Adopted April 17, 2002
As amended through February 10, 2006

Schedule A: Permitted Non-Audit and Audit Related Services

Schedule B: Prohibited Services

This policy is adopted by the Audit Committee of the Board of Directors of Avaya to govern certain features of Avaya’s relationship with its external independent auditing firm (the “Independent Auditor”). Specifically, this policy addresses the selection of the Independent Auditor, the employment by Avaya of employees, former employees or close relatives of employees of the Independent Auditor and the provision of non-audit services by the Independent Auditor to Avaya. The terms of this policy are intended to comply with the provisions of the Sarbanes-Oxley Act of 2002 and related rulemaking of the Securities and Exchange Commission (collectively, the “Act”). In the event that the provisions of the Act are more restrictive than this policy, the provisions of the Act shall govern.

Selection of Independent Auditor – As provided in the Audit Committee Charter, the Audit Committee (the “Committee”) has the sole and direct authority to engage, appoint or replace the Independent Auditor. The Committee shall appoint the Independent Auditor annually. The Committee shall consider all factors it deems necessary or advisable in order to assess the qualifications of the Independent Auditor and the individuals comprising the Independent Auditor’s engagement team for Avaya.

Factors the Committee may consider in its assessment of the qualifications of the Independent Auditor may include:

• the Independent Auditor’s internal procedures for ensuring the quality of the audit;
  
  
• any material issues raised by the most recent internal quality-control review, or peer review, of the Independent Auditor, or by any review, inquiry or investigation by governmental or professional authorities, including, without limitation, the Public Company Accounting Oversight Board (“PCAOB”) within the preceding five years, respecting one or more independent audits carried out by the Independent Auditor, and any steps taken to deal with any such issues (the Committee may also consider how frequently the Avaya audit will be subject to such an internal review and the results of any internal or peer review of the Avaya audit);
  
  
• any matters described in reports filed by the Independent Auditor with the PCAOB;



• the Independent Auditor’s recent record with respect to restatements, outstanding litigation or settlements and SEC enforcement actions;
  
  
• the results of any survey of Avaya personnel assessing the performance of the Independent Auditor;
  
  
• information regarding the qualifications of any non-U.S. affiliates of the Independent Auditor that will service the Avaya audit;
  
  
• the terms and conditions of the proposed engagement letter to be entered into by Avaya and the Independent Auditor;
  
  
• for the purpose of evaluating the qualifications of the Independent Auditor, the scope, plan and staffing of the audit as set forth in the proposed audit plan (such plan may be a joint plan with Avaya’s internal audit function), including the proposed hours for audit staff and management and related fees and, in the case of an incumbent Independent Auditor, a comparison of such hours and fees to the prior year’s actual fees; and
  
  
• whether or not the shareholders of Avaya have ratified the Audit Committee’s selection of the Independent Auditor.
  
  

Factors the Committee may consider in its assessment of the qualifications of the individuals comprising the Independent Auditor’s engagement team for Avaya may include (the Committee may request a discussion of such factors with the Independent Auditor’s lead audit partner):

• the resumes of the partners and managers, including any applicable specialists or National Office personnel, of the Independent Auditor’s engagement team of Avaya; and
  
  
• the relevant industry and other experience of such partners and managers (including, without limitation, experience in SEC matters, securities offerings, M&A transactions, leasing and other financing transactions).
  
  

The Committee’s assessment of the qualifications of the Independent Auditor shall also include consideration of any matters that may raise independence concerns, including any relationships between the Independent Auditor and Avaya.

Rotation of the Independent Auditor – The Independent Auditor’s lead audit partner and reviewing audit partner shall be required to rotate every five (5) years, or such shorter period as may be required by the Independent Auditor’s firm policy. Upon rotation, neither the lead audit partner nor the reviewing audit partner shall be eligible to fulfill either role on the Avaya audit engagement for a period of five (5) years. Any audit partner other than the lead audit partner or the reviewing audit partner who (A) provides more than ten (10) hours of audit, review, or attest services in connection with the annual or interim consolidated financial statements of Avaya or (B) serves as the “lead partner” in connection with any audit or review related to the annual or interim financial statements of a subsidiary of Avaya whose assets or revenues constitute 20% or more of Avaya’s respective consolidated assets or revenues, shall be required to rotate every seven (7) years, or such shorter period as may be required by the Independent Auditor’s firm policy. Upon rotation, no such audit partner shall be eligible to provide any audit, attest or review services on the Avaya audit engagement for a period of two (2) years.

The Committee shall not require a mandatory rotation of independent auditing firms, but shall expressly consider re-bidding the engagement of an Independent Auditor every five (5) years in anticipation of the rotation of the lead audit partner and reviewing audit partner. Notwithstanding the foregoing, the Committee may at any time, in its sole discretion, require the rotation of the Independent Auditor or the lead audit or reviewing partner or make a determination to re-bid the engagement of the Independent Auditor.

