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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-1119726
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification No.)
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4655 Great America Parkway
Santa Clara, California |
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95054
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
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Smaller Reporting Company
¨
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Emerging growth company
¨
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(Do not check if a smaller
reporting company)
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Item
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Description
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Page
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1.
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2.
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3.
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4.
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1.
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1A.
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2.
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3.
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4.
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5.
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6.
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Item 1.
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Financial Statements.
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Successor
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|
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Predecessor
|
||||||||
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Period from December 16, 2017 through December 31, 2017
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Period from October 1, 2017 through December 15, 2017
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Three months ended December 31, 2016
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||||||
REVENUE
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|
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||||||
Products
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$
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71
|
|
|
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$
|
253
|
|
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$
|
401
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Services
|
77
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|
|
|
351
|
|
|
474
|
|
|||
|
148
|
|
|
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604
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|
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875
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|||
COSTS
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||||||
Products:
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|
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||||||
Costs
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33
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|
|
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84
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|
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145
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|||
Amortization of technology intangible assets
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7
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|
|
|
3
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|
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5
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Services
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30
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|
|
|
155
|
|
|
190
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|||
|
70
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|
|
|
242
|
|
|
340
|
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|||
GROSS PROFIT
|
78
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|
|
|
362
|
|
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535
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|||
OPERATING EXPENSES
|
|
|
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||||||
Selling, general and administrative
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50
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|
|
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264
|
|
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336
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|||
Research and development
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9
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38
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|
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62
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|||
Amortization of intangible assets
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7
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|
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10
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|
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57
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|||
Restructuring charges, net
|
10
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14
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10
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|||
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76
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|
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326
|
|
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465
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|||
OPERATING INCOME
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2
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|
|
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36
|
|
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70
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|||
Interest expense
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(9
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)
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|
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(14
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)
|
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(174
|
)
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|||
Other (expense) income, net
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(2
|
)
|
|
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(2
|
)
|
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4
|
|
|||
Reorganization items, net
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—
|
|
|
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3,416
|
|
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—
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(LOSS) INCOME BEFORE INCOME TAXES
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(9
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)
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3,436
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|
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(100
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)
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|||
Benefit from (provision for) income taxes
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246
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(459
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)
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(3
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)
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NET INCOME (LOSS)
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$
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237
|
|
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$
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2,977
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$
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(103
|
)
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Net income (loss) per share:
|
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||||||
Basic
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$
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2.16
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$
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5.19
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$
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(0.22
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)
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Diluted
|
$
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2.15
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$
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5.19
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$
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(0.22
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)
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Weighted average shares outstanding:
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||||||
Basic
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109.8
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497.3
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497.0
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|||
Diluted
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110.3
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497.3
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497.0
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Successor
|
|
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Predecessor
|
||||||||
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Period from December 16, 2017 through December 31, 2017
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Period from October 1, 2017 through December 15, 2017
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Three months ended December 31, 2016
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||||||
Net income (loss)
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$
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237
|
|
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$
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2,977
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$
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(103
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)
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Other comprehensive (loss) income:
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||||||
Pension, post-retirement and postemployment benefit-related items, net of income taxes of $58 for the period from October 1, 2017 through December 15, 2017 and $6 for the three months ended December 31, 2016
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—
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655
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14
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|||
Cumulative translation adjustment, net of income taxes of $(4) for the three months ended December 31, 2016
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(13
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)
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3
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23
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|||
Other comprehensive (loss) income
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(13
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)
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658
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37
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Elimination of Predecessor Company accumulated other comprehensive loss
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—
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790
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—
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|||
Total comprehensive income (loss)
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$
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224
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|
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$
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4,425
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$
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(66
|
)
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Successor
|
|
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Predecessor
|
||||
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December 31, 2017
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September 30, 2017
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||||
ASSETS
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Current assets:
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||||
Cash and cash equivalents
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$
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417
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$
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876
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Accounts receivable, net
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413
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536
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Inventory
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124
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96
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Other current assets
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230
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269
|
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TOTAL CURRENT ASSETS
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1,184
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1,777
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Property, plant and equipment, net
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306
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200
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||
Deferred income taxes, net
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31
|
|
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—
|
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||
Intangible assets, net
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3,421
|
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311
|
|
||
Goodwill
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2,632
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3,542
|
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Other assets
|
53
|
|
|
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68
|
|
||
TOTAL ASSETS
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$
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7,627
|
|
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$
|
5,898
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LIABILITIES
|
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||||
Current liabilities:
|
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||||
Debt maturing within one year
|
$
|
—
|
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$
|
725
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|
Long-term debt, current portion
|
29
|
|
|
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—
|
|
||
Accounts payable
|
304
|
|
|
|
282
|
|
||
Payroll and benefit obligations
|
124
|
|
|
|
127
|
|
||
Deferred revenue
|
384
|
|
|
|
614
|
|
||
Business restructuring reserve
|
36
|
|
|
|
35
|
|
||
Other current liabilities
|
153
|
|
|
|
90
|
|
||
TOTAL CURRENT LIABILITIES
|
1,030
|
|
|
|
1,873
|
|
||
Non-current liabilities:
|
|
|
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|
||||
Long-term debt, net of current portion
|
2,867
|
|
|
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—
|
|
||
Pension obligations
|
793
|
|
|
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513
|
|
||
Other post-retirement obligations
|
215
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|
|
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—
|
|
||
Deferred income taxes, net
|
444
|
|
|
|
32
|
|
||
Business restructuring reserve
|
34
|
|
|
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34
|
|
||
Other liabilities
|
377
|
|
|
|
170
|
|
||
TOTAL NON-CURRENT LIABILITIES
|
4,730
|
|
|
|
749
|
|
||
LIABILITIES SUBJECT TO COMPROMISE
|
—
|
|
|
|
7,705
|
|
||
TOTAL LIABILITIES
|
5,760
|
|
|
|
10,327
|
|
||
Commitments and contingencies (Note 20)
|
|
|
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|
||||
Predecessor equity awards on redeemable shares
|
—
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|
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7
|
|
||
Predecessor preferred stock, $0.001 par value, 250,000 shares authorized at September 30, 2017
|
|
|
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|
||||
Convertible Series B preferred stock; 48,922 shares issued and outstanding at September 30, 2017
|
—
|
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|
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393
|
|
||
Series A preferred stock; 125,000 shares issued and outstanding at September 30, 2017
|
—
|
|
|
|
184
|
|
||
Successor preferred stock, $0.01 par value; 55,000,000 authorized, no shares issued or outstanding at December 31, 2017
|
|
|
|
|
—
|
|
||
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
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|
||||
Predecessor common stock, $0.001 par value; 750,000,000 shares authorized, 494,768,243 issued and outstanding at September 30, 2017
|
—
|
|
|
|
—
|
|
||
Successor common stock, $0.01 par value; 550,000,000 shares authorized, 110,000,000 issued and 109,794,137 outstanding at December 31, 2017
|
1
|
|
|
|
—
|
|
||
Additional paid-in capital
|
1,642
|
|
|
|
2,389
|
|
||
Retained earnings (Accumulated deficit)
|
237
|
|
|
|
(5,954
|
)
|
||
Accumulated other comprehensive loss
|
(13
|
)
|
|
|
(1,448
|
)
|
||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
|
1,867
|
|
|
|
(5,013
|
)
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$
|
7,627
|
|
|
|
$
|
5,898
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Number
|
|
Par Value
|
|
Additional
Paid-in Capital |
|
(Accumulated
Deficit) Retained Earnings |
|
Accumulated
Other Comprehensive (Loss) Income |
|
Total
Stockholders' (Deficit) Equity |
|||||||||||
Balance as of September 30, 2017 (Predecessor)
|
|
494.8
|
|
|
$
|
—
|
|
|
$
|
2,389
|
|
|
$
|
(5,954
|
)
|
|
$
|
(1,448
|
)
|
|
$
|
(5,013
|
)
|
Issuance of common stock, net of shares redeemed and cancelled, under employee stock option plan
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Amortization of share-based compensation
|
|
|
|
|
|
3
|
|
|
|
|
|
|
3
|
|
|||||||||
Accrued dividends on Series A preferred stock
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
(2
|
)
|
|||||||||
Accrued dividends on Series B preferred stock
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
(4
|
)
|
|||||||||
Reclassifications to equity awards on redeemable shares
|
|
|
|
|
|
1
|
|
|
|
|
|
|
1
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
2,977
|
|
|
|
|
2,977
|
|
|||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
658
|
|
|
658
|
|
|||||||||
Balance as of December 15, 2017 (Predecessor)
|
|
494.8
|
|
|
—
|
|
|
2,387
|
|
|
(2,977
|
)
|
|
(790
|
)
|
|
(1,380
|
)
|
|||||
Cancellation of Predecessor equity
|
|
(494.8
|
)
|
|
|
|
(2,387
|
)
|
|
2,977
|
|
|
790
|
|
|
1,380
|
|
||||||
Balance as of December 15, 2017 (Predecessor)
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Number
|
|
Par Value
|
|
Additional
Paid-in Capital |
|
(Accumulated
Deficit) Retained Earnings |
|
Accumulated
Other Comprehensive (Loss) Income |
|
Total
Stockholders' Equity (Deficit) |
|||||||||||
Balance as of December 15, 2017 (Predecessor)
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of Successor common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock issued for Predecessor debt
|
|
103.7
|
|
|
1
|
|
|
1,548
|
|
|
|
|
|
|
1,549
|
|
|||||||
Common stock issued for Pension Benefit Guaranty Corporation
|
|
6.1
|
|
|
|
|
90
|
|
|
|
|
|
|
90
|
|
||||||||
Common stock issued for general unsecured creditors or Predecessor debt
|
|
0.2
|
|
|
|
|
3
|
|
|
|
|
|
|
3
|
|
||||||||
Balance as of December 15, 2017 (Predecessor)
|
|
110.0
|
|
|
$
|
1
|
|
|
$
|
1,641
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 15, 2017 (Successor)
|
|
110.0
|
|
|
1
|
|
|
1,641
|
|
|
—
|
|
|
—
|
|
|
1,642
|
|
|||||
Issuance of common stock, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Amortization of share-based compensation
|
|
|
|
|
|
1
|
|
|
|
|
|
|
1
|
|
|||||||||
Net income
|
|
|
|
|
|
|
|
237
|
|
|
|
|
237
|
|
|||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
(13
|
)
|
|||||||||
Balance as of December 31, 2017 (Successor)
|
|
110.0
|
|
|
$
|
1
|
|
|
$
|
1,642
|
|
|
$
|
237
|
|
|
$
|
(13
|
)
|
|
$
|
1,867
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
22
|
|
|
|
31
|
|
|
90
|
|
|||
Share-based compensation
|
1
|
|
|
|
—
|
|
|
2
|
|
|||
Amortization of debt issuance costs
|
—
|
|
|
|
—
|
|
|
36
|
|
|||
Accretion of debt discount
|
—
|
|
|
|
—
|
|
|
25
|
|
|||
Provision for uncollectible receivables
|
1
|
|
|
|
(1
|
)
|
|
1
|
|
|||
Deferred income taxes, net
|
(245
|
)
|
|
|
455
|
|
|
(1
|
)
|
|||
Post-retirement curtailment
|
—
|
|
|
|
—
|
|
|
(4
|
)
|
|||
Loss on disposal of long-lived assets
|
—
|
|
|
|
1
|
|
|
—
|
|
|||
Unrealized gain on foreign currency exchange
|
(4
|
)
|
|
|
—
|
|
|
(8
|
)
|
|||
Reorganization items:
|
|
|
|
|
|
|
||||||
Net gain on settlement of Liabilities subject to compromise
|
—
|
|
|
|
(1,804
|
)
|
|
—
|
|
|||
Payment to PBGC
|
—
|
|
|
|
(340
|
)
|
|
—
|
|
|||
Payment to pension trust
|
—
|
|
|
|
(49
|
)
|
|
—
|
|
|||
Payment of unsecured claims
|
—
|
|
|
|
(58
|
)
|
|
—
|
|
|||
Fresh start adjustments, net
|
—
|
|
|
|
(1,671
|
)
|
|
—
|
|
|||
Non-cash and financing related reorganization items, net
|
—
|
|
|
|
26
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable
|
5
|
|
|
|
14
|
|
|
54
|
|
|||
Inventory
|
3
|
|
|
|
(2
|
)
|
|
1
|
|
|||
Accounts payable
|
27
|
|
|
|
(40
|
)
|
|
(22
|
)
|
|||
Payroll and benefit obligations
|
(22
|
)
|
|
|
16
|
|
|
(56
|
)
|
|||
Business restructuring reserve
|
(3
|
)
|
|
|
(7
|
)
|
|
(18
|
)
|
|||
Deferred revenue
|
44
|
|
|
|
28
|
|
|
1
|
|
|||
Other assets and liabilities
|
—
|
|
|
|
(16
|
)
|
|
(42
|
)
|
|||
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
|
66
|
|
|
|
(440
|
)
|
|
(44
|
)
|
|||
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Capital expenditures
|
(2
|
)
|
|
|
(13
|
)
|
|
(14
|
)
|
|||
Acquisition of businesses, net of cash acquired
|
—
|
|
|
|
—
|
|
|
(4
|
)
|
|||
Restricted cash
|
10
|
|
|
|
21
|
|
|
—
|
|
|||
Other investing activities, net
|
—
|
|
|
|
—
|
|
|
3
|
|
|||
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
|
8
|
|
|
|
8
|
|
|
(15
|
)
|
|||
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from Term Loan Credit Agreement
|
—
|
|
|
|
2,896
|
|
|
—
|
|
|||
Repayment of DIP financing
|
—
|
|
|
|
(725
|
)
|
|
—
|
|
|||
Repayment of first lien debt
|
—
|
|
|
|
(2,061
|
)
|
|
—
|
|
|||
Repayment of Foreign ABL
|
—
|
|
|
|
—
|
|
|
(5
|
)
|
|||
Repayment of Domestic ABL
|
—
|
|
|
|
—
|
|
|
(22
|
)
|
|||
Repayment of long-term debt, including adequate protection payments
|
—
|
|
|
|
(111
|
)
|
|
(6
|
)
|
|||
Debt issuance costs
|
—
|
|
|
|
(97
|
)
|
|
—
|
|
|||
Repayments of borrowings on revolving loans under the Senior Secured Credit Agreement
|
—
|
|
|
|
—
|
|
|
(18
|
)
|
|||
Repayments of borrowings under sale-leaseback transaction
|
—
|
|
|
|
(4
|
)
|
|
(5
|
)
|
|||
Other financing activities, net
|
—
|
|
|
|
—
|
|
|
(1
|
)
|
|||
NET CASH USED FOR FINANCING ACTIVITIES
|
—
|
|
|
|
(102
|
)
|
|
(57
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
3
|
|
|
|
(2
|
)
|
|
(11
|
)
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
77
|
|
|
|
(536
|
)
|
|
(127
|
)
|
|||
Cash and cash equivalents at beginning of period
|
340
|
|
|
|
876
|
|
|
336
|
|
|||
Cash and cash equivalents at end of period
|
$
|
417
|
|
|
|
$
|
340
|
|
|
$
|
209
|
|
1.
|
Background and Basis of Presentation
|
•
|
Debtor-in-Possession Credit Agreement.
