Stock – Based Compensation

The Company expenses the fair value of grants of various stock-based compensation programs over the vesting period of the awards. Awards granted are recognized as compensation expense based on the grant-date fair value estimated in accordance with generally accepted accounting principles.

The table below summarizes certain data for the Company’s stock based compensation plans:



	Year Ended March 31,
	2012		2011		2010
Compensation expense for all stock based compensation plans	$	2,618	$	4,609	$	448
Tax (expense) benefits for stock-based compensation	$	—	$	—	$	(748	)
Intrinsic value of stock options exercised	$	—	$	22	$	59
Fair value of stock options vested	$	1,477	$	189	$	908

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 11 - Stock - Based Compensation (continued)

The Company’s shareholders approved the 2007 Incentive Plan (the “2007 Plan”) at its Annual Meeting of Shareholders on August 16, 2007 and amended the plan at its Annual Meeting of Shareholders on August 11, 2011 and August 6, 2009. The 2007 Plan is an omnibus plan that provides the flexibility to grant a variety of equity awards including stock options, stock appreciation rights, stock awards, stock units, performance awards and incentive awards to officers, directors and employees of the Company. A maximum of 13,900 shares may be granted under the plan as amended. As of March 31, 2012, 11,281 equity awards have been granted, 4,679 equity awards have been cancelled and 1,184 vested under the 2007 Plan, leaving 7,298 shares available for future awards under the 2007 Plan. Total equity awards outstanding are 6,207 inclusive of 5,419 awards granted and outstanding under the 2007 plan and 788 awards granted under prior plans. Shares issued under both the 2007 plan and earlier plans are new shares which have been authorized and designated for award under the plans. Individual types of awards are discussed in greater detail below.

Stock Option Awards

Stock options allow for the purchase of common stock at a price determined at the time the option is granted. Stock options generally vest ratably over four years and generally expire after ten years. The fair value of these options is determined at grant date using the Black-Scholes valuation model and includes estimates of forfeiture based on historical experience. The fair value is then recognized as compensation expense ratably over the vesting term of the options. There were 2,835 stock options granted during fiscal year 2011. No stock options were granted during 2012 and 2010.

Assumptions used to determine the fair value of options issued in 2011 include the following:



	2011
Grant Price	$	3.97
Exercise Price	$	6.00
Expected Life in Years	6.50
Annualized Volatility	59.2		%
Annual Dividend Rate	0.00		%
Risk Free Rate	2.48		%
Fair Value	$	5,540

A summary of option activity for stock options follows:



Options	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at March 31, 2009	2,636		6.08
Exercised	(30	)	3.26
Forfeited	(173	)	6.46
Expired	(276	)	4.89
Outstanding at March 31, 2010	2,157		6.24
Granted	2,835		6.00
Exercised	(35	)	2.98
Forfeited	(433	)	6.91
Outstanding at March 31, 2011	4,524		6.05
Forfeited	(203	)	5.98
Expired	(130	)	6.86
Outstanding at March 31, 2012	4,191		6.03	7.31	—
Vested and expected to vest at March 31, 2012	4,084		6.03	7.27	—
Exercisable at March 31, 2012	1,931		6.06	5.36	—

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 11 - Stock - Based Compensation (continued)

Stock Option Awards (continued)

The intrinsic values in the table above represent the total pre-tax intrinsic value which is the difference between the Company’s closing stock price and the exercise price multiplied by the number of options. The expense related to stock option awards for 2012, 2011, and 2010 was $907, $2,874, and $1,090, respectively. Options exercised in 2011 and 2010 were purchased by the tender of existing shares of option holders. There were no options exercised in 2012.

The table below shows the movement in unvested options from March 31, 2011 to March 31, 2012.



	Shares		Weighted Average Grant Date Fair Value	Aggregate Grant Date Fair Value
Unvested March 31, 2011	2,983		2.06	$	6,143
Forfeited	(66	)	3.76	(250		)
Vested	(657	)	2.25	(1,477		)
Unvested March 31, 2012	2,260		1.95	$	4,416

As of March 31, 2012, there is $2,697 of unearned compensation, net of expected forfeitures, related to stock option awards which will vest over a weighted average remaining life of 3.98 years.

Restricted Stock

Restricted stock is common stock that is both nontransferable and forfeitable unless and until certain conditions are satisfied. The fair value of restricted shares is determined on grant date and is amortized over the vesting period which is generally three years.



