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AVID TECHNOLOGY, INC.
FORM 10-K
(Annual Report)
Filed 09/12/14 for the Period Ending 12/31/13
Address 75 NETWORK DRIVE
BURLINGTON, MA 01803
Telephone 978.640.6789
CIK 0000896841
Symbol AVID
SIC Code 3861 - Photographic Equipment and Supplies
Industry Photography
Sector Consumer Cyclical
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2014, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    AVID TECHNOLOGY, INC. FORM 10-K (Annual Report) Filed 09/12/14 for the Period Ending 12/31/13 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 75 NETWORK DRIVE BURLINGTON, MA 01803 978.640.6789 0000896841 AVID 3861 - Photographic Equipment and Supplies Photography Consumer ...

  • Page 2
    ... of Incorporation or Organization) 04-2977748 (I.R.S. Employer Identification No.) 75 Network Drive Burlington, Massachusetts 01803 (Address of Principal Executive Offices, Including Zip Code) (978) 640-6789 (Registrant's Telephone Number, Including Area Code) Securities Registered Pursuant...

  • Page 3
    ...Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Financial Statements and Supplementary Financial Information Report of Independent Registered Public Accounting Firm Changes in and...

  • Page 4
    ... to mitigate and remediate effectively the material weaknesses in our internal controls over financial reporting; the development, marketing and selling of new products and services; our ability to successfully implement our Avid Everywhere strategic plan; anticipated trends relating to our sales...

  • Page 5
    ...by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, or the Securities Act. We own or have rights to trademarks and service marks that we use in connection with the operation of our business. Avid is a trademark of Avid Technology, Inc. Other trademarks, logos...

  • Page 6
    ... Maintenance Release PCS resulted in errors in the timing of revenue recognition reported in our previously issued consolidated financial statements. Historically, we generally recognized revenue upon product shipment or over the period services and post-contract customer support were provided...

  • Page 7
    ... at December 31, 2010 was reflected as an adjustment to the 2011 opening balance of accumulated deficit in our Consolidated Financial Statements in Item 8 of this Form 10-K. We also adjusted income taxes as necessary to reflect the impact of the changes in the timing of revenue recognition described...

  • Page 8
    ... information Management's discussion and analysis of financial condition and results of operations Date or Period Year ended December 31, 2011 Years ended and as of December 31, 2011, 2010 and 2009 Quarters ended September 30, 2012, June 30, 2012 and March 31, 2012 As of and for the year ended...

  • Page 9
    ...1. BUSINESS OVERVIEW We provide technology products, solutions and services that enable the creation and monetization of audio and video content. Specifically, we develop, market, sell and support software and hardware for digital media content production, management and distribution. Digital media...

  • Page 10
    ... of our products and tools used to create content, including digital audio workstations (DAW), music notation software, control surfaces, live sound systems, video editing solutions, and graphics creation systems. Media Suite includes all of our tools and services used to manage, protect, distribute...

  • Page 11
    ...vocational schools, that prepare students for professional media production careers in the digital workplace. For this market, we offer a range of products and solutions based on the Avid MediaCentral Platform , including hardware- and software-based creative production tools, scalable media storage...

  • Page 12
    ... Avid Media Composer 7, a nonlinear-editing solution; Pro Tools 11, a digital audio workstation; Avid Interplay Production 3.0 for media production and asset management; Avid Interplay Pulse for multi-platform distribution (rebranded to Media | Distribute in 2014); ISIS 5500 and 7500 shared storage...

  • Page 13
    ...to create 2D/3D on-air graphics. Revenues from our professional video creative tools accounted for approximately 11% , 13% and 16% of our net revenues from continuing operations for 2013 , 2012 and 2011 (Restated), respectively. Video Storage and Server Solutions Our Avid ISIS shared storage systems...

  • Page 14
    ...internally developed and third-party software plug-ins and integrated hardware. Pro Tools solutions are offered at a range of price points and are used by professionals and aspiring professionals in music, film, television, radio, game, Internet and other media production environments. Our Pro Tools...

  • Page 15
    ... is reflected in discontinued operations for all periods presented. Professional Services and Customer Success Our Professional Services team delivers workflow design and consulting; program and project management; system installation and commissioning; and role-based product level training. The...

  • Page 16
    ... and online technical support, on-site assistance, hardware replacement and extended warranty, and software upgrades. In addition to support services, we offer a broad array of professional services, including installation, integration, planning and consulting services, and customer training. In...

  • Page 17
    ... manufacturing operations, see "Risk Factors" in Item 1A of this Form 10-K. Research and Development We are committed to delivering best-in-class digital media content-creation solutions that are designed for the unique needs, skills and sophistication levels of our target customer markets. Having...

  • Page 18
    ... software industry in general. This problem is particularly acute in some of the international markets in which we operate. Although we attempt to protect our intellectual property rights through patents, trademarks, copyrights, licensing arrangements, maintaining certain technology as trade secrets...

  • Page 19
    ..., and 2013, the restatement of our financial statements for the years ended December 31, 2011, and the accounting review undertaken in connection therewith, involved many months of review and analysis, including an evaluation of more than 700 software updates and the proper application of generally...

  • Page 20
    ... not be required, that we will be able to timely complete our remaining SEC filings for periods subsequent to this report, or that we will be able to stay current with our reporting obligations in the future. We have been named in class action lawsuits related to the circumstances that gave rise to...

  • Page 21
    ... results of operations could be adversely affected. Following our management change in early 2013, we started a significant business transformation process with the goal of achieving long-term growth. As part of this process, we adopted a number of key strategic initiatives to drive revenue growth...

  • Page 22
    ...solutions for our customers and are in the process of developing our Avid Everywhere strategy and platform designed to address changes in the industry by offering an open platform that will enable people to connect, collaborate, store, manage, distribute, share and monetize media assets, the changes...

  • Page 23
    ... exchange rates; • longer collection cycles for accounts receivable payment cycles and difficulties in enforcing contracts; • difficulties in managing and staffing international implementations and operations, and executing our business strategy internationally; • potentially adverse tax...

  • Page 24
    ... and time zone differences complicate effective management of contractors that are located abroad. Additionally, competition for talent in certain locations may lead to high turnover rates that disrupt development or manufacturing continuity. The manufacturers we use also manufacture products for...

  • Page 25
    .... We license third-party technology for incorporation into or bundling with our products. This technology may provide us with critical or strategic feature sets or functionality. The profit margin for each of our products depends in part on the royalty, license and purchase fees we pay in connection...

  • Page 26
    ... model for our products and services could adversely affect our revenues and gross margins and therefore our profitability. We distribute many of our products indirectly through third-party resellers and distributors. We also distribute products directly to end-user customers. Successfully managing...

  • Page 27
    ... offerings and entering into new markets in which we may not have experience; • distraction of management's attention from normal business operations; • potential loss of key employees of the acquired company; • difficulty implementing effective internal controls over financial reporting...

  • Page 28
    ... or using products or services that incorporate the challenged intellectual property; • make substantial payments for legal fees, settlement payments or other costs or damages; • obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology, which...

  • Page 29
    ... stock price and the high cost of capital. As a result of the restatement, we have deferred a significant portion of revenues from customer transactions occurring prior to 2011 to subsequent periods. The deferred revenues resulted in us reporting net income for the fiscal years 2011, 2012 and 2013...

  • Page 30
    ...of revenue backlog as revenue is based on our current estimates and could change based on a number of factors, including (i) the timing of delivery of products and services, (ii) customer cancellations or change orders, or (iii) changes in the estimated period of time Implied Maintenance Release PCS...

