17. Stock-Based Compensation

In July 2010, the shareholders approved the EnerSys 2010 Equity Incentive Plan ("2010 EIP"). The 2010 EIP consolidated the Company's existing equity incentive plans, the 2000 Management Equity Plan, the 2004 Equity Incentive Plan and the 2006 Equity Incentive Plan, into one plan. The 2010 EIP reserves 3,177,477 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock, restricted stock units, market share units and other forms of equity-based compensation. Shares subject to any awards that expire without being exercised or that are forfeited or settled in cash shall again be available for future grants of awards under the 2010 EIP. Shares subject to awards that have been retained by the Company in payment or satisfaction of the exercise price and any applicable tax withholding obligation of an award shall not count against the limit described above, and only the number of shares delivered in the settlement of stock appreciation rights shall count against the limit.

At March 31, 2011, 3,160,394 shares are available for future grants. The Company's management equity incentive plans are intended to provide an incentive to employees and non-employee directors of the Company to remain in the service of the Company and to increase their interest in the success of the Company in order to promote the long-term interests of the Company. The plans seek to promote the highest level of performance by providing an economic interest in the long-term performance of the Company. The Company settles employee share-based compensation awards with newly issued shares.

Stock Options

Non-qualified stock options have been granted to employees under the equity incentive plans at prices not less than the fair market value of the shares on the dates the options were granted. Options issued in fiscal 2010 vest over a three-year or six-month period and options issued in fiscal 2009 vest over a three-year period, and options issued in fiscal 2008 vest over a four-year period. Options become exercisable in equal installments over the vesting period. Options generally expire in 10 years, however options vesting in six months expire in 3 1/2 years.

The weighted average fair value of options granted in fiscal 2010 were $8.35 and $5.15 and $11.64 in fiscal 2009, and were determined using the following assumptions:


	2010			2010			2009
	10 Year Options			3.5 Year Options			10 Year Options
Exercise price	$	16.20		$	16.24		$	30.19
Risk-free interest rate		2.01	%		0.93	%		3.1	%
Dividend yield		0	%		0	%		0	%
Expected life		5 years			2 years			5 years
Expected volatility		56.6	%		56.6	%		38.6	%
Weighted average fair value	$	8.35		$	5.15		$	11.64

There were no options granted in fiscal 2011.

For fiscal 2011, 2010 and 2009, the Company recognized $2,333 ($1,844 net of taxes), $2,993 ($2,095 net of taxes) and $1,906 ($1,270 net of taxes), respectively, of stock-based compensation expense associated with the stock option grants.

The following table summarizes the Company's stock option activity in the years indicated:


	Number of Options			Weighted Average Remaining Contract Term (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding as of March 31, 2008		3,534,935			4.4	$	15.27	$	30,617
Granted		264,206					30.19		—
Exercised		(983,991	)				15.30		13,544
Canceled		(171,975	)				15.97		—

Options outstanding as of March 31, 2009		2,643,175			4.2	$	16.70	$	1,752
Granted		539,506					16.21		—
Exercised		(667,862	)				12.22		7,125
Canceled		(83,586	)				21.43		522

Options outstanding as of March 31, 2010		2,431,233			4.0	$	17.69	$	19,191
Exercised		(1,415,391	)				15.34		18,482
Canceled		(155,063	)				29.32		9

Options outstanding as of March 31, 2011		860,779			6.2	$	19.52	$	17,129

Options exercisable as of March 31, 2011		502,876			5.1	$	19.51	$	10,014

Options expected to vest after March 31, 2011		357,903			7.6	$	19.54	$	7,115

The following table summarizes information regarding stock options outstanding and exercisable at March 31, 2011:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$10.01-15.00		150,289		2.5	$	12.29		150,289	$	12.29
$15.01-20.00		454,928		7.5		16.82		173,465		17.09
$20.01-25.00		49,514		1.0		21.91		49,514		21.91
Over $25.00		206,048		7.1		30.19		129,608		30.19

