**EXHIBIT 10.42**

 

**Compensation Arrangements for Named Executive Officersand Non-Employee Directors of Avaya Inc. (“Avaya” or “the Company”)**

 

**Compensation Arrangements for Named Executive Officers**

 

Inaddition to participation in certain plans and/or arrangements already filedand identified as exhibits to this Form 10-K, the following applies withrespect to the Company’s Chief Executive Officer (“CEO”) and the other fourmost highly compensated executive officers (together with the CEO, the “NamedExecutive Officers”) for fiscal 2005:

 

Salariesfor fiscal 2005 were:

 
| Donald K.  Peterson                                                             |   | $      | 940,000 |   |
|---------------------------------------------------------------------------------|--------|--------|---------|--------|
| Chairman of  the Board and Chief Executive Officer                              |   |   |    |
|                                                                            |   |   |    |
| Garry K.  McGuire                                                               |   | $      | 470,000 |   |
| Chief  Financial Officer and Senior Vice President — Corporate Development |   |   |    |
|                                                                            |   |   |    |
| Michael C.  Thurk                                                               |   | $      | 475,000 |   |
| Senior Vice  President and President — Global Communications Solutions     |   |   |    |
|                                                                            |   |   |    |
| Louis J. D’Ambrosio                                                        |   | $      | 475,000 |   |
| Senior Vice  President and President — Global Sales and Marketing          |   |   |    |
|                                                                            |   |   |    |
| Francis M.  Scricco                                                             |   | $      | 475,000 |   |
| Senior Vice  President and President — Avaya Global Services               |   |   |    |

 

Salariesfor the Named Executive Officers for fiscal 2006 remain unchanged.

 

In addition, Avaya providesthe Named Executive Officers with certain fringe benefits, including one ormore of the following:  financialcounseling services, a car allowance, reimbursement for home security systems,certain temporary housing expenses, and limited use of the corporate aircraftand automobiles for personal reasons. The Compensation Committee of the Company’s Board of Directors periodicallyreviews fringe benefits made available to the Company’s executive officers,including the CEO, to ensure that they are in line with market practice.

 

**Compensation Arrangements for Non-Employee Directors**

 

Upon becoming a member ofAvaya’s Board, each new Director receives an inaugural grant of restricted stockunits having a total value on the date of grant of $50,000. The restrictedstock units are placed in that Director’s deferred share account under theCompany’s Deferred Compensation Plan, and, assuming they have vested, theunderlying shares are distributed to that Director upon retirement from theBoard.

 

----

 

For fiscal 2005, allnon-management Directors received an annual retainer of $100,000. The chair ofthe Audit Committee receives an additional annual retainer of $20,000. Thechair of each other committee (other than Mr. Peterson) receives anadditional annual retainer of $10,000. Directors do not receive separatemeeting fees. The retainers are paid on March 1 of the respective fiscalyear.

 

Non-employee Directorsreceived the following compensation with respect to fiscal 2005:

 
| **Name**               | ** ** | **Amount** | ** ** |
|------------------------|------------|------------|------------|
| Bruce R.  Bond         |       | $          | 100,000    |   |
| Joseph P.  Landy       |       | $          | 100,000    |   |
| Mark Leslie            |       | $          | 100,000    |   |
| Philip A.  Odeen       |       | $          | 110,000    |   |
| Hellene S.  Runtagh    |       | $          | 100,000    |   |
| Daniel C. Stanzione    |       | $          | 110,000    |   |
| Paula Stern            |       | $          | 100,000    |   |
| Anthony P. Terracciano |       | $          | 100,000    |   |
| Richard F. Wallman     |       | $          | 120,000    |   |
| Ronald L. Zarrella     |       | $          | 100,000    |   |

 

Directors are required toelect to receive at least 50% of their retainers in our Common Stock, to be receivedeither at the time of payment of their retainers or to be placed in theirdeferred share accounts under the Company’s Deferred Compensation Plan. Anyremaining amounts may be paid in cash, but in no event is the cash paidpermitted to exceed 50% of the annual retainer. Directors can elect to deferall or a portion of their cash retainers under our Deferred Compensation Plan.The interest rate on cash deferrals is determined by the Board. The Board hasdetermined that the interest rate to be applied at the end of each fiscalquarter to each deferred cash account is 120% of the average 10-year U.S.Treasury note rate for the previous calendar quarter.

 

We also provide non-employeeDirectors with travel accident insurance when traveling in connection withAvaya-related business. We do not provide a retirement plan or otherperquisites for our Directors.  Directorshave an opportunity to participate in the Avaya Product Program for Directors, inwhich certain Avaya products (specifically, an Avaya IP Office system for onelocation with up to 20 telephones) and associated maintenance services areprovided at no charge; however, the equipment and the related maintenance istaxable as income to any Director that chooses to participate, and the Companyprovides a gross-up for the resulting taxes. The cost of providing the productsand the installation services for each Director who participates in the ProductProgram is estimated to be between $3,000 and $5,000, with maintenance servicesranging from between $300 and $600 each year, depending upon the systemsinstalled.

 

----