UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE14A-101)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Soliciting Material Pursuant to |
AVAYA HOLDINGS CORP.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(4) and0-11. | |||
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☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(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. | |||
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4655 Great America Parkway
Santa Clara, California 95054
2605 Meridian Parkway, Suite 200
Durham, North Carolina 27713
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2019MARCH 3, 2021
To the Stockholders of Avaya Holdings Corp.:
The Annual Meeting of Stockholders (the “Annual Meeting”) of Avaya Holdings Corp. (the “Company” or “Avaya”) will be held virtually via live webcast at www.virtualshareholdermeeting.com/AVYA2021 on Wednesday, May 15, 2019,March 3, 2021, at 9:0010:30 a.m., Eastern time,time. You will be able to attend the meeting online and submit questions during the meeting by visiting the website listed above. You will also be able to vote your shares electronically at the Company’s offices located at 2605 Meridian Parkway, Durham, North Carolina 27713,Annual Meeting. The meeting will be held online only, and will be held for the following purpose:
1. | To elect |
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To ratify the appointment of PricewaterhouseCoopers LLP as |
3. | To approve, on an advisory basis, the Company’s named executive officers’ compensation; and |
To transact any other business as may properly come before the |
The foregoing items of business are more fully described in the proxy statementProxy Statement accompanying this notice. The Company’s board of directors (the “Board”) has fixed the close of business on March 20, 2019January 4, 2021 as the record date for determining stockholders of the Company entitled to receive notice of and vote at the Annual Meeting and any adjournment or postponement thereof.
The Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.
By Order of the Board of Directors,
Shefali Shah
Executive Vice President,
Chief Administrative
Officer and General Counsel
January 19, 2021
AprilImportant Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on March 3, 20192021
The Notice of Annual Meeting, Proxy Statement and Form of Proxy are first being distributed and made available on or about April 3, 2019.January 19, 2021 to all stockholders entitled to vote at the Annual Meeting. This Proxy Statement and the enclosed Form of Proxy, the Notice of Annual Meeting of Stockholders, and the Company’s 20182020 Annual Report are available on the Internet at http://materials.proxyvote.com/05351X.
Stockholders of record as of January 4, 2021 will be able to participate in the Annual Meeting by visiting our Annual Meeting website at www.virtualshareholdermeeting.com/AVYA2021. To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials.
The Annual Meeting will begin promptly at 10:30 a.m. Eastern time on Wednesday, March 3, 2021. Online check-in will begin at 10:15 a.m. Eastern time, and you should allow approximately 15 minutes for the online check-in procedures.
Voting.Whether or not you plan to virtually attend the Annual Meeting and regardless of the number of shares of the Company’s common stockCommon Stock that you own, please cast your vote, at your earliest convenience, as instructed in the proxy card. Your vote is very important. Your vote before the Annual Meeting will ensure representation of your shares at the Annual Meeting even if you are unable to virtually attend. You may submit your vote by the Internet, telephone, mail or in person.person by participating virtually in the meeting. Voting over the Internet or by telephone is fast and convenient, and your vote is immediately confirmed and tabulated. By using the Internet or telephone, you help us reduce postage, printing and proxy tabulation costs. We encourage all holders of record to vote in accordance with the instructions on the proxy card and/or voting instruction form prior to the Annual Meeting even if they plan on virtually attending the meeting in person.meeting. Submitting a vote before the Annual Meeting will not preclude you from voting your shares at the meeting should you decide to virtually attend. You may vote using the following methods:
Prior to the Annual Meeting, visit the website listed on your proxy card/voting instruction form to vote via the Internet. | ||||||
During the Annual Meeting, visit our Annual Meeting website at www.virtualshareholdermeeting.com/AVYA2021. | ||||||
Sign, date and return your proxy card/voting instruction form to vote by mail. | ||||||
Call the telephone number on your proxy card/voting instruction form to vote by telephone. | ||||||
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Arrangements Involving Other Stockholders which Beneficially Own More Than 5% of Any Class of Stock | 15 | |||
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PROPOSAL 1 | ||||
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PROPOSAL 2 | ||||
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 21 | |||
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| 2021 Proxy Statement | i |
PROXY SUMMARY |
This summary highlights certain information contained in the Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement before voting. For more complete information regarding the Company’s performance in the fiscal 2018,year which ended on September 30, 2020 (“Fiscal 2020”), please review the Company’s Annual Report on Form10-K for the year ended September 30, 2018, as amended by Amendment No. 1 (collectively, the2020 (the “Form10-K”), that accompanied this Proxy Statement.
2021 Annual Meeting Overview
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March 3, 2021 at 10:30 a.m., Eastern time | ||
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Participate in the Annual Meeting by visiting our Annual Meeting website at www.virtualshareholdermeeting.com/AVYA2021 |
There will not be a physical meeting in North Carolina, New York or anywhere else.
Record Date January 4, 2021 |
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Virtual Stockholder Meeting Our 2021 Annual Meeting will be conducted exclusively online via live webcast, allowing all of | |||||
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Roadmap of Voting Matters
ROADMAP OF VOTING MATTERS
Stockholders are being asked to vote on the following matters at the 20192021 Annual Meeting:
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Board | Further Information | |||||
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3 Advisory approval of the Company’s named executive officers’ compensation | ✓FOR | Page 24 |
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PROXY SUMMARY | › | Governance Highlights |
GOVERNANCE HIGHLIGHTS
Governance Highlights
We are committed to the highest standards of corporate governance, which we believe promotes the long-term interests of stockholders. The Corporate Governance section beginning on page 107 describes our governance framework, which includes the following highlights:
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✓ Non-Executive Chairman ✓ 7 of 8 Directors Are Independent ✓ Fully Independent Board ✓ Regular Executive Sessions of Independent Directors ✓ Annual Election of All Directors ✓ Annual Board and Committee Self-Evaluations ✓ Structured Process for Board’s Risk Oversight |
Stockholder Matters | ||||
✓ Recommended Annual“Say-on-Pay” Advisory Vote | ||||
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DIRECTOR NOMINEES
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✓ Prohibition on Executives Hedging and Pledging Stock ✓ Executive Compensation
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| 2021 Proxy Statement |
Director Nominees | › | PROXY SUMMARY |
FISCAL 2018 PERFORMANCE AT A GLANCE
The fiscal year ended September 30, 2018 (“Fiscal 2018”) was a year of both considerable change and significant accomplishments for the Company. The Company successfully emerged from a Chapter 11 restructuring on December 15, 2017 (the “Emergence Date”) and its shares began trading on the New York Stock Exchange on January 17, 2018. Fiscal 2018 annual revenue was $2,851 million andnon-GAAPDirector Nominees Fiscal 2018 annual revenue was $3,057 million. The Company maintained its industry-leading business model, with gross margin of 52.8% and a record
Other
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Name | Age | Director Since | Position | Board | Audit | Compensation | Nominating and Corporate Governance | |||||||||
James M. Chirico, Jr. |
63 |
2017 |
none |
President and Chief Executive Officer of the Company | ||||||||||||
Stephan Scholl |
50 |
2017 |
none |
Chief Executive Officer of Alight Solutions |
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Susan L. Spradley |
59 |
2017 |
2 |
Chief Executive Officer of Motion Intelligence, Inc. |
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Stanley J. Sutula, III |
55 |
2017 |
none |
Chief Financial Officer of Colgate-Palmolive Company |
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Robert Theis |
59 |
2020 |
1 |
General Partner of World Innovation Lab | ||||||||||||
Scott D. Vogel |
45 |
2017 |
3 |
Managing Member of Vogel Partners LLC |
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William D. Watkins |
68 |
2017 |
2 |
Former Chairman and Chief Executive Officer of Imergy Power Systems |
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Jacqueline E. Yeaney |
52 |
2019 |
none |
Executive Vice President, Marketing of Tableau Software
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non-GAAPExperience/Skills gross margin of 62.5%, as well as net income of $3,264 million and Adjusted EBITDA margin of 24.4%.* In addition, the Company achieved each of its following strategic priorities:
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Executive Compensation | ||||||||||||||||||
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International Experience | ||||||||||||||||||
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Other Public Company | ||||||||||||||||||
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Risk Management | ||||||||||||||||||
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Strategic Planning, Business Development, Business Operations | ||||||||||||||||||
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| 2021 Proxy Statement | 3 |
PROXY SUMMARY | › | Business Overview and Fiscal 2020 Performance at a |
Business Overview and Fiscal 2020 Performance at a Glance
As a global leader in communications solutions and services for businesses of all sizes, Avaya is reimagining digital communications with innovation that defines the future of work and the customer experience. Our global team of experienced professionals delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support.
Avaya’s Fiscal 2020 results demonstrate our continued transformation into a cloud company and successful execution against our growth strategy. For the first time in more than ten years, the Company delivered year-over-year growth in our third and fourth fiscal quarters as a result of our prior investments. Our success was achieved against the backdrop of the global pandemic and continued to gain traction during the year and setting the stage for continued success.
Strong operational performance drove Avaya’s solid financial performance in Fiscal 2020. Highlights include:
Annual Revenue | Annual Adjusted EBITDA* | Annual CAPS Revenue | ||||||||||
$2,873m | $710m | 26% |
Annual revenue was $2,873 million and non-GAAP annual revenue* was $2,879 million and we maintained strong profitability with Adjusted EBITDA* of $710 million.
Gross margin was 55.0% and non-GAAP gross margin* was 61.1%, with Adjusted EBITDA margin* of 24.7%.
The Company generated cash flow from operations of $147 million and ended Fiscal 2020 with $727 million in cash and cash equivalents.
Non-GAAP recurring revenues grew to 62.6% of total revenues from 58.5% in the prior fiscal year and 87.6% of revenues came from software and services, up from 83.1% in the prior fiscal year.
Cloud, Alliance Partners, and Subscription (“CAPS”) revenue, as a key performance indicator, expanded to a billion-dollar run rate business in less than one year and represented 26% of non-GAAP revenues, compared to 15% in the fiscal year which ended on September 30, 2019 (“Fiscal 2019”).
• | CAPS highlights the value of Avaya’s innovative solutions, including Avaya OneCloudTM Subscription. This offering is activating our global base by bundling high-value innovations like Avaya SpacesTM, video, contact center, AI and other cloud solutions, as customers move to an on-demand consumption model. |
The Company signed 386 deals with a total contract value (TCV) over $1 million, 49 deals with a TCV over $5 million and 17 deals with a TCV over $10 million – an increase in every category as compared to the prior fiscal year.**
In addition, in Fiscal 2020 we took actions to improve our capital structure that enhanced our financial flexibility, strengthened our balance sheet and reduced refinancing risk, such as:
Repurchasing approximately 29 million shares, or 26% of our Common Stock, at an average weighted price of $11.39 per share;
Paying down $250 million of term debt; and
Refinancing and extending the weighted-average debt maturities from 4.1 years to 6.1 years.
As we position for the future, Avaya shifted its comprehensive portfolio of capabilities to Avaya OneCloudTM, a multi-cloud application ecosystem that provides for the future of the customer experience center (the evolved contact center) and the future of the digital workplace (advanced unified communications). Our open, extensible development platform enables customers and third parties to easily create custom applications and automated workflows for their unique needs, integrating Avaya’s capabilities into the customer’s existing infrastructure and business applications.
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Business Overview and Fiscal | › |
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We believe our hybrid delivery architecture uniquely positions Avaya to protect customer investments, prevent disruptions, and ensure multiexperience continuity across each phase of a customer’s personalized cloud journey. Because Avaya offers a range of operational, consumption and commercial
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models, the entire portfolio can be deployed in the cloud in some way; from subscription and managed services, to our private and public cloud offers. Therefore, we can help every organization take advantage of the benefits of cloud.
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EXECUTIVE COMPENSATION HIGHLIGHTS
** | We define TCV as the value of all active ratable contracts that have not been recognized as revenue, including both billed and unbilled backlog. |
Executive Compensation Highlights
As the Company stabilized its business following the Emergence Date and built the foundation and momentum to grow the business in the fiscal year which will end on September 30, 2019 (“Fiscal 2019”), the Compensation Committee transitioned the Company’s executive compensation program. As described in “Compensation Discussion & Analysis” below, the Compensation Committee made changes to the program following the Emergence Date that reflect industry fundamentals, operating environment and results, enhance the incentive and retentive elements of the program, and create greater alignment with best practices and stockholders’ interests. These changes included, but were not limited to, (i) adopting a Fiscal 2018 Executive Annual Incentive Plan (“EAIP”) with financial performance objectives for payments thereunder, (ii) eliminating accelerated vesting upon termination without cause in the form of incentive equity award agreements for grants made in and after May 2018, and (iii) adopting an Involuntary Separation Plan for Senior Executives (“Separation Plan”) and a Change in Control Severance Plan (“CIC Plan”) for certain senior executives.
Why am I receiving these materials?
The Board of Directors (the “Board”) of Avaya Holdings Corp. (which we refer to in this Proxy Statement as we, our, us, our Company or the Company) is providing you these proxy materials in connection with the Board’s solicitation of proxies from our stockholders for our 2019 annual meeting of stockholders (which we refer to as the Annual Meeting) and any adjournments and postponements of the Annual Meeting. The Annual Meeting will be held on Wednesday, May 15, 2019, at 9:00 a.m. Eastern Time, at the Company’s offices located at 2605 Meridian Parkway, Durham, North Carolina 27713. These materials were first mailed to stockholders on or about April 3, 2019. You are invited to attend the Annual Meeting and requested to vote on the items described in this Proxy Statement.
What is the purpose of the Annual Meeting?
You and our other stockholders entitled to vote at the Annual Meeting are requested to vote on proposals to (i) elect seven members of our Board of Directors to serve until our 2020 annual meeting of stockholders; (ii) to approve, on an advisory basis, our named executive officers’ compensation; (iii) to approve, on an advisory basis, the frequency of holding future advisory votes to approve the Company’s named executive officers’ compensation; and (iv) to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for Fiscal 2019.
Who is entitled to vote at the Annual Meeting?
Only holders of record of our Common Stock at the close of business on March 20, 2019, the record date for the Annual Meeting, are entitled to notice of, and to vote at, the Annual Meeting. A list of our stockholders will be available for review at our executive offices in Santa Clara, California during ordinary business hours for a period of ten (10) days prior to the meeting. Each stockholder is entitled to one vote for each share of Common Stock held. Shares of our Common Stock represented in person or by a properly submitted proxy will be voted at the Annual Meeting. On the record date, 110,717,544 shares of our Common Stock were outstanding and entitled to vote.
What constitutes a quorum?
The presence at the Annual Meeting, in person or by proxy, of the holders of a majority in voting power of the issued and outstanding shares of our Common Stock entitled to vote at the Annual Meeting is required to constitute a quorum for the transaction of business.
What vote is required to approve each item to be voted on at the Annual Meeting?
Election of Directors.A nominee for director will be elected to the Board with a plurality of votes, which means that the seven nominees receiving the most “for” votes will be elected. Votes withheld from any nominee will have no effect on the outcome of the election of directors. Votes may not be cast “against” the election of a nominee. Abstentions and brokernon-votes (described below) are not counted for purposes of the election of directors and will not affect the outcome of such election. Our stockholders do not have cumulative voting rights for the election of directors.
Votes Required to Adopt Other Proposals.The affirmative vote of the holders of a majority in voting power of the votes cast by stockholders present or represented by proxy and entitled to vote at the Annual Meeting is required for approval of all other items being submitted to stockholders for consideration.
Because your votes on Proposal No. 2 and 3 are advisory, the results will not be binding on us, our Board or our Compensation Committee. However, we value our stockholders’ views on the effectiveness of our executive compensation program and our Board and Compensation Committee will consideris designed with the advisory votesobjective of strongly linking pay with performance as evidenced by the graphs below:
* | Please see page 32 for information on our Compensation Peer Group. |
| 2021 Proxy Statement | 5 |
PROXY SUMMARY | › | Executive Compensation Highlights |
Say-on-Pay
Avaya’s executive compensation program for 2019 received substantial stockholder support and was approved, on an advisory basis, by approximately | ||||||
93% | of stockholders voting on the proposal at the 2020 Annual |
The table below highlights the key characteristics of our stockholders when making future decisions about executive compensation.compensation program for Fiscal 2020, many of which we believe drive performance and are aligned with compensation and governance best practices. The table also highlights certain practices we have not implemented because we do not believe they would serve our stockholders’ interests.
Executive Compensation Practices | ||||||
What We Do | What We Don’t Do | |||||
+ | WeDo have a pay-for-performance philosophy, which ties compensation to pre-established performance goals | - | WeDon’t allow discounting, reloading or repricing of stock options without stockholder approval | |||
+ | WeDo use multiple performance metrics for annual incentive programs | - | WeDon’t have “single trigger” vesting of outstanding equity-based awards based solely on a CIC | |||
+ | WeDo use an independent compensation consultant | - | WeDon’t maintain compensation policies or practices that encourage unreasonable risk taking | |||
+ | WeDo have reasonable severance and change in control (“CIC”) protections that require involuntary termination (i.e., are “double trigger” protections) | - | WeDon’t have employment agreements with our NEOs other than our CEO | |||
+ | WeDo have a clawback policy | - | WeDon’t generally guarantee portions of annual incentive bonuses unless needed to attract talent | |||
+ | WeDo have policies prohibiting hedging/pledging of the Company’s stock | - | WeDon’t offer excessive perquisites | |||
+ | WeDo have robust stock ownership guidelines for our NEOs | - | WeDon’t provide tax gross-ups for any excise taxes triggered in connection with a change in control |
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| 2021 Proxy Statement |
Overview | › | CORPORATE GOVERNANCE |
How are abstentions and brokernon-votes counted?
Abstentions and brokernon-votesCorporate Governance (described below) will be counted for purposes of determining whether a quorum is present at the Annual Meeting. Abstentions will not affect the outcome of the election of directors. Abstentions will have the same effect as votes against any matter other than the election of directors.
Under the New York Stock Exchange (“NYSE”) rules, brokers are permitted to vote their clients’ proxies in their own discretion as to certain “routine” proposals. However, where a proposal is considered“non-routine,”Overview a broker who has not received instructions from its client generally does not have discretion to vote its clients’ uninstructed shares on that proposal. When a broker indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, the missing votes are referred to as “brokernon-votes.” Those shares would be considered present for purposes of determining whether a quorum is present, but would not be counted in determining the number of votes present for, or determining the outcome of, thenon-routine proposal. Under NYSE rules, only Proposal 4 (Ratification of Independent Accounting Firm) in this Proxy Statement is a routine matter. Therefore, no brokernon-votes are expected on Proposal 4. Proposal 1 (Election of Directors), Proposal 2(Say-on-Pay) and Proposal 3(Say-on-Pay Frequency) are considerednon-routine matters. Accordingly, your broker may not vote your shares with respect to these items if you have not provided instructions and brokernon-votes will not affect the outcome of these proposals.
How does the Board recommend that I vote?
Our Board of Directors recommends that you vote:
FOR each of the nominees for director named in this Proxy Statement;
FOR approval of the Company’s named executive officers’ compensation;
FOR approval of holding future advisory votes to approve the Company’s named executive officers’ compensation every ONE YEAR; and
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for Fiscal 2019.
Will any other matters be voted on?
We are not aware of any other matters that will be brought before the stockholders for a vote at the Annual Meeting. If any other matter is properly brought before the Annual Meeting, your proxy will authorize each of Sara R. Bucholtz and Shefali Shah to vote on such matters in her discretion.
How do I vote?
Stockholders of record can vote as follows:
by telephone by calling the toll-free number1-800-690-6903 (have your proxy card in hand when you call);
by Internet before the Annual Meeting at www.proxyvote.com (have your proxy card in hand when you access the website);
in person if you attend the Annual Meeting; or
by completing, dating, signing and promptly returning the accompanying proxy card, in the enclosed postage-paid,pre-addressed envelope provided for such purpose. No postage is necessary if the proxy card is mailed in the United States. Date and sign your name exactly as it appears on your proxy card.
We recommend that you vote by proxy even if you plan to attend the Annual Meeting. As described below, you can revoke your proxy or change your vote at the Annual Meeting.
The Internet and telephone voting procedures are designed to authenticate stockholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. The deadline for voting by telephone or electronically over the Internet is 11:59 p.m., New York City time, on Tuesday, May 14, 2019. Mailed proxy cards with respect to shares held of record should be mailed to allow sufficient time for delivery and tabulation.
If you hold your shares through a bank, broker or other nominee (also known as “street name”), such entity/person will give you separate instructions for voting your shares. “Street name” stockholders who wish to vote in person at the Annual Meeting will need to obtain a proxy form from the institution that holds their shares and those institutions will likely require your instructions to be submitted before the deadline listed above.
Can I change my vote after I return my proxy card?
Yes. Even after you have voted electronically through the Internet, by telephone or submitted your proxy card, you may change your vote at any time before the proxy is exercised at the Annual Meeting. You may change your vote by (i) sending written notice of revocation to Sara R. Bucholtz, Corporate Secretary, Avaya Holdings Corp., 4655 Great America Parkway, Santa Clara, CA 95054, (ii) submitting a valid proxy with a subsequent date by the Internet, telephone or mail, or (iii) attending the Annual Meeting and voting. Your attendance at the Annual Meeting will not by itself revoke a proxy that you have previously submitted. Stockholders who hold shares through a bank, broker or other nominee should consult with that party as to the procedures to be used for revoking a vote.
What if I return a proxy card but do not make specific choices?
If we receive a signed and dated proxy card from you that does not specify how your shares are to be voted on one or more matters, your shares will be voted “For” the election of each of the director nominees, “For” Proposals No. 2 and 4 and a frequency of every “One Year” for Proposal No. 3. If any other mater is properly presented at the Annual Meeting, the individuals named as proxy holders on your proxy card will vote your shares in the manner recommended by the Board on all proposals presented in the Proxy Statement and as they may determine in their best judgment as to any other matters properly presented for vote at the Annual Meeting.
What does it mean if I receive more than one proxy card or voting instruction form?
It means your shares are registered differently or are held in more than one account at the transfer agent and/or with one or more banks, brokers or other nominees. Please vote all your shares.
How will votes be recorded?
Votes will be tabulated by Broadridge, and the results will be certified by one or more Inspectors of Election, who are required to resolve impartially any interpretive questions as to the conduct of the vote. In tabulating votes, the Inspectors of Election will make a record of the number of shares voted for or against each nominee and each other matter voted upon, the number of shares abstaining with respect to each nominee or other matter, and the number of shares held of record by banks, brokers or other nominees and present at the Annual Meeting but not voting.
What is “householding” and how does it affect me?
We have adopted the “householding” procedure approved by the Securities and Exchange Commission (“SEC”), which allows us to deliver one set of documents to a household of stockholders instead of delivering a set to each stockholder in a household, unless we have been instructed otherwise. This procedure is more environmentally friendly and cost-effective because it reduces the number of copies to be printed and mailed. We and some banks, brokers or other nominees household annual reports and proxy statements, delivering a single annual report and proxy statement to multiple stockholders sharing an address unless we have been instructed otherwise.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report and proxy statement in the future, please notify your bank, broker or other nominee if your shares are held in a brokerage account or notify us at the address or telephone number below if you hold registered shares. Alternatively, if, at any time, you and another stockholder sharing the same address wish to participate in householding and prefer to receive a single copy of our annual report and proxy statement, please notify your bank, broker or other nominee if your shares are held in a bank or brokerage account or notify us if you hold registered shares.
At any time, you may request a separate copy of our annual report or proxy statement by sending a written request to the Corporate Secretary at Avaya Holdings Corp., 4655 Great America Parkway, Santa Clara, CA 95054, or by calling (908)953-6000.
Who is paying for this proxy solicitation?
We will pay for the entire costs of soliciting proxies. In addition to these proxy materials, our directors, officers and employees may also solicit proxies in person, by phone or other means of communications. Directors, officers and employees will not be paid any additional compensation for soliciting proxies.
In addition, we have engaged D.F. King, a proxy solicitation firm, to assist us in the solicitation of proxies for a fee of approximately $8,500, plus reasonableout-of-pocket expenses.
Where can I find the voting results of the Annual Meeting?
We plan to announce preliminary voting results at the Annual Meeting and to publish the final results in a current report on Form8-K following the Annual Meeting.
Chapter 11 Emergence and Selection of Directors
On the Emergence Date, the Company, together with certain of its affiliates (collectively, the “Debtors”), emerged from restructuring after filing voluntary petitions for relief (the “Filing”) under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the Southern District of New York (the “Court”) on January 19, 2017. On November 28, 2017, the Court entered an order confirming the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 (the “Plan of Reorganization”). The Plan of Reorganization became effective on the Emergence Date.
For further information on the Filing, the Plan of Reorganization and the Debtors’ emergence from Chapter 11, see Note 4, “Emergence from Voluntary Reorganization under Chapter 11 Proceedings” and Note 5, “Fresh Start Accounting” included in Item 8, “Financial Statements and Supplementary Data,” in the Annual Report on Form10-K. Additional information can also be found in the Company’s Amendment No. 3 to its Registration Statement on Form 10 filed with the SEC on January 10, 2018.
Pursuant to the Plan of Reorganization, upon emergence our Board consisted of our President and Chief Executive Officer (“CEO”), James M. Chirico, Jr., and six independent directors: William D. Watkins (Chair), Ronald A. Rittenmeyer, Stephan Scholl, Susan L. Spradley, Stanley J. Sutula, III and Scott D. Vogel. Mr. Rittenmeyer submitted his resignation as a director of the Company effective as of April 30, 2018. The Board elected Jacqueline E. Yeaney as a director, effective as of March 18, 2019, to fill the vacancy on the Board. The term for all the current directors expires at the upcoming Annual Meeting.
On the Emergence Date, the following persons ceased to serve as directors of the Company: Charles H. Giancarlo, Mary C. Henry, Kevin J. Kennedy, John Marren, Afshin Mohebbi, Greg K. Mondre, Kiran Patel and Gary B. Smith.
Our Board is responsible for providing oversight over the Company’s business and affairs, including the Company’s strategic direction, as well as the management and financial and operational execution that can best perpetuate the success of the business and support the long-term interestinterests of our stockholders. To effectively support its responsibilities, the Board has three committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these Board committees is currently comprised solely of independent directors. These Board committees carry out responsibilities set out in specific committee charters approved by the Board that are consistent with applicable requirements of the NYSENew York Stock Exchange (“NYSE”) and the SEC.Securities and Exchange Commission (“SEC”). The Board and each committee may from time to time form other committees for specified purposes. The Board and each committee may also, at its discretion, retain outside advisors at the Company’s expense in carrying out its responsibilities.
Our Board is committed to good corporate governance practices and seeks to represent stockholder interests through the exercise of sound judgment. To this end, the Board has adopted Corporate Governance Guidelines (“Guidelines”) that provide specific provisionsthe framework for the governance of the Board and Company and a Code of Ethics and Business Conduct (“Code of Conduct”) that represents our commitment to the highest standards of ethics and integrity in the conduct of our business. The Board committee charters, the Guidelines and the Code of Conduct, as well as any amendments we may make to these documents from time to time, may be found under “Corporate Governance” in the Investor Relations section of our website under “Corporate Governance” at
https://investors.avaya.com/corporate-governance/governance-policies, and, together with our charter and bylaws, serve as our governance and compliance framework. The referencedInformation on our website, including the information on the Investor Relations section of our websitereferenced here and below, is not aconsidered part of this Proxy Statement.
Our Code of Conduct is designed to help directors and employees worldwide to resolve ethical issues in an increasingly complex global business environment. The Code of Conduct applies to all directors and employees, including, without limitation, the CEO,Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”), the Chief Accounting Officer, the Corporate Controller and any other employee with any responsibility for the preparation and filing of documents with the SEC. The Code of Conduct covers a variety of topics, including those required to be addressed by the SEC. Topics covered include, but are not limited to, conflicts of interest, confidentiality of information and compliance with applicable laws and regulations. Directors and employees of the Company receive periodic updates regarding corporate governance policies governed by and are informed when there are any material changes to the Code of Conduct.
We will post amendments to or waivers of the provisions of the Code of Conduct made with respect to any of our directors and executive officers on the Investor Relations section of our website within four business days.days of effecting any such amendment or waiver. During Fiscal 2018,2020, no amendments to or waivers of the provisions of the Code of Conduct were made with respect to any of our directors or executive officers.