  • Page 31
    ... manufacturing costs in the long term. Our international sales are, for the most part, transacted through foreign subsidiaries and generally in the currency of the end-user customers. Consequently, we are exposed to short-term currency exchange risks that may adversely affect our revenues, operating...

  • Page 32
    ... to be volatile. " The market price of our common stock has been and may continue to be volatile. As a result of the delay in filing our periodic reports with the SEC, our common stock was suspended from trading effective February 25, 2014 and formally de-listed effective May 2, 2014. Following the...

  • Page 33
    ... rights plan may have the effect of discouraging advantageous offers for our business or common stock and limit the price that investors might be willing to pay in the future for shares of our common stock. Our charter, bylaws, and the provisions of the Delaware General Corporation Law include...

  • Page 34
    ... time arising from the normal course of business activities, including claims of alleged infringement of intellectual property rights and contractual, commercial, employee relations, product or service performance, or other matters. We do not believe these matters will have a material adverse effect...

  • Page 35
    ... cumulative stockholder return on our common stock during the period from December 31, 2008 through December 31, 2013 with the cumulative return during the period for the NASDAQ Composite Index (all companies traded on NASDAQ Capital, Global or Global Select Markets), the Old Avid Peer Group Index...

  • Page 36
    ... reference in setting executive compensation. The compensation committee seeks generally to include companies with similar product and service offerings to those of Avid while also achieving a balance of smaller and larger sized peer companies in terms of market capitalizations and revenue. The Avid...

  • Page 37
    ... condensed consolidated financial data presented. CONSOLIDATED STATEMENTS OF OPERATIONS DATA : (in thousands, except per share data) For the Year Ended December 31, 2013 Net revenues (1) Cost of revenues Gross profit Operating expenses: Research and development Marketing and selling General and...

  • Page 38
    ... presented to report the consumer business as a discontinued operation. CONSOLIDATED BALANCE SHEET DATA: (in thousands) As of December 31, 2013 Cash, cash equivalents and marketable securities Working capital deficit Total assets (1) Deferred revenues (current and long-term amounts) Long-term...

  • Page 39
    ... Maintenance Release PCS resulted in errors in the timing of revenue recognition reported in our previously issued consolidated financial statements. Historically, we generally recognized revenue upon product shipment or over the period services and post-contract customer support were provided...

  • Page 40
    ... at December 31, 2010 was reflected as an adjustment to the 2011 opening balance of accumulated deficit in our Consolidated Financial Statements in Item 8 of this Form 10-K. We also adjusted income taxes as necessary to reflect the impact of the changes in the timing of revenue recognition described...

  • Page 41
    ...presented to report the consumer business as a discontinued operation. EXECUTIVE OVERVIEW Our Company We provide technology products, solutions and services that enable the creation and monetization of audio and video content. Specifically, we develop, market, sell and support software and hardware...

  • Page 42
    ... 30% of billings as revenue in the year of billing. We expect this trend to continue in future periods. 2012 Divestiture of Consumer Business On July 2, 2012, we sold, in two separate transactions, a group of consumer audio and video products and certain related intellectual property, or the...

  • Page 43
    ... from deferred revenue amortization is a general improvement in our services and support delivery whereby revenue increased while costs declined. Operating Expenses Our total operating expenses from continuing operations for 2013 decreased to $314.7 million , from $333.5 million for 2012 . This...

  • Page 44
    ...it could cause a material increase or decrease in the amount of revenues reported in a particular period. We often receive multiple purchase orders or contracts from a single customer or a group of related customers that are evaluated to determine if they are, in effect, part of a single arrangement...

  • Page 45
    ... presented in the consolidated financial statements. BESP of Implied Maintenance Release PCS (as a % of Product BESP) Product Group Estimated Service Period Professional video creative tools Video storage and workflow solutions Media management solutions Consumer video-editing software Digital...

  • Page 46
    ... of Implied Maintenance Release PCS and other service and support elements over time as services are rendered. As a result of the adoption of these standards, we recorded increased revenues and net income of approximately $300 million for the year ended December 31, 2011 (Restated) as compared...

  • Page 47
    ... in the case of professional services, training and support). Standalone sales of support contracts are recognized ratably over the service period of the product being supported. From time to time, we offer certain customers free upgrades or specified future products or enhancements. When a software...

  • Page 48
    ... included Avid's stock price; or performance conditions, generally our return on equity or operating margin; or a combination of performance or market conditions. The fair values and derived service periods for all grants that include vesting based on market conditions are estimated using the...

  • Page 49
    ... Based on our policies for the calculation and payment of severance benefits, we account for employee-related restructuring charges as an ongoing benefit arrangement in accordance with ASC Topic 712, Compensation - Nonretirement Postemployment Benefits . Severance-related charges are accrued when it...

  • Page 50
    ...hardware and software products and solutions for digital media content production, management and distribution, and related professional services and maintenance contracts. Net Revenues from Continuing Operations for the Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 Net Revenues...

  • Page 51
    ... revenues from continuing operations decreased $21.7 million , or 7.3% , for 2012, compared to 2011 (Restated). In 2012, compared to 2011 (Restated), revenues from our video creative tools and storage and workflow solutions decreased, while revenues from our media management solutions all increased...

  • Page 52
    ... As a percentage of revenues from continuing operations, our digital audio software and workstation solutions and control surfaces, consoles and live-sound system categories both decreased during 2012, compared to 2011 (Restated). Services Revenues 2013 Compared to 2012 Services revenues are derived...

  • Page 53
    ..., testing and distribution of finished products; warehousing; customer support costs related to maintenance contract revenues and other services; royalties for third-party software and hardware included in our products; amortization of technology; and providing professional services and training. 44

  • Page 54
    ... net revenues less costs of revenues divided by net revenues, fluctuates based on factors such as the mix of products sold, the cost and proportion of third-party hardware and software included in the systems sold, the offering of product upgrades, price discounts and other sales-promotion programs...

  • Page 55
    ... related to professional services contracts assumed as part of a 2010 acquisition. Operating Expenses and Operating Income Operating Expenses and Operating Income for the Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 Expenses $ Change % 2012 Expenses Research and development...

  • Page 56
    ... Development Expenses for the Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 (Decrease)/Increase From 2012 $ % 2012 (Decrease)/Increase From 2011 (Restated) $ % Personnel-related expenses Facilities and information technology infrastructure costs Consulting and outside services...

  • Page 57
    ... Change in Marketing and Selling Expenses for Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 (Decrease)/Increase From 2012 $ % 2012 (Decrease)/Increase From 2011 (Restated) $ % Personnel-related expenses Consulting and outside services costs Facilities and information technology...

  • Page 58
    ... increased related legal expenses, partially offset by savings resulting from our 2012 restructuring actions and improved organizational efficiencies following our 2012 consumer business divestiture. Year-Over-Year Change in General and Administrative Expenses for the Years Ended December 31, 2013...

  • Page 59
    ... November and December 2013, our executive management team identified opportunities to lower costs in the supply and hardware technology group by eliminating 29 positions in hardware shared services and 15 positions in the supply and technology group. Additionally, an engineering reorganization at...

  • Page 60
    ... this plan. Interest and Other Income (Expense), Net Interest and other income (expense), net, generally consists of interest income and interest expense. Interest and Other Income (Expense) for the Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 Income (Expense) Change $ % 2012...

  • Page 61
    ... as the net expense related to the deferred compensation plan recorded in 2012. Provision for Income Taxes, Net Provision for Income Taxes, Net for the Years Ended December 31, 2013 and 2012 (dollars in thousands) 2013 Provision $ Change % 2012 Provision Provision for income taxes, net $ 2,939...

