrument. Each of the parties hereto understands and agrees that this Amendment may be delivered by any party thereto either in the form of an executed hard copy original or an executed original sent by facsimile transmission to be followed promptly by delivery of a hard copy original, and that any failure by any party to receive the hard copy executed original of this Amendment shall not diminish the binding effect of receipt of an executed original sent by facsimile transmission.
5. The illegality or unenforceability of any provision of this Amendment shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Amendment, the Credit Agreement or any other Credit Document.
6. The Company hereby confirms that the provisions set forth in Article 10 of the Credit Agreement (including, without limitation, Section 10.04(a) as to governing law and Section 10.04(b) as to jurisdiction) are applicable to this Amendment, and the Company hereby reaffirms all of its obligations under Article 10 of the Credit Agreement in respect of this Amendment, including, without limitation, under Section 10.04 thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

PLANTRONICS, INC.

a Delaware corporation

By: /s/ Barbara V. Scherer

Barbara V. Scherer

Title: Chief Financial Officer and

Senior Vice President, Finance

By: /s/ Richard R. Pickard

Title: General Counsel and

Vice President, Legal

WELLS FARGO BANK, NATIONAL

ASSOCIATION

/s/ R, Steve Seldomridge

R. Steve Seldomridge

Title: Vice President

SCHEDULE 2.01

To Credit Agreement

Commitment

Wells Fargo Bank, National Association

Commitment: $75,000,000.00

Applicable Percentage: 100%