STOCK PLANS AND STOCK-BASED COMPENSATION

Stock Plans

Stock options granted subsequent to September 2007 generally vest over a three-year period. Options granted from September 2004 to September 2007 generally vested over a four-year period. Restricted stock grants generally have vesting periods over three or four years, depending on the size of the grant. The Management Equity Committee is authorized to make option and restricted stock grants to employees who are not senior executives pursuant to guidelines approved by the Compensation Committee and subject to quarterly reporting to the Compensation Committee. The Company currently grants options and restricted stock from only the 2003 Stock Plan. The Company settles stock option exercises and releases of vested restricted stock with newly issued common shares.

2003 Stock Plan

In June 2003, the Board of Directors ("Board") and stockholders approved the Plantronics Inc. Parent Corporation 2003 Stock Plan (the "2003 Stock Plan"). The 2003 Stock Plan, which has a term of 10 years (unless amended or terminated earlier by the Board) and is due to expire in September 2013, provides for incentive stock options, non-qualified stock options, restricted stock awards, stock appreciation rights, and restricted stock units. As of March 31, 2012, there have been 11,900,000 shares of common stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization or certain corporate reorganizations) cumulatively reserved since inception under the 2003 Stock Plan for issuance to employees, directors and consultants of Plantronics.

Under the 2003 Stock Plan, all stock options may not be granted at less than 100% of the estimated fair market value of the Company's common stock at the date of grant. Incentive stock options may not be granted at less than 100% of the estimated fair market value of the Company's common stock at the date of grant, as determined by the Board, and the option term may not exceed 7 years. Incentive stock options granted to a 10% stockholder may not be granted at less than 110% of the estimated fair market value of the common stock at the date of grant and the option term may not exceed five years.

Awards of restricted stock and restricted stock units with a per share or per unit purchase price less than the fair market value on the grant date that were granted from July 26, 2006 through August 4, 2011 are counted against the total number of shares issuable under the Plan as 2.5 shares for every 1 share subject thereto. No participant shall receive restricted stock awards in any fiscal year having an aggregate initial value greater than $2.0 million, and no participant shall receive restricted stock units in any fiscal year having an aggregate initial value greater than $2.0 million.

At March 31, 2012, options to purchase 2,828,087 shares of common stock and unvested restricted stock of 815,440 were outstanding, and there were 2,608,941 shares available for future grant under the 2003 Stock Plan which takes into account the 2.5 ratio for grants of restricted stock during the specific time period as noted above.

1993 Stock Option Plan

In September 1993, the Board approved the Plantronics Inc. Parent Corporation 1993 Stock Option Plan (the "1993 Stock Option Plan"). Under the 1993 Stock Option Plan, there were 22,927,726 shares of common stock (which number is subject to adjustment in the event of stock splits, reverse stock splits, recapitalization, or certain corporate reorganizations) cumulatively reserved since inception for issuance to employees and consultants of Plantronics. The 1993 Stock Option Plan, which provided for incentive stock options as well as nonqualified stock options to purchase shares of common stock, had a term of 10 years; therefore, the ability to grant new options under this 1993 Stock Option Plan expired in September 2003. At March 31, 2012, options to purchase 475,788 shares of common stock were outstanding under the 1993 Stock Option Plan.

2002 Employee Stock Purchase Plan ("ESPP")

On June 10, 2002, the Board approved the 2002 ESPP, which was approved by the stockholders on July 17, 2002, to provide certain employees with an opportunity to purchase Plantronics' common stock through payroll deductions. The plan qualifies under Section 423 of the Internal Revenue Code. Under the 2002 ESPP, which is effective through June 2012, the purchase price of Plantronics' common stock is equal to 85% of the lesser of the fair market value closing price of Plantronics' common stock on (i) the first day of the offering period, or (ii) the last day of the offering period. Each offering period is generally six months long. There were 182,209, 170,376 and 281,598, shares issued under the 2002 ESPP in fiscal years 2012, 2011 and 2010, respectively. At March 31, 2012, there were 317,810 shares reserved for future issuance under the 2002 ESPP.

