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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
AVAYA INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
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(Title of Class of Securities)
053499 10 9
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(CUSIP Number)
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Stephen Distler
E.M. WARBURG, PINCUS & CO., LLC
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 878-0600
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
WITH A COPY TO:
SCOTT A. ARENARE
E.M. WARBURG, PINCUS & CO., LLC
466 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 878-0600
OCTOBER 2, 2000
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box: [__].
Page 1 of 16 Pages
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<PAGE>
SCHEDULE 13D
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CUSIP No. 053499 10 9 Page 2 of 16 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
WARBURG, PINCUS EQUITY PARTNERS, L.P.
I.R.S. IDENTIFICATION NO. 13-3986317
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
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3 SEC USE ONLY |_|
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7
SOLE VOTING POWER
NUMBER OF -0-
------------------------------------------------------------------
SHARES 8
SHARED VOTING POWER
BENEFICIALLY 26,752,849.83(1)
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OWNED BY 9
SOLE DISPOSITIVE POWER
EACH -0-
------------------------------------------------------------------
REPORTING 10
SHARED DISPOSITIVE POWER
PERSON WITH 26,752,849.83(1)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
26,752,849.83(1)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.7%(2)
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14 TYPE OF REPORTING PERSON
PN
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--------------------
(1) This number is an estimate. The actual number may be materially higher or
lower. See Items 4 and 5. Assumes the full exercise and conversion of all
securities into Common Stock pursuant to the terms and conditions of the
Purchase Agreement described herein.
(2) Gives effect to the new issuance of shares of Common Stock upon the full
exercise and conversion of all securities into Common Stock pursuant to the
terms and conditions of the Preferred Stock and Warrant Purchase Agreement
described herein.
<PAGE>
SCHEDULE 13D
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CUSIP No. 053499 10 9 Page 3 of 16 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
WARBURG, PINCUS & CO.
I.R.S. IDENTIFICATION NO. 13-6358475
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
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3 SEC USE ONLY |_|
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
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7
SOLE VOTING POWER
NUMBER OF -0-
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SHARES 8
SHARED VOTING POWER
BENEFICIALLY 28,309,894(1)
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OWNED BY 9
SOLE DISPOSITIVE POWER
EACH -0-
------------------------------------------------------------------
REPORTING 10
SHARED DISPOSITIVE POWER
PERSON WITH 28,309,894(1)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
28,309,894(1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1%(2)
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14 TYPE OF REPORTING PERSON
PN
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--------------------
(1) This number is an estimate. The actual number may be materially higher or
lower. See Items 4 and 5. Assumes the full exercise and conversion of all
securities into Common Stock pursuant to the terms and conditions of the
Purchase Agreement described herein.
(2) Gives effect to the new issuance of shares of Common Stock upon the full
exercise and conversion of all securities into Common Stock pursuant to the
terms and conditions of the Preferred Stock and Warrant Purchase Agreement
described herein.
<PAGE>
SCHEDULE 13D
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CUSIP No. 053499 10 9 Page 4 of 16 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
E.M. WARBURG, PINCUS & CO., LLC
I.R.S. IDENTIFICATION NO. 13-3536050
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |X|
(b) |_|
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3 SEC USE ONLY |_|
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
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7
SOLE VOTING POWER
NUMBER OF -0-
------------------------------------------------------------------
SHARES 8
SHARED VOTING POWER
BENEFICIALLY 28,309,894(1)
------------------------------------------------------------------
OWNED BY 9
SOLE DISPOSITIVE POWER
EACH -0-
------------------------------------------------------------------
REPORTING 10
SHARED DISPOSITIVE POWER
PERSON WITH 28,309,894(1)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
28,309,894(1)
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.1%(2)
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
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--------------------
(1) This number is an estimate. The actual number may be materially higher or
lower. See Items 4 or 5. Assumes the full exercise and conversion of all
securities into Common Stock pursuant to the terms and conditions of the
Purchase Agreement described herein.
