Avaya Holdings Corp. (Form: 10-Q, Received: 02/10/2020 16:33:17)

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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 December 31, 2019



☐	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)



Delaware		26-1119726
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4655 Great America Parkway		95054
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 Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AVYA	New 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 January 31, 2020, 95,288,505 shares of common stock, $.01 par value, of the registrant were outstanding.

TABLE OF CONTENTS



Item	Description	Page

	PART I—FINANCIAL INFORMATION
1.	Financial Statements	1
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
3.	Quantitative and Qualitative Disclosures About Market Risk	40
4.	Controls and Procedures	41

	PART II—OTHER INFORMATION
1.	Legal Proceedings	42
1A.	Risk Factors	42
2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
3.	Defaults Upon Senior Securities	43
4.	Mine Safety Disclosures	43
5.	Other Information	43
6.	Exhibits	44
7.	Signatures	45

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.

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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 December 31,
	2019			2018
REVENUE
Products	$	298		$	324
Services	417			414
	715			738
COSTS
Products:
Costs	104			115
Amortization of technology intangible assets	43			43
Services	174			173
	321			331
GROSS PROFIT	394			407
OPERATING EXPENSES
Selling, general and administrative	283			257
Research and development	52			53
Amortization of intangible assets	41			40
Restructuring charges, net	3			7
	379			357
OPERATING INCOME	15			50
Interest expense	(58		)	(60		)
Other income, net	14			22
(LOSS) INCOME BEFORE INCOME TAXES	(29		)	12
Provision for income taxes	(25		)	(3		)
NET (LOSS) INCOME	$	(54	)	$	9
(LOSS) EARNINGS PER SHARE
Basic	$	(0.54	)	$	0.08
Diluted	$	(0.54	)	$	0.08
Weighted average shares outstanding
Basic	109.0			110.3
Diluted	109.0			111.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(In millions)



	Three months ended December 31,
	2019			2018
Net (loss) income	$	(54	)	$	9
Other comprehensive income (loss):
Cumulative translation adjustment	3			1
Change in interest rate swaps, net of income taxes of $2 for the three months ended December 31, 2019 and $7 for the three months ended December 31, 2018	7			(21		)
Other comprehensive income (loss)	10			(20		)
Total comprehensive loss	$	(44	)	$	(11	)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and share amounts)



	December 31, 2019			September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	766		$	752
Accounts receivable, net	281			314
Inventory	61			63
Contract assets	207			187
Contract costs	123			114
Other current assets	204			115
TOTAL CURRENT ASSETS	1,642			1,545
Property, plant and equipment, net	254			255
Deferred income taxes, net	34			35
Intangible assets, net	2,809			2,891
Goodwill, net	2,107			2,103
Operating lease right-of-use assets	188			—
Other assets	127			121
TOTAL ASSETS	$	7,161		$	6,950
LIABILITIES
Current liabilities:
Debt maturing within one year	$	—		$	29
Accounts payable	272			291
Payroll and benefit obligations	123			116
Contract liabilities	487			472
Operating lease liabilities	51			—
Business restructuring reserve	29			33
Other current liabilities	204			158
TOTAL CURRENT LIABILITIES	1,166			1,099
Non-current liabilities:
Long-term debt, net of current portion	2,877			3,090
Pension obligations	759			759
Other post-retirement obligations	199			200
Deferred income taxes, net	65			72
Contract liabilities	381			78
Operating lease liabilities	143			—
Business restructuring reserve	31			36
Other liabilities	301			316
TOTAL NON-CURRENT LIABILITIES	4,756			4,551
TOTAL LIABILITIES	5,922			5,650
Commitments and contingencies (Note 20)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at December 31, 2019 and September 30, 2019
Convertible Series A, 125,000 shares issued and outstanding at December 31, 2019 and no shares issued and outstanding at September 30, 2019	126			—
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000 shares authorized; 100,505,954 shares issued and outstanding at December 31, 2019; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 2019	1			1
Additional paid-in capital	1,618			1,761
Accumulated deficit	(343		)	(289		)
Accumulated other comprehensive loss	(163		)	(173		)
TOTAL STOCKHOLDERS' EQUITY	1,113			1,300
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,161		$	6,950

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In millions)



	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity
	Shares		Par Value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity
Balance as of September 30, 2019	111.0		$	1	$	1,761		$	(289	)	$	(173	)	$	1,300
Issuance of common stock under the equity incentive plan	0.3													—
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 expense					6									6
Accretion of preferred stock to redemption value					(4		)							(4		)
Preferred stock dividends accrued					(1		)							(1		)
Net loss								(54		)				(54		)
Other comprehensive income											10			10
Balance as of December 31, 2019	100.5		$	1	$	1,618		$	(343	)	$	(163	)	$	1,113

Balance as of September 30, 2018	110.2		$	1	$	1,745		$	287		$	18		$	2,051
Issuance of common stock under the equity incentive plan	0.8													—
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.3	)			(6		)							(6		)
Share-based compensation expense					6									6
Adjustment for adoption of new accounting standard								92						92
Net income								9						9
Other comprehensive loss											(20		)	(20		)
Balance as of December 31, 2018	110.7		$	1	$	1,745		$	388		$	(2	)	$	2,132

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Three months ended December 31,
	2019			2018
OPERATING ACTIVITIES:
Net (loss) income	$	(54	)	$	9
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	107			117
Share-based compensation	6			6
Debt discount and issuance costs	8			5
Deferred income taxes, net	(8		)	(2		)
Change in fair value of emergence date warrants	3			(18		)
Unrealized loss on foreign currency transactions	9			14
Unrealized gain on marketable securities	(1		)	—
Realized gain on sale of marketable securities	(11		)	—
Other non-cash credits, net	(14		)	—
Changes in operating assets and liabilities:
Accounts receivable	35			49
Inventory	3			(11		)
Operating lease right-of-use assets	4			—
Contract assets	(18		)	(43		)
Contract costs	(8		)	(7		)
Accounts payable	(15		)	26
Payroll and benefit obligations	(10		)	(37		)
Business restructuring reserve	(6		)	(4		)
Operating lease liabilities	(1		)	—
Contract liabilities	(25		)	21
Other assets and liabilities	8			(39		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	12			86
INVESTING ACTIVITIES:
Capital expenditures	(26		)	(21		)
Proceeds from sale of marketable securities	294			—
Other investing activities, net	—			(1		)
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES	268			(22		)
FINANCING ACTIVITIES:
Shares repurchased under share repurchase program	(132		)	—
Proceeds from issuance of Series A Preferred Stock, net of issuance costs of $4	121			—
Repayment of Term Loan Credit Agreement	(250		)	(7		)
Payment of acquisition-related contingent consideration	(5		)	—
Principal payments for financing leases	(3		)	(5		)
Other financing activities, net	(2		)	(6		)
NET CASH USED FOR FINANCING ACTIVITIES	(271		)	(18		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	5			(3		)
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	14			43
Cash, cash equivalents, and restricted cash at beginning of period	756			704
Cash, cash equivalents, and restricted cash at end of period	$	770		$	747

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 as of December 31, 2019 and for the three months ended December 31, 2019 and 2018 reflect the operating results 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, and 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. These estimates include assessing the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, business restructuring reserves, pension and post-retirement benefit costs, the fair value of equity compensation, the fair value of assets acquired and liabilities assumed in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, and fair value measurements, among others. The markets for the Company's products are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could affect the future recoverability of the Company's assets. 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 three months ended December 31, 2018, the Company recorded an out-of-period adjustment to correct sales and marketing expense. The impact resulted in a $5 million increase to Selling, general and administrative expense and a decrease to net income of $3 million for the three months ended December 31, 2018. Management concluded that the correction was not material to previously issued consolidated financial statements and to the three months ended December 31, 2018.

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.

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 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

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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 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 has elected the land easement practical expedient to not reassess whether an existing or expired land easement is a lease or contains a lease. The Company has 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 significant 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, 2019					Upon Adoption of
(In millions)	As Reported		Adjustments			ASC 842
ASSETS
Other current assets	$	115	$	(2	)	$	113
Intangible assets, net	2,891		(2		)	2,889
Operating lease right-of-use assets	—		190			190

LIABILITIES
Current liabilities:
Operating lease liabilities	—		51			51
Business restructuring reserve	33		(4		)	29
Non-current liabilities:
Operating lease liabilities	—		143			143
Business restructuring reserve	36		(1		)	35
Other liabilities	316		(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 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

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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, 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:



	Three months ended December 31,
(In millions)	2019			2018
REVENUE
Products & Solutions	$	298		$	326
Services	419			422
Unallocated Amounts	(2		)	(10		)
	$	715		$	738



	Three months ended December 31, 2019
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	149	$	246	$	(1	)	$	394
International:
Europe, Middle East and Africa	93		94		(1		)	186
Asia Pacific	34		43		—			77
Americas International - Canada and Latin America	22		36		—			58
Total International	149		173		(1		)	321
Total revenue	$	298	$	419	$	(2	)	$	715

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	Three months ended December 31, 2018
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	150	$	251	$	(7	)	$	394
International:
Europe, Middle East and Africa	106		94		(1		)	199
Asia Pacific	38		41		(1		)	78
Americas International - Canada and Latin America	32		36		(1		)	67
Total International	176		171		(3		)	344
Total revenue	$	326	$	422	$	(10	)	$	738

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 December 31, 2019 is $2.6 billion, of which 55% and 28% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance 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)	December 31, 2019		September 30, 2019		Increase (Decrease)
Accounts receivable, net	$	281	$	314	$	(33	)

Contract assets:
Current	$	207	$	187	$	20
Non-current (Other assets)	14		16		(2		)
	$	221	$	203	$	18

Cost of obtaining a contract:
Current (Contract costs)	$	90	$	89	$	1
Non-current (Other assets)	45		45		—
	$	135	$	134	$	1

Cost to fulfill a contract:
Current (Contract costs)	$	33	$	25	$	8

Contract liabilities:
Current	$	487	$	472	$	15
Non-current	381		78		303
	$	868	$	550	$	318

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 three months ended December 31, 2019 and 2018, the Company recognized revenue of $251 million and $242 million that had been recorded as a Contract liability as of October 1, 2019 and October 1, 2018, respectively.

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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 months ended December 31, 2019 the Company recognized $32 million for amortization of costs to obtain customer contracts which were included in Selling, general and administrative expense.

For the three months ended December 31, 2018, the Company recognized $22 million for amortization of costs to obtain customer contracts, of which $20 million was included in Selling, general and administrative expense and the remaining $2 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 December 31, 2019 and 2018, the Company recognized $14 million of contract fulfillment costs within Costs, respectively.

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 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 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 9.9 years.

The following table details the components of net lease expense for the three months ended December 31, 2019:



In millions	Three months ended December 31, 2019
Operating lease cost ⁽¹⁾	$	18
Short-term lease cost⁽¹⁾	2
Variable lease cost⁽¹⁾⁽²⁾	5
Finance lease cost:
Amortization of right-of-use assets⁽¹⁾	1
Interest expense on lease liabilities⁽³⁾	—
Sublease income⁽⁴⁾	(2		)
Total lease cost	$	24


⁽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 Interest expense.


⁽⁴⁾	Included in Other income, net.

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The Company's right-of-use assets and lease liabilities for financing leases are included in the Condensed Consolidated Balance Sheet as follows:



In millions	December 31, 2019
ASSETS
Property, plant and equipment, net	$	7

LIABILITIES
Other current liabilities	9
Other liabilities	7

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 December 31, 2019:



In millions	Operating Leases			Financing Leases
Remaining nine months of 2020	$	50		$	8
2021	49			6
2022	43			2
2023	31			1
2024	23			—
2025	12			—
2026 and thereafter	19			—
Total lease payments	227			17
Less: imputed interest	(33		)	(1		)
Total lease liability	$	194		$	16
Weighted average remaining lease term	4.7 Years			2.2 Years
Weighted average interest rate	6.3		%	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 millions	Operating Leases		Capital Leases
2020	$	51	$	12
2021	39		6
2022	33		2
2023	22		—
2024	17		—
2025 and thereafter	29		—
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 December 31, 2019 and September 30, 2019, finance lease obligations associated with these sale leaseback agreements were $11 million and $13 million, respectively.

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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 will introduce and deploy Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS") solution. Avaya Cloud Office will expand the Company's portfolio to offer a full suite of UC, CC, UCaaS and contact center as a service ("CCaaS") solutions to a global customer base. ACO combines RingCentral's leading UCaaS platform with Avaya technology, services and migration capabilities to create a highly differentiated UCaaS offering. Upon launch, the Company will have a full suite of public, private and hybrid cloud solutions for its global UC and CC customers and partners. ACO is expected to launch in the second quarter of fiscal 2020. The transaction closed on October 31, 2019.

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 three months ended December 31, 2019, the Company sold a significant portion of the RingCentral shares and realized a gain of $11 million which is recorded 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. For the three months ended December 31, 2019, the Company recorded an unrealized gain of $1 million related to RingCentral shares maintained by the Company as of December 31, 2019.

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

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 December 31, 2019, 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 new 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 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 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 Products & Solutions and Services reporting units were assigned goodwill of $625 million and $1,478 million, respectively, and had an excess fair value over carrying value of 6% and 9%, respectively. The Company considers a reporting unit to be "at risk" of a potential future impairment charge if the excess fair value over carrying value is less than 10%.

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extent that business conditions deteriorate 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.

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 December 31, 2019
Finite-lived intangible assets:
Cost	$	962		$	2,154		$	42		$	3,158
Accumulated amortization	(351		)	(318		)	(13		)	(682		)
Finite-lived intangible assets, net	611			1,836			29			2,476

Indefinite-lived intangible assets:
Cost	—			—			333			333
Accumulated impairment	—			—			—			—
Indefinite-lived intangible assets, net	—			—			333			333
Intangible assets, net	$	611		$	1,836		$	362		$	2,809
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, net	652			1,875			31			2,558
Indefinite-lived intangible assets:
Cost	2			—			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.

The Company determined that no events occurred or circumstances changed during three months ended December 31, 2019 that would indicate that its finite-lived intangible assets may not be recoverable or that it is more likely than not that its indefinite-lived intangible assets are impaired. However, to the extent that business conditions deteriorate 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 December 31,
(In millions)	2019			2018
OTHER INCOME, NET
Interest income	$	3		$	3
Foreign currency losses, net	(4		)	(1		)
Gain on marketable securities	12			—
Other pension and post-retirement benefit credits, net	5			2
Change in fair value of emergence date warrants	(3		)	18
Sublease income	2			—
Other, net	(1		)	—
Total other income, net	$	14		$	22

The following table presents supplemental cash flow information for the periods presented:



	Three months ended December 31,
(In millions)	2019			2018
OTHER PAYMENTS
Interest payments	$	58		$	48
Income tax payments	12			7

NON-CASH INVESTING ACTIVITIES
(Decrease) increase in Accounts payable for Capital expenditures	$	(5	)	$	4

During the three months ended December 31, 2019, the Company made payments for operating lease liabilities of $14 million and recorded non-cash additions for operating lease right-of-use assets of $9 million.

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)	December 31, 2019		September 30, 2019		December 31, 2018		September 30, 2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	766	$	752	$	743	$	700
Restricted cash included in other assets	4		4		4		4
Total cash, cash equivalents, and restricted cash	$	770	$	756	$	747	$	704

8. Business Restructuring Reserves and Programs

For the three months ended December 31, 2019, the Company recognized restructuring charges of $3 million primarily related to exited leased facilities. For the three months ended December 31, 2018, the Company recognized restructuring charges of $7 million for employee severance costs associated with employee severance agreements primarily in the U.S. and Canada. 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 restructuring charges 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, and 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

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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 three months ended December 31, 2019:



(In millions)	Fiscal 2020 Restructuring Program ⁽²⁾		Fiscal 2019 Restructuring Program ⁽³⁾			Fiscal 2008 through 2018 Restructuring Programs ⁽⁴⁾			Total
Accrual balance as of September 30, 2019	$	—	$	11		$	53		$	64
Adjustments ⁽¹⁾	—		—			(1		)	(1		)
Cash payments	—		(1		)	(5		)	(6		)
Restructuring charges	1		—			—			1
Impact of foreign currency fluctuations	—		—			2			2
Accrual balance as of December 31, 2019	$	1	$	10		$	49		$	60


⁽¹⁾	Includes changes in estimates for increases and decreases in costs related to the Company's restructuring programs, which are recorded in Restructuring charges, net in the Condensed Consolidated Statements of Operations in the period of the adjustment.


⁽²⁾	Payments related to the 2020 restructuring plan are expected to be completed in fiscal 2020.


⁽³⁾	Payments related to the 2019 restructuring plan are expected to be completed in fiscal 2026.


⁽⁴⁾	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:



	December 31, 2019				September 30, 2019
(In millions)	Principal amount		Net of discounts and issuance costs		Principal amount		Net of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024	$	2,624	$	2,600	$	2,874	$	2,846
Convertible 2.25% senior notes due June 15, 2023	350		277		350		273
Total debt	$	2,974	2,877		$	3,224	3,119
Debt maturing within one year			—				(29		)
Long-term debt, net of current portion			$	2,877			$	3,090

Term Loan and ABL Credit Agreements

As of December 31, 2019 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 December 31, 2019.

For the three months ended December 31, 2019 and 2018, the Company recognized interest expense of $44 million and $50 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 December 31, 2019, the Company had issued and outstanding letters of credit and guarantees of $39 million under the ABL Credit Agreement. As of December 31, 2019, the Company had no 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 $119 million at December 31, 2019. For the three months ended December 31, 2019 and 2018, recognized interest expense related to the ABL Credit Agreement was not material.

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Convertible Notes

The Company's 2.25% Convertible Notes have an aggregate principal amount outstanding of $350 million (including 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 both the three months ended December 31, 2019 and 2018, the Company recognized interest expense of $6 million related to the Convertible Notes, which includes $4 million of amortization of the underwriting discount and issuance costs.

The net carrying amount of the Convertible Notes for the periods indicated was as follows:



(In millions)	December 31, 2019			September 30, 2019
Principal	$	350		$	350
Less:
Unamortized debt discount	(68		)	(72		)
Unamortized issuance costs	(5		)	(5		)
Net carrying amount	$	277		$	273

The weighted average contractual interest rate of the Company's outstanding debt was 6.3% as of December 31, 2019 and September 30, 2019. The effective interest rate for the Term Loan Credit Agreement as of December 31, 2019 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 December 31, 2019 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 December 31, 2019, 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.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed 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 December 31, 2019, 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) income 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) income to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive (loss) income at December 31, 2019, approximately $24 million would be reclassified into net income in the next twelve months as interest expense.

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

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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 December 31, 2019.

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 December 31, 2019 and September 30, 2019 was determined using the input assumptions summarized below:



	December 31, 2019		September 30, 2019
Expected volatility	55.09	%	56.89	%
Risk-free interest rates	1.61	%	1.55	%
Contractual remaining life (in years)	2.96		3.21
Price per share of common stock	$13.50		$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:



		December 31, 2019				September 30, 2019
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other current liabilities	—		24		—		23
Interest rate contracts	Other liabilities	—		48		—		58
		—		72		—		81

Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Other current assets	3		—		1		—
Emergence Date Warrants	Other liabilities	—		8		—		5
		3		8		1		5
Total derivative fair value		$	3	$	80	$	1	$	86

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The following table provides information regarding the location and amount of pre-tax gains (losses) for derivatives designated as cash flow hedges:



	Three months ended December 31,
	2019					2018
(In millions)	Interest Expense			Other Comprehensive Income (Loss)		Interest Expense			Other Comprehensive (Loss) Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(58	)	$	10	$	(60	)	$	(20	)

Impact of cash flow hedging relationships:
Gain (Loss) recognized in AOCI - on interest rate swaps	—			4		—			(31		)
Interest expense reclassified from AOCI	(5		)	5		(3		)	3

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 December 31,
(In millions)	Location of Derivative Pre-tax Gain (Loss)	2019			2018
Emergence Date Warrants	Other income, net	$	(3	)	$	18
Foreign exchange contracts	Other income, net	5			—

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:



	December 31, 2019						September 30, 2019
(In millions)	Asset			Liability			Asset			Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheets	$	3		$	80		$	1		$	86
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets	(2		)	(2		)	(1		)	(1		)
Net amounts	$	1		$	78		$	—		$	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.

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.