  • Page 62
    ...AND CAPITAL RESOURCES Liquidity and Sources of Cash We have generally funded our operations in recent years through the use of existing cash balances, which we have supplemented from time to time since the fourth quarter of 2010 with borrowings under our credit facilities. At December 31, 2013 , our...

  • Page 63
    ...be able to execute our business strategy. Cash Flows The following table summarizes our cash flows for the years ended December 31, 2013 , 2012 and 2011 (Restated) (in thousands): Year Ended December 31, 2011 2013 2012 (Restated) Net cash (used in) provided by operating activities Net cash (used in...

  • Page 64
    ... the year ended December 31, 2013 , reflecting primarily the non-cash amortization of pre-2011 deferred revenues and payments related to pre-2013 restructuring activities, partially offset by improvements in cash collections of accounts receivable, lower cash investments in inventory and the timing...

  • Page 65
    ... of credit may automatically renew based on the terms of the underlying agreements. We operate our business globally and, consequently, our results from operations are exposed to movements in foreign currency exchange rates. We enter into foreign currency contracts, which generally have one-month...

  • Page 66
    ..., 2014, the Financial Accounting Standards Board, or the FASB, and the International Accounting Standards Board, or the IASB, issued substantially converged final standards on revenue recognition. FASB Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606...

  • Page 67
    ... contracts to manage certain short-term exposures to fluctuations in the foreign currency exchange rates that exist as part of our ongoing international business operations. We do not enter into any derivative instruments for trading or speculative purposes. The success of our hedging programs...

  • Page 68
    ... upon the level of certain accounts receivable and inventory balances and subject to other terms and conditions. At December 31, 2013 , we had no outstanding borrowings under the credit facilities. A hypothetical 10% increase or decrease in interest rates payable on outstanding borrowings under the...

  • Page 69
    ... TECHNOLOGY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8: Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011...

  • Page 70
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Avid Technology, Inc. Burlington, Massachusetts We have audited the accompanying consolidated balance sheets of Avid Technology, Inc. and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated...

  • Page 71
    AVID TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2013 Net revenues: Products Services Total net revenues Cost of revenues: Products Services Amortization of intangible assets Total cost of revenues Gross profit Operating ...

  • Page 72
    AVID TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2013 Net income Other comprehensive income (loss): Net change in defined benefit plan Foreign currency translation adjustments $ - (1,717) 19,436 $ - 606 93,497 $ 146 (2,319) 224,194 $ 21,153...

  • Page 73
    ...294,361 2012 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable Accrued compensation and benefits Accrued expenses and other current liabilities Income taxes payable Deferred tax liabilities, net Deferred revenues Total current liabilities Long-term deferred tax liabilities...

  • Page 74
    AVID TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (in thousands) Shares of Common Stock In Issued Treasury Balances at December 31, 2010 (As reported) Cumulative prior period adjustments resulting from restatement and other revisions Balances at December 31, 2010 (Restated) ...

  • Page 75
    ... expenses, compensation and benefits and other liabilities Income taxes payable Deferred revenues Net cash (used in) provided by operating activities Cash flows from investing activities: Purchases of property and equipment Capitalized software development costs Change in other long-term assets...

  • Page 76
    The accompanying notes are an integral part of the consolidated financial statements. 65

  • Page 77
    ... of Business Avid Technology, Inc. ("Avid" or the "Company") provides technology solutions that enable the creation and monetization of audio and video content. Specifically, the Company develops, markets, sells and supports software and hardware for digital media content production, management and...

  • Page 78
    .... These multiple-deliverable arrangements may include products, support, training, professional services and Implied Maintenance Release PCS. In accordance with Accounting Standards Update ("ASU") No. 2009-13, Multiple-Deliverable Revenue Arrangements, an amendment to ASC Topic 605 ("ASU No. 2009-13...

  • Page 79
    ... revenue recognition of Implied Maintenance Release PCS and other service and support elements over time as services are rendered. As a result of the adoption of these standards, the Company recorded increased revenues and net income of approximately $300 million for the year ended December 31, 2011...

  • Page 80
    ... ratably over the service period of the product being supported. From time to time, the Company offers certain customers free upgrades or specified future products or enhancements. When a software deliverable arrangement contains an Implied Maintenance Release PCS deliverable, revenue recognition of...

  • Page 81
    ..., customer credit worthiness and current economic trends. To date, actual bad debts have not differed materially from management's estimates. The following table sets forth the activity in the allowance for doubtful accounts for the years ended December 31, 2013 , 2012 and 2011 (Restated...

  • Page 82
    ... revenues, net income, cash flow and financial position. The Company uses derivatives in the form of foreign currency contracts to manage its short-term exposures to fluctuations in the foreign currency exchange rates that exist as part of its ongoing international business operations. The Company...

  • Page 83
    ... estimating the fair value using a discounted cash flow method, the Company uses assumptions that include forecast revenues, gross margins, operating profit margins, growth rates and long term discount rates, all of which require significant judgment by management. Changes to these assumptions could...

  • Page 84
    ...on time, performance conditions, market conditions, or a combination of performance or market conditions. Product Warranties The Company provides warranties on externally sourced and internally developed hardware. The warranty period for all of the Company's products is generally 90 days to one year...

  • Page 85
    ...-contract customer support ("PCS") under U.S. GAAP. The business practice of providing Software Updates at no charge for many of the Company's products creates an implicit obligation and an additional undelivered element for each impacted arrangement (referred to as "Implied Maintenance Release PCS...

  • Page 86
    ... Maintenance Release PCS resulted in errors in the timing of revenue recognition reported in the Company's previously issued consolidated financial statements. Historically, the Company generally recognized revenue upon product shipment or over the period services and post-contract customer support...

  • Page 87
    ... 2010 was reflected as an adjustment to the 2011 opening balance of accumulated deficit. Income Taxes The Company identified and corrected certain errors related to the accounting for an intercompany loan made between two of its international subsidiaries that occurred during the year ended December...

  • Page 88
    ... statements. Adjustments to Consolidated Statement of Operations The following table presents the impact of the financial statement adjustments on the Company's previously reported consolidated statement of operations for the year ended December 31, 2011 (in thousands except per share data): 77

  • Page 89
    Year Ended December 31, 2011 As Previously Reported Net revenues: Products Services Total net revenues Cost of revenues: Products Services Amortization of intangible assets Total cost of revenues Gross profit Operating expenses: Research and development Marketing and selling General and ...

  • Page 90
    ...533) (17,436) (640) (240,560) 2,967 Cash flows from investing activities: Purchases of property and equipment Capitalized software development costs Change in other long-term assets Net cash used in investing activities (10,771) - (1,099) (11,870) - - - - (24) (1,242) 944 (322) - - - - (10,795...

  • Page 91
    ... potential common shares result from certain stock options and restricted stock units granted to the Company's executive officers that vest based on performance conditions, market conditions, or a combination of performance or market conditions. Year Ended December 31, 2013 2012 2011 Options Non...

  • Page 92
    ...sets forth the net foreign exchange gains and losses recorded as marketing and selling expenses in the Company's statements of operations during the years ended December 31, 2013 , 2012 and 2011 (Restated) that resulted from the gains and losses on Company's foreign currency contracts not designated...

  • Page 93
    ... at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2012 Financial Assets: Deferred compensation assets Foreign currency contracts Financial Liabilities...

  • Page 94
    82

  • Page 95
    ...19.5 million for the years ended December 31, 2013 , 2012 and 2011 (Restated), respectively. I. DISCONTINUED OPERATIONS On July 2, 2012, the Company sold a group of consumer audio and video products and certain related intellectual property (the "Consumer Business") with a negative carrying value...