		860,779		6.2	$	19.52		502,876	$	19.51

A summary of the status of the Company's non-vested options as of March 31, 2011, and changes during the year ended March 31, 2011, is presented below:


	Number of Options			Weighted Average Grant-Date Fair Value
Nonvested at March 31, 2010		614,607		$	9.08
Vested		(256,258	)		9.01
Forfeited		(446	)		8.00

Nonvested at March 31, 2011		357,903		$	8.70

Restricted Stock, Restricted Stock Units and Market Share Units

In fiscal 2011, the Company granted to non-employee directors 21,248 restricted stock units at the market price of $22.59 per restricted stock unit at the date of grant. In fiscal 2010, the Company granted to non-employee directors 23,723 restricted stock units in fiscal 2010, at the market price of $21.05 per restricted stock unit at the date of grant. These restricted stock units vest thirteen-months following the date of grant.

In fiscal 2011, the Company granted to management and other key employees 291,701 restricted stock units at the market price on that date of $25.67 per share and 124,091 market share units at the fair market value on that date of $34.45 per share. Restricted stock units are granted at the market price of the Company's common stock on the date of grant and vest and are settled in common stock 25% per year over a four-year period from the date of grant.

Market share units are granted at fair value on the date of grant and vest and are settled in common stock on the third anniversary of the date of grant. Market share units are converted into between zero and two shares of common stock for each unit granted at the end of a three-year performance cycle. The conversion ratio is calculated by dividing the average closing share price of the Company's common stock during the ninety calendar days immediately preceding the vesting date by the average closing share price of the Company's common stock during the ninety calendar days immediately preceding the grant date, with the resulting quotient capped at two. This quotient is then multiplied by the number of market share units granted to yield the number of shares of common stock to be delivered on the vesting date. The fair value of the market share units was estimated at the date of grant using a binomial matrix-pricing model with the following assumptions: a risk-free interest rate of 1.30 %, dividend yield of zero, time to maturity of 3 years and expected volatility of 43.0%.

The Company granted to management and other key employees 366,367 restricted stock units in fiscal 2010, at the fair market value on that date of $16.20 per share, and 227,214 restricted stock units in fiscal 2009, at an average fair market value on date of grants of $30.19 per share. These restricted stock units are granted at the fair market value of the Company's common stock on the date of grant and vest 25% per year over a four-year period from the date of grant.

No restricted stock awards were granted in fiscal 2011, 2010 and 2009.

Generally, restricted stock is granted at the fair market value of the Company's common stock on the date of grant and vest in annual installments of 25% over a four-year period from the date of grant.

A summary of the changes in restricted stock, restricted stock units and market share units awarded to employees and directors that were outstanding under the Company's equity compensation plans during fiscal 2011 is presented below:


	Restricted Stock					Restricted Stock Units (RSU)/ Market Share Units (MSU)
	Number of Restricted Shares			Weighted Average Grant Date Fair Value		Number of RSU and MSU			Weighted Average Grant Date Fair Value
Non-vested awards as of March 31, 2010		1,000		$	18.32		608,630		$	20.45
Granted		—			—		437,040			28.01
Vested		(1,000	)		18.32		(177,184	)		21.12
Canceled		—			—		(3,094	)		24.76

Non-vested awards as of March 31, 2011		—		$	—		865,392		$	23.97

The Company recognized equity-based compensation expense related to the vesting of restricted shares, restricted stock units and market share units of approximately $6,723, with a related tax benefit of $1,659 for fiscal 2011, approximately $3,968, with a related tax benefit of $1,190 for fiscal 2010, and approximately $3,115, with a related tax benefit of $1,045 for fiscal 2009.

All Award Plans

As of March 31, 2011, unrecognized compensation expense associated with the non-vested incentive awards outstanding was $15,403 and is expected to be recognized over a weighted average period of twenty months.