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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38289
AVAYA HOLDINGS CORP.
(Exact name of registrant as specified in its charter)

Delaware26-1119726
(State or other jurisdiction of incorporation or organization) 
(I.R.S. Employer Identification No.)
4655 Great America Parkway95054
Santa Clara,California
(Address of Principal executive offices) (Zip Code)
(908) 953-6000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common StockAVYANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller Reporting Company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes      No  
As of April 30, 2020, 82,787,845 shares of common stock, $.01 par value, of the registrant were outstanding.




TABLE OF CONTENTS 
ItemDescriptionPage
PART I—FINANCIAL INFORMATION
1.
Financial Statements
2.
3.
Quantitative and Qualitative Disclosures About Market Risk
4.
Controls and Procedures
PART II—OTHER INFORMATION
1.
Legal Proceedings
1A.
Risk Factors
2.
Unregistered Sales of Equity Securities and Use of Proceeds
3.
Defaults Upon Senior Securities
4.
Mine Safety Disclosures
5.
Other Information
6.
Exhibits
7.
Signatures
When we use the terms "we," "us," "our," "Avaya" or the "Company," we mean Avaya Holdings Corp., a Delaware corporation, and its consolidated subsidiaries taken as a whole, unless the context otherwise indicates.
This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Avaya and are the property of Avaya Holdings Corp. and/or its affiliates. This Quarterly Report on Form 10-Q also contains additional trade names, trademarks or service marks belonging to us and to other companies. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
 




Table of Contents

PART I—FINANCIAL INFORMATION


Item 1.Financial Statements.

Avaya Holdings Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
 
Three months ended
March 31,
Six months ended
March 31,
2020201920202019
REVENUE
Products$245  $287  $543  $611  
Services437  422  854  836  
682  709  1,397  1,447  
COSTS
Products:
Costs92  105  196  220  
Amortization of technology intangible assets44  44  87  87  
Services175  174  349  347  
311  323  632  654  
GROSS PROFIT371  386  765  793  
OPERATING EXPENSES
Selling, general and administrative248  251  531  508  
Research and development51  52  103  105  
Amortization of intangible assets41  41  82  81  
Impairment of goodwill624    624    
Restructuring charges, net4  4  7  11  
968  348  1,347  705  
OPERATING (LOSS) INCOME(597) 38  (582) 88  
Interest expense(53) (58) (111) (118) 
Other income, net15  1  29  23  
LOSS BEFORE INCOME TAXES(635) (19) (664) (7) 
(Provision for) benefit from income taxes(37) 6  (62) 3  
NET LOSS$(672) $(13) $(726) $(4) 
LOSS PER SHARE
Basic$(7.24) $(0.12) $(7.24) $(0.04) 
Diluted$(7.24) $(0.12) $(7.24) $(0.04) 
Weighted average shares outstanding
Basic93.0  110.8  101.1  110.5  
Diluted93.0  110.8  101.1  110.5  
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
1

Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
(In millions)
Three months ended
March 31,
Six months ended
March 31,
2020201920202019
Net loss$(672) $(13) $(726) $(4) 
Other comprehensive (loss) income:
Cumulative translation adjustment(9) 18  (6) 19  
Change in interest rate swaps, net of income taxes of $2 and $4 for the three months ended March 31, 2020 and 2019 and $11 for the six months ended March 31, 2019
(46) (10) (39) (31) 
Other comprehensive (loss) income(55) 8  (45) (12) 
Total comprehensive loss$(727) $(5) $(771) $(16) 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2

Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except per share and share amounts)
March 31, 2020September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents$553  $752  
Accounts receivable, net262  314  
Inventory56  63  
Contract assets233  187  
Contract costs130  114  
Other current assets211  115  
TOTAL CURRENT ASSETS1,445  1,545  
Property, plant and equipment, net254  255  
Deferred income taxes, net27  35  
Intangible assets, net2,720  2,891  
Goodwill, net1,476  2,103  
Operating lease right-of-use assets175    
Other assets114  121  
TOTAL ASSETS$6,211  $6,950  
LIABILITIES
Current liabilities:
Debt maturing within one year$  $29  
Accounts payable254  291  
Payroll and benefit obligations125  116  
Contract liabilities477  472  
Operating lease liabilities48    
Business restructuring reserve25  33  
Other current liabilities246  158  
TOTAL CURRENT LIABILITIES1,175  1,099  
Non-current liabilities:
Long-term debt, net of current portion2,883  3,090  
Pension obligations728  759  
Other post-retirement obligations197  200  
Deferred income taxes, net48  72  
Contract liabilities375  78  
Operating lease liabilities135    
Business restructuring reserve26  36  
Other liabilities313  316  
TOTAL NON-CURRENT LIABILITIES4,705  4,551  
TOTAL LIABILITIES5,880  5,650  
Commitments and contingencies (Note 20)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at March 31, 2020 and September 30, 2019
Convertible Series A, 125,000 shares issued and outstanding at March 31, 2020 and no shares issued and outstanding at September 30, 2019127    
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000 shares authorized; 82,654,594 shares issued and outstanding at March 31, 2020; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 20191  1  
Additional paid-in capital1,436  1,761  
Accumulated deficit(1,015) (289) 
Accumulated other comprehensive loss(218) (173) 
TOTAL STOCKHOLDERS' EQUITY 204  1,300  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,211  $6,950  
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
3

Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(In millions)
Common StockAdditional
Paid-In
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
(Loss) Income
Total
Stockholders'
Equity
SharesPar Value
Balance as of September 30, 2019
111.0  $1  $1,761  $(289) $(173) $1,300  
Issuance of common stock under the equity incentive plan0.3    
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.1) (2) (2) 
Shares repurchased and retired under share repurchase program(10.7) (142) (142) 
Share-based compensation expense6  6  
Accretion of preferred stock to redemption value(4) (4) 
Preferred stock dividends accrued(1) (1) 
Net loss (54) (54) 
Other comprehensive income10  10  
Balance as of December 31, 2019100.5  $1  $1,618  $(343) $(163) $1,113  
Issuance of common stock under the equity incentive plan0.6    
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.2) (1) (1) 
Shares repurchased and retired under share repurchase program(18.2) (188) (188) 
Share-based compensation expense8  8  
Preferred stock dividends accrued(1) (1) 
Net loss(672) (672) 
Other comprehensive loss(55) (55) 
Balance as of March 31, 202082.7  $1  $1,436  $(1,015) $(218) $204  
Balance as of September 30, 2018110.2  $1  $1,745  $287  $18  $2,051  
Issuance of common stock under the equity incentive plan0.8    
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.3) (6) (6) 
Share-based compensation expense6  6  
Adjustment for adoption of new accounting standard 92  92  
Net income 9  9  
Other comprehensive loss(20) (20) 
Balance as of December 31, 2018110.7  $1  $1,745  $388  $(2) $2,132  
Share-based compensation expense 5  
Adjustment for adoption of new accounting standard3  3  
Net loss(13) (13) 
Other comprehensive income8  8  
Balance as of March 31, 2019110.7  $1  $1,750  $378  $6  $2,135  
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
4

Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Six months ended
March 31,
20202019
OPERATING ACTIVITIES:
Net loss$(726) $(4) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization212  225  
Share-based compensation14  11  
Debt discount and issuance costs14  11  
Deferred income taxes, net(17) 3  
Impairment of goodwill624    
Change in fair value of emergence date warrants(3) (21) 
Unrealized loss on foreign currency transactions8  12  
Impairment of debt securities10    
Unrealized gain on equity securities(19)   
Realized gain on sale of equity securities(11)   
Other non-cash credits, net(6) 7  
Changes in operating assets and liabilities:
Accounts receivable41  74  
Inventory6  (9) 
Operating lease right-of-use assets12    
Contract assets(53) (68) 
Contract costs(13) (30) 
Accounts payable(31) 5  
Payroll and benefit obligations(24) (63) 
Business restructuring reserve(13) (15) 
Operating lease liabilities(10)   
Contract liabilities(30) 50  
Other assets and liabilities47  (65) 
NET CASH PROVIDED BY OPERATING ACTIVITIES32  123  
INVESTING ACTIVITIES:
Capital expenditures(48) (47) 
Proceeds from sale of marketable securities294    
Other investing activities, net  (1) 
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES246  (48) 
FINANCING ACTIVITIES:
Shares repurchased under share repurchase program(330)   
Proceeds from issuance of Series A Preferred Stock, net of issuance costs of $4 121    
Repayment of Term Loan Credit Agreement(250) (15) 
Payment of acquisition-related contingent consideration(5) (9) 
Principal payments for financing leases(5) (8) 
Other financing activities, net(3) (7) 
NET CASH USED FOR FINANCING ACTIVITIES(472) (39) 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(5) (1) 
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(199) 35  
Cash, cash equivalents, and restricted cash at beginning of period756  704  
Cash, cash equivalents, and restricted cash at end of period$557  $739  
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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Avaya Holdings Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Background and Basis of Presentation
Background
Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the "Company" or "Avaya"), is a global leader in digital communications products, solutions and services for businesses of all sizes. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. The Company's global team of professionals delivers services from initial planning and design, to implementation and integration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly to customers through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-add resellers, system integrators and business partners that provide sales and services support.
Basis of Presentation
Avaya Holdings has no material assets or standalone operations other than its ownership of Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements of Avaya Holdings and its consolidated subsidiaries, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial statements. The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2019, included in the Company's Annual Report on Form 10-K filed with the SEC on November 29, 2019. In management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of the results for the entire fiscal year.
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates. During the second quarter of fiscal 2020, the World Health Organization characterized a novel strain of coronavirus ("COVID-19") as a pandemic. Concerns related to the spread of COVID-19 and the actions required to mitigate its impact have created substantial disruption to the global economy. The duration of the pandemic and the long-term impacts on the global economy are uncertain. We expect the effects of the COVID-19 pandemic to negatively impact our results of operations, cash flows and financial position. In addition, the pandemic may affect management's estimates and assumptions, in particular those that require a projection of our financial results, our cash flows or broader economic conditions, such as the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, annual effective tax rate, the fair value of equity compensation, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill (see Note 6, "Goodwill, net and Intangible Assets, net") and fair value measurements (see Note 11, "Fair Value Measurements"), among others.
The accompanying Condensed Consolidated Financial Statements of the Company have been prepared assuming that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. While the existing cash and cash equivalents of $553 million as of March 31, 2020, future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months, our ability to meet these requirements will depend on the Company’s ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control. The Company further believes that its financial resources allow it to manage the anticipated impact of COVID-19 on the Company’s business operations for the foreseeable future. The challenges posed by COVID-19 on the Company’s business are evolving rapidly. Consequently, the Company will continue to evaluate its financial position in light of future developments.
2. Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to reclassify from accumulated other
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comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. The Company adopted this standard as of October 1, 2019. The adoption of this standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard, along with other guidance subsequently issued by the FASB (collectively "ASC 842"), superseded all lease accounting guidance and requires lessees to recognize lease assets and liabilities for all leases with initial lease terms of more than 12 months. The standard makes similar changes to lessor accounting and aligns key aspects of the lessor accounting model with the GAAP revenue recognition standard. The Company adopted ASC 842 on October 1, 2019 using the modified retrospective transition method as of the beginning of the period of adoption. Therefore, on October 1, 2019, the Company recognized and measured leases without revising the historical comparative period information or disclosures. The modified retrospective transition method included optional practical expedients which lessened the burden of implementing ASC 842 by not requiring a reassessment of certain conclusions reached under the previous lease accounting guidance. The Company elected to apply the package of practical expedients to forego a reassessment of (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) the initial direct costs for an existing lease. In addition, the Company elected the land easement practical expedient permitting it to not reassess whether an existing or expired land easement is a lease or contains a lease. The Company also adopted the practical expedient permitting the non-lease components of an arrangement to be included in the right-of-use asset to which they relate. The Company did not elect the practical expedient allowing the use-of-hindsight which would require the Company to reassess the lease term of existing leases based on all facts and circumstances through the effective date.
The adoption of ASC 842 had a material impact to the Company's Condensed Consolidated Balance Sheet mainly due to the recognition of $190 million of operating lease right-of-use assets and $194 million of operating lease liabilities. The adoption of ASC 842 also resulted in the one-time reclassification of certain prepaid and deferred rent and facility-related business restructuring liabilities to operating lease right-of-use assets.
The impact of the adoption of ASC 842 on the September 30, 2019 Condensed Consolidated Balance Sheet was as follows:
September 30, 2019Upon Adoption of ASC 842
(In millions)As ReportedAdjustments
ASSETS
Other current assets$115  $(2) $113  
Intangible assets, net2,891  (2) 2,889  
Operating lease right-of-use assets  190  190  
LIABILITIES
Current liabilities:
Operating lease liabilities  51  51  
Business restructuring reserve33  (4) 29  
Non-current liabilities:
Operating lease liabilities  143  143  
Business restructuring reserve36  (1) 35  
Other liabilities316  (3) 313  

Recent Standards Not Yet Effective

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification ("ASC") 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This standard is effective for the Company beginning in the first quarter of fiscal 2022, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use
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software. The standard is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted. The amendments in this standard may be applied on a retrospective or prospective basis. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal 2021, with early adoption permitted. The amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard on its disclosures.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal 2021. Certain disclosures in the standard need to be applied on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This standard, along with other guidance subsequently issued by the FASB, requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables and contract assets, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity's assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a modified retrospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.
3. Revenue Recognition
Disaggregation of Revenue
The following tables provide the Company's disaggregated revenue for the periods presented:

(In millions)Three months ended
March 31,
Six months ended
March 31,
2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  

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Three months ended March 31, 2020Three months ended March 31, 2019
(In millions)Products & SolutionsServicesUnallocatedTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$119  $266  $(1) $384  $130  $248  $(3) $375  
International:
Europe, Middle East and Africa78  94    172  93  96  (1) 188  
Asia Pacific
27  43    70  37  43  (1) 79  
Americas International - Canada and Latin America21  35    56  29  38    67  
Total International126  172    298  159  177  (2) 334  
Total revenue$245  $438  $(1) $682  $289  $425  $(5) $709  

Six months ended March 31, 2020Six months ended March 31, 2019
(In millions)Products & SolutionsServicesUnallocatedTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$268  $512  $(2) $778  $280  $499  $(10) $769  
International:
Europe, Middle East and Africa171  188  (1) 358  199  190  (2) 387  
Asia Pacific
60  87    147  75  84  (2) 157  
Americas International - Canada and Latin America44  70    114  61  74  (1) 134  
Total International275  345  (1) 619  335  348  (5) 678  
Total revenue$543  $857  $(3) $1,397  $615  $847  $(15) $1,447  
Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.
Transaction Price Allocated to the Remaining Performance Obligations
The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of March 31, 2020 was $2.5 billion, of which 58% and 26% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance expected to be recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of intellectual property, and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.
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Contract Balances
The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:
(In millions)March 31, 2020September 30, 2019Increase (Decrease)
Accounts receivable, net$262  $314  $(52) 
Contract assets:
Current$233  $187  $46  
Non-current (Other assets)23  16  7  
$256  $203  $53  
Cost of obtaining a contract:
Current (Contract costs)$89  $89  $  
Non-current (Other assets)41  45  (4) 
$130  $134  $(4) 
Cost to fulfill a contract:
Current (Contract costs)$41  $25  $16  
Contract liabilities:
Current$477  $472  $5  
Non-current375  78  297  
$852  $550  $302  
The increase in Contract liabilities was mainly driven by consideration received in connection with the strategic partnership with RingCentral, Inc. ("RingCentral") as discussed in Note 5, "Strategic Partnership."
During the six months ended March 31, 2020 and 2019, the Company recognized revenue of $405 million and $396 million that had been previously recorded as a Contract liability as of October 1, 2019 and October 1, 2018, respectively.
Contract Costs
The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract, such as sales commissions and products and services, respectively. For the three and six months ended March 31, 2020, the Company recognized $34 million and $66 million, respectively, for amortization of costs to obtain customer contracts which were included in Selling, general and administrative expense. For the three months ended March 31, 2019, the Company recognized $24 million for amortization of costs to obtain customer contracts, of which $23 million was included in Selling, general and administrative expense and the remaining $1 million was a reduction to Revenue. For the six months ended March 31, 2019, the Company recognized $46 million for amortization of costs to obtain customer contracts, of which $43 million was included in Selling, general and administrative expense and the remaining $3 million was a reduction to Revenue.
Contract fulfillment costs are recognized consistent with the transfer to the customer of the underlying performance obligations based on the specific contracts to which they relate. For both the three months ended March 31, 2020 and 2019, the Company recognized $6 million of contract fulfillment costs within Costs and for both the six months ended March 31, 2020 and 2019, the Company recognized $20 million of contract fulfillment costs within Costs.
4. Leases
The Company enters into various arrangements for office, warehouse and data center facilities, network equipment and vehicles. The Company assesses whether an arrangement contains a lease at contract inception. When an arrangement contains a lease, the Company records a right-of-use asset and lease liability. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make payments for the right to use the asset.
Right-of-use assets and lease liabilities are recognized at the lease commencement date at the present value of future payments over the lease term. The present value of future payments is discounted using the rate implicit in the lease, when available. However, as most of the Company's leases do not provide an implicit interest rate, the present value is calculated using the
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Company's incremental borrowing rate, which represents the interest rate the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
Options to extend or terminate a lease are included in the calculation of the lease term to the extent that the option is reasonably certain of exercise. For the majority of the Company's leases, the Company has concluded that it is not reasonably certain it would exercise such options, therefore the lease term is generally the non-cancelable period stated within the lease. The Company has elected to not record a right-of-use asset and lease liability for short term leases with an initial term of 12 months or less. The Company's leases have remaining lease terms ranging from 1 month to 9.7 years.
The following table details the components of net lease expense for the three and six months ended March 31, 2020:
In millionsThree months ended
March 31, 2020
Six months ended
March 31, 2019
Operating lease cost (1)
$16  $34  
Short-term lease cost(1)
1  3  
Variable lease cost(1)(2)
4  9  
Finance lease amortization of right-of-use assets(1)
1  2  
Sublease income(3)
(1) (3) 
Total lease cost$21  $45  
(1)Allocated between Cost of products and services, and Operating expenses.
(2)Includes real estate taxes and other charges for non-lease services payable to lessors and recognized in the period incurred.
(3)Included in Other income, net.

The Company's right-of-use assets and lease liabilities for financing leases are included in the Condensed Consolidated Balance Sheet as follows:
In millionsMarch 31, 2020
ASSETS
Property, plant and equipment, net$6  
LIABILITIES
Other current liabilities8  
Other liabilities6  
The following table presents the Company's annual maturity of lease payments, weighted average remaining lease term and weighted average interest rate for operating and financing leases as of March 31, 2020:
In millionsOperating LeasesFinancing Leases
Remaining six months of 2020$32  $6  
202150  6  
202244  2  
202331  1  
202423    
202512    
2026 and thereafter20    
Total lease payments212  15  
Less: imputed interest(29) (1) 
Total lease liability$183  $14  
Weighted average remaining lease term4.7 years2.1 years
Weighted average interest rate6.3 %6.1 %
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The following table presents the Company's future minimum lease payments under non-cancelable leases as of September 30, 2019, prior to the adoption of ASC 842:
In millionsOperating LeasesCapital Leases
2020$51  $12  
202139  6  
202233  2  
202322    
202417    
2025 and thereafter29    
Total lease payments$191  20  
Less: imputed interest(1) 
Total lease liability$19  
The capital lease obligation as of September 30, 2019 included $11 million and $8 million within Other current liabilities and Other liabilities, respectively.
The Company outsources certain delivery services associated with its Enterprise Cloud and Managed Services, which included the sale of specified assets owned by the Company that were leased-back by the Company and are accounted for as a finance lease. As of March 31, 2020 and September 30, 2019, finance lease obligations associated with these sale leaseback agreements were $9 million and $13 million, respectively.
5. Strategic Partnership
On October 3, 2019, the Company entered into certain agreements that establish the framework for the Company's strategic partnership with RingCentral, a leading provider of global enterprise cloud communications, collaboration and contact center ("CC") solutions, to accelerate the Company's transition to the cloud. Through this partnership, the Company introduced Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS") solution. Avaya Cloud Office expands the Company's portfolio to offer a full suite of UC, CC, UCaaS and contact center as a service ("CCaaS") solutions to its global customer base. ACO combines RingCentral's leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly differentiated UCaaS offering. The transaction closed on October 31, 2019 and ACO was launched on March 31, 2020. The Company now has a full suite of public, private and hybrid cloud solutions for its global UC and CC customers and partners.
As part of the strategic partnership, the Company and RingCentral also entered into an agreement governing the terms of the commercial arrangement between the parties (the "Framework Agreement"). Under the Framework Agreement, the parties entered into a Super Master Agent Agreement, pursuant to which Avaya will act as an agent to Avaya's channel partners with respect to the sale of ACO and make direct sales of ACO. RingCentral will pay a fee to Avaya, including for the benefit of its channel partners, for each such sale. In addition, for each unit of ACO sold during the term of the Framework Agreement, RingCentral will pay Avaya certain fees. Among other things, the Framework Agreement requires Avaya to (subject to certain exceptions) market and sell ACO as its exclusive UCaaS solution (as defined in the Framework Agreement). The Framework Agreement has a multiyear term and can be terminated early by either party in the event (i) the other party fails to cure a material breach or (ii) the other party undergoes a change in control.
In accordance with the Framework Agreement, RingCentral paid Avaya $375 million, predominantly for future fees, as well as for certain licensing rights. The $375 million payment consisted of $361 million in RingCentral shares and $14 million in cash. During the six months ended March 31, 2020, the Company sold a significant portion of the RingCentral shares and realized a gain within Other income, net within the Condensed Consolidated Statements of Operations. The remaining shares are accounted for within Other current assets on the Condensed Consolidated Balance Sheets and are remeasured to fair value each reporting period with changes in fair value included in Other income, net as an unrealized gain or loss.
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The following table summarizes the realized and unrealized gains on RingCentral shares recorded by the Company for the periods presented:
(In millions)Three months ended March 31, 2020Six months ended March 31, 2020
Realized gain$  $11  
Unrealized gain18  19  
Total gain$18  $30  
In connection with the strategic partnership, the Company and RingCentral entered into an investment agreement, whereby RingCentral purchased 125,000 shares of the Company's Series A 3% Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $125 million. See Note 15, "Capital Stock" for additional information on the Series A Preferred Stock.
6. Goodwill, net and Intangible Assets, net
Goodwill, net
The changes in the carrying amount of goodwill by segment during fiscal 2020 were as follows:
(In millions)Products & SolutionsServicesTotal
Balance as of September 30, 2019
Cost$1,282  $1,478  $2,760  
Accumulated impairment charges(657)   (657) 
625  1,478  2,103  
Impairment charges(624)   (624) 
Foreign currency fluctuations(1) (2) (3) 
Balance as of March 31, 2020
Cost1,281  1,476  2,757  
Accumulated impairment charges(1,281)   (1,281) 
$  $1,476  $1,476  
Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level. The Company's reporting units are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company's goodwill was primarily recorded upon emergence from bankruptcy as a result of applying fresh start accounting.
During the first quarter of fiscal 2020, the Company changed its reporting units to align with changes in its organizational structure, mainly resulting from the previously disclosed strategic review process which concluded in October 2019. As a result, on October 1, 2019, the Company consolidated its Unified Communications and Contact Center reporting units into a Products & Solutions reporting unit and consolidated its Global Support Services, Avaya Professional Services and Enterprise Cloud and Managed Services reporting units into a Services reporting unit. As a result of these changes, the Company's reporting units are the same as its operating segments. Due to the consolidation of reporting units, the Company performed an interim goodwill impairment assessment immediately before and after the consolidation on October 1, 2019 by estimating and comparing the fair value of each reporting unit to its carrying value. The Company determined that the carrying amounts of each of the Company's reporting units did not exceed their estimated fair values and therefore no impairment existed as of October 1, 2019.
The Company concluded that a triggering event occurred for both of its reporting units during the three months ended March 31, 2020 due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility in the financial markets. As a result, the Company performed an interim quantitative goodwill impairment test as of March 31, 2020 to compare the fair values of its reporting units to their respective carrying amounts, including the goodwill allocated to each reporting unit. The Company estimated the fair value of each reporting unit using a weighting of fair values derived from an income and a market approach.
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Under the income approach, the fair value of a reporting unit is estimated using a discounted cash flows model. Future cash flows are based on forward-looking information regarding revenue and costs for each reporting unit and are discounted using an appropriate discount rate. The discounted cash flows model relies on assumptions regarding revenue growth rates, projected gross profit, working capital needs, selling, general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates. The discount rates the Company used represent the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of its model, the Company used a terminal value approach. Under this approach, the Company applied a perpetuity growth assumption to determine the terminal value. The Company incorporated the present value of the resulting terminal value into its estimate of fair value. Forecasted cash flows for each reporting unit consider current economic conditions and trends, estimated future operating results, the Company’s view of growth rates and anticipated future economic conditions. Revenue growth rates inherent in this forecast are based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and product evolution from a technological segment basis. Macroeconomic factors such as changes in economies, product evolutions, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets.
The market approach estimates the fair value of a reporting unit by applying multiples of operating performance measures to the reporting unit's operating performance (the "Guideline Public Company Method"). These multiples were derived from comparable publicly-traded companies with similar investment characteristics to the reporting unit. The key estimates and assumptions that were used to determine the fair value under this market approach include current and forward 12-month operating performance results, as applicable, and the selection of the relevant multiples that were applied.
The results of the Company’s interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company’s Services reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company’s long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new technology innovation through the utilization of the Company’s subscription offering, which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount of the Products & Solutions goodwill in the Impairment of goodwill line item in the Condensed Consolidated Statements of Operations. As of March 31, 2020, the estimated fair value of the Services reporting unit exceeded its carrying amount by 16%.
The Company’s long-term forecast includes significant estimates and assumptions, including management’s estimate of the potential impact of the COVID-19 pandemic on the Company’s operating results. Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the macroeconomic environment and, more specifically, on the Company’s future operating results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently contemplated by the Company’s long-term forecast. To the extent business conditions deteriorate or there are changes in key assumptions and estimates included in the long-term forecast, it may be necessary to record additional impairment charges in the future.
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Intangible Assets, net
The Company's intangible assets consist of the following for the periods indicated:
(In millions)
Technology
and Patents
Customer
Relationships
and Other
Intangibles
Trademarks
and Trade Names
Total
Balance as of March 31, 2020
Finite-lived intangible assets:
Cost$960  $2,150  $42  $3,152  
Accumulated amortization(394) (355) (16) (765) 
Finite-lived intangible assets, net566  1,795  26  2,387  
Indefinite-lived intangible assets:
Cost    333  333  
Accumulated impairment        
Indefinite-lived intangible assets, net    333  333  
Intangible assets, net$566  $1,795  $359  $2,720  
Balance as of September 30, 2019
Finite-lived intangible assets:
Cost$960  $2,154  $42  $3,156  
Accumulated amortization(308) (279) (11) (598) 
Finite-lived intangible assets, net652  1,875  31  2,558  
Indefinite-lived intangible assets:
Cost2    333  335  
Accumulated amortization(2)     (2) 
Indefinite-lived intangible assets, net    333  333  
Intangible assets, net$652  $1,875  $364  $2,891  
Intangible assets include technology and patents, customer relationships, and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.
As a result of the goodwill triggering event described above, the Company performed a recoverability test on all of its finite-lived asset groups as of March 31, 2020 before proceeding to the goodwill impairment review and concluded that no impairment charge was necessary. The recoverability test of finite-lived assets was based on forecasts of undiscounted cash flows for each asset group.
The Company also performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of March 31, 2020. The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name was estimated by applying a royalty rate to forecasted net revenues which was then discounted using a risk-adjusted rate of return on capital. Revenue growth rates inherent in the forecast were based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and product evolution from a technological segment basis. The royalty rate was determined using a set of observed market royalty rates. The result of the interim impairment test of the Avaya Trade Name as of March 31, 2020 indicated no impairment existed and the level of excess fair value over carrying value was 5%. An increase in the discount rate of 50 basis points or a decrease in the long-term growth rate of 140 basis points would result in an estimated fair value below its carrying value.
To the extent that business conditions change or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record impairment charges in the future.
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7. Supplementary Financial Information

The following table presents a summary of Other income, net for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER INCOME, NET
Interest income$2  $4  $5  $7  
Foreign currency loss, net(7) (6) (11) (7) 
Gain on investments in equity and debt securities, net8    20    
Other pension and post-retirement benefit credits, net6  2  11  4  
Change in fair value of emergence date warrants6  3  3  21  
Sublease income1    3    
Other, net(1) (2) (2) (2) 
Total other income, net$15  $1  $29  $23  
The gain on investments in equity and debt securities, net includes realized and unrealized gains on RingCentral shares as disclosed in Note 5, "Strategic Partnership," and are partially offset by a $10 million impairment of debt securities during the three and six months ended March 31, 2020, which is further described in Note 11, "Fair Value Measurements."
The following table presents supplemental cash flow information for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER PAYMENTS
Interest payments$46  $51  $104  $99  
Income tax payments13  28  25  35  
NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures
$1  $1  $(4) $5  
During the three and six months ended March 31, 2020, the Company made payments for operating lease liabilities of $19 million and $33 million, respectively, and recorded non-cash additions for operating lease right-of-use assets of $6 million and $15 million, respectively.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:
(In millions)March 31, 2020September 30, 2019March 31, 2019September 30, 2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents$553  $752  $735  $700  
Restricted cash included in other assets4  4  4  4  
Total cash, cash equivalents, and restricted cash$557  $756  $739  $704  


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8. Business Restructuring Reserves and Programs
The following table summarizes the restructuring charges by activity for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Employee separation costs$—  $ $ $10  
Facility exit costs    
Total restructuring charges$ $ $ $11  
The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal years. The Company's employee separation costs generally encompass severance charges which include, but are not limited to, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the affected employees. Facility exit costs primarily relate to lease obligation charges for exited facilities. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings opportunities globally and take additional restructuring actions in the future and the costs of any such actions could be material. The Company does not allocate restructuring reserves to its operating segments.
As a result of the adoption of ASC 842 on October 1, 2019, the Company no longer records facility-related restructuring charges within the Business restructuring reserve on the Condensed Consolidated Balance Sheets. As a result, the Company recorded a one-time reclassification of $5 million for certain facility-related lease obligations from the Business restructuring reserve to Operating lease right-of-use assets upon adoption of ASC 842.
The following table summarizes the activity for employee separation costs recognized under the Company's restructuring programs for the six months ended March 31, 2020:
(In millions)
Fiscal 2020 Restructuring Program (1)
Fiscal 2019 Restructuring Program (2)
Fiscal 2008 through 2018 Restructuring Programs (3)
Total
Accrual balance as of September 30, 2019$  $11  $53  $64  
Cash payments  (3) (11) (14) 
Restructuring charges1      1  
Impact of foreign currency fluctuations(1) 1      
Accrual balance as of March 31, 2020$  $9  $42  $51  
(1)Payments related to the 2020 restructuring plan are expected to be completed in fiscal 2020.
(2)Payments related to the 2019 restructuring plan are expected to be completed in fiscal 2026.
(3)Payments related to the 2008 through 2018 restructuring plans are expected to be completed in fiscal 2026.
9. Financing Arrangements
The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:
  
March 31, 2020September 30, 2019
(In millions)Principal amountNet of discounts and issuance costsPrincipal amountNet of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024$2,624  $2,601  $2,874  $2,846  
Convertible 2.25% senior notes due June 15, 2023350  282  350  273  
Total debt$2,974  2,883  $3,224  3,119  
Debt maturing within one year  (29) 
Long-term debt, net of current portion$2,883  $3,090  
Term Loan and ABL Credit Agreements
As of March 31, 2020 and September 30, 2019, the Company maintained (i) its Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent, maturing on December 15, 2024, (the "Term Loan Credit Agreement") and (ii) its ABL Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several
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lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, maturing on December 15, 2022, which provides a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of $300 million from time to time, subject to borrowing base availability (the "ABL Credit Agreement"). On November 7, 2019, the Company made a principal prepayment on its Term Loan of $250 million. Due to the prepayment, there are no amounts due within one year on the Term Loan and the entire debt balance has been classified as non-current as of March 31, 2020.
For the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $40 million and $50 million, respectively, related to the Term Loan Credit Agreement, including the amortization of the underwriting discount. For the six months ended March 31, 2020 and 2019, the Company recognized interest expense of $86 million and $100 million, respectively, related to the Term Loan Credit Agreement, including the amortization of the underwriting discount.
Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At March 31, 2020, the Company had issued and outstanding letters of credit and guarantees of $39 million under the ABL Credit Agreement. As of March 31, 2020, the Company had no borrowings outstanding under the ABL Credit Agreement. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $39 million of outstanding letters of credit and guarantees, was $97 million at March 31, 2020. For the three and six months ended March 31, 2020 and 2019, recognized interest expense related to the ABL Credit Agreement was not material. On April 6, 2020, the Company borrowed $50 million under the ABL Credit Agreement.
Convertible Notes
The Company's 2.25% Convertible Notes have an aggregate principal amount outstanding of $350 million (including notes issued in connection with the underwriters' exercise in full of an over-allotment option of $50 million) and mature on June 15, 2023 (the "Convertible Notes"). The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee.
For the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $7 million and $6 million related to the Convertible Notes, which includes $5 million and $4 million of amortization of the underwriting discount and issuance costs, respectively. For the six months ended March 31, 2020 and 2019, the Company recognized interest expense of $13 million and $12 million related to the Convertible Notes, which includes $9 million and $8 million of amortization of the underwriting discount and issuance costs, respectively.
The net carrying amount of the Convertible Notes for the periods indicated was as follows:
(In millions)March 31, 2020September 30, 2019
Principal350  $350  
Less:
Unamortized debt discount(63) (72) 
Unamortized issuance costs(5) (5) 
Net carrying amount$282  $273  
The weighted average contractual interest rate of the Company's outstanding debt was 6.1% and 6.3% as of March 31, 2020 and September 30, 2019, respectively. The effective interest rate for the Term Loan Credit Agreement as of March 31, 2020 and September 30, 2019 was not materially different than its contractual interest rate including adjustments related to hedging. The effective interest rate for the Convertible Notes was 9.2% as of March 31, 2020 and September 30, 2019 reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs.
As of March 31, 2020, the Company was not in default under any of its debt agreements.
10. Derivative Instruments and Hedging Activities
The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.
Interest Rate Contracts
The Company, from time-to-time, enters into interest rate swap contracts as a hedge against changes in interest rates on its outstanding variable rate loans.
The Company maintains interest rate swap agreements with six counterparties, which fix a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on
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December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of March 31, 2020, the total notional amount of the six Swap Agreements was $1,800 million.
The Swap Agreements are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the Swap Agreements is reclassified from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive loss at March 31, 2020, approximately $47 million would be reclassified to interest expense in the next twelve months.
It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.
Foreign Currency Forward Contracts
The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a component of Other income, net to offset the change in the value of the hedged assets and liabilities. As of March 31, 2020, the Company maintained open foreign currency forward contracts with a total notional value of $406 million, primarily hedging the British Pound Sterling, Indian Rupee, Chinese Renminbi, Czech Koruna and Euro.
Emergence Date Warrants
In accordance with the bankruptcy plan adopted in connection with the Company's emergence from bankruptcy on December 15, 2017 (the "Plan of Reorganization"), the Company issued warrants to purchase 5,645,200 shares of Company common stock to the holders of second lien obligations extinguished pursuant to the Plan of Reorganization pursuant to a warrant agreement (the "Emergence Date Warrants"). Each Emergence Date Warrant has an exercise price of $25.55 per share and expires on December 15, 2022. The Emergence Date Warrants contain certain derivative features that require them to be classified as a liability and require changes in the fair value of the liability to be recognized in earnings each reporting period. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of March 31, 2020.
The fair value of the Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment. The fair value of the Emergence Date Warrants as of March 31, 2020 and September 30, 2019 was determined using the input assumptions summarized below:
March 31,
2020
September 30, 2019
Expected volatility65.24 %56.89 %
Risk-free interest rates0.27 %1.55 %
Contractual remaining life (in years)2.713.21
Price per share of common stock$8.09$10.23
In determining the fair value of the Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends throughout the term of the warrants.

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The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
March 31, 2020September 30, 2019
(In millions)Balance Sheet CaptionAssetLiabilityAssetLiability
Derivatives Designated as Hedging Instruments:
Interest rate contractsOther current liabilities  46    23  
Interest rate contractsOther liabilities  74    58  
  120    81  
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contractsOther current assets1    1    
Foreign exchange contractsOther current liabilities  6      
Emergence Date WarrantsOther liabilities  2    5  
1  8  1  5  
Total derivative fair value$1  $128  $1  $86  
The following tables provide information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:
Three months ended March 31, 2020Three months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(53) $(55) $(58) $8  
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$  $(54) $  $(16) 
Interest expense reclassified from AOCI$(6) $6  $(2) $2  

Six months ended March 31, 2020Six months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(111) $(45) $(118) $(12) 
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$  $(50) $  $(47) 
Interest expense reclassified from AOCI$(11) $11  $(5) $5  
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The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:
Three months ended
March 31,
Six months ended
March 31,
(In millions)Location of Derivative Pre-tax Gain (Loss)2020201920202019
Emergence Date WarrantsOther income, net  $6  $3  $3  $21  
Foreign exchange contractsOther income, net  (7)   (2)   
The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:
March 31, 2020September 30, 2019
(In millions)AssetLiabilityAssetLiability
Gross amounts recognized in the Condensed Consolidated Balance Sheets$1  $128  $1  $86  
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets(1) (1) (1) (1) 
Net amounts$  $127  $  $85  

11. Fair Value Measurements
Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Considerable judgment was required in developing certain of the estimates of fair value including the consideration of the recent COVID-19 pandemic that has caused significant volatility in U.S. and international markets, and accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Fair Value Hierarchy
The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:
Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.
Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and September 30, 2019 were as follows:
 March 31, 2020September 30, 2019
 Fair Value Measurements UsingFair Value Measurements Using
(In millions)Total
Level 1
Level 2Level 3Total
Level 1
Level 2Level 3
Assets:
Investments in equity securities
$89  $89  $  $  $  $  $  $  
Investments in debt securities        10      10  
Foreign exchange contracts1    1    1    1    
Total assets$90  $89  $1  $  $11  $  $1  $10  
Liabilities:
Interest rate contracts$120  $  $120  $  $81  $  $81  $  
Spoken acquisition earn-outs        5      5  
Foreign exchange contracts6    6            
Emergence Date Warrants2      2  5      5  
Total liabilities $128  $  $126  $2  $91  $  $81  $10  
Investments in equity securities
The investments in equity securities are valued using quoted market prices for identical assets in active markets that are observable and are recorded in Other current assets in the Condensed Consolidated Balance Sheets.
Investments in debt securities
The investments in debt securities were valued using a discounted cash flow model which includes various unobservable inputs including cash flow projections, long-term growth rates, discount rates and market comparable companies. The investments in debt securities were recorded in Other assets in the Condensed Consolidated Balance Sheets.
Interest rate and foreign exchange contracts
Interest rate and foreign exchange contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs.
Spoken acquisition earn-outs
The Spoken acquisition earn-outs classified as Level 3 liabilities were measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities. The earn-outs were recorded in Other current liabilities in the Condensed Consolidated Balance Sheets.
Emergence Date Warrants
Emergence Date Warrants classified as Level 3 liabilities are valued using the Black-Scholes option pricing model.
During the three and six months ended March 31, 2020 and 2019, there were no transfers between Level 1 and Level 2, or into and out of Level 3.
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The following table summarizes the activity for the Company's Level 3 assets and liabilities measured at fair value on a recurring basis:
(In millions)Emergence Date WarrantsSpoken acquisition earn-outsInvestments in debt securities
Balance as of September 30, 2019$5  $5  $10  
Change in fair value(1)
(3)     
Impairment(2)
    (10) 
Settlement  (5)   
Balance as of March 31, 2020$2  $  $  
(1)Changes in fair value of the Emergence Date Warrants are included in Other income, net.
(2)During the three and six months ended March 31, 2020, the Company recorded an other-than-temporary impairment charge for a $10 million credit loss on its investments in debt securities mainly driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company. The impairment charge is included in Other income, net.
Fair Value of Financial Instruments
The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.
As of March 31, 2020 and September 30, 2019, the estimated fair value of the Convertible Notes was determined based on the quoted price of the Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2.
The estimated fair values of amounts borrowed under the Company's other financing arrangements as of March 31, 2020 and September 30, 2019 were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.
The estimated fair values of the amounts borrowed under the Company's financing agreements as of March 31, 2020 and September 30, 2019 are as follows:
March 31, 2020September 30, 2019
(In millions)Principal amountFair valuePrincipal amountFair value
Term Loan Credit Agreement due December 15, 2024$2,624  $2,162  $2,874  $2,739  
Convertible 2.25% senior notes due June 15, 2023350  281  350  298  
Total debt$2,974  $2,443  $3,224  $3,037  

12. Income Taxes
The Company's effective income tax rate for the three and six months ended March 31, 2020 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) deferred tax assets (including losses) generated for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) U.S. state and local income taxes, (4) the impact of the Tax Cuts and Jobs Act ("the Act") and associated regulations, (5) the goodwill impairment charge recorded in the second quarter of fiscal 2020, (6) the impact of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and (7) foreign tax credits.
The Company's effective income tax rate for the three and six months ended March 31, 2019 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Act, (7) a limitation on the deductibility of interest expense under the Internal Revenue Code of 1986, as amended, Section 163(j), and (8) foreign tax credits.
On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company has a September 30th tax year-end and therefore many of the tax law changes became effective in the first quarter of fiscal 2019. The Company benefits from the deduction attributable to Foreign Derived Intangible Income ("FDII") and has taxable income attributable to Global Intangible Low-Taxed Income ("GILTI"), both of which impact
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the effective tax rate. During the three months ended December 31, 2018, Avaya completed its analysis of the impact of the Act as required by Staff Accounting Bulletin No. 118 issued by the SEC on December 22, 2017.
13. Benefit Obligations
The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.
The components of the pension and post-retirement net periodic benefit (credit) cost for the periods indicated are provided in the table below:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost$1  $1  $2  $2  
Interest cost8  9  15  19  
Expected return on plan assets(15) (15) (28) (30) 
Net periodic benefit credit$(6) $(5) $(11) $(9) 
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost$2  $1  $4  $3  
Interest cost1  3  2  5  
Net periodic benefit cost$3  $4  $6  $8  
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Service cost$  $1  $  $1  
Interest cost3  4  6  7  
Expected return on plan assets(2) (3) (5) (5) 
Amortization of prior service cost(1)   (1)   
Net periodic benefit cost$  $2  $  $3  
The service components of net periodic benefit (credit) cost were recorded similar to compensation expense, while all other components were recorded in Other income, net.
The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations, or to directly pay benefits where appropriate. Contributions to U.S. pension plans were $9 million for the six months ended March 31, 2020, which represented the amounts required to satisfy the minimum statutory funding requirements in the U.S. On March 27, 2020, the CARES Act was signed into law, providing limited relief for pension funding and retirement plan distributions. Under the CARES Act, employers may delay contributions for single employer defined benefit pension plans until January 1, 2021. As a result, the Company does not expect to make any U.S. pension plan contributions for the remainder of fiscal 2020.
Contributions to the non-U.S. pension plans were $14 million for the six months ended March 31, 2020. For the remainder of fiscal 2020, the Company estimates that it will make contributions totaling $9 million for its non-U.S. plans.
Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as retiree medical benefit claims are disbursed. These payments are funded by the Company up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from the participants, if required. During the six months ended March 31, 2020, the Company made payments for retiree medical and dental benefits of $7 million and received a $3 million reimbursement from the represented employees' post-retirement health trust related to payments in prior periods. The Company estimates it will make contributions for retiree medical and dental benefits totaling $6 million for the remainder of fiscal 2020.
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14. Share-based Compensation
Pre-tax share-based compensation expense was $8 million and $5 million for the three months ended March 31, 2020 and 2019, respectively, and $14 million and $11 million for the six months ended March 31, 2020 and 2019, respectively.
2017 Equity Incentive Plan
On December 15, 2017, the Company adopted the Avaya Holdings Corp. 2017 Equity Incentive Plan (the "2017 Plan"), under which non-employee directors, employees of the Company or any of its affiliates, and certain consultants and advisors may be granted stock options, restricted stock, restricted stock units ("RSUs"), performance awards ("PRSUs") and other forms of awards granted or denominated in shares of the Company's common stock, as well as certain cash-based awards.
2019 Equity Incentive Plan
On November 13, 2019, the Board of Directors of the Company (the "Board") approved the Avaya Holdings Corp. 2019 Equity Incentive Plan and on January 8, 2020 approved an amendment to such plan (as so amended, the "2019 Plan"). On November 13, 2019, the Board also adopted the 2019 Omnibus Inducement Equity Plan (the "Inducement Plan"), which reserved up to 1,700,000 shares of the Company's common stock for awards to be made to certain prospective employees pursuant to the "inducement grant" exemption under the NYSE Listing Rules. On March 4, 2020, the stockholders of the Company approved the 2019 Plan and, as of such date, no additional awards may be granted under the 2017 Plan or the Inducement Plan (together, the “Prior Plans”). The 2019 Plan provides an initial pool of 18,800,000 shares of common stock that may be issued or granted, which can be adjusted for shares that become available from existing awards issued under the Prior Plans in accordance with the terms of the 2019 Plan.
On March 4, 2020, the Board also approved equity settlement of all awards previously granted under the 2019 Plan that were classified as a liability and remeasured each period with the cumulative effect of the change in fair value recognized as an adjustment to earnings in the period of the remeasurement. As a result, the awards were reclassified from liability-based awards to equity-based awards effective March 4, 2020 and will no longer be remeasured to fair value each reporting period. The cumulative effect of the change in fair value of these awards from their grant date through March 4, 2020 was not material.
Employee Stock Purchase Plan
On January 8, 2020, the Board approved the Avaya Holdings Corp. 2020 Employee Stock Purchase Plan (“ESPP”). A maximum of 5,500,000 shares of the Company’s common stock has been reserved for issuance under the ESPP. Under the ESPP, eligible employees may purchase the Company’s common stock through payroll deductions at a discount not to exceed 15% of the lower of the fair market values of the Company’s common stock as of the beginning or end of each 3-month offering period. Payroll deductions are limited to 10% of the employee’s eligible compensation and a maximum of 6,250 shares of the Company's common stock may be purchased by an employee each offering period. The first offering period is scheduled to begin on June 1, 2020.
Restricted Stock Units
During the six months ended March 31, 2020, the Company granted 1,880,285 RSUs with a weighted average grant date fair value of $12.06 per RSU. During the six months ended March 31, 2020, there were 904,508 RSUs that vested with a weighted average grant date fair value of $15.32 per RSU.
Performance Restricted Stock Units
During the six months ended March 31, 2020, the Company granted 661,856 PRSUs with a weighted average grant date fair value of $13.69 per PRSU, which will vest based on the attainment of specified performance metrics for each of the next three separate fiscal years (collectively the "Performance Period"), and the Company's total shareholder return over the Performance Period as compared to the total shareholder return for a specified index of companies over the same period. During the Performance Period, the Company will adjust compensation expense for the awards based on its best estimate of attainment of the specified annual performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned during the Performance Period will be recognized as an adjustment to earnings in the period of the revision.