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In addition to upholding high ethical standards in the ways we conduct business, we recognize that our Company has opportunities to bring about positive social, environmental and economic change. We takecall this our corporate responsibility seriously and we encouragework with our customers, partners, employees, and each othercommunity to achieve more.make a positive impact in the world. Our Corporate Responsibility ReportPolicy and overall Company program, which details our corporate responsibility effortscommitments, goals, and activities isinitiatives, are available aton our Investor Relations website located at https://www.avaya.com/en/about-avaya/corporate-responsibility. The referenced information
Environment | Avaya is committed to continually reducing the environmental impacts of our products. • Avaya is a member of We Are Still In, the largest climate action group in the US. • Avaya tracks and reports its carbon emissions annually to the CDP (formerly known as the Carbon Disclosure Project). In 2015, we set a goal to reduce our Scope 1 and Scope 2 emissions by 15% cumulatively by 2020. We exceeded this goal and achieved a cumulative 40% reduction from 2014 to 2020. • Avaya’s ISO 14001 certified Design for Environment (“DfE”) program focuses on continually reducing the environmental impact of our solutions and services; current initiatives include developing energy efficient products and eliminating single-use plastic packaging in our supply chain. Our commitment to demonstrating care for the environment through the DfE program is stated in our R&D Environmental Policy. • Our technology helps our customers achieve their environmental goals. For example, the Avaya Spaces videoconferencing platform reduces or eliminates the need for business travel by enabling customers to host engaging and effective meetings remotely. This results in significant Scope 3 carbon emission reductions for our customers, which helps mitigate climate change. | |
Human Rights | Avaya is dedicated to providing a safe and healthy work environment for our employees. • Avaya is a member of the Responsible Business Alliance (“RBA”), the world’s largest industry coalition dedicated to upholding social, environmental, and ethical standards in global supply chains, and has adopted the Supplier Code of Conduct. • Avaya has policies and programs in place to identify risks and prevent the use of child labor, slavery, and human trafficking in our business operations and supply chain, including our Code of Conduct, Supplier Code of Conduct, Human Rights Statement and UK Modern Slavery Transparency Act Statement. • Avaya has a Conflict Minerals Policy and submits an annual Conflict Minerals Report to the SEC with the aim of eliminating the social and environmental harm brought from sourcing conflict minerals from the Democratic Republic of Congo. | |
Diversity and | We cultivate diverse perspectives and foster healthy dialogue around race, gender, and sexuality. • Avaya is a member of CEO Action for Diversity and Inclusion™, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace. • Avaya’s Diversity and Inclusion Policy states our commitment to promote diversity and foster a culture of inclusion within our company, industry, and communities. • Avaya conducts unconscious bias training for Avaya employees to identify, address and reduce underlying biases that are carried to foster a more inclusive work environment. • Avaya’s Talent Exchange Program gives employees the opportunity to perform their job in other parts of the world in order to build cultural intelligence and foster a diverse workforce. • Avaya has a Supplier Diversity Program to promote a network of diverse strategic supplier alliances to deliver exceptional products and services to our customers. |
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Overview | › | CORPORATE GOVERNANCE |
Community | Year round, Avaya organizes and participates in charitable activities that give back to the communities where we live and work. • We sponsor a Month of Giving each year in an effort to support fundraising and volunteering efforts by our worldwide employees, partners and customers. Over the past five years, we have raised over $950,000, donated 7,000 pounds of materials such as food, clothing and supplies and spent thousands of hours volunteering worldwide. • We partnered with Save the Children to fund various projects around the world, with a focus on places where children’s education so desperately needs support, such as Mozambique, Afghanistan and Uganda. Between 2015 and 2020, we donated nearly $250,000 to projects in these countries. • In India, we partnered with a variety of non-profit organizations to support both education and health. Over the past five years, we have donated 165,122,065 IRN to these projects, which is equivalent to approximately $2.2 million USD at today’s exchange rate. • We have a Corporate Social Responsibility (“CSR”) program in India that is focused on enhancing the quality of education and utilizing Avaya technology to improve access to health and education. We have established multi-year partnerships with non-governmental agencies that support remedial education, STEM Education, and Information, Communication, and Technology (ICT) enabled education in government schools. • In response to the ongoing COVID-19 pandemic, we have undertaken multiple initiatives in India to assist those who are underprivileged and unable to obtain basic supplies. These initiatives include providing COVID Care Kits, School Kits which include essential supplies for completing homework and studies during online learning and Kishori Care Kits which include basic necessities for adolescent girls. |
We believe it is our responsibility to make the world a better place and |
Prohibition on Hedging or Pledging of Company Stock
Our Insider Trading Policy prohibits Covered Individuals (as defined below) (and such individuals’ immediate family and household members) from entering into hedging transactions involving our securities. “Covered Individuals” refers to our (i) directors; (ii) officers who are designated as being subject to Section 16 of the Investor Relations sectionSecurities Exchange Act of 1934, as amended; and (iii) certain other officers and key employees of the Company designated by our website is notGeneral Counsel (which currently includes Senior Vice Presidents, Vice Presidents and Senior Directors, individuals involved in the preparation of internal and external financial and SEC reports, individuals in sales operations and finance and individuals supporting Avaya’s Cloud Offering). Covered Individuals (and such individuals’ immediate family and household members) are also prohibited under this policy from holding our stock in a part of this Proxy Statement.margin account as collateral for a margin loan or otherwise pledging our stock as collateral for a loan.
Leadership Structure of the Board
Under our bylaws, our Board appoints our corporate officers, including the CEO. Our Board understands that there is no single, generally accepted approach to providing Board leadership and that given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. Currently, our bylaws provide that the chairman of the Board may not simultaneously serve as our CEO. The Board believes that the current Board leadership structure is best for Avaya and its stockholders at this time. Our Nominating and Corporate Governance Committee periodically reviews the Company’s governance structure and practices, including the provisions of our certificate of incorporation and our bylaws.
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CORPORATE GOVERNANCE | › | Overview |
Among other considerations, the Board values independent board oversight as an essential component of strong corporate performance. On at least an annual basis, the Board undertakes a review of the independence of each director and considers whether any director has a material relationship with Avaya. The Board evaluates each director under the independence rules of the NYSE, the Guidelines and the audit committee independence requirements of the SEC.
The NYSE rules require listed company boards to have at least a majority of independent directors. Based on its evaluation, our Board determined that each of Messrs. Scholl, Sutula, Theis, Vogel and Watkins and Mses. Spradley and Yeaney, representing sixseven of Avaya’s seveneight current directors, are independent directors as defined under the NYSE rules. Mr. Chirico, who serves as our President and CEO, is the only current member of the Board who is not independent.
Board Composition and Director Qualifications
The Company seeks to align Board composition with the Company’s strategic direction sosuch that Board members bring skills, experience and backgrounds that are relevant to the key strategic and operational issues that they will
oversee and approve. Director candidates
are typically selected based foron their integrity and character, sound and independent judgment, and track record of accomplishments in leadership roles, as well as based on their professional, corporate and corporateindustry expertise, skills and experience. Criteria that are typically considered byMore specifically, among others, the Nominating and Corporate Governance Committee and the Board considers the following criteria in the selection of director candidates include:candidates:
the independence, judgment, strength of character, reputation in the business community, ethics and integrity of the individual;
the business or other relevant experience, skills and knowledge that the individual may have that will enable him or her to provide effective oversight of the Company’s business and to serve on or chair, as appropriate, relevant Board committees;
the fit of the individual’s skill set and personality with those of the other Board members so as to build a Board that works together effectively and constructively;
diversity with respect to experience, gender, race, ethnicity and age; and
the individual’s ability to devote sufficient time to carry out his or her responsibilities as a director in light of his or her occupation and the number of boards of directors and committees of other public companies on which he or she serves.
Our Board met seventeen10 times during Fiscal 2018, three times prior to the Emergence Date and fourteen times thereafter.2020. During Fiscal 2018,2020, each current Board member attended 75% or more of the meetings of the Board and each of the committees on which he or she served (during the period he or she served on the Board and on such committees.) In addition, our Board met in executive session without management present during many of its meetings. Due to the COVID-19 pandemic, all Fiscal 2020 Board and committee meetings including but not limited to its three regularly scheduledin-person meetings in Fiscal 2018.held after March 4, 2020 were held virtually. Our chairman
of the Board presides over the executive sessions of the Board. Committees of the Board also meet in executive session as they may deem appropriate.
We encourage our directors to attend our annual meetings of stockholders and we anticipate that each director will virtually attend our Annual Meeting. All of our then current Board members attended our 2020 Annual Meeting of Stockholders.
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Board Committees | › | CORPORATE GOVERNANCE |
The composition and responsibilities
Each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are described below. Each of these Board committees is currently comprised solely of independent directors. In addition, each member of the Audit Committee is financially literate and two members of the Audit Committee qualify as audit committee financial experts pursuant to SEC rules. The composition and some of the key responsibilities of each of these committees are described below. In addition to the responsibilities listed below, each Board committee conducts an annual performance self-evaluationself-
evaluation and an annual review of its committee charter.
Board Each of Directors
Current Committee Composition: Stanley J. Sutula, III (Committee Chair), Susan L. Spradley and Scott D. Vogel
Pre-Emergence Date Committee Composition: Kiran Patel (Committee Chair), Mary Henry, Greg Mondre and Ronald A. Rittenmeyer
The Board has determined that each of Messrs. Sutula and Vogel and Ms. Spradley is financially literate, able to read and understand fundamental financial statements, and meets the independence rules of the NYSE and Rule10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has also affirmatively determined that each of Messrs. Sutula and Vogel qualifies as an audit committee financial expert under the applicable requirements of the rules and regulations of the SEC
It is Company policy that no member of the Audit Committee may simultaneously serve on the auditthese committees of more than two other publicly traded companies, unless service on any such additional audit committee is approved by the Board upon recommendation of the Nominating and Corporate Governance Committee. Currently, Messrs. Sutula and Vogel and Ms. Spradley do not serve on more than two other audit committees for publicly traded companies.
Committee Responsibilities: The Audit Committee is responsible for, among other things:
selecting, and evaluating the performance of, the Company’s independent registered public accounting firm (including its qualifications, performance and independence);
evaluating the integrity of the Company’s accounting and financial reporting systems, including the audit of the Company’s annual financial statements by the independent registered public accounting firm;
overseeing the Company’s systems of internal accounting and financial controls and reviewing the activities and qualifications of the Company’s internal audit function;
reviewing the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof;
reviewing and discussing risk management and controls, including policies and guidelines with respect to risk assessment and risk management, as well as the Company’s major financial and cyber security risk exposures and the steps management has taken to monitor and control such exposures;
reviewing and approving related party transactions for potential conflicts of interest;
the processes for handling complaints relating to accounting, internal accounting controls and auditing matters; and
preparing the report required to be included in our annual report on Form10-K or proxy statement.
The Audit Committee’s role is one of oversight. The primary responsibility of the Audit Committee is to oversee the Company’s financial reporting process on behalf of the Board and report the results of its activities to the Board. The Company’s management is responsible for preparing the Company’s financial statements and the
independent registered public accounting firm is responsible for auditing those financial statements. It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles.
Meetings. The Audit Committee meets at least four times annually and more frequently as circumstances dictate. The Audit Committee held thirteen meetings during Fiscal 2018, two meetings prior to the Emergence Date and eleven meetings thereafter.
Current Committee Composition: Scott D. Vogel (Committee Chair) and Stephan Scholl
Pre-Emergence Date Committee Composition: John Marren (Committee Chair), Charles Giancarlo and Gary Smith
In addition, Ronald A. Rittenmeyer served on the Compensation Committee from December 15, 2017 until his resignation from the Board, effective April 30, 2018.
The Board has determined that each of Messrs. Scholl and Vogel meets the independence rules for compensation committees set by the NYSE. In addition, each of them is a“Non-Employee Director,” as defined byRule 16b-3 under the Exchange Act, and satisfies the requirements of an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended.
Committee Responsibilities: The Compensation Committee is responsible for, among other things:
reviewing and evaluating the performance of each of the Company’s senior officers who are, as determined from time to time by our Board, subject to the provisions of Section 16 of the Exchange Act (the “Senior Executives” or “Section 16 Officers”), and setting their compensation based on that evaluation;
reviewing the individual goals and objectives of, and evaluating the performance of, the CEO, and setting the CEO’s compensation based on that evaluation;
reviewing, approving and making recommendations to the Board, as required by law or regulation, with respect to adopting equity-based plans and incentive compensation plans in which the CEO and the other Senior Executives may participate;
approving grants of stock options, restricted stock awards and/or other awards under equity-based plans;
making recommendations to the Board regarding compensation of thenon-employee Board members and committee members;
approving employment agreements and severance plans for Senior Executives;
monitoring compliance with the Company’s share ownership guidelines;
developing and periodically reviewing with the Board succession plans with respect to the CEO and other senior executives;
administering the Company’s clawback policy;
reviewing and discussing with management the compensation discussion and analysis to be included in our filings with the SEC and preparing an annual compensation committee report for inclusion in our annual report on Form10-K or proxy statement; and
overseeing any other such matters as the Board shall deem appropriate from time to time.
The Compensation Committee has authority under its respective charter to access such internal and external resources, including retaining legal, financial or other advisors, as the Compensation Committeecommittee deems necessary or appropriate to fulfill its responsibilities. The Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant during Fiscal 2018 followingTo view each committee’s full responsibilities, see the Emergence Date. FW Cook advisedspecific committee charters under “Corporate Governance” in the Compensation Committee on, among other things, the reasonablenessInvestor Relations section of our executive compensation levels in comparison to other similarly situated companies and on the appropriateness of our executive andnon-employee director compensation program structure in supporting our business objectives. FW Cook does not provide any other services to the Company. Meetings of the Compensation Committee are attended by the CEO, if requested by the Compensation Committee. The Chairman of the Compensation Committee reports the actions of the Compensation Committee regarding compensation of Senior Executives to the Board.website at https://investors.avaya.com/corporate-governance/governance-policies.
Committees and Membership | Key Committee Responsibilities | |
Audit Stanley J. Sutula, III, Chair* Susan L. Spradley Scott D. Vogel* * Qualifies as an audit committee financial expert Meetings in Fiscal 2020: 9 | • Select, and evaluate the performance of, the Company’s independent registered public accounting firm (including its qualifications, performance and independence); • Review and discuss with management and our independent registered public accounting firm the content of our financial statements prior to filing our quarterly reports on Form 10-Q, and the annual audited financial statements, including disclosures made in management’s discussion and analysis of financial condition and results of operations, and recommend to our Board whether the audited financial statements should be included in our annual report on Form 10-K; • Oversee the Company’s systems of internal accounting and financial controls and review the activities and qualifications of the Company’s internal audit function; • Review and discuss risk management and controls, including policies and guidelines with respect to risk assessment and risk management; • Review and approve related party transactions for potential conflicts of interest; and • Oversee the processes for handling complaints relating to accounting, internal accounting controls and auditing matters. | |
Audit Committee Report, Page 23 | ||
Compensation Scott D. Vogel, Chair Stephan Scholl Jacqueline E. Yeaney Meetings in FIscal 2020: 7 | • Approve the compensation of each of the Company’s senior officers who are, as determined from time to time by our Board, subject to the provisions of Section 16 of the Exchange Act (the “Senior Executives” or “Section 16 Officers”), and approve (as appropriate) employment agreements and severance plans; • Review the CEO’s individual goals and objectives and set the CEO’s compensation after evaluating his performance; • Review, approve and make recommendations to the Board regarding equity-based plans and incentive compensation plans in which the CEO and the other Senior Executives may participate; • Approve grants of stock options, restricted stock awards and/or other awards under equity-based plans; • Recommend to the Board compensation of the non-employee Board members; • Monitor compliance with the Company’s share ownership guidelines; • Develop and periodically review with the Board succession plans with respect to the CEO and other senior executives; • Monitor progress of the Company’s human capital management, including, among other things, management depth and strength assessment, leadership development, talent assessment, diversity and inclusion and the results of the Company’s employee surveys; and • Administer the Company’s clawback policy. | |
Compensation Committee Report, Page 36 |
Meetings. The Compensation Committee meets at least four times annually and more frequently as deemed necessary by the committee Chair. The Compensation Committee held nine meetings during Fiscal 2018, one meeting prior to the Emergence Date and eight meetings thereafter.
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CORPORATE GOVERNANCE | › | Board Committees |
Committees and Membership | Key Committee Responsibilities | |
Nominating and Corporate Governance Susan L. Spradley, Chair Stephan Scholl William D. Watkins Meetings in Fiscal 2020: 2 | • Evaluate the performance, size and composition of the Board to determine the qualifications and areas of expertise, including a diversity of experience and backgrounds, needed to further enhance the composition of the Board and working with management in attracting candidates with those qualifications; • Identify individuals qualified to become directors and review the qualifications of prospective nominees, including nominees recommended by stockholders, and recommend to the Board candidates for election at the Company’s Annual Meeting of Stockholders and to fill Board vacancies; • Recommend to the Board committee chairs and members, as well as changes in number or function of committees; • Establish procedures, subject to the Board’s approval, for the annual performance self-evaluation of the Board and its committees; • Periodically review the Company’s corporate governance practices and leadership structure; and • Develop and oversee a Company orientation program for new directors and an education program for all directors. |
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee until the Emergence Date were Messrs. Marren (Committee Chair), Giancarlo and Smith. Each of them resigned from the Board and the Compensation Committee in connection with the Company’s emergence from bankruptcy, at which time Messrs. Vogel (Committee Chair) and Scholl were appointed to the Compensation Committee.
Each current member of the Compensation Committee is an independent director. No individual who was a member of the Compensation Committee during Fiscal 2018:2020: (i) was an officer or employee of the Company or any of its subsidiaries during
Fiscal 2018;2020; (ii) was formerly an officer of the Company or any of its subsidiaries; or (iii) served on the board of directors of any other company any of whose executive officers served on the Company’s Compensation Committee or its Board, with the exception of Mr. Giancarlo who served as the Company’s President and Chief Executive Officer from June 30, 2008 until December 22, 2008.Board.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Current Committee Composition: Susan L. Spradley (Committee Chair), Stephan Scholl and William D. Watkins
Pre-Emergence Date Committee Composition: Afshin Mohebbi (Committee Chair), Charles Giancarlo, Kevin J. Kennedy and Gary Smith
In addition, from December 15, 2017 until Ronald A. Rittenmeyer’s resignation from the Board on April 30, 2018, the composition of the Nominating and Corporate Governance Committee was Ronald A. Rittenmeyer (Committee Chair) and Susan L. Spradley.
The Board has determined that each of Ms. Spradley and Messrs. Scholl and Watkins meets the independence rules of the NYSE.
Committee Responsibilities: The Nominating and Corporate Governance Committee is responsible for, among other things:
evaluating the performance, size and composition of the Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board and working with management in attracting candidates with those qualifications;
developing and recommending to the Board criteria for the selection of new directors;
identifying individuals qualified to become directors and reviewing the qualifications of prospective nominees, including nominees recommended by stockholders, and recommending to the Board candidates for election at the Company’s Annual Meeting of Stockholders and to fill Board vacancies;
recommending qualified individuals to serve as committee members and chairs on the various Board committees and recommending to the Board, as appropriate, changes in number, function or composition of committees;
establishing procedures, subject to the Board’s approval, for the annual performance self-evaluation of the Board and its committees;
developing and overseeing a Company orientation program for new directors and an education program for all directors and periodically reviewing such programs and updating them as necessary;
monitoring, with the assistance of our General Counsel, current developments in the regulation and practice of corporate governance; and
periodically reviewing our Corporate Governance Guidelines and recommending changes, as appropriate, to the Board.
Meetings. The Nominating and Corporate Governance Committee held two meetings during Fiscal 2018, both of which were after the Emergence Date. The Nominating and Corporate Governance Committee meets periodically, as deemed necessary by the committee Chair.
The Nominating and Corporate Governance Committee is responsible for identifying, evaluating and recommending qualified candidates for election to the Board. To fulfill these responsibilities, the Nominating and Corporate Governance Committee reviews the composition of the Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board and works with management to attract candidates with those qualifications.
To identify new director candidates, the Nominating and Corporate Governance Committee seeks advice and names of candidates from its members, other members of the Board, members of management and other public and private sources. The Nominating and Corporate Governance Committee, in formulating its recommendation of candidates to the Board, considers each candidate’s personal qualifications and how such personal qualifications effectively address the then perceived current needs of the Board and its committees, including the criteria described above under “Board Composition and Director Qualifications.” The selection process includes, among other things, interviews with Board members, the CEO and other members of senior management, as appropriate, and reference checks
of identified candidates. The Nominating and Corporate Governance Committee will also considergives the same consideration to director candidates submitted by stockholders. See the procedures described in this Proxy Statement under the heading “Process for Director Nominations and Stockholder Proposals” for more details.
The Nominating and Corporate Governance Committee has sole authority under its charter to retain and terminate, at the Company’s expense, any search firm or advisor to be used to identify director candidates and has sole authority to approve the search firm’s or advisor’s fees and other retention terms. After the Nominating and Corporate Governance Committee completes its evaluation, it presents its recommendations to the Board for consideration and approval.
In 2017, the Company engaged Heidrick & Struggles International,connection with our strategic partnership with RingCentral, Inc., a worldwide executive search firm (“Heidrick & Struggles”RingCentral”), to help identify individuals to serve as directors upon the Company’s emergence from bankruptcy. Heidrick & Struggles identified each of Messrs. Scholl, Sutula and Watkins and Ms. Spradley as director candidates. Each of them, as well as Mr. Rittenmeyer, who served as a Company director prior to emergence from bankruptcy, and Mr. Vogel, were approved as partRingCentral’s acquisition of the Plan of Reorganization.Series A Stock, in October 2019 we entered into an Investor Rights Agreement with RingCentral. This agreement entitles RingCentral to nominate one person (the “RingCentral Nominee”) to
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Board Committees | › | CORPORATE GOVERNANCE |
In May 2018,
our Board until such time as RingCentral and its affiliates no longer hold or beneficially own, in the Board engaged Heidrick & Struggles to help the Board identify individuals to possibly join the Board following Mr. Rittenmeyer’s resignation from the Board.aggregate, shares of Series A Stock that can be converted into more than 4,759,339 shares of our Common Stock assuming conversion of all Series A Stock then held. In addition, the Board appointed an ad hoc committee ofRingCentral Nominee has the Board, comprised of Messrs. Chirico, Scholloption (i) to serve on our Audit and Watkins, to evaluate potential director candidates and recommend candidates to the Nominating and Corporate Governance Committee. ThisCommittees; or (ii) to attend (but not vote at) all of our Board committee considered director candidates identified by Heidrick & Strugglesmeetings. Accordingly, effective
November 6, 2020, Robert Theis was elected to the Board and participates on the directors interviewed certain director candidates based uponAudit Committee, the committee’s recommendation. After consideration of a recommendation fromCompensation Committee and the Nominating and Corporate Governance Committee as a non-voting member. For further information on our relationship with RingCentral, please see the Board elected Ms. Yeaney to serve on the Board, effective as of March 18, 2019.“Certain Relationships and Related Transactions” section in this Proxy Statement.
The Nominating and Corporate Governance Committee evaluated the director nominees and recommended that the Board nominate each director nominee named above forre-election.
Board Oversight of Risk Management
While the Board has the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements and the incentives created by the compensation awards it administers. Our Audit Committee oversees management of enterprise risks
and receives and reviews briefings concerning the Company’s information security and technology risks (including cyber security), financial risks and potential conflicts of interests. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the Board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by the Board and its committees.
Stockholders or interested parties may contact the Board, theNon-Executive Chairman and/or independent directors about corporate governance or other matters related to the Board by writing to the following address (indicating by name or title to whom the correspondence should be directed):
Avaya Holdings Corp. Board of Directors
Attention: Corporate Secretary
4655 Great America Pkwy2605 Meridian Parkway, Suite 200
Santa Clara, CA 95054Durham, North Carolina 27713
Communications may also be sent by email to bdofdirectors@avaya.com. The Corporate Secretary manages all communications received as set forth above to determine whether the contents represent a message to the Board, its committees or any member, group or committee of the Board.
Certain Relationships and Related Transactions
Strategic Partnership with RingCentral, Inc.
On October 3, 2019, the Company entered into a strategic partnership with RingCentral, Inc. (“RingCentral”). In connection with the strategic partnership, the Company and RingCentral entered into (i) an Investment Agreement (the “Investment Agreement”), pursuant to which RingCentral purchased $125 million aggregate principal amount of the Company’s Series A Stock; and (ii) a Framework Agreement (the “Framework Agreement”), each as described below.
Investment Agreement
The Investment Agreement provided for the sale by the Company to RingCentral, in a private placement under the Securities Act of 1933, as amended,
125,000 shares of Series A Stock, for an aggregate purchase price of $125 million. The Series A Stock issued to RingCentral pursuant to the Investment Agreement is convertible into shares of Common Stock, at an initial conversion price of $16.00 per share. The Company completed the issuance and sale of the Series A Stock (the “Closing”) on October 31, 2019.
Framework Agreement, Super Master Agent Agreement and Development Agreement
The Framework Agreement governs the terms of the commercial arrangement between Avaya Inc. and RingCentral. Pursuant to the Framework Agreement, the parties entered into a Super Master Agent
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CORPORATE GOVERNANCE | › | Board Committees |
Agreement dated as of October 31, 2019, between Avaya Inc. and RingCentral (the “Super Master Agent Agreement”), pursuant to which Avaya will act as an agent to Avaya’s channel partners with respect to the sale of Avaya Cloud Office by RingCentral (“ACO”) and make direct sales of ACO. RingCentral will pay a commission to Avaya, including for the benefit of Avaya’s channel partners, for each such sale. In addition, for each qualified unit of ACO sold during the term of the Framework Agreement, RingCentral will pay Avaya certain commissions. Among other things, the Framework Agreement requires Avaya to (subject to certain exceptions) market and sell ACO as its exclusive UCaaS solution (as defined by “Subject Functionality” in the Framework Agreement). In addition, under certain circumstances, the Company may be required to issue shares of Series A Stock or shares of Common Stock to RingCentral in satisfaction of its obligations under the Framework Agreement. Further, RingCentral paid Avaya an advance of $375 million, predominantly for future commissions, as well as for certain licensing rights (the “Consideration Advance”) in accordance with the Framework Agreement. The Consideration Advance was paid primarily in RingCentral stock. The $375 million payment consisted of $361 million in RingCentral shares and $14 million in cash. During the nine months ended June 30, 2020, the Company sold all of its RingCentral shares. The Framework Agreement has a multiyear term and can be terminated earlier by either party in the event (i) the other party fails to cure a material breach; or (ii) the other party undergoes a change in control.
Pursuant to the Framework Agreement, on October 3, 2019, Avaya Management L.P., Avaya Inc. and RingCentral entered into a Development Agreement, pursuant to which Avaya and RingCentral collaborate to develop ACO as a new branded service. The Development Agreement permits Avaya and RingCentral to enter into product description documents which specify the development work to be completed by each of Avaya and RingCentral. The Development Agreement will terminate when the Framework Agreement and Super Master Agent
Agreement are terminated. Additionally, the Development Agreement may be terminated by Avaya or RingCentral in the event that the other (a) fails to cure a material breach or (b) experiences an Insolvency Event (as defined in the Framework Agreement).
Investor Rights Agreement
In connection with the Closing, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with RingCentral. Pursuant to the terms of the Investor Rights Agreement, among other things, from and after the Closing, until the first date on which RingCentral and its affiliates no longer hold or beneficially own, in the aggregate, a number of shares of Common Stock (calculated assuming conversion of the Series A Stock to Common Stock) that is equal to or greater than 4,759,339 shares (subject to certain adjustments) (the “Investor Ownership Threshold”), RingCentral is entitled to nominate one person to the Board. Currently, Mr. Theis serves in this capacity. For more information, please see the “RingCentral Nominee” section in the Proxy Statement. In addition, for so long as the Investor Ownership Threshold is met, RingCentral is required to vote all of its shares in favor of each director nominee nominated by the Nominating and Corporate Governance Committee and against the removal of any director nominated by such committee. Furthermore, for as long as the RingCentral Nominee sits on the Board, RingCentral is subject to customary standstill provisions, has a consent right over certain actions taken by the Company, and has customary preemptive rights.
Registration Rights Agreement
In connection with the Closing, the Company entered into a Registration Rights Agreement with RingCentral, pursuant to which RingCentral filed a registration statement providing for the resale, from time to time, by the Company of shares of Common Stock of RingCentral issued to the Company under the Framework Agreement.
2017 Registration Rights Agreement
In connection with our emergence from Chapter 11, we entered into a Registration Rights Agreement with certain of our creditors and their affiliates who became Company stockholders upon our emergence from bankruptcy, pursuant to which we provide them certain “demand” registration rights and customary “piggyback” registration rights. The Registration
Rights Agreement also provides that we will pay certain expenses relating to such registrations and indemnify the registration rights holders against (or make contributions in respect of) certain liabilities which may arise under the Securities Act of 1933, as amended.
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| 2021 Proxy Statement |
Board Committees | › | CORPORATE GOVERNANCE |
Arrangements Involving the Company’s Current Directors
James M. Chirico, Jr. is a director and he is Chief Executive Officer and President of the Company. The Company also employs his daughter, Mackenzie Chirico, whose salary and commissions in Fiscal 2020 were approximately $138,400.
Stephan Scholl is a director and he is the Chief Executive Officer of Alight Solutions, a leading provider of integrated benefits, payroll and cloud solutions. During Fiscal 2020, sales of the Company’s products and services to Alight Solutions were approximately $332,500 and the Company purchased approximately $5,002,900 in services from Alight Solutions.
Stanley J. Sutula, III is a director and served as the Executive Vice President and Chief Financial Officer of Pitney Bowes Inc., a business-to-business provider of equipment, software and services from January
2017 to November 2020. During Fiscal 2020, sales of the Company’s products and services to Pitney Bowes Inc. were approximately $212,800 and the Company purchased de minimis amounts of goods and services from Pitney Bowes Inc.
Arrangements Involving Other Stockholders which Beneficially Own More than 5% of Any Class of Stock
We have entered into arrangements on ordinary business terms and at an arm’s length basis with certain of our stockholders or their affiliates. Arrangements involving stockholders or their affiliates that beneficially own more than 5% of any class of our stock and in which total payments for all of these arrangements exceeded $120,000 in Fiscal 2020 are described below.
In Fiscal 2020 the Company received approximately $1,335,000 from The Vanguard Group from ordinary course sales of the Company’s products and services and the Company paid approximately $32,000 to The Vanguard Group for purchases of services.
Related Party Transaction Policy
In December 2017, our Board adopted written procedures for the review, approval and/or ratification of all transactions between the Company and certain “related persons,” such as our executive officers, directors and owners of more than 5% of our voting securities. The Board most recently reviewed this policy in August 2020 and adopted only immaterial changes.
The procedures give our Audit Committee the power to approve or disapprove existing and potential related party transactions involving our directors and our Section 16 Officers. Upon becoming aware of an existing or potential related party transaction, the Audit Committee is required to conduct a full inquiry into the facts and circumstances concerning that transaction and to determine the appropriate actions, if any, for the Company to take. In reviewing a transaction, the Audit Committee considers relevant
facts and circumstances, including, but not limited to, whether the transaction is in the best interests of the Company and its stockholders, whether the terms are consistent with a transaction available on an arms-length basis and whether the transaction is in the Company’s ordinary course of business. At the discretion of the Audit Committee, consideration of a related party transaction may be submitted to the Board. A director who is the subject of a potential related party transaction is not permitted to vote in the decision-making process of the Audit Committee or Board, as applicable, relating to what actions, if any, shall be taken by us in light of that transaction.
All related party transactions identified above that occurred during Fiscal 2020 or that are currently proposed which required approval and/or ratification through the procedures described above were subject to such review procedures.
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PROPOSAL 1 Election of Directors |
PROPOSAL 1 – ELECTION OF DIRECTORS
Under our bylaws, our Board shallis required to consist of at least seven directors and not more than nine. Allnine directors will beall of whom are in onethe same class. Currently our Board has seveneight members. At each annual meeting of stockholders, the directors will beare elected to serve until the earlier of their death, resignation, retirement, disqualification, removal or incapacity or until their successors have been elected and qualified.
Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated James M. Chirico, Jr., Stephan Scholl, Susan L. Spradley, Stanley J. Sutula, III, Robert Theis, Scott D. Vogel, William D. Watkins and Jacqueline E. Yeaney for election as directors, each to serve until the next annual meeting of stockholders or until his or her successor is duly elected and qualified, except in the case of their earlier death,
resignation, retirement, disqualification, removal or incapacity. Each nominee is currently serving as a director and has consented to serve for the new term. Should any of themnominee become unavailable for election, your proxy authorizes the named proxies to vote for such other person, if any, as the Board may recommend.
The following table identifies the experience and qualifications that our director nominees bring to the Board. As described above under “Board Composition and Director Qualifications,” the Nominating and Corporate Governance Committee formulates its recommendation of candidates to the Board after consideration of each candidate’s personal qualifications and how such personal qualifications effectively address the then perceived current needs of the Board and its committees.
