Avid 2014 Annual Report Download - page 82

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Common Stock Repurchases
In April 2007, the Company’s Board approved a stock repurchase program that authorized the Company to repurchase up to $100
million of the Company’s common stock through transactions on the open market, in block trades or otherwise. In February 2008, the
Company’s Board of Directors approved a $100 million increase in the authorized funds for the repurchase of the Company’s common
stock. At December 31, 2014, there was $80.3 million available for future stock repurchases under the program. This stock
repurchase program has no expiration date. During the years ended December 31, 2014, 2013 and 2012, no shares were repurchased
under this program.
Under some of the Company’s equity compensation plans, employees have the option or may be required to satisfy minimum
withholding tax obligations by tendering to the Company a portion of the common stock received under the award.
Stock Incentive Plans
In November 2014, the Company registered an aggregate of 3,750,000 of its shares of $0.01 par value per share common stock,
which have been authorized and reserved for issuance under the Avid Technology, Inc. 2014 Stock Incentive Plan (the “Plan”). The
Plan was originally adopted by the Company’s Board of Directors on September 14, 2014 and approved by the Company’s
stockholders on October 29, 2014. In connection with the approval of the Plan the Company’s Amended and Restated 2005 Stock
Incentive Plan has been closed; no additional awards may be granted under that Plan. Shares available for issuance under the
Company’s 2014 Stock Incentive Plan totaled 3,267,184 at December 31, 2014.
Under the Plan, the Company may grant stock awards or options to purchase the Company’s common stock to employees, officers,
directors and consultants. The exercise price for options generally must be no less than market price on the date of grant. Awards may
be performance-based where vesting or exercisability is conditioned on achieving performance objectives, time-based or a
combination of both. Current option grants become exercisable over various periods, typically three to four years for employees and
one year for non-employee directors, and have a maximum term of seven to ten years. Restricted stock and restricted stock unit
awards with time-based vesting typically vest over three to four years for employees and one year for non-employee directors.
In November 2014, the Compensation Committee of the Board of Directors modified certain market and performance based options
and restricted stock units held by seven employees of the Company that were originally granted between 2009 and 2013. The
modifications included (i) a conversion of vesting conditions from market and performance bases to a four year service period,
including providing credit for service already rendered prior to the modification and (ii) an acceleration clause that allows vesting of
between 50% and 100% of unvested awards if certain 2014 Adjusted EBITDA targets are achieved. In total, options to purchase
933,750 shares and 31,250 restricted stock units were modified, which resulted in incremental compensation expense of $4.3 million,
$2.3 million of which was recognized upon modification, $1.5 million of which was recognized in the quarter ended December 31,
2014 upon achieving specific 2014 Adjusted EBITDA targets and the remaining $0.5 million will be recognized within the next twelve
months.
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option grants with time-based vesting.
The Black-Scholes model relies on a number of key assumptions to calculate estimated fair value. The assumed dividend yield of zero
is based on the fact that the Company has never paid cash dividends and has no present expectation to pay cash dividends and the
Company’s current credit agreement precludes the Company from paying dividends. Historically, the expected stock-price volatility
assumption has been based on recent (six-month trailing) implied volatility calculations. These calculations are performed on
exchange traded options of the Company’s common stock, based on the implied volatility of long-term (9- to 39-month term)
exchange-traded options. During 2014, the Company changed the method of calculating the expected volatility. The expected
volatility is now based on actual historic stock volatility for periods equivalent to the expected term of the award. The assumed risk-
free interest rate is the U.S. Treasury security rate with a term equal to the expected life of the option. The assumed expected life is
based on company-specific historical experience considering the exercise behavior of past grants and models the pattern of aggregate
exercises.
The fair value of restricted stock and restricted stock unit awards with time-based vesting is based on the intrinsic value of the awards
at the date of grant, as the awards have a purchase price of $0.01 per share.
The Company also issues stock option grants or restricted stock unit awards with vesting based on market conditions, specifically the
Company’s stock price; performance conditions, generally the Company’s return on equity or operating margin. The fair values and
derived service periods for all grants that include vesting based on market conditions are estimated using the Monte Carlo valuation
method. For stock option grants that include vesting based on performance conditions, the fair values are estimated using the Black-