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The grant date fair value of the awards was determined using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return market condition and the following assumptions presented on a weighted-average basis:
Six months ended March 31, 2020
Expected volatility(1)
55.75 %
Risk-free interest rate(2)
1.61 %
Dividend yield(3)
 %
(1)Expected volatility based on a blend of Company and peer group company historical data adjusted for the Company's leverage.
(2)Risk-free interest rate based on U.S. Treasury yields with a term equal to the remaining Performance Period as of the grant date.
(3)Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

Stock Options
During the six months ended March 31, 2020, the Company granted 163,666 non-qualified stock options with a grant date fair value of $6.11 per option. The grant date fair value was determined using the Black-Scholes option pricing model with the following assumptions:
Six months ended March 31, 2020
Exercise price$11.38  
Expected volatility(1)
56.76 %
Expected life (in years)(2)
5.97
Risk-free interest rate(3)
1.71 %
Dividend yield(4)
 %
(1)Expected volatility based on a blend of Company and peer group company historical data adjusted for the Company's leverage.
(2)Expected life based on the vesting terms of the option and a contractual life of ten years.
(3)Risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term.
(4)Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

15. Capital Stock
Preferred Stock
The Company's certificate of incorporation authorizes it to issue up to 55,000,000 shares of preferred stock with a par value of $0.01 per share.
On October 31, 2019, the Company issued 125,000 shares of its 3% Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), to RingCentral for an aggregate purchase price of $125 million. The Series A Preferred Stock is convertible into shares of the Company's common stock at an initial conversion price of $16.00 per share, which represents an approximately 9% interest in the Company's common stock on an as-converted basis as of March 31, 2020, assuming no holders of warrants, convertible notes or similar instruments exercise their exercise or conversion rights. The holders of the Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of the Company's common stock on all matters submitted to a vote of the holders of the common stock. Holders of the Series A Preferred Stock are entitled to receive dividends, in preference and priority to holders of the Company's common stock, which accrue on a daily basis at the rate of 3% per annum of the stated value of the Series A Preferred Stock. The stated value of the Series A Preferred Stock was initially $1,000 per share and will be increased by the sum of any dividends on such shares not paid in cash. These dividends are cumulative and compound quarterly. The holders of the Series A Preferred Stock participate in any dividends the Company pays on its common stock, equal to the dividend which holders would have received if their Series A Preferred Stock had been converted into common stock on the date such common stock dividend was determined. In the event the Company is liquidated or dissolved, the holders of the Series A Preferred Stock are entitled to receive an amount equal to the liquidation preference (which equals the stated value plus any accrued and unpaid dividends) for each share of Series A Preferred Stock before any distribution is made to holders of the Company's common stock.
The Series A Preferred Stock are redeemable at the Company's election upon the termination of the Framework Agreement. In addition, the holders of the Series A Preferred Stock have certain rights to require the Company to redeem or put rights to require the Company to repurchase all or any portion of the Series A Preferred Stock. The holders can exercise such redemption
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rights, upon at least 21 days notice, after the termination of the Framework Agreement or upon the occurrence of certain events. If and to the extent the redemption right is exercised, the Company would be required to purchase each share of Series A Preferred Stock at the per share price equal to the stated value of the Series A Preferred Stock which will be increased by the sum of any dividends on such shares that have accrued and have been paid in kind, plus all accrued but unpaid dividends. Given that the holders of the Series A Preferred Stock may require the Company to redeem all or a portion of its shares, the Series A Preferred Stock is classified in the mezzanine section of the Condensed Consolidated Balance Sheets between Total liabilities and Stockholders' equity. As of March 31, 2020, the carrying value of the Series A Preferred Stock was $127 million, which includes $2 million of accumulated and unpaid dividends.
In connection with the issuance of the Series A Preferred Stock, the Company granted RingCentral certain customary consent rights with respect to certain actions by the Company, including amending the Company's organizational documents in a manner that would have an adverse effect on the Series A Preferred Stock and issuing securities that are senior to, or equal in priority with, the Series A Preferred Stock. In addition, pursuant to an Investor Rights Agreement, until such time when RingCentral and its affiliates hold or beneficially own less than 4,759,339 shares of the Company's common stock (on an as-converted basis), RingCentral has the right to nominate one person for election to the Company's Board of Directors. The director designated by RingCentral has the option (i) to serve on the Company's Audit and Nominating and Corporate Governance Committees or (ii) to attend (but not vote at) all of the Company's Board of Directors' committee meetings. The director to be designated by RingCentral will be nominated to the Company’s Board of Directors following RingCentral’s identification of a nominee.
Common Stock
The Company's certificate of incorporation authorizes it to issue up to 550,000,000 shares of common stock with a par value of $0.01 per share. As of March 31, 2020, there were 82,654,594 shares issued and outstanding. As of September 30, 2019, there were 111,046,085 shares issued and 111,033,405 shares outstanding with the remaining 12,680 shares distributable in accordance with the Plan of Reorganization.
On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase Emergence Date Warrants for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and may be terminated, increased or decreased by the Board of Directors in its discretion at any time. As of March 31, 2020, there were no warrant repurchases under the program.
On October 1, 2019, the Board of Directors of the Company approved a share repurchase program authorizing the Company to repurchase the Company's common stock for an aggregate expenditure of up to $500 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company adopted a purchase plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to implement the share repurchase program. The share repurchase program does not obligate the Company to purchase any common stock and may be terminated, increased or decreased by the Board in its discretion at any time. All shares that are repurchased under the program are retired by the Company. During the three and six months ended March 31, 2020, the Company repurchased 18,206,273 and 28,923,664 shares of its common stock based on the settlement date of the repurchase at a weighted average price per share of $10.89 and $11.41, respectively, including transaction costs. As of March 31, 2020, the remaining authorized amount for share repurchases under this program was $170 million.
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16. Loss Per Common Share
Basic loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised; if the Company's Series A Preferred Stock were converted into shares of the Company's common stock; if the Company's Convertible Notes or the warrants the Company sold to purchase up to 12.6 million shares of its common stock in connection with the issuance of Convertible Notes ("Call Spread Warrants") were exercised; and/or if the Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company.
The following table sets forth the calculation of net loss attributable to common stockholders and the computation of basic and diluted loss per share for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions, except per share amounts)2020201920202019
Loss per share:
Numerator
Net loss$(672) $(13) $(726) $(4) 
Dividends and accretion to preferred stockholders(1)   (6)   
Undistributed loss(673) (13) (732) (4) 
Percentage allocated to common stockholders(1)
100.0 %100.0 %100.0 %100.0 %
Numerator for basic and diluted loss per common share$(673) $(13) $(732) $(4) 
Denominator for basic and diluted loss per weighted average common shares93.0  110.8  101.1  110.5  
Loss per common share
Basic $(7.24) $(0.12) $(7.24) $(0.04) 
Diluted$(7.24) $(0.12) $(7.24) $(0.04) 
(1) Basic weighted average common stock outstanding
93.0  110.8  101.1  110.5  
 Basic weighted average common stock and common stock equivalents (preferred shares)
93.0  110.8  101.1  110.5  
 Percentage allocated to common stockholders
100.0 %100.0 %100.0 %100.0 %

The Company's Series A Preferred Stock are participating securities, which requires the application of the two-class method to calculate basic and diluted earnings per share. Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had been distributed. Basic loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Net loss attributable to common stockholders is increased for preferred stock dividends earned and accretion recognized during the period. No allocation of undistributed earnings to participating securities was performed for periods with net losses as such securities do not have a contractual obligation to share in the losses of the Company.
For the three and six months ended March 31, 2020, the Company excluded 1.0 million stock options, 3.2 million RSUs, 5.6 million Emergence Date Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.0 million PRSUs from the diluted loss per share calculation as their performance metrics have not yet been attained. For the three and six months ended March 31, 2019, the Company excluded 1.0 million stock options, 3.5 million restricted stock units and 5.6 million Emergence Date Warrants from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 0.5 million PRSUs from the diluted loss per share calculation as their performance metrics had not yet been attained. The Company's Convertible Notes and Call Spread Warrants were also excluded for all periods presented as their effect would have been anti-dilutive.
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17. Operating Segments
The Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, email, instant messaging and video. The Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize complex enterprise communications networks.
The Company's chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company's internal management systems. Management does not include in its segment measures of profitability selling, general and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, impairment charges, and merger-related costs as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.
Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts (1)
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  
GROSS PROFIT
Products & Solutions$154  $184  $348  $398  
Services263  255  509  510  
Unallocated Amounts (2)
(46) (53) (92) (115) 
371  386  765  793  
OPERATING EXPENSES
Selling, general and administrative248  251  531  508  
Research and development51  52  103  105  
Amortization of intangible assets41  41  82  81  
Impairment of goodwill624    624    
Restructuring charges, net4  4  7  11  
968  348  1,347  705  
OPERATING (LOSS) INCOME(597) 38  (582) 88  
INTEREST EXPENSE AND OTHER INCOME, NET
(38) (57) (82) (95) 
LOSS BEFORE INCOME TAXES$(635) $(19) $(664) $(7) 
(1)Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.
(2)Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management's performance, but rather are controlled at the corporate level.
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18.  Accumulated Other Comprehensive (Loss) Income
The components of Accumulated other comprehensive (loss) income for the periods indicated were as follows:
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2019$(106) $(4) $(53) $(163) 
Other comprehensive loss before reclassifications  (36) (54) (90) 
Amounts reclassified to earnings  27  6  33  
Benefit from income taxes    2  2  
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2019$(106) $(7) $(60) $(173) 
Other comprehensive loss before reclassifications  (33) (50) (83) 
Amounts reclassified to earnings  27  11  38  
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2018$51  $(30) $(23) $(2) 
Other comprehensive income (loss) before reclassifications  18  (16) 2  
Amounts reclassified to earnings    2  2  
Benefit from income taxes    4  4  
Balance as of March 31, 2019$51  $(12) $(33) $6  

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018$51  $(31) $(2) $18  
Other comprehensive income (loss) before reclassifications  19  (47) (28) 
Amounts reclassified to earnings    5  5  
Benefit from income taxes    11  11  
Balance as of March 31, 2019$51  $(12) $(33) $6  

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Reclassifications from Accumulated other comprehensive (loss) income related to the unrealized loss on term loan interest rate swap agreements are recorded in Interest expense in the Condensed Consolidated Statements of Operations. Reclassifications from Accumulated other comprehensive (loss) income related to foreign currency translation reflect the impact of certain liquidated entities and are recorded in Other income, net in the Condensed Consolidated Statements of Operations.
19. Related Party Transactions
The Company's Board of Directors is comprised of seven directors, including the Company's Chief Executive Officer and six non-employee directors.
Specific Arrangements Involving the Company's Current Directors and Executive Officers
William D. Watkins is a Director and Chair of the Board of Directors of the Company and serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the six months ended March 31, 2020 and 2019, the Company purchased goods and services from subsidiaries of Flex Ltd., making payments of $16 million in both periods. As of March 31, 2020, the Company had outstanding accounts payable due to Flex Ltd. of $6 million and outstanding accounts receivable due from Flex Ltd. of $1 million. As of September 30, 2019, the Company had outstanding accounts payable due to Flex Ltd. of $6 million.
20. Commitments and Contingencies
Legal Proceedings
In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including but not limited to, those relating to intellectual property, commercial, employment, environmental indemnity and regulatory matters. The Company records accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
In the opinion of the Company's management, while the outcome of these matters is uncertain, the likely results of these matters are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows. However, an unfavorable resolution could have a material adverse effect on the Company's financial position, results of operations or cash flows in the periods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of the ultimate disposition.
Product Warranties
The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company's products. These product warranties extend over a specified period of time, generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Condensed Consolidated Balance Sheets, for actual experience. As of March 31, 2020 and September 30, 2019, the amount reserved was $2 million.
Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements
Letters of Credit and Guarantees
The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of March 31, 2020, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $49 million. The outstanding letters of credit are collateralized by restricted cash of $4 million, which is included in Other assets on the Condensed Consolidated Balance Sheets as of March 31, 2020.
Purchase Commitments and Termination Fees
The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers, but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another.
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The Company's outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company's products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company, and is subject to quality control standards.
Transactions with Nokia
Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution Agreement"), Lucent Technologies, Inc. (now Nokia) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the "Company's Businesses") and distributed the Company's stock pro-rata to the shareholders of Lucent ("distribution"). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company's Businesses and all contingent liabilities primarily relating to the Company's Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement.
In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement effective October 1, 2000 (the "Tax Sharing Agreement") that governs Nokia's and the Company's respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company's separation from Nokia.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise indicates, as used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," the terms "we," "us," "our," "the Company," "Avaya" and similar terms refer to Avaya Holdings Corp. and its consolidated subsidiaries. "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2019, which were included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 29, 2019.
Our accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial statements. In our opinion, the unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows for the periods indicated.
The matters discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See "Cautionary Note Regarding Forward-Looking Statements" at the end of this discussion.
Overview
Avaya is a global leader in digital communications products, solutions and services for businesses of all sizes. We enable organizations around the globe to succeed by creating intelligent communications experiences for customers and employees. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. Our global, experienced team of professionals delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support. Our business has two operating segments: Products & Solutions and Services.
Products & Solutions
Products & Solutions encompasses our unified communications and contact center platforms, applications and devices.
The Company's unified communications ("UC") solutions enable organizations to reimagine what teaming can mean and help companies increase employee productivity, improve customer service and reduce costs. With Avaya's UC solutions, organizations can provide their workers with a single app for all-channel calling, messaging, meetings and team collaboration with the same ease of use they receive from consumer apps. Avaya embeds communications directly into the applications, browsers and devices employees use every day, giving people a more natural, efficient and flexible way to connect, engage, respond and share - where and how they want - for better business results.
Avaya offers an open, extensible development platform, so that customers and third parties can easily create custom applications and automated workflows for their unique needs, integrating Avaya's capabilities into the customer's existing infrastructure and business applications. Our solutions enable a seamless communications experience that fits into how employees work instead of changing how they work. Avaya continues to evolve its UC solutions for cloud deployment, as some customers prefer to consume this service via the cloud.
The Company's industry-leading digital contact center ("CC") solutions enable customers to build a customized portfolio of applications, driving stronger customer engagement and higher customer lifetime value. Our reliable, secure and scalable communications solutions include voice, email, chat, social media, video, performance management and ease of third-party integration that can improve customer service and help companies compete more effectively. Similar to the Company's UC solutions, the Company is evolving the CC solution set for cloud development.
Avaya also focuses on ensuring an outstanding experience for mobile callers by integrating transformative technologies, including Artificial Intelligence, mobility, big data analytics and cybersecurity into our contact center solutions. As organizations use these solutions to gain a deeper understanding of their customer needs, we believe that their teams become more efficient and effective and their customer loyalty grows.
The Company's UC and CC solutions are supported by our portfolio of innovative business phones and multimedia devices, which is one of the broadest in the industry. Avaya brings consumer technology to employee mobile devices and the desktop in a way that can help our customers enhance customer service, internal and external collaboration, and employee productivity. Customers experience seamless audio and video capabilities for both Avaya and approved third-party UC platforms via open Session Initiation Protocol ("SIP") devices. SIP is used for signaling and controlling multi-media communication sessions in applications of Internet telephony for voice and video calls, along with integration with numerous apps that help connect and
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accelerate business. Developers can easily customize capabilities for their specific needs with our client Software Development Kit.
Services
Services consists of a portfolio of offerings to help customers achieve better business outcomes, including global support services, enterprise cloud and managed services and professional services. Customers upgrading and acquiring new technology innovation through the utilization of our subscription offerings is also included in Services.
The Company's global support services address the risk of system outages and help businesses protect their technology investments. We help our customers maintain their competitiveness through proactive problem prevention, rapid resolution and continual solution optimization. The majority of our revenue in this business is recurring in nature.
Enterprise cloud and managed services enable customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both, depending on the solution and the needs of the customer. The majority of our revenue in this business is recurring in nature and based on multi-year services contracts.
The Company's professional services enable businesses worldwide to take full advantage of their solution investments to drive measurable business results. Our expert consultants and experienced engineers work with clients as a strategic partner along each step of the solution lifecycle to deliver services that drive business transformation and expand ongoing value. The majority of our revenue in this business is one-time in nature.
Together, these comprehensive services enable clients to leverage communications technology to help them maximize their business results. Our global team of professionals delivers services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support. We help our customers use communications to minimize the risk of outages, enable employee productivity and deliver a differentiated customer experience.
Our services teams also help our clients transition at their desired pace to next generation communications technology solutions, either via the cloud, on-premises, or a hybrid of both. Customers can choose various levels of support for their communications solutions, including deployment, training, monitoring, troubleshooting and optimization, and more. Our proactive, preventative system performance monitoring can quickly identify and resolve issues. Remote diagnostics and resolutions rapidly fix existing problems and avoid potential issues, helping our customers save time and reducing the risk of an outage.
Recent Developments
Strategic Partnership with RingCentral
On October 3, 2019, the Company entered into a strategic partnership with RingCentral, Inc. ("RingCentral"), a leading provider of global enterprise cloud communications, collaboration and contact center ("CC") solutions, to accelerate the Company's transition to the cloud. Through this partnership, the Company introduced Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS") solution. Avaya Cloud Office expands the Company's portfolio to offer a full suite of UC, CC, UCaaS and contact center as a service ("CCaaS") solutions to its global customer base. ACO combines RingCentral's leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly differentiated UCaaS offering. The transaction closed on October 31, 2019 and ACO was launched on March 31,2020. The Company now has a full suite of public, private and hybrid cloud solutions for its global UC and CC customers and partners.
As part of the strategic partnership, the Company and RingCentral also entered into an agreement governing the terms of the commercial arrangement between the parties (the "Framework Agreement"). Under the Framework Agreement, the parties entered into a Super Master Agent Agreement, pursuant to which Avaya will act as an agent to Avaya's channel partners with respect to the sale of ACO and make direct sales of ACO. The Framework Agreement has a multiyear term and can be terminated early by either party in the event (i) the other party fails to cure a material breach or (ii) the other party undergoes a change in control.
In accordance with the Framework Agreement, RingCentral paid Avaya $375 million, predominantly for future fees, as well as for certain licensing rights. The $375 million payment consisted of $361 million in RingCentral shares valued as of October 31, 2019 and $14 million in cash. During the six months ended March 31, 2020, the Company sold a significant portion of the RingCentral shares.
In connection with the strategic partnership, the Company and RingCentral entered into an investment agreement, whereby RingCentral purchased 125,000 shares of the Company’s 3% Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $125 million. See Note 15, "Capital Stock," to our unaudited interim Condensed Consolidated Financial Statements for additional information on the Series A Preferred Stock.
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Factors and Trends Affecting Our Results of Operations
We are dependent on general economic conditions and the willingness of our customers to invest in technology. Instability in the geopolitical environment of our customers, instability in the global credit markets and other disruptions, such as the novel coronavirus disease ("COVID-19") described below, put pressure on the global economy causing uncertainties.
COVID-19 was first reported in Wuhan, the capital city of the Hubei province of China, in December 2019 and in January 2020, the World Health Organization ("WHO") declared it a Public Health Emergency of International Concern. On March 11, 2020, the WHO characterized COVID-19 as a pandemic. The COVID-19 pandemic, and the governmental responses to it, are having a negative impact on global, regional and national economies, disrupting supply chains and reducing international trade and business activity. The extent of the impact of the COVID-19 pandemic on our business, financial performance and liquidity, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted. Although the COVID-19 pandemic did not have a material impact on the Company’s revenue and gross margin for the three and six months ended March 31, 2020, the Company did recognize a significant goodwill impairment charge and additional bad debt expense during the period as a result of the COVID-19 pandemic which are described in more detail in the Financial Results Summary below. If the pandemic continues to have a significant adverse effect on regional, national and global economies, we may be required to recognize additional impairments and bad debt expense in the future. Due to the uncertainty and unpredictability of the COVID-19 impact on the Company’s future operating results, financial position and cash flows, as well as the demand for the Company's products and services, current results and financial condition discussed herein may not be indicative of future operating results and trends. For further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, refer to Part II, Item 1A "Risk Factors" of this Form 10-Q.
The health and safety of our employees has been our highest priority throughout the COVID-19 pandemic, and we have implemented several preventative and protective measures, including requiring, to the extent possible, all employees to work remotely, and cancelling conventions and conferences where social distancing would not be possible. We have also implemented business continuity plans and have continued to support our customers primarily by providing our services remotely instead of onsite.
The Company has also implemented cost containment and cash management initiatives to mitigate the impact of the COVID-19 pandemic on its business and liquidity and will continue to evaluate its financial position in light of future developments. For example, although the Company retains approval for additional share repurchases under its share repurchase program, it has elected to suspend repurchases out of caution and prudence due to the existing global economic and market uncertainties. Refer to Part II, Item 2 "Unregistered Sales of Equity Securities and Use of Proceeds" of this Form 10-Q for additional information. In addition, during April 2020, the Company elected to borrow $50 million under its ABL Credit Agreement solely as a precautionary measure to boost liquidity and reinforce stability in an economically turbulent environment.
We believe that the current macroeconomic environment has accelerated a developing trend in the way people work, with more employees working remotely, and believe this could increase demand for the Company’s products and services. During the second quarter of fiscal 2020, we provided over 2 million temporary software licenses free of charge to companies around the world to enable their employees to work remotely, which may lead to future revenue opportunities for us.
As a result of a growing market trend preferring cloud consumption, more customers are exploring subscription and pay-per-use based models, rather than CapEx models, for procuring technology. The shift to subscription and pay-per-use models enables customers to manage costs and efficiencies by paying a subscription or a per minute or per message fee for business communications services rather than purchasing the underlying products and services, infrastructure and personnel, which are owned and managed by the equipment vendor or a cloud and managed services provider. We believe the market trend toward these flexible consumption models will continue as we see an increasing number of opportunities and requests for proposals based on subscription and pay-per-use models. This trend has driven an increase in the proportion of total Company revenues attributable to software and services. In addition, we believe customers are moving away from owned and operated infrastructure, preferring cloud offerings and virtualized server defined networks, which reduce our associated maintenance support opportunities. We continue to evolve into a software and services business and focus our go-to-market efforts by introducing new solutions and innovations, particularly on workflow automation, multi-channel customer engagement and cloud-enabled communications applications. The Company is focused on growing products and services with a recurring revenue stream. Recurring revenue includes products and services that are delivered pursuant to multi-period contracts including revenue recurring from sales of software, maintenance, Cloud, and Enterprise Cloud and Managed Services.
The Company has maintained its focus on profitability levels and investing in future results. As the Company continues its transformation to a software and service-led organization, it has implemented programs designed to streamline its operations, generate cost savings and eliminate overlapping processes and resources. These cost savings programs include: (1) reducing headcount, (2) eliminating real estate costs associated with unused or under-utilized facilities and (3) implementing gross margin improvement and other cost reduction initiatives. The Company continues to evaluate opportunities to streamline its
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operations and identify cost savings globally and may take additional restructuring actions in the future. The costs of those actions could be material.
Financial Results Summary
The following table displays our consolidated net loss for the three and six months ended March 31, 2020 and 2019:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
REVENUE
Products$245  $287  $543  $611  
Services437  422  854  836  
682  709  1,397  1,447  
COSTS
Products:
Costs92  105  196  220  
Amortization of technology intangible assets44  44  87  87  
Services175  174  349  347  
311  323  632  654  
GROSS PROFIT371  386  765  793  
OPERATING EXPENSES
Selling, general and administrative248  251  531  508  
Research and development51  52  103  105  
Amortization of intangible assets41  41  82  81  
Impairment of goodwill624  —  624  —  
Restructuring charges, net   11  
968  348  1,347  705  
OPERATING (LOSS) INCOME(597) 38  (582) 88  
Interest expense(53) (58) (111) (118) 
Other income, net15   29  23  
LOSS BEFORE INCOME TAXES(635) (19) (664) (7) 
(Provision for) benefit from income taxes(37)  (62)  
NET LOSS$(672) $(13) $(726) $(4) 

Three months ended March 31, 2020 Compared with the Three months ended March 31, 2019 Results
Revenue
Revenue for the three months ended March 31, 2020 was $682 million compared to $709 million for the three months ended March 31, 2019. The decrease was primarily driven by lower demand for the Company's on-premises unified communications solutions and the unfavorable impact of foreign currency exchange rates. The decrease was partially offset by higher subscription revenue and a lower impact of applying fresh start accounting upon emergence from bankruptcy, which initially resulted in the recognition of deferred revenue at fair value and lower revenue in subsequent periods.
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The following table displays revenue and the percentage of revenue to total sales by operating segment for the periods indicated:
Percentage of Total RevenueYr. to Yr. Percentage Change, excluding Foreign Currency Impact
(In millions)Three months ended
March 31, 2020
Three months ended
March 31, 2019
Three months ended
March 31, 2020
Three months ended
March 31, 2019
Yr. to Yr. Percentage Change
Products & Solutions$245  $289  36 %41 %(15)%(14)%
Services438  425  64 %60 %%%
Unallocated amounts
(1) (5) — %(1)%(1)(1)
Total revenue682  709  100 %100 %(4)%(3)%
(1)Not meaningful.

Products & Solutions revenue for the three months ended March 31, 2020 was $245 million compared to $289 million for the three months ended March 31, 2019. The decrease was primarily attributable to lower demand for the Company's on-premises unified communications products.
Services revenue for the three months ended March 31, 2020 was $438 million compared to $425 million for the three months ended March 31, 2019. The increase was primarily attributable to growth in the Company's subscription offerings, partially offset by the planned declines in hardware maintenance and software support services which continue to face headwinds driven by lower new product sales over the past several years and lower professional services revenue.
Unallocated amounts for the three months ended March 31, 2020 and 2019 represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy which is excluded from segment revenue.
The following table displays revenue and the percentage of revenue to total sales by location for the periods indicated:
Percentage of Total RevenueYr. to Yr. Percentage Change, excluding Foreign Currency Impact
(In millions)Three months ended
March 31, 2020
Three months ended
March 31, 2019
Three months ended
March 31, 2020
Three months ended
March 31, 2019
Yr. to Yr. Percentage Change
U.S.$384  $375  56 %53 %%%
International:
EMEA172  188  26 %27 %(9)%(7)%
APAC - Asia Pacific
70  79  10 %11 %(11)%(9)%
Americas International - Canada and Latin America56  67  %%(16)%(17)%
Total International298  334  44 %47 %(11)%(9)%
Total revenue682  709  100 %100 %(4)%(3)%
Revenue in the U.S. was $384 million for the three months ended March 31, 2020 compared to $375 million for three months ended March 31, 2019. Higher revenue from subscriptions and contact center solutions and a lower impact of fresh start accounting were offset by lower demand for the Company's on-premises unified communications solutions and lower professional services revenue. Revenue in Europe, Middle East and Africa ("EMEA") for the three months ended March 31, 2020 was $172 million compared to $188 million for the three months ended March 31, 2019. The decrease in EMEA revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center solutions and maintenance services and the unfavorable impact of foreign currency exchange rates, partially offset by higher professional services revenue. Revenue in Asia Pacific ("APAC") for the three months ended March 31, 2020 was $70 million compared to $79 million for the three months ended March 31, 2019. The decrease in APAC revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center products and the unfavorable impact of foreign currency exchange rates, partially offset by higher professional services revenue. Revenue in Americas International for the three months ended March 31, 2020 was $56 million compared to $67 million for the three months ended March 31, 2019. The decrease in Americas International revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center products and maintenance services.
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Gross Profit
The following table sets forth gross profit and gross margin by operating segment for the periods indicated:
Gross MarginChange
(In millions)Three months ended
March 31, 2020
Three months ended
March 31, 2019
Three months ended
March 31, 2020
Three months ended
March 31, 2019
AmountPercent
Products & Solutions$154  $184  62.9 %63.7 %$(30) (16)%
Services263  255  60.0 %60.0 % %
Unallocated amounts(46) (53) (1) (1)  (1)
Total$371  $386  54.4 %54.4 %$(15) (4)%
(1)Not meaningful.

Gross profit for the three months ended March 31, 2020 was $371 million compared to $386 million for the three months ended March 31, 2019. The decrease was primarily driven by the decline in revenue described above.
Products & Solutions gross profit for the three months ended March 31, 2020 was $154 million compared to $184 million for the three months ended March 31, 2019. The decrease was mainly attributable to the decline in revenue described above. Products & Solutions gross margin decreased from 63.7% to 62.9% for the three months ended March 31, 2020 mainly driven by higher fixed overhead costs as a percentage of revenue due to the decline in revenue.
Services gross profit for the three months ended March 31, 2020 was $263 million compared to $255 million for the three months ended March 31, 2019. The increase was mainly due to the increase in revenue described above. Services gross margin was 60.0% for both the three months ended March 31, 2020 and 2019 as the favorable impact of higher subscription revenue was offset by higher professional services costs.
Unallocated amounts for the three months ended March 31, 2020 and 2019 include the amortization of technology intangibles; the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; and costs that are not core to the measurement of segment performance, but rather are controlled at the corporate level.
Operating Expenses
The following table sets forth operating expenses and the percentage of operating expenses to total revenue for the periods indicated:
Three months ended
March 31,
Percentage of Total RevenueChange
(In millions)Three months ended
March 31, 2020
Three months ended
March 31, 2019
Three months ended
March 31, 2020
Three months ended
March 31, 2019
AmountPercent
Selling, general and administrative$248  $251  36.3 %35.4 %$(3) (1)%
Research and development51  52  7.5 %7.3 %(1) (2)%
Amortization of intangible assets41  41  6.0 %5.8 %—  — %
Impairment of goodwill624  —  91.5 %— %624  n/a
Restructuring charges, net  0.6 %0.6 %—  — %
Total operating expenses$968  $348  141.9 %49.1 %$620  178 %
Selling, general and administrative expenses for the three months ended March 31, 2020 were $248 million compared to $251 million for the three months ended March 31, 2019. The decrease was primarily attributable to lower headcount-related costs and the favorable impact of foreign currency exchange rates, partially offset by higher bad debt expense due to collection uncertainties for certain customers as a result of the COVID-19 pandemic.
Research and development expenses for the three months ended March 31, 2020 were $51 million compared to $52 million for the three months ended March 31, 2019.
Amortization of intangible assets was $41 million for both the three months ended March 31, 2020 and 2019.
Impairment of goodwill for the three months ended March 31, 2020 was $624 million. During the three months ended March 31, 2020, the Company performed an interim impairment test of its goodwill and indefinite-lived intangible assets due to (i) the
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impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility in the financial markets. The results of the Company’s interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company’s Services reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company’s long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new technology innovation through the utilization of the Company’s subscription offering, which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount of the Products & Solutions goodwill. As of March 31, 2020, the estimated fair value of the Services reporting unit exceeded its carrying amount by 16%. The results of the indefinite-lived intangible asset impairment test indicated that no impairment existed and the level of excess fair value over carrying value was 5%. An increase in the discount rate of 50 basis points or a decrease in the long-term growth rate of 140 basis points would result in an estimated fair value below its carrying value. The Company’s long-term forecast includes significant estimates and assumptions, including management’s estimate of the potential impact of the COVID-19 pandemic on the Company’s operating results. Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the macroeconomic environment and the Company’s future operating results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently considered in the Company’s long-term forecast. To the extent business conditions deteriorate or there are changes in key assumptions and estimates included in the long-term forecast, it may be necessary to record additional impairment charges in the future.
Restructuring charges, net were $4 million for both the three months ended March 31, 2020 and 2019. Restructuring charges during the three months ended March 31, 2020 primarily related to exited leased facilities. Restructuring charges during the three months ended March 31, 2019 mainly related to employee severance actions in EMEA.
Operating (Loss) Income
Operating loss for the three months ended March 31, 2020 was $597 million compared to operating income of $38 million for the three months ended March 31, 2019. Our operating results for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 reflect, among other things:
lower revenue and gross profit for the three months ended March 31, 2020, as described above; and
a $624 million impairment charge related to the Company's goodwill during the three months ended March 31, 2020.
Interest Expense
Interest expense for the three months ended March 31, 2020 was $53 million compared to $58 million for the three months ended March 31, 2019. The decrease was mainly driven by the prepayment of $250 million of the outstanding principal amount of the Company's Term Loan on November 7, 2019 and lower average interest rates.
Other Income, Net
Other income, net for the three months ended March 31, 2020 was $15 million compared to $1 million for the three months ended March 31, 2019. Other income, net for the three months ended March 31, 2020 consisted of unrealized gains on RingCentral shares received by the Company under the strategic partnership of $18 million; a decrease in the fair value of the warrants issued in accordance with the Company's bankruptcy plan ("Emergence Date Warrants") of $6 million; other pension and post-retirement benefit credits of $6 million; interest income of $2 million and sublease income of $1 million, partially offset by a $10 million impairment of debt securities driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company; net foreign currency losses of $7 million; and other, net of $1 million. Other income, net for the three months ended March 31, 2019 consisted of interest income of $4 million; a change in fair value of the Emergence Date Warrants of $3 million; and other pension and post-retirement benefit credits of $2 million, partially offset by net foreign currency losses of $6 million and other, net of $2 million.
(Provision for) Benefit from Income Taxes
The provision for income taxes was $37 million for the three months ended March 31, 2020 compared to a benefit from income taxes of $6 million for the three months ended March 31, 2019.
The Company's effective income tax rate for the three months ended March 31, 2020 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) deferred tax assets (including losses) generated for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) U.S. state and local income taxes, (4) the impact of the Tax Cuts and Jobs Act ("the Act") and associated regulations, (5) the goodwill
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impairment charge recorded in the second quarter of fiscal 2020, (6) the impact of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and (7) foreign tax credits.
The Company's effective income tax rate for the three months ended March 31, 2019 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Act, (7) a limitation on the deductibility of interest expense under the Internal Revenue Code of 1986, as amended, Section 163(j), and (8) foreign tax credits.
Net Loss
Net loss was $672 million for the three months ended March 31, 2020 compared to $13 million for the three months ended March 31, 2019, as a result of the items discussed above.
Six months ended March 31, 2020 Compared with the Six months ended March 31, 2019 Results
Revenue
Revenue for the six months ended March 31, 2020 was $1,397 million compared to $1,447 million for the six months ended March 31, 2019. The decrease was primarily driven by lower demand for the Company's on-premise unified communications and contact center solutions and the unfavorable impact of foreign currency exchange rates. The decrease was partially offset by higher subscription revenue and a lower impact of applying fresh start accounting upon emergence from bankruptcy, which initially resulted in the recognition of deferred revenue at fair value and lower revenue in subsequent periods.
The following table displays revenue and the percentage of revenue to total sales by operating segment for the periods indicated:
Percentage of Total RevenueYr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)Six months ended
March 31, 2020
Six months ended
March 31, 2019
Six months ended
March 31, 2020
Six months ended
March 31, 2019
Yr. to Yr. Percentage Change
Products & Solutions$543  $615  39 %42 %(12)%(11)%
Services857  847  61 %59 %%%
Unallocated amounts
(3) (15) — %(1)%(1)(1)
Total revenue$1,397  $1,447  100 %100 %(3)%(3)%
(1)Not meaningful.

Products & Solutions revenue for the six months ended March 31, 2020 was $543 million compared to $615 million for the six months ended March 31, 2019. The decrease was primarily attributable to lower demand for the Company's on-premise unified communications and contact center solutions.
Services revenue for the six months ended March 31, 2020 was $857 million compared to $847 million for the six months ended March 31, 2019. The increase was primarily attributable to growth in the Company's subscription offerings, partially offset by the planned declines in hardware maintenance and software support services which continue to face headwinds driven by lower new product sales over the past several years.
Unallocated amounts for the six months ended March 31, 2020 and 2019 represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy which is excluded from segment revenue.
40


The following table displays revenue and the percentage of revenue to total sales by location for the periods indicated:
Percentage of Total RevenueYr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)Six months ended
March 31, 2020
Six months ended
March 31, 2019
Six months ended
March 31, 2020
Six months ended
March 31, 2019
Yr. to Yr. Percentage Change
U.S.$778  $769  56 %53 %%%
International:
EMEA358  387  26 %27 %(7)%(6)%
APAC - Asia Pacific
147  157  10 %11 %(6)%(5)%
Americas International - Canada and Latin America114  134  %%(15)%(14)%
Total International619  678  44 %47 %(9)%(8)%
Total revenue$1,397  $1,447  100 %100 %(3)%(3)%
Revenue in the U.S. was $778 million for the six months ended March 31, 2020 compared to $769 million for the six months ended March 31, 2019. Higher subscription revenue and a lower impact of fresh start accounting were offset by lower demand for the Company's on-premises unified communications and contact center solutions and lower professional services revenue. Revenue in Europe, Middle East and Africa ("EMEA") for the six months ended March 31, 2020 was $358 million compared to $387 million for the six months ended March 31, 2019. The decrease in EMEA revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center solutions and maintenance services and the unfavorable impact of foreign currency exchange rates, partially offset by higher professional services revenue. Revenue in Asia Pacific ("APAC") for the six months ended March 31, 2020 was $147 million compared to $157 million for the six months ended March 31, 2019. The decrease in APAC revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center solutions, partially offset by higher professional services revenue. Revenue in Americas International for the six months ended March 31, 2020 was $114 million compared to $134 million for the six months ended March 31, 2019. The decrease in Americas International revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center solutions and maintenance services.
Gross Profit
The following table sets forth gross profit and gross margin by operating segment for the periods indicated:
Gross MarginChange
(In millions)Six months ended
March 31, 2020
Six months ended
March 31, 2019
Six months ended
March 31, 2020
Six months ended
March 31, 2019
AmountPercent
Products & Solutions$348  $398  64.1 %64.7 %$(50) (13)%
Services509  510  59.4 %60.2 %(1) — %
Unallocated amounts(92) (115) (1) (1) 23  (1)
Total$765  $793  54.8 %54.8 %$(28) (4)%
(1)Not meaningful.

Gross profit for the six months ended March 31, 2020 was $765 million compared to $793 million for the six months ended March 31, 2019. The decrease was primarily driven by the decline in revenue described above.
Products & Solutions gross profit for the six months ended March 31, 2020 was $348 million compared to $398 million for the six months ended March 31, 2019. The decrease was mainly attributable to the decline in revenue described above. Products & Solutions gross margin decreased from 64.7% to 64.1% for the six months ended March 31, 2020 mainly driven by higher fixed overhead costs as a percentage of revenue due to decline in revenue, partially offset by more favorable product mix.
Services gross profit for the six months ended March 31, 2020 was $509 million compared to $510 million for the six months ended March 31, 2019. Services gross margin decreased from 60.2% to 59.4% for the six months ended March 31, 2020 mainly driven by less favorable services mix.
Unallocated amounts for the six months ended March 31, 2020 and 2019 include the amortization of technology intangibles; the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; and costs that are not core to the measurement of segment performance, but rather are controlled at the corporate level.



Operating Expenses
The following table sets forth operating expenses and the percentage of operating expenses to total revenue for the periods indicated:
Percentage of Total RevenueChange
(In millions)Six months ended
March 31, 2020
Six months ended
March 31, 2019
Six months ended
March 31, 2020
Six months ended
March 31, 2019
AmountPercent
Selling, general and administrative$531  $508  38.0 %35.0 %$23  %
Research and development103  105  7.4 %7.3 %(2) (2)%
Amortization of intangible assets82  81  5.9 %5.6 % %
Impairment of goodwill624  —  44.6 %— %624  n/a  
Restructuring charges, net 11  0.5 %0.8 %(4) (36)%
Total operating expenses$1,347  $705  96.4 %48.7 %$642  91 %
Selling, general and administrative expenses for the six months ended March 31, 2020 were $531 million compared to $508 million for the six months ended March 31, 2019. The increase was primarily attributable to advisory fees associated with executing the strategic partnership with RingCentral; higher accrued incentive compensation; and higher bad debt expense due to collection uncertainties as a result of the COVID-19 pandemic, partially offset by lower consulting costs; the favorable impact of foreign currency exchange rates; and lower headcount-related costs.
Research and development expenses for the six months ended March 31, 2020 were $103 million compared to $105 million for the six months ended March 31, 2019.
Amortization of intangible assets for the six months ended March 31, 2020 was $82 million compared to $81 million for the six months ended March 31, 2019.
Impairment of goodwill for the six months ended March 31, 2020 was $624 million. During the six months ended March 31, 2020, the Company performed an interim impairment test of its goodwill and indefinite-lived intangible assets due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility in the financial markets. The results of the Company’s interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company’s Services reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company’s long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new technology innovation through the utilization of the Company’s subscription offering, which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount of the Products & Solutions goodwill. As of March 31, 2020, the estimated fair value of the Services reporting unit exceeded its carrying amount by 16%. The results of the indefinite-lived intangible asset impairment test indicated that no impairment existed and the level of excess fair value over carrying value was 5%. An increase in the discount rate of 50 basis points or a decrease in the long-term growth rate of 140 basis points would result in an estimated fair value below its carrying value. The Company’s long-term forecast includes significant estimates and assumptions, including management’s estimate of the potential impact of the COVID-19 pandemic on the Company’s operating results. Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the macroeconomic environment and the Company’s future operating results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently considered in the Company’s long-term forecast. To the extent business conditions deteriorate or there are changes in key assumptions and estimates included in the long-term forecast, it may be necessary to record additional impairment charges in the future.
Restructuring charges, net, for the six months ended March 31, 2020 were $7 million compared to $11 million for the six months ended March 31, 2019. Restructuring charges during the six months ended March 31, 2020 primarily related to exited leased facilities. Restructuring charges during the six months ended March 31, 2019 consisted of employee separation costs of $10 million primarily associated with employee severance actions in the U.S., EMEA and Canada and costs related to exited leased facilities of $1 million.



Operating (Loss) Income
Operating loss for the six months ended March 31, 2020 was $582 million compared to operating income of $88 million for the six months ended March 31, 2019. Our operating results for the six months ended March 31, 2020 as compared to the six months ended March 31, 2019 reflect, among other things:
lower revenue and gross profit for the six months ended March 31, 2020, as described above;
costs incurred in connection with entering into the strategic partnership with RingCentral during the six months ended March 31, 2020;
higher accrued incentive compensation during the six months ended March 31, 2020; and
a $624 million impairment charge related to the Company’s goodwill during the six months ended March 31, 2020.
Interest Expense
Interest expense for the six months ended March 31, 2020 was $111 million compared to $118 million for the six months ended March 31, 2019. The decrease was mainly driven by the prepayment of $250 million of the outstanding principal amount of the Company's Term Loan on November 7, 2019 and lower average interest rates.
Other Income, Net
Other income, net for the six months ended March 31, 2020 was $29 million compared to $23 million for the six months ended March 31, 2019. Other income, net for the six months ended March 31, 2020 consisted of realized and unrealized gains on RingCentral shares received by the Company under the strategic partnership of $30 million; other pension and post-retirement benefit credits of $11 million; interest income of $5 million; a decrease in the fair value of the Emergence Date Warrants of $3 million; and sublease income of $3 million, partially offset by net foreign currency losses of $11 million; an impairment of debt securities of $10 million, driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company; and other, net of $2 million. Other income, net for the six months ended March 31, 2019 consisted of a change in fair value of the Emergence Date Warrants of $21 million; interest income of $7 million; and other pension and post-retirement benefit credits of $4 million, partially offset by net foreign currency losses of $7 million and other, net of $2 million.
(Provision for) Benefit from Income Taxes
The provision for income taxes was $62 million for the six months ended March 31, 2020 compared to a benefit from income taxes of $3 million for the six months ended March 31, 2019.
The Company's effective income tax rate for the six months ended March 31, 2020 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) deferred tax assets (including losses) generated for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) U.S. state and local income taxes, (4) the impact of the Act and associated regulations, (5) the goodwill impairment charge recorded in the second quarter of fiscal 2020, (6) the impact of the CARES Act and (7) foreign tax credits.
The Company's effective income tax rate for the six months ended March 31, 2019 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Act, (7) a limitation on the deductibility of interest expense under the Internal Revenue Code of 1986, as amended, Section 163(j), and (8) foreign tax credits.
Net Loss
Net loss was $726 million for the six months ended March 31, 2020 compared to $4 million for the six months ended March 31, 2019, as a result of the items discussed above.
Liquidity and Capital Resources
We expect our existing cash balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity. Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, as well as our current estimates of the impact that the COVID-19 pandemic will have on our business and cash flow, we believe these sources will be adequate to meet our liquidity needs for at least the next twelve months.


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Cash Flow Activity
The following table provides a summary of the statements of cash flows for the periods indicated:
Six months ended
March 31,
(In millions)20202019
Net cash provided by (used for):
Operating activities$32  $123  
Investing activities246  (48) 
Financing activities(472) (39) 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(5) (1) 
Net (decrease) increase in cash, cash equivalents, and restricted cash(199) 35  
Cash, cash equivalents, and restricted cash at beginning of period756  704  
Cash, cash equivalents, and restricted cash at end of period$557  $739  
Operating Activities
Cash provided by operating activities for the six months ended March 31, 2020 and 2019 was $32 million and $123 million, respectively. The decrease was primarily due to higher advisory fees associated with executing the strategic partnership with RingCentral; lower cash earnings; and higher interest payments, partially offset by the timing of vendor and customer payments; lower contributions to the Company's pension and post-retirement benefit plans; lower income tax payments; and lower severance payments under the Company's restructuring programs.
Investing Activities
Cash provided by investing activities for the six months ended March 31, 2020 was $246 million, compared to cash used for investing activities of $48 million for six months ended March 31, 2019. The change was primarily due to proceeds received from the sale of shares of common stock of RingCentral in November 2019, which shares were received upon entry into the strategic partnership in October 2019.
Financing Activities
Cash used for financing activities for the six months ended March 31, 2020 and 2019 was $472 million and $39 million, respectively.
Cash used for financing activities for the six months ended March 31, 2020 included:
repurchases of shares under the Company's share repurchase program of $330 million;
a principal prepayment under the Term Loan Credit Agreement of $250 million;
payment of acquisition-related contingent consideration of $5 million;
repayments in connection with financing leases of $5 million; and
other financing activities, net of $3 million; partially offset by
proceeds from the issuance of Series A Preferred Stock, net of issuance costs, of $121 million.
Cash used for financing activities for the six months ended March 31, 2019 included:
scheduled debt repayments under the Term Loan Credit Agreement of $15 million;
payment of acquisition-related contingent consideration of $9 million;
repayments in connection with financing leases of $8 million; and
other financing activities, net of $7 million.
As of March 31, 2020, the Company was not in default under any of its debt agreements.
Future Cash Requirements
Our primary future cash requirements will be to fund operations, debt service, restructuring payments and capital expenditures. In addition, we may use cash in the future to make strategic acquisitions.
Specifically, we expect our primary cash requirements for the remainder of fiscal 2020 to be as follows:
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Debt service—We expect to make payments of approximately $92 million during the remainder of fiscal 2020 in interest associated with the Term Loan Credit Agreement and interest and fees on our ABL Credit Agreement and 2.25% Convertible Notes due 2023. 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 $15 million to $20 million during the remainder of fiscal 2020 for employee separation costs and lease termination obligations associated with restructuring actions. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.
Capital expenditures—We expect to spend approximately $55 million for capital expenditures, including capitalized software development costs, during the remainder of fiscal 2020.
In addition to the matters identified above, in the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, relating to intellectual property, commercial, employment, environmental and regulatory matters, which may require us to make cash payments. These and other legal matters could have a material adverse effect on the manner in which the Company does business and the Company's financial position, results of operations, cash flows and liquidity.
We and our subsidiaries and affiliates may from time to time seek to retire or purchase our outstanding equity (common stock and warrants) and/or debt (including publicly issued debt) through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. 
Future Sources of Liquidity
We expect our cash balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity.
As of March 31, 2020 and September 30, 2019, our cash and cash equivalent balances held outside the U.S. were $191 million and $176 million, respectively. As of March 31, 2020, the Company's cash and cash equivalents held outside the U.S. are not expected to be needed to be repatriated to fund the Company's operations in the U.S. based on our expected future sources of liquidity.
Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At March 31, 2020, the Company had issued and outstanding letters of credit and guarantees of $39 million under the ABL Credit Agreement and had no other borrowings outstanding under the ABL. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $39 million of outstanding letters of credit and guarantees, was $97 million at March 31, 2020. On April 6, 2020, the Company elected to borrow $50 million under the ABL Credit Agreement solely as a precautionary measure to boost liquidity and reinforce stability in an economically turbulent environment.
We believe that our existing cash and cash equivalents of $553 million as of March 31, 2020, future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We also believe that our financial resources, along with appropriate management of discretionary expenses, will allow us to manage the anticipated impact of COVID-19 on our business operations, and specifically our liquidity, for the foreseeable future. However, the challenges posed by COVID-19 on our business are evolving rapidly and could result in the need for additional liquidity. Consequently, we will continue to evaluate our financial position in light of future developments.
Off-Balance Sheet Arrangements
See discussion in Note 20, "Commitments and Contingencies," to our unaudited interim Condensed Consolidated Financial Statements for further details.
Debt Ratings
Our ability to obtain additional external financing and the related cost of borrowing may be affected by our ratings, which are periodically reviewed by the major credit rating agencies. The ratings are subject to change or withdrawal at any time by the respective credit rating agencies.
As of March 31, 2020, the Company's debt ratings were as follows:
Moody's Investors Service issued a corporate family rating of "B2" with a stable outlook and a rating of the 7-year $2,925 million Term Loan Credit Agreement of "B2";
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Standard and Poor's issued a definitive corporate credit rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "B"; and
Fitch Ratings Inc. issued a Long-Term Issuer Default Rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "BB-".
Critical Accounting Policies and Estimates
Management has reassessed the critical accounting policies and estimates disclosed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 29, 2019 and determined that there were no significant changes to our critical accounting policies and estimates during the six months ended March 31, 2020, except for recently adopted accounting policy changes as discussed in Note 2, "Recent Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements and certain other changes discussed in more detail below.
Revenue Recognition
As the Company continues to transform its business model to meet the evolving needs of its customers, it is increasing the proportion of subscription software offerings it provides. During the six months ended March 31, 2020, the Company continued to make strides with developing and selling its subscription-based offerings which mainly consist of software as a service (“SaaS”) arrangements and term software license arrangements. SaaS arrangements do not include the right for the customer to take possession of the software during the contractual term of the arrangement, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control of the software, with the associated software maintenance revenue recognized ratably over the contract term as the customer consumes the services.
Goodwill and Indefinite-lived Intangible Assets
Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level. The Company's reporting units are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company's goodwill was primarily recorded upon emergence from bankruptcy as a result of applying fresh start accounting.
During the three months ended March 31, 2020, the Company concluded that a triggering event occurred for both of its reporting units due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility in the financial markets. As a result, the Company performed an interim quantitative goodwill impairment test as of March 31, 2020 to compare the fair values of its reporting units to their respective carrying amounts, including the goodwill allocated to each reporting unit. The fair value of each reporting unit was determined using a combination of the income approach and the market approach in accordance with the Company's historical practices and accounting policies.
The results of the Company’s interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company’s Services reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company’s long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new technology innovation through the utilization of the Company’s subscription offering, which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount of the Products & Solutions goodwill in the Impairment of Goodwill line item in the Condensed Consolidated Statements of Operations. As of March 31, 2020, the estimated fair value of the Services reporting unit exceeded its carrying amount by 16%.
The Company also performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of March 31, 2020. The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach in accordance with the Company's historical practices and accounting policies. The result of the interim impairment test of the Avaya Trade Name as of March 31, 2020 indicated no impairment existed, however, the level of excess fair value over carrying value was 5%. An increase in the discount rate of 50 basis points or a decrease in the long-term growth rate of 140 basis points would result in an estimated fair value below its carrying value.
The Company’s long-term forecast includes significant estimates and assumptions, including management’s estimate of the potential impact of the COVID-19 pandemic on the Company’s operating results. Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the macroeconomic environment and the Company’s future operating results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently considered in the Company’s long-term
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forecast. To the extent business conditions deteriorate or there are changes in key assumptions and estimates included in the long-term forecast, it may be necessary to record additional impairment charges in the future.
New Accounting Pronouncements
See discussion in Note 2, "Recent Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements for further details.
EBITDA and Adjusted EBITDA
EBITDA is defined as net (loss) income before income taxes, interest expense, interest income and depreciation and amortization and excludes the results of discontinued operations. EBITDA provides us with a measure of operating performance that excludes certain non-operating and/or non-cash expenses, which can differ significantly from company to company depending on capital structure, the tax jurisdictions in which companies operate and capital investments.
Adjusted EBITDA is EBITDA as further adjusted by the items noted in the reconciliation table below. We believe Adjusted EBITDA provides a measure of our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization, and therefore presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years. In addition, Adjusted EBITDA serves as a basis for determining certain management and employee compensation. We also present EBITDA and Adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Under the Company's debt agreements, the ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied in part to ratios based on a measure of Adjusted EBITDA.
EBITDA and Adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net (loss) income or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Further, Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations that still affect our net income. In particular, our formulation of Adjusted EBITDA adjusts for certain amounts that are included in calculating net (loss) income as set forth in the following table including, but not limited to, restructuring charges, impairment charges, resolution of certain legal matters and a portion of our pension costs and post-retirement benefits costs, which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. However, these are expenses that may recur, may vary and/or may be difficult to predict.
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The unaudited reconciliation of net loss, which is a GAAP measure, to EBITDA and Adjusted EBITDA, which are non-GAAP measures, is presented below for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Net loss$(672) $(13) $(726) $(4) 
Interest expense53  58  111  118  
Interest income(2) (4) (5) (7) 
Provision for (benefit from) income taxes37  (6) 62  (3) 
Depreciation and amortization105  108  212  225  
EBITDA(479) 143  (346) 329  
Impact of fresh start accounting adjustments
(a)(1)  (1)  
Restructuring charges, net of sublease income
   11  
Advisory fees(b)  40   
Acquisition-related costs
—   —   
Share-based compensation
  14  11  
Impairment of goodwill624  —  624  —  
 Change in fair value of Emergence Date Warrants(6) (3) (3) (21) 
Loss on foreign currency transactions
  11   
Gain on investments in equity and debt securities, net
(c)(8) —  (20) —  
Adjusted EBITDA$149  $166  $323  $355  
(a)The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.
(b)Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.
(c)Realized and unrealized gains on investments in equity securities, net of impairment of investments in debt securities.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, including statements containing words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "model," "can," "could," "may," "should," "will," "would" or similar words or the negative thereof, constitute "forward-looking statements." These forward-looking statements, which are based on our current plans, expectations, estimates and projections about future events, should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. We caution you therefore against relying on any of these forward-looking statements.
The forward-looking statements included herein are based upon our assumptions, estimates and beliefs and involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and may be affected by a variety of risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Risks, uncertainties and other factors that may cause these forward-looking statements to be inaccurate include, among others: the risks and factors discussed in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q and our Quarterly Report filed with the SEC on February 10, 2020, as well as Part I, Item 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the SEC on November 29, 2019.
All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company has exposure to changing interest rates primarily under the Term Loan Credit Agreement and ABL Credit Agreement, each of which bears interest at variable rates based on LIBOR. The Company had $2,624 million of variable rate loans outstanding as of March 31, 2020.
The Company maintains interest rate swap agreements with six counterparties, which fix a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of March 31, 2020, the total notional amount of the six Swap Agreements was $1,800 million.
It is management's intention that the notional amount of the Swap Agreements be less than the variable rate loans outstanding during the life of the derivatives. For the three months ended March 31, 2020 and 2019, the Company recognized a loss on the Swap Agreements of $6 million and $2 million, respectively, which is reflected in Interest expense in the Condensed Consolidated Statements of Operations. For the six months ended March 31, 2020 and 2019, the Company recognized a loss on the Swap Agreements of $11 million and $5 million, respectively, which is also reflected in Interest expense. At March 31, 2020, the fair value of the outstanding Swap Agreements was a deferred loss of $118 million. Based on the payment dates of the contracts, $46 million and $74 million, including accrued interest, was recorded in Other current liabilities and Other liabilities in the Condensed Consolidated Balance Sheets, respectively. On an annual basis, a hypothetical one percent change in interest rates for the $824 million of unhedged variable rate debt as of March 31, 2020 would affect interest expense by approximately $8 million.
Foreign Currency Risk
Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. ("foreign") operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are Euros, Canadian Dollars, British Pound Sterling, Chinese Renminbi, Indian Rupee, Australian Dollars and United Arab Emirates Dirham.
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Non-U.S. denominated revenue was $157 million and $314 million for the three and six months ended March 31, 2020, respectively. We estimate a 10% change in the value of the U.S. dollar relative to all foreign currencies would affect our revenue for the three and six months ended March 31, 2020 by $16 million and $32 million, respectively.
The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a component of Other income, net to offset the change in the value of the underlying assets and liabilities. As of March 31, 2020, the Company maintained open foreign exchange contracts with a total notional value of $406 million, primarily hedging the British Pound Sterling, Indian Rupee, Chinese Renminbi, Czech Koruna and Euro. At March 31, 2020, the fair value of the open foreign exchange contracts was a net unrealized loss of $5 million, with $6 million recorded in Other current liabilities and $1 million recorded in Other current assets in the Condensed Consolidated Balance Sheets. For the three and six months ended March 31, 2020, the Company's loss on foreign exchange contracts was $7 million and $2 million, respectively, which was recorded in Other income, net in Condensed Consolidated Statement of Operations. For the three and six months ended March 31, 2019, the gain/loss on foreign exchange contracts was not material.

Item 4.Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2020, the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Chief Financial Officer, evaluating the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2020 to provide reasonable assurance that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes In Internal Control Over Financial Reporting
There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION

Item 1.Legal Proceedings
The information set forth under Note 20, "Commitments and Contingencies," to the unaudited interim Condensed Consolidated Financial Statements is incorporated herein by reference.

Item 1A.Risk Factors
There have been no material changes during the quarterly period ended March 31, 2020 to the risk factors previously disclosed in the Company's Form 10-K and Form 10-Q filed with the Securities and Exchange Commission on November 29, 2019 and February 10, 2020, respectively, other than as shown below:
The outbreak of COVID-19 coronavirus could have a material adverse effect on the Company’s business, results of operations and financial condition and/or cash flows.
In December 2019, a novel coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On March 11, 2020, the WHO characterized COVID-19 as a pandemic. The current COVID-19 pandemic, and the governmental responses to it, are having a negative impact on global, regional and national economies, disrupting supply chains and reducing international trade and business activity. The outbreak has caused many governments to implement stay-at-home orders, quarantines and significant restrictions on travel. Several governments have also implemented restrictions that prohibit many employees from commuting to their customary work locations and require these employees to work remotely if possible. The quarantines, travel bans, and other restrictions were initially put in place on a national level in China in January 2020, and as the virus spread globally, similar restrictions were implemented in other countries and regions throughout the second quarter of fiscal 2020, with many restrictions commencing in Asia Pacific, Europe and North America.
The impact of the COVID-19 pandemic may adversely impact our financial condition and results of operations in a variety of ways, including, but not limited to:
Our ability to operate, as well as our partners’ and/or customers’ ability to operate, in affected areas may be hindered, which may cause our business and operating results to decline.
Clients and customers may have difficulty meeting their payment obligations to us, resulting in late or non-payment of amounts owed.
We may experience significant reductions or volatility in demand for our solutions as customers may not be able to enter into new purchase commitments due to financial downturns or general economic uncertainty.
We may experience temporary or long-term disruptions in our supply chain, which may significantly impact our distribution network, results of operations (including sales) or business.
The effects of shelter-in-place orders may negatively disrupt our business, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.
To the extent our employees, including our executive officers and other members of our management team, are impacted in significant numbers by the outbreak of the pandemic and are not available or allowed to conduct work, our business and operating results may be negatively impacted.
We may not be able to ensure business continuity in the event our continuity of operations and crisis management plans are not effective or are improperly implemented.
The significant disruption of global financial markets, which has impacted the value of our common stock and could further materially impact the value of our stock in the future, may reduce our ability to access further capital, which could in the future negatively affect our liquidity and affect our business in the near and long-term.
The extent of the impact of the COVID-19 pandemic on our business, financial performance and liquidity, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted. Any of the foregoing factors, or other cascading effects of the coronavirus pandemic that are not currently foreseeable, could have a material adverse effect on our business, results of operations, financial condition and/or cash flows. Some economists are predicting that the recession caused by the COVID-19 pandemic, including as a result of the actions by governments to slow the spread of the disease will be steep and severe. The effectiveness of economic stabilization efforts, including proposed
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government stimulus efforts, is not assured. Additionally, as pandemic conditions wane, we cannot predict how quickly the marketplaces in which we operate will return to normal.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information with respect to purchases by the Company of shares of common stock during the three months ended March 31, 2020:
Period
Total Number of Shares (or Units) Purchased(1)
Average Price Paid per Share (or Unit)(4)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under Plans or Programs(2)(3)
January 1 - 31, 20205,412,554  $12.8070  5,335,642  $315,000,002  
February 1 - 29, 20202,652,333  $13.7008  2,543,450  $280,120,047  
March 1 - 31, 202010,327,181  $9.2106  10,327,181  $185,000,003  
Total18,392,068  $10.9165  18,206,273  
(1)January and February 2020 include 76,912 and 108,883 shares of common stock withheld for taxes on restricted stock units that vested, respectively.
(2)On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Company's outstanding warrants to purchase shares of the Company's common stock for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions.
(3)On October 1, 2019, the Company's Board of Directors approved a share repurchase program, authorizing the Company to repurchase the Company's common stock for an aggregate expenditure of up to $500 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. Share repurchases presented in the table above are based on the transaction settlement date. In connection with the COVID-19 pandemic, the Company has determined to suspend the repurchase program but may recommence the program at any time based on its assessment of the impact the COVID-19 pandemic has on the Company’s stock price, business and liquidity.
(4)Average price paid per share includes transaction costs associated with the repurchases.

Item 3.Defaults Upon Senior Securities
None.

