COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jul. 02, 2022

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Lease Payments

Future minimum lease payments under non-cancelable operating leases as of July 2, 2022 were as follows:


(in thousands)	Operating Leases(1)
2023 (remaining nine months)	$	9,983
2024	12,485
2025	9,166
2026	7,956
2027	6,344
Thereafter	10,802
Total lease payments	56,736
Less: Imputed interest(2)	(6,167)
Present value of lease liabilities	$	50,569

(1) The weighted average remaining lease term was 4.9 years as of July 2, 2022.

(2) The weighted average discount rate was 4.5% as of July 2, 2022.

Unconditional Purchase Obligations

The Company's off-balance sheet unconditional purchase obligations are comprised of third-party manufacturing, component purchases, and other general and administrative commitments.

We use several contract manufacturers to manufacture raw materials, components, and subassemblies for our products through our supply and demand information that can cover periods up to 78 weeks. The contract manufacturers use this information to acquire components and build products. We also obtain individual components for our products from a wide variety of individual suppliers using a combination of purchase orders, supplier contracts, including annual minimum purchase obligations, and open orders based on projected demand information.

A substantial portion of the raw materials, components, and subassemblies used in our products are provided by our suppliers on a consignment basis. These consigned inventories are not recorded on our consolidated balance sheets until we take title to the raw materials, components, and subassemblies, which occurs when they are consumed in the production process. Prior to consumption in the production process, our suppliers bear the risk of loss and retain title to the consigned inventory. The agreements allow us to return parts in excess of maximum order quantities to the suppliers at the supplier’s expense. Returns for other reasons are negotiated with the suppliers on a case-by-case basis and to date have been immaterial. If our suppliers were to discontinue financing consigned inventory, it would require us to make cash outlays and we could incur expenses which, if material, could negatively affect our business and financial results.

As of July 2, 2022, the Company had outstanding off-balance sheet unconditional purchase obligations of $687.6 million, including third-party manufacturing and component purchases of $557.0 million net of consigned inventories of $77.4 million. We expect to consume unconditional purchase obligations in the normal course of business, net of an immaterial purchase commitments reserve. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs in partnering with our suppliers given the current environment.

Other Guarantees and Obligations

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets of a subsidiary, matters related to the Company's conduct of business and tax matters prior to the sale. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various triggering events relating to the sale and use of its products and services.

In addition, the Company also provides indemnification to customers against claims related to undiscovered liabilities, additional product liability, or environmental obligations. The Company has also entered into indemnification agreements with

its directors, officers, and certain other personnel that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers of the Company or certain of its affiliated entities. The Company maintains director and officer liability insurance, which may cover certain liabilities arising from its obligation to indemnify its directors, officers, and certain other personnel in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these agreements due to the limited history of prior claims and the unique facts and circumstances involved in each particular claim. Such indemnification obligations might not be subject to maximum loss clauses. Historically, the Company has not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related to such indemnification obligations in the condensed consolidated financial statements.

As of July 2, 2022, the Company had $28.7 million in off balance-sheet contractual obligations related to advisory services performed in connection with the Merger Agreement which are contingent upon the close of the Merger.

Claims and Litigation

On January 23, 2018, FullView, Inc. filed a complaint in the United States District Court of the Northern District of California against Polycom, Inc. (“Polycom”) alleging infringement of two patents and thereafter filed a similar complaint in connection with the counterpart patents in Canada. Polycom thereafter filed petitions for inter parties review (“IPR”) of both patents U.S. Patent Trial and Appeal Board (“PTAB”), the results of which were appealed to the Court of Appeals for the Federal Circuit. Litigation in both matters in the United States and Canada, respectively, were stayed pending the results of that appeal. Subsequent to the appeal, FullView initiated arbitration proceedings under a terminated license agreement with Polycom alleging that Polycom had failed to pay certain royalties due under that agreement. The arbitration panel awarded an immaterial amount to FullView. FullView filed a First and Second Amended Complaint and Polycom filed a motion to dismiss. The Court granted Polycom's partial motion to dismiss without prejudice and invalidated one of the patents in suit and granted FullView's motion of validity on the second patent. On June 30, 2022, FullView filed a motion for summary judgment on infringement of the ‘143 patent and the Company filed its opposition in July. These motions currently are tentatively scheduled to be heard by the Court on September 29, 2022. Discovery continues in this matter.

On June 21, 2018, directPacket Research Inc. (“directPacket”) filed a complaint alleging patent infringement by Polycom in the United States District Court for the Eastern District of Virginia, Norfolk Division. The Court granted Polycom’s Motion to Transfer Venue to the Northern District of California. Polycom filed petitions for IPR of the asserted patents which were granted by the PTAB. The District Court matter was stayed pending resolution of the IPRs. After oral argument, the PTAB issued final written decisions invalidating two of the asserted patents. The remaining claims of the third patent were unasserted against the Company. directPacket appealed the PTAB decision regarding the '588 patent and Polycom appealed the PTAB's decision on the '978 patent to the United States Court of Appeals for the Federal Circuit. On December 13, 2021, the Court issued an affirmance of the decision regarding the invalidity of all asserted claims of the ‘978 patent. On January 27, 2022, the Court vacated the PTAB’s finding that certain claims of the '588 patent were invalid as obvious and remanded the case for further proceedings at the PTAB. The PTAB agreed with Polycom that additional briefing was needed to decide the issue of invalidity in light of the Federal Circuit’s revised claim construction. The district court case remains stayed pending the PTAB decision.

