8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO

 SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 16, 2004

AVAYA INC.

(Exact name of registrant as specified in its charter)

Delaware	1-15951	22-3713430
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)
211 Mount Airy Road Basking Ridge, NJ		07920
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (908) 953-6000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

Performance Vesting Restricted Stock Unit Awards

On December 16, 2004, the Committee approved awards of performance vesting restricted stock units (“RSUs”) made to executive officers of the Company pursuant to the terms of the Avaya Inc. 2004 Long Term Incentive Plan.  The RSUs will vest upon the date the Committee determines that the Company’s diluted earnings per share for the fiscal year ended September 30, 2007 is at least equal to a specified target; provided, however, that the percentage of RSUs that may vest shall be determined based on a schedule to be attached to each RSU agreement; provided, further, however, that if the aggregate earnings per share total calculated by combining the Company’s diluted earnings per share for each of the fiscal years ended September 30, 2005, 2006 and 2007 is less than a specified target, then all RSUs shall be forfeited and cancelled.  Attached as Exhibit 10.1 is the form of Avaya Inc. 2004 Long Term Incentive Plan Performance Vesting Restricted Stock Unit Award Agreement.  However, information regarding earnings per share and other targets have been omitted as they involve confidential business information, the disclosure of which would have an adverse effect on the Company.

Tenovis Special Incentive Plan

On December 16, 2004, the Compensation Committee (the “Committee”) of the Board of Directors of Avaya Inc. (the “Company”) approved a special incentive plan designed to promote a successful integration of the recent acquisition of Tenovis Germany GmbH and its subsidiaries (collectively, “Tenovis”) and the achievement of three metrics:  targeted revenue for Germany, targeted revenue for the EMEA region, and contribution margin for the EMEA region for the calendar year 2005.  EMEA consists of the European, Middle Eastern and African operations of the Company.  Participants in the plan include certain employees of the Company involved in the integration and management of Tenovis, including executive officers of the Company.  Under the arrangement, the aggregate amount available for all awards to eligible participants, including executive officers, is not expected to be material to the Company.  Because the plan does not exist in any formal document, only a written description thereof has been included with this Form 8-K as Exhibit 10.2.  However, information regarding the target metrics has been omitted as it involves confidential business information, the disclosure of which would have an adverse effect on the Company.

Item 8.01  Other Events.

Attached as Exhibit 99.1 is a press release issued by the Company in connection with the redemption of the Company’s Liquid Yield Option™ Notes due 2021 (LYONs).

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Item 9.01. Financial Statements and Exhibits.

10.1Avaya Inc. 2004 Long Term Incentive Plan Performance Vesting Restricted Stock Unit Award Agreement.

10.2Written description of the Tenovis Special Incentive Plan.

99.1         Press Release of Avaya Inc., dated December 20, 2004.

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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 hereunto duly authorized.

	AVAYA INC.
Date: December 21, 2004	By:	/s/	Pamela F. Craven
		Name:	Pamela F. Craven
		Title:	Senior Vice President, General Counsel and Secretary

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EX-10.1

Exhibit 10.1

AVAYA INC. 2004 LONG TERM INCENTIVE PLAN (“PLAN”)

PERFORMANCE VESTING RESTRICTED STOCK UNIT AWARD AGREEMENT

Name	Grant Date
«FirstName» «LastName»	«GrantDate»
Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

You have been granted as of the Grant Date set forth above, «RSUs» restricted stock units (“Restricted Stock Units”) (subject to Section 1 below). Upon termination of the restrictions related thereto, each Restricted Stock Unit will be converted into one share of Avaya Inc. (“Avaya”) common stock, par value $.01 (“Shares”), subject to the terms and conditions of the Plan and this Agreement.

1.Vesting of Award.  The Restricted Stock Units shall vest and become nonforfeitable upon the date the Committee determines that the following condition has been satisfied:  that Avaya’s diluted earnings per share (determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and as adjusted by the Items (defined below)) (“EPS”) for the fiscal year ended September 30, 2007, shall be at least $XXX; provided, however, that the percentage of Restricted Stock Units that may vest and become nonforfeitable shall be determined based on the schedule attached hereto as Appendix A; provided, further, however, that if the aggregate EPS total calculated by combining Avaya’s EPS for each of the fiscal years ended September 30, 2005, 2006 and 2007 is less than $XXX, then all Restricted Stock Units shall be forfeited and cancelled (the date on which any Restricted Stock Unit vests being the “Vesting Date” for such Restricted Stock Unit).  Consistent with the terms of the Plan, the Committee may, in its discretion, reduce the amount of any Award subject to Article 22 of the Plan based on such criteria as it shall determine, including but not limited to individual merit.

