<PAGE>
 
 
                          SCHEDULE 14A INFORMATION
 
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
                              (AMENDMENT NO.  )
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [_]
 
Check the appropriate box:
 
[_] Preliminary Proxy Statement       [_] Confidential, for Use of the
                                          Commission Only (as permitted by
                                          Rule 14a-6(e)(2))
 
[X] Definitive Proxy Statement
 
[_] Definitive Additional Materials
 
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

 
                             AVID TECHNOLOGY, INC.
              ------------------------------------------------
              (Name of Registrant as Specified In Its Charter)
 
                             AVID TECHNOLOGY, INC.
              ------------------------------------------------
                 (Name of Person(s) Filing Proxy Statement)
 

Payment of Filing Fee (check the appropriate box):
 
[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
    (1) Title of each class of securities to which transaction applies:

        ________________________________________________________________________

    (2) Aggregate number of securities to which transaction applies:

        ________________________________________________________________________
 
    (3) Per unit price or other underlying value of transaction computed
        pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
        filing fee is calculated and state how it was determined):

        ________________________________________________________________________

    (4) Proposed maximum aggregate value of transaction:

        ________________________________________________________________________

    (5) Total fee paid:

        ________________________________________________________________________
 
[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
    or the Form or Schedule and the date of its filing.
 
    (1) Amount Previously Paid:

        ________________________________________________________________________
 
    (2) Form, Schedule or Registration Statement No.:

        ________________________________________________________________________
 
    (3) Filing Party:

        ________________________________________________________________________
 
    (4) Date Filed:

        ________________________________________________________________________


<PAGE>
 
                             AVID TECHNOLOGY, INC.
 
                         METROPOLITAN TECHNOLOGY PARK
                                 ONE PARK WEST
                        TEWKSBURY, MASSACHUSETTS 01876
 

 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, MAY 19, 1998
 
  The Annual Meeting of Stockholders of Avid Technology, Inc. (the "Company")
will be held on Tuesday, May 19, 1998, at BankBoston, 100 Federal Street,
Boston, Massachusetts at 10:00 a.m., local time, to consider and act upon the
following matters:
 
    1. To elect three Class II Directors to serve for the ensuing three
  years.
 
    2. To approve an amendment of the Company's 1996 Employee Stock Purchase
  Plan.
 
    3. To approve an amendment of the Company's 1997 Stock Incentive Plan.
 
    4. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
  independent accountants for the current fiscal year.
 
    5. To transact such other business as may properly come before the
  meeting or any adjournment thereof.
 
  Stockholders of record at the close of business on March 30, 1998 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
 
  All stockholders are cordially invited to attend the meeting.
 
                                          By Order of the Board of Directors,
 
                                          Frederic G. Hammond
                                          Secretary
 
Tewksbury, Massachusetts
A
pril 6, 1998
 
  WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED
IF THE PROXY IS MAILED IN THE UNITED STATES.

<PAGE>
 
                             AVID TECHNOLOGY, INC.
 
                         METROPOLITAN TECHNOLOGY PARK
                                 ONE PARK WEST
                        TEWKSBURY, MASSACHUSETTS 01876
 
 PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19,
                                     1998
 
  This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Avid Technology, Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held on May 19, 1998 and at
any adjournments of that meeting (the "Annual Meeting"). All proxies will be
voted in accordance with the stockholders' instructions, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in
person at the Annual Meeting.
 
  This Proxy Statement, together with the Company's Annual Report to
Stockholders for 1997, is being mailed to stockholders on or about April 6,
1998.
 
VOTING SECURITIES AND VOTES REQUIRED
 
  At the close of business on March 30, 1998, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of
23,321,829, shares of common stock, $.01 par value per share, of the Company
(the "Common Stock"). Stockholders are entitled to one vote per share.
 
  Shares of Common Stock represented in person or by proxy (including shares
which abstain or do not vote for any reason with respect to one or more of the
matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present at the Annual Meeting. The affirmative
vote of the holders of a plurality of the shares of Common Stock present or
represented and voting at the Annual Meeting is required for election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented and voting at the Annual Meeting is
required to approve the proposed amendments of the Company's 1996 Employee
Stock Purchase Plan and 1997 Stock Incentive Plan.
 
  Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter ("broker non-votes"), will not be counted as votes in favor
of such matter, and will also not be counted as votes cast or shares voting on
such matter. Accordingly, abstentions and broker non-votes will not affect the
voting on items submitted to the stockholders for approval at the Annual
Meeting.

<PAGE>
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The following table sets forth certain information as of January 31, 1998,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each executive officer of the Company named in the Summary Compensation
Table set forth under the caption "Executive Compensation" below and (iv) all
directors and executive officers of the Company as a group:
 

<TABLE>
<CAPTION>
 
                                                 NUMBER OF
                                                    SHARES      PERCENTAGE OF
                                                 BENEFICIALLY   COMMON STOCK
BENEFICIAL OWNER                                   OWNED(1)   OUTSTANDING(1)(2)
- ----------------                                 ------------ -----------------
<S>                                              <C>          <C>
Mackenzie Financial Corporation(3).............   2,399,600         10.3%
 150 Bloor Street West, Suite M111
 Toronto, Ontario, Canada M5S 3B5
Montgomery Asset Management, LLC(4)............   2,204,115          9.5%
 101 California Street
 San Francisco, CA 94111
Nicholas-Applegate Capital Management(5).......   1,580,790          6.8%
 600 West Broadway, 29th Floor
 San Diego, CA 92101
Intel Corporation(6)...........................   1,552,632          6.7%
 2200 Mission College Boulevard
 Santa Clara, CA 95052
Charles T. Brumback(7).........................       8,500            *
William E. Foster(8)...........................      37,500            *
Peter C. Gotcher(9)............................     346,204          1.5%
Robert M. Halperin(10).........................      71,832            *
Nancy Hawthorne................................           0          --
Roger J. Heinen, Jr............................           0          --
William S. Kaiser(11)..........................      48,848            *
William J. Miller(12)..........................     214,496            *
Lucille S. Salhany.............................           0          --
William J. Warner..............................     250,000          1.1%
Clifford A. Jenks(13)..........................      48,438            *
William L. Flaherty(14)........................      66,871            *
David R. Froker(15)............................      26,209            *
David E. Olson(16).............................      56,218            *
All directors and executive officers as a group   1,519,270          6.4%
 (18 persons)(17)..............................
</TABLE>

- --------
*  Less than 1%
 (1) The inclusion herein of any shares of Common Stock deemed beneficially
     owned does not constitute an admission of beneficial ownership of such
     shares. Unless otherwise indicated, each person listed above has sole
     voting and/or investment power with respect to the shares listed. Any
     reference in the footnotes below to shares subject to stock options held
     by the person or entity in question relates only to stock options which
     were exercisable on, or within 60 days after, January 31, 1998.
 
                                       2

<PAGE>
 
 (2) In calculating the percent of the Company's Common Stock beneficially
     owned by each person or entity listed, the number of shares deemed
     outstanding consists of the 23,228,810 shares actually outstanding as of
     January 31, 1998, plus, for that person or entity only, any shares
     subject to options that were exercisable on, or within 60 days after,
     January 31, 1998.
 (3) Beneficial ownership as reported in an amendment to a Schedule 13G filed
     with the Securities and Exchange Commission (the "Commission") in January
     1998.
 (4) Beneficial ownership as reported in an amendment to a Schedule 13G filed
     with the Commission in February 1998. Includes 2,000,000 shares held by
     Montgomery Growth Fund, a mutual fund managed by Montgomery Asset
     Management, LLC.
 (5) Beneficial ownership as reported in a Schedule 13G filed with the
     Commission in February 1998. Nicholas-Applegate Capital Management holds
     sole investment power with respect to all such shares and shares voting
     power with respect to 4,490 such shares.
 (6) Beneficial ownership as reported in a Schedule 13D filed with the
     Commission in April 1997.
 (7) Includes 7,500 shares subject to stock options.
 (8) Includes 37,500 shares subject to stock options.
 (9) Includes 45,000 shares subject to stock options.
(10) Includes 25,332 shares owned by Mr. Halperin's adult children and 46,500
     shares subject to stock options. Mr. Halperin has power of attorney to
     vote and/or dispose of shares owned by his adult children, but disclaims
     beneficial ownership thereof.
(11) Includes 20,813 shares subject to stock options.
(12) Includes 124,375 shares subject to stock options.
(13) Includes 28,438 shares subject to stock options.
(14) Includes 23,750 shares subject to stock options and 3,000 shares held by
     Mr. Flaherty as custodian for his children.
(15) Includes 16,209 shares subject to stock options.
(16) Includes 900 shares held by a trust, as to which Mr. Olson disclaims
     beneficial ownership, and 37,546 shares subject to stock options.
(17) Includes an aggregate of 607,360 shares subject to options held by
     directors and executive officers of the Company.
 
