Exhibit 10.31

SEPARATION
  AGREEMENT AND GENERAL RELEASE

This SEPARATION AGREEMENT
  AND GENERAL RELEASE (the “Agreement”) is entered into as of November
  16, 2005 (the “Effective Date”), by and between Agere Systems Inc.,
  a Delaware corporation (together with its predecessors and its successors and
  assigns, the “Company” or “Agere”), and Kevin P. Pennington
  (the “Employee”).
  


W I T N E
  S S E T H:


  WHEREAS, the Employee is currently employed by the Company;

WHEREAS,
  the Employee and the Company have decided to (a) place the Employee on a paid
  leave of absence (“LOA”) for 24 months beginning on December 1,
  2005 as set forth in Section 1 below and (b) terminate their employment relationship
  effective after such LOA; 

WHEREAS,
  the Employee and the Company (the “Parties”) have negotiated and
  agreed to a final settlement of their respective rights, obligations and liabilities;
  and

WHEREAS,
  the Parties have agreed that the Company’s Officer Severance Policy attached
  hereto as Exhibit A (the “Officer Severance Policy”), except as
  otherwise modified by this Agreement, shall be applicable to the Employee.

NOW,
  THEREFORE, for good and valuable consideration, the receipt and sufficiency
  of which is hereby acknowledged, the Employee and the Company hereby agree as
  follows:

1.        FY
  05 Bonus; Leave of Absence Payments; Severance. 

(a)       Employee
  shall not be eligible to participate in the Company’s FY05 bonus program
  for executive committee members.

(b)       Subject
  to the terms and conditions of this Agreement and in exchange for the Employee
  executing this Agreement, the Company agrees to place the Employee on a LOA
  for 24 months effective from December 1, 2005 through November 30, 2007 at which
  time the Employee will terminate from the Company’s payroll. During the
  LOA, the Company shall pay the Employee leave of absence payments (the “LOA
  Payments”) in an amount equal to Five Hundred and Forty-Five Thousand
  Dollars ($545,000). The LOA Payments shall be made as follows:

(i)       For
  the six month period from December 1, 2005 to May 31, 2006, no LOA Payment shall
  be made. On the first payroll date on or after June 1, 2006, the Company shall
  pay the Employee a lump sum Payment in an amount equal One Hundred and Thirty-Six
  Thousand Two Hundred and Fifty Dollars ($136,250);

(ii)     On
  each subsequent monthly payment cycle after June 1, 2006, the Company shall
  pay the Employee a Payment in an amount equal to



Page 1 of 6







Twenty-Two
  Thousand Seven Hundred and Eight Dollars and Thirty-Three Cents ($22,708.33)
  for a total of eighteen months.

(c)        In
  addition to the LOA Payments, on or before December 31, 2005 the Company shall
  pay the Employee a severance payment in an amount equal to Five Hundred and
  Forty-Five Thousand Dollars ($545,000) (the “Severance Payment,”
  and together with the LOA Payments, the “Payments”).


  (d)       The Payments shall be made in the
  ordinary course of the Company’s payroll cycle; provided, however
  that no Payment will be made prior to the Expiration Date (as defined in paragraph
  8 of this Agreement). The Employee acknowledges and agrees that the Payments
  (i) represent the gross amount before all applicable federal, state and local
  withholding taxes that are required to, and will, be deducted by the Company,
  and (ii) except as set forth in Sections 2, 3 and 4 below, are in consideration
  of all amounts owed by the Company to the Employee, including without limitation
  any amounts that may be due to the Employee under any Company benefit or welfare
  plan or policies. The Employee will not accrue any vacation or personal days
  while on a LOA. Payment for accrued and unused vacation and personal days will
  be paid concurrent with the first Payment hereunder in accordance with the Company’s
  vacation policy.

(e)       In
  the event of the death of the Employee while on leave of absence, then any portion
  of the cash Payments not yet paid will be paid, in a lump sum, to the Employee’s
  estate. Any unvested stock options and restricted stock units that would have
  otherwise vested during the remaining term of the leave of absence will vest
  immediately upon the death of the Employee and become exercisable by the Employee’s
  estate. Company provided medical coverage will end upon the death of the Employee
  at which time any dependents covered at that time can continue coverage under
  the Consolidated Omnibus Budget Reconciliation Act (Cobra) of 1986.