“Items” shall include:

(i)any of the following items that has an impact on net income for a fiscal year of more than $XX million:

a.extraordinary items (net of applicable taxes),

b.cumulative effects of changes in accounting principles, and

c.nonrecurring items (net of applicable taxes) including, but not limited to, gains or losses on asset dispositions and sales of divisions, business units or subsidiaries, restructuring charges, gains and losses from qualified benefit plan curtailments and settlements, and income or expenses related to deferred tax assets, and

(ii)any of the following items that has an impact on EPS for a fiscal year of more than $XX per share:

a.gains and losses (net of applicable taxes) from the sales of securities, and

b.the issuance or exercise of any dilutive securities such as convertible debt, preferred stock, warrants, restricted stock units or stock options.

The period beginning October 1, 2004 and ending on the day prior to the Vesting Date for a Restricted Stock Unit is herein referred to as the “Restriction Period” with respect to such Restricted Stock Unit.

2.Termination of Employment.  Upon termination of your employment for any reason other than death or disability as described below, including without limitation, retirement and termination as a result of your employer ceasing to be either Avaya or a Subsidiary, any Restricted Stock Units that are not vested shall be forfeited and cancelled. Transfer to and from Avaya and any Subsidiary shall not be considered a termination of employment for purposes of this Agreement.  Nor shall it be considered a termination of employment for purposes of this Agreement if you are placed on an approved leave of absence, unless the Committee shall otherwise determine.

  (a)Death - - If you die prior to the Vesting Date, then the Restriction Period will end and the award will be paid only if the condition set forth in Section 1 is met after your date of death, in which case the award will be paid as soon as practicable after the Vesting Date according to the following formula and all other Restricted Stock Units not so paid will be forfeited and cancelled:  the number of Restricted Stock Units that will vest shall be determined by multiplying the total number of Restricted Stock Units subject to this award by a fraction, the numerator of which shall be equal to the number of complete months which you survived following October 1, 2004, and the denominator of which shall be equal to the number of complete months in the Restriction Period.  In all other instances if you die prior to the Vesting Date your award will be forfeited and cancelled.

(b)Disability - - “Disability” means termination of employment under circumstances where you qualify for and receive payments under a long-term disability pay plan maintained by Avaya or any Subsidiary or as required by or available under applicable local law.  If your employment is terminated prior to the Vesting Date, then the Restriction Period will end and the award will be paid only if the condition set forth in Section 1 is met after your date of termination, in which case the award will be paid as soon as practicable after the Vesting Date according to the following formula and all other Restricted Stock Units not so paid will be forfeited and cancelled:  the number of Restricted Stock Units that will vest shall be determined by multiplying the total number of Restricted Stock Units subject to this award by a fraction, the numerator of which shall be equal to the number of complete months you were employed by Avaya or any Subsidiary following October 1, 2004, and the denominator of which shall be equal to the number of complete months in the Restriction Period.  In all other instances if you terminate your employment as a result of a Disability, your award will be forfeited.

3.Delivery of Shares.   As soon as practicable after termination of the Restriction Period, and subject to Section 6, the Company will deliver a certificate representing the Shares being distributed to you or to your legal representative.

4.Transferability.  Unless otherwise provided for in the Plan, you may not transfer, pledge, assign, sell or otherwise alienate your Restricted Stock Units.

5.No Right of Employment.  Neither the Plan nor this Restricted Stock Unit Award shall be construed as giving you the right to be retained in the employ of Avaya or any Subsidiary.

6.Taxes.  Avaya shall deduct or cause to be deducted from, or collect or cause to be collected with respect to, your Restricted Stock Units any federal, state, or local taxes required by law to be withheld or paid with respect to your Restricted Stock Units, and you or your legal representative or beneficiaries shall be required to pay any such amounts.  Avaya shall have the right to take such action as may be necessary, in Avaya’s opinion, to satisfy such obligations.

7.Beneficiary.  You may, in accordance with procedures established by the Committee, designate one or more beneficiaries to receive all or part of this award in case of your death, and you may change or revoke such designation at any time.  Such designation shall not be effective unless and until the Senior Vice President- Human Resources shall determine, on advice of counsel, that resale of Shares by your beneficiary(ies) does not require any registration, qualification, consent or approval of any securities exchange or governmental or regulatory agency or authority.  In the event of your death, any portion of this Award that is subject to such a designation (to the extent such designation is valid, effective and enforceable under this Agreement and applicable law) shall be distributed to such beneficiary or beneficiaries in accordance with this Agreement.  Any other portion of this Award shall be distributed to your estate.  If there shall be any question as to the legal right of any beneficiary to receive a distribution hereunder, or to the extent your designation is not effective, such portion will be delivered to your estate, in which event neither Avaya nor any Subsidiary shall have any further liability to anyone with respect to such award.