Stock-based Compensation

The following table summarizes the amount of stock-based compensation expense included in the Consolidated statements of operations for the periods presented:



	Fiscal Year Ended March 31,
(in thousands)	2012			2011			2010
Cost of revenues	$	2,212		$	2,202		$	1,929

Research, development and engineering	3,917			3,765			3,505
Selling, general and administrative	11,352			9,906			9,443
Stock-based compensation expense included in operating expenses	15,269			13,671			12,948
Total stock-based compensation	17,481			15,873			14,877
Income tax benefit	(5,463		)	(4,892		)	(4,746		)
Total stock-based compensation expense, net of tax	$	12,018		$	10,981		$	10,131

For the year ended March 31, 2010, stock-based compensation expense presented in the table above includes $1.2 million recorded in discontinued operations.

As of March 31, 2012, the total unrecognized compensation cost related to unvested stock options was $8.7 million and is expected to be recognized over a weighted average period of 1.9 years. The total unrecognized compensation cost related to non-vested restricted stock awards was $16.9 million and is expected to be recognized over a weighted average period of 2.5 years.

Stock Plan Activity

Stock Options

The following is a summary of the Company’s stock option activity during fiscal year 2012:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Outstanding at March 31, 2011	5,360		$	25.58
Options granted	654		$	34.93
Options exercised	(1,831	)	$	20.88
Options forfeited or expired	(879	)	$	38.96
Outstanding at March 31, 2012	3,304		$	26.47	3.7	$	45,544
Vested and expected to vest at March 31, 2012	3,225		$	26.29	3.6	$	45,044
Exercisable at March 31, 2012	2,316		$	23.79	2.8	$	38,137

The total intrinsic values of stock options exercised during fiscal years 2012, 2011 and 2010 were $27.6 million, $26.2 million and $9.0 million, respectively. Intrinsic value is defined as the amount by which the fair value of the underlying stock exceeds the exercise price at the time of option exercise. The total cash received from employees as a result of employee stock option exercises during fiscal year 2012 was $38.2 million.

Restricted Stock

The following is a summary of the Company’s restricted stock activity during fiscal year 2012:



	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested at March 31, 2011	688		$	29.52
Granted	391		$	36.37
Vested	(202	)	$	27.35
Forfeited	(62	)	$	30.91
Non-vested at March 31, 2012	815		$	33.37

The weighted average grant-date fair value of restricted stock is based on the quoted market price of the Company's common stock on the date of grant. The weighted average grant-date fair values of restricted stock granted during fiscal years 2012, 2011 and 2010 were $36.37, $33.54 and $24.62, respectively. The total grant-date fair values of restricted stock that vested during fiscal years 2012, 2011 and 2010 were $5.5 million, $3.1 million and $3.1 million, respectively.

Valuation Assumptions

The Company estimates the fair value of stock options and ESPP shares using a Black-Scholes option valuation model. The fair value of the stock options and ESPP shares granted during the respective periods is estimated on the date of grant using the following weighted average assumptions:



	Employee Stock Options									ESPP
Fiscal Year Ended March 31,	2012			2011			2010			2012			2011			2010
Expected volatility	45.3		%	45.7		%	53.7		%	37.3		%	38.7		%	49.0		%
Risk-free interest rate	1.0		%	1.4		%	2.0		%	0.1		%	0.2		%	0.2		%
Expected dividends	0.6		%	0.6		%	1.0		%	0.6		%	0.6		%	0.8		%
Expected life (in years)	4.0			4.2			4.5			0.5			0.5			0.5
Weighted-average grant date fair value	$	12.06		$	11.92		$	8.71		$	8.69		$	8.67		$	7.22

The Company recognizes the grant-date fair value of stock-based compensation as compensation expense in the Consolidated statements of operations using the straight-line attribution approach over the service period for which the stock-based compensation is expected to vest.

The expected stock price volatility for the years ended March 31, 2012, 2011 and 2010 was determined based on an equally weighted average of historical and implied volatility. Implied volatility is based on the volatility of the Company’s publicly traded options on its common stock with terms of six months or less. The Company determined that a blend of implied volatility and historical volatility is more reflective of market conditions and a better indicator of expected volatility than using purely historical volatility. The expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The dividend yield assumption is based on our current dividend and the market price of our common stock at the date of grant.