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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 December 31, 2019 and September 30, 2019 were as follows:



	December 31, 2019								September 30, 2019
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Investments in equity securities	$	71	$	71	$	—	$	—	$	—	$	—	$	—	$	—
Investments in debt securities	10		—		—		10		10		—		—		10
Foreign exchange contracts	3		—		3		—		1		—		1		—
Total assets	$	84	$	71	$	3	$	10	$	11	$	—	$	1	$	10

Liabilities:
Interest rate contracts	$	72	$	—	$	72	$	—	$	81	$	—	$	81	$	—
Spoken acquisition earn-outs	—		—		—		—		5		—		—		5
Emergence Date Warrants	8		—		—		8		5		—		—		5
Total liabilities	$	80	$	—	$	72	$	8	$	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 are 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 are 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 priced using the Black-Scholes option pricing model.

During the three months ended December 31, 2019 and 2018, 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 Warrants		Spoken acquisition earn-outs			Investment in debt securities
Balance as of September 30, 2019	$	5	$	5		$	10
Change in fair value⁽¹⁾	3		—			—
Settlement	—		(5		)	—
Balance as of December 31, 2019	$	8	$	—		$	10


⁽¹⁾	Changes in fair value of the Emergence Date Warrants are 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 December 31, 2019 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 at December 31, 2019 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 at December 31, 2019 and September 30, 2019 are as follows:



	December 31, 2019				September 30, 2019
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Term Loan Credit Agreement due December 15, 2024	$	2,624	$	2,570	$	2,874	$	2,739
Convertible 2.25% senior notes due June 15, 2023	350		307		350		298
Total debt	$	2,974	$	2,877	$	3,224	$	3,037

12. Income Taxes

The Company's effective income tax rate for the three months ended December 31, 2019 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) 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 Tax Cuts and Jobs Act ("the Act") and associated regulations, (7) nondeductible expenses, and (8) foreign tax credits.

The Company's effective income tax rate for the three months ended December 31, 2018 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, and (7) 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 30^th 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.

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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 December 31,
(In millions)	2019			2018
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost	$	1		$	1
Interest cost	7			10
Expected return on plan assets	(13		)	(15		)
Net periodic benefit credit	$	(5	)	$	(4	)
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	2		$	2
Interest cost	1			2
Net periodic benefit cost	$	3		$	4
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Interest cost	3			3
Expected return on plan assets	(3		)	(2		)
Net periodic benefit cost	$	—		$	1

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 $5 million for the three months ended December 31, 2019, which represented the amounts required to satisfy the minimum statutory funding requirements in the U.S. For the remainder of fiscal 2020, the Company estimates that it will make contributions totaling $11 million to satisfy the minimum statutory funding requirements in the U.S.

Contributions to the non-U.S. pension plans were $4 million for the three months ended December 31, 2019. For the remainder of fiscal 2020, the Company estimates that it will make contributions totaling $20 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 three months ended December 31, 2019, the Company made payments for retiree medical and dental benefits of $3 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 $10 million for the remainder of fiscal 2020.

14. Share-based Compensation

Pre-tax share-based compensation expense was $6 million for both the three months ended December 31, 2019 and 2018.

2017 Equity Incentive Plan

The Company has one stockholder-approved share-based compensation plan, 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

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("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"). The maximum number of shares of common stock that may be issued or granted under the 2019 Plan is 18,800,000 shares of the Company's common stock (the "New Share Reserve"), plus any shares that again become available for issuance under the 2017 Plan in accordance with the terms of the 2017 Plan and 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. Awards that were made following October 31, 2019 under the 2017 Plan or the Inducement Plan are counted against the New Share Reserve based on the fungible share ratio included in the 2019 Plan. No awards may be granted under the 2017 Plan or the Inducement Plan subsequent to the date on which the 2019 Plan is approved by the stockholders of the Company.

Awards granted under the 2019 Plan are classified as a liability and will be remeasured each period with the cumulative effect of the change in fair value recognized as an adjustment to earnings in the period of remeasurement until shareholder approval of the 2019 Plan is obtained. The 2019 Plan will be subject to stockholder vote in March 2020. During the three months ended December 31, 2019, share-based compensation expense associated with awards granted under the 2019 Plan were not material.

Restricted Stock Units

During the three months ended December 31, 2019, the Company granted 1,680,506 RSUs with a weighted average grant date fair value of $11.93 per RSU. During the three months ended December 31, 2019, there were 256,467 RSUs that vested with a weighted average grant date fair value of $15.70 per RSU.

Performance Restricted Stock Units

During the three months ended December 31, 2019, the Company granted 639,435 PRSUs with a weighted average grant date fair value of $13.65 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.

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:



	Three months ended December 31, 2019
Expected volatility⁽¹⁾	55.85	%
Risk-free interest rate⁽²⁾	1.64	%
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.

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Stock Options

During the three months ended December 31, 2019, 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:



	Three months ended December 31, 2019
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 7% interest in the Company's common stock on an as-converted basis as of December 31, 2019, 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, compound quarterly and are paid quarterly in arrears. 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 December 31, 2019, the carrying value of the Series A Preferred Stock was $126 million, which includes $1 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-

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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 Company anticipates that the RingCentral nominee will be identified by RingCentral and nominated to the Company's Board of Directors at some point after the Company's Annual Meeting in March 2020.

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 December 31, 2019, there were 100,505,954 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 December 31, 2019, 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 months ended December 31, 2019, the Company repurchased 10,717,391 shares of its common stock at a weighted average price per share of $12.29, including transaction costs, based on the settlement date of the repurchase. There were an additional 728,532 shares repurchased that were pending settlement as of December 31, 2019 which have been accrued for by the Company within Other current liabilities in the Condensed Consolidated Balance Sheet. Based on share repurchases that have settled as of December 31, 2019, the remaining authorized amount for share repurchases under this program was $368 million.

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16. (Loss) Earnings Per Common Share

Basic (loss) earnings per share is calculated by dividing net (loss) income 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 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) income attributable to common stockholders and the computation of basic and diluted (loss) earnings per share for the periods indicated:



	Three months ended December 31,
(In millions, except per share amounts)	2019			2018
(Loss) earnings per share:
Numerator
Net (loss) income	$	(54	)	$	9
Dividends and accretion to preferred stockholders	(5		)	—
Undistributed (loss) income	(59		)	9
Percentage allocated to common stockholders⁽¹⁾	100.0		%	100.0		%
Numerator for basic and diluted (loss) earnings per common share	$	(59	)	$	9

Denominator
Denominator for basic (loss) earnings per weighted average common shares	109.0			110.3
Effect of dilutive securities
Restricted stock units	—			0.9
Denominator for diluted (loss) earnings per weighted average common shares	109.0			111.2

(Loss) earnings per common share
Basic	$	(0.54	)	$	0.08
Diluted	$	(0.54	)	$	0.08

⁽¹⁾ Basic weighted average common stock outstanding	109.0			110.3
Basic weighted average common stock and common stock equivalents (preferred shares)	109.0			110.3
Percentage allocated to common stockholders	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) earnings per common share is computed by dividing the net (loss) income 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 months ended December 31, 2019, the Company excluded 1.0 million stock options, 3.7 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 months ended December 31, 2018, the Company excluded 1.1 million stock options, 0.4 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's Convertible Notes and Call

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Spread Warrants were also excluded for the three months ended December 31, 2019 and 2018 as discussed in more detail below.

For purposes of considering the Convertible Notes in determining diluted (loss) earnings per share, the Company has the ability and current intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the principal amount (the "Conversion Premium") in shares of the Company's common stock. Therefore, only the impact of the Conversion Premium will be included in diluted weighted average shares outstanding using the treasury stock method. Since the Convertible Notes were out of the money and anti-dilutive as of December 31, 2019 and 2018, they were excluded from the diluted (loss) earnings per share calculation for the three months ended December 31, 2019 and 2018. The Call Spread Warrants will not be considered in calculating diluted weighted average shares outstanding until the price per share of the Company's common stock exceeds the strike price of $37.3625 per share. When the price per share of the Company's common stock exceeds the strike price per share of the Call Spread Warrants, the effect of the additional shares that may be issued upon exercise of the Call Spread Warrants will be included in diluted weighted average shares outstanding using the treasury stock method.

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 December 31,
(In millions)	2019			2018
REVENUE
Products & Solutions	$	298		$	326
Services	419			422
Unallocated Amounts⁽¹⁾	(2		)	(10		)
	$	715		$	738
GROSS PROFIT
Products & Solutions	$	194		$	214
Services	246			255
Unallocated Amounts⁽²⁾	(46		)	(62		)
	394			407
OPERATING EXPENSES
Selling, general and administrative	283			257
Research and development	52			53
Amortization of intangible assets	41			40
Restructuring charges, net	3			7
	379			357
OPERATING INCOME	15			50
INTEREST EXPENSE AND OTHER INCOME, NET	(44		)	(38		)
(LOSS) INCOME BEFORE INCOME TAXES	$	(29	)	$	12


⁽¹⁾	Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

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⁽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.


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 Items			Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Accumulated Other Comprehensive (Loss) Income
Balance as of September 30, 2019	$	(106	)	$	(7	)	$	(60	)	$	(173	)
Other comprehensive income before reclassifications	—			3			4			7
Amounts reclassified to earnings	—			—			5			5
Benefit from income taxes	—			—			(2		)	(2		)
Balance as of December 31, 2019	$	(106	)	$	(4	)	$	(53	)	$	(163	)



(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Accumulated Other Comprehensive Income (Loss)
Balance as of September 30, 2018	$	51	$	(31	)	$	(2	)	$	18
Other comprehensive income (loss) before reclassifications	—		1			(31		)	(30		)
Amounts reclassified to earnings	—		—			3			3
Benefit from income taxes	—		—			7			7
Balance as of December 31, 2018	$	51	$	(30	)	$	(23	)	$	(2	)

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.

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 three months ended December 31, 2019 and 2018, the Company purchased goods and services from subsidiaries of Flex Ltd. making payments of $9 million and $8 million respectively. As of both December 31, 2019 and 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

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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 December 31, 2019 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 December 31, 2019, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $60 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 December 31, 2019.

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.

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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 as of December 31, 2019 and for the three months ended December 31, 2019 and 2018 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.

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 will introduce and deploy Avaya Cloud Office by RingCentral ("Avaya Cloud Office" or "ACO"), a new global unified communications as a service ("UCaaS") solution. Avaya Cloud Office will expand the Company's portfolio to offer a full suite of UC, CC, UCaaS and contact center as a service ("CCaaS") solutions to a 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 Company now has a full suite of public, private and hybrid cloud solutions for its global UC and CC customers and partners. ACO is expected to launch in the second quarter of fiscal 2020. The transaction closed on October 31, 2019.

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

There are a number of trends and uncertainties affecting our business. Most importantly, 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 similar disruptions put pressure on the global economy causing uncertainties. Our business is also affected by changes in foreign currency exchange rates. We believe these uncertainties have impacted our customers' willingness to spend on IT and the manner in which they procure such technologies and services. This includes delays or rejection of capital projects, including the implementation of our products and services.

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 operations and identify cost savings globally and may take additional restructuring actions in the future. The costs of those actions could be material.

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Financial Results Summary

Three Months Ended December 31, 2019 Compared with the Three Months Ended December 31, 2018 Results

The following table displays our consolidated net (loss) income for the periods indicated:



	Three months ended December 31,
(In millions)	2019			2018
REVENUE
Products	$	298		$	324
Services	417			414
	715			738
COSTS
Products:
Costs	104			115
Amortization of technology intangible assets	43			43
Services	174			173
	321			331
GROSS PROFIT	394			407
OPERATING EXPENSES
Selling, general and administrative	283			257
Research and development	52			53
Amortization of intangible assets	41			40
Restructuring charges, net	3			7
	379			357
OPERATING INCOME	15			50
Interest expense	(58		)	(60		)
Other income, net	14			22
(LOSS) INCOME BEFORE INCOME TAXES	(29		)	12
Provision for income taxes	(25		)	(3		)
NET (LOSS) INCOME	$	(54	)	$	9

Revenue

Revenue for the three months ended December 31, 2019 was $715 million compared to $738 million for the three months ended December 31, 2018. The decrease was primarily driven by lower demand for the Company's on-premises 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:



	Three months ended December 31,
							Percentage of Total Revenue						Yr. to Yr. Percentage Change, excluding Foreign Currency Impact
(In millions)	2019			2018			2019		2018		Yr. to Yr. Percentage Change
Products & Solutions	$	298		$	326		42	%	44	%	(9	)%	(8	)%
Services	419			422			58	%	57	%	(1	)%	—	%
Unallocated amounts	(2		)	(10		)	—	%	(1	)%	⁽¹⁾		⁽¹⁾
Total revenue	$	715		$	738		100	%	100	%	(3	)%	(3	)%


⁽¹⁾	Not meaningful.

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Products & Solutions revenue for the three months ended December 31, 2019 was $298 million compared to $326 million for the three months ended December 31, 2018. The decrease was primarily attributable to lower demand for the Company's on-premises unified communications and contact center products.

Services revenue for the three months ended December 31, 2019 was $419 million and relatively flat compared to the three months ended December 31, 2018. Growth in revenue from the Company's subscription offerings substantially offset 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 three months ended December 31, 2019 and 2018 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:



	Three months ended December 31,
					Percentage of Total Revenue						Yr. to Yr. Percentage Change, excluding Foreign Currency Impact
(In millions)	2019		2018		2019		2018		Yr. to Yr. Percentage Change
U.S.	$	394	$	394	55	%	53	%	—	%	—	%
International:
EMEA	186		199		26	%	27	%	(7	)%	(5	)%
APAC - Asia Pacific	77		78		11	%	11	%	(1	)%	(2	)%
Americas International - Canada and Latin America	58		67		8	%	9	%	(13	)%	(13	)%
Total International	321		344		45	%	47	%	(7	)%	(6	)%
Total revenue	$	715	$	738	100	%	100	%	(3	)%	(3	)%

Revenue in the U.S. was $394 million for both the three months ended December 31, 2019 and 2018. 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. Revenue in Europe, Middle East and Africa ("EMEA") for the three months ended December 31, 2019 was $186 million compared to $199 million for the three months ended December 31, 2018. The decrease in EMEA revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center products and maintenance services and the unfavorable impact of foreign currency exchange rates, partially offset by growth in professional services revenue. Revenue in Asia Pacific ("APAC") for the three months ended December 31, 2019 was $77 million compared to $78 million for the three months ended December 31, 2018. The decrease in APAC revenue was primarily attributable to lower demand for the Company's on-premises unified communications and contact center products. Revenue in Americas International for the three months ended December 31, 2019 was $58 million compared to $67 million for the three months ended December 31, 2018. 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.

Gross Profit

The following table sets forth gross profit and gross margin by operating segment for the periods indicated:



	Three months ended December 31,
							Percentage of Total Revenue				Change
(In millions)	2019			2018			2019		2018		Amount			Percent
Products & Solutions	$	194		$	214		65.1	%	65.6	%	$	(20	)	(9	)%
Services	246			255			58.7	%	60.4	%	(9		)	(4	)%
Unallocated amounts	(46		)	(62		)	⁽¹	⁾	⁽¹	⁾	16			⁽¹⁾
Total	$	394		$	407		55.1	%	55.1	%	$	(13	)	(3	)%


⁽¹⁾	Not meaningful.

Gross profit for the three months ended December 31, 2019 was $394 million compared to $407 million for the three months ended December 31, 2018. The decrease was primarily driven by the decline in revenue described above.

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Products & Solutions gross profit for the three months ended December 31, 2019 was $194 million compared to $214 million for the three months ended December 31, 2018. The decrease was mainly attributable to the decline in revenue described above. Products & Solutions gross margin decreased from 65.6% to 65.1% in the three months ended December 31, 2019 mainly driven by less favorable product mix.

Services gross profit for the three months ended December 31, 2019 was $246 million compared to $255 million for the three months ended December 31, 2018. The decrease was mainly due to the decline in revenue described above. Services gross margin decreased from 60.4% to 58.7% in the three months ended December 31, 2019 mainly driven by less favorable product mix.

Unallocated amounts for the three months ended December 31, 2019 and 2018 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 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 December 31,
					Percentage of Total Revenue				Change
(In millions)	2019		2018		2019		2018		Amount			Percent
Selling, general and administrative	$	283	$	257	39.6	%	34.8	%	$	26		10	%
Research and development	52		53		7.3	%	7.2	%	(1		)	(2	)%
Amortization of intangible assets	41		40		5.7	%	5.4	%	1			3	%
Restructuring charges, net	3		7		0.4	%	0.9	%	(4		)	(57	)%
Total operating expenses	$	379	$	357	53.0	%	48.3	%	$	22		6	%

Selling, general and administrative expenses for the three months ended December 31, 2019 were $283 million compared to $257 million for the three months ended December 31, 2018. The increase was primarily attributable to expenses associated with executing the strategic partnership with RingCentral and higher accrued incentive compensation, partially offset by lower consulting costs and the favorable impact of foreign currency exchange rates.

Research and development expenses for the three months ended December 31, 2019 were $52 million compared to $53 million for the three months ended December 31, 2018.

Amortization of intangible assets for the three months ended December 31, 2019 was $41 million compared to $40 million for the three months ended December 31, 2018.

Restructuring charges, net, for the three months ended December 31, 2019 were $3 million compared to $7 million for the three months ended December 31, 2018. Restructuring charges during the three months ended December 31, 2019 primarily related to exited leased facilities. Restructuring charges during the three months ended December 31, 2018 consisted of employee separation costs primarily associated with employee severance actions in the U.S. and Canada.

Operating Income

Operating income for the three months ended December 31, 2019 was $15 million compared to $50 million for the three months ended December 31, 2018. Our operating results for the three months ended December 31, 2019 as compared to the three months ended December 31, 2018 reflect, among other things:


•	lower revenue and gross profit for the three months ended December 31, 2019, as described above;


•	costs incurred in connection with entering into the strategic partnership with RingCentral during the three months ended December 31, 2019; and


•	higher accrued incentive compensation during the three months ended December 31, 2019.

Interest Expense

Interest expense for the three months ended December 31, 2019 was $58 million compared to $60 million for the three months ended December 31, 2018. The decrease was mainly driven by lower average interest rates and the prepayment of $250 million of the outstanding principal amount of the Company's Term Loan on November 7, 2019.

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Other Income, Net

Other income, net for the three months ended December 31, 2019 was $14 million compared to $22 million for the three months ended December 31, 2018. Other income, net for the three months ended December 31, 2019 consisted of gains on marketable securities of $12 million driven by realized and unrealized gains on RingCentral shares received by the Company under the strategic partnership; other pension and post-retirement benefit credits of $5 million; interest income of $3 million and sublease income of $2 million, partially offset by net foreign currency losses of $4 million; an increase in the fair value of the warrants issued in accordance with the Company's bankruptcy plan ("Emergence Date Warrants") of $3 million and other, net of $1 million. Other income, net for the three months ended December 31, 2018 consisted of a change in fair value of the Emergence Date Warrants of $18 million; interest income of $3 million; and other, net of $1 million.

Provision for Income Taxes

The provision for income taxes was $25 million for the three months ended December 31, 2019 compared to $3 million for the three months ended December 31, 2018.

Net Loss

Net loss was $54 million for the three months ended December 31, 2019 compared to net income of $9 million for the three months ended December 31, 2018, 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, we believe these sources will be adequate to meet our liquidity needs for at least the next twelve months.

Cash Flow Activity

The following table provides a summary of the statements of cash flows for the periods indicated:



	Three months ended December 31,
(In millions)	2019			2018
Net cash provided by (used for):
Operating activities	$	12		$	86
Investing activities	268			(22		)
Financing activities	(271		)	(18		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	5			(3		)
Net increase in cash, cash equivalents, and restricted cash	14			43
Cash, cash equivalents, and restricted cash at beginning of period	756			704
Cash, cash equivalents, and restricted cash at end of period	$	770		$	747

Operating Activities

Cash provided by operating activities for the three months ended December 31, 2019 and 2018 was $12 million and $86 million, respectively. The decrease was primarily due to higher advisory fees associated with executing the strategic partnership with RingCentral; lower cash earnings; higher interest payments; and higher income tax payments.

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Investing Activities

Cash provided by investing activities for the three months ended December 31, 2019 was $268 million, compared to cash used for investing activities of $22 million for three months ended December 31, 2018. The change was primarily due to proceeds received from the sale of shares of common stock of RingCentral received upon entry into the strategic partnership, partially offset by higher capital expenditures for the Company's enterprise cloud and managed services offerings.

