EXHIBIT 10.42


 


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


 


Compensation Arrangements for Named Executive Officers



 


In
addition to participation in certain plans and/or arrangements already filed
and identified as exhibits to this Form 10-K, the following applies with
respect to the Company’s Chief Executive Officer (“CEO”) and the other four
most highly compensated executive officers (together with the CEO, the “Named
Executive Officers”) for fiscal 2005:


 


Salaries
for 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

  	
   

  	
   

  	
   

  



 


Salaries
for the Named Executive Officers for fiscal 2006 remain unchanged.


 


In addition, Avaya provides
the Named Executive Officers with certain fringe benefits, including one or
more of the following:  financial
counseling services, a car allowance, reimbursement for home security systems,
certain temporary housing expenses, and limited use of the corporate aircraft
and automobiles for personal reasons. 
The Compensation Committee of the Company’s Board of Directors periodically
reviews 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 of
Avaya’s Board, each new Director receives an inaugural grant of restricted stock
units having a total value on the date of grant of $50,000. The restricted
stock units are placed in that Director’s deferred share account under the
Company’s Deferred Compensation Plan, and, assuming they have vested, the
underlying shares are distributed to that Director upon retirement from the
Board.


 





















 


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


 


Non-employee Directors
received 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 to
elect to receive at least 50% of their retainers in our Common Stock, to be received
either at the time of payment of their retainers or to be placed in their
deferred share accounts under the Company’s Deferred Compensation Plan. Any
remaining amounts may be paid in cash, but in no event is the cash paid
permitted to exceed 50% of the annual retainer. Directors can elect to defer
all 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 has
determined that the interest rate to be applied at the end of each fiscal
quarter 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-employee
Directors with travel accident insurance when traveling in connection with
Avaya-related business. We do not provide a retirement plan or other
perquisites for our Directors.  Directors
have an opportunity to participate in the Avaya Product Program for Directors, in
which certain Avaya products (specifically, an Avaya IP Office system for one
location with up to 20 telephones) and associated maintenance services are
provided at no charge; however, the equipment and the related maintenance is
taxable as income to any Director that chooses to participate, and the Company
provides a gross-up for the resulting taxes. The cost of providing the products
and the installation services for each Director who participates in the Product
Program is estimated to be between $3,000 and $5,000, with maintenance services
ranging from between $300 and $600 each year, depending upon the systems
installed.