Amazing. In a bankruptcy filing yesterday, Avaya asked the court to approve a $3.7 MILLION bonus pool for the "Key Employees". Who are these key employees, you ask? No, not the people in the field who are killing themselves to keep this sinking ship afloat. No, not the lower level leaders who have to lead their troops into battle everyday. It is the EIC, who sit in their ivory towers making ridiculous comments and sending stupid emails about how we need to work harder and that everything is fine. Amazing. After driving the company into bankruptcy, these people have the unmitigated audacity to request huge bonuses for themselves because they are 'vital to the performance of the company". Their arrogance is appalling. The only thing they deserve is to be removed immediately and some real leaders appointed. You can't make this stuff up and it's all in the bankruptcy records. Here is an excerpt:
The Debtors’ chapter 11 cases pose a singular challenge in this regard: unlike
many reorganizations, the Debtors’ broader industry is not experiencing a general downturn;
there is no “wave” of bankruptcies being undertaken by communications or software providers
like the Debtors, and competitors like Cisco and Microsoft are not similarly required to
“sell through” a chapter 11. Rather, the Debtors may be viewed as unique among competitors
and distribution partners as the “only” global communications provider operating in chapter 11,
which is matter of acute importance where distributors and end users alike have a choice as to
utilize the Debtors’ products and services or those of a competitor. Thus, the Debtors and their
5 Recent articles and competitor advertisements are annexed as Exhibit D attached hereto.
6 Cf. Matt Jarzemsky, Avaya Weighing Bankruptcy Filing, Sale of Call-Center Software Unit, Wall Street
Journal, Nov. 24, 2016, https://www.wsj.com/articles/avaya-weighing-bankruptcy-filing-sale-of-call-centersoftware-
unit-1479941695.
management team must convince end users and distribution partners to stay the course, even
where these chapter 11 cases have caused the Debtors to stand out in the market.
- To this end, the Debtors and their stakeholders require outperformance from the
11 members of the Debtors’ Executive Committee (collectively, the “KEIP Participants”) to
achieve their business and restructuring goals. Thus, the Debtors announced at the outset of
these chapter 11 cases that they intended to continue their prepetition incentive program with
respect to the KEIP Participants on a postpetition basis—although the Debtors did not and do not
seek authority to pay any prepetition balances outstanding with respect to this program.7 This
decision recognized the business reality that incentives are an appropriate and necessary tool to
drive outperformance for any enterprise, including businesses operating in chapter 11. And, now
that these chapter 11 cases are past their initial stages, Debtors presently seek authority to pay
incentive awards for their Key Employee Incentive Plan (the “KEIP”) for their second fiscal
quarter ending March 31, 2017 (“2Q 2017”), in each case subject to the achievement of defined
Adjusted EBTIDA goals for that period.
- Through the KEIP, the Debtors will continue their incentive program for the
KEIP Participants for 2Q 2017, which plan will provide a maximum award opportunity of
approximately $3.7 million in the aggregate if the Debtors’ achieve an Adjusted EBITDA target
of $205 million during their second fiscal quarter ended March 31, 2017 (“Target Adjusted
EBITDA”), with an award opportunity of approximately $3.0 million in the aggregate upon the
achievement of an Adjusted EBITDA threshold of $170 million (“Threshold Adjusted
EBITDA”, and together with the Target Adjusted EBITDA, the “Performance Goals”). These
7 See Debtors’ Motion Seeking Entry of Interim and Final Orders (I) Authorizing the Debtors to (A) Pay
Prepetition Wages, Salaries, Other Compensation, and Reimbursable Expenses and (B) Continue Employee Benefits...
Performance Goals reflect the same projected performance presented to the Debtors’ Board
Directors prior to the commencement of these chapter 11 cases, have been vetted by the Debtors’
independent Chief Restructuring Officer, and were subsequently ratified by the Compensation
Committee of the Debtors’ Board of Directors on February 21, 2017. Additionally, the
$3.0-$3.7 million award pool proposed under the KEIP reflects a voluntary, 35% reduction to
award levels utilized by the Debtors for the KEIP program on a prepetition basis.8
- As set forth in the Koza Declaration, achieving the Debtors’ Performance Goals
requires a substantial “stretch” by the KEIP Participants at both threshold and maximum levels.
As a general matter, the quarter ending March 31 is historically the Debtors’ most challenging
financial period in any given fiscal year as a result of, among other things, the drop-off in large
scale capital expenditures that more typically occur towards the calendar year end. Put another
way, revenues and cash flows already have a declining trajectory in this period. And, as noted
above, competitors are aggressively using the overhang of these chapter 11 cases to ramp up
pressure on the Debtors’ market presence, further increasing these operational challenges.