Exhibit 10.b


 


TELLABS, INC.


 


EXECUTIVE CONTINUITY AND
PROTECTION PROGRAM


 


1.                                       PURPOSE
OF PROGRAM.  The purpose of the Tellabs,
Inc. Executive Continuity and Protection Program (the “Program”) is to attract
and retain well-qualified individuals as executives and key personnel of
Tellabs, Inc. and/or its Subsidiaries, and to provide a benefit to each such
individual if his/her employment is terminated in connection with a Change in
Control (as defined below).  The Program
is intended to qualify as a “top-hat” plan under the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), in that it is intended to be an “employee
benefit plan” (as such term is defined under Section 3(3) of ERISA) which is
unfunded and provides benefits only to a select group of management or highly
compensated employees of the Company and/or its Subsidiaries.


 


2.                                       DEFINITIONS.  The following terms shall have the following
meanings unless the context indicates otherwise:


 


(a)                                  “AAA”
shall have the meaning ascribed to such term in Section 12(k).


 


(b)                                 “Applicable
Benefits Schedule” with respect to a Participant shall mean the Benefits
Schedule designated by the Committee as applicable to the Participant.


 


(c)                                  “Applicable
Rate” shall have the meaning ascribed to such term on the Applicable Benefits
Schedule.


 


(d)                                 “Beneficiary”
shall mean a beneficiary designated in writing by a Participant to receive
Change in Control Severance Benefits in accordance with Section 6(d) below, and
if no beneficiary is designated by the Participant, then the Participant’s
estate shall be deemed to be the Participant’s designated beneficiary.


 


(e)                                  “Benefits
Schedule” shall mean a separate Benefits Schedule adopted as part of the
Program, which Schedule sets forth certain provisions relating to the determination
of eligibility for and/or the amount of Change in Control Severance Benefits
payable under the Program.


 


(f)                                    “Board”
shall mean the Board of Directors of the Company.


 


(g)                                 “Change
in Control” means the first of the following events to occur:


 


(i)                                     Any
“person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), excluding for this purpose, the
Company or any Subsidiary of the Company, or any employee benefit plan of the
Company or any Subsidiary of the Company, or any person or entity organized,
appointed or established by the Company for or pursuant to the terms of any
such plan which acquires beneficial ownership of voting securities of the
Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company’s then outstanding securities; provided,


 





















 


however, that no Change in
Control will be deemed to have occurred as a result of a change in ownership
percentage resulting solely from an acquisition of securities by the Company;
and provided further that no Change in Control will be deemed to have occurred
if a person inadvertently acquires an ownership interest of twenty percent
(20%) or more but then promptly reduces that ownership interest below twenty
percent (20%);


 


(ii)                                  During
any two (2) consecutive years, individuals who at the beginning of such two
(2)-year period constitute the Board and any new director (except for a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described elsewhere in this definition of
Change in Control) whose election by the Board or nomination for election by
the Company’s stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved (such individuals and any such new director, the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;


 


(iii)                               Consummation
of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a “Business Combination”),
in each case, unless, following such Business Combination,


 


(A)                              all
or substantially all of the individuals and entities who were the beneficial
owners of outstanding voting securities of the Company immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company’s assets either directly
or through one or more Subsidiaries) (the “Resulting Corporation”) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the outstanding voting securities of the Company;


 


(B)                                no
person (as defined in Section 13(d) and 14(d) of the Exchange Act) (other than
the Company, the Resulting Corporation or any employee benefit plan (or related
trust) of the Company or such Resulting Corporation) beneficially owns,
directly or indirectly, twenty percent (20%) or more of, respectively, the then
combined voting power of the then outstanding voting securities of the
Resulting Corporation, except to the extent that such ownership resulted solely
from ownership of securities of the Company prior to the Business Combination;
and


 


(C)                                at
least a majority of the members of the board of directors of the Resulting
Corporation were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or


 





















 


(iv)                              Approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.


 


(h)                                 “Change
in Control Date” shall mean the date that a Change in Control first occurs.


 


(i)                                     “Change
in Control Severance Benefits” shall mean the compensation and benefits
provided to a Terminated Participant pursuant to Section 6 of the Program.