(2) Gives effect to the new issuance of shares of Common Stock upon the full
exercise and conversion of all securities into Common Stock pursuant to the
terms and conditions of the Preferred Stock and Warrant Purchase Agreement
described herein.
<PAGE>
This Schedule 13D is being filed on behalf of Warburg, Pincus Equity
Partners, L.P., a Delaware limited partnership ("WPEP"), Warburg, Pincus & Co.,
a New York general partnership ("WP"), and E.M. Warburg, Pincus & Co., LLC, a
New York limited liability company ("EMW" and, together with WPEP and WP, the
"Reporting Entities"). This Schedule 13D relates to the common shares, par value
$0.01, of Avaya Inc., a Delaware corporation (the "Company"). Unless the context
otherwise requires, references herein to the "Common Stock" are to the shares of
common stock of the Company, par value $0.01 per share. The holdings of Common
Stock of WP and EMW in this Schedule 13D include certain shares of Common Stock
which are beneficially held by Warburg, Pincus Netherlands Equity Partners I,
C.V. ("WPNEPI"), Warburg, Pincus Netherlands Equity Partners II, C.V.
("WPNEPII") and Warburg, Pincus Netherlands Equity Partners III, C.V.
("WPNEPIII" and, together with WPNEPI, WPNEPII and WPEP, the "Investors"). WP,
EMW and the Investors are referred to herein as the "Group Members."
ITEM 1. SECURITY AND ISSUER.
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This statement on Schedule 13D relates to the Common Stock of the
Company, and is being filed pursuant to Rule 13d-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The address of the principal
executive offices of the Company is 211 Mount Airy Road, Basking Ridge, New
Jersey 07920.
ITEM 2. IDENTITY AND BACKGROUND.
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(a) This statement is filed by the Reporting Entities. The Group Members are
deemed to be a group within the meaning of Rule 13d-5. The sole general
partner of each of the Investors is WP. EMW manages each of the Investors.
Lionel I. Pincus is the managing partner of WP and the managing member of
EMW and may be deemed to control both WP and EMW. The general partners of
WP and the members of EMW are described in Schedule I, which is attached
hereto as part of Exhibit 1 and incorporated herein by reference.
(b) The address of the principal business and principal office of each of the
Reporting Entities is 466 Lexington Avenue, New York, New York 10017.
(c) The principal business of each of the Investors is that of a
partnership engaged in making venture capital and related investments.
The principal business of WP is acting as general partner of each of the
Investors, Warburg Pincus International Partners, L.P., Warburg, Pincus
Ventures International, L.P., Warburg, Pincus Ventures, L.P., Warburg,
Pincus Investors, L.P. and Warburg, Pincus Capital Company, L.P. The
principal business of EMW is acting as manager of each of the Investors,
Warburg Pincus International Partners, L.P., Warburg, Pincus Ventures
International, L.P., Warburg, Pincus Ventures, L.P., Warburg, Pincus
Investors, L.P. and Warburg, Pincus Capital Company, L.P.
(d) None of the Reporting Entities, nor, to the best of their knowledge, any of
the directors, executive officers, general partners or members referred to
in paragraph (a) has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or
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<PAGE>
similar misdemeanors).
(e) None of the Reporting Entities nor, to the best of their knowledge, any of
the directors, executive officers, general partners or members referred to
in paragraph (a) above has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) Except for WPNEPI, WPNEPII, WPNEPIII, which are organized under the laws of
The Netherlands and except as otherwise indicated on Schedule I, each of
the individuals referred to in paragraph (a) above is a United States
citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
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The total amount of funds required by the Investors to purchase the
securities of the Company as described herein is $400,000,000, furnished from
the working capital of the Investors.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
The purchase by the Investors of the securities of the Company as
described herein was effected because of the Reporting Entities' belief that the
Company represents an attractive investment based on the Company's business
prospects and strategy. Subject to the terms of the Standstill Provision (as
described below) and depending on prevailing market, economic and other
conditions, the Reporting Entities may from time to time acquire additional
shares of the Company or engage in discussions with the Company concerning
further acquisitions of shares of the Company or futher investments by them in
the Company. The Reporting Entities intend to review their investment in the
Company on a continuing basis and, depending upon the price and availability of
shares of Common Stock, subsequent developments affecting the Company, the
Company's business and prospects, other investment and business opportunities
available to the Reporting Entities, general stock market and economic
conditions, tax considerations and other factors considered relevant, and
subject to the Standstill Provision, may decide at any time to increase or
decrease the size of their investment in the Company.