                                       3

<PAGE>
 
                             ELECTION OF DIRECTORS
 
  The Company's Board of Directors consists of three classes (designated Class
I, Class II and Class III Directors), with members of each class holding
office for overlapping three-year terms. In October 1997, the Board of
Directors elected Nancy Hawthorne as a Class I Director. In January 1998, the
Board of Directors elected Roger J. Heinen, Jr. as a Class II Director and
Lucille S. Salhany as a Class III Director. Mr. Kaiser has resigned from the
Board of Directors, effective as of the date of the Annual Meeting.
 
  The persons named in the enclosed proxy will vote to elect Peter C. Gotcher,
Roger J. Heinen, Jr. and William J. Warner as Class II Directors, unless
authority to vote for the election of any or all of the nominees is withheld
by marking the proxy to that effect. Each of the nominees has indicated his
willingness to serve, if elected, but if any or all of the nominees should be
unable or unwilling to serve, proxies may be voted for substitute nominee(s)
designated by the Board of Directors.
 
DIRECTORS
 
  Set forth below regarding each continuing director and each of the nominees
are each such person's name, age, positions with the Company, principal
occupation, business experience during at least the past five years and the
names of other publicly held corporations of which such director of the
Company (including the three nominees for Class II Directors) serves as a
director and the year during which each such person first became a director of
the Company.
 
 NOMINEES
 
          CLASS II DIRECTORS (TERMS TO EXPIRE AT 2001 ANNUAL MEETING)
 
  Peter C. Gotcher, 38, has served as a director since August 1995 and is a
part-time employee of the Company. From January 1995 to April 1996, Mr.
Gotcher was Executive Vice President and General Manager of Digidesign, the
Company's Audio Division. From October 1983 to January 1995, Mr. Gotcher was
President and Chief Executive Officer of Digidesign, Inc.
 
  Roger J. Heinen, Jr., 47, has served as a director since January 1998. Since
March 1996, Mr. Heinen has been a private consultant to several software and
technology companies. From January 1993 to March 1996 he was Senior Vice
President, Developer Division with Microsoft. Previously, Mr. Heinen held
various management positions in software development, including Senior Vice
President and General Manager, Software Division with Apple Computer, Inc. and
Corporate Consulting Engineer with Digital Equipment Corporation. Mr. Heinen
is also a director of ANSYS, Inc. and MAPICS, Inc.
 
  William J. Warner, 43, the founder of the Company, has served as a director
since the Company's inception in September 1987 and is a part-time employee of
the Company. Mr. Warner was President and Chief Executive Officer of the
Company from its inception through, respectively, May and September 1991.
Since January 1992, Mr. Warner has been Chairman of Wildfire Communications,
Inc., a developer of personal communications products.
 
 CONTINUING MEMBERS OF THE BOARD OF DIRECTORS
 
          CLASS I DIRECTORS (TERMS TO EXPIRE AT 2000 ANNUAL MEETING)
 
  Charles T. Brumback, 69, became a director of the Company in April 1996. Mr.
Brumback was Chairman of Tribune Company ("Tribune") from January 1993 to
December 1995 and Chief Executive Officer from August 1990 to May 1995.
Previously, he served as President and Chief Operating Officer of Tribune and
President and Chief Executive Officer of Chicago Tribune Company. He served as
a Tribune board member from 1981 through May 1996.
 
                                       4

<PAGE>
 
  Robert M. Halperin, 69, has served as a director since May 1991. Mr.
Halperin was Vice Chairman of the Board of Raychem Corporation from April 1990
to November 1994. Prior to April 1990, Mr. Halperin was President of Raychem
Corporation.
 
  Nancy Hawthorne, 46, became a director of the Company in October 1997. Since
October, 1997, Ms. Hawthorne has been Chief Executive Officer and Managing
Partner of Hawthorne, Krauss & Associates, LLC, a provider of consulting
services to corporate management. Previously, Ms. Hawthorne served as
Executive Vice President--Enterprise Transformation at MediaOne, a
telecommunications firm. She also served as Senior Vice President and Chief
Financial Officer of MediaOne from 1992 to 1996. Ms. Hawthorne is also a
director of Perini Corporation.
 
           CLASS III DIRECTORS (TERMS EXPIRE AT 1999 ANNUAL MEETING)
 
  William E. Foster, 53, has served as a director since January 1993. Mr.
Foster has been Chairman of Stratus Computer, Inc. ("Stratus") since 1980 and
was Chief Executive Officer of Stratus from July 1996 to May 1997. Mr. Foster
also serves on the Board of Directors of VideoServer, Inc.
 
  William J. Miller, 52, was appointed Chief Executive Officer and Chairman of
the Board of the Company in April 1996 and President in September 1996. From
March 1992 to September 1995, Mr. Miller served as Chief Executive Officer of
Quantum Corporation ("Quantum"). He was a member of the Board of Directors,
and Chairman thereof, from, respectively, May 1992 and September 1993 to
August 1995. From 1981 to March 1992, he served in various positions at
Control Data Corporation, most recently as Executive Vice President and
President, Information Services. Mr. Miller is a also director of Innovex,
Inc. and Waters Corporation.
 
  Lucille S. Salhany, 51, has served as a director since January 1998. Ms.
Salhany has been President of JH Media, Ltd., a communications consulting
firm, since October 1997. She has also been a private consultant for BHC
Communications, Inc., a 50% partner in UPN Network, since May 1997. Ms.
Salhany was President and Chief Executive Officer of UPN Network from
September 1994 to September 1997. From September 1991 to September 1994, Ms.
Salhany was Chairman of the FOX Broadcasting Company. Ms. Salhany is also a
director of American Media, Inc., Boston Restaurant Associates, Inc. and
Compaq Computer Corporation.
 
BOARD AND COMMITTEE MEETINGS
 
  The Company has a standing Audit Committee of the Board of Directors, which
reviews the Company's financial reporting and internal controls and policies,
recommends the selection of the Company's independent auditors, reviews the
overall plan and scope of the independent audit and provides the opportunity
for direct contact between the Company's independent accountants and the
Board. The Audit Committee met five times during 1997. The current Audit
Committee members are Messrs. Brumback and Kaiser.
 
  The Company has a standing Compensation Committee of the Board of Directors
which reviews, and recommends to the Board for approval, the compensation
programs for the Chief Executive Officer, other executive officers and key
employees. The Compensation Committee also administers the Company's bonus and
incentive plans and programs, including stock option and stock purchase plans.
The Compensation Committee met four times during 1997 and acted by written
consent on one occasion. The current members of the Compensation Committee are
Messrs. Foster, Halperin and Kaiser.
 
  The Company has a standing Nominating and Governance Committee of the Board
of Directors which recommends nominees for director and reviews the corporate
governance structure of the Company. The Nominating and Governance Committee
met once during 1997. The Nominating and Governance Committee will consider
nominees recommended by stockholders. Stockholders who wish to recommend
nominees for director should submit such recommendations to the Secretary of
the Company, at the principal offices of the Company, who will forward such
recommendations to the Nominating and Governance Committee for consideration.
The current members of the Nominating and Governance Committee are Messrs.
Brumback and Halperin.
 
                                       5

<PAGE>
 
  During 1997, the Board of Directors met nine times and acted by written
consent on two occasions. Each director was present for at least 75% of the
aggregate number of Board meetings and meetings held by all committees on
which that director then served.
 

DIRECTORS' COMPENSATION
 
  The members of the Board of Directors who are not employees of the Company
are each paid an annual retainer of $5,000 and a fee of $1,000 for each
meeting attended. The Company does not pay directors who are also employees in
connection with their service on the Board of Directors. The Company
reimburses all of its directors for their out-of-pocket expenses in connection
with performing their duties as directors of the Company.
 
  Under the Company's 1993 Director Stock Option Plan, as amended, directors
of the Company who are not officers or employees of the Company or any
subsidiary of the Company receive an option to purchase 5,000 shares of Common
Stock upon initial election to the Board of Directors. In addition, each
director receives an option to purchase 3,000 shares of Common Stock on the
date of each annual meeting of stockholders provided the director has then
served a minimum of six months on the Board of Directors.
 
EXECUTIVE COMPENSATION
 
  The following table sets forth certain information for each of the last
three fiscal years regarding the compensation of the Company's Chief Executive
Officer and four other executive officers as required under the rules of the
Commission (the "Named Executive Officers").
 