Item 4.Mine Safety Disclosures
Not applicable. 

Item 5.Other Information
None.
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Item 6.Exhibits

Exhibit NumberExhibit Description
10.1*  
10.2*  
10.3*  
10.4*  
10.5*  
31.1    
31.2    
32.1    
32.2    
101.INSXBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Labels Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)
* Indicates management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AVAYA HOLDINGS CORP.
By:
/s/ KEVIN SPEED
Name:Kevin Speed
Title:Vice President, Controller and Chief Accounting Officer
May 11, 2020

54
avaya-ex101_2020331x10q
EXHIBIT 10.1 Form of RSU Award Agreement 2019 Equity Incentive Plan RESTRICTED STOCK UNIT AWARD AGREEMENT PURSUANT TO THE AVAYA HOLDINGS CORP. 2019 EQUITY INCENTIVE PLAN * * * Participant: [Participant Name] “Grant Date”: [Grant Date] Grant Number: [Client Grant ID] Number of Restricted Stock Units (“RSUs”) Granted: [RSUs Granted] * * * This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2019 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; WHEREAS, the Committee has determined that it would be in the best interests of the Company to grant the Participant an Other Stock-Based Award in the form of the RSUs provided herein, each of which represents the right to receive one share of Common Stock upon vesting of such RSU, subject to the terms and conditions contained herein and in the Plan. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows: 1. Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. 2. Grant of RSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of RSUs specified above, subject to adjustment as provided for in the


 
Plan, on the terms and conditions set forth in this Agreement, including, without limitation, in Appendix I and II attached hereto, and otherwise provided for in the Plan. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the RSUs, except as otherwise specifically provided for in the Plan or this Agreement. The RSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book- entry account shall be that of a general, unsecured creditor of the Company. 3. Vesting. (a) General. Except as set forth in Section 3(b) or Section 3(c), as applicable, the RSUs subject to this Award shall vest as follows, provided that the Participant has not incurred a Termination of Employment prior to each such vesting date, and provided, further, that there shall be no proportionate or partial vesting in the periods prior to each such vesting date. Vesting Dates Percentage of RSUs On the date listed below which is closest to, and following, the one year anniversary of the Grant Date: 33.34% • February 15 • May 15 • August 15 • November 15 Quarterly thereafter on each February 15, May 15, August 15 and 8.33% November 15 Notwithstanding the foregoing, if the number of RSUs is not evenly divisible, then no fractional RSUs shall vest and the smaller installments shall vest first, and upon vesting of the last installment in accordance with the terms and conditions hereof, 100% of the RSUs subject to this Award shall be fully vested. (b) Accelerated Vesting Upon a Qualifying Termination (Change in Control). In the event the Participant incurs a Termination of Employment prior to the last vesting date provided for in Section 3(a) as a result of the Participant’s Termination of Employment by the Company or the Company Entity that is the Participant’s actual employing entity without Cause, by the Participant for Good Reason, or due to the Participant’s death or Disability (any such Termination of Employment, a “Qualifying Termination”), and such Qualifying Termination occurs (i) only to the extent the Participant is also a participant in the Avaya Inc. Change in Control Severance Plan, during a Potential Change in Control Period, as such term is defined in the Avaya Inc. Change in Control Severance Plan or (ii) within the twenty-four (24) month period immediately following a Change in Control, subject to the Participant’s (or the Participant’s estate’s, if applicable) execution, delivery and non-revocation of a customary release of claims in favor of the Company and its subsidiaries and affiliates within sixty (60) days of such Termination of Employment and, except in the event of a Termination of Employment due to death, continued 2


 
compliance with Appendix I to this Agreement, all outstanding and unvested RSUs shall fully vest effective as of the date of such Termination of Employment. (c) Forfeiture. Except as otherwise expressly provided for in Section 3(b) or as otherwise determined by the Committee or its designee, all outstanding and unvested RSUs shall be immediately forfeited upon the Participant’s Termination of Employment for any reason. For the avoidance of doubt, in the event that the Participant fails to execute, deliver and not revoke the release of claims provided for in Section 3(b), any RSUs that remain outstanding and unvested as of the sixtieth (60th) day following the date on which the Qualifying Termination occurs shall be forfeited and cancelled as of such sixtieth (60th) day without consideration therefor. Additionally, in the event of the Participant’s Termination of Employment by the Company or the Company Entity that is the Participant’s actual employing entity for Cause, all of the Participant’s outstanding RSUs, whether or not vested, shall be forfeited and cancelled without consideration therefor effective as of the date of such Termination of Employment. 4. Delivery of Shares. Except as otherwise expressly provided for in Section 23, promptly following the vesting of the RSUs (but in no event more than sixty (60) days thereafter) (or, in the event of a Qualifying Termination pursuant to Section 3(b) above, on the sixtieth (60th) day following the date on which the Participant’s Termination of Employment occurs, provided the conditions set forth in Section 3(b) above have been met), the Participant shall receive the number of shares of Common Stock (or any consideration paid in respect of such Common Stock in connection with a Change in Control) that correspond to the number of RSUs that have become vested on the applicable vesting date, less any shares of Common Stock withheld by the Company pursuant to Section 13.6 of the Plan, and such vested RSUs shall be cancelled upon receipt of the shares of Common Stock (or any consideration paid in respect of such Common Stock in connection with a Change in Control). 5. Non-Transferability. No portion of the RSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the RSUs as provided herein. 6. Governing Law. All questions concerning the construction, validity and interpretation of this Agreement, including but not limited to Appendix I and II hereto, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.11 of the Plan. 7. Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 7. 8. Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that: 3


 
(a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 8. (b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register such shares of Common Stock (or to file a “re- offer prospectus”). (c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom. 9. Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter; provided however, that the restrictive covenants contained in Appendix I hereto are in addition to and not in lieu of any other restrictive covenants by which the Participant may be bound. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof. 10. Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to RSUs awarded under the Plan or future RSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this RSU Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. 11. No Right to Employment or Service. Any questions as to whether and when there has been a Termination of Employment and the cause of such Termination of Employment shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause, and shall not guarantee any right to future employment. 4


 
12. Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the RSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted by applicable law. This authorization and consent is freely given by the Participant. 13. Compliance with Laws. The grant of RSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the RSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements. As a condition to the settlement of the RSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation. 14. Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. 15. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 17. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder. 18. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 19. Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of RSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the RSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation 5


 
and shall not be considered as part of such compensation in the event of severance, redundancy or resignation. 20. Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award will be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion. 21. No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself. 22. No Rights as a Stockholder. The Participant’s interest in the RSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been issued to the Participant in accordance with this Agreement and the Plan. 23. Withholding. Notwithstanding the withholding provision in the Plan or anything else in this Agreement: (a) If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon vesting of the RSUs (regardless of when the Common Stock underlying the RSUs are delivered to the Participant), on each date that all or a portion of the RSUs actually vests, if (1) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell Common Stock or (2) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation. (b) If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon delivery of the Common Stock underlying the RSUs (regardless of when vesting occurs), then following each date that all or a portion of the RSUs actually vests, the Company will defer the delivery of the Common Stock otherwise deliverable to the Participant until the earliest of: (1) the date of the Participant’s Termination of Employment, (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to such vested RSUs, or (3) the date on which the Company has in place an effective registration statement under the Securities Act or there is a Securities Act exemption available under which the Participant may sell Common Stock and on which the Participant is not subject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date (x) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell shares of Common Stock or (y) the Participant is subject to a Company-imposed trading blackout, then unless the 6


 
Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation. 24. Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the RSUs are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. 25. Non-U.S. Provisions. The Award and the shares of Common Stock subject to the Award and payable pursuant to Section 4 of this Agreement shall be subject to any special terms and conditions for the Participant's country set forth in Appendix II attached hereto (the "Country Addendum"). Moreover, if the Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement. [Remainder of Page Intentionally Left Blank] 7


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●]. AVAYA HOLDINGS CORP. By: Name: Title: PARTICIPANT [To be executed electronically.] 8


 
Appendix I NON-DISCLOSURE, IP ASSIGNMENT, NON-COMPETITION AND NON-SOLICITATION By executing the Award Agreement, the Participant acknowledges the importance to Avaya Holdings Corp. and its Affiliates existing now or in the future (hereinafter referred to collectively as the “Company” or “Avaya”), of protecting its confidential information and other legitimate business interests, including, without limitation, the valuable trade secrets and good will that it develops or acquires. The Participant further acknowledges that the Company is engaged in a highly competitive business, that its success in the marketplace depends upon the preservation of its confidential information and industry reputation, and that obtaining agreements such as this one from its employees is reasonable and necessary. The Participant undertakes the obligations in this Appendix I in consideration of the Participant’s initial and/or ongoing relationship with the Company, this Award, the Participant’s being granted access to trade secrets and other confidential information of the Company, and for other good and valuable consideration, the receipt and sufficiency of which the Participant acknowledges. As used in this Appendix I, “relationship” refers to a Participant’s employment or association as an advisor, consultant or contractor, with the Company, as applicable. 1. Loyalty and Conflicts of Interest 1.1. Exclusive Duty. During the Participant’s relationship with the Company, the Participant will not engage in any other business activity that creates a conflict of interest except as permitted by the Company’s Code of Conduct, as in effect from time to time. 1.2. Compliance with Company Policy. The Participant will comply with all lawful policies, practices and procedures of the Company, as these may be implemented and/or changed by the Company from time to time. Without limiting the generality of the foregoing, the Participant acknowledges that the Company may from time to time have agreements with other Persons which impose obligations or restrictions on the Company regarding Intellectual Property, as defined below, created during the course of work under such agreements and/or regarding the confidential nature of such work. The Participant will comply with and be bound by all such obligations and restrictions which the Company conveys to the Participant and will take all actions necessary (to the extent within Participant’s power and authority) to discharge the obligations of the Company under such agreements. 2. Confidentiality 2.1. Nondisclosure and Nonuse of Confidential Information. All Confidential Information, as defined below, which the Participant creates or has access to as a result of the Participant’s relationship with the Company, is and shall remain the sole and exclusive property of the Company. The Participant will never, directly or indirectly, use or disclose any Confidential Information, except (a) as required for the proper performance of the Participant’s regular duties for the Company, (b) as expressly authorized in writing in advance by the Company’s General Counsel, (c) as required by applicable law or regulation, or (d) as may be Appendix I - 1


 
reasonably determined by the Participant to be necessary in connection with the enforcement of Participant’s rights in connection with this Appendix I. This restriction shall continue to apply after the termination of the Participant’s relationship with the Company or any restriction time period set forth in this Appendix I, howsoever caused. The Participant shall furnish prompt notice to the Company’s General Counsel of any required disclosure of Confidential Information sought pursuant to subpoena, court order or any other legal process or requirement, and shall provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure, to the greatest extent time and circumstances permit. 2.2. Permissible Disclosure. Nothing in the Award Agreement or this Appendix I shall prohibit or restrict the Company, the Participant or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to the Award Agreement, including without limitation, this Appendix I, or the Plan, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; or (iii) accepting any U.S. Securities and Exchange Commission awards. In addition, nothing in this Agreement or the Plan prohibits or restricts Avaya or the Participant from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation. 2.3. Trade Secrets. Pursuant to 18 U.S.C. § 1833(b), the Participant will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of Avaya that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to the Participant’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Participant files a lawsuit for retaliation by Avaya for reporting a suspected violation of law, the Participant may disclose the trade secret to the Participant’s attorney and use the trade secret information in the court proceeding, so long as the Participant files any document containing the trade secret under seal and does not disclose the trade secret except under court order. Nothing in this Agreement or the Plan is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section. 2.4. Use and Return of Documents. All documents, records, and files, in any media of whatever kind and description, relating to the business, present or otherwise, of the Company, and any copies (including, without limitation, electronic), in whole or in part, thereof (the “Documents” and each individually, a “Document”), whether or not prepared by the Participant, shall be the sole and exclusive property of the Company. Except as required for the proper performance of the Participant’s regular duties for the Company or as expressly authorized in writing in advance by the Company, the Participant will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Participant will safeguard, and return to the Company immediately upon termination of the Participant’s relationship with the Company, and at such other times as may be specified by the Company, all Documents and other property of the Company, and all documents, records and files of its customers, subcontractors, vendors, and suppliers (“Third-Party Documents” and Appendix I - 2


 
each individually a “Third-Party Document”), as well as all other property of such customers, subcontractors, vendors and suppliers, then in the Participant’s possession or control. Provided, however, if a Document or Third-Party Document is on electronic media, the Participant may, in lieu of surrender of the Document or Third-Party Document, provide a copy on electronic media to the Company and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company, the Participant will disclose all passwords necessary or desirable to enable the Company to obtain access to the Documents and Third-Party Documents. Notwithstanding any provision of this Section 2.4 to the contrary, the Participant shall be permitted to retain copies of all Documents evidencing Participant’s hire, equity, compensation rate and benefits, this Appendix I, and any other agreements between the Participant and the Company that the Participant has signed or electronically accepted. 3. Non-Competition, Non-Solicitation, and Other Restricted Activity 3.1. Non-Competition. This paragraph is applicable to Participants who hold Senior Director and higher positions as of the date this Award is accepted. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, whether paid or not, (a) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for, (b) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of, or (c) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate him or herself with, any business whose business, product(s) or operations are in any respect competitive with or otherwise similar to the Company’s business. The foregoing covenant shall cover the Participant’s activities in every part of the Territory. “Territory” shall mean (a) all states of the United States of America from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company; and (b) all other countries from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company. The foregoing shall not prevent: (a) passive ownership by the Participant of no more than two percent (2%) of the equity securities of any publicly traded company; or (b) the Participant’s providing services to a division or subsidiary of a multi- division entity or holding company, so long as (i) no division or subsidiary to which the Participant provides services is in any way competitive with or similar to the business of the Company, and (ii) the Participant is not involved in, and does not otherwise engage in competition on behalf of, the multi-division entity or any competing division or subsidiary thereof. 3.2. Good Will. Any and all good will which the Participant develops during his or her relationship with the Company with any of the customers, prospective customers, subcontractors or suppliers of the Company shall be the sole, exclusive and permanent property of the Company, and shall continue to be such after termination of the Participant’s relationship with the Company, howsoever caused. Appendix I - 3


 
3.3. Non-Solicitation of Customers. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, contact, or cause to be contacted, directly or indirectly, or engage in any form of oral, verbal, written, recorded, transcribed, or electronic communication with any customer of the Company for the purposes of conducting business that is competitive with or similar to that of the Company or for the purpose of disadvantaging the Company’s business in any way; provided that this restriction applies (i) only with respect to those customers who are or have been a customer of the Company at any time within the immediately preceding one-year period or whose business has been solicited on behalf of the Company by any of its officers, employees or agents within said one-year period, other than by form letter, blanket mailing or published advertisement, and (ii) only if the Participant has performed work for such customer during his or her relationship with the Company, has been introduced to, or otherwise had contact with, such customer as a result of his or her relationship with the Company, or has had access to Confidential Information which would assist in the solicitation of such customer. The foregoing restrictions shall not apply to general solicitation or advertising, including through media and trade publications. 3.4. Non-Solicitation/Non-Hiring of Employees and Independent Contractors. During his or her relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, and will not assist anyone else to, (a) hire or solicit for hiring any employee of the Company or seek to persuade or induce any employee of the Company to discontinue employment with the Company, or (b) hire or engage any independent contractor providing services to the Company, or solicit, encourage or induce any independent contractor providing services to the Company to terminate or diminish in any substantial respect its relationship with the Company. For the purposes of this Appendix I, an “employee” or “independent contractor” of the Company is any person who is or was such at any time within the preceding six-month period. The foregoing restrictions shall not apply to general solicitation or advertising, including through media, trade publications and general job postings. 3.5. Non-Solicitation of Others. The Participant agrees that for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will not solicit, encourage, or induce, or cause to be solicited, encouraged or induced, directly or indirectly, any franchisee, joint venture, supplier, vendor or contractor who conducted business with the Company at any time during the two year period preceding the termination of his or her relationship with the Company, to terminate or adversely modify any business relationship with the Company, or not to proceed with, or enter into, any business relationship with the Company, nor shall the Participant otherwise interfere with any business relationship between the Company and any such franchisee, joint venture, supplier, vendor or contractor. 3.6. Notice of New Address and Employment. During the twelve (12)-month period immediately following the termination of Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will promptly provide the Company with pertinent information concerning each new job or other business activity in Appendix I - 4


 
which the Participant engages or plans to engage during such twelve (12)-month period as the Company may reasonably request in order to determine the Participant’s continued compliance with his or her obligations under this Appendix I. The Participant shall notify any new employer(s) of the Participant’s obligations under this Appendix I, and hereby consents to notification by the Company to such employer(s) concerning his or her obligations under this Appendix I. The Company shall treat any such notice and information as confidential, and will not use or disclose the information contained therein except to enforce its rights hereunder. Any breach of this Section 3.6 shall constitute a material breach of this agreement. 3.7. Acknowledgement of Reasonableness; Remedies. In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has carefully read and considered all the terms and conditions hereof. The Participant acknowledges without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the good will, Confidential Information and other legitimate business interests of the Company, that each and every one of those restraints is reasonable in respect to subject matter, length of time, and geographic area; and that these restraints will not prevent the Participant from obtaining other suitable employment during the period in which Participant is bound by them. The Participant will never assert, or permit to be asserted on the Participant’s behalf, in any forum, any position contrary to the foregoing. Were the Participant to breach any of the provisions of this Appendix I, the harm to the Company would be irreparable. Therefore, in the event of such a breach or threatened breach, the Company shall, in addition to any other remedies available to it, have the right to obtain preliminary and permanent injunctive relief against any such breach or threatened breach without having to post bond, and the Participant agrees that injunctive relief is an appropriate remedy to address any such breach. Without limiting the generality of the foregoing, or other forms of relief available to the Company, in the event of the Participant’s breach of any of the provisions of this Appendix I, the Participant will forfeit any award or payment made pursuant to any applicable severance or other incentive plan or program, or if a payment has already been made, the Participant will be obligated to return the proceeds to the Company. 3.8. Unenforceability. In the event that any provision of this Appendix I shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The 12-month period of restriction set forth in Sections 3.1, 3.3, 3.4 and 3.5 hereof and the 12-month period of obligation set forth in Section 3.6 hereof shall be tolled, and shall not run, during any period of time in which the Participant is in violation of the terms thereof, in order that the Company shall have the agreed- upon temporal protection recited herein. 3.9. Limited Exception for Attorneys. Insofar as the restrictions set forth in this Section 3 prohibit the solicitation, inducement or attempt to hire a licensed attorney who is employed at the Company, they shall not apply if the Participant is a licensed attorney and the restrictions contained herein are illegal, unethical or unenforceable under the laws, rules and regulations of the jurisdiction in which the Participant is licensed as an attorney. Appendix I - 5


 
3.10. Attorneys’ Fees and Costs. Except as prohibited by law, the Participant shall indemnify the Company from any and all costs and fees, including attorneys’ fees, incurred by the Company in successfully enforcing the terms of this Award Agreement against the Participant, (including, but not limited to, a court partially or fully granting any application, motion, or petition by the Company for a temporary restraining order, preliminary injunction, or permanent injunction), as a result of the Participant’s breach or threatened breach of any provision contained herein. Upon successful enforcement, the Company shall be entitled to recover from the Participant its costs and fees incurred to date at any time during the course of a dispute (i.e., final resolution of such dispute is not a prerequisite) upon written demand to the Participant. 3.11. Enforcement. The Company agrees that it will not enforce Sections 3.1, 3.3, 3.5 or the portion of Section 3.4 that prohibits Participant from hiring Company employees and independent contractors to restrict Participant’s employment in any jurisdiction in which such enforcement is contrary to law or regulation to the extent that Participant is a resident of such jurisdiction at the time Participant’s relationship with the Company terminates and does not otherwise change residency during the restriction period. 4. Intellectual Property 4.1. In signing or electronically accepting the Award Agreement, the Participant hereby assigns and shall assign to the Company all of his or her rights, title and interest in and to all inventions, discoveries, improvements, ideas, mask works, computer or other apparatus programs and related documentation, and other works of authorship (hereinafter each designated “Intellectual Property”), whether or not patentable, copyrightable or subject to other forms of protection, made, created, developed, written or conceived by the Participant during the period of his or her relationship with the Company, whether during or outside of regular working hours, either solely or jointly with another, in whole or in part, either: (a) in the course of such relationship, (b) relating to the actual or anticipated business or research development of the Company, or (c) with the use of Company time, material, private or proprietary information, or facilities, except as provided in Section 4.5 below. 4.2. The Participant will, without charge to the Company, but at its expense, execute a specific assignment of title to the Company and do anything else reasonably necessary, including but not limited to providing or signing additional documentation that is reasonably necessary to the Company or its designee, to enable the Company to secure, maintain and/or perfect a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. Participant agrees that this obligation shall continue after Participant’s relationship with the Company terminates. If the Company is unable because of Participant’s mental or physical incapacity or for any other reason to secure Participant’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Intellectual Property assigned to the Company as above, then Participant hereby irrevocably designates and appoints the Company or its designee and its duly authorized officers and agents as Participant’s agent and attorney in fact, to act for and on Participant’s behalf and instead to execute and file any such applications and to do all other lawfully permitted acts to Appendix I - 6


 
further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Participant. 4.3. The Participant acknowledges that the copyrights in Intellectual Property created with the scope of his or her relationship with the Company belong to the Company by operation of law. Participant further acknowledges and agrees that the decision whether or not to commercialize or market any Intellectual Property developed by Participant solely or jointly with others is within the Company’s sole benefit and discretion and that no payment will be due to Participant as a result of the Company’s efforts to commercialize or market such Intellectual Property. 4.4. The Participant has previously provided to the Company a list (the “Prior Invention List”) describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Participant prior to his or her relationship with the Company, which belong to the Participant and which are not assigned to the Company hereunder (collectively referred to as “Prior Inventions”); and, if no Prior Invention List was previously provided, the Participant represents and warrants that there are no such Prior Inventions. Participant will not incorporate, or permit to be incorporated, any Prior Invention into an Avaya product, process, machine, solution or system without the Company’s prior written consent. Notwithstanding the foregoing sentence, if, in the course of Participant’s relationship with the Company, Participant incorporates into an Avaya product, process, machine, solution or system a Prior Invention owned by Participant or in which Participant has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, sell, offer for sale and import, such Prior Invention as part of or in connection with such product, process, machine, solution or system. 4.5. Exception to Assignments. THE PARTICIPANT UNDERSTANDS THAT THE PROVISIONS OF THIS AWARD AGREEMENT REQUIRING ASSIGNMENT OF INTELLECTUAL PROPERTY (AS DEFINED ABOVE) TO THE COMPANY DO NOT APPLY TO ANY INTELLECTUAL PROPERTY FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON PARTICIPANT’S OWN TIME, UNLESS (A) THE INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY, OR (ii) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT; (B) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY PARTICIPANT FOR THE COMPANY; OR (C) THE INTELLECTUAL PROPERTY OTHERWISE QUALIFIES FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 (ATTACHED HERETO AS EXHIBIT A). THE PARTICIPANT WILL ADVISE THE COMPANY PROMPTLY IN WRITING OF ANY INVENTIONS THAT PARTICIPANT BELIEVES MEET THE CRITERIA FOR THIS SECTION 4.5 EXCEPTION TO ASSIGNMENTS AND WHICH WERE NOT OTHERWISE DISCLOSED ON THE PRIOR INVENTION LIST PREVIOUSLY DELIVERED TO THE COMPANY TO PERMIT A DETERMINATION OF OWNERSHIP BY THE COMPANY. ANY SUCH DISCLOSURE WILL BE RECEIVED IN CONFIDENCE. Appendix I - 7


 
5. Definitions Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section 5 and as provided elsewhere in this Appendix I. For purposes of this Appendix I, the following definitions apply: “Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, contract or equity interest. “Confidential Information” means any and all information of the Company, whether or not in writing, that is not generally known by others with whom the Company competes or does business, or with whom it plans to compete or do business, and any and all information, which, if disclosed, would assist in competition against the Company, including but not limited to (a) all proprietary information of the Company, including but not limited to the products and services, technical data, methods, processes, know-how, developments, inventions, and formulae of the Company, (b) the development, research, testing, marketing and financial activities and strategic plans of the Company, (c) the manner in which the Company operates, (d) its costs and sources of supply, (e) the identity and special needs of the customers, prospective customers and subcontractors of the Company, and (f) the people and organizations with whom the Company has business relationships and the substance of those relationships. Without limiting the generality of the foregoing, Confidential Information shall specifically include: (i) any and all product testing methodologies, product test results, research and development plans and initiatives, marketing research, plans and analyses, strategic business plans and budgets, and technology grids; (ii) any and all vendor, supplier and purchase records, including without limitation the identity of contacts at any vendor, any list of vendors or suppliers, any lists of purchase transactions and/or prices paid; and (iii) any and all customer lists and customer and sales records, including without limitation the identity of contacts at purchasers, any list of purchasers, and any list of sales transactions and/or prices charged by the Company. Confidential Information also includes any information that the Company may receive or has received from customers, subcontractors, suppliers or others, with any understanding, express or implied, that the information would not be disclosed. Notwithstanding the foregoing, Confidential Information does not include information that (A) is known or becomes known to the public in general (other than as a result of a breach of Section 2 hereof by the Participant), (B) is or has been independently developed or conceived by the Participant without use of the Company’s Confidential Information or (C) is or has been made known or disclosed to the Participant by a third party without a breach of any obligation of confidentiality such third party may have to the Company of which the Participant is aware. “Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company. Appendix I - 8


 
6. Compliance with Other Agreements and Obligations The Participant represents and warrants that his or her employment or other relationship with the Company and execution and performance of the Award Agreement, including this Appendix I, will not breach or be in conflict with any other agreement to which the Participant is a party or is bound, and that the Participant is not now subject to any covenants against competition or similar covenants or other obligations to third parties or to any court order, judgment or decree that would affect the performance of the Participant’s obligations hereunder or the Participant’s duties and responsibilities to the Company, except as disclosed in writing to the Company’s General Counsel no later than the time an executed copy of the Award Agreement, including this Appendix I, is returned by the Participant. The Participant will not disclose to or use on behalf of the Company, or induce the Company to use, any proprietary information of any previous employer or other third party without that party’s consent. Participant agrees that if in the course of his or her relationship with the Company, Participant is asked for information relating to Participant’s former employers’ business that would require Participant to reveal information that is not publicly available, Participant will refrain from using and providing such information. 7. Entire Agreement; Severability; Modification With respect to the subject matter hereof, this Appendix I sets forth the entire agreement between the Participant and the Company, and, except as otherwise expressly set forth herein, supersedes all prior and contemporaneous communications, agreements and understandings, written or oral, regarding the same. If the Participant previously executed an Award Agreement with an Appendix I or other schedule containing similar provisions, this Appendix I shall supersede such agreement. In the event of conflict between this Appendix I and any prior agreement between the Participant and the Company with respect to the subject matter hereof, this Appendix I shall govern. The provisions of this Appendix I are severable, and no breach of any provision of this Appendix I by the Company, or any other claimed breach of contract or violation of law, shall operate to excuse the Participant’s obligation to fulfill the requirements of Sections 2, 3 and 4 hereof. No deletion, addition, marking, notation or other change to the body of this Appendix I shall be of any force or effect, and this Appendix I shall be interpreted as if such change had not been made. This Appendix I may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Participant and the Company’s General Counsel. If any provision of this Appendix I should, for any reason, be held invalid or unenforceable in any respect, it shall not affect any other provisions, and shall be construed by limiting it so as to be enforceable to the maximum extent permissible by law. Provisions of this Appendix I shall survive any termination if so provided in this Appendix I or if necessary or desirable to accomplish the purpose of other surviving provisions. It is agreed and understood that no changes to the nature or scope of the Participant’s relationship with the Company shall operate to extinguish the Participant’s obligations hereunder or require that a new agreement concerning the subject matter of this Appendix I be executed. 8. Assignment Neither the Company nor the Participant may make any assignment of this Appendix I or any interest in it, by operation of law or otherwise, without the prior written consent of the Appendix I - 9


 
other; provided, however, the Company may assign its rights and obligations under this Appendix I without the Participant’s consent (a) in the event that the Participant is transferred to a position with one of the Company’s Affiliates or (b) in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into any company or entity or transfer to any company or entity all or substantially all of the business, properties or assets of the Company or any division or line of business of the Company with which the Participant is at any time associated. This Appendix I shall inure to the benefit of and be binding upon the Participant and the Company, and each of their respective successors, executors, administrators, heirs, representatives and permitted assigns. 9. Successors The Participant consents to be bound by the provisions of this Appendix I for the benefit of the Company, and any successor or permitted assign to whose employ the Participant may be transferred, without the necessity that a new agreement concerning the subject matter or this Appendix I be re-signed at the time of such transfer. 10. Acknowledgement of Understanding In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has read and understood all of its terms; that the Participant has had a full and reasonable opportunity to consider its terms and to consult with any person of his or her choosing before signing or electronically accepting; that the Participant has not relied on any agreements or representations, express or implied, that are not set forth expressly in the Award Agreement, including this Appendix I; and that the Participant has signed the Award Agreement knowingly and voluntarily. [no more text on this page] Appendix I - 10


 
EXHIBIT A CALIFORNIA LABOR CODE SECTION 2870 INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.” Appendix I - 11


 
Appendix II Country Addendum Special Terms and Conditions Applicable in Countries Outside the United States Except as provided otherwise herein, any capitalized term not defined in this Country Addendum shall have the same meaning as is ascribed thereto in the Plan or the Agreement, as applicable. This Country Addendum includes additional (or, if indicated, different) terms and conditions that govern the Award granted to the Participant under the Plan if the Participant works and/or resides in one of the countries listed below. If the Participant is a citizen or resident of a country other than that in which he or she is currently working and/or residing (or is considered as such for local law purposes) or if the Participant transfers his or her service relationship and/or residence to another country after the Award is granted, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to the Participant. ALL COUNTRIES OUTSIDE THE UNITED STATES Responsibility for Taxes. The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax- Related Items in connection with any aspect of the Plan, including, but not limited to, the grant, vesting or exercise (if applicable) of the Award, the delivery of shares of Common Stock, the subsequent sale of any shares of Common Stock acquired pursuant to the Award and the receipt of any dividends, dividend equivalents or other distributions with respect to the shares of Common Stock; and (b) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Prior to the relevant taxable or tax withholding event, as applicable, the Participant agrees to make arrangements acceptable to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their sole discretion, to satisfy any withholding obligation for Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation payable to the Participant by the Company and/or the Employer; (ii) withholding from the proceeds of the sale of any shares of Common Stock acquired pursuant to the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Appendix II - 1


 
Participant’s behalf pursuant to this authorization without further consent); (iii) withholding from any shares of Common Stock to be delivered to the Participant pursuant to the Award; and/or (iv) any other method approved by the Company and, to the extent required by applicable law or the Plan, approved by the Committee. Depending on the withholding method, the Company and/or the Employer may withhold for Tax- Related Items by considering statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Participant. In the event of any over- withholding, the Participant may receive a refund of any over-withheld amount in cash (without interest and without entitlement to the equivalent amount in shares of Common Stock). If the obligation for Tax-Related Items is satisfied by withholding shares of Common Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Common Stock to which he or she is entitled pursuant to the Award, notwithstanding that a number of shares of Common Stock are withheld to satisfy the obligation for Tax-Related Items. The Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue the shares of Common Stock or the proceeds of the sale of shares of Common Stock, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items. Nature of Grant. In accepting the Award, the Participant acknowledges, understands and agrees that: a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; b) the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Awards, or benefits in lieu of Awards, even if Awards have been granted in the past; c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; d) the Award and the Participant’s participation in the Plan shall not create or amend a right to employment or be interpreted as forming an employment or service contract with the Company or any Subsidiary (including the Employer); e) the Participant is voluntarily participating in the Plan; f) the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty; g) if the Participant acquires shares of Common Stock, the value of such shares of Common Stock may increase or decrease in value, even below the per share exercise price; Appendix II - 2


 
h) unless otherwise agreed with the Company, the Award is not granted as consideration for, or in connection with, any service the Participant may provide as a director of a Subsidiary; i) no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Participant's Termination of Employment (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); j) unless otherwise provided in the Plan or by the Company in its discretion, the Award and any benefit that may be received pursuant to this Agreement do not create any entitlement to have the Award or any such benefit transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Common Stock underlying the Award; and k) neither the Company nor any Subsidiary (including the Employer) shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the Award or the subsequent sale of any shares of Common Stock acquired pursuant to the Award. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan or the Participant’s acquisition or sale of the underlying shares of Common Stock. The Participant should consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan. Language. The Participant acknowledges and represents that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English so as to allow the Participant to understand the terms and conditions of this Agreement or any other document related to the Award and/or the Plan. Furthermore, if the Participant has received this Agreement, or any other document related to the Award and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. Imposition of Other Requirements. The Company reserves the right to impose other requirements on participation in the Plan or on the Award or shares of Common Stock acquired pursuant to the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the undersigned to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Choice of Venue. Participant agrees to the exclusive venue and jurisdiction of the State and Federal Courts located in the state of Delaware and waives any objection based on lack of Appendix II - 3


 
jurisdiction or inconvenient forum. Any action relating to or arising out of this Plan must be commenced within one year after the cause of action accrued. Insider Trading / Market Abuse Restrictions. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions including, but not limited to, the United States (“U.S.”) and the Participant’s country of residence, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock or Awards, or rights linked to the value of shares of Common Stock during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s insider trading policy as set forth in the “Avaya Holdings Corp. Insider Trading and Disclosure of Confidential Information Policy for Directors, Officers and Employees.” The Participant is responsible for ensuring compliance with any applicable restrictions. Exchange Control, Tax and/or Foreign Asset / Account Reporting. Certain foreign asset and/or foreign account reporting requirements and exchange controls may affect the Participant’s ability to purchase or hold shares of Common Stock under the Plan or funds received from participating in the Plan in a brokerage or bank account outside of the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in the Participant’s country. The Participant may also be required to repatriate sale proceeds or other funds received as a result of his or her participation in the Plan to the Participant’s country through a designated bank or broker and/or within a certain time after receipt. The Participant is responsible for complying with any applicable regulations and should consult with his or her personal legal and tax advisors for any details. Data Privacy. This provision replaces Section 12 (Transfer of Personal Data) of the Agreement: If the Participant would like to participate in the Plan, the Participant will need to review the information provided in this Agreement and, where applicable, declare consent to the processing and/or transfer of personal data as described below. a) EEA+ Controller and Representative. If the Participant is based in the European Union (“EU”), the European Economic Area, Switzerland or, if and when the United Kingdom leaves the EU, the United Kingdom (collectively “EEA+”), the Participant should note that the Company, with its address at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is the controller responsible for the processing of the Participant’s personal data in connection with the Agreement and the Plan. The Company’s representative in the EU is Avaya Deutschland GmbH, Theodor-Heuss Allee 112, Frankfurt, Germany 60486. b) Data Collection and Usage. The Company collects, uses and otherwise processes certain personal data about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or Appendix II - 4


 
directorships held in the Company, details of all Awards or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, which the Company receives from the Participant, the Employer or otherwise in connection with this Agreement or the Plan (“Data”), for the purposes of implementing, administering and managing the Plan and allocating the cash payment or shares of Common Stock pursuant to the Plan. If the Participant is based in the EEA+, the legal basis, where required, for the processing of Data by the Company is the necessity of the data processing for the Company to (i) perform its contractual obligations under this Agreement, (ii) comply with legal obligations established in the EEA+, or (iii) pursue the legitimate interest of complying with legal obligations established outside of the EEA+. If the Participant is based outside of the EEA+, the legal basis, where required, for the processing of Data by the Company is the Participant’s consent, as further described below. c) Stock Plan Administration Service Providers. The Company transfers Data to Fidelity Stock Plan Services, LLC, an independent service provider (the "Service Provider"), which is assisting the Company by performing recordkeeping and administration services for the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Service Provider will open an account for the Participant to receive and trade shares of Common Stock acquired under the Plan. The Participant may be asked to agree on separate terms and data processing practices with the Service Provider, with such agreement being a condition to the ability to participate in the Plan. d) International Data Transfers. In the event the Participant resides, works or is otherwise located outside of the U.S., Data will be transferred from the Participant’s country to the U.S., where the Company and its service providers are based. The Participant understands and acknowledges that the U.S. is not subject to an unlimited adequacy finding by the European Commission and might not provide a level of protection of personal data equivalent to the level of protection in the Participant’s country. As a result, in the absence of a self-certification of the data recipient in the U.S. under the EU/U.S. or Swiss/U.S. Privacy Shield Framework or the implementation of appropriate safeguards such as the Standard Contractual Clauses adopted by the EU Commission or binding corporate rules approved by the competent EU data protection authority, the processing of personal data might not be subject to substantive data processing principles or supervision by data protection authorities. In addition, data subjects might have no or less enforceable rights regarding the processing of their personal data. Neither the Company nor the Service Provider is currently self-certified under the EU/U.S. or Swiss/U.S. Privacy Shield Framework but the Company has Appendix II - 5


 
implemented binding corporate rules, among others, with its subsidiaries in the EEA+. If the Participant is based in the EEA+, Data will be transferred from the EEA+ to the Company based on the binding corporate rules. The Participant may view a copy of such appropriate safeguards at https://www.avaya.com/en/privacy/bcr/. The onward transfer of Data from the Company to the Service Provider or, as the case may be, a different service provider of the Company is based solely on the Participant’s consent, as further described below. If the Participant is based outside of the EEA+, the Company’s legal basis, where required, for the transfer of Data from the Participant’s country to the Company and from the Company onward to the Service Provider or, as the case may be, a different service provider of the Company is the Participant’s consent, as further described below. e) Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. f) Data Subject Rights. The Participant may have a number of rights under data privacy laws in his or her jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access or copies of Data the Company processes, (ii) the rectification or amendment of incorrect or incomplete Data, (iii) the deletion of Data, (iv) request restrictions on the processing of Data, (v) object to the processing of Data for legitimate interests, (vi) the portability of Data, (vi) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or to (viii) receive a list with the names and addresses of any potential recipients of Data. To receive additional information regarding these rights or to exercise these rights, the Participant can contact the Company's data privacy office at dataprivacy@avaya.com or, for the Participants in the EEA+, view the Company's binding corporate rules at https://www.avaya.com/en/privacy/bcr/. g) Necessary Disclosure of Personal Data. The Participant understands that providing the Company with Data is necessary for the performance of the Agreement and that the Participant’s refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect the Participant’s ability to participate in the Plan. h) Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing any consents referred to herein on a purely voluntary basis. The Participant understands that he or she may withdraw any such consent at any time with future effect for any or no reason. If the Participant does not consent, or if the Participant later seeks to withdraw the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant Awards to Appendix II - 6


 
the Participant or administer or maintain the Awards. For more information on the consequences of refusal to consent or withdrawal of consent, the Participant should contact the Company's data privacy office at dataprivacy@avaya.com. Declaration of Consent. If the Participant is based in the EEA+, by accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant explicitly declares his or her consent to the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. as described above. If the Participant is based outside of the EEA+, by accepting the Awards and indicating consent via the Company’s online acceptance procedure, Participant explicitly declares his or her consent to the entirety of the Data processing operations described in this Agreement including, without limitation, the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. BELGIUM Acceptance of Agreement. If the Award is an Option, the Participant should refer to the separate Belgium Option Package for information about the tax impact of the acceptance of the Award and consult his or her personal tax advisor for further information. CANADA Method of Exercise and Payment. If this Award is an Option, due to tax considerations in Canada and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price by having the Company withhold shares of Common Stock issuable upon exercise of the Option or in the form of Common Stock owned by the Participant. The Company reserves the right to allow these forms of payment of the Per Share Exercise Price for legal or administrative reasons. Delivery of Shares / Settlement. The Award will be settled by the delivery of shares of Common Stock and not by the delivery of cash or a combination of cash and shares of Common Stock. Securities Law Notification. The Participant is permitted to sell any shares of Common Stock acquired under the Plan through the Service Provider or other such stock plan service provider as may be selected by the Company in the future, provided the sale of shares takes place outside Canada through facilities of a stock exchange on which the Common Stock is listed. The Common Stock is currently listed on the New York Stock Exchange. Appendix II - 7


 
The following provisions will apply to individuals who are residents of Quebec: Language Consent. The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or directly hereto, be drawn up in English. Consentement à la Langue Utilisée. Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention. Data Privacy. This provision supplements the above Data Privacy section of this Country Addendum: The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company and its Subsidiaries (including the Employer) to disclose and discuss the Plan with their advisors. The Participant further authorizes the Company and the Employer to record and keep such information in Participant’s employment file. GERMANY No country specific terms and conditions. INDIA Method of Exercise and Payment. If this Award is an Option, due to exchange control considerations in India and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, unless all of the shares of Common Stock subject to the exercised portion of the Option are sold at such time (i.e., a "sell-to-cover" method of exercise and payment is not permitted but a "sell-all" method of exercise and payment is permitted). The Company reserves the right to allow this form of payment of the Per Share Exercise Price for legal or administrative reasons. IRELAND No country specific terms and conditions. ITALY Method of Exercise and Payment. If this Award is an Option, due to regulatory considerations in Italy and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant must pay the Appendix II - 8


 
Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, provided that all of the shares of Common Stock subject to the exercised portion of the Option must be sold at such time (i.e., a "sell-all" method of exercise and payment is required). The Company reserves the right to allow other forms of payment of the Per Share Exercise Price for legal or administrative reasons. Plan Document Acknowledgment. In accepting the Award, the Participant acknowledges that the Participant has received a copy of the Plan and the Agreement and has reviewed the Plan and the Agreement in their entirety and fully understands and accepts all provisions of the Plan and the Agreement. The Participant further acknowledges that the Participant has read and specifically and expressly approves the following sections of the Agreement and the Country Addendum: Vesting (for RSUs and PRSUs); Vesting and Exercisability (for Options); Exercise Following Termination (for Options); Securities Representation (for RSUs and PRSUs); Compliance with Laws; Further Assurances; Acceptance of Agreement; Withholding and Responsibility for Taxes; Language; Imposition of Other Requirements; Governing Law; Choice of Venue. MEXICO Plan Document Acknowledgment. By accepting the Award, the Participant acknowledges that he or she has received a copy of the Plan and the Agreement, which the Participant has reviewed. The Participant acknowledges further that he or she accepts all the provisions of the Plan and the Agreement. The Participant also acknowledges that he or she has read and specifically and expressly approves the terms and conditions set forth in the Nature of Grant section, which clearly provide as follows: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in it are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) none of the Company or its Subsidiaries (including the Employer) are responsible for any decrease in the value of any shares of Common Stock (or the amount of any cash payment) that may be acquired under the Plan. Labor Law Policy and Acknowledgment. In accepting the Award, the Participant expressly recognizes that Avaya Holdings Corp., with offices at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis and the Participant’s sole Employer is a Subsidiary in Mexico (“Avaya- Mexico”). Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from his or her participation in the Plan do not establish any rights between the Participant and Avaya-Mexico, and do not form part of the employment conditions and/or benefits provided by Avaya-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant’s employment. Appendix II - 9


 
The Participant further understands that his or her participation in the Plan is a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant’s participation at any time without any liability to the Participant. Finally, the Participant hereby declares that he or she does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and Participant therefore grants a full and broad release to the Company and its Subsidiaries, branches, representation offices, shareholders, officers, agents or legal representatives with respect to any claim that may arise. Reconocimiento del Plan. Al aceptar este premio ("Award"), el Participante reconoce que él o ella ha recibido una copia del plan y del Contrato y que lo ha revisado. El Participante reconoce además que acepta todas las disposiciones del Plan y del Contrato. El Participante de igual forma reconoce que acepta los términos y condiciones establecidos en la sección Naturaleza del Otorgamiento ("Nature of Grant"), que estipula claramente lo siguiente: (i) la participación del Participante en el Plan no constituye un derecho adquirido; (ii) la Compañía ofrece el plan y la Participación del Participante en él de manera totalmente discrecional; (iii) la participación del Participante en el Plan es voluntaria; y (iv) ninguna de las Compañías o Subsidiarias (incluido el Patrón) son responsables de cualquier disminución en el valor de las Acciones (o el monto de cualquier pago en efectivo) que pueda adquirirse en virtud del Plan Política de la Ley Laboral y Reconocimiento. Al aceptar este Premio ("Award"), el Participante reconoce expresamente que Avaya Holdings Corp., con oficinas ubicadas en 350 Mt. Kemble Avenue, Morristown, New Jersey 07960, U.S.A.., es el único responsable de la administración del Plan y que la participación del Participante en el mismo, el pago del premio o la adquisición de Acciones no constituye de ninguna manera una relación laboral entre el Participante y la Compañía, debido a que la participación de esa persona en el Plan deriva únicamente de una relación comercial y el único Patrón del participante es un Afiliada Mexicana de la Compañía (“Avaya-México”). Derivado de lo anterior, el Participante reconoce expresamente que el Plan y los beneficios que pudieran derivar para el Participante por su participación en el mismo, no establecen ningún derecho entre el Participante e Avaya-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por Avaya-México, y cualquier modificación al Plan o la terminación del mismo de ninguna manera podrá ser interpretada como una modificación o desmejora de los términos y condiciones de trabajo del Participante. Asimismo, el Participante reconoce que su participación en el Plan es resultado de la decisión unilateral y discrecional de la Compañía, por lo tanto, la Compañía se reserva el derecho absoluto para modificar y/o discontinuar la participación del Participante en cualquier momento, sin ninguna responsabilidad hacia el Participante. Finalmente el Participante manifiesta que no se reserva ninguna acción o derecho que ejercitar en contra dela Compañía, por cualquier compensación o daños en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia exime amplia y completamente a la Compañía, sus Afiliadas, sucursales, oficinas de representación, sus accionistas, administradores, agentes y representantes legales con respecto a cualquier reclamo que pudiera surgir. Appendix II - 10


 
NETHERLANDS No country specific terms and conditions. SINGAPORE Securities Law Notification. The grant of the Award is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA under which it is exempt from the prospectus and registration requirements and is not made with a view to the underlying shares of Common Stock being subsequently offered for sale to any other party. The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Any shares of Common Stock acquired pursuant to the Award cannot be offered for sale in Singapore prior to the six-month anniversary of the Grant Date, unless such offer or sale is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). SPAIN Labor Law Acknowledgement. By accepting the Award, the Participant consents to participation in the Plan and acknowledges that the Participant has received a copy of the Plan. The Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant the Award under the Plan to individuals who may be employees of the Company or its Subsidiaries throughout the world. The decision is limited and entered into based upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any Subsidiary on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, the Participant understands that the Award is granted on the assumption and condition that the Award and any shares of Common Stock acquired pursuant to the Award shall not become part of any employment or service contract (whether with the Company or any Subsidiary) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, the Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of the Award, which is gratuitous and discretionary, since the future value of the Award and the underlying shares of Common Stock is unknown and unpredictable. In addition, the Participant understands that the grant of the Award would not be made but for the assumptions and conditions set forth hereinabove; thus, the Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the Award and any right to a cash payment or shares of Common Stock shall be null and void. Further, the Participant understands and agrees that upon Termination of Employment, unless otherwise specifically provided in the Agreement or determined by the Committee or its designee, any unvested portion of the Award will be immediately forfeited and, if the Award is an Option, any vested portion of the Option shall remain exercisable only for the period described in Section Appendix II - 11


 
4 of the Agreement and shall be subject to the terms of the Plan and, thereafter, any unexercised portion of the Option will be forfeited. In particular, the Participant understands and agrees that, unless otherwise expressly provided in the Agreement or determined by the Committee or its designee, the unvested portion of the Award, and any vested portion of an Option that is not exercised within any post-termination exercise period described in the Agreement, will be cancelled without entitlement to any shares of Common Stock or to any amount as indemnification if the Participant terminates employment by reason of, but not limited to, resignation; disciplinary dismissal adjudged to be with cause; disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to a "despido improcedente"); individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause; material modification of the terms of employment under Article 41 of the Workers’ Statute; relocation under Article 40 of the Workers’ Statute; Article 50 of the Workers’ Statute; unilateral withdrawal by the Participant's employer; and under Article 10.3 of Royal Decree 1382/1985. Securities Law Notification. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the Award. The Agreement has not been, nor will it be, registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus. UNITED ARAB EMIRATES Securities Law Notification. The Award is being offered only to qualified employees of the Company and its Subsidiaries and is in the nature of providing equity incentives to such employees in the United Arab Emirates. Any documents related to the Plan, including the Plan and the Agreement, are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. Prospective acquirers of any securities offered pursuant to the Award should conduct their own due diligence on securities. If the Participant does not understand the contents of the Plan or the Agreement, the Participant should consult an authorized financial adviser. UNITED KINGDOM ("U.K.") Withholding. This provision supplements the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum: Without limitation to the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum, the Participant hereby agrees that the Participant is liable for all Tax-Related Items and hereby covenants to pay all such Tax- Related Items, as and when requested by the Company or the Employer, as applicable, or by Her Majesty’s Revenue and Customs (“HMRC”) (or any other tax or relevant authority). The Participant also hereby agrees to indemnify and keep indemnified the Company and the Employer, as applicable, Appendix II - 12


 
against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax or relevant authority) on the Participant’s behalf. Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Participant is such a director or executive officer of the Company and the U.K. income tax liability arising as a result of participation in the Plan is not collected from or paid by the Participant within ninety (90) days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant acknowledges that he or she will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-assessment regime and for paying the Company or the Employer, as applicable, for the value of any employee national insurance contributions due on this additional benefit. Appendix II - 13


 
avaya-ex102_2020331x10q
EXHIBIT 10.2 Form of Nonqualified Stock Option Award Agreement 2019 Equity Incentive Plan NONQUALIFIED STOCK OPTION AWARD AGREEMENT PURSUANT TO THE AVAYA HOLDINGS CORP. 2019 EQUITY INCENTIVE PLAN * * * * * Participant: [Participant Name] “Grant Date”: [Grant Date] Grant Number: [Client Grant ID] “Per Share Exercise Price”: [Grant Date FMV] Number of shares of Common Stock subject to this Non-Qualified Stock Option (“Option”): [Options Granted] * * * * * This NON-QUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2019 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and WHEREAS, the Committee has determined that it would be in the best interests of the Company to grant the Participant the Option provided herein, subject to the terms and conditions contained herein and in the Plan. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows: 1. Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. No part of the Option granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Code.