The Company paid in full the debtor-in-possession credit agreement (the "DIP Credit Agreement") in the amount of
$725 million
;
|
•
|
Predecessor Equity and Indebtedness.
The Debtors' obligations under stock certificates, equity interests, and / or any other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or ownership interest in, the Debtors or giving rise to any claim or equity interest were cancelled, except as provided under the Plan of Reorganization;
|
•
|
Successor Equity.
The Company's certificate of incorporation was amended and restated to authorize the issuance of
605.0 million
shares of Successor Company stock, consisting of
55.0 million
shares of preferred stock, par value
$0.01
per share, and
550.0 million
shares of common stock, par value
$0.01
per share, of which
110.0 million
shares of common stock were issued (as discussed below);
|
•
|
Exit Financing.
The Successor Company entered into (1) a term loan credit agreement ("the Term Loan Credit Agreement") for a principal amount of
$2,925 million
maturing on
December 15, 2024
, and (2) a
$300 million
asset-based revolving credit facility (the "ABL Credit Agreement") maturing on
December 15, 2022
;
|
•
|
First Lien Debt Claims.
All of the Predecessor Company's outstanding obligations under the variable rate term B-3, B-4, B-6, and B-7 loans and the
7%
and
9%
senior secured notes (collectively, the "Predecessor first lien obligations") were cancelled, and the holders of claims under the Predecessor first lien obligations received
99.3 million
shares of Successor Company common stock. In addition, the holders of the Predecessor first lien obligations received cash in the amount of
$2,061 million
;
|
•
|
Second Lien Debt Claims.
All the Predecessor Company's outstanding obligations under the
10.50%
senior secured notes (the "Predecessor second lien obligations") were cancelled, and the holders of claims under the Predecessor second lien obligations received
4.4 million
shares of Successor Company common stock. In addition, holders of the Predecessor second lien obligations received warrants to purchase
5.6 million
shares of Successor Company common stock at an exercise price of
$25.55
per warrant (the "Warrants");
|
•
|
Claims of Pension Benefit Guaranty Corporation ("PBGC").
The Predecessor Company's outstanding obligations under the Avaya Inc. Pension Plan for Salaried Employees ("APPSE") were terminated and transferred to the PBGC. The PBGC received
6.1 million
shares of Successor Company common stock and
$340 million
in cash; and
|
•
|
General Unsecured Claims.
Holders of the Predecessor Company's general unsecured claims will receive their pro rata share of the general unsecured recovery pool. A liquidating trust was established in the amount of
$58 million
for the benefit of the general unsecured claims. Included in the
110.0 million
Successor Company common stock issued are
0.2 million
additional shares of common stock that have been issued (but are not outstanding) for the benefit of the general unsecured creditors. The general unsecured creditors will receive a total of
$58 million
in cash and common stock. Any excess cash and / or common stock not distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations.
|
(1)
|
The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices and was estimated to be
99%
of par value.
|
(2)
|
The following assumptions were used when measuring the fair value of the U.S. pension, non-U.S. pension, and post-retirement benefit plans: weighted-average return on assets of
7.75%
,
3.80%
and
5.90%
, and weighted-average discount rate to measure plan obligations of
3.70%
,
1.52%
and
3.77%
, respectively.
|
(3)
|
The fair value of the Warrants was estimated using the Black-Scholes pricing model.
|
(In millions)
|
|
||
Enterprise value
|
$
|
5,721
|
|
Plus:
|
|
||
Non-debt current liabilities
|
955
|
|
|
Non-debt non-current liabilities
|
2,090
|
|
|
Excess cash and cash equivalents
|
220
|
|
|
Less:
|
|
||
Pension and other post-retirement obligations, net of deferred taxes
|
(856
|
)
|
|
Capital lease obligations
|
(20
|
)
|
|
Change in net deferred tax liabilities from reorganization
|
(510
|
)
|
|
Warrants issued upon emergence
|
(17
|
)
|
|
Reorganization value of Successor assets
|
$
|
7,583
|
|
(In millions)
|
Predecessor Company
|
|
Reorganization Adjustments
|
|
|
|
Fresh Start Adjustments
|
|
|
|
Successor Company December 15, 2017
|
||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
744
|
|
|
$
|
(404
|
)
|
|
(1)
|
|
$
|
—
|
|
|
|
|
$
|
340
|
|
Accounts receivable, net
|
523
|
|
|
—
|
|
|
|
|
(106
|
)
|
|
(21,29)
|
|
417
|
|
||||
Inventory
|
98
|
|
|
—
|
|
|
|
|
29
|
|
|
(22)
|
|
127
|
|
||||
Other current assets
|
366
|
|
|
(58
|
)
|
|
(2)
|
|
(66
|
)
|
|
(23)
|
|
242
|
|
||||
TOTAL CURRENT ASSETS
|
1,731
|
|
|
(462
|
)
|
|
|
|
(143
|
)
|
|
|
|
1,126
|
|
||||
Property, plant and equipment, net
|
194
|
|
|
—
|
|
|
|
|
116
|
|
|
(24)
|
|
310
|
|
||||
Deferred income taxes, net
|
—
|
|
|
48
|
|
|
(3)
|
|
(17
|
)
|
|
(25)
|
|
31
|
|
||||
Intangible assets, net
|
298
|
|
|
—
|
|
|
|
|
3,137
|
|
|
(26)
|
|
3,435
|
|
||||
Goodwill
|
3,541
|
|
|
—
|
|
|
|
|
(909
|
)
|
|
(27)
|
|
2,632
|
|
||||
Other assets
|
70
|
|
|
6
|
|
|
(4)
|
|
(27
|
)
|
|
(28)
|
|
49
|
|
||||
TOTAL ASSETS
|
$
|
5,834
|
|
|
$
|
(408
|
)
|
|
|
|
$
|
2,157
|
|
|
|
|
$
|
7,583
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Debt maturing within one year
|
$
|
725
|
|
|
$
|
(696
|
)
|
|
(5)
|
|
$
|
—
|
|
|
|
|
$
|
29
|
|
Accounts payable
|
325
|
|
|
(49
|
)
|
|
(6)
|
|
—
|
|
|
|
|
276
|
|
||||
Payroll and benefit obligations
|
123
|
|
|
23
|
|
|
(7)
|
|
—
|
|
|
|
|
146
|
|
||||
Deferred revenue
|
627
|
|
|
50
|
|
|
(8)
|
|
(341
|
)
|
|
(29)
|
|
336
|
|
||||
Business restructuring reserve
|
35
|
|
|
3
|
|
|
(9)
|
|
—
|
|
|
|
|
38
|
|
||||
Other current liabilities
|
97
|
|
|
65
|
|
|
(6,10)
|
|
(3
|
)
|
|
(30)
|
|
159
|
|
||||
TOTAL CURRENT LIABILITIES
|
1,932
|
|
|
(604
|
)
|
|
|
|
(344
|
)
|
|
|
|
984
|
|
||||
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt, net of current portion
|
—
|
|
|
2,771
|
|
|
(11)
|
|
96
|
|
|
(31)
|
|
2,867
|
|
||||
Pension obligations
|
539
|
|
|
246
|
|
|
(12)
|
|
—
|
|
|
|
|
785
|
|
||||
Other post-retirement obligations
|
—
|
|
|
212
|
|
|
(13)
|
|
—
|
|
|
|
|
212
|
|
||||
Deferred income taxes, net
|
28
|
|
|
113
|
|
|
(14)
|
|
548
|
|
|
(32)
|
|
689
|
|
||||
Business restructuring reserve
|
26
|
|
|
4
|
|
|
(9)
|
|
4
|
|
|
(33)
|
|
34
|
|
||||
Other liabilities
|
180
|
|
|
233
|
|
|
(8,15)
|
|
(43
|
)
|
|
(29,34)
|
|
370
|
|
||||
TOTAL NON-CURRENT LIABILITIES
|
773
|
|
|
3,579
|
|
|
|
|
605
|
|
|
|
|
4,957
|
|
||||
LIABILITIES SUBJECT TO COMPROMISE
|
7,585
|
|
|
(7,585
|
)
|
|
(16)
|
|
—
|
|
|
|
|
—
|
|
||||
TOTAL LIABILITIES
|
10,290
|
|
|
(4,610
|
)
|
|
|
|
261
|
|
|
|
|
5,941
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Equity awards on redeemable shares
|
6
|
|
|
(6
|
)
|
|
(17)
|
|
—
|
|
|
|
|
—
|
|
||||
Preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Series B
|
397
|
|
|
(397
|
)
|
|
(17)
|
|
—
|
|
|
|
|
—
|
|
||||
Series A
|
186
|
|
|
(186
|
)
|
|
(17)
|
|
—
|
|
|
|
|
—
|
|
||||
STOCKHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Common stock (Successor)
|
—
|
|
|
1
|
|
|
(18)
|
|
—
|
|
|
|
|
1
|
|
||||
Additional paid-in capital (Successor)
|
—
|
|
|
1,641
|
|
|
(18)
|
|
—
|
|
|
|
|
1,641
|
|
||||
Common stock (Predecessor)
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||
Additional paid-in capital (Predecessor)
|
2,387
|
|
|
(2,387
|
)
|
|
(17)
|
|
—
|
|
|
|
|
—
|
|
||||
(Accumulated deficit) retained earnings
|
(5,978
|
)
|
|
4,872
|
|
|
(19)
|
|
1,106
|
|
|
(36)
|
|
—
|
|
||||
Accumulated other comprehensive (loss) income
|
(1,454
|
)
|
|
664
|
|
|
(20)
|
|
790
|
|
|
(35)
|
|
—
|
|
||||
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY
|
(5,045
|
)
|
|
4,791
|
|
|
|
|
1,896
|
|
|
|
|
1,642
|
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
|
$
|
5,834
|
|
|
$
|
(408
|
)
|
|
|
|
$
|
2,157
|
|
|
|
|
$
|
7,583
|
|
(In millions)
|
|
||
Sources:
|
|
||
Proceeds from Term Loan Credit Agreement, net of original issue discount
|
$
|
2,896
|
|
Release of restricted cash
|
76
|
|
|
Total sources of cash
|
2,972
|
|
|
Uses:
|
|
||
Repayment of DIP Credit Agreement
|
(725
|
)
|
|
Payment of DIP accrued interest
|
(1
|
)
|
|
Cash paid to Predecessor first lien debt-holders
|
(2,061
|
)
|
|
Cash paid to PBGC
|
(340
|
)
|
|
Payment for professional fees escrow account
|
(56
|
)
|
|
Funding payment for Avaya represented employee pension plan
|
(49
|
)
|
|
Payment of accrued professional & administrative fees
|
(27
|
)
|
|
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement
|
(59
|
)
|
|
Payment for general unsecured claims
|
(58
|
)
|
|
Total uses of cash
|
(3,376
|
)
|
|
Net uses of cash
|
$
|
(404
|
)
|
2.
|
Other Current Assets.
|
(In millions)
|
|
||
Release of restricted cash
|
$
|
(76
|
)
|
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement
|
(42
|
)
|
|
Payment of fees related to the ABL Credit Agreement
|
5
|
|
|
Restricted cash for bankruptcy related professional fees
|
55
|
|
|
Total other current assets
|
$
|
(58
|
)
|
3.
|
Deferred Income Taxes.
The adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of the bankruptcy reorganization.
|
4.
|
Other Assets.
The adjustment represents the re-establishment of a foreign prepaid tax.
|
5.
|
Debt Maturing Within One Year.
The adjustment represents the net effect of the Company’s repayment of
$725 million
for the DIP Credit Agreement and Term Loan Credit Agreement principal payments of
$29 million
due over the next year.
|
6.
|
Accounts Payable
. The net decrease of
$49 million
includes
$50 million
for professional fees that were reclassified to Other current liabilities for accrued bankruptcy related professional fees that will be paid from an escrow account and the payment of
$3 million
of bankruptcy related professional fees, partially offset by reinstatement of
$4 million
contact cure costs from liabilities subject to compromise.
|
7.
|
Payroll and Benefi
t
Obligations.
The Company reinstated
$23 million
of liabilities subject to compromise related to the post-employment and post-retirement benefit obligations.
|
8.
|
Deferred Revenue.
The reinstatement of liabilities subject to compromise was
$79 million
of which
$50 million
is included in deferred revenue and
$29 million
in other liabilities.
|
9.
|
Business Restructuring Reserve.
The reinstatement of liabilities subject to compromise was
$7 million
, of which
$3 million
is current and
$4 million
is non-current.
|
(In millions)
|
|
||
Reclassification of accrued bankruptcy related professional fees
|
$
|
50
|
|
Reinstatement of other current liabilities
|
16
|
|
|
Payment of accrued interest on the DIP Credit Agreement
|
(1
|
)
|
|
Total other current liabilities
|
$
|
65
|
|
12.
|
Pension Obligations.
In accordance with the Plan of Reorganization, the Company reinstated from liabilities subject to compromise
$295 million
related to the Avaya Pension Plan for represented employees and also contributed
$49 million
to the related pension trust.
|
13.
|
Other Post-retirement Obligations.
Other post-retirement benefit obligations of
$212 million
were reinstated from liabilities subject to compromise.
|
14.
|
Deferred Income Taxes
. The adjustment represents the reinstatement of the deferred tax liability that was included in liabilities subject to compromise.
|
15.
|
Other Liabilities
. The increase of
$233 million
primarily relates to the reinstatement of employee benefits, tax liabilities and deferred revenue from liabilities subject to compromise. Also included is the value of the Warrants issued to the holders of the Predecessor second lien obligations on the Emergence Date.
|
17.
|
Cancellation of Predecessor Preferred and Common Stock.
All common stock, Series A and B preferred stock and all other equity awards of the Predecessor Company were cancelled on the Emergence Date without any recovery on account thereof.
|
18.
|
Issuance of Successor Common Stock and Warrants.
In settlement of the Company's
$5,721 million
Predecessor first lien obligations and Predecessor second lien obligations, the holders of the Predecessor first lien obligations received a total of
99.3 million
shares of common stock (fair value of
$1,486 million
) and
$2,061 million
in cash and the holders of the Predecessor second lien obligations received a total of
4.4 million
shares of common stock (fair value of
$66 million
) and
5.6 million
of Warrants to purchase additional common shares (fair value of
$17 million
). In addition, as part of the Plan of Reorganization, the Company completed a distressed termination of the APPSE in accordance with the Stipulation Settlement with the PBGC, the PBGC received
$340 million
in cash and
6.1 million
shares of common stock (fair value of
$90 million
).
|
19.
|
Accumulated Deficit.
|
(In millions)
|
|
||
Accumulated deficit:
|
|
||
Net gain on settlement of liabilities subject to compromise
|
$
|
1,804
|
|
Expense for certain professional fees
|
(26
|
)
|
|
Benefit from income taxes
|
118
|
|
|
Cancellation of Predecessor equity awards
|
6
|
|
|
Cancellation of Predecessor Preferred stock Series B
|
397
|
|
|
Cancellation of Predecessor Preferred stock Series A
|
186
|
|
|
Cancellation of Predecessor Common stock
|
2,387
|
|
|
Total
|
$
|
4,872
|
|
20.
|
Accumulated Comprehensive Loss.
