We are providing this information to assist stockholders in computing the tax basis in their Agere Systems stock following the reclassification and reverse stock split in 2005. This information represents our understanding of federal income tax laws and regulations, and does not constitute tax advice. It does not purport to be complete or to describe the tax consequences that may apply to particular stockholders. You should consult your own tax advisor regarding the particular tax consequences of the reclassification and reverse split applicable to you, including the applicability of any state, local or foreign tax laws.

As part of the reclassification and reverse stock split, the following steps were taken:

  • Step 1: Each share of Agere Class A common stock and Class B common stock became a share of new common stock. (The "reclassification")
  • Step 2: Each 10 shares of Agere's new common stock were combined into 1 share of new common stock. (The "reverse stock split")
  • Step 3: Stockholders received cash instead of any fractional share to which they would otherwise have been entitled as a result of Step 2.
Your receipt of cash instead of a fractional share in Step 3, or the proceeds from the sale of any shares, may be a taxable event for you and may cause you to recognize capital gain or loss under U.S. federal and state income tax laws. In order to determine the amount of any gain or loss, you need to know the tax basis of your Agere shares.

The following information will help you compute your tax basis in your new Agere common stock, including any fraction for which you received cash. This information assumes that you know your tax basis in the Agere Class A common stock and/or Class B common stock you held before the reclassification and the reverse stock split. If you received your Agere shares as part of the spin-off of Agere from Lucent Technologies, you should have already calculated that tax basis. Lucent sent you a form for this purpose that you might find with your 2002 tax returns or with your investment papers.

Calculate your tax basis for your new Agere common stock as follows:
  • STEP 1 - Reclassification: In the reclassification, each share of your Class A common stock and Class B common stock became a share of new common stock. Your tax basis in your shares of new common stock received in the reclassification is equal to your tax basis in the shares of Class A common stock and Class B common stock from which your shares of new common stock were derived.

    Example: If you had 75 shares of Class A common stock with a tax basis of $75 ($1 per share) and 100 shares of Class B common stock with a tax basis of $145 ($1.45 per share), you would have a tax basis of $75 in 75 of your shares of new common stock received in the reclassification ($1 per share) and you would have a tax basis of $145 in the remaining 100 shares of new common stock received in the reclassification ($1.45 per share).

      Before  Reclassification   After  Reclassification  
    Example 75 Old Class A Shares  =  75 New Common Shares  
    Your Information      =      Box 1


    Example Tax Basis of $1.00 per
    Old Class A Share    		  =  Tax Basis of $1.00 per
    New Common Share    		  
    Your Information $   =  $  Box 2


    Example 100 Old Class B Shares  =  100 New Common Shares  
    Your Information      =      Box 3


    Example Tax Basis of $1.45 per
    Old Class B Share    		  =  Tax Basis of $1.45 per
    New Common Share    		  
    Your Information $   =  $  Box 4


  • STEP 2 - Reverse Split: In the reverse split, each 10 shares of your new common stock were combined into 1 share of new common stock. Your tax basis in each share of new common stock after the reverse split would be equal to the tax basis in each share of new common stock prior to the reverse split multiplied by 10.

    Example: Using the example above, the 75 shares of new common stock attributable to Class A common stock would become 7.5 (75÷10) shares of new common stock after the reverse split, with a tax basis of $10 ($1x10) per share, and the 100 shares of new common stock attributable to Class B common stock would become 10 (100÷10) shares of new common stock after the reverse split with a tax basis of $14.50 ($1.45x10) per share.

    To compute the number of shares of new common stock you
    held after the reverse stock split that relates to your holdings of
    Class A common stock, divide the number in box 1 by 10    		     Box 5
    To compute your per share tax basis in the shares shown
    in box 5, multiply the amount in Box 2 by 10    		 $  Box 6
    To compute the number of shares of new common stock you
    held after the reverse stock split that relates to your holdings of
    Class B common stock, divide the number in box 3 by 10    		     Box 7
    To compute your per share tax basis in the shares shown
    in box 7, multiply the amount in Box 4 by 10    		 $  Box 8


  • STEP 3 - Fractional shares: You may have received cash instead of any fractional share to which you would otherwise have been entitled after the reverse split. Your tax basis in the fractional share should be equal to the tax basis of one share of the stock that resulted in a fraction, multiplied by the relevant fraction.

    Example: Continuing to use our example, you would have a .5 fractional share with respect to the 7.5 shares of new common stock, and the tax basis for this fractional share will be $5.

      Your Information  
    Fraction of a share:     Box 9
    Your per share tax basis in the fraction
    (Insert the amount from Box 6 or Box 8, as applicable):    		     Box 10
    To compute your tax basis in the fraction of
    a share, multiply the amount in Box 9 by Box 10:    		 $   Box 11
Your gain or loss in the fraction of a share, for tax purposes, would be the difference between the amount you received for the fraction and your tax basis in the fraction of a share, as determined above. If this difference is positive, you have a gain. If it is negative you have a loss.

If you are a registered shareholder with Computershare and were mailed a check, your fractional share proceeds were calculated at the rate of $12.30 per full share. If you own your shares through a bank or broker you may have received a different rate.

Please note that if you acquired your Agere (or Lucent or AT&T) shares on different dates, you will need to perform these calculations for each separate acquisition. Because of the complicated nature of these calculations and the fact that a number of special circumstances, including acquisition of shares as a gift or through an employee stock purchase plan, require special calculations, we strongly recommend that you consult your tax advisor.