On August 8, 2000, the Investors entered into a Preferred Stock and
Warrant Purchase Agreement with the Company (the "Purchase Agreement"), attached
hereto as Exhibit 2, pursuant to which the Company agreed to issue and sell and
the Investors agreed to purchase (a) 4 million shares of the Company's Series B
Convertible Participating Preferred Stock (the "Series B Stock"), (b) four-year
warrants to purchase shares of Common Stock representing 2.0% of the Total
Shares Outstanding (as defined below) (the "Series A Warrants") and (c)
five-year warrants to purchase shares of Common Stock representing 1.6% of the
Total Shares Outstanding. The material terms of these securities are described
below.
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<PAGE>
SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
DIVIDENDS.
- For so long as the Series B Stock is outstanding, holders of
Series B Stock will receive dividends equally and ratably with the
holders of Common Stock. Equal and ratable dividends are
calculated on an as-converted basis.
- During the fourth and fifth years after October 2, 2000 (the
"Issue Date"), the Company has the option to pay a quarterly cash
dividend on each share of Series B Stock at an annual rate of
3.25%, compounded quarterly, of the liquidation preference of the
Series B Stock.
- During the sixth through tenth years after the Issue Date, the
Company has the option to pay a quarterly cash dividend on each
share of Series B Stock at an annual rate of 6.5%, compounded
quarterly, of the liquidation preference of the Series B Stock.
- After the tenth anniversary of the Issue Date, the Company will
be required to pay a quarterly cash dividend on each share of
Series B Stock at an annual rate of 12%, compounded quarterly, of
the liquidation preference of the Series B Stock.
LIQUIDATION PREFERENCE. The initial liquidation preference for each
share of Series B Stock is $100. From the Issue Date until the tenth
anniversary of that date, the liquidation preference for each share will
increase at an annual rate of 6.5%, compounded quarterly. The increase in the
liquidation preference for any quarter will be reduced by the amount of any cash
dividends the Company pays on the Series B Stock, other than dividends paid on
Common Stock in which the Series B Stock participates.
Following a change-in-control of the Company during the first five
years after the Issue Date, other than a change-in-control transaction that is a
business combination involving solely the issuance of Common Stock, some or all
of the liquidation preference of the Series B Stock that would otherwise accrete
through the fifth anniversary of the Issue Date, will be accelerated, subject to
the Company's ability to pay a portion of the accelerated accretion in cash in
some instances.
REDEMPTION. At any time after the fifth anniversary of the Issue
Date, the Company can force the holders of shares of Series B Stock to convert
their shares into Common Stock. If the Company gives a notice of mandatory
conversion, the holders of Series B Stock have the right to require the Company
to redeem their shares for cash, in whole or in part, at their option, at a cash
redemption price equal to (a) the liquidation preference in effect on the
redemption date, plus (b) except to the extent that a dividend has been declared
for the applicable quarter, an amount equal to the unrecognized accretion and
dividends accrued and unpaid on the Series B Stock up to but not including the
redemption date.
For 60 days following the occurrence of a change-in-control
transaction, the
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<PAGE>
holders of Series B Stock have the right to require the Company to redeem their
shares for cash, in whole or in part, at their option, at a cash redemption
price equal to (a) 101% of the liquidation value in effect on the redemption
date, plus (b) except to the extent that a dividend has been declared for the
applicable quarter, an amount equal to the unrecognized accretion and dividends
accrued and unpaid on the Series B Stock up to but not including the redemption
date.