                          SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                 LONG-TERM
                                  ANNUAL COMPENSATION           COMPENSATION
                                  --------------------  ----------------------------
                                                                         SECURITIES
                                                                         UNDERLYING
                                                        RESTRICTED STOCK   OPTIONS      ALL OTHER
NAME AND PRINCIPAL POSITION  YEAR SALARY ($) BONUS ($)   AWARDS ($)(1)   (SHARES)(#) COMPENSATION ($)
- ---------------------------  ---- ---------- ---------  ---------------- ----------- ----------------
<S>                          <C>  <C>        <C>        <C>              <C>         <C>
William J. Miller(2)....     1997  425,000    595,000      1,324,500        60,000        3,135(3)
 Chief Executive             1996  273,750        --             --        250,000          --
 Officer,
 President, Chairman of
 the Board
Clifford A. Jenks(4)....     1997  275,000    330,000        529,800        20,000        1,362(3)
 Executive Vice              1996   64,696     64,375(5)         --         75,000          --
 President,
 General Manager of
 Editing and Effects
 Products
William L. Flaherty(6)..     1997  260,000    312,000        397,350        20,000        3,135(3)
 Senior Vice President       1996   72,917     80,000(5)         --         50,000          --
 of Finance, Chief
 Financial Officer and
 Treasurer
David R. Froker.........     1997  215,000    209,625        264,900        20,000        2,246(3)
 Senior Vice President,      1996  154,333        --             --         25,000          --
 General Manager of          1995   86,750     61,635            --
 Digidesign
David E. Olson..........     1997  215,000    209,625        264,900        20,000        2,688(3)
 Senior Vice President,      1996  158,666     81,314            --         35,000          --
 General Manager of          1995  114,758    138,370            --            --           --
 Digital News Production
 Group
</TABLE>

- --------
(1) For each of the Named Executive Officers, represents the fair market value
    of shares of restricted stock on June 26, 1997, the date of grant. Such
    shares will vest in five equal annual installments and may not be
    transferred until vested. Vesting may accelerate by one year if the price
    of the Company's Common Stock
 
                                       6

<PAGE>
 
   exceeds $35.00 for 20 consecutive trading days and by an additional year if
   the price of the Company's Common Stock exceeds $60.00 for 20 consecutive
   trading days, in each case subject to certain additional limitations. If
   and when declared, dividends will be payable on such shares. Upon a
   termination of employment of the Named Executive Officer, the vesting of
   his shares will terminate and the Company may repurchase the unvested
   shares at par value.
 
  The following numbers of shares of restricted stock received in fiscal 1997
by each of the Named Executive Officers constitute all shares of restricted
stock held by each at the end of fiscal 1997.
 

<TABLE>
<CAPTION>
                                                                      SHARES (#)
                                                                      ----------
     <S>                                                              <C>
     Mr. Miller......................................................   50,000
     Mr. Jenks.......................................................   20,000
     Mr. Flaherty....................................................   15,000
     Mr. Froker......................................................   10,000
     Mr. Olson.......................................................   10,000
</TABLE>

 
(2) Mr. Miller became Chief Executive Officer and Chairman of the Board of the
    Company in April 1996 and became President of the Company in September
    1996.
(3) Constitutes a matching contribution under the Company's 401(k) Plan.
(4) Mr. Jenks joined the Company in October 1996, became Senior Vice President
    of Worldwide Sales and Marketing in January 1997 and became Executive Vice
    President, General Manager of Editing and Effects Products in January
    1998.
(5) Includes a bonus of $30,000 paid upon commencement of employment.
(6) Mr. Flaherty joined the Company in September 1996, became Senior Vice
    President of Finance and Chief Financial Officer of the Company in January
    1997 and became Treasurer of the Company in December 1997.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
  The following table sets forth certain information regarding options granted
to the Named Executive Officers during the fiscal year ended December 31,
1997.

<TABLE>
<CAPTION>
                                           INDIVIDUAL GRANTS
                         ------------------------------------------------------
                                                                                POTENTIAL REALIZABLE
                                                                                  VALUE AT ASSUMED
                                                                                    ANNUAL RATES
                            NUMBER OF                                                 OF STOCK
                           SECURITIES    PERCENT OF TOTAL                         APPRECIATION FOR
                           UNDERLYING    OPTIONS GRANTED    EXERCISE    EXPIRA-    OPTION TERM (4)
                         OPTIONS GRANTED TO EMPLOYEES IN      PRICE      TION   ---------------------
NAME                         (#) (1)     FISCAL YEAR (2)  ($/SHARE) (3)  DATE     5%($)     10%($)
- ----                     --------------- ---------------- ------------- ------- --------- -----------
<S>                      <C>             <C>              <C>           <C>     <C>       <C>
William J. Miller.......     60,000            4.89%         11.1875    3/21/07   422,146   1,069,800
Clifford A. Jenks.......     20,000            1.63%         11.1875    1/29/07   140,715     356,600
William L. Flaherty.....     20,000            1.63%         11.1875    1/29/07   140,715     356,600
David R. Froker.........     20,000            1.63%         11.1875    1/29/07   140,715     356,600
David E. Olson..........     20,000            1.63%         11.1875    1/29/07   140,715     356,600
</TABLE>

- --------
(1) Options vest over a four-year period (25% on the first anniversary of the
    date of grant and thereafter in 12 equal quarterly installments).
(2) Calculated based on grants of options to employees of the Company during
    1997 to purchase up to an aggregate of 1,227,000 shares of Common Stock.
(3) The exercise price is equal to or above the fair market value of the
    Company's Common Stock on the date of grant.
(4) Potential realizable value is based on an assumption that the market price
    of the Company's Common Stock will appreciate at the stated rate,
    compounded annually, from the date of grant until the end of the ten-year
    term. These values are calculated based on rules promulgated by the
    Commission and do not reflect the Company's estimate or projection of
    future stock price. Actual gains, if any, on stock option exercises will
    depend upon the future performance of the Company's Common Stock.
 
                                       7

<PAGE>
 
   AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
 
  The following table sets forth information regarding options exercised
during the year ended December 31, 1997 by the Named Executive Officers.
 

<TABLE>
<CAPTION>
                                                     NUMBER OF SECURITIES
                                                          UNDERLYING           VALUE OF UNEXERCISED
                           SHARES                         UNEXERCISED              IN-THE-MONEY
                          ACQUIRED                        OPTIONS AT          OPTIONS AT FISCAL YEAR-
                         ON EXERCISE    VALUE           FISCAL YEAR-END          END EXERCISABLE/
NAME                         (#)     REALIZED ($) EXERCISABLE / UNEXERCISABLE  UNEXERCISABLE($) (1)
- ----                     ----------- ------------ --------------------------- -----------------------
<S>                      <C>         <C>          <C>                         <C>
William J. Miller.......      --           --          93,750 / 216,250         667,969 / 2,047,031
Clifford A. Jenks.......      --           --          18,750 /  76,250         260,156 / 1,091,719
William L. Flaherty.....      --           --          15,625 /  54,375         160,156 /   663,594
David R. Froker.........    6,279      123,367          9,646 /  35,823          67,278 /   441,426
David E. Olson..........    4,431      161,776         30,357 /  43,406         295,942 /   493,458
</TABLE>

- --------
(1) The per-share value of unexercised in-the-money options is calculated by
    subtracting the option exercise price from the last sale price of the
    Company's Common Stock as reported on the Nasdaq National Market on
    December 31, 1997.
 
EMPLOYMENT AND OTHER AGREEMENTS
 
  The Company has employment agreements with certain of its executive
officers, including each of the Named Executive Officers, which provide
certain severance benefits, including the payment of up to 12 months of such
officer's base salary if the Company terminates such officer's employment
other than for cause or if the officer terminates employment under certain
limited circumstances. In addition, during the period from the first to the
second anniversary after such a termination, the Company will pay the amount
by which the officer's monthly base salary at the time of termination exceeds
the monthly compensation from any new employer. The Company also has
agreements with each such officer providing that, upon any termination of
employment without cause or for good reason (as defined) within two years
following a change in control, the officer will receive severance benefits of
up to two times such officer's annual employment compensation (grossed up to
cover any excise tax imposed by Section 4999 of the International Revenue Code
of 1986, as amended (the "Code")) and any unvested options then held by such
officer will become immediately exercisable in full.
 
R
EPORT OF THE COMPENSATION COMMITTEE
 
  During 1997, the Compensation Committee of the Board of Directors (the
"Committee") was comprised of Messrs. Halperin and Kaiser, and after joining
the Committee in March 1997, Mr. Foster. All members of the Committee are non-
employee directors. The Committee establishes and administers the policies
that govern both annual compensation and equity ownership. This report is
submitted by the Committee (as comprised at the end of 1997) and addresses the
Company's policies for fiscal 1997 as they apply to the Named Executive
Officers.
 
  The Company uses its compensation program to achieve the following
objectives:
 
  .  To provide compensation that attracts, motivates and retains the best
     talent and highest caliber people to serve customers and achieve
     strategic objectives.
 