 
2. Grant of Option. The Company hereby grants to the Participant, as of the Grant Date specified above, the Option to acquire from the Company at the Per Share Exercise Price specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement, including, without limitation, in Appendix I attached hereto, and otherwise provided for in the Plan, the aggregate number of shares of Common Stock specified above subject to adjustment as provided for in the Plan (the “Option Shares”). Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason. The Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by the Option unless and until the Participant has become the holder of record of such shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the Option, except as otherwise specifically provided for in the Plan or this Agreement. 3. Vesting and Exercisability. (a) General. Except as set forth in Section 3(b) or Section 3(c), as applicable, the Option shall vest and become exercisable as follows, provided that the Participant has not incurred a Termination of Employment prior to each such vesting date, and provided, further, that there shall be no proportionate or partial vesting in the periods prior to each such vesting date: Vesting Dates Percentage of Option On the date listed below which is closest to, and following, the one year 33.34% anniversary of the Grant Date: • February 15 • May 15 • August 15 • November 15 Quarterly thereafter on each February 15, May 15, August 15 and 8.33% November 15 Notwithstanding the foregoing, if the number of Option Shares is not evenly divisible, then the portion of the Option represented by any fractional Option Shares shall not vest and the smaller installments shall vest first, and upon vesting of the last installment in accordance with the terms and conditions hereof, 100% of the Option subject to this Award shall be fully vested. (b) Accelerated Vesting Upon a Qualifying Termination (Change in Control). In the event the Participant incurs a Termination of Employment prior to the last vesting date provided for in Section 3(a) as a result of the Participant’s Termination of Employment by the Company or the Company Entity that is the Participant’s actual employing entity without Cause, by the Participant for Good Reason, or due to the Participant’s death or Disability (any such Termination of Employment, a “Qualifying Termination”), and such Qualifying Termination 2


 
occurs (i) only to the extent the Participant is also a participant in the Avaya Inc. Change in Control Severance Plan, during a Potential Change in Control Period, as such term is defined in the Avaya Inc. Change in Control Severance Plan or (ii) within the twenty-four (24) month period immediately following a Change in Control, subject to the Participant’s (or the Participant’s estate’s, if applicable) execution, delivery and non-revocation of a customary release of claims in favor of the Company and its subsidiaries and affiliates within sixty (60) days of such Termination of Employment and, except in the event of a Termination of Employment due to death, continued compliance with Appendix I to this Agreement, any outstanding and unvested portion of the Option shall fully vest effective as of the date of such Termination of Employment. (c) Expiration. Unless earlier terminated in accordance with the terms and provisions of the Plan and/or this Agreement, all outstanding portions of the Option (whether vested or not vested) shall expire and shall no longer be exercisable immediately following the tenth (10th) anniversary of the Grant Date (such date, the “Option Expiration Date”). (d) Forfeiture. Except as otherwise expressly provided for in Section 3(b) or as otherwise determined by the Committee or its designee, any outstanding and unvested portion of the Option shall be immediately forfeited upon the Participant’s Termination of Employment for any reason. For the avoidance of doubt, in the event that the Participant fails to execute, deliver and not revoke the release of claims provided for in Section 3(b), any portion of the Option that remains outstanding and unvested as of the sixtieth (60th) day following the date on which the Qualifying Termination occurs shall be forfeited and cancelled as of such sixtieth (60th) day without consideration therefor. Additionally, in the event of the Participant’s Termination of Employment by the Company or the Company Entity that is the Participant’s actual employing entity for Cause, all outstanding portions of the Option, whether or not vested, shall be forfeited and cancelled without consideration therefor effective as of the date of such Termination of Employment. 4. Exercise Following Termination. Subject to the terms of the Plan and this Agreement, the Option, to the extent vested and non-forfeitable at the time of the Participant’s Termination, shall remain exercisable as follows: (a) Qualifying Termination. In the event of a Qualifying Termination, the vested portion of the Option, including any portion that vests pursuant to and subject to the terms and conditions of Section 3(b) above, shall remain exercisable until: (i) For a Qualifying Termination due to the Participant’s death or Disability, the earlier of (A) one (1) year after the date of such Termination of Employment and (B) the Option Expiration Date; and (ii) For any other Qualifying Termination, the earlier of (A) ninety (90) days after the date of such Termination of Employment and (B) the Option Expiration Date. (b) Resignation without Good Reason. In the event of the Participant’s Termination of Employment by the Participant without Good Reason, the vested portion of the Option shall remain exercisable until the earlier of (i) ninety (90) days from the date of such Termination of Employment, and (ii) the Option Expiration Date. 3


 
5. Method of Exercise and Payment. Subject to Section 13.6 of the Plan and the terms and conditions of the Plan and this Agreement, to the extent that the Option has become vested and exercisable with respect to a number of shares of Common Stock as provided herein, the Option may thereafter be exercised by the Participant, in whole or in part, at any time or from time to time prior to the expiration of the Option as provided herein and in accordance with Section 6.4(d) of the Plan. 6. Non-Transferability. The Option, and any rights and interests with respect thereto, issued under this Agreement and the Plan shall not be sold, exchanged, transferred, assigned, pledged, encumbered or otherwise disposed of or hypothecated in any way by the Participant (or any beneficiary of the Participant who holds the Option as a result of a Transfer by will or by the laws of descent and distribution), other than by testamentary disposition by the Participant or the laws of descent and distribution. Notwithstanding the foregoing, in accordance with Section 6.4(e) of the Plan, the Committee may, in its sole discretion, permit the Option to be Transferred to a Family Member for no value, provided that such Transfer shall only be valid upon execution of a written instrument in form and substance acceptable to the Committee in its sole discretion evidencing such Transfer and the transferee’s acceptance thereof signed by the Participant and the transferee, and provided, further, that the Option may not be subsequently Transferred other than by will or by the laws of descent and distribution or to another Family Member (as permitted by the Committee in its sole discretion) in accordance with the terms of the Plan and this Agreement, and shall remain subject to the terms of the Plan and this Agreement. Any attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise dispose of or hypothecate in any way the Option, or the levy of any execution, attachment or similar legal process upon the Option, contrary to the terms and provisions of this Agreement and/or the Plan shall be null and void and without legal force or effect. 7. Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.11 of the Plan. 8. Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter; provided however, that the restrictive covenants contained in Appendix I hereto are in addition to and not in lieu of any other restrictive covenants by which the Participant may be bound. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof. 9. Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to the Option 4


 
awarded under the Plan or future Options that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this Option Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. 10. No Right to Employment or Service. Any questions as to whether and when there has been a Termination of Employment and the cause of such Termination of Employment shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause, and shall not guarantee any right to future employment. 11. Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the Option awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted by applicable law. This authorization and consent is freely given by the Participant. 12. Compliance with Laws. The grant of the Option (and the issuance of the Option Shares upon exercise of the Option) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule, regulation or exchange requirement applicable thereto. The Company shall not be obligated to grant the Option or issue any of the Option Shares pursuant to this Agreement if any such issuance would violate any such requirements. As a condition to the issuance of any Option Shares, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation. 13. Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. 14. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 16. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder. 5


 
17. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 18. Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of the Option made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the Option awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation, and shall not be considered as part of such compensation in the event of severance, redundancy or resignation. 19. Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award will be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion. 20. No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself. 21. No Rights as a Stockholder. The Participant’s interest in the Option shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been issued to the Participant upon exercise in accordance with this Agreement and the Plan. 22. Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the Option is intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. 23. Non-U.S. Provisions. The Award and the shares of Common Stock subject to the Award and payable pursuant to exercise of the Award shall be subject to any special terms and conditions for the Participant's country set forth in Appendix II attached hereto (the "Country Addendum"). Moreover, if the Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement. [Remainder of Page Intentionally Left Blank] 6


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●]. AVAYA HOLDINGS CORP. By: Name: Title: PARTICIPANT [To be executed electronically.] 7


 
Appendix I NON-DISCLOSURE, IP ASSIGNMENT, NON-COMPETITION AND NON-SOLICITATION By executing the Award Agreement, the Participant acknowledges the importance to Avaya Holdings Corp. and its Affiliates existing now or in the future (hereinafter referred to collectively as the “Company” or “Avaya”), of protecting its confidential information and other legitimate business interests, including, without limitation, the valuable trade secrets and good will that it develops or acquires. The Participant further acknowledges that the Company is engaged in a highly competitive business, that its success in the marketplace depends upon the preservation of its confidential information and industry reputation, and that obtaining agreements such as this one from its employees is reasonable and necessary. The Participant undertakes the obligations in this Appendix I in consideration of the Participant’s initial and/or ongoing relationship with the Company, this Award, the Participant’s being granted access to trade secrets and other confidential information of the Company, and for other good and valuable consideration, the receipt and sufficiency of which the Participant acknowledges. As used in this Appendix I, “relationship” refers to a Participant’s employment or association as an advisor, consultant or contractor, with the Company, as applicable. 1. Loyalty and Conflicts of Interest 1.1. Exclusive Duty. During the Participant’s relationship with the Company, the Participant will not engage in any other business activity that creates a conflict of interest except as permitted by the Company’s Code of Conduct, as in effect from time to time. 1.2. Compliance with Company Policy. The Participant will comply with all lawful policies, practices and procedures of the Company, as these may be implemented and/or changed by the Company from time to time. Without limiting the generality of the foregoing, the Participant acknowledges that the Company may from time to time have agreements with other Persons which impose obligations or restrictions on the Company regarding Intellectual Property, as defined below, created during the course of work under such agreements and/or regarding the confidential nature of such work. The Participant will comply with and be bound by all such obligations and restrictions which the Company conveys to the Participant and will take all actions necessary (to the extent within Participant’s power and authority) to discharge the obligations of the Company under such agreements. 2. Confidentiality 2.1. Nondisclosure and Nonuse of Confidential Information. All Confidential Information, as defined below, which the Participant creates or has access to as a result of the Participant’s relationship with the Company, is and shall remain the sole and exclusive property of the Company. The Participant will never, directly or indirectly, use or disclose any Confidential Information, except (a) as required for the proper performance of the Participant’s regular duties for the Company, (b) as expressly authorized in writing in advance by the Company’s General Counsel, (c) as required by applicable law or regulation, or (d) as may be reasonably determined by the Participant to be necessary in connection with the enforcement of Participant’s rights in connection with this Appendix I. This restriction shall continue to apply after the termination of the Participant’s relationship with the Company or any restriction time period set forth in this Appendix I, howsoever caused. The Participant shall furnish prompt notice to the Company’s General Counsel of any required disclosure of Confidential Information Appendix I - 1


 
sought pursuant to subpoena, court order or any other legal process or requirement, and shall provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure, to the greatest extent time and circumstances permit. 2.2. Permissible Disclosure. Nothing in the Award Agreement or this Appendix I shall prohibit or restrict the Company, the Participant or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to the Award Agreement, including without limitation, this Appendix I, or the Plan, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; or (iii) accepting any U.S. Securities and Exchange Commission awards. In addition, nothing in this Agreement or the Plan prohibits or restricts Avaya or the Participant from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation. 2.3. Trade Secrets. Pursuant to 18 U.S.C. § 1833(b), the Participant will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of Avaya that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to the Participant’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Participant files a lawsuit for retaliation by Avaya for reporting a suspected violation of law, the Participant may disclose the trade secret to the Participant’s attorney and use the trade secret information in the court proceeding, so long as the Participant files any document containing the trade secret under seal and does not disclose the trade secret except under court order. Nothing in this Agreement or the Plan is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section. 2.4. Use and Return of Documents. All documents, records, and files, in any media of whatever kind and description, relating to the business, present or otherwise, of the Company, and any copies (including, without limitation, electronic), in whole or in part, thereof (the “Documents” and each individually, a “Document”), whether or not prepared by the Participant, shall be the sole and exclusive property of the Company. Except as required for the proper performance of the Participant’s regular duties for the Company or as expressly authorized in writing in advance by the Company, the Participant will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Participant will safeguard, and return to the Company immediately upon termination of the Participant’s relationship with the Company, and at such other times as may be specified by the Company, all Documents and other property of the Company, and all documents, records and files of its customers, subcontractors, vendors, and suppliers (“Third-Party Documents” and each individually a “Third-Party Document”), as well as all other property of such customers, subcontractors, vendors and suppliers, then in the Participant’s possession or control. Provided, however, if a Document or Third-Party Document is on electronic media, the Participant may, in lieu of surrender of the Document or Third-Party Document, provide a copy on electronic media to the Company and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company, the Participant will disclose all passwords necessary or desirable to enable the Company to obtain access to the Documents and Third-Party Documents. Notwithstanding any provision of this Section 2.4 to the contrary, the Participant shall be permitted to retain copies of all Documents evidencing Participant’s hire, equity, compensation rate and benefits, this Appendix I, and any other agreements between the Participant and the Company that the Participant has signed or electronically accepted. Appendix I - 2


 
3. Non-Competition, Non-Solicitation, and Other Restricted Activity 3.1. Non-Competition. This paragraph is applicable to Participants who hold Senior Director and higher positions as of the date this Award is accepted. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, whether paid or not, (a) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for, (b) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of, or (c) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate him or herself with, any business whose business, product(s) or operations are in any respect competitive with or otherwise similar to the Company’s business. The foregoing covenant shall cover the Participant’s activities in every part of the Territory. “Territory” shall mean (a) all states of the United States of America from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company; and (b) all other countries from which the Company derived revenue or conducted business at any time during the two- year period prior to the date of the termination of the Participant’s relationship with the Company. The foregoing shall not prevent: (a) passive ownership by the Participant of no more than two percent (2%) of the equity securities of any publicly traded company; or (b) the Participant’s providing services to a division or subsidiary of a multi-division entity or holding company, so long as (i) no division or subsidiary to which the Participant provides services is in any way competitive with or similar to the business of the Company, and (ii) the Participant is not involved in, and does not otherwise engage in competition on behalf of, the multi-division entity or any competing division or subsidiary thereof. 3.2. Good Will. Any and all good will which the Participant develops during his or her relationship with the Company with any of the customers, prospective customers, subcontractors or suppliers of the Company shall be the sole, exclusive and permanent property of the Company, and shall continue to be such after termination of the Participant’s relationship with the Company, howsoever caused. 3.3. Non-Solicitation of Customers. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, contact, or cause to be contacted, directly or indirectly, or engage in any form of oral, verbal, written, recorded, transcribed, or electronic communication with any customer of the Company for the purposes of conducting business that is competitive with or similar to that of the Company or for the purpose of disadvantaging the Company’s business in any way; provided that this restriction applies (i) only with respect to those customers who are or have been a customer of the Company at any time within the immediately preceding one-year period or whose business has been solicited on behalf of the Company by any of its officers, employees or agents within said one-year period, other than by form letter, blanket mailing or published advertisement, and (ii) only if the Participant has performed work for such customer during his or her relationship with the Company, has been introduced to, or otherwise had contact with, such customer as a result of his or her relationship with the Company, or has had access to Confidential Information which would assist in the solicitation of such customer. The foregoing restrictions shall not apply to general solicitation or advertising, including through media and trade publications. 3.4. Non-Solicitation/Non-Hiring of Employees and Independent Contractors. During his or her relationship with the Company and for a period of twelve (12) months immediately Appendix I - 3


 
following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, and will not assist anyone else to, (a) hire or solicit for hiring any employee of the Company or seek to persuade or induce any employee of the Company to discontinue employment with the Company, or (b) hire or engage any independent contractor providing services to the Company, or solicit, encourage or induce any independent contractor providing services to the Company to terminate or diminish in any substantial respect its relationship with the Company. For the purposes of this Appendix I, an “employee” or “independent contractor” of the Company is any person who is or was such at any time within the preceding six-month period. The foregoing restrictions shall not apply to general solicitation or advertising, including through media, trade publications and general job postings. 3.5. Non-Solicitation of Others. The Participant agrees that for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will not solicit, encourage, or induce, or cause to be solicited, encouraged or induced, directly or indirectly, any franchisee, joint venture, supplier, vendor or contractor who conducted business with the Company at any time during the two year period preceding the termination of his or her relationship with the Company, to terminate or adversely modify any business relationship with the Company, or not to proceed with, or enter into, any business relationship with the Company, nor shall the Participant otherwise interfere with any business relationship between the Company and any such franchisee, joint venture, supplier, vendor or contractor. 3.6. Notice of New Address and Employment. During the twelve (12)-month period immediately following the termination of Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will promptly provide the Company with pertinent information concerning each new job or other business activity in which the Participant engages or plans to engage during such twelve (12)-month period as the Company may reasonably request in order to determine the Participant’s continued compliance with his or her obligations under this Appendix I. The Participant shall notify any new employer(s) of the Participant’s obligations under this Appendix I, and hereby consents to notification by the Company to such employer(s) concerning his or her obligations under this Appendix I. The Company shall treat any such notice and information as confidential, and will not use or disclose the information contained therein except to enforce its rights hereunder. Any breach of this Section 3.6 shall constitute a material breach of this agreement. 3.7. Acknowledgement of Reasonableness; Remedies. In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has carefully read and considered all the terms and conditions hereof. The Participant acknowledges without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the good will, Confidential Information and other legitimate business interests of the Company, that each and every one of those restraints is reasonable in respect to subject matter, length of time, and geographic area; and that these restraints will not prevent the Participant from obtaining other suitable employment during the period in which Participant is bound by them. The Participant will never assert, or permit to be asserted on the Participant’s behalf, in any forum, any position contrary to the foregoing. Were the Participant to breach any of the provisions of this Appendix I, the harm to the Company would be irreparable. Therefore, in the event of such a breach or threatened breach, the Company shall, in addition to any other remedies available to it, have the right to obtain preliminary and permanent injunctive relief against any such breach or threatened breach without having to post bond, and the Participant agrees that injunctive relief is an appropriate remedy to address any such breach. Without limiting the generality of the foregoing, or other forms of relief available to the Company, in the event of the Participant’s breach of any of the provisions of this Appendix I, the Participant will forfeit any award or payment made pursuant to any applicable severance or other incentive plan or program, or if a payment has already been made, the Participant will be obligated to return the proceeds Appendix I - 4


 
to the Company. 3.8. Unenforceability. In the event that any provision of this Appendix I shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The 12- month period of restriction set forth in Sections 3.1, 3.3, 3.4 and 3.5 hereof and the 12-month period of obligation set forth in Section 3.6 hereof shall be tolled, and shall not run, during any period of time in which the Participant is in violation of the terms thereof, in order that the Company shall have the agreed- upon temporal protection recited herein. 3.9. Limited Exception for Attorneys. Insofar as the restrictions set forth in this Section 3 prohibit the solicitation, inducement or attempt to hire a licensed attorney who is employed at the Company, they shall not apply if the Participant is a licensed attorney and the restrictions contained herein are illegal, unethical or unenforceable under the laws, rules and regulations of the jurisdiction in which the Participant is licensed as an attorney. 3.10. Attorneys’ Fees and Costs. Except as prohibited by law, the Participant shall indemnify the Company from any and all costs and fees, including attorneys’ fees, incurred by the Company in successfully enforcing the terms of this Award Agreement against the Participant, (including, but not limited to, a court partially or fully granting any application, motion, or petition by the Company for a temporary restraining order, preliminary injunction, or permanent injunction), as a result of the Participant’s breach or threatened breach of any provision contained herein. Upon successful enforcement, the Company shall be entitled to recover from the Participant its costs and fees incurred to date at any time during the course of a dispute (i.e., final resolution of such dispute is not a prerequisite) upon written demand to the Participant. 3.11. Enforcement. The Company agrees that it will not enforce Sections 3.1, 3.3, 3.5 or the portion of Section 3.4 that prohibits Participant from hiring Company employees and independent contractors to restrict Participant’s employment in any jurisdiction in which such enforcement is contrary to law or regulation to the extent that Participant is a resident of such jurisdiction at the time Participant’s relationship with the Company terminates and does not otherwise change residency during the restriction period. 4. Intellectual Property 4.1. In signing or electronically accepting the Award Agreement, the Participant hereby assigns and shall assign to the Company all of his or her rights, title and interest in and to all inventions, discoveries, improvements, ideas, mask works, computer or other apparatus programs and related documentation, and other works of authorship (hereinafter each designated “Intellectual Property”), whether or not patentable, copyrightable or subject to other forms of protection, made, created, developed, written or conceived by the Participant during the period of his or her relationship with the Company, whether during or outside of regular working hours, either solely or jointly with another, in whole or in part, either: (a) in the course of such relationship, (b) relating to the actual or anticipated business or research development of the Company, or (c) with the use of Company time, material, private or proprietary information, or facilities, except as provided in Section 4.5 below. 4.2. The Participant will, without charge to the Company, but at its expense, execute a specific assignment of title to the Company and do anything else reasonably necessary, including but not limited to providing or signing additional documentation that is reasonably necessary to the Company Appendix I - 5


 
or its designee, to enable the Company to secure, maintain and/or perfect a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. Participant agrees that this obligation shall continue after Participant’s relationship with the Company terminates. If the Company is unable because of Participant’s mental or physical incapacity or for any other reason to secure Participant’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Intellectual Property assigned to the Company as above, then Participant hereby irrevocably designates and appoints the Company or its designee and its duly authorized officers and agents as Participant’s agent and attorney in fact, to act for and on Participant’s behalf and instead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Participant. 4.3. The Participant acknowledges that the copyrights in Intellectual Property created with the scope of his or her relationship with the Company belong to the Company by operation of law. Participant further acknowledges and agrees that the decision whether or not to commercialize or market any Intellectual Property developed by Participant solely or jointly with others is within the Company’s sole benefit and discretion and that no payment will be due to Participant as a result of the Company’s efforts to commercialize or market such Intellectual Property. 4.4. The Participant has previously provided to the Company a list (the “Prior Invention List”) describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Participant prior to his or her relationship with the Company, which belong to the Participant and which are not assigned to the Company hereunder (collectively referred to as “Prior Inventions”); and, if no Prior Invention List was previously provided, the Participant represents and warrants that there are no such Prior Inventions. Participant will not incorporate, or permit to be incorporated, any Prior Invention into an Avaya product, process, machine, solution or system without the Company’s prior written consent. Notwithstanding the foregoing sentence, if, in the course of Participant’s relationship with the Company, Participant incorporates into an Avaya product, process, machine, solution or system a Prior Invention owned by Participant or in which Participant has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, sell, offer for sale and import, such Prior Invention as part of or in connection with such product, process, machine, solution or system. 4.5. Exception to Assignments. THE PARTICIPANT UNDERSTANDS THAT THE PROVISIONS OF THIS AWARD AGREEMENT REQUIRING ASSIGNMENT OF INTELLECTUAL PROPERTY (AS DEFINED ABOVE) TO THE COMPANY DO NOT APPLY TO ANY INTELLECTUAL PROPERTY FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON PARTICIPANT’S OWN TIME, UNLESS (A) THE INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY, OR (ii) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT; (B) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY PARTICIPANT FOR THE COMPANY; OR (C) THE INTELLECTUAL PROPERTY OTHERWISE QUALIFIES FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 (ATTACHED HERETO AS EXHIBIT A). THE PARTICIPANT WILL ADVISE THE COMPANY PROMPTLY IN WRITING OF ANY INVENTIONS THAT PARTICIPANT BELIEVES MEET THE CRITERIA FOR THIS SECTION 4.5 EXCEPTION TO ASSIGNMENTS AND WHICH WERE NOT Appendix I - 6


 
OTHERWISE DISCLOSED ON THE PRIOR INVENTION LIST PREVIOUSLY DELIVERED TO THE COMPANY TO PERMIT A DETERMINATION OF OWNERSHIP BY THE COMPANY. ANY SUCH DISCLOSURE WILL BE RECEIVED IN CONFIDENCE. 5. Definitions Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section 5 and as provided elsewhere in this Appendix I. For purposes of this Appendix I, the following definitions apply: “Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, contract or equity interest. “Confidential Information” means any and all information of the Company, whether or not in writing, that is not generally known by others with whom the Company competes or does business, or with whom it plans to compete or do business, and any and all information, which, if disclosed, would assist in competition against the Company, including but not limited to (a) all proprietary information of the Company, including but not limited to the products and services, technical data, methods, processes, know-how, developments, inventions, and formulae of the Company, (b) the development, research, testing, marketing and financial activities and strategic plans of the Company, (c) the manner in which the Company operates, (d) its costs and sources of supply, (e) the identity and special needs of the customers, prospective customers and subcontractors of the Company, and (f) the people and organizations with whom the Company has business relationships and the substance of those relationships. Without limiting the generality of the foregoing, Confidential Information shall specifically include: (i) any and all product testing methodologies, product test results, research and development plans and initiatives, marketing research, plans and analyses, strategic business plans and budgets, and technology grids; (ii) any and all vendor, supplier and purchase records, including without limitation the identity of contacts at any vendor, any list of vendors or suppliers, any lists of purchase transactions and/or prices paid; and (iii) any and all customer lists and customer and sales records, including without limitation the identity of contacts at purchasers, any list of purchasers, and any list of sales transactions and/or prices charged by the Company. Confidential Information also includes any information that the Company may receive or has received from customers, subcontractors, suppliers or others, with any understanding, express or implied, that the information would not be disclosed. Notwithstanding the foregoing, Confidential Information does not include information that (A) is known or becomes known to the public in general (other than as a result of a breach of Section 2 hereof by the Participant), (B) is or has been independently developed or conceived by the Participant without use of the Company’s Confidential Information or (C) is or has been made known or disclosed to the Participant by a third party without a breach of any obligation of confidentiality such third party may have to the Company of which the Participant is aware. “Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company. Appendix I - 7


 
6. Compliance with Other Agreements and Obligations The Participant represents and warrants that his or her employment or other relationship with the Company and execution and performance of the Award Agreement, including this Appendix I, will not breach or be in conflict with any other agreement to which the Participant is a party or is bound, and that the Participant is not now subject to any covenants against competition or similar covenants or other obligations to third parties or to any court order, judgment or decree that would affect the performance of the Participant’s obligations hereunder or the Participant’s duties and responsibilities to the Company, except as disclosed in writing to the Company’s General Counsel no later than the time an executed copy of the Award Agreement, including this Appendix I, is returned by the Participant. The Participant will not disclose to or use on behalf of the Company, or induce the Company to use, any proprietary information of any previous employer or other third party without that party’s consent. Participant agrees that if in the course of his or her relationship with the Company, Participant is asked for information relating to Participant’s former employers’ business that would require Participant to reveal information that is not publicly available, Participant will refrain from using and providing such information. 7. Entire Agreement; Severability; Modification With respect to the subject matter hereof, this Appendix I sets forth the entire agreement between the Participant and the Company, and, except as otherwise expressly set forth herein, supersedes all prior and contemporaneous communications, agreements and understandings, written or oral, regarding the same. If the Participant previously executed an Award Agreement with an Appendix I or other schedule containing similar provisions, this Appendix I shall supersede such agreement. In the event of conflict between this Appendix I and any prior agreement between the Participant and the Company with respect to the subject matter hereof, this Appendix I shall govern. The provisions of this Appendix I are severable, and no breach of any provision of this Appendix I by the Company, or any other claimed breach of contract or violation of law, shall operate to excuse the Participant’s obligation to fulfill the requirements of Sections 2, 3 and 4 hereof. No deletion, addition, marking, notation or other change to the body of this Appendix I shall be of any force or effect, and this Appendix I shall be interpreted as if such change had not been made. This Appendix I may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Participant and the Company’s General Counsel. If any provision of this Appendix I should, for any reason, be held invalid or unenforceable in any respect, it shall not affect any other provisions, and shall be construed by limiting it so as to be enforceable to the maximum extent permissible by law. Provisions of this Appendix I shall survive any termination if so provided in this Appendix I or if necessary or desirable to accomplish the purpose of other surviving provisions. It is agreed and understood that no changes to the nature or scope of the Participant’s relationship with the Company shall operate to extinguish the Participant’s obligations hereunder or require that a new agreement concerning the subject matter of this Appendix I be executed. Appendix I - 8


 
8. Assignment Neither the Company nor the Participant may make any assignment of this Appendix I or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, the Company may assign its rights and obligations under this Appendix I without the Participant’s consent (a) in the event that the Participant is transferred to a position with one of the Company’s Affiliates or (b) in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into any company or entity or transfer to any company or entity all or substantially all of the business, properties or assets of the Company or any division or line of business of the Company with which the Participant is at any time associated. This Appendix I shall inure to the benefit of and be binding upon the Participant and the Company, and each of their respective successors, executors, administrators, heirs, representatives and permitted assigns. 9. Successors The Participant consents to be bound by the provisions of this Appendix I for the benefit of the Company, and any successor or permitted assign to whose employ the Participant may be transferred, without the necessity that a new agreement concerning the subject matter or this Appendix I be re-signed at the time of such transfer. 10. Acknowledgement of Understanding In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has read and understood all of its terms; that the Participant has had a full and reasonable opportunity to consider its terms and to consult with any person of his or her choosing before signing or electronically accepting; that the Participant has not relied on any agreements or representations, express or implied, that are not set forth expressly in the Award Agreement, including this Appendix I; and that the Participant has signed the Award Agreement knowingly and voluntarily. [no more text on this page] Appendix I - 9


 
EXHIBIT A CALIFORNIA LABOR CODE SECTION 2870 INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.” Appendix I - 10


 
Appendix II Country Addendum Special Terms and Conditions Applicable in Countries Outside the United States Except as provided otherwise herein, any capitalized term not defined in this Country Addendum shall have the same meaning as is ascribed thereto in the Plan or the Agreement, as applicable. This Country Addendum includes additional (or, if indicated, different) terms and conditions that govern the Award granted to the Participant under the Plan if the Participant works and/or resides in one of the countries listed below. If the Participant is a citizen or resident of a country other than that in which he or she is currently working and/or residing (or is considered as such for local law purposes) or if the Participant transfers his or her service relationship and/or residence to another country after the Award is granted, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to the Participant. ALL COUNTRIES OUTSIDE THE UNITED STATES Responsibility for Taxes. The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax- Related Items in connection with any aspect of the Plan, including, but not limited to, the grant, vesting or exercise (if applicable) of the Award, the delivery of shares of Common Stock, the subsequent sale of any shares of Common Stock acquired pursuant to the Award and the receipt of any dividends, dividend equivalents or other distributions with respect to the shares of Common Stock; and (b) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Prior to the relevant taxable or tax withholding event, as applicable, the Participant agrees to make arrangements acceptable to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their sole discretion, to satisfy any withholding obligation for Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation payable to the Participant by the Company and/or the Employer; (ii) withholding from the proceeds of the sale of any shares of Common Stock acquired pursuant to the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Appendix II - 1


 
Participant’s behalf pursuant to this authorization without further consent); (iii) withholding from any shares of Common Stock to be delivered to the Participant pursuant to the Award; and/or (iv) any other method approved by the Company and, to the extent required by applicable law or the Plan, approved by the Committee. Depending on the withholding method, the Company and/or the Employer may withhold for Tax- Related Items by considering statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Participant. In the event of any over- withholding, the Participant may receive a refund of any over-withheld amount in cash (without interest and without entitlement to the equivalent amount in shares of Common Stock). If the obligation for Tax-Related Items is satisfied by withholding shares of Common Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Common Stock to which he or she is entitled pursuant to the Award, notwithstanding that a number of shares of Common Stock are withheld to satisfy the obligation for Tax-Related Items. The Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue the shares of Common Stock or the proceeds of the sale of shares of Common Stock, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items. Nature of Grant. In accepting the Award, the Participant acknowledges, understands and agrees that: a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; b) the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Awards, or benefits in lieu of Awards, even if Awards have been granted in the past; c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; d) the Award and the Participant’s participation in the Plan shall not create or amend a right to employment or be interpreted as forming an employment or service contract with the Company or any Subsidiary (including the Employer); e) the Participant is voluntarily participating in the Plan; f) the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty; g) if the Participant acquires shares of Common Stock, the value of such shares of Common Stock may increase or decrease in value, even below the per share exercise price; Appendix II - 2


 
h) unless otherwise agreed with the Company, the Award is not granted as consideration for, or in connection with, any service the Participant may provide as a director of a Subsidiary; i) no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Participant's Termination of Employment (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); j) unless otherwise provided in the Plan or by the Company in its discretion, the Award and any benefit that may be received pursuant to this Agreement do not create any entitlement to have the Award or any such benefit transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Common Stock underlying the Award; and k) neither the Company nor any Subsidiary (including the Employer) shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the Award or the subsequent sale of any shares of Common Stock acquired pursuant to the Award. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan or the Participant’s acquisition or sale of the underlying shares of Common Stock. The Participant should consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan. Language. The Participant acknowledges and represents that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English so as to allow the Participant to understand the terms and conditions of this Agreement or any other document related to the Award and/or the Plan. Furthermore, if the Participant has received this Agreement, or any other document related to the Award and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. Imposition of Other Requirements. The Company reserves the right to impose other requirements on participation in the Plan or on the Award or shares of Common Stock acquired pursuant to the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the undersigned to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Choice of Venue. Participant agrees to the exclusive venue and jurisdiction of the State and Federal Courts located in the state of Delaware and waives any objection based on lack of jurisdiction or inconvenient forum. Any action relating to or arising out of this Plan must be commenced within one year after the cause of action accrued. Insider Trading / Market Abuse Restrictions. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions including, but not limited to, the United States (“U.S.”) and the Participant’s country of residence, which may affect the Appendix II - 3


 
Participant’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock or Awards, or rights linked to the value of shares of Common Stock during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s insider trading policy as set forth in the “Avaya Holdings Corp. Insider Trading and Disclosure of Confidential Information Policy for Directors, Officers and Employees.” The Participant is responsible for ensuring compliance with any applicable restrictions. Exchange Control, Tax and/or Foreign Asset / Account Reporting. Certain foreign asset and/or foreign account reporting requirements and exchange controls may affect the Participant’s ability to purchase or hold shares of Common Stock under the Plan or funds received from participating in the Plan in a brokerage or bank account outside of the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in the Participant’s country. The Participant may also be required to repatriate sale proceeds or other funds received as a result of his or her participation in the Plan to the Participant’s country through a designated bank or broker and/or within a certain time after receipt. The Participant is responsible for complying with any applicable regulations and should consult with his or her personal legal and tax advisors for any details. Data Privacy. This provision replaces Section 12 (Transfer of Personal Data) of the Agreement: If the Participant would like to participate in the Plan, the Participant will need to review the information provided in this Agreement and, where applicable, declare consent to the processing and/or transfer of personal data as described below. a) EEA+ Controller and Representative. If the Participant is based in the European Union (“EU”), the European Economic Area, Switzerland or, if and when the United Kingdom leaves the EU, the United Kingdom (collectively “EEA+”), the Participant should note that the Company, with its address at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is the controller responsible for the processing of the Participant’s personal data in connection with the Agreement and the Plan. The Company’s representative in the EU is Avaya Deutschland GmbH, Theodor-Heuss Allee 112, Frankfurt, Germany 60486. b) Data Collection and Usage. The Company collects, uses and otherwise processes certain personal data about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, which the Company receives from the Participant, the Employer or otherwise in connection with this Agreement or the Plan (“Data”), for the purposes of implementing, administering and managing the Appendix II - 4


 
Plan and allocating the cash payment or shares of Common Stock pursuant to the Plan. If the Participant is based in the EEA+, the legal basis, where required, for the processing of Data by the Company is the necessity of the data processing for the Company to (i) perform its contractual obligations under this Agreement, (ii) comply with legal obligations established in the EEA+, or (iii) pursue the legitimate interest of complying with legal obligations established outside of the EEA+. If the Participant is based outside of the EEA+, the legal basis, where required, for the processing of Data by the Company is the Participant’s consent, as further described below. c) Stock Plan Administration Service Providers. The Company transfers Data to Fidelity Stock Plan Services, LLC, an independent service provider (the "Service Provider"), which is assisting the Company by performing recordkeeping and administration services for the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Service Provider will open an account for the Participant to receive and trade shares of Common Stock acquired under the Plan. The Participant may be asked to agree on separate terms and data processing practices with the Service Provider, with such agreement being a condition to the ability to participate in the Plan. d) International Data Transfers. In the event the Participant resides, works or is otherwise located outside of the U.S., Data will be transferred from the Participant’s country to the U.S., where the Company and its service providers are based. The Participant understands and acknowledges that the U.S. is not subject to an unlimited adequacy finding by the European Commission and might not provide a level of protection of personal data equivalent to the level of protection in the Participant’s country. As a result, in the absence of a self-certification of the data recipient in the U.S. under the EU/U.S. or Swiss/U.S. Privacy Shield Framework or the implementation of appropriate safeguards such as the Standard Contractual Clauses adopted by the EU Commission or binding corporate rules approved by the competent EU data protection authority, the processing of personal data might not be subject to substantive data processing principles or supervision by data protection authorities. In addition, data subjects might have no or less enforceable rights regarding the processing of their personal data. Neither the Company nor the Service Provider is currently self-certified under the EU/U.S. or Swiss/U.S. Privacy Shield Framework but the Company has implemented binding corporate rules, among others, with its subsidiaries in the EEA+. If the Participant is based in the EEA+, Data will be transferred from the EEA+ to the Company based on the binding corporate rules. The Participant may view a copy of such appropriate safeguards at https://www.avaya.com/en/privacy/bcr/. The onward transfer of Data from the Company to the Service Provider or, as the case may be, a different service provider of the Company is based solely on the Participant’s consent, as further described Appendix II - 5


 
below. If the Participant is based outside of the EEA+, the Company’s legal basis, where required, for the transfer of Data from the Participant’s country to the Company and from the Company onward to the Service Provider or, as the case may be, a different service provider of the Company is the Participant’s consent, as further described below. e) Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. f) Data Subject Rights. The Participant may have a number of rights under data privacy laws in his or her jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access or copies of Data the Company processes, (ii) the rectification or amendment of incorrect or incomplete Data, (iii) the deletion of Data, (iv) request restrictions on the processing of Data, (v) object to the processing of Data for legitimate interests, (vi) the portability of Data, (vi) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or to (viii) receive a list with the names and addresses of any potential recipients of Data. To receive additional information regarding these rights or to exercise these rights, the Participant can contact the Company's data privacy office at dataprivacy@avaya.com or, for the Participants in the EEA+, view the Company's binding corporate rules at https://www.avaya.com/en/privacy/bcr/. g) Necessary Disclosure of Personal Data. The Participant understands that providing the Company with Data is necessary for the performance of the Agreement and that the Participant’s refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect the Participant’s ability to participate in the Plan. h) Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing any consents referred to herein on a purely voluntary basis. The Participant understands that he or she may withdraw any such consent at any time with future effect for any or no reason. If the Participant does not consent, or if the Participant later seeks to withdraw the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant Awards to the Participant or administer or maintain the Awards. For more information on the consequences of refusal to consent or withdrawal of consent, the Participant should contact the Company's data privacy office at dataprivacy@avaya.com. Appendix II - 6


 
Declaration of Consent. If the Participant is based in the EEA+, by accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant explicitly declares his or her consent to the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. as described above. If the Participant is based outside of the EEA+, by accepting the Awards and indicating consent via the Company’s online acceptance procedure, Participant explicitly declares his or her consent to the entirety of the Data processing operations described in this Agreement including, without limitation, the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. BELGIUM Acceptance of Agreement. If the Award is an Option, the Participant should refer to the separate Belgium Option Package for information about the tax impact of the acceptance of the Award and consult his or her personal tax advisor for further information. CANADA Method of Exercise and Payment. If this Award is an Option, due to tax considerations in Canada and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price by having the Company withhold shares of Common Stock issuable upon exercise of the Option or in the form of Common Stock owned by the Participant. The Company reserves the right to allow these forms of payment of the Per Share Exercise Price for legal or administrative reasons. Delivery of Shares / Settlement. The Award will be settled by the delivery of shares of Common Stock and not by the delivery of cash or a combination of cash and shares of Common Stock. Securities Law Notification. The Participant is permitted to sell any shares of Common Stock acquired under the Plan through the Service Provider or other such stock plan service provider as may be selected by the Company in the future, provided the sale of shares takes place outside Canada through facilities of a stock exchange on which the Common Stock is listed. The Common Stock is currently listed on the New York Stock Exchange. The following provisions will apply to individuals who are residents of Quebec: Language Consent. The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or directly hereto, be drawn up in English. Consentement à la Langue Utilisée. Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention. Appendix II - 7


 
Data Privacy. This provision supplements the above Data Privacy section of this Country Addendum: The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company and its Subsidiaries (including the Employer) to disclose and discuss the Plan with their advisors. The Participant further authorizes the Company and the Employer to record and keep such information in Participant’s employment file. GERMANY No country specific terms and conditions. INDIA Method of Exercise and Payment. If this Award is an Option, due to exchange control considerations in India and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, unless all of the shares of Common Stock subject to the exercised portion of the Option are sold at such time (i.e., a "sell-to-cover" method of exercise and payment is not permitted but a "sell-all" method of exercise and payment is permitted). The Company reserves the right to allow this form of payment of the Per Share Exercise Price for legal or administrative reasons. IRELAND No country specific terms and conditions. ITALY Method of Exercise and Payment. If this Award is an Option, due to regulatory considerations in Italy and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant must pay the Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, provided that all of the shares of Common Stock subject to the exercised portion of the Option must be sold at such time (i.e., a "sell-all" method of exercise and payment is required). The Company reserves the right to allow other forms of payment of the Per Share Exercise Price for legal or administrative reasons. Appendix II - 8


 
Plan Document Acknowledgment. In accepting the Award, the Participant acknowledges that the Participant has received a copy of the Plan and the Agreement and has reviewed the Plan and the Agreement in their entirety and fully understands and accepts all provisions of the Plan and the Agreement. The Participant further acknowledges that the Participant has read and specifically and expressly approves the following sections of the Agreement and the Country Addendum: Vesting (for RSUs and PRSUs); Vesting and Exercisability (for Options); Exercise Following Termination (for Options); Securities Representation (for RSUs and PRSUs); Compliance with Laws; Further Assurances; Acceptance of Agreement; Withholding and Responsibility for Taxes; Language; Imposition of Other Requirements; Governing Law; Choice of Venue. MEXICO Plan Document Acknowledgment. By accepting the Award, the Participant acknowledges that he or she has received a copy of the Plan and the Agreement, which the Participant has reviewed. The Participant acknowledges further that he or she accepts all the provisions of the Plan and the Agreement. The Participant also acknowledges that he or she has read and specifically and expressly approves the terms and conditions set forth in the Nature of Grant section, which clearly provide as follows: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in it are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) none of the Company or its Subsidiaries (including the Employer) are responsible for any decrease in the value of any shares of Common Stock (or the amount of any cash payment) that may be acquired under the Plan. Labor Law Policy and Acknowledgment. In accepting the Award, the Participant expressly recognizes that Avaya Holdings Corp., with offices at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis and the Participant’s sole Employer is a Subsidiary in Mexico (“Avaya- Mexico”). Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from his or her participation in the Plan do not establish any rights between the Participant and Avaya-Mexico, and do not form part of the employment conditions and/or benefits provided by Avaya-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant’s employment. The Participant further understands that his or her participation in the Plan is a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant’s participation at any time without any liability to the Participant. Finally, the Participant hereby declares that he or she does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and Participant therefore grants a full and broad release Appendix II - 9


 
to the Company and its Subsidiaries, branches, representation offices, shareholders, officers, agents or legal representatives with respect to any claim that may arise. Reconocimiento del Plan. Al aceptar este premio ("Award"), el Participante reconoce que él o ella ha recibido una copia del plan y del Contrato y que lo ha revisado. El Participante reconoce además que acepta todas las disposiciones del Plan y del Contrato. El Participante de igual forma reconoce que acepta los términos y condiciones establecidos en la sección Naturaleza del Otorgamiento ("Nature of Grant"), que estipula claramente lo siguiente: (i) la participación del Participante en el Plan no constituye un derecho adquirido; (ii) la Compañía ofrece el plan y la Participación del Participante en él de manera totalmente discrecional; (iii) la participación del Participante en el Plan es voluntaria; y (iv) ninguna de las Compañías o Subsidiarias (incluido el Patrón) son responsables de cualquier disminución en el valor de las Acciones (o el monto de cualquier pago en efectivo) que pueda adquirirse en virtud del Plan Política de la Ley Laboral y Reconocimiento. Al aceptar este Premio ("Award"), el Participante reconoce expresamente que Avaya Holdings Corp., con oficinas ubicadas en 350 Mt. Kemble Avenue, Morristown, New Jersey 07960, U.S.A.., es el único responsable de la administración del Plan y que la participación del Participante en el mismo, el pago del premio o la adquisición de Acciones no constituye de ninguna manera una relación laboral entre el Participante y la Compañía, debido a que la participación de esa persona en el Plan deriva únicamente de una relación comercial y el único Patrón del participante es un Afiliada Mexicana de la Compañía (“Avaya-México”). Derivado de lo anterior, el Participante reconoce expresamente que el Plan y los beneficios que pudieran derivar para el Participante por su participación en el mismo, no establecen ningún derecho entre el Participante e Avaya-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por Avaya-México, y cualquier modificación al Plan o la terminación del mismo de ninguna manera podrá ser interpretada como una modificación o desmejora de los términos y condiciones de trabajo del Participante. Asimismo, el Participante reconoce que su participación en el Plan es resultado de la decisión unilateral y discrecional de la Compañía, por lo tanto, la Compañía se reserva el derecho absoluto para modificar y/o discontinuar la participación del Participante en cualquier momento, sin ninguna responsabilidad hacia el Participante. Finalmente el Participante manifiesta que no se reserva ninguna acción o derecho que ejercitar en contra dela Compañía, por cualquier compensación o daños en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia exime amplia y completamente a la Compañía, sus Afiliadas, sucursales, oficinas de representación, sus accionistas, administradores, agentes y representantes legales con respecto a cualquier reclamo que pudiera surgir. NETHERLANDS No country specific terms and conditions. Appendix II - 10


 
SINGAPORE Securities Law Notification. The grant of the Award is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA under which it is exempt from the prospectus and registration requirements and is not made with a view to the underlying shares of Common Stock being subsequently offered for sale to any other party. The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Any shares of Common Stock acquired pursuant to the Award cannot be offered for sale in Singapore prior to the six-month anniversary of the Grant Date, unless such offer or sale is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). SPAIN Labor Law Acknowledgement. By accepting the Award, the Participant consents to participation in the Plan and acknowledges that the Participant has received a copy of the Plan. The Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant the Award under the Plan to individuals who may be employees of the Company or its Subsidiaries throughout the world. The decision is limited and entered into based upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any Subsidiary on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, the Participant understands that the Award is granted on the assumption and condition that the Award and any shares of Common Stock acquired pursuant to the Award shall not become part of any employment or service contract (whether with the Company or any Subsidiary) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, the Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of the Award, which is gratuitous and discretionary, since the future value of the Award and the underlying shares of Common Stock is unknown and unpredictable. In addition, the Participant understands that the grant of the Award would not be made but for the assumptions and conditions set forth hereinabove; thus, the Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the Award and any right to a cash payment or shares of Common Stock shall be null and void. Further, the Participant understands and agrees that upon Termination of Employment, unless otherwise specifically provided in the Agreement or determined by the Committee or its designee, any unvested portion of the Award will be immediately forfeited and, if the Award is an Option, any vested portion of the Option shall remain exercisable only for the period described in Section 4 of the Agreement and shall be subject to the terms of the Plan and, thereafter, any unexercised portion of the Option will be forfeited. Appendix II - 11


 
In particular, the Participant understands and agrees that, unless otherwise expressly provided in the Agreement or determined by the Committee or its designee, the unvested portion of the Award, and any vested portion of an Option that is not exercised within any post-termination exercise period described in the Agreement, will be cancelled without entitlement to any shares of Common Stock or to any amount as indemnification if the Participant terminates employment by reason of, but not limited to, resignation; disciplinary dismissal adjudged to be with cause; disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to a "despido improcedente"); individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause; material modification of the terms of employment under Article 41 of the Workers’ Statute; relocation under Article 40 of the Workers’ Statute; Article 50 of the Workers’ Statute; unilateral withdrawal by the Participant's employer; and under Article 10.3 of Royal Decree 1382/1985. Securities Law Notification. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the Award. The Agreement has not been, nor will it be, registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus. UNITED ARAB EMIRATES Securities Law Notification. The Award is being offered only to qualified employees of the Company and its Subsidiaries and is in the nature of providing equity incentives to such employees in the United Arab Emirates. Any documents related to the Plan, including the Plan and the Agreement, are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. Prospective acquirers of any securities offered pursuant to the Award should conduct their own due diligence on securities. If the Participant does not understand the contents of the Plan or the Agreement, the Participant should consult an authorized financial adviser. UNITED KINGDOM ("U.K.") Withholding. This provision supplements the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum: Without limitation to the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum, the Participant hereby agrees that the Participant is liable for all Tax-Related Items and hereby covenants to pay all such Tax- Related Items, as and when requested by the Company or the Employer, as applicable, or by Her Majesty’s Revenue and Customs (“HMRC”) (or any other tax or relevant authority). The Participant also hereby agrees to indemnify and keep indemnified the Company and the Employer, as applicable, against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax or relevant authority) on the Participant’s behalf. Appendix II - 12


 
Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Participant is such a director or executive officer of the Company and the U.K. income tax liability arising as a result of participation in the Plan is not collected from or paid by the Participant within ninety (90) days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant acknowledges that he or she will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-assessment regime and for paying the Company or the Employer, as applicable, for the value of any employee national insurance contributions due on this additional benefit. Appendix II - 13


 
avaya-ex103_2020331x10q
EXHIBIT 10.3 Form of PRSU Award Agreement 2019 Equity Incentive Plan PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT PURSUANT TO THE AVAYA HOLDINGS CORP. 2019 EQUITY INCENTIVE PLAN * * * Participant: [#ParticipantName#] Grant Date: [#GrantDate#] Grant Number: [#ClientGrantID#] Number of Performance Restricted Stock Units (“PRSUs”) Granted: [#QuantityGranted#] * * * This PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT (together with all appendices attached hereto, this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2019 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and WHEREAS, the Committee has determined under the Plan that it would be in the best interests of the Company to grant the Participant a Performance Award in the form of the PRSUs provided herein, each of which represents the right to receive one share of Common Stock upon vesting of such PRSU, subject to the terms and conditions contained in this Agreement and in the Plan. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows: 1. Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.


 
2. Grant of PRSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of PRSUs specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement, including, without limitation, in Appendix I, II, III and IV attached hereto, and the Plan. The number of PRSUs granted under this Agreement represents the target number of PRSUs that can be earned by the Participant under this Agreement. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock, if any, which may be issued pursuant to this Agreement, except as otherwise specifically provided for in the Plan or this Agreement. The PRSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book-entry account shall be that of a general, unsecured creditor of the Company. 3. Vesting. Subject to the Plan and the other terms of this Agreement, the PRSUs subject to this Agreement shall vest in accordance with the performance matrix set forth on Appendix I (the “Performance Matrix”). 4. Settlement. Any PRSUs subject to this Award that vest in accordance with the terms of this Agreement and the Performance Matrix shall be settled in the manner set forth in the Performance Matrix. 5. Non-Transferability. No portion of the PRSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the PRSUs as provided herein. 6. Governing Law. All questions concerning the construction, validity and interpretation of this Agreement, including but not limited to Appendix I, II, III and/or IV hereto, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.11 of the Plan. 7. Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 7. 8. Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that: (a) The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 8. 2


 
(b) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, then any shares of Common Stock issued hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register any such shares of Common Stock (or to file a “re-offer prospectus”). (c) If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of shares of Common Stock issued hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom. 9. Entire Agreement; Amendment. Except as expressly set forth herein, this Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter; provided however, that the restrictive covenants contained in Appendix III hereto are in addition to and not in lieu of any other restrictive covenants by which the Participant may be bound. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof. 10. Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to PRSUs awarded under the Plan or future PRSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. 11. No Right to Employment or Service. Any questions as to whether and when there has been a Termination of Employment and the cause of such Termination of Employment shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s employment or service at any time, for any reason and with or without Cause, and shall not guarantee any right to future employment. 12. Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information 3


 
related to the PRSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted by applicable law. This authorization and consent is freely given by the Participant. 13. Compliance with Laws. Notwithstanding anything in this Agreement to the contrary, the grant of PRSUs and any issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the PRSUs or any shares of Common Stock or other property pursuant to this Agreement if any such issuance would violate any such requirements or laws. As a condition to the settlement of the PRSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation. 14. Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. 15. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 17. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder. 18. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 19. Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of PRSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the PRSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation and shall not be considered as part of such compensation in the event of severance, redundancy or resignation. 4


 
20. Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60th) day following the Grant Date (the “Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award will be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion. 21. No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself. 22. No Rights as a Stockholder. The Participant’s interest in the PRSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until shares of Common Stock have been issued to the Participant in accordance with this Agreement and the Plan. 23. Withholding. Notwithstanding the withholding provision in the Plan or anything else in this Agreement: (a) If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon vesting of the PRSUs (regardless of when the Common Stock underlying the PRSUs are delivered to the Participant), on each date that all or a portion of the PRSUs actually vests, if (1) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell Common Stock or (2) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation. (b) If in the tax jurisdiction in which the Participant resides, a tax withholding obligation arises upon delivery of the Common Stock underlying the PRSUs (regardless of when vesting occurs), then following each date that all or a portion of the PRSUs actually vests, the Company will defer the delivery of the Common Stock otherwise deliverable to the Participant until the earliest of: (1) the date of the Participant’s Termination of Employment, (2) the date that the short-term deferral period under Section 409A of the Code expires with respect to such vested RSUs, or (3) the date on which the Company has in place an effective registration statement under the Securities Act or there is a Securities Act exemption available under which the Participant may sell Common Stock and on which the Participant is not subject to a Company-imposed trading blackout (the earliest of such dates, the “Delivery Date”). If on the Delivery Date (x) the Company does not have in place an effective registration statement under the Securities Act and there is not a Securities Act exemption available under which the Participant may sell shares of Common Stock or (y) the Participant is subject to a Company-imposed trading blackout, then unless the Participant has made other arrangements satisfactory to the Company, the Company will withhold from the shares of Common Stock to be delivered to the Participant such number of shares of 5


 
Common Stock as are sufficient in value (as determined by the Company in its sole discretion) to cover the amount of the tax withholding obligation. 24. Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the PRSUs are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. 25. Non-U.S. Provisions. The Award and the shares of Common Stock subject to the Award and payable pursuant to Section 4 of this Agreement shall be subject to any special terms and conditions for the Participant's country set forth in Appendix IV attached hereto (the "Country Addendum"). Moreover, if the Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Agreement. [Remainder of Page Intentionally Left Blank] 6


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●]. AVAYA HOLDINGS CORP. By: Name: Title: PARTICIPANT [To be executed electronically.] 7


 
Appendix I PRSUs Performance Matrix The “target” number of PRSUs eligible to vest and be earned under this Agreement in accordance with this Performance Matrix is [#QuantityGranted#] (the “Target PRSUs”). However, the Participant is eligible to earn between 0%-150% of the Target PRSUs based on the Company’s level of achievement of the performance factors described below. In no event shall the Participant be eligible to earn more than 150% of the Target PRSUs (the “Maximum PRSUs”). This performance award consists of three, separately measured fiscal year performance periods, each from October 1 of each of 2019, 2020, and 2021 through September 30 of each of 2020, 2021, and 2022, respectively (each, a “Performance Year”, and collectively, the “Performance Period”). The “Performance Factor” shall be Adjusted EBITDA, as separately measured for each applicable Performance Year. “Adjusted EBITDA” shall mean EBITDA as reported in the Company’s Form 10-K for the applicable Performance Year, excluding the impact of: adjustments for fresh start accounting; restructuring costs; advisory fees; investment banking, legal fees, integration costs and accelerated compensation expense relating to actual or potential acquisitions or divestitures, non-cash share- based compensation, asset impairment charges, gain or loss on sale/disposal of long-lived assets, gain or loss on the sale of a business, gain or loss on extinguishment or modification of debt, gain or loss on equity investment, resolution of legal matters (including reserves, settlements, and certain legal costs), changes in fair value of derivatives and Emergence Date Warrants as defined within Form 10-K, securities registration fees, gain or loss on foreign currency transactions, and pension/OPEB/nonretirement post-employment retirement benefits and long-term disability costs. In addition, the Compensation Committee shall equitably adjust (1) Adjusted EBITDA for any Performance Year to reflect the impact of other special or non-recurring events not known as of the grant date of the Award if it determines such adjustment is necessary in order to prevent the enlargement or dilution of any benefits with respect to the Award; except that, any adjustment for the results of operations of acquired businesses shall be excluded for the Performance Year in which such acquisition occurs and (2) the Maximum Adjusted EBITDA targets if the aggregate incremental accrual / expense under such year’s Annual Incentive Plan associated with above- target attainment of Adjusted EBITDA for such fiscal year is materially different from $14M (i.e., if such incremental accrual / expense exceeds $14M, the amount of such excess will be deducted from the target for such year and if $14M exceeds such incremental accrual / expense, the excess will be added to the target for such year) and if the Compensation Committee determines such adjustment is necessary in order to prevent the enlargement or dilution of any benefits with respect to the Award. For each Performance Year, up to 1/3rd of the Maximum PRSUs shall become eligible to vest (subject to the other terms and conditions set forth herein) based on the Company’s actual level of achievement of the Performance Factor as compared to the threshold, target and maximum levels set forth on Appendix II, as illustrated in the table below: Appendix I - 1


 
Level of Percentage of PRSUs Eligible to be Earned Performance Year Achievement (as a percentage of 1/3 of the Target PRSUs) Fiscal 2020 Below Threshold 0% October 1, 2019 – Threshold 50% September 30, 2020 Target 100% Maximum 150% Fiscal 2021: Below Threshold 0% October 1, 2020- Threshold 50% September 30, 2021 Target 100% Maximum 150% Fiscal 2022: Below Threshold 0% October 1, 2021- Threshold 50% September 30, 2022 Target 100% Maximum 150% If, upon conclusion of the applicable Performance Year, achievement of the Performance Factor exceeds a specified level for such Performance Factor, but is below the next specified level, the percentage of PRSUs earned and eligible to vest shall be linearly interpolated on a straight-line basis. No PRSUs shall be earned in respect of the Performance Factor for any Performance Year for which achievement of the Performance Factor falls below the “Threshold” level established for that Performance Year. Determination of Eligible Units. Within 60 days following the Company’s delivery of audited financial statements in respect of the applicable Performance Year, the Committee will determine (i) whether and to what extent the Performance Factor has been achieved, and (ii) the number of PRSUs that are deemed earned in respect of such Performance Year (the date such determination is made, the “Determination Date”), which PRSUs shall remain eligible to vest on the later of (x) February 15, 2023 and (y) five days after the Determination Date (as applicable, the “Vesting Date”), so long as the Participant has not incurred a Termination of Employment prior to such date (the “Eligible Units”). The number of Eligible Units (if any) will be further adjusted following the end of the Performance Period (but prior to the Vesting Date) based on the TSR Modifier described below. Following the end of the Performance Period, any PRSUs that do not constitute Eligible Units following the Committee’s determination thereof will be automatically forfeited by the Participant without consideration. Except as otherwise set forth herein, if the Participant incurs a Termination of Employment prior to the Vesting Date, all PRSUs granted under this Agreement shall be forfeited. Appendix I - 2