The changes to Accumulated comprehensive loss relate to the settlement of the APPSE and the Avaya Supplemental Pension Plan ("ASPP") and the associated taxes.
|
21.
|
Accounts Receivable.
This adjustment relates to a change in accounting policy for the way the Company will present uncollected deferred revenue upon emergence from bankruptcy. The Company will offset such deferred revenue against the related account receivable.
|
22.
|
Inventory
. This adjustment relates to the write-up of inventory to fair value based on estimated selling prices, less costs of disposal.
|
23.
|
Other Current Assets
. This adjustment reflects the write-off of certain prepaid commissions, deferred installation costs and debt issuance costs that do not meet the definition of an asset upon emergence.
|
24.
|
Property, Plant and Equipment
. An adjustment of
$116 million
was recorded to increase the net book value of property, plant and equipment to its estimated fair value based on estimated current acquisition price, plus costs to make the property fully operational.
|
25.
|
Deferred Income Tax.
T
he adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of future taxable income from the reversal of deferred tax liabilities that were established as part of fresh start accounting.
|
26.
|
Intangible Assets.
The Company recorded an adjustment to intangible assets for
$3,137 million
as follows:
|
(In millions)
|
Successor
|
|
|
Predecessor
|
|
|
||||||
|
December 15, 2017 Post-emergence
|
|
|
December 15, 2017 Pre-emergence
|
|
Difference
|
||||||
Customer relationships and other intangible assets
|
$
|
2,155
|
|
|
|
$
|
96
|
|
|
$
|
2,059
|
|
Technology and patents
|
905
|
|
|
|
12
|
|
|
893
|
|
|||
Trademarks and trade names
|
375
|
|
|
|
190
|
|
|
185
|
|
|||
Total
|
$
|
3,435
|
|
|
|
$
|
298
|
|
|
$
|
3,137
|
|
28.
|
Other Assets.
The
$27 million
decrease to other assets is related to prepaid commissions that do not meet the definition of an asset upon emergence as there is no future benefit to the Successor Company.
|
29.
|
Deferred Revenue.
The fair value of deferred revenue, which principally relates to payments on annual maintenance contracts, was determined by deducting selling costs and associated profit from the Predecessor deferred revenue balance to arrive at the costs and profit associated with fulfilling the liability. Additionally, the decrease includes the impact of an accounting policy change whereby the Successor Company no longer presents uncollected deferred revenue.
|
30.
|
Other Current Liabilities.
The decrease of
$3 million
to other current liabilities is related to the fair value of real estate leases determined to be above or below market using the income approach based on the difference between the contractual rental rate and the estimated market rental rate, discounted utilizing a risk-related discount rate.
|
31.
|
Long-term Debt
. The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.
|
32.
|
Deferred Income Taxes.
The adjustment represents the establishment of deferred tax liabilities related to book/tax differences created by fresh start accounting adjustments. The amount is net of the release of the valuation allowance on deferred tax assets, which management believes more likely than not will be realized as a result of future taxable income from the reversal of such deferred tax liabilities.
|
33.
|
Business Restructuring Reserve.
The Company recorded an increase to its non-current business restructuring reserves based on estimated future cash flows applied to a current discount rate at emergence.
|
34.
|
Other Liabilities.
A decrease in other liabilities of
$43 million
relates to deferred revenue and real estate leases as previously discussed.
|
35.
|
Accumulated Other Comprehensive Loss.
The remaining balance in Accumulated comprehensive loss was reversed to Reorganization expenses, net.
|
36.
|
Fresh Start Adjustments.
The following table reflects the cumulative impact of the fresh start adjustments as discussed above, the elimination of the Predecessor Company's accumulated other comprehensive loss and the adjustments required to eliminate accumulated deficit.
|
(In millions)
|
|
|
|
|
||||
Eliminate Predecessor Intangible assets
|
$
|
(298
|
)
|
|
|
|
||
Eliminate Predecessor Goodwill
|
(3,541
|
)
|
|
|
|
|||
Establish Successor Intangible assets
|
3,435
|
|
|
|
|
|||
Establish Successor Goodwill
|
2,632
|
|
|
|
|
|||
Fair value adjustment to Inventory
|
29
|
|
|
|
|
|||
Fair value adjustment to Other current assets
|
(66
|
)
|
|
|
|
|||
Fair value adjustment to Property, plant and equipment
|
116
|
|
|
|
|
|||
Fair value adjustment to Other assets
|
(27
|
)
|
|
|
|
|||
Fair value adjustment to Deferred revenue
|
235
|
|
|
|
|
|||
Fair value adjustment to Business restructuring reserves
|
(4
|
)
|
|
|
|
|||
Fair value adjustment to Other current liabilities
|
3
|
|
|
|
|
|||
Fair value adjustment to Long-term debt
|
(96
|
)
|
|
|
|
|||
Fair value adjustment to Other liabilities
|
43
|
|
|
|
|
|||
Release Predecessor Accumulated comprehensive loss
|
(790
|
)
|
|
|
|
|||
Fresh start adjustments included in Reorganization items, net
|
|
|
|
$
|
1,671
|
|
||
Tax impact of fresh start adjustments
|
|
|
|
(565
|
)
|
|||
Gain on fresh start accounting
|
|
|
|
$
|
1,106
|
|
6.
|
Goodwill and Intangible Assets
|
(In millions)
|
Global
Communications
Solutions
|
|
Avaya Global Services
|
|
Total
|
||||||
September 30, 2017 (Predecessor)
|
$
|
1,093
|
|
|
$
|
2,449
|
|
|
$
|
3,542
|
|
Adjustments
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Impact of fresh start accounting
|
68
|
|
|
(977
|
)
|
|
(909
|
)
|
|||
December 15, 2017 (Predecessor)
|
$
|
1,160
|
|
|
$
|
1,472
|
|
|
$
|
2,632
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
December 31, 2017 (Successor)
|
$
|
1,160
|
|
|
$
|
1,472
|
|
|
$
|
2,632
|
|
|
Successor
|
||||||||||||||
|
As of December 31, 2017
|
||||||||||||||
(In millions)
|
Technology and patents
|
|
Customer relationships and other intangibles
|
|
Trademarks
and trade names |
|
Total
|
||||||||
Gross Carrying Amount
|
$
|
905
|
|
|
$
|
2,155
|
|
|
$
|
375
|
|
|
$
|
3,435
|
|
Accumulated Amortization
|
(7
|
)
|
|
(7
|
)
|
|
—
|
|
|
(14
|
)
|
||||
Net
|
$
|
898
|
|
|
$
|
2,148
|
|
|
$
|
375
|
|
|
$
|
3,421
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
Predecessor
|
||||||||||||||
|
As of September 30, 2017
|
||||||||||||||
(In millions)
|
Technology and patents
|
|
Customer relationships and other intangibles
|
|
Trademarks
and trade names |
|
Total
|
||||||||
Gross Carrying Amount
|
$
|
1,427
|
|
|
$
|
2,196
|
|
|
$
|
545
|
|
|
$
|
4,168
|
|
Accumulated Amortization
|
(1,411
|
)
|
|
(2,091
|
)
|
|
—
|
|
|
(3,502
|
)
|
||||
Accumulated Impairment
|
—
|
|
|
—
|
|
|
(355
|
)
|
|
(355
|
)
|
||||
Net
|
$
|
16
|
|
|
$
|
105
|
|
|
$
|
190
|
|
|
$
|
311
|
|
7.
|
Supplementary Financial Information
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
OTHER (EXPENSE) INCOME, NET
|
|
|
|
|
|
|
||||||
Interest income
|
$
|
—
|
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Foreign currency gains, net
|
2
|
|
|
|
—
|
|
|
11
|
|
|||
Income from transition services agreement, net
|
—
|
|
|
|
3
|
|
|
—
|
|
|||
Other pension and post-retirement benefit costs
|
1
|
|
|
|
(8
|
)
|
|
(6
|
)
|
|||
Change in fair value of the warrant liability
|
(5
|
)
|
|
|
—
|
|
|
—
|
|
|||
Other, net
|
—
|
|
|
|
1
|
|
|
(1
|
)
|
|||
Total other (expense) income, net
|
$
|
(2
|
)
|
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
REORGANIZATION ITEMS, NET
|
|
|
|
|
|
|
||||||
Bankruptcy-related professional fees
|
$
|
—
|
|
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
Net gain on settlement of liabilities subject to compromise
|
—
|
|
|
|
1,804
|
|
|
—
|
|
|||
Net gain on fresh start adjustments
|
—
|
|
|
|
1,671
|
|
|
—
|
|
|||
Other items, net
|
—
|
|
|
|
(3
|
)
|
|
—
|
|
|||
Reorganization items, net
|
$
|
—
|
|
|
|
$
|
3,416
|
|
|
$
|
—
|
|
Cash payments for reorganization items
|
$
|
1
|
|
|
|
$
|
2,524
|
|
|
$
|
—
|
|
8.
|
Business Restructuring Reserves and Programs
|
(In millions)
|
Employee Separation Costs
|
|
Lease Obligations
|
|
Total
|
||||||
2018 restructuring charges
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
Cash payments
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||
Balance as of December 15, 2017 (Predecessor)
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
2018 restructuring charges
(1)
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Cash payments
|
(2
|
)
|
|
(10
|
)
|
|
(12
|
)
|
|||
Balance as of December 31, 2017 (Successor)
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
7
|
|
(In millions)
|
Employee Separation Costs
|
|
Lease Obligations
|
|
Total
|
||||||
Balance as of September 30, 2017 (Predecessor)
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
5
|
|
Cash payments
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|||
Balance as of December 15, 2017 (Predecessor)
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Balance as of December 31, 2017 (Successor)
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
(In millions)
|
Employee Separation Costs
|
|
Lease Obligations
|
|
Total
|
||||||
Balance as of September 30, 2017 (Predecessor)
|
$
|
51
|
|
|
$
|
24
|
|
|
$
|
75
|
|
Cash payments
|
(3
|
)
|
|
(17
|
)
|
|
(20
|
)
|
|||
Expense
|
1
|
|
|
1
|
|
|
2
|
|
|||
Adjustments - fresh start and reorganization items
|
$
|
4
|
|
|
$
|
(1
|
)
|
|
$
|
3
|
|
Balance as of December 15, 2017 (Predecessor)
|
$
|
53
|
|
|
$
|
7
|
|
|
$
|
60
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Cash Payments
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Impact of foreign currency fluctuations
|
2
|
|
|
—
|
|
|
2
|
|
|||
Balance as of December 31, 2017 (Successor)
|
$
|
53
|
|
|
$
|
7
|
|
|
$
|
60
|
|
9.
|
Financing Arrangements
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
|
December 31, 2017
|
|
|
September 30, 2017
|
||||||||||||
(In millions)
|
Principal amount
|
|
Net of discounts and issuance costs
|
|
|
Principal amount
|
|
Net of discounts and issuance costs
|
||||||||
Term Loan Credit Agreement
|
$
|
2,925
|
|
|
$
|
2,896
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
DIP Credit Agreement due January 19, 2018
|
—
|
|
|
—
|
|
|
|
725
|
|
|
725
|
|
||||
First lien debt:
|
|
|
|
|
|
|
|
|
||||||||
Senior secured term B-3 loans
|
—
|
|
|
—
|
|
|
|
594
|
|
|
594
|
|
||||
Senior secured term B-4 loans
|
—
|
|
|
—
|
|
|
|
1
|
|
|
1
|
|
||||
Senior secured term B-6 loans
|
—
|
|
|
—
|
|
|
|
519
|
|
|
519
|
|
||||
Senior secured term B-7 loans
|
—
|
|
|
—
|
|
|
|
2,012
|
|
|
2,012
|
|
||||
7% senior secured notes
|
—
|
|
|
—
|
|
|
|
982
|
|
|
982
|
|
||||
9% senior secured notes
|
—
|
|
|
—
|
|
|
|
284
|
|
|
284
|
|
||||
Second lien debt:
|
|
|
|
|
|
|
|
|
||||||||
10.50% senior secured notes
|
—
|
|
|
—
|
|
|
|
1,440
|
|
|
1,440
|
|
||||
Total debt
|
$
|
2,925
|
|
|
2,896
|
|
|
|
$
|
6,557
|
|
|
6,557
|
|
||
Debt maturing within one year
|
|
|
(29
|
)
|
|
|
|
|
(725
|
)
|
||||||
Long-term debt, net of current portion
(1)
|
|
|
$
|
2,867
|
|
|
|
|
|
$
|
5,832
|
|
1.
|
the Successor Company entered into the Term Loan Credit Agreement and the ABL Credit Agreement;
|
2.
|
the DIP Credit Agreement was paid in full;
|
3.
|
the holders of the Predecessor first lien obligations received cash and Successor Company common stock (aggregate fair value of
$3,547 million
) and the Company cancelled
$4,281 million
of the Predecessor Company first lien obligations; and
|
4.
|
the holders of the Predecessor second lien obligations received Successor Company common stock and Warrants to purchase common stock (aggregate fair value of
$83 million
) and the Company cancelled
$1,440 million
of the Predecessor Company second lien obligations.
|
1.
|
In the case of Base Rate Loans denominated in U.S. dollars, at a rate per annum equal to
0.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the highest of (i) the Federal Funds Rate plus
0.50%
, (ii) the U.S. prime rate as publicly announced by Citibank, N.A. and (iii) the LIBOR Rate for an interest period of one month;
|
2.
|
In the case of LIBOR Rate Loans denominated in U.S. dollars, at a rate per annum equal to
1.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;
|
3.
|
In the case of Canadian Prime Rate Loans denominated in Canadian dollars, at a rate per annum equal to
0.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the highest of (i) the “Base Rate” as publicly announced by Citibank, N.A., Canadian branch and (ii) the CDOR Rate for an interest period of
30
days;
|
4.
|
In the case of CDOR Rate Loans denominated in Canadian dollars, at a rate per annum equal to
1.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the applicable CDOR Rate;
|
5.
|
In the case of LIBOR Rate Loans denominated in Sterling, at a rate per annum equal to
1.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate;
|
6.
|
In the case of EURIBOR Rate Loans denominated in Euro, at a rate per annum equal to
1.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the applicable LIBOR Rate; and
|
7.
|
In the case of Overnight LIBOR Rate Loans, at a rate per annum equal to
1.75%
(subject to a
0.25%
step-up or step-down based on availability) plus the applicable Overnight LIBOR Rate.