  .  To align management's interest with the success of the Company.
 
  .  To align management's interests with those of stockholders by including
     long-term equity incentives.
 
  .  To increase the profitability of the Company and, accordingly, increase
     stockholder value.
 
  Overview. The Committee believes that its executive compensation program
provides an overall level of compensation that is competitive in the computer-
based digital editing industry and among companies of comparable size and
complexity. At the beginning of each fiscal year, the Company establishes an
annual salary plan for the Company's senior executive officers based on its
review of salary data for executive officers at
 
                                       8

<PAGE>
 
comparable companies. The Company's executive compensation program consists of
base salary, annual incentive compensation, long-term equity incentives in the
form of stock options and certain benefits, such as life insurance benefits,
the Company's employee stock purchase program, medical and life insurance and
401(k) savings plans, which are generally available to all U.S.-based
employees of the Company.
 
  Salary. Base salary compensation is generally set within the range of
salaries of executive officers with comparable qualifications, experience and
responsibilities at other companies in the same or similar business and of
comparable size. In addition to external market data, salary is determined by
the Company's financial performance and the individual's performance based on
predetermined non-financial objectives. Non-financial objectives include an
individual's contribution to the Company as a whole, including his or her
ability to motivate others, develop the skills necessary to grow as the
Company matures, recognize and pursue new business opportunities and initiate
programs to enhance the Company's growth and success.
 
  Incentive Compensation. The Executive and Senior Management Variable
Compensation Program was the Company's incentive program for executive
officers in 1997. The primary purpose of the program was to provide cash
incentives to executives to achieve the financial goals established by the
Company for fiscal 1997. Cash bonuses were paid under the program based on the
Company's return on invested capital, which consists of after-tax profit as a
percentage of total invested capital. For purposes of the program, total
invested capital consists of shareholders' equity less cash reserves. Cash
bonuses for 1997 awarded to executive officers of the Company, including those
received by the Named Executive Officers as described in the Summary
Compensation Table under "Executive Compensation," were determined objectively
based on return on invested capital for fiscal 1997. A portion of each of the
bonuses received by Messrs. Froker and Olson was determined based on operating
profits of the Company's Digidesign division.
 
  Long-Term Incentive Compensation. Long-term incentive compensation, in the
form of stock options, grants of restricted stock and offerings under the
Company's stock purchase plan, helps to align the interests of management and
stockholders and enables executives to develop a long-term stock ownership
position in the Company.
 
  Stock Options. In addition to considering an executive's past performance,
the Company's desire to retain an individual is of paramount importance in the
determination of stock option grants. In order to encourage key employees to
continue in the employ of the Company and to motivate such employees to
improve long-term stock market performance, stock options are granted at an
option price equal to the fair market value of the Company's Common Stock on
the date of grant and generally vest over a four-year period. In January 1997,
the Company granted options to purchase up to an aggregate of 145,000 shares
of Common Stock to eight executive officers of the Company, including the
Named Executive Officers.
 
  Restricted Stock. In June 1997, the Committee recommended and the Board of
Directors approved a Performance Restricted Stock Award Plan (the "Performance
Plan") designed to recognize, reward and retain key employees of the Company.
The Performance Plan constituted a one-time award, under the Company's 1997
Stock Incentive Plan, of an aggregate of 137,500 shares of Common Stock at
nominal consideration ("Restricted Shares") to certain executive officers of
the Company, including the Named Executive Officers. Restricted Shares will
vest in five equal annual installments and may not be transferred until
vested. Vesting may accelerate by one year if the price of the Company's
Common Stock exceeds $35.00 for 20 consecutive trading days and by an
additional year if the price of the Company's Common Stock exceeds $60.00 for
20 consecutive trading days, in each case subject to certain additional
limitations. In no event will vesting accelerate by more than two years. Upon
a termination of employment of a holder of Restricted Shares, vesting will
terminate and the Company may repurchase the unvested Restricted Shares at par
value. The Committee believes the Performance Plan appropriately recognizes
the performance of, and provides a valuable incentive to, key employees of the
Company.
 
  Employee Stock Purchase Plan. The Company's employee stock purchase program,
which is available to virtually all employees, including executive officers,
allows participants to purchase shares of the Company's
 
                                       9

<PAGE>
 
Common Stock at a 15 percent discount from the fair market value of the Common
Stock at the beginning or end of the applicable purchase period. See
"Amendment of 1996 Employee Stock Purchase Plan."
 
  Compensation of Chief Executive Officer. As the Company's President and
Chief Executive Officer during fiscal 1997, William J. Miller received salary
compensation of $425,000. Mr. Miller's salary was based on an assessment of
comparative industry salaries using established executive compensation
surveys. Mr. Miller's cash bonus for 1997 was determined objectively based on
the Company's performance in 1997 in accordance with the terms of the
Company's Executive and Senior Management Variable Compensation Program. See
"Incentive Compensation." The Committee believes Mr. Miller's total cash
compensation for 1997 was appropriate in comparison with that of chief
executive officers of other companies of similar size in Avid's industry.
 
  In March 1997, the Company granted Mr. Miller an option to purchase up to
60,000 shares of Common Stock at $11.1875 per share. One-quarter of the shares
covered by this option became exercisable on the first anniversary of the date
of grant, and the remaining shares will become exercisable in twelve equal
quarterly installments thereafter. The Committee believes that this option
provides an appropriate long-term incentive for continued efforts on behalf of
the Company.
 
  Impact of Section 162(m) of the Internal Revenue Code. Section 162(m) of the
Code generally disallows tax deductions to publicly traded corporations for
compensation over one million dollars paid to the corporation's Chief
Executive Officer or any of its other four most highly compensated executive
officers. Qualifying performance-based compensation is not subject to this
disallowance if certain requirements are met. From March 1997 to November
1997, the Company had an Executive Option Grant Sub-Committee of the
Compensation Committee (the "Sub-Committee"), composed of Messrs. Kaiser and
Foster, independent directors for purposes of Section 162(m) of the Code. The
Sub-Committee reviewed and approved certain executive compensation for 1997
with respect to which the Company wished to preserve tax deductions available
pursuant to Section 162(m) of the Code. The Company generally seeks to
structure the compensation arrangements of its executive officers in a manner
that is intended to avoid disallowances under Section 162(m).
 
                                          COMPENSATION COMMITTEE
 
                                          William E. Foster
                                          Robert M. Halperin
                                          William S. Kaiser
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  The members of the Compensation Committee in 1997 were Messrs. Foster,
Halperin and Kaiser, none of whom are employees of the Company. No executive
officer of the Company is a member of the compensation committee of another
corporation or other entity (or other persons serving an equivalent function
for such entity) whose executive officers served on the Company's Board of
Directors.
 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
  Based solely on its review of copies of reports filed by persons required to
file such reports with respect to beneficial ownership of securities of the
Company ("Reporting Persons") pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Act"), and written representations from
certain Reporting Persons, the Company believes that all filings required to
be made by Reporting Persons of the Company were timely made in accordance
with the requirements of the Exchange Act.
 
                                      10

<PAGE>
 
S
TOCK PERFORMANCE GRAPH
 
  The following graph compares the cumulative total stockholder return on the
Common Stock of the Company during the period from March 11, 1993 (the date on
which the Company's Common Stock became registered under Section 12 of the
Act) to December 31, 1997 with the cumulative total return of (i) the Nasdaq
National Market Index and (ii) a Peer Group Index* over the same period. This
comparison assumes the investment of $100 on March 11, 1993 in the Company's
Common Stock, the Nasdaq National Market Index and the Peer Group Index and
assumes dividends, if any, are reinvested.
 
                             [GRAPH APPEARS HERE]


<TABLE> 
<CAPTION> 
                          Mar. 11, 1993      Dec. 31, 1993     Dec. 30, 1994      Dec. 31, 1995      Dec. 31, 1996     Dec. 31, 1997
                          -------------      -------------     -------------      -------------      -------------     -------------
<S>                       <C>                <C>               <C>                <C>                <C>               <C> 
AVID TECHNOLOGY, INC.         $100             $106.50            $160.65            $ 95.00             $ 51.88          $133.75
SIC CODE INDEX                $100             $148.30            $190.22            $192.17             $195.81          $191.16
NASDAQ MARKET INDEX           $100             $119.85            $125.84            $163.22             $202.83          $248.10
</TABLE>
 

- --------
* Peer Group Index reflects the stock performance of the 88 publicly traded
  companies which comprise the SIC Code Index 3663 (Radio and Television
  Broadcasting and Communications Equipment).
 