Experience/Skills
Senior Leadership | |||||||||||||||||||||||||
8 | |||||||||||||||||||||||||
Finance, Accounting or Financial Reporting | |||||||||||||||||||||||||
6 | |||||||||||||||||||||||||
Corporate Governance | |||||||||||||||||||||||||
5 | |||||||||||||||||||||||||
Executive Compensation | |||||||||||||||||||||||||
4 | |||||||||||||||||||||||||
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7 | |||||||||||||||||||||||||
Other Public Company Board Experience | |||||||||||||||||||||||||
5 | |||||||||||||||||||||||||
Risk Management | |||||||||||||||||||||||||
7 | |||||||||||||||||||||||||
| Strategic Planning, Business Development, Business Operations | ||||||||||||||||||||||||
8 | |||||||||||||||||||||||||
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PROPOSAL 1 Election of Directors |
Each director to be elected by stockholders is elected by a plurality of votes, which means that the seveneight nominees receiving the most “for” votes will be elected. Votes withheld from any nominee will have no effect on the outcome of the election of directors. Votes may not be cast “against” the election of a nominee. Abstentions and brokernon-votes will not be counted for any purpose in determining whether a nominee is elected. Directors may be removed, with or without cause, upon the affirmative vote of the holders of at least a majority of our voting stock. Directors need not be stockholders but are subject to certain share ownership requirements as described in the “Compensation Discussion & Analysis” below.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” EACH OF THE DIRECTOR NOMINEES NAMED BELOW.Director Nominees
James M. Chirico, Jr. | ||||
Director Age: 63 President and Chief Executive Officer of Avaya Holdings Corp. | ||||
| Mr. Chirico has been our President and | |||
Experience, Qualifications, Attributes and Skills Mr. Chirico’s role as CEO, the management perspective he brings to Board deliberations and his extensive management experience at Avaya, as well as at other companies, led to the conclusion that he should serve as a director of our Company. | ||||
Committees: • None | Other Public Company Boards: • None |
Stephan Scholl
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Age: 50 Chief Executive Officer of Alight Solutions | Personal Highlights Mr. Scholl joined our Board on | |||
Experience, Qualifications, Attributes and Skills Mr. Scholl’s experience in software and services, including with a cloud business, his service as an executive officer of companies including as President and Chief Executive Officer, as well as his independence from the Company, led to the conclusion that he should serve as a director of our Company. | ||||
Committees: • Compensation • Nominating & Corporate Governance | Other Public Company Boards: • None |
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PROPOSAL 1 Election of Directors |
Susan L. Spradley | ||||
Director since: 2017
Chief Executive Officer of Motion Intelligence, Inc. | Personal Highlights Ms. Spradley joined our Board on | |||
Experience, Qualifications, Attributes and Skills Ms. Spradley’s experience in the wireless telecommunications industry, including broad operating experience in sales, product portfolio management, and research and development for multiple global communications-related companies and her extensive public company executive leadership experience, as well as her independence from the Company, led to the conclusion that she should serve as a director of our Company. | ||||
Committees: • Audit • Nominating & Corporate Governance (Chair) | Other Public Company Boards: • NetScout Systems Inc. (April 2018 – Present) • Qorvo (January 2017 – Present) |
Stanley J. Sutula, III | ||||||
Director since: 2017
Chief Financial Officer of Colgate- Palmolive Company | Personal Highlights Mr. Sutula joined our Board on | |||||
Experience, Qualifications, Attributes and Skills Mr. Sutula’s experience in senior finance positions, including as Chief Financial Officer and Controller, and his experience with software and global management, as well as his independence from the Company, led to the conclusion that he should serve as a director of our Company. | ||||||
Committees: • Audit (Chair) | Other Public Company Boards: • None |
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PROPOSAL 1 Election of Directors |
Robert Theis | ||||
Director since: 2020 Age: 59 General Partner of World Innovation Lab | Personal Highlights Mr. Theis joined our Board on November 6, 2020. Mr. Theis has served as a General Partner of World Innovation Lab, a venture capital firm, since September 2016. He was a co-founder and served as Managing Partner of Garnett Theis Capital, a venture capital firm, from October 2014 to September 2016. He served as a managing director at Scale Venture Partners (“Scale Ventures”), a venture capital firm, from May 2008 to October 2014. Prior to joining Scale Ventures, from July 2000 to April 2008, Mr. Theis served as a general partner with Doll Capital Management, a venture capital firm. From July 1996 to June 2000, Mr. Theis served as Executive Vice President and served on the board of directors of New Era of Networks, Inc., a supplier of Internet infrastructure software and services. From April 1986 to June 1996, Mr. Theis served as a Managing Director at Sun Microsystems, Inc., a provider of computers and computer components acquired by Oracle Corporation, and from January 1984 to March 1986, as Marketing Manager at Silicon Graphics, Inc., a provider of high-performance computing solutions. Mr. Theis serves on the board of directors at the Computer History Museum, a museum that provides stories and artifacts of the information age and computing revolution. Mr. Theis is RingCentral’s nominee to our Board. | |||
Experience, Qualifications, Attributes and Skills Mr. Theis’s substantial experience as a venture capitalist investment professional and as a director of technology infrastructure and applications companies, as well as his independence from the Company, led to the conclusion that he should serve as a director of our Company. | ||||
| Other Public Company Boards: • RingCentral, Inc. (August 2011 – Present) |
Scott D. Vogel | ||||
Director since: 2017 Age: 45 Managing Member of Vogel Partners LLC | Personal Highlights Mr. Vogel joined our Board on | |||
Experience, Qualifications, Attributes and Skills Mr. Vogel’s mix of experience with executive management oversight, finance and capital markets, human resources and compensation and strategic planning, as well as his independence from the Company, led to the conclusion that he should serve as a director of our Company. | ||||
Committees: • Audit • Compensation (Chair) | Other Public Company Boards: • Bonanza Creek Energy, Inc. (April 2017 – Present) • CBL & Associates Properties, Inc. (October 2020 – Present) • Contura Energy, Inc. (December 2019 – Present) |
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PROPOSAL 1 Election of Directors |
William D. Watkins | ||||
Director since: 2017 Age: 68 Independent Chair of
| Personal Highlights Mr. Watkins joined our Board and became Chair of the Board on | |||
Experience, Qualifications, Attributes and Skills Mr. | ||||
Committees: • Nominating & Corporate Governance | Other Public Company Boards: • Flex Ltd. (April 2009 – Present) • Maxim Integrated Products, Inc. (August 2008 – Present) |
Jacqueline “Jackie” E. Yeaney
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Director since: 2019 Age: 52 Executive Vice | Personal Highlights Ms. Yeaney joined our Board on March 18, 2019. Ms. Yeaney is Executive Vice President, Marketing of Tableau Software, a self-service analytics platform owned by Salesforce.com, Inc., a position she has held since August 22, 2019. Prior to that Ms. Yeaney was | |||
Experience, Qualifications, Attributes and Skills Ms. Yeaney’s experience with global public company technology companies, including experience with strategy, marketing and transformation in the cloud and software industries, and her executive leadership experience, as well as her independence from the Company, led to the conclusion that she should serve as a director of our Company. | ||||
Committees: • Compensation | Other Public Company Boards: • None |
The Board unanimously recommends that you vote “FOR” each of the director nominees named in this proposal. |
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PROPOSAL 2 Ratification of Appointment of Independent Registered Public Accounting Firm |
STOCK OWNERSHIPPROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for Fiscal 2021 and is seeking ratification of such selection by our stockholders at the Annual Meeting. PwC has audited our financial statements since 2000. The Audit Committee and PwC do not believe that PwC’s tenure as the Company’s auditor has diminished its independence, candor, or objectivity. The Audit Committee further believes PwC’s familiarity with the Company’s business and operations allows it to conduct better, more efficient, and more effective audits. At the same time, the Audit Committee remains mindful of the risks of PwC’s long tenure and carefully monitors PwC’s performance, fee structure and any issues bearing on the independence of the firm. Representatives of PwC are expected to virtually attend the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of
PwC as our independent registered public accounting firm. However, our Audit Committee is submitting the selection of PwC to our stockholders for ratification as a matter of good corporate governance practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PwC. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority in voting power of shares entitled to vote (virtually or by proxy) at the Annual Meeting is required to approve the ratification of the selection of PwC as our independent registered public accounting firm. Abstentions will have the same effect as an “Against” vote for purposes of determining whether this matter has been approved. Since this proposal is considered “routine” under the NYSE rules, no broker non-votes are expected on this proposal.
Section 16(a) Beneficial Ownership Reporting CompliancePre-Approval Policies and Procedures
Our officersAudit Committee pre-approves all audit and directorsnon-audit services provided by our independent registered public accounting firm. Our Audit Committee may delegate authority to one or more members of the Audit Committee to provide such pre-approvals, provided that such approvals are presented to the Audit Committee at a subsequent
meeting. This policy is set forth in the charter of the Audit Committee and persons beneficially holding more than 10%available under “Corporate Governance” in the Investor Relations section of our Common Stock are required underwebsite at https://investors.avaya.com/corporate-governance/governance-policies. The referenced information on the Exchange Act to file reports of ownership and changes in ownershipInvestor Relations section of our Common Stockwebsite is not a part of this Proxy Statement.
Principal Accountant Fees and other equity securities with the SEC. We file these reports of ownership and changes in ownership on behalf of our officers and directors.Services
We believe that during the Fiscal 2018, our directors and Section 16 Officers complied with all Section 16(a) filing requirements. In making the above statement, we have relied solely upon our review of the written representations of our directors and Section 16 Officers and/or our review of the reports filed for Fiscal 2018.
Security Ownership of Certain Beneficial Owners and Management
The following table presentsprovides information as toregarding the beneficial ownership of our Common Stock as of March 18, 2019 for:fees for the audit and other services provided by PricewaterhouseCoopers LLP for the fiscal years ended September 30, 2020 and 2019:
each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock;
Fiscal Years Ended September 30, | ||||||||||||
(In thousands) | 2020 |
| 2019 | |||||||||
Audit Fees | $ | 11,171 |
| $ | 14,119 |
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Audit-Related Fees |
| 434 |
|
| 1,004 |
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Tax Fees |
| 1,475 |
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| 1,109 |
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All Other Fees |
| 787 |
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| 502 |
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Total Fees | $ | 13,867 |
| $ | 16,734 |
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each of our directors and director nominees;
each named executive officer as set forth in the summary compensation table in this Proxy Statement; and
all current executive officers, directors and director nominees as a group.
Percentage ownership of our Common Stock in the table is based on 110,717,682 shares of Common Stock outstanding as of March 18, 2019. Shares of Common Stock that may be acquired within 60 days of March 18, 2019 pursuant to the exercise of options or warrants, and restricted stock units (“RSUs”) that vest within 60 days of March 18, 2019 are deemed to be outstanding for the purpose of computing the percentage ownership of such holder but are not deemed to be outstanding for computing the percentage ownership of any other person shown in the table. Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them. Unless otherwise noted below, the address of each of the individuals and entities named below is c/o Avaya Holdings Corp., 4655 Great America Parkway, Santa Clara, California 95054.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Total Shares | ||||||
5% Stockholder: | ||||||||
Davidson Kempner Capital Management LP and other Reporting Persons | 10,871,113 | (1) | 9.8 | % | ||||
c/o Davidson Kempner Capital Management LP 520 Madison Avenue, 30th Floor New York, New York 10022 | ||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 9,985,183 | (2) | 9.0 | % | ||||
JPMorgan Chase & Co. | 9,867,620 | (3) | 8.9 | % | ||||
270 Park Avenue New York, New York 10017 |
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Total Shares | ||||||
BlackRock, Inc. | 7,469,484 | (4) | 6.7 | % | ||||
55 East 52nd Street New York, New York 10055 | ||||||||
Directors: | ||||||||
James M. Chirico, Jr. | 592,739 | (5) | * | |||||
Stephan Scholl | 16,887 | (6) | * | |||||
Susan L. Spradley | 16,887 | (6) | * | |||||
Stanley J. Sutula, III | 16,887 | (6) | * | |||||
Scott D. Vogel | 16,887 | (6) | * | |||||
William D. Watkins | 16,887 | (6) | * | |||||
Jacqueline E. Yeaney | 2,885 | (7) | * | |||||
Named Executive Officers (other than James M. Chirico, Jr.): | ||||||||
Dino Di Palma | — | (8) | * | |||||
Jaroslaw S. Glembocki | — | (9) | * | |||||
Edward Nalbandian | 28,786 | (10) | * | |||||
Patrick J. O’Malley, III | 98,869 | (11) | * | |||||
William Mercer Rowe | — | (12) | * | |||||
Shefali Shah | 52,009 | (13) | * | |||||
David Vellequette | — | (14) | * | |||||
All Current Directors and Executive Officers as a Group (12 persons)(5), (6), (7), (10), (13) | 767,369 | * |
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PROPOSAL 2 Ratification of |
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Audit Fees
DIRECTOR COMPENSATIONAudit fees consist of fees for professional services rendered for the audit of our annual consolidated financial statements and the review of our quarterly consolidated financial statements. Audit fees also include services that are typically provided by the independent registered public accounting firm in connection with statutory audit and regulatory filings.
MembersAudit-Related Fees
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the Board whoaudit or review of our financial statements and are Company employees do not receive any additional compensationreported above under “AuditFees.” The services for their service as directors.the fees under this category
include due diligence services and consultation and review in connection with the adoption of new accounting policies.
Fiscal 2018Non-EmployeeTax Fees Director Compensation Program
PriorTax fees consist of fees for services to support the Emergence Datecompliance with and filing of direct and indirect tax returns for our international subsidiaries and certain due diligence and consulting services.
Immediately priorAll Other Fees
All other fees consist of fees for other permitted services including, but not limited to, the Emergence Date, the Company’s independentnon-employee directors were Mary C. Henry, Kiran Patel and Gary B. Smith. They received compensation for Fiscal 2018 until the end of their service on the Emergence Date under the following program with all cash retainers paid in quarterly installments:advisory services.
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AUDIT COMMITTEE REPORT |
non-independent,non-employeeAudit Committee Report
In connection with the Company’s consolidated financial statements for the year ended September 30, 2020, the Audit Committee has:
reviewed and discussed the audited financial statements with management;
discussed with the Company’s independent registered public accounting firm, PwC, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees; and
received the written disclosures and the letter from PwC as required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and the Audit Committee discussed with PwC that firm’s independence.
Based on the review and discussions with the Company’s management and the independent registered public accounting firm, as set forth above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s 2020 Annual Report, for filing with the SEC.
MEMBERS OF THE AUDIT COMMITTEE:
Stanley J. Sutula, III, Chair
Susan L. Spradley
Scott Vogel
The foregoing report shall not be deemed incorporated by reference by any general statement or reference to this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under those Acts.
| 2021 Proxy Statement | 23 |
PROPOSAL 3 Advisory Approval of the Company’s Named Executive Officers’ Compensation (“say-on-pay”) |
PROPOSAL 3 – ADVISORY APPROVAL OF THE COMPANY’S NAMED EXECUTIVE OFFICERS’ COMPENSATION (“SAY-ON-PAY”)
As required by Section 14A of the Exchange Act and pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we are providing our stockholders with an advisory vote on executive compensation. This advisory vote, commonly known as a “say-on-pay” directors who receivedvote, is a non-employeenon-binding, director compensation: John W. Marren, Afshin Mohebbi,advisory vote on the compensation paid to our named executive officers (“NEOs”) as disclosed pursuant to Item 402 of Regulation S-K, in the “Compensation Discussion and Ronald A. Rittenmeyer. During Fiscal 2018, annualAnalysis” in this Proxy Statement. This say-on-pay vote is not intended to address any specific item of compensation, but rather the overall compensation of the NEOs and the policies and procedures described in this Proxy Statement.
We are committed to utilizing a mix of incentive compensation programs that will reward success in achieving the Company’s financial objectives and growing value for stockholders, and continuing to refine these incentives to maximize Company performance. The Compensation Committee has overseen the development of a compensation program designed to achieve pay-for-performance and alignment with stockholder interests, as described more fully in the “Compensation Discussion and Analysis” section above. The compensation program was $300,000 for Messrs. Marrendesigned in a manner that we believe is reasonable, competitive and Rittenmeyerappropriately balances the goals of attracting, motivating, rewarding and $450,000 for Mr. Mohebbi. These amounts were paid in cash in quarterly installmentsretaining our executives.
Previously, the Board determined to hold a say-on-pay vote every year until the Emergence Date. Messrs. Marrennext required advisory vote on the frequency of holding future say-on-pay votes. At our 2020 Annual Meeting, our stockholders approved, on an advisory basis, our executive compensation paid to named executive officers in Fiscal 2019.
The Board invites you to review carefully the “Compensation Discussion and Mohebbi resigned fromAnalysis” and the
tabular and other disclosures on executive compensation in this Proxy Statement. Based upon that review, the Board asrecommends that the stockholders approve, on an advisory basis, the compensation of the Emergence Date. Mr. Rittenmeyer remainedNEOs, as discussed and disclosed in the “Compensation Discussion and Analysis,” the compensation tables, and any related narrative disclosure contained in this Proxy Statement. The Board recommends that stockholders vote, on an advisory basis, in favor of the following “Say-on-Pay” resolution:
“RESOLVED, that the stockholders of Avaya Holdings Corp. approve, on an advisory basis, the compensation paid to the Company’s NEOs as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion included in this Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Company, the Board followingor the Emergence DateCompensation Committee. However, we value the views of our stockholders and participated in the new compensation program described below during that time.
As of the Emergence Date
In January 2018, upon the recommendation of the Compensation Committee expects to carefully review and take into account the Board approved a post-emergence compensation program that was effective as of December 15, 2017. The new program consistedoutcome of the following:vote when designing and considering future executive compensation arrangements.
The proxy holders named on the accompanying proxy card will vote in favor of the advisory “say-on-pay” vote unless a stockholder directs otherwise.
The affirmative vote of a majority of the votes cast (virtually or by proxy) at the Annual Meeting is required to approve, on a non-binding and advisory basis, the compensation paid by the Company to the NEOs as described in this Proxy Statement. Abstentions will have the same effect as an “Against” vote for purposes of determining whether this proposal has been approved. Broker non-votes will not be counted for any purpose in determining whether this proposal has been approved.
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| The Board unanimously recommends a vote “FOR” the approval of the compensation paid to the Company’s NEOs, as disclosed in |
The cash retainer was paid in quarterly installments beginning in March 2018. RSUs vested in four equal installments in March, June, September and December 2018. However, the delivery of the underlying shares is deferred until the earliest to occur of: (i) December 15, 2020, (ii) the recipient’s separation from the Company or (iii) a change in control of the Company, as defined in the Avaya Holdings Corp. 2017 Equity Incentive Plan.
Non-Employee Director Compensation Paid in Fiscal 2018
The following table details the total compensation paid to of ournon-employee directors for Fiscal 2018:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
Non-Employee Directors After Emergence Date | ||||||||||||
Ronald A. Rittenmeyer(2) | 100,000 | 249,360 | 349,360 | |||||||||
Stephan Scholl(3) | 75,000 | 249,360 | 324,360 | |||||||||
Susan L. Spradley(3) | 75,000 | 249,360 | 324,360 | |||||||||
Stanley J. Sutula, III(3) | 75,000 | 249,360 | 324,360 | |||||||||
Scott D. Vogel(3) | 75,000 | 249,360 | 324,360 | |||||||||
William D. Watkins(3) | 75,000 | 249,360 | 324,360 | |||||||||
Non-Employee Directors Resigning at Emergence Date(4) | ||||||||||||
Mary Henry | 65,000 | — | 65,000 | |||||||||
John Marren | 75,000 | — | 75,000 | |||||||||
Afshin Mohebbi | 125,000 | — | 125,000 | |||||||||
Kiran Patel | 70,000 | — | 70,000 | |||||||||
Gary Smith | 67,500 | — | 67,500 |
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Fiscal 2019Non-Employee Director Compensation Program Changes
In August 2018, upon the recommendation of the Compensation Committee with input from FW Cook, the Committee’s independent consultant, the Board approved a reduction in the annual cash retainer from $100,000 to $75,000 in order to better align with our Compensation Peer Group, and established additional retainers for theNon-Executive Chair and each committee chair. In February 2019, upon the recommendation of the Compensation Committee with input from the Compensation Committee’s independent consultant, the Board granted thenon-employee directors a supplemental equity award in order to account for the period of Board service from January 1, 2019 through the date of the Annual Meeting and to reflect the change in timing of future annual equity awards to occur at Annual Meetings. Effective for Fiscal 2019, the program currently consists of the following:
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Compensation Discussion and Analysis
Quick Reference Guide
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Overview | 25 | |||
Fiscal 2020 Named Executive Officers | 26 | |||
Primary Elements of Compensation | 26 | |||
Stockholder Engagement & Results of Say-on-Pay Vote | 26 | |||
Key Elements of Our Executive Compensation Program | 27 | |||
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Compensation Committee Report | 36 | |||
Executive Compensation Tables | 37 | |||
Proxy Ratio Disclosure | 46 |
During Fiscal 2020, we achieved two quarters’ of quarter-over-quarter and year-over-year growth to close out the year and maintained our profitability while reinvesting in our business to successfully position our company for future growth. We grew our CAPS revenue, a key performance indicator, to 26% of non-GAAP revenues* as compared to 15% of non-GAAP revenues* in our prior fiscal year. In addition, consistent with our long-term capital allocation strategy, we made decisive moves to take advantage of market opportunities to improve our capital structure by repurchasing shares, paying down debt and extend debt maturities to improve shareholder value, enhance our financial flexibility and strengthen our balance sheet.
We made these advances while navigating the global coronavirus pandemic, during which almost all of our commercial operations were conducted virtually. Notwithstanding the challenges posed to our business by the pandemic, we maintained the financial metrics previously set for our Fiscal 2020 compensation program. In Fiscal 2020 our non-GAAP revenues* were $2,872 million on a constant currency basis, which was 99.2% of our annual operating plan and resulted in 88.5% achievement under the Annual Incentive Plan (“AIP”), and Adjusted EBITDA* was $710 million, which was 105% of our annual operating plan and resulted in 187.2% AIP achievement.
* | Non-GAAP revenue and Adjusted EBITDA are financial performance metrics that are not calculated and presented in |
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The annual cash retainer will be paid in arrears to thenon-employee directors as four quarterly payments of $18,750, beginning March 2019. The additional cash fees for serving as committee chairs will similarly be paid in arrears in four quarterly installments, beginning in March 2019. The meeting fees, if any, will be paid in arrears at the end of Fiscal 2019. RSUs granted in February and March 2019 were fully vested as of the grant date, with deferred settlement provisions similar to the 2018 awards, and it is expected that this design will be retained for future equity awards.
Non-Employee Director Share Ownership Guideline
Non-employee directors are expected to own shares equivalent to six times the value of the annual cash retainer for Board service (not the additional cash retainers for leadership positions). Until the guideline is achieved, the director must hold at least 50% of net shares received upon vesting of an award. As of the date of this filing, allnon-employee directors comply with these ownership guidelines.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
Fiscal 2018 was a year of transition for our Company. On January 19, 2017, we filed voluntary petitions for relief under Chapter 11, and, on the Emergence Date, we successfully emerged from Chapter 11 as a restructured company.
During the Chapter 11 proceedings, the compensation committee of our Board (the “Predecessor Compensation Committee”), comprised of John W. Marren (Committee Chair), Charles H. Giancarlo and Gary B. Smith, oversaw our executive compensation programs. During this time, the Predecessor Compensation Committee implemented executive compensation decisions with our major creditors and, where required, with the approval of the Chapter 11 bankruptcy court (the “Bankruptcy Court”).
The Company emerged from Chapter 11 with a newly established Board determined to lead our Company to a successful future and profitable growth. Following the Emergence Date, a new compensation committee of the Board was formed (the “Compensation Committee”), comprised of Scott D. Vogel (Committee Chair), Stephan Scholl and Ronald A. Rittenmeyer (who served through his resignation from the Board, effective April 30, 2018).
Key points of our Company’s performance in Fiscal 2018 are described under “Fiscal 2018 Performance at a Glance” above and more fully in our Form10-K that accompanies this Proxy Statement. As we stabilized our business following the Emergence Date and built the momentum and foundation to grow the business in Fiscal 2019, the Compensation Committee also transitioned our executive compensation program. As described below, the Compensation Committee made changes to the program following the Emergence Date that reflect our industry fundamentals, operating environment and results, enhance the incentive and retentive elements of the program, and create greater alignment with best practices and stockholders’ interests.
Fiscal 2018Fiscal 2020 Named Executive Officers
Fiscal 2020 Named Executive Officers
This Compensation Discussion and Analysis (the “CD&A”) explains the key elements of the compensation of our Company’s named executive officers (“NEOs”)NEOs and describes the objectives and principles underlying our Company’s executive compensation program for Fiscal 2018.2020. For Fiscal 2018,2020, our NEOs were:
Name | Title as of September 30, | |
James M. Chirico, Jr. | President and | |
Kieran McGrath | ||
Anthony Bartolo(1) | ||
Shefali Shah | Executive Vice President, General Counsel and Chief Administrative Officer | |
Stephen Spears(2) | ||
(1) | Mr. |
(2) | Mr. |
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Effective February 15, 2019, the Company appointed Kieran J. McGrath as the Company’s Senior Vice President and Chief Financial Officer.
Compensation Decisions
It is important to understand the distinction between the compensation decisions made by a combination of our Predecessor Compensation Committee, our major creditors and, in certain circumstances, the Bankruptcy Court during our Chapter 11 proceeding and the enhancements approved by the Compensation Committee following the Emergence Date. The chart below summarizes the major Fiscal 2018 executive compensation elements designed or implemented during the tenure of each of the Predecessor Compensation Committee and the Compensation Committee:
Element | ||||
Base | ||||
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• Focus executives’ attention on annual financial, operational, and
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| Variable Pay: Equity -50% RSUs -50% performance-based restricted stock units (“ | |||
| • Directly align executive pay with long-term stockholder value • Focus executives on long-term performance goals • Retain executives |
Stockholder Engagement & Results of Say-on-Pay Vote
It is Avaya’s practice to engage with our investors on a regular basis to consistently keep open dialogue about our business, prospects and performance. We typically meet with over 300 investors each year as part of our investor relations program and with our top 25 active stockholders each quarter. During Fiscal 2020, our investor relations team participated in nineteen conference events and responded to numerous inbound requests for information and input. We believe these interactions allow for a productive exchange of ideas between management and our stockholders. Our investor relations team discusses with our stockholders any subject they wish to raise, subject to the limitations of applicable securities law, including matters of capital allocation and financing activities, strategy, environmental, social and corporate governance (“ESG”) and executive compensation.
Based on stockholder feedback, we believe these engagement efforts, as well as actions taken after our “Say-on-Pay” advisory vote at our 2019 Annual Meeting, were well received by our stockholders.
At our 2020 Annual Meeting, we held a “Say-on-Pay” advisory vote on the executive compensation program of the named executive officers for Fiscal 2019. We were pleased that approximately 93% of stockholder votes cast were in favor of our executive compensation program for Fiscal 2019. We believe this strong support recognized the actions which the Board and senior management took to address stockholder concerns regarding our executive compensation program following the disappointing results of the Say-on-Pay advisory vote held at our 2019 Annual Meeting. The Compensation Committee and stockholders (as seen by the high support for last year’s Say-on Pay vote) believe that the changes which were made in Fiscal 2019 enhanced our executive compensation practices and help align executive compensation with our Company’s business and strategic objectives, as well as support long-term stockholder value creation.
The Compensation Committee continues to evaluate its approach to executive compensation and will continue to consider the outcome of our Say-on-Pay
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Stockholder Engagement & Results of Say-on-Pay Vote | › | COMPENSATION DISCUSSION AND ANALYSIS |
votes when making future compensation decisions for the NEOs. We welcome input from our stockholders
on our compensation policies and compensation program at any time.
Key Elements of Our Executive Compensation ProgramsProgram
Fiscal 2018There were no changes to the base salaries from Fiscal 2019 for the Emergence NEOscontinuing NEOs. Base salaries for executives hired in Fiscal 2020 were established during the tenureset as a part of the Predecessor Compensation Committee prior toarm’s length negotiation of the Emergence Date. With respect to continuing NEOs, there was an increase to Mr. Chirico’s base salary to $1,250,000 from $750,000 effective with his being namedapplicable employment arrangements, taking into consideration our Presidentexecutive compensation principles and CEO, an increase to Mr. Glembocki’s base salary to $500,000 from $425,000 to better align withcompetitive market positioning and enhance internal equitability, and no change to Mr. Vellequette’s base salary.
Following the Emergence Date, the Fiscal 2018 base salaries for each of Messrs. Nalbandian and Di Palma were established as part of their employment offers upon joining the Company and Mr. Di Palma’s base salary was subsequently adjusted to $500,000 from $400,000 to recognize his assumption of increased responsibilities after joining the Company.
practices. The Fiscal 20182020 base salaries for the NEOs are set forth below:
Named Executive Officer | Fiscal | 2020 Base Salary ($) | |||||||||
James M. Chirico, Jr. | 1,250,000 | ||||||||||
| 650,000 | ||||||||||
| 650,000 | ||||||||||
| 600,000 | ||||||||||
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Short-Term Incentives & Other Bonuses
Sign-On Bonuses
Under the termsAnnual cash bonus opportunities for each NEO in respect of his Executive Employment Agreement that was negotiated among certain Company creditors,Fiscal 2020 were 100% based on achievement of performance goals. Mr. Spears, who joined the Company and Mr. Chirico and approved by the Bankruptcy Court, Mr. Chiricoon September 15, 2020, was entitled tonot eligible for asign-on bonus in connection with his promotion to President and CEO. Each newly-hired NEO also was entitled to asign-on bonus as described in greater detail in the footnotes to the Summary Compensation Table.
All of thesesign-on bonuses were paid in Fiscal 2018. Other than with respect to the CEO, thesesign-on bonuses were made subject to clawback upon voluntary termination or termination for cause within one year following the executive’s hire date. Under the CEO’s Executive Employment Agreement, thesign-on bonus clawback lapses on October 1, 2019.
One-Time Emergence Bonus Awards
As noted above, the Company successfully emerged from Chapter 11 proceedings within a single calendar year. The Company’s size, global operations and numerous stakeholders resulted in a relatively complex restructuring in Chapter 11. The Company’s timely emergence from Chapter 11 was primarily driven by the extraordinary efforts of our employees. Following the Emergence Date, the Compensation Committee approvedone-time2020 annual cash bonus awards to the following NEOs as recognition for their extraordinary contributions to this success: $250,000 to Mr. Chirico, $25,000 to Mr. O’Malley and $20,000 to Mr. Glembocki.
Annual Incentive Planbonus.