Financing Activities

Cash used for financing activities for the three months ended December 31, 2019 and 2018 was $271 million and $18 million, respectively.

Cash used for financing activities for the three months ended December 31, 2019 included:


•	a principal prepayment under the Term Loan Credit Agreement of $250 million;


•	repurchases of shares under the Company's share repurchase program of $132 million;


•	payment of acquisition-related contingent consideration of $5 million;


•	repayments in connection with financing leases of $3 million; and


•	other financing activities, net of $2 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 three months ended December 31, 2018 included:


•	scheduled debt repayments under the Term Loan Credit Agreement of $7 million;


•	repayments in connection with financing leases of $5 million; and


•	other financing activities, net of $6 million.

As of December 31, 2019, 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, capital expenditures, benefit obligations and share repurchases. 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:


•	Debt service—We expect to make payments of approximately $140 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.


•	Share repurchases - We expect to make payments of approximately 270 million during the remainder of fiscal 2020 for share repurchases under the Company's share repurchase program.


•	Restructuring payments—We expect to make payments of approximately $25 million to $30 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 $95 million for capital expenditures, including capitalized software development costs, during the remainder of fiscal 2020.

•

Benefit obligations—We estimate we will make payments under our pension and post-retirement benefit obligations totaling $41 million during the remainder of fiscal 2020. These payments include $11 million to satisfy the minimum statutory funding requirements of our U.S. qualified pension plans; $20 million for our non-U.S. benefit plans, which are predominantly not pre-funded; and $10 million for represented retiree post-retirement benefits. See discussion in Note 13, "Benefit Obligations," to our unaudited interim Condensed Consolidated Financial Statements for further details.

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.

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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 December 31, 2019 and September 30, 2019, our cash and cash equivalent balances held outside the U.S. were $193 million and $176 million, respectively. As of December 31, 2019, the Company's cash and cash equivalents held outside the U.S. are not required to be repatriated to fund the Company's operations 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 December 31, 2019, 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 $119 million at December 31, 2019.

We believe that our existing cash and cash equivalents of $766 million as of December 31, 2019, 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.

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 December 31, 2019, 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";


•	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 three months ended December 31, 2019, 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 first quarter of fiscal 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.

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Goodwill

During the three months ended December 31, 2019, the Company closely monitored the key variables and other market factors for all of its reporting units and determined that it was not required to perform an additional interim impairment test. To the extent that business conditions deteriorate 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.

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 but could be substantial. 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) income, 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 December 31,
(In millions)		2019			2018
Net (loss) income		$	(54	)	$	9
Interest expense		58			60
Interest income		(3		)	(3		)
Provision for income taxes		25			3
Depreciation and amortization		107			117
EBITDA		133			186
Impact of fresh start accounting adjustments	(a)	—			3
Restructuring charges, net of sublease income		1			7
Advisory fees	(b)	39			1
Acquisition-related costs		—			3
Share-based compensation		6			6
Change in fair value of Emergence Date Warrants		3			(18		)
Loss on foreign currency transactions		4			1
Gain on marketable securities	(c)	(12		)	—
Adjusted EBITDA		$	174		$	189


^(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.

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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 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" to 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 December 31, 2019.

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 December 31, 2019 and 2018, the Company recognized a loss on its hedge contracts of $5 million and $3 million, respectively, which is reflected in Interest expense in the Condensed Consolidated Statements of Operations. At December 31, 2019, the fair value of the outstanding Swap Agreements was a deferred loss of $71 million. Based on the payment dates of the contracts, $24 million and $48 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 December 31, 2019 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 for the three months ended December 31, 2019. 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 months ended December 31, 2019 by $16 million.

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 December 31, 2019, the Company maintained open foreign exchange contracts with a total notional value of $431 million, primarily hedging the British Pound Sterling, Indian Rupee, Chinese Renminbi, Czech Koruna, Mexican Peso and Japanese Yen. At December 31, 2019, the fair value of the open foreign exchange contracts was $3 million and recorded in Other current assets in the Condensed Consolidated Balance Sheets. For the three months ended December 31, 2019, the Company's gain on foreign exchange contracts was $5 million and was recorded within Other income, net on the Condensed Consolidated Statement of Operations.



Item 4.	Controls and Procedures

Disclosure Controls and Procedures

As of December 31, 2019, 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 December 31, 2019 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 December 31, 2019 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 December 31, 2019 to the risk factors previously disclosed in the Company's Form 10-K filed with the Securities and Exchange Commission on November 29, 2019 other than as shown below:

We have significant international sales and operations and face risks related to health epidemics that could impact our sales and operating results.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China. Any outbreak of contagious diseases, and other adverse public health developments, could have a material and adverse effect on our business operations. These could include supply-chain disruptions, restrictions on our ability to distribute our products and restrictions on our abilities to provide services in the regions affected. Any prolonged and significant supply-chain disruptions or inability to provide products or services would likely impact our sales in the affected region, increase our costs and negatively affect our operating results. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services and likely impact our operating results.

We are dependent on our intellectual property. If we are not able to protect our proprietary rights or if those rights are invalidated or circumvented, our business may be adversely affected.

Our business is primarily dependent on our technology and our ability to innovate in business communications and, as a result, we are reliant on our intellectual property. We generally protect our intellectual property through patents, trademarks, trade secrets, copyrights, confidentiality and nondisclosure agreements and other measures to the extent our budget permits. There can be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient to protect our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of our patents, patent applications, trademarks or our other intellectual property or proprietary rights will not be challenged, invalidated or circumvented. In addition, our business is global and the level of protection of our proprietary technology varies by country and may be particularly uncertain in countries that do not have well developed judicial systems or laws that adequately protect intellectual property rights. Patent litigation and other challenges to our patents and other proprietary rights are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area. Financial considerations also preclude us from seeking patent protection in every country where infringement litigation could arise. Our inability to predict our intellectual property requirements in all geographies and affordability constraints also impact our intellectual property protection investment decisions. If we are unable to protect our proprietary rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur to create our products.

Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. Moreover, it may be difficult or practically impossible to detect theft or unauthorized use of our intellectual property. For example, we actively combat software piracy as we enforce our intellectual property rights, but we nonetheless lose significant revenue due to illegal or unauthorized use of our software. If piracy activities continue at historical levels or increase, they may further harm our business. Enforcement of our intellectual property rights also depends on our legal actions being successful against these infringers, but these actions may not be successful, even when our rights have been infringed.

In addition, our business is global and the level of protection of our proprietary technology varies by country and may be particularly uncertain in countries that do not have well developed judicial systems or laws that adequately protect intellectual property rights. The level of protection afforded our intellectual property may also be particularly uncertain in countries that require the transfer of technology as a condition to market access. Our partnerships with foreign entities sometimes require us to transfer technology and/or certain intellectual property rights in countries that afford less protection of intellectual property rights than other countries. While we believe such technology and intellectual property transfer requirements have not adversely affected our business, such requirements may change over time and become detrimental to our ability to protect our technology or intellectual property in certain foreign countries. Patent litigation and other challenges to our patents and other proprietary rights are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area. Financial considerations also preclude us from seeking patent protection in every country where infringement litigation could arise. Our inability to predict our intellectual property requirements in all geographies and affordability

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constraints also impact our intellectual property protection investment decisions. If we are unable to protect our proprietary rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur to create our products.



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 December 31, 2019:



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⁾
October 1 - 31, 2019	89,400	$	10.3000	—	$	515,000,000
November 1 - 30, 2019	733,124	$	12.4330	712,909	$	506,134,098
December 1 - 31, 2019	10,004,482	$	12.2796	10,004,482	$	383,282,638
Total	10,827,006	$	12.2737	10,717,391


⁽¹⁾	October and November 2019 include 89,400 and 20,215 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 stock 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. There were an additional 728,532 shares repurchased and pending settlement as of December 31, 2019 that are not reflected in the table.


⁽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 Number		Exhibit Description
10.1⁺		First Amended and Restated Framework Agreement, dated as of February 10, 2020, by and between Avaya Inc. and RingCentral, Inc.
10.2*		Amendment No. 1 to Executive Employment Agreement, dated January 3, 2020, between James M. Chirico, Jr. and Avaya Inc., incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed on January 6, 2020
10.3*		Avaya Holdings Corp. 2019 Equity Incentive Plan (as amended), incorporated herein by reference to Annex B to the Company's Definitive Proxy Statement for its 2020 Annual General Meeting of Stockholders filed on January 17, 2020
10.4*		Form of Restricted Stock Unit Award Agreement pursuant to the Avaya Holdings Corp. 2019 Omnibus Inducement Equity Plan
10.5*		Form of Nonqualified Stock Option Award Agreement Pursuant to the Avaya Holdings Corp. 2019 Omnibus Inducement Equity Plan
31.1		Certification of James M. Chirico, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Kieran J. McGrath pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of James M. Chirico, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Kieran J. McGrath pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL 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.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Labels Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)

* Indicates management contract or compensatory plan or arrangement.

⁺ Confidential portions of this Exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K and Avaya Holdings agrees to furnish supplementally to the Securities and Exchange Commission a copy of any redacted information or omitted schedule and/or exhibit upon request.

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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

February 10, 2020

EXHIBIT 10.1

[Redacted Version]

***Certain information identified with brackets ([*****]) has been excluded from this exhibit because such information is both (i) not material and (ii) competitively harmful if publicly disclosed***

First Amended and Restated Framework Agreement

This FIRST AMENDED AND RESTATED FRAMEWORK AGREEMENT (this “Agreement”) is made and entered into as of February 10, 2020 (the “A&R Date”) and effective as of October 3, 2019 and amends, restates and supersedes in its entirety the Framework Agreement entered into as of October 3, 2019 (such agreement, the “Original Agreement” and such date, the “Execution Date”) by and between RingCentral, Inc., a Delaware corporation (“RingCentral”) and Avaya Inc., a Delaware corporation (“Avaya”) (each of RingCentral and Avaya, a “Party” and collectively the “Parties”).

Background:


A.	RingCentral is a cloud communications provider;


B.	Avaya is a provider of unified communications and contact center solutions and services;

RingCentral and Avaya Holdings Corp., a Delaware corporation (“Avaya Holdings”) have entered into (i) an Investment Agreement, dated as of the Execution Date (as may be amended, modified, or supplemented from time to time, the “Investment Agreement”), pursuant to which, and subject to the terms and conditions thereof, RingCentral shall purchase, and Avaya Holdings shall sell to RingCentral, certain shares of Series A Convertible Preferred Stock, par value $0.01 per share, of Avaya Holdings (“Avaya Series A Preferred Stock”), and (ii) an agreement, dated as of the Execution Date (as may be amended, modified or supplemented from time to time, the “Holdings Agreement”), pursuant to which Avaya Holdings agreed to issue the Shares (as defined below) pursuant to Section 5.4(h) and certain other restrictions in connection with the transactions contemplated by this Agreement;

the Parties entered into the Original Agreement as part of a broader relationship among the Parties, including in connection with RingCentral’s significant equity investment in Avaya Holdings, with the objective of RingCentral and Avaya efficiently commercializing an Offering (as defined below) with an enhanced Subject Functionality (as defined below) to complement their then-existing activities;


E.	the Parties now wish to make changes with respect to, among other things, certain representations made by Avaya; and


F.	the Parties have agreed to amend and restate the Original Agreement to reflect the foregoing changes.

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth in this Agreement, the Parties, intending to be legally bound, hereby agree as follows:

1.Definitions

1.1 “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under

common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of that Person, whether through the ownership of voting securities or partnership or other ownership interests, by Contract or otherwise at any time and for so long as such control exists.

1.2 “Antitrust Law” means the HSR Act and all other Laws that are designed or intended to prohibit, restrict or regulate actions, including transactions, acquisitions and mergers, having the purpose or effect of creating or strengthening a dominant position, monopolization, lessening of competition or restraint of trade.

1.3 “Available” means, with respect to a particular Location, that ACO is, in accordance with applicable Law in all material respects, commercially available in such Location for Sale to final end customers and licensees (it being understood that, as an example, “RingCentral Office” was, as of the Execution Date, Available in the U.S., Canada, United Kingdom, France, Australia, and the Netherlands).

1.4 “Avaya Certificate of Designations” means that certain Certificate of Designations of Series A Convertible Preferred Stock of Avaya Holdings, as amended.

1.1 “Avaya Cloud Office by RingCentral” or “ACO” means the Offerings developed pursuant to the terms of the Development Agreement and referred to in the Development Agreement as an “MVP”.

1.2 “Avaya Common Stock” means shares of Common Stock, par value $0.01 per share, of Avaya Holdings.

1.3 “Avaya Customer” means each final end customer or licensee that purchases, licenses or otherwise receives any Avaya Services from Avaya or any of its Subsidiaries, directly or through the Avaya Channel.

1.4 “Avaya Endpoint” means an endpoint hardware device Sold by Avaya or any of its Subsidiaries and configured to facilitate communications. Avaya Endpoints include all Avaya and Avaya Subsidiary tablets, telephones, headsets, huddle room and conference room devices, and any other Avaya and Avaya Subsidiary endpoint hardware devices or similar devices.

1.5 “Avaya Services” means all Offerings that are Sold by Avaya or by any Avaya Subsidiary, directly or through the Avaya Channel.

1.6 “Blackout Period” has the meaning set forth in the Stockholder Agreement.

1.7 “Business Day” means any day except a Saturday, a Sunday or other day on which the SEC or banking institutions in New York, New York or San Francisco, California are authorized or required by law, regulation or executive order to be closed.

1.8 “CCaaS” means any Offering of Avaya or any of its Affiliates that is primarily designed to be used as, and for which the primary function is to provide or support, call center functionality (including Contact Center as a Service).

1.9 “Change of Control” of a Party means any transaction or series of related transactions involving: (i) any direct or indirect purchase or other acquisition by any Person not Affiliated with such Party (such a Person, a “Third Party”) or the equityholders of such Third Party, whether from such Party or any

other Person(s), of securities representing more than 50% of the total outstanding voting power of such Party after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any Third Party that, if consummated in accordance with its terms, would result in such Third Party beneficially owning more than 50% of the total outstanding voting power of such Party after giving effect to the consummation of such tender or exchange offer; (ii) any direct or indirect purchase or other acquisition by, or license or grant of other quasi-ownership or similar interest to, any Third Party or the equityholders of such Third Party of, in, or to more than 50% of (a) the consolidated assets or (b) consolidated revenues, in each case, of such Party and its Subsidiaries taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition); or (iii) any merger, consolidation, business combination, recapitalization, reorganization, or other transaction involving such Party or any of its Subsidiaries pursuant to which any Third Party would hold securities representing more than 50% of the total outstanding voting power of such Party or of the surviving or resulting entity of such transaction after giving effect to the consummation of such transaction.

1.10 “Channel” means, with respect to Avaya and RingCentral, respectively, each agent, master-agent, sub-agent, representative, contractor, consultant, referrer, reseller, partner, distributor or any other Person that refers, sells, resells, licenses, transfers, or otherwise provides Offerings of Avaya or RingCentral, as applicable, or of a Subsidiary of such Party. For avoidance of doubt, agents and subagents of Avaya under the Super Master Agent Agreement are part of the Avaya Channel.

1.11 “Channel Compensation” means certain compensation to be paid by RingCentral in accordance with the Super Master Agent Agreement, which compensation Avaya or one of its Affiliates is, legally or contractually, obligated to pay to the Avaya Channel.

1.12 “Cloud Model” has the meaning ascribed to it in the definition of Subject Functionality.

1.13 “Contract” means any written or oral contract, subcontract, note, bond, mortgage, indenture, lease, license, sublicense, or other agreement, understanding, or arrangement.

1.14 “CPaaS” has the meaning ascribed to it in the definition of Subject Functionality.

1.15 “Deployable” means, with respect to a particular Location, that ACO is, in accordance with applicable Law in all material respects, available in such Location for deployment to final end customers and licensees in connection with a Sale thereof in the Territory (it being understood that, as an example, “RingCentral Office” was, as of the Execution Date, Deployable in at least forty (40) countries (including Germany, Hong Kong, and Singapore) in connection with a Sale thereof in the United States and was, as of the Execution Date, deployed in such countries as “RingCentral Global Office”).

1.16 “Development Agreement” means a Development Agreement substantially in the form attached hereto as Exhibit A.

1.17 “Effective Date” means the Closing Date (as defined in the Investment Agreement).

1.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

1.19 “Extended Territory” means any and all Locations outside of the Territory in which ACO is Deployable, in the case of each such Location, effective ninety (90) days after the date that ACO becomes Deployable in such Location, provided that RingCentral has provided Avaya with at least ninety (90) days’

notice prior to the date that ACO is or will be so Deployable in such Location (where such notice is given by RingCentral solely where RingCentral has a reasonable expectation that ACO will be made Deployable in such Location within ninety (90) days after the provision of such notice); provided, however, that if a Location is both in the Territory and in the Extended Territory, it shall be deemed to be in the Territory (and not in the Extended Territory) for all purposes under this Agreement.

1.20 “Governmental Entity” means any government, political subdivision, governmental, administrative, self-regulatory or regulatory entity or body, department, commission, board, agency or instrumentality, or other legislative, executive or judicial governmental entity, and any court, tribunal, judicial or arbitral body, in each case whether federal, national, state, county, municipal, provincial, local, foreign or multinational.

1.21 “Holder” means Avaya or RingCentral, as applicable, in its capacity as a recipient and holder of RingCentral Common Stock, in the case of Avaya, or Avaya Common Stock or Avaya Series A Preferred Stock, in the case of RingCentral.

1.22 “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

1.23 “Insolvency Event” means, with respect to a Party, that such Party or any of its Subsidiaries comprising more than 50% of such Party’s consolidated assets (i) becomes the subject of a bankruptcy or insolvency proceeding (including any proceeding under Title 11 of the United States Code or other applicable Law concerning bankruptcy, insolvency, liquidation, dissolution, or creditors rights), (ii) has had a receiver, manager, receiver and manager, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it or has called a meeting of its creditors or (iii) admits in writing to a third party its inability to pay its debts as they become due.

1.24 “Investor Rights Agreement” means an agreement entered into by RingCentral and Avaya Holdings on or about the Effective Date which provides for certain rights and obligations of Avaya Holdings and RingCentral following the Effective Date.

1.25 “[******]” has the meaning ascribed to it in the definition of Subject Functionality.

1.26 “Issuer” means Avaya Holdings or RingCentral, as applicable, in its capacity as an issuer of Avaya Common Stock or Avaya Series A Preferred Stock, in the case of Avaya Holdings, or RingCentral Common Stock, in the case of RingCentral.

1.27 “Law” means any federal, national, state, county, municipal, provincial, local, foreign or multinational, treaty, statute, constitution, common law, ordinance, code, decree, order, judgment, rule, regulation, ruling, published policy or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity and any award, order or decision of an arbitrator or arbitration panel with jurisdiction over the Parties and subject matter of the dispute.

1.28 “Location” means a country or special administrative region of a country (e.g., Hong Kong with respect to China).

1.29 “Market” (including, with correlative meanings, the terms “Marketed” and “Marketing”) means, with respect to an Offering, the marketing, promotion, advertising, or offering for Sale of such Offering.

1.30 “Multi-Tenant” means any deployment of software and supporting infrastructure that is not Single‑Tenant.

1.31 “Offering” means any product, component, feature, application, module, system, portal, software, hardware, service, platform, technology, or other offering.

1.32 “Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Entity, other entity, or any syndicate or group that would be deemed to be a Person under Section 13(d)(3) of the Exchange Act.

1.33 “Registration Rights Agreement” means a Registration Rights Agreement in substantially the form attached hereto as Exhibit B.

1.34 “Representatives” means, with respect to a Person, such Person’s Subsidiaries and the directors, managers, members, officers, employees, agents, contractors, subcontractors, or other representatives of such Person and its Subsidiaries.

1.35 “Retail UCaaS” has the meaning ascribed to it in the definition of Subject Functionality.

1.36 “RingCentral Common Stock” means the Class A Common Stock, par value $0.0001 per share, of RingCentral.

1.37 “RingCentral Customer” means each final end customer or licensee that directly or indirectly purchases, licenses or otherwise receives any RingCentral Services from RingCentral or any RingCentral Affiliate.

1.38 “RingCentral Services” means all Offerings that are Sold directly or indirectly by RingCentral or any RingCentral Affiliate. The RingCentral Services shall, with respect to a particular Location, automatically include ACO when it first becomes Available in such Location.