 
Modifier Based on TSR (the “TSR Modifier”). Notwithstanding the foregoing, following the end of the Performance Period, the Company will measure its total shareholder return (“TSR”) relative to the other entities in the TSR Index (as defined below), as measured from the grant date through the last day of the Performance Period, in order to determine whether a performance modifier equal to +/- 25% will be applied to the number of Eligible Units certified by the Compensation Committee as “earned” as a result of achievement of the Performance Factor for the Performance Period. If, following the end of the Performance Period, the Company’s Percentile is above 75%, then an additional number of PRSUs granted under this Agreement shall constitute Eligible Units, with such additional number to be calculated by multiplying (i) the number of Eligible Units earned in respect of the Performance Factor during the Performance Period by (ii) 1.25; provided, that in no event shall more than the Maximum PRSUs vest under this Agreement and, provided, further that if the Company’s absolute TSR is negative for the Performance Period, that in no event shall more than the Target PRSUs vest under this Agreement. If, following the end of the Performance Period, the Company’s Percentile is at or below 25%, then the number of Eligible Units earned in respect of the Performance Factor during the Performance Period and that are eligible to vest shall be reduced to a number of PRSUs to be calculated by multiplying (i) the number of Eligible Units earned in respect of the Performance Factor during the Performance Period by (ii) 0.75. Determination of TSR: TSR for the Company and each other entity in the TSR Index shall be determined in accordance with the following formula. TSR shall be equal to (a) divided by (b), expressed as a percentage, where: (a) is equal to the sum of (i) and (ii), where (i) is the difference determined by the Ending Price minus the Starting Price (each as defined below); and (ii) is the sum of all dividends paid on common stock during the Performance Period, provided that all dividends are treated as reinvested in the Company’s common stock on the ex-dividend date; and (b) is equal to the Starting Price. For purposes of determining TSR: “Starting Price” means, with respect to the Company, the average closing price of one share of the Company’s common stock on the applicable stock exchange during the 30 days immediately preceding and including the grant date, and, for each other entity in the TSR Index, means such entity’s closing price on the grant date. “Ending Price” means, with respect to the Company, the average closing price of one share of the Company’s common stock on the applicable stock exchange during the 30 days immediately preceding and including the last day of the Performance Period, and, for each other entity in the TSR Index, means such entity’s closing price on the last trading day included in the Performance Period. Appendix I - 3


 
The Company’s “Percentile” shall be equal to the absolute value of the difference obtained by 100% minus the quotient of (A) the Rank (as defined below), divided by (B) the total number of entities in the TSR Index (including the Company, but after removal of any entities in accordance with calculation of the Rank), expressed as a percentage. The Company’s “Rank” shall be determined by the Company’s position within the ranking of each entity in the TSR Index (as defined below, which includes the Company) in descending order based on their respective TSRs (with the highest TSR having a Rank of one). For purposes of developing the ordering provided in the immediately-preceding sentence, (A) any entity that filed for bankruptcy protection under the United States Bankruptcy Code during the Performance Period shall be assigned the lowest order of any entity in the TSR Index, and (B) any entity that is acquired during the Performance Period, or otherwise no longer listed on a national securities exchange at the end of the Performance Period (other than the Company), shall be removed from the TSR Index and shall be excluded for purposes of ordering the entities in the TSR Index (and for purposes of calculating the Company’s Percentile). In addition to the Company, the “TSR Index” shall be comprised of the Russell 2000 Index as in effect on the grant date, subject to adjustment at end of the Performance Period as set forth in the definition of Rank above. Treatment upon a Change in Control; Qualifying Terminations. The provisions of Section 10.1 of the Plan shall govern the treatment of the PRSUs upon the occurrence of a Change in Control; provided, that if the Committee determines to treat the PRSUs in accordance with Section 10(1)(a) of the Plan (i.e., if the PRSUs are continued, assumed or substituted in connection with such Change in Control), the following provisions shall apply: in the event the Participant incurs a Termination of Employment prior to the Vesting Date as a result of the Participant’s Termination of Employment without Cause (other than death or Disability), or by the Participant for Good Reason (any such Termination of Employment, a “Qualifying Termination”), and such Qualifying Termination occurs (i) only to the extent the Participant is also a participant in the Avaya Inc. Change in Control Severance Plan, during a Potential Change in Control Period, as such term is defined in the Avaya Inc. Change in Control Severance Plan or (ii) within the twelve (12) month period immediately following a Change in Control, subject to the Participant’s execution, delivery and non-revocation of a customary release of claims in favor of the Company and its subsidiaries and affiliates within sixty (60) days of such Termination of Employment and continued compliance with Appendix I to this Agreement, (1) any Eligible Units attributable to a Performance Year ending prior to the date of such Termination of Employment shall immediately vest and be settled, and (2) any PRSUs eligible to be earned based upon achievement of the Performance Factor for (i) the Performance Year in which such Termination of Employment occurs and (ii) any Performance Year commencing following the date of such Termination of Employment, shall immediately vest and be settled at “target” level achievement. Any PRSUs that do not vest as a result of the foregoing sentence shall immediately be cancelled and forfeited for no consideration. Upon a Change in Control, the Compensation Committee will apply the TSR Modifier to the number of Eligible Units attributable to any Performance Year that has elapsed as of the Change Appendix I - 4


 
in Control date, with the last day of the Performance Period being deemed to be the effective date of the Change in Control for purposes of applying the TSR Modifier. Settlement of Eligible Units. Any PRSUs that become vested on the Vesting Date will be settled within 10 business days following the Vesting Date, subject to Section 23 of the Agreement. Appendix I - 5


 
Appendix II Threshold, Target and Maximum Levels Applicable to the Performance Factor (Adjusted EBITDA, in Millions) Performance Year Threshold Target Maximum Fiscal 2020 October 1, 2019 -September 30, 2020 Fiscal 2021 October 1, 2020-September 30, 2021 Fiscal 2022 October 1, 2021-September 30, 2022 Levels shown above are subject to any applicable adjustments permitted under the Plan. Appendix II - 1


 
Appendix III NON-DISCLOSURE, IP ASSIGNMENT, NON-COMPETITION AND NON-SOLICITATION By executing the Award Agreement, the Participant acknowledges the importance to Avaya Holdings Corp. and its Affiliates existing now or in the future (hereinafter referred to collectively as the “Company” or “Avaya”), of protecting its confidential information and other legitimate business interests, including, without limitation, the valuable trade secrets and good will that it develops or acquires. The Participant further acknowledges that the Company is engaged in a highly competitive business, that its success in the marketplace depends upon the preservation of its confidential information and industry reputation, and that obtaining agreements such as this one from its employees is reasonable and necessary. The Participant undertakes the obligations in this Appendix III in consideration of the Participant’s initial and/or ongoing relationship with the Company, this Award, the Participant’s being granted access to trade secrets and other confidential information of the Company, and for other good and valuable consideration, the receipt and sufficiency of which the Participant acknowledges. As used in this Appendix III, “relationship” refers to a Participant’s employment or association as an advisor, consultant or contractor, with the Company, as applicable. 1. Loyalty and Conflicts of Interest 1.1. Exclusive Duty. During the Participant’s relationship with the Company, the Participant will not engage in any other business activity that creates a conflict of interest except as permitted by the Company’s Code of Conduct, as in effect from time to time. 1.2. Compliance with Company Policy. The Participant will comply with all lawful policies, practices and procedures of the Company, as these may be implemented and/or changed by the Company from time to time. Without limiting the generality of the foregoing, the Participant acknowledges that the Company may from time to time have agreements with other Persons which impose obligations or restrictions on the Company regarding Intellectual Property, as defined below, created during the course of work under such agreements and/or regarding the confidential nature of such work. The Participant will comply with and be bound by all such obligations and restrictions which the Company conveys to the Participant and will take all actions necessary (to the extent within Participant’s power and authority) to discharge the obligations of the Company under such agreements. 2. Confidentiality 2.1. Nondisclosure and Nonuse of Confidential Information. All Confidential Information, as defined below, which the Participant creates or has access to as a result of the Participant’s relationship with the Company, is and shall remain the sole and exclusive property of the Company. The Participant will never, directly or indirectly, use or disclose any Confidential Information, except (a) as required for the proper performance of the Participant’s regular duties for the Company, (b) as expressly authorized in writing in advance by the Company’s General Counsel, (c) as required by applicable law or regulation, or (d) as may be reasonably determined by the Participant to be necessary in connection with the enforcement of Participant’s rights in Appendix III - 1


 
connection with this Appendix III. This restriction shall continue to apply after the termination of the Participant’s relationship with the Company or any restriction time period set forth in this Appendix III, howsoever caused. The Participant shall furnish prompt notice to the Company’s General Counsel of any required disclosure of Confidential Information sought pursuant to subpoena, court order or any other legal process or requirement, and shall provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure, to the greatest extent time and circumstances permit. 2.2. Permissible Disclosure. Nothing in the Award Agreement or this Appendix III shall prohibit or restrict the Company, the Participant or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to the Award Agreement, including without limitation, this Appendix III, or the Plan, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; or (iii) accepting any U.S. Securities and Exchange Commission awards. In addition, nothing in this Agreement or the Plan prohibits or restricts Avaya or the Participant from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation. 2.3. Trade Secrets. Pursuant to 18 U.S.C. § 1833(b), the Participant will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of Avaya that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to the Participant’s attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Participant files a lawsuit for retaliation by Avaya for reporting a suspected violation of law, the Participant may disclose the trade secret to the Participant’s attorney and use the trade secret information in the court proceeding, so long as the Participant files any document containing the trade secret under seal and does not disclose the trade secret except under court order. Nothing in this Agreement or the Plan is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section. 2.4. Use and Return of Documents. All documents, records, and files, in any media of whatever kind and description, relating to the business, present or otherwise, of the Company, and any copies (including, without limitation, electronic), in whole or in part, thereof (the “Documents” and each individually, a “Document”), whether or not prepared by the Participant, shall be the sole and exclusive property of the Company. Except as required for the proper performance of the Participant’s regular duties for the Company or as expressly authorized in writing in advance by the Company, the Participant will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Participant will safeguard, and return to the Company immediately upon termination of the Participant’s relationship with the Company, and at such other times as may be specified by the Company, all Documents and other property of the Company, and all documents, records and files of its customers, subcontractors, vendors, and suppliers (“Third-Party Documents” and each individually a “Third-Party Document”), as well as all other property of such customers, Appendix III - 2


 
subcontractors, vendors and suppliers, then in the Participant’s possession or control. Provided, however, if a Document or Third-Party Document is on electronic media, the Participant may, in lieu of surrender of the Document or Third-Party Document, provide a copy on electronic media to the Company and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company, the Participant will disclose all passwords necessary or desirable to enable the Company to obtain access to the Documents and Third-Party Documents. Notwithstanding any provision of this Section 2.4 to the contrary, the Participant shall be permitted to retain copies of all Documents evidencing Participant’s hire, equity, compensation rate and benefits, this Appendix III, and any other agreements between the Participant and the Company that the Participant has signed or electronically accepted. 3. Non-Competition, Non-Solicitation, and Other Restricted Activity 3.1. Non-Competition. This paragraph is applicable to Participants who hold Senior Director and higher positions as of the date this Award is accepted. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, whether paid or not, (a) serve as a partner, principal, licensor, licensee, employee, consultant, officer, director, manager, agent, affiliate, representative, advisor, promoter, associate, investor, or otherwise for, (b) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of, or (c) build, design, finance, acquire, lease, operate, manage, control, invest in, work or consult for or otherwise join, participate in or affiliate him or herself with, any business whose business, product(s) or operations are in any respect competitive with or otherwise similar to the Company’s business. The foregoing covenant shall cover the Participant’s activities in every part of the Territory. “Territory” shall mean (a) all states of the United States of America from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company; and (b) all other countries from which the Company derived revenue or conducted business at any time during the two-year period prior to the date of the termination of the Participant’s relationship with the Company. The foregoing shall not prevent: (a) passive ownership by the Participant of no more than two percent (2%) of the equity securities of any publicly traded company; or (b) the Participant’s providing services to a division or subsidiary of a multi-division entity or holding company, so long as (i) no division or subsidiary to which the Participant provides services is in any way competitive with or similar to the business of the Company, and (ii) the Participant is not involved in, and does not otherwise engage in competition on behalf of, the multi-division entity or any competing division or subsidiary thereof. 3.2. Good Will. Any and all good will which the Participant develops during his or her relationship with the Company with any of the customers, prospective customers, subcontractors or suppliers of the Company shall be the sole, exclusive and permanent property of the Company, and shall continue to be such after termination of the Participant’s relationship with the Company, howsoever caused. 3.3. Non-Solicitation of Customers. During the Participant’s relationship with the Company and for a period of twelve (12) months immediately following the termination of Appendix III - 3


 
the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, directly or indirectly, contact, or cause to be contacted, directly or indirectly, or engage in any form of oral, verbal, written, recorded, transcribed, or electronic communication with any customer of the Company for the purposes of conducting business that is competitive with or similar to that of the Company or for the purpose of disadvantaging the Company’s business in any way; provided that this restriction applies (i) only with respect to those customers who are or have been a customer of the Company at any time within the immediately preceding one-year period or whose business has been solicited on behalf of the Company by any of its officers, employees or agents within said one-year period, other than by form letter, blanket mailing or published advertisement, and (ii) only if the Participant has performed work for such customer during his or her relationship with the Company, has been introduced to, or otherwise had contact with, such customer as a result of his or her relationship with the Company, or has had access to Confidential Information which would assist in the solicitation of such customer. The foregoing restrictions shall not apply to general solicitation or advertising, including through media and trade publications. 3.4. Non-Solicitation/Non-Hiring of Employees and Independent Contractors. During his or her relationship with the Company and for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company for any reason, whether voluntary or involuntary, the Participant will not, and will not assist anyone else to, (a) hire or solicit for hiring any employee of the Company or seek to persuade or induce any employee of the Company to discontinue employment with the Company, or (b) hire or engage any independent contractor providing services to the Company, or solicit, encourage or induce any independent contractor providing services to the Company to terminate or diminish in any substantial respect its relationship with the Company. For the purposes of this Appendix III, an “employee” or “independent contractor” of the Company is any person who is or was such at any time within the preceding six-month period. The foregoing restrictions shall not apply to general solicitation or advertising, including through media, trade publications and general job postings. 3.5. Non-Solicitation of Others. The Participant agrees that for a period of twelve (12) months immediately following the termination of the Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will not solicit, encourage, or induce, or cause to be solicited, encouraged or induced, directly or indirectly, any franchisee, joint venture, supplier, vendor or contractor who conducted business with the Company at any time during the two year period preceding the termination of his or her relationship with the Company, to terminate or adversely modify any business relationship with the Company, or not to proceed with, or enter into, any business relationship with the Company, nor shall the Participant otherwise interfere with any business relationship between the Company and any such franchisee, joint venture, supplier, vendor or contractor. 3.6. Notice of New Address and Employment. During the twelve (12)-month period immediately following the termination of Participant’s relationship with the Company, for any reason, whether voluntary or involuntary, the Participant will promptly provide the Company with pertinent information concerning each new job or other business activity in which the Participant engages or plans to engage during such twelve (12)-month period as the Company may reasonably request in order to determine the Participant’s continued compliance with his or her obligations under this Appendix III. The Participant shall notify any new employer(s) of the Appendix III - 4


 
Participant’s obligations under this Appendix III, and hereby consents to notification by the Company to such employer(s) concerning his or her obligations under this Appendix III. The Company shall treat any such notice and information as confidential, and will not use or disclose the information contained therein except to enforce its rights hereunder. Any breach of this Section 3.6 shall constitute a material breach of this agreement. 3.7. Acknowledgement of Reasonableness; Remedies. In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has carefully read and considered all the terms and conditions hereof. The Participant acknowledges without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the good will, Confidential Information and other legitimate business interests of the Company, that each and every one of those restraints is reasonable in respect to subject matter, length of time, and geographic area; and that these restraints will not prevent the Participant from obtaining other suitable employment during the period in which Participant is bound by them. The Participant will never assert, or permit to be asserted on the Participant’s behalf, in any forum, any position contrary to the foregoing. Were the Participant to breach any of the provisions of this Appendix III, the harm to the Company would be irreparable. Therefore, in the event of such a breach or threatened breach, the Company shall, in addition to any other remedies available to it, have the right to obtain preliminary and permanent injunctive relief against any such breach or threatened breach without having to post bond, and the Participant agrees that injunctive relief is an appropriate remedy to address any such breach. Without limiting the generality of the foregoing, or other forms of relief available to the Company, in the event of the Participant’s breach of any of the provisions of this Appendix III, the Participant will forfeit any award or payment made pursuant to any applicable severance or other incentive plan or program, or if a payment has already been made, the Participant will be obligated to return the proceeds to the Company. 3.8. Unenforceability. In the event that any provision of this Appendix III shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The 12-month period of restriction set forth in Sections 3.1, 3.3, 3.4 and 3.5 hereof and the 12-month period of obligation set forth in Section 3.6 hereof shall be tolled, and shall not run, during any period of time in which the Participant is in violation of the terms thereof, in order that the Company shall have the agreed- upon temporal protection recited herein. 3.9. Limited Exception for Attorneys. Insofar as the restrictions set forth in this Section 3 prohibit the solicitation, inducement or attempt to hire a licensed attorney who is employed at the Company, they shall not apply if the Participant is a licensed attorney and the restrictions contained herein are illegal, unethical or unenforceable under the laws, rules and regulations of the jurisdiction in which the Participant is licensed as an attorney. 3.10. Attorneys’ Fees and Costs. Except as prohibited by law, the Participant shall indemnify the Company from any and all costs and fees, including attorneys’ fees, incurred by the Company in successfully enforcing the terms of this Award Agreement against the Participant, (including, but not limited to, a court partially or fully granting any application, motion, or petition by the Company for a temporary restraining order, preliminary injunction, or Appendix III - 5


 
permanent injunction), as a result of the Participant’s breach or threatened breach of any provision contained herein. Upon successful enforcement, the Company shall be entitled to recover from the Participant its costs and fees incurred to date at any time during the course of a dispute (i.e., final resolution of such dispute is not a prerequisite) upon written demand to the Participant. 3.11. Enforcement. The Company agrees that it will not enforce Sections 3.1, 3.3, 3.5 or the portion of Section 3.4 that prohibits Participant from hiring Company employees and independent contractors to restrict Participant’s employment in any jurisdiction in which such enforcement is contrary to law or regulation to the extent that Participant is a resident of such jurisdiction at the time Participant’s relationship with the Company terminates and does not otherwise change residency during the restriction period. 4. Intellectual Property 4.1. In signing or electronically accepting the Award Agreement, the Participant hereby assigns and shall assign to the Company all of his or her rights, title and interest in and to all inventions, discoveries, improvements, ideas, mask works, computer or other apparatus programs and related documentation, and other works of authorship (hereinafter each designated “Intellectual Property”), whether or not patentable, copyrightable or subject to other forms of protection, made, created, developed, written or conceived by the Participant during the period of his or her relationship with the Company, whether during or outside of regular working hours, either solely or jointly with another, in whole or in part, either: (a) in the course of such relationship, (b) relating to the actual or anticipated business or research development of the Company, or (c) with the use of Company time, material, private or proprietary information, or facilities, except as provided in Section 4.5 below. 4.2. The Participant will, without charge to the Company, but at its expense, execute a specific assignment of title to the Company and do anything else reasonably necessary, including but not limited to providing or signing additional documentation that is reasonably necessary to the Company or its designee, to enable the Company to secure, maintain and/or perfect a patent, copyright or other form of protection for said Intellectual Property anywhere in the world. Participant agrees that this obligation shall continue after Participant’s relationship with the Company terminates. If the Company is unable because of Participant’s mental or physical incapacity or for any other reason to secure Participant’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Intellectual Property assigned to the Company as above, then Participant hereby irrevocably designates and appoints the Company or its designee and its duly authorized officers and agents as Participant’s agent and attorney in fact, to act for and on Participant’s behalf and instead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Participant. 4.3. The Participant acknowledges that the copyrights in Intellectual Property created with the scope of his or her relationship with the Company belong to the Company by operation of law. Participant further acknowledges and agrees that the decision whether or not to commercialize or market any Intellectual Property developed by Participant solely or jointly with others is within the Company’s sole benefit and discretion and that no payment will be due to Appendix III - 6


 
Participant as a result of the Company’s efforts to commercialize or market such Intellectual Property. 4.4. The Participant has previously provided to the Company a list (the “Prior Invention List”) describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Participant prior to his or her relationship with the Company, which belong to the Participant and which are not assigned to the Company hereunder (collectively referred to as “Prior Inventions”); and, if no Prior Invention List was previously provided, the Participant represents and warrants that there are no such Prior Inventions. Participant will not incorporate, or permit to be incorporated, any Prior Invention into an Avaya product, process, machine, solution or system without the Company’s prior written consent. Notwithstanding the foregoing sentence, if, in the course of Participant’s relationship with the Company, Participant incorporates into an Avaya product, process, machine, solution or system a Prior Invention owned by Participant or in which Participant has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, sell, offer for sale and import, such Prior Invention as part of or in connection with such product, process, machine, solution or system. 4.5. Exception to Assignments. THE PARTICIPANT UNDERSTANDS THAT THE PROVISIONS OF THIS AWARD AGREEMENT REQUIRING ASSIGNMENT OF INTELLECTUAL PROPERTY (AS DEFINED ABOVE) TO THE COMPANY DO NOT APPLY TO ANY INTELLECTUAL PROPERTY FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON PARTICIPANT’S OWN TIME, UNLESS (A) THE INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY, OR (ii) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT; (B) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY PARTICIPANT FOR THE COMPANY; OR (C) THE INTELLECTUAL PROPERTY OTHERWISE QUALIFIES FULLY UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 (ATTACHED HERETO AS EXHIBIT A). THE PARTICIPANT WILL ADVISE THE COMPANY PROMPTLY IN WRITING OF ANY INVENTIONS THAT PARTICIPANT BELIEVES MEET THE CRITERIA FOR THIS SECTION 4.5 EXCEPTION TO ASSIGNMENTS AND WHICH WERE NOT OTHERWISE DISCLOSED ON THE PRIOR INVENTION LIST PREVIOUSLY DELIVERED TO THE COMPANY TO PERMIT A DETERMINATION OF OWNERSHIP BY THE COMPANY. ANY SUCH DISCLOSURE WILL BE RECEIVED IN CONFIDENCE. 5. Definitions Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section 5 and as provided elsewhere in this Appendix III. For purposes of this Appendix III, the following definitions apply: Appendix III - 7


 
“Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by management authority, contract or equity interest. “Confidential Information” means any and all information of the Company, whether or not in writing, that is not generally known by others with whom the Company competes or does business, or with whom it plans to compete or do business, and any and all information, which, if disclosed, would assist in competition against the Company, including but not limited to (a) all proprietary information of the Company, including but not limited to the products and services, technical data, methods, processes, know-how, developments, inventions, and formulae of the Company, (b) the development, research, testing, marketing and financial activities and strategic plans of the Company, (c) the manner in which the Company operates, (d) its costs and sources of supply, (e) the identity and special needs of the customers, prospective customers and subcontractors of the Company, and (f) the people and organizations with whom the Company has business relationships and the substance of those relationships. Without limiting the generality of the foregoing, Confidential Information shall specifically include: (i) any and all product testing methodologies, product test results, research and development plans and initiatives, marketing research, plans and analyses, strategic business plans and budgets, and technology grids; (ii) any and all vendor, supplier and purchase records, including without limitation the identity of contacts at any vendor, any list of vendors or suppliers, any lists of purchase transactions and/or prices paid; and (iii) any and all customer lists and customer and sales records, including without limitation the identity of contacts at purchasers, any list of purchasers, and any list of sales transactions and/or prices charged by the Company. Confidential Information also includes any information that the Company may receive or has received from customers, subcontractors, suppliers or others, with any understanding, express or implied, that the information would not be disclosed. Notwithstanding the foregoing, Confidential Information does not include information that (A) is known or becomes known to the public in general (other than as a result of a breach of Section 2 hereof by the Participant), (B) is or has been independently developed or conceived by the Participant without use of the Company’s Confidential Information or (C) is or has been made known or disclosed to the Participant by a third party without a breach of any obligation of confidentiality such third party may have to the Company of which the Participant is aware. “Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company. 6. Compliance with Other Agreements and Obligations The Participant represents and warrants that his or her employment or other relationship with the Company and execution and performance of the Award Agreement, including this Appendix III, will not breach or be in conflict with any other agreement to which the Participant is a party or is bound, and that the Participant is not now subject to any covenants against competition or similar covenants or other obligations to third parties or to any court order, judgment or decree that would affect the performance of the Participant’s obligations hereunder or the Participant’s duties and responsibilities to the Company, except as disclosed in writing to the Company’s General Counsel no later than the time an executed copy of the Award Agreement, including this Appendix III, is returned by the Participant. The Participant will not disclose to or Appendix III - 8


 
use on behalf of the Company, or induce the Company to use, any proprietary information of any previous employer or other third party without that party’s consent. Participant agrees that if in the course of his or her relationship with the Company, Participant is asked for information relating to Participant’s former employers’ business that would require Participant to reveal information that is not publicly available, Participant will refrain from using and providing such information. 7. Entire Agreement; Severability; Modification With respect to the subject matter hereof, this Appendix III sets forth the entire agreement between the Participant and the Company, and, except as otherwise expressly set forth herein, supersedes all prior and contemporaneous communications, agreements and understandings, written or oral, regarding the same. If the Participant previously executed an Award Agreement with an Appendix III or other schedule containing similar provisions, this Appendix III shall supersede such agreement. In the event of conflict between this Appendix III and any prior agreement between the Participant and the Company with respect to the subject matter hereof, this Appendix III shall govern. The provisions of this Appendix III are severable, and no breach of any provision of this Appendix III by the Company, or any other claimed breach of contract or violation of law, shall operate to excuse the Participant’s obligation to fulfill the requirements of Sections 2, 3 and 4 hereof. No deletion, addition, marking, notation or other change to the body of this Appendix III shall be of any force or effect, and this Appendix III shall be interpreted as if such change had not been made. This Appendix III may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by the Participant and the Company’s General Counsel. If any provision of this Appendix III should, for any reason, be held invalid or unenforceable in any respect, it shall not affect any other provisions, and shall be construed by limiting it so as to be enforceable to the maximum extent permissible by law. Provisions of this Appendix III shall survive any termination if so provided in this Appendix III or if necessary or desirable to accomplish the purpose of other surviving provisions. It is agreed and understood that no changes to the nature or scope of the Participant’s relationship with the Company shall operate to extinguish the Participant’s obligations hereunder or require that a new agreement concerning the subject matter of this Appendix III be executed. 8. Assignment Neither the Company nor the Participant may make any assignment of this Appendix III or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, the Company may assign its rights and obligations under this Appendix III without the Participant’s consent (a) in the event that the Participant is transferred to a position with one of the Company’s Affiliates or (b) in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into any company or entity or transfer to any company or entity all or substantially all of the business, properties or assets of the Company or any division or line of business of the Company with which the Participant is at any time associated. This Appendix III shall inure to the benefit of and be binding upon the Participant and the Company, and each of their respective successors, executors, administrators, heirs, representatives and permitted assigns. Appendix III - 9


 
9. Successors The Participant consents to be bound by the provisions of this Appendix III for the benefit of the Company, and any successor or permitted assign to whose employ the Participant may be transferred, without the necessity that a new agreement concerning the subject matter or this Appendix III be re-signed at the time of such transfer. 10. Acknowledgement of Understanding In signing or electronically accepting the Award Agreement, the Participant gives the Company assurance that the Participant has read and understood all of its terms; that the Participant has had a full and reasonable opportunity to consider its terms and to consult with any person of his or her choosing before signing or electronically accepting; that the Participant has not relied on any agreements or representations, express or implied, that are not set forth expressly in the Award Agreement, including this Appendix III; and that the Participant has signed the Award Agreement knowingly and voluntarily. [no more text on this page] Appendix III - 10


 
EXHIBIT A CALIFORNIA LABOR CODE SECTION 2870 INVENTION ON OWN TIME-EXEMPTION FROM AGREEMENT “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.” Appendix III - 11


 
Appendix IV Country Addendum Special Terms and Conditions Applicable in Countries Outside the United States Except as provided otherwise herein, any capitalized term not defined in this Country Addendum shall have the same meaning as is ascribed thereto in the Plan or the Agreement, as applicable. This Country Addendum includes additional (or, if indicated, different) terms and conditions that govern the Award granted to the Participant under the Plan if the Participant works and/or resides in one of the countries listed below. If the Participant is a citizen or resident of a country other than that in which he or she is currently working and/or residing (or is considered as such for local law purposes) or if the Participant transfers his or her service relationship and/or residence to another country after the Award is granted, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to the Participant. ALL COUNTRIES OUTSIDE THE UNITED STATES Responsibility for Taxes. The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax- Related Items in connection with any aspect of the Plan, including, but not limited to, the grant, vesting or exercise (if applicable) of the Award, the delivery of shares of Common Stock, the subsequent sale of any shares of Common Stock acquired pursuant to the Award and the receipt of any dividends, dividend equivalents or other distributions with respect to the shares of Common Stock; and (b) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Prior to the relevant taxable or tax withholding event, as applicable, the Participant agrees to make arrangements acceptable to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their sole discretion, to satisfy any withholding obligation for Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation payable to the Participant by the Company and/or the Employer; (ii) withholding from the proceeds of the sale of any shares of Common Stock acquired pursuant to the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Appendix IV - 1


 
Participant’s behalf pursuant to this authorization without further consent); (iii) withholding from any shares of Common Stock to be delivered to the Participant pursuant to the Award; and/or (iv) any other method approved by the Company and, to the extent required by applicable law or the Plan, approved by the Committee. Depending on the withholding method, the Company and/or the Employer may withhold for Tax- Related Items by considering statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Participant. In the event of any over- withholding, the Participant may receive a refund of any over-withheld amount in cash (without interest and without entitlement to the equivalent amount in shares of Common Stock). If the obligation for Tax-Related Items is satisfied by withholding shares of Common Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Common Stock to which he or she is entitled pursuant to the Award, notwithstanding that a number of shares of Common Stock are withheld to satisfy the obligation for Tax-Related Items. The Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue the shares of Common Stock or the proceeds of the sale of shares of Common Stock, if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items. Nature of Grant. In accepting the Award, the Participant acknowledges, understands and agrees that: a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; b) the grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future Awards, or benefits in lieu of Awards, even if Awards have been granted in the past; c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; d) the Award and the Participant’s participation in the Plan shall not create or amend a right to employment or be interpreted as forming an employment or service contract with the Company or any Subsidiary (including the Employer); e) the Participant is voluntarily participating in the Plan; f) the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty; g) if the Participant acquires shares of Common Stock, the value of such shares of Common Stock may increase or decrease in value, even below the per share exercise price; Appendix IV - 2


 
h) unless otherwise agreed with the Company, the Award is not granted as consideration for, or in connection with, any service the Participant may provide as a director of a Subsidiary; i) no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Participant's Termination of Employment (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any); j) unless otherwise provided in the Plan or by the Company in its discretion, the Award and any benefit that may be received pursuant to this Agreement do not create any entitlement to have the Award or any such benefit transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Common Stock underlying the Award; and k) neither the Company nor any Subsidiary (including the Employer) shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the Award or the subsequent sale of any shares of Common Stock acquired pursuant to the Award. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan or the Participant’s acquisition or sale of the underlying shares of Common Stock. The Participant should consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan. Language. The Participant acknowledges and represents that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English so as to allow the Participant to understand the terms and conditions of this Agreement or any other document related to the Award and/or the Plan. Furthermore, if the Participant has received this Agreement, or any other document related to the Award and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. Imposition of Other Requirements. The Company reserves the right to impose other requirements on participation in the Plan or on the Award or shares of Common Stock acquired pursuant to the Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the undersigned to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Choice of Venue. Participant agrees to the exclusive venue and jurisdiction of the State and Federal Courts located in the state of Delaware and waives any objection based on lack of Appendix IV - 3


 
jurisdiction or inconvenient forum. Any action relating to or arising out of this Plan must be commenced within one year after the cause of action accrued. Insider Trading / Market Abuse Restrictions. The Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions including, but not limited to, the United States (“U.S.”) and the Participant’s country of residence, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock or Awards, or rights linked to the value of shares of Common Stock during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s insider trading policy as set forth in the “Avaya Holdings Corp. Insider Trading and Disclosure of Confidential Information Policy for Directors, Officers and Employees.” The Participant is responsible for ensuring compliance with any applicable restrictions. Exchange Control, Tax and/or Foreign Asset / Account Reporting. Certain foreign asset and/or foreign account reporting requirements and exchange controls may affect the Participant’s ability to purchase or hold shares of Common Stock under the Plan or funds received from participating in the Plan in a brokerage or bank account outside of the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in the Participant’s country. The Participant may also be required to repatriate sale proceeds or other funds received as a result of his or her participation in the Plan to the Participant’s country through a designated bank or broker and/or within a certain time after receipt. The Participant is responsible for complying with any applicable regulations and should consult with his or her personal legal and tax advisors for any details. Data Privacy. This provision replaces Section 12 (Transfer of Personal Data) of the Agreement: If the Participant would like to participate in the Plan, the Participant will need to review the information provided in this Agreement and, where applicable, declare consent to the processing and/or transfer of personal data as described below. a) EEA+ Controller and Representative. If the Participant is based in the European Union (“EU”), the European Economic Area, Switzerland or, if and when the United Kingdom leaves the EU, the United Kingdom (collectively “EEA+”), the Participant should note that the Company, with its address at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is the controller responsible for the processing of the Participant’s personal data in connection with the Agreement and the Plan. The Company’s representative in the EU is Avaya Deutschland GmbH, Theodor-Heuss Allee 112, Frankfurt, Germany 60486. b) Data Collection and Usage. The Company collects, uses and otherwise processes certain personal data about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or Appendix IV - 4


 
directorships held in the Company, details of all Awards or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, which the Company receives from the Participant, the Employer or otherwise in connection with this Agreement or the Plan (“Data”), for the purposes of implementing, administering and managing the Plan and allocating the cash payment or shares of Common Stock pursuant to the Plan. If the Participant is based in the EEA+, the legal basis, where required, for the processing of Data by the Company is the necessity of the data processing for the Company to (i) perform its contractual obligations under this Agreement, (ii) comply with legal obligations established in the EEA+, or (iii) pursue the legitimate interest of complying with legal obligations established outside of the EEA+. If the Participant is based outside of the EEA+, the legal basis, where required, for the processing of Data by the Company is the Participant’s consent, as further described below. c) Stock Plan Administration Service Providers. The Company transfers Data to Fidelity Stock Plan Services, LLC, an independent service provider (the "Service Provider"), which is assisting the Company by performing recordkeeping and administration services for the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Service Provider will open an account for the Participant to receive and trade shares of Common Stock acquired under the Plan. The Participant may be asked to agree on separate terms and data processing practices with the Service Provider, with such agreement being a condition to the ability to participate in the Plan. d) International Data Transfers. In the event the Participant resides, works or is otherwise located outside of the U.S., Data will be transferred from the Participant’s country to the U.S., where the Company and its service providers are based. The Participant understands and acknowledges that the U.S. is not subject to an unlimited adequacy finding by the European Commission and might not provide a level of protection of personal data equivalent to the level of protection in the Participant’s country. As a result, in the absence of a self-certification of the data recipient in the U.S. under the EU/U.S. or Swiss/U.S. Privacy Shield Framework or the implementation of appropriate safeguards such as the Standard Contractual Clauses adopted by the EU Commission or binding corporate rules approved by the competent EU data protection authority, the processing of personal data might not be subject to substantive data processing principles or supervision by data protection authorities. In addition, data subjects might have no or less enforceable rights regarding the processing of their personal data. Neither the Company nor the Service Provider is currently self-certified under the EU/U.S. or Swiss/U.S. Privacy Shield Framework but the Company has Appendix IV - 5


 
implemented binding corporate rules, among others, with its subsidiaries in the EEA+. If the Participant is based in the EEA+, Data will be transferred from the EEA+ to the Company based on the binding corporate rules. The Participant may view a copy of such appropriate safeguards at https://www.avaya.com/en/privacy/bcr/. The onward transfer of Data from the Company to the Service Provider or, as the case may be, a different service provider of the Company is based solely on the Participant’s consent, as further described below. If the Participant is based outside of the EEA+, the Company’s legal basis, where required, for the transfer of Data from the Participant’s country to the Company and from the Company onward to the Service Provider or, as the case may be, a different service provider of the Company is the Participant’s consent, as further described below. e) Data Retention. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws. f) Data Subject Rights. The Participant may have a number of rights under data privacy laws in his or her jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access or copies of Data the Company processes, (ii) the rectification or amendment of incorrect or incomplete Data, (iii) the deletion of Data, (iv) request restrictions on the processing of Data, (v) object to the processing of Data for legitimate interests, (vi) the portability of Data, (vi) lodge complaints with competent authorities in the Participant’s jurisdiction, and/or to (viii) receive a list with the names and addresses of any potential recipients of Data. To receive additional information regarding these rights or to exercise these rights, the Participant can contact the Company's data privacy office at dataprivacy@avaya.com or, for the Participants in the EEA+, view the Company's binding corporate rules at https://www.avaya.com/en/privacy/bcr/. g) Necessary Disclosure of Personal Data. The Participant understands that providing the Company with Data is necessary for the performance of the Agreement and that the Participant’s refusal to provide Data would make it impossible for the Company to perform its contractual obligations and may affect the Participant’s ability to participate in the Plan. h) Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing any consents referred to herein on a purely voluntary basis. The Participant understands that he or she may withdraw any such consent at any time with future effect for any or no reason. If the Participant does not consent, or if the Participant later seeks to withdraw the Participant’s consent, the Participant’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant Awards to Appendix IV - 6


 
the Participant or administer or maintain the Awards. For more information on the consequences of refusal to consent or withdrawal of consent, the Participant should contact the Company's data privacy office at dataprivacy@avaya.com. Declaration of Consent. If the Participant is based in the EEA+, by accepting the Award and indicating consent via the Company’s online acceptance procedure, the Participant explicitly declares his or her consent to the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. as described above. If the Participant is based outside of the EEA+, by accepting the Awards and indicating consent via the Company’s online acceptance procedure, Participant explicitly declares his or her consent to the entirety of the Data processing operations described in this Agreement including, without limitation, the onward transfer of Data by the Company to the Service Provider or, as the case may be, a different service provider of the Company in the U.S. BELGIUM Acceptance of Agreement. If the Award is an Option, the Participant should refer to the separate Belgium Option Package for information about the tax impact of the acceptance of the Award and consult his or her personal tax advisor for further information. CANADA Method of Exercise and Payment. If this Award is an Option, due to tax considerations in Canada and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price by having the Company withhold shares of Common Stock issuable upon exercise of the Option or in the form of Common Stock owned by the Participant. The Company reserves the right to allow these forms of payment of the Per Share Exercise Price for legal or administrative reasons. Delivery of Shares / Settlement. The Award will be settled by the delivery of shares of Common Stock and not by the delivery of cash or a combination of cash and shares of Common Stock. Securities Law Notification. The Participant is permitted to sell any shares of Common Stock acquired under the Plan through the Service Provider or other such stock plan service provider as may be selected by the Company in the future, provided the sale of shares takes place outside Canada through facilities of a stock exchange on which the Common Stock is listed. The Common Stock is currently listed on the New York Stock Exchange. Appendix IV - 7


 
The following provisions will apply to individuals who are residents of Quebec: Language Consent. The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or directly hereto, be drawn up in English. Consentement à la Langue Utilisée. Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention. Data Privacy. This provision supplements the above Data Privacy section of this Country Addendum: The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company and its Subsidiaries (including the Employer) to disclose and discuss the Plan with their advisors. The Participant further authorizes the Company and the Employer to record and keep such information in Participant’s employment file. GERMANY No country specific terms and conditions. INDIA Method of Exercise and Payment. If this Award is an Option, due to exchange control considerations in India and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant may not pay the Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, unless all of the shares of Common Stock subject to the exercised portion of the Option are sold at such time (i.e., a "sell-to-cover" method of exercise and payment is not permitted but a "sell-all" method of exercise and payment is permitted). The Company reserves the right to allow this form of payment of the Per Share Exercise Price for legal or administrative reasons. IRELAND No country specific terms and conditions. ITALY Method of Exercise and Payment. If this Award is an Option, due to regulatory considerations in Italy and notwithstanding the provisions of Section 6.4(d) of the Plan, the Participant must pay the Appendix IV - 8


 
Per Share Exercise Price through a procedure whereby the Participant delivers irrevocable instructions to a broker acceptable to the Committee to sell a number of shares of Common Stock with an aggregate value equal to the Per Share Exercise Price and deliver the proceeds of such sale to the Company, provided that all of the shares of Common Stock subject to the exercised portion of the Option must be sold at such time (i.e., a "sell-all" method of exercise and payment is required). The Company reserves the right to allow other forms of payment of the Per Share Exercise Price for legal or administrative reasons. Plan Document Acknowledgment. In accepting the Award, the Participant acknowledges that the Participant has received a copy of the Plan and the Agreement and has reviewed the Plan and the Agreement in their entirety and fully understands and accepts all provisions of the Plan and the Agreement. The Participant further acknowledges that the Participant has read and specifically and expressly approves the following sections of the Agreement and the Country Addendum: Vesting (for RSUs and PRSUs); Vesting and Exercisability (for Options); Exercise Following Termination (for Options); Securities Representation (for RSUs and PRSUs); Compliance with Laws; Further Assurances; Acceptance of Agreement; Withholding and Responsibility for Taxes; Language; Imposition of Other Requirements; Governing Law; Choice of Venue. MEXICO Plan Document Acknowledgment. By accepting the Award, the Participant acknowledges that he or she has received a copy of the Plan and the Agreement, which the Participant has reviewed. The Participant acknowledges further that he or she accepts all the provisions of the Plan and the Agreement. The Participant also acknowledges that he or she has read and specifically and expressly approves the terms and conditions set forth in the Nature of Grant section, which clearly provide as follows: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in it are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) none of the Company or its Subsidiaries (including the Employer) are responsible for any decrease in the value of any shares of Common Stock (or the amount of any cash payment) that may be acquired under the Plan. Labor Law Policy and Acknowledgment. In accepting the Award, the Participant expressly recognizes that Avaya Holdings Corp., with offices at 350 Mt. Kemble Avenue, Morristown, NJ 07960, United States of America, is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis and the Participant’s sole Employer is a Subsidiary in Mexico (“Avaya- Mexico”). Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from his or her participation in the Plan do not establish any rights between the Participant and Avaya-Mexico, and do not form part of the employment conditions and/or benefits provided by Avaya-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant’s employment. Appendix IV - 9


 
The Participant further understands that his or her participation in the Plan is a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant’s participation at any time without any liability to the Participant. Finally, the Participant hereby declares that he or she does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and Participant therefore grants a full and broad release to the Company and its Subsidiaries, branches, representation offices, shareholders, officers, agents or legal representatives with respect to any claim that may arise. Reconocimiento del Plan. Al aceptar este premio ("Award"), el Participante reconoce que él o ella ha recibido una copia del plan y del Contrato y que lo ha revisado. El Participante reconoce además que acepta todas las disposiciones del Plan y del Contrato. El Participante de igual forma reconoce que acepta los términos y condiciones establecidos en la sección Naturaleza del Otorgamiento ("Nature of Grant"), que estipula claramente lo siguiente: (i) la participación del Participante en el Plan no constituye un derecho adquirido; (ii) la Compañía ofrece el plan y la Participación del Participante en él de manera totalmente discrecional; (iii) la participación del Participante en el Plan es voluntaria; y (iv) ninguna de las Compañías o Subsidiarias (incluido el Patrón) son responsables de cualquier disminución en el valor de las Acciones (o el monto de cualquier pago en efectivo) que pueda adquirirse en virtud del Plan Política de la Ley Laboral y Reconocimiento. Al aceptar este Premio ("Award"), el Participante reconoce expresamente que Avaya Holdings Corp., con oficinas ubicadas en 350 Mt. Kemble Avenue, Morristown, New Jersey 07960, U.S.A.., es el único responsable de la administración del Plan y que la participación del Participante en el mismo, el pago del premio o la adquisición de Acciones no constituye de ninguna manera una relación laboral entre el Participante y la Compañía, debido a que la participación de esa persona en el Plan deriva únicamente de una relación comercial y el único Patrón del participante es un Afiliada Mexicana de la Compañía (“Avaya-México”). Derivado de lo anterior, el Participante reconoce expresamente que el Plan y los beneficios que pudieran derivar para el Participante por su participación en el mismo, no establecen ningún derecho entre el Participante e Avaya-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por Avaya-México, y cualquier modificación al Plan o la terminación del mismo de ninguna manera podrá ser interpretada como una modificación o desmejora de los términos y condiciones de trabajo del Participante. Asimismo, el Participante reconoce que su participación en el Plan es resultado de la decisión unilateral y discrecional de la Compañía, por lo tanto, la Compañía se reserva el derecho absoluto para modificar y/o discontinuar la participación del Participante en cualquier momento, sin ninguna responsabilidad hacia el Participante. Finalmente el Participante manifiesta que no se reserva ninguna acción o derecho que ejercitar en contra dela Compañía, por cualquier compensación o daños en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia exime amplia y completamente a la Compañía, sus Afiliadas, sucursales, oficinas de representación, sus accionistas, administradores, agentes y representantes legales con respecto a cualquier reclamo que pudiera surgir. Appendix IV - 10


 
NETHERLANDS No country specific terms and conditions. SINGAPORE Securities Law Notification. The grant of the Award is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA under which it is exempt from the prospectus and registration requirements and is not made with a view to the underlying shares of Common Stock being subsequently offered for sale to any other party. The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Any shares of Common Stock acquired pursuant to the Award cannot be offered for sale in Singapore prior to the six-month anniversary of the Grant Date, unless such offer or sale is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). SPAIN Labor Law Acknowledgement. By accepting the Award, the Participant consents to participation in the Plan and acknowledges that the Participant has received a copy of the Plan. The Participant understands that the Company has unilaterally, gratuitously and in its sole discretion decided to grant the Award under the Plan to individuals who may be employees of the Company or its Subsidiaries throughout the world. The decision is limited and entered into based upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any Subsidiary on an ongoing basis, other than as expressly set forth in the Agreement. Consequently, the Participant understands that the Award is granted on the assumption and condition that the Award and any shares of Common Stock acquired pursuant to the Award shall not become part of any employment or service contract (whether with the Company or any Subsidiary) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever. Furthermore, the Participant understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from the grant of the Award, which is gratuitous and discretionary, since the future value of the Award and the underlying shares of Common Stock is unknown and unpredictable. In addition, the Participant understands that the grant of the Award would not be made but for the assumptions and conditions set forth hereinabove; thus, the Participant understands, acknowledges and freely accepts that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the Award and any right to a cash payment or shares of Common Stock shall be null and void. Further, the Participant understands and agrees that upon Termination of Employment, unless otherwise specifically provided in the Agreement or determined by the Committee or its designee, any unvested portion of the Award will be immediately forfeited and, if the Award is an Option, any vested portion of the Option shall remain exercisable only for the period described in Section Appendix IV - 11


 
4 of the Agreement and shall be subject to the terms of the Plan and, thereafter, any unexercised portion of the Option will be forfeited. In particular, the Participant understands and agrees that, unless otherwise expressly provided in the Agreement or determined by the Committee or its designee, the unvested portion of the Award, and any vested portion of an Option that is not exercised within any post-termination exercise period described in the Agreement, will be cancelled without entitlement to any shares of Common Stock or to any amount as indemnification if the Participant terminates employment by reason of, but not limited to, resignation; disciplinary dismissal adjudged to be with cause; disciplinary dismissal adjudged or recognized to be without good cause (i.e., subject to a "despido improcedente"); individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause; material modification of the terms of employment under Article 41 of the Workers’ Statute; relocation under Article 40 of the Workers’ Statute; Article 50 of the Workers’ Statute; unilateral withdrawal by the Participant's employer; and under Article 10.3 of Royal Decree 1382/1985. Securities Law Notification. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the grant of the Award. The Agreement has not been, nor will it be, registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus. UNITED ARAB EMIRATES Securities Law Notification. The Award is being offered only to qualified employees of the Company and its Subsidiaries and is in the nature of providing equity incentives to such employees in the United Arab Emirates. Any documents related to the Plan, including the Plan and the Agreement, are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. Prospective acquirers of any securities offered pursuant to the Award should conduct their own due diligence on securities. If the Participant does not understand the contents of the Plan or the Agreement, the Participant should consult an authorized financial adviser. UNITED KINGDOM ("U.K.") Withholding. This provision supplements the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum: Without limitation to the Withholding section of the Agreement (if applicable) and the Responsibility for Taxes section of this Country Addendum, the Participant hereby agrees that the Participant is liable for all Tax-Related Items and hereby covenants to pay all such Tax- Related Items, as and when requested by the Company or the Employer, as applicable, or by Her Majesty’s Revenue and Customs (“HMRC”) (or any other tax or relevant authority). The Participant also hereby agrees to indemnify and keep indemnified the Company and the Employer, as applicable, Appendix IV - 12


 
against any Tax-Related Items that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax or relevant authority) on the Participant’s behalf. Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Participant is such a director or executive officer of the Company and the U.K. income tax liability arising as a result of participation in the Plan is not collected from or paid by the Participant within ninety (90) days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant acknowledges that he or she will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-assessment regime and for paying the Company or the Employer, as applicable, for the value of any employee national insurance contributions due on this additional benefit. Appendix IV - 13


 
Document
EXHIBIT 10.4

Form of Non-Employee Director Deferred RSU Award Agreement
2019 Equity Incentive Plan

NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT
PURSUANT TO THE
AVAYA HOLDINGS CORP.
2019 EQUITY INCENTIVE PLAN

* * * * *

Participant: [Participant Name]   

Grant Date: [Grant Date ]   

Grant Number: [Client Grant ID]  

Number of Restricted Stock Units (“RSUs”) Granted: [RSUs Granted] 

* * * * *

        This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Avaya Holdings Corp., a corporation organized in the State of Delaware (the “Company”), and the Participant specified above, pursuant to the Avaya Holdings Corp. 2019 Equity Incentive Plan, as in effect and as amended from time to time (the “Plan”), which is administered by the Committee; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company to grant the Participant an Other Stock-Based Award in the form of the RSUs provided herein, each of which represents the right to receive one share of Common Stock on the Settlement Date (as defined below), subject to the terms and conditions contained herein and in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:
1.Incorporation by Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms, conditions and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time, unless such amendments are expressly intended not to apply to the Award provided hereunder), all of which terms, conditions and provisions are made a part of and incorporated into this Agreement as if they were each expressly set forth herein. Except as provided otherwise herein, any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content and agrees to be bound thereby and hereby. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.