 


(j)                                     “Change
in Control Severance Multiplier” shall mean the multiplier used to determine
cash Change in Control Severance Benefits paid to a specific Terminated
Participant as determined by the Committee and set forth on the Applicable
Benefits Schedule.


 


(k)                                  “Code”
means the Internal Revenue Code of 1986, as amended.


 


(l)                                     “Committee”
shall mean (i) the Board or (ii) a committee or subcommittee of the Board as
from time to time appointed by the Board from among its members.  The initial Committee shall be the Board’s
Compensation Committee.  In the absence
of an appointed Committee, the Board shall function as the Committee under the
Program.  On a Change in Control Date,
and during the twenty-four (24)-month period following such Change in Control
Date, the Committee shall be comprised of such persons, whether or not such
persons are members of the Board, as appointed by the Board prior to the Change
in Control Date, with any additions or changes to the Committee following such
Change in Control Date to be made and/or approved by all Committee members then
in office.


 


(m)                               “Company”
shall mean Tellabs, Inc., a Delaware corporation, including any successor
entity or any successor to the assets of the Company.


 


(n)                                 “Confidential
Information” shall have the meaning ascribed to such term in Section 7(a).


 


(o)                                 “Effective
Date” shall mean May 6, 2005.


 


(p)                                 “ERISA”
shall have the meaning ascribed to such term in Section 1.


 


(q)                                 “Excise
Tax” shall have the meaning ascribed to such term on the Applicable Benefits
Schedule.


 


(r)                                    “Participant(s)”
shall have the meaning set forth in Section 3(b).


 


(s)                                  “Payments”
shall have the meaning ascribed to such term on the Applicable Benefits
Schedule.


 


(t)                                    “Program”
shall have the meaning ascribed to such term in Section 1.


 


(u)                                 “Protection
Period” shall mean the period after a Change in Control Date set forth in the
Applicable Benefits Schedule.


 





















 


(v)                                 “Qualifying
Termination” of a Participant’s employment shall have the meaning ascribed to
such term on the Applicable Benefits Schedule.


 


(w)                               “Reference
Base Salary” with respect to a Participant means the annual base salary of such
Participant as in effect immediately prior to the Termination Date (determined
without regard to any reduction which would constitute a basis for a
Participant’s resignation for Good Reason, if such Participant’s Applicable
Benefits Schedule contains a right to terminate for Good Reason), or, if
greater, the highest annual base salary of such Participant as in effect during
the period beginning on the Change in Control Date and ending on the
Termination Date.


 


(x)                                   “Restriction
Period” means the post-employment period set forth on the Applicable Benefits
Schedule during which the covenants set forth in Section 7(b) shall apply to a
Participant.


 


(y)                                 “Subsidiary”
shall mean a corporation of which the Company directly or indirectly owns more
than fifty percent (50%) of the “voting stock” (meaning the capital stock of
any class or classes having general voting power under ordinary circumstances,
in the absence of contingencies, to elect the directors of a corporation) or
any other business entity in which the Company directly or indirectly has an ownership
interest of more than fifty percent (50%).


 


(z)                                   “Terminated
Participant” shall mean a Participant whose employment with the Company and/or
a Subsidiary has been terminated as described in Section 5 below.


 


(aa)                            “Termination
Date” shall mean the date a Terminated Participant’s employment with the
Company and/or a Subsidiary is terminated as described in Section 5 below.


 


3.                                       PARTICIPATION.  Only those executives and key personnel as
the Committee in its sole discretion may designate, from time to time, shall
participate in the Program.  At the time
the Committee designates an individual as a Participant, the Committee shall
also designate the Applicable Benefits Schedule for such Participant’s
participation in the Program.


 


4.                                       ADMINISTRATION.


 


(a)                                  Responsibility.  The Committee shall have the responsibility,
in its sole discretion, to control, operate, manage and administer the Program
in accordance with its terms.