CONVERSION. Holders of Series B Stock may convert their shares into
shares of Common Stock at any time. The number of shares of Common Stock into
which each share of Series B Stock will be convertible is determined by dividing
the amount of the liquidation preference at the time of the conversion of that
share by the conversion price determined as described below.
From and after the fifth anniversary of the Issue Date of the Series
B Stock, the Company has the right to require the holders of Series B Stock, at
the Company's option, to convert any or all of their shares into shares of
Common Stock at the conversion price determined as described below.
The initial conversion price is calculated as of 90 days after the
Issue Date by dividing $7.6 billion by the number of fully diluted shares
outstanding of Common Stock, calculated on a modified treasury stock basis. The
number of fully diluted shares calculated on a modified treasury stock basis is
equal to the sum of: (a) the number of shares of Common Stock outstanding
immediately following the distribution of shares of Common Stock by Lucent
Technologies Inc. ("Lucent") to Lucent's shareholders (the "Distribution"),
which occurred on September 30, 2000; (b) all shares of Common Stock issuable
upon exercise or conversion of all options and convertible securities issued and
outstanding immediately following the Distribution that are held by employees,
officers and directors of the Company and with respect to which the exercise
price is less than or equal to the average trading price of the Common Stock
over the last 20 trading days during the period ending on the 90th day after the
Issue Date (the "Twenty Day Average Price"); and (c) all shares and restricted
shares of Common Stock and all shares of Common Stock issuable upon exercise or
conversion of all options and convertible securities issued, sold or granted
following the Distribution (other than those referred to in clause (b) above) to
employees, officers and directors of the Company and with respect to which the
exercise price (or in the case of shares or restricted shares, the purchase
price) is less than or equal to the Twenty Day Average Price (in the case of
clauses (b) and (c), after giving effect to the deemed receipt by the Company of
the aggregate exercise or conversion (or purchase) price of all such shares,
options or convertible securities and the deemed application of such amount to
acquire shares of Common Stock at the Twenty Day Average Price). The conversion
price is subject to customary anti-dilution adjustments.
VOTING RIGHTS. The holders of Series B Stock (a) will be entitled to
vote with the holders of Common Stock on all matters submitted for a vote of the
holders of Common Stock, voting together with the holders of Common Stock as one
class and (b) will be entitled to a number of votes equal to the number of votes
to which the shares of Common Stock issuable upon conversion of shares of Series
B Stock would have been entitled if such shares of Common Stock had been
outstanding at the time of the applicable vote and related record date.
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<PAGE>
Generally the holders of Series B Stock will be entitled to vote as
a single class with respect to (a) the amendment, alteration or repeal of any
provision of the Company's certificate of incorporation which adversely affects
the preferences, rights or powers of the Series B Stock; and (b) the
authorization of any securities which would rank senior to the Series B Stock or
parity securities in excess of $400 million.
WARRANTS
The Series A and B Warrants have an exercise price equal to 130% of
the initial conversion price for the Series B Stock. The Series A and B Warrants
are exercisable for 3.6% of the Total Shares Outstanding. "Total Shares
Outstanding" is calculated as of 90 days following the Issue Date and is equal
to the sum, adjusted to reflect the expected dilution resulting from the
issuance of shares of Common Stock upon exercise of the Series A and B Warrants,
of: (a) the number of shares of Common Stock outstanding as of the Issue Date
(the "Initial Outstanding Amount") and (b) the lesser of (i) 17.65% of the
Initial Outstanding Amount and (ii) the sum of (A) all shares of Common Stock
issuable upon exercise or conversion of all options and convertible securities
granted, sold or issued to directors, officers or employees of the Company as of
the Issue Date which at such date had an exercise or conversion price less than
or equal to the Exercise Price (defined below) as of the Issue Date, whether
such shares are vested or unvested and without regard to the relationship of
exercise or conversion price thereof to the market price of the Common Stock and
(B) all shares and restricted shares of Common Stock and all shares of Common
Stock issuable upon exercise or conversion of all options and convertible
securities granted, sold or issued to directors, officers or employees of the
Company after the Issue Date and on or prior to the 90th day following the Issue
Date which had at the date of grant, sale or issuance and exercise price (or in
the case of shares or restricted shares, a purchase price) less than or equal to
the Exercise Price at such date of grant, sale or issuance, whether such shares
are vested or unvested and without regard to the relationship of the exercise or
conversion price thereof to the market price of the Common Stock. The exercise
price for both the Series A and Series B Warrants is equal to 1.3 times the
initial conversion price of the Series B Stock (the "Exercise Price").
