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                                                                    EXHIBIT 10.5
                                                                         [DRAFT]



                  AGERE SYSTEMS INC. SHORT TERM INCENTIVE PLAN


         SECTION 1. PURPOSE. The purpose of the Agere Systems Inc. Short Term
Incentive Plan (the "Plan") is to provide Officers of Agere Systems Inc. (the
"Company") and its affiliates with incentive compensation based upon the level
of achievement of financial and other performance criteria. The Plan will
enhance the ability of the Company and its affiliates to attract individuals of
exceptional managerial talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.

         SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:

         (a) "AWARD" means a cash payment.

         (b) "BOARD" means the Board of Directors of the Company.

         (c) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time and any successor thereto.

         (d) "COMMITTEE" means the Corporate Governance and Compensation
Committee of the Board (or any successor committee).

         (e) "COVERED EMPLOYEE" means a "covered employee" within the meaning of
Section 162(m) of the Code.

         (f) "NET INCOME" means the net income of the Company as determined
under generally accepted accounting principles, excluding (a) extraordinary
items (net of applicable taxes); (b) cumulative effects of changes in accounting
principles; (c) securities gains and losses (net of applicable taxes); and (d)
nonrecurring items (net of applicable taxes) including, but not limited to,
gains or losses on asset dispositions and sales of divisions, business units or
subsidiaries, restructuring charges, gains and losses from qualified benefit
plan curtailments and settlements, and income or expenses related to deferred
tax assets.

         (g) "OFFICER" means any employee of the Company or any affiliate
holding a position above the executive ("E Band") level or any salary grade
level that the Committee determines, in its sole discretion, is the equivalent
thereof.

         (h) "OUTSIDE DIRECTORS" means those members of the Board who are
"outside directors" within the meaning of Section 162(m) of the Code.

         (i) "PARTICIPANT" means any person selected by the Committee to
participate in the Plan.
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                  AGERE SYSTEMS INC. SHORT TERM INCENTIVE PLAN

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         (j) "PERFORMANCE YEAR" means the fiscal year in which a Participant
provides services on account of which the Award is made.

         (k) "PERSON" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.

         (l) "TARGET AWARD" means an Award level that may be paid if certain
performance criteria are achieved in the Performance Year.

         SECTION 3. ELIGIBILITY. Persons employed by the Company or any of its
affiliates during a Performance Year in active service at an Officer level for
all or any part of the Performance Year are eligible to be Participants under
the Plan for such Performance Year (whether or not so employed or living at the
date an Award is made) and may be considered by the Committee for an Award. An
Officer is not rendered ineligible to be a Participant by reason of being a
member of the Board.

         SECTION 4. AWARDS-GENERAL. The Committee will establish Target Awards
for Participants at the beginning of each Performance Year and the performance
criteria to be applicable to Awards for such Performance Year. The performance
criteria utilized by the Committee may be based on individual performance,
earnings per share, other Company and business unit financial objectives,
customer satisfaction indicators, operational efficiency measures, and other
measurable objectives tied to the Company's success or such other criteria as
the Committee shall determine. Awards will be made by the Committee following
the end of each Performance Year. Awards shall be paid after the end of the
Performance Year, except to the extent that a Participant has made an election
to defer the receipt of such Award pursuant to the Company's deferred
compensation plan. The Award amount with respect to a Participant shall be
determined in the sole discretion of the Committee, or, in the case of an Award
to a Participant who is not a Covered Employee, in the sole discretion of the
Committee or such person or committee empowered by the Committee or Board. The
determination of the Award amount for each Participant shall be made at the end
of each Performance Year and may be less than (including no Award) or, in the
case of a Participant who is not a Covered Employee, greater than the Target
Award.

         SECTION 5. AWARDS TO COVERED EMPLOYEES.

         (a) If the Committee determines at the time a Target Award is
established for a Participant that such Participant is, or may be as of the end
of the tax year for which the Company would claim a tax deduction in connection
with such Award, a Covered Employee, then the Committee may provide that this
Section 5 is applicable to such Award under such terms as the Committee shall
determine.