 


(b)                                 Authority
of the Committee.  The Committee
shall have the maximum discretionary authority permitted by law that may be
necessary to enable it to discharge its responsibilities with respect to the
Program, including but not limited to the following:


 


(i)                                     to determine eligibility for participation in the Program;


 


(ii)                                  to designate Participants and the Applicable Benefits
Schedule;


 


(iii)                               to establish the terms and provisions of, and to adopt as
part of the Program, one or more Benefits Schedules setting forth, among other
things, the Change


 





















 


in
Control Severance Multiplier, Protection Period and Restriction Period, and
such other terms and provisions as the Committee shall determine;


 


(iv)                              to calculate a Participant’s Change in Control Severance
Benefits;


 


(v)                                 to
correct any defect, supply any omission, or reconcile any inconsistency in the
Program in such manner and to such extent as it shall deem appropriate in its
sole discretion to carry the same into effect;


 


(vi)                              to issue administrative guidelines as an aid to administer
the Program and make changes in such guidelines as it from time to time deems
proper;


 


(vii)                           to make rules for carrying out and administering the Program
and make changes in such rules as it from time to time deems proper;


 


(viii)                        to the extent permitted under the Program, grant waivers of
Program terms, conditions, restrictions, and limitations;


 


(ix)                                to
construe and interpret the Program and make reasonable determinations as to a
Participant’s eligibility for benefits under the Program, including
determinations as to Change in Control of the Company, Qualifying Termination
and disability; and


 


(x)                                   to take any and all other actions it deems necessary or
advisable for the proper operation or administration of the Program.


 


(c)                                  Action
by the Committee.  Except as may
otherwise be required or permitted under an applicable charter, the Committee
may (i) act only by a majority of its members (provided that any determination
of the Committee may be made, without a meeting, by a writing or writings
signed by all of the members of the Committee), and (ii) may authorize any one
or more of its members to execute and deliver documents on behalf of the
Committee.


 


(d)                                 Delegation
of Authority.  The Committee may
delegate to one or more of its members, or to one or more agents, such
administrative duties as it may deem advisable; provided, however, that any
such delegation shall be in writing.  In
addition, the Committee, or any person to whom it has delegated duties as
aforesaid, may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Program.  The Committee may employ such legal or other
counsel, consultants and agents as it may deem desirable for the administration
of the Program and may rely upon any opinion or computation received from any
such counsel, consultant or agent. 
Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company, or the Subsidiary whose
employees have benefited from the Program, as determined by the Committee.


 


(e)                                  Determinations
and Interpretations by the Committee. 
All determinations and interpretations made by the Committee shall be
binding and conclusive to the maximum extent permitted by law on all
Participants and their heirs, successors, and legal representatives.


 





















 


(f)                                    Information.  The Company shall furnish to the Committee in
writing all information the Committee may deem appropriate for the exercise of
its powers and duties in the administration of the Program.  Such information may include, but shall not
be limited to, the full names of all Participants, their earnings and their
dates of birth, employment, retirement, death or other termination of
employment.  Such information shall be
conclusive for all purposes of the Program, and the Committee shall be entitled
to rely thereon without any investigation thereof.


 


(g)                                 Self-Interest.  No member of the Committee may act, vote or
otherwise influence a decision of the Committee specifically relating to
his/her benefits, if any, under the Program.


 


5.                                       TERMINATION
OF EMPLOYMENT ON OR AFTER A CHANGE IN CONTROL DATE.  If, during the period commencing on a Change
in Control Date and ending on the last day of the Protection Period following
such Change in Control Date, a Participant’s employment is terminated under
circumstances constituting a Qualifying Termination, such Terminated
Participant shall be entitled to receive the Change in Control Severance
Benefits on or after the Termination Date.


 


6.                                       CHANGE
IN CONTROL SEVERANCE BENEFITS.


 


(a)                                  Cash
Payment.  In the event of termination
of the Participant due to a Qualifying Termination within the Protection Period
following the Change in Control Date, the Terminated Participant shall be
entitled to receive a lump sum severance allowance within fifteen (15) business
days of such termination, in an amount which is equal to the product of the
Change in Control Severance Multiplier (as set forth on the Applicable Benefits
Schedule) times the sum of:


 


(i)                                     The
Participant’s Reference Base Salary; and


 


(ii)                                  The
Participant’s target bonus for the year which includes his/her Termination
Date.