2.        Equity.
  The Employee agrees to forfeit all of his stock options and restricted stock
  grants except for (a) the 50,000 stock options granted on November 1, 2002 (strike
  price $9.95), (b) the 60,000 stock options granted on December 1, 2003 (strike
  price $35.45) and (c) the 60,000 stock options granted on December 1, 2004 (strike
  price $13.80) (the “Non-Forfeited Grants”). Except for the vesting
  provisions set forth in the Officer Severance Policy, nothing herein shall be
  deemed to supercede or replace any provision of any applicable plan or agreement
  pursuant to which any stock option or restricted stock unit was granted to the
  Employee.

3.        Health
  and Welfare Benefits. Except for the continuation of coverage set forth
  in the Officer Severance Policy, nothing herein shall be deemed to supercede
  or replace any provision of any health or welfare plan applicable to the Employee.
  In addition, the terms of that relocation/housing letter agreement related to
  the sale of the Employee’s primary residence are incorporated and made
  part of this Agreement.

4.        Retirement
  Benefits. Except as set forth in the Officer Severance Policy, nothing herein
  shall be deemed to supercede or replace any provision of any retirement plan
  applicable to the Employee.




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5.        Non-Solicitation;
  Non-Compete and Cooperation. 


  (a)       Until November 30, 2007, the Employee
  shall not, without the prior written consent of the Company’s Chief Executive
  Officer, (i) directly or indirectly solicit or employ (or encourage any company
  or business organization in which he is an officer, employee, partner, director,
  consultant or member of a technical advisory board to solicit or employ) or
  (ii) refer to any employee search firms, any person who was employed by the
  Company on the Effective Date. 

(b)       Until
  November 30, 2007, the Employee shall not, without the prior written consent
  of the Company’s Chief Executive Officer, at any time or for any reason,
  anywhere in the world, directly or indirectly (i) engage in any business or
  activity, whether as an employee, consultant, partner, principal, agent, representative,
  stockholder (except as a holder of less than 5% of the combined voting power
  of the outstanding stock of a publicly held company) or in any other individual,
  corporate or representative capacity, or render any services or provide any
  advice to any business, activity, person or entity, if the Employee knows or
  reasonably should know that such business, activity, service, person or entity,
  directly or indirectly, competes in any material manner with the Company’s
  business, or (ii) meaningfully assist, help or otherwise support any person,
  business, corporation, partnership or other entity or activity, whether as an
  employee, consultant, partner, principal, agent, representative, stockholder
  (other than in the capacity as a stockholder of less than 5% of the combined
  voting power of the outstanding shares of stock of a publicly held company)
  or in any other individual, corporate or representative capacity, to create,
  commence or otherwise initiate, or to develop, enhance or otherwise further,
  any business or activity if the Employee knows or reasonably should know that
  such business, activity, service, person or entity, directly or indirectly,
  competes in any material manner with the Company’s business. 

(c)       If
  at any time the Employee violates the provisions of Sections 5(a) or 5(b) above,
  any amounts remaining unpaid under the terms of this Agreement as well as any
  benefits provided for in the Agreement (other than those from qualified retirement
  or welfare plans) and any continuing vesting of stock options or restricted
  stock units, if any, shall immediately be forfeited and terminated, and any
  amounts already paid by the Company to the Employee in accordance herewith,
  except for the sum of One Thousand Dollars ($1,000) shall, at the sole discretion
  of the Company, be required to be repaid by the Employee to the Company within
  ten (10) business days of the Company’s request in writing therefore.
  This provision shall not affect the Company’s right to otherwise specifically
  enforce any provision relating to non-solicitation or non-competition that is
  in this Agreement or in any other agreement, document or plan applicable to
  the Employee.

(d)       The
  Employee hereby agrees that, from time to time upon the reasonable request of
  the Company, the Employee shall assist the Company in connection with any pending
  or future dispute, litigation, arbitration or similar proceeding or investigation
  or any regulatory requests or filings involving the Company, any of its employees
  or directors or the employees and directors of any subsidiary.