|
10.
|
Derivative Warrant Liability
|
|
December 31, 2017
|
|
December 15, 2017
|
||
Expected volatility
|
52.38
|
%
|
|
54.57
|
%
|
Risk free interest rates
|
2.20
|
%
|
|
2.20
|
%
|
Expected life (in years)
|
4.96
|
|
|
5.00
|
|
Price per share of common stock
|
$17.55
|
|
$14.93
|
||
|
|
|
|
||
Fair value of warrant liability
|
$22 million
|
|
$17 million
|
11.
|
Fair Value Measures
|
|
Successor
|
||||||||||||||
|
December 31, 2017
|
||||||||||||||
|
Fair Value Measurements Using
|
||||||||||||||
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Other Non-Current Assets:
|
|
|
|
|
|
|
|
||||||||
Investments
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other Non-Current Liabilities:
|
|
|
|
|
|
|
|
||||||||
Warrants
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
Predecessor
|
||||||||||||||
|
September 30, 2017
|
||||||||||||||
|
Fair Value Measurements Using
|
||||||||||||||
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Other Non-Current Assets:
|
|
|
|
|
|
|
|
||||||||
Investments
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Successor
|
|
|
Predecessor
|
||||||||||||
|
December 31, 2017
|
|
|
September 30, 2017
|
||||||||||||
(In millions)
|
Principal
Amount
|
|
Fair
Value
|
|
|
Principal
Amount
|
|
Fair
Value
|
||||||||
Term Loan Credit Agreement due December 15, 2024
|
$
|
2,925
|
|
|
$
|
2,896
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
DIP Credit Agreement due January 19, 2018
|
—
|
|
|
—
|
|
|
|
725
|
|
|
732
|
|
||||
Variable rate Term B-3 Loans due October 26, 2017
|
—
|
|
|
—
|
|
|
|
594
|
|
|
503
|
|
||||
Variable rate Term B-4 Loans due October 26, 2017
|
—
|
|
|
—
|
|
|
|
1
|
|
|
1
|
|
||||
Variable rate Term B-6 Loans due March 31, 2018
|
—
|
|
|
—
|
|
|
|
519
|
|
|
440
|
|
||||
Variable rate Term B-7 Loans due May 29, 2020
|
—
|
|
|
—
|
|
|
|
2,012
|
|
|
1,709
|
|
||||
7% senior secured notes due April 1, 2019
|
—
|
|
|
—
|
|
|
|
982
|
|
|
832
|
|
||||
9% senior secured notes due April 1, 2019
|
—
|
|
|
—
|
|
|
|
284
|
|
|
241
|
|
||||
10.50% senior secured notes due March 1, 2021
|
—
|
|
|
—
|
|
|
|
1,440
|
|
|
67
|
|
||||
Total
|
$
|
2,925
|
|
|
$
|
2,896
|
|
|
|
$
|
6,557
|
|
|
$
|
4,525
|
|
12.
|
Income Taxes
|
13.
|
Benefit Obligations
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Pension Benefits - U.S.
|
|
|
|
|
|
|
||||||
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
||||||
Service cost
|
$
|
—
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
1
|
|
|
|
22
|
|
|
24
|
|
|||
Expected return on plan assets
|
(2
|
)
|
|
|
(38
|
)
|
|
(45
|
)
|
|||
Amortization of previously unrecognized net actuarial loss
|
—
|
|
|
|
20
|
|
|
26
|
|
|||
Settlement loss
(1)
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Net periodic benefit cost
|
$
|
(1
|
)
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Pension Benefits - Non-U.S.
|
|
|
|
|
|
|
||||||
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
||||||
Service cost
|
$
|
—
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
—
|
|
|
|
3
|
|
|
2
|
|
|||
Amortization of previously unrecognized net actuarial loss
|
—
|
|
|
|
1
|
|
|
3
|
|
|||
Net periodic benefit cost
|
$
|
—
|
|
|
|
$
|
6
|
|
|
$
|
7
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Post-retirement Benefits - U.S.
|
|
|
|
|
|
|
||||||
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
||||||
Interest cost
|
$
|
—
|
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Expected return on plan assets
|
—
|
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Amortization of unrecognized prior service cost
|
—
|
|
|
|
(3
|
)
|
|
(4
|
)
|
|||
Amortization of previously unrecognized net actuarial loss
|
—
|
|
|
|
2
|
|
|
3
|
|
|||
Curtailment
|
—
|
|
|
|
—
|
|
|
(4
|
)
|
|||
Net periodic benefit cost
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
Exercise price
|
|
$
|
19.46
|
|
Expected term (in years)
(1)
|
|
8.54
|
|
|
Volatility
(2)
|
|
65.37
|
%
|
|
Risk-free rate
(3)
|
|
2.35
|
%
|
|
Dividend yield
(4)
|
|
—
|
%
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions, except per share amounts)
|
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||
Numerator
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
Dividends to preferred stockholders
|
|
—
|
|
|
|
(6
|
)
|
|
(8
|
)
|
|||
Undistributed earnings
|
|
237
|
|
|
|
2,971
|
|
|
(111
|
)
|
|||
Percentage allocated to common stockholders
(1)
|
|
100.0
|
%
|
|
|
86.9
|
%
|
|
100.0
|
%
|
|||
Numerator for basic and diluted earnings per common share
|
|
$
|
237
|
|
|
|
$
|
2,582
|
|
|
$
|
(111
|
)
|
|
|
|
|
|
|
|
|
||||||
Denominator
|
|
|
|
|
|
|
|
||||||
Denominator for basic earnings per weighted average common shares
|
|
109.8
|
|
|
|
497.3
|
|
|
497.0
|
|
|||
Effect of dilutive securities
|
|
|
|
|
|
|
|
||||||
Restricted stock units
|
|
0.5
|
|
|
|
—
|
|
|
—
|
|
|||
Stock options
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Warrants
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Denominator for diluted earnings per weighted average common shares
|
|
110.3
|
|
|
|
497.3
|
|
|
497.0
|
|
|||
|
|
|
|
|
|
|
|
||||||
Per common share net income (loss)
|
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
2.16
|
|
|
|
$
|
5.19
|
|
|
$
|
(0.22
|
)
|
Diluted
|
|
$
|
2.15
|
|
|
|
$
|
5.19
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
||||||
(1)
Basic weighted average common stock outstanding
|
|
109.8
|
|
|
|
497.3
|
|
|
497.0
|
|
|||
Basic weighted average common stock and common stock equivalents (preferred shares)
|
|
109.8
|
|
|
|
572.4
|
|
|
497.0
|
|
|||
Percentage allocated to common stockholders
|
|
100.0
|
%
|
|
|
86.9
|
%
|
|
100.0
|
%
|
17.
|
Operating Segments
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
REVENUE
|
|
|
|
|
|
|
||||||
Global Communications Solutions
|
$
|
71
|
|
|
|
$
|
253
|
|
|
$
|
343
|
|
Avaya Networking
(1)
|
—
|
|
|
|
—
|
|
|
58
|
|
|||
Enterprise Collaboration Solutions
|
71
|
|
|
|
253
|
|
|
401
|
|
|||
Avaya Global Services
|
77
|
|
|
|
351
|
|
|
474
|
|
|||
|
$
|
148
|
|
|
|
$
|
604
|
|
|
$
|
875
|
|
GROSS PROFIT
|
|
|
|
|
|
|
||||||
Global Communications Solutions
|
$
|
41
|
|
|
|
$
|
169
|
|
|
$
|
231
|
|
Avaya Networking
(1)
|
—
|
|
|
|
—
|
|
|
25
|
|
|||
Enterprise Collaboration Solutions
|
41
|
|
|
|
169
|
|
|
256
|
|
|||
Avaya Global Services
|
50
|
|
|
|
196
|
|
|
284
|
|
|||
Unallocated Amounts
(2)
|
(13
|
)
|
|
|
(3
|
)
|
|
(5
|
)
|
|||
|
78
|
|
|
|
362
|
|
|
535
|
|
|||
OPERATING EXPENSES
|
|
|
|
|
|
|
||||||
Selling, general and administrative
|
50
|
|
|
|
264
|
|
|
336
|
|
|||
Research and development
|
9
|
|
|
|
38
|
|
|
62
|
|
|||
Amortization of intangible assets
|
7
|
|
|
|
10
|
|
|
57
|
|
|||
Restructuring charges, net
|
10
|
|
|
|
14
|
|
|
10
|
|
|||
|
76
|
|
|
|
326
|
|
|
465
|
|
|||
OPERATING INCOME
|
2
|
|
|
|
36
|
|
|
70
|
|
|||
INTEREST EXPENSE, OTHER (EXPENSE) INCOME, NET AND REORGANIZATION ITEMS, NET
|
(11
|
)
|
|
|
3,400
|
|
|
(170
|
)
|
|||
(LOSS) INCOME BEFORE INCOME TAXES
|
$
|
(9
|
)
|
|
|
$
|
3,436
|
|
|
$
|
(100
|
)
|
18.
|
Accumulated Other Comprehensive Loss
|
(In millions)
|
Change in unamortized pension, post-retirement and postemployment benefit-related items
|
|
Foreign Currency Translation
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
Beginning balance September 30, 2016 (Predecessor)
|
$
|
(1,627
|
)
|
|
$
|
(33
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1,661
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||
Amounts reclassified to earnings
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
(Provision for) benefit from income taxes
|
(6
|
)
|
|
4
|
|
|
—
|
|
|
(2
|
)
|
||||
Ending balance December 31, 2016 (Predecessor)
|
$
|
(1,613
|
)
|
|
$
|
(10
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1,624
|
)
|
(In millions)
|
Change in unamortized pension, post-retirement and postemployment benefit-related items
|
|
Foreign Currency Translation
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
Beginning balance October 1, 2017 (Predecessor)
|
$
|
(1,375
|
)
|
|
$
|
(72
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1,448
|
)
|
Other comprehensive (loss) income before reclassifications
|
(24
|
)
|
|
3
|
|
|
—
|
|
|
(21
|
)
|
||||
Amounts reclassified to earnings
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
Pension settlement
|
721
|
|
|
—
|
|
|
—
|
|
|
721
|
|
||||
Provision for income taxes
|
(58
|
)
|
|
—
|
|
|
—
|
|
|
(58
|
)
|
||||
Ending balance December 15, 2017 (Predecessor)
|
(720
|
)
|
|
(69
|
)
|
|
(1
|
)
|
|
(790
|
)
|
||||
Elimination of Predecessor Company accumulated other comprehensive loss
|
720
|
|
|
69
|
|
|
1
|
|
|
790
|
|
||||
Ending balance December 15, 2017 (Predecessor)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Beginning balance December 15, 2017 (Successor)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other comprehensive loss before reclassifications
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
||||
Ending balance December 31, 2017 (Successor)
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
$
|
—
|
|
|
$
|
(13
|
)
|
(In millions)
|
|
||
Accrued warranty obligations as of September 30, 2017 (Predecessor)
|
$
|
2
|
|
Reductions for payments and costs to satisfy claims
|
(1
|
)
|
|
Accruals for warranties issued during the period
|
1
|
|
|
Accrued warranty obligations as of December 15, 2017 (Predecessor)
|
$
|
2
|
|
|
|
||
|
|
||
Reductions for payments and costs to satisfy claims
|
$
|
(1
|
)
|
Accruals for warranties issued during the period
|
1
|
|
|
Accrued warranty obligations as of December 31, 2017 (Successor)
|
$
|
2
|
|
21.
|
Condensed Financial Information of Parent Company
|
|
Successor
|
|
|
Predecessor
|
||||||||
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Equity in net income (loss) of Avaya Inc.
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
NET INCOME (LOSS)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
NET INCOME (LOSS) PER SHARE AVAILABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
|
||||||
Basic
|
$
|
2.16
|
|
|
|
$
|
5.19
|
|
|
$
|
(0.22
|
)
|
Diluted
|
$
|
2.15
|
|
|
|
$
|
5.19
|
|
|
$
|
(0.22
|
)
|
Weighted average shares outstanding
|
|
|
|
|
|
|
||||||
Basic
|
109.8
|
|
|
|
497.3
|
|
|
497.0
|
|
|||
Diluted
|
110.3
|
|
|
|
497.3
|
|
|
497.0
|
|
|
Successor
|
|
|
Predecessor
|
||||||||
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Net income (loss)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
Equity in other comprehensive (loss) income of Avaya Inc.
|
(13
|
)
|
|
|
658
|
|
|
37
|
|
|||
Elimination of Predecessor Company accumulated other comprehensive loss
|
—
|
|
|
|
790
|
|
|
—
|
|
|||
Comprehensive income (loss)
|
$
|
224
|
|
|
|
$
|
4,425
|
|
|
$
|
(66
|
)
|
|
Successor
|
|
|
Predecessor
|
||||||||
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three Months Ended December 31, 2016
|
||||||
Net income (loss)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
Adjustments to reconcile net loss to net cash used for operating activities:
|
|
|
|
|
|
|
||||||
Equity in net income (loss) of Avaya Inc.
|
(237
|
)
|
|
|
(2,977
|
)
|
|
103
|
|
|||
Net cash provided by (used for) operating activities
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used for) investing activities
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used for) financing activities
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Cash and cash equivalents at beginning of period
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Cash and cash equivalents at end of period
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
22.
|
Subsequent Events
|
•
|
The Company paid in full amounts outstanding under the debtor-in-possession credit agreement (the "DIP Credit Agreement").
|
•
|
The Debtors' obligations under stock certificates, equity interests, and / or any other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or ownership interest in, the Debtors or giving rise to any claim or equity interest were cancelled, except as provided under the Plan of Reorganization;
|
•
|
The Company's certificate of incorporation was amended and restated to authorize the issuance of
605.0 million
shares of stock, consisting of
55.0 million
shares of preferred stock, par value
$0.01
per share, and
550.0 million
shares of common stock, par value
$0.01
per share;
|
•
|
The Company entered into a term loan credit agreement (the "Term Loan Credit Agreement") with a principal amount of
$2,925 million
and a
$300 million
asset-based revolving credit facility (the "ABL Credit Agreement");
|
•
|
The Company issued
99.3 million
shares of Successor Company common stock to the holders of the Predecessor's first lien obligations that was extinguished in the bankruptcy. In addition, these holders received
$2,061 million
in cash;
|
•
|
The Company issued
4.4 million
shares of Successor Company common stock to the holders of the Predecessor's second lien obligations that was extinguished in the bankruptcy. In addition, these holders received warrants to purchase
5.6 million
shares of Successor Company common stock at an exercise price of
$25.55
per warrant (the "Warrants");
|
•
|
The Company issued
6.1 million
shares of Successor Company common stock to the Pension Benefit Guaranty Corporation ("PBGC"). In addition, the PBGC received
$340 million
in cash; and
|
•
|
The Debtors established a liquidating trust in the amount of
$58 million
for the benefit of general unsecured creditors. In addition, the Company issued
0.2 million
additional shares of Successor Company common stock for the benefit of its former general unsecured creditors. The general unsecured creditors will receive a total of
$58 million
in cash and these shares of common stock. Any excess cash and / or common stock not distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations.