 


(b)                                 Pro
Rata Annual Bonus.  Following the
Termination Date, the Terminated Participant shall be entitled to receive a
pro-rated annual bonus at target for the year which includes his/her
Termination Date, based on the number of days which have elapsed during such
year as of the Termination Date.  Such
payment shall be paid at the same time as the lump sum payment is made under
Section 6(a).


 


(c)                                  Payment
in Lieu of Benefit Continuation.  In
lieu of continuing the provision of medical and all other employee benefits and
perquisites, including but not limited to executive allowance, retirement and
any deferred compensation, to a Terminated Participant and his/her eligible
dependents, the Company or its Subsidiary who employed the Terminated
Participant shall also pay to the Terminated Participant as a lump sum payment
payable with the lump sum payable under Section 6(a) an amount equal to ten
percent (10%) of his/her Reference Base Salary multiplied by the Change in
Control Severance Multiplier.  Such
payment shall be in addition to such Participant’s rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (commonly known as
COBRA).


 





















 


(d)                                 Payment
of Change in Control Severance Benefits to Beneficiaries.  In the event of a Terminated Participant’s
death, all Change in Control Severance Benefits that would have been paid to
the Terminated Participant under this Section 6 but for his/her death, shall be
paid to the Participant’s Beneficiary.


 


(e)                                  Right
to Earned or Accrued Compensation and Benefits.  Notwithstanding anything contained in the
Program to the contrary, the Company shall pay to a Terminated Participant
within fifteen (15) business days following the later of the Termination Date
or the Change in Control Date all compensation (such as salary, bonus and/or
accrued but untaken vacation) earned prior to the Termination Date.  In addition, all accrued compensation and
benefits with respect to such Terminated Participant shall not be forfeited
(except to the extent such forfeiture occurs under the terms of an applicable
plan).


 


(f)                                    Other
Benefits.  Notwithstanding anything
contained in the Program to the contrary, the Company or the Committee may, in
its sole discretion provide benefits in addition to the benefits described
under this Section 6, which benefits may, but are not required to be, uniform
among Participants.


 


7.                                       PARTICIPANT
COVENANTS.


 


(a)                                  Non-Use
and Non-Disclosure of Confidential Information.


 


(i)                                     As
a condition to receiving the right to participate in the Program and any
benefits hereunder, each Participant agrees that he/she shall not, at any time
during employment or thereafter, make use of or disclose, directly or
indirectly, any (A) trade secret or other confidential secret information of
the Company, or any of its Subsidiaries or (B) other technical, business,
proprietary or financial information of the Company or any of its Subsidiaries
not available to the public generally or to the competitors of the Company or
any of its Subsidiaries (“Confidential Information”), except to the extent that
such Confidential Information (I) becomes a matter of public record or is
published in a newspaper, magazine or other periodical or on electronic or
other media available to the general public, other than as a result of any act
or omission of him/her, (II) is required to be disclosed by any law, regulation
or order of any court or regulatory commission, department or agency, provided
that he/she gives prompt notice of such requirement to the Company to enable
the Company to seek an appropriate protective order, or (III) is required to be
used or disclosed by him/her to perform properly his/her duties to the Company
or any of its Subsidiaries.  Each Participant
further agrees that on or before the Termination Date he/she shall return to
the Company all Company property, including but not limited to all records,
memoranda, notes, plans, reports, computer tapes and software and other
documents and data which constitute Confidential Information which he/she may
possess or have under his/her control (together with all copies thereof).


 


(ii)                                  Each
Participant agrees that he/she will assign to the Company (or a Subsidiary of
the Company), his/her entire right, title and interest in and to all discoveries
and improvements, patentable or otherwise, trade secrets and ideas, writing and
copyrightable material, which may have been conceived by him/her or developed
or


 





