Restricted Stock	Shares	Weighted Average Grant Date Fair Value
Restricted at March 31, 2009	494	5.26
Granted	192	4.25
Vested	(271)	4.13
Forfeited	(17)	5.95
Restricted at March 31, 2010	398	5.51
Granted	143	3.34
Vested	(258)	6.08
Forfeited	(27)	5.06
Restricted at March 31, 2011	256	3.77
Granted	146	3.27
Vested	(185)	3.60
Forfeited	(13)	4.15
Restricted at March 31, 2012	204	3.55

As of March 31, 2012, there was $191 of remaining unamortized deferred compensation associated with restricted stock awards that will be expensed over the remaining service period through August 6, 2013. Expense recognized due to the vesting of restricted stock awards was $550, $559 and $824 for the years ended March 31, 2012, 2011 and 2010, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 11 - Stock - Based Compensation (continued)

Restricted Stock Units

Restricted stock units differ from restricted stock in that no shares are issued until restrictions lapse. Certain restricted stock units vest at the end of a three-year service period and others vest ratably over a three year period. The fair value of the restricted stock units is determined on the grant date and is amortized over the vesting period.



Restricted Stock Units	Shares		Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2009	92		4.47
Granted	106		4.26
Forfeited	(10	)	4.39
Outstanding as of March 31, 2010	188		4.36
Granted	959		4.57
Vested	(5	)	4.59
Forfeited	(253	)	4.58
Outstanding as of March 31, 2011	889		4.53
Vested	(251	)	4.55
Forfeited	(50	)	4.56
Outstanding as of March 31, 2012	588		4.51

As of March 31, 2012, there was $1,340 of remaining unamortized deferred compensation associated with these restricted stock units that will be expensed over the remaining service period through February 9, 2014. Expense recognized due to the vesting of these awards was $1,322, $829 and $236 during the years ended March 31, 2012, 2011 and 2010 respectively.

Performance Shares

This award differs from restricted stock in that no shares are issued unless and until both service and performance conditions are met. These shares will vest at the end of a two-year performance period but the level of the awards to be earned at the end of the performance period is contingent upon attainment of specific business performance goals. If certain minimum performance levels are not attained, compensation earned under these awards will be zero. Alternatively, if the maximum performance goals described by the plan are attained, the awards will be 150% of the plan’s target. The table below includes the maximum number of shares that may be earned under the plan.



Performance Shares	Shares		Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2009	1,188		4.47
Granted	1,782		4.19
Forfeited	(203	)	4.36
Outstanding as of March 31, 2010	2,767		4.30
Vested	(291	)	4.47
Forfeited	(496	)	4.02
Shares not vesting due to Performance	(803	)	4.47
Outstanding as of March 31, 2011	1,177		4.26
Forfeited	(1,177	)	4.26
Outstanding as of March 31, 2012	—		—

As of March 31, 2012, the Company has no performance shares expected to vest. Expense (income) recognized due to the expected vesting of this type of award was $163 and $(1,514) for the years ended March 31, 2011 and 2010, respectively. There was no expense recognized for the year ended March 31, 2012.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 11 - Stock - Based Compensation (continued)

Performance-Based Restricted Stock Units

Restricted stock units vest at the end of either a two or three year performance period but the level of the award to vest is subject to similar performance criteria as the Performance Shares described above. The awards are also variable in that they range from zero to 200% of the plan’s target contingent on the performance level attained. The table below includes the maximum number of restricted stock units that may be earned under the plan.



Performance-Based Restricted Stock Units	Shares		Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2009	150		4.47
Outstanding as of March 31, 2010	150		4.47
Granted	2,097		4.56
Vested	(40	)	4.47
Forfeited	(698	)	4.59
Shares not vesting due to Performance	(110	)	4.47
Outstanding as of March 31, 2011	1,399		4.55
Forfeited	(175	)	4.59
Outstanding as of March 31, 2012	1,224		4.54

As of March 31, 2012, the Company anticipates that no performance-based restricted stock units will vest. There is $5,559 remaining unamortized deferred compensation associated with the 1,224 restricted stock units that could potentially vest through March 31, 2014. Expense (income) recognized due to the expected vesting of these awards were $(161), $184 and $(179) during the years ended March 31, 2012, 2011 and 2010, respectively.