                AMENDMENT OF 1996 EMPLOYEE STOCK PURCHASE PLAN
 
  The Company's 1996 Employee Stock Purchase Plan (the "1996 Plan") currently
provides for the issuance of up to 200,000 shares of Common Stock. In December
1997, the Board of Directors voted to amend the 1996 Plan to increase the
number of shares authorized for issuance thereunder by 500,000 shares to
700,000 shares of Common Stock. The Board of Directors' primary reason for
adopting the amendment to the 1996 Plan was to enhance the Company's ability
to attract, retain and motivate qualified employees. The following summary of
the 1996 Plan is qualified in all respects by reference to the full text of
the 1996 Plan, which is available upon request to the Secretary of the
Company.
 
SUMMARY OF THE 1996 PLAN
 
  The 1996 Plan, as amended, authorizes the issuance of up to an aggregate of
700,000 shares of Common Stock to participating employees. The 1996 Plan is
administered by the Compensation Committee or the Board of Directors which is
authorized to decide questions of eligibility and to make rules and
regulations for the administration and interpretation of the 1996 Plan.
Employees (including executive officers) who have completed three months of
employment with the Company and who are employed by the Company prior to the
applicable
 
                                      11

<PAGE>
 
offering commencement date are eligible to participate in the 1996 Plan. As of
March 31, 1998, the Company had approximately 1,600 eligible employees.
Because participation in the 1996 Plan is voluntary and participants may
withdraw from the 1996 Plan at any time during an offering period, the
benefits to be received by any particular person or group are not determinable
by the Company at this time.
 
  Under the 1996 Plan, the Company conducts offerings ("Offerings") to
employees to purchase Common Stock. Offerings under the 1996 Plan commence on
February 1 and August 1 and terminate, respectively, on July 31 and January
31. During each Offering, the maximum number of shares which may be purchased
by a participating employee equals the lesser of (i) $25,000 divided by the
fair market value of a share of the Company's Common Stock on the offering
date or (ii) six percent of such employee's annualized compensation (for the
immediately preceding six-month period) divided by the Offering Commencement
Price, as defined below. An employee may elect to have up to ten percent
deducted from his or her regular salary for this purpose. The price at which
an employee's option is exercised is the lower of (i) 85% of the last sale
price of the Common Stock on the Nasdaq National Market (the "last sale
price") on the day that the Offering commences (the "Offering Commencement
Price") or (ii) 85% of the last sale price on the day that the Offering
terminates. The last reported sale price of the Company's Common Stock on the
Nasdaq National Market on March 30, 1998 was $39.75 per share.
 
  In the event of a "continuity of control" merger with another corporation (a
merger whereby the holders of capital stock of the Company immediately prior
to such merger hold at least 80% of the voting power of the capital stock of
the surviving corporation after the merger), the holder of each purchase
option then outstanding would be entitled to receive at the end of the
Offering the equivalent number of securities or property which holders of
Common Stock were entitled to receive upon consummation of such merger. In the
event of a merger that is not a "continuity of control" merger, or in
connection with a sale of all or substantially all of the assets of the
Company, the Board of Directors or the Compensation Committee may (i)
terminate all outstanding purchase options and refund all payroll deductions,
(ii) provide notice to all plan participants and allow them to exercise their
purchase options prior to the effective date of such transaction, or (iii)
provide that, in lieu of Common Stock, plan participants will receive an
appropriate amount of the stock, securities or other property that holders of
Common Stock will receive for their shares of Common Stock in the transaction.
 
  The Board of Directors or the Compensation Committee may at any time
terminate or amend the 1996 Plan. However, if stockholder approval of an
amendment is required by Section 423 of the Code, such amendment may not be
effected without such stockholder approval. The 1996 Plan requires that all
amounts in the accounts of participating employees be promptly refunded upon
termination of the 1996 Plan.
 
  The 1996 Plan is not qualified under Section 401(a) of the Code.
 
FEDERAL INCOME TAX CONSEQUENCES
 
  See Appendix A to this Proxy Statement for a discussion of the U.S. federal
income tax consequences of the 1996 Plan.
 
BOARD RECOMMENDATION
 
  The Board of Directors believes that the approval of the amendment of the
1996 Plan is in the best interests of the Company and its stockholders and
therefore recommends that the stockholders vote FOR this proposal.
 
                    AMENDMENT OF 1997 STOCK INCENTIVE PLAN
 
  The Company's 1997 Stock Incentive Plan (the "1997 Plan") currently provides
for the issuance of up to 1,000,000 shares of Common Stock. In March 1998, the
Board of Directors voted to amend the 1997 Plan to increase the number of
shares authorized for issuance thereunder by 500,000 shares to 1,500,000
shares of Common Stock. The Board of Directors' primary reason for adopting
the amendment to the 1997 Plan was to enhance the Company's ability to
attract, retain and motivate qualified employees. The following summary of
 
                                      12

<PAGE>
 
the 1997 Plan is qualified in all respects by reference to the full text of
the 1997 Plan, which is available upon request to the Secretary of the
Company.
 
SUMMARY OF THE 1997 PLAN
 
  The 1997 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Code, nonstatutory stock options, restricted
stock awards and other stock-based awards, including the grant of shares based
upon certain conditions, the grant of securities convertible into Common Stock
and the grant of stock appreciation rights (collectively "Awards").
 
  Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair
market value of the Common Stock on the date of grant. Under present law,
however, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Common
Stock on the date of grant (or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power of the Company). The 1997 Plan permits the Board to determine
the manner of payment of the exercise price of options, including through
payment by cash, check or in connection with a "cashless exercise" through a
broker, by surrender to the Company of shares of Common Stock, by delivery to
the Company of a promissory note, or by any other lawful means.
 
  Restricted Stock Awards. Restricted stock Awards entitle recipients to
acquire shares of Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the
end of the applicable restriction period established for such Award. As of
March 30, 1998, 346,200 shares of restricted stock were outstanding. A maximum
of 403,800 additional shares may be issued as restricted stock under the 1997
Plan (assuming stockholder approval of the proposed amendment of the 1997
Plan).
 
  Other Stock-Based Awards. Under the 1997 Plan, the Board has the right to
grant other Awards, including Awards of unrestricted Common Stock and Awards,
the value of which is based upon the value of Common Stock (such as securities
convertible into Common Stock and stock appreciation rights), having such
terms and conditions as the Board may determine.
 
 Eligibility to Receive Awards
 
  Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to be granted Awards under the 1997 Plan.
Currently, however, the Code provides that incentive stock options may be
granted only to employees. The maximum number of shares with respect to which
an Award may be granted to any participant under the 1997 Plan may not exceed
300,000 shares per calendar year.
 
  As of March 30, 1998, approximately 1,600 persons were eligible to receive
Awards under the 1997 Plan, including the Company's executive officers and
non-employee directors. The granting of Awards under the 1997 Plan is
discretionary and the Company cannot now determine the number or type of
Awards to be granted in the future to any particular person or group.
 
  On March 30, 1998, the last reported sale price of the Company Common Stock
on the Nasdaq National Market was $39.75.
 
 Administration
 
  The 1997 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1997 Plan and to interpret the provisions
 
                                      13

<PAGE>
 
of the 1997 Plan. Pursuant to the terms of the 1997 Plan, the Board of
Directors may delegate authority under the 1997 Plan to one or more committees
of the Board, and subject to certain limitations, to one or more executive
officers of the Company. Subject to any applicable limitations contained in
the 1997 Plan, the Board of Directors, the Compensation Committee, or any
other committee or executive officer to whom the Board delegates authority,
selects the recipients of Awards and determines (i) the number of shares of
Common Stock covered by options and the dates upon which such options become
exercisable, (ii) the exercise price of options, (iii) the duration of
options, and (iv) the number of shares of Common Stock subject to any
restricted stock or other stock-based Awards and the terms and conditions of
such Awards, including conditions for repurchase, issue price and repurchase
price.
 
  The Board of Directors is required to make appropriate adjustments in
connection with the 1997 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1997 Plan), the
Board of Directors is authorized to provide for outstanding Options or other
stock-based Awards to be assumed or substituted for, to accelerate the Awards
to make them fully exercisable prior to consummation of the Acquisition Event
or, if cash is to be received by holders of Common Stock on consummation of
the Acquisition Event, to provide for a cash out of the value of any
outstanding options. If any Award expires or is terminated, surrendered,
canceled or forfeited, the unused shares of Common Stock covered by such Award
will again be available for grant under the 1997 Plan.
 
 Amendment or Termination
 
  No Award may be made under the 1997 Plan after February 26, 2007, but Awards
previously granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 1997 Plan, except that no Award
designated as subject to Section 162(m) of the Code by the Board of Directors
after the date of such amendment shall become exercisable, realizable or
vested (to the extent such amendment was required to grant such Award) unless
and until such amendment shall have been approved by the Company's
stockholders.
 
  The 1997 Plan is not qualified under Section 401(a) of the Code.
 