1.39 “Rules of Engagement” means those certain Rules of Engagement attached to the Super Master Agent Agreement, which is a part of and incorporated into the Super Master Agent Agreement.

1.40 “SEC” means the United States Securities and Exchange Commission.

1.41 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

1.42 “Sell” (including, with correlative meanings, the terms “Sale”, “Sold”, and “Selling”) means, with respect to an Offering, the sale, resale, license, or other provision of such Offering, whether by way of migration, a new purchase, or otherwise.

1.43 “Shares” means shares of RingCentral Common Stock, Avaya Common Stock, or Avaya Series A Preferred Stock, as applicable.

1.44 “Single-Tenant” means the deployment of a single instance of software and supporting infrastructure that is dedicated to a single customer or licensee with a single billing relationship between the provider or licensor, on the one hand, and the customer or licensee, on the other hand.

1.45 “Stockholder Agreement” means a Stockholder Agreement in substantially the form attached hereto as Exhibit C.

1.46 “Storefront Portal” means an online electronic commerce portal owned and operated by Avaya that allows Avaya Customers to purchase, license or otherwise order Offerings from Avaya, any of its Affiliates, or from the Avaya Channel.

1.47 “Subject Functionality” means any [*********************************] that, taken as a whole, is primarily designed to be used as, or has as its primary function to provide, an alternative to, or [*************************************************************************], and which functionality is both (i) run over the Internet on a physical server(s), container(s), or virtual machine(s), in each case, maintained and controlled offsite (“Cloud Model”), and (ii) deployed in a [************] manner.

(a) For the avoidance of doubt, without limiting the definition of Subject Functionality, for the purposes of this Agreement, the [*************************************] (“[******]”) and the [*************************************] Offering sold through the Storefront Portal (“Retail UCaaS”), as they exist on the Effective Date or as may be further developed, improved, extended, rebranded, or otherwise modified by Avaya during the Term, shall be deemed to include Subject Functionality.

(b) Notwithstanding the foregoing, and for the avoidance of doubt, Subject Functionality shall be deemed to exclude any Offering that is or is in one or more of the following:

(i) CCaaS;

(ii) “Avaya Spaces” Offering, “Avaya XCaaS” Offerings (“XCaaS”), “Avaya IX Workplace” Offerings (excluding the Retail UCaaS product, but including Avaya’s “IX Meetings”, “IX Collaboration”, and “IX Devices” Offerings), “Avaya Mobile Experience” Offering, or Communications Platform as a Service (“CPaaS”) Offerings, in each case, together with any developments, improvements, extensions, rebranded versions, or modifications with respect thereto;

(iii) “Avaya Equinox”, “Avaya Aura”, or “Avaya ReadyNow” (i.e., a hosted “Aura” Offering) Offerings, in each case, where (A) deployed in a Single-Tenant manner (whether or not running on a Cloud Model), (B) deployed in a Multi-Tenant manner and not running on a Cloud Model, or (C) deployed in a Multi-Tenant manner by a single customer or licensee with a single billing relationship with Avaya or any of its Affiliates and a single point of administration, in each case, together with any developments, improvements, extensions, rebranded versions, or modifications with respect thereto except to the extent any such development, improvement, extension, rebranded versions, or modification results in such applicable Offering being both deployed in a Multi-Tenant manner and run on a Cloud Model (except as specifically permitted in clause (C) above); or

(iv) SIP trunking.

1.48 “Subsidiary” means, with respect to any Person, any other Person (other than a natural Person) of which securities or other ownership interests (i) having ordinary voting power to elect a majority

of the board of directors or other persons performing similar functions or (ii) representing more than 50% of such securities or ownership interests, in each case, are at the time directly or indirectly beneficially owned by such first Person.

1.49 “Super Master Agent Agreement” means a Super Master Agent Agreement in substantially the form attached hereto as Exhibit D.

1.50 “Taxes” means any federal, state, local or non-U.S. taxes, including sales and use taxes, transaction privilege taxes, gross receipts taxes, income taxes, business and occupation taxes, social security taxes, payroll taxes, employment taxes, estimated taxes, real property taxes, stamp taxes, franchise taxes, transfer taxes, value added taxes, withholding taxes, unemployment taxes, and other similar charges in the nature of tax such as duties, customs, tariffs, imposts, and government-imposed surcharges (including any fee, assessment, or other charge relating to the Universal Service Fund or similar vehicle or system of subsidies and fees managed by the Federal Communications Commission or other Governmental Entity) imposed by any Governmental Entity, together with any interest, penalties and additions to tax imposed thereon.

1.51 “Territory” means any and all Locations in which ACO is Available, in the case of each such Location, effective ninety (90) days after the date that ACO first becomes Available in such Location, provided that RingCentral has provided Avaya with at least ninety (90) days’ notice prior to the date that ACO is or will be so Available in such Location (where such notice is given by RingCentral solely where RingCentral has a reasonable expectation that ACO will be made Available in such Location within ninety (90) days after the provision of such notice).

1.52 “U.S.” means the United States of America.

1.53 “Unified Communications Offering” means any unified communications Offering that both (i) uses a Cloud Model, and (ii) is deployed in a Multi-Tenant manner, which, for the avoidance of doubt, shall not include any Offering that is primarily designed to be used as, and for which the primary function is to provide or support, call center functionality (including Contact Center as a Service).

1.54 “Unit” means, with respect to any Offering, an individual license or user seat, or other unit, as applicable, with respect to such Offering.

2. Commercial Relationship

2.1 Super Master Agent Agreement. RingCentral and Avaya shall enter into the Super Master Agent Agreement on the Effective Date, including the Rules of Engagement.

2.2 Exclusivity. Except as expressly authorized in writing by RingCentral or otherwise provided in this Agreement, during the Term, (i) ACO shall be the sole and exclusive Offering for Subject Functionality Marketed or Sold by Avaya (and Avaya shall cause ACO to be the sole and exclusive Offering for Subject Functionality Marketed or Sold by its Subsidiaries) throughout the Territory and the Extended Territory and (ii) in connection therewith, Avaya shall not, and shall cause its Subsidiaries not to:

(a) directly or indirectly Market or Sell any other Offering with Subject Functionality, or establish, engage in, conduct, or operate any business that Markets or Sells any other Offering with Subject Functionality, whether on its own, together with its Subsidiaries, or through the Avaya Channel, in the Territory or Extended Territory, in each case, other than in a de minimis manner;

(b) form a joint venture with, or enter into a Contract for a strategic transaction, strategic partnership, or strategic relationship with, any of the Persons set forth on Schedule 1 or any successor to any such Person’s business (which Schedule 1 may be updated by mutual agreement of Avaya and RingCentral on an annual basis, it being understood that neither Avaya nor RingCentral shall unreasonably withhold, condition, or delay its consent with respect thereto (each such Person set forth on Schedule 1, as updated from time to time, a “Relevant Company”)), to the extent it is for the Marketing, Sale, or strategic development of or with respect to any Offering of a Relevant Company (as such Offering exists as of, and with respect to Persons that are Relevant Companies as of, the commencement of such joint venture, transaction, partnership, or relationship) that is directly competitive with one or more of RingCentral’s proprietary or core RingCentral-branded Unified Communications Offerings in existence as of the commencement of such joint venture, transaction, partnership, or relationship and that are commercially Available or Deployable to final end customers and licensees within the Territory or Extended Territory, respectively (in each case, determining Territory and Extended Territory as if such Offerings were ACO), provided that,

(I) this clause (b) shall not prohibit (x) a Change of Control of Avaya Holdings or any of its Affiliates, (y) upon the request of customer or licensee, Avaya of any of its Affiliates from integrating any Avaya Service with, or otherwise making any Avaya Service compatible with, any Offering of the sixth Person set forth on Schedule 1 (which shall include through public application programming interfaces) to enhance such Avaya Service (provided, that, Avaya shall not (and shall cause its Subsidiaries not to) Market any such integration (excluding, for the avoidance of doubt, listings of product specifications)), or (z) Avaya or any of its Affiliates from forming a joint venture with, or entering into a Contract for a strategic transaction, strategic partnership, or strategic relationship with, any Relevant Company to the extent it is for the Marketing or Sale of or with respect to CCaaS, and

(II) for the avoidance of doubt, for purposes of determining whether the Marketing or Sale of or with respect to an Offering of a Person is directly competitive with one or more of the proprietary or core RingCentral-branded Unified Communications Offerings of RingCentral (but excluding any Offerings of any successor thereto) under this clause (b), such determination shall not include the Offerings of any Person that acquires or is acquired by RingCentral that are in existence as of or prior to such acquisition;

(c) acquire any debt or equity interest in any Relevant Company, provided that this clause (c) shall not prohibit a Change of Control of Avaya Holdings or any of its Affiliates;

(d) acquire or license any assets for the purpose of establishing, engaging in, conducting, or operating the business of Marketing or Selling any other Offering with Subject Functionality during the Term in the Territory or the Extended Territory, in each case, other than de minimis assets in connection therewith; or

(e) customize any of the “open SIP” Avaya Endpoints for the purpose of being compatible with the Offerings as of the date of such customization of any Person that is a Relevant Company as of the date of such customization; provided, however, that nothing herein shall restrict or otherwise impact Avaya’s or any of its Subsidiaries’ ability to maintain “open SIP” standard certification in accordance with their customary certification processes in the ordinary course of business consistent with past practice (which, for purposes of clarity, may require Avaya or its Subsidiaries to configure such Avaya Endpoints to become certified to standards publicly maintained by the second Person set forth on Schedule 1).

Notwithstanding the foregoing, the Parties hereby agree that:

(i) Avaya and its Subsidiaries may act under, and subject to the terms and conditions of, the Super Master Agent Agreement, as an agent with respect to RingCentral Services as contemplated thereunder, including ACO when it becomes Available; and

(ii) Avaya and its Subsidiaries may, on their own, together with their Affiliates, or through the Avaya Channel, do any of the following:

A. solely with respect to [******] and solely in the Extended Territory (and the Parties agree that [******] shall be an exception to ACO being the sole and exclusive Offering with Subject Functionality in the Extended Territory as provided in this Section 2.2), engage in any activity that would otherwise be prohibited by this Section 2.2;

B. with respect to a Location in the Territory or the Extended Territory, for Contracts in existence as of the date that the applicable Location became part of the Territory or Extended Territory, respectively:

I. provide support, and take actions to fulfill Avaya’s or any of its Affiliates’ obligations thereunder, in respect of Avaya Services (including [******] and [************]) (it being understood that neither Avaya nor any of its Affiliates shall be permitted to amend, modify, or renew any such Contract to the extent such amendment, modification or renewal would extend the term thereof); and

II. fulfill any Person’s or any of its Affiliates’ requests to Sell to any of them additional Units of any Avaya Services for which any Units of such Avaya Service were Sold to such Person or any of its Affiliates prior to such date, in each case, only for the remainder of the term of such Contract (it being understood that neither Avaya nor any of its Affiliates shall be permitted to amend, modify, or renew any such Contract to the extent such amendment, modification or renewal would extend the term thereof);

C. solely with respect to the [**************] Offering solely within [*******] for so long as [*******] is not in the Territory, engage in any activity that would otherwise be prohibited by this Section 2.2;

D. elect to [*************] or [*************] each of [******], [************], and [*****], in which case Avaya Holdings and its Subsidiaries (including Avaya) may [********************************************* ***********************************************************], and continue to [***********************************] (and engage in, conduct, and operate a business in connection therewith) [****************************************** ********************************************************************************] of such Avaya Service;

E. with respect to FedRamp certification requirements,

I. for so long as ACO is not FedRamp certified to the certification level requested by a particular Person, Market and Sell to such Person

any Avaya Service with Subject Functionality that is FedRamp certified to such certification level;

II. in respect of such Avaya Service with Subject Functionality, provide support, and take actions to fulfill Avaya’s or any of its Affiliates’ Contracts in effect as of such date that ACO becomes FedRamp certified to the applicable certification level; and

III. fulfill any Person’s or any of its Affiliates’ requests to Sell to any of them additional Units of such Avaya Service with Subject Functionality for which any Units of such Avaya Service were Sold to such Person or any of its Affiliates prior to such date that ACO becomes FedRamp certified to the applicable certification level;

F. with respect to Governmental Entities,

I. for so long as, with respect to a particular Governmental Entity, (1) ACO does not comply with applicable technical or contractual requirements of such Governmental Entity or (2) RingCentral is not otherwise authorized to Market or Sell to such Governmental Entity due to the lack of an approved contracting vehicle or absence of approved vendor or related contracting authority, Market and Sell Avaya Services with Subject Functionality to such Governmental Entity;

II. in respect of such Avaya Services with Subject Functionality, provide support, and take actions to fulfill Avaya’s or any of its Subsidiaries’ Contracts in effect as of such date (the “Governmental Trigger Date”) that (1) ACO complies with applicable technical and contractual requirements of such Governmental Entity and (2) RingCentral is permitted to Market and Sell to such Governmental Entity with all necessary approvals and contracting authority; and

III. fulfill any Person’s or any of its Affiliates’ requests to Sell to any of them additional Units of such Avaya Services with Subject Functionality for which any Units of such Avaya Service were Sold to such Person or any of its Affiliates prior to the applicable Governmental Trigger Date;

G. purchase, license, develop, or use Offerings with Subject Functionality for internal administrative purposes, provided that Avaya shall, and shall cause its Subsidiaries to, as applicable, first discuss and evaluate with RingCentral the potential purchase or license of ACO for such internal administrative purposes; and

H. engage in any conduct required by an order of a Governmental Entity with competent jurisdiction.

2.3 Certain Requirements.

(a) Efforts to Marketing and Sale of ACO. Once ACO is Available in a particular Location in the Territory:

(i) Avaya shall, and shall cause its Subsidiaries to, use reasonable best efforts to (and to cause the Avaya Channel to) Market and Sell ACO to all Avaya Customers utilizing any Offering with Subject Functionality (including all [************] and all [******************], but excluding such Avaya Customers utilizing any [*******************], which customers are governed by Section 2.3(a)(ii)), in such Location;

(ii) without limiting the foregoing, Avaya shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to (and to cause the Avaya Channel to) Market and Sell ACO to all other Avaya Customers (including those utilizing the [************] Offering, the [****************] Offering, and [*******************]) in such Location; and

(iii) RingCentral and its Affiliates shall not (and shall cause the RingCentral Channel not to) undertake to Sell ACO to any Person without Avaya’s prior written consent.

(b) Other Avaya Requirements. Avaya shall not, and shall cause its Subsidiaries not to, take any action or omit to take any action, and shall not direct any other Representative to take any action or omit to take any action, that would directly disincentivize the Marketing or Sale of ACO to the benefit of any other Avaya Services that are designed to provide functionality substantially similar to ACO, taken as a whole, including to the benefit of Avaya’s on-premise and private cloud Offerings, including [*****], “[**********],” “[***************]”, and the “[**************]” [*************] Offerings. Without limiting the foregoing, Avaya shall, and shall cause its Subsidiaries:

(i) not to take any action or omit to take any action, and shall not direct any Representative or the Avaya Channel to take any action or omit to take any action, with respect to any rate of sales commissions or Avaya Channel compensation that is intended to directly disincentivize the Marketing or Sale of ACO to the benefit of any Avaya Services that are designed to provide functionality substantially similar to ACO, taken as a whole, including to the benefit of Avaya’s on-premise and private cloud Offerings that are so designed, including “[**********],” “[***************]” ([**********]), and the “[**************]” [*************] Offerings;

(ii) not to provide a lower sales compensation rate or channel spiffs for ACO as compared to any Avaya Services that are designed to provide functionality substantially similar to ACO, taken as a whole (e.g., “[**********]”, “[***************]” ([**********]), and “[**************]” Offerings) (it being understood that this clause (ii) shall not be applicable to CCaaS); provided that, nothing in this Section 2.3(b) shall restrict Avaya or any of its Subsidiaries from increasing or reducing incentives or rebates with respect to ACO from time to time so long as incentives and rebates on ACO are on parity with or better than those offered with respect to Avaya Services that are designed to provide functionality substantially similar to ACO, taken as a whole;

(iii) to maintain and implement a reasonable sales compensation and commission plan with respect to ACO, which plan shall set forth in detail such sales compensation and commissions, including with respect to the Avaya Channel and Avaya’s salespersons, and shall otherwise be subject to RingCentral’s reasonable review and comment, and shall promptly provide to RingCentral any updates thereto;

(iv) to maintain and implement a sales and marketing plan for the Territory that is specific for ACO (the “Avaya ACO Sales and Marketing Plan”), which Avaya ACO Sales and Marketing Plan shall contemplate an overlay sales team dedicated to ACO and a marketing plan with respect to ACO, which overlay sales team and Avaya ACO Sales and Marketing Plan shall be

reasonable after taking into consideration the size of the addressable market for ACO, including the install base of Avaya and its Subsidiaries, as reasonably determined by Avaya, and which Avaya ACO Sales and Marketing Plan shall be subject to RingCentral’s reasonable review and comment, and Avaya shall promptly provide to RingCentral any updates thereto; and

(v) in the Territory, to ensure that their main websites and the Storefront Portal shall Market ACO at least as prominently and positively in the ordinary course of business, and in all material respects, as each Avaya Service (which Avaya Service is designed to have substantially similar functionality as ACO, taken as a whole) then‑currently Marketed on such websites and the Storefront Portal in the ordinary course of business.

Nothing in this Section 2.3(b) shall require Avaya or any other Person to breach any Contract existing as of the Execution Date or limit Avaya’s or any of its Subsidiaries’ ability to independently and unilaterally determine, change, or otherwise set the price or alter any other economic terms for any Avaya Service.

(i) not to take any action or omit to take any action, and shall not direct any other Representative or the RingCentral Channel to take any action or omit to take any action, with respect to any rate of sales commissions or RingCentral Channel compensation that is intended to directly disincentivize the Marketing or Sale of ACO to the benefit of other RingCentral Services that are designed to provide functionality substantially similar to ACO, taken as a whole;

(ii) to maintain and implement a budget specific to an overlay sales team dedicated to ACO (the “RingCentral Overlay Sales Team” and such budget, the “RingCentral Overlay Sales Budget”), which RingCentral Overlay Sales Team and RingCentral Overlay Sales Budget shall be reasonable after taking into consideration the size of the addressable market for ACO, including the install base of Avaya, as reasonably determined by RingCentral, and which RingCentral Overlay Sales Budget shall be subject to Avaya’s reasonable review and comment; and RingCentral shall promptly provide to Avaya any updates thereto; and

(iii) from time to time, as reasonably requested by Avaya, to provide certain training, consulting, and other professional services in connection with ACO and the Marketing, Sale, and support thereof (the “RingCentral Consulting Services”).

Nothing in this Section 2.3(c) shall require RingCentral or any other Person to breach any Contract existing as of the Effective Date.

(d) [*******************************************************************]. In the event Avaya or any of its Subsidiaries [*****] any of Avaya’s [*****], [*****], [*******************] ([******]), [********], or [***********] Offerings, and upon Avaya’s written request and subject to Avaya’s cooperation and sharing of all information reasonably requested by RingCentral, [******************************************************************** ************************] (determined by RingCentral in its sole discretion), RingCentral and Avaya will use commercially reasonable efforts [************************************************************************************

******************************************]. In such event, the Parties will engage in good faith discussions regarding such [*********************************************************] in connection therewith.

(e) Endpoints. (i) Avaya shall use its commercially reasonable efforts to cause (x) the Avaya Endpoints existing as of the Effective Date to be, as soon as reasonably practicable following the Effective Date, and (y) future Avaya Endpoints to be, at all times prior to such Avaya Endpoints being Sold, in each case, compatible with ACO and the other RingCentral Services, and (ii) RingCentral shall use its commercially reasonable efforts to cause (x) the RingCentral Services existing as of the Effective Date to be, as soon as reasonably practicable following the Effective Date, and (y) future RingCentral Services to be, at all times prior to the RingCentral Services being Sold, in each case, compatible with the Avaya Endpoints. To the extent an Avaya Endpoint and the RingCentral Services are so compatible, RingCentral shall offer such Avaya Endpoint as part of its and its Subsidiaries’ product catalogs at least as prominently and positively in the ordinary course of business, in all material respects, as any other RingCentral Offering that is designed to provide substantially similar functionality (taken as a whole) and is then‑currently Marketed in such product catalogs in the ordinary course of business. Each Party acknowledges that the other Party’s performance of its obligations under this Section 2.3(e) depends on such Party’s compliance with this Section 2.3(e) and timely, accurate and effective delivery of all information to make the Avaya Endpoints compatible with ACO, and the other RingCentral Services compatible with the Avaya Endpoints, including such information, cooperation, and assistance reasonably required by either Party. Each Party further acknowledges and agrees that its failure to satisfy any such responsibilities may prevent or delay the other Party’s performance of its obligations under this Section 2.3(e). The Parties agree to work together in good faith to develop a mutually agreed process pursuant to which Avaya will sell to RingCentral certain Avaya Endpoints on commercially favorable terms.