Of these warrants, Series A Warrants exercisable for 2.0% of such
Total Shares Outstanding have a four-year term and Series B Warrants exercisable
for 1.6% of such Total Shares Outstanding have a five-year term. During a period
commencing on a date that the Company expects will be no later than June 30,
2001, until the second anniversary of the Issue Date, if the market price of the
Common Stock exceeds 200%, in the case of the Series A Warrants, and 225%, in
the case of the Series B Warrants, of the Exercise Price for 20 consecutive
trading days, the Company can force the exercise of up to 50% of the Series A
Warrants and the Series B Warrants, respectively. The warrants are exercisable
immediately upon issuance and will have customary antidilution rights.
The Purchase Agreement contains a number of other material
provisions, which are summarized below.
BOARD SEAT. The shares of Series B Stock will be entitled to vote,
on an as-converted basis, with our Common Stock on any matters submitted to
holders of the Common
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Stock. The shares of Series B Stock also have limited rights to vote as a
separate class. So long as the Investors and their permitted transferees
maintain ownership of a combination of shares of Series B Stock and Common Stock
that, in the aggregate, on an as-converted basis, represents at least 50% of the
shares of Common Stock initially issuable on conversion of all the shares of
Series B Stock purchased, they will be permitted to designate for election one
individual to the Company's board of directors, and the Company's board of
directors will use reasonable efforts to cause such person to be elected. While
this ownership level is maintained, the Investors and their permitted
transferees also will be permitted to designate one observer to attend meetings
of the Company's board of directors.
PREEMPTIVE RIGHTS. As long as the Investors and their permitted
transferees maintain the minimum ownership interest necessary to designate a
director for election to the Company's board of directors, they will be entitled
to preemptive rights to purchase a percentage of any new shares of Common Stock
and Common Stock equivalents sold by the Company for cash in capital-raising
transactions.
STANDSTILL PROVISION. The Investors, their controlled affiliates and
any member of the Warburg Group (as defined below) are prohibited, for a period
of five years beginning on August 8, 2000, from acquiring additional shares of
Common Stock that, together with shares already owned by them, would exceed 9.9%
of the then outstanding Common Stock. The number of shares owned by the
Investors, their controlled affiliates and the members of the Warburg Group is
equal to the sum of: (a) the number of shares of Common Stock beneficially owned
by the Investors, their controlled affiliates and the members of the Warburg
Group, excluding any shares issuable with respect to any then unexercised
warrants; and (b) the number of shares of Common Stock issuable upon conversion
of the shares of Series B Stock beneficially owned by the Investors, their
controlled affiliates and the members of the Warburg Group, assuming the
liquidation preference of such shares of Series B Stock had accreted until the
fifth anniversary of the Issue Date.
The Investors, their controlled affiliates and any member of the
Warburg Group are prohibited, for a period of five years beginning on August 8,
2000, from taking certain actions that could result in a change-in-control of
the Company. The "Warburg Group" is defined in the Purchase Agreement to mean,
collectively, any investment fund that is an affiliate of WP.
The Company has agreed to file a shelf registration statement for
the registered sale of the Series B Stock, the Series A and B Warrants and the
shares of Common Stock issuable in respect of the Series B Stock and the Series
A and B Warrants.
The foregoing summary of the investment transaction is qualified in
its entirety by reference to the Purchase Agreement (including exhibits
thereto), a copy of which is set forth as Exhibit 2 and is incorporated herein
by reference.