6.        Non-Disparagement.
  

The
  Employee agrees that he shall not (i) testify or otherwise provide testimony
  in any form at or for any legal or administrative proceeding, including testimony
  related to any matter involving the Company, unless legally compelled to do
  so or (ii) make




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statements
  to third parties, the public, the press or the media or any administrative agency,
  in either case that would portray the Company in an adverse light or disparage
  the Company, or cause injury to the Company with respect to events occurring
  prior to or after the Effective Date.

7.        Confidentiality.
  Employee hereby agrees and covenants, that:

(a)       he
  shall not divulge to any person or entity other than the Company, without express
  written authorization of the Company’s Chief Executive Officer, any proprietary
  or confidential information, whether written or oral, received or gained by
  him in the course of his employment by the Company or of his duties with the
  Company (“Confidential Information”), nor shall he make use of any
  such Confidential Information on his own behalf or on behalf of any other person
  or entity, for so long as such Confidential Information is not known to the
  general public; and

(b)       he
  shall return or cause to be returned to the Company’s Chief Executive
  Officer any and all property of the Company of any kind or description whatsoever,
  including, but not limited to, any Confidential Information, which has been
  furnished to him or is held by him, at his residence or elsewhere, and shall
  not retain any copies, duplicates, reproductions or excerpts thereof.

8.        Release.
  In consideration of the Company’s entering into this Agreement and the
  payments and benefits set forth herein, the Employee, on behalf of himself and
  his heirs, executors, administrators, successors and assigns, knowingly and
  voluntarily waives, releases and forever discharges the Company, each of its
  subsidiaries or affiliated companies, their respective current and former officers,
  employees, agents and directors, and any successor or assign of any of the foregoing,
  from any claim, charge, action or cause of action any of them may have against
  any such released person, whether known or unknown, from the beginning of time
  through the date of this Agreement based upon any matter, cause or thing whatsoever
  related to or arising out of his employment by the Company or his termination
  other than claims arising out of a breach of this Agreement or any claim that
  cannot be waived by law. All such claims are forever barred by this Agreement.

This release and waiver
  includes, but is not limited to, any rights or claims under United States federal,
  state or local law, for wrongful or abusive discharge, for breach of any contract,
  or for discrimination based upon race, color, ethnicity, sex, age, national
  origin, religion, disability, sexual orientation, or any unlawful criterion
  or circumstance, including, but not limited to, rights or claims under the Family
  and Medical Leave Act, claims of discrimination under the Employee Retirement
  Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act,
  the Workforce Adjustment Retraining Notification Act, Title VII of the Civil
  Rights Act of 1964, the Americans with Disabilities Act, Section 1981 through
  1988 of the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Age
  Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
  Act, the Rehabilitation Act of 1973, Executive Order 11246 and any other executive
  order, the Fair Labor Standards Act and its state and local counterparts, the
  Uniform Services Employment and Reemployment Rights Act, and the Immigration
  Reform Control Act, all as amended. The Employee confirms that he has no claim
  or basis for a claim whatsoever against the Company with respect to any such
  matters related to or arising out of his employment by the Company or his termination.



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The Employee affirms that
  he has been given at least 21 days within which to consider this release and
  its consequences, that he has seven days following his signing of this Agreement
  (the seventh day being the “Expiration Date”) to revoke and cancel
  the terms and conditions contained herein and the terms and conditions of this
  Agreement shall not become effective or enforceable until the seven-day revocation
  and cancellation period has expired, and that, prior to the execution of this
  Agreement, he has been advised by the Company to consult with an attorney of
  his choice concerning the terms and conditions set forth herein. Any revocation
  or cancellation of this Agreement by the Employee pursuant to this paragraph
  shall be in writing delivered to the Company.

9.        Entire
  Agreement. This Agreement contains the entire agreement between the Parties
  concerning the subject matter hereof and supersedes all prior agreements, understandings,
  discussions, negotiations, and undertakings, whether written or oral, between
  the Parties with respect thereto. This Agreement may not be modified or amended
  except by a writing signed by both Parties.