3. Development of ACO. RingCentral, Avaya, and Avaya Management L.P. shall enter into the Development Agreement on the Execution Date.

4. Project Management

4.1 Project Managers and Product Managers. Each Party shall appoint a principal point of contact for this Agreement to be its project manager (the “Project Manager”) for management and implementation of the commercial relationship contemplated by this Agreement and a product manager (the “Product Manager”) for management of the product development activities of ACO (RingCentral’s and Avaya’s Product Manager may be the same person who is RingCentral’s or Avaya Management L.P.’s Development Manager (as defined in the Development Agreement), respectively). For the avoidance of doubt, no person shall be appointed as Project Manager or Product Manager whose primary job function is to provide substantial and direct day-to-day supervision of an Offering other than ACO (it being understood that a person that has general supervisory authority over multiple Offerings of a Party shall not be prohibited from being a Project Manager or Product Manager, so long as such Person complies with the Rules of Engagement). Each Party may change its Project Manager or Product Manager at any time by notifying the other Party in writing. Each Party shall be solely responsible for the performance of its Project Manager and Product Manager under this Agreement. Each Party’s Project Manager shall coordinate with its Product Manager.

4.2 Project Manager Responsibilities. Each Party’s Project Manager shall manage that Party’s activities under this Agreement, understand the obligations of that Party under this Agreement, regularly discuss work progress with the other Party’s Project Manager, and collaborate with the other Party’s Project Manager to identify barriers to success, key issues and issues-resolution options for the activities

contemplated in this Agreement. The Project Managers shall hold regular status meetings with additional relevant representatives of each Party to discuss progress.

4.3 Product Manager Responsibilities. Each Party’s Product Manager shall manage such Party’s product development activities under the Development Agreement with respect to ACO, understand the obligations of RingCentral and Avaya Management L.P., respectively, under the Development Agreement with respect to ACO, regularly discuss work progress with the other Party’s Product Manager with respect to ACO, and collaborate with the other Party’s Product Manager to identify barriers to success, key issues and issues-resolution options for the activities contemplated in this Agreement and the Development Agreement with respect to ACO. The Product Managers shall hold regular status meetings with additional relevant representatives of each Party to discuss progress of the development of ACO.

4.4 Quarterly Executive Reviews. Throughout the Term, RingCentral and Avaya shall meet and confer in person for a quarterly review meeting that shall be attended by the Chief Executive Officer of each such Person and at least one other executive of each of such Person who is knowledgeable about the transactions contemplated by this Agreement and the Super Master Agent Agreement (this group being defined herein as the “Governance Committee”). The Governance Committee shall discuss, among other things, the Parties’ present and future relationship, the addressable market and the go-to-market strategy for ACO, and any other material issue reasonably requested in a written notice delivered at least five (5) Business Days prior to such quarterly review meeting. In addition, during the Term, the Governance Committee shall have monthly update conference calls.

4.5 Guidelines. The Parties shall, promptly following the Execution Date, work in good faith to establish antitrust guidelines and protocols for their Project Managers, Product Managers, Chief Executive Officers, and other designated executives referenced in this Section 4.

5. Payments

5.1 Certain Defined Terms.

(a) “[***]” means, with respect to [************************************] (i) [**************************] (ii) the [**************************] (it being understood that the foregoing [***********] is an [*******************************] that is [***************************************] or any of its Affiliates and, solely for purposes of this definition of [***], the [*****************] need not be actually be [************************] or any of its Affiliates at the [*******************]).

(b) “AVYA 5-day VWAP” means, with respect to a referenced date, the volume weighted average price per share rounded to four decimal places (with amounts 0.00005 and above rounded up) of the Avaya Common Stock on the New York Stock Exchange (or, if different, the principal trading market for such security) for five (5) consecutive trading days ending on the last full trading day before such referenced date as reported by Bloomberg.

(c) “AVYA 20-day VWAP” means, with respect to a referenced date, the volume weighted average price per share rounded to four decimal places (with amounts 0.00005 and above rounded up) of the Avaya Common Stock on the New York Stock Exchange (or, if different, the principal trading market for such security) for twenty (20) consecutive trading days ending on the last full trading day before such referenced date as reported by Bloomberg.

(d) “[***]” means, with respect to [****************], the [*****************************************************] (or, if [***********************************], the [************************************ ***************************************]) attributable to such [**************] (and, for the avoidance of doubt, any [***************]); provided that, for the avoidance of doubt, (i) [***] shall exclude (A) [********************************************************************** *******************************************************************************************************************************************************************************************************], (B) [*********************************************** *****************************************************************************************************************************************************************], (C) [*** *****************************************************************], and (D) [********* ***************************************], and (ii) [*** ************************************************************************************************************************************************]. The Parties agree that, for purposes of this Agreement, a [****************] shall include the [*************] that RingCentral or any of its Affiliates intends to [***************************************************************************************************************]. An example of a [******************] is set forth on Schedule 2.

(e) “[*************]” means only those accounts set forth on Schedule 3 hereto.

(f)

(i) “[*********************]” means any Person that is both (i) not party to a Contract for any [*******************], and (ii) in a Location that is outside of the Territory. The Parties agree that RingCentral may, in its sole discretion, [*******************************************************************************************************************************] with Subject Functionality as contemplated under the Rules of Engagement to a Person that would otherwise qualify as a [*********************] if such Person is an Affiliate of a party to a Contract for any [*******************]. [*************************************************** *********************************************************************************].

(ii) “Qualified Seat” means: (i) a Unit of ACO Sold during the Term for a subscription fee in a Location in which ACO is Available; (ii) a Unit of ACO Sold during the [**********************] commencing upon the expiration or termination of the Term for a subscription fee in a Location in which ACO is Available, but solely with respect to clause (ii), only if (A) Avaya, any of its Subsidiaries, or the Avaya Channel registered the sales opportunity with RingCentral prior to expiration or termination of the Term in accordance with the lead registration process set forth in the Rules of Engagement, and (B) Avaya, any of its Subsidiaries, or the Avaya Channel [*************************************] (as defined in the Rules of Engagement) with respect to such sales opportunity as set forth in the Rules of Engagement; (iii) in the case of [*************************************************** ************************************************************************] Sold during the Term [*********************] for a subscription fee in a Location that such Offering is, in accordance with applicable Law in all material respects, commercially available in such Location for Sale to final end customers and licensees, but, solely with respect to clause (iii), only

if (A) Avaya, any of its Subsidiaries, or the Avaya Channel registered the sales opportunity with RingCentral in accordance with the lead registration process set forth in the Rules of Engagement, and (B) Avaya, any of its Subsidiaries, or the Avaya Channel [*************************************] (as defined in the Rules of Engagement) with respect to such sales opportunity as set forth in the Rules of Engagement; and (iv) in the case of [**********************] only, a [*************************************************************************] Unit of RingCentral’s or any of its Subsidiaries’ own or branded Offering with Subject Functionality Sold during period beginning on the Effective Date and ending on the date that is [*************] after the Effective Date to such [*********************] for a subscription fee in a Location that is both (x) outside of the Territory, and (y) in which such Offering is, in accordance with applicable Law in all material respects, commercially available in such Location for Sale to final end customers and licensees, but, solely with respect to clause (iv), only if (A) Avaya, any of its Subsidiaries, or the Avaya Channel registered the sales opportunity with RingCentral in accordance with the lead registration process set forth in the Rules of Engagement, and (B) Avaya, any of its Subsidiaries, or the Avaya Channel [*************************************] (as defined in the Rules of Engagement) with respect to such sales opportunity as set forth in the Rules of Engagement.

(g) “RNG 5-day VWAP” means, with respect to a referenced date, the volume weighted average price per share rounded to four decimal places (with amounts 0.00005 and above rounded up) of the RingCentral Common Stock on the New York Stock Exchange (or, if different, the principal trading market for such security) for five (5) consecutive trading days ending on the last full trading day before such referenced date as reported by Bloomberg.

(h) “[***************]” means, with respect to [*****************], the [****************************************************************************************************************************************************************************************************************************************************************************************************] on the [********************************** ****************************************].

5.2 RingCentral Upfront Payment. If a Qualified Seat is Sold and the applicable [*********************************] (at any time) its [**********************] payment with respect to such Qualified Seat (the [***********************************************], the “Accrual Date”), subject to the other terms and conditions of this Agreement, RingCentral shall:

(a) pay, or issue to Avaya (or, with respect to a cash payment, Avaya one of its Subsidiaries, as designated by Avaya) consideration equal to [******************************************************************************************************************************************], which [******************]may be payable in arrears in cash or shares of RingCentral Common Stock or a combination thereof, at RingCentral’s election; in the event RingCentral elects to pay [*********************] in whole or in part in shares of RingCentral Common Stock, (x) the number of shares of RingCentral Common Stock to be issued for such [******************] shall equal (A) the value of the Elective Component (or portion thereof) that RingCentral elects to settle in shares of RingCentral Common Stock, divided by (B) the RNG 5-day VWAP as of the date of issuance, and (y) [***************************************************************************************************************************************************************************************************]; and

(b) [*************************] of a [*************************************************************************************************************************************************************], or otherwise, and each, a “[***************]” and, together with the corresponding [******************], an “Upfront Payment”); provided, however, that the [***************] shall be [*******************]:

(i) on the [***********************] of the Effective Date:

A. if [***********************] or more [***************] that have not been subject to a [***************] (as defined below) prior thereto have been Sold prior thereto, then the [***************] shall, from and after such [***********], continue to be [****************************** ************************] until the earlier of (i) the date upon which [***********************************************************] have been [******] in respect of the [***************], and (ii) the [***********************] of the Effective Date;

B. if less than [***************************************] that have not been subject to a [***************] (as defined below) prior thereto have been Sold prior thereto, then the [***************] shall, from and after such [******************] anniversary, equal a [****************] of [************************] the [*********] of which is [**************************] and the [***********]of which is the [***************] as of the [***********************] of Effective Date, which [*******************************************************************************************************************************************************************], or otherwise) shall be the [***************] until the [***********************] of the Effective Date;

(ii) from and after the [***********************] of the Effective Date, the [***************] shall equal a [*******************************************************************************************************************************************************************], or otherwise) of [************************] the [*********] of which is [**************************] and the [***********] of which is the [***************]as of the [***********************] of Effective Date;

(iii) notwithstanding the foregoing in this Section 5.2(b), if at any time, the foregoing adjustments would result in the [***************] being a [****************] of [************************] greater than [***************], then [*********************] to satisfy the [***************] by [******************************************************]equal to or greater than [***************] and [**************************************] between such [*********************] and such [************************] (with each [*********************************] being deemed to have a [**********************************] as of the [****************]);

(iv) notwithstanding the foregoing in this Section 5.2(b), if [**********************************] of [************************] have been [******]

in respect of the [***************], at any time thereafter, [*********************] to satisfy the [***************] by paying [******************************************************************************] (with each [*********************************] being deemed to have a [**********************************] as of the [****************]); and

(v) in the event of a Change of Control of RingCentral, the [***************] shall be satisfied by [***********] and the amount [*******] shall be equal to (A) the [***************************************************************** ************************************************], multiplied by (B) [**************************] Sections 5.2(b)(i) and 5.2(b)(ii), calculated by [*****************************] with the [******************* **********************************************************************************************].

(c) Satisfaction of Upfront Payment. Subject to the other terms and conditions of this Agreement, (x) any cash payable in satisfaction of an Upfront Payment shall be paid, by wire transfer of immediately available funds to an account designated in writing by Avaya, on the [***********] immediately following [***************************************************************] after the applicable Accrual Date; and (y) any shares of RingCentral Common Stock payable in satisfaction of an Upfront Payment shall be issued on the [***********************] following [***************************************************************]. For the avoidance of doubt, there shall only be one Upfront Payment made in respect of any Qualified Seat, even if such [****] is [**********************************] or otherwise.

(d) Clawback Credits. Notwithstanding the foregoing, if, prior to the [*************************] of the Accrual Date of a particular Qualified Seat, a RingCentral Customer cancels its Contract with RingCentral or modifies its Contract with RingCentral such that such RingCentral Customer [********************************************************** *************************], such Qualified Seat, there shall be an automatic credit to the Consideration Advance Balance for the full value of the Upfront Payment paid by RingCentral to Avaya in respect of such Qualified Seat (with each share (or fractional share) of RingCentral Common Stock comprising such Upfront Payment being deemed to have the value determined pursuant to Section 5.2(a) or Section 5.2(b), as applicable) (each such automatic credit, a “Clawback Credit”).

5.3 RingCentral Recurring Payments.

(a) Subject to the other terms and conditions of this Agreement, RingCentral shall pay or issue to Avaya (or, with respect to a cash payment, Avaya one of its Subsidiaries, as designated by Avaya), for each [****************] during and after the Term, [***********************************************************************************************************************************************] in respect of each Qualified Seat for which [***************************************] (each, a “Recurring Payment”), which Recurring Payment may be payable in arrears in cash or shares of RingCentral Common Stock or a combination thereof, at RingCentral’s election; provided, however, that, after the date that is [**************] after the Accrual Date of such Qualified Seat, no Recurring Payment shall be payable in respect of such Qualified Seat that was [************************************************************************************************] (i.e., [*********************************************************]). In the

event RingCentral elects to make a Recurring Payment in whole or in part in shares of RingCentral Common Stock, (x) the number of shares of RingCentral Common Stock to be issued for such [**************] shall equal (A) the value of the Recurring Payment (or portion thereof) that RingCentral elects to settle in shares of RingCentral Common Stock, divided by (B) the RNG 5-day VWAP as of the date of issuance (rounded to the nearest whole share), and (y) [*****************************************************************************************************************************************************************************************************************************************************]. Following the [******************************************] and the [******************] contemplated by the Super Master Agent Agreement, solely with respect to [*****************************] (and any [****************************************************************************] with respect thereto) that, as a result of the [******************] contemplated by the Super Master Agent Agreement, [*************************] under the terms of the Contract, after giving effect and taking into account any amendments to, work orders, change orders or other similar instruments related to such Contract, for [*******************] (or any [*****************] thereof (an “[*********************************]”)), which [********************************************************************************], each [*********] of [********************] shall, solely for the purposes of the Recurring Payment, be deemed to be a [**********************************************************]. In furtherance of the foregoing, RingCentral and its Affiliates shall not take or omit, or cause to be taken or omitted, any action the primary purpose of which is to [****************************************************] that would otherwise occur in the ordinary course of business.

(b) Satisfaction of Recurring Payment. Subject to the other terms and conditions of this Agreement, (i) any cash payable in satisfaction of a Recurring Payment shall be paid, by wire transfer of immediately available funds to an account designated in writing by Avaya, on the [***********] immediately following [***************************************************************] after the applicable calendar quarter; and (ii) any shares of RingCentral Common Stock payable in satisfaction of a [*****************] shall be issued on the [***********************] following [***************************************************************] after the applicable [****************].

5.4 Consideration Advance.

(a) Consideration Advance. As incentive for Avaya to enter into long-term commercial relationships with RingCentral, RingCentral shall make an advance payment to Avaya of certain of the consideration that would otherwise be payable pursuant to the terms of this Agreement, which advance payment shall be in an amount equal to three hundred forty‑five million dollars ($345,000,000) (the “Consideration Advance”) consisting of the following three (3) tranches: (i) an amount equal to [******************************************] (“Tranche 1”), (ii) an amount equal to [************************************************] (“Tranche 2”) and (iii) an amount equal to [*****************************************] (“Tranche 3”, together with Tranche 1 and Tranche 2, each, a “Tranche” and collectively, the “Tranches”). The Consideration Advance may be paid in cash or shares of RingCentral Common Stock or a combination thereof, at RingCentral’s election, which election shall be notified to Avaya in writing within one (1) Business Day after the Effective Date. In the event RingCentral elects to make the Consideration Advance in whole or in part in shares of RingCentral Common Stock, (x) the number of shares of RingCentral Common Stock to be issued for the Consideration Advance shall equal (A) the value of the Consideration Advance (or portion thereof) that RingCentral elects to settle

in shares of RingCentral Common Stock, divided by (B) the RNG 5-day VWAP as of the Effective Date (subject to Section 5.4(b)(i)). For the avoidance of doubt, all Consideration Advances received by Avaya shall constitute properties of Avaya and may be used freely by Avaya.

(b) Payment Mechanism. Any portion of the Consideration Advance to be paid in cash shall be paid as promptly as practicable after the Effective Date by wire transfer of immediately available funds to an account designated in writing by Avaya. If the Effective Date occurs (i) on a date that is during a Blackout Period or the five (5) trading day period after the expiration of a Blackout Period, then the shares of RingCentral Common Stock comprising the applicable portion of the Consideration Advance shall (A) be issued on the [***********************] following [***************************************************************************************************], and (B) notwithstanding Section 5.4(a)(x)(B), be determined based on the RNG 5-day VWAP as of the date of such issuance, or (ii) on any other date, then the shares of RingCentral Common Stock comprising any portion of the Consideration Advance shall be issued as promptly as reasonably practicable after the Effective Date, but in no event during a Blackout Period.

(c) One Block Trade. If RingCentral makes the Consideration Advance in shares of RingCentral Common Stock, RingCentral shall be responsible for, and pay to Avaya the following amounts in connection with one block trade by Avaya of some or all of the shares of RingCentral Common Stock issued to satisfy the Consideration Advance: (i) the difference between the aggregate purchase price received by Avaya in such block trade and the product of (x) the closing price of the RingCentral Common Stock on the day such block trade is consummated and (y) the number of shares of RingCentral Common Stock sold in such block trade (the “Block Trade Spread”); and (ii) the reasonable and documented out-of-pocket attorneys’ fees and expenses of Avaya, which shall not exceed fifty thousand dollars ($50,000). Avaya shall use its commercially reasonable efforts to minimize the Block Trade Spread, including by bidding such block trade to J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC, and any other financial banking institution or other broker-dealer reasonably requested by RingCentral and selecting the financial banking institution or other broker-deal providing for the lowest Block Trade Spread. RingCentral shall reasonably cooperate with Avaya and the banking institution or other broker-dealer selected for such block trade and as may be reasonably requested to facilitate and effectuate such block trade, including immediately removing any restrictive legend on the shares of RingCentral Common Stock sold in such block trade upon request of Avaya.

(d) Consideration Credit. As incentive for RingCentral to make the Consideration Advance to Avaya in advance of the payment obligations pursuant to this Agreement, Avaya shall provide RingCentral a credit (the “Consideration Credit”), commencing on the receipt of the applicable amount of Consideration Advance, in an amount equal to 2.50% per annum of the daily outstanding Consideration Advance Balance (as defined below) in respect of the applicable Tranche, computed on the basis of a 365/366-day year for the actual number of days elapsed, which amount shall be added to the outstanding Consideration Advance Balance in respect of the applicable Tranche in arrears on the last day of March, June, September and December.

(e) Exhaustion of Consideration Advance Balance. For purposes of this Agreement, “Consideration Advance Balance” of any Tranche means, as of a referenced date, the amount of the Consideration Advance under such Tranche actually received by Avaya from RingCentral as may have been increased or reduced prior to such date as a result of the addition of the accrued Consideration Credit to the then-outstanding Consideration Advance Balance of such Tranche as of each applicable quarter end pursuant to Section 5.4(d), any Clawback Credits, any exhaustion or replenishment pursuant to this Section 5.4(e), any return pursuant to Section 5.4(f) or Section 5.4(g), and any conversion pursuant to Section 5.4(h). For

so long as there is a positive Consideration Advance Balance, the Consideration Advance Balance shall be automatically reduced from time to time by any Upfront Payment or Recurring Payment that RingCentral is required to pay pursuant to the terms of Section 5.2 or Section 5.3, any other cash amounts that RingCentral is required to pay pursuant to Section 5.2, Section 5.3, or Section 5.4, or any purchase price of Avaya Endpoints that RingCentral is obligated to pay pursuant to a purchase of Avaya Endpoints pursuant to the process contemplated by the last sentence of Section 2.3(e) and, upon such automatic reduction, RingCentral’s payment obligations with respect thereto shall be irrevocably deemed satisfied with such reduction to apply, first to outstanding Consideration Advance Balance under Tranche 3, second to outstanding Consideration Advance Balance under Tranche 2 and third to outstanding Consideration Advance Balance under Tranche 1. Any Clawback Credit shall increase the Consideration Advance Balance of the Tranche previously reduced by the corresponding Upfront Payment giving rise to such Clawback Credit.