The Company’s updatedBoard-approved Fiscal 20182020 financial plans were approved by the Board in March 2018 andplan served as the basis for the EAIP,AIP, our annual cash incentive plan, as approved by the Compensation Committee. The EAIPAIP was designed to reward ourdrive the Company’s objective of profitable, revenue growth in Fiscal 2020. The funding for NEO bonuses under the AIP was determined based on
Fiscal 2020 non-GAAP revenue* (measured in constant currency) (70%) and Adjusted EBITDA* (30%) for the NEOs for stabilizing revenue while maintaining profitability with performanceother than Mr. Chirico (whose AIP opportunity was also based on the CAPS metrics, as described below) each as measured against equally weighted goals forpre-established threshold, target and maximum levels as shown in the tables below:
Non-GAAP Revenue * (measured in constant currency using the exchange rate in effect on September 30, 2019) | ||||
Threshold | $2,750 million | |||
Target | $2,895 million | |||
Max | $3,040 million | |||
Actual: | $2,872 million |
Adjusted EBITDA * | ||||
Threshold | $637 million | |||
Target | $680 million | |||
Max | $714 million | |||
Actual: | $710 million |
* | Non-GAAP revenue and Adjusted EBITDA are financial performance metrics that are not calculated and presented in accordance with GAAP. See the “Reconciliation of GAAP to non-GAAP (Adjusted) Financial Measures” in Annex A at the end of this Proxy Statement for additional discussion of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measure, as well as information on the calculation of constant currency. |
The Compensation Committee approved non-GAAP revenue* and Adjusted EBITDA,EBITDA* goals that were lower than actual levels of achievement for Fiscal 2019 as describeda result of contemplated investments in
go-to-market motions, cloud development and processing capabilities to accelerate the Company’s transition to a cloud and subscription as a service company. The Compensation Committee believes
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COMPENSATION DISCUSSION AND ANALYSIS | › | Key Elements of our Executive Compensation Program |
growth in the ReconciliationCompany’s cloud offerings, including the Company’s Contact Center as a service (CCaaS) solution, will drive sustainable, long-term value creation.
The bonus payout opportunity under the AIP for Messrs. McGrath and Bartolo and Ms. Shah was based 100% on the corporate financial goals set forth above and for each of GAAP tonon-GAAP (Adjusted) Financial Measures atthem the endtarget and maximum bonus opportunities were 100% of this Proxy Statement.
Pursuant to the termsbase salary, prorated as applicable for time in service in that position, and 200% of the CEO’s Executive Employment Agreement, that bonus target, respectively.
Mr. Chirico’s Fiscal 2018 target bonus opportunity under EAIP was 200%150% of his base salary and his maximum bonus opportunity was 125%200% of target, or 250%that bonus target. Mr. Chirico’s annual bonus was based (i) 50% on the corporate financial goals under the AIP described above and (ii) 50% on the Company’s achievement of base salary.its Cloud and Alliance Partner and Subscription (“CAPS”) metric. The Fiscal 2018 target bonus opportunitiesCAPS metric was designed to track high value revenue and serve as a relevant measure for the other NEOs were 100% of base salaryCompany’s transformation to a cloud and SaaS company. CAPS achievement was measured against pre-established threshold, target and maximum opportunities were 200% of target, or 200% of salary.levels as shown in the table below:
CAPS Revenue | ||||
Threshold | $450.9 million | |||
Target | $501.0 million | |||
Max | $551.1 million | |||
Actual: | $762.0 million |
The CEO’s Executive Employment Agreementtable below presents the achievements under the AIP and the employment terms forCAPS metric and the otherresulting payouts to our NEOs (other thanin respect of Fiscal 2020 (as further detailed in the Summary Compensation Table):
Corporate Financial Metrics
| CAPS
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Named Executive Officer | Non-GAAP Revenue Growth Attainment | % Earned | Adjusted EBITDA Attainment | % Earned | CAPS Revenue Attainment | % Earned | Total % of Target Bonus Earned | Actual AIP Earned | ||||||||||||||||||||||||||||||||
James M. Chirico, Jr. | $ | 2,872 million | 1 | 88.5 | % | $ | 710 million | 187.2 | % | $ | 762 million | 200 | % | 159 | % | $ | 2,982,281 |
1 | Measured in constant currency using the exchange rate in effect on September 30, 2020. |
Corporate Financial Metrics
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Named Executive Officer | Non-GAAP Revenue Growth Attainment | % Earned | Adjusted EBITDA Attainment | % Earned | Total % of Target Bonus Earned | Actual AIP Earned | ||||||||||||||||||||||||
Kieran McGrath | $ | 2,872 million | 1 | 88.5 | % | $ | 710 million | 187.2 | % | 118 | % | $ | 767,715 | |||||||||||||||||
Anthony Bartolo | $ | 2,872 million | 1 | 88.5 | % | $ | 710 million | 187.2 | % | 118 | % | $ | 767,715 | |||||||||||||||||
Shefali Shah | $ | 2,872 million | 1 | 88.5 | % | $ | 710 million | 187.2 | % | 118 | % | $ | 708,660 |
1 | Measured in constant currency using the exchange rate in effect on September 30, 2019. |
In connection with his hire, Mr. Vellequette) includedBartolo received a one-time sign-on bonus of $650,000.
In connection with his hire in September 2020, Mr. Spears received a one-time sign-on bonus of $750,000 and was guaranteed payment of 100% of target weighted for each financial metric to encourage retention and provide a level of certainty during what was expected to be a year of transition following emergence from Chapter 11. There are no guaranteesan annual bonus with respect to bonusesFiscal 2021 of at least 125% of his target
bonus, assuming continued employment through the regular bonus payment date. No bonus guarantees exist beyond Mr. Spears’ first full fiscal year of employment.
Upon a termination for cause or a voluntary termination prior to continuing NEOs for Fiscal 2019. The Company does not intend to provide guaranteed bonuses in the future, except in extraordinary circumstances.
The Company’s Fiscal 2018 revenue performance supported payments at the maximum level for that metric under the EAIP. Primarily as a resultfirst anniversary of the strategic investments made in Fiscal 2018 noted above that are expectedhire date, as applicable, each of these sign-on bonuses
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Key Elements of our Executive Compensation Program | › | COMPENSATION DISCUSSION AND ANALYSIS |
must be repaid to further enhance the Company’s future growth and success, the Company’s Adjusted EBITDA level did not achieve the threshold for payout against that metric. All awards areCompany, pro-rated based on numbercompleted months of daysemployment. When approving the hiring bonuses for Messrs. Bartolo and Spears, the Compensation Committee took into consideration potential payments forgone by each NEO was employed byexecutive when joining Avaya.
Fiscal 2020 Equity Awards
In Fiscal 2020, the Company.
Summarizedequity awards to the CEO and the other NEOs continuing from Fiscal 2019 (Mr. McGrath and Ms. Shah) were 50% performance-based and 50% time-based in the table below areform of RSUs under the weightingsAvaya Holdings Corp. 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”).
In connection with his hire in Fiscal 2020, Mr. Bartolo received stock options and actual results for each performance metric:
Performance Metric | Weighting | Threshold ($M) | Target ($M) | Maximum ($M) | Fiscal 2018 Results ($M) | Achievement (% of Weighted Target) | ||||||||||||||||||
Pre-AIP Adjusted EBITDA | 50.0 | % | 814 | 814 | 867 | 779 | 0 | % | ||||||||||||||||
Revenue | 50.0 | % | 2,950 | 2,950 | 3,050 | 3,049.5 | 200 | % |
Each NEOtime-based RSUs under the Avaya Holdings Corp. 2019 Omnibus Inducement Equity Plan (the “Inducement Plan”). He also received paymentan annual award consistent with the awards granted to the CEO and the other NEOs continuing from Fiscal 2019 consisting of 50% performance-based and 50% time-based in the form of such NEO’s Fiscal 2018 guaranteed bonus amount in May 2018 and the remaining 50% of the fiscal guaranteed bonus amount and the additional amounts payable with respect to revenue overachievement as set forth below will be paid in January 2019. For Fiscal 2019, NEO bonuses will be determined based on an EAIP described in greater detail below and will be paid annually.
Named Executive Officer | Annual Base ($) | Target Incentive (%) | Annual Target Incentive ($) | FY18 Guaranteed Incentive Award ($) | Additional Payment: Revenue Metric ($) | Total FY18 EAIP Award ($) | ||||||||||||||||||
James M. Chirico, Jr | 1,250,000 | 200 | % | 2,500,000 | 2,500,000 | 312,500 | 2,812,500 | |||||||||||||||||
Patrick J. O’Malley III | 650,000 | 100 | % | 650,000 | 650,000 | 304,521 | 954,521 | |||||||||||||||||
Shefali Shah | 600,000 | 100 | % | 600,000 | 600,000 | 235,068 | 835,068 | |||||||||||||||||
Edward Nalbandian | 500,000 | 100 | % | 500,000 | 291,667 | 85,103 | 376,770 | |||||||||||||||||
Dino Di Palma | 500,000 | 100 | % | 500,000 | 158,333 | 26,895 | 185,228 |
Equity Awards
Cancellation ofpre-Emergence Equity Awards
All outstanding equity awards held by our NEOs that were granted prior to January 15, 2017 were cancelled without payment effective upon the Emergence Date.
Incentive Equity Awards
Emergence Equity Awards, consisting of restricted stock units (“RSUs”) andnon-qualified options, were madeRSUs under the 2017 Equity Incentive Plan.
In connection with his hire in Fiscal 2020, Mr. Spears received a hiring award of time-based RSUs under the Avaya Holdings Corp. 2019 Equity Incentive Plan to selected employees including the Emergence NEOs. In addition,(the “2019 Equity Incentive Plan”). The time-based RSUs and options were granted to other NEOs who joined the Company following the Emergence Date. Each of these equity awards generally vest as toone-third of the underlying shares on the first anniversary of the grant date and then in equal, quarterly incrementsinstallments over the next two years, subject to continued employment.
TheseThe PRSU awards were inducements to retain existing executives and to recruit new hires during our first year of transition following emergence from Chapter 11. In May 2018, the Compensation Committee revised the terms and conditions of the form of equity award agreements to be utilized for future awards to eliminate any accelerated vesting of such awards upon a termination of employment that does not occur in connection with a Change in Control (“CIC”) transaction.
Fiscal 2019 Compensation Actions
The Compensation Committee approved the Fiscal 2019 executive compensation structure for the NEOs in the first quarter of Fiscal 2019. There were no changes made to the Fiscal 2018 base salaries or target bonus opportunities for the NEOs for Fiscal 2019.
Consistent with the Company’s key objective of achieving revenue growth in Fiscal 2019, the Compensation Committee approved a Fiscal 2019 EAIP with funding determined by Fiscal 2019 revenue against established threshold, target and maximum levels; and further subject to achievement of a minimum level of Adjusted EBITDA. The CEO’s award under the Fiscal 2019 EAIP will be based solely on financial performance. Awards will be allocated to the other NEOs based 80% on financial performance results and 20% on achievement of individual performance objectives (MBOs), as determined by the Compensation Committee.
The structure, terms and grant date value of the equity awards made to the NEOs in Fiscal 2018 are not indicative of the expected structure, terms and grant date value of such awards to be made as part of our ongoing annual compensation program. In February 2019, the Compensation Committee approved the first ordinary course annual post-emergence equity grants to certain of the NEOs other than the CEO, which consisted of a mix of time-based and performance-based RSUs with a grant date value that was in line with annual equity award values made by our Compensation Peer Group. Taking into account the size and structure of the CEO’s Emergence Equity Award, the CEO’s fiscal 2019 equity award consisted solely of performance-based RSUs. The following NEOs received equity awards as detailed below.
Named Executive Officer(1) | FY19 RSU Award ($) | FY19 PRSU Award ($) | Total FY19 Equity Award ($) | |||||||||
James M. Chirico, Jr | — | 3,000,000 | 3,000,000 | |||||||||
Patrick J. O’Malley III | 375,000 | 375,000 | 750,000 | |||||||||
Shefali Shah | 625,000 | 625,000 | 1,250,000 | |||||||||
Edward Nalbandian | 375,000 | 375,000 | 750,000 |
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The CEO’s Fiscal 2019 award consisted solely of performance restricted stock units (each, a “PRSU”below (the “FY2020 PRSUs”) which will be earned if and when the average closing price of one share of Common Stock for 60 consecutive days during the three-year period beginning on February 11, 2019 and ending February 11, 2022 equals or exceeds $23.50. If earned, these PRSUs will not be settled until the third anniversary of the grant date, subject to satisfaction of the service-based vesting requirements set forth in the CEO’s PRSU award agreement.
Messrs. O’Malley and Nalbandian and Ms. Shah received equity grants consisting of (i) 50% RSUs which generally vest as toone-third of the underlying shares on the first anniversary of the grant date and then in equal,
quarterly increments over the next two years, subject to continued employment, and (ii) 50% PRSUs described below. The recipients of these PRSUs are eligible to earn, with respect to each separately measured performance period, between0%-150% of 1/3rd of the total number of target PRSUs granted, based on the Company’s level of achievement of Adjusted EBITDA as compared to the
is achieved against pre-established threshold, target, and maximum levels applicable toestablished for each performance period. Theof the three separate fiscal years included in the total performance period is three years, consisting of(i.e., fiscal years 2019, 2020, 2021 and 2021. Any2022). The applicable threshold, target and maximum levels for each fiscal year were established at the beginning of the total three-year performance period based on our current strategic plan. With respect to each fiscal year within the total three-year performance period, FY2020 PRSUs are eligible to be earned PRSUs willin respect of performance achieved as follows: 0% below threshold, 50% at threshold, 100% at target, and 150% at maximum level, with points in between being linearly interpolated; provided, that the Compensation Committee has the discretion to equitably adjust Adjusted EBITDA for any performance year to reflect the impact of special or non-recurring events not be settled until the third anniversaryknown as of the grant date subjectin order to satisfactionprevent the enlargement or dilution of benefits under the service-based vesting requirements set forth inaward. At the PRSU award agreements. Any PRSUs earned based on Adjusted EBITDA achievement will be subject to possible adjustment upward or downward (by +/- 25%) based on the Company’s total shareholder return (“TSR”) relative to the other entities in the TSR Index (as defined in the PRSU award agreements), as measured from the February 11, 2019 grant date through the last dayend of the total three-year performance period.period, the percentage of FY2020 PRSUs eligible to vest may be adjusted up or down by 25% based on a relative Total Shareholder Return (“TSR”) modifier using the Russell 2000 Index in effect on the date of grant for achievement in the top or bottom quartile, respectively, and no change for achievement in the second or third quartile. If at the end of the TSR measurementtotal three-year performance period the Company’s absolute TSR is negative, then no more than the totaltarget number of targetFY2020 PRSUs granted will be eligible to vest. Earned FY2020 PRSUs will not be settled for the recipients until the end of the applicable three-year performance period, subject to satisfaction of service-based vesting requirements set forth in the applicable award agreement.
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COMPENSATION DISCUSSION AND ANALYSIS | › | Key Elements of our Executive Compensation Program |
In Fiscal 2020, the NEOs received equity awards in respect of the underlying shares of the Company’s common stock with grant date fair values detailed below that have been approximated and therefore differ slightly from those set forth in the Summary Compensation Table. It is important to note that the values shown below represent target opportunities, meaning that these amounts represent the “target” levels of compensation that may be earned in the
future based on the value of the underlying shares, and are not actual earned amounts. The amounts actually earned (if any) will be determined on the date(s) on which the awards actually vest, based on continued employment and be settled.
The termsperformance against the performance goals (if applicable) as described below. For more information on grants to the NEOs during Fiscal 2020, see “Executive Compensation — Grants of these Plan-Based Awards in Fiscal 2020.”
Named Executive Officer | RSU Award as of Grant Date ($) | Common Stock Underlying RSU Award (#) | Option Award as of Grant Date ($) | Common Stock Underlying Option Award (#) | PRSU Award Opportunity as of Grant Date ($) | Common Stock Underlying PRSU Award (#) | Total Equity Award Opportunity as of Grant Date ($) | Common Stock Underlying Total Equity Award (#) | ||||||||||||||||||||
James M. Chirico, Jr.(1) | $ | 3,228,239 | 253,593 | $ | 3,228,239 | 253,593 | $6,456,478 | 507,186 | ||||||||||||||||||||
Kieran McGrath(1) | $ | 875,000 | 73,964 | $ | 875,000 | 73,964 | $1,750,000 | 147,928 | ||||||||||||||||||||
Anthony Bartolo(2) | $ | 2,000,000 | 175,746 | $ | 1,000,000 | 163,666 | $ | 1,000,000 | 87,873 | $4,000,000 | 427,285 | |||||||||||||||||
Shefali Shah(1) | $ | 625,000 | 52,832 | $ | 625,000 | 52,831 | $1,250,000 | 105,663 | ||||||||||||||||||||
Stephen Spears(3) | $ | 2,800,000 | 188,552 | $2,800,000 | 188,552 |
(1) | These awards were granted under the 2017 Equity Incentive Plan. |
(2) | 87,873 RSUs and the options listed above were granted under the Inducement Plan; 87,873 RSUs and the PRSUs listed above were granted under the 2017 Equity Incentive Plan. |
(3) | These awards were granted under the 2019 Equity Incentive Plan. |
Fiscal 2019 equity grants are more fullyPRSUs
Ms. Shah received PRSUs in Fiscal 2019 (the “FY2019 PRSUs”) with substantially the same design as the FY2020 PRSUs described above except that 75% of the PRSUs may be earned in respect of performance at the threshold level. In Fiscal 2019, our CEO received a PRSU award (the “CEO FY2019 PRSU”) which will be earned if the average closing
price of the Company’s Common Stock equals or exceeds $23.50 for 60 consecutive days within three years of the February 11, 2019 grant date (representing appreciation in the respective award agreements filed as exhibits tostock price of more than 50% from the Company’s Quarterly Report on Form10-Q for the quarters ended June 30, 2018 and December 31, 2018.
In connection with his hire, Mr. McGrath’s Fiscal 2019 base salary will be $650,000 and his Fiscal 2019 target bonus opportunity will be 100%date of base salary, with a maximum opportunity of 200% of base salary. In addition, he will receive a monthly housing allowance of $3,000, which arrangement will be reviewed after eighteen months. Mr. McGrath received RSUs pursuant to the 2017 Equity Incentive Plan with a fair market grant date value of $4,000,000. These RSUs will vest 33.33% on the first anniversary of the grant date, and 8.33% quarterly thereafter over the next two years,grant), subject to Mr. McGrath’s employment withChirico’s continued employment.
Fiscal 2020 Performance – Fiscal 2019 PRSUs and Fiscal 2020 PRSUs
At the end of Fiscal 2020, the CEO FY2019 PRSU stock price goal had not yet been achieved.
For purposes of the FY2020 PRSUs and the FY2019 PRSUs, Fiscal 2020 Adjusted EBITDA was $710 million, which was above the “maximum” level of Adjusted EBITDA for the FY2020 PRSUs and below
the “threshold” level of Adjusted EBITDA for the FY2019 PRSUs. As such, as a result of Fiscal 2020 performance as detailed below, 150% of the tranche of FY2020 PRSUs attributable to Fiscal 2020 performance, and 0% of the tranche of the Fiscal 2019 PRSUs attributable to Fiscal 2020 performance, remain eligible for vesting:
Fiscal 2020 Adjusted EBITDA (in millions) | Fiscal Adjusted (in
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PRSU Awards | Threshold | Target | Maximum | ||||||||||||||||||||||
FY2019 PRSUs (Year 2) | $740 | $781 | $822 | $710 | 0% | ||||||||||||||||||||
FY2020 PRSUs (Year 1) | $632 | $680 | $707 | $710 | 150% |
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| 2021 Proxy Statement |
Determination of NEO Compensation | › | COMPENSATION DISCUSSION AND ANALYSIS |
Goals for each PRSU award are aligned to our strategic plan at the time the award is granted, and performance for each fiscal year in the three-year performance period is measured independently. The Adjusted EBITDA goal pertaining to Fiscal 2020 was lower for the FY2020 PRSU award than for the FY2019 PRSU award to reflect changes in our plan to
account for investments by the Company onto accelerate its transition to a cloud and subscription as a service company designed to create sustainable, long-term value creation. No adjustments were made to incentive goals for either cycle after the applicable vesting date. Mr. McGrath also received aawards were granted.
sign-on bonus of $650,000, which was paid in March 2019, and he will participate in the Separation Plan and the CIC Plan (described below).
Determination of NEO Compensation
Our executive compensation principles reflect the following core beliefs:
Pay-for-performance;Pay-for-performance
Annual incentives tied to the successful achievement of challengingpre-established financial andnon-financial operating goals that support our annual business plans; andplans
Long-term incentives that provide opportunities for executives to earn equity compensation for multi-year employment retention and achieving challenging financial and strategic goals that drive our longer-term stockholder value, while aligning the interests of senior executives with stockholders through Company ownership.ownership
The Company’s executive compensation program is governed by the Compensation Committee with the support of management and the Compensation Committee’s independent compensation consultant.
Summarized below are roles and responsibilities of the parties that participate in development of the Company’s executive compensation program.
The Compensation Committee is responsible for overseeing our executive compensation program. The Compensation Committeeprogram with responsibilities are set forth in its charter, including:
Developing our executive compensation philosophy;
Approving base salaries, shortshort-term and long-term programs and opportunities for senior executives;
Assessing performance and approving earned incentives for senior executives;
Approving long-term incentive grants, including performance goals and award terms;
Approving severance programs for senior executives and executive participation;
Approving policies and practices that mitigate compensation-related risks to the Company; and
Producing a compensation committeeCompensation Committee report to be included in the Company’s annual proxy statement or annual report on Form10-K.
TheOur CEO reviews the performance of the other NEOs and makes recommendations to the Compensation Committee on their base salariessalary and short- and long-term opportunities. TheOur CEO does not provide input regarding his own compensation. Our human resources team also supports the Compensation Committee in the design, implementation and administration of our compensation program.
Independent Compensation Consultants
Pursuant to its charter, the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other advisor and is directly responsible for the appointment, compensation arrangements and oversight of the work of any such person. Any such engagement may only be made after taking into consideration of all factors relevant to that person’s independence from management and the Company.Company, as outlined in the applicable NYSE rules. For Fiscal 2018,2020, the Compensation Committee engagedcontinued to engage an independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), after assessing its independence in accordance with applicable NYSE rules. FW Cook does not provide any other services to us and its work in support of the Compensation Committee did not raise any conflicts of interest or independence concerns. FW Cook provides the Compensation Committee with competitive market data, assistance on evaluation of the peer group composition, input to incentive program design and information on relevant market trends.
Competitive Market Information
Talent for senior-level management positions and key roles in the organization can be acquired across a spectrum of high-tech and software companies. As
| 2021 Proxy Statement | 31 |
COMPENSATION DISCUSSION AND ANALYSIS | › | Determination of NEO Compensation |
such, we utilize competitive compensation information from both high-tech and software company compensation surveys, as well as from a group of companies of similar size and/or complexity (the “Compensation Peer Group”), in the following ways:
As an input in developing base-salary ranges, short- and long-term equity award ranges;ranges
To evaluate share utilization by reviewing overhang levels and annual run rates;rates
To evaluate the form and mix of equity awarded to NEOs;NEOs
To evaluate share ownership guidelines;guidelines
To assess the competitiveness of total direct compensation awarded to NEOs; andNEOs
As an input in designing compensation plans, benefits and perquisites.perquisites
In addition to the Compensation Peer Group, the Compensation Committee also reviews pay data from the Radford Global Compensation Survey, with a focus on technology companies of a comparable revenue size to our Company. The survey data provides a significant sample size, includes information for management positions below senior executives, and is used to supplement the pay data from the Compensation Peer Group. While the Compensation Committee examines executive compensation data from surveys and the Compensation Peer Group, competitive compensation information is not the sole factor in its decision-making process.
The Compensation Peer Group for the first half of Fiscal 2018 was2020 and Fiscal 2021 were approved by the Predecessor Compensation Committee in August 2017May 2019 and used during Chapter 11 in conjunction with employment offers made to incoming
NEOs. In May 2018, the Compensation Committee conducted2020, respectively, following an assessment of our Compensation Peer Group with guidance from FW Cook. For Fiscal 2019, due to size, Adobe, Intuit and VMware were2021, one company was removed and BlackBerry, LogMeln, NCR and Verint Systems wereone was added. The peer group changes were made to address peer group activity (removal of LogMein in anticipation of its buyout by private equity firms, which occurred in September 2020) and to maintain a balanced sample (addition of CDK Global). The revised Compensation Peer Group of 16fifteen companies washas been used in the second half offor Fiscal 20182021 compensation planning and will be used in Fiscal 2019.
The following table shows the chronology of these peer group changes:actions.
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Fiscal 2018 Executive Compensation Policies and Practices
The executive compensation program is governed by the Compensation Committee with the support of Company management and the independent compensation consultant. The following are characteristics of the program that demonstrate strong governance of the program:
Executive Compensation Practices
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Our NEOs are eligible to participate in benefit plans of the Company that are made available to the Company’s employees generally, including a 401(k) plan.plan and an employee stock purchase plan (the
“ESPP”). Under the 401(k) plan, for 2018, beginning with the second quarter of Fiscal 2018, the Company matched 50% of employee contributions up to 5% of eligible pay. In 2017, includingPursuant to the first quarterESPP, eligible employees are able to purchase shares of Fiscal 2018,Company Common Stock through periodic payroll deductions at a discount from the previous match metrics forthen-current market price.
32 |
| 2021 Proxy Statement |
Determination of NEO Compensation | › | COMPENSATION DISCUSSION AND ANALYSIS |
Other than the 401(k) plan were not met, and no match funding was contributed.
Perquisites
Thelimited perquisites noted below, the Company generally does not grant perquisites to the NEOs that are different from the perquisites available to all Company employees generally, other than a $15,000employees. NEOs are entitled to the following perquisites:
An annual stipend paid to each NEO annually ($20,000 paid to our CEO and $15,000 to the CEO)other NEOs) to offset financial counseling fees incurred by such NEO. We believe the benefits we receive from providing this perquisite significantly outweighs its cost.
Commencing with the January 2019
In each of calendar year NEOs will be entitled to participate in2019 and 2020, an executive physical program was available to NEOs, to ensure management team continuity and planning.
planning. This program was discontinued in calendar year 2021. |
From October 2019 to March 2020, Mr. McGrath received a housing allowance to help defray the costs associated with regular travel from his office location to his residence.
In connection with his hire, Mr. Bartolo received a one-time reimbursement of relocation expenses of $93,352.
The Committee reviews executive benefits and perquisites on an annual basis.
Following the Emergence Date,In fiscal 2018, the Compensation Committee approved share ownership guidelines for our NEOs, which are designed to align their long-term financial interests with those of our stockholders.stockholders by increasing stock ownership levels. The NEO share ownership guidelines are as follows:
Role | Value of Common Stock to be Owned | |
CEO | 6 times base salary | |
Other NEOs | 2 times base salary |
If aan NEO doesis not meetin compliance with his or her ownership guideline, such NEO must retain at least 50% of the net shares received as the result of the exercise, vesting or payment of any equity award after any selling or withholding of stock to pay taxes associated with vesting until the ownership guideline is met. As of the dateend of this filing,Fiscal 2020, all currently employed NEOs complywere in compliance with thesetheir applicable ownership guidelines.guideline. The Compensation Committee is responsible for the administration of the share ownership guidelines, including granting any exceptions and addressing any failure to meet or show sustained progress to meet the ownership guidelines.
Prohibition on Hedging or Pledging of Company Stock
Our Insider Trading Policy prohibits our directors, executive officers, including our NEOs,Covered Individuals (and such individuals’ immediate family and certainnon-executives designated by our General Counsel,household members) from entering into hedging transactions involving our stock,securities. “Covered Individuals” means our (i) directors; (ii) officers who are designated as being subject to Section 16 of the Securities Exchange Act of 1934, as amended; and (iii) certain other officers and key employees of the Company designated by our General Counsel (which currently includes Senior Vice Presidents, Vice Presidents and Senior Directors, and individuals involved in the preparation of internal and external
financial reports and SEC reports). Covered Individuals (and such individuals’ immediate family and household members) are also prohibited from holding our stock in a margin account as collateral for a margin loan or otherwise pledging our stock as collateral for a loan.
The Board has adopted a compensation recoupment policy that provides the Board discretion to recover incentive compensation paid to current and former executives in the event of an accounting restatement triggered by our material noncompliance with any financial reporting requirement under the securities laws.
Each of the CICInvoluntary Separation Plan for Senior Executives (“Separation Plan”) and the SeparationChange in Control Severance Plan (“CIC Plan”), which are described later in this CD&A and were approved by the Compensation Committee in Fiscalfiscal 2018, are intended to provide transitional assistance to certain senior executives whose employment is involuntarily terminated by us (as described in more detail in the applicable plan).us. All currently employed NEOs other than our CEO are participants in the CIC Plan and the Separation Plan. TheOur CEO’s Executive Employment Agreement contains change in control provisions described later in this CD&A.
| 2021 Proxy Statement | 33 |
COMPENSATION DISCUSSION AND ANALYSIS | › | Determination of NEO Compensation |
The following table highlights the key plan provisions (certain terms used in the following table are defined in the respective plan):
Element | CEO Employment (CIC Related) | CEO Employment
| CIC Plan Provisions | Separation Plan | ||||
Cash Severance
| 3.0x | 2.0x | 1.5x | 1.0x | ||||
In-cycle bonus | Pro-rata target bonus | None | Pro-rata target bonus | None | ||||
Benefits Continuation | 18 months | 18 months | 18 months | 12 months | ||||
Equity acceleration | All equity awards will fully vest upon a qualifying termination | Acceleration pursuant to the applicable award agreement(s), as | Treatment of performance-based awards granted on or after February 11, 2019 will be governed by the terms of the applicable award agreement, summarized in | Acceleration pursuant to the applicable award agreement(s) as
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The CIC benefits provided in the Executive Employment Agreement provide for a potentialgross-up payment in connection with any excise taxes that are imposed under Section 280G/Section 4999 of the Code (referred to as the “Section 280Ggross-up”). The Section 280G/Section 4999 excise tax may be assessed by the Internal Revenue Service in connection with certain “excess parachute payments” that become payable in connection with a CIC. Given the variability of the calculations involved, the amount of any tax imposed will vary depending on factors such tenure with the Company and vesting/exercise of equity awards.
The Section 280Ggross-up was negotiated between Mr. Chirico and our major creditors in connection with the Chapter 11 proceedings and reflects the unique circumstances of the Company’s retention concerns during that time. The Company has not provided for Section 280Ggross-up payments for any other NEOs and does not intend to provide for any similar provisions in the future.