On November 15, 2019, Felice Bassuk, individually and on behalf of others similarly situated, filed a complaint against the Company, its former CEO, Joseph Burton, its CFO, Charles Boynton, and its former CFO, Pamela Strayer, alleging various securities law violations. The Company disputes the allegations. The Court appointed lead plaintiff and lead counsel and renamed the action “In re Plantronics, Inc. Securities Litigation” on February 13, 2020. Plaintiffs filed the amended complaint on June 5, 2020 and the Company filed a Motion to Dismiss the Amended Complaint on August 7, 2020. The hearing scheduled for January 13, 2021 was vacated and on March 29, 2021, the Court issued its order granting the Company’s motion to dismiss, but allowing the Plaintiffs leave to amend their complaint. The Plaintiff filed its second amended complaint on June 22, 2021 and the Company filed its Motion to Dismiss on September 7, 2021. The court is expected to rule based on the briefs without a hearing and the parties are awaiting the court's ruling.

On December 17, 2019, Cisco Systems, Inc. (“Cisco”) filed a First Amended Complaint for Trade Secret Misappropriation against Plantronics, Inc. and certain individuals which amends a previously filed complaint against certain other individuals. The Company disputes the allegations. The Company filed a Motion to Dismiss and the Court granted the Motion with leave to amend as to defendants He, Chung and Williams, granted the Motion to Compel Arbitration for defendant Williams and granted in part and denied in part the Motion to Dismiss by defendants Puorro and the Company. Cisco filed an Amended Complaint and the defendants moved to dismiss or strike portions of the Amended Complaint. The Court granted in part and denied in part the Motion to Dismiss. On September 10, 2020, the Company filed a Motion for Protective Order and a Motion to Strike and Challenge the Sufficiency of Cisco’s Trade Secret Disclosure. On December 21, 2020, the Court granted in part and denied in part such Motions. On December 30, 2020, Cisco filed a motion for leave to file a Motion for Reconsideration. On January 11,

2021 the Company filed its opposition. The Court issued its Case Management and Pretrial order setting a settlement conference which occurred on April 1, 2021. During such mediation conference, the parties were unable to reach settlement. The Texas arbitration proceeding between Mr. Williams and Cisco was settled pursuant to an agreement by the parties, and Mr. Williams was dismissed with prejudice from both that proceeding and from the district court action. On August 13, 2021, Mr. He settled with Cisco pursuant to which he will be permanently enjoined and forever prohibited from receiving, using, and/or distributing Cisco Confidential Business Information except in limited circumstances. Discovery is ongoing.

On July 22, 2020, Koss Corporation filed a complaint alleging patent infringement by the Company and Polycom in the United States District Court for the Western District of Texas, Waco Division. The Company answered the Complaint on October 1, 2020 disputing the claims. On December 18, 2020, the Company filed a Motion to Transfer Venue to the Northern District of California which was granted on May 20, 2021. On November 1, 2021, the Company filed a Motion to Dismiss the suit with the District Court on the grounds of non-patentable subject matter. The Court will rule based on the briefs without a hearing and the parties are awaiting the Court's ruling.

During the months of May through June 2022, seven purported stockholders commenced separate actions against the Company and its directors related to the Merger. Those cases were: Stein v. Plantronics, Inc., et al., Civil Action No. 22-cv-03574, filed in the United States District Court for the Southern District of New York on May 3, 2022; Whitfield v. Plantronics, Inc., et al., Civil Action No. 22-cv-02583, filed in the United States District Court for the Eastern District of New York on May 5, 2022; Vicknair v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-02753, filed in the United States District Court for the Eastern District of New York on May 11, 2022; Justice, II v. Plantronics, Inc., et al., No. 2:22-cv-01861, filed in United States District Court for the Eastern District of Pennsylvania on May 12, 2022; Hansen v. Plantronics, Inc., et al., Civil Action No. 5:22-cv-02989-VKD, filed in the United States District Court for the Northern District of California on May 20, 2022; Nathan v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-04461, filed in the United States District Court for the Southern District of New York on May 31, 2022; and Finger v. Plantronics, Inc., et al., Civil Action No. 1:22-cv-03288, filed in the United States District Court for the Eastern District of New York on June 3, 2022. We refer to the complaints referenced in this paragraph collectively as the “Complaints.” The Complaints asserted claims against all defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and against the individual defendants under Section 20(a) of the Exchange Act for alleged “control person” liability, with respect to allegedly false or misleading statements in the Company’s preliminary proxy statement filed on May 2, 2022 and/or the Company’s definitive proxy statement filed on May 17, 2022. The Complaints sought, among other relief (1) to enjoin defendants from consummating the Merger; (2) to rescind the Merger or recover damages, if the Merger is completed; (3) to require the individual defendants to issue a revised proxy statement; (4) declaratory relief; and (5) attorneys’ fees and costs. All of the Complaints were voluntarily dismissed with prejudice in June and July 2022 prior to the consummation of the Merger.

In addition to the specific matters discussed above, the Company is involved in various legal proceedings and investigations arising in the normal course of conducting business. Where applicable, in relation to the matters described above, the Company has accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to the Company's financial condition, results of operations, or cash flows. The Company is not able to estimate an amount or range of any reasonably possible loss, including in excess of any amount accrued, because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings, and the difficulty of predicting the settlement value of many of these proceedings.

However, based upon the Company's historical experience, the resolution of these proceedings is not expected to have a material effect on the Company's financial condition, results of operations or cash flows. The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.