FEDERAL INCOME TAX CONSEQUENCES
 
  See Appendix B to this Proxy Statement for a discussion of the U.S. federal
income tax consequences of the 1997 Plan.
 
BOARD RECOMMENDATION
 
  The Board of Directors believes that the approval of the amendment of the
1997 Plan is in the best interests of the Company and its stockholders and
therefore recommends that the stockholders vote FOR this proposal.
 
             RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
 
  The Audit Committee has selected the firm of Coopers & Lybrand L.L.P.
("Coopers & Lybrand") as the Company's independent accountants for the current
fiscal year. Coopers & Lybrand has served as the Company's independent
accountants since 1992. Although stockholder ratification of the selection of
Coopers & Lybrand is not required by law, the Board of Directors believes that
it is advisable to give stockholders the opportunity to ratify this selection.
If this proposal is not approved at the Annual Meeting, the Company will
reconsider the selection of Coopers & Lybrand.
 
  Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
 
 
                                      14

<PAGE>
 
                                 OTHER MATTERS
 
  Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
 
  All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of shares held in their names and the Company will reimburse them for
out-of-pocket expenses incurred on behalf of the Company.
 
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
 
  Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company at
its principal office in Tewksbury, Massachusetts not later than December 7,
1998 for inclusion in the proxy statement for that meeting.
 
                                          By Order of the Board of Directors,
 
                                          Frederic G. Hammond
                                          Secretary
 
April 6, 1998
 
  THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT STOCKHOLDERS PLAN TO ATTEND, STOCKHOLDERS ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
 
                                      15

<PAGE>
 
                                  DETACH HERE


                                     PROXY

                             AVID TECHNOLOGY, INC.

                        ANNUAL MEETING OF STOCKHOLDERS
                   This Proxy is Solicited on behalf of the
                       Board of Directors of the Company




   The undersigned, having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoints Messrs. 
William J. Miller, Willliam L. Flaherty and Frederic G. Hammond, and each of 
them, with full power of substitution, as proxies to represent and vote all 
shares of stock which the undersigned would be entitled to vote, if personally 
present, at the Annual Meeting of Stockholders of Avid Technology, Inc. to be 
held at BankBoston, 100 Federal Street, Boston, Massachusetts, on Tuesday, May 
19, 1998, at 10:00 a.m., and at any adjournment thereof, with respect to the 
following matters set forth on the reverse side.



- -----------                                                         -----------
SEE RESERVE                                                         SEE RESERVE 
   SIDE          CONTINUED AND TO BE SIGNED ON THE RESERVE SIDE        SIDE     
- -----------                                                         ----------- 


<PAGE>
 

                                  DETACH HERE

[X] Please mark votes as in this example.

1.  To elect the three nominees listed below to serve as Class II Directors for 
    a term of three years.

    Nominees:    Mr. Peter C. Gotcher, Mr. Roger J. Heinen, Jr. and Mr. William 
                 J. Warner

         FOR                WITHHELD    
         ALL     [_]        FROM ALL   [_] 
       NOMINEES             NOMINEES  

[_] 
   ----------------------------------------
   For all nominees except as noted above


     MARK HERE           MARK HERE  
    IF YOU PLAN          FOR ADDRESS
     TO ATTEND   [_]     CHANGE AND   [_]   
    THE MEETING          NOTE BELOW   

2.  To approve an amendment to the Company's 1996 Employee Stock Purchase Plan.

           FOR        AGAINST        ABSTAIN
           [_]          [_]            [_]

3.  To approve an amendment to the Company's 1997 Stock Incentive Plan.

           FOR        AGAINST        ABSTAIN
           [_]          [_]            [_]           

4.  To ratify the selection of Coopers & Lybrand, L.L.P., as independent 
    accountants of the Company.

           FOR        AGAINST        ABSTAIN
           [_]          [_]            [_]           

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS 
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.  This proxy,
when properly executed, will be voted in the manner directed herein by the 
undersigned.  IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1
THROUGH 4.

Please sign and return immediately.

When signing as attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign. All joint owners
must sign.

Signature:                                          Date: 
          ----------------------------------------       ----------------------

Signature:                                          Date: 
          ----------------------------------------       ----------------------



<PAGE>
 
                                                                     APPENDIX A
 
                      FEDERAL INCOME TAX CONSEQUENCES OF
                     THE 1996 EMPLOYEE STOCK PURCHASE PLAN
 
  The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under
the 1996 Plan and with respect to the sale of Common Stock acquired under the
1996 Plan.
 
  Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the 1996 Plan or upon purchasing
shares of Common Stock at the end of an offering. Instead, if a participant
sells Common Stock acquired under the 1996 Plan at a sale price that exceeds
the price at which the participant purchased the Common Stock, then the
participant will recognize taxable income in an amount equal to the excess of
the sale price of the Common Stock over the price at which the participant
purchased the Common Stock. A portion of that taxable income will be ordinary
income, and a portion may be capital gain.
 
  If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale
price of the Common Stock is higher than the price at which the participant
purchased the Common Stock, then the participant will recognize ordinary
compensation income in an amount equal to the lesser of:
 
    (i) fifteen percent of the fair market value of the Common Stock on the
  Grant Date; and
 
    (ii) the excess of the sale price of the Common Stock over the price at
  which the participant purchased the Common Stock.
 
  Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
 
  If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an
amount equal to the excess of the fair market value of the Common Stock on the
date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale and will be a short-term capital gain or loss if the participant
has held the Common Stock for a shorter period.
 
  Tax Consequences to the Company. The offering of Common Stock under the 1996
Plan will have no tax consequences to the Company. Moreover, in general,
neither the purchase nor the sale of Common Stock acquired under the 1996 Plan
will have any tax consequences to the Company except that the Company will be
entitled to a business-expense deduction with respect to any ordinary
compensation income recognized by a participant upon making a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
 
 
                                      A-1

<PAGE>
 
                                                                      APPENDIX I



                             Avid Technology, Inc.

                       1996 EMPLOYEE STOCK PURCHASE PLAN

                               February 12, 1996


     The purpose of this Plan is to provide eligible employees of Avid
Technology, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"), commencing on August 1, 1996.  Two Hundred Thousand
(200,000) shares of Common Stock in the aggregate have been approved for this
purpose.

     1.   Administration.  The Plan will be administered by the Company's Board
          --------------                                                       
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee").  The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.

     2.   Eligibility.  Participation in the Plan will neither be permitted nor
          -----------                                                          
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder.  All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:

          (a) they are regularly employed by the Company or a Designated
     Subsidiary for more than 20 hours a week and for more than five months in a
     calendar year; and

          (b) they have been employed by the Company or a Designated Subsidiary
     for at least three months prior to enrolling in the Plan; and

          (c) they are employees of the Company or a Designated Subsidiary on
     the first day of the applicable Plan Period (as defined below).

     No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary.  For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall 

<PAGE>
 
apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by
the employee.

     3.   Offerings.  The Company will make one or more offerings ("Offerings")
          ---------                                                            
to employees to purchase stock under this Plan.  Offerings will begin each
August 1 and February 1, or the first business day thereafter (the "Offering
Commencement Dates").  Each Offering Commencement Date will begin a six month
period (a "Plan Period") during which payroll deductions will be made and held
for the purchase of Common Stock at the end of the Plan Period.  The Board or
the Committee may, at its discretion, choose a different Plan Period of twelve
(12) months or less for subsequent Offerings.

     4.   Participation.  An employee eligible on the Offering Commencement Date
          -------------                                                         
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 30 days prior to the applicable Offering Commencement Date.  The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period.  Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.

     5.   Deductions.  The Company will maintain payroll deduction accounts for
          ----------                                                           
all participating employees.  With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of ten percent (10%) of the Compensation he or she receives during the
Plan Period or such shorter period during which deductions from payroll are
made.   The Board or the Committee may set a minimum payroll deduction
requirement.

     No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at the
Offering Commencement Date of the Plan Period) for each calendar year in which
the Option is outstanding at any time.

                                      I-2

<PAGE>
 
     6.   Deduction Changes.  An employee may decrease or discontinue his
          -----------------                                              
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form.  However, an employee may not increase his payroll deduction
during a Plan Period.  If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).

     7.   Interest.  Interest will not be paid on any employee accounts, except
          --------                                                             
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.

     8.   Withdrawal of Funds.  An employee may at any time prior to the close
          -------------------                                                 
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering.  Partial withdrawals are not
permitted.  The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board  or the Committee,
except that employees who are also directors or officers of the Company within
the meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated thereunder may not participate again for a
period of at least six months as provided in Rule 16b-3(d)(2)(i) or any
successor provision.

