AVID TECHNOLOGY, INC.
Avid Technology Park
One Park West
Tewksbury, MA 01876
2005 EMPLOYEE BONUS PLAN
On December 8, 2004, based upon a recommendation from the Compensation
Committee of the Board of Directors (the "Board") of Avid Technology, Inc. (the
"Company"), the Board adopted this 2005 Employee Bonus Plan (the "Plan").
PURPOSE OF THE PLAN
The purpose of this Plan is: (1) to advance the interests of the
Company's stockholders by enhancing the Company's ability to attract, retain and
motivate talented employees and (2) to reward employees for helping the Company
to achieve certain financial goals for 2005, as well as for individual
performance and contributions. Except where the context otherwise requires, the
term "Company" includes any of the Company's present or future parent or
subsidiary corporations as defined in Sections 424(e) or (f) of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder and
any other business venture (including, without limitation, joint venture or
limited liability company) in which the Company has a controlling interest, as
determined by the Board.
ADMINISTRATION
The Plan is administered by the Board. The Board has the exclusive right
to administer, interpret and decide any and all matters arising under or in
connection with the Plan including, without limitation, the right to modify,
amend, revoke or suspend the Plan at any time in its sole discretion. All
decisions by the Board are made in the Board's sole discretion and shall be
final and binding on all persons having or claiming any interest in the Plan. No
director or person acting pursuant to the authority delegated by the Board will
be liable for any action or determination relating to or under the Plan made in
good faith.
To the extent permitted by applicable law, the Board may delegate to one
or more executive officers of the Company such powers under the Plan as the
Board may determine in its discretion, provided that the Board shall determine
the Bonus Payout (as defined below) for each executive officer of the Company.
To the extent permitted by applicable law, the Board may delegate any or
all of its powers under the Plan to one or more committees or subcommittees of
the Board (each, a "Committee"). All references in the Plan to the "Board" means
the Board or a Committee of the Board or the executive officer referred to in
the immediately preceding paragraph to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or executive
officer.
ELIGIBILITY
All Company employees (other than temporary employees, employees hired
after September 30, 2005 and employees who are covered by a sales compensation
or commission-based plan) are eligible to participate in the Plan, including all
of the Company's executive officers. Eligible employees must be employed by the
Company at the time awards are paid out under the Plan in order to receive their
award, if any. Each such eligible employee is deemed a "Participant" in the
Plan.
BONUS PAYOUTS
A Participant's bonus payout under the 2005 Bonus Plan ("Bonus Payout")
is based on three factors: (1) the Participant's Target Award (as defined
below); (2) the financial performance of the Participant's Business Unit
("Business Unit Performance"); and (3) the Participant's individual performance
("Individual Performance").
Target Award. A "Participant's Target Award" is an amount between 5% and
140% of a Participant's base salary, based on various factors (as determined by
the Board for all executive officers, and by management for all other
Participants), including the Participant's role and position within the
organizational structure of the Company. The "Company Target Award" or a
"Business Unit Target Award" is the sum of the Target Awards for all
Participants in the Company or such business unit, as the case may be.
Business Unit Performance. The Business Unit Performance component of a
Participant's Bonus Payout is an objective measurement of a business unit's
financial results based on both revenue and operating profit, as further
discussed below.
Individual Performance. Based on the subjective evaluation (by the Board
for all executive officers, and by management for all other Participants) of the
Participant's overall performance and contributions to the Company, a multiplier
ranging from 0 to 1.2 is applied to the Participant's Target Award in order to
determine the Participant's Bonus Payout. Accordingly, this Individual
Performance component may increase a Participant's Bonus Payout by as much as
20% of such Participant's Target Award or, in other circumstances, reduce the
award to zero.
PLAN GOALS AND MEASUREMENT
For purposes of the Plan, all Participants are grouped into one of three
business units: Corporate, Audio or Video. For each of the business units,
Business Unit Performance is measured by both revenue and operating profit. In
order for a Participant to receive a bonus, revenue and operating profit for the
Company and the Participant's business unit must exceed minimum amounts
established by the Board, as further described below.
As a threshold matter, for all business units, the Company's (1) 2005
revenues must exceed the Company's 2004 revenues (as may be adjusted by the
Board for any acquisitions made by the Company) and (2) 2005 operating profit
must exceed a minimum amount established by the Board for any Bonus Payout to be
made to any Participant.