Treatment of Equity Awards upon Certain Terminations of Employment
Mr. Chirico
The table below summarizes the treatment for outstanding equity awards held by NEOs upon certain terminations of employment, including upon the occurrence of a change in control (a “CIC”), which terms are more fully described in the 2017 Equity Incentive Plan, the Inducement Plan or the 2019 Equity Incentive Plan, as applicable, and the applicable award agreements applicable to Mr. Chirico’s emergence awardagreements. The RSUs and stock options granted to Mr. Chirico and Ms. Shah when the Company emerged from Chapter 11 restructuring (“Emergence Awards”), which were negotiated among certain Company creditors and the Company and Mr. Chirico and approved by the Bankruptcy Court, provided for the accelerated vesting of 75% of the outstanding and unvested awards as of the date of his termination of employment, in the event he had been terminated without “cause”, upon death or disability, or if he resigned for “good reason” (an “Equity Award Qualifying Termination”), in each case,Chapter 11 bankruptcy court, fully vested on or prior to December 15, 2018. If any such termination occurs following December 15, 2018, Mr. Chirico will vest in either: (i) an additional portion of the awards such that 75% of the total number of awards granted under the applicable award agreement become vested, or (ii) apro-rata portion of the then-current vesting tranche of the awards (as provided for under the original vesting schedule), based on the number of days of his employment from the most31, 2020.
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| 2021 Proxy Statement |
Determination of NEO Compensation | › | COMPENSATION DISCUSSION AND ANALYSIS |
recent vesting date prior to the date of his termination until the next vesting date following the date of such termination, plus the awards that would have vested pursuant to the original vesting schedule in the first twelve (12) months immediately following the date of such termination, whichever of (i) or (ii) results in greater total vesting.
Equity Awards | Non-CIC Termination of Employment | CIC Termination of Employment | ||
CEO FY2019 PRSUs | Upon a termination prior to the end of the performance period by the Company without “cause” or resignation for “good reason” without a CIC, then, to the extent the applicable stock price goal has been achieved prior to the termination date, the CEO FY2019 PRSU will vest on a pro-rated basis. In connection with any other termination of employment or to the extent that the applicable stock price goal has not been achieved prior to the terminate date, the CEO FY2019 PRSUs will be forfeited upon termination. | If a CIC occurs prior to the end of the performance period and either (i) the stock price goal has been achieved, or (ii) the value of the consideration received by the Company’s stockholders (on a per share basis) equals or exceeds the stock price goal, then the CEO FY2019 PRSU will be treated in accordance with the CIC provisions under the 2017 Equity Incentive Plan that permit the awards to be assumed, substituted or accelerated in connection with the CIC, in the discretion of the Compensation Committee. Otherwise, the CEO FY2019 PRSUs will be cancelled in connection with a CIC. | ||
FY2019 PRSUs & FY2020 PRSUs | If a termination occurs prior to the vesting date, all awards are forfeited. | If a CIC occurs prior to the vesting date, then the PRSUs will be treated in accordance with the CIC provisions under the 2017 Equity Incentive Plan that permit the awards may be assumed, substituted or accelerated in connection with the CIC, in the discretion of the Compensation Committee. If PRSUs are converted into new awards following a CIC, and the recipient’s employment is terminated without Cause (other than death or Disability) or for Good Reason prior to vesting during a Potential Change in Control Period (as defined in the CIC Plan) or within 12 months of a CIC, then: • Earned units from a performance year ending prior to the termination date, vest immediately. • Units eligible to be earned in the year of the termination or any subsequent performance year, vest immediately at “target” level. | ||
RSUs and Options | If a CIC occurs prior to the applicable vesting date, the award will be treated in accordance with the CIC provisions under the 2017 Equity Incentive Plan, Inducement Plan or 2019 Equity Incentive Plan, as applicable that permit the awards to be assumed, substituted or accelerated in connection with the CIC, in the discretion of the Compensation Committee. If the awards are converted into new awards following a CIC and employment is terminated without Cause, for Good Reason or due to death or Disability within 24 months of a CIC, the award fully vests. |
As described in the chart above, if Mr. Chirico is terminated in one of the foregoing circumstances in connection with a CIC, all of his outstanding equity awards will vest.
| 2021 Proxy Statement | 35 |
Other NEOs
COMPENSATION DISCUSSION AND ANALYSIS | › | Determination of NEO Compensation |
Pursuant to the award agreements applicable to their emergence award RSUs and stock options, upon an Equity Award Qualifying Termination, the emergence awards held by Mr. O’Malley and Ms. Shah will vest as to the number of awards that would have otherwise vested in the 12 months following the termination date had he or she not been terminated.
Pursuant to the award agreements applicable to his RSUs and stock options, upon an Equity Award Qualifying Termination, the emergence awards held by Mr. Nalbandian will vest only to the extent the CEO determines to vest the balance of the outstanding and unvested awards held as of the termination date, which determination may be made following the NEO’s termination of employment and in consultation with the Board.
With respect to outstanding equity awards that were not granted as part of the NEOs’ emergence awards, such as those for Mr. Di Palma, upon any termination of employment (other than certain terminations of employment in connection with a CIC as described elsewhere in this CD&A), all unvested equity awards held by the NEO as of the applicable termination date will be forfeited.
Deductibility of Compensation Expenses
Under Section 162(m) of the Internal Revenue Code, (“Code”), certain compensation paid to a publicly-heldpublicly held company’s “covered employees” (as defined in Section 162(m) of the Code) that exceeds $1 million is generally not tax deductible. Historically, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code could be excluded from this $1 million deduction limit, but this exception was repealed pursuant to the Tax Cuts and Jobs Act, effective for taxable years beginning after December 31, 2017 (although transition relief may be
available for certainnon-binding contracts in place as of November 2, 2017).
In the past, both the PredecessorThe Compensation Committee and the Compensation Committee consideredconsiders the impact of Section 162(m) of the Code when designing and implementing incentive compensation plans. However, the Predecessor Compensation Committee believed, andplans, however, the Compensation Committee believes that the deductibility of compensation should not govern the design features of our executive compensation arrangements. As a result, certain compensation that is paid to our “covered employees” (as defined under Section 162(m)) exceeding $1 million is not expected to be deductible for federal income tax purposes.
RISK ASSESSMENT IN COMPENSATION PROGRAMS
The Compensation Committee periodically reviews our compensation programs for features that might encourage inappropriate risk-taking. The programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation. We believe our compensation programs encourage and reward prudent business judgment without encouraging undue risk.
In August 2018, management conducted, and2020, the Compensation Committee reviewed athe comprehensive global risk assessment
of our compensation policies and practices.practices conducted by management in Fiscal 2020. The risk assessment included a global inventory of incentive plans and programs and considered factors such as the plan metrics, number of participants, maximum payments and risk mitigation factors. Based on the review, the Compensation Committee believes our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the CD&A above with management. Based on such review and discussion, the Compensation Committee has recommended to the Board that the CD&A for Fiscal 2018 be included in this Proxy Statement.
MEMBERS OF THE COMPENSATION COMMITTEE:
Scott D. Vogel, Chair
Stephan Scholl
Jacqueline E. Yeaney
36 |
| 2021 Proxy Statement |
Executive Compensation Tables | › | COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE COMPENSATION TABLES
Fiscal 20182020 Summary Compensation Table
Name | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | Non- Equity Incent. Plan Comp. ($)(4) | All Other Comp. ($)(5) | Total ($) | ||||||||||||||||||||||||
James M. Chirico, Jr. President and | 2018 | 1,250,000 | 5,250,000 | 22,147,896 | 3,866,629 | 312,500 | 44,875 | 32,871,900 | ||||||||||||||||||||||||
2017 | 750,000 | 1,651,363 | 33,383 | 2,434,746 | ||||||||||||||||||||||||||||
2016 | 708,654 | 2,500,000 | 1,945,314 | 23,817 | 5,177,785 | |||||||||||||||||||||||||||
Patrick J. O’Malley III | 2018 | 611,632 | 975,000 | 3,691,324 | 644,442 | 304,521 | 32,280 | 6,259,199 | ||||||||||||||||||||||||
Shefali Shah | 2018 | 473,810 | 1,100,000 | 1,845,654 | 322,221 | 235,068 | 25,080 | 4,001,833 | ||||||||||||||||||||||||
Edward Nalbandian | 2018 | 291,667 | 591,667 | 1,823,250 | 298,200 | 85,103 | 12,178 | 3,102,065 | ||||||||||||||||||||||||
Dino Di Palma | 2018 | 162,500 | 358,333 | 1,925,905 | 230,790 | 26,895 | 5,945 | 2,710,368 | ||||||||||||||||||||||||
William Mercer Rowe Former SVP Cloud | 2018 | 445,015 | 1,100,000 | 1,845,654 | 322,221 | — | 1,225,955 | 4,938,845 | ||||||||||||||||||||||||
Jaroslaw Glembocki Former SVP Operations | 2018 | 375,000 | 270,000 | 1,661,096 | 290,001 | — | 1,281,160 | 3,877,257 | ||||||||||||||||||||||||
David Vellequette | 2018 | 169,901 | 216,450 | 672,945 | 1,059,296 | |||||||||||||||||||||||||||
2017 | 650,000 | 1,478,211 | 38,016 | 2,166,227 | ||||||||||||||||||||||||||||
2016 | 640,865 | 1,550,000 | 1,807,814 | 26,056 | 4,024,735 |
Name | Year | Salary(1) | Bonus(2) | Stock Awards(3) | Option Awards(3) | Non-Equity Incent. Plan Comp.(4) | All Other Comp.(5) | Total | ||||||||||||||||||||||||||||||||
James M. Chirico, Jr. President and Chief Executive Officer |
| 2020 | $ | 1,250,000 | $ | 6,879,978 | $ | 2,982,281 | $ | 46,365 | $ | 11,158,624 | ||||||||||||||||||||||||||||
| 2019 | $ | 1,250,000 | $ | 3,065,813 | $ | 46,240 | $ | 4,362,053 | |||||||||||||||||||||||||||||||
| 2018 | $ | 1,250,000 | $ | 5,250,000 | $ | 22,147,896 | $ | 3,866,629 | $ | 312,500 | $ | 44,875 | $ | 32,871,900 | |||||||||||||||||||||||||
Kieran McGrath EVP and Chief Financial Officer |
| 2020 | $ | 650,000 | $ | 1,857,976 | $ | 767,715 | $ | 58,078 | $ | 3,333,769 | ||||||||||||||||||||||||||||
| 2019 | $ | 435,689 | $ | 650,000 | $ | 3,999,985 | $ | 41,169 | $ | 5,126,843 | |||||||||||||||||||||||||||||
Anthony Bartolo EVP and Chief Product Officer |
| 2020 | $ | 529,356 | $ | 650,000 | $ | 3,114,219 | $ | 1,000,000 | $ | 767,715 | $ | 123,163 | $ | 6,184,453 | ||||||||||||||||||||||||
Shefali Shah EVP, General Counsel and CAO |
| 2020 | $ | 600,000 | $ | 1,327,127 | $ | 708,660 | $ | 22,113 | $ | 2,657,900 | ||||||||||||||||||||||||||||
| 2019 | $ | 600,000 | $ | 1,193,200 | $ | 30,375 | $ | 1,823,575 | |||||||||||||||||||||||||||||||
| 2018 | $ | 473,810 | $ | 1,100,000 | $ | 1,845,654 | $ | 322,221 | $ | 235,068 | $ | 25,080 | $ | 4,001,833 | |||||||||||||||||||||||||
Stephen Spears EVP and Chief Revenue Officer
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| 2020 | $ | 27,273 | $ | 750,000 | $ | 2,799,997 | $ | 3,577,270 | ||||||||||||||||||||||||||||||
(1) |
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(2) | For Fiscal 2020, amounts shown include sign-on bonus for Mr. Bartolo ($650,000) and Mr. Spears ($750,000). For Fiscal 2019, amounts shown include sign-on bonus for Mr. McGrath ($650,000). For fiscal 2018, for Mr. Chirico, includessign-on bonus ($2,500,000),one-time emergence bonus ($250,000) and guaranteed |
(3) | For Fiscal 2020, amounts represent equity grants of RSUs, PRSUs and Stock Options. For Messrs. Chirico and McGrath, and Ms. Shah, the grants consist of 50% RSUs and 50% PRSUs. For Mr. Bartolo, the grant consists of RSUs, PRSUs and Stock Options. For Mr. Spears, the grant consists solely of RSUs. For Fiscal 2020, the stock awards were granted on December 6, 2019 for Mr. McGrath and Ms. Shah, on December 9, 2019 for Mr. Bartolo, on December 23, 2019 for Mr. Chirico, and on September 15, 2020 for Mr. Spears. Amounts shown represent the aggregate grant date fair value of each award as calculated in accordance with ASC 718. The aggregate grant date value for awards subject to performance conditions are shown based on the probable outcome of the applicable performance criteria as of the grant date, which was “target” level achievement. Assuming maximum level of achievement, the grant date fair value of the PRSUs for each of Messrs. Chirico, McGrath and Bartolo, and Ms. Shah would have been $4,404,910, $1,186,013, $1,344,457 and $847,145, respectively. See Note |
(4) |
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Name | Year | Short-Term Cash Awards ($)(a) | Cash Long- Term Incentive ($)(b) | Key Employee Incentive Plan ($)(c) | Total ($) | |||||||||||||||
James M. Chirico, Jr. | 2018 | 312,500 | 312,500 | |||||||||||||||||
2017 | 460,938 | 1,190,425 | 1,651,363 | |||||||||||||||||
2016 | 281,250 | 976,564 | 687,500 | 1,945,314 | ||||||||||||||||
Patrick J. O’Malley III | 2018 | 304,521 | 304,521 | |||||||||||||||||
Shefali Shah | 2018 | 235,068 | 235,068 | |||||||||||||||||
Edward Nalbandian | 2018 | 85,103 | 85,103 | |||||||||||||||||
Dino Di Palma | 2018 | 26,895 | 26,895 | |||||||||||||||||
William Mercer Rowe | 2018 | — | — | |||||||||||||||||
Jaroslaw Glembocki | 2018 | — | — | |||||||||||||||||
David Vellequette | 2018 | 216,450 | 216,450 | |||||||||||||||||
2017 | 460,938 | 1,017,273 | 1,478,211 | |||||||||||||||||
2016 | 243,750 | 976,564 | 587,500 | 1,807,814 |
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(5) | The following table separately quantifies “all other compensation” amounts for Fiscal |
Name | Financial Counseling ($) | Life Insurance Premiums ($) | Life Insurance Imputed Income ($) | HSA Contribution ($) | 401(k) Company Match ($) | Severance ($) | Total ($) | |||||||||||||||||||||
James M. Chirico, Jr | 20,000 | 3,540 | 14,460 | 6,875 | 44,875 | |||||||||||||||||||||||
Patrick J. O’Malley III | 15,000 | 3,540 | 9,030 | 200 | 4,510 | 32,280 | ||||||||||||||||||||||
Shefali Shah | 15,000 | 2,380 | 2,700 | 5,000 | 25,080 | |||||||||||||||||||||||
Edward Nalbandian | 1,800 | 4,128 | 6,250 | 12,178 | ||||||||||||||||||||||||
Dino Di Palma | 1,440 | 1,380 | 3,125 | 5,945 | ||||||||||||||||||||||||
William Mercer Rowe | 15,000 | 2,380 | 1,700 | 6,875 | 1,200,000 | 1,225,955 | ||||||||||||||||||||||
Jaroslaw Glembocki | 15,000 | 2,634 | 8,839 | 4,687 | 1,250,000 | 1,281,160 | ||||||||||||||||||||||
David Vellequette | 15,000 | 3,140 | 4,620 | 185 | 650,000 | 672,945 |
Name | Financial Counseling | Life Insurance Premiums | Life Insurance Imputed Income | HSA Earned | 401(k) Company Match | Relocation | Housing Allowance | Total | ||||||||||||||||||||||||||||||||
James M. Chirico, Jr | $ | 20,000 | $ | 2,400 | $ | 15,840 | $ | 1,000 | $ | 7,125 | $ | 46,365 | ||||||||||||||||||||||||||||
Kieran McGrath | $ | 15,000 | $ | 2,200 | $ | 15,840 | $ | 7,038 | $ | 18,000 | $ | 58,078 | ||||||||||||||||||||||||||||
Anthony Bartolo | $ | 15,000 | $ | 2,000 | $ | 4,140 | $ | 500 | $ | 8,171 | $ | 93,352 | $ | 123,163 | ||||||||||||||||||||||||||
Shefali Shah | $ | 15,000 | $ | 645 | $ | 968 | $ | 500 | $ | 5,000 | $ | 22,113 | ||||||||||||||||||||||||||||
Stephen Spears |
| 2021 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS | › | Executive Compensation Tables |
Fiscal 20182020 Grants of Plan-Based Awards
Estimated Future Payouts under Non-Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units(2) | All Other Option Awards: Number of Securities Underlying Options(3) | Exercise or Base Price of Option Awards ($)(4) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||
James M. Chirico, Jr. | 10/1/2018 | (1) | 2,500,000 | 2,500,000 | 3,125,000 | |||||||||||||||||||||||||||
12/15/2017 | 1,460,943 | 22,147,896 | ||||||||||||||||||||||||||||||
12/15/2017 | 486,981 | 19.46 | 3,866,629 | |||||||||||||||||||||||||||||
Patrick J. O’Malley III | 10/23/2017 | (1) | 650,000 | 650,000 | 1,300,000 | |||||||||||||||||||||||||||
12/15/2017 | 243,491 | 3,691,324 | ||||||||||||||||||||||||||||||
12/15/2017 | 81,164 | 19.46 | 644,442 | |||||||||||||||||||||||||||||
Shefali Shah | 12/18/2017 | (1) | 600,000 | 600,000 | 1,200,000 | |||||||||||||||||||||||||||
12/15/2017 | 121,745 | 1,845,654 | ||||||||||||||||||||||||||||||
12/15/2017 | 40,582 | 19.46 | 322,221 | |||||||||||||||||||||||||||||
Edward Nalbandian | 3/1/2018 | (1) | 500,000 | 500,000 | 1,000,000 | |||||||||||||||||||||||||||
3/7/2018 | 85,000 | 1,823,250 | ||||||||||||||||||||||||||||||
3/7/2018 | 28,000 | 21.45 | 298,200 | |||||||||||||||||||||||||||||
Dino Di Palma | 5/29/2018 | (1) | 500,000 | 500,000 | 1,000,000 | |||||||||||||||||||||||||||
8/22/2018 | 64,000 | 1,425,920 | ||||||||||||||||||||||||||||||
8/22/2018 | 22,441 | 499,985 | ||||||||||||||||||||||||||||||
8/22/2018 | 21,000 | 22.28 | 230,790 | |||||||||||||||||||||||||||||
William Mercer Rowe | 12/18/2017 | (1) | 600,000 | 600,000 | 1,200,000 | |||||||||||||||||||||||||||
12/15/2017 | 121,745 | 1,845,654 | ||||||||||||||||||||||||||||||
12/15/2017 | 40,582 | 19.46 | 322,221 | |||||||||||||||||||||||||||||
Jaroslaw Glembocki | 10/1/2018 | (1) | 500,000 | 500,000 | 1,000,000 | |||||||||||||||||||||||||||
12/15/2017 | 109,571 | 1,661,096 | ||||||||||||||||||||||||||||||
12/15/2017 | 36,524 | 19.46 | 290,001 | |||||||||||||||||||||||||||||
David Vellequette | — | — |
Estimated Future Payouts under Non-Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units(2)(3) | All Other Option Awards: Number of Securities Underlying Options (#) |
Estimated Future Payouts under Equity Incentive Plan Awards(4) | Exercise or Base Price of Option Awards ($) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||||||||||||||||||||
James M. Chirico, Jr. | 10/1/2019 | (1) | $ | 468,750 | $ | 1,875,000 | $ | 3,750,000 | |||||||||||||||||||||||||||||||||||||||||||||||
12/23/2019 | 253,593 | $ | 3,228,239 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
12/23/2019 | $ | 1,829,673 | $ | 3,651,739 | $ | 4,404,910 | $ | 3,651,739 | |||||||||||||||||||||||||||||||||||||||||||||||
Kieran McGrath | 10/1/2019 | (1) | $ | 162,500 | $ | 650,000 | $ | 1,300,000 | |||||||||||||||||||||||||||||||||||||||||||||||
12/6/2019 | 73,964 | $ | 874,994 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | 492,600 | $ | 982,982 | $ | 1,186,013 | $ | 982,982 | ||||||||||||||||||||||||||||||||||||||||||||||||
Anthony Bartolo | 12/9/2019 | (1) | $ | 162,500 | $ | 650,000 | $ | 1,300,000 | |||||||||||||||||||||||||||||||||||||||||||||||
12/9/2019 | 163,666 | $ | 11.38 | $ | 999,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||
12/9/2019 | 87,873 | $ | 999,995 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
12/9/2019 | 87,873 | $ | 999,995 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
12/9/2019 | $ | 557,994 | $ | 1,114,230 | $ | 1,344,457 | $ | 1,114,230 | |||||||||||||||||||||||||||||||||||||||||||||||
Shefali Shah | 10/1/2019 | (1) | $ | 150,000 | $ | 600,000 | $ | 1,200,000 | |||||||||||||||||||||||||||||||||||||||||||||||
12/6/2019 | 52,832 | $ | 625,003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
12/6/2019 | $ | 351,854 | $ | 702,124 | $ | 847,145 | $ | 702,124 | |||||||||||||||||||||||||||||||||||||||||||||||
Stephen Spears | 9/15/2020 | (1) | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
9/15/2020 | 188,552 | $ | 2,799,997 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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(1) |
|
(2) | For Messrs. Chirico, |
(3) | For Mr. Spears, the RSU award vests 33.34% on the first anniversary of the grant date and 8.33% quarterly thereafter. |
|
(4) | Amounts shown |
(5) | Amounts shown represent the aggregate grant date fair value of each award as calculated in accordance with ASC 718. The aggregate grant date value for awards subject to performance conditions are shown based on the probable outcome of the applicable performance criteria as of the grant date, which was “target” level achievement. See Note |
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| 2021 Proxy Statement |
Executive Compensation Tables | › | COMPENSATION DISCUSSION AND ANALYSIS |
Outstanding Equity Awards atyear-end Fiscal 20182020
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(2)(3) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (#)(4) | Market Value of Shares or Units of Stock that have not vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that have not vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that have not vested ($) | ||||||||||||||||||||||||
James M. Chirico, Jr. | — | 486,981 | 19.46 | 12/15/2027 | ||||||||||||||||||||||||||||
1,460,943 | 32,345,278 | — | — | |||||||||||||||||||||||||||||
Patrick J. O’Malley III | — | 81,164 | 19.46 | 12/15/2027 | ||||||||||||||||||||||||||||
243,491 | 5,390,891 | — | — | |||||||||||||||||||||||||||||
Shefali Shah | — | 40,582 | 19.46 | 12/15/2027 | ||||||||||||||||||||||||||||
121,745 | 2,695,434 | — | — | |||||||||||||||||||||||||||||
Edward Nalbandian | 4,666 | 23,334 | 21.45 | 3/7/2028 | ||||||||||||||||||||||||||||
70,834 | 1,568,265 | — | — | |||||||||||||||||||||||||||||
Dino Di Palma | — | 21,000 | 22.28 | 8/22/2028 | ||||||||||||||||||||||||||||
86,441 | 1,913,804 | — | — | |||||||||||||||||||||||||||||
William Mercer Rowe | 20,290 | — | 19.46 | 9/12/2019 | ||||||||||||||||||||||||||||
— | — | — | — | |||||||||||||||||||||||||||||
Jaroslaw Glembocki | 18,260 | — | 19.46 | 6/30/2019 | ||||||||||||||||||||||||||||
— | — | — | — | |||||||||||||||||||||||||||||
David Vellequette | — | — | — | — | ||||||||||||||||||||||||||||
— | — | — | — |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#)(1) | Number of Securities Underlying Unexercised Options Unexercisable (#)(2)(3) | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (4) | Market Value of Shares or Units of Stock that have not vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that have not vested (#)(6) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that have not vested ($)(7) | ||||||||||||||||||||||||||||||||
James M. Chirico, Jr. |
| 446,399 |
| 40,582 | $ | 19.46 |
| 12/15/2027 | ||||||||||||||||||||||||||||||||
| 121,746 | $ | 1,850,539 | |||||||||||||||||||||||||||||||||||||
| 253,593 | $ | 3,854,614 | |||||||||||||||||||||||||||||||||||||
| 274,223 | $ | 4,168,190 | |||||||||||||||||||||||||||||||||||||
| 253,593 | $ | 3,854,614 | |||||||||||||||||||||||||||||||||||||
Kieran McGrath |
| 128,866 | $ | 1,958,763 | ||||||||||||||||||||||||||||||||||||
| 73,964 | $ | 1,124,253 | |||||||||||||||||||||||||||||||||||||
| 73,964 | $ | 1,124,253 | |||||||||||||||||||||||||||||||||||||
Anthony Bartolo |
| 163,666 | $ | 11.38 |
| 12/9/2029 | ||||||||||||||||||||||||||||||||||
| 87,873 | $ | 1,335,670 | |||||||||||||||||||||||||||||||||||||
| 87,873 | $ | 1,335,670 | |||||||||||||||||||||||||||||||||||||
| 87,873 | $ | 1,335,670 | |||||||||||||||||||||||||||||||||||||
Shefali Shah |
| 37,200 |
| 3,382 | $ | 19.46 |
| 12/15/2027 | ||||||||||||||||||||||||||||||||
| 10,146 | $ | 154,219 | |||||||||||||||||||||||||||||||||||||
| 20,136 | $ | 306,067 | |||||||||||||||||||||||||||||||||||||
| 52,832 | $ | 803,046 | |||||||||||||||||||||||||||||||||||||
| 40,270 | $ | 612,104 | |||||||||||||||||||||||||||||||||||||
| 52,831 | $ | 803,031 | |||||||||||||||||||||||||||||||||||||
Stephen Spears | ||||||||||||||||||||||||||||||||||||||||
| 188,552 | $ | 2,865,990 |
(1) | Represents the exercisable portion of stock options granted and outstanding. |
(2) | Represents the unvested and |
(3) | The stock option awards are scheduled to vest as follows: |
Name | Number of Securities Underlying Options | Grant Date | Vesting Description | |||||||
James M. Chirico, Jr. | 486,981 | 12/15/2017 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | |||||||
| 12/ | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||
Shefali Shah | 40,582 | 12/15/2017 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter |
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COMPENSATION DISCUSSION AND ANALYSIS | › | Executive Compensation Tables |
(4) | The RSU awards are scheduled to vest as follows: |
Name | RSU Award | Grant Date | RSUs Vested | RSUs Cancelled | RSUs Unvested | Vesting Description | RSU Award | Grant Date | RSUs Vested | RSUs Cancelled | RSUs Unvested | Vesting Description | ||||||||||||||||||||||||||||||
James M. Chirico, Jr. | 1,460,943 | 12/15/2017 | 0 | 0 | 1,460,943 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | 1,460,943 | 12/15/2017 | 1,339,197 | 121,746 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | |||||||||||||||||||||||||||||||
Patrick J. O’Malley III | 243,491 | 12/15/2017 | 0 | 0 | 243,491 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | ||||||||||||||||||||||||||||||||||||
James M. Chirico, Jr. | 253,593 | 12/23/2019 | 253,593 | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||||||||||||||||||||||||||||||||
Kieran McGrath | 257,731 | 2/11/2019 | 128,865 | 128,866 | 33.34% 1st anniversary then 8.33% quarterly; full vesting 3 years after grant | |||||||||||||||||||||||||||||||||||||
Kieran McGrath | 73,964 | 12/6/2019 | 73,964 | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||||||||||||||||||||||||||||||||
Anthony Bartolo | 87,873 | 12/9/2019 | 87,873 | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||||||||||||||||||||||||||||||||
Anthony Bartolo | 87,873 | 12/9/2019 | 87,873 | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||||||||||||||||||||||||||||||||
Shefali Shah | 121,745 | 12/15/2017 | 0 | 0 | 121,745 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | 121,745 | 12/15/2017 | 111,599 | 10,146 | 33.33% on 1st anniversary; 8.33% last day of each quarter thereafter | |||||||||||||||||||||||||||||||
Edward Nalbandian | 85,000 | 3/7/2018 | 14,166 | 0 | 70,834 | 16.67% on 6 month anniversary; 16.67% on 1st anniversary; 8.33% last day of each quarter thereafter | ||||||||||||||||||||||||||||||||||||
Dino Di Palma(a) | 64,000 | 8/22/2018 | 0 | 0 | 64,000 | 33.34% on August 15, 2019; 8.33% on November 15, February 15, May 15 and August 15 quarterly thereafter | ||||||||||||||||||||||||||||||||||||
22,441 | 8/22/2018 | 0 | 0 | 22,441 | 33.34% on August 15, 2019; 8.33% on November 15, February 15, May 15 and August 15 quarterly thereafter | |||||||||||||||||||||||||||||||||||||
Shefali Shah | 40,270 | 2/11/2019 | 20,134 | 20,136 | 33.34% 1st anniversary then 8.33% quarterly; full vesting 3 years after grant | |||||||||||||||||||||||||||||||||||||
Shefali Shah | 52,832 | 12/6/2019 | 52,832 | 33.34% on the date closest to Feb 15, May 15, Aug 15, Nov 15, and following the 1st anniversary; 8.33% quarterly thereafter | ||||||||||||||||||||||||||||||||||||||
Stephen Spears | 188,552 | �� | 9/15/2020 | 188,552 | 33.34% on 1st anniversary; 8.33% quarterly thereafter on Feb 15, May 15, Aug 15, Nov 15 |
|
(5) | Determined using the |
(6) | The PRSU awards are scheduled to vest as follows: |
Name | PRSU Award | Grant Date | PRSUs Vested | PRSUs Cancelled | PRSUs Unvested | Vesting Description | ||||||||||||||||
James M. Chirico, Jr. | 274,223 | 2/11/2019 | 274,223 | Vesting, if any, is eligible to occur February 11, 2022, subject to achievement of the applicable performance conditions | ||||||||||||||||||
James M. Chirico, Jr. | 253,593 | 12/23/2019 | 253,593 | Vesting, if any, is eligible to occur February 15, 2023, subject to achievement of the applicable performance conditions | ||||||||||||||||||
Kieran McGrath | 73,964 | 12/6/2019 | 73,964 | Vesting, if any, is eligible to occur February 15, 2023, subject to achievement of the applicable performance conditions | ||||||||||||||||||
Anthony Bartolo | 87,873 | 12/9/2019 | 87,873 | Vesting, if any, is eligible to occur February 15, 2023, subject to achievement of the applicable performance conditions |
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| 2021 Proxy Statement |
Executive Compensation Tables | › | COMPENSATION DISCUSSION AND ANALYSIS |
Name | PRSU Award | Grant Date | PRSUs Vested | PRSUs Cancelled | PRSUs Unvested |
| Vesting Description | ||||||||||||||||||||||
Shefali Shah | 40,270 | 2/11/2019 | 40,270 | Vesting, if any, is eligible to occur February 15, 2022, subject to achievement of the applicable performance conditions | |||||||||||||||||||||||||
Shefali Shah | 52,831 | 12/6/2019 | 52,831 | Vesting, if any, is eligible to occur February 15, 2023, subject to achievement of the applicable performance conditions |
(7) | Determined using the closing price of a share of the Company’s Common Stock on September 30, 2020, the last day of the fiscal year, which was $15.20 per share. |
Stock Vested
The following table sets forth information regarding stock award vestingsvesting for our NEOs during Fiscal 2018.2020:
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value realized on Vesting ($) (1) | ||||||||||||
Edward Nalbandian | — | — | 14,166 | 312,502 | ||||||||||||
William Mercer Rowe | — | — | 60,871 | 1,342,814 | ||||||||||||
Jaroslaw Glembocki | — | — | 54,785 | 1,100,083 |
Stock Awards | ||||||||||
Name | Shares Acquired on Vesting (#) | Value realized ($)(1) | ||||||||
James M. Chirico, Jr. |
| 486,982 | $ | 6,058,059 | ||||||
Kieran McGrath |
| 128,865 | $ | 1,782,181 | ||||||
Anthony Bartolo |
|
|
|
|
|
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Shefali Shah |
| 60,717 | $ | 783,300 | ||||||
Stephen Spears |
|
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|
|
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(1) | The amounts included in the table have been determined using the Company’s closing market price on the date immediately preceding the applicable vesting date. |
| 2021 Proxy Statement | 41 |
COMPENSATION DISCUSSION AND ANALYSIS | › | Executive Compensation Tables |
Potential Payments upon Termination or CIC
Separation Plan
The Separation Plan was adopted to provide transitional assistance to certain senior executives whose employment is terminated by the Company for any reason other than for “cause” (as defined under the Separation Plan) (a “Qualifying Separation”). In the event thatIf a participant becomes eligible to receive benefits underexperiences a Qualifying Separation, the Separation Plan, he or sheparticipant will be entitled to receive a payment equal to 100% of the sum of his or her (i) then current annual base salary andplus (ii) annual target cash bonus under the EAIPAIP or any successor plan, along with certain subsidized medical benefits for 12 months. The participant must execute and not revoke an effective release of claims in order to receive his or her severance benefits.
