AVAYA INC FILES (8-K) Disclosing Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Financial Statements and Exhibits
(Edgar Glimpses Via Acquire Media NewsEdge) Item 1.01.Entry into a Material Definitive Agreement.
Both Avaya Inc. (the "Company") and its parent company, Avaya Holdings Corp.
("Parent"), are party to a Management Services Agreement with Silver Lake
Management Company, L.L.C. ("SLP") and TPG Capital Management, L.P. ("TPG," and,
together with SLP, the "Managers"), pursuant to which the Managers provide
management and financial advisory services. Under the Management Services
Agreement, the Managers receive, among other things, a monitoring fee of $7
million per annum. A copy of the management services agreement is listed as
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 2013 (the "Form 10-K").
On December 12, 2013, Parent, the Company and TPG agreed that, effective October
1, 2013, the portion of the monitoring fees payable to TPG will be reduced by
$1,325,000 for the Company's fiscal year ended September 30, 2014 and thereafter
on an annual basis by $800,000. A copy of that agreement is incorporated herein
by reference and filed herewith as Exhibit 10.1.
Item. 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Executive Committee Performance Recognition Plan Amendment
As previously disclosed on Form 8-K filed on November 21, 2013, the Compensation
Committee of the Board of Directors of Parent (the "Board") recently approved
the amendment of the Executive Committee Performance Recognition Plan (the "EC
LTIP"). The EC LTIP as revised is incorporated herein by reference and filed
herewith as Exhibit 10.2.
Chief Executive Officer Compensation
On December 11, 2013, the Board approved the following long-term incentive grant
("LTI Grant") comprised of a mix of stock options, restricted stock units
("RSUs") and cash to Mr. Kevin J. Kennedy, Chief Executive Officer and President
of the Company:
Stock Options RSUs
LTI Grant Total ($) ($) (#) ($) (#) Cash ($)
$7,500,000 $1,500,000 1,200,000 $2,250,000 1,000,000 $3,750,000
Stock options and RSUs under the LTI Grant vest 1/3 on the first anniversary of
the date of grant and 1/12 on each quarterly anniversary of the date of grant
thereafter. The cash portion of each LTI Grant will vest 1/3 on each anniversary
of the date of grant. The number of stock options and RSUs awarded is based upon
the fair market value of a share of Parent's common stock, which was $2.25 on
the date of grant and a Black-Scholes value of $1.25 as of June 30, 2013,
If at the end of each fiscal year during the vesting period the Compensation
Committee or the Board determines that a "Pre-STIP Adjusted EBITDA" target has
been achieved by the Company, then for such fiscal year a multiplier of 1.5
times will be applied to one-third of the initial grant date value of the RSU
and cash portions of the award. Additional RSUs and cash will be granted as of
the date of such determination and will be 100% vested at the time of grant. The
number of RSUs to be delivered will be determined using the fair market value of
a share of Parent's common stock on the date such determination is made.
Accordingly, Mr. Kennedy has the opportunity to receive an additional amount of
RSUs having a value of $375,000 and additional cash of $625,000 in each fiscal
year if the multiplier for such fiscal year is triggered, or RSUs having an
aggregate value of $1,125,000 and additional cash of $1,875,000 if the
multiplier is triggered for all three fiscal years. For purposes of the award,
"Pre-STIP Adjusted EBITDA" means Adjusted EBITDA (as defined in the Company's
Form 10-K), excluding the impact of payments under the Avaya Inc. Short Term
Incentive Plan ("STIP") or any successor plan.
In addition to the above, the Board approved a one-time cash bonus to Mr.
Kennedy in the amount of $3,000,000 payable on or about December 27, 2013 in
recognition of his performance and continued efforts to transform the Company's
Non-Employee Director Compensation
Pursuant to a stockholders agreement, each of Mr. Afshin Mohebbi and Mr. Ronald
Rittenmeyer serves on the boards of directors of the Company and Parent as a
director designated by TPG. Parent has entered into letter agreements dated
December 16, 2013 to pay to each of them (or their replacement directors who are
also TPG-designated directors) as follows in connection with their service with
the boards of the Company and/or Parent:
• Mr. Afshin Mohebbi - (i) $450,000 for his service as a director for the
fiscal year ended September 30, 2013; and (ii) $500,000 for his service as a
director for the fiscal year ended September 30, 2014 and each fiscal year
• Mr. Ronald Rittenmeyer - (i) $75,000 for his service with board matters for
the fiscal year ended September 30, 2013 prior to becoming a director
effective October 1, 2013; and (ii) $300,000 for his service as a director
for the fiscal year ended September 30, 2014 and each fiscal year thereafter.
Copies of each of the agreements with Mr. Mohebbi and Mr. Rittenmeyer are
incorporated herein by reference and filed herewith as Exhibit 10.3 and Exhibit
On December 11, 2013, the Board approved the amount to be awarded to Mr. Kennedy
under the STIP for the second half of the fiscal year ended September 30, 2013.
Information regarding the STIP for fiscal 2013 was previously described by the
Company in the Compensation Discussion and Analysis ("CD&A") section of its Form
10-K. However, as indicated on page 155 of the Form 10-K, as of the date of its
filing Mr. Kennedy's STIP award for the second half of fiscal 2013 had not been
determined. As a result, it was omitted from the discussion in the CD&A as well
as from the Summary Compensation Table included in the Form 10-K.
Mr. Kennedy's STIP award for the second half of fiscal 2013 and his new total
compensation amount for fiscal 2013 are set forth below:
Name Non-Equity Incentive Plan Comp. Total
Kevin J. Kennedy
Item 9.01 Financial Statements and Exhibits
Exhibit Exhibit Name
10.1 Letter Agreement dated December 12, 2013 by and among Avaya Holdings
Corp., Avaya Inc. and TPG Capital Management, L.P.
10.2 Executive Committee Performance Recognition Plan as amended and
restated effective as of October 1, 2013
10.3 Letter Agreement dated December 16, 2013 between Avaya Holdings Corp.
and Mr. Afshin Mohebbi
10.4 Letter Agreement dated December 16, 2013 between Avaya Holdings Corp.
and Mr. Ronald Rittenmeyer
This current report on Form 8-K contains "forward-looking statements." All
statements other than statements of historical fact are "forward-looking"
statements for purposes of the U.S. federal and state securities laws. These
statements may be identified by the use of forward looking terminology such as
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "might," "plan," "potential," "predict," "should" or "will" or the
negative thereof or other variations thereon or comparable terminology. The
Company has based these forward-looking statements on its current expectations,
assumptions, estimates and projections. While the Company believes these
expectations, assumptions, estimates and projections are reasonable, such
forward-looking statements are only predictions and involve known and unknown
risks and uncertainties, many of which are beyond its control. These factors,
including those discussed in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2013 may cause its actual results, performance
or achievements to differ materially from any future results, performance or
achievements expressed or implied by these forward-looking statements. For a
further list and description of such risks and uncertainties, please refer to
the Company's filings with the SEC that are available at www.sec.gov. The
Company cautions you that the list of important factors included in the
Company's SEC filings may not contain all of the material factors that are
important to you. In addition, in light of these risks and uncertainties, the
referred to in the forward-looking statements contained in this report may not
in fact occur. The Company undertakes no obligation to publicly update or revise
any forward-looking statement as a result of new information, future events or
otherwise, except as otherwise required by law.
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