10.      No
  Admission. The parties acknowledge and agree that this Agreement does not
  constitute and should not be construed in any way as an admission by any other
  party of (a) any wrongdoing or liability whatsoever, (b) any violation of the
  Employee’s rights or those of any other person, or (c) any violation of
  any order, law, statute, duty or contract. The Company specifically disclaims
  any liability for any alleged wrongdoing or liability, for any alleged violation
  of my rights or those of any other person, or for any alleged violation of any
  order, law, statute, duty or contract.

11.      Severability.
  In the event that any provision or portion of this Agreement shall be determined
  to be invalid or unenforceable for any reason, the remaining provisions or portions
  of this Agreement shall be unaffected thereby and shall remain in full force
  and effect to the fullest extent permitted by law.

12.      Survival;
  Termination. The respective rights and obligations of the Parties hereunder
  shall survive any termination of this Agreement to the extent necessary for
  the intended preservation of such rights and obligations. This Agreement may
  be terminated by the Company if the Employee breaches any provision hereof.
  In addition, the termination provisions set forth in the Officer Severance Policy
  shall apply.

13.      Interpretation;
  Governing Law. This Agreement shall be interpreted in accordance with the
  plain meaning of its terms and not strictly for or against any person or entity.
  To the extent that federal law controls the interpretation or enforceability
  of any provision of this Agreement, this Agreement shall be construed and enforced
  in accordance with federal law. Otherwise, this Agreement shall be governed
  by and construed and interpreted in accordance with the laws of the Commonwealth
  of Pennsylvania without reference to the principles of conflicts of law.

14.      Counterparts.
  This Agreement may be executed in one or more counterparts, each of which shall
  be deemed to be an original but all of which together shall constitute one and
  the same instrument. Signatures delivered by facsimile shall be effective for
  all purposes.



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BY SIGNING AND DELIVERING THIS AGREEMENT, THE EMPLOYEE STATES:

(A)        HE
  HAS READ IT AND UNDERSTANDS IT AND HAS AT LEAST 21 DAYS TO CONSIDER IT AND A
  PERIOD OF SEVEN DAYS AFTER EXECUTING IT TO REVOKE IT; 

(B)        HE
  AGREES WITH IT AND IS AWARE THAT HE IS GIVING UP IMPORTANT RIGHTS, INCLUDING
  RIGHTS PROVIDED BY THE OLDER WORKERS BENEFIT PROTECTION ACT, FOR CONSIDERATION
  TO WHICH HE WAS NOT ALREADY OTHERWISE ENTITLED; 

(C)        HE
  WAS ADVISED TO, AND IS AWARE OF HIS RIGHT TO CONSULT WITH AN ATTORNEY BEFORE
  SIGNING IT; AND

(D)        HE
  HAS SIGNED IT KNOWINGLY AND VOLUNTARILY.

 IN WITNESS WHEREOF, the
  Parties have executed this Agreement on the date first written above.

 


	 	AGERE
      SYSTEMS INC.
	 	 	 	 
	 	 	 	 
	 	By: 	/s/
      Richard L. Clemmer
	 	Name: 	 	Richard L. Clemmer
	 	Title: 	 	President and
      Chief Executive 

      Officer
	 	 	 	 
	 	 	 	 
	 	By: 
    	/s/
      Kevin P. Pennington
	 	Name: 	 	Kevin P. Pennington





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Exhibit
  A - Agere Officer Severance Policy

	Eligibility	  	•  	Agere
      Officer status.
	 	•
      	Triggered
      by (a) Company initiated termination, other than for “Cause”
      as defined on page 2, or (b) as described under the “Change in Control
      Provisions” on page 2.
	 	•
      	Contingent
      upon signing the standard, Agere Release Agreement (including non-compete,
      non-solicitation provisions).
	 	•
      	All
      payments and benefits listed below will be offset by any individually negotiated
      or legally required arrangement.
	 	 	 	 	 
	Leave
      of

      Absence Payment	 	•
      	24
      months of base salary and target bonus.
	 	•
      	Base
      salary will be paid monthly. Target bonus will be paid annually in December.
      Both payments are benefits bearing.
	 	 	 	 	 
	Equity	 	Stock
      Options
	 	•
      	Options
      continue vesting as scheduled during the 24 month period.
	 	•
      	
      At end of the 24 month period, your employment will end and options will
      follow normal termination provisions:
	 	 	   -  	Pension
      eligible — Keep vested remainder of term; unvested options cancel;
	 	 	   -  	Not Pension
      eligible — 90 days to exercise vested; unvested options cancel.
	 	 	 	 