          (b) If an Award is subject to this Section 5, then the payment of cash
pursuant thereto shall be subject to the Company having a level of Net Income
for the applicable Performance Year set by the Committee within the time
prescribed by Section 162(m) of the Code or the
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                  AGERE SYSTEMS INC. SHORT TERM INCENTIVE PLAN

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regulations thereunder in order for the level to be considered
"pre-established". The Committee may, in its discretion, reduce the amount of
such an Award at any time prior to payment based on such criteria as it shall
determine, including but not limited to individual merit and the attainment of
specified levels of one or any combination of the following: net cash provided
by operating activities, earnings per share from continuing operations,
operating income, revenues, gross margin, return on operating assets, return on
equity, economic value added, stock price appreciation, total shareowner return
(measured in terms of stock price appreciation and dividend growth), or cost
control, of the Company or the affiliate or division of the Company for or
within which the Participant is primarily employed.

          (c) Notwithstanding any contrary provision of this Plan, the Committee
may not adjust upwards the amount payable pursuant to any Award subject to this
Section 5, nor may it waive the achievement of the Net Income requirement
contained in Section 5(b), except in the case of the death or disability of the
Participant.

         (d) Prior to the payment of any Award subject to this Section 5, the
Committee shall certify in writing that the Net Income requirement applicable to
such Award was met.

          (e) The Committee shall have the power to impose such other
restrictions on Awards subject to this Section 5 as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code, the regulations promulgated thereunder, and any successors thereto.

         SECTION 6. OTHER CONDITIONS.

         (a) No person shall have any claim to an Award under the Plan and there
is no obligation for uniformity of treatment of Participants under the Plan.
Awards under the Plan may not be assigned or alienated.

         (b) Neither the Plan nor any action taken hereunder shall be construed
as giving to any Participant the right to be retained in the employ of the
Company or any affiliate.

         (c) The Company or any affiliate shall have the right to deduct from
any Award to be paid under the Plan any federal, state or local taxes required
by law to be withheld with respect to such payment.

         (d) Awards under the Plan will, to the extent provided therein, be
included in base compensation or covered compensation under the retirement
programs of the company for purposes of determining pensions, retirement and
death related benefits.

         (e) In the event an Award under the Plan is deferred under the
Company's deferred compensation plan, it will be reflected in the calculations
of the above benefit plans as if it had been paid as scheduled and not deferred.
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                  AGERE SYSTEMS INC. SHORT TERM INCENTIVE PLAN

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          (f) Notwithstanding any contrary provision of the Plan, the maximum
amount which may be paid to a Participant in any Performance Year is $9 million.

         SECTION 7. DESIGNATION OF BENEFICIARIES. A Participant may, if the
Committee permits, designate a beneficiary or beneficiaries to receive all or
part of the Award which may be made to the Participant, or may be payable, after
such Participant's death. A designation of beneficiary shall be made in
accordance with procedures specified by the Company and may be replaced by a new
designation or may be revoked by the Participant at any time. In case of the
Participant's death, an Award with respect to which a designation of beneficiary
has been made (to the extent it is valid and enforceable under applicable law)
shall be paid to the designated beneficiary or beneficiaries. Any Award granted
or payable to a Participant who is deceased and not subject to such a
designation shall be distributed to the Participant's estate. If there shall be
any question as to the legal right of any beneficiary to receive an Award under
the Plan, the amount in question may be paid to the estate of the Participant,
in which event the Company or its affiliates shall have no further liability to
anyone with respect to such amount.

        SECTION 8.PLAN ADMINISTRATION.

        (a) The Committee shall have full discretionary power to administer and
interpret the Plan and to establish rules for its administration (including the
power to delegate authority to others to act for and on behalf of the Committee)
subject to such resolutions, not inconsistent with the Plan, as may be adopted
by the Board, except that the Committee (or any subcommittee thereof) shall have
the exclusive authority to exercise any such power with respect to Awards to
which Section 5 is applicable. In making any determinations under or referred to
in the Plan, the Committee (and its delegates, if any) shall be entitled to rely
on opinions, reports or statements of employees of the Company and its
affiliates and of counsel, public accountants and other professional or expert
persons.

         (b) The Plan shall be governed by the laws of the State of Delaware and
applicable Federal law.

         SECTION 9. MODIFICATION OR TERMINATION OF PLAN. The Board may modify or
terminate the Plan at any time, effective at such date as the Board may
determine.