Employment Relationships of the Independent Auditor's Professionals – Subject to any more stringent requirements of the Independent Auditor’s firm policy or applicable law or regulation, without the express approval of the Committee, Avaya may not employ in an accounting role or financial reporting oversight role (senior manager level positions or above) the following individuals:

• any current employee of the Independent Auditor who has participated in the Avaya audit in any capacity or any individual who has been employed by the Independent Auditor during the prior 24 months and participated in the Avaya audit in any capacity or any close family member of any such employee;
  
  
• any partner or manager employed by the Independent Auditor who provides ten (10) or more hours of non-audit services to Avaya; or
  
  
• any partner of the Independent Auditor resident in the same office as the lead audit partner on the Avaya audit.
  
  

Provision of Non-Audit and Audit-Related Services by the Independent Auditor – In addition to the audit of Avaya’s consolidated financial statements, the Independent Auditor may be engaged to provide the Non-Audit Services and Audit-Related Services set forth on Schedule A hereto (to the extent not prohibited under the Exchange Act, the rules and regulations promulgated thereunder and the rules and regulations of the PCAOB). Notwithstanding the foregoing, the Independent Auditor shall be prohibited from providing the services set forth on Schedule B hereto.

Any request to engage the Independent Auditor to provide any service shall be submitted in writing to the Chief Financial Officer (the “CFO”), with a copy to the Secretary. Such request shall be in a form and contain such information as may be required by the CFO from time to time, including a detailed description of the service to be rendered, the anticipated fees to be paid to the Independent Auditor and the business reasons for engaging the Independent Auditor to provide the service. Upon approval by the CFO, and confirmation by the Secretary that the proposed engagement complies with the terms of this Policy and the Act, the request for engagement shall be presented to the Committee for approval. Any engagement of the Independent Auditor and the related fees shall require the pre-approval of the Committee, which approval shall be obtained by one of three methods: (A) pre-approval of the specific engagement by the Committee; (B) pre-approval of the specific engagement by a member of the Committee so delegated to grant such approvals (the “Committee Delegate”); provided, however, that the Committee Delegate shall report the approval of any engagement to the Committee at its next scheduled meeting and provided, further, that the fees associated with all engagements approved by the Committee Delegate shall not exceed a cumulative amount of $500,000 in any period between scheduled Committee meetings; or (C) pursuant to the terms of an annual non-audit/audit-related service plan to be pre-approved by the Committee, which plan shall set out in reasonable detail the approved services to be rendered by the Independent Auditor and the corresponding fee limit by type of service (i.e statutory audits, tax compliance services, tax advisory services). Any fees incurred in excess of the amount pre-approved for such type of service under this clause (C) shall require the approval of the full Committee or the Committee Delegate prior to payment.

In determining whether to approve the engagement of the Independent Auditor, the Committee or the Committee Delegate, as the case may be, shall consider, among other things, this Policy, the terms of the Act and whether the nature of the engagement and the related fees are consistent with the following principles, as stated in the SEC’s rules on auditor independence:

• the Independent Auditor cannot function in the role of management of the Company;
  
  
• the Independent Auditor cannot audit its own work; and
  
  
• the Independent Auditor cannot serve in an advocacy role on behalf of the Company.
  
  

It is the intent of the Committee, that for any fiscal year, the amount of total fees earned by the Independent Auditor for the provision of audit, audit-related and tax compliance/preparation services to the Company shall be greater than the amount of total fees earned by the Independent Auditor for the provision of all other non-audit services.

With respect to permissible tax services set forth on Schedule A hereto, the Committee shall require additional information as required by the rules and regulations of the PCAOB.  The Independent Auditor shall be required to:

• describe in writing to the Committee:


• the scope of the proposed tax service, the fee structure for the engagement and any side letter or other amendment to the engagement letter or other agreement relating to the service; and


• any compensation arrangement;


• discuss with the Committee the potential effects of the services on the firm’s independence; and


• document the substance of its discussions with the Committee.

Special Provisions Relating to Director Engagement of the Independent Auditor – The Independent Auditor shall be prohibited from providing personal tax services to any member of the Committee during such person’s tenure on the Committee.  In situations where a new member is appointed to the Committee, the new Committee member would be permitted to continue to use any services of the Independent Auditor that had already been contracted for prior to appointment.  In addition, the Independent Auditor would be permitted to be retained to assist in the defense of prior year audits where it was involved in the original tax preparation.

The Independent Auditor may provide tax services to members of the Board of Directors of Avaya who do not serve on the Committee, provided that both the relevant Director and the Independent Auditor are required to notify the Committee of such provision of services.