(f) Return of Consideration Advance. Upon one Business Day’s written notice to RingCentral, Avaya shall be permitted to return all or any portion of the Consideration Advance Balance of any Tranche at any time by making a cash payment, by wire transfer of immediately available funds to an account designated in writing by RingCentral.

(g) Return of Remaining Consideration Advance Balance. The outstanding Consideration Advance Balance shall be returned to RingCentral: (A) with respect to Tranche 1, by wire transfer of immediately available funds to an account designated in writing by RingCentral on the later of (x) the last day of the Initial Term and (y) [**************], (B) with respect to Tranche 2, by wire transfer of immediately available funds to an account designated in writing by RingCentral on [*****************] and (C) with respect to Tranche 3, by wire transfer of immediately available funds to an account designated in writing by RingCentral on the later of (x) the last day of the Initial Term and (y) [**************], unless, in each case of the foregoing clauses (A)-(C), (i) this Agreement has been terminated prior to such date pursuant to Section 11.2 or (ii) the Extension has occurred, in which case of clauses (i) and (ii), such outstanding Consideration Advance Balance of the applicable Tranche shall be returned upon the expiration or termination of this Agreement, subject to Section 5.4(h). If Avaya does not return the Consideration Advance Balance in full in cash within thirty (30) days after the applicable due date, Avaya shall pay a late fee in an amount of 2.00% per annum commencing on the thirty-first day after the applicable due date in addition to the Consideration Credit. For the avoidance of doubt, Consideration Credit shall continue to accrue on the outstanding Consideration Advance Balance pursuant to Section 5.4(e) until all such Consideration Advance Balance has been returned pursuant to this Section 5.4(g) or converted pursuant to Section 5.4(h).

(h) Conversion of Consideration Advance Balance under Tranche 1; Conversion of Unexhausted Consideration Advance Balance.

(i) With respect to Tranche 1, RingCentral shall have the right, but not the obligation, at any time on or after the [***********] anniversary of the Effective Date, to convert all then-outstanding Consideration Advance Balance under Tranche 1 into shares of Avaya Holdings pursuant to Section 5.4(h)(iii).

(ii) In the event the Consideration Advance Balance under any Tranche is not repaid in full in cash on or before the date that is seven (7) Business Days after the applicable due date, RingCentral shall have the right, but not the obligation, from thereafter to convert any portion or all of such Consideration Advance Balance under any such applicable Tranche into shares of Avaya Holdings pursuant to Section 5.4(h)(iii).

(iii) In each case of the foregoing clauses (i) and (ii), RingCentral may elect either (i) shares of Avaya Series A Preferred Stock at a price per share equal to the Stated Value (as defined in the Avaya Certificate of Designations) as of the Effective Date or (ii) shares of Avaya Common Stock at a price per share equal to the AVYA 20-day VWAP as of the date that RingCentral delivers to Avaya a Conversion Notice. Promptly (and in any event no later than six (6) trading days) after its receipt of a Conversion Notice, Avaya shall cause Avaya Holdings to issue to RingCentral the shares specified in such Conversion Notice. For purposes of this Agreement, a “Conversion Notice” shall mean a written notice delivered by RingCentral to Avaya specifying RingCentral’s election to exercise its conversion rights under this Section 5.4(h), the amount and Tranche of the Consideration Advance Balance to be so converted, and the number and class of shares into which RingCentral is electing to convert any portion of the Consideration Advance Balance of the applicable Tranche, including a calculation of such number and class of shares. Notwithstanding the foregoing, prior to the receipt of Stockholder Approval (as defined in the Avaya Certificate of Designations), Avaya shall not be required to issue any number of shares of Avaya Common Stock under this Section 5.4(h) that would exceed the number equal to (i) twenty-two million, one-hundred twenty-three thousand, twenty-two (22,123,022) shares of Avaya Common Stock minus (ii) the aggregate number of shares of Avaya Common Stock issued upon conversion of shares of Avaya Series A Preferred Stock pursuant to the Avaya Certificate of Designations since the Effective Date.

5.5 Currency and No Offsets. All amounts under this Agreement are stated and calculated, and shall be paid, in United States Dollars ($ U.S.). No payment obligation of a Party under this Agreement shall be offset or apply against any payment obligation of the other Party, other than the application to the Consideration Advance Balance of any Upfront Payment or Recurring Payment, any other payment obligations of RingCentral under this Agreement or the increase of the Consideration Advance Balance by any Clawback Credit pursuant to Section 5.4(e), to the extent such payment has been accrued in accordance with the terms of this Agreement.

5.6 Taxes.

(a) Subject to the provisos in this Section 5.6(a), each Party shall be solely responsible for all Taxes imposed on that Party by applicable Law and Governmental Entities in respect of the payments and transactions made under this Agreement; provided that, notwithstanding the foregoing, all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees (including any penalties and interest thereon) incurred in connection with the issuance of Shares pursuant to this Agreement, shall be borne by the Issuer.

(b) Notwithstanding anything to the contrary in this Agreement, each Party (and any permitted assignee pursuant to Section 12.2 and in the case of Avaya or any of Affiliate of Avaya designated by Avaya) shall be entitled to deduct and withhold from any amounts payable or otherwise deliverable pursuant to this Agreement any Taxes as may be required to be deducted or withheld therefrom under any provision of U.S. federal, state, local or non-U.S. Tax Law or other applicable Law, shall pay over to the appropriate Governmental Entity any such amounts deducted or withheld, and shall be provided any necessary Tax forms, including Form W-9 or the appropriate series of Form W-8, as applicable, or any similar information. The Parties shall use commercially reasonable efforts to cooperate with each other to reduce or minimize any amounts, if any, required to be deducted or withheld, including by applying, only if applicable and if any necessary documentation or certifications are provided and any other requirements are met, a reduced rate of withholding pursuant to an applicable tax treaty. Subject to the following proviso, to the extent any amounts are deducted or withheld and paid over to the appropriate Governmental Entity pursuant

to this Section 5.6(b), such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid; provided that to the extent a Party assigns its payment obligations under this Agreement pursuant to Section 12.2 to any Person that is not a U.S. corporation (or in the case of Avaya, Avaya designates an Affiliates of Avaya that is not a U.S. corporation to undertake payment of such payment obligation), to the extent such assignee (or designated Affiliate of Avaya) deducts or withholds any amounts pursuant to this Section 5.6(b) from any amounts payable by such assignee or such Affiliates of Avaya hereunder that would not have been required to have been deducted or withheld if no such assignment of such payment obligations or designation had been made (any such Taxes, “Additional Taxes”), then such Party or its assignee or designee shall pay such additional amounts (the “Additional Amounts”) as may be necessary to ensure that the net amount received by the Party entitled to such amount payable hereunder after such withholding or deduction of Additional Taxes (and after deducting or withholding any Taxes imposed or levied by a relevant taxing jurisdiction on the Additional Amounts) will equal the amounts that would have been received by the Party entitled to any such amounts payable hereunder had no such withholding or deduction been made. To the extent any amounts are deducted or withheld and paid over to the appropriate Governmental Entity pursuant to this Section 5.6(b), the applicable Party (or assignee or designee) undertaking such withholding shall provide the other Party, within thirty (30) days after the date of such deduction or withholding (or, if receipts, certificates or evidence are not available within thirty (30) days, as soon as practical thereafter), certified copies of tax receipts, certificates or other evidence of such withholding and payment reasonably acceptable to the other Party.

5.7 Records.

(a) Each Party will maintain, in accordance with its customary practices, reasonable records of such Party’s and its Affiliates’ transactions and activities under this Agreement for a period of seven (7) years after such records are generated (including all activities undertaken in connection with this Agreement, all fees, charges, costs, revenue, and amounts and consideration incurred, paid or received by such Party or any of its Affiliates); provided that notwithstanding the foregoing each Party shall be required to maintain any such records in respect of Taxes for no longer than a period of four (4) years after such records are generated. Each Party shall maintain a reasonable accounting system sufficient to accurately calculate any payment required to be made by the other Party pursuant to this Section 5, and all components thereof, and shall preserve, as part of such books, accounts, and records, all information and data (including reasonable underlying supporting documentation) relating to such calculations during the Term and for a period of seven (7) years thereafter; provided that notwithstanding the foregoing each Party shall be required to maintain any such records in respect of Taxes for no longer than a period of four (4) years after such records are generated. The Parties shall provide each other with reporting regarding such transactions and activities (including regarding information with respect to Sales of Qualified Seats, [************************************], Sales of Licensed Products, Upfront Payments, Recurring Payments, Clawback Credits, and License Fees), as applicable, in a form, and at a frequency, agreed by the Parties (which agreement shall not be unreasonably withheld, conditioned or delayed).

(b) Each Party has the right to audit and inspect during the Term and for seven (7) years thereafter (an “Auditing Party”), in accordance with this Section 5.7, such records of the other Party and its Affiliates’ to assess compliance with this Agreement (including the accuracy of any payment made under this Section 5) or as reasonably required to enable the Auditing Party or any of its Affiliates (the “Audited Party”) to comply with applicable Law, provided that each Party may only perform one audit during each calendar year. At the Auditing Party’s option or upon the Audited Party’s request, each audit will be performed by a nationally recognized independent certified public accounting firm at the Auditing Party’s sole cost and expense, upon not less than ten (10) Business Days’ prior written notice to the Audited Party. The Auditing Party shall ensure that the auditor is subject to a written confidentiality agreement containing non-disclosure

obligations that are no less stringent than those contained with this Agreement. The Audited Party shall make such records available in electronic form to the extent reasonably practicable. Such right shall include the right for the auditor to enter onto the Audited Party’s premises during normal business hours and on reasonable advance notice and to have reasonable access to any of their applicable personnel and providers. In connection with performance of an inspection or audit under this Section 5.7(b), the Audited Party shall reasonably assist and cooperate with the Auditing Party’s auditor and shall provide reasonable access to data, documentation, information, personnel, and records reasonably requested by the auditor, in each case, to the extent related to the transactions contemplated by this Agreement. Any access to any properties or facilities of the Audited Party shall be subject to the Audited Party’s reasonable security measures and the applicable insurance requirements of any applicable real property lease. Notwithstanding anything herein to the contrary, an Audited Party may refuse to grant or provide any access to, or to disclose, any information if and to the extent such access or disclosing such information would: (A) violate applicable Law or any Contract, provided, that, the Audited Party shall provide such access or disclose such information to the greatest extent possible without violating applicable Law or Contract; (B) cause the loss of or jeopardize any attorney-client, attorney-work product, or similar legal or protective privilege, provided, that, if any information is withheld pursuant to the foregoing clause (B), the Audited Party shall inform the Auditing Party as to the general nature of what is being withheld and the parties shall use commercially reasonable efforts, such as entry into a customary joint defense agreement, to enable the Audited Party to provide such information without causing the loss of any such privilege; or (C) unreasonably interfere with the business or operations of the Audited Party or any of its Affiliates. The Parties shall cooperate to minimize to the extent reasonably practicable any unnecessary disruption to their respective businesses that may result from the requests for access, data and information hereunder.

5.8 Determination.

(a) The Upfront Payment and any Recurring Payments, and the calculations thereof, shall be determined in good faith by RingCentral based on its books and records and accounting policies and principles. The License Fee, and the calculations thereof, shall be determined in good faith by Avaya based on its books and records and accounting policies and principles. Each Party shall, together with its payment of any amount under this Agreement, provide to the other Party reasonable detail regarding the calculation of such amount. Any dispute (i) Avaya may have to a payment made pursuant to this Section 5, or the calculation thereof, or (ii) RingCentral may have to a payment made pursuant to Section 6.2(e), or the calculations thereof, shall be made by written notice delivered to the other Party on or before the date that is ninety (90) days after such payment, which shall specify in reasonable detail the basis of such dispute and the other Party’s calculations of such payment amount (a “Dispute Notice”).

(b) After delivery of a Dispute Notice, RingCentral and Avaya shall engage in good faith discussions in an attempt to reconcile any differences and resolve such dispute, in the first instance by each Party’s Project Manager. The Project Managers shall attempt in good faith to resolve such dispute as promptly as reasonably practicable. If the Project Managers agree that they are unable to resolve the dispute, or if such dispute is not resolved within fifteen (15) Business Days following the submission of such Dispute Notice, then the Parties shall immediately escalate such dispute to senior executives of each Party. Such senior executives shall attempt in good faith to resolve such dispute as promptly as reasonably practicable. If such senior executives agree that they are unable to resolve the dispute, or if such dispute is not resolved within fifteen (15) Business Days following such escalation, then the Parties shall immediately escalate such dispute to the Chief Financial Officers of each Party. If such Chief Financial Officers agree that they are unable to resolve the dispute, or if such dispute is not resolved within fifteen (15) Business Days of such escalation, then the Parties can proceed with an action commenced in accordance with Section 12.6. Each

Party shall pay its own costs and expenses incurred in connection with the disputes contemplated by this Section 5.8.

6. Intellectual Property Licenses.

6.1 Patent and Patent Cross License. The Parties shall engage in good faith discussions regarding the terms on which (a) RingCentral may purchase certain patents and patent families from Avaya or its Subsidiaries, together with selected licensing rights (subject to diligence and third-party evaluation), and (b) RingCentral and its Affiliates, on the one hand, and Avaya and its Subsidiaries, on the other hand, would cross-license their respective patent portfolios.

6.2 [******************************] License.

(a) Payment.

(i) As consideration for the grant of the exclusive license and right to all Licensed Product payments set forth in this Section 6.2, RingCentral shall (i) on the Effective Date, pay to Avaya or one of its Subsidiaries (as designated by Avaya) [**************************************] in cash, by wire transfer of immediately available funds to an account designated in writing by Avaya, and (ii) issue to Avaya (x) the number of shares of RingCentral Common Stock equal to (A) [*************************************], divided by (B) the RNG 5-day VWAP as of the Effective Date (subject to the proviso of this sentence) (clauses (i) and (ii), together the “License Payment”); provided, however, that if the Effective Date occurs (x) on a date that is during a Blackout Period or the five (5) trading day period after the expiration of a Blackout Period, then the shares of RingCentral Common Stock comprising any portion of the License Payment shall (A) be issued on the [*************************************************************************************************************************************], and (B) notwithstanding the foregoing, be determined based on the RNG 5-day VWAP as of the date of such issuance, or (y) on any other date, then the shares of RingCentral Common Stock comprising any portion of the License Payment shall be issued as promptly as reasonably practicable after the Effective Date, but in no event during a Blackout Period.

(b) Certain Defined Terms.

(i) “Embodiments” means copies of the Licensed Product or any software (whether in object code, source code, or other form) or any other technology, documentation, computer files, materials, or tangible embodiment (in any form or medium) of any intellectual property right included in the Licensed IP.

(ii) “Exclusive License” has the meaning ascribed in Section 6.2(c)(i).

(iii) “Licensed IP” means the copyright rights in and to the object code required to support the Licensed Product.

(iv) “Licensed Product” means the [****************************] Offering (as it exists as of the Effective Date) that is [***************************************************].

(i) Avaya or a Subsidiary of Avaya (as designated by Avaya) hereby grants to RingCentral an exclusive, personal, non‑transferable, worldwide license under the Licensed IP, solely to Sell, service, support, and otherwise commercialize the Licensed Product limited to a field of use to be [***************************************************] (the “Exclusive License”). For clarification, the exclusivity in the Exclusive License is also with respect to Avaya and all Avaya Affiliates.

(ii) The Exclusive License is irrevocable and perpetual, but subject to the terms and conditions of this Agreement (including Section 6.2(c)(iii)), and non-sublicenseable (other than the license granted pursuant to Section 6.2(d)).

(iii) RingCentral will have the option, but not the obligation, [************] to Avaya or to a Subsidiary of Avaya (as designated by Avaya) the Exclusive License at any time after [**************] have elapsed from the Effective Date, for a price [**************************************] of the Exclusive License as mutually determined at that time by the Parties in good faith. If RingCentral exercises the foregoing option, RingCentral will offer to Avaya or such Subsidiary the opportunity [***********] the Exclusive License, and Avaya will have the option to accept or decline [****************] the Exclusive License. If RingCentral agrees [*******], and Avaya or such Subsidiary agrees [****************] the Exclusive License, the Parties will negotiate in good faith the [***] for the Exclusive License. If the Parties cannot agree on the [***], the Parties may engage a competent third party to help determine the [***] of the Exclusive License. RingCentral will not be obligated to sell, and Avaya and such Subsidiary will not be obligated to purchase the Exclusive License if the Parties do not agree upon the [***]. If RingCentral agrees to sell and Avaya or such Subsidiary agrees to purchase back the Exclusive License, and if the Parties agree upon the [***], upon completion of such transaction and payment of the respective [***] amount in full by Avaya or such Subsidiary to RingCentral, the Exclusive License will end.

(d) [*********************]. Effective upon Avaya’s or an Avaya Subsidiary’s receipt of the License Payment, RingCentral hereby grants to Avaya and its Subsidiaries [*************************************************************************]. RingCentral will be entitled to all benefits and be responsible for all obligations [*******************************************************************************************************************************************************] (the “Obligations”).

(e) License Fee Payments.

(i) In consideration for RingCentral granting to Avaya and its Subsidiaries [*****************************], Avaya or its applicable Subsidiary (as designated by Avaya) hereby shall [************************************************************ **********************************************************************************************************************************************************************************************************************************************************************************] (“License Fee”); provided that, for the avoidance of doubt, (A) License Fee shall exclude (I) any revenue from one-time or non-recurring transactions or services (including set-up, installation, professional services, sales of handsets and

other equipment) and other one-time charges and services (including usage based charges and charges for a toll-free number), (II) any Taxes paid to Avaya or any of its Subsidiaries by the customer, and (III) any costs and expenses reimbursed to Avaya or any of its Subsidiaries, (B) the License Fee shall be calculated after giving effect to, and net of, any credits, refunds, discounts, and other reductions in respect of such Licensed Product, and (C) for the avoidance of doubt, the License Fee shall not be reduced by any income Taxes paid by Avaya or any of its Affiliates or withholding Taxes in lieu thereof. Avaya or its applicable Affiliate (as designated by Avaya) will start to pay to RingCentral the License Fee on the Effective Date. The License Fee during the first month will be prorated accordingly if the Effective Date is not the first day of the calendar month. RingCentral shall file all Tax returns (including information returns), prepare all Tax books and records, comply with applicable Tax withholding rules (if any), and pay all Taxes, in each case, for U.S. federal income and other applicable tax purposes, in accordance with treating the License Fees as income of RingCentral and shall not take any position contrary to the foregoing for applicable Tax purposes, in each case, unless required by a “determination” as defined in Section 1313(a) of the Code (as defined below) or otherwise required by a Tax authority in connection with the final and binding settlement of an audit.

(ii) Subject to the other terms and conditions of this Agreement, Avaya or its applicable Subsidiary (as designated by Avaya), shall pay RingCentral any cash payable in satisfaction of a License Fee by wire transfer of immediately available funds to an account designated in writing by RingCentral, on the trading day immediately following Avaya’s first quarterly or year-end earnings announcement after the applicable calendar quarter.

(iii) Avaya represents, as of the Effective Date, that its projections for the aggregate subscription fees to be collected and received by Avaya or its applicable Subsidiary that are attributable to the Licensed Products in each of the First Year Period, the Second Year Period, and the Third Year Period in accordance with this Section 6.2(e) are, at a minimum: (A) during the twelve (12) month period following the Effective Date (such period, the “First Year Period”), [**********************************************************]; (B) during the twelve (12) month period following the First Year Period (such period, the “Second Year Period”), [************************************]; and (C) during the twelve (12) month period following the Second Year Period (such period, the “Third Year Period”, and each of the First Year Period, Second Year Period, and Third Year Period, a “Subscription Fee Period”), [******************************************************].

