Avid 2000 Annual Report Download - page 53

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In March 1999, the Company and Tektronix, Inc., were sued by Glen Holly Entertainment, Inc., a Tektronix distributor,
claiming that Tektronixs discontinuance of the Tektronix Lightworks product line was the result of a strategic alliance by
Tektronix and Avid. Glen Holly has raised antitrust and other common law causes of action against the Company, and
seeks lost future profits, treble damages, attorneys' fees, and interest. The case is currently in discovery and trial has been
set for June 2001. The Company views the complaint as without merit and intends to defend itself vigorously. However, an
adverse resolution of this litigation could have an adverse effect on the Companys consolidated financial position or results
of operations in the period in which the litigation is resolved. No costs have been accrued for this possible loss contingency.
The Company also receives inquiries from time to time with regard to additional possible patent infringement claims. These
inquiries are generally referred to counsel and are in various stages of discussion. If any infringement is determined to exist,
the Company may seek licenses or settlements. In addition, from time to time as a normal incidence of the nature of the
Company's business, various claims, charges, and litigation have been asserted or commenced against the Company arising
from or related to contractual or employee relations, intellectual property rights or product performance. Management does
not believe these claims will have a material adverse effect on the financial position or results of operations of the Company.
The Company has entered into employment agreements with certain officers of the Company that provide for severance pay
and benefits, including accelerated vesting of options. Under the terms of the agreements, these officers receive 100% of
such severance benefits if they are involuntarily terminated. Such agreements are effective for two years and are
automatically extended for successive one-year periods after the second anniversary, unless 30 days advance written notice
is given by either party. The Company has also entered into change in control employment agreements with certain officers
of the Company. As defined in the agreements, a change in control includes, but is not limited to: a third person or entity
becoming the beneficial owner of 30% or more of the Companys common stock, the shareholders approving any plan or
proposal for the liquidation or dissolution of the Company, or within a twenty-four month period a majority of the members
of the Companys Board of Directors ceasing to continue as members of the board unless their successors are each approved
by at least two-thirds of the Companys directors. If at any time within two years of the change in control, the officers
employment is terminated by the Company for any reason other than cause or by the officer for good reason, as such terms
are defined in the agreement, then the employee is entitled to receive certain severance payments plus an amount equal to
compensation earned under the management incentive compensation plan during the previous two years as well as
accelerated vesting of options.
J. CAPITAL STOCK
Preferred Stock
The Company has authorized up to one million shares of preferred stock, $.01 par value per share for issuance. Each series
of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges, and liquidation preferences, as shall be determined by the Board of Directors.
Shareholder Rights Plan
In February 1996, the Board of Directors approved a Shareholder Rights Plan. The rights were distributed in March 1996
as a dividend at the rate of one right for each share of Common Stock outstanding. No value was assigned to these rights.
The rights may be exercised to purchase shares of a new series of $.01 par value, junior participating preferred stock or to
purchase a number of shares of the Companys common stock which equals the exercise price of the right, $115, divided by
one-half of the then-current market price, upon occurrence of certain events, including the purchase of 20% or more of the
Companys common stock by a person or group of affiliated or associated persons. The rights expire on February 28, 2006
and may be redeemed by the Company for $.01 each at any time prior to the tenth day following a change in control and in
certain other circumstances.
Common Stock
In 2000, 1999 and 1997, the Company granted shares of restricted common stock to certain employees under Company
stock option and award plans. The grants totaled 260,000 shares, 50,000 shares, and 347,200 shares, respectively. Unvested
restricted shares may not be sold, transferred or assigned and are subject to forfeiture in the event that an employee ceases
to be employed by the Company. The shares under the 1997 award vest (and restrictions lapse) annually in 20% increments,
and accelerated vesting may occur if certain stock price performance goals established by the Board of Directors are met.
On May 1, 1998, an additional 20% of the restricted stock became vested due to the attainment of specific stock
performance goals. The shares under the 1999 and 2000 awards vest 40% on the first anniversary and 60% on the second
anniversary of the awards. The Company initially recorded in 1997, 1999 and 2000, as a separate component of