CIC Plan
The CIC Plan was designed to facilitate certain executives’ continued dedication to the Company notwithstanding the potential occurrence of a CIC of the Company and to encourage such executives’ full attention and dedication to the Company in the event of a CIC.
The CIC Plan provides that if a participant’s employment is terminated by the Company without “cause” (other than due to the Participant’s death or disability) or by the Participant for “good reason,” (each of “cause” and “good reason” as defined in the CIC Plan) in each case either (i) during a “Potential CIC Period” (as defined in the CIC Plan, but generally a period following the entry into an agreement, the consummation of which would result in a CIC (as defined in the CIC Plan) or following a time when the Committee determines that a Potential CIC has occurred); or (ii) within one year following a CIC of the Company, the participant will be entitled to receive certain payments and benefits.
The CIC Plan provides that upon any such termination the participantseach participant will receive (i) an amount equal to the participant’s applicable multiple (the “Multiple”) multiplied by the sum of his or her annual base salary and target annual bonus,bonus; (ii) apro-rata pro rata amount of the participant’s target annual bonus, calculated based on the number of days during the applicable performance period the participant was employed by the Company during the performance period in which the Participant’s employment was terminated,terminated; and (iii) full vesting of any outstanding time-based Company equity awards. Additionally, the
CIC Plan provides that participants who are covered under the Avaya Inc. Medical Expense Plan for Salaried Employees on the date their employment terminates will receive, for a specified number of months (the “COBRA Multiple”) or until comparable coverage is available from a successor employer, an amount equal to the Company’s portion of the participant’s COBRA premiums. The Compensation Committee determined that the Multiple and COBRA Multiple for each Participant is 1.5 and 18 months, respectively. The participant must execute and not revoke an effective release of claims in order to receive his or her severance benefits.
Executive Employment Agreement
Other than Mr. Chirico, none of our NEOs are party to employment agreements with us.
On October 1, 2017, Mr. Chirico was appointed President and Chief Executive Officer of the Company and he became a member of the board of directorsour Board on the Emergence Date.December 15, 2017. Pursuant to the Executive Employment Agreement entered into on November 13, 2017 and negotiated among certain Company creditors, the Company and Mr. Chirico and approved by the Bankruptcy Court in conjunction with Company’s emergence from Chapter 11,Amendment No. 1 dated January 3, 2020, Mr. Chirico’s initial base salary is $1,250,000, to be annually reviewed for increase (but not decrease) by the Compensation Committee. Mr. Chirico’s target bonus will be equal to 200%150% of his base salary (the “Target Bonus”), based on meeting reasonably attainable quantitative performance goals to be established by the Compensation Committee in good faith after discussion with Mr. Chirico. Mr. Chirico’s actual bonus payout may range up to (but cannot exceed) 250%300% of his base salary, provided that Mr. Chirico’s actual bonus for Fiscal 2018 would be no less thansalary. Pursuant to the Target Bonus.Executive Employment Agreement. Mr. Chirico was also entitled to receive, and did receive,received aone-time cash payment of $2,500,000 (the“Sign-On Bonus”) within ten days after December 15, 2017, which was the Emergence Date,date the Company successfully emerged from Chapter 11 (the “Emergence Date”), which he will be
would have been required to repay (on anafter-tax basis) in the event he iswas terminated by the Company for “cause” or resigns without “good reason” (each as defined below) as follows: (x) 100% of theSign-On Bonus if his employment ends on or prior to October 1, 2018 or (y) 50% of theSign-On Bonus if his employment ends after October 1, 2018 but on or prior to October 1, 2019. Additionally, upon the Emergence Date, Mr. Chirico was entitled to receive an incentive equity award consisting of RSUs (75% of the award) and stock options (25% of the award), with a fair market value of approximately $30 million as of the Emergence Date (33.3% of the Emergence Date award pool), pursuant to the 2017 Equity Incentive Plan, which plan was approved by the Bankruptcy
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| 2021 Proxy Statement |
Executive Compensation Tables | › | COMPENSATION DISCUSSION AND ANALYSIS |
Court in conjunction with the Company’s emergence from Chapter11. One-third of this award vested on the first anniversary of the Emergence Date and the remainder will vestvested 8.33% at the end of each quarter thereafter, so that thethereafter. This award will be fully vested on December 31, 2020.
Upon a termination of Mr. Chirico’s employment other than for “cause” (not due to death or disability) or due to his resignation for “good reason” (each as defined below) (each, a “Qualifying Termination”), subject to his timely execution andnon-revocation of a release of claims, Mr. Chirico is entitled to receive (i) a lump sum amount equal to two (the “Multiplier”) times the sum of his base salary and Target Bonus,Bonus; (ii) any earned but unpaid bonus for the completed performance period preceding the Qualifying Termination,Termination; and (iii) up to 18 months’months of Company-paid COBRA benefits. If the Qualifying Termination (or a termination for death or disability) occurs within thesix-month period preceding or the24-month period following a CIC of the Company, the Multiplier is increased to three, and Mr. Chirico is also entitled to full vesting of all of his outstanding long-term incentive awards, whether cash-based or equity-based, with any exercisable awards to remain outstanding until the expiration of their term. Upon request of Mr. Chirico, in January 2020 the Company and Mr. Chirico amended the Executive Employment Agreement to eliminate a Code Section 280G “gross-up” provision, and add a provision to provide that in the event any of the amounts provided for under the Executive Employment Agreement to Mr. Chirico would constitute “parachute payments” within the meaning of Code Section 280G and could be subject to the related excise tax, Mr. Chirico would be entitled to receive either full payment of benefits under the Executive Employment Agreement or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to Mr. Chirico. The Executive Employment Agreement, contains a Code Section 280Gas amended, does not require us to provide any tax “gross-up”gross-up provision, which will provide Mr. Chirico with an additional payment to the extent he receives any payments and/or benefits that are subject to excise tax imposed under Code Section 4999.payments.
Pursuant to the Executive Employment Agreement, “cause” means any of Mr. Chirico’s: (i) material breach of his duties and responsibilities as a senior officer of the Company (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate, and which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company or its affiliated companies and subsidiaries;
(ii) conviction of (including a plea of guilty ornolo contendere to) a felony; (iii) commission of fraud involving the Company or its subsidiaries; (iv) material violation of a material provision of the Company’s Code of Conduct or any statutory or common law duty of loyalty to the Company or its subsidiaries; or (v) material violation of the Executive Employment Agreement.
Pursuant to the Executive Employment Agreement, “good reason” means the occurrence, without Mr. Chirico’s express written consent (which may be withheld for any reason or no reason), of any of the following events or conditions: (i) a material reduction by the Company in Mr. Chirico’s base salary; (ii) a material breach of the Executive Employment Agreement which shall include a material reduction or material negative change by the Company in the type or level of compensation and benefits (other than base salary) to which Mr. Chirico is entitled under the Executive Employment Agreement, other than any such reduction or change that is part of, and consistent with, a general reduction or change applicable to all senior officers of the Company; (iii) a material failure by the Company to pay or provide to Mr. Chirico any compensation or benefits to which he is entitled; (iv) a change in Mr. Chirico’s status, positions, titles, offices or responsibilities that constitutes a material and adverse change or the assignment to Mr. Chirico of any duties or responsibilities that are materially and adversely inconsistent with his status, positions, titles, offices or responsibilities as in effect immediately before such assignment; (v) the Company changing the location of Mr. Chirico’s principal working location to a location more than 50 miles from such location as in effect immediately prior to the Emergence Date; or (vi) any material breach by the Company of the Executive Employment Agreement or any other agreement between the Company and Mr. Chirico incorporated by reference in the Executive Employment Agreement. In order to terminate for Good Reason, (A) Mr. Chirico must provide notice to the Company within 60 days of the initial occurrence of the alleged event or condition; (B) the Company must fail to cure such alleged event or condition within 30 days of such notice; and (C) Mr. Chirico must resign within 6 months of the initial occurrence of the alleged event or condition.
The Company shall pay directly or reimburse Mr. Chirico for his reasonable legal fees and expenses incurred in connection with the negotiation and implementation of the foregoing employment
| 2021 Proxy Statement | 43 |
COMPENSATION DISCUSSION AND ANALYSIS | › | Executive Compensation Tables |
arrangements and any related documents (including without limitation any documentation relating to the incentive equity grants he will receive).
Pursuant to the Executive Employment Agreement, Mr. Chirico is subject to the following restrictive
covenants:(i) non-competition andnon-solicitation of customers, employees, independent contractors and others during the employment term and forone-year post-employment,post-employment; (ii) assignment of inventions to the Company,Company; (iii) perpetualnon-disparagement,non-disparagement; and (iv) perpetual confidentiality.
Potential Payments upon Involuntary Termination without CIC
The tablestable set forth below reflectreflects the amount of compensation that would have been payable to the NEOs in the event of termination of employment, including certain benefits upon an involuntary termination related tothat does not occur in connection with a CIC. The amounts shown assume a termination effective as of September 30, 2018.2020. The actual amounts that would be payable can be determined only at the time of the NEO’s termination.
Name | Annual Base Salary ($) | Annual Target Bonus ($) | Total Severance Pay ($) (1) | Benefits ($)(2) | Outplacement Services ($)(3) | Accelerated Equity ($)(4) | Total ($) | Annual Base Salary | Annual Target Bonus | Total Severance Pay1 | Benefits2 | Outplacement Services3 | Accelerated Equity4 | Total | ||||||||||||||||||||||||||||||||||||||||
James M. Chirico, Jr. | 1,250,000 | 2,500,000 | 7,500,000 | 29,754 | 7,000 | 19,629,350 | 27,166,104 | $ | 1,250,000 |
| $ | 1,875,000 |
| $ | 6,250,000 |
| $ | 36,180 |
| $ 7,000 | $ | 1,850,539 |
| $ | 8,143,719 |
| ||||||||||||||||||||||||||||
Patrick J. O’Malley III | 650,000 | 650,000 | 1,300,000 | 19,836 | 7,000 | 3,271,559 | 4,598,395 | |||||||||||||||||||||||||||||||||||||||||||||||
Kieran McGrath | $ | 650,000 |
| $ | 650,000 |
| $ | 1,300,000 |
| $ | 24,120 |
| $ 7,000 |
| $ | 1,331,120 |
| |||||||||||||||||||||||||||||||||||||
Anthony Bartolo | $ | 650,000 |
| $ | 650,000 |
| $ | 1,300,000 |
| $ | 24,120 |
| $ 7,000 |
| $ | 1,331,120 |
| |||||||||||||||||||||||||||||||||||||
Shefali Shah | 600,000 | 600,000 | 1,200,000 | 19,836 | 7,000 | 1,635,735 | 2,862,571 | $ | 600,000 |
| $ | 600,000 |
| $ | 1,200,000 |
| $ | 24,120 |
| $ 7,000 | $ | 154,219 |
| $ | 1,385,339 |
| ||||||||||||||||||||||||||||
Edward Nalbandian | 500,000 | 500,000 | 1,000,000 | 19,836 | 7,000 | — | 1,026,836 | |||||||||||||||||||||||||||||||||||||||||||||||
Dino Di Palma(5) | 500,000 | 500,000 | 1,000,000 | 19,836 | 7,000 | — | 1,026,836 | |||||||||||||||||||||||||||||||||||||||||||||||
Stephen Spears | $ | 600,000 |
| $ | 600,000 |
| $ | 1,200,000 |
| $ | 24,120 |
| $ 7,000 |
| $ | 1,231,120 |
|
(1) | For Mr. Chirico, amount shown under “Total Severance Pay” represents two times the sum of his base salary and target annual bonus for the year of termination, payable in a lump sum. For all other NEOs, represents the sum of the NEO’s base salary plus target annual bonus for the year of termination. |
(2) | For Mr. Chirico, represents the estimated value of providing certain COBRA continuation payments for a period of 18 months following his termination date; for all other NEOs, represents continuation payments for a period of 12 months following the NEO’s termination date. |
(3) | For all NEOs, “Outplacement Services” represents the value of outplacement services that would be made available to the executive for a certain period of time following termination of employment. |
(4) | For all NEOs, represents the |
For Mr. Chirico and Ms. Shah, the values above include the value attributable to the accelerated vesting of Mr. Chirico’s and Ms. Shah’s Emergence Awards, which fully vested on December 31, 2020.
For Mr. Chirico, such acceleration would have occurred upon an Equity Award Qualifying Termination (as defined in the Emergence Awards) and either: (i) an additional portion of the awards would have accelerated and vested such that 75% of the total number of the Emergence Awards granted under the applicable award agreement would become vested; or (ii) a pro rata portion of the then-current vesting tranche of the Emergence Awards (as provided for under the original vesting schedule), would have accelerated and vested, based on the number of days of his employment from the most recent vesting date prior to the date of his termination until the next vesting date following the date of such termination, plus the Emergence Awards that would have vested pursuant to the original vesting schedule in the first twelve (12) months immediately following the date of such termination, whichever of (i) or (ii) which would result in greater total vesting. For Ms. Shah, upon termination of her employment, the number of Emergence Awards that would have otherwise vested in the 12 months following the termination date had she not been terminated would have accelerated and vested.
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Executive Compensation Tables | › | COMPENSATION DISCUSSION AND ANALYSIS |
Potential Payments upon Involuntary Termination with CIC
Name | Annual Base Salary ($) | Annual Target Bonus ($) | Total Severance Pay ($)(1) | Benefits (18 months) ($)(2) | Excise Tax Gross-Up ($) | Accelerated Equity ($)(3) | Total ($) | |||||||||||||||||||||
James M. Chirico, Jr. | 1,250,000 | 2,500,000 | 11,250,000 | 29,758 | 8,643,856 | 33,650,387 | 53,574,001 | |||||||||||||||||||||
Patrick J. O’Malley III | 650,000 | 650,000 | 1,950,000 | 29,758 | — | 5,608,410 | 7,588,168 | |||||||||||||||||||||
Shefali Shah | 600,000 | 600,000 | 1,800,000 | 29,758 | — | 2,804,194 | 4,633,952 | |||||||||||||||||||||
Edward Nalbandian | 500,000 | 500,000 | 1,500,000 | 29,758 | — | 1,584,365 | 3,114,123 | |||||||||||||||||||||
Dino Di Palma(4) | 500,000 | 500,000 | 1,500,000 | 29,758 | — | 1,913,804 | 3,443,562 |
The table set forth below reflects the amount of compensation that would have been payable to the NEOs in the event of termination of employment, including certain benefits upon an involuntary termination related to a CIC. The amounts shown assume a termination effective as of September 30, 2020. The actual amounts that would be payable can be determined only at the time of the NEO’s termination.
Name | Annual Base Salary | Annual Target Bonus | Total Pay1 | Benefits2 | Accelerated Equity3 | Total | ||||||||||||||||||||||||
James M. Chirico, Jr. | $ | 1,250,000 | $ | 1,875,000 | $ | 11,250,000 |
| $ 36,180 | $ | 9,559,766 | $ | 20,845,946 | ||||||||||||||||||
Kieran McGrath | $ | 650,000 | $ | 650,000 | $ | 2,600,000 |
| $ 36,180 | $ | 4,207,269 | $ | 6,843,449 | ||||||||||||||||||
Anthony Bartolo | $ | 650,000 | $ | 650,000 | $ | 2,600,000 |
| $ 36,180 | $ | 4,632,213 | $ | 7,268,393 | ||||||||||||||||||
Shefali Shah | $ | 600,000 | $ | 600,000 | $ | 2,400,000 |
| $ 36,180 | $ | 2,474,433 | $ | 4,910,613 | ||||||||||||||||||
Stephen Spears | $ | 600,000 | $ | 600,000 | $ | 1,800,000 |
| $ 36,180 | $ | 2,865,990 | $ | 4,702,170 |
(1) | For Mr. Chirico, amount shown under “Total Severance Pay” represents the sum of three times the sum of his base salary plus target annual bonus for the year of termination, plus the pro-rated target bonus for the year of termination, payable in a lump sum. For all other NEOs, represents the sum of 1.5 times the sum of the NEO’s base salary plus target annual bonus for the year of termination, plus the pro-rated target bonus for the year of termination, payable in a lump sum. |
(2) | For all NEOs, represents the estimated value of providing certain COBRA continuation payments for a period of 18 months following the NEO’s termination date. |
(3) | For all NEOs, represents the acceleration value attributable to the accelerated vesting of outstanding equity awards, based on the fair market value of a share of the Company’s |
For Mr. Chirico and Ms. Shah, the values above include the value attributable to the accelerated vesting of Mr. Chirico’s and Ms. Shah’s Emergence Awards, which fully vested on December 31, 2020. For Mr. Chirico, such acceleration would have occurred upon an Equity Award Qualifying Termination (as defined in the Emergence Awards) and, as per the terms of the CEO Employment Agreement, if Mr. Chirico is terminated in connection with a CIC, all of his outstanding Emergence Awards would have vested in full. For Ms. Shah, upon termination of her employment, the number of Emergence Awards that would have otherwise vested in the 12 months following the termination date had she not been terminated would have accelerated and vested. |
The amounts shown in the chart above do not take into account any reductions in payment that may be applied in order to avoid any excise taxes under Section 280G and Section 4999 of the Code.
During Fiscal 2018, Messrs. Vellequette, Glembocki and Rowe terminated from the Company and were provided severance and benefits per the separation plan in place at the time of termination. Each received severance equal to 100% of annual base salary, and for Messrs. Glembocki and Rowe, the severance also included 100% of annual incentive target. The three executives were also provided with benefits continuance for up to twelve months.
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PAY RATIO DISCLOSURE | › | CD&A |
PAY RATIO DISCLOSURE
The pay ratio information is provided pursuant to the SEC’s guidance under Item 402(u) ofRegulation S-K. Due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this pay ratio disclosure is a reasonable estimate calculated in a
manner consistent with Item 402(u) ofRegulation S-K using the data and assumptions described below. The pay ratio was not used to make management decisions and the Board does not use this pay ratio to determine executive compensation adjustments.
Methodology to Determine Median Employee
To
In Fiscal 2020, to determine the median employee, we evaluated our 8,4758,549 employees (other than our CEO and student employees) as of September 30, 20182020 (the “Determination Date”). These 8,4758,549 employees consistconsisted of all our full-time and part-time employees (other than our CEO and student
employees) as of the Determination Date, of which 2,821 are2,774 were US employees and 5,654 are5,775 were non-US employees. employees. The median employee was selected using the total cash compensation approach, consisting of base salary and target short-term incentive levels for Fiscal 2018.2020.
Median Employee to CEO Pay Ratio
After identifying
To calculate the median employee,CEO pay ratio for Fiscal 2020, we calculated annual total compensation for thatthe median employee using the same methodology we used to calculate our NEOs “total” compensation as described in the Fiscal 20182020 Summary Compensation Table. Based on this methodology, the median employee’s annual total compensation was $87,725.$86,600. As reported
for Mr. Chirico for Fiscal 2020 under the Fiscal 2020 Summary Compensation Table above, Mr. Chirico’s annual total compensation was $32,871,900 (the same amount as reported for Mr. Chirico for Fiscal 2018 under the Fiscal 2018 Summary Compensation Table above).$10,735,124. Based on this information, for Fiscal 2018,2020, the ratio of the annual total compensation of Mr. Chirico to the median annual total compensation of all other employees was estimated to be 375:124:1. Compensation for
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| 2021 Proxy Statement |
STOCK OWNERSHIP |
non-USStock Ownership employees was converted
Security Ownership of Certain Beneficial Owners and Management
The following table presents information as to U.S. dollar equivalents using exchange ratesthe beneficial ownership of our Common Stock as of the Determination DateJanuary 4, 2021 for:
As permitted
each stockholder known by the applicable SEC pay ratio rules, we are providing supplemental information regarding our CEO pay ratio in order to provide additional context as to how our CEO compensation relates to the compensation of our employees generally. As discussed in the CD&A, as part of his Fiscal 2018 compensation, Mr. Chirico was granted an emergence equity award and asign-on bonus that were intended to serve as inducement awards in connection with the restructuring process. The grant date fair value of the equity award as requiredus to be reported in the Summary Compensation Table pursuant to applicable SEC rules was $26,014,525. The grant date fair value of this award is not indicative of the expected grant date fair value(s) applicable to future equity-based awards to be made as part of our ongoing annual compensation program. Thesign-on bonus as reported in the Summary Compensation Table was $2,500,000. As an additional reference point to the required CEO pay ratio stated above, without this inducement equity grant andsign-on bonus, Mr. Chirico’s total annual compensation as reported in the Summary Compensation Table for Fiscal 2018 would have been $4,357,375.
PROPOSAL 2 – ADVISORY APPROVAL OF THE COMPANY’S NAMED EXECUTIVE OFFICERS’ COMPENSATION(“SAY-ON-PAY”)
As required by Section 14A of the Exchange Act and pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we are providing our stockholders with an advisory vote on executive compensation. This advisory vote, commonly known as a“say-on-pay” vote, is anon-binding, advisory vote on the compensation paid to our NEOs as disclosed pursuant to Item 402 ofRegulation S-K, in the “Compensation Discussion and Analysis” in this Proxy Statement. Thissay-on-pay vote is not intended to address any specific item of compensation, but rather the overall compensation of the NEOs and the policies and procedures described in this Proxy Statement.
We are committed to utilizing a mix of incentive compensation programs that will reward success in achieving the Company’s financial objectives and growing value for stockholders, and continuing to refine these incentives to maximize Company performance. The Compensation Committee has overseen the development of a compensation program designed toachieve pay-for-performance and alignment with stockholder interests, as described more fully in the “Compensation Discussion and Analysis” section above. The compensation program was designed in a manner that we believe is reasonable, competitive and appropriately balances the goals of attracting, motivating, rewarding and retaining our executives.
The Board invites you to review carefully the “Compensation Discussion and Analysis” and the tabular and other disclosures on executive compensation in this Proxy Statement. Based upon that review, the Board recommends that the stockholders approve, on an advisory basis, the compensation of the NEOs, as discussed and disclosed in the “Compensation Discussion and Analysis,” the compensation tables, and any related narrative disclosure contained in this Proxy Statement. The Board recommends that stockholders vote, on an advisory basis, in favor of thefollowing “Say-on-Pay” resolution:
“RESOLVED, that the stockholders of Avaya Holdings Corp. approve, on an advisory basis, the compensation paid to the Company’s NEOs as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion included in this Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Company, the Board or the Compensation Committee. However, we value the views of our stockholders and the Compensation Committee expects to carefully review and take into account the outcome of the vote when designing and considering future executive compensation arrangements.
The proxy holders named on the accompanying proxy card will vote in favor of the advisory“say-on-pay” vote unless a stockholder directs otherwise.
The affirmative vote of a majority of the votes cast (in person or by proxy) at the Annual Meeting is required to approve, on anon-binding and advisory basis, the compensation paid by the Company to the NEOs as described in this Proxy Statement. Abstentions will have the same effect as an “Against” vote for purposes of determining whether this proposal has been approved. Brokernon-votes will not be counted for any purpose in determining whether this proposal has been approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION PAID TO THE COMPANY’S NEOS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO ITEM 402 OF REGULATIONS-K.
PROPOSAL 3 – ADVISORY APPROVAL OF THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICERS’ COMPENSATION
(“SAY-ON-PAY FREQUENCY”)
Pursuant to the Dodd-Frank Act and Section 14A of the Exchange Act, we are also asking our stockholders to vote to approve, on an advisory basis, the frequency of holding future advisory votes to approve the compensation of our NEOs. Stockholders may advise the Board on whether they prefer such votes to occur every one year, two years or three years, or abstain from voting.
The Board believes that submitting the advisory vote on the compensation of our NEOs on an annual basis is appropriate for the Company and our stockholders. The Board believes that an annual advisory vote on executive compensation will allow our stockholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the Proxy Statement every year. Additionally, an annual advisory vote is consistent with our objective of engaging in regular dialogue with our stockholders on corporate governance and executive compensation matters. Accordingly, the Board recommends that stockholders vote, on an advisory basis, in favor of the following“Say-on-Pay Frequency” resolution:
“RESOLVED, that the stockholders of Avaya Holdings Corp. approve, on an advisory basis, that the frequency of the advisory vote to approve the compensation of our NEOs shall be “EVERY YEAR.””
Although the advisory voteis non-binding, the Board expects to consider the outcome of the vote when making future decisions about the frequency of holding an advisory vote to approve named executive officers’ compensation. It is expected that the nextSay-on-Pay Frequency proposal will occur at our 2025 annual meeting.
The affirmative vote of a majority of the votes cast (in person or by proxy) at the Annual Meeting is required to approve, on anon-binding and advisory basis, the frequency for holding futureSay-on-Pay votes. You can choose whetherthe Say-on-Pay vote should be conducted “EVERY YEAR,” “EVERY TWO YEARS” or “EVERY THREE YEARS.” You may also abstain from voting on this item, which will have the same effect as an “Against” vote for purposes of determining whether this proposal has been approved. Brokernon-votes will not be counted for any purpose in determining whether this proposal has been approved
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR CONDUCTING FUTURE ADVISORY VOTES TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICERS’ COMPENSATION “EVERY YEAR.”
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions
2017 Registration Rights Agreement
In connection with our emergence from bankruptcy, we entered into a registration rights agreement with certain of our creditors and their affiliates who became Company stockholders upon our emergence from bankruptcy, pursuant to which we provide them certain “demand” registration rights and customary “piggyback” registration rights. The registration rights agreement also provides that we will pay certain expenses relating to such registrations and indemnify the registration rights holders against (or make contributions in respect of) certain liabilities which may arise under the Securities Act of 1933, as amended.
Arrangements Involving the Company’s Current Directors
Stanley J. Sutula, III is a director and he is Executive Vice President and Chief Financial Officer of Pitney Bowes Inc., abusiness-to-business provider of equipment, software and services. During Fiscal 2018, sales of the Company’s products and services to Pitney Bowes Inc. were approximately $160,000 and the Company purchased de minimis amounts of goods and services from Pitney Bowes Inc.
Jacqueline E. Yeaney is a director and she was the Senior Vice President and Chief Marketing Officer of Ellucian, a privately-held provider of software and services for higher education management, from January 2017 until April 1, 2019. During Fiscal 2018, sales of the Company’s products and services to Ellucian were approximately $134,000.
Arrangements Involving the Company’s Current Executive Officers
Kieran J. McGrath is Senior Vice President and Chief Financial Officer of the Company. Prior to joining the Company in February 2019, he was the Executive Vice President and Chief Financial Officer of CA Technologies during Fiscal 2018. During Fiscal 2018, the Company purchased goods and services from CA Technologies of approximately $620,000.
Arrangements Involving the Company’s Post-Emergence Former Directors and Former Executive Officers
Laurent Philonenko was a Senior Vice President of the Company until February 15, 2019 and in Fiscal 2018 he was a Section 16 Officer from December 18, 2017 until August 23, 2018. Mr. Philonenko served as an Advisor to Koopid, Inc., a software development company specializing in mobile communications, from February 2017 until January 2018. In Fiscal 2018, the Company purchased goods and services from Koopid, Inc. of approximately $620,000.
Ronald A. Rittenmeyer was a director of the Company before and following the Emergence Date, until his resignation as a director of the Company which was effective as of April 30, 2018. While he was a director of the Company, he served as Executive Chairman on the board of directors of Tenet Healthcare Corporation (“Tenet Healthcare”), a healthcare services company. In Fiscal 2018, sales of the Company’s products and services to Tenet Healthcare were approximately $1.1 million.
Arrangements Involving the Company’s Former Sponsors and/or their Affiliates
The Company was formed in 2007 by affiliates of two private equity firms, Silver Lake Partners (“Silver Lake”) and TPG Capital (“TPG”, together with Silver Lake, the “Sponsors”). Our affiliations with the Sponsors terminated upon our emergence from bankruptcy.
In connection with the Sponsors’ acquisition of Avaya Inc. through Avaya Holdings Corp. in a transaction that was completed on October 26, 2007, we entered into certain stockholder agreements and registration rights
agreements with the Sponsors and variousco-investors. Each of these arrangements was terminated in connection with our emergence from bankruptcy. In addition, we entered into a management services agreement with affiliates of the Sponsors, which terminated upon our emergence from bankruptcy. In Fiscal 2018, we paid $200,000 under the management services agreement, all of which was related to expense reimbursement.
Transactions with Other Sponsor Portfolio Companies
The Sponsors are private equity firms that have investments in companies that do business with Avaya. From October 1, 2017 through the Emergence Date on December 15, 2017, the Company recorded $10 million associated with sales of the Company’s products and services to companies in which one or both of the Sponsors had investments. From October 1, 2017 through the Emergence Date on December 15, 2017, the Company purchased goods and services of $15 million from companies in which one or both of the Sponsors had investments.