8.Governing Law.  The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflicts of law.

9.Subject to Plan.  This Agreement and grant of Restricted Stock Units are subject to all of the terms and conditions of the Plan.

Please indicate your acceptance of terms 1-9, and acknowledge that you have received a copy of the Plan, as currently in effect, by signing at the place provided and returning the original of this Agreement.

ACCEPTED AND AGREED:	Avaya Inc.
SIGNATURE	BY

EX-10.2

Exhibit 10.2

Written Description of the Tenovis Special Incentive Plan

On December 16, 2004, the Compensation Committee (the “Committee”) of the Board of Directors of Avaya Inc. (the “Company”) approved a special incentive plan designed to promote a successful integration of the recent acquisition of Tenovis Germany GmbH and its subsidiaries (collectively, “Tenovis”) and the achievement of three metrics:  targeted revenue for Germany, targeted revenue for the EMEA region, and contribution margin for the EMEA region for the calendar year 2005.  EMEA consists of the European, Middle Eastern and African operations of the Company.  Participants in the plan include certain employees of the Company involved in the integration and management of Tenovis, including executive officers of the Company.

Based on the level of involvement and impact, participants are eligible for an award equal to a percentage of their base salaries.  Participants must be on payroll on December 31, 2005 to be eligible for the payment. The plan provides that no payments will be made to certain executive officers under the plan unless a minimum percentage payout under the Avaya Inc. Short Term Incentive Plan is achieved for fiscal 2005.

EX-99.1

Exhibit 99.1

Media Inquiries:
Investor Inquiries:
Lynn Newman	Matthew Booher
908-953-8692 (office)	908-953-7500 (office)
973-993-8033 (home)	mbooher@avaya.com
lynnnewman@avaya.com

AVAYA ANNOUNCES COMPLETION OF REDEMPTION OF LIQUID YIELD OPTION™ NOTES (LYONs) DUE 2021

For Immediate Release:  Monday, December 20, 2004

BASKING RIDGE, N.J.,  - Avaya Inc. (NYSE:AV), a leading global provider of business communications software, systems and services, today announced that at 5:00 p.m. on December 20, 2004, $61,000 principal amount at maturity of the company’s Liquid Yield Option™ Notes due 2021 (LYONs), which represented all outstanding LYONs, were redeemed for cash.  Holders will receive the redemption price of $545.67 per $1,000 principal amount at maturity of LYONs.  Since Avaya delivered to holders its notice of redemption on November 18, 2004, holders of $548.7 million principal amount at maturity of LYONs converted their outstanding LYONs into 20,546,199 shares of Avaya common stock pursuant to the terms of the indenture.  As provided in the indenture, each $1,000 principal amount at maturity of LYONs was exchangeable for 37.4437 shares of Avaya common stock.

Prior to the conversions and the redemption of the LYONs, Avaya’s diluted share count included 20,548,503 shares related to the LYONs as required pursuant to SFAS 128.  Of these shares, 20,546,199 shares were issued in connection with the conversions of the LYONs described above and will continue to be included in Avaya’s diluted share count in future periods and 2,284 shares were related to LYONs redeemed for cash and accordingly, will be excluded from Avaya’s diluted share count in future periods.  An aggregate of 20 fractional shares was cashed out in connection with the conversion transactions.  Because the shares issued in connection with the conversions of the LYONs were already included in Avaya’s diluted share count, the conversions of the LYONs will not result in an increase in Avaya’s diluted share count.

“The LYONs redemption and recent senior secured notes tender are the latest steps in Avaya’s longstanding financial strategy to de-lever our balance sheet and strengthen our capital structure,” said Garry K. McGuire, chief financial officer and senior vice president, corporate development, Avaya.

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Avaya said its total debt has been reduced to approximately $370 million, substantially all of which it assumed in connection with the company’s recent acquisition of Tenovis GmbH & Co. KG.  The assumed Tenovis debt includes $279 million related to an accounts receivable securitization and $68 million of real estate financing obligations.

About Avaya

Avaya Inc. designs, builds and manages communications networks for more than one million businesses worldwide, including more than 90 percent of the FORTUNE 500®. Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services.

Driving the convergence of voice and data communications with business applications – and distinguished by comprehensive worldwide services – Avaya helps customers leverage existing and new networks to achieve superior business results.  For more information visit the Avaya website: http://www.avaya.com

Liquid Yield Option™ Notes is a trademark of Merrill, Lynch & Co., Inc.

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