2.Grant of RSUs. The Company hereby grants to the Participant, as of the Grant Date specified above, the number of RSUs specified above, subject to adjustment as provided for in the Plan, on the terms and conditions set forth in this Agreement and otherwise provided for in the Plan. Except as otherwise provided by the Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of the shares of Common Stock underlying the RSUs, except as otherwise specifically provided for in the Plan or this Agreement. The RSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company. The Participant’s interest in the book-entry account shall be that of a general, unsecured creditor of the Company.
3.Vesting. The RSUs subject to this Award shall vest immediately upon grant.
4.Delivery of Shares. Within sixty (60) days following the first to occur among (a) the Participant’s Termination of Directorship (provided that such termination also constitutes a “separation from service” for purposes of Section 409A of the Code), (b) the consummation of a Change in Control (provided that such Change in Control also constitutes a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code), and (c) the third anniversary of the grant date (as applicable, the “Settlement Date”), the Participant shall receive the number of shares of Common Stock that corresponds to the number of RSUs that are vested RSUs as of the Settlement Date (“Vested RSUs”), and such Vested RSUs shall be cancelled upon receipt of the shares of Common Stock.
5.Non-Transferability. No portion of the RSUs may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company as a result of forfeiture of the RSUs as provided herein.
6.Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the choice of law principles thereof. Any suit, action or proceeding with respect to this Agreement shall be governed by Section 13.11 of the Plan.
7.Tax Liability; Section 409A of the Code.
(a)The Participant agrees and acknowledges that the Company has no withholding obligation with respect to the Participant, and accordingly, the Participant is solely responsible and liable for any and all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), and the Company (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or settlement of the RSUs or the subsequent sale of any shares and (ii) does not commit to structure the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items.
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(b)The intent of the parties is that the RSUs granted hereunder comply with Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. However, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Participant by Section 409A of the Code or damages for failing to comply with Section 409A of the Code.
(c)As noted above, a termination of service shall not be deemed to have occurred for purposes of this Agreement unless such termination is also a “separation from service” within the meaning of Section 409A of the Code, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of service” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if the Participant is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then the delivery of shares of Common Stock in respect of the Vested RSUs pursuant to Section 4 shall not occur until the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of the Participant’s death, to the extent required under Section 409A of the Code. Upon the expiration of the foregoing delay period, the Company shall deliver all shares of Common Stock delayed pursuant to this Section 7(c) at the same time.
(d)Whenever this Agreement specifies a settlement period with reference to a number of days, the actual settlement date within the specified period shall be within the sole discretion of the Company.
(e)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any settlement in shares of Common Stock under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code be subject to offset by any other amount unless otherwise permitted by Section 409A of the Code.
8.Legend. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates, if any, representing shares of Common Stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates, if any, representing shares of Common Stock acquired pursuant to this Agreement in the possession of the Participant in order to carry out the provisions of this Section 8.
9.Securities Representations. This Agreement is being entered into by the Company in reliance upon the following express representations and warranties of the Participant. The Participant hereby acknowledges, represents and warrants that:
(a)The Participant has been advised that the Participant may be an “affiliate” within the meaning of Rule 144 under the Securities Act and in this connection the Company is relying in part on the Participant’s representations set forth in this Section 9.
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(b)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the shares of Common Stock issuable hereunder must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Common Stock and the Company is under no obligation to register such shares of Common Stock (or to file a “re-offer prospectus”).
(c)If the Participant is deemed an affiliate within the meaning of Rule 144 of the Securities Act, the Participant understands that (i) the exemption from registration under Rule 144 shall not be available unless (A) a public trading market then exists for the Common Stock, (B) adequate information concerning the Company is then available to the public, and (C) other terms and conditions of Rule 144 or any exemption therefrom are complied with, and (ii) any sale of the shares of Common Stock issuable hereunder may be made only in limited amounts in accordance with the terms and conditions of Rule 144 or any exemption therefrom.
10.Entire Agreement; Amendment. This Agreement, together with the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.
11.Notices; Electronic Delivery and Acceptance. Any notice hereunder by the Participant shall be given to the Company in writing and such notice shall be deemed duly given only upon receipt thereof by the General Counsel of the Company. Any notice hereunder by the Company shall be given to the Participant in writing and such notice shall be deemed duly given only upon receipt thereof at such address as the Participant may have on file with the Company. The Company may, in its sole discretion, decide to deliver any documents related to RSUs awarded under the Plan or future RSUs that may be awarded under the Plan by electronic means or request the Participant’s consent to participate in the Plan by electronic means. By accepting this RSU Award, the Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
12.No Right to Service. Any questions as to whether and when there has been a Termination of Directorship and the cause of such Termination of Directorship shall be determined in the sole discretion of the Committee. Nothing in this Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries or its Affiliates to terminate the Participant’s service at any time, for any reason and with or without Cause.
13.Transfer of Personal Data. The Participant authorizes, agrees and unambiguously consents to the transmission by the Company (or any Subsidiary) of any personal data information related to the RSUs awarded under this Agreement for legitimate business purposes (including, without limitation, the administration of the Plan), to the extent permitted by applicable law. This authorization and consent is freely given by the Participant.
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14.Compliance with Laws. The grant of RSUs and the issuance of shares of Common Stock hereunder shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act, the Exchange Act and in each case any respective rules and regulations promulgated thereunder) and any other law, rule regulation or exchange requirement applicable thereto. The Company shall not be obligated to issue the RSUs or any shares of Common Stock pursuant to this Agreement if any such issuance would violate any such requirements. As a condition to the settlement of the RSUs, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation.
15.Binding Agreement. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns.
16.Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.
17.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.
18.Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.
19.Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
20.Acquired Rights. The Participant acknowledges and agrees that: (a) the Company may terminate or amend the Plan at any time; (b) the award of RSUs made under this Agreement is completely independent of any other award or grant and is made at the sole discretion of the Company; (c) no past grants or awards (including, without limitation, the RSUs awarded hereunder) give the Participant any right to any grants or awards in the future whatsoever; and (d) any benefits granted under this Agreement are not part of the Participant’s ordinary compensation, and shall not be considered as part of such compensation in the event of termination or resignation.
21.Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for this Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than the sixtieth (60th) day following the Grant Date (the
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Final Acceptance Date”). If the Participant’s acceptance of this Agreement does not occur by the Final Acceptance Date, then the entire Award will be forfeited and cancelled without any consideration therefor, except as otherwise determined in the Committee’s sole and absolute discretion.
22.No Waiver. No waiver or non-action by either party hereto with respect to any breach by the other party of any provision of this Agreement shall be deemed or construed to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself.
23.No Rights as a Stockholder. The Participant’s interest in the RSUs shall not entitle the Participant to any rights as a stockholder of the Company. The Participant shall not be deemed to be the holder of, or have any of the rights and privileges of a stockholder of the Company in respect of, the shares of Common Stock unless and until such shares have been issued to the Participant in accordance with Section 4.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of [●].

AVAYA HOLDINGS CORP.



By:      

Name:      

Title:      



PARTICIPANT

[To be executed electronically.]




6

Document
EXHIBIT 10.5
AVAYA HOLDINGS CORP.
2020 EMPLOYEE STOCK PURCHASE PLAN
(As Adopted by the Board of Directors of the Company on January 8, 2020,
and approved by the stockholders of the Company on March 4, 2020)
1.               Definitions.
(a)            “Administrator” means the Committee or, subject to Applicable Law, a subcommittee of the Committee or one or more of the Company’s officers or management team appointed by the Board or Committee to administer the day-to-day operations of the Plan.
(b)            “Affiliate” will have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act. The Board will have the authority to determine the time or times at which “Affiliate” status is determined within the foregoing definition.
(c)            “Applicable Law” means the requirements relating to the administration of equity-based awards under state corporate laws, United States federal and state securities laws, the Code, the rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any non-U.S. jurisdiction where rights are, or will be, granted under the Plan.
(d)             “Board” means the board of directors of the Company.
(e)             “Change in Control” means any one of the following:
(i)        any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company or its subsidiaries, any trustee or other fiduciary holding securities under any employee benefit plan of the Company or its subsidiaries, or any other entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock ), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors;
(ii)        during any period of 12 consecutive calendar months, individuals who were directors of the Company on the first day of such period (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the first day of such period whose election, or nomination for election, by the Company’s stockholders was approved by a vote of at least two-thirds of the Incumbent Directors will be considered as though such individual were an Incumbent Director, but excluding, for purposes of this proviso, any such individual whose initial assumption of office occurs as a result of an actual or threatened proxy contest with



respect to election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as used in Section 13(d) of the Exchange Act), in each case, other than the Board, which individual, for the avoidance of doubt, shall not be deemed to be an Incumbent Director for purposes of this Section 1(e)(ii), regardless of whether such individual was approved by a vote of at least two-thirds of the Incumbent Directors;
 
(iii)        consummation of a reorganization (excluding a reorganization under either Chapter 7 or Chapter 11 of Title 11 of the United States Code), merger, consolidation or other similar business combination (any of the foregoing, a “Business Combination”) of the Company with any other corporation, in any case with respect to which the Company’s Voting Securities outstanding immediately prior to such Business Combination do not, immediately following such Business Combination, continue to represent (either by remaining outstanding or being converted into Voting Securities of the Company or any ultimate parent thereof) more than fifty percent (50%) of the Voting Securities entitled to vote generally in the election of directors of the Company (or its successor) or any ultimate parent thereof after the Business Combination; or
(iv)        a complete liquidation or dissolution of the Company or the consummation of a sale or disposition by the Company of all or substantially all of the assets of the Company and its subsidiaries (on a consolidated basis) to any person that is not an Affiliate of the Company or its subsidiaries.
(f)              “Code” means the United States Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or United States Treasury Regulation thereunder will include such section or regulation, any regulation or other official applicable guidance promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(g)              “Committee” means the Compensation Committee of the Board or any properly delegated subcommittee thereof. If no Compensation Committee or subcommittee thereof exists, the term “Committee” shall be deemed to refer to the Board for all purposes under the Plan.
(h)              “Common Stock” means the common stock, $0.01 par value, of the Company, as the same may be converted, changed, reclassified or exchanged.
(i)              “Company” means Avaya Holdings Corp., a Delaware corporation, or any successor to all or substantially all of the Company’s business that adopts the Plan.
(j)              “Contributions” means the amount of Eligible Pay contributed by a Participant through payroll deductions or other payments that the Administrator may permit a Participant to make to fund the exercise of rights to purchase Shares granted pursuant to the Plan.
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(k)             “Designated Company” means any Parent, Subsidiary or Affiliate, whether now existing or existing in the future, that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan. The Administrator may designate any Parent, Subsidiary or Affiliate as a Designated Company in a Non-423 Offering. For purposes of a Section 423 Offering, only the Company and any Parent or Subsidiary may be Designated Companies; provided, however, that at any given time, a Parent or Subsidiary that is a Designated Company under a Section 423 Offering will not be a Designated Company under a Non-423 Offering.
(l)              “Effective Date” means the date the Plan is approved by the Board, subject to stockholder approval as provided in Section 18 hereof.
(m)            “Eligible Employee” means any person providing services to the Company or a Designated Company in an employee-employer relationship who meets such other initial service requirement specified by the Administrator pursuant to Section 5(c)(A). For purposes of clarity, the term “Eligible Employee” will not include the following, regardless of any subsequent reclassification as an employee by the Company or a Designated Company, any governmental agency, or any court: (i) any independent contractor; (ii) any consultant; (iii) any individual performing services for the Company or a Designated Company who has entered into an independent contractor or consultant agreement with the Company or a Designated Company; (iv) any individual performing services for the Company or a Designated Company under a purchase order, a supplier agreement or any other agreement that the Company or a Designated Company enters into for services; (v) any individual classified by the Company or a Designated Company as contract labor (such as contractors, contract employees, job shoppers), regardless of length of service; (vi) any individual whose base wage or salary is not processed for payment by the payroll department(s) or payroll provider(s) of the Company or a Designated Company; and (vii) any leased employee within the meaning of Code Section 414(n), including such persons leased from a professional employer organization. The Administrator will have exclusive discretion to determine whether an individual is an Eligible Employee for purposes of the Plan.
(n)        “Eligible Pay” means the following amounts paid by the Company or any Parent, Subsidiary or Affiliate to the Eligible Employee (other than amounts paid after termination of employment date, even if such amounts are paid for pre-termination date services), including (i) base salary or wages (including 13th/14th month payments or similar concepts under local law, whether such payments are characterized as base salary, bonus or otherwise under local law), cash bonuses, commissions, and overtime pay, and (ii) any portion of such amounts voluntarily deferred or reduced by the Eligible Employee (A) under any employee benefit plan of the Company or a Parent, Subsidiary or Affiliate available to all levels of employees on a non-discriminatory basis upon satisfaction of eligibility requirements, and (B) under any deferral plan of the Company (provided such amounts would not otherwise have been excluded had they not been deferred); but excluding (iii) relocation pay, severance payments, cash allowances for a stated purpose (such as a medical or car allowance), income derived from stock options, stock appreciation rights, restricted stock units or other equity-based awards, the cost of employee benefits paid for by the Company, imputed income arising under any Company group insurance or benefit program, contributions made by the Company under
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any employee benefit plan, and similar items of compensation. For Eligible Employees in the United States, Eligible Pay will include elective amounts that are not includible in gross income of the Eligible Employee by reason of Sections 125, 132(f)(4), 402(e)(3), 402(h) or 403(b) of the Code. The Administrator will have discretion to determine the application of this definition to Eligible Employees outside the United States.
(o)        “Enrollment Period” means the period during which an Eligible Employee may elect to participate in the Plan, with such period occurring before the first day of each Offering Period, as prescribed by the Administrator.
(p)        “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, from time to time, or any successor law thereto, and the regulations promulgated thereunder.
(q)        “Fair Market Value” means, as of any given date, (i) the closing sales price for the Common Stock on the Trading Day immediately prior to the applicable date as quoted on the New York Stock Exchange or, if no sale occurred on such date, the closing price reported for the first Trading Day immediately prior to such date during which a sale occurred; or (ii) if the Common Stock is not traded on an exchange but is regularly quoted on a national market or other quotation system, the closing sales price on the Trading Day immediately prior to such date as quoted on such market or system, or if no sales occurred on such date, then on the Trading Day immediately prior to such date on which sales prices are reported; or (iii) in the absence of an established market for the Common Stock of the type described in (i) or (ii) of this Section 1(q), the fair market value established by the Committee acting in good faith.
(r)        “Non-423 Offering” has the meaning ascribed to it in Section 2.
(s)        “Offering” means a Section 423 Offering or a Non-423 Offering of a right to purchase Shares under the Plan during an Offering Period as further described in Section 6. Unless otherwise determined by the Administrator, each Offering under the Plan in which Eligible Employees of one or more Designated Companies may participate will be deemed a separate offering for purposes of Section 423 of the Code, even if the dates of the applicable Offering Periods of each such Offering are identical, and the provisions of the Plan will separately apply to each Offering. With respect to Section 423 Offerings, the terms of separate Offerings need not be identical provided that all Eligible Employees granted purchase rights in a particular Offering will have the same rights and privileges, except as otherwise may be permitted by Code Section 423; a Non-423 Offering need not satisfy such requirements.
(t)        “Offering Period” means the periods established in accordance with Section 6 during which rights to purchase Shares may be granted pursuant to the Plan and Shares may be purchased on one or more Purchase Dates. The duration and timing of Offering Periods may be changed pursuant to Sections 6 and 17.
(u)        “Parent” means a parent corporation of the Company, whether now or hereafter existing, as “parent corporation” is defined in Section 424(e) of the Code.
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(v)        “Participant” means an Eligible Employee who elects to participate in the Plan.
(w)        “Plan” means the Avaya Holdings Corp. 2020 Employee Stock Purchase Plan, as may be amended from time to time.
(x)        “Purchase Date” means the last Trading Day of each Purchase Period (or such other Trading Day as the Administrator may determine).
(y)        “Purchase Period” means a period of time within an Offering Period, as may be specified by the Administrator in accordance with Section 6, generally beginning on the first Trading Day of each Offering Period and ending on a Purchase Date. An Offering Period may consist of one or more Purchase Periods.
(z)        “Purchase Price” means the purchase price at which Shares may be acquired on a Purchase Date and which will be set by the Administrator; provided, however, that the Purchase Price for a Section 423 Offering will not be less than eighty-five percent (85%) of the lesser of (i) the Fair Market Value of the Shares on the first Trading Day of the Offering Period or (ii) the Fair Market Value of the Shares on the Purchase Date. Unless otherwise determined by the Administrator prior to the commencement of an Offering Period, the Purchase Price will be eighty-five percent (85%) of the lesser of (A) the Fair Market Value of the Shares on the first Trading Day of the Offering Period or (B) the Fair Market Value of the Shares on the Purchase Date.
(aa)        “Section 423 Offering” has the meaning ascribed to it in Section 2.
(bb)        “Shares” means the shares of Common Stock.
 
(cc)        “Subsidiary” means a subsidiary corporation of the Company, whether now or hereafter existing, as “subsidiary corporation” is defined in Section 424(f) of the Code.
(dd)        “Tax-Related Items” means any income tax, social insurance, payroll tax, payment on account or other tax-related items arising in relation to the Participant’s participation in the Plan.
(ee)        “Trading Day” means a day on which the principal exchange that Shares are listed on is open for trading.
(ff)        “Voting Securities” means the outstanding securities of the Company entitled to vote generally in the election of directors (or comparable equity interests) of such entity.
2.               Purpose of the Plan. The purpose of the Plan is to provide an opportunity for Eligible Employees of the Company and its Designated Companies to purchase Common Stock at a discount through voluntary Contributions, thereby attracting, retaining and rewarding
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such persons and strengthening the mutuality of interest between such persons and the Company’s stockholders. The Company intends for offerings under the Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (each, a “Section 423 Offering”); provided, however, that the Administrator may also authorize the grant of rights under offerings of the Plan that are not intended to comply with the requirements of Section 423 of the Code, pursuant to any rules, procedures, agreements, appendices, or sub-plans adopted by the Administrator for such purpose (each, a “Non-423 Offering”).
3.               Number of Reserved Shares. Subject to adjustment pursuant to Section 16 hereof, Five Million, Five Hundred Thousand (5,500,000) Shares may be sold pursuant to the Plan. Such Shares may be authorized but unissued Shares, treasury Shares or Shares purchased in the open market. For avoidance of doubt, up to the maximum number of Shares reserved under this Section 3 may be used to satisfy purchases of Shares under Section 423 Offerings and any remaining portion of such maximum number of Shares may be used to satisfy purchases of Shares under Non-423 Offerings.
4.               Administration of the Plan.
(a)        Committee as Administrator. The Plan will be administered by the Committee. Notwithstanding anything in the Plan to the contrary, subject to Applicable Law, any authority or responsibility that, under the terms of the Plan, may be exercised by the Committee may alternatively be exercised by the Board. Subject to Applicable Law, no member of the Board or Committee (or its delegates) will be liable for any good faith action or determination made in connection with the operation, administration or interpretation of the Plan. In the performance of its responsibilities with respect to the Plan, the Committee will be entitled to rely upon, and no member of the Committee will be liable for any action taken or not taken in reliance upon, information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party that the Committee deems necessary.
(b)        Powers of the Administrator. The Administrator will have full power and authority to administer the Plan, including, without limitation, the authority to (i) construe, interpret, reconcile any inconsistency in, correct any default in and supply any omission in, and apply the terms of the Plan and any enrollment form or other instrument or agreement relating to the Plan, (ii) determine eligibility and adjudicate all disputed claims filed under the Plan, including whether Eligible Employees will participate in a Section 423 Offering or a Non-423 Offering and which Subsidiaries and Affiliates of the Company (or Parent, if applicable) will be Designated Companies participating in either a Section 423 Offering or a Non-423 Offering (within the limits of the Plan), (iii) determine the terms and conditions of any right to purchase Shares under the Plan, (iv) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the Plan, (v) amend an outstanding right to purchase Shares, including any amendments to a right that may be necessary for purposes of effecting a transaction contemplated under Section 16 hereof (including, but not limited to, an amendment to the class or type of stock that may be issued pursuant to the exercise of a right or the Purchase Price applicable to a right), provided that the
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amended right otherwise conforms to the terms of the Plan, and (vi) make any other determination and take any other action that the Administrator deems necessary or desirable for the administration of the Plan, including, without limitation, the adoption of any such rules, procedures, agreements, appendices, or sub-plans (collectively, “Sub-Plans”) as are necessary or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the United States, as further set forth in Section 4(c) below.
(c)        Non-U.S. Sub-Plans. Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt such Sub-Plans relating to the operation and administration of the Plan to accommodate local laws, customs and procedures for jurisdictions outside of the United States, the terms of which Sub-Plans may take precedence over other provisions of this Plan, with the exception of Section 3 hereof, but unless otherwise superseded by the terms of such Sub-Plan, the provisions of this Plan will govern the operation of such Sub-Plan. To the extent inconsistent with the requirements of Section 423, any such Sub-Plan will be considered part of a Non-423 Offering, and purchase rights granted thereunder will not be required by the terms of the Plan to comply with Section 423 of the Code. Without limiting the generality of the foregoing, the Administrator is authorized to adopt Sub-Plans for particular non-U.S. jurisdictions that modify the terms of the Plan to meet applicable local requirements, customs or procedures regarding, without limitation, (i) eligibility to participate, (ii) the definition of Eligible Pay, (iii) the dates and duration of Offering Periods or other periods during which Participants may make Contributions towards the purchase of Shares, (iv) the method of determining the Purchase Price and the discount from Fair Market Value at which Shares may be purchased, (v) any minimum or maximum amount of Contributions a Participant may make in an Offering Period or other specified period under the applicable Sub-Plan, (vi) the treatment of purchase rights upon a Change in Control or a change in capitalization of the Company, (vii) the handling of payroll deductions and the methods for making Contributions by means other than payroll deductions, (viii) establishment of bank, building society or trust accounts to hold Contributions, (ix) payment of interest, (x) conversion of local currency, (xi) obligations to pay payroll tax, (xii) determination of beneficiary designation requirements, (xiii) withholding procedures, and (xiv) handling of Share issuances.
(d)        Binding Authority. All determinations by the Administrator in carrying out and administering the Plan and in construing and interpreting the Plan and any enrollment form or other instrument or agreement relating to the Plan will be made in the Administrator’s sole discretion and will be final, binding and conclusive for all purposes and upon all interested persons.
(e)        Delegation of Authority. To the extent not prohibited by Applicable Law, the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees of the Committee, to one or more of the other parties comprising the “Administrator” hereunder, or to other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. For purposes of the Plan, reference to the Administrator will be deemed to include any subcommittee, subcommittees, or other persons or groups of persons to whom the Committee delegates authority pursuant to this Section 4(e).
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5.               Eligible Employees.
(a)        General. Any individual who is an Eligible Employee as of the commencement of an Offering Period will be eligible to participate in the Plan, subject to the requirements of Section 7.
(b)        Non-U.S. Employees. An Eligible Employee who works for a Designated Company and is a citizen or resident of a jurisdiction other than the United States (without regard to whether such individual also is a citizen or resident of the United States or is a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from participation in the Plan or an Offering if the participation of such Eligible Employee is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or a Section 423 Offering to violate Section 423 of the Code. In the case of a Non-423 Offering, an Eligible Employee (or group of Eligible Employees) may be excluded from participation in the Plan or an Offering if the Administrator has determined, in its sole discretion, that participation of such Eligible Employee(s) is not advisable or practicable for any reason.
(c)        Limitations. Notwithstanding any provisions of the Plan to the contrary, no Eligible Employee will be granted a right to purchase Shares under a Section 423 Offering (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding rights to purchase capital stock possessing five percent (5%) or more of the combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase capital stock under all employee stock purchase plans of the Company and any Parent and Subsidiaries accrues at a rate that exceeds Twenty-Five Thousand Dollars (US$25,000) worth of such stock (determined at the fair market value of the shares of such stock at the time such right is granted) for each calendar year in which such purchase right is outstanding. The Administrator, in its discretion, from time to time may, prior to an Enrollment Period for all purchase rights to be granted in an Offering, determine (on a uniform and nondiscriminatory basis for Section 423 Offerings) that the definition of Eligible Employee will or will not include an individual if he or she: (A) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (B) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (C) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), (D) is a highly compensated employee within the meaning of Section 414(q) of the Code, or (E) is a highly compensated employee within the meaning of Section 414(q) of the Code with compensation above a certain level or who is an officer or subject to the disclosure requirements of Section 16(a) of the Exchange Act, provided the exclusion is applied with respect to each Section 423 Offering in an identical manner to all highly compensated individuals of the Designated Company whose employees are participating in that Offering.
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6.               Offering Periods. The Plan will be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day of the relevant Offering Period and terminating on the last Trading Day of the relevant Offering Period. Unless and until the Administrator determines otherwise in its discretion, each Offering Period will consist of one (1) approximately six (6)-month Purchase Period, which will run simultaneously with the Offering Period. Unless otherwise provided by the Administrator, Offering Periods will run from June 1 (or the first Trading Day thereafter) through November 30 (or the last Trading Day prior to such date) and from December 1 (or the first Trading Day thereafter) through May 31 (or the last Trading Day prior to such date). The Administrator has authority to establish additional or alternative sequential or overlapping Offering Periods, a different number of Purchase Periods within an Offering Period, a different duration for one or more Offering Periods or Purchase Periods or different commencement or ending dates for such Offering Periods with respect to future offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter, provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. To the extent that the Administrator establishes additional or overlapping Offering Periods with a Purchase Price based (in part) on the Fair Market Value of a Share on the first Trading Day of an Offering Period, the Administrator will have discretion to structure an Offering Period so that if the Fair Market Value of a Share on the first Trading Day of the Offering Period in which a Participant is currently enrolled is higher than the Fair Market Value of a Share on the first Trading Day of any subsequent Offering Period, the Company will automatically enroll such Participant in the subsequent Offering Period and will terminate his or her participation in such original Offering Period.
7.           Election to Participate and Payroll Deductions. An Eligible Employee may elect to participate in an Offering Period under the Plan during any Enrollment Period. Any such election will be made by completing the online enrollment process through the Company’s designated Plan broker or by completing and submitting an enrollment form to the Administrator during such Enrollment Period, authorizing Contributions in whole percentages from one percent (1%) to ten percent (10%) of the Eligible Employee’s Eligible Pay for the Purchase Period within the Offering Period to which the deduction applies. A Participant may elect to increase or decrease the rate of such Contributions during any subsequent Enrollment Period by submitting the appropriate form online through the Company’s designated Plan broker or to the Administrator, provided that no change in Contributions will be permitted to the extent that such change would result in total Contributions exceeding ten percent (10%) of the Eligible Employee’s Eligible Pay, or such other maximum amount as may be determined by the Administrator. During a Purchase Period, a Participant may not increase his or her rate of Contributions and may decrease the rate of Contributions only one (1) time. Notwithstanding the foregoing, a Participant may reduce the rate of his or her Contributions to zero percent (0%) at any time during a Purchase Period. Any change to a Participant’s rate of Contributions during a Purchase Period will become effective as soon as possible after the Participant’s submission of an amended enrollment form (either through the Company’s online Plan enrollment process or by submitting the appropriate form to the Administrator). If a Participant reduces his or her rate of Contributions to zero percent (0%) during an Offering Period, the Contributions made by the Participant prior to such reduction will be applied to the purchase of Shares on the next Purchase
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Date, but if the Participant does not increase such rate of Contributions above zero percent (0%) prior to the commencement of the next subsequent Offering Period under the Plan, such action will be treated as the Participant’s withdrawal from the Plan in accordance with Section 14 hereof. Once an Eligible Employee elects to participate in an Offering Period, then such Participant will automatically participate in the Offering Period commencing immediately following the last day of such prior Offering Period at the same rate of Contributions as was in effect in the prior Offering Period unless the Participant elects to increase or decrease the rate of Contributions or withdraws or is deemed to withdraw from this Plan as described above in this Section 7. A Participant who is automatically enrolled in a subsequent Offering Period pursuant to this Section 7 is not required to file any additional documentation in order to continue participation in the Plan; provided, however, that participation in the subsequent Offering Period will be governed by the terms and conditions of the Plan in effect at the beginning of such Offering Period, subject to the Participant’s right to withdraw from the Plan in accordance with Section 14 below. The Administrator has the authority to change the rules set forth in this Section 7 regarding participation in the Plan.
8.           Contributions. The Company will establish an account in the form of a bookkeeping entry for each Participant for the purpose of tracking Contributions made by each Participant during the Offering Period, and will credit all Contributions made by each Participant to such account. The Company will not be obligated to segregate the Contributions from the general funds of the Company or any Designated Company nor will any interest be paid on such Contributions, unless otherwise determined by the Administrator or required by Applicable Law. All Contributions received by the Company for Shares sold by the Company on any Purchase Date pursuant to this Plan may be used for any corporate purpose.
9.           Limitation on Number of Shares That an Employee May Purchase. Subject to the limitations set forth in Section 5(c), each Participant will have the right to purchase as many Shares, which may include fractional Shares in the Administrator’s sole discretion, as may be purchased with the Contributions credited to his or her account as of the last day of the Offering Period (or such other date as the Administrator may determine) at the Purchase Price applicable to such Offering Period; provided, however, that a Participant may not purchase in excess of Twelve Thousand-Five Hundred (12,500) Shares under the Plan per Offering Period or such other maximum number of Shares as may be established for an Offering Period by the Administrator (in each case subject to adjustment pursuant to Section 16 hereof). To the extent that the purchase of fractional Shares is not authorized by the Administrator in connection with an Offering, any amount remaining in a Participant’s account that was not applied to the purchase of Shares on a Purchase Date because it was not sufficient to purchase a whole Share will be carried forward for the purchase of Shares on the following Purchase Date. However, any amounts not applied to the purchase of Shares during an Offering Period for any reason other than as described in the foregoing sentence shall not be carried forward to any subsequent Offering Period and shall instead be refunded, without interest, as soon as practicable following the Purchase Date, except as otherwise determined by the Administrator or required by Applicable Law.
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10.           Taxes. At the time a Participant’s purchase right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the Shares acquired under the Plan, or at the time of any other taxable event, the Participant will make adequate provision for any Tax-Related Items. In their sole discretion, the Company or the Designated Company that employs the Participant may satisfy any obligation to withhold Tax-Related Items by (a) withholding from the Participant’s wages or other compensation, (b) withholding a sufficient whole number of Shares otherwise issuable following purchase having an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld with respect to the Shares, (c) withholding from proceeds from the sale of Shares issued upon purchase, either through a voluntary sale or a mandatory sale arranged by the Company, (d) requiring the Participant to make a cash payment to the Company or another Designated Company equal to the amount of the Tax-Related Items, or (e) any other method permitted under Applicable Law.
11.           Brokerage Accounts or Plan Share Accounts. By enrolling in the Plan, each Participant will be deemed to have authorized the establishment of a brokerage account on his or her behalf at a securities brokerage firm selected by the Administrator. Alternatively, the Administrator may provide for Plan share accounts for each Participant to be established by the Company or by an outside entity selected by the Administrator which is not a brokerage firm. Shares purchased by a Participant pursuant to the Plan will be held in the Participant’s brokerage or Plan share account. The Company may require that Shares be retained in such brokerage or Plan share account for a designated period of time, and/or may establish procedures to permit tracking of dispositions of Shares.
12.           Rights as a Stockholder. A Participant will have no rights as a stockholder with respect to Shares subject to any rights granted under this Plan or any Shares deliverable under this Plan unless and until recorded in the books of the brokerage firm selected by the Administrator or, as applicable, the Company, its transfer agent, stock plan administrator or such other outside entity which is not a brokerage firm.
13.             Rights Not Transferable. Rights granted under this Plan are not transferable by a Participant other than by will or the laws of descent and distribution, and are exercisable during a Participant’s lifetime only by the Participant.
14.             Withdrawals. A Participant may withdraw from an Offering Period by submitting the appropriate form online through the Company’s designated Plan broker or to the Administrator. A notice of withdrawal must be received no later than the last day of the month immediately preceding the month of the Purchase Date or by such other deadline as may be prescribed by the Administrator. Upon receipt of such notice, automatic deductions of Contributions on behalf of the Participant will be discontinued commencing with the payroll period immediately following the effective date of the notice of withdrawal, and such Participant will not be eligible to participate in the Plan until the next Enrollment Period. Any Contributions credited to the account of any Participant who withdraws from an Offering Period according to the procedures and timing set forth in this Section 14 will be refunded, without interest, as soon as practicable, except as otherwise determined by the Administrator or required by Applicable Law.
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15.             Termination of Employment.
(a)        General. Upon a Participant ceasing to be an Eligible Employee for any reason prior to a Purchase Date, Contributions for such Participant will be discontinued and any Contributions then credited to the Participant’s account will be refunded, without interest, as soon as practicable, except as otherwise determined by the Administrator or required by Applicable Law.
(b)        Leave of Absence. Subject to the discretion of the Administrator, if a Participant is granted a paid leave of absence, payroll deductions on behalf of the Participant will continue and any Contributions credited to the Participant’s account may be used to purchase Shares as provided under the Plan. If a Participant is granted an unpaid leave of absence, payroll deductions on behalf of the Participant will be discontinued and no other Contributions will be permitted (unless otherwise determined by the Administrator or required by Applicable Law), but any Contributions then credited to the Participant’s account may be used to purchase Shares on the next applicable Purchase Date. Where the period of leave exceeds three (3) months and the Participant’s right to reemployment is not guaranteed by statute or by contract, for purposes of the Plan, the employment relationship will be deemed to have terminated three (3) months and one (1) day following the commencement of such leave.
(c)        Transfer of Employment. Unless otherwise determined by the Administrator or required by Applicable Law, a Participant whose employment transfers or whose employment terminates with an immediate rehire (with no break in service) by or between the Company or a Designated Company will not be treated as having terminated employment for purposes of participating in the Plan or an Offering; however, if a Participant transfers from a Section 423 Offering to a Non-423 Offering, the exercise of the Participant’s purchase right will be qualified under the Section 423 Offering only to the extent that such exercise complies with Code Section 423. If a Participant transfers from a Non-423 Offering to a Section 423 Offering, the exercise of the Participant’s purchase right will remained non-qualified under the Non-423 Offering. The Administrator may establish additional or different rules to govern transfers of employment for purposes of participation in the Plan or an Offering, consistent with the applicable requirements of Section 423 of the Code.
16.             Adjustment Provisions.
(a)        Changes in Capitalization. In the event of any change affecting the number, class, value, or terms of the shares of Common Stock resulting from a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of Shares, merger, consolidation, rights offering, separation, reorganization or liquidation or any other change in the corporate structure or Shares, including any extraordinary dividend or extraordinary distribution (but excluding any regular cash dividend), then the Committee, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will, in such manner as it may deem equitable, adjust the number and class of Common Stock that may be delivered under the Plan (including the numerical limits of Sections 3 and 9), the Purchase Price per Share and the number of shares of Common Stock covered by each right under the Plan that has not yet been exercised. For the
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avoidance of doubt, the Committee may not delegate its authority to make adjustments pursuant to this Section 16(a). Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, will affect, and no adjustment by reason thereof will be made with respect to, the number or price of Shares subject to a purchase right.
(b)        Change in Control. In the event of a Change in Control, each outstanding right to purchase Shares will be equitably adjusted and assumed or an equivalent right to purchase Shares substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation in a Change in Control refuses to assume or substitute for the purchase right or the successor corporation is not a publicly traded corporation, the Offering Period then in progress will be shortened by setting a New Purchase Date and will end on the New Purchase Date. The New Purchase Date will be before the date of the Company’s proposed Change in Control. The Administrator will notify each Participant in writing, at least ten (10) Trading Days prior to the New Purchase Date (or such other date as may be specified by the Administrator), that the Purchase Date for the Participant’s purchase right has been changed to the New Purchase Date and that Shares will be purchased automatically for the Participant on the New Purchase Date, unless the Participant has withdrawn from the Offering Period prior to such date, as provided in Section 14 hereof.
17.             Amendments and Termination of the Plan. The Board or the Committee may amend the Plan at any time, provided that, if stockholder approval is required pursuant to Applicable Law, then no such amendment will be effective unless approved by the Company’s stockholders within such time period as may be required. The Board may suspend the Plan or discontinue the Plan at any time, including shortening an Offering Period in connection with a spin-off or other similar corporate event. Upon termination of the Plan, all Contributions will cease and all Contributions then credited to a Participant’s account will be equitably applied to the purchase of whole Shares then available for sale, and any remaining amounts will be promptly refunded, without interest (unless required by Applicable Law), to Participants. For the avoidance of doubt, the Board or Committee, as applicable herein, may not delegate its authority to make amendments to or suspend the operations of the Plan pursuant to this Section 17.
18.             Stockholder Approval; Effective Date. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Law. The Plan will become effective on the Effective Date, subject to approval of the stockholders of the Company as contemplated in the foregoing sentence. For the avoidance of doubt, the Board may not delegate its authority to approve the Plan pursuant to this Section 18.
19.             Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company will not be required to deliver any Shares issuable upon exercise of a right under the Plan prior to the completion of any registration or qualification of the Shares under any local, state, federal or foreign securities or exchange
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control law or under rulings or regulations of any governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Administrator will, in its absolute discretion, deem necessary or advisable. The Company is under no obligation to register or qualify the Shares with any state or foreign securities commission, or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. If, pursuant to this Section 19, the Administrator determines that the Shares will not be issued to any Participant, any Contributions credited to such Participant’s account will be promptly refunded, without interest (unless required by Applicable Law), to the Participant, without any liability to the Company or any of its Subsidiaries or Affiliates (or any Parent, if applicable).
20.             Code Section 409A; Tax Qualification.
(a)        Code Section 409A. Rights to purchase Shares granted under a Section 423 Offering are exempt from the application of Section 409A of the Code and rights to purchase Shares granted under a Non-423 Offering are intended to be exempt from Section 409A of the Code pursuant to the “short-term deferral” exemption contained therein. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Administrator determines that a right granted under the Plan may be subject to Section 409A of the Code or that any provision in the Plan would cause a right under the Plan to be subject to Section 409A of the Code, the Administrator may amend the terms of the Plan and/or of an outstanding right granted under the Plan, or take such other action the Administrator determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding right or future right that may be granted under the Plan from or to allow any such rights to comply with Section 409A of the Code, but only to the extent any such amendments or action by the Administrator would not violate Section 409A of the Code. Notwithstanding the foregoing, the Company will have no liability to a Participant or any other party if the right to purchase Shares under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Administrator with respect thereto. The Company makes no representation that the right to purchase Shares under the Plan is compliant with Section 409A of the Code.
(b)        Tax Qualification. Although the Company may endeavor to (i) qualify a right to purchase Shares for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 20(a) hereof. The Company will be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
21.             No Employment Rights. Participation in the Plan will not be construed as giving any Participant the right to be retained as an employee of the Company, a Subsidiary, or one of its Affiliates or Parent, as applicable. Furthermore, if the Company, a Subsidiary, or an
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Affiliate (or Parent, if applicable) dismisses a Participant from employment, no liability or claim will arise under the Plan.
22.             Governing Law; Choice of Forum. Except to the extent that provisions of this Plan are governed by applicable provisions of the Code or any other substantive provision of United States federal law, this Plan will be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to the conflict of laws principles thereof. The Company and each Participant, as a condition to such Participant’s participation in the Plan, hereby irrevocably submit to the exclusive jurisdiction of any state or U.S. federal court located in the state of Delaware over any suit, action or proceeding arising out of or relating to or concerning the Plan. The Company and each Participant, as a condition to such Participant’s participation in the Plan, acknowledge that the forum designated by this Section 22 has a reasonable relation to the Plan and to the relationship between such Participant and the Company. Notwithstanding the foregoing, nothing in the Plan will preclude the Company from bringing any action or proceeding in any other court for the purpose of enforcing the provisions of this Section 22. The agreement by the Company and each Participant as to forum is independent of the law that may be applied in the action, and the Company and each Participant, as a condition to such Participant’s participation in the Plan, (i) agree to such forum even if the forum may under applicable law choose to apply non-forum law, (ii) hereby waive, to the fullest extent permitted by applicable law, any objection which the Company or such Participant now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding in any court referred to in this Section 22, (iii) undertake not to commence any action arising out of or relating to or concerning the Plan in any forum other than the forum described in this Section 22 and (iv) agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding in any such court will be conclusive and binding upon the Company and each Participant.
23.         Waiver of Jury Trial. Each Participant waives any right such Participant may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with the Plan.
24.         Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings will not be deemed in any way material or relevant to the construction or interpretation of the Plan.
25.         Expenses. Unless otherwise set forth in the Plan or determined by the Administrator, all expenses of administering the Plan, including expenses incurred in connection with the purchase of Shares for sale to Participants, will be borne by the Company and its Subsidiaries or Affiliates (or any Parent, if applicable).
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Document

EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, James M. Chirico, Jr., certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Avaya Holdings Corp.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial
        reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
        reporting and the preparation of financial statements for external purposes in accordance with generally accepted
        accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2020
 
/s/    JAMES M. CHIRICO, JR.
James M. Chirico, Jr.
Director, President and Chief Executive Officer
(Principal Executive Officer)


Document

EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Kieran J. McGrath, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Avaya Holdings Corp.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2020
 
/s/    KIERAN J. MCGRATH
Kieran J. McGrath
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)


Document

EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Avaya Holdings Corp. (the “Company”) on Form 10-Q for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James M. Chirico, Jr., Director, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    JAMES M. CHIRICO, JR.
James M. Chirico, Jr.
Director, President and Chief Executive Officer
(Principal Executive Officer)

Date: May 11, 2020

Document

EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Avaya Holdings Corp. (the “Company”) on Form 10-Q for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kieran J. McGrath, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/    KIERAN J. MCGRATH
Kieran J. McGrath
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 2020

v3.20.1
Revenue Recognition - Transaction Price Allocated to the Remaining Performance Obligations (Details)
$ in Billions
Mar. 31, 2020
USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation, amount $ 2.5
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01  
Revenue from Contract with Customer [Abstract]  
Revenue, Remaining Performance Obligation, Percentage 58.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation, expected timing of satisfaction, period 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01  
Revenue from Contract with Customer [Abstract]  
Revenue, Remaining Performance Obligation, Percentage 26.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Remaining performance obligation, expected timing of satisfaction, period 1 year
v3.20.1
Recent Accounting Pronouncements - Narrative (Details) - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Oct. 01, 2019
Sep. 30, 2019
Oct. 01, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]          
Operating Lease, Right-of-Use Asset $ 175   $ 190 $ 0  
Operating Lease, Liability, Current 48   51 0  
Restructuring Reserve, Current 25   29 33  
Increase of net cash used in investing activities 246 $ (48)      
Accounts receivable, net 262     314  
Inventory 56     63  
Contract assets 233     187  
Contract costs 130     114  
Other current assets 211   113 115  
Intangible assets, net 2,720   2,889 2,891  
Operating Lease, Liability, Noncurrent 135   143 0  
Restructuring Reserve, Noncurrent 26   35 36  
Property, Plant and Equipment, Net 254     255  
Deferred income taxes, net 27     35  
Other assets 114     121  
Contract liabilities 477     472  
Goodwill 1,476     2,103  
Other current liabilities 246     158  
Deferred income taxes, net 48     72  
Other Liabilities, Noncurrent 313   313 316  
Retained Earnings (Accumulated Deficit) (1,015)     $ (289)  
Operating Lease, Liability $ 183   194    
Accounting Standards Update 2018-02 [Member]          
New Accounting Pronouncements or Change in Accounting Principle [Line Items]          
Operating Lease, Right-of-Use Asset     190    
Operating Lease, Liability, Current     51    
Restructuring Reserve, Current     (4)    
Other current assets     (2)    
Intangible assets, net     (2)    
Operating Lease, Liability, Noncurrent     143    
Restructuring Reserve, Noncurrent     (1)    
Other Liabilities, Noncurrent     (3)    
Previously Reported [Member] | Accounting Standards Update 2014-09          
New Accounting Pronouncements or Change in Accounting Principle [Line Items]          
Retained Earnings (Accumulated Deficit)     3   $ 92
Previously Reported [Member] | Accumulated Deficit | Accounting Standards Update 2014-09          
New Accounting Pronouncements or Change in Accounting Principle [Line Items]          
Retained Earnings (Accumulated Deficit)     $ 3   $ 92
v3.20.1
Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Mar. 31, 2020
Mar. 31, 2019
REVENUE            
Revenue $ 682   $ 709   $ 1,397 $ 1,447
COSTS            
TOTAL COST OF REVENUE 311   323   632 654
GROSS PROFIT 371   386   765 793
OPERATING EXPENSES            
Selling, general and administrative 248   251   531 508
Research and development 51   52   103 105
Amortization of intangible assets 41   41   82 81
Restructuring charges, net 4   4   7 11
TOTAL OPERATING EXPENSES 968   348   1,347 705
OPERATING (LOSS) INCOME (597)   38   (582) 88
Interest expense (53)   (58)   (111) (118)
Other income (expense), net 15   1   29 23
LOSS BEFORE INCOME TAXES (635)   (19)   (664) (7)
(Provision for) benefit from income taxes (37)   6   (62) 3
NET INCOME (LOSS) $ (672) $ (54) $ (13) $ 9 $ (726) $ (4)
LOSS PER SHARE            
Net income (loss) per common share - basic (in usd per share) $ (7.24)   $ (0.12)   $ (7.24) $ (0.04)
Net income (loss) per common share - diluted (in usd per share) $ (7.24)   $ (0.12)   $ (7.24) $ (0.04)
Weighted average shares outstanding            
Weighted average number of shares - basic (in shares) 93.0   110.8   101.1 110.5
Weighted average number of shares - diluted (in shares) 93.0   110.8   101.1 110.5
Goodwill, Impairment Loss $ 624   $ 0   $ 624 $ 0
Products            
REVENUE            
Revenue 245   287   543 611
COSTS            
Total Cost of Goods and Services 92   105   196 220
Amortization of technology intangible assets 44   44   87 87
Services            
REVENUE            
Revenue 437   422   854 836
COSTS            
Total Cost of Goods and Services $ 175   $ 174   $ 349 $ 347
v3.20.1
Benefit Obligations - Narrative (Details)
6 Months Ended
Mar. 31, 2020
USD ($)
Post-retirement Benefits  
Defined Benefit Plan Disclosure [Line Items]  
Contributions by employer $ 7,000,000
Reimbursement of prior period payments 3,000,000
U.S. | Postretirement Health Coverage  
Defined Benefit Plan Disclosure [Line Items]  
Estimated future employer contributions in current fiscal year 6,000,000
Non-US  
Defined Benefit Plan Disclosure [Line Items]  
Contributions by employer 14,000,000
Non-US | Pension Plan  
Defined Benefit Plan Disclosure [Line Items]  
Estimated future employer contributions in current fiscal year 9,000,000
Not Pre-Funded | U.S.  
Defined Benefit Plan Disclosure [Line Items]  
Contributions by employer $ 9,000,000
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2020
Sep. 30, 2019
Preferred Stock, Shares Outstanding 125,000 0
Common stock, par value (usd per share) $ 0.01 $ 0.01
Common stock, shares authorized 550,000,000 550,000,000
Common stock, shares issued 82,654,594 111,046,085
Common stock, shares outstanding 82,654,594 111,033,405
Preferred Stock, Par or Stated Value Per Share $ 0.01  
Preferred Stock, Shares Authorized 55,000,000  
Preferred Stock, Shares Issued 125,000 0
Temporary Equity, Par or Stated Value Per Share $ 0.01 $ 0.01
Temporary Equity, Shares Authorized 55,000,000 55,000,000
Series A Preferred Stock    
Preferred Stock, Par or Stated Value Per Share $ 0.01  
v3.20.1
Derivative Instruments and Hedging Activities - Derivatives Not Designated as Hedging Instruments (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Derivative [Line Items]          
Derivative Liability, Fair Value, Gross Liability $ 128   $ 128   $ 86
Other income, net | Derivatives Not Designated as Hedging Instruments: | Emergence Date Warrants          
Derivative [Line Items]          
Derivative, gain (loss) 6 $ 3 3 $ 21  
Other income, net | Derivatives Not Designated as Hedging Instruments: | Foreign Exchange Forward [Member]          
Derivative [Line Items]          
Derivative, gain (loss) $ (7) $ 0 $ (2) $ 0  
v3.20.1
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Millions
Mar. 31, 2020
Sep. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities $ 2  
Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 90 $ 11
Liabilities 128 91
Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 89 0
Liabilities 0 0
Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 1 1
Liabilities 126 81
Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 10
Liabilities 2 10
Equity Securities [Member] | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Equity Securities [Member] | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Equity Securities [Member] | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Equity Securities [Member] | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Corporate Debt Securities [Member] | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 89 10
Corporate Debt Securities [Member] | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 89 0
Corporate Debt Securities [Member] | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Corporate Debt Securities [Member] | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 10
Interest rate contracts | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 120 81
Interest rate contracts | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 0
Interest rate contracts | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 120 81
Interest rate contracts | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 0
Spoken acquisition earn-outs | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 5
Spoken acquisition earn-outs | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 0
Spoken acquisition earn-outs | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 0
Spoken acquisition earn-outs | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities   5
Foreign currency forward contracts | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 1 1
Liabilities 6 0
Foreign currency forward contracts | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Liabilities 0 0
Foreign currency forward contracts | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 1 1
Liabilities 6 0
Foreign currency forward contracts | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Assets 0 0
Liabilities 0 0
Emergence Date Warrants | Foreign currency forward contracts | Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 2 5
Emergence Date Warrants | Foreign currency forward contracts | Recurring | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities 0 0
Emergence Date Warrants | Foreign currency forward contracts | Recurring | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities $ 0 0
Emergence Date Warrants | Foreign currency forward contracts | Recurring | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Liabilities   $ 5
v3.20.1
Net Income (Loss) Per Common Share
6 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Net Income (Loss) Per Common Share Per Common Share
Basic loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised; if the Company's Series A Preferred Stock were converted into shares of the Company's common stock; if the Company's Convertible Notes or the warrants the Company sold to purchase up to 12.6 million shares of its common stock in connection with the issuance of Convertible Notes ("Call Spread Warrants") were exercised; and/or if the Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company.
The following table sets forth the calculation of net loss attributable to common stockholders and the computation of basic and diluted loss per share for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions, except per share amounts)2020201920202019
Loss per share:
Numerator
Net loss$(672) $(13) $(726) $(4) 
Dividends and accretion to preferred stockholders(1) —  (6) —  
Undistributed loss(673) (13) (732) (4) 
Percentage allocated to common stockholders(1)
100.0 %100.0 %100.0 %100.0 %
Numerator for basic and diluted loss per common share$(673) $(13) $(732) $(4) 
Denominator for basic and diluted loss per weighted average common shares93.0  110.8  101.1  110.5  
Loss per common share
Basic $(7.24) $(0.12) $(7.24) $(0.04) 
Diluted$(7.24) $(0.12) $(7.24) $(0.04) 
(1) Basic weighted average common stock outstanding
93.0  110.8  101.1  110.5  
 Basic weighted average common stock and common stock equivalents (preferred shares)
93.0  110.8  101.1  110.5  
 Percentage allocated to common stockholders
100.0 %100.0 %100.0 %100.0 %

The Company's Series A Preferred Stock are participating securities, which requires the application of the two-class method to calculate basic and diluted earnings per share. Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had been distributed. Basic loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Net loss attributable to common stockholders is increased for preferred stock dividends earned and accretion recognized during the period. No allocation of undistributed earnings to participating securities was performed for periods with net losses as such securities do not have a contractual obligation to share in the losses of the Company.
For the three and six months ended March 31, 2020, the Company excluded 1.0 million stock options, 3.2 million RSUs, 5.6 million Emergence Date Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.0 million PRSUs from the diluted loss per share calculation as their performance metrics have not yet been attained. For the three and six months ended March 31, 2019, the Company excluded 1.0 million stock options, 3.5 million restricted stock units and 5.6 million Emergence Date Warrants from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 0.5 million PRSUs from the diluted loss per share calculation as their performance metrics had not yet been attained. The Company's Convertible Notes and Call Spread Warrants were also excluded for all periods presented as their effect would have been anti-dilutive.
v3.20.1
Commitments and Contingencies
6 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Legal Proceedings
In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including but not limited to, those relating to intellectual property, commercial, employment, environmental indemnity and regulatory matters. The Company records accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
In the opinion of the Company's management, while the outcome of these matters is uncertain, the likely results of these matters are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows. However, an unfavorable resolution could have a material adverse effect on the Company's financial position, results of operations or cash flows in the periods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of the ultimate disposition.
Product Warranties
The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company's products. These product warranties extend over a specified period of time, generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Condensed Consolidated Balance Sheets, for actual experience. As of March 31, 2020 and September 30, 2019, the amount reserved was $2 million.
Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements
Letters of Credit and Guarantees
The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of March 31, 2020, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $49 million. The outstanding letters of credit are collateralized by restricted cash of $4 million, which is included in Other assets on the Condensed Consolidated Balance Sheets as of March 31, 2020.
Purchase Commitments and Termination Fees
The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers, but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another.
The Company's outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company's products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company, and is subject to quality control standards.
Transactions with Nokia
Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution Agreement"), Lucent Technologies, Inc. (now Nokia) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the "Company's Businesses") and distributed the Company's stock pro-rata to the shareholders of Lucent ("distribution"). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company's Businesses and all contingent liabilities primarily relating to the Company's Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement.
In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement effective October 1, 2000 (the "Tax Sharing Agreement") that governs Nokia's and the Company's respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company's separation from Nokia.
v3.20.1
Fair Value Measurements
6 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Considerable judgment was required in developing certain of the estimates of fair value including the consideration of the recent COVID-19 pandemic that has caused significant volatility in U.S. and international markets, and accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Fair Value Hierarchy
The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:
Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.
Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and September 30, 2019 were as follows:
 March 31, 2020September 30, 2019
 Fair Value Measurements UsingFair Value Measurements Using
(In millions)Total
Level 1
Level 2Level 3Total
Level 1
Level 2Level 3
Assets:
Investments in equity securities
$89  $89  $—  $—  $—  $—  $—  $—  
Investments in debt securities—  —  —  —  10  —  —  10  
Foreign exchange contracts —   —   —   —  
Total assets$90  $89  $ $—  $11  $—  $ $10  
Liabilities:
Interest rate contracts$120  $—  $120  $—  $81  $—  $81  $—  
Spoken acquisition earn-outs—  —  —  —   —  —   
Foreign exchange contracts —   —  —  —  —  —  
Emergence Date Warrants —  —    —  —   
Total liabilities $128  $—  $126  $ $91  $—  $81  $10  
Investments in equity securities
The investments in equity securities are valued using quoted market prices for identical assets in active markets that are observable and are recorded in Other current assets in the Condensed Consolidated Balance Sheets.
Investments in debt securities
The investments in debt securities were valued using a discounted cash flow model which includes various unobservable inputs including cash flow projections, long-term growth rates, discount rates and market comparable companies. The investments in debt securities were recorded in Other assets in the Condensed Consolidated Balance Sheets.
Interest rate and foreign exchange contracts
Interest rate and foreign exchange contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs.
Spoken acquisition earn-outs
The Spoken acquisition earn-outs classified as Level 3 liabilities were measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities. The earn-outs were recorded in Other current liabilities in the Condensed Consolidated Balance Sheets.
Emergence Date Warrants
Emergence Date Warrants classified as Level 3 liabilities are valued using the Black-Scholes option pricing model.
During the three and six months ended March 31, 2020 and 2019, there were no transfers between Level 1 and Level 2, or into and out of Level 3.
The following table summarizes the activity for the Company's Level 3 assets and liabilities measured at fair value on a recurring basis:
(In millions)Emergence Date WarrantsSpoken acquisition earn-outsInvestments in debt securities
Balance as of September 30, 2019$ $ $10  
Change in fair value(1)
(3) —  —  
Impairment(2)
—  —  (10) 
Settlement—  (5) —  
Balance as of March 31, 2020$ $—  $—  
(1)Changes in fair value of the Emergence Date Warrants are included in Other income, net.
(2)During the three and six months ended March 31, 2020, the Company recorded an other-than-temporary impairment charge for a $10 million credit loss on its investments in debt securities mainly driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company. The impairment charge is included in Other income, net.
Fair Value of Financial Instruments
The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.
As of March 31, 2020 and September 30, 2019, the estimated fair value of the Convertible Notes was determined based on the quoted price of the Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2.
The estimated fair values of amounts borrowed under the Company's other financing arrangements as of March 31, 2020 and September 30, 2019 were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.
The estimated fair values of the amounts borrowed under the Company's financing agreements as of March 31, 2020 and September 30, 2019 are as follows:
March 31, 2020September 30, 2019
(In millions)Principal amountFair valuePrincipal amountFair value
Term Loan Credit Agreement due December 15, 2024$2,624  $2,162  $2,874  $2,739  
Convertible 2.25% senior notes due June 15, 2023350  281  350  298  
Total debt$2,974  $2,443  $3,224  $3,037  
v3.20.1
Background and Basis of Presentation
6 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Background and Basis of Presentation Background and Basis of Presentation
Background
Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the "Company" or "Avaya"), is a global leader in digital communications products, solutions and services for businesses of all sizes. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. The Company's global team of professionals delivers services from initial planning and design, to implementation and integration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly to customers through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-add resellers, system integrators and business partners that provide sales and services support.
Basis of Presentation
Avaya Holdings has no material assets or standalone operations other than its ownership of Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements of Avaya Holdings and its consolidated subsidiaries, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial statements. The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2019, included in the Company's Annual Report on Form 10-K filed with the SEC on November 29, 2019. In management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of the results for the entire fiscal year.
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates. During the second quarter of fiscal 2020, the World Health Organization characterized a novel strain of coronavirus ("COVID-19") as a pandemic. Concerns related to the spread of COVID-19 and the actions required to mitigate its impact have created substantial disruption to the global economy. The duration of the pandemic and the long-term impacts on the global economy are uncertain. We expect the effects of the COVID-19 pandemic to negatively impact our results of operations, cash flows and financial position. In addition, the pandemic may affect management's estimates and assumptions, in particular those that require a projection of our financial results, our cash flows or broader economic conditions, such as the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, annual effective tax rate, the fair value of equity compensation, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill (see Note 6, "Goodwill, net and Intangible Assets, net") and fair value measurements (see Note 11, "Fair Value Measurements"), among others.
The accompanying Condensed Consolidated Financial Statements of the Company have been prepared assuming that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. While the existing cash and cash equivalents of $553 million as of March 31, 2020, future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months, our ability to meet these requirements will depend on the Company’s ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control. The Company further believes that its financial resources allow it to manage the anticipated impact of COVID-19 on the Company’s business operations for the foreseeable future. The challenges posed by COVID-19 on the Company’s business are evolving rapidly. Consequently, the Company will continue to evaluate its financial position in light of future developments.
v3.20.1
Business Restructuring Reserves and Programs
6 Months Ended
Mar. 31, 2020
Restructuring Reserve [Abstract]  
Business Restructuring Reserves and Programs Business Restructuring Reserves and Programs
The following table summarizes the restructuring charges by activity for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Employee separation costs$—  $ $ $10  
Facility exit costs    
Total restructuring charges$ $ $ $11  
The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal years. The Company's employee separation costs generally encompass severance charges which include, but are not limited to, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the affected employees. Facility exit costs primarily relate to lease obligation charges for exited facilities. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings opportunities globally and take additional restructuring actions in the future and the costs of any such actions could be material. The Company does not allocate restructuring reserves to its operating segments.
As a result of the adoption of ASC 842 on October 1, 2019, the Company no longer records facility-related restructuring charges within the Business restructuring reserve on the Condensed Consolidated Balance Sheets. As a result, the Company recorded a one-time reclassification of $5 million for certain facility-related lease obligations from the Business restructuring reserve to Operating lease right-of-use assets upon adoption of ASC 842.
The following table summarizes the activity for employee separation costs recognized under the Company's restructuring programs for the six months ended March 31, 2020:
(In millions)
Fiscal 2020 Restructuring Program (1)
Fiscal 2019 Restructuring Program (2)
Fiscal 2008 through 2018 Restructuring Programs (3)
Total
Accrual balance as of September 30, 2019$—  $11  $53  $64  
Cash payments—  (3) (11) (14) 
Restructuring charges —  —   
Impact of foreign currency fluctuations(1)  —  —  
Accrual balance as of March 31, 2020$—  $ $42  $51  
(1)Payments related to the 2020 restructuring plan are expected to be completed in fiscal 2020.
(2)Payments related to the 2019 restructuring plan are expected to be completed in fiscal 2026.
(3)Payments related to the 2008 through 2018 restructuring plans are expected to be completed in fiscal 2026.
v3.20.1
Benefit Obligations (Tables)
6 Months Ended
Mar. 31, 2020
Retirement Benefits [Abstract]  
Schedule of Net Benefit Costs
The components of the pension and post-retirement net periodic benefit (credit) cost for the periods indicated are provided in the table below:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost$ $ $ $ 
Interest cost  15  19  
Expected return on plan assets(15) (15) (28) (30) 
Net periodic benefit credit$(6) $(5) $(11) $(9) 
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost$ $ $ $ 
Interest cost    
Net periodic benefit cost$ $ $ $ 
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Service cost$—  $ $—  $ 
Interest cost    
Expected return on plan assets(2) (3) (5) (5) 
Amortization of prior service cost(1) —  (1) —  
Net periodic benefit cost$—  $ $—  $ 
v3.20.1
Financing Arrangements (Tables)
6 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Long-term Debt Instruments
The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:
  