|
|
Successor
|
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three Months Ended December 31, 2017
|
|
Three months ended December 31, 2016
|
||||||||
REVENUE
|
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
71
|
|
|
|
$
|
253
|
|
|
$
|
324
|
|
|
$
|
401
|
|
Services
|
77
|
|
|
|
351
|
|
|
428
|
|
|
474
|
|
||||
|
148
|
|
|
|
604
|
|
|
752
|
|
|
875
|
|
||||
COSTS
|
|
|
|
|
|
|
|
|
||||||||
Products:
|
|
|
|
|
|
|
|
|
||||||||
Costs
|
33
|
|
|
|
84
|
|
|
117
|
|
|
145
|
|
||||
Amortization of technology intangible assets
|
7
|
|
|
|
3
|
|
|
10
|
|
|
5
|
|
||||
Services
|
30
|
|
|
|
155
|
|
|
185
|
|
|
190
|
|
||||
|
70
|
|
|
|
242
|
|
|
312
|
|
|
340
|
|
||||
GROSS PROFIT
|
78
|
|
|
|
362
|
|
|
440
|
|
|
535
|
|
||||
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
50
|
|
|
|
264
|
|
|
314
|
|
|
336
|
|
||||
Research and development
|
9
|
|
|
|
38
|
|
|
47
|
|
|
62
|
|
||||
Amortization of intangible assets
|
7
|
|
|
|
10
|
|
|
17
|
|
|
57
|
|
||||
Restructuring charges, net
|
10
|
|
|
|
14
|
|
|
24
|
|
|
10
|
|
||||
|
76
|
|
|
|
326
|
|
|
402
|
|
|
465
|
|
||||
OPERATING INCOME
|
2
|
|
|
|
36
|
|
|
38
|
|
|
70
|
|
||||
Interest expense
|
(9
|
)
|
|
|
(14
|
)
|
|
(23
|
)
|
|
(174
|
)
|
||||
Other (expense) income, net
|
(2
|
)
|
|
|
(2
|
)
|
|
(4
|
)
|
|
4
|
|
||||
Reorganization items, net
|
—
|
|
|
|
3,416
|
|
|
3,416
|
|
|
—
|
|
||||
(LOSS) INCOME BEFORE INCOME TAXES
|
(9
|
)
|
|
|
3,436
|
|
|
3,427
|
|
|
(100
|
)
|
||||
Benefit from (provision for) income taxes
|
246
|
|
|
|
(459
|
)
|
|
(213
|
)
|
|
(3
|
)
|
||||
NET INCOME (LOSS)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
3,214
|
|
|
$
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|||||||||||||||
|
Successor
|
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
|
Change
|
|||||||||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three Months Ended December 31, 2017
|
|
Three Months Ended December 31, 2016
|
|
Three Months Ended December 31, 2017
|
|
Three months ended December 31, 2016
|
|
Amount
|
|
Percent
|
|||||||||||||
GCS
|
$
|
41
|
|
|
|
$
|
169
|
|
|
$
|
210
|
|
|
$
|
231
|
|
|
64.8
|
%
|
|
67.3
|
%
|
|
$
|
(21
|
)
|
|
(9.1
|
)%
|
Networking
|
—
|
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
43.1
|
%
|
|
(25
|
)
|
|
(100.0
|
)%
|
|||||
ECS
|
41
|
|
|
|
169
|
|
|
210
|
|
|
256
|
|
|
64.8
|
%
|
|
63.8
|
%
|
|
(46
|
)
|
|
(18.0
|
)%
|
|||||
AGS
|
50
|
|
|
|
196
|
|
|
246
|
|
|
284
|
|
|
57.5
|
%
|
|
59.9
|
%
|
|
(38
|
)
|
|
(13.4
|
)%
|
|||||
Unallocated amounts
|
(13
|
)
|
|
|
(3
|
)
|
|
(16
|
)
|
|
(5
|
)
|
|
(1)
|
|
|
(1)
|
|
|
(11
|
)
|
|
(1)
|
|
|||||
Total
|
$
|
78
|
|
|
|
$
|
362
|
|
|
$
|
440
|
|
|
$
|
535
|
|
|
58.5
|
%
|
|
61.1
|
%
|
|
$
|
(95
|
)
|
|
(17.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
Percentage of Revenue
|
|
|
|
|
|||||||||||||||
|
Successor
|
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
|
Change
|
|||||||||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three Months Ended December 31, 2017
|
|
Three Months Ended December 31, 2016
|
|
Three Months Ended December 31, 2017
|
|
Three months ended December 31, 2016
|
|
Amount
|
|
Percent
|
|||||||||||||
Selling, general and administrative
|
$
|
50
|
|
|
|
$
|
264
|
|
|
$
|
314
|
|
|
$
|
336
|
|
|
41.7
|
%
|
|
38.4
|
%
|
|
$
|
(22
|
)
|
|
(7
|
)%
|
Research and development
|
9
|
|
|
|
38
|
|
|
47
|
|
|
62
|
|
|
6.3
|
%
|
|
7.1
|
%
|
|
(15
|
)
|
|
(24
|
)%
|
|||||
Amortization of intangible assets
|
7
|
|
|
|
10
|
|
|
17
|
|
|
57
|
|
|
2.3
|
%
|
|
6.5
|
%
|
|
(40
|
)
|
|
(70
|
)%
|
|||||
Restructuring charges, net
|
10
|
|
|
|
14
|
|
|
24
|
|
|
10
|
|
|
3.2
|
%
|
|
1.1
|
%
|
|
14
|
|
|
140
|
%
|
|||||
Total operating expenses
|
$
|
76
|
|
|
|
$
|
326
|
|
|
$
|
402
|
|
|
$
|
465
|
|
|
53.5
|
%
|
|
53.1
|
%
|
|
$
|
(63
|
)
|
|
(14
|
)%
|
•
|
the impact of applying fresh start accounting upon emergence from bankruptcy on December 15, 2017;
|
•
|
during the
three months ended December 31, 2016
, the Company recognized $49 million in advisory fees incurred to assist in the assessment of strategic and financial alternatives to improve the Company’s capital structure;
|
•
|
operating results from the Networking business for the
three months ended December 31, 2016
;
|
•
|
higher restructuring charges for the
three months ended December 31, 2017
primarily related to employee separation charges and lease termination agreements associated with vacated facilities particularly in Europe and the U.S.;
|
•
|
a favorable impact of foreign currency on our operating results; and
|
•
|
Operating income includes depreciation and amortization of
$53 million
and non-cash share-based compensation of
$1 million
for the
three months ended December 31, 2017
compared to depreciation and amortization of
$90 million
and non-cash share-based compensation of
$2 million
for the
three months ended December 31, 2016
.
|
|
|
Successor
|
|
|
Predecessor
|
|
Non-GAAP Combined
|
|
Predecessor
|
|||||||
(In millions)
|
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2017
|
|
Three months ended December 31, 2016
|
|||||||
Net cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
|||||||
Net income (loss)
|
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
3,214
|
|
|
$
|
(103
|
)
|
Adjustments to net income (loss) for non-cash items
|
|
(225
|
)
|
|
|
(3,410
|
)
|
|
(3,635
|
)
|
|
141
|
|
|||
Changes in operating assets and liabilities
|
|
54
|
|
|
|
(7
|
)
|
|
47
|
|
|
(82
|
)
|
|||
Operating activities
|
|
66
|
|
|
|
(440
|
)
|
|
(374
|
)
|
|
(44
|
)
|
|||
Investing activities
|
|
8
|
|
|
|
8
|
|
|
16
|
|
|
(15
|
)
|
|||
Financing activities
|
|
—
|
|
|
|
(102
|
)
|
|
(102
|
)
|
|
(57
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
|
3
|
|
|
|
(2
|
)
|
|
1
|
|
|
(11
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
77
|
|
|
|
(536
|
)
|
|
(459
|
)
|
|
(127
|
)
|
|||
Cash and cash equivalents at beginning of period
|
|
340
|
|
|
|
876
|
|
|
876
|
|
|
336
|
|
|||
Cash and cash equivalents at end of period
|
|
$
|
417
|
|
|
|
$
|
340
|
|
|
417
|
|
|
$
|
209
|
|
•
|
Debt service
—We expect to make payments of
$160 million
during the remainder of fiscal
2018
in principal and interest associated with the Term Loan Credit Agreement and interest and fees associated with our ABL Credit Agreement. In the ordinary course of business, we may from time to time borrow and repay amounts under our ABL Credit Agreement.
|
•
|
Restructuring payments
—We expect to make payments of approximately
$25 million
to
$30 million
during the remainder of fiscal
2018
for employee separation costs and lease termination obligations associated with restructuring actions we have taken through
December 31, 2017
and additional actions we may take in fiscal
2018
. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.
|
•
|
Capital expenditures
—We expect to spend approximately
$50 million
to
$60 million
for capital expenditures and capitalized software development costs during the remainder of fiscal
2018
.
|
•
|
Benefit obligations
—We estimate we will make payments in respect of our pension and post-retirement benefit obligations totaling
$80 million
during the remainder of fiscal
2018
. These payments include
$43 million
for the Avaya Pension Plan for represented employees;
$24 million
for our non-U.S. benefit plans, which are predominately not pre-funded;
$1 million
for our U.S. retiree medical benefit plan, which is not pre-funded and
$12 million
for represented retiree post-retirement health trusts. See discussion in Note 13, “Benefit Obligations” to our unaudited interim Condensed Consolidated Financial Statements for further details of our benefit obligations.
|
•
|
Acquisitions
—The acquisition of Spoken Communications is expected to close within the next two months and be funded by cash on hand, however the ultimate purchase price and certain other terms are subject to further negotiation.
|
|
Successor
|
|
|
Predecessor
|
||||||||
(In millions)
|
Period from December 16, 2017 through December 31, 2017
|
|
|
Period from October 1, 2017 through December 15, 2017
|
|
Three months ended December 31, 2016
|
||||||
Net income (loss)
|
$
|
237
|
|
|
|
$
|
2,977
|
|
|
$
|
(103
|
)
|
Interest expense
(a)
|
9
|
|
|
|
14
|
|
|
174
|
|
|||
Interest income
|
—
|
|
|
|
(2
|
)
|
|
—
|
|
|||
(Benefit from) provision for income taxes
|
(246
|
)
|
|
|
459
|
|
|
3
|
|
|||
Depreciation and amortization
|
22
|
|
|
|
31
|
|
|
90
|
|
|||
EBITDA
|
22
|
|
|
|
3,479
|
|
|
164
|
|
|||
Impact of fresh start accounting adjustments
(b)
|
27
|
|
|
|
—
|
|
|
—
|
|
|||
Restructuring charges, net
|
10
|
|
|
|
14
|
|
|
10
|
|
|||
Sponsors’ and other advisory fees
(c)
|
8
|
|
|
|
3
|
|
|
51
|
|
|||
Reorganization items, net
|
—
|
|
|
|
(3,416
|
)
|
|
—
|
|
|||
Non-cash share-based compensation
|
1
|
|
|
|
—
|
|
|
2
|
|
|||
Loss on disposal of long-lived assets
|
—
|
|
|
|
1
|
|
|
—
|
|
|||
Resolution of certain legal matters
(d)
|
—
|
|
|
|
37
|
|
|
—
|
|
|||
Change in fair value of warrant liability
|
5
|
|
|
|
—
|
|
|
—
|
|
|||
Gain on foreign currency transactions
|
(2
|
)
|
|
|
—
|
|
|
(11
|
)
|
|||
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs
(e)
|
—
|
|
|
|
17
|
|
|
21
|
|
|||
Other
|
—
|
|
|
|
—
|
|
|
1
|
|
|||
Adjusted EBITDA
|
$
|
71
|
|
|
|
$
|
135
|
|
|
$
|
238
|
|
(a)
|
Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the
period from October 1, 2017 through December 15, 2017
, contractual interest expense related to debt subject to compromise of
$94 million
has not been recorded, as it was not expected to be an allowed claim under the Bankruptcy Filing.
|
(b)
|
The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.
|
(c)
|
Sponsors’ fees represent monitoring fees payable to affiliates of two private equity firms, Silver Lake Partners (“Silver Lake”) and TPG Capital (“TPG”, together with Silver Lake, the “Sponsors”) that each had an ownership interest in the Predecessor Company and their designees pursuant to a management services agreement. Upon emergence, the Company no longer has affiliations with the Sponsors. Other advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.
|
(d)
|
Costs in connection with certain legal matters includes reserves and settlements, as well as associated legal costs.
|
(e)
|
Represents that portion of our pension and post-employment benefit costs which represent the amortization of prior service costs and net actuarial gain (loss) associated with these benefits.
|
•
|
we face formidable competition from providers of unified communications and contact center products and related services;
|
•
|
market opportunity for business communications products and services may not develop in the ways that we anticipate;
|
•
|
our ability to rely on our indirect sales channel;
|
•
|
our products and services may fail to keep pace with rapidly changing technology and evolving industry standards;
|
•
|
we rely on third-party contract manufacturers and component suppliers, some of which are sole source and limited source suppliers, as well as warehousing and distribution logistics providers;
|
•
|
recently completed bankruptcy proceedings may adversely affect our operations in the future;
|
•
|
our actual financial results may vary significantly from the financial projections filed with the Bankruptcy Court;
|
•
|
our historical financial information may not be indicative of our future financial performance;
|
•
|
our quarterly and annual revenues and operating results have historically fluctuated and the results of one period may not provide a reliable indicator of our future performance;
|
•
|
operational and logistical challenges as well as changes in economic or political conditions, in a specific country or region;
|
•
|
our revenues are dependent on general economic conditions and the willingness of enterprises to invest in technology;
|
•
|
the potential that we may not be able to protect our proprietary rights or that those rights may be invalidated or circumvented;
|
•
|
certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences;
|
•
|
changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;
|
•
|
cancellation of indebtedness income is expected to result in material reductions in, or elimination of, tax attributes;
|
•
|
tax examinations and audits;
|
•
|
fluctuations in foreign currency exchange rates;
|
•
|
business communications products are complex, and design defects, errors, failures or “bugs” may be difficult to detect and correct;
|
•
|
if we are unable to integrate acquired businesses effectively;
|
•
|
failure to realize the benefits we expect from our cost-reduction initiatives;
|
•
|
liabilities incurred as a result of our obligation to indemnify, and to share certain liabilities with, Lucent Technologies, Inc. ("Lucent") (now Nokia Corporation) in connection with our spin-off from Lucent in September 2000;
|
•
|
transfers or issuances of our equity may impair or reduce our ability to utilize our net operating loss carryforwards and certain other tax attributes in the future;
|
•
|
our ability to retain and attract key personnel;
|
•
|
our ability to establish and maintain proper and effective internal control over financial reporting;
|
•
|
if we do not adequately remediate our material weaknesses, or if we experience additional material weaknesses in the future;
|
•
|
potential litigation in connection with our emergence from bankruptcy;
|
•
|
breach of the security of our information systems, products or services or of the information systems of our third-party providers;
|
•
|
business interruptions, whether due to catastrophic disasters or other events;
|
•
|
claims that were not discharged in the Plan of Reorganization could have a material adverse effect on our results of operations and profitability;
|
•
|
potential litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products or services;
|
•
|
the composition of our board of directors has changed significantly;
|
•
|
we have entered into many related party transactions with a significant number of our foreign subsidiaries, which could adversely affect us in the event of their bankruptcy or similar insolvency proceeding; and
|
•
|
environmental, health and safety, laws, regulations, costs and other liabilities.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
•
|
Control activities over the completeness and accuracy of interim forecasts by tax jurisdiction used in accounting for the Company’s interim income tax provision were not performed at the appropriate level of precision. This control deficiency resulted in an adjustment to the Company’s income tax provision for the quarter ended June 30, 2017.