Arrangements Involving the Company’sPre-Emergence Directors
Charles Giancarlo was a director of the Company immediately prior to the Emergence Date and he served in this capacity as a director designated by Silver Lake.
John W. Marren was a director of the Company immediately prior to the Emergence Date and he served in this capacity as a director designated by TPG.
Afshin Mohebbi was a director of the Company immediately prior to the Emergence Date and he held the position of Senior Advisor of TPG.
Greg Mondre was a director of the Company immediately prior to the Emergence Date and he served in this capacity as a director designated by Silver Lake. He held the positions of Managing Partner and Managing Director of Silver Lake. Mr. Mondre was related to the former Vice Chairman andCo-Chief Executive Officer of C3/Customer Contact Channels Holdings L.P. (“C3 Holdings”), a provider of outsourced customer management solutions. In Fiscal 2018, sales of the Company’s products and services to C3 Holdings were $356,000.
Gary B. Smith was a director of the Company immediately prior to the Emergence Date and he served as President, Chief Executive Officer and director of Ciena Corporation (“Ciena”), a network infrastructure company. In Fiscal 2018, sales of the Company’s products and services to Ciena were $514,000.
Related Party Transaction Policy
In December 2017, our Board adopted written procedures for the review, approval and/or ratification of all transactions between the Company and certain “related persons,” such as our executive officers, directors and ownersbeneficial owner of more than 5% of our voting securities.Common Stock;
The procedures give our Audit Committee the power to approve or disapprove existing and potential related party transactions involving
each of our directors and director nominees;
each named executive officer as set forth in the summary compensation table in this Proxy Statement; and
all current executive officers, directors and director nominees as a group.
Percentage ownership of our Section 16 Officers. Upon becoming awareCommon Stock in the table is based on 83,892,451 shares of an existingCommon Stock outstanding as of January 4, 2021. Shares of
Common Stock that may be acquired within 60 days of January 4, 2021 pursuant to the exercise of options or potential related party transaction, the Audit Committee is requiredwarrants, and restricted stock units (“RSUs”) that vest, or conversion of Series A Stock are deemed to conduct a full inquiry into the facts and circumstances concerning that transaction and to determine the appropriate actions, if any,be outstanding for the Companypurpose of computing the percentage ownership of such holder but are not deemed to take. In reviewing a transaction,be outstanding for computing the Audit Committee considers relevant facts and circumstances, including, but not limited to, whether the transaction ispercentage ownership of any other person shown in the best intereststable. For instance, as of January 4, 2021, RingCentral owns 125,000 shares of our Series A Stock, which could be converted into 8,093,204 shares of our outstanding Common Stock as of such date. In calculating the “Percent of Class Owned” in the table below, we have assumed the conversion of the Series A Stock to Common Stock for RingCentral but have not assumed such conversion with regards to any other beneficial owner.
Beneficial ownership of shares is determined under the SEC rules and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them. Unless otherwise noted below, the address of each of the individuals and entities named below is c/o Avaya Holdings Corp., 2605 Meridian Parkway, Suite 200, Durham, North Carolina 27713.
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership | Percent of Class Owned | |||||||||
5% Stockholder: | ||||||||||||
The Vanguard Group | Common Stock | 10,946,989(1) | 13.05% | |||||||||
100 Vanguard Blvd. Malvern, Pennsylvania 19355 | ||||||||||||
BlackRock, Inc. | Common Stock | 8,093,155(2) | 9.65% | |||||||||
55 East 52nd Street New York, New York 10055 | ||||||||||||
RingCentral, Inc. | Common Stock | 8,093,204(3) | 8.80% | |||||||||
20 Davis Drive Belmont, CA 94002 |
(1) | The information was based upon a Schedule 13G/A filed with the SEC on February 10, 2020 by The Vanguard Group. The Vanguard Group has sole voting power with respect to 107,773 of these shares, shared voting power with respect to 16,592 of these shares, sole dispositive power with respect to 10,838,595 of these shares and shared dispositive power with respect to 108,394 of these shares. The Vanguard Group’s Schedule 13G/A indicates that (i) 91,802 of these shares are beneficially owned by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, as a result of its serving as investment manager of collective trust accounts; and (ii) 32,563 of these shares are beneficially owned by Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, as a result of its serving as investment manager of Australian investment offerings. |
(2) | The information was based upon a Schedule 13G/A filed with the SEC on February 10, 2020 by BlackRock, Inc. BlackRock, Inc. has sole voting power with respect to 7,834,897 of these shares and sole dispositive power with respect to 8,093,155 of these shares. BlackRock, Inc.’s Schedule 13G/A indicates that each of the following subsidiaries owns at 5% or greater of the shares reported on this |
| 2021 Proxy Statement | 47 |
STOCK OWNERSHIP | › | Security Ownership of Certain Beneficial Owners and Management |
Schedule 13G/A: BlackRock Advisors, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock Investment Management (Australia) Limited; BlackRock (Netherlands) B.V.; BlackRock Fund Advisors; BlackRock Asset Management Ireland Limited; BlackRock Institutional Trust Company, National Association; BlackRock Financial Management, Inc.; BlackRock Asset Management Schweiz AG; BlackRock Fund Management Company S.A. and BlackRock Investment Management, LLC. |
(3) | The information was based upon a Schedule 13D filed with the SEC on November 12, 2019 by RingCentral, Inc. RingCentral, Inc. has sole voting and dispositive power with respect to 125,000 shares of Series A Stock, currently convertible into 8,093,204 shares of Common Stock. |
Name of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership | Percent of Class Owned | |||||||||
Directors | ||||||||||||
James M. Chirico, Jr. | Common Stock | 1,397,182 | (4) | 1.67% | ||||||||
Stephan Scholl | Common Stock | 52,417 | (5) | * | ||||||||
Susan L. Spradley | Common Stock | 52,417 | (5) | * | ||||||||
Stanley J. Sutula, III | Common Stock | 52,417 | (5) | * | ||||||||
Scott D. Vogel | Common Stock | 52,417 | (5) | * | ||||||||
William D. Watkins | Common Stock | 52,417 | (5) | * | ||||||||
Jacqueline E. Yeaney | Common Stock | 38,415 | (6) | * | ||||||||
Robert Theis | Common Stock | 4,740 | (7) | * | ||||||||
Named Executive Officers (other than James M. Chirico, Jr.): |
| |||||||||||
Shefali Shah | Common Stock | 142,584 | (8) | * | ||||||||
Kieran McGrath | Common Stock | 139,822 | (9) | * | ||||||||
Anthony Bartolo | Common Stock | 124,846 | (10) | * | ||||||||
Stephen Spears | Common Stock | * | ||||||||||
All Current Directors and Executive Officers as a Group (13 persons)(4),(5),(6),(7),(8),(9),(10),(11) |
|
Common Stock |
|
|
2,122,857 |
|
2.53% |
* | Represents beneficial ownership of less than one percent of the outstanding shares of Common Stock. |
(4) | Includes (i) 486,981 shares of Common Stock issuable upon the exercise of outstanding stock options that are exercisable or will become exercisable within 60 days of January 4, 2021 and (ii) 84,547 shares of Common Stock issuable upon the vesting of RSUs that will vest within 60 days of January 4, 2021. |
(5) | Includes (i) 4,040 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) February 12, 2022, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the Avaya Holdings Corp. 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”); (ii) 16,846 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) May 15, 2022, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the 2017 Equity Incentive Plan; and (iii) 18,684 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) March 4, 2023, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the Avaya Holdings Corp. 2019 Equity Incentive Plan (the “2019 Equity Incentive Plan”). All of the RSUs can only be settled with Common Stock. |
(6) | Includes (i) 2,885 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) March 18, 2022, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the 2017 Equity Incentive Plan; and (ii) 16,846 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) May 15, 2022, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the 2017 Equity Incentive Plan; and (iii) 18,684 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) March 4, 2023, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the 2019 Equity Incentive Plan. These RSUs can only be settled with Common Stock. |
(7) | Consists of 4,740 shares of Common Stock issuable in respect of RSUs that have vested but have had their settlement deferred until the earliest to occur of: (x) November 6, 2023, (y) the recipient’s separation of service from the Company and (z) a “change in control” of the Company, as defined in the 2019 Equity Incentive Plan. These RSUs can only be settled with Common Stock. |
(8) | Includes (i) 40,852 shares of Common Stock issuable upon the exercise of outstanding stock options that are exercisable or will become exercisable within 60 days of January 4, 2021, and (ii) 3,354 shares of Common Stock issuable upon the vesting of RSUs within 60 days of January 4, 2021. |
(9) | Includes 21,469 shares of Common Stock issuable upon the vesting of RSUs within 60 days of January 4, 2021. |
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| 2021 Proxy Statement |
Security Ownership of Certain Beneficial Owners and Management | › | STOCK OWNERSHIP |
(10) | Includes (i) 58,592 shares of Common Stock issuable upon the exercise of outstanding stock options that are exercisable or will become exercisable within 60 days of January 4, 2021, and (ii) 58,592 shares of Common Stock issuable upon the vesting of RSUs within 60 days of January 4, 2021. |
(11) | All current directors and executive officers includes: the eight directors listed above, Anthony F. Bartolo, Kieran J. McGrath, Shefali A. Shah, Stephen D. Spears and Kevin Speed. |
| 2021 Proxy Statement | 49 |
DIRECTOR COMPENSATION |
Members of the Board who are Company employees do not receive any additional compensation for their service as directors.
Fiscal 2020 Non-Employee Director Compensation Program
For Fiscal 2020, the program consisted of the following:
Additional Compensation •Additional Cash Retainers for Leadership Positions: Non-Executive Chair: $75,000 Audit Committee Chair: $25,000 Compensation Committee Chair: $15,000 Nominating & Corporate Governance Committee Chair: $10,000 •Meeting Fees: $2,000 per Board or committee meeting in excess of 20 aggregate meetings during the fiscal year •Initial Equity Grant for Any Non-Employee Director Joining the Board of Directors Before the next Annual General Meeting: $250,000 in RSUs, pro-rated to reflect service as a non-employee director for the portion of the fiscal year served until the next Annual Meeting |
The annual cash retainer was paid in arrears to the non-employee directors as four quarterly payments of $18,750, beginning March 2020. The additional cash fees for serving as committee chairs were similarly paid in arrears in four quarterly installments, beginning in March 2020. The meeting fees were paid in arrears at the end of the 2020 fiscal year. RSUs granted to non-employee directors in Fiscal 2020 vested in full on the grant date, while the delivery of the underlying shares is deferred until the earliest to occur of: (i) the third anniversary of the grant date;
(ii) the recipient’s separation from the Company; or (iii) a change in control of the Company, and its stockholders, whether the terms are consistent with a transaction available on an arms-length basis and whether the transaction isas defined in the Company’s ordinary course2019 Equity Incentive Plan.
Pursuant to the 2019 Equity Incentive Plan, the maximum total compensation (including awards under the 2019 Equity Incentive Plan, determined based on the fair market value of business. At the discretionsuch awards as of the Audit Committee, considerationgrant date, plus annual retainer fees) that may be paid to any non-employee director in respect of a related party transaction may be submittedsingle fiscal year is limited to $750,000.
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Fiscal 2020 Non-Employee Director Compensation Program | › | DIRECTOR COMPENSATION |
The following table details the Board. A director who istotal compensation paid to our non-employee directors for Fiscal 2020:
Name | Fees Earned or Paid in Cash (1) | Stock Awards(2) | Total | ||||||||||||
Stephan Scholl | $ | 75,000 |
| $ | 250,000 |
| $325,000 | ||||||||
Susan L. Spradley | $ | 87,000 | $ | 250,000 |
| $337,000 | |||||||||
Stanley J. Sutula, III | $ | 100,000 | $ | 250,000 |
| $350,000 | |||||||||
Scott D. Vogel | $ | 98,000 | $ | 250,000 |
| $348,000 | |||||||||
William D. Watkins | $ | 150,000 | $ | 250,000 |
| $400,000 | |||||||||
Jacqueline E. Yeaney | $ | 75,000 | $ | 250,000 |
| $325,000 |
(1) | Cash compensation consists of the $75,000 annual cash retainer and additional cash retainers for leadership positions, as described above. The table above also includes meeting fees paid for Fiscal 2020 consisting of $2,000 for Ms. Spradley and $8,000 for Mr. Vogel. |
(2) | Amounts shown represent the grant date fair value of the annual grant award of $250,000, awarded on March 4, 2020 following each director’s re-election at the 2020 Annual General Meeting, as calculated in accordance with ASC 718. See Note 16 of the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 for an explanation of the assumptions used in the valuation of these awards. |
Non-Employee Director Share Ownership Guidelines
Non-employee directors are expected to own shares equivalent to six times the subject of a potential related party transaction is not permitted to vote in the decision-making processvalue of the Audit Committee orannual cash retainer for Board as applicable, relating to what actions, if any, shall be taken by us in lightservice (not the additional cash retainers for leadership positions). Until the guideline
is achieved, the director must hold at least 50% of that transaction.
All related party transactions identified above that occurred during Fiscal 2018 or that are currently proposed which required approval and/or ratification through the procedures described above were subject to such review procedures (other than those listed above under the heading “Transactions with Other Sponsor Portfolio Companies” which were transacted in the ordinary coursenet shares received upon vesting of an award. As of the Company’s business).end of fiscal year 2020, all non-employee directors were in compliance with the ownership guidelines.
| 2021 Proxy Statement | 51 |
EXECUTIVE OFFICERS |
EXECUTIVE OFFICERSExecutive Officers
The officers are elected by and serve at the discretion of the Board. Below is biographical information regarding our current Section 16 Officers. Biographical information about Mr. Chirico is in this Proxy Statement under the heading “PROPOSAL 1 – ELECTION OF DIRECTORS.”
Name | Age |
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James M. Chirico, Jr. | 63 | President, Chief Executive Officer and Director | ||||
| 50 |
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Kieran McGrath | 61 | Executive Vice President and Chief Financial Officer | ||||
| 49 |
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| 52 | Executive Vice President, Chief Revenue Officer | ||||
Kevin Speed | 46 | Vice President, Controller and Chief Accounting Officer |
Mr. Bartolo has been our Executive Vice President, Chief Product Officer since December 9, 2019. Prior to joining the Company, Mr. Bartolo served as the Executive Vice President, Chief Product Officer and Interim CEO of Tata Communications Limited, a leading global digital infrastructure provider, from February 2013 until December 2019. Previously, Mr. Bartolo worked as a Vice President and General Manager at Avaya from December 2008 through August 2012. Prior to that, Mr. Bartolo held various management positions at Symbol Technologies Limited and Nortel Networks Limited in North America, as well as at other companies in Asia and Europe.
Mr. McGrath has been our SeniorExecutive Vice President, and Chief Financial Officer since December 9, 2019, after having served as our Senior Vice President, Chief Financial Officer from February 15, 2019 until December 8, 2019. Mr. McGrath joined the Company on January 31, 2019 as Senior Vice President, Finance. Prior to joining the Company, Mr. McGrath served as the Executive Vice President and Chief Financial Officer of CA Technologies, a global leader in software solutions that simplify complex enterprise environments, from November 2016 until November 2018 when that company became a subsidiary of Broadcom Inc. Prior to that, he served as CA Technologies’ Senior Vice President and interim Chief Financial Officer from July 2016 to November 2016, and as Senior Vice President and Corporate Controller upon joining the company in September 2014 until July 2016. Prior to that, Mr. McGrath was Vice President, Finance at International Business Machines Corporation, a cognitive solutions and cloud platform company, where he held various senior executive finance positions across the company, including leading the finance department for IBM’s Software Group, from January 2009 until August 2014.
Mr. Nalbandian has been our Senior Vice President and President, Services since March 1, 2018. Previously he served as Chief Executive Officer of Strategic Products and Services (SPS) from September 2016 until September 2017 and President of Enabling Managed Services, LLC from September 2014 until September 2016. Prior to that he served as Avaya’s Vice President of Managed Services from 2008 until 2014. Early in his career, he ran managed services at IBM and AT&T.
Mr. Passi has been our Senior Vice President and President, Cloud since November 5, 2018. Previously he served as Executive Vice President of Products and Technology of Five9 Inc., a provider of cloud software for contact centers, from January 2017 until September 2018. Prior to that Mr. Passi served as Five9’s Executive Vice President, Product Management and Application Development from November 2015 to January 2017, Executive Vice President of Product Management from January 2015 to November 2015 and Senior Vice President of Product Management from August 2013 to December 2014. From October 2012 to August 2013, Mr. Passi served as the Head of Product & Technology at Deutsche Telekom Hosted Business Services, a provider of cloud-based business communications solutions. Prior to that, Mr. Passi worked in several management positions at Amdocs Inc., Ciena and Rainmaker Systems.
Ms. Shah has been our Executive Vice President, Chief Administrative Officer and General Counsel since December 9, 2019, after having served as our Senior Vice President, Chief Administrative Officer and General Counsel sincefrom December 18, 2017.2017 until December 8, 2019. Previously she served as Senior Vice President, General Counsel and Corporate Secretary of Era Group Inc. from March 2014 until December 2017. Prior to that Ms. Shah served as Era Group Inc.’s2017 and Acting General Counsel and Corporate Secretary from February 2013 through February 2014. From June 2006 to February 2013, Ms. Shah held several positions with Comverse Technology, Inc., including Senior Vice President, General Counsel and Corporate Secretary. Ms. Shah served on the Board of Directors of Verint Systems Inc. from August 2007 until February 2013. Prior thereto, she was an associate at Weil Gotshal & Manges LLP from September 2002 to May 2006 and Hutchins, Wheeler & Dittmar, P.C. from September 1996 to September 2002.
Mr. Spears has been our Executive Vice President and Chief Revenue Officer since September 15, 2020. Prior to joining the Company, Mr. Spears served as SAP SE’s Chief Operating Officer, Solution Area Sales Organization (SAS) and Chief Revenue Officer at SAP SuccessFactors from March 2020 until September 2020, after having served as SAP SuccessFactors’ Chief Revenue Officer from September 2017 until September 2020 and as the Senior Vice President, Sales, HANA Enterprise Cloud from May 2012 until September 2017. Prior to that, Mr. Spears held various senior leadership roles in SAP’s Middleware, Platform and Integration business and SAP Americas Operations and Business Development during his tenure at SAP, which began in 2003.
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EXECUTIVE OFFICERS |
Mr. Dell’OssoSpeed has been our Vice President, Controller and Chief Accounting Officer since February 19,June 6, 2019. Prior to that he served as ourthe Company’s Vice President Chief Accounting Officer and Corporate Controller from JulyFebruary 11, 2019 through June 5, 2019. Before joining the Company, Mr. Speed served as the Senior Vice President, General Auditor of CA Technologies, a global leader in software solutions that simplify complex enterprise environments, from January 2016 to November 2018 when the company became a subsidiary of Broadcom Inc. Mr. Speed remained a CA Technologies employee until February 8, 2019. While serving as CA Technologies’ Senior Vice
President, General Auditor he also served as CA Technologies’ Executive Sponsor, Finance Rotation Program from January 2016 until November 2018. Prior to that he was CA Technologies’ Vice President, Corporate Business Development from April 2015 to February 2019January 2016 and he served in various roles in Corporate Accounting and Corporate Financial Planning and Analysis from the time he joined the company in October 2006 through April 2015. Prior to joining CA Technologies, Mr. Speed was a Senior DirectorManager in the KPMG LLP metro New York office and Controller, Revenue and Inventory Assurance from June 2011 to July 2015. From September 1991 to June 2011, Mr. Dell’Osso held several positions at PricewaterhouseCoopersa Manager in the Arthur Andersen LLP including Director, National Professional Services Group from July 2006 to June 2011.metro New York office.
| 2021 Proxy Statement | 53 |
PROXY AND VOTING INFORMATION |
PROPOSAL 4 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLICProxy and Voting Information
ACCOUNTING FIRMWhy am I receiving these materials?
Our Audit Committee has appointed
The Board of Directors (the “Board”) of Avaya Holdings Corp. (which we refer to in this Proxy Statement as we, our, us, our Company or the Company) is providing you these proxy materials in connection with the Board’s solicitation of proxies from our stockholders for our 2021 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjournments and postponements of the Annual
Meeting. The Annual Meeting will be held exclusively virtually, conducted via a live audio webcast on Wednesday, March 3, 2021, at 10:30 a.m. Eastern time. These materials were first mailed to stockholders on or about January 19, 2021. You are invited to virtually attend the Annual Meeting and requested to vote on the items described in this Proxy Statement.
What is the purpose of the Annual Meeting?
You and our other stockholders entitled to vote at the Annual Meeting are requested to vote on proposals to (i) elect eight members of our Board to serve until our 2022 Annual Meeting of Stockholders; (ii) to ratify the
appointment of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for Fiscal 20192021; and (iii) to approve, on an advisory basis, our named executive officers’ compensation.
Who is seeking ratificationentitled to vote at the Annual Meeting?
Only holders of such selection byrecord of our stockholdersCommon Stock and our Series A Stock at the close of business on January 4, 2021, the record date for the Annual Meeting, are entitled to notice of, and to vote at, the Annual Meeting. PwC has audited our financial statements since 2000. The Audit Committee and PwC do not believe that PwC’s tenure asHolders of the Company’s auditor has diminished its independence, candor, or objectivity. The Audit Committee further believes PwC’s familiaritySeries A Stock vote on an as-converted basis together with the Company’sCommon Stock as a single class. A list of our stockholders will be available for review at our executive offices in Durham, North Carolina during ordinary business hours for a period of ten (10) days prior to the meeting and operations allows it to conduct better, more efficient, and more effective audits. Aton the same time,virtual Annual Meeting website during the Audit Committee remains mindfulentirety of the risksmeeting. Each stockholder is entitled to one vote for (i) each share of PwC’s long tenureCommon Stock held; and carefully monitors PwC’s performance, fee structure and any issues bearing(ii) each share of Common Stock that would be issuable upon conversion of Series A Stock held on
the independencerecord date. Shares of the firm. Representatives of PwC are expected to attendour Common Stock represented virtually or by a properly submitted proxy will be voted at the Annual Meeting. TheyAt the close of business on the record date, 83,892,451 shares of our Common Stock and 125,000 shares of our Series A Stock (representing 8,093,204 shares of Common Stock on an as-converted basis) were outstanding representing a total of 91,985,655 votes eligible to be cast at the Annual Meeting.
When we refer to our stockholders in our proxy materials we are referring to the stockholders entitled to vote at the Annual Meeting consisting of holders of our Common Stock and Series A Stock.
Why are you holding a virtual meeting instead of a physical meeting?
We are embracing the latest technology to provide expanded access, improved communication and cost savings for our stockholders and our Company. Hosting a virtual meeting provides a consistent experience to all stockholders regardless of geographic location and enhances stockholder access
and engagement by enabling more of our stockholders to attend and participate in the Annual Meeting. Additionally, in light of the ongoing COVID-19 pandemic, we are choosing to host a virtual Annual Meeting this year to protect our stockholders and employees.
How can I attend the virtual Annual Meeting?
The Annual Meeting will have an opportunitybe a completely virtual meeting of stockholders conducted exclusively by a live audio webcast.
If you are a stockholder of record as of the close of business on January 4, 2021, the record date for the Annual Meeting, you will be able to makevirtually attend the
Annual Meeting, vote your shares and submit your questions online during the meeting by visiting www.virtualshareholdermeeting.com/AVYA2021. You will need to enter the 16-digit control number included on your notice, on your proxy card or on the instructions that accompanied your proxy materials.
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| 2021 Proxy Statement |
PROXY AND VOTING INFORMATION |
If you are a statementstockholder holding your shares in “street name” as of the close of business on January 4, 2021, you may gain access to the meeting by following the instructions in the voting instruction card provided by your broker, bank or other nominee. You may not vote your shares electronically at the Annual Meeting unless you receive a valid proxy from your brokerage firm, bank, broker dealer or other nominee holder.
The online meeting will begin promptly at 10:30 a.m., Eastern time. We encourage you to access the
meeting prior to the start time. Online check-in will begin at 10:15 a.m., Eastern time, and you should allow approximately 15 minutes for the online check-in procedures.
If you wish to submit a question for the Annual Meeting, you may do so in advance at www.virtualshareholdermeeting.com/AVYA2021, or you may type it into the dialogue box provided at any point during the virtual meeting (until the floor is closed to questions).
What can I do if they so desireI need technical assistance during the Annual Meeting?
If you encounter any difficulties accessing the virtual Annual Meeting webcast, please call the technical
support number that will be posted on the Annual Meeting website log-in page.
If I cannot participate in the live Annual Meeting webcast, can I vote or listen to it later?
You may vote your shares before the meeting by telephone, by mail, or electronically by visiting www.proxyvote.com and following the instructions on your proxy card. You do not need to access the Annual Meeting webcast to vote if you submitted your
vote via proxy in advance of the Annual Meeting. An audio replay of the Annual Meeting, including the questions answered during the meeting, will be available to respond to appropriate questions.at https://investors.avaya.com until our 2022 Annual Meeting of Stockholders.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of PwC as our independent registered public accounting firm. However, our Audit Committee is submitting the selection of PwC to our stockholders for ratification asWhat constitutes a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PwC. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.quorum?
The affirmative vote ofpresence at the holdersAnnual Meeting, virtually or by proxy, of a majority in voting power of the issued and outstanding shares of our stock, including both Common Stock and Series A Stock (on an
as-converted basis), entitled to vote (in person or by proxy) at the Annual Meeting constitutes a quorum for the transaction of business at such meeting.
How are abstentions and broker non-votes counted?
Abstentions and broker non-votes (described below) will be counted for purposes of determining whether a quorum is required to approvepresent at the ratificationAnnual Meeting. Abstentions will not affect the outcome of the selectionelection of PwC as our independent registered public accounting firm.directors. Abstentions will have the same effect as an “Against”votes against any matter other than the election of directors.
Under the New York Stock Exchange (“NYSE”) rules, brokers are permitted to vote their clients’ proxies in their own discretion as to certain “routine” proposals. However, where a proposal is considered “non-routine,” a broker who has not received instructions from its client generally does not have discretion to vote its clients’ uninstructed shares on that proposal. When a broker indicates on a proxy that it does not have discretionary authority to vote
certain shares on a particular proposal, the missing votes are referred to as “broker non-votes.” Those shares would be considered present for purposes of determining whether this matter has been approved. Since this proposala quorum is considered “routine” underpresent, but would not be counted in determining the number of votes present for, or determining the outcome of, the non-routine proposal. Under NYSE rules, noonly Proposal 2 (Ratification of Independent Accounting Firm) in this Proxy Statement is a routine matter while Proposal 1 (Election of Directors) and Proposal 3 (Say-on-Pay) are considered non-routine matters. Accordingly, your broker may not vote your shares with respect to these items if you have not provided instructions and broker non-votes are expectedwill not affect the outcome of these proposals.
| 2021 Proxy Statement | 55 |
PROXY AND VOTING INFORMATION |
What vote is required to approve each item to be voted on this proposal.at the Annual Meeting and how does the Board recommend I vote?
Pre-Approval Policies and Procedures
Our Audit Committeepre-approves all audit andnon-audit services provided by our independent registered public accounting firm. Our Audit Committee may delegate authority toOnly votes cast “For” a nominee will be counted in the election of directors. Votes that are withheld in respect of one or more membersnominees will result in those nominees receiving fewer votes but will not count as a vote against the nominees. Abstentions and broker non-votes (described above) are not counted for purposes of the Audit Committeeelection of directors and will not affect the outcome of such election. You have the right to provide suchpre-approvals, provided that such approvals are presentedvote “For” or “Against,” or to the Audit Committee at a subsequent meeting. This policy is set forth“Abstain” from voting in the charter of the Audit Committeeconnection with Proposals 2 and available under “Corporate Governance” in the Investor Relations section of our website at https://investors.avaya.com/corporate-governance/governance-policies. The referenced information on the Investor Relations section of our website is not a part of this Proxy Statement.
Principal Accountant Fees and Services
3. The following table provides information regardingsummarizes each proposal, the feesBoard’s recommendation, the affirmative vote required for the auditapproval and other services provided by PricewaterhouseCoopers LLP for the fiscal years ended September 30, 2018 and 2017:whether broker discretionary voting is allowed.
Fiscal Years Ended September 30, | ||||||||
(In thousands) | 2018 | 2017 | ||||||
Audit Fees | $ | 17,709 | $ | 17,896 | ||||
Audit-Related Fees | 1,315 | 339 | ||||||
Tax Fees | 1,102 | 1,118 | ||||||
All Other Fees | 4,588 | 9,125 | ||||||
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Total Fees | $ | 24,714 | $ | 28,478 | ||||
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Proposal Number | Proposal | Board Recommendation | Affirmative Vote Required for Approval | Broker Discretionary Voting Allowed | ||||
1 | Election of Directors | FOR ALL | Plurality vote | No | ||||
2 | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for Fiscal 2021 | FOR | Majority of votes cast | Yes | ||||
3 | Advisory approval of the Company’s named executive officers’ compensation | FOR | Majority of votes cast | No |
Audit FeesWill any other matters be voted on?
Audit fees consist of fees for professional services rendered for the audit of our annual consolidated financial statements and the review of our quarterly consolidated financial statements. Audit fees also include services that
are typically provided by the independent registered public accounting firm in connection with statutory audit and regulatory filings.
Audit-Related Fees
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees under this category include due diligence services and consultation and review in connection with the adoption of new accounting policies.
Tax Fees
Tax fees consist of fees for services to support the compliance with and filing of direct and indirect tax returns for our international subsidiaries and certain due diligence and consulting services.
All Other Fees
All other fees consist of fees for other permitted services including, but not limited to, advisory services.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 2019.
In connection with the Company’s consolidated financial statements for the year ended September 30, 2018, the Audit Committee has:
reviewedWe are not aware of any other matters that will be brought before the stockholders for a vote at the Annual Meeting. If any other matter is properly
brought before the Annual Meeting, your proxy will authorize each of Sara Bucholtz and discussedShefali Shah to vote on such matters in her discretion.
How do I vote?
Stockholders of record can vote as follows:
by telephone by calling the audited financial statements with management;toll-free number 1-800-690-6903 (have your proxy card in hand when you call);
discussed withby Internet before the Company���s independent registered public accounting firm, PwC,Annual Meeting at www.proxyvote.com (have your proxy card in hand when you access the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees; andwebsite);
receivedduring the Annual Meeting at www.virtualshareholdermeeting.com/AVYA2021 by using the 16-digit control number included with these proxy materials; or
by completing, dating, signing and promptly returning the accompanying proxy card, in the enclosed postage-paid, pre-addressed envelope provided for such purpose. No postage is necessary if the proxy card is mailed in the United States. Date and sign your name exactly as it appears on your proxy card.