(f) No Delivery or Support Obligations. Notwithstanding anything to the contrary contained herein, Avaya and its Subsidiaries shall have no obligation under this Agreement to deliver, directly or indirectly, to RingCentral (and, as a material inducement to Avaya or its Subsidiary granting the license pursuant to Section 6.2(c), RingCentral hereby waives any right it may have to (and shall not) require, directly or indirectly, the delivery of) (i) any Embodiments, or (ii) any technical, consulting, support or other services (including any cooperation or assistance or other further assurances) with respect to the Licensed IP or any Embodiment. Further, RingCentral shall not (and shall not attempt to), directly or indirectly, procure or obtain or, except to the extent such prohibition is not permitted by applicable Law, reverse engineer, disassemble or decompile, any Embodiment (or any portion thereof), or otherwise attempt to discover the source code of any Embodiment (or any portion thereof). RingCentral shall not exploit the Licensed IP in any manner not expressly permitted pursuant to Section 6.2(c), and RingCentral shall not exercise any rights under the Exclusive License (other than to grant the license granted pursuant to Section 6.2(d)).

(g) Registration. Avaya and its Subsidiaries shall have the sole and exclusive right (but not the obligation) to obtain, apply for, register, prosecute, and maintain, throughout the world, the Licensed IP, and RingCentral shall not engage in any such activity or record or file this Agreement (including the license granted pursuant to this Section 6.2) with any intellectual property agency or office of any Governmental Entity. For clarification, the foregoing clauses in this Section 6.2(g) will not prevent RingCentral from obtaining, applying for, registering, prosecuting, and/or maintaining, throughout the world, any other intellectual property rights owned by RingCentral.

(h) Enforcement. RingCentral shall not, except solely upon Avaya’s request or with Avaya’s prior written consent, and Avaya and its Subsidiaries shall have the exclusive right (but not the obligation) to, bring or threaten to bring any action or other proceeding (including any appeal) of any kind whatsoever with respect to the Licensed IP against a third party to enforce or defend the Licensed IP (including the institution of any action or other proceeding for infringement thereof) (an “Enforcement Claim”). Avaya and its Subsidiaries may take, in their sole discretion, any action it deems appropriate to protect the Licensed IP.

(i) If Avaya or any of its Subsidiaries brings an Enforcement Claim, RingCentral shall, to the extent it is a necessary party to such Enforcement Claim, join Avaya or such Subsidiary at Avaya’s or such Subsidiary’s sole cost and expense in such Enforcement Claim and agree to be represented by counsel for Avaya or such Subsidiary and assist Avaya or such Subsidiary in such Enforcement Claim. Upon Avaya’s request, RingCentral shall assign to Avaya or a Subsidiary of Avaya (as designated by Avaya) the right to any and all Enforcement Claims, and the right to any and all damages or other relief with respect thereto.

(ii) Additionally, at Avaya’s request and direction and at Avaya’s sole cost and expense (and solely upon Avaya’s request), RingCentral shall bring or threaten to bring any Enforcement Claim. RingCentral agrees that Avaya and its Subsidiaries shall have the sole and exclusive right to control the prosecution, compromise, and settlement of such Enforcement Claim using counsel chosen by Avaya and that RingCentral shall comply (and cause such counsel to comply) with Avaya’s and its Subsidiaries’ direction with respect thereto (including by causing the filing of pleadings, briefs, and other documents in connection therewith, at Avaya’s and such Subsidiaries’ direction).

(iii) RingCentral shall, at Avaya’s sole cost and expense, fully assist and cooperate with Avaya and its Subsidiaries in connection with any Enforcement Claim and take such measures as may be necessary to preserve the attorney-client and other privileges applicable thereto. Avaya or its applicable Subsidiary shall be entitled to retain any and all damages received, collected, or awarded in connection with, or paid pursuant to any settlement of, any Enforcement Claim.

(iv) Avaya shall defend, indemnify and hold harmless RingCentral and its Affiliates for and against any damages, expenses, liabilities or other losses incurred by RingCentral or its Affiliates as a result of any third-party claims or causes of action to the extent arising out of (A) RingCentral’s actions solely to the extent such actions were taken at and in accordance with the direction of Avaya or any of its Subsidiaries in connection with an Enforcement Claim brought by Avaya or any of its Subsidiaries and (B) the Obligations. All claims for indemnification pursuant to this Section 6.2(h)(iv) shall be subject to Section 6.3 of the Development Agreement, mutatis mutandis.

(i) Reservation of Rights. All rights not granted to RingCentral under this Section 6.2 are expressly reserved by Avaya and its Subsidiaries. RingCentral agrees that, except as expressly provided in Sections 6.2(c), no other intellectual property rights or licenses, express or implied, are granted by Avaya or any of its Subsidiaries to RingCentral under this Agreement. As between Avaya and its Subsidiaries, on the one hand, and RingCentral, on the other hand, Avaya or its applicable Subsidiary shall be the exclusive owner of all Licensed IP and the Licensed Product. The license to the Licensed IP granted by Avaya and its Subsidiaries hereunder is granted on an “as-is” basis.

7. Shares.

7.1 Issuance of Shares. The Shares to be issued to Holder pursuant to this Agreement are intended to be issued pursuant to one or more exemptions from registration, including under Section 4(a)(ii) of the Securities Act and the exemption from qualification under applicable state securities Laws. Holder shall assist Issuer as may be necessary to comply with the securities and blue sky Laws relating to the transactions contemplated by this Agreement. Notwithstanding anything herein to the contrary, the number of Shares to be issued on any particular date shall be rounded to the nearest whole share.

7.2 Regulatory Approvals.

(a) Notwithstanding anything to the contrary in this Agreement, in no event shall any Shares be issued to Holder unless and until (i) any waiting period (and extensions thereof) applicable to the issuance of such Shares under the HSR Act shall have expired or been terminated, and (ii) any other required approvals, consents, or clearances under any applicable Antitrust Laws shall have been obtained (“Required Antitrust Approvals”). Upon obtaining all Required Antitrust Approvals with respect to an applicable issuance of Shares, the Parties shall cause such Shares to be issued as promptly as reasonably practicable thereafter, in accordance with the terms of this Agreement and, in the case of the issuance of RingCentral Common Stock to satisfy an Upfront Payment or a Recurring Payment, such issuance to occur on [*************************************************************************************************] after the date upon which all such Required Antitrust Approvals were obtained.

(b) The Parties shall reasonably cooperate with one another to determine if there are any Required Antitrust Approvals with respect to any particular issuance of Shares and shall, to the extent required, as promptly as reasonably practicable (i) file with the Federal Trade Commission and the Antitrust Division of the Department of Justice a Notification and Report Form relating to the issuance of such Shares as required by the HSR Act, and (ii) file such notification filings, forms and submissions with any Governmental Entity as are required by other applicable Antitrust Laws in connection with such issuance of shares. The Parties shall (A) cooperate and coordinate (and shall cause its respective Subsidiaries to cooperate and coordinate) with the other in the making of such filings; and (B) make an appropriate response as promptly as reasonably practicable to any request for additional information and documentary material issued pursuant to the HSR Act or other applicable Antitrust Laws. Without limiting the foregoing, the Parties shall request and shall use reasonable best efforts to obtain early termination of the waiting period under the HSR Act or other applicable Antitrust Laws.

(c) Notwithstanding anything herein to the contrary, and for the avoidance of doubt, no Party or any of its Affiliates shall be required to offer, negotiate, commit to, or effect, by consent decree, hold separate order, or otherwise (and no Party or any of its Affiliates shall, without the prior written consent of the other Party, offer, negotiate, commit to, or effect, by consent decree, hold separate order, or otherwise) any of the following in order to obtain expiration or early termination of the HSR Act (or any other approval, clearance, or consent by a Governmental Entity under any other applicable Antitrust Law): (i) the sale,

divestiture, transfer, license, disposition, or hold separate (through the establishment of a trust or otherwise), of any and all of the capital stock or other equity or voting interest, assets (whether tangible or intangible), rights, properties, products or businesses of such Party or any of its Affiliates; (ii) the termination, modification, or assignment of existing relationships, joint ventures, Contracts, or obligations of such Party or any of its Affiliates; (iii) the modification of any course of conduct regarding future operations of such Party or its respective Affiliates; or (iv) any other restrictions on the activities of such Party or any of its Affiliates, including the freedom of action of such Party or any of its Affiliates with respect to, or their ability to retain, one or more of their respective operations, divisions, businesses, product lines, customers, assets or rights or interests, or their freedom of action with respect to their assets, properties, or businesses.

7.3 Holder Representations. Holder hereby represents and warrants as of the Effective Date and as of the date of each issuance of Shares:

(a) Holder acknowledges that the Shares will not have been registered under the Securities Act or under any state or other applicable securities Laws. Holder (i) acknowledges that it is acquiring the Shares pursuant to an exemption from registration under the Securities Act solely for investment and for Holder’s own account, not as nominee or agent, and with no present intention or view to distribute any of the Shares to any Person in violation of the Securities Act, (ii) will not sell or otherwise dispose of any of the Preferred Shares (as defined in the Investment Agreement) or the Conversion Shares (as defined in the Investment Agreement), except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable state securities Laws, (iii) is knowledgeable, sophisticated and experienced in financial and business matters, fully understands the limitations on transfer and the restrictions on sales of such Shares and is able to bear the economic risk of its investment and afford the complete loss of such investment, and (iv) is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act).

(b) Holder understands and acknowledges that (i) its representations and warranties contained herein are being relied upon by Issuer as a basis for availing itself of such exemption and other exemptions under the securities Laws of all applicable states and for other purposes, (ii) no U.S. state or federal agency has made any finding or determination as to the fairness of the terms of the sale of the Shares or any recommendation or endorsement thereof, and (iii) the Shares are “restricted securities” under the Securities Act inasmuch as they are being acquired from Issuer in a transaction not involving a public offering and that under applicable securities Laws such Shares may be resold without registration under the Securities Act only in certain limited circumstances.

7.4 RingCentral Representations. RingCentral hereby represents and warrants as of the Effective Date and as of the date of each issuance of Shares that the Shares will be, when issued, duly authorized validly issued, fully paid, nonassessable, and issued in compliance with all applicable securities Laws and RingCentral’s then operative certificate of incorporation and bylaws.

7.5 Stockholder Agreement; Registration Rights Agreement. RingCentral and Avaya shall enter into the Stockholder Agreement and the Registration Rights Agreement on the Effective Date.

8. Confidentiality.

8.1 “Confidential Information” means all information, data, drawings, benchmark tests, specifications, trade secrets, and any other Technology (as defined in the Development Agreement), and other proprietary information provided or made available by either Party or any of its Affiliates to the other Party or any of its Affiliates in connection with this Agreement, the Super Master Agent Agreement, the

Development Agreement, or the PDD (as defined in the Development Agreement), that is in written, graphic, machine readable or other tangible form and is marked “Confidential”, “Proprietary” or in some other manner to indicate its confidential nature, or that by its nature should reasonably be understood as confidential, but in any case, includes a Party’s or any of its Affiliates’ proprietary software, inventions, business model and strategies, company financial planning and financial data, product plans and strategies, and prospect and customer lists. Confidential Information may also include oral information that by its nature should reasonably be understood as confidential at the time of being received. Confidential Information will exclude any information that (i) was at the time of disclosure, or later becomes generally known and available in the public domain, through no fault of the receiving Party; (ii) was known to the receiving Party at the time of disclosure without an obligation of confidentiality; or (iii) becomes known to the receiving Party from a source other than the disclosing Party and not in violation of the disclosing Party’s rights or any direct or indirect obligation of confidentiality to the disclosing Party. For the avoidance of doubt, the Licensed IP, Licensed Product, and Embodiments shall constitute the Confidential Information of Avaya.

8.2 Confidential Information Obligations. Each Party acknowledges that the Confidential Information constitutes valuable trade secrets and each Party agrees that it will use the Confidential Information of the other Party solely in accordance with the provisions of this Agreement for the purpose of fulfilling its obligations or exercising its rights (or Avaya Management L.P.’s rights, as applicable) under this Agreement, the Super Master Agent Agreement, the Development Agreement, or of any exhibit, schedule or attachment of any of them, and will not disclose, or permit to be disclosed, the same, directly or indirectly, to any unaffiliated third Party without the other Party’s prior written consent. Each Party agrees to exercise due care in protecting the Confidential Information from unauthorized use and disclosure.

8.3 Permitted Disclosure. If a receiving Party is requested or required to disclose all or any part of any Confidential Information of the disclosing Party under a discovery request, a subpoena, or an inquiry issued by a court of competent jurisdiction or by a judicial, administrative, regulatory or governmental agency or legislative body or committee or under applicable Law, such receiving Party shall, to the extent practicable and subject to applicable Laws, give prompt notice of such request to the disclosing Party and shall give the disclosing Party the opportunity to seek an appropriate confidentiality agreement, protective order or modification of any disclosure or otherwise intervene, prevent, delay or otherwise affect the response to such request, and the receiving Party shall cooperate in such efforts.

8.4 Independent Development. The terms of confidentiality under this Agreement will not be construed to limit each Party’s right to independently develop or acquire any Offerings without use of the other Party’s Confidential Information. Further, each Party will be free to use for any purpose the residuals resulting from access to or work with the other Party’s Confidential Information (including Technology (as defined in the Development Agreement)), provided that each Party will maintain the confidentiality of the other Party’s Confidential Information as provided in this Agreement. The term “residual” means technical or business information in non-tangible form, which may be retained by persons in their unaided memories after having had access to the Confidential Information, including ideas, concepts, know-how, or techniques contained therein; provided that the term “residual” shall exclude information regarding customers and prospective customers or sales or pricing that is obtained in connection with the Super Master Agent Agreement (which excluded information includes the types of information described in Section V of Appendix D of the Super Master Agent Agreement). The foregoing in this Section 8.4 will not be deemed to grant to either Party a license under the other Party’s intellectual property rights.

8.5 Effect of Termination. Each receiving Party shall, upon expiration or termination of this Agreement (except to the extent retention of any particular Confidential Information is necessary for any obligation that extends beyond such expiration or termination), either return to the disclosing Party, or destroy

and notify in writing the disclosing Party of the destruction of, any and all Confidential Information of the disclosing Party, whether in hard copy or electronic format and whether standalone or included in any other materials or documents, in the receiving Party’s possession.

9. Public Announcements. From the Execution Date through the Effective Date, Avaya and RingCentral shall consult with each other before issuing, and give each other the opportunity to review and comment upon any press release or other public statements with respect to this Agreement or the Transactions and shall not issue any such press release or make any such public statement without the other Party’s prior written consent (which shall not be unreasonably, withheld, conditioned or delayed), except (a) as such Party may reasonably conclude may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system (and then only after as much advance notice and consultation as is feasible) or (b) such public statements principally directed to employees, suppliers, customers, partners or vendors that reconvey previous press releases or public statements.

10. Representations, Warranties, and Liability.

10.1 Representations and Warranties. Each Party represents and warrants that: (a) as of the Execution Date and the A&R Date with respect to this Agreement, as of the Execution Date with respect to the Development Agreement, and as of the Effective Date with respect to the Super Master Agent Agreement, (i) such Party and its Affiliates have the necessary right, title, and interest to all deliverables provided by such Party or its Affiliates under this Agreement, the Super Master Agent Agreement, and the Development Agreement, (ii) such Party is a corporation duly incorporated, validly existing and in good standing under the applicable Laws, (iii) such Party and its Affiliates have all requisite corporate and partnership (as applicable) power and authority to execute, deliver and perform its and their obligations under this Agreement, the Super Master Agent Agreement, and the Development Agreement, and (iv) the execution, delivery and performance of this Agreement, the Super Master Agent Agreement, and the Development Agreement have been duly authorized by such Party and its Affiliates, as applicable; and (b) as of the Effective Date, (i) such Party and its Subsidiaries are in compliance in all material respects with all applicable Laws in connection with its and their obligations under this Agreement, the Super Master Agent Agreement, and the Development Agreement, and (ii) there is no outstanding litigation, arbitrated matter or other dispute to which such Party or any of its Affiliates is a party, and which, if decided unfavorably to such Party or its Affiliates, would reasonably be expected to have a material effect on the ability of such Party or its Affiliates to fulfill its or their respective obligations under this Agreement, the Super Master Agent Agreement, and the Development Agreement.

10.2 Mutual Disclaimers. EXCEPT AS EXPRESSLY SPECIFIED IN THIS AGREEMENT, THE SUPER MASTER AGENT AGREEMENT, OR THE DEVELOPMENT AGREEMENT, NEITHER PARTY (NOR AVAYA MANAGEMENT L.P. WITH RESPECT TO THE DEVELOPMENT AGREEMENT) PROVIDES ANY OTHER WARRANTY, EXPRESS, IMPLIED OR STATUTORY, TO THE OTHER PARTY OR TO ANY THIRD PARTY, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THE AFOREMENTIONED AGREEMENTS, INCLUDING WITH RESPECT TO ANY PRODUCTS, SOFTWARE, SERVICES OR OTHERWISE (INCLUDING THE LICENSED IP AND LICENSED PRODUCT), AND EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NONINFRINGEMENT, OR, ANY OTHER MATTER ARISING FROM COURSE OF PERFORMANCE OR USAGE. NOTWITHSTANDING THE FOREGOING AND FOR THE AVOIDANCE OF DOUBT, THIS SECTION 10.2 SHALL NOT LIMIT ANY REPRESENTATION OR WARRANTY MADE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE

INVESTMENT AGREEMENT OR THE HOLDINGS AGREEMENT (OTHER THAN THOSE GOVERNED BY THIS AGREEMENT, THE SUPER MASTER AGENT AGREEMENT, OR THE DEVELOPMENT AGREEMENT), INCLUDING THOSE SET FORTH IN THE INVESTMENT AGREEMENT OR THE HOLDINGS AGREEMENT, OR ANY CLAIM IN CONNECTION THEREWITH, OR ANY CLAIM OR RECOURSE FOR FRAUD.

10.3 EXCLUSION OF CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, (I) IN NO EVENT WILL A PARTY BE LIABLE FOR ANY PUNITIVE DAMAGES, AND (II) EXCEPT WITH RESPECT TO A PARTY’S BREACH OF SECTION 2.2 OR SECTION 8, RINGCENTRAL’S BREACH OF SECTION 6.2(f), SECTION 6.2(g), SECTION 6.2(h), OR THE LAST SENTENCE OF SECTION 5.3(a), OR A PARTY’S INFRINGEMENT OR MISAPPROPRIATION OF THE OTHER PARTY’S OR ITS AFFILIATES’ INTELLECTUAL PROPERTY RIGHTS, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, OR EXEMPLARY DAMAGES, OR FOR ANY CLAIM FOR LOSS OF PROFITS, LOSS OF ANTICIPATED PROFITS, OR LOSS OF DATA, IN EACH CASE OF (I) AND (II), IN CONNECTION WITH, ARISING FROM OR IN RELATION TO THIS AGREEMENT, WHETHER BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR ANY OTHER LEGAL OR EQUITABLE GROUNDS, AND REGARDLESS OF WHETHER SUCH DAMAGES ARE FORESEEABLE OR WHETHER SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES. WITHOUT LIMITING A PARTY’S RESPONSIBILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT AND THE OTHER PARTY’S RIGHT TO CLAIM OTHER DIRECT DAMAGES, EACH PARTY AGREES THAT ITS PAYMENT OBLIGATIONS (WHETHER IN CASH, SHARES, OR OTHERWISE) UNDER THIS AGREEMENT (INCLUDING THE CONSIDERATION ADVANCE OR THE REPAYMENT OR CONVERSION THEREOF, AND ALL UPFRONT PAYMENTS, AND RECURRING PAYMENTS) (THE “PAYMENT OBLIGATIONS”), BUT NOT ANY INCREASE IN THE VALUE OF ANY SHARES, SHALL BE DEEMED TO BE DIRECT DAMAGES UNDER THIS AGREEMENT.

10.4 DAMAGES CAP. EXCEPT WITH RESPECT TO THE PAYMENT OBLIGATIONS, A CLAIM BY RINGCENTRAL FOR LICENSE FEE DAMAGES (AS DEFINED BELOW) IN ACCORDANCE WITH SECTION 10.6 IN RESPECT OF A BREACH BY AVAYA OF SECTION 6.2(e)(iii), A PARTY’S BREACH OF SECTION 2.2, SECTION 8, OR SECTION 9, RINGCENTRAL’S BREACH OF SECTION 6.2(f), SECTION 6.2(g), SECTION 6.2(h), OR THE LAST SENTENCE OF SECTION 5.3(a), OR A PARTY’S INFRINGEMENT OR MISAPPROPRIATION OF THE OTHER PARTY’S OR ITS AFFILIATES’ INTELLECTUAL PROPERTY RIGHTS, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY DAMAGES OR LOSSES IN CONNECTION WITH, ARISING FROM OR IN RELATION TO THIS AGREEMENT FOR ANY AMOUNT IN EXCESS OF [***********************************].

