Avid 2005 Annual Report Download - page 85

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71
Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions and results:
Stock Options Stock Purchase Plan
2005 2004 2003 2005 (a) 2004 2003
Expected dividend yield 0.0% 0.0% 0.0% – 0.0% 0.0%
Risk-free interest rate 4.0% 2.2% 2.0% – 1.9% 1.1%
Expected volatility 51% 61% 69% – 38% 71%
Expected life (in years) 4.24 3.40 3.51 – 0.25 0.43
Fair value of options granted at fair value $22.57 $19.66 $12.30 – $5.89 $7.97
Fair value of options granted below fair value – $35.14 – – – –
(a) Based on the plan design, the Company is not required to assign fair value to shares issued from the Stock Purchase Plan.
K. EMPLOYEE BENEFIT PLANS
Employee Benefit Plans
The Company has a defined contribution employee benefit plan under section 401(k) of the Internal Revenue Code covering
substantially all U.S. employees. The 401(k) plan allows employees to make contributions up to a specified percentage of their
compensation. The Company may, upon resolution by the Board of Directors, make discretionary contributions to the plan. The
Company’s contribution to the plan is 50% of up to the first 6% of an employee’s salary contributed to the plan by the employee.
The Company’s contributions to this plan totaled $2.8 million, $2.4 million and $2.1 million in 2005, 2004 and 2003, respectively.
In addition, the Company has various retirement and post-employment plans covering certain international employees. Certain
of the plans require the Company to match employee contributions up to a specified percentage as defined by the plans. The
Company made related contributions of $1.6 million, $1.5 million and $1.1 million in 2005, 2004 and 2003, respectively.
Nonqualified Deferred Compensation Plan
The Board of Directors has approved a nonqualified deferred compensation plan (the “Deferred Plan”). The Deferred Plan covers
senior management and members of the Board of Directors as approved by the Company’s Compensation Committee. The plan
provides for a trust to which participants can contribute varying percentages or amounts of eligible compensation for deferred
payment. Payouts are generally made upon termination of employment with the Company. The benefit payable under the Deferred
Plan represents an unfunded and unsecured contractual obligation of the Company to pay the value of the deferred compensation
in the future, adjusted to reflect the trust’s investment performance. The assets of the trust, as well as the corresponding
obligations, were approximately $1.4 million and $1.0 million as of December 31, 2005 and 2004, respectively, and were recorded
in other current assets and accrued compensation and benefits at those dates.
L. RESTRUCTURING AND OTHER COSTS, NET
In December 2005, the Company implemented a restructuring program under which 20 employees worldwide were terminated and
a portion of a leased facility in Montreal, Canada was vacated. In connection with these actions, the Company recorded charges of
$0.8 million for employee terminations and $0.5 million for continuing rent obligations on excess space vacated, net of potential
sublease income.
In September 2005, the Company recorded a restructuring charge of $2.0 million in connection with a revised estimate for the lease
obligation associated with a facility that was vacated as part of a restructuring plan in 1999. The revision was necessary due to one
of the subtenants in the facility giving notice of their intention to discontinue their sublease. The lease extends through September
2010. This accrual was reduced by $0.2 million in the fourth quarter of 2005 based on further analysis.
In connection with the August 2005 Pinnacle acquisition, the Company recorded accruals of $14.4 million related to severance
agreements and lease or other contract terminations in accordance with EITF Issue No. 95-3, “Recognition of Liabilities in
Connection with a Purchase Business Combination”. Such amounts recorded in connection with the Pinnacle acquisition are
reflected in the purchase price allocation for the acquisition and any adjustments for the accruals will be recorded as adjustments to
goodwill (see Note F).