     9.   Purchase of Shares.  On the Offering Commencement Date of each Plan
          ------------------                                                 
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing six percent (6%) of such employee's annualized
Compensation for the immediately prior six-month period by the price determined
in accordance with the formula set forth in the following paragraph but using
the closing price on the Offering Commencement Date of such Plan Period.

     The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less.  Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter market, whichever is applicable, as published in
                                                                               
The Wall Street Journal.  If no sales of Common Stock were made on such a day,
- -----------------------                                                       
the price of the Common Stock for 

                                      I-3

<PAGE>
 
purposes of clauses (a) and (b) above shall be the reported price for the next
preceding day on which sales were made.

     Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for pursuant to the formula set forth
above (but not in excess of the maximum number determined in the manner set
forth above).

     Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.

     10.  Issuance of Certificates.  Certificates representing shares of Common
          ------------------------                                             
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.

     11.  Rights on Retirement, Death or Termination of Employment.  In the
          --------------------------------------------------------         
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate.  If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.

     12.  Optionees Not Stockholders.  Neither the granting of an Option to an
          --------------------------                                          
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.

                                      I-4

<PAGE>
 
     13.  Rights Not Transferable.  Rights under this Plan are not transferable
          -----------------------                                              
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.

     14.  Application of Funds.  All funds received or held by the Company under
          --------------------                                                  
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.

     15.  Adjustment in Case of Changes Affecting Common Stock.  In the event of
          ----------------------------------------------------                  
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee.  In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.

     16.  Merger.  If the Company shall at any time merge or consolidate with
          ------                                                             
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Committee shall take such steps in
connection with such merger as the Committee shall deem necessary to assure that
the provisions of Paragraph 15 shall thereafter be applicable, as nearly as
reasonably may be, in relation to the said securities or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.

     In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an 

                                      I-5

<PAGE>
 
Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.

     17.  Amendment of the Plan.  The Board may at any time, and from time to
          ---------------------                                              
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.

     18.  Insufficient Shares.  In the event that the total number of shares of
          -------------------                                                  
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.

     19.  Termination of the Plan.  This Plan may be terminated at any time by
          -----------------------                                             
the Board.  Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.

     20.  Governmental Regulations.  The Company's obligation to sell and
          ------------------------                                       
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.  The Plan shall be governed by Delaware law except to the
extent that such law is preempted by federal law.  The Plan is intended to
comply with the provisions of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. Any provision inconsistent with such Rule shall to that
extent be inoperative and shall not affect the validity of the Plan.

     21.  Issuance of Shares.  Shares may be issued upon exercise of an Option
          ------------------                                                  
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.

     22.  Notification upon Sale of Shares.  Each employee agrees, by entering
          --------------------------------                                    
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.

                                      I-6

<PAGE>
 
     23.  Effective Date and Approval of Shareholders.  The Plan shall take
          -------------------------------------------                      
effect on February 12, 1996 subject to approval by the shareholders of the
Company as required by Rule 16b-3 under the Exchange Act and by Section 423 of
the Code, which approval must occur within twelve months of the adoption of the
Plan by the Board.

                              Adopted by the Board of Directors
                              on February 12, 1996


                              Approved by the stockholders on
                                 June 5, 1996

                                      I-7

<PAGE>
 
                             Avid Technology, Inc.



                       1996 Employee Stock Purchase Plan

                                Amendment No. 1



     Pursuant to Section 17 of the 1996 Employee Stock 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 ascribed to them in the Plan.

     The first paragraph (without number) of the Plan is hereby deleted in its
entirety and replaced with the following:

               "The purpose of this Plan is to provide eligible employees of
          Avid Technology, Inc. (the "Company") and certain of its subsidiaries
          with opportunities to purchase shares of the Company's common stock,
          $.01 par value (the "Common Stock"), commencing on August 1, 1996.
          Seven Hundred Thousand (700,000) shares of Common Stock in the
          aggregate have been approved for this purpose."

     This amendment shall be effective as of the date of its approval by the
Board of Directors of the Company, subject to stockholder approval.

                              Adopted by the Board of Directors
                              December 4, 1997

                              Approved by the stockholders
                              [May 19, 1998]

                                      I-8

<PAGE>
 
                                                                     APPENDIX B
 
                      FEDERAL INCOME TAX CONSEQUENSES OF
                         THE 1997 STOCK INCENTIVE PLAN
 
  The following is a summary of the United States federal income tax
consequences that generally will arise with respect to stock options and
restricted stock awards granted under the 1997 Plan and with respect to the
sale of Common Stock acquired under the 1997 Plan.
 
  Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option.
Instead, a participant will recognize taxable income with respect to an
incentive stock option only upon the sale of Common Stock acquired through the
exercise of the option ("ISO Stock"). The exercise of an incentive stock
option, however, may subject the participant to the alternative minimum tax.
 
  Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least
two years from the date the option was granted (the "Grant Date") and one year
from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
 
  If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of
the gain recognized by the participant will be ordinary compensation income
and the remaining gain, if any, will be a capital gain. This capital gain will
be a long-term capital gain if the participant has held the ISO Stock for more
than one year prior to the date of the sale.
 
  If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of the sale.
 
  Non-Statutory Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a non-
statutory option. However, a participant generally will recognize ordinary
compensation income upon the exercise of a non-statutory option in an amount
equal to the excess of the fair market value of the Common Stock acquired
through the exercise of the option (the "NSO Stock") on the Exercise Date over
the exercise price.
 
  A participant will have a tax basis for any NSO Stock equal to the exercise
price plus any income recognized upon the exercise of the option. Upon selling
NSO Stock, a participant generally will recognize capital gain or loss in an
amount equal to the excess of the sale price of the NSO Stock over the
participant's tax basis in the NSO Stock. This capital gain or loss will be a
long-term capital gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale.
 
  Restricted Stock. A participant will not recognize taxable income upon the
grant of a restricted stock award unless the participant makes an election
under Section 83(b) of the Code (a "Section 83(b) Election"). If the
participant makes a Section 83(b) Election within 30 days of the date of the
grant, then the participant will recognize ordinary compensation income, for
the year in which the award is granted, in an amount equal to the difference
between the fair market value of the Common Stock at the time the award is
granted and the purchase price paid for the Common Stock. If such election is
made and the participant subsequently forfeits some or all
 
                                      B-1

<PAGE>
 
of the shares, then the participant generally will not be entitled to any
refund of taxes paid as a result of the Section 83(b) Election. If a Section
83(b) Election is not made, then the participant will recognize ordinary
compensation income at the time that the forfeiture provisions or restrictions
on transfer lapse in an amount equal to the difference between the fair market
value of the Common Stock at the time of such lapse and the original purchase
price paid for the Common Stock. The participant will have a tax basis in the
Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
 
  Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss equal to
the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. The gain or loss will be a long-
term gain or loss if the shares are held for more than one year. For this
purpose, the holding period shall begin just after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b) Election is not
made, or just after the award is granted if a Section 83(b) Election is made.
 
  Other Stock-Based Awards. The tax consequences associated with any other
stock-based award granted under the 1997 Plan will vary depending on the
specific terms of such award, including, whether or not the award has a
readily ascertainable fair market value, whether or not the award is subject
to forfeiture provisions or restrictions on transfer, the nature of the
property to be received by the participant under the award, the applicable
holding period and the participants's tax basis.
 
  Tax Consequences to the Company. The grant of a stock option or restricted
stock award (absent a Section 83(b) Election by the participant) under the
1997 Plan will have no tax consequences to the Company. Moreover,
in general, neither the exercise of an incentive stock option acquired under
the 1997 Plan nor the sale of any Common Stock acquired under the 1997 Plan
will have any tax consequences to the Company. However, the Company generally
will be entitled to a business-expense deduction with respect to any ordinary
compensation income recognized by a participant under the 1997 Plan, including
as a result of the exercise of a non-statutory stock option, a Disqualifying
Disposition or a Section 83(b) Election. Any such deduction will be subject to
the limitations of Section 162(m) of the Code.
 
 
                                      B-2

<PAGE>
 
                                                                     APPENDIX II



                             Avid Technology, Inc.

                           1997 Stock Incentive Plan

1.   Purpose

     The purpose of this 1997 Stock Incentive Plan (the "Plan") of Avid
Technology, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of Avid Technology, Inc. as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code").

2.   Eligibility

     All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other stock-
based awards (each, an "Award") under the Plan.  Any person who has been granted
an Award under the Plan shall be deemed a "Participant".

3.   Administration, Delegation

     (a) Administration by Board of Directors.  The Plan will be administered by
the Board of Directors of the Company (the "Board").  The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency.  All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award.  No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

     (b) Delegation to Executive Officers.  To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the 

<PAGE>
 
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.

     (c) Appointment of Committees.  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 (a "Committee").  All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.

4.   Stock Available for Awards

     (a) Number of Shares.  Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to 1,000,000 shares of Common Stock, $.01 par
value per share, of the Company (the "Common Stock").  If any Award expires or
is terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.