	 	Restricted
      Stock
	 	•
      	Restricted
      stock continues vesting as scheduled during the 24 month period.
	 	 	 	 
	 	ESPP
	 	•
      	Your
      participation will continue through payroll deductions.
	 	 	 	 	 
	Retirement
      Benefits   	 	Service
      Pension
	 	Retirement
      eligible:     Your severance pay will count towards
      your pension. Pension payments begin after termination of this arrangement.
	 	 	 	 
	 	Not
      retirement eligible:   Deferred vested employees can elect
      to begin payment at the termination of this arrangement. The severance period
      can be used to accrue service/age toward achieving pension eligibility.
	 	 	 	 
	 	Cash
      Balance Pension
	 	•
      	Severance
      pay will count towards the cash balance plan. The cash balance is payable
      at the end of the 24 month period or later at employee election.
	 	 	 	 
	 	401(k)
	 	•
      	Payroll
      deductions continue
	 	 	 	 	 
	Health
      and

      Welfare Benefits	 	•
      	Medical,
      Dental, Disability, Life Insurance, Car Allowance, Financial Counseling
      benefits continue the same as actively employed Officers.
	 	•
      	Company
      credit cards, home office equipment, voice mail and e-mail will be cancelled
      at the beginning of the 24 month period.





Exhibit A – Page 1 of 2







	Termination

      Provisions	    	•  	 In
      the event you need to terminate this arrangement during the 24 month leave
      period for any reason (including conflict with another employer), there
      will be no acceleration of any remaining unpaid amounts of base salary or
      target bonus and any such unpaid amounts will be forfeited. The normal
      “voluntary” termination provisions for the stock and benefit
      plans will apply. 
	 	 	 	 	 	 
	Change
      in Control   

      Provisions	 	•	If
      a Change in Control (as defined in the 2001 Long Term Incentive Plan or
      its successor plan as in effect immediately before the Change in Control)
      shall occur, this policy will remain in effect and
	 	 	 	 	 	 
	 	 	 	(a)  	you
      will also be entitled to the benefits of this policy if you terminate your
      employment within three months of an event constituting Good Reason. Good
      Reason is defined as follows:
	 	 	 	 	 	 
	 	 	 	 	          (i)          	the
      assignment to you by the Board of Directors or another representative of
      the Company of duties which represent a material decrease in responsibility
      and are materially inconsistent with the duties associated with your position,
      any reduction in your job title, or a material negative change in the level
      of Officer to whom you report, or
	 	 	 	 	 	 
	 	 	 	 	          (ii)	a material
      negative change in the terms and conditions of your employment, including
      a reduction by the Company of your annual base salary or a material decrease
      in your target opportunity for a Short Term Incentive Award.
	 	 	 	 	 	 
	 	 	 	;
      and
	 	 	 	 	 	 
	 	 	 	(b)	Notwithstanding
      anything to the contrary in this policy, in the event that you become subject
      to the tax (the “Excise Tax”) imposed by Section 4999 of the
      Internal Revenue Code of 1986 (or any similar tax that may hereafter be
      imposed), the Company will pay you, at each time you become subject to an
      Excise Tax or additional Excise Tax, an amount in addition to any amount
      or benefit you receive or are deemed to have received that results in Excise
      Tax, such that the net amount retained or deemed received by you, after
      deduction of any Excise Tax on such amount or benefit and any federal, state
      and local income tax and Excise Tax upon the payment of any additional amount
      provided for by this paragraph, shall be equal to the amount of such payment
      or benefit. This paragraph applies to any payment or benefit you may receive
      or be deemed to have received from the Company that subjects you to Excise
      Tax, even if that payment or benefit is not provided for by this policy.





	“Cause”
        is defined as:

	     	(i)	violation
      of Agere’s code of conduct;
	 	(ii)	conviction of (including
      a plea of guilty or nolo contendere) of a felony or any crime of theft,
      dishonesty or moral turpitude, or
	 	(iii)  	gross omission or gross
      dereliction of any statutory or common law duty of loyalty to Agere.





Exhibit A – Page 2 of 2