|
•
|
Control activities over the completeness and accuracy of the allocation of the tax provision calculations (the “intraperiod allocation”) were insufficient to ensure that the intraperiod allocation balances were accurately determined. This control deficiency resulted in an adjustment to the Company’s income tax provision for the quarter ended June 30, 2017.
|
•
|
Implementing specific additional review procedures over the income tax provision calculations for interim quarters to ensure that the results of such calculations are not inconsistent with the actual results and trends being observed in the business. The deficiency, and the related remediation, applies only to interim quarters in which the income tax provision is based on forecast results for the year. The controls and processes related to the income tax provision for our fiscal year-end are not affected as they are based on actual results for the year.
|
•
|
Hiring additional personnel, including a Vice President of Tax, with the appropriate experience and technical expertise in income taxes.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults Upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
Exhibit Number
|
|
|
10.1
|
|
|
10.2
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
A
VAYA
H
OLDINGS
C
ORP.
|
|
|
|
|
|
By:
|
/s/ L. D
AVID
D
ELL'
Osso
|
|
|
L. David Dell'Osso
Vice President, Corporate Controller & Chief Accounting Officer
(Principal Accounting Officer)
|
(i)
|
Commencing on the day immediately following the Emergence Date, so long as you continue to provide services hereunder, you will be paid $1,900,000 per year in cash (the “
Annual Consulting Fee
”), payable monthly in advance commencing not later than three (3) business days from the date hereof and pro-rated for any partial months of service. Additionally, during the Post-Emergence Consulting Period, so long as you continue to provide services hereunder, you will be eligible to receive an annual cash consulting completion fee (the “
Annual Consulting Completion Fee
”) in an amount not to exceed a maximum of $2,475,000 per year (the “
Target Annual Consulting Completion Fee
”), based on achievement of performance goals for you that are reasonably within your control as established by the Successor CEO in consultation with you and the Compensation Committee of the Board in good faith;
provided
that, in any event, your actual Annual Consulting Completion Fee will not be less than $1,900,000 for either 12-month period during the Post-Emergence Consulting Period. Each Annual Consulting Completion
|
(ii)
|
If the Company terminates the Consulting Services prior to the second anniversary of the Emergence Date for any reason other than a “Disqualifying Reason” (as defined below) then, still subject to your execution, delivery and non-revocation of the Release attached hereto as
Exhibit B
within thirty (30) days of the termination date, you will receive an amount equal to (A) the Annual Consulting Fees and the Target Annual Consulting Completion Fees payable for the entire Post-Emergence Consulting Period, reduced by (B) the Annual Consulting Fees and the Annual Consulting Completion Fees actually paid to you from the Emergence Date through the termination date (the “
Early Termination Fee
”). The Early Termination Fee will be paid in cash on the fifth day following the date on which the Release becomes effective and non-revocable (such date, the “
Release Effective Date
”),
provided
that if the Release consideration period spans two calendar years, and the Release Effective Date occurs in the first calendar year, the Early Termination Fee will be paid in the first payroll period of the second calendar year. For the avoidance of doubt, you will not be entitled to any fees, including, without limitation, any Annual Consulting Fees and Annual Consulting Completion Fees, for the period following termination of the Consulting Services, except as earned prior to the termination date and as set forth in this paragraph 3(b)(ii).
|
(iii)
|
“
Disqualifying Reason
” means any of your (A) failure to perform the Consulting Services that continues for more than ten (10) days following the Company’s written notice of such failure, (B) fraud or intentional misconduct in the performance of the Consulting Services, (C) material breach of any material Company policy, or (D) material breach of any of the restrictive covenants set forth in Appendix I attached hereto.
|
(a)
|
Dispute Resolution
. Any dispute or controversy arising under or in connection with this Letter Agreement or your engagement with the Company shall be settled exclusively by arbitration administered by JAMS, conducted before a single arbitrator, who shall be a current or former partner at an Am Law 100 firm; shall take place in San Francisco, California; and shall be conducted in accordance with the JAMS Comprehensive Arbitration Rules and Procedures then in effect, as modified herein. The decision of the arbitrator shall be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that the party that substantially prevails in such arbitration shall be awarded, and the losing party shall be required to pay, (i) the legal fees and expenses of the party that prevails, and (ii) the arbitration costs. All aspects of the arbitration shall be considered confidential and shall not be disseminated by any party with the exception of the ability and opportunity to prosecute its claim or assert its defense to any such claim or as otherwise may be required by applicable law.
|
(b)
|
Injunctive Relief
. Notwithstanding the provisions of paragraph 12(a) above, you acknowledge that any actual or threatened breach of Appendix I will cause irreparable injury to the Company or any of its subsidiaries or affiliates or any of its or their respective operations, clients, shareholders, officers, directors or employees (each, a “
Company Party
”). Accordingly, in addition to any other relief available to the Company Parties, and in addition to the right to pursue arbitration under paragraph 12(a) above, the Company shall be entitled to seek and obtain, from a court of competent jurisdiction, emergency injunctive relief, including a temporary restraining order and/or preliminary injunction (without posting a bond), in connection with such actual or threatened breach. Such relief shall be in addition to any and all other remedies, including the recovery of monetary damages, attorneys’ fees and costs, available to the Company Parties against you for such breaches or threatened breaches. Upon the issuance (or denial) of an injunction, the underlying merits of any dispute will be resolved in accordance with the arbitration provisions of paragraph 12(a) of this Letter Agreement. You acknowledge that Appendix I is necessary for the protection of the Company Parties’ legitimate business interests and are reasonable in nature.
|
Dated: 1/12, 2018
|
/s/ Kevin J. Kennedy
Kevin J. Kennedy |
1.
|
Release
. Employee, for himself and his heirs, executors, administrators, successors and assigns (hereinafter collectively referred to as the “
Releasors
”), hereby fully releases and discharges the Company and its parents, subsidiaries, affiliates, insurers, successors and assigns, and their respective officers, directors, employees, related parties and agents (all such persons, firms, corporations and entities being deemed beneficiaries hereof and are referred to herein as the “
Related Parties
”), from any and all actions, causes of action, claims, obligations, costs, losses, liabilities, damages and demands of whatsoever character, whether or not known, suspected or claimed, which the Releasors have, from the beginning of time through the date on which Employee signs this Release, including, but not limited to, (a) any and all claims or rights arising out of, or which might be considered to arise out of or to be connected in any way with, Employee’s relationship with the Company and its past, current and future parents, subsidiaries and affiliates (collectively, the “
Company Entities
”) or the termination of Employee’s relationship with the Company Entities; (b) any claims under any contracts, agreements or understandings Employee may have with any of the Related Parties, written or oral, at any time prior to the date hereof (including, but not limited to, under the Employment Agreement and/or the CIC Agreement); (c) with respect to any claims (including proofs of claims) asserted against the Company or any of its affiliated debtors in possession in their pending Chapter 11 cases; and (d) any claims or causes of action arising under any federal, state or local law, rule or ordinance, tort, express or implied contract, public policy, or any other obligation, including, without limitation, any claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Vietnam Era Veterans Readjustment Act of 1974, the Immigration Reform and Control Act of 1974, the Labor Management Relations Act, the National Labor Relations Act, the Occupational Safety and Health Act, the Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment Rights Act, the Worker Adjustment and Retraining
|
2.
|
Covenant Not to Sue
. Employee represents and warrants that Employee has not filed or caused to be filed any lawsuit, complaint or charge against any of the Related Parties in any court, any municipal, state or federal agency or any other tribunal. Employee agrees that Employee will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration pursuing any claim released under this Release; cause or assist any person or entity to sue or file a complaint, grievance or demand for arbitration against any of the Related Parties for any claim released hereunder; or accept any monetary or other recovery in connection with any complaint, grievance or demand for arbitration brought by any other person or entity. For the avoidance of doubt, Employee is not waiving or releasing Employee’s right to file a charge with, or participate in an investigation by, the Equal Employment Opportunity Commission (“
EEOC
”) or any other government agency or participating in any EEOC or other agency investigation; Employee is, however, waiving Employee’s right to recover any monetary relief or other damages from any of the Related Parties in connection with such a charge or investigation, whether such charge is filed by Employee or someone else. Employee further represents and warrants that Employee has not assigned or conveyed to any other person or entity any part of or interest in the consideration paid by the Company under this Release or in any of the claims released in Paragraph 1 of this Release. The Released Parties are intended to be third-party beneficiaries
|
3.
|
Company Release
. The Company hereby releases Employee and all of Employee’s heirs, agents, attorneys, insurers, representatives, and affiliates (each as an intended third party beneficiary) (collectively, the “
Employee Released Parties
”) from any and all claims from the beginning of time through the date upon which the Company signs this Release, including claims (a) arising from or in any way relating to Employee’s employment and/or service with the Company and/or Employee’s separation or termination from such employment and/or service; (b) arising from or in any way related to any agreement with any Released Parties; (c) arising from or in any way related to any awards, policies, plans, programs or practices of any Released Parties that may apply to Employee or in which Employee may participate; and/or (d) compensation and/or benefits that Employee has received from the Company prior to the date hereof and/or will receive pursuant to paragraph 3 of the Letter Agreement;
provided
that the foregoing release does not affect or waive any claims of the Company related to the Letter Agreement, this Release or any future release of such claims; and
provided
,
further
, that the following claims are not released under this Release: (x) claims related to facts concealed by Employee; or (y) claims related to any acts or omissions outside the scope of employment..
|
4.
|
Consideration
. Employee acknowledges that Employee would not be entitled to the consideration (or any portion thereof) but for the terms of the Letter Agreement and this Release. Employee acknowledges and agrees that the consideration provided to Employee pursuant to the Letter Agreement and this Release: (a) is in full discharge of any and all liabilities and obligations of the Company to Employee, monetarily or otherwise, with respect to Employee’s employment; and (b) exceeds any payment, benefit or other thing of value to which Employee might otherwise be entitled. Employee acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state and local taxes, if any, that Employee owes under any federal, state and/or local laws as a result of the payments and other consideration provided pursuant to the Letter Agreement and this Release.
|
5.
|
California Waiver
. The claims released herein by the parties include all such claims, whether known or unknown. Therefore, the parties waive the effect of California Civil Code Section 1542 and any other analogous provision of applicable law of any jurisdiction. Section 1542 states:
|
6.
|
Representation.
No promise or inducement has been made to Employee other than those set forth in this Release and the Letter Agreement. This Release is executed by Employee without reliance on any promises or representations by the Company or any of its agents that is not included herein or in the Letter Agreement. Employee states that that he is fully competent to manage his business affairs and understands that he is waiving legal rights, whether presently known or hereafter discovered, by signing this Release. Employee hereby acknowledges that he has carefully read this Release and has had the opportunity to thoroughly discuss the terms of this Release with legal counsel of his choosing. Employee hereby acknowledges that he fully understands the terms, conditions and significance of this Release and its final and binding effect and that he affixes his signature hereto voluntarily, knowingly, of his own free will, and with the intent to be bound hereby. Employee represents and warrants that he has not assigned any of the claims waived hereunder to any other person or entity.
|
7.
|
Waiver
. Employee understands that this Release includes a release covering all legal rights or claims under the Age Discrimination in Employment Act of 1967 (“
ADEA
”) (29 U.S.C. § 626, as amended), and all other federal, state, and local laws regarding age discrimination, whether those claims are presently known to Employee or hereafter discovered. Employee is not waiving or releasing any right or claim which Employee may have under the ADEA which arises after Employee signs this Release. To the extent the Company has a right to recoupment of any amounts paid to Employee under this Release, that right to recoupment shall not apply and the Company will not seek recoupment in the event Employee breaches the waiver and release of age discrimination claims by bringing any complaint, claim, charge or challenge under the ADEA. Employee acknowledges that he is entitled to consider the terms of this Release for twenty-one (21) days before signing it. Employee further understands that this Release shall be null and void if he fails to execute it prior to expiration of the twenty-one (21) day period. To execute this Release, Employee must sign and date this Release below and return a complete copy thereof to the Company c/o Elizabeth McCarthy, 4655 Great America Parkway, Santa Clara, CA 95054. Should Employee execute this Release within the twenty-one (21) day period, Employee understands that he may revoke this Release within seven (7) days of the day on which he signs it (the “
Revocation Period
”). Employee may revoke his acceptance by notifying the Company, c/o Elizabeth McCarthy, at the above contact information, in writing, within seven (7) calendar days after he executes this Release, by hand delivery, email, fax or overnight courier, at the address noted above. If Employee revokes this Release prior to the expiration of the Revocation Period, this Release and the promises contained herein (including, but not limited to, the
|
8.
|
No Admission
. Employee agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or Employee of any improper or unlawful conduct.
|
9.
|
Breach
. Should either party materially breach this Release, then:
|
a.
|
The non-breaching party shall have no further obligations to the breaching party under this Release (including, but not limited to, any obligation to make any further payments);
|
b.
|
The non-breaching party shall be entitled to recoup the amount of the payment(s) received pursuant to the Letter Agreement (if any), plus the reasonable attorneys’ fees and costs incurred in recouping such amounts;
|
c.
|
The non-breaching party shall have all rights and remedies available to it under this Release, the Letter Agreement and any applicable law; and
|
d.
|
All of the parties’ promises, covenants, representations and warranties under Appendix I shall remain in full force and effect.
|
10.
|
Survival
. Employee hereby acknowledges that the Letter Agreement shall survive Employee’s execution of this Release.
|
/s/ Kevin J. Kennedy
|
DATED:
1/12/2018
|
1.