We recommend that you vote by proxy even if you plan to virtually attend the Annual Meeting. As
described below, you can revoke your proxy or change your vote at the Annual Meeting.
The Internet and telephone voting procedures are designed to authenticate stockholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. The deadline for voting by telephone or electronically over the Internet is 11:59 p.m., New York City time, on Tuesday, March 2, 2021. Mailed proxy cards with respect to shares held of record should be mailed to allow sufficient time for delivery and tabulation.
If you hold your shares through a bank, broker or other nominee (also known as “street name”), such entity/person will give you separate instructions for voting your shares. “Street name” stockholders who wish to vote virtually at the Annual Meeting will need to obtain a proxy form from the institution that holds their shares and those institutions will likely require your instructions to be submitted before the deadline listed above.
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| 2021 Proxy Statement |
PROXY AND VOTING INFORMATION |
Can I change my vote after I return my proxy card?
Yes. Even after you have voted electronically through the Internet, by telephone or submitted your proxy card, you may change your vote at any time before the proxy is exercised at the Annual Meeting. You may change your vote by (i) sending written disclosuresnotice of revocation to Sara Bucholtz, Corporate Secretary, Avaya Holdings Corp., 2605 Meridian Parkway, Suite 200, Durham, North Carolina 27713; (ii) submitting a
valid proxy with a subsequent date by the Internet, telephone or mail; or (iii) virtually attending the Annual Meeting and voting. Your virtual attendance at the Annual Meeting will not by itself revoke a proxy that you have previously submitted. Stockholders who hold shares through a bank, broker or other nominee should consult with that party as to the procedures to be used for revoking a vote.
If I dissent to any matter to be voted on, what are my rights?
None of Delaware law (the state of incorporation of Avaya Holdings Corp.), our Certificate of Incorporation, as amended (including the Certificate of Designation for the Series A Stock), or our bylaws, as amended, provides for appraisal or other similar
rights for dissenting stockholders in connection with any of the proposals to be voted upon at the Annual Meeting. Accordingly, our stockholders will have no right to dissent and obtain payment for their shares.
What if I return a proxy card but do not make specific choices?
If we receive a signed and dated proxy card from you that does not specify how your shares are to be voted on one or more matters, your shares will be voted “For” the election of each of the director nominees and “For” Proposals No. 2 and 3. If any other mater is properly presented at the Annual Meeting, the individuals named as proxy holders on your proxy
card will vote your shares in the manner recommended by the Board on all proposals presented in the Proxy Statement and as they may determine in their best judgment as to any other matters properly presented for vote at the Annual Meeting.
What does it mean if I receive more than one proxy card or voting instruction form?
It means your shares are registered differently or are held in more than one account at the transfer agent
and/or with one or more banks, brokers or other nominees. Please vote all your shares.
How will votes be recorded?
Votes will be tabulated by Broadridge, and the letter from PwCresults will be certified by one or more Inspectors of Election, who are required to resolve impartially any interpretive questions as required by PCAOB Ethicsto the conduct of the vote. In tabulating votes, the Inspectors of Election will make a record of the number of shares voted for or against
each nominee and Independence Rule 3526, Communicationeach other matter voted upon, the number of shares abstaining with Audit Committees Concerning Independence,respect to each nominee or other matter, and the Audit Committee discussed with PwC that firm’s independence.number of shares held of record by banks, brokers or other nominees and present at the Annual Meeting but not voting.
Based on
What is “householding” and how does it affect me?
We have adopted the review“householding” procedure approved by the SEC, which allows us to deliver one set of documents to a household of stockholders instead of delivering a set to each stockholder in a household, unless we have been instructed otherwise. This procedure is more environmentally friendly and discussions withcost-effective because it reduces the Company’s managementnumber of copies to be printed and mailed. We and some banks,
brokers or other nominees send household annual reports and proxy statements, delivering a single annual report and proxy statement to multiple stockholders sharing an address unless we have been instructed otherwise.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate
| 2021 Proxy Statement | 57 |
PROXY AND VOTING INFORMATION |
annual report and proxy statement in the independentfuture, please notify your bank, broker or other nominee if your shares are held in a brokerage account or notify us at the address or telephone number below if you hold registered public accounting firm, as set forth above,shares. Alternatively, if, at any time, you and another stockholder sharing the Audit Committee recommendedsame address wish to participate in householding and prefer to receive a single copy of our annual report and proxy statement, please notify your bank, broker or
other nominee if your shares are held in a bank or brokerage account or notify us if you hold registered shares.
At any time, you may request a separate copy of our annual report or proxy statement by sending a written request to the Board thatCorporate Secretary at Avaya Holdings Corp., 2605 Meridian Parkway, Suite 200, Durham, North Carolina 27713, or by calling (908) 953-6000.
Who is paying for this proxy solicitation?
We will pay for the audited financial statementsentire costs of soliciting proxies. In addition to these proxy materials, our directors, officers and employees may also solicit proxies in person, by phone or other means of communications. Directors, officers and employees will not be includedpaid any additional compensation for soliciting proxies.
In addition, we have engaged D.F. King, a proxy solicitation firm, to assist us in the Company’s 2018solicitation of proxies for a fee of approximately $8,500, plus reasonable out-of-pocket expenses.
Where can I find the voting results of the Annual Report, for filing withMeeting?
We plan to announce preliminary voting results at the SEC.Annual Meeting and to publish the final results in a
current report on Form 8-K following the Annual Meeting.
MEMBERS OF THE AUDIT COMMITTEE:Who is Avaya Holdings Corp.’s transfer agent?
Stanley J. Sutula, III, Chair
Susan L. Spradley
Avaya Holdings Corp.’s transfer agent is American Stock Transfer and Trust Company LLC.
Scott Vogel
The foregoing report shall not be deemed incorporated by reference by any general statement or reference to this Proxy Statement into any filing under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under those Acts.
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| 2021 Proxy Statement |
PROCESS FOR DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS |
PROCESS FOR DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALSProcess for Director Nominations and Stockholder Proposals
The Nominating and Corporate Governance Committee is responsible for identifying, evaluating and recommending qualified candidates for election to the Board. The Nominating and Corporate Governance Committee will consider director candidates submitted by stockholders. Any stockholder wishing to submit a candidate for consideration should send the Corporate Secretary, at 4655 Great America2605 Meridian Parkway, Santa Clara, California 95054,Suite 200, Durham, North Carolina 27713, the information detailed in section 3.2 of our bylaws, which includes, among other things, the following:
Stockholder’s name, address, number of Common Shares (including any derivative interest related to Company shares and/or any short position in the Company’s securities) owned by the stockholder and any person controlling, or acting in concert with, that stockholder, any proxy, contract or other arrangement pursuant to which such stockholder or any person controlling, or acting in concert with, that stockholder, has a right to vote any Common Shares;
Candidate’s name, age, business address, residence address and number of Common Shares (including any derivative interest related to Company shares and/or any short position in the Company’s securities) owned directly or indirectly by the candidate;
A detailed resume describing, among other things, the candidate’s educational background, occupation, employment history and material outside commitments (e.g., memberships on other boards and committees, charitable foundations, etc.);
• | A supporting statement which describes the candidate’s reasons for seeking election to the Board, and documents the candidate’s ability to satisfy the director qualifications criteria described above under the heading “Board Composition and Director Qualifications”; |
A description of any arrangements or understandings between or among the stockholder, the candidate and/or any person controlling, or acting in concert with, that stockholder; and
A signed statement from the candidate confirming his/her willingness to serve on the Board, if elected.
The Corporate Secretary will promptly forward such materials to the Chair of the Nominating and Corporate Governance Committee and the Chairman of the Board. The Corporate Secretary also will keep copies of such materials for future reference by the Nominating and Corporate Governance Committee when filling Board positions.
To be timely, a stockholder’s notice must be received by the Corporate Secretary, (i) in the case of the 2020 annual meeting2022 Annual Meeting of stockholders,Stockholders, not later than the close of business on January 3, 2020,October 21, 2021, which is the ninetieth (90th) day before the anniversary of the mailing date of this year’s proxy statement, nor earlier than the opening of business on December 4, 2019,September 21 2021, which is the one hundred twentieth (120th) day before such anniversary date. If the annual meetingAnnual Meeting is called for a date that is more than thirty (30) days earlier or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the one hundred twentieth (120th) day before the meeting and not later than the later of (A) the close of business on the ninetieth (90th) day before the meeting or (B) the close of business on the tenth (10th) day following the day on which public announcement of the date of the annual meetingAnnual Meeting is first made by the Company. For a special meeting of stockholders called for the purpose of electing directors, such notice must be received not earlier than the opening of business on the one hundred twentieth (120th) day before the meeting and not later than the later of (A) the close of business on the ninetieth (90th) day before the meeting or (B) the close of business on the tenth (10th) day following the day on which public announcement of the date of the special meeting is first made by the Company.
Under its charter, the Nominating and Corporate Governance Committee must review with the Board, at least annually, the requisite qualifications, independence, skills and characteristics of Board candidates, members and
the Board as a whole. When assessing potential new directors, the
| 2021 Proxy Statement | 59 |
PROCESS FOR DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS |
Nominating and Corporate Governance Committee considers individuals from various and diverse backgrounds. While the selection of qualified directors is a complex and subjective process that requires consideration of many intangible factors, the
Nominating and Corporate Governance Committee believes candidates should generally meet the criteria listed above under the heading “Board Composition and Director Qualifications.”
Stockholder Proposals Forfor Inclusion in Our Proxy Materials
If you wish to submit a proposal for inclusion in next year’s proxy statement, we must receive the proposal on or before December 4, 2019,September 21, 2021, which is one hundred twenty (120) calendar days prior to the anniversary of this year’s mailing date, and it must otherwise comply with the requirements of Rule14a-8 of the Exchange Act. Upon timely receipt of any such
proposal, we will determine whether to include such proposal in the proxy statement and proxy in accordance with applicable regulations governing the solicitation of proxies. Any proposals should be submitted, in writing, to the Corporate Secretary, Avaya Holdings Corp., 4655 Great America2605 Meridian Parkway, Santa Clara, California 95054.Suite 200, Durham, North Carolina 27713.
Other Matters to be Brought Before the 20202022 Annual Meeting of Stockholders
Our bylaws also establish an advance notice procedure with regard to stockholder proposals that are not submitted for inclusion in the proxy statement but that a stockholder instead wishes to present directly at an annual meeting.Annual Meeting. Under our bylaws, notice of such stockholder proposal for the 2020 annual meeting2022 Annual Meeting of stockholdersStockholders must be delivered to the Corporate Secretary at the above address not earlier than the opening of business on December 4, 2019,September 21, 2021, which is one hundred twenty (120) calendar days prior to the anniversary of this year’s mailing date, and not later than the close of business on January 3, 2020,October 21, 2021, which is ninety (90) calendar days prior to the anniversary of this year’s mailing date.
If the date of the 2020 annual meeting2022 Annual Meeting is more than thirty (30) days before or more than sixty (60) days after the anniversary of our 20192021 Annual Meeting, then the notice of a stockholder proposal must be delivered no earlier than the opening of business on the one hundred twentieth (120th) day prior to the meeting and not later than the close of business on the later of (i) the 90th day prior to the meetingmeeting; or (ii) the 10th day after the Company first makes a public announcement of the meeting date.
All stockholder proposals submitted under our bylaws must comply with the requirements of the bylaws. The presiding officer of the Annual Meeting may refuse to acknowledge or introduce any such matter if notice of the matter is not received within the applicable deadlines or does not comply with our bylaws.
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| 2021 Proxy Statement |
ANNUAL REPORT |
ADDITIONAL FILINGSAnnual Report
Our consolidated financial statements for Fiscal 2020 are included in our Annual Report on Form 10-K that accompanies this Proxy Statement. This Proxy Statement and our Annual Report are posted on the
Investor Relations section of our website at https://investors.avaya.com/financial-info/sec-filings and are available from the SEC at its website at www.sec.gov.
Our Annual Reports on Form10-K, Quarterly Reports on Form10-Q, Current Reports on Form8-K and all amendments to those reports are available without charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. They may be accessed at the Investor Relations section of our website athttps://investors.avaya.com/financial-info/sec-filings and are available from the SEC at its website at www.sec.gov. Information on our website, including the information on the Investor Relations section referenced here and below,herein, is not considered part of this Proxy Statement.
In accordance with SEC rules, the information contained in the Report of the Audit Committee and the Report of the Compensation Committee shall not be deemed to be “soliciting material,” or to be “filed” with the SEC or subject to the SEC’s Regulation 14A, or to the liabilities of Section 18 of the Exchange Act,
except to the extent that we specifically request that the information be treated as soliciting material or specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
We encourage stockholders to voluntarily elect to receive our future proxy and annual report materials electronically. We believe in working to keep our environment cleaner and healthier and such elections will help us reduce our impact on the environment.
If you are a registered stockholder, please visit www.proxyvote.com for simple instructions (have your proxy card in hand when you access the website).
Beneficial stockholders can opt fore-delivery at www.proxyvote.com (have your proxy card in hand when you access the website) or by contacting their nominee.
Our consolidated financial statements for Fiscal 2018 are included in our Annual Report on Form10-K that accompanies this Proxy Statement. This Proxy Statement and our Annual Report are posted on the Investor Relations section of our website athttps://investors.avaya.com/financial-info/sec-filings and are available from the SEC at its website at www.sec.gov.
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. Should other matters be properly introduced at the 20192021 Annual Meeting, those persons named in the enclosed proxy will have discretionary authority to act on such matters and will vote the proxy in accordance with their best judgment.
By Order of the Board of Directors,
Shefali Shah
SeniorExecutive Vice President, Chief Administrative Officer
and General Counsel
April 3, 2019January 19, 2021
| 2021 Proxy Statement | 61 |
ANNEX A |
RECONCILIATION OFReconciliation of GAAP TOto NON-GAAPnon-GAAP (ADJUSTED) FINANCIAL MEASURES(Adjusted) Financial Measures
The information furnished in this Proxy Statement includes acontains non-GAAP financial measure labeled as “adjusted”measures that differsdiffer from measures calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Although GAAP requires that we report on our results for, including the periods October 1, 2017 through December 15, 2017 and December 16, 2017 through September 30, 2018 separately, management reviews the Company’s operating results for the twelve months ended September 30, 2018 by combining the results of these periods because such presentation provides the most meaningful comparison of our results. The Company cannot adequately benchmark the operating results of thefinancial measures labeled as 16-day“non-GAAP” period ended December 31, 2017 against any of the previous periods reported in its condensed consolidated financial statements and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends regarding the company’s overall performance. Management believes that the key performance metrics such as revenue, gross margin and operating income, among others, when combined for the three and nine months ended December 31, 2017 and September 30, 2018, respectively, provide meaningful comparisons to other periods and are useful in identifying current business trends.or “adjusted.”
EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings and the tabletables below.
We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation and it is used as a basis for calculating covenants in our credit agreements. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. We also present adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization and it presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years.
Adjusted EBITDA hasand adjusted EBITDA have limitations as an analytical tool.tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we considerdo not to beconsider indicative of our ongoing operations. operations but that still affect our net income.
In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss), however, these are expenses that may recur, may vary and are difficult to predict. In addition, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.
We also present the measuresnon-GAAP revenue, andnon-GAAP gross profitmargin, non-GAAP operating income and non-GAAP operating margin as a supplement to our unaudited condensed consolidated financial statements presented in accordance with GAAP. We believe thesenon-GAAP measures are the most meaningful for period to periodperiod-to-period comparisons because they exclude the impact of the earnings and charges noted in the applicable tables below that resulted from matters that we consider not to be indicative of our ongoing operations.
The following tablesCompany presents constant currency information to provide a framework to assess how the Company’s underlying business performance excluding the effect of foreign currency rate fluctuations. To present Successor, Predecessorthis information for current and combinedcomparative prior period results and reconcile revenue, gross profit and net income tofor entities reporting in currencies other than U.S. dollars, the amounts are converted into U.S. dollars at the exchange rate in effect on the last day of the Company’s prior fiscal year (i.e. September 30, 2019).
The presentation of these non-GAAP revenue,financial measures is not intended to be considered in isolation from, as substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from the non-GAAP gross profit andfinancial measures used by other companies. In addition, these non-GAAP Adjusted EBITDA.measures have limitations in that they do not reflect the amounts associated with the Company’s results of operations as determined in accordance with GAAP.
|
| 2021 Proxy Statement |
ANNEX A |
The following tables reconcile historical GAAP measures to non-GAAP measures.
Avaya Holdings Corp.
Supplemental ScheduleSchedules ofNon-GAAP Adjusted EBITDAReconciliations
(Unaudited)(Unaudited; in millions)
Successor | Predecessor | Combined | Predecessor | |||||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||||||||||
(In millions) | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | 3,264 | $ | (182 | ) | $ | (730 | ) | $ | (168 | ) | |||||||||
Interest expense | 169 | 14 | 183 | 246 | 471 | 452 | ||||||||||||||||||
Interest income | (5 | ) | (2 | ) | (7 | ) | (4 | ) | (1 | ) | (1 | ) | ||||||||||||
(Benefit from) provision for income taxes | (546 | ) | 459 | (87 | ) | (16 | ) | 11 | 70 | |||||||||||||||
Depreciation and amortization | 384 | 31 | 415 | 326 | 374 | 371 | ||||||||||||||||||
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EBITDA | 289 | 3,479 | 3,768 | 370 | 125 | 724 | ||||||||||||||||||
Impact of fresh start accounting adjustments | 196 | — | 196 | — | — | — | ||||||||||||||||||
Restructuring charges, net | 81 | 14 | 95 | 30 | 105 | 62 | ||||||||||||||||||
Advisory fees | 18 | 3 | 21 | 85 | 43 | 7 | ||||||||||||||||||
Acquisition and integration-related costs | 15 | — | 15 | 1 | 2 | 4 | ||||||||||||||||||
Reorganization items, net | — | (3,416 | ) | (3,416 | ) | 98 | — | — | ||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | — | 6 | ||||||||||||||||||
Third-party fees expensed in connection with the debt modification | — | — | — | — | — | 8 | ||||||||||||||||||
Third-party sales transformation costs | — | — | — | — | 5 | — | ||||||||||||||||||
Non-cash share-based compensation | 19 | — | 19 | 11 | 19 | 19 | ||||||||||||||||||
Impairment of indefinite-lived intangible assets | — | — | — | 65 | 100 | — | ||||||||||||||||||
Goodwill impairment | — | — | — | 52 | 442 | — | ||||||||||||||||||
Impairment of long-lived assets | — | — | — | 3 | — | — | ||||||||||||||||||
Loss (gain) on sale/disposal of long-lived assets, net | 4 | 1 | 5 | — | 1 | (1 | ) | |||||||||||||||||
Gain on sale of Networking business | — | — | — | (2 | ) | — | — | |||||||||||||||||
Change in certain tax indemnifications | — | — | — | — | — | (9 | ) | |||||||||||||||||
Loss on equity investment | — | — | — | — | 11 | — | ||||||||||||||||||
Resolution of certain legal matters | — | 37 | 37 | 64 | 106 | — | ||||||||||||||||||
Change in fair value of Preferred Series B embedded derivative | — | — | — | — | (73 | ) | 24 | |||||||||||||||||
Change in fair value of Emergence Date Warrants | 17 | — | 17 | — | — | — | ||||||||||||||||||
Securities registration fees | — | — | — | — | 1 | — | ||||||||||||||||||
Gain on foreign currency transactions | (28 | ) | — | (28 | ) | (2 | ) | (10 | ) | (14 | ) | |||||||||||||
Pension/OPEB/nonretirement postemployment retirement benefits and long-term disability costs | — | 17 | 17 | 90 | 63 | 69 | ||||||||||||||||||
Other | — | — | — | 1 | — | 1 | ||||||||||||||||||
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Adjusted EBITDA | $ | 611 | $ | 135 | $ | 746 | $ | 866 | $ | 940 | $ | 900 | ||||||||||||
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(In millions) | Fiscal year ended September 30, 2020 | Fiscal year ended September 30, 2019 | ||||||
GAAP Revenue | $ | 2,873 |
| $ | 2,887 |
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Adj. for fresh start accounting |
| 6 |
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| 21 |
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Non-GAAP Revenue | $ | 2,879 |
| $ | 2,908 |
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(In millions) | Fiscal year ended September 30, 2020 | Fiscal year ended September 30, 2019 | ||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin |
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Gross Profit | $ | 1,580 |
| $ | 1,575 |
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Items excluded: |
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Adj. for fresh start accounting |
| 7 |
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| 37 |
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Amortization of technology intangible assets | 174 | 174 | ||||||
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Non-GAAP Gross Profit | $ | 1,761 |
| $ | 1,786 |
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GAAP Gross Margin |
| 55.0 | % |
| 54.6 | % | ||
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Non-GAAP Gross Margin |
| 61.2 | % |
| 61.4 | % |
Annex A - 2
| 2021 Proxy Statement | A - 2 |
ANNEX A |
Avaya Holdings Corp.
ReconciliationSupplemental Schedules of GAAP toNon-GAAP ResultsReconciliations
(Unaudited)(Unaudited; in millions)
Successor | Predecessor | |||||||||||||||||||||||||||||||
(In millions) | Period from Dec. 16, 2017 through Sept. 30, 2018 | Period from Oct. 1, 2017 through Dec. 15, 2017 | Fiscal 2018 Combined Results | Adj. for Fresh Start Accounting | Amortization of Intangible Assets | Loss on Disposal of Long-lived Assets | Share- based Comp | Fiscal 2018 Non-GAAP Results | ||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||
Products | $ | 989 | $ | 253 | $ | 1,242 | $ | 63 | $ | — | $ | — | $ | — | $ | 1,305 | ||||||||||||||||
Services | 1,258 | 351 | 1,609 | 143 | — | — | — | 1,752 | ||||||||||||||||||||||||
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2,247 | 604 | 2,851 | 206 | — | — | — | 3,057 | |||||||||||||||||||||||||
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Costs | ||||||||||||||||||||||||||||||||
Products: | ||||||||||||||||||||||||||||||||
Costs | 372 | 84 | 456 | (21 | ) | — | (2 | ) | — | 433 | ||||||||||||||||||||||
Amortization of technology intangible assets | 135 | 3 | 138 | — | (138 | ) | — | — | — | |||||||||||||||||||||||
Services | 597 | 155 | 752 | (37 | ) | — | (2 | ) | (1 | ) | 712 | |||||||||||||||||||||
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1,104 | 242 | 1,346 | (58 | ) | (138 | ) | (4 | ) | (1 | ) | 1,145 | |||||||||||||||||||||
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GROSS PROFIT | $ | 1,143 | $ | 362 | $ | 1,505 | $ | 264 | $ | 138 | $ | 4 | $ | 1 | $ | 1,912 | ||||||||||||||||
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(In millions) | Fiscal year ended September 30, 2020 | Fiscal year ended September 30, 2019 | ||||||
Net loss | $ | (680 | ) | $ | (671 | ) | ||
Interest expense |
| 226 |
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| 237 |
| ||
Interest income |
| (6 | ) |
| (14 | ) | ||
Provision for income taxes |
| 62 |
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| 2 |
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Depreciation and amortization |
| 423 |
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| 443 |
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EBITDA | $ | 25 |
| $ | (3 | ) | ||
Impact of fresh start accounting adjustments |
| 1 |
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| 5 |
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Restructuring charges, net of sublease income |
| 20 |
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| 22 |
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Advisory fees |
| 40 |
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| 11 |
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Acquisition-related costs |
| — |
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| 9 |
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Share-based compensation |
| 30 |
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| 25 |
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Impairment charges |
| 624 |
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| 659 |
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Change in fair value of Emergence Date Warrants |
| 3 |
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| (29 | ) | ||
Loss on foreign currency transactions |
| 16 |
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| 8 |
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Gain on investments in equity and debt securities, net |
| (49 | ) |
| (1 | ) | ||
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Adjusted EBITDA | $ | 710 | $ | 706 | ||||
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Adjusted EBITDA Margin |
| 24.7 | % |
| 24.3 | % |
Fiscal year ended September 30, 2017 | ||||||||||||
(In millions) | GAAP Results | Amortization of Intangible Assets | Non-GAAP Results | |||||||||
Revenue | ||||||||||||
Products | $ | 1,437 | $ | — | $ | 1,437 | ||||||
Services | 1,835 | — | 1,835 | |||||||||
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3,272 | — | 3,272 | ||||||||||
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Costs | ||||||||||||
Products: | ||||||||||||
Costs | 499 | — | 499 | |||||||||
Amortization of technology intangible assets | 20 | (20 | ) | — | ||||||||
Services | 745 | — | 745 | |||||||||
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1,264 | (20 | ) | 1,244 | |||||||||
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GROSS PROFIT | $ | 2,008 | $ | 20 | $ | 2,028 | ||||||
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| 2021 Proxy Statement |
Fiscal year ended September 30, 2016 | ||||||||||||||||||||
(In millions) | GAAP Results | Amortization of Intangible Assets | Share- based Comp | Resolution of Certain Legal Matters | Non-GAAP Results | |||||||||||||||
Revenue | ||||||||||||||||||||
Products | $ | 1,755 | $ | — | $ | — | $ | — | $ | 1,755 | ||||||||||
Services | 1,947 | — | — | — | 1,947 | |||||||||||||||
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3,702 | — | — | — | 3,702 | ||||||||||||||||
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Products: | ||||||||||||||||||||
Costs | 629 | — | — | (2 | ) | 627 | ||||||||||||||
Amortization of technology intangible assets | 30 | (30 | ) | — | — | — | ||||||||||||||
Services | 785 | — | (1 | ) | — | 784 | ||||||||||||||
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1,444 | (30 | ) | (1 | ) | (2 | ) | 1,411 | |||||||||||||
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GROSS PROFIT | $ | 2,258 | $ | 30 | $ | 1 | $ | 2 | $ | 2,291 | ||||||||||
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AVAYA HOLDINGS CORP. 2605 MERIDIAN PARKWAY, SUITE 200 DURHAM, NORTH CAROLINA 27713 | VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 PM Eastern Time on March 2, 2021. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/AVYA2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 PM Eastern Time on March 2, 2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
Fiscal year ended September 30, 2015 | ||||||||||||||||
(In millions) | GAAP Results | Amortization of Intangible Assets | Share- based Comp | Non-GAAP Results | ||||||||||||
Revenue | ||||||||||||||||
Products | $ | 2,029 | $ | — | $ | — | $ | 2,029 | ||||||||
Services | 2,052 | — | — | 2,052 | ||||||||||||
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4,081 | — | — | 4,081 | |||||||||||||
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Costs | ||||||||||||||||
Products: | ||||||||||||||||
Costs | 742 | — | — | 742 | ||||||||||||
Amortization of technology intangible assets | 35 | (35 | ) | — | — | |||||||||||
Services | 835 | — | (2 | ) | 833 | |||||||||||
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1,612 | (35 | ) | (2 | ) | 1,575 | |||||||||||
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GROSS PROFIT | $ | 2,469 | $ | 35 | $ | 2 | $ | 2,506 | ||||||||
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
Annex A - 4
AVAYA HOLDINGS CORP. 4655 GREAT AMERICA PARKWAY SANTA CLARA, CA 95054 VOTE BY INTERNET—www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May 14, 2019. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BYPHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 14, 2019. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote at www.proxyvote.com and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E71263-P18748D28876-P47774 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY AVAYA HOLDINGS CORP. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) William D. Watkins 05) Stanley J. Sutula, III 02) James M. Chirico, Jr. 06) Scott D. Vogel 03) Stephan Scholl 07) Jacqueline E. Yeaney 04) Susan L. Spradley The Board of Directors recommends you vote FOR the following proposal: 2. To approve, on an advisory basis, our named executive officers’ compensation. The Board of Directors recommends you vote 1 YEAR on the following proposal: 3. To approve, on an advisory basis, the frequency of future advisory votes to approve our named executive officers’ compensation. The Board of Directors recommends you vote FOR the following proposal: 4. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019. NOTE: With respect to other matters that properly come before the 2019 Annual Meeting and any adjournment or postponement thereof, this proxy will be voted in the discretion of the named proxies. For address changes and/or comments, please check this box and write them on ! the back where indicated. Please indicate if you plan to attend this meeting. ! ! Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. For All Withhold All Except For All To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. For Against Abstain ! ! ! 1 Year 2 Years 3 Years Abstain For Against Abstain ! ! ! Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
AVAYA HOLDINGS CORP. | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||||||||||
The Board of Directors recommends you | ||||||||||||||||||||||||
1. | Election of Directors | ☐ | ☐ | ☐ | ||||||||||||||||||||
Nominees: | ||||||||||||||||||||||||
01) James M. Chirico, Jr. 05) Robert Theis | ||||||||||||||||||||||||
02) Stephan Scholl 06) Scott D. Vogel | ||||||||||||||||||||||||
03) Susan L. Spradley 07) William D. Watkins | ||||||||||||||||||||||||
04) Stanley J. Sutula, III 08) Jacqueline E. Yeaney | ||||||||||||||||||||||||
The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | |||||||||||||||||||||
2. | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2021. | ☐ | ☐ | ☐ | ||||||||||||||||||||
3. | Advisory approval of the Company’s named executive officers’ compensation. | ☐ | ☐ | ☐ | ||||||||||||||||||||
NOTE: With respect to other matters that properly come before the 2021 Annual Meeting and any adjournment or postponement thereof, this proxy will be voted in the discretion of the named proxies. | ||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
ADMISSION TICKET 2019 ANNUAL MEETING OF STOCKHOLDERS Wednesday, May 15, 2019 9:00 a.m. Eastern Time Avaya Holdings Corp. 2605 Meridian Parkway Durham, North Carolina 27713 This admission ticket admits only the named stockholder. Note: If you plan on attending the Annual Meeting in person, please bring, in addition to this Admission Ticket, a proper form of identification. The use of video or still photography at the Annual Meeting is not permitted. For the safety of attendees, all bags, packages and briefcases are subject to inspection. Your compliance is appreciated. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice &and Proxy Statement Form 10-K and Form 10-K/A10-K are available at www.proxyvote.com. AVAYA HOLDINGS CORP. Annual Meeting of Stockholders May 15, 2019 9:00 AM ET This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Sara R. Bucholtz and Shefali Shah, or either of them, as proxies, each with the power to appoint their substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of AVAYA HOLDINGS CORP. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM ET on May 15, 2019, at the Company’s offices located at 2605 Meridian Parkway, Durham, North Carolina 27713, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Address Changes/Comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side
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D28877-P47774
AVAYA HOLDINGS CORP. Annual Meeting of Stockholders March 3, 2021 10:30 AM ET This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Shefali Shah and Sara Bucholtz, or either of them, as proxies, each with the power to appoint their substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of AVAYA HOLDINGS CORP. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 10:30 AM ET on March 3, 2021, online at www.virtualshareholdermeeting.com/AVYA2021, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side |