March 31, 2020September 30, 2019
(In millions)Principal amountNet of discounts and issuance costsPrincipal amountNet of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024$2,624  $2,601  $2,874  $2,846  
Convertible 2.25% senior notes due June 15, 2023350  282  350  273  
Total debt$2,974  2,883  $3,224  3,119  
Debt maturing within one year—  (29) 
Long-term debt, net of current portion$2,883  $3,090  
Convertible Debt
The net carrying amount of the Convertible Notes for the periods indicated was as follows:
(In millions)March 31, 2020September 30, 2019
Principal350  $350  
Less:
Unamortized debt discount(63) (72) 
Unamortized issuance costs(5) (5) 
Net carrying amount$282  $273  
v3.20.1
Business Restructuring Reserves and Programs (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Restructuring Cost and Reserve [Line Items]        
Restructuring Charges $ 4 $ 4 $ 7 $ 11
Restructuring Reserve [Roll Forward]        
Prior Period Reclassification Adjustment     5  
Employee Separation Costs        
Restructuring Cost and Reserve [Line Items]        
Restructuring Charges     1  
Restructuring Reserve [Roll Forward]        
Restructuring Reserve, beginning balance     64  
Cash payments     (14)  
Impact of foreign currency fluctuations     0  
Restructuring Reserve, ending balance 51   51  
Employee Separation Costs | Fiscal 2020 Restructuring Program [Member]        
Restructuring Cost and Reserve [Line Items]        
Restructuring Charges     1  
Restructuring Reserve [Roll Forward]        
Restructuring Reserve, beginning balance     0  
Cash payments     0  
Impact of foreign currency fluctuations     (1)  
Restructuring Reserve, ending balance 0   0  
Employee Separation Costs | Fiscal 2019 Restructuring Program [Member]        
Restructuring Cost and Reserve [Line Items]        
Restructuring Charges     0  
Restructuring Reserve [Roll Forward]        
Restructuring Reserve, beginning balance     11  
Cash payments     (3)  
Impact of foreign currency fluctuations     1  
Restructuring Reserve, ending balance 9   9  
Employee Separation Costs | Fiscal 2008-2018 Restructuring Program [Member]        
Restructuring Cost and Reserve [Line Items]        
Restructuring Charges     0  
Restructuring Reserve [Roll Forward]        
Restructuring Reserve, beginning balance     53  
Cash payments     (11)  
Impact of foreign currency fluctuations     0  
Restructuring Reserve, ending balance $ 42   $ 42  
v3.20.1
Derivative Instruments and Hedging Activities - Narrative (Details)
$ / shares in Units, $ in Millions
6 Months Ended
May 16, 2018
counterparty
Mar. 31, 2020
USD ($)
agreement
Nov. 14, 2018
USD ($)
Dec. 15, 2017
$ / shares
shares
Derivative [Line Items]        
Number of counterparties | counterparty 6      
Class of warrant or right, number of securities called by each warrant or right (in shares) | shares       5,645,200
Class of warrant or right, exercise price of warrants or rights (in USD per share) | $ / shares       $ 25.55
Warrant Repurchase Program, Number of Securities Called by Warrants or Rights, Authorized Amount     $ 15  
Warrant Repurchase Program, Number of Securities Called by Warrants or Rights, Number of Warrants Repurchased   $ 0    
Interest rate contracts        
Derivative [Line Items]        
Derivative fixed interest rate 2.935%      
Number of instruments held (agreement) | agreement   6    
Derivative notional amount   $ 1,800    
Expected gain (loss) to be reclassified within twelve months   47    
Foreign Exchange Contract [Member]        
Derivative [Line Items]        
Derivative notional amount   $ 406    
v3.20.1
Share-based Compensation - 2019 Equity Incentive Plan (Details) - shares
shares in Thousands
Mar. 31, 2020
Nov. 13, 2019
Share-based Payment Arrangement [Abstract]    
Common Stock, Capital Shares Reserved for Future Issuance 18,800 1,700
v3.20.1
Commitments and Contingencies - Letters of Credit and Guarantees (Details)
$ in Millions
Mar. 31, 2020
USD ($)
Line of Credit Facility [Line Items]  
Restricted cash $ 4
Standby Letters of Credit  
Line of Credit Facility [Line Items]  
Letters of credit, maximum amount $ 49
v3.20.1
Operating Segments - Summarized Financial Information of Operating Segments (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Segment Reporting Information          
REVENUE $ 682 $ 709 $ 1,397 $ 1,447  
GROSS PROFIT 371 386 765 793  
OPERATING EXPENSES          
Selling, general and administrative 248 251 531 508  
Research and development 51 52 103 105  
Amortization of intangible assets 41 41 82 81  
Restructuring charges, net 4 4 7 11  
TOTAL OPERATING EXPENSES 968 348 1,347 705  
OPERATING (LOSS) INCOME (597) 38 (582) 88  
INTEREST EXPENSE AND OTHER INCOME, NET (38) (57) (82) (95)  
Total Assets 6,211   6,211   $ 6,950
LOSS BEFORE INCOME TAXES (635) (19) (664) (7)  
Products & Solutions          
Segment Reporting Information          
REVENUE 245 289 543 615  
Services          
Segment Reporting Information          
REVENUE 438 425 857 847  
Operating Segments | Products & Solutions          
Segment Reporting Information          
REVENUE 245 289 543 615  
GROSS PROFIT 154 184 348 398  
Operating Segments | Services          
Segment Reporting Information          
REVENUE 438 425 857 847  
GROSS PROFIT 263 255 509 510  
Unallocated          
Segment Reporting Information          
REVENUE (1) (5) (3) (15)  
GROSS PROFIT $ (46) $ (53) $ (92) $ (115)  
v3.20.1
Benefit Obligations - Components of the Pension and Post-Retirement Net Periodic Benefit Cost (Credit) (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
U.S. | Pension Plan        
Components of net periodic benefit credit        
Service cost $ 1 $ 1 $ 2 $ 2
Interest cost 8 9 15 19
Expected return on plan assets (15) (15) (28) (30)
Net periodic benefit cost (credit) (6) (5) (11) (9)
U.S. | Post-retirement Benefits        
Components of net periodic benefit credit        
Service cost 0 1 0 1
Interest cost 3 4 6 7
Expected return on plan assets (2) (3) (5) (5)
Net periodic benefit cost (credit) 0 2 0 3
Defined Benefit Plan, Amortization of Prior Service Cost (Credit) (1) 0 (1) 0
Non-US | Pension Plan        
Components of net periodic benefit credit        
Service cost 2 1 4 3
Interest cost 1 3 2 5
Net periodic benefit cost (credit) $ 3 $ 4 $ 6 $ 8
v3.20.1
Leases Future Minimum Lease Payments for Operating and Capital Leases (Details)
$ in Millions
Sep. 30, 2019
USD ($)
Future Minimum Lease Payments for Operating and Capital Leases [Abstract]  
Operating Leases, Future Minimum Payments Due, Next Twelve Months $ 51
Capital Leases, Future Minimum Payments Due, Next Twelve Months 12
Operating Leases, Future Minimum Payments, Due in Two Years 39
Capital Leases, Future Minimum Payments Due in Two Years 6
Operating Leases, Future Minimum Payments, Due in Three Years 33
Capital Leases, Future Minimum Payments Due in Three Years 2
Operating Leases, Future Minimum Payments, Due in Four Years 22
Capital Leases, Future Minimum Payments Due in Four Years 0
Operating Leases, Future Minimum Payments, Due in Five Years 17
Capital Leases, Future Minimum Payments Due in Five Years 0
Operating Leases, Future Minimum Payments, Due Thereafter 29
Capital Leases, Future Minimum Payments Due Thereafter 0
Operating Leases, Future Minimum Payments Due 191
Capital Leases, Future Minimum Payments Due 20
Capital Leases, Future Minimum Payments, Interest Included in Payments (1)
Capital Lease, Liability $ 19
v3.20.1
Net Income (Loss) Per Common Share - Reconciliation (Details) - USD ($)
$ / shares in Units, shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Mar. 31, 2020
Mar. 31, 2019
Numerator            
Net income (loss) $ (672) $ (54) $ (13) $ 9 $ (726) $ (4)
Dividends and accretion to preferred stockholders (1)   0   (6) 0
Undistributed Earnings, Basic $ (673)   $ (13)   $ (732) $ (4)
Percentage allocated to common stockholders 100.00%   100.00%   100.00% 100.00%
Numerator for basic and diluted loss per common share $ (673)   $ (13)   $ (732) $ (4)
Weighted average shares outstanding            
Denominator for basic earnings per weighted average common shares (in shares) 93.0   110.8   101.1 110.5
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract]            
Denominator for diluted earnings (loss) per weighted average common shares (in shares) 93.0   110.8   101.1 110.5
Loss per common share            
Basic (in usd per share) $ (7.24)   $ (0.12)   $ (7.24) $ (0.04)
Diluted (in usd per share) $ (7.24)   $ (0.12)   $ (7.24) $ (0.04)
Weighted average number of shares - basic (in shares) 93.0   110.8   101.1 110.5
Basic weighted average common stock and common stock equivalents (preferred shares) (in shares) 93.0   110.8   101.1 110.5
v3.20.1
Supplementary Financial Information - Supplementary Cash Flow Information - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Sep. 30, 2018
Other Significant Noncash Transactions [Line Items]            
Operating Lease, Payments $ 19   $ 33      
Restricted Cash, Noncurrent 4 $ 4 4 $ 4 $ 4 $ 4
Cash 553 735 553 735 752 700
OTHER PAYMENTS            
Interest payments 46 51 104 99    
Income tax payments 13 28 25 35    
NON-CASH INVESTING ACTIVITIES            
Increase (decrease) in Accounts payable for Capital expenditures 1 1 (4) 5    
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 557 $ 739 557 $ 739 $ 756 $ 704
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability $ 6   $ 15      
v3.20.1
Supplementary Financial Information
6 Months Ended
Mar. 31, 2020
Supplementary Financial Information [Abstract]  
Supplementary Financial Information Supplementary Financial Information
The following table presents a summary of Other income, net for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER INCOME, NET
Interest income$ $ $ $ 
Foreign currency loss, net(7) (6) (11) (7) 
Gain on investments in equity and debt securities, net —  20  —  
Other pension and post-retirement benefit credits, net  11   
Change in fair value of emergence date warrants   21  
Sublease income —   —  
Other, net(1) (2) (2) (2) 
Total other income, net$15  $ $29  $23  
The gain on investments in equity and debt securities, net includes realized and unrealized gains on RingCentral shares as disclosed in Note 5, "Strategic Partnership," and are partially offset by a $10 million impairment of debt securities during the three and six months ended March 31, 2020, which is further described in Note 11, "Fair Value Measurements."
The following table presents supplemental cash flow information for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER PAYMENTS
Interest payments$46  $51  $104  $99  
Income tax payments13  28  25  35  
NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures
$ $ $(4) $ 
During the three and six months ended March 31, 2020, the Company made payments for operating lease liabilities of $19 million and $33 million, respectively, and recorded non-cash additions for operating lease right-of-use assets of $6 million and $15 million, respectively.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:
(In millions)March 31, 2020September 30, 2019March 31, 2019September 30, 2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents$553  $752  $735  $700  
Restricted cash included in other assets    
Total cash, cash equivalents, and restricted cash$557  $756  $739  $704  
v3.20.1
Intangible Assets
6 Months Ended
Mar. 31, 2020
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible Assets . Goodwill, net and Intangible Assets, net
Goodwill, net
The changes in the carrying amount of goodwill by segment during fiscal 2020 were as follows:
(In millions)Products & SolutionsServicesTotal
Balance as of September 30, 2019
Cost$1,282  $1,478  $2,760  
Accumulated impairment charges(657) —  (657) 
625  1,478  2,103  
Impairment charges(624) —  (624) 
Foreign currency fluctuations(1) (2) (3) 
Balance as of March 31, 2020
Cost1,281  1,476  2,757  
Accumulated impairment charges(1,281) —  (1,281) 
$—  $1,476  $1,476  
Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level. The Company's reporting units are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company's goodwill was primarily recorded upon emergence from bankruptcy as a result of applying fresh start accounting.
During the first quarter of fiscal 2020, the Company changed its reporting units to align with changes in its organizational structure, mainly resulting from the previously disclosed strategic review process which concluded in October 2019. As a result, on October 1, 2019, the Company consolidated its Unified Communications and Contact Center reporting units into a Products & Solutions reporting unit and consolidated its Global Support Services, Avaya Professional Services and Enterprise Cloud and Managed Services reporting units into a Services reporting unit. As a result of these changes, the Company's reporting units are the same as its operating segments. Due to the consolidation of reporting units, the Company performed an interim goodwill impairment assessment immediately before and after the consolidation on October 1, 2019 by estimating and comparing the fair value of each reporting unit to its carrying value. The Company determined that the carrying amounts of each of the Company's reporting units did not exceed their estimated fair values and therefore no impairment existed as of October 1, 2019.
The Company concluded that a triggering event occurred for both of its reporting units during the three months ended March 31, 2020 due to (i) the impact of the COVID-19 pandemic on the macroeconomic environment which led to revisions to the Company's long-term forecast during the second quarter of fiscal 2020 and (ii) the sustained decrease in the Company's stock price since the advent of the pandemic which was caused by the resulting volatility in the financial markets. As a result, the Company performed an interim quantitative goodwill impairment test as of March 31, 2020 to compare the fair values of its reporting units to their respective carrying amounts, including the goodwill allocated to each reporting unit. The Company estimated the fair value of each reporting unit using a weighting of fair values derived from an income and a market approach.
Under the income approach, the fair value of a reporting unit is estimated using a discounted cash flows model. Future cash flows are based on forward-looking information regarding revenue and costs for each reporting unit and are discounted using an appropriate discount rate. The discounted cash flows model relies on assumptions regarding revenue growth rates, projected gross profit, working capital needs, selling, general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates. The discount rates the Company used represent the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of its model, the Company used a terminal value approach. Under this approach, the Company applied a perpetuity growth assumption to determine the terminal value. The Company incorporated the present value of the resulting terminal value into its estimate of fair value. Forecasted cash flows for each reporting unit consider current economic conditions and trends, estimated future operating results, the Company’s view of growth rates and anticipated future economic conditions. Revenue growth rates inherent in this forecast are based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and product evolution from a technological segment basis. Macroeconomic factors such as changes in economies, product evolutions, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets.
The market approach estimates the fair value of a reporting unit by applying multiples of operating performance measures to the reporting unit's operating performance (the "Guideline Public Company Method"). These multiples were derived from comparable publicly-traded companies with similar investment characteristics to the reporting unit. The key estimates and assumptions that were used to determine the fair value under this market approach include current and forward 12-month operating performance results, as applicable, and the selection of the relevant multiples that were applied.
The results of the Company’s interim goodwill impairment test as of March 31, 2020 indicated that the estimated fair value of the Company’s Services reporting unit exceeded its carrying amount. The carrying amount of the Company's Products & Solutions reporting unit exceeded its estimated fair value primarily due to a reduction in the Company’s long-term forecast to reflect increased risk from higher market uncertainty and the accelerated reduction of product sales related to the Company’s historical on-premises perpetual licenses. The Company anticipates a continued shift and acceleration of customers upgrading and acquiring new technology innovation through the utilization of the Company’s subscription offering, which is included in the Services reporting unit. As a result, the Company recorded a goodwill impairment charge of $624 million to write down the full carrying amount of the Products & Solutions goodwill in the Impairment of goodwill line item in the Condensed Consolidated Statements of Operations. As of March 31, 2020, the estimated fair value of the Services reporting unit exceeded its carrying amount by 16%.
The Company’s long-term forecast includes significant estimates and assumptions, including management’s estimate of the potential impact of the COVID-19 pandemic on the Company’s operating results. Due to the uncertainty surrounding the impact of the COVID-19 pandemic on the macroeconomic environment and, more specifically, on the Company’s future operating results, it is reasonably possible that the pandemic could have a more adverse impact than what is currently contemplated by the Company’s long-term forecast. To the extent business conditions deteriorate or there are changes in key assumptions and estimates included in the long-term forecast, it may be necessary to record additional impairment charges in the future.
Intangible Assets, net
The Company's intangible assets consist of the following for the periods indicated:
(In millions)
Technology
and Patents
Customer
Relationships
and Other
Intangibles
Trademarks
and Trade Names
Total
Balance as of March 31, 2020
Finite-lived intangible assets:
Cost$960  $2,150  $42  $3,152  
Accumulated amortization(394) (355) (16) (765) 
Finite-lived intangible assets, net566  1,795  26  2,387  
Indefinite-lived intangible assets:
Cost—  —  333  333  
Accumulated impairment—  —  —  —  
Indefinite-lived intangible assets, net—  —  333  333  
Intangible assets, net$566  $1,795  $359  $2,720  
Balance as of September 30, 2019
Finite-lived intangible assets:
Cost$960  $2,154  $42  $3,156  
Accumulated amortization(308) (279) (11) (598) 
Finite-lived intangible assets, net652  1,875  31  2,558  
Indefinite-lived intangible assets:
Cost —  333  335  
Accumulated amortization(2) —  —  (2) 
Indefinite-lived intangible assets, net—  —  333  333  
Intangible assets, net$652  $1,875  $364  $2,891  
Intangible assets include technology and patents, customer relationships, and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.
As a result of the goodwill triggering event described above, the Company performed a recoverability test on all of its finite-lived asset groups as of March 31, 2020 before proceeding to the goodwill impairment review and concluded that no impairment charge was necessary. The recoverability test of finite-lived assets was based on forecasts of undiscounted cash flows for each asset group.
The Company also performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of March 31, 2020. The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name was estimated by applying a royalty rate to forecasted net revenues which was then discounted using a risk-adjusted rate of return on capital. Revenue growth rates inherent in the forecast were based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and product evolution from a technological segment basis. The royalty rate was determined using a set of observed market royalty rates. The result of the interim impairment test of the Avaya Trade Name as of March 31, 2020 indicated no impairment existed and the level of excess fair value over carrying value was 5%. An increase in the discount rate of 50 basis points or a decrease in the long-term growth rate of 140 basis points would result in an estimated fair value below its carrying value.
To the extent that business conditions change or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record impairment charges in the future.
v3.20.1
Net Income (Loss) Per Common Share (Tables)
6 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Schedule of Earnings (Loss) Per Share
The following table sets forth the calculation of net loss attributable to common stockholders and the computation of basic and diluted loss per share for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions, except per share amounts)2020201920202019
Loss per share:
Numerator
Net loss$(672) $(13) $(726) $(4) 
Dividends and accretion to preferred stockholders(1) —  (6) —  
Undistributed loss(673) (13) (732) (4) 
Percentage allocated to common stockholders(1)
100.0 %100.0 %100.0 %100.0 %
Numerator for basic and diluted loss per common share$(673) $(13) $(732) $(4) 
Denominator for basic and diluted loss per weighted average common shares93.0  110.8  101.1  110.5  
Loss per common share
Basic $(7.24) $(0.12) $(7.24) $(0.04) 
Diluted$(7.24) $(0.12) $(7.24) $(0.04) 
(1) Basic weighted average common stock outstanding
93.0  110.8  101.1  110.5  
 Basic weighted average common stock and common stock equivalents (preferred shares)
93.0  110.8  101.1  110.5  
 Percentage allocated to common stockholders
100.0 %100.0 %100.0 %100.0 %
v3.20.1
Derivative Instruments and Hedging Activities (Tables)
6 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Assumptions Used The fair value of the Emergence Date Warrants as of March 31, 2020 and September 30, 2019 was determined using the input assumptions summarized below:
March 31,
2020
September 30, 2019
Expected volatility65.24 %56.89 %
Risk-free interest rates0.27 %1.55 %
Contractual remaining life (in years)2.713.21
Price per share of common stock$8.09$10.23
Schedule of Derivative Instruments in Balance Sheet
The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
March 31, 2020September 30, 2019
(In millions)Balance Sheet CaptionAssetLiabilityAssetLiability
Derivatives Designated as Hedging Instruments:
Interest rate contractsOther current liabilities—  46  —  23  
Interest rate contractsOther liabilities—  74  —  58  
—  120  —  81  
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contractsOther current assets —   —  
Foreign exchange contractsOther current liabilities—   —  —  
Emergence Date WarrantsOther liabilities—   —   
    
Total derivative fair value$ $128  $ $86  
Derivatives Designated as Cash Flow Hedges
The following tables provide information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:
Three months ended March 31, 2020Three months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(53) $(55) $(58) $ 
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$—  $(54) $—  $(16) 
Interest expense reclassified from AOCI$(6) $ $(2) $ 

Six months ended March 31, 2020Six months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(111) $(45) $(118) $(12) 
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$—  $(50) $—  $(47) 
Interest expense reclassified from AOCI$(11) $11  $(5) $ 
Derivatives Not Designated As Hedging Instruments
The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:
Three months ended
March 31,
Six months ended
March 31,
(In millions)Location of Derivative Pre-tax Gain (Loss)2020201920202019
Emergence Date WarrantsOther income, net  $ $ $ $21  
Foreign exchange contractsOther income, net  (7) —  (2) —  
Schedule of Outstanding Derivative Positions Presented on a Net Basis The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:
March 31, 2020September 30, 2019
(In millions)AssetLiabilityAssetLiability
Gross amounts recognized in the Condensed Consolidated Balance Sheets$ $128  $ $86  
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets(1) (1) (1) (1) 
Net amounts$—  $127  $—  $85  
v3.20.1
Supplementary Financial Information - Consolidated Statements of Operations Information (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
OTHER INCOME (EXPENSE), NET        
Interest income $ 2 $ 4 $ 5 $ 7
Foreign currency loss, net (7) (6) (11) (7)
Marketable Securities, Gain (Loss) 8 0 20 0
Net Periodic Defined Benefits Expense (Reversal of Expense), Excluding Service Cost Component 6 2 11 4
Change in fair value of emergence date warrants 6 3 3 21
Sublease Income 1 0 3 0
Other, net (1) (2) (2) (2)
Total other income (expense), net 15 1 29 23
Other income (expense), net 15 1 29 23
Net Periodic Defined Benefits Expense (Reversal of Expense), Excluding Service Cost Component (6) (2) (11) (4)
Change in fair value of emergence date warrants $ (6) $ (3) $ (3) $ (21)
v3.20.1
Financing Arrangements - Carrying Amount of Convertible Debt (Details) - USD ($)
Mar. 31, 2020
Sep. 30, 2019
Debt Instrument [Line Items]    
Principal $ 2,974,000,000 $ 3,224,000,000
Less:    
Unamortized debt discount (63,000,000) (72,000,000)
Unamortized issuance costs (5,000,000) (5,000,000)
Convertible Notes    
Debt Instrument [Line Items]    
Principal 350,000,000 350,000,000
Less:    
Net carrying amount $ 282,000,000 $ 273,000,000
v3.20.1
Leases Lessee, Finance Leases (Details)
$ in Millions
Mar. 31, 2020
USD ($)
Property, Plant and Equipment [Member]  
Lessee, Lease, Description [Line Items]  
Finance Lease, Right-of-Use Asset $ 6
Other Current Liabilities [Member]  
Lessee, Lease, Description [Line Items]  
Finance Lease, Liability, Current 8
Other Liabilities [Member]  
Lessee, Lease, Description [Line Items]  
Finance Lease, Liability, Noncurrent $ 6
v3.20.1
Net Income (Loss) Per Common Share - Narrative (Details) - USD ($)
$ / shares in Units, shares in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2020
Mar. 31, 2019
Jun. 11, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Stock Repurchased During Period, Value $ 10.89 $ 11.41    
Document Period End Date   Mar. 31, 2020    
Preferred Stock, Par or Stated Value Per Share $ 0.01 $ 0.01    
Stock options        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive securities excluded from computation of earnings per share (in shares)   1,000 1,000  
Performance Shares [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive securities excluded from computation of earnings per share (in shares)   1,000 500  
Restricted Stock Units (RSUs) [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive securities excluded from computation of earnings per share (in shares)   3,200 3,500  
Warrants        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive securities excluded from computation of earnings per share (in shares)   5,600 5,600  
Convertible Series B Preferred Stock        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive securities excluded from computation of earnings per share (in shares)   100    
Call Spread Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Class of Warrant or Right, Outstanding       12,600
v3.20.1
Share-based Compensation - PRSU (Details) - Market-Based Performance Shares [Member] - $ / shares
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate 55.75%  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value   $ 13.69
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period   661,856
v3.20.1
Commitments and Contingencies - Transactions with Nokia (Details)
$ in Millions
6 Months Ended
Mar. 31, 2020
USD ($)
Indemnification Agreement  
Loss Contingencies [Line Items]  
Threshold amount of contribution and distribution agreement $ 50
v3.20.1
Accumulated Other Comprehensive (Loss) Income - Components (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]        
Beginning Balance $ 1,113 $ 2,132 $ 1,300 $ 2,051
Other comprehensive income (loss) before reclassifications (90) 2 (83) (28)
Amounts reclassified to earnings 33 2 38 5
(Provision for) benefit from income taxes (2) (4)   (11)
Ending Balance 204 2,135 204 2,135
Cumulative translation adjustment (9) 18 (6) 19
Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items        
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]        
Beginning Balance (106) 51 (106) 51
Other comprehensive income (loss) before reclassifications 0 0 0 0
Amounts reclassified to earnings 0 0 0 0
(Provision for) benefit from income taxes 0 0   0
Ending Balance (106) 51 (106) 51
Foreign Currency Translation        
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]        
Beginning Balance (4) (30) (7) (31)
Amounts reclassified to earnings 27 0 27 0
(Provision for) benefit from income taxes 0 0   0
Ending Balance (13) (12) (13) (12)
Unrealized Loss on Term Loan Interest Rate Swap        
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]        
Beginning Balance (53) (23) (60) (2)
Other comprehensive income (loss) before reclassifications (54) (16) (50) (47)
Amounts reclassified to earnings 6 2 11 5
(Provision for) benefit from income taxes (2) (4)   (11)
Ending Balance (99) (33) (99) (33)
Accumulated Other Comprehensive (Loss) Income        
Increase (Decrease) in Accumulated Other Comprehensive Income (Loss) [Roll Forward]        
Beginning Balance (163) (2) (173) 18
Ending Balance $ (218) $ 6 $ (218) $ 6
v3.20.1
Share-based Compensation (Details) - USD ($)
$ / shares in Units, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based compensation expense $ 8 $ 5 $ 14 $ 11
Restricted Stock Units (RSUs) [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period 1,880,285      
Grants in period, weighted average grant date fair value (in dollars per share) $ 12.06      
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period 904,508      
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value $ 15.32      
Restricted Stock Units (RSUs) [Member] | 2017 Equity Incentive Plan        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Award vesting period     3 years  
Market-Based Performance Shares [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period     661,856  
Grants in period, weighted average grant date fair value (in dollars per share)     $ 13.69  
v3.20.1
Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Oct. 01, 2019
Oct. 01, 2018
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Disaggregation of Revenue [Line Items]              
Document Period End Date         Mar. 31, 2020    
Contract with Customer, Liability, Revenue Recognized $ 405 $ 396          
Capitalized Contract Cost to Obtain a Contract, Amortization       $ 24   $ 46  
Capitalized Contract Cost to Fulfill, Amortization     $ 6 6 $ 20 20  
Accounts receivable, net              
Accounts receivable, net     262   262   $ 314
Increase (decrease) in accounts receivable, net         (52)    
Contract assets:              
Contract assets, current     233   233   187
Increase (decrease) in contract assets, current         46    
Contract assets, non-current     23   23   16
Increase (decrease) in contract assets, non-current         7    
Total contract assets     256   256   203
Increase (decrease) in total contract assets         53    
Cost of obtaining a contract:              
Cost of obtaining a contract, current     89   89   89
Increase (decrease) in cost of obtaining a contract, current         0    
Cost of obtaining a contract, non-current     41   41   45
Increase (decrease) in cost of obtaining a contract, non-current         (4)    
Total cost of obtaining a contract     130   130   134
Increase (decrease) in total cost of obtaining a contract         (4)    
Cost to fulfill a contract:              
Cost incurred to fulfill a contract, current     41   41   25
Increase (decrease) in cost incurred to fulfill a contract, current         16    
Contract liabilities:              
Contract liabilities, current     477   477   472
Increase (decrease) in contract liabilities, current         5    
Contract liabilities, non-current     375   375   78
Increase (decrease) in contract liabilities, non-current         297    
Total contract liabilities     852   852   $ 550
Increase (decrease) in total contract liabilities         302    
Selling, General and Administrative Expenses [Member]              
Disaggregation of Revenue [Line Items]              
Capitalized Contract Cost to Obtain a Contract, Amortization     $ 34 23 $ 66 43  
Cost of Sales [Member]              
Disaggregation of Revenue [Line Items]              
Capitalized Contract Cost to Obtain a Contract, Amortization       $ 1   $ 3  
v3.20.1
Revenue Recognition - Impact of Adoption (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Oct. 01, 2019
Oct. 01, 2018
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
ASSETS                  
Accounts receivable, net     $ 262       $ 262   $ 314
Inventory     56       56   63
Contract assets     233       233   187
Contract costs     130       130   114
Other current assets $ 113   211       211   115
Property, plant and equipment, net     254       254   255
Deferred income taxes, net     27       27   35
Other assets     114       114   121
Accounts Payable, Current     254       254   291
LIABILITIES                  
Contract liabilities     477       477   472
Other current liabilities     246       246   158
Deferred income taxes, net     48       48   72
Other liabilities 313   313       313   316
STOCKHOLDERS' EQUITY                  
Retained Earnings (Accumulated Deficit)     (1,015)       (1,015)   $ (289)
REVENUE                  
Revenue     (682)   $ (709)   (1,397) $ (1,447)  
Contract with Customer, Liability, Revenue Recognized $ 405 $ 396              
COSTS                  
Cost of Revenue     311   323   632 654  
GROSS PROFIT     (371)   (386)   (765) (793)  
Operating Income (Loss) [Abstract]                  
OPERATING LOSS     597   (38)   582 (88)  
Interest expense     (53)   (58)   (111) (118)  
Other income (expense), net     (15)   (1)   (29) (23)  
LOSS BEFORE INCOME TAXES     (635)   (19)   (664) (7)  
(Provision for) benefit from income taxes     37   (6)   62 (3)  
Net income (loss)     (672) $ (54) (13) $ 9 (726) (4)  
Products                  
REVENUE                  
Revenue     (245)   (287)   (543) (611)  
COSTS                  
Total Cost of Goods and Services     (92)   (105)   (196) (220)  
Amortization of technology intangible assets     (44)   (44)   (87) (87)  
Services                  
REVENUE                  
Revenue     (437)   (422)   (854) (836)  
COSTS                  
Total Cost of Goods and Services     $ (175)   $ (174)   $ (349) $ (347)  
v3.20.1
Derivative Instruments and Hedging Activities - Derivatives Designated as Cash Flow Hedges (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Mar. 31, 2020
Mar. 31, 2019
Derivative [Line Items]            
Interest expense $ (53)   $ (58)   $ (111) $ (118)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent (55) $ 10 8 $ (20) (45) (12)
Accumulated Other Comprehensive (Loss) Income            
Derivative [Line Items]            
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent   $ 10   $ (20)    
Interest Expense [Member] | Derivatives Designated as Hedging Instruments:            
Derivative [Line Items]            
Derivative Instruments, Loss Reclassified from Accumulated OCI into Income, Effective Portion 0   0   0 0
Interest Rate Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net $ (6)   (2)   $ (11) (5)
Other Comprehensive Income (Loss) [Member] | Derivatives Designated as Hedging Instruments:            
Derivative [Line Items]            
Derivative Instruments, Loss Reclassified from Accumulated OCI into Income, Effective Portion     (16)     (47)
Interest Rate Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net     $ 2     $ 5
v3.20.1
Leases Narrative (Details) - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Lessee, Lease, Description [Line Items]    
Document Period End Date Mar. 31, 2020  
Maximum    
Lessee, Lease, Description [Line Items]    
Lessee Leases, Term of Contract 9 years 8 months 12 days  
Minimum [Member]    
Lessee, Lease, Description [Line Items]    
Lessee Leases, Term of Contract 1 month  
Other current liabilities    
Lessee, Lease, Description [Line Items]    
Capital Lease Obligations   $ 11
Other Liabilities [Member]    
Lessee, Lease, Description [Line Items]    
Capital Lease Obligations   8
Sale Lease Back Transaction [Member] | Avaya Private Cloud Services Business [Member]    
Lessee, Lease, Description [Line Items]    
Capital Lease Obligations $ 9 $ 13
v3.20.1
Intangible Assets - Narrative (Details) - USD ($)
$ in Millions
Mar. 31, 2020
Sep. 30, 2019
Finite-Lived Intangible Assets [Line Items]    
Decrease in Growth Rate Resulting In An Estimated Fair Value Below The Carrying Value 14000.00%  
Fair value in excess of carrying amount, percent 5.00%  
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss $ 0 $ 2
Increase in Discount Rate Resulting In An Estimated Fair Value Below The Carrying Value 5000.00%  
Acquired Technology and Patents [Member]    
Finite-Lived Intangible Assets [Line Items]    
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss $ 0 2
Trademarks and Trade Names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss $ 0 $ 0
v3.20.1
Recent Accounting Pronouncements
6 Months Ended
Mar. 31, 2020
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to reclassify from accumulated other
comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. The Company adopted this standard as of October 1, 2019. The adoption of this standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard, along with other guidance subsequently issued by the FASB (collectively "ASC 842"), superseded all lease accounting guidance and requires lessees to recognize lease assets and liabilities for all leases with initial lease terms of more than 12 months. The standard makes similar changes to lessor accounting and aligns key aspects of the lessor accounting model with the GAAP revenue recognition standard. The Company adopted ASC 842 on October 1, 2019 using the modified retrospective transition method as of the beginning of the period of adoption. Therefore, on October 1, 2019, the Company recognized and measured leases without revising the historical comparative period information or disclosures. The modified retrospective transition method included optional practical expedients which lessened the burden of implementing ASC 842 by not requiring a reassessment of certain conclusions reached under the previous lease accounting guidance. The Company elected to apply the package of practical expedients to forego a reassessment of (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) the initial direct costs for an existing lease. In addition, the Company elected the land easement practical expedient permitting it to not reassess whether an existing or expired land easement is a lease or contains a lease. The Company also adopted the practical expedient permitting the non-lease components of an arrangement to be included in the right-of-use asset to which they relate. The Company did not elect the practical expedient allowing the use-of-hindsight which would require the Company to reassess the lease term of existing leases based on all facts and circumstances through the effective date.
The adoption of ASC 842 had a material impact to the Company's Condensed Consolidated Balance Sheet mainly due to the recognition of $190 million of operating lease right-of-use assets and $194 million of operating lease liabilities. The adoption of ASC 842 also resulted in the one-time reclassification of certain prepaid and deferred rent and facility-related business restructuring liabilities to operating lease right-of-use assets.
The impact of the adoption of ASC 842 on the September 30, 2019 Condensed Consolidated Balance Sheet was as follows:
September 30, 2019Upon Adoption of ASC 842
(In millions)As ReportedAdjustments
ASSETS
Other current assets$115  $(2) $113  
Intangible assets, net2,891  (2) 2,889  
Operating lease right-of-use assets—  190  190  
LIABILITIES
Current liabilities:
Operating lease liabilities—  51  51  
Business restructuring reserve33  (4) 29  
Non-current liabilities:
Operating lease liabilities—  143  143  
Business restructuring reserve36  (1) 35  
Other liabilities316  (3) 313  

Recent Standards Not Yet Effective

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification ("ASC") 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This standard is effective for the Company beginning in the first quarter of fiscal 2022, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use
software. The standard is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted. The amendments in this standard may be applied on a retrospective or prospective basis. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal 2021, with early adoption permitted. The amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard on its disclosures.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal 2021. Certain disclosures in the standard need to be applied on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This standard, along with other guidance subsequently issued by the FASB, requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables and contract assets, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity's assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a modified retrospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.
v3.20.1
Income Taxes - Income Taxes Narrative (Details) - USD ($)
$ in Billions
2 Months Ended 6 Months Ended
Dec. 15, 2017
Mar. 31, 2020
Revenue, Remaining Performance Obligation, Amount   $ 2.5
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 35.00% 21.00%
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2020
Sep. 30, 2019
Current assets:    
Cash and cash equivalents $ 553 $ 752
Accounts receivable, net 262 314
Inventory 56 63
Contract assets 233 187
Contract costs 130 114
Other current assets 211 115
TOTAL CURRENT ASSETS 1,445 1,545
Property, plant and equipment, net 254 255
Deferred income taxes, net 27 35
Intangible assets, net 2,720 2,891
Goodwill 1,476 2,103
Operating Lease, Right-of-Use Asset 175 0
Other assets 114 121
TOTAL ASSETS 6,211 6,950
Current liabilities:    
Debt maturing within one year 0 29
Accounts payable 254 291
Payroll and benefit obligations 125 116
Contract liabilities 477 472
Business restructuring reserve, current portion 25 33
Other current liabilities 246 158
TOTAL CURRENT LIABILITIES 1,175 1,099
Non-current liabilities:    
Long-term debt 2,883 3,090
Pension obligations 728 759
Other post-retirement obligations 197 200
Deferred income taxes, net 48 72
Contract liabilities, non-current 375 78
Operating Lease, Liability, Noncurrent 135 0
Business restructuring reserve, non-current portion 26 36
Other liabilities 313 316
TOTAL NON-CURRENT LIABILITIES 4,705 4,551
TOTAL LIABILITIES 5,880 5,650
Operating Lease, Liability, Current 48 0
Preferred Stock, Value, Outstanding 127 0
STOCKHOLDER'S DEFICIENCY    
Common stock 1 1
Additional paid-in capital 1,436 1,761
Accumulated deficit (1,015) (289)
Accumulated other comprehensive loss (218) (173)
TOTAL STOCKHOLDER'S DEFICIENCY 204 1,300
Total Liabilities and Stockholders' Equity $ 6,211 $ 6,950
v3.20.1
Capital Stock
6 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Capital Stock Capital Stock
Preferred Stock
The Company's certificate of incorporation authorizes it to issue up to 55,000,000 shares of preferred stock with a par value of $0.01 per share.
On October 31, 2019, the Company issued 125,000 shares of its 3% Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), to RingCentral for an aggregate purchase price of $125 million. The Series A Preferred Stock is convertible into shares of the Company's common stock at an initial conversion price of $16.00 per share, which represents an approximately 9% interest in the Company's common stock on an as-converted basis as of March 31, 2020, assuming no holders of warrants, convertible notes or similar instruments exercise their exercise or conversion rights. The holders of the Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of the Company's common stock on all matters submitted to a vote of the holders of the common stock. Holders of the Series A Preferred Stock are entitled to receive dividends, in preference and priority to holders of the Company's common stock, which accrue on a daily basis at the rate of 3% per annum of the stated value of the Series A Preferred Stock. The stated value of the Series A Preferred Stock was initially $1,000 per share and will be increased by the sum of any dividends on such shares not paid in cash. These dividends are cumulative and compound quarterly. The holders of the Series A Preferred Stock participate in any dividends the Company pays on its common stock, equal to the dividend which holders would have received if their Series A Preferred Stock had been converted into common stock on the date such common stock dividend was determined. In the event the Company is liquidated or dissolved, the holders of the Series A Preferred Stock are entitled to receive an amount equal to the liquidation preference (which equals the stated value plus any accrued and unpaid dividends) for each share of Series A Preferred Stock before any distribution is made to holders of the Company's common stock.
The Series A Preferred Stock are redeemable at the Company's election upon the termination of the Framework Agreement. In addition, the holders of the Series A Preferred Stock have certain rights to require the Company to redeem or put rights to require the Company to repurchase all or any portion of the Series A Preferred Stock. The holders can exercise such redemption
rights, upon at least 21 days notice, after the termination of the Framework Agreement or upon the occurrence of certain events. If and to the extent the redemption right is exercised, the Company would be required to purchase each share of Series A Preferred Stock at the per share price equal to the stated value of the Series A Preferred Stock which will be increased by the sum of any dividends on such shares that have accrued and have been paid in kind, plus all accrued but unpaid dividends. Given that the holders of the Series A Preferred Stock may require the Company to redeem all or a portion of its shares, the Series A Preferred Stock is classified in the mezzanine section of the Condensed Consolidated Balance Sheets between Total liabilities and Stockholders' equity. As of March 31, 2020, the carrying value of the Series A Preferred Stock was $127 million, which includes $2 million of accumulated and unpaid dividends.
In connection with the issuance of the Series A Preferred Stock, the Company granted RingCentral certain customary consent rights with respect to certain actions by the Company, including amending the Company's organizational documents in a manner that would have an adverse effect on the Series A Preferred Stock and issuing securities that are senior to, or equal in priority with, the Series A Preferred Stock. In addition, pursuant to an Investor Rights Agreement, until such time when RingCentral and its affiliates hold or beneficially own less than 4,759,339 shares of the Company's common stock (on an as-converted basis), RingCentral has the right to nominate one person for election to the Company's Board of Directors. The director designated by RingCentral has the option (i) to serve on the Company's Audit and Nominating and Corporate Governance Committees or (ii) to attend (but not vote at) all of the Company's Board of Directors' committee meetings. The director to be designated by RingCentral will be nominated to the Company’s Board of Directors following RingCentral’s identification of a nominee.
Common Stock
The Company's certificate of incorporation authorizes it to issue up to 550,000,000 shares of common stock with a par value of $0.01 per share. As of March 31, 2020, there were 82,654,594 shares issued and outstanding. As of September 30, 2019, there were 111,046,085 shares issued and 111,033,405 shares outstanding with the remaining 12,680 shares distributable in accordance with the Plan of Reorganization.
On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase Emergence Date Warrants for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and may be terminated, increased or decreased by the Board of Directors in its discretion at any time. As of March 31, 2020, there were no warrant repurchases under the program.
On October 1, 2019, the Board of Directors of the Company approved a share repurchase program authorizing the Company to repurchase the Company's common stock for an aggregate expenditure of up to $500 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company adopted a purchase plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to implement the share repurchase program. The share repurchase program does not obligate the Company to purchase any common stock and may be terminated, increased or decreased by the Board in its discretion at any time. All shares that are repurchased under the program are retired by the Company. During the three and six months ended March 31, 2020, the Company repurchased 18,206,273 and 28,923,664 shares of its common stock based on the settlement date of the repurchase at a weighted average price per share of $10.89 and $11.41, respectively, including transaction costs. As of March 31, 2020, the remaining authorized amount for share repurchases under this program was $170 million.
v3.20.1
Related Party Transactions
6 Months Ended
Mar. 31, 2020
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
The Company's Board of Directors is comprised of seven directors, including the Company's Chief Executive Officer and six non-employee directors.
Specific Arrangements Involving the Company's Current Directors and Executive Officers
William D. Watkins is a Director and Chair of the Board of Directors of the Company and serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the six months ended March 31, 2020 and 2019, the Company purchased goods and services from subsidiaries of Flex Ltd., making payments of $16 million in both periods. As of March 31, 2020, the Company had outstanding accounts payable due to Flex Ltd. of $6 million and outstanding accounts receivable due from Flex Ltd. of $1 million. As of September 30, 2019, the Company had outstanding accounts payable due to Flex Ltd. of $6 million.
v3.20.1
Fair Value Measurements (Tables)
6 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements, Recurring and Nonrecurring
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and September 30, 2019 were as follows:
 March 31, 2020September 30, 2019
 Fair Value Measurements UsingFair Value Measurements Using
(In millions)Total
Level 1
Level 2Level 3Total
Level 1
Level 2Level 3
Assets:
Investments in equity securities
$89  $89  $—  $—  $—  $—  $—  $—  
Investments in debt securities—  —  —  —  10  —  —  10  
Foreign exchange contracts —   —   —   —  
Total assets$90  $89  $ $—  $11  $—  $ $10  
Liabilities:
Interest rate contracts$120  $—  $120  $—  $81  $—  $81  $—  
Spoken acquisition earn-outs—  —  —  —   —  —   
Foreign exchange contracts —   —  —  —  —  —  
Emergence Date Warrants —  —    —  —   
Total liabilities $128  $—  $126  $ $91  $—  $81  $10  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table summarizes the activity for the Company's Level 3 assets and liabilities measured at fair value on a recurring basis:
(In millions)Emergence Date WarrantsSpoken acquisition earn-outsInvestments in debt securities
Balance as of September 30, 2019$ $ $10  
Change in fair value(1)
(3) —  —  
Impairment(2)
—  —  (10) 
Settlement—  (5) —  
Balance as of March 31, 2020$ $—  $—  
(1)Changes in fair value of the Emergence Date Warrants are included in Other income, net.
(2)During the three and six months ended March 31, 2020, the Company recorded an other-than-temporary impairment charge for a $10 million credit loss on its investments in debt securities mainly driven by a decline in the macroeconomic environment due to the COVID-19 pandemic and a decline in the expected operating results and cash flows for the investment company. The impairment charge is included in Other income, net.
Fair Value, by Balance Sheet Grouping
The estimated fair values of the amounts borrowed under the Company's financing agreements as of March 31, 2020 and September 30, 2019 are as follows:
March 31, 2020September 30, 2019
(In millions)Principal amountFair valuePrincipal amountFair value
Term Loan Credit Agreement due December 15, 2024$2,624  $2,162  $2,874  $2,739  
Convertible 2.25% senior notes due June 15, 2023350  281  350  298  
Total debt$2,974  $2,443  $3,224  $3,037  
v3.20.1
Business Restructuring Reserves and Programs (Tables)
6 Months Ended
Mar. 31, 2020
Restructuring Reserve [Abstract]  
Schedule of Restructuring and Related Costs
The following table summarizes the activity for employee separation costs recognized under the Company's restructuring programs for the six months ended March 31, 2020:
(In millions)
Fiscal 2020 Restructuring Program (1)
Fiscal 2019 Restructuring Program (2)
Fiscal 2008 through 2018 Restructuring Programs (3)
Total
Accrual balance as of September 30, 2019$—  $11  $53  $64  
Cash payments—  (3) (11) (14) 
Restructuring charges —  —   
Impact of foreign currency fluctuations(1)  —  —  
Accrual balance as of March 31, 2020$—  $ $42  $51  
v3.20.1
Accumulated Other Comprehensive (Loss) Income (Tables)
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Equity [Abstract]    
Schedule of Accumulated Other Comprehensive Income (Loss)
The components of Accumulated other comprehensive (loss) income for the periods indicated were as follows:
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2019$(106) $(4) $(53) $(163) 
Other comprehensive loss before reclassifications—  (36) (54) (90) 
Amounts reclassified to earnings—  27   33  
Benefit from income taxes—  —    
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2019$(106) $(7) $(60) $(173) 
Other comprehensive loss before reclassifications—  (33) (50) (83) 
Amounts reclassified to earnings—  27  11  38  
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2018$51  $(30) $(23) $(2) 
Other comprehensive income (loss) before reclassifications—  18  (16)  
Amounts reclassified to earnings—  —    
Benefit from income taxes—  —    
Balance as of March 31, 2019$51  $(12) $(33) $ 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018$51  $(31) $(2) $18  
Other comprehensive income (loss) before reclassifications—  19  (47) (28) 
Amounts reclassified to earnings—  —    
Benefit from income taxes—  —  11  11  
Balance as of March 31, 2019$51  $(12) $(33) $ 
v3.20.1
Revenue Recognition
6 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
Disaggregation of Revenue
The following tables provide the Company's disaggregated revenue for the periods presented:

(In millions)Three months ended
March 31,
Six months ended
March 31,
2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  
Three months ended March 31, 2020Three months ended March 31, 2019
(In millions)Products & SolutionsServicesUnallocatedTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$119  $266  $(1) $384  $130  $248  $(3) $375  
International:
Europe, Middle East and Africa78  94  —  172  93  96  (1) 188  
Asia Pacific
27  43  —  70  37  43  (1) 79  
Americas International - Canada and Latin America21  35  —  56  29  38  —  67  
Total International126  172  —  298  159  177  (2) 334  
Total revenue$245  $438  $(1) $682  $289  $425  $(5) $709  

Six months ended March 31, 2020Six months ended March 31, 2019
(In millions)Products & SolutionsServicesUnallocatedTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$268  $512  $(2) $778  $280  $499  $(10) $769  
International:
Europe, Middle East and Africa171  188  (1) 358  199  190  (2) 387  
Asia Pacific
60  87  —  147  75  84  (2) 157  
Americas International - Canada and Latin America44  70  —  114  61  74  (1) 134  
Total International275  345  (1) 619  335  348  (5) 678  
Total revenue$543  $857  $(3) $1,397  $615  $847  $(15) $1,447  
Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.
Transaction Price Allocated to the Remaining Performance Obligations
The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of March 31, 2020 was $2.5 billion, of which 58% and 26% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance expected to be recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of intellectual property, and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.
Contract Balances
The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:
(In millions)March 31, 2020September 30, 2019Increase (Decrease)
Accounts receivable, net$262  $314  $(52) 
Contract assets:
Current$233  $187  $46  
Non-current (Other assets)23  16   
$256  $203  $53  
Cost of obtaining a contract:
Current (Contract costs)$89  $89  $—  
Non-current (Other assets)41  45  (4) 
$130  $134  $(4) 
Cost to fulfill a contract:
Current (Contract costs)$41  $25  $16  
Contract liabilities:
Current$477  $472  $ 
Non-current375  78  297  
$852  $550  $302  
The increase in Contract liabilities was mainly driven by consideration received in connection with the strategic partnership with RingCentral, Inc. ("RingCentral") as discussed in Note 5, "Strategic Partnership."
During the six months ended March 31, 2020 and 2019, the Company recognized revenue of $405 million and $396 million that had been previously recorded as a Contract liability as of October 1, 2019 and October 1, 2018, respectively.
Contract Costs
The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract, such as sales commissions and products and services, respectively. For the three and six months ended March 31, 2020, the Company recognized $34 million and $66 million, respectively, for amortization of costs to obtain customer contracts which were included in Selling, general and administrative expense. For the three months ended March 31, 2019, the Company recognized $24 million for amortization of costs to obtain customer contracts, of which $23 million was included in Selling, general and administrative expense and the remaining $1 million was a reduction to Revenue. For the six months ended March 31, 2019, the Company recognized $46 million for amortization of costs to obtain customer contracts, of which $43 million was included in Selling, general and administrative expense and the remaining $3 million was a reduction to Revenue.
Contract fulfillment costs are recognized consistent with the transfer to the customer of the underlying performance obligations based on the specific contracts to which they relate. For both the three months ended March 31, 2020 and 2019, the Company recognized $6 million of contract fulfillment costs within Costs and for both the six months ended March 31, 2020 and 2019, the Company recognized $20 million of contract fulfillment costs within Costs
v3.20.1
Financing Arrangements
6 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Financing Arrangements Financing Arrangements
The following table reflects principal amounts of debt and debt net of discounts and issuance costs for the periods presented:
  