|
Release
. Consultant, for himself and his heirs, executors, administrators, successors and assigns (hereinafter collectively referred to as the “
Releasors
”), hereby fully releases and discharges the Company, its parents, subsidiaries, affiliates, insurers, successors and assigns, and their respective officers, directors, employees, related parties and agents (all such persons, firms, corporations and entities being deemed beneficiaries hereof and are referred to herein as the “
Related Parties
”), from any and all actions, causes of action, claims, obligations, costs, losses, liabilities, damages and demands of whatsoever character, whether or not known, suspected or claimed, which the Releasors have, from the beginning of time through the date on which Consultant signs this Release, including, but not limited to, (a) any and all claims or rights arising out of, or which might be considered to arise out of or to be connected in any way with, Consultant’s relationship with the Company and its past, current and future parents, subsidiaries and affiliates (collectively, the “
Company Entities
”) or the termination of Consultant’s relationship with the Company Entities; (b) any claims under any contracts, agreements or understandings Consultant may have with any of the Related Parties, written or oral, at any time prior to the date hereof (including, but not limited to, under the Employment Agreement and/or the CIC Agreement); (c) with respect to any claims (including proofs of claims) asserted against the Company or any of its affiliated debtors in possession in their pending Chapter 11 cases; and (d) any claims or causes of action arising under any federal, state or local law, rule or ordinance, tort, express or implied contract, public policy or any other obligation, or any tangible or intangible property of Consultant’s that remains with the Company, and any other applicable laws, regulations and rules, whether arising under any contract (express or implied), agreement, statute, regulation, ordinance, common law, public policy or any other source. Consultant specifically intends this Release to be the broadest possible release permitted under law. Notwithstanding the foregoing, Consultant shall not be deemed to have released (i) any obligations undertaken within the Letter Agreement, this Release or any future claims Consultant may have arising from or related to a breach of the Letter Agreement or this Release; (ii) any claims to
|
2.
|
Covenant Not to Sue
. Consultant represents and warrants that Consultant has not filed or caused to be filed any lawsuit, complaint or charge against any of the Related Parties in any court, any municipal, state or federal agency or any other tribunal. Consultant agrees that Consultant will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration pursuing any claim released under this Release; cause or assist any person or entity to sue or file a complaint, grievance or demand for arbitration against any of the Related Parties for any claim released hereunder; or accept any monetary or other recovery in connection with any complaint, grievance or demand for arbitration brought by any other person or entity. For the avoidance of doubt, Consultant is not waiving or releasing Consultant’s right to file a charge with, or participate in an investigation any government agency or participating in any government agency investigation; Consultant is, however, waiving Consultant’s right to recover any monetary relief or other damages from any of the Related Parties in connection with such a charge or investigation, whether such charge is filed by Consultant or someone else. Consultant further represents and warrants that Consultant has not assigned or conveyed to any other person or entity any part of or interest in the consideration paid by the Company under this Release or in any of the claims released in Paragraph 1 of this Release. The Released Parties are intended to be third-party beneficiaries of this Release, and this Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder.
|
3.
|
Company Release
. The Company hereby releases Consultant and all of Consultant’s heirs, agents, attorneys, insurers, representatives and affiliates (each as an intended third party beneficiary) (collectively, the “
Consultant Released Parties
”) from any and all claims from the beginning of time through the date upon which the Company signs this Release, including claims (a) arising from or in any way relating to Consultant’s engagement with the Company and/or Consultant’s separation or termination from such employment and/or service; (b) arising from or in any way related to any agreement with any Released Parties; (c) arising from or in any way related to any awards, policies, plans, programs or practices of any Released Parties that may apply to Consultant or in which Consultant may participate; and/or (d) compensation and/or benefits that Consultant have received from the Company prior to the date hereof and/or will receive pursuant to paragraph 3 of the Letter Agreement;
provided
that the foregoing release does not affect or waive any claims of the Company related to the Letter Agreement, this Release or any future release of such claims; and
|
4.
|
Consideration
. Consultant acknowledges that Consultant would not be entitled to the consideration (or any portion thereof) but for the terms of the Letter Agreement and this Release. Consultant acknowledges and agrees that the consideration provided to Consultant pursuant to the Letter Agreement and this Release: (a) is in full discharge of any and all liabilities and obligations of the Company to Consultant, monetarily or otherwise, with respect to Consultant’s engagement; and (b) exceeds any payment, benefit or other thing of value to which Consultant might otherwise be entitled. Consultant acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state and local taxes, if any, that Consultant owes under any federal, state and/or local laws as a result of the payments and other consideration provided pursuant to the Letter Agreement and this Release.
|
5.
|
California Waiver
. The claims released herein by the parties include all such claims, whether known or unknown. Therefore, the parties waive the effect of California Civil Code Section 1542 and any other analogous provision of applicable law of any jurisdiction. Section 1542 states:
|
6.
|
Representation.
No promise or inducement has been made to Consultant other than those set forth in this Release and the Letter Agreement. This Release is executed by Consultant without reliance on any promises or representations by the Company or any of its agents that is not included herein or in the Letter Agreement. Consultant states that that he is fully competent to manage his business affairs and understands that he is waiving legal rights, whether presently known or hereafter discovered, by signing this Release. Consultant hereby acknowledges that he has carefully read this Release and has had the opportunity to thoroughly discuss the terms of this Release with legal counsel of his choosing. Consultant hereby acknowledges that he fully understands the terms, conditions and significance of this Release and its final and binding effect and that he affixes his signature hereto voluntarily, knowingly, of his own free will, and with the intent to be bound hereby. Consultant represents and warrants that he has not assigned any of the claims waived hereunder to any other person or entity.
|
7.
|
Effective Date
. Consultant acknowledges that he is entitled to consider the terms of this Release for twenty-one (21) days before signing it. Consultant further understands that this Release shall be null and void if he fails to execute it prior to expiration of the twenty-one (21) day period. To execute this Release, Consultant must sign and date this Release below and return a complete copy thereof to the Company c/o Elizabeth McCarthy, 4655 Great America Parkway, Santa Clara, CA 95054. Should Consultant execute this Release within the twenty-one (21) day period, Consultant understands that he may revoke this Release within seven (7) days of the day on which he signs it (the “
Revocation Period
”). Consultant may revoke his acceptance by notifying the Company, c/o Elizabeth McCarthy, at the above contact information, in writing, within seven (7) calendar days after he executes this Release, by hand delivery, email, fax or overnight courier, at the address noted above. If Consultant revokes this Release prior to the expiration of the Revocation Period, this Release and the promises contained herein (including, but not limited to, the Company’s obligations hereunder) automatically shall be null and void. If Consultant does not revoke this Release within seven (7) days of signing it, this Release shall become fully binding, effective and enforceable on the eighth (8th) calendar day after the day Consultant executes it.
|
8.
|
No admission
. Consultant agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or Consultant of any improper or unlawful conduct
|
9.
|
Breach
. Should either party materially breach this Release, then:
|
a.
|
The non-breaching party shall have no further obligations to the breaching party under this Release (including, but not limited to, any obligation to make any further payments);
|
b.
|
The non-breaching party shall be entitled to recoup the amount of the payment(s) received pursuant to the Letter Agreement (if any), plus the reasonable attorneys’ fees and costs incurred in recouping such amounts;
|
c.
|
The non-breaching party shall have all rights and remedies available to it under this Release, the Letter Agreement and any applicable law; and
|
d.
|
All of the parties’ promises, covenants, representations and warranties under Appendix I shall remain in full force and effect.
|
10.
|
Survival
. Consultant hereby acknowledges that the Letter Agreement shall survive Consultant’s execution of this Release.
|
(i)
|
Commencing on the day immediately following the Emergence Date, so long as you continue to provide services hereunder, you will be paid $1,900,000 per year in cash (the “
Annual Consulting Fee
”), payable monthly in advance commencing not later than three (3) business days from the date hereof and pro-rated for any partial months of service. Additionally, during the Post-Emergence Consulting Period, so long as you continue to provide services hereunder, you will be eligible to receive an annual cash consulting completion fee (the “
Annual Consulting Completion Fee
”) in an amount not to exceed a maximum of $2,475,000 per year (the “
Target Annual Consulting Completion Fee
”), based on achievement of performance goals for you that are reasonably within your control as established by the Successor CEO in consultation with you and the Compensation Committee of the Board in good faith;
provided
that, in any event, your actual Annual Consulting Completion Fee will not be less than $1,900,000 for either 12-month period during the Post-Emergence Consulting Period. Each Annual Consulting Completion
|
(ii)
|
If the Company terminates the Consulting Services prior to the second anniversary of the Emergence Date for any reason other than a “Disqualifying Reason” (as defined below) then, still subject to your execution, delivery and non-revocation of the Release attached hereto as
Exhibit B
within thirty (30) days of the termination date, you will receive an amount equal to (A) the Annual Consulting Fees and the Target Annual Consulting Completion Fees payable for the entire Post-Emergence Consulting Period, reduced by (B) the Annual Consulting Fees and the Annual Consulting Completion Fees actually paid to you from the Emergence Date through the termination date (the “
Early Termination Fee
”). The Early Termination Fee will be paid in cash on the fifth day following the date on which the Release becomes effective and non-revocable (such date, the “
Release Effective Date
”),
provided
that if the Release consideration period spans two calendar years, and the Release Effective Date occurs in the first calendar year, the Early Termination Fee will be paid in the first payroll period of the second calendar year. For the avoidance of doubt, you will not be entitled to any fees, including, without limitation, any Annual Consulting Fees and Annual Consulting Completion Fees, for the period following termination of the Consulting Services, except as earned prior to the termination date and as set forth in this paragraph 3(b)(ii).
|
(iii)
|
“
Disqualifying Reason
” means any of your (A) failure to perform the Consulting Services that continues for more than ten (10) days following the Company’s written notice of such failure, (B) fraud or intentional misconduct in the performance of the Consulting Services, (C) material breach of any material Company policy, or (D) material breach of any of the restrictive covenants set forth in Appendix I attached hereto.
|
(a)
|
Dispute Resolution
. Any dispute or controversy arising under or in connection with this Letter Agreement or your engagement with the Company shall be settled exclusively by arbitration administered by JAMS, conducted before a single arbitrator, who shall be a current or former partner at an Am Law 100 firm; shall take place in San Francisco, California; and shall be conducted in accordance with the JAMS Comprehensive Arbitration Rules and Procedures then in effect, as modified herein. The decision of the arbitrator shall be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that the party that substantially prevails in such arbitration shall be awarded, and the losing party shall be required to pay, (i) the legal fees and expenses of the party that prevails, and (ii) the arbitration costs. All aspects of the arbitration shall be considered confidential and shall not be disseminated by any party with the exception of the ability and opportunity to prosecute its claim or assert its defense to any such claim or as otherwise may be required by applicable law.
|
(b)
|
Injunctive Relief
. Notwithstanding the provisions of paragraph 12(a) above, you acknowledge that any actual or threatened breach of Appendix I will cause irreparable injury to the Company or any of its subsidiaries or affiliates or any of its or their respective operations, clients, shareholders, officers, directors or employees (each, a “
Company Party
”). Accordingly, in addition to any other relief available to the Company Parties, and in addition to the right to pursue arbitration under paragraph 12(a) above, the Company shall be entitled to seek and obtain, from a court of competent jurisdiction, emergency injunctive relief, including a temporary restraining order and/or preliminary injunction (without posting a bond), in connection with such actual or threatened breach. Such relief shall be in addition to any and all other remedies, including the recovery of monetary damages, attorneys’ fees and costs, available to the Company Parties against you for such breaches or threatened breaches. Upon the issuance (or denial) of an injunction, the underlying merits of any dispute will be resolved in accordance with the arbitration provisions of paragraph 12(a) of this Letter Agreement. You acknowledge that Appendix I is necessary for the protection of the Company Parties’ legitimate business interests and are reasonable in nature.
|
Dated: 1/12, 2018
|
/s/ Kevin J. Kennedy
Kevin J. Kennedy |
1.
|
Release
. Employee, for himself and his heirs, executors, administrators, successors and assigns (hereinafter collectively referred to as the “
Releasors
”), hereby fully releases and discharges the Company and its parents, subsidiaries, affiliates, insurers, successors and assigns, and their respective officers, directors, employees, related parties and agents (all such persons, firms, corporations and entities being deemed beneficiaries hereof and are referred to herein as the “
Related Parties
”), from any and all actions, causes of action, claims, obligations, costs, losses, liabilities, damages and demands of whatsoever character, whether or not known, suspected or claimed, which the Releasors have, from the beginning of time through the date on which Employee signs this Release, including, but not limited to, (a) any and all claims or rights arising out of, or which might be considered to arise out of or to be connected in any way with, Employee’s relationship with the Company and its past, current and future parents, subsidiaries and affiliates (collectively, the “
Company Entities
”) or the termination of Employee’s relationship with the Company Entities; (b) any claims under any contracts, agreements or understandings Employee may have with any of the Related Parties, written or oral, at any time prior to the date hereof (including, but not limited to, under the Employment Agreement and/or the CIC Agreement); (c) with respect to any claims (including proofs of claims) asserted against the Company or any of its affiliated debtors in possession in their pending Chapter 11 cases; and (d) any claims or causes of action arising under any federal, state or local law, rule or ordinance, tort, express or implied contract, public policy, or any other obligation, including, without limitation, any claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and Medical Leave Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Vietnam Era Veterans Readjustment Act of 1974, the Immigration Reform and Control Act of 1974, the Labor Management Relations Act, the National Labor Relations Act, the Occupational Safety and Health Act, the Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment Rights Act, the Worker Adjustment and Retraining Notification Act, the Sarbanes-Oxley Act of 2002, and the Code, all as amended, and/or any other federal, state or local labor laws, wage and hour and wage payment laws, employee relations and/or fair employment practices laws, any public policy, any claim for misrepresentation, defamation or invasion of privacy, any claim for compensation, wages, commissions, bonuses, royalties, equity-based awards, deferred compensation, other monetary or equitable relief, vacation, personal or sick time, other fringe benefits, attorneys’ fees, or any tangible or intangible property of Employee’s that remains with the Company, and any other applicable laws, regulations and rules, whether arising under any contract (express or implied), agreement, statute, regulation, ordinance, common law, public policy or any other source. Employee specifically intends this Release to be the broadest possible release permitted under law. Notwithstanding the foregoing, Employee shall not be deemed to have released (i) any obligations undertaken within the Letter Agreement, this Release or any future claims Employee may have arising from or related to a breach of the Letter Agreement or this Release; (ii) any claims to indemnification to which Employee may be entitled under the Company’s certificate of incorporation, bylaws, indemnification agreements, directors and officers insurance policies, or applicable law with respect to the period of Employee’s employment; (iii) any claims or rights which cannot be waived by law, including Employee’s right to workers compensation; (iv) any vested and non-forfeitable benefits under any employee benefit plans; and (v) claims related to facts concealed by the Company.
|
2.