     (b) Per-Participant Limit  Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares with
respect to which an Award may be granted to any Participant under the Plan shall
be 300,000 per calendar year.  The Per-Participant limit described in this
Section 4(b) shall be construed and applied consistently with Section 162(m) of
the Code.

     (c) Adjustment to Common Stock.  In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate.  If this Section 4(c) applies 

                                      II-2

<PAGE>
 
and Section 8(e)(l) also applies to any event, Section 8(e)(l) shall be
applicable to such event, and this Section 4(c) shall not be applicable.

5.   Stock Options

     (a) General  The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.  An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".

     (b) Incentive Stock Options.  An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

     (c) Exercise Price.  The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.

     (d) Duration of Options.  Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.

     (e) Exercise of Option.  Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.

     (f) Payment Upon Exercise.  Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:

          (1) in cash or by check, payable to the order of the Company;

          (2) except as the Board may otherwise provide in an Option, delivery
     of an irrevocable and unconditional undertaking by a credit worthy broker
     to deliver promptly to the Company sufficient funds to pay the exercise
     price, or delivery by the Participant to the Company of a copy of
     irrevocable and unconditional instructions to a credit worthy broker to
     deliver promptly to the Company cash or a check sufficient to pay the
     exercise price;

                                      II-3

<PAGE>
 
          (3) to the extent permitted by the Board and explicitly provided in
     the Option (i) by delivery of shares of Common Stock owned by the
     Participant valued at their fair market value as determined by the Board in
     good faith ("Fair Market Value"), which Common Stock was owned by the
     Participant at least six months prior to such delivery, (ii) by delivery of
     a promissory note of the Participant to the Company on terms determined by
     the Board, or (iii) by payment of such other lawful consideration as the
     Board may determine; or

          (4) any combination of the above permitted forms of payment.

6.   Restricted Stock

     (a) Grants.  The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").  The
Company may issue Restricted Stock Awards for up to a maximum of 500,000 shares
of Common Stock under this Plan (as adjusted pursuant to Section 4(c) and net of
any Restricted Stock Awards forfeited under this Plan).

     (b) Terms and Conditions.  The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any.  Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee).  At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary").  In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

7.   Other Stock-Based Awards

     The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.

                                      II-4

<PAGE>
 
8.   General Provisions Applicable to Awards

     (a) Transferability of Awards.   Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.

     (b) Documentation.   Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine.  Each Award may
contain terms and conditions in addition to those set forth in the Plan.

     (c) Board Discretion.   Except as otherwise provided by the Plan, each type
of Award may be made alone in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.

     (d) Termination of Status.   The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.

     (e)  Acquisition Events

          (1) Consequences of Acquisition Events.  Upon the occurrence of an
     Acquisition Event (as defined below), or the execution by the Company of
     any agreement with respect to an Acquisition Event, the Board shall take
     any one or more of the following actions with respect to then outstanding
     Awards: (i) provide that outstanding Options shall be assumed, or
     equivalent Options shall be substituted, by the acquiring or succeeding
     corporation (or an affiliate thereof), provided that any such Options
     substituted for Incentive Stock Options shall satisfy, in the determination
     of the Board, the requirements of Section 424(a) of the Code; (ii) upon
     written notice to the Participants, provide that all then unexercised
     Options will become exercisable in full as of a specified date (the
     "Acceleration Date") prior to the Acquisition Event and will terminate
     immediately prior to the consummation of such Acquisition Event, except to
     the extent exercised by the Participants between the Acceleration Date and
     the consummation of such Acquisition Event; (iii) in the event of an
     Acquisition Event under the terms of which holders of Common Stock will
     receive upon consummation thereof a cash payment for each share of Common

                                      II-5

<PAGE>
 
     Stock surrendered pursuant to such Acquisition Event (the "Acquisition
     Price"), provide that all outstanding Options shall terminate upon
     consummation of such Acquisition Event and each Participant shall receive,
     in exchange therefor, a cash payment equal to the amount (if any) by which
     (A) the Acquisition Price multiplied by the number of shares of Common
     Stock subject to such outstanding Options (whether or not then
     exercisable), exceeds (B) the aggregate exercise price of such Options;
     (iv) provide that all Restricted Stock Awards then outstanding shall become
     free of all restrictions prior to the consummation of the Acquisition
     Event; and (v) provide that any other stock-based Awards outstanding (A)
     shall become exercisable, realizable or vested in full, or shall be free of
     all conditions or restrictions, as applicable to each such Award, prior to
     the consummation of the Acquisition Event, or (B), if applicable, shall be
     assumed, or equivalent Awards shall be substituted, by the acquiring or
     succeeding corporation (or an affiliate thereof).

          An "Acquisition Event" shall mean: (a) any merger or consolidation
     which results in the voting securities of the Company outstanding
     immediately prior thereto continuing to represent (either by remaining
     outstanding or by being converted into voting securities of the surviving
     or acquiring entity) less than 50% of the combined voting power of the
     voting securities of the Company or such surviving or acquiring entity
     outstanding immediately after such merger or consolidation; (b) any sale of
     all or substantially all of the assets of the Company; (c) the complete
     liquidation of the Company; or (d) the acquisition of "beneficial
     ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities
     of the Company representing 50% or more of the combined voting power of the
     Company's then outstanding securities (other than through a merger or
     consolidation or an acquisition of securities directly from the Company) by
     any "person", as such term is used in Sections 13(d) and 14(d) of the
     Exchange Act other than the Company, any trustee or other fiduciary holding
     securities under an employee benefit plan of the Company or any corporation
     owned directly or indirectly by the stockholders of the Company in
     substantially the same proportion as their ownership of stock of the
     Company.

          (2) Assumption of Options Upon Certain Events.  The Board may grant
     Awards under the Plan in substitution for stock and stock-based awards held
     by employees of another corporation who become employees of the Company as
     a result of a merger or consolidation of the employing corporation with the
     Company or the acquisition by the Company of property or stock of the
     employing corporation.  The substitute Awards shall be granted on such
     terms and conditions as the Board considers appropriate in the
     circumstances.

     (f) Withholding.  Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be 

                                      II-6

<PAGE>
 
withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability.  The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value.  The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.

     (g) Amendment of Award.  The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

     (h) Conditions on Delivery of Stock.  The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

     (i) Acceleration.  The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

9.   Miscellaneous

     (a) No Right To Employment or Other Status.  No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company.  The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

     (b) No Rights As Stockholder.  Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a

                                      II-7

<PAGE>
 
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.

     (c) Effective Date and Term of Plan.  The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders.  No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board or (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.

     (d) Amendment of Plan.   The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.

     (e) Stockholder Approval  For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.

          (f) Governing Law.  The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.

                                      II-8

<PAGE>
 
                             Avid Technology, Inc.

                  Amendment No. 1 to 1997 Stock Incentive Plan

     Pursuant to Section 9(d) of the 1997 Stock Incentive 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 to them in the Plan.

     1.   Section 4(a) of the Plan is hereby deleted in its entirety and
          replaced with the following:

               "(a)  Number of Shares.  Subject to adjustment under Section
          4(c), Awards may be made under the Plan for up to 1,500,000 shares of
          Common Stock, $.01 par value per share, of the Company (the "Common
          Stock").  If any Award expires or is terminated, surrendered or
          canceled without having been fully exercised or is forfeited in whole
          or in part or results in any Common Stock not being issued, the unused
          Common Stock covered by such Award shall again be available for the
          grant of Awards under the Plan, subject, however, in the case of
          Incentive Stock Options (as hereinafter defined), to any limitation
          required under the Code.  Shares issued under the Plan may consist in
          whole or in part of authorized but unissued shares or treasury
          shares."

     2.   Section 6(a) of the Plan is hereby deleted in its entirety and
          replaced with the following:

               "(a) Grants.  The Board may grant Awards entitling recipients to
          acquire shares of Common Stock, subject to the right of the Company to
          repurchase all or part of such shares at their issue price or other
          stated or formula price (or to require forfeiture of such shares if
          issued at no cost) from the recipient in the event that conditions
          specified by the Board in the applicable Award are not satisfied prior
          to the end of the applicable restriction period or periods established
          by the Board for such Award (each, "Restricted Stock Award"). The
          Company may issue Restricted Stock Awards for up to a maximum of
          750,000 shares of Common Stock under this Plan (as adjusted pursuant
          to Section 4(c) and net of any Restricted Stock Awards forfeited under
          this Plan)."

     This amendment shall be effective as of the date of its approval by the
Board of Directors of the Company, subject to stockholder approval.

                              Adopted by the Board of Directors
                              March 27, 1998

                              Approved by the stockholders
                              [May 19, 1998]

                                      II-9