Except as set forth above, none of the Reporting Entities nor, to
the best of their knowledge, any person listed in Schedule I, has any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a
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<PAGE>
merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; (c) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; (d) any change in the present Board of
Directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Company; (f) any other material change in the Company's business or
corporate structure; (g) any changes in the Company's charter, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those
enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) The Reporting Entities beneficially own shares of Common Stock
by virtue of their ownership of the Series B Stock and the Series A
and B Warrants (the "Securities"), which are convertible into or
exercisable for shares of Common Stock. As of October 2, 2000, the
Reporting Entities estimate that WP and EMW each beneficially owned
28,309,894 shares of Common Stock, assuming the full conversion and
exercise of the Securities. Also as of this date, the Reporting Entities
estimate that WPEP beneficially owned 26,752,849.83 shares of
Common Stock, assuming the full conversion and exercise of the Securities.
Of the shares beneficially owned by WP and EMW, the Reporting Entities
estimate that 1,557,044.17 shares represent the aggregate shares of Common
Stock beneficially held by WPNEPI, WPNEPII and WPNEPIII. By reason of WP's
and EMW's respective relationships with the Investors, under Rule 13d-3
under the Exchange Act, WP and EMW may be deemed to beneficially own all of
the shares of Common Stock which are beneficially owned by these entities.
Assuming the full conversion and exercise of the Securities into Common
Stock, as of October 2, 2000, the estimated 28,309,894 shares of Common
Stock beneficially held by the Group Members represented approximately
9.1% of the outstanding shares of Common Stock, after giving effect to the
new issuance of shares of Common Stock upon the full exercise and
conversion of the Securities into Common Stock and based on the
282,027,939 shares of Common Stock outstanding as of October 2, 2000 (as
set forth on the Form 4 filed by Lucent Technologies Inc. on October 10,
2000).
Assuming the full conversion and exercise of the Securities into Common
Stock, as of October 2, 2000, the estimated 26,752,849.83 shares of Common
Stock beneficially held by WPEP represented approximately 8.7% of the
outstanding shares of Common Stock, after giving effect to the new issuance
of shares of Common Stock upon the full exercise and conversion of the
Securities into Common Stock.
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<PAGE>
Assuming the full conversion and exercise of the Securities into Common
Stock, as of October 2, 2000, the estimated 1,557,044.17 shares of Common
Stock beneficially held by WPNEPI, WPNEPII and WPNEPIII represented 5.5% of
the aggregate shares of Common Stock beneficially held by the Group
Members.
The numbers used in this Item 5(a) and Item 5(b) are estimates. The actual
numbers may be materially higher or lower than the estimated numbers. The
actual numbers will be determined as of 90 days following October 2, 2000,
based on the conversion and exercise formulas summarized in Item 4 herein.
The Company, in the section "Ownership of Our Common Stock" in its
Information Statement (filed as Exhibit 99.1 to its Registration Statement
on Form 10 (File No. 1-15951)), estimated that the Securities owned by the
Investors would be initially convertible into and exercisable for
28,309,894 shares of Common Stock, using an assumed conversion ratio. Of
the 28,309,894 shares of Common Stock, the Company, in Note (B) in the
section "Unaudited Pro Forma Condensed Financial Statements" in its
Information Statement, estimated that approximately 17 million shares are
represented by the shares of Series B Stock beneficially held by the
Investors, using an assumed conversion ratio.
(b) The Investors have beneficial ownership over an estimated 28,309,894 shares
of Common Stock, of which WPEP has beneficial ownership over an estimated
26,752,849.83 shares of Common Stock and WPNEPI, WPNEPII and WPNEPIII have
beneficial ownership over an estimated 1,557,044.17 shares of Common Stock.
Of the 28,309,894 shares of Common Stock beneficially held by the
Investors, approximately 17 million shares are represented by the shares of
Series B Stock beneficially held by the Investors, which even if not
converted into Common Stock would in the aggregate be entitled to voting
power equivalent to approximately 17 million shares of Common Stock. WPEP,
WPNEPI, WPNEPII and WPNEPIII each share voting power and dispositive power
over their holdings of such shares with EMW and WP.