|
Covenant Not to Sue
. Employee represents and warrants that Employee has not filed or caused to be filed any lawsuit, complaint or charge against any of the Related Parties in any court, any municipal, state or federal agency or any other tribunal. Employee agrees that Employee will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration pursuing any claim released under this Release; cause or assist any person or entity to sue or file a complaint, grievance or demand for arbitration against any of the Related Parties for any claim released hereunder; or accept any monetary or other recovery in connection with any complaint, grievance or demand for arbitration brought by any other person or entity. For the avoidance of doubt, Employee is not waiving or releasing Employee’s right to file a charge with, or participate in an investigation by, the Equal Employment Opportunity Commission (“
EEOC
”) or any other government agency or participating in any EEOC or other agency investigation; Employee is, however, waiving Employee’s right to recover any monetary relief or other damages from any of the Related Parties in connection with such a charge or investigation, whether such charge is filed by Employee or someone else. Employee further represents and warrants that Employee has not assigned or conveyed to any other person or entity any part of or interest in the consideration paid by the Company under this Release or in any of the claims released in Paragraph 1 of this Release. The Released Parties are intended to be third-party beneficiaries of this Release, and this Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder.
|
3.
|
Company Release
. The Company hereby releases Employee and all of Employee’s heirs, agents, attorneys, insurers, representatives, and affiliates (each as an intended third party beneficiary) (collectively, the “
Employee Released Parties
”) from any and all claims from the beginning of time through the date upon which the Company signs this Release, including claims (a) arising from or in any way relating to Employee’s employment and/or service with the Company and/or Employee’s separation or termination from such employment and/or service; (b) arising from or in any way related to any agreement with any Released Parties; (c) arising from or in any way related to any awards, policies, plans, programs or practices of any Released Parties that may apply to Employee or in which Employee may participate; and/or (d) compensation and/or benefits that Employee has received from the Company prior to the date hereof and/or will receive pursuant to paragraph 3 of the Letter Agreement;
provided
that the foregoing release does not affect or waive any claims of the Company related to the Letter Agreement, this Release or any future release of such claims; and
provided
,
further
, that the following claims are not released under this Release: (x) claims related to facts concealed by Employee; or (y) claims related to any acts or omissions outside the scope of employment..
|
4.
|
Consideration
. Employee acknowledges that Employee would not be entitled to the consideration (or any portion thereof) but for the terms of the Letter Agreement and this Release. Employee acknowledges and agrees that the consideration provided to Employee pursuant to the Letter Agreement and this Release: (a) is in full discharge of any and all liabilities and obligations of the Company to Employee, monetarily or otherwise, with respect to Employee’s employment; and (b) exceeds any payment, benefit or other thing of value to which Employee might otherwise be entitled. Employee acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state and local taxes, if any, that Employee owes under any federal, state and/or local laws as a result of the payments and other consideration provided pursuant to the Letter Agreement and this Release.
|
5.
|
California Waiver
. The claims released herein by the parties include all such claims, whether known or unknown. Therefore, the parties waive the effect of California Civil Code Section 1542 and any other analogous provision of applicable law of any jurisdiction. Section 1542 states:
|
6.
|
Representation.
No promise or inducement has been made to Employee other than those set forth in this Release and the Letter Agreement. This Release is executed by Employee without reliance on any promises or representations by the Company or any of its agents that is not included herein or in the Letter Agreement. Employee states that that he is fully competent to manage his business affairs and understands that he is waiving legal rights, whether presently known or hereafter discovered, by signing this Release. Employee hereby acknowledges that he has carefully read this Release and has had the opportunity to thoroughly discuss the terms of this Release with legal counsel of his choosing. Employee hereby acknowledges that he fully understands the terms, conditions and significance of this Release and its final and binding effect and that he affixes his signature hereto voluntarily, knowingly, of his own free will, and with the intent to be bound hereby. Employee represents and warrants that he has not assigned any of the claims waived hereunder to any other person or entity.
|
7.
|
Waiver
.
Employee understands that this
Release
includes a release covering all legal rights or claims under the Age Discrimination in Employment Act of 1967 (“
ADEA
”) (29 U.S.C. § 626, as amended), and all other federal, state, and local laws regarding age discrimination, whether those claims are presently known to Employee or hereafter discovered.
Employee is not waiving or releasing any right or claim which Employee may have under the ADEA which arises after Employee signs this Release. To the extent the Company has a right to recoupment of any amounts paid to Employee under this Release, that right to recoupment shall not apply and the Company will not seek recoupment in the event Employee breaches the waiver and release of age discrimination claims by bringing any complaint, claim, charge or challenge under the ADEA.
Employee acknowledges that he is entitled to consider the terms of this
Release
for twenty-one (21) days before signing it. Employee further understands that this
Release
shall be null and void if he fails to execute it prior to expiration of the twenty-one (21) day period. To execute this
Release
, Employee must sign and date this
Release
below and return a complete copy thereof to the Company c/o Elizabeth McCarthy, 4655 Great America Parkway, Santa Clara, CA 95054. Should Employee execute this
Release
within the twenty-one (21) day period, Employee understands that he may revoke this Release within seven (7) days of the day on which he signs it (the “
Revocation Period
”). Employee may revoke his acceptance by notifying the Company, c/o Elizabeth McCarthy
, at the above contact information
, in writing, within seven (7) calendar days after he executes this Release, by hand delivery, email, fax or overnight courier, at the address noted above. If Employee revokes this
Release
prior to the expiration of the Revocation Period, this
Release
and the promises contained herein (including, but not limited to, the Company’s obligations hereunder) automatically shall be null and void. If Employee does not revoke this
Release
within seven (7) days of signing it, this
Release
shall become fully binding, effective and enforceable on the eighth (8th) calendar day after the day Employee executes it.
|
8.
|
No Admission
. Employee agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or Employee of any improper or unlawful conduct.
|
9.
|
Breach
. Should either party materially breach this Release, then:
|
a.
|
The non-breaching party shall have no further obligations to the breaching party under this Release (including, but not limited to, any obligation to make any further payments);
|
b.
|
The non-breaching party shall be entitled to recoup the amount of the payment(s) received pursuant to the Letter Agreement (if any), plus the reasonable attorneys’ fees and costs incurred in recouping such amounts;
|
c.
|
The non-breaching party shall have all rights and remedies available to it under this Release, the Letter Agreement and any applicable law; and
|
d.
|
All of the parties’ promises, covenants, representations and warranties under Appendix I shall remain in full force and effect.
|
10.
|
Survival
. Employee hereby acknowledges that the Letter Agreement shall survive Employee’s execution of this Release.
|
/s/ Kevin J. Kennedy
|
DATED:
1/12/2018
|
1.
|
Release
. Consultant, for himself and his heirs, executors, administrators, successors and assigns (hereinafter collectively referred to as the “
Releasors
”), hereby fully releases and discharges the Company, its parents, subsidiaries, affiliates, insurers, successors and assigns, and their respective officers, directors, employees, related parties and agents (all such persons, firms, corporations and entities being deemed beneficiaries hereof and are referred to herein as the “
Related Parties
”), from any and all actions, causes of action, claims, obligations, costs, losses, liabilities, damages and demands of whatsoever character, whether or not known, suspected or claimed, which the Releasors have, from the beginning of time through the date on which Consultant signs this Release, including, but not limited to, (a) any and all claims or rights arising out of, or which might be considered to arise out of or to be connected in any way with, Consultant’s relationship with the Company and its past, current and future parents, subsidiaries and affiliates (collectively, the “
Company Entities
”) or the termination of Consultant’s relationship with the Company Entities; (b) any claims under any contracts, agreements or understandings Consultant may have with any of the Related Parties, written or oral, at any time prior to the date hereof (including, but not limited to, under the Employment Agreement and/or the CIC Agreement); (c) with respect to any claims (including proofs of claims) asserted against the Company or any of its affiliated debtors in possession in their pending Chapter 11 cases; and (d) any claims or causes of action arising under any federal, state or local law, rule or ordinance, tort, express or implied contract, public policy or any other obligation, or any tangible or intangible property of Consultant’s that remains with the Company, and any other applicable laws, regulations and rules, whether arising under any contract (express or implied), agreement, statute, regulation, ordinance, common law, public policy or any other source. Consultant specifically intends this Release to be the broadest possible release permitted under law. Notwithstanding the foregoing, Consultant shall not be deemed to have released (i) any obligations undertaken within the Letter Agreement, this Release or any future claims Consultant may have arising from or related to a breach of the Letter Agreement or this Release; (ii) any claims to indemnification to which Consultant may be entitled under the Company’s certificate of incorporation, bylaws, indemnification agreements, directors and officers insurance policies, or applicable law with respect to the period prior to the Post-Emergence Consulting Period; (iii) any claims or rights which cannot be waived by law; (iv) any vested and non-forfeitable benefits under any employee benefit plan; and (v) claims related to facts concealed by the Company.
|
2.
|
Covenant Not to Sue
. Consultant represents and warrants that Consultant has not filed or caused to be filed any lawsuit, complaint or charge against any of the Related Parties in any court, any municipal, state or federal agency or any other tribunal. Consultant agrees that Consultant will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration pursuing any claim released under this Release; cause or assist any person or entity to sue or file a complaint, grievance or demand for arbitration against any of the Related Parties for any claim released hereunder; or accept any monetary or other recovery in connection with any complaint, grievance or demand for arbitration brought by any other person or entity. For the avoidance of doubt, Consultant is not waiving or releasing Consultant’s right to file a charge with, or participate in an investigation any government agency or participating in any government agency investigation; Consultant is, however, waiving Consultant’s right to recover any monetary relief or other damages from any of the Related Parties in connection with such a charge or investigation, whether such charge is filed by Consultant or someone else. Consultant further represents and warrants that Consultant has not assigned or conveyed to any other person or entity any part of or interest in the consideration paid by the Company under this Release or in any of the claims released in Paragraph 1 of this Release. The Released Parties are intended to be third-party beneficiaries of this Release, and this Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder.
|
3.
|
Company Release
. The Company hereby releases Consultant and all of Consultant’s heirs, agents, attorneys, insurers, representatives and affiliates (each as an intended third party beneficiary) (collectively, the “
Consultant Released Parties
”) from any and all claims from the beginning of time through the date upon which the Company signs this Release, including claims (a) arising from or in any way relating to Consultant’s engagement with the Company and/or Consultant’s separation or termination from such employment and/or service; (b) arising from or in any way related to any agreement with any Released Parties; (c) arising from or in any way related to any awards, policies, plans, programs or practices of any Released Parties that may apply to Consultant or in which Consultant may participate; and/or (d) compensation and/or benefits that Consultant have received from the Company prior to the date hereof and/or will receive pursuant to paragraph 3 of the Letter Agreement;
provided
that the foregoing release does not affect or waive any claims of the Company related to the Letter Agreement, this Release or any future release of such claims; and
provided
,
further
, that the following claims are not released under this Release: (x) claims related to facts concealed by Consultant; or (y) claims related to acts or omissions outside the scope of the Consulting Services.
|
4.
|
Consideration
. Consultant acknowledges that Consultant would not be entitled to the consideration (or any portion thereof) but for the terms of the Letter Agreement and this Release. Consultant acknowledges and agrees that the consideration provided to Consultant pursuant to the Letter Agreement and this Release: (a) is in full discharge of any and all liabilities and obligations of the Company to Consultant, monetarily or otherwise, with respect to Consultant’s engagement; and (b) exceeds any payment, benefit or other thing of value to which Consultant might otherwise be entitled. Consultant acknowledges and agrees that he is solely and entirely responsible for the payment and discharge of all federal, state and local taxes, if any, that Consultant owes under any federal, state and/or local laws as a result of the payments and other consideration provided pursuant to the Letter Agreement and this Release.
|
5.
|
California Waiver
. The claims released herein by the parties include all such claims, whether known or unknown. Therefore, the parties waive the effect of California Civil Code Section 1542 and any other analogous provision of applicable law of any jurisdiction. Section 1542 states:
|
6.
|
Representation.
No promise or inducement has been made to Consultant other than those set forth in this Release and the Letter Agreement. This Release is executed by Consultant without reliance on any promises or representations by the Company or any of its agents that is not included herein or in the Letter Agreement. Consultant states that that he is fully competent to manage his business affairs and understands that he is waiving legal rights, whether presently known or hereafter discovered, by signing this Release. Consultant hereby acknowledges that he has carefully read this Release and has had the opportunity to thoroughly discuss the terms of this Release with legal counsel of his choosing. Consultant hereby acknowledges that he fully understands the terms, conditions and significance of this Release and its final and binding effect and that he affixes his signature hereto voluntarily, knowingly, of his own free will, and with the intent to be bound hereby. Consultant represents and warrants that he has not assigned any of the claims waived hereunder to any other person or entity.
|
7.
|
Effective Date
. Consultant
acknowledges that he is entitled to consider the terms of this
Release
for twenty-one (21) days before signing it.
Consultant
further understands that this
Release
shall be null and void if he fails to execute it prior to expiration of the twenty-one (21) day period. To execute this
Release
,
Consultant
must sign and date this
Release
below and return a complete copy thereof to the Company c/o Elizabeth McCarthy, 4655 Great America Parkway, Santa Clara, CA 95054. Should
Consultant
execute this
Release
within the twenty-one (21) day period,
Consultant
understands that he may revoke this Release within seven (7) days of the day on which he signs it (the “
Revocation Period
”).
Consultant
may revoke his acceptance by notifying the Company, c/o Elizabeth McCarthy,
at the above contact information
, in writing, within seven (7) calendar days after he executes this Release, by hand delivery, email, fax or overnight courier, at the address noted above. If Consultant revokes this
Release
prior to the expiration of the Revocation Period, this
Release
and the promises contained herein (including, but not limited to, the Company’s obligations hereunder) automatically shall be null and void. If
Consultant
does not revoke this
Release
within seven (7) days of signing it, this
Release
shall become fully binding, effective and enforceable on the eighth (8th) calendar day after the day Consultant executes it.
|
8.
|
No admission
. Consultant agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or Consultant of any improper or unlawful conduct
|
9.
|
Breach
. Should either party materially breach this Release, then:
|
a.
|
The non-breaching party shall have no further obligations to the breaching party under this Release (including, but not limited to, any obligation to make any further payments);
|
b.
|
The non-breaching party shall be entitled to recoup the amount of the payment(s) received pursuant to the Letter Agreement (if any), plus the reasonable attorneys’ fees and costs incurred in recouping such amounts;
|
c.
|
The non-breaching party shall have all rights and remedies available to it under this Release, the Letter Agreement and any applicable law; and
|
d.
|
All of the parties’ promises, covenants, representations and warranties under Appendix I shall remain in full force and effect.
|
10.
|
Survival
. Consultant hereby acknowledges that the Letter Agreement shall survive Consultant’s execution of this Release.
|
|
|
|
/s/ J
AMES
M. C
HIRICO
, J
R
.
|
|
James M. Chirico, Jr.
Director, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ P
ATRICK
J. O'M
ALLEY
, III
|
|
Patrick J. O'Malley, III
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
/s/ J
AMES
M. C
HIRICO
, J
R
.
|
|
James M. Chirico, Jr.
Director, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ P
ATRICK
J. O'M
ALLEY
, III
|
|
Patrick J. O'Malley, III
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|