10.5 NO LIMITATION ON FRAUD. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, AND FOR THE AVOIDANCE OF DOUBT, NOTHING IN THIS AGREEMENT SHALL LIMIT ANY CLAIM OR RECOURSE OF ANY PARTY IN CONNECTION WITH ANY FRAUD OR WILLFUL MISCONDUCT COMMITTED BY THE OTHER PARTY OR ANY OF ITS REPRESENTATIVES.

10.6 License Fees. Notwithstanding anything to the contrary contained in this Agreement or applicable Law, Avaya and RingCentral agree that (1) if, with respect to a Subscription Fee Period, the projection for the aggregate subscription fees for such Subscription Fee Period set forth in Section 6.2(e)(iii) is greater than the actual aggregate amount of subscription fees collected and received by Avaya or its

applicable Subsidiary that are attributable to Licensed Products in such Subscription Fee Period, the existence of such difference shall be deemed to be a breach of Section 6.2(e)(iii), (2) Avaya may cure any breach of Section 6.2(e)(iii) by payment of applicable direct damages, (3) no breach of Section 6.2(e)(iii) is a material breach of this Agreement, (4) notwithstanding Section 12.7, RingCentral’s sole and exclusive remedy, and Avaya’s sole and exclusive liability, for Avaya’s breach of Section 6.2(e)(iii) with respect to a Subscription Fee Period shall be, regardless of when any claim with respect to any such breach is made, direct damages in an amount to be mutually agreed by the Parties in good faith. Such damages shall not exceed the difference between the projection in Section 6.2(e)(iii) corresponding to such Subscription Fee Period and the actual aggregate amount of subscription fees collected and received by Avaya or its applicable Subsidiary that are attributable to the Licensed Products in such Subscription Fee Period (such difference with respect to such Subscription Fee Period, the “Licensee Fee Damages”), and (5) in no event shall RingCentral be entitled any Licensee Fee Damage with respect to the same Subscription Fee Period more than once (such as, for example, if Avaya breaches Section 6.2(e)(iii) by both breaching the representation set forth in such Section and being deemed to have breached such Section pursuant to clause (1) of this Section 10.6). For the avoidance of doubt, nothing in Section 6.2(e)(iii) or this Section 10.6 shall be construed to be (x) a representation by Avaya regarding its projection of subscription fees to be collected or received by Avaya or its applicable Subsidiary that are attributable to the Licensed Products in any period of time following the Third Year Period, or (y) a damage that would otherwise be subject to the cap on damages set forth in Section 10.4.

11. Term and Termination

11.1 Term. Section 2.1, Section 3, Section 4.5, Section 7.2, Section 7.5, Section 8, Section 9, Section 10, this Section 11.1, Section 11.2(b)(i), Section 11.3, and Section 12 (other than Sections 12.1 and 12.10) (and the definitions set forth in this Agreement as used in the foregoing Sections) shall become effective on the Execution Date and all other provisions of this Agreement shall become effective on the Effective Date, and this Agreement shall continue in effect from the Effective Date until the date that is [*******] years after the Effective Date (“Initial Term”), unless terminated in accordance with its terms. The Initial Term shall be automatically extended by [*******] additional years (the “Extension”) if [****************************************************************************************************************************************] during the Initial Term. The Initial Term together with the Extension, and any additional extension of the term of this Agreement, are cumulatively denoted the “Term” of this Agreement.

11.2 Termination.

(a) If a Party enters into a definitive agreement for or consummates a Change of Control of such Party (such Party, the “Acquired Party”): (i) the Acquired Party shall promptly (and in any event, within three (3) Business Days thereafter) notify the other Party thereof; (ii) the other Party may at any time during the one-hundred twenty (120) day period following its receipt of such notice, terminate this Agreement (together with the Super Master Agent Agreement and the Development Agreement) upon written notice to the Acquired Party, such termination to be effective one hundred eighty (180) days following the Acquired Party’s receipt of such notice of termination; and (iii) either Party may, if such Change of Control event occurs prior to the expiration of the Initial Term, elect to eliminate the Extension by written notice delivered prior to the occurrence of the Extension.

(b) Other Termination. This Agreement (i) prior to the Effective Date, shall automatically terminate upon termination of the Investment Agreement, (ii) may be terminated immediately, by written notice, (A) by either Party in the event of a material breach of this Agreement by the other Party

that remains uncured for ninety (90) days from receipt of a written notice specifying in reasonable detail such material breach, or (B) by either Party if the other Party is subject of an Insolvency Event, (iii) may be terminated by RingCentral, by written notice, in the event that the restrictions set forth in Section 2.2(i) and Section 2.2(ii)(a) are determined, as set forth in an order of one or more Governmental Entities of competent jurisdiction over any Location in the Territory or a portion thereof, to be void, voidable, or otherwise unenforceable, and Section 11.2(b)(ii)(A) is satisfied with respect to a material breach of such Sections (mutatis mutandis, as if such Section 2.2(i) and Section 2.2(ii)(a) were not void, voidable, or otherwise unenforceable), and such material breach would materially and adversely affect the expected benefits to RingCentral of Section 2.2(i) and Section 2.2(ii)(a), (iv) may be terminated by RingCentral immediately, by written notice, in the event of a material breach of the Holdings Agreement by Avaya Holdings that remains uncured for ninety (90) days from Avaya Holdings’ receipt of a written notice from RingCentral specifying in reasonable detail such material breach, or (v) following the Effective Date, shall automatically terminate upon any termination of the Development Agreement or the Super Master Agent Agreement. Avaya and its Subsidiaries shall have the right to immediately terminate the license granted in Section 6.2(c), by written notice, in the event (x) that all or any portion of Section 6.2(f), Section 6.2(g), or Section 6.2(h) is determined, as set forth in an order of a Governmental Entity of competent jurisdiction, to be void, voidable, or otherwise unenforceable and RingCentral or any of its Affiliates engages in any activity that would otherwise have been prohibited by any such Section (but, for the purposes of this clause (x), not taking into account Section 2.2(e)(ii)H), or (y) of a material breach of any provision of Section 6.2 by RingCentral that remains uncured for ten (10) days from receipt of a written notice specifying in reasonable detail such material breach. In the event of any such termination of such license, Avaya’s payment obligations under Section 6.2(e) shall also terminate.

11.3 Effect of Termination. The provisions of Section 5.2, Section 5.3, Section 5.4(d), Section 5.4(g), Section 5.4(h), Section 5.5, Section 5.6, Section 5.7, Section 5.8, Section 6.2, Section 8, Section 9 (solely until the fifth (5th) anniversary of the date of such expiration or termination), Section 10 (except Section 10.1), Section 11, and Section 12 (except Section 12.1) (and the definitions set forth in this Agreement as used in the foregoing Sections) shall remain in full force and effect and survive any termination or expiration of this Agreement (other than any termination pursuant to Section 11.2(b)(i)). No provision of this Agreement shall survive any termination of this Agreement pursuant to Section 11.2(b)(i). Each Party acknowledges and agrees that the termination or expiration of this Agreement for any reason (other than a termination of this Agreement pursuant to Section 11.2(b)(i)) shall not release a Party from any liability or obligation that already has accrued as of the effective date of such termination or expiration, as applicable, and shall not constitute a waiver or release of, or otherwise be deemed to adversely affect, any rights, remedies, or claims which a Party may have hereunder at Law, in equity or otherwise or which may arise out of or in connection with such termination or expiration.

12. General

12.1 Compliance with Laws. Each Party shall comply with all applicable Laws under this Agreement, the Super Master Agent Agreement, and the Development Agreement. In the United States, these may include Department of Commerce including U.S. Export Administration regulations, SEC, Environmental Protection Agency, and Department of Transportation regulations applicable to restricted or hazardous materials, and all employment and labor Laws governing that Party’s personnel. Neither Party will, in connection with this Agreement, export/re-export any technical data, process, product, or service, directly or indirectly (including the release of controlled technology to foreign nationals from controlled countries), to any country for which the United States government or any agency thereof requires an export license or other government approval without first obtaining such license.

12.2 Assignment. Prior to the Effective Date, neither Party may assign this Agreement (including by operation of Law) without the express consent of the other Party. Following the Effective Date, neither Party may assign this Agreement (including by operation of Law) without the express consent of the other Party, except that each Party may assign this Agreement, without the consent of the other Party, (i) to a U.S. corporation in connection with a corporate reorganization, provided that such Party remains responsible for all of its and such assignee’s obligations and liabilities hereunder, or (ii) to a purchaser of all or substantially all of the assets of such Party in one or more related transactions, in each case of (i) and (ii) only so long as the Development Agreement and Super Master Agent Agreement are also so assigned to such assignee or purchaser, respectively and the assignee agrees to be bound, in advance in writing, the terms of this Agreement, the Development Agreement, and the Super Master Agent Agreement. Following such an assignment, notwithstanding anything to the contrary in this Agreement, the assigning Party’s rights and obligations under this Agreement will apply only to the business (including services and products) of the assigning Party (and its Affiliates, if and as applicable) acquired by the assignee, as such business is conducted (and services and products Marketed or Sold) as of and from and after the effective date of such assignment (the “Acquired Business”), and does not apply to any other business, or any other past, current, or future services or products, of the assignee or any of its Affiliates (it being understood, for the avoidance of doubt, the assignee entity itself shall be bound by this Agreement and obligated to comply with the provisions hereof as they relate to the Acquired Business).

12.3 Notices. All notices, requests, permissions, waivers or other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered by hand or sent by postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when so delivered by hand, by facsimile (which is confirmed), by electronic mail (which is confirmed), or if mailed, three days after mailing (one Business Day in the case of express mail or overnight courier service) to the Parties at the following addresses or facsimiles (or at such other address or facsimile for a Party as shall be specified by like notice):

If to Avaya:

Avaya Inc.

4655 Great America Parkway

Santa Clara, California 95054

Attn: Shefali Shah, General Counsel

Email: sashah@avaya.com

with a copy to (which copy alone shall not constitute notice):

Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attn:     Sarkis Jebejian, P.C.
    Jonathan L. Davis, P.C.
Email:    sarkis.jebejian@kirkland.com

If to RingCentral:

RingCentral, Inc.

20 Davis Drive
Belmont, CA 94002
Attn: John Marlow, Chief Administrative Officer, General Counsel,

and Senior Vice President of Corporate Development
Email: johnm@ringcentral.com

with a copy to (which copy alone shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attn: Jeffrey D. Saper
Email: jsaper@wsgr.com

and

Wilson Sonsini Goodrich & Rosati, P.C.
One Market Plaza
Spear Tower, Suite 3300
San Francisco, CA 94105
Attn:     Robert Ishii
    Mark Baudler
    Rich Mullen
Email:     rishii@wsgr.com
    mbaudler@wsgr.com
    rich.mullen@wsgr.com

12.4 Relationship of Parties. Without limiting the Super Master Agent Agreement and the arrangements thereunder, this Agreement does not create and will not be construed as creating any relationship of agency, franchise, fiduciary duty, partnership, or employment between the Parties. Accordingly, without limiting the Super Master Agent Agreement and the arrangements thereunder, neither Party will have the authority, either express or implied, to make any Contract, commitment or representation, or incur any debt or obligation on behalf of the other Party. The Parties agree to file all Tax returns (including information returns), prepare all Tax books and records, comply with applicable Tax withholding rules (if any), and pay all Taxes, in each case, for U.S. federal income and other applicable tax purposes, in accordance with the two immediately preceding sentences and in accordance with amounts payable by RingCentral to Avaya or any of its applicable Subsidiaries (as designated by Avaya) pursuant to Section 5 of this Agreement not being an allocation of gross receipts from sales of ACO to customers to Avaya or any of its Subsidiaries (as designated by Avaya) for applicable Tax purposes, with all relevant gross receipts from sales of ACO to customers recognized as gross receipts of RingCentral (or its applicable Affiliate) for applicable Tax purposes and shall not take any position contrary to the foregoing for applicable Tax purposes, in each case, unless required by a “determination” as defined in Section 1313(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or otherwise required by a Tax authority in connection with the final and binding settlement of an audit.

12.5 Independent Contractors. Without limiting the Super Master Agent Agreement and the arrangements thereunder, each Party is an independent contractor for the other Party, and its employees, contractors and other personnel and representatives will not, under this Agreement, act as, nor be agents or employees of the other Party and the Parties. The Parties agree to file all Tax returns (including information returns), prepare all Tax books and records, comply with applicable Tax withholding rules (if any), and pay

all Taxes, in each case, for U.S. federal income and other applicable tax purposes, in accordance with the immediately preceding sentence and in accordance with amounts payable by RingCentral to Avaya or any of its applicable Subsidiaries (as designated by Avaya) pursuant to Section 5 of this Agreement not being an allocation of gross receipts from sales of ACO to customers to Avaya or any of its applicable Subsidiaries (as designated by Avaya) for applicable Tax purposes, with all relevant gross receipts from sales of ACO to customers recognized as gross receipts of RingCentral (or its applicable Affiliate) for applicable Tax purposes and shall not take any position contrary to the foregoing for applicable Tax purposes, in each case, unless required by a “determination” as defined in Section 1313(a) of the Code or otherwise required by a Tax authority in connection with the final and binding settlement of an audit.

12.6 Applicable Law; Exclusive Jurisdiction; Jury Waiver.

(a) This Agreement, and all rights, obligations, claims, causes of action (whether in contract, tort or statute) or other matter that may result from, arise out of, be in connection with or relating to this Agreement, or the negotiation, administration, performance, or enforcement of this Agreement (the “Relevant Matters”), shall be governed by, and construed and enforced in accordance with, the internal Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of Laws thereof, including its statutes of limitations. RingCentral and Avaya hereby acknowledge and agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

(b) Each of the Parties irrevocably consents to the exclusive jurisdiction and venue of state courts located in the State of Delaware in connection with any Relevant Matter (or, only such courts decline to accept jurisdiction over a particular matter, any federal court within the State of Delaware). Each Party agrees not to commence any legal proceedings with respect to a Relevant Matter except in such Delaware state courts (or, only such courts decline to accept jurisdiction over a particular matter, any federal court within the State of Delaware). By execution and delivery of this Agreement, each Party irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and to the appellate courts therefrom solely for the purposes of disputes in connection with any Relevant Matter and not as a general submission to such jurisdiction or with respect to any other dispute, matter or claim whatsoever. The Parties hereby waive any right to stay or dismiss any action or proceeding in connection with any Relevant Matter brought before the foregoing courts on the basis of (i) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason or that it or any of its property is immune from the above-described legal process, (ii) that such action or proceeding is brought in an inconvenient forum, that venue for the action or proceeding is improper or that this Agreement may not be enforced in or by such courts, or (iii) any other defense that would hinder or delay the levy, execution or collection of any amount to which any Party is entitled pursuant to any final judgment of any court having jurisdiction.

(c) EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ACTIONS OF ANY PARTY IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT, OR ANY OTHER RELEVANT MATTER.

12.7 Specific Performance. The Parties agree that, in the event of any breach or threatened breach by a Party of this Agreement, (i) the other Party shall be entitled, without proof of actual damages (and in addition to any other remedy that may be available to it), to a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other agreement and an injunction preventing or restraining such breach or threatened breach, and (ii) no Party shall be required

to provide or post any bond or other security or collateral in connection with any such decree, order or injunction or in connection with any related action or legal proceeding. Any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by Law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy.

12.8 Construction. For purposes of this Agreement, unless otherwise required by the context: the singular number will include the plural, and vice versa; the verb “may” indicates a legal right to perform the respective activity but does not establish a legal obligation to perform that activity; the word “will” shall be construed to have the same meaning and effect as the word “shall,” and vice versa; and the words “include,” “including” and “for example,” and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words “without limitation.” The word “or” is used in the inclusive sense of “and/or.” The terms “or,” “any” and “either” are not exclusive. When used herein, the phrase “to the extent” shall be deemed to be followed by the words “but only to the extent.” The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The headings in this Agreement are for convenience of reference only, and will not be referred to in connection with the construction or interpretation of this Agreement. English is the official language of this Agreement. This Agreement may be translated or executed in languages other than English, but the Parties agree that the English version will control. Each Party waives any rights it may have under the Laws of any country or jurisdiction to have this Agreement written in any local language, or interpreted or superseded by local Law in those countries.

12.9 Miscellaneous. No amendment or modification of this Agreement will be valid or binding upon the Parties unless made in writing and executed by authorized representatives of each Party, except as otherwise expressly provided in this Agreement. This Agreement (together with the Super Master Agent Agreement and Development Agreement) supersedes all prior agreements and understandings, including oral representations, between the Parties (and, with respect to the Development Agreement, Avaya Management L.P., as applicable) relating to its subject matter. No waiver of any provision of this Agreement will be effective unless it is expressly stated to be a waiver and communicated to the other Party in writing by the waiving Party. Waiver of breach of any provision of this Agreement on any occasion will not be deemed a waiver of that provision or of any other provision on any other occasion, nor will such waiver affect the right of either Party to terminate this Agreement. If any provision in this Agreement is held to be invalid or unenforceable for any reason, such provision will, to the extent of such invalidity or unenforceability, be severed, but without in any way affecting the remainder of such provision or any other clause in this Agreement, and the provision will be replaced with a provision which, to the extent permitted by applicable Law, achieves the purposes intended by the invalid or unenforceable provision. This Agreement may be executed in counterparts.

12.10 Non-Solicitation. During the Term and for a period of twelve (12) months thereafter, neither Party shall (and each Party shall cause its Subsidiaries not to) directly or indirectly solicit for employment, any current or former officer or employee of the other Party or any of its Affiliates known to such Party to have performed any work in connection with or related to this Agreement, the Development Agreement, or the Super Master Agent Agreement, during and for the twelve (12) month period following such officer’s or employee’s performance of such work; provided, however, that nothing in this Section 12.10 shall prohibit either Party or its Affiliates from (i) engaging in general advertisements, solicitations or publication of employment opportunities that are not targeted at such employees or officers of the other Party, including through the assistance of third party recruiting firms, or (ii) hiring any person (A) who responds to any such advertisement, solicitation or publication, or (B) whose employment with such other Party has been terminated for at least six (6) months.

12.11 Non-Exclusive; Independent Advice; Minimum Commitment. Except as otherwise set forth in Section 2.2, this Agreement is non-exclusive, and nothing in this Agreement shall prohibit either Party from Selling any product or service or working with another product or services provider. Nothing in this Agreement shall prohibit either Party or any of its Affiliates from providing any Person with such Party’s or Affiliates’ independent advice, opinion, or belief (whether positive, negative, or otherwise) regarding any product or service (including any Avaya Service or RingCentral Service) or such Person’s solution requirements. Each Party acknowledges and agrees that the execution of this Agreement is not a guarantee by the other Party of any minimum Sales requirement or volume commitment with respect to ACO, any other RingCentral Service, or any Avaya Service.

[signature page follows]

IN WITNESS WHEREOF, intending to be bound, the Parties have executed this Agreement:

(RingCentral) (Avaya)

RingCentral, Inc. Avaya Inc.

By: /s/ John Marlow By: /s/ Shefali Shah

Name: John Marlow Name: Shefali Shah

Title: General Counsel Title: EVP, Chief Adminsitrative Officer

Date: February 10, 2020 Date: February 10, 2020



Vesting Dates	Percentage of RSUs
On the date listed below which is closest to, and following, the one year anniversary of the Grant Date: o February 15 o May 15 o August 15 o November 15	33.34%
Quarterly thereafter on each February 15, May 15, August 15 and November 15	8.33%



Vesting Dates	Percentage of Option
On the date listed below which is closest to, and following, the one year anniversary of the Grant Date: • February 15 • May 15 • August 15 • November 15	33.34%
Quarterly thereafter on each February 15, May 15, August 15 and November 15	8.33%




	/s/ JAMES M. CHIRICO, JR.
	James M. Chirico, Jr. Director, President and Chief Executive Officer (Principal Executive Officer)




	/s/ KIERAN J. MCGRATH
	Kieran J. McGrath Executive Vice President and Chief Financial Officer (Principal Financial Officer)