(c) Except for the Securities acquired pursuant to the Purchase Agreement and
the 19,512 shares of Common Stock beneficially held by Henry B. Schacht,
the Chairman of the Board of the Company (as reported on the Form 3 filed
by Mr. Schacht on October 10, 2000), during the last sixty days there were
no transactions in shares of Common Stock effected by the Reporting
Entities or, to the best of their knowledge, by any of the persons set
forth on Schedule I hereto.
(d) Except as set forth in this Item 5, no person other than each respective
record owner referred to herein of the Securities is known to have the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such Securities.
(e) Not applicable.
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<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
-----------------------------------
Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the
Group Members have entered into an agreement on October 12, 2000 with respect to
the joint filing of this statement and any amendment or amendments hereto (the
"Joint Filing Agreement"). The Joint Filing Agreement is attached hereto as
Exhibit 1 and incorporated herein by reference.
The Preferred Stock and Warrant Purchase Agreement among the Company
and the Investors was entered into on August 8, 2000 and is described herein in
Item 4, supra.
Except as referred to above, there are no contracts, arrangements,
understandings or relationships among the persons named in Item 2 or between
such persons and any other person with respect to any securities of the Company.
By virtue of the relationships among the Group Members as described
in Item 2, the Group Members may be deemed to be a "group" under the Federal
securities laws. Lionel I. Pincus disclaims any beneficial ownership of the
shares of Common Stock reported herein as being beneficially owned by the
Reporting Entities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
1. Joint Filing Agreement, dated as of October 12, 2000, by and
among Warburg, Pincus Equity Partners, L.P.; Warburg, Pincus &
Co.; E.M. Warburg Pincus & Co., LLC; Warburg, Pincus Netherlands
Equity Partners I, C.V.; Warburg, Pincus Netherlands Equity
Partners II, C.V.; and Warburg, Pincus Netherlands Equity
Partners III, C.V.
2. Preferred Stock and Warrant Purchase Agreement (including
exhibits thereto), dated as of August 8, 2000, by and among
Avaya Inc. and the Investors (incorporated by reference to
Exhibit 10.17 to Amendment No. 1 to the Registration Statement
on Form 10 of Avaya Inc., as amended (File No. 1-15951) filed
on August 9, 2000).
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<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and
belief, the undersigned certify that the information set forth in this statement
is true, complete and correct.
Dated: October 12, 2000
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Stephen Distler
-----------------------------------
Name: Stephen Distler
Title: Partner
WARBURG, PINCUS & CO.
By: /s/ Stephen Distler
-------------------------------------------
Name: Stephen Distler
Title: Partner
E.M. WARBURG, PINCUS & CO., LLC
By: /s/ Stephen Distler
-------------------------------------------
Name: Stephen Distler
Title: Member
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
C.V.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Stephen Distler
-----------------------------------
Name: Stephen Distler
Title: Partner
-14-
<PAGE>
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
C.V.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Stephen Distler
-----------------------------------
Name: Stephen Distler
Title: Partner
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS
III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:/s/ Stephen Distler
-----------------------------------
Name: Stephen Distler
Title: Partner
-15-
<PAGE>
INDEX OF EXHIBITS
1. Joint Filing Agreement, dated as of October 12, 2000, by and
among Warburg, Pincus Equity Partners, L.P.; Warburg, Pincus
& Co.; E.M. Warburg Pincus & Co., LLC; Warburg, Pincus
Netherlands Equity Partners I, C.V.; Warburg, Pincus
Netherlands Equity Partners II, C.V.; and Warburg, Pincus
Netherlands Equity Partners III, C.V.
2. Preferred Stock and Warrant Purchase Agreement (including
exhibits thereto), dated as of August 8, 2000, among Avaya
Inc. and the Investors (incorporated by reference to
Exhibit 10.17 to Amendment No. 1 to the Registration Statement
on Form 10 of Avaya Inc., as amended (File No. 1-15951) filed
on August 9, 2000).
-16-