  • Page 96
    ... ASSETS Amortizing identifiable intangible assets related to the Company's acquisitions or capitalized costs of internally developed or externally purchased software that form the basis for the Company's products consisted of the following at December 31, 2013 and 2012 (in thousands): December 31...

  • Page 97
    Long-term accrued restructuring Long-term deferred compensation Total $ 2,335 3,890 14,586 $ 5,119 3,936 17,978 84

  • Page 98
    ... potential sublease agreements, on a net present value basis, as well as other facilities-related obligations. The Company received no sublease income during the years ended December 31, 2013 , 2012 or 2011 . The Company's leases for corporate office space in Burlington, Massachusetts, which expire...

  • Page 99
    ... or manage inventory levels in response to shifts in customer demand, the Company may have insufficient, excess or obsolete product inventory. Contingencies In March 2013 and May 2013, two purported securities class action lawsuits were filed against the Company and certain of its former executive...

  • Page 100
    ... by the manufacturer, the Company records an accrual for the related liability based on historical trends and actual material and labor costs. The following table sets forth the activity in the product warranty accrual account for the years ended December 31, 2013 , 2012 and 2011 (in thousands...

  • Page 101
    ... available for future stock repurchases under the program. This stock repurchase program has no expiration date. During the years ended December 31, 2013 , 2012 and 2011 , no shares were repurchased under this program. Under some of the Company's equity compensation plans, employees have the option...

  • Page 102
    ... the Company's stock price; performance conditions, generally the Company's return on equity or operating margin; or a combination of performance or market conditions. The fair values and derived service periods for all grants that include vesting based on market conditions are estimated using the...

  • Page 103
    ... table sets forth the weighted-average key assumptions and fair value results for stock options granted during the years ended December 31, 2013 , 2012 and 2011 (Restated): Year Ended December 31, 2011 2013 Expected dividend yield Risk-free interest rate Expected volatility Expected life (in years...

  • Page 104
    ... the years ended December 31, 2013 , 2012 , and 2011 (Restated) was $1.1 million , $2.3 million , and $4.2 million , respectively. Employee Stock Purchase Plan The Company's Second Amended and Restated 1996 Employee Stock Purchase Plan (the "ESPP") offers the Company's shares for purchase at a price...

  • Page 105
    ...captions in the Company's consolidated statements of operations for the years ended December 31, 2013 , 2012 and 2011 (Restated), respectively (in thousands): Year Ended December 31, 2011 2013 Cost of products revenues Cost of services revenues Research and development expenses Marketing and selling...

  • Page 106
    ... current assets" and "accrued compensation and benefits" at those dates. In November 2013, the Board determined not to offer senior management or the members of the Board the opportunity to participate in the Deferred Plan in 2014 due to the restatement of the Company's financial statements and its...

  • Page 107
    ...expire between 2019 and 2033. The federal net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules of the Internal Revenue Code. The Company completed an assessment at December 31, 2013 regarding whether there may have been a Section 382...

  • Page 108
    ... following table sets forth a reconciliation of the Company's income tax provision (benefit) to the statutory U.S. federal tax rate for the years ended December 31, 2013 , 2012 and 2011 (Restated): Year Ended December 31, 2011 2013 2012 (Restated) Statutory rate Tax credits Foreign operations Non...

  • Page 109
    ... and December 2013, the Company's executive management team identified opportunities to lower costs in the supply and hardware technology group by eliminating 29 positions in hardware shared services and 15 positions in the supply and technology group. Additionally, an engineering reorganization at...

  • Page 110
    .... No further restructuring actions are anticipated under this plan. Restructuring Summary The following table sets forth the activity in the restructuring accruals for the years ended December 31, 2013 , 2012 and 2011 (Restated) (in thousands): Non-Acquisition-Related Restructuring Liabilities...

  • Page 111
    ... revenues for Implied Maintenance Release PCS. The Company provides online and telephone support and access to software upgrades for customers whose products are under warranty or covered by a maintenance contract. The Company's professional services team provides installation, integration, planning...

  • Page 112
    ... following table sets forth the Company's revenues from continuing operations by geographic region for the years ended December 31, 2013 , 2012 and 2011 (Restated) (in thousands): Year Ended December 31, 2011 2013 2012 (Restated) Revenues: United States Other Americas Europe, Middle East and Africa...

  • Page 113
    ... management, include all normal recurring adjustments necessary for a fair presentation of such information. Quarter Ended (In thousands, except per share data) Dec. 31 Net revenues Cost of revenues Amortization of intangible assets Gross profit Operating expenses: Research and development Marketing...

  • Page 114

  • Page 115
    ... (f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's board of directors, management, and...

  • Page 116
    ... risks, including changes in the Company's business practices, that could significantly impact the Company's consolidated financial statements as well as the system of internal control over financial reporting. Control Activities - We did not have control activities that were designed and operating...

  • Page 117
    ... team responsible for designing, implementing, monitoring and executing internal control over financial reporting. In order to effect the restatement of millions of transactions over a nine-year period, a significant amount of effort was exerted by both Company resources and third-party consultants...

  • Page 118
    ... systems that impact revenue recognition and other financial information and disclosures have effective general computer controls, including access and change management controls; and Implementing additional monitoring activities over the financial close and reporting process. • We believe that...

  • Page 119
    ... opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other...

  • Page 120
    ... financial statements and included an explanatory paragraph relating to the restatement of the financial statements as discussed in Note B to the consolidated financial statements. /s/ Deloitte & Touche LLP Boston, Massachusetts September 11, 2014 ITEM 9B. OTHER INFORMATION Not Applicable. 106

  • Page 121
    .... Class II Directors (terms to expire at our 2014 annual meeting) Robert M. Bakish, 50, became a director in October 2009. Mr. Bakish has served as the President and Chief Executive Officer of Viacom International Media Networks, a division of Viacom Inc., a global entertainment content company...

  • Page 122
    ...a chief financial officer of four public companies, as well as his accomplished history of working with global, public companies in the technology industry. He is also a valued member of our compensation committee. EXECUTIVE OFFICERS Our executive officers are elected annually by the board and serve...

  • Page 123
    ... the time he joined us, Mr. Gahagan served in various capacities at EMC Corporation, a provider of storage systems, software and services to support information storage and management strategies, most recently as Senior Vice President and General Manager of the Resource Management Software group...

  • Page 124
    ... committee reviews and approves all related-party transactions; Our code of business conduct and ethics is distributed annually to all of our employees; and Any waiver of our code of business conduct and ethics given to our executive officers or directors must be approved by our board of directors...

  • Page 125
    .... The plan is similar to plans adopted by numerous publicly traded companies and will expire at the next annual meeting of our stockholders. For a more complete description of the Rights Plan, please see our Current Report on Form 8-K dated January 7, 2014. The Board's Role in Risk Oversight Risk is...

  • Page 126
    ... the individual's name, together with the information referred to above, to the Nominating and Governance Committee, Avid Technology, Inc., c/o Corporate Secretary, 75 Network Drive, Burlington, Massachusetts 01803, or by email to [email protected]. Assuming that appropriate biographical and...

  • Page 127
    ... registered public accounting firm and management. Our audit committee met six times in 2013 and 11 times in 2012. Compensation Committee. The compensation committee's responsibilities include: • administering our executive officer compensation programs; • annually reviewing and approving an...

  • Page 128
    ...not meet formally in 2013. In 2012, our strategy committee met five times. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our directors, executive officers and the holders of more than 10% of our common stock to file with the SEC initial reports of...

  • Page 129
    ...our historical annual pay setting process. 2013 Business Overview As discussed elsewhere in this Form 10-K, we have completed the accounting evaluation commenced in early 2013 and have restated our consolidated financial statements as of December 31, 2011 and for the year then ended. Throughout this...

  • Page 130
    ... undertook a review of these topics as well as critiques offered by the stockholder advisory firms Institutional Shareholder Services and Glass Lewis with respect to our fiscal year 2011 executive compensation program. • In conjunction with the appointment of a new management team focused on...

  • Page 131
    ... benefits. We do not offer access to company jets, car allowances, personal security, financial planning advice, tax preparation services or club memberships. • No Excise Tax Gross-Ups. Following the changes in our executive management in 2013, none of our NEOs is entitled to Internal Revenue Code...

  • Page 132
    ... based on our company's stock price. The nature and scope of the assignments for PM&P for 2013 and 2012 executive compensation included: • • reviewing our peer group to determine the appropriateness of its composition; preparing executive compensation pay studies and competitive assessments to...

  • Page 133
    ... our executive compensation program with market practices, our compensation committee, with the assistance of its independent compensation consultant, reviews executive compensation from a peer group of publicly traded companies, which we refer to as the "Avid Peer Group." In 2013, our compensation...

  • Page 134
    ... executive compensation program has the following elements: Element Description Base Salary Annual Performance-Based Cash Bonuses Long-Term Equity Awards Other Benefits and Perquisites Post-Employment Payments Incentive Awards Designed to Address Turnaround Situations Compensation Mix Fixed annual...

  • Page 135
    ... executive officers were entitled to participate. Payouts under the 2013 Annual Incentive Program were contingent on the company achieving a free cash flow threshold of $(2.6) million, with free cash flow defined as operating cash flow (excluding restructuring, management change and certain one-time...

  • Page 136
    ... the plan were also set narrowly. Furthermore, while we had started working on a number of the strategic initiatives tied to the bonus program, at the time the 2013 Annual Incentive Program was approved, achievement of these targets was by no means determined. Free cash flow for 2013 (as calculated...

  • Page 137
    ... filing of our Annual Report on Form 10-K for the year ended December 31, 2012, (ii) immediately prior to a change in control of the company, or (iii) such date on or subsequent to March 31, 2014 as established at the discretion of our compensation committee. Payouts under the 2013 Remediation Plan...

  • Page 138
    ... met for the executive bonus plan for 2012, the compensation committee, in accordance with the plan, used the company's historical accounting models. Based on this calculation and as adjusted for currency exchanges, we achieved revenues of $577.5 million, resulting in a company performance payout of...

  • Page 139
    ...under the executive bonus plan for 2012, which payment, if any, is to be made only if the company pays bonuses on account of 2012 to executives who remain employed with the company. See " Employment and Severance Agreements with our NEOs - Severance Agreements with and Severance Benefits Provided to...

  • Page 140
    ... (i) prior to 2012, stock price, (ii) annual return on equity, or ROE, and (iii) operating margin. As of February 2012, in order to increase our executive officers' focus on sustained profitability and the creation of long-term value for our stockholders, we started using operating margin and ROE...

  • Page 141
    ... our company's stock price. To determine the appropriate sizes for these equity awards, our compensation committee reviewed data from its independent compensation consultant based on the 50 th percentile of the target annual long-term equity incentive values of the 2012 Avid Peer Group and published...

  • Page 142
    ... fiscal years 2012 and 2013, as of the date of filing of this Form 10-K the compensation committee had not determined if any of the equity awards vested based on financial performance in fiscal years 2012 or 2013. When our compensation committee conducted its annual review of executive compensation...

  • Page 143
    ... the time it is expected to take an executive officer to find alternative employment. Our company also benefits under these arrangements by requiring the executive officer to sign a general release of claims against the company and non-competition and non-solicitation provisions as a condition to...

  • Page 144
    ... deferred compensation plan in 2012 or 2013. Also, in 2013, due to the restatement process, we did not offer any of our employees or directors the opportunity to participate in the deferred compensation plan for 2014. EMPLOYMENT AND SEVERANCE AGREEMENTS WITH OUR NEOs Employment Agreement and Offer...

  • Page 145
    ... 2013 compared to the baseline set for December 31, 2012. Other Benefits . Mr. Hernandez is entitled to the use of our corporate apartment near our offices in California for business related purposes. Severance . The agreement provides that if Mr. Hernandez's employment is terminated by the company...

  • Page 146
    ... without cause or by the executive for good reason other than in connection with a change in control of the company, he will, subject to signing a release, be entitled to receive, in addition to any unpaid salary, benefits and bonus earned for the preceding year, (i) 12 months base salary (paid in...

  • Page 147
    ... without cause or by the executive for good reason other than in connection with a change in control of the company, he will, subject to signing a release, be entitled to receive, in addition to any unpaid salary, benefits and bonus earned for the preceding year, (i) 12 months base salary (paid in...

  • Page 148
    ... our practice of making annual restricted stock grants in 2013 and 2014 up to the date of the filing of this Form 10K to any of our executive officers or other employees and because our executive officers were restricted from making open market acquisitions of our common stock during the restatement...

  • Page 149
    ... in its charter adopted by the board of directors. A copy of the charter can be accessed from the corporate governance page in the investor relations section of the company's website at www.avid.com. The compensation committee has reviewed and discussed with management the disclosures contained in...

  • Page 150
    ... Board (FASB) ASC Topic 718, Compensation-Stock Compensation . This column was prepared assuming none of the awards will be forfeited. The amounts were calculated as described in Note M, "Capital Stock," of our audited financial statements in our Annual Report on Form 10-K for the year ended...

  • Page 151
    ... on a performance-based schedule tied to our stock price and the incremental improvement in our annual return on equity over a base year amount. 4 Non-equity Incentive Plan Compensation: These amounts were paid pursuant to the terms of our executive bonus plans for 2013, 2012 and 2011. For a summary...

  • Page 152
    ...2013 Fiscal Year-End . For additional information regarding the equity and non-equity incentive plan awards, please refer to the " Annual Performance-Based Cash Awards" and " Long-Term Equity Incentive Compensation sections under Analysis of 2013 and 2012 Executive Compensation Decisions and Actions...

  • Page 153
    ... for Stock-Based Compensation," to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013. (10) Messrs. Greenfield, Sexton and Lawrence had departed the Company at the time the 2013 Annual Incentive Program was approved. All bonus payments made...

  • Page 154
    ... return on equity and operating margin. For a summary of the vesting schedule, see the Long-Term Equity Incentive Compensation-Performance-Based Awards section of our Compensation Discussion and Analysis . (5) These restricted stock units vest on a time-based schedule as follows: 25% of the shares...

  • Page 155
    ... see Note M, "Capital Stock," to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013. (8) Upon the executive's departure from the company, all unvested equity awards that were not accelerated pursuant to employment or severance agreements were...

  • Page 156
    ... date of filing of this Form 10-K the compensation committee had not determined if any of the equity awards have vested based on financial performance in fiscal years 2012 or 2013. (4) These options granted to Mr. Hernandez were granted during his term as an outside director. (5) The shares subject...

  • Page 157
    ...to Vest 100% 84% 68% 52% 36% 20% Annual Operating Margin 10% 7.5% 5% Percentage of Equity Award to Vest 100% 66.66% 33.33% (15) The shares subject to this option vest on a performance-based schedule based on annual return on equity targets and stock price targets as follows: the vesting of 50% of...

  • Page 158
    ...of 6.25% every three months thereafter ending on the fourth anniversary of the grant date. (5) The shares subject to this option vest 2.083% each month. The most recent installment vested on December 15, 2012 and the last installment vests on June 15, 2013. (6) The shares subject to this option vest...

  • Page 159
    ...- based schedule tied to both our stock price and our annual return on equity. See footnote 16 to the table "Outstanding Option Awards as of December 31, 2013." Outstanding Stock Awards as of December 31, 2013 Number of Shares or Units of Stock that Have Not Vested(2)(4) Market Value of Shares or...

  • Page 160
    ... of filing of this Form 10-K the compensation committee had thus not determined if any of the equity awards have vested based on financial performance in fiscal years 2012 or 2013. (5) Ms. Arnold's employment terminated on August 1, 2012. Pursuant to the terms of her executive employment agreement...

  • Page 161
    ... number of shares that vested; however, the company withheld 1,658 shares to satisfy minimum tax withholding obligations, so only 3,265 shares were issued. Of this amount 2,813 shares were accelerated as of Mr. Lawrence's termination date. Restricted Stock Awards That Vested in 2012 Stock Awards...

  • Page 162
    ... payable under the various arrangements assuming that the change in control of our company occurred on December 31, 2013 and the NEO's employment was immediately terminated. In order for a NEO to be eligible to receive any of the below payments and benefits, he or she must execute a general release...

  • Page 163
    ... the plan payout factor is 100%) and prorated for the number of months that the executive officer was actually employed by our company. For Messrs. Rosica and Duva, this amount represents 18 and 12 months annual base salary, respectively, in effect on the date of termination. Payments to Messrs...

  • Page 164
    ...Park, who was designated an outside director effective as of November 15, 2012, was in May 2014 granted an option for 15,000 shares of our common stock as an initial award. In February 2014, our board approved cash compensation, effective January 1, 2014, for our outside directors as set forth below...

  • Page 165
    ... Non-Qualified Deferred Compensation for a discussion of our nonqualified deferred compensation plan. Director Compensation Table for Fiscal Years 2013 and 2012 The following table sets forth a summary of the compensation we paid to our directors for service on our board in 2013 and 2012. 151

  • Page 166
    ... accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation , of options granted to each of our outside directors in 2012. The grant date fair value was determined by using the Black-Scholes option pricing model. The options for...

  • Page 167
    ... every three months beginning on March 19, 2008 and 625,000 shares would vest pursuant to a performance-based schedule tied to our stock price and annual return on equity. As of Mr. Greenfield's resignation as our President and CEO on February 11, 2013, all of the time-based vested options...

  • Page 168
    ... months beginning on April 28, 2008 and 210,000 shares would vest pursuant to a performance-based schedule tied to our stock price and annual return on equity. As of Mr. Sexton's resignation as our Executive Vice President, Chief Financial Officer and Chief Administrative Officer on April 22, 2013...

  • Page 169
    ...based on the Company's financial statements for fiscal years 2012 or 2013, which has not been determined as of the filing of this Form 10-K. Amount and nature of ownership listed is based solely upon information contained in a Schedule 13D/A filed with the SEC by Blum Capital Partners LP and various...

  • Page 170
    ... the periods reported, there were no related person transactions. EMPLOYMENT AGREEMENTS As permitted by the Delaware General Corporation Law, we have adopted provisions in our amended and restated certificate of incorporation that authorize and require us to indemnify our executive officers and...

  • Page 171
    ... charter, which can be accessed from the corporate governance page in the investor relations section of the company's website at www.avid.com. The audit committee has reviewed the company's audited consolidated financial statements for the fiscal years ended December 31, 2013 and 2012 as well as the...

  • Page 172
    ... its review of the representations and information provided by management and the independent registered public accounting firm, the audit committee recommended to the board that the audited consolidated financial statements be included in the company's Annual Report on Form 10-K for the year ended...

  • Page 173
    ... STATEMENT SCHEDULES (a) 1. FINANCIAL STATEMENTS The following consolidated financial statements are included in Item 8: Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011 (Restated) Consolidated...

  • Page 174
    ... authorized. AVID TECHNOLOGY, INC. (Registrant) By: /s/ Louis Hernandez, Jr. Louis Hernandez, Jr. Chief Executive Officer and President (Principal Executive Officer) Date: September 11, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...

  • Page 175
    160

  • Page 176
    ... of the lenders party thereto, and Wells Fargo Capital Finance, LLC, as agent, dated October 1, 2010 Network Drive at Northwest Park Office Lease dated as of November 20, 2009 between Avid Technology, Inc. and Netview 5 and 6 LLC (for premises at 65 Network Drive, Burlington, Massachusetts) 8-K 10...

  • Page 177
    ...Network Drive at Northwest Park Office Lease dated as of November 20, 2009 between Avid Technology, Inc. and Netview 1,2,3,4 & 9 LLC (for premises at 75 Network Drive, Burlington, Massachusetts) 1993 Director Stock Option Plan, as amended Second Amended and Restated 1996 Employee Stock Purchase Plan...

  • Page 178
    ... 1, 2012 Executive Officer Employment Agreement dated February 4, 2011 between the Registrant and James Vedda Amended and Restated Employment Agreement dated December 20, 2010 between the Registrant and Glover Lawrence Summary of 2013 Annual Executive Incentive Program Executive Employment Agreement...

  • Page 179
    ... Document **100.PRE 31.2 X X X X X X X X Management contract or compensatory plan identified pursuant to Item 15(a)3. Effective date of Form S-1. Pursuant to Rule 406T of Regulation S-T, XBRL (Extensible Business Reporting Language) information is deemed not filed or a part of a registration...

  • Page 180
    ... or replaced, being collectively referred to herein as the "Loan Documents"); WHEREAS, Borrowers have requested that Agent and Lenders make certain amendments to the Credit Agreement, and Agent and Lenders are willing to make such amendments, subject to terms and conditions set forth herein; and...

  • Page 181
    ... condition of the making of Advances and providing Letters of Credit to Borrowers: (a) each Loan Party (i) is duly organized and existing and in good standing (or the applicable equivalent under local law) under the laws of the jurisdiction of its organization, and in the case of Avid Ireland...

  • Page 182
    ... any Governmental Authority, other than registrations, consents, approvals, notices, or other actions that have been obtained and that are still in force and effect; (f) the representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and...

  • Page 183
    ..., the parties hereto have caused this Amendment to be executed on the day and year first above written. BORROWERS : AVID TECHNOLOGY, INC. By: /s/ Ken Sexton Name: Ken Sexton Title: Chief Financial Officer AVID TECHNOLOGY INTERNATIONAL B.V. By: /s/ Ken Sexton Name: Ken Sexton Title: Managing Director...

  • Page 184
    ... Board of Directors, March 14, 2013 Pursuant to Section 18 of the Second Amended and Restated 1996 Employee Purchase Plan (the "Plan") of Avid Technology, Inc. (the "Company"), the Plan is hereby amended as set forth below. Capitalized terms used herein and not defined herein shall have the meanings...

  • Page 185
    ...the Board of Directors, May 10, 2013 Pursuant to Section 3(a) of the Amended and Restated 2005 Stock Option Plan (the "Plan") of Avid Technology, Inc. (the "Company"), the Plan is hereby amended as set forth below. Capitalized terms used herein and not defined herein shall have the meanings ascribed...

  • Page 186
    ... is granted under and governed by the terms and conditions of the Plan, the attached Terms and Conditions of the ISO Shares and any applicable, superseding terms of your employment agreement with the Company. AVID TECHNOLOGY, INC. By_____ Date: _____ I acknowledge the stock option grant made to...

  • Page 187
    ... an option, subject to these Terms and Conditions, 1. the attached Notice and the Plan, to purchase the number of ISO Shares identified in the Notice at the price per Share set forth in the Notice. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed in the Notice...

  • Page 188
    terms as set forth in the Optionee's then-effective employment agreement, offer letter or other similar agreement with the Company, if any. (iii) Exercise Period Upon Death, Disability or Retirement . If the Optionee dies, becomes disabled (within the meaning of Section 22(e)(3) of the Code) or ...

  • Page 189
    ... from the Grant Date or one year after such ISO Shares were acquired pursuant to exercise of this option, the Optionee shall notify the Company's Stock Plan Manager of such disposition by post or inter-office mail at Avid Technology, Inc., Second Floor, 75 Network Drive, Burlington, MA 01803 of such...

  • Page 190
    ... transfer set forth in Section 6. (d) Entire Agreement . These Terms and Conditions, the Notice, the Plan and any applicable, superseding terms of the Optionee's employment agreement constitute the entire agreement between the parties, and supersede all prior agreements and understandings, relating...

  • Page 191
    ...you and the Company agree that this stock option is granted under and governed by the terms and conditions of the Plan, the attached Terms and Conditions of the NSO Shares and any applicable, superseding terms of your employment agreement with the Company. AVID TECHNOLOGY, INC. By: _____ Date: _____

  • Page 192
    ... option, subject to these Terms and Conditions, the attached Notice and the Plan, to purchase the number of NSO Shares identified in the Notice at the price per Share set forth in the Notice. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed in the Notice. It...

  • Page 193
    ... sufficient to pay the exercise price and any required tax withholding; (c) if the Common Stock is registered under the Securities Exchange Act of 1934, by delivery of shares of Common Stock owned by the Optionee valued at their Fair Market Value (as defined in Section 5(h)(3) of the Plan), provided...

  • Page 194
    ... conditions as the Board may establish, such tax obligations may be paid in whole or in part in shares of Common Stock, including NSO Shares retained from the option creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by law, deduct any such tax...

  • Page 195
    ...20, 2010 (the "Prior Agreement"). Recital The Company and the Executive desire to amend and restate the Prior Agreement in its entirety as set forth herein, effective as of the date set forth above, to provide that the term of this Agreement shall continue until March 14, 2014, with automatic annual...

  • Page 196
    have an interest in any outside business activities or enter into any consulting agreements which, in the good faith determination of the Board of Directors (excluding Executive), conflict with the 1

  • Page 197
    ...last day of employment with the Company; and at the Board's request, Executive will execute any documents necessary to reflect such resignation. 1.5 Date. ARTICLE II Term 2.1 Term . The term of this Agreement (the "Term") shall commence on the Effective Date and shall expire on March 14, 2014 unless...

  • Page 198
    ..."Start Price"). (a) One Hundred Thousand (100,000) shares of the Stock Option will vest on a time-based schedule in equal 6.25% increments every three months, with the first vesting date on March 19, 2008 and the last vesting date on December 19, 2011, as long as Executive is employed by the Company...

  • Page 199
    ... end of the first 20 consecutive trading day period following the Effective Date during which the common stock of the Company, as quoted on Nasdaq (or on such other exchange as such shares may be traded), trades (without regard to the closing price) at a price per share at least four times the Start...

  • Page 200
    ... benefits, on the same terms and conditions, as amended from time to time, as are generally made available by the Company to its full-time executive officers. Executive shall be entitled to six (6) weeks of paid vacation per year. The Company shall pay, or reimburse Executive for, all business...

  • Page 201
    ... from Executive to the Company; or 4.1.6. The termination of Executive's employment by Executive with Good Reason (as defined below), to be effective as set forth below. 4.2 For purposes of this Agreement, the following definitions shall apply: 4.2.1. "Cause" shall mean (i) Executive's willful...

  • Page 202
    ... the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from...

  • Page 203
    ... (y) such Person shall publicly announce the termination of its intentions to take such actions. 4.2.7. "Pro Ration Percentage" shall mean the amount, expressed as a percentage, equal to the number of days in the then current fiscal year through the date that Executive's employment with the Company...

  • Page 204
    ... the terms of any applicable benefits plans and programs of the Company and (b) all vesting of all stock options and restricted stock awards then held by the Executive shall immediately cease as of the date Executive's employment with the Company terminates. 4.3.3. Without Cause or with Good Reason...

  • Page 205
    ...such date. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company. 4.3.4. Without Cause or with Good Reason After a Change...

  • Page 206
    ... the Date of Termination (Executive agrees to notify the Company in writing promptly upon becoming eligible to receive such group medical and dental insurance from another employer); (c) notwithstanding anything to the contrary in the applicable stock option or restricted stock agreement (including...

  • Page 207
    ...the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's employment with the Company terminates. 4.5.2. The parties acknowledge and agree that the interpretation of Section 409A of the Code and its application to the terms of this Agreement is...

  • Page 208
    ... Executive does not actively participate in management) any firm, person or other entity that competes in any geographic area with the Company in the business of the development, manufacture, promotion, distribution or sale of professional or consumer film, video or audio production tools, including...

  • Page 209
    ... in disputing in good faith any issue hereunder relating to the termination of the Executive's employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with review of determinations made under Section 4.4, and any tax audit or...

  • Page 210
    ... the next business day), followed within 24 hours by notification pursuant to any of the foregoing methods of delivery, in all cases addressed to the other party hereto as follows: (a) If to the Company: Avid Technology, Inc. 75 Network Drive Burlington, MA 01803 Attention: General Counsel Facsimile...

  • Page 211
    ... Applicable Law . This Agreement shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof) and the parties hereby submit to the jurisdiction of the courts of that state. 6.9 Waiver of Jury Trial . Executive...

  • Page 212
    ..., the undersigned have duly executed and delivered this Agreement as of the date first above written. Avid Technology, Inc. By: /s/ Ken Sexton Ken Sexton Executive Vice President, Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer) /s/ Gary G. Greenfield Gary...

  • Page 213
    ... payable under the Executive Employment Agreement (the "Agreement") originally entered into between him and Avid Technology, Inc. (the "Company") on December 17, 2007 and as amended and restated on December 20, 2010 and March 14, 2011, and is conditioned upon the Company's release of Executive...

  • Page 214
    ... day after the date on which Executive has signed this General Release. Executive expressly agrees that, in the event he revokes this General Release, the Company shall not be obligated to pay him any amounts the payment of which is expressly conditioned under the Agreement on the effectiveness...

  • Page 215
    .... EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is entered into as of February 4, 2011, by and between Avid Technology, Inc., a Delaware corporation with its principal executive offices at 75 Network Drive, Burlington, Massachusetts 01803 (the "Company"), and...

  • Page 216
    ... of this Agreement, from and after the end of the Term, Executive shall be an employee-atwill. Article 3. Payments 3.1. Base Compensation . During the Term, the Company shall pay Executive an annual base salary (the "Base Salary") of Three Hundred Twenty-Five Thousand Dollars ($325,000), payable in...

  • Page 217
    ... terms and conditions, as amended from time to time, as are generally made available by the Company to its Executive Officers. Executive shall be entitled to four (4) weeks of paid vacation per year, accruing ratably on a monthly basis. The Company shall pay, or reimburse Executive for, all business...

  • Page 218
    ...benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition pursuant to a transaction which satisfies the criteria set forth in clauses (a) and (b) of Section 4.2.2(iii); or (ii) Individuals who, as of the Effective Date...

  • Page 219
    ... Date such office location shall be deemed to be Burlington, Massachusetts); provided, however, that a termination for Good Reason by Executive can occur only if (a) Executive has given the Company a written notice of the existence of a condition giving rise to Good Reason within ninety (90) days...

  • Page 220
    ... Executive under this Agreement shall cease as of the Date of Termination, except that Executive shall be entitled to any amounts earned, accrued or owing but not yet paid under Section 3.1 and any benefits due in accordance with the terms of any applicable benefit plans and programs of the Company...

  • Page 221
    ... day of the subsequent tax year; (iii) the Company shall pay Executive the Annual Incentive Bonus for the year in which the Date of Termination occurred, in the amount of Executive's Target Bonus multiplied by the applicable actual plan payout factor and pro rated by the number of months Executive...

  • Page 222
    ...such date. No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company. 4.3.4. Without Cause or with Good Reason After a Change...

  • Page 223
    ... Date of Termination (Executive agrees to notify the Company in writing promptly upon becoming eligible to receive such group medical, dental and vision insurance from another employer); (iii) notwithstanding anything to the contrary in the applicable stock option or restricted stock unit agreement...

  • Page 224
    ... does not actively participate in management) any firm, person or other entity that competes or plans to compete in any geographic area with the Company in the business of the development, manufacture, promotion, distribution or sale of digital film, video or audio production tools, including, but...

  • Page 225
    ... limited to, trade secrets, inventions, products, processes, methods, techniques, formulas, compositions, projects, developments, plans, research data, financial data, personnel data of other employees, computer programs, and customer and supplier lists. Executive will not at any time, either during...

  • Page 226
    ... Agreement means any new or useful art, discovery, improvement, development or invention, whether or not patentable and whether or not in tangible form, and all related know-how, designs, maskworks, trademarks, formulae, processes, manufacturing techniques, trade secrets, ideas, artwork, software...

  • Page 227
    ... during the term of this agreement, Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to Executive by the Company and (ii) the amount of any payment provided hereunder shall not be reduced by any compensation earned by Executive. 7.3. Right to...

  • Page 228
    ... and made to all other executive employment agreements entered into between the Company and its then-current Executive Officers. 7.8. Applicable Law and Forum . This Agreement shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts (without reference to the conflicts of...

  • Page 229
    ... the Company with (or directing the Company to the location of) business records and other information relating to the Company's business. IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Executive Employment Agreement as of the date first above written. Avid Technology, Inc...

  • Page 230
    ... the Released Parties up to the date Executive signs this Agreement, but nothing in this Agreement prevents Executive from filing a charge with, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission or a state fair employment practices agency (except...

  • Page 231
    ... the Prior Agreement in its entirety as set forth herein, effective as of the date set forth above (or, where required by Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") as of January 1, 2009), to clarify the application of Section 409A of the Code to the benefits that may...

  • Page 232
    ... of this Agreement, from and after the end of the Term, Executive shall be an employee-at-will. Article 3. Payments 3.1. Base Compensation . During the Term, the Company shall pay Executive an annual base salary (the "Base Salary") of Two Hundred Fifty Thousand Dollars ($250,000), payable in regular...

  • Page 233
    ...schedule, as follows, as long as Executive is employed by the Company on each such vesting date: (a) Ten Thousand (10,000) shares of the Stock Option will vest at the end of the first twenty (20) consecutive trading day period following the Effective Date during which the common stock of the Company...

  • Page 234
    ... benefits, on the same terms and conditions, as amended from time to time, as are generally made available by the Company to its full-time executive officers. Executive shall be entitled to four (4) weeks of paid vacation per year. The Company shall pay, or reimburse Executive for, all business...

  • Page 235
    ...as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (a) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or 5 "Change-in-Control of the...

  • Page 236
    ... the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (b) no Person (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from...

  • Page 237
    ... Effective Date such office location shall be deemed to be Burlington, Massachusetts); provided, however, that a termination for Good Reason by Executive can occur only if (a) Executive has given the Company a notice of the existence of a condition giving rise to Good Reason within ninety (90) days...

  • Page 238
    ... day of the subsequent tax year; (iii) the Company shall pay Executive the Annual Incentive Bonus for the year in which the Date of Termination occurred, in the amount of Executive's Target Bonus multiplied by the applicable actual plan payout factor and pro rated by the number of months Executive...

  • Page 239
    ... date. No either payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of the Company. 4.3.4. Without Cause or with Good Reason After a Change...

  • Page 240
    ...as of the Date of Termination (Executive agrees to notify the Company in writing promptly upon becoming eligible to receive such group medical and dental insurance from another employer); (iii) notwithstanding anything to the contrary in the applicable stock option or restricted stock unit agreement...

  • Page 241
    ...of the Code. 4.5. General Release . In order to be eligible to receive any of the salary or benefits under Sections 4.3.1, 4.3.3, 4.3.4 or 4.3.5 hereof, Executive (or his personal representative, if applicable) shall be required to execute and deliver to the Company and allow to become effective and...

  • Page 242
    ... does not actively participate in management) any firm, person or other entity that competes or plans to compete in any geographic area with the Company in the business of the development, manufacture, promotion, distribution or sale of digital film, video or audio production tools, including, but...

  • Page 243
    ... As used herein, the term "lnnovation(s)" means any new or useful art, discovery, improvement, developments or inventions whether or not patentable, and all related know-how, designs, maskworks, trademarks, formulae, processes, manufacturing techniques, trade secrets, ideas, artwork, software or...

  • Page 244
    ... license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or machine. 6.3. Other Agreements . Executive hereby represents that, except as he has disclosed in writing to the Company, he is not bound by the terms of any agreement...

  • Page 245
    ... next business day), followed within twenty-four (24) hours by notification pursuant to any of the foregoing methods of delivery, in all cases addressed to the other party hereto as follows: (a) If to the Company: Avid Technology, Inc. 75 Network Drive Burlington, MA 01803 Attention: General Counsel...

  • Page 246
    ... employment agreements entered into between the Company and its then-current executive officers. 7.7. Applicable Law . This Agreement shall be interpreted in accordance with the Jaws of the Commonwealth of Massachusetts (without reference to the conflicts of laws provisions thereof) and the parties...

  • Page 247
    IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Executive Employment Agreement as of the date first above written. Avid Technology, Inc. By: /s/ Ken Sexton Name: Ken Sexton Title: EVP, CFO & CAO /s/ Glover Lawrence Glover Lawrence 17

  • Page 248
    ... the Released Parties up to the date Executive signs this Agreement, but nothing in this Agreement prevents Executive from filing a charge with, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission or a state fair employment practices agency (except...

  • Page 249
    ... INCENTIVE PROGRAM • On October 28, 2013, the Compensation Committee (the "Committee") of the Board of Directors of Avid Technology, Inc. (the "Company") adopted a 2013 Annual Incentive Program (the "2013 Program"). All of the Company's executive officers and certain other officers designated by...

  • Page 250
    ...ITALY S.R.L. (Italy) AVID TECHNOLOGY K.K. (Japan) AVID TECHNOLOGY MEXICO, S. de R.L. de C.V. (Mexico) AVID GENERAL PARTNER B.V. (Netherlands) AVID TECHNOLOGY C.V. (Netherlands) AVID TECHNOLOGY HOLDING B.V. (Netherlands) AVID TECHNOLOGY INTERNATIONAL B.V. (Netherlands) AVID TECHNOLOGY (S.E. ASIA) PTE...

  • Page 251
    ... control over financial reporting (which report expresses an adverse opinion on the effectiveness of Avid Technology, Inc.'s internal control over financial reporting because of material weaknesses), appearing in this Annual Report on Form 10-K of Avid Technology, Inc. for the year ended December 31...

  • Page 252
    ...financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 11, 2014 /s/ Louis Hernandez, Jr. Louis Hernandez, Jr. Chief Executive Officer and...

  • Page 253
    ...'s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 11, 2014 /s/ John W. Frederick...

  • Page 254
    ...OF 2002 In connection with the Annual Report on Form 10-K of Avid Technology, Inc. (the "Company") for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Louis Hernandez, Jr., Chief Executive Officer and President...