 


acquired
by him/her while he/she was employed by the Company, which may pertain directly
or indirectly to the business of the Company or any Subsidiary.  Participants agree to promptly and fully
disclose in writing all such developments to the Company. Participants, during
employment and thereafter, shall without charge to Company, but at its expense,
upon the Company’s request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable
the Company or any of its Subsidiaries to file and prosecute applications for,
and to acquire, maintain and enforce, all patents, trademarks and copyrights in
all countries.  Notwithstanding anything
contained in the foregoing, pursuant to Employee Patent Act, 765 ILCS 1060/1 et
seq. (1996), this Section 7(a)(ii) does not apply to any invention for which no
equipment, supplies, facilities or trade secret information of the Company (or
a Subsidiary of the Company) was used and which was developed entirely on the
Participant’s own time, unless (a) the invention relates (i) to the business of
the Company (or a Subsidiary of the Company) or (ii) to the Company’s (or a
Subsidiary of the Company) actual or demonstrably anticipated research or
development, or (b) the invention results from any work performed by the
Participant for the Company (or a Subsidiary of the Company).


 


(b)                                 Non-Solicitation;
Non-Competition.  As a further
condition to receiving the right to participate in the Program and any benefits
hereunder, each Participant agrees that during his/her employment and for the
Restriction Period set forth on the Applicable Benefits Schedule, he/she will
not, without the written consent of the Company, directly or indirectly, on
his/her own behalf or on behalf of any other person or entity:


 


(i)                                     engage
or be interested in (as owner, partner, stockholder, employee, director,
officer, agent, consultant or otherwise), with or without compensation, any
business which is in direct competition with the Company or of any of its
Subsidiaries in providing data, voice or video transport, switching/routing,
network access system and/or voice quality enhancement solutions to service
providers or end users or any other products which the Company or any of its
Subsidiaries may be manufacturing, selling or distributing to service providers
or end users;


 


(ii)                                  solicit
for employment, or employ or retain, any person who was employed by the Company
or any of its Subsidiaries or affiliates (other than persons employed in a
clerical or other non-professional position) within the six (6)-month period
preceding the date of such hiring; or


 


(iii)                               solicit, entice, persuade or induce any person or entity
doing business with the Company and its Subsidiaries or affiliates, to
terminate such relationship or to refrain from extending or renewing the same.


 


The
Participant is prohibited from engaging in the above activities in any state of
the United States and in any country outside the United States in which the
Company does business.  Nothing in
subparagraph (i) above will prohibit a Participant from acquiring or holding
not more than one percent of any class of publicly traded securities of any
such business; provided that such securities entitle such Participant to no
more than one percent (1%) of the total outstanding


 





















 


votes entitled to be cast by security
holders of such business in matters on which such security holders are entitled
to vote.


 


(c)                                  Remedies;
Injunctive Relief; Blue Pencil. 
Participants agree that the protective covenants set forth in this
Section 7 are reasonable and necessary to protect the legal interests of
the Company and its Subsidiaries.  The
Participant acknowledges and agrees that (i) a threatened or actual breach
of any of the covenants and provisions contained in this Section 7 will result
in irreparable harm to the business of the Company or its Subsidiaries and
affiliates, (ii) a remedy at law in the form of monetary damages for any
threatened or actual breach by the Participant of any of the covenants and
provisions contained in this Section 7 is inadequate, (iii) in addition to
any remedy at law or equity for such breach, the Company shall be entitled to
institute and maintain appropriate proceedings in equity, including a suit for
injunction to enforce the specific performance by the Participant of the
obligations hereunder and to enjoin the Participant from engaging in any
activity in violation hereof and (iv) the covenants on the Participant’s
part contained in this Section 7 shall be construed as agreements independent
of any other provisions in the Program, and the existence of any claim, setoff
or cause of action by the Participant against the Company, whether predicated
on the Program or otherwise, shall not constitute a defense or bar to the
specific enforcement by the Company of said covenants.  In the event of a breach or a violation by
the Participant of any of the covenants and provisions of the Program,
(1) the running of the Restriction Period (but not of Participant’s
obligation thereunder) shall be tolled during the period of the continuance of
any actual breach or violation and (2) the Participant shall be obligated
to pay to the Company the amount of any Severance Benefits or Change in Control
Benefits theretofore paid to the Participant (or if not yet paid, the Company
shall not be obligated to make such payments). 
If a court of competent jurisdiction (or an arbitrator in accordance
with Section 12(k)) would otherwise declare any portions of this Section 7
void or unenforceable in the circumstances, such portions of this