March 31, 2020September 30, 2019
(In millions)Principal amountNet of discounts and issuance costsPrincipal amountNet of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024$2,624  $2,601  $2,874  $2,846  
Convertible 2.25% senior notes due June 15, 2023350  282  350  273  
Total debt$2,974  2,883  $3,224  3,119  
Debt maturing within one year—  (29) 
Long-term debt, net of current portion$2,883  $3,090  
Term Loan and ABL Credit Agreements
As of March 31, 2020 and September 30, 2019, the Company maintained (i) its Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent, maturing on December 15, 2024, (the "Term Loan Credit Agreement") and (ii) its ABL Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several
lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, maturing on December 15, 2022, which provides a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of $300 million from time to time, subject to borrowing base availability (the "ABL Credit Agreement"). On November 7, 2019, the Company made a principal prepayment on its Term Loan of $250 million. Due to the prepayment, there are no amounts due within one year on the Term Loan and the entire debt balance has been classified as non-current as of March 31, 2020.
For the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $40 million and $50 million, respectively, related to the Term Loan Credit Agreement, including the amortization of the underwriting discount. For the six months ended March 31, 2020 and 2019, the Company recognized interest expense of $86 million and $100 million, respectively, related to the Term Loan Credit Agreement, including the amortization of the underwriting discount.
Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At March 31, 2020, the Company had issued and outstanding letters of credit and guarantees of $39 million under the ABL Credit Agreement. As of March 31, 2020, the Company had no borrowings outstanding under the ABL Credit Agreement. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $39 million of outstanding letters of credit and guarantees, was $97 million at March 31, 2020. For the three and six months ended March 31, 2020 and 2019, recognized interest expense related to the ABL Credit Agreement was not material. On April 6, 2020, the Company borrowed $50 million under the ABL Credit Agreement.
Convertible Notes
The Company's 2.25% Convertible Notes have an aggregate principal amount outstanding of $350 million (including notes issued in connection with the underwriters' exercise in full of an over-allotment option of $50 million) and mature on June 15, 2023 (the "Convertible Notes"). The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee.
For the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $7 million and $6 million related to the Convertible Notes, which includes $5 million and $4 million of amortization of the underwriting discount and issuance costs, respectively. For the six months ended March 31, 2020 and 2019, the Company recognized interest expense of $13 million and $12 million related to the Convertible Notes, which includes $9 million and $8 million of amortization of the underwriting discount and issuance costs, respectively.
The net carrying amount of the Convertible Notes for the periods indicated was as follows:
(In millions)March 31, 2020September 30, 2019
Principal350  $350  
Less:
Unamortized debt discount(63) (72) 
Unamortized issuance costs(5) (5) 
Net carrying amount$282  $273  
The weighted average contractual interest rate of the Company's outstanding debt was 6.1% and 6.3% as of March 31, 2020 and September 30, 2019, respectively. The effective interest rate for the Term Loan Credit Agreement as of March 31, 2020 and September 30, 2019 was not materially different than its contractual interest rate including adjustments related to hedging. The effective interest rate for the Convertible Notes was 9.2% as of March 31, 2020 and September 30, 2019 reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs.
As of March 31, 2020, the Company was not in default under any of its debt agreements.
v3.20.1
Capital Stock - Narrative (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Oct. 01, 2019
Sep. 30, 2019
Nov. 14, 2018
Class of Stock [Line Items]              
Preferred Stock, Shares Authorized 55,000,000   55,000,000        
Preferred stock, par value (in usd per share) $ 0.01   $ 0.01        
Proceeds from Issuance of Preferred Stock and Preference Stock     $ 121,000,000 $ 0      
Strategic Partnership Interest on As-Converted Basis 900.00%   900.00%        
Document Period End Date     Mar. 31, 2020        
Preferred Stock, Value, Outstanding $ 127,000,000   $ 127,000,000     $ 0  
Dividends, Preferred Stock $ 1,000,000 $ 1,000,000 $ 2,000,000        
Strategic Partnership, Minimum Shares Required for Consent Rights     4,759,339        
Preferred shares issued 125,000   125,000     0  
Common stock, shares authorized 550,000,000   550,000,000     550,000,000  
Common stock, par value (usd per share) $ 0.01   $ 0.01     $ 0.01  
Common stock, shares issued 82,654,594   82,654,594     111,046,085  
Common stock, shares outstanding 82,654,594   82,654,594     111,033,405  
Common stock, issued for GUC (shares)           12,680  
Warrant repurchase program, authorized amount             $ 15,000,000
Warrant Repurchase Program, Number of Securities Called by Warrants or Rights, Number of Warrants Repurchased $ 0   $ 0        
Stock Repurchase Program, Authorized Amount         $ 500,000,000    
Stock Repurchased During Period, Shares 18,206,273   28,923,664        
Stock Repurchased During Period, Value $ 10.89   $ 11.41        
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased 170,000,000   170,000,000        
As Previously Reported              
Class of Stock [Line Items]              
Common stock, shares issued 82,654,594   82,654,594     111,046,085  
Series A Preferred Stock              
Class of Stock [Line Items]              
Preferred stock, par value (in usd per share) $ 0.01   $ 0.01        
Proceeds from Issuance of Preferred Stock and Preference Stock     $ 125,000,000        
Price per share of common stock (in usd per share) $ 16.00   $ 16.00        
v3.20.1
Leases Finance and Operating Leases, Liabilities, Maturities (Details) - USD ($)
Mar. 31, 2020
Oct. 01, 2019
Leases [Abstract]    
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year $ 32,000,000  
Finance Lease, Liability, Payments, Due Next Twelve Months 6,000,000  
Lessee, Operating Lease, Liability, Payments, Due Year Two 50,000,000  
Finance Lease, Liability, Payments, Due Year Two 6,000,000  
Lessee, Operating Lease, Liability, Payments, Due Year Three 44,000,000  
Finance Lease, Liability, Payments, Due Year Three 2,000,000  
Lessee, Operating Lease, Liability, Payments, Due Year Four 31,000,000  
Finance Lease, Liability, Payments, Due Year Four 1,000,000  
Lessee, Operating Lease, Liability, Payments, Due Year Five 23,000,000  
Finance Lease, Liability, Payments, Due Year Five 0  
Lessee, Operating Lease, Liability, Payments, Due Year Six 12,000,000  
Finance Lease, Liability, Payments, Due Year Six 0  
Lessee, Operating Lease, Liability, Payments, Due after Year Five 20,000,000  
Finance Lease, Liability, Payments, Due after Year Five 0  
Lessee, Operating Lease, Liability, Payments, Due 212,000,000  
Finance Lease, Liability, Payment, Due 15,000,000  
Lessee, Operating Lease, Liability, Undiscounted Excess Amount (29,000,000)  
Finance Lease, Liability, Undiscounted Excess Amount (1,000,000)  
Operating Lease, Liability 183,000,000 $ 194,000,000
Finance Lease, Liability $ 14,000,000  
Operating Lease, Weighted Average Remaining Lease Term 4 years 8 months 12 days  
Finance Lease, Weighted Average Remaining Lease Term 2 years 1 month 6 days  
Operating Lease, Weighted Average Discount Rate, Percent 6.30%  
Finance Lease, Weighted Average Discount Rate, Percent 6.10%  
v3.20.1
Commitments and Contingencies - Product Warranties (Details) - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]    
Product warranties, maximum term 2 years  
Amount reserved for product warranties $ 2 $ 2
v3.20.1
Share-based Compensation - Options, Narrative (Details) - Stock options
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value | $ / shares $ 6.11
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares 163,666
v3.20.1
Derivative Instruments and Hedging Activities - Assumptions Used (Details)
6 Months Ended 12 Months Ended
Mar. 31, 2020
$ / shares
Sep. 30, 2019
$ / shares
Expected volatility    
Derivative [Line Items]    
Warrants, measurement input 0.6524 0.5689
Risk-free interest rates    
Derivative [Line Items]    
Warrants, measurement input 0.0027 0.0155
Contractual remaining life (in years)    
Derivative [Line Items]    
Derivative, Remaining Maturity 2 years 8 months 15 days 3 years 2 months 15 days
Warrants    
Derivative [Line Items]    
Price per share of common stock (in usd per share) $ 8.09 $ 10.23
v3.20.1
Goodwill - Schedule of Goodwill (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Oct. 01, 2019
Sep. 30, 2019
Goodwill [Line Items]            
Indefinite-lived Intangible Assets (Excluding Goodwill) $ 333   $ 333     $ 335
Goodwill [Roll Forward]            
Goodwill, Beginning Balance     2,103      
Goodwill, Ending Balance 1,476   1,476      
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss 0   0     (2)
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 333   333     333
Intangible assets, net 2,720   2,720   $ 2,889 2,891
Accumulated impairment charges (1,281)   (1,281)     (657)
Goodwill, Impairment Loss (624) $ 0 (624) $ 0    
Goodwill, Gross 2,757   2,757     2,760
Goodwill, Foreign Currency Translation Gain (Loss)     (3)      
Products & Solutions            
Goodwill [Roll Forward]            
Goodwill, Beginning Balance     625      
Goodwill, Ending Balance 0   0      
Accumulated impairment charges (1,281)   (1,281)     (657)
Goodwill, Impairment Loss     (624)      
Goodwill, Gross 1,281   1,281     1,282
Goodwill, Foreign Currency Translation Gain (Loss)     (1)      
Services            
Goodwill [Roll Forward]            
Goodwill, Beginning Balance     1,478      
Goodwill, Ending Balance 1,476   1,476      
Accumulated impairment charges 0   0     0
Goodwill, Impairment Loss     0      
Goodwill, Gross 1,476   1,476     1,478
Goodwill, Foreign Currency Translation Gain (Loss)     (2)      
Acquired Technology and Patents [Member]            
Goodwill [Line Items]            
Indefinite-lived Intangible Assets (Excluding Goodwill) 0   0     2
Goodwill [Roll Forward]            
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss 0   0     (2)
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 0   0     0
Customer relationships and other intangibles            
Goodwill [Line Items]            
Indefinite-lived Intangible Assets (Excluding Goodwill) 0   0     0
Goodwill [Roll Forward]            
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss 0   0     0
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 0   0     0
Trademarks and Trade Names [Member]            
Goodwill [Line Items]            
Indefinite-lived Intangible Assets (Excluding Goodwill) 333   333     333
Goodwill [Roll Forward]            
Indefinite-lived Intangible Assets (Excluding Goodwill), Accumulated Impairment Loss 0   0     0
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 333   333     333
Trademarks and Trade Names [Member]            
Goodwill [Roll Forward]            
Intangible assets, net 359   359     364
Customer relationships and other intangibles            
Goodwill [Roll Forward]            
Intangible assets, net 1,795   1,795     1,875
Acquired Technology and Patents [Member]            
Goodwill [Roll Forward]            
Intangible assets, net $ 566   $ 566     $ 652
v3.20.1
Financing Arrangements - Schedule of Debt (Details) - USD ($)
6 Months Ended
Mar. 31, 2020
Sep. 30, 2019
Debt Instrument [Line Items]    
Document Period End Date Mar. 31, 2020  
Principal $ 2,974,000,000 $ 3,224,000,000
Net of discounts and issuance costs 2,883,000,000 3,119,000,000
Debt maturing within one year 0 (29,000,000)
Long-term debt, net of current portion 2,883,000,000 3,090,000,000
Term Loan Credit Agreement due December 15, 2024    
Debt Instrument [Line Items]    
Principal 2,624,000,000 2,874,000,000
Net of discounts and issuance costs 2,601,000,000 2,846,000,000
Convertible 2.25% senior notes due June 15, 2023    
Debt Instrument [Line Items]    
Principal 350,000,000 350,000,000
Net of discounts and issuance costs $ 282,000,000 $ 273,000,000
v3.20.1
Derivative Instruments and Hedging Activities - Presented on a Net Basis (Details) - USD ($)
$ in Millions
Mar. 31, 2020
Sep. 30, 2019
Derivative [Line Items]    
Gross amounts recognized in the consolidated balance sheet, Asset $ 1 $ 1
Gross amounts recognized in the consolidated balance sheet, Liability 128 86
Gross amount subject to offset in master netting arrangements not offset in the Consolidated Balance Sheet, Asset (1) (1)
Gross amount subject to offset in master netting arrangements not offset in the Consolidated Balance Sheet, Liability (1) (1)
Derivative Asset 0 0
Derivative Liability $ 127 $ 85
v3.20.1
Fair Value Measurements - Level 3 Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net $ (10) $ 0
Level 3 | Emergence Date Warrants    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Fair value of derivative liability, beginning balance 5  
Change in fair value (3)  
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements 0  
Fair value of derivative liability, ending balance 2  
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net 0  
Level 3 | Spoken acquisition earn-outs    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Fair value of derivative liability, beginning balance 5  
Change in fair value 0  
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements 5  
Fair value of derivative liability, ending balance 0  
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net 0  
Level 3 | Investments [Domain]    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Fair value of derivative liability, beginning balance 10  
Change in fair value 0  
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements 0  
Fair value of derivative liability, ending balance 0  
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net $ (10)  
v3.20.1
Consolidated Statements of Changes in Stockholders' Equity (Deficit) - USD ($)
$ in Millions
Total
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss
Beginning Balance (in shares) at Sep. 30, 2018   110,200,000      
Beginning Balance at Sep. 30, 2018 $ 2,051 $ 1 $ 1,745 $ 287 $ 18
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan (in shares)   800,000      
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan 0        
Stock Repurchased During Period, Shares   (300,000)      
Amortization of share-based compensation 6   6    
Net income (loss) 9        
Other comprehensive income (loss) (20)       (20)
Shares repurchased and retired for tax withholding on vesting of restricted stock units (6)   (6)    
Ending Balance at Dec. 31, 2018 2,132 $ 1 1,745 388 (2)
Ending Balance (in shares) at Dec. 31, 2018   110,700,000      
Beginning Balance (in shares) at Sep. 30, 2018   110,200,000      
Beginning Balance at Sep. 30, 2018 2,051 $ 1 1,745 287 18
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (4)        
Other comprehensive income (loss) (12)        
Ending Balance at Mar. 31, 2019 2,135 $ 1 1,750 378 6
Ending Balance (in shares) at Mar. 31, 2019   110,700,000      
Beginning Balance (in shares) at Dec. 31, 2018   110,700,000      
Beginning Balance at Dec. 31, 2018 2,132 $ 1 1,745 388 (2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Amortization of share-based compensation 5        
Net income (loss) (13)        
Other comprehensive income (loss) 8        
Ending Balance at Mar. 31, 2019 2,135 $ 1 1,750 378 6
Ending Balance (in shares) at Mar. 31, 2019   110,700,000      
Beginning Balance (in shares) at Sep. 30, 2019   111,000,000.0      
Beginning Balance at Sep. 30, 2019 1,300 $ 1 $ 1,761 (289) (173)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan (in shares)   300,000      
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan $ 0        
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation   100,000      
Stock Repurchased and Retired During Period, Shares (142,000,000) (10,700,000) (142,000,000)    
Amortization of share-based compensation $ 6   $ 6    
Preferred Stock, Accretion of Redemption Discount (4)   (4)    
Accrued dividends on Series A preferred stock (1)   (1)    
Net income (loss) (54)        
Other comprehensive income (loss) 10       10
Shares repurchased and retired for tax withholding on vesting of restricted stock units (2)   (2)    
Ending Balance at Dec. 31, 2019 1,113 $ 1 1,618 (343) (163)
Ending Balance (in shares) at Dec. 31, 2019   100,500,000      
Beginning Balance (in shares) at Sep. 30, 2019   111,000,000.0      
Beginning Balance at Sep. 30, 2019 $ 1,300 $ 1 1,761 (289) (173)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock Repurchased During Period, Shares (28,923,664)        
Accrued dividends on Series A preferred stock $ (2)        
Net income (loss) (726)        
Other comprehensive income (loss) (45)        
Ending Balance at Mar. 31, 2020 204 $ 1 1,436 (1,015) (218)
Ending Balance (in shares) at Mar. 31, 2020   82,700,000      
Beginning Balance (in shares) at Dec. 31, 2019   100,500,000      
Beginning Balance at Dec. 31, 2019 1,113 $ 1 $ 1,618 (343) (163)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan (in shares)   600,000      
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan $ 0        
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation   200,000      
Stock Repurchased and Retired During Period, Shares (188,000,000) (18,200,000) (188,000,000)    
Stock Repurchased During Period, Shares (18,206,273)        
Amortization of share-based compensation $ 8   $ 8    
Accrued dividends on Series A preferred stock (1)   (1)    
Net income (loss) (672)        
Other comprehensive income (loss) (55)        
Shares repurchased and retired for tax withholding on vesting of restricted stock units (1)   (1)    
Ending Balance at Mar. 31, 2020 $ 204 $ 1 $ 1,436 $ (1,015) $ (218)
Ending Balance (in shares) at Mar. 31, 2020   82,700,000      
v3.20.1
Consolidated Statements of Comprehensive Income (Loss) Statement - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Net income (loss) $ (672) $ (13) $ (726) $ (4)
Cumulative translation adjustment (9) 18 (6) 19
Change in interest rate swaps, net of income taxes of $2 and $4 for the three months ended March 31, 2020 and 2019 and $11 for the six months ended March 31, 2019 (46) (10) (39) (31)
Other comprehensive (loss) income (55) 8 (45) (12)
Total comprehensive loss $ (727) $ (5) $ (771) $ (16)
v3.20.1
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Sep. 30, 2019
Dec. 31, 2018
Sep. 30, 2018
Disaggregation of Revenue [Line Items]                
Revenue $ 682 $ 709 $ 1,397 $ 1,447        
Common Stock                
Disaggregation of Revenue [Line Items]                
Shares, Outstanding 82.7 110.7 82.7 110.7 100.5 111.0 110.7 110.2
U.S.                
Disaggregation of Revenue [Line Items]                
Revenue $ 384 $ 375 $ 778 $ 769        
International                
Disaggregation of Revenue [Line Items]                
Revenue 298 334 619 678        
Europe, Middle East and Africa                
Disaggregation of Revenue [Line Items]                
Revenue 172 188 358 387        
Asia Pacific                
Disaggregation of Revenue [Line Items]                
Revenue 70 79 147 157        
Americas International - Canada and Latin America                
Disaggregation of Revenue [Line Items]                
Revenue 56 67 114 134        
Products & Solutions                
Disaggregation of Revenue [Line Items]                
Revenue 245 289 543 615        
Products & Solutions | U.S.                
Disaggregation of Revenue [Line Items]                
Revenue 119 130 268 280        
Products & Solutions | International                
Disaggregation of Revenue [Line Items]                
Revenue 126 159 275 335        
Products & Solutions | Europe, Middle East and Africa                
Disaggregation of Revenue [Line Items]                
Revenue 78 93 171 199        
Products & Solutions | Asia Pacific                
Disaggregation of Revenue [Line Items]                
Revenue 27 37 60 75        
Products & Solutions | Americas International - Canada and Latin America                
Disaggregation of Revenue [Line Items]                
Revenue 21 29 44 61        
Services                
Disaggregation of Revenue [Line Items]                
Revenue 438 425 857 847        
Services | U.S.                
Disaggregation of Revenue [Line Items]                
Revenue 266 248 512 499        
Services | International                
Disaggregation of Revenue [Line Items]                
Revenue 172 177 345 348        
Services | Europe, Middle East and Africa                
Disaggregation of Revenue [Line Items]                
Revenue 94 96 188 190        
Services | Asia Pacific                
Disaggregation of Revenue [Line Items]                
Revenue 43 43 87 84        
Services | Americas International - Canada and Latin America                
Disaggregation of Revenue [Line Items]                
Revenue 35 38 70 74        
Unallocated                
Disaggregation of Revenue [Line Items]                
Revenue (1) (5) (3) (15)        
Unallocated | U.S.                
Disaggregation of Revenue [Line Items]                
Revenue (1) (3) (2) (10)        
Unallocated | International                
Disaggregation of Revenue [Line Items]                
Revenue 0 (2) (1) (5)        
Unallocated | Europe, Middle East and Africa                
Disaggregation of Revenue [Line Items]                
Revenue 0 (1) (1) (2)        
Unallocated | Asia Pacific                
Disaggregation of Revenue [Line Items]                
Revenue 0 (1) 0 (2)        
Unallocated | Americas International - Canada and Latin America                
Disaggregation of Revenue [Line Items]                
Revenue $ 0 $ 0 $ 0 $ (1)        
v3.20.1
Background and Basis of Presentation - Narrative (Details)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Mar. 31, 2020
USD ($)
segment
Mar. 31, 2019
USD ($)
Number of segments | segment         2  
Quantifying Misstatement in Current Year Financial Statements, Amount | $ $ (672) $ (54) $ (13) $ 9 $ (726) $ (4)
v3.20.1
Business Combinations (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Business Acquisition [Line Items]          
Goodwill $ 1,476   $ 1,476   $ 2,103
Revenue 682 $ 709 1,397 $ 1,447  
Operating income (loss) (597) $ 38 (582) $ 88  
Spoken          
Business Acquisition [Line Items]          
Contingent consideration $ 0   $ 0    
v3.20.1
Leases (Notes)
6 Months Ended
Mar. 31, 2020
Leases, Codification Topic 842 [Abstract]  
Leases of Lessee Disclosure [Text Block] Leases
The Company enters into various arrangements for office, warehouse and data center facilities, network equipment and vehicles. The Company assesses whether an arrangement contains a lease at contract inception. When an arrangement contains a lease, the Company records a right-of-use asset and lease liability. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make payments for the right to use the asset.
Right-of-use assets and lease liabilities are recognized at the lease commencement date at the present value of future payments over the lease term. The present value of future payments is discounted using the rate implicit in the lease, when available. However, as most of the Company's leases do not provide an implicit interest rate, the present value is calculated using the
Company's incremental borrowing rate, which represents the interest rate the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
Options to extend or terminate a lease are included in the calculation of the lease term to the extent that the option is reasonably certain of exercise. For the majority of the Company's leases, the Company has concluded that it is not reasonably certain it would exercise such options, therefore the lease term is generally the non-cancelable period stated within the lease. The Company has elected to not record a right-of-use asset and lease liability for short term leases with an initial term of 12 months or less. The Company's leases have remaining lease terms ranging from 1 month to 9.7 years.
The following table details the components of net lease expense for the three and six months ended March 31, 2020:
In millionsThree months ended
March 31, 2020
Six months ended
March 31, 2019
Operating lease cost (1)
$16  $34  
Short-term lease cost(1)
  
Variable lease cost(1)(2)
  
Finance lease amortization of right-of-use assets(1)
  
Sublease income(3)
(1) (3) 
Total lease cost$21  $45  
(1)Allocated between Cost of products and services, and Operating expenses.
(2)Includes real estate taxes and other charges for non-lease services payable to lessors and recognized in the period incurred.
(3)Included in Other income, net.

The Company's right-of-use assets and lease liabilities for financing leases are included in the Condensed Consolidated Balance Sheet as follows:
In millionsMarch 31, 2020
ASSETS
Property, plant and equipment, net$ 
LIABILITIES
Other current liabilities 
Other liabilities 
The following table presents the Company's annual maturity of lease payments, weighted average remaining lease term and weighted average interest rate for operating and financing leases as of March 31, 2020:
In millionsOperating LeasesFinancing Leases
Remaining six months of 2020$32  $ 
202150   
202244   
202331   
202423  —  
202512  —  
2026 and thereafter20  —  
Total lease payments212  15  
Less: imputed interest(29) (1) 
Total lease liability$183  $14  
Weighted average remaining lease term4.7 years2.1 years
Weighted average interest rate6.3 %6.1 %
The following table presents the Company's future minimum lease payments under non-cancelable leases as of September 30, 2019, prior to the adoption of ASC 842:
In millionsOperating LeasesCapital Leases
2020$51  $12  
202139   
202233   
202322  —  
202417  —  
2025 and thereafter29  —  
Total lease payments$191  20  
Less: imputed interest(1) 
Total lease liability$19  
The capital lease obligation as of September 30, 2019 included $11 million and $8 million within Other current liabilities and Other liabilities, respectively.
The Company outsources certain delivery services associated with its Enterprise Cloud and Managed Services, which included the sale of specified assets owned by the Company that were leased-back by the Company and are accounted for as a finance lease. As of March 31, 2020 and September 30, 2019, finance lease obligations associated with these sale leaseback agreements were $9 million and $13 million, respectively.
v3.20.1
Income Taxes
2 Months Ended 6 Months Ended
Dec. 15, 2017
Mar. 31, 2020
Income Tax Disclosure [Abstract]    
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 35.00% 21.00%
Income Taxes   Income Taxes
The Company's effective income tax rate for the three and six months ended March 31, 2020 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) deferred tax assets (including losses) generated for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) U.S. state and local income taxes, (4) the impact of the Tax Cuts and Jobs Act ("the Act") and associated regulations, (5) the goodwill impairment charge recorded in the second quarter of fiscal 2020, (6) the impact of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and (7) foreign tax credits.
The Company's effective income tax rate for the three and six months ended March 31, 2019 differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, (6) the impact of the Act, (7) a limitation on the deductibility of interest expense under the Internal Revenue Code of 1986, as amended, Section 163(j), and (8) foreign tax credits.
On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Company has a September 30th tax year-end and therefore many of the tax law changes became effective in the first quarter of fiscal 2019. The Company benefits from the deduction attributable to Foreign Derived Intangible Income ("FDII") and has taxable income attributable to Global Intangible Low-Taxed Income ("GILTI"), both of which impact
the effective tax rate. During the three months ended December 31, 2018, Avaya completed its analysis of the impact of the Act as required by Staff Accounting Bulletin No. 118 issued by the SEC on December 22, 2017.
v3.20.1
Operating Segments
6 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Operating Segments Segments
The Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, email, instant messaging and video. The Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize complex enterprise communications networks.
The Company's chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company's internal management systems. Management does not include in its segment measures of profitability selling, general and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, impairment charges, and merger-related costs as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.
Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts (1)
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  
GROSS PROFIT
Products & Solutions$154  $184  $348  $398  
Services263  255  509  510  
Unallocated Amounts (2)
(46) (53) (92) (115) 
371  386  765  793  
OPERATING EXPENSES
Selling, general and administrative248  251  531  508  
Research and development51  52  103  105  
Amortization of intangible assets41  41  82  81  
Impairment of goodwill624  —  624  —  
Restructuring charges, net   11  
968  348  1,347  705  
OPERATING (LOSS) INCOME(597) 38  (582) 88  
INTEREST EXPENSE AND OTHER INCOME, NET
(38) (57) (82) (95) 
LOSS BEFORE INCOME TAXES$(635) $(19) $(664) $(7) 
(1)Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.
(2)Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management's performance, but rather are controlled at the corporate level.
v3.20.1
Document and Entity Information Document - shares
6 Months Ended
Mar. 31, 2020
Apr. 30, 2020
Cover [Abstract]    
Document Fiscal Period Focus Q2  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Entity Filer Category Large Accelerated Filer  
Title of 12(b) Security Common Stock  
Trading Symbol AVYA  
Entity Information, Former Legal or Registered Name None  
Entity Central Index Key 0001418100  
Entity Incorporation, State or Country Code DE  
Document Transition Report false  
Document Quarterly Report true  
Document Type 10-Q  
Document Fiscal Year Focus 2020  
Document Period End Date Mar. 31, 2020  
Entity File Number 001-38289  
Entity Registrant Name AVAYA HOLDINGS CORP.  
Entity Tax Identification Number 26-1119726  
Entity Address, Address Line One 4655 Great America Parkway  
Entity Address, City or Town Santa Clara,  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 95054  
City Area Code 908  
Local Phone Number 953-6000  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Bankruptcy Proceedings, Reporting Current true  
Entity Common Stock, Shares Outstanding   82,787,845
v3.20.1
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Change in interest rate swaps, tax $ 2 $ 4 $ 0 $ 11
v3.20.1
Intangible Assets (Details) - USD ($)
$ in Millions
Mar. 31, 2020
Oct. 01, 2019
Sep. 30, 2019
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Cost $ 3,152   $ 3,156
Accumulated amortization (765)   (598)
Finite-lived intangible assets, net 2,387   2,558
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 333   333
Intangible assets, net 2,720 $ 2,889 2,891
Acquired technology and patents      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Cost 960   960
Accumulated amortization (394)   (308)
Finite-lived intangible assets, net 566   652
Customer relationships and other intangibles      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Cost 2,150   2,154
Accumulated amortization (355)   (279)
Finite-lived intangible assets, net 1,795   1,875
Trademarks and trade names      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Cost 42   42
Accumulated amortization (16)   (11)
Finite-lived intangible assets, net 26   31
Acquired technology and patents      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 0   0
Customer relationships and other intangibles      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 0   0
Trademarks and trade names      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Indefinite-Lived Intangible Assets (Excluding Goodwill And Accumulated Impairment) 333   333
Trademarks and trade names      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Intangible assets, net 359   364
Customer relationships and other intangibles      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Intangible assets, net 1,795   1,875
Acquired technology and patents      
Finite-lived and Indefinite-lived Intangible Assets [Line Items]      
Intangible assets, net $ 566   $ 652
v3.20.1
Fair Value Measurements - Fair Value of Financial Instruments (Details) - USD ($)
Mar. 31, 2020
Sep. 30, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Debt face amount $ 2,974,000,000 $ 3,224,000,000
Estimate of Fair Value Measurement    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Long-term debt, fair value 2,443,000,000 3,037,000,000
Term Loan Credit Agreement due December 15, 2024    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Debt face amount 2,624,000,000 2,874,000,000
Term Loan Credit Agreement due December 15, 2024 | Estimate of Fair Value Measurement    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Long-term debt, fair value 2,162,000,000 2,739,000,000
Convertible 2.25% senior notes due June 15, 2023    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Debt face amount 350,000,000 350,000,000
Convertible 2.25% senior notes due June 15, 2023 | Estimate of Fair Value Measurement    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Long-term debt, fair value $ 281,000,000 $ 298,000,000
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:    
Depreciation and amortization $ 212 $ 225
Share-based compensation 14 11
Amortization of Debt Issuance Costs and Discounts 14 11
Deferred income taxes, net (17) 3
Change in fair value of emergence date warrants (3) (21)
Unrealized loss on foreign currency transactions 8 12
Marketable Securities, Unrealized Gain (Loss) (19) 0
Marketable Securities, Realized Gain (Loss) (11) 0
Other non-cash credits, net (6) 7
Increase (Decrease) in Receivables 41 74
Changes in operating assets and liabilities:    
Inventory 6 (9)
Operating lease right-of-use assets (12) 0
Contract assets (53) (68)
Contract costs (13) (30)
Accounts payable (31) 5
Payroll and benefit obligations (24) (63)
Business restructuring reserve (13) (15)
Operating lease liabilities (10) 0
Contract liabilities (30) 50
Other assets and liabilities 47 (65)
NET CASH PROVIDED BY OPERATING ACTIVITIES 32 123
INVESTING ACTIVITIES:    
Capital expenditures (48) (47)
Proceeds from Sale and Maturity of Marketable Securities 294 0
Other investing activities, net 0 (1)
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES 246 (48)
Payments for Repurchase of Common Stock (330) 0
Proceeds from Issuance of Preferred Stock and Preference Stock 121 0
FINANCING ACTIVITIES:    
Repayment of long-term debt (250) (15)
Payment for Contingent Consideration Liability, Financing Activities (5) (9)
Payments related to sale-leaseback transactions (5) (8)
Other financing activities, net (3) (7)
NET CASH USED FOR FINANCING ACTIVITIES (472) (39)
Effect of exchange rate changes on cash and cash equivalents (5) (1)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (199) 35
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 557 739
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net 10 0
Net income (loss) $ (726) $ (4)
v3.20.1
Strategic Partnership (Details) - USD ($)
$ / shares in Units, $ in Millions
3 Months Ended 6 Months Ended
Oct. 03, 2019
Mar. 31, 2020
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Class of Stock [Line Items]          
Proceeds from strategic partnership $ 375        
Proceeds from strategic partnership, share value received 361        
Proceeds from strategic partnership, cash portion $ 14        
Realized gain (loss) from strategic partnership   $ 0 $ 11    
Unrealized gain (loss) from strategic partnership   18 19    
Strategic Partnership Transactions, Unrealized Gain (Loss), Net   $ 18 $ 30    
Preferred shares issued   125,000 125,000   0
Preferred stock, par value (in usd per share)   $ 0.01 $ 0.01    
Proceeds from Issuance of Preferred Stock and Preference Stock     $ 121 $ 0  
Series A Preferred Stock          
Class of Stock [Line Items]          
Preferred stock, par value (in usd per share)   $ 0.01 $ 0.01    
Proceeds from Issuance of Preferred Stock and Preference Stock     $ 125    
v3.20.1
Revenue Recognition - Narrative (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Oct. 01, 2019
Oct. 01, 2018
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Disaggregation of Revenue [Line Items]            
Capitalized Contract Cost to Obtain a Contract, Amortization       $ 24   $ 46
Capitalized Contract Cost to Fulfill, Amortization     $ 6 6 $ 20 20
Revenue recognized that was previously recorded as a contract liability $ 405 $ 396        
Revenue, Remaining Performance Obligation, Amount     2,500   2,500  
Selling, General and Administrative Expenses            
Disaggregation of Revenue [Line Items]            
Capitalized Contract Cost to Obtain a Contract, Amortization     $ 34 23 $ 66 43
Cost of Sales [Member]            
Disaggregation of Revenue [Line Items]            
Capitalized Contract Cost to Obtain a Contract, Amortization       $ 1   $ 3
v3.20.1
Leases (Tables)
6 Months Ended
Mar. 31, 2020
Leases, Codification Topic 842 [Abstract]  
Schedule of Future Minimum Lease Payments for Operating and Capital Leases [Table Text Block]
The following table presents the Company's future minimum lease payments under non-cancelable leases as of September 30, 2019, prior to the adoption of ASC 842:
In millionsOperating LeasesCapital Leases
2020$51  $12  
202139   
202233   
202322  —  
202417  —  
2025 and thereafter29  —  
Total lease payments$191  20  
Less: imputed interest(1) 
Total lease liability$19  
Lease, Cost [Table Text Block]
The following table details the components of net lease expense for the three and six months ended March 31, 2020:
In millionsThree months ended
March 31, 2020
Six months ended
March 31, 2019
Operating lease cost (1)
$16  $34  
Short-term lease cost(1)
  
Variable lease cost(1)(2)
  
Finance lease amortization of right-of-use assets(1)
  
Sublease income(3)
(1) (3) 
Total lease cost$21  $45  
Lessee, Finance Leases [Table Text Block]
The Company's right-of-use assets and lease liabilities for financing leases are included in the Condensed Consolidated Balance Sheet as follows:
In millionsMarch 31, 2020
ASSETS
Property, plant and equipment, net$ 
LIABILITIES
Other current liabilities 
Other liabilities 
Finance and Operating Leases, Liabilities, Maturities [Table Text Block]
The following table presents the Company's annual maturity of lease payments, weighted average remaining lease term and weighted average interest rate for operating and financing leases as of March 31, 2020:
In millionsOperating LeasesFinancing Leases
Remaining six months of 2020$32  $ 
202150   
202244   
202331   
202423  —  
202512  —  
2026 and thereafter20  —  
Total lease payments212  15  
Less: imputed interest(29) (1) 
Total lease liability$183  $14  
Weighted average remaining lease term4.7 years2.1 years
Weighted average interest rate6.3 %6.1 %
v3.20.1
Benefit Obligations
6 Months Ended
Mar. 31, 2020
Retirement Benefits [Abstract]  
Benefit Obligations Benefit Obligations
The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.
The components of the pension and post-retirement net periodic benefit (credit) cost for the periods indicated are provided in the table below:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost$ $ $ $ 
Interest cost  15  19  
Expected return on plan assets(15) (15) (28) (30) 
Net periodic benefit credit$(6) $(5) $(11) $(9) 
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost$ $ $ $ 
Interest cost    
Net periodic benefit cost$ $ $ $ 
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Service cost$—  $ $—  $ 
Interest cost    
Expected return on plan assets(2) (3) (5) (5) 
Amortization of prior service cost(1) —  (1) —  
Net periodic benefit cost$—  $ $—  $ 
The service components of net periodic benefit (credit) cost were recorded similar to compensation expense, while all other components were recorded in Other income, net.
The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations, or to directly pay benefits where appropriate. Contributions to U.S. pension plans were $9 million for the six months ended March 31, 2020, which represented the amounts required to satisfy the minimum statutory funding requirements in the U.S. On March 27, 2020, the CARES Act was signed into law, providing limited relief for pension funding and retirement plan distributions. Under the CARES Act, employers may delay contributions for single employer defined benefit pension plans until January 1, 2021. As a result, the Company does not expect to make any U.S. pension plan contributions for the remainder of fiscal 2020.
Contributions to the non-U.S. pension plans were $14 million for the six months ended March 31, 2020. For the remainder of fiscal 2020, the Company estimates that it will make contributions totaling $9 million for its non-U.S. plans.
Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as retiree medical benefit claims are disbursed. These payments are funded by the Company up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from the participants, if required. During the six months ended March 31, 2020, the Company made payments for retiree medical and dental benefits of $7 million and received a $3 million reimbursement from the represented employees' post-retirement health trust related to payments in prior periods. The Company estimates it will make contributions for retiree medical and dental benefits totaling $6 million for the remainder of fiscal 2020.
v3.20.1
Accumulated Other Comprehensive (Loss) Income
6 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Accumulated Other Comprehensive (Loss) Income Accumulated Other Comprehensive (Loss) Income
The components of Accumulated other comprehensive (loss) income for the periods indicated were as follows:
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2019$(106) $(4) $(53) $(163) 
Other comprehensive loss before reclassifications—  (36) (54) (90) 
Amounts reclassified to earnings—  27   33  
Benefit from income taxes—  —    
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2019$(106) $(7) $(60) $(173) 
Other comprehensive loss before reclassifications—  (33) (50) (83) 
Amounts reclassified to earnings—  27  11  38  
Balance as of March 31, 2020$(106) $(13) $(99) $(218) 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2018$51  $(30) $(23) $(2) 
Other comprehensive income (loss) before reclassifications—  18  (16)  
Amounts reclassified to earnings—  —    
Benefit from income taxes—  —    
Balance as of March 31, 2019$51  $(12) $(33) $ 

(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Term Loan Interest Rate SwapAccumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018$51  $(31) $(2) $18  
Other comprehensive income (loss) before reclassifications—  19  (47) (28) 
Amounts reclassified to earnings—  —    
Benefit from income taxes—  —  11  11  
Balance as of March 31, 2019$51  $(12) $(33) $ 
Reclassifications from Accumulated other comprehensive (loss) income related to the unrealized loss on term loan interest rate swap agreements are recorded in Interest expense in the Condensed Consolidated Statements of Operations.
v3.20.1
Revenue Recognition (Tables)
6 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
The following tables provide the Company's disaggregated revenue for the periods presented:

(In millions)Three months ended
March 31,
Six months ended
March 31,
2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  
Contract with Customer, Asset and Liability
The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:
(In millions)March 31, 2020September 30, 2019Increase (Decrease)
Accounts receivable, net$262  $314  $(52) 
Contract assets:
Current$233  $187  $46  
Non-current (Other assets)23  16   
$256  $203  $53  
Cost of obtaining a contract:
Current (Contract costs)$89  $89  $—  
Non-current (Other assets)41  45  (4) 
$130  $134  $(4) 
Cost to fulfill a contract:
Current (Contract costs)$41  $25  $16  
Contract liabilities:
Current$477  $472  $ 
Non-current375  78  297  
$852  $550  $302  
v3.20.1
Operating Segments (Tables)
6 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Summarized Financial Information of Operating Segments
Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
REVENUE
Products & Solutions$245  $289  $543  $615  
Services438  425  857  847  
Unallocated Amounts (1)
(1) (5) (3) (15) 
$682  $709  $1,397  $1,447  
GROSS PROFIT
Products & Solutions$154  $184  $348  $398  
Services263  255  509  510  
Unallocated Amounts (2)
(46) (53) (92) (115) 
371  386  765  793  
OPERATING EXPENSES
Selling, general and administrative248  251  531  508  
Research and development51  52  103  105  
Amortization of intangible assets41  41  82  81  
Impairment of goodwill624  —  624  —  
Restructuring charges, net   11  
968  348  1,347  705  
OPERATING (LOSS) INCOME(597) 38  (582) 88  
INTEREST EXPENSE AND OTHER INCOME, NET
(38) (57) (82) (95) 
LOSS BEFORE INCOME TAXES$(635) $(19) $(664) $(7) 
(1)Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.
(2)Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management's performance, but rather are controlled at the corporate level.
v3.20.1
Intangible Assets (Tables)
6 Months Ended
Mar. 31, 2020
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class
The Company's intangible assets consist of the following for the periods indicated:
(In millions)
Technology
and Patents
Customer
Relationships
and Other
Intangibles
Trademarks
and Trade Names
Total
Balance as of March 31, 2020
Finite-lived intangible assets:
Cost$960  $2,150  $42  $3,152  
Accumulated amortization(394) (355) (16) (765) 
Finite-lived intangible assets, net566  1,795  26  2,387  
Indefinite-lived intangible assets:
Cost—  —  333  333  
Accumulated impairment—  —  —  —  
Indefinite-lived intangible assets, net—  —  333  333  
Intangible assets, net$566  $1,795  $359  $2,720  
Balance as of September 30, 2019
Finite-lived intangible assets:
Cost$960  $2,154  $42  $3,156  
Accumulated amortization(308) (279) (11) (598) 
Finite-lived intangible assets, net652  1,875  31  2,558  
Indefinite-lived intangible assets:
Cost —  333  335  
Accumulated amortization(2) —  —  (2) 
Indefinite-lived intangible assets, net—  —  333  333  
Intangible assets, net$652  $1,875  $364  $2,891  
v3.20.1
Supplementary Financial Information (Tables)
6 Months Ended
Mar. 31, 2020
Supplementary Financial Information [Abstract]  
Consolidated Statements of Operations Information
The following table presents a summary of Other income, net for the periods indicated:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER INCOME, NET
Interest income$ $ $ $ 
Foreign currency loss, net(7) (6) (11) (7) 
Gain on investments in equity and debt securities, net —  20  —  
Other pension and post-retirement benefit credits, net  11   
Change in fair value of emergence date warrants   21  
Sublease income —   —  
Other, net(1) (2) (2) (2) 
Total other income, net$15  $ $29  $23  
Supplemental Cash Flow Information
The following table presents supplemental cash flow information for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2020201920202019
OTHER PAYMENTS
Interest payments$46  $51  $104  $99  
Income tax payments13  28  25  35  
NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures
$ $ $(4) $ 
During the three and six months ended March 31, 2020, the Company made payments for operating lease liabilities of $19 million and $33 million, respectively, and recorded non-cash additions for operating lease right-of-use assets of $6 million and $15 million, respectively.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:
(In millions)March 31, 2020September 30, 2019March 31, 2019September 30, 2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents$553  $752  $735  $700  
Restricted cash included in other assets    
Total cash, cash equivalents, and restricted cash$557  $756  $739  $704  
v3.20.1
Strategic Partnership (Notes)
6 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Strategic Partnership Strategic Partnership
On October 3, 2019, the Company entered into certain agreements that establish the framework for the Company's strategic partnership with RingCentral, a leading provider of global enterprise cloud communications, collaboration and contact center ("CC") solutions, to accelerate the Company's transition to the cloud. Through this partnership, the Company introduced Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS") solution. Avaya Cloud Office expands the Company's portfolio to offer a full suite of UC, CC, UCaaS and contact center as a service ("CCaaS") solutions to its global customer base. ACO combines RingCentral's leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly differentiated UCaaS offering. The transaction closed on October 31, 2019 and ACO was launched on March 31, 2020. The Company now has a full suite of public, private and hybrid cloud solutions for its global UC and CC customers and partners.
As part of the strategic partnership, the Company and RingCentral also entered into an agreement governing the terms of the commercial arrangement between the parties (the "Framework Agreement"). Under the Framework Agreement, the parties entered into a Super Master Agent Agreement, pursuant to which Avaya will act as an agent to Avaya's channel partners with respect to the sale of ACO and make direct sales of ACO. RingCentral will pay a fee to Avaya, including for the benefit of its channel partners, for each such sale. In addition, for each unit of ACO sold during the term of the Framework Agreement, RingCentral will pay Avaya certain fees. Among other things, the Framework Agreement requires Avaya to (subject to certain exceptions) market and sell ACO as its exclusive UCaaS solution (as defined in the Framework Agreement). The Framework Agreement has a multiyear term and can be terminated early by either party in the event (i) the other party fails to cure a material breach or (ii) the other party undergoes a change in control.
In accordance with the Framework Agreement, RingCentral paid Avaya $375 million, predominantly for future fees, as well as for certain licensing rights. The $375 million payment consisted of $361 million in RingCentral shares and $14 million in cash. During the six months ended March 31, 2020, the Company sold a significant portion of the RingCentral shares and realized a gain within Other income, net within the Condensed Consolidated Statements of Operations. The remaining shares are accounted for within Other current assets on the Condensed Consolidated Balance Sheets and are remeasured to fair value each reporting period with changes in fair value included in Other income, net as an unrealized gain or loss.
v3.20.1
Derivative Instruments and Hedging Activities
6 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.
Interest Rate Contracts
The Company, from time-to-time, enters into interest rate swap contracts as a hedge against changes in interest rates on its outstanding variable rate loans.
The Company maintains interest rate swap agreements with six counterparties, which fix a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on
December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of March 31, 2020, the total notional amount of the six Swap Agreements was $1,800 million.
The Swap Agreements are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the Swap Agreements is reclassified from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive loss at March 31, 2020, approximately $47 million would be reclassified to interest expense in the next twelve months.
It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.
Foreign Currency Forward Contracts
The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a component of Other income, net to offset the change in the value of the hedged assets and liabilities. As of March 31, 2020, the Company maintained open foreign currency forward contracts with a total notional value of $406 million, primarily hedging the British Pound Sterling, Indian Rupee, Chinese Renminbi, Czech Koruna and Euro.
Emergence Date Warrants
In accordance with the bankruptcy plan adopted in connection with the Company's emergence from bankruptcy on December 15, 2017 (the "Plan of Reorganization"), the Company issued warrants to purchase 5,645,200 shares of Company common stock to the holders of second lien obligations extinguished pursuant to the Plan of Reorganization pursuant to a warrant agreement (the "Emergence Date Warrants"). Each Emergence Date Warrant has an exercise price of $25.55 per share and expires on December 15, 2022. The Emergence Date Warrants contain certain derivative features that require them to be classified as a liability and require changes in the fair value of the liability to be recognized in earnings each reporting period. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of March 31, 2020.
The fair value of the Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment. The fair value of the Emergence Date Warrants as of March 31, 2020 and September 30, 2019 was determined using the input assumptions summarized below:
March 31,
2020
September 30, 2019
Expected volatility65.24 %56.89 %
Risk-free interest rates0.27 %1.55 %
Contractual remaining life (in years)2.713.21
Price per share of common stock$8.09$10.23
In determining the fair value of the Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends throughout the term of the warrants.
The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
March 31, 2020September 30, 2019
(In millions)Balance Sheet CaptionAssetLiabilityAssetLiability
Derivatives Designated as Hedging Instruments:
Interest rate contractsOther current liabilities—  46  —  23  
Interest rate contractsOther liabilities—  74  —  58  
—  120  —  81  
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contractsOther current assets —   —  
Foreign exchange contractsOther current liabilities—   —  —  
Emergence Date WarrantsOther liabilities—   —   
    
Total derivative fair value$ $128  $ $86  
The following tables provide information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:
Three months ended March 31, 2020Three months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(53) $(55) $(58) $ 
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$—  $(54) $—  $(16) 
Interest expense reclassified from AOCI$(6) $ $(2) $ 

Six months ended March 31, 2020Six months ended March 31, 2019
(In millions)Interest ExpenseOther Comprehensive Income (Loss)Interest ExpenseOther Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(111) $(45) $(118) $(12) 
Impact of cash flow hedging relationships:
Loss recognized in AOCI on interest rate swaps$—  $(50) $—  $(47) 
Interest expense reclassified from AOCI$(11) $11  $(5) $ 
The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations:
Three months ended
March 31,
Six months ended
March 31,
(In millions)Location of Derivative Pre-tax Gain (Loss)2020201920202019
Emergence Date WarrantsOther income, net  $ $ $ $21  
Foreign exchange contractsOther income, net  (7) —  (2) —  
The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:
March 31, 2020September 30, 2019
(In millions)AssetLiabilityAssetLiability
Gross amounts recognized in the Condensed Consolidated Balance Sheets$ $128  $ $86  
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets(1) (1) (1) (1) 
Net amounts$—  $127  $—  $85  
v3.20.1
Share-based Compensation - ESPP (Details)
6 Months Ended
Mar. 31, 2020
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Share-Based Compensation Arrangement By Share-based Payment Award, Maximum Employee Shares per Offering Period 6,250
Employee Stock Purchase Plan [Member] | Employee Stock [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized 5,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date 15.00%
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate 10.00%
v3.20.1
Leases Lease Cost (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Lease Cost [Line Items]        
Operating Lease, Cost $ 16   $ 34  
Short-term Lease, Cost 1   3  
Variable Lease, Cost 4   9  
Finance Lease, Right-of-Use Asset, Amortization 1   2  
Sublease Income (1) $ 0 (3) $ 0
Lease, Cost 21   45  
Sublease Income $ 1 $ 0 $ 3 $ 0
v3.20.1
Related Party Transactions (Details)
$ in Millions
6 Months Ended
Mar. 31, 2020
USD ($)
director
Mar. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Related Party Transaction [Line Items]      
Number of directors | director 7    
Flex Ltd | Affiliated Entity      
Related Party Transaction [Line Items]      
Accounts payable, related parties $ 6   $ 6
Accounts Receivable, Related Parties 1    
Flex Ltd | Purchased Goods And Services From Flex Ltd. | Board of Directors Chairman      
Related Party Transaction [Line Items]      
Cost of goods and services sold $ 16 $ 16  
Non-Employee Director      
Related Party Transaction [Line Items]      
Number of directors | director 6    
v3.20.1
Share-based Compensation - Valuations Assumptions (Details) - Share-based Payment Arrangement, Option [Member]
3 Months Ended
Mar. 31, 2020
$ / shares
Rate
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Exercise Price | $ / shares $ 11.38
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate 1.71%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate 0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate 56.76%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term 5 years 11 months 19 days
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate 1.61%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate 0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate 55.75%
v3.20.1
Goodwill - Narrative (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Sep. 30, 2019
Goodwill [Line Items]          
Goodwill $ 1,476,000,000   $ 1,476,000,000   $ 2,103,000,000
Fair value in excess of carrying amount, percent 5.00%   5.00%    
Goodwill, Impairment Loss $ 624,000,000 $ 0 $ 624,000,000 $ 0  
Products & Solutions          
Goodwill [Line Items]          
Goodwill 0   0   625,000,000
Goodwill, Impairment Loss     624,000,000    
Services          
Goodwill [Line Items]          
Goodwill 1,476,000,000   1,476,000,000   $ 1,478,000,000
Goodwill, Impairment Loss     0    
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount $ 0.16   $ 0.16    
v3.20.1
Financing Arrangements - Narrative (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Apr. 06, 2020
Sep. 30, 2019
Jun. 11, 2018
Dec. 15, 2017
Debt Instrument [Line Items]                
Document Period End Date     Mar. 31, 2020          
Debt face amount $ 2,974,000,000   $ 2,974,000,000     $ 3,224,000,000    
Letters of credit outstanding $ 0   $ 0          
Weighted average contractual interest rate of debt 6.10%   6.10%     6.30%    
Amortization of debt issuance costs $ 5,000,000 $ 4,000,000 $ 9,000,000 $ 8,000,000        
Subsequent Event                
Debt Instrument [Line Items]                
Letters of credit outstanding         $ 50,000,000      
Term Loan Credit Agreement due December 15, 2024                
Debt Instrument [Line Items]                
Repayments of Debt     250,000,000          
Term Loan                
Debt Instrument [Line Items]                
Debt face amount 2,624,000,000   2,624,000,000     $ 2,874,000,000    
Interest expense on debt 40,000,000 50,000,000 86,000,000 100,000,000        
Line of Credit | Revolving Credit Facility | ABL Credit Agreement                
Debt Instrument [Line Items]                
Line of credit facility, current borrowing capacity               $ 300,000,000
Line of Credit | Letter of Credit | ABL Credit Agreement                
Debt Instrument [Line Items]                
Letters of credit, maximum amount               $ 150,000,000
Letters of credit outstanding 39,000,000   39,000,000          
Letter of credit, remaining borrowing capacity 97,000,000   97,000,000          
Convertible Notes                
Debt Instrument [Line Items]                
Debt face amount 350,000,000   350,000,000     $ 350,000,000    
Interest rate, stated percentage             2.25%  
Interest expense on debt $ 7,000,000 $ 6,000,000 $ 13,000,000 $ 12,000,000        
Effective interest rate 9.20%   9.20%     9.20%    
Over-Allotment Option | Convertible Notes                
Debt Instrument [Line Items]                
Debt face amount             $ 50,000,000  
v3.20.1
Derivative Instruments and Hedging Activities - Fair Value (Details) - USD ($)
$ in Millions
Mar. 31, 2020
Sep. 30, 2019
Derivative [Line Items]    
Derivative Asset $ 1 $ 1
Derivatives Designated as Hedging Instruments:    
Derivative [Line Items]    
Derivative Asset 0 0
Derivative Liability 120 81
Derivatives Designated as Hedging Instruments: | Other current liabilities | Interest rate contracts    
Derivative [Line Items]    
Derivative Asset 0 0
Derivative Liability 46 23
Derivatives Designated as Hedging Instruments: | Other liabilities | Interest rate contracts    
Derivative [Line Items]    
Derivative Asset 0 0
Derivative Liability 74 58
Derivatives Not Designated as Hedging Instruments:    
Derivative [Line Items]    
Derivative Asset 1 1
Derivative Liability 8 5
Derivatives Not Designated as Hedging Instruments: | Other current liabilities | Foreign Exchange Contract [Member]    
Derivative [Line Items]    
Derivative Asset 0 0
Derivative Liability 6 0
Derivatives Not Designated as Hedging Instruments: | Other liabilities | Warrants    
Derivative [Line Items]    
Derivative Asset 0 0
Derivative Liability 2 5
Derivatives Not Designated as Hedging Instruments: | Other Current Assets [Member] | Foreign Exchange Contract [Member]    
Derivative [Line Items]    
Derivative Asset 1 1
Derivative Liability $ 0 $ 0