Business Unit Performance is measured by revenue and operating profit.
Once a business unit meets a minimum revenue threshold and a minimum operating
profit threshold ("Threshold Operating Profit"), each as established by the
Board, Participants in that business unit become eligible to receive a
percentage of their Target Awards (up to 100%) if the target operating profit
("Target Operating Profit") is achieved, subject to their Individual
Performance. The Target Operating Profit is an amount set by the Board which
exceeds the Threshold Operating Profit and is based on the Company's operating
plan for 2005.
The Threshold Operating Profit and Target Operating Profit levels are
set by the Board for the Video and Audio business units. The Threshold Operating
Profit for the Corporate business unit is the sum of the Threshold Operating
Profit for the Audio and Video business units. Similarly, the Target Operating
Profit for the Corporate business unit is the sum of the Target Operating
Profits for the Audio and Video business units.
If the Corporate business unit exceeds its Target Operating Profit, 15%
of such excess amount (the "Over-Achievement Pool") will be added to the total
bonus pool available for all Participants whose business unit exceeds its Target
Operating Profit (each, a "Qualifying Business Unit"). The Over-Achievement Pool
will first be divided between the Corporate business unit and the other
Qualifying Business Unit(s) in proportion to each unit's Target Award. The
portion of the Over-Achievement Pool that is allocated to the non-Corporate
Qualifying Business Unit(s) will then be divided proportionally based on each
non-Corporate Qualifying Business Unit's contribution to operating profit in
excess of the Target Operating Profit.
The Business Unit Performance component of a Participant's Bonus Payout
is determined as follows: (1) for executive officers of the Company and vice
presidents in the Corporate business unit, 100% of the Business Unit Performance
component is based on the results of the Corporate business unit; (2) for vice
presidents in the Audio and Video business units, 75% of the Business Unit
Performance component is based on the results of their respective business unit
and the remaining 25% is based on the Corporate business unit results; and (3)
for all Participants below the vice president level, 100% of the Business Unit
Performance component is based on the results of their respective business unit.
PRO-RATED BONUS PAYOUTS
Bonus Payouts may be pro-rated under the following circumstances:
1. Any salary change occurring in the year will be automatically
pro-rated, as Bonus Payouts are calculated on the actual base salary
paid during 2005. For purposes of the Plan, actual base salary
includes regular wages, vacation, sick time and holiday time, but not
leave of absence pay, overtime, shift differential or other premium
pay.
2. If a Participant is hired after January 1, 2005, the Participant's
Bonus Payout will be pro-rated to include only that portion of the
year for which the Participant was employed by the Company. For
example, if the Participant is hired on July 1, 2005, the
Participant's Bonus Payout will be based on a half year's base
salary.
3. If a Participant transfers between business units during the year,
the Participant's Bonus Payout will be pro-rated for the time spent
in each business unit.
4. If an individual in a temporary position becomes an employee, the
Participant's Bonus Payout will be calculated on the actual base
salary paid after becoming an employee.
5. If a Participant is promoted after January 1, 2005 to a position with
a higher Target Award, the Bonus Payout will be adjusted to account
for the portion of the year spent at each position.
6. If a Participant is on an approved leave of absence for part of the
year, the Participant's Bonus Payout will be calculated based on the
actual base salary paid during the year. Employees who are on an
approved leave of absence on the Bonus Payout date will be considered
to be employed for purposes of this Plan.
7. If a Participant becomes disabled and qualifies for benefits under
the Company's long-term disability plan, the Participant's Bonus
Payout will be calculated on the actual base salary paid while on the
Company payroll as an employee.
TIMING OF PLAN PAYOUT
Bonus Payouts under the Plan will be determined after the Company's
financial results for 2005 are publicly released, which is currently anticipated
to be in February 2006. Bonus Payouts, if any, are expected to be paid in
February 2006.
MISCELLANEOUS
Nothing in this Plan will be construed as creating an employment
relationship between a Participant and the Company, nor is the Plan intended to
be a guarantee of any kind of compensation or any other binding commitment of
the Company. The Company may modify Bonus Payouts or establish separate
procedures for Participants who are foreign nationals or who are employed
outside the United States in order to comply with laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, currency, employee
benefits or other matters. The provisions of this Plan and all awards made
hereunder shall be governed by, and interpreted in accordance with, the laws of
The Commonwealth of Massachusetts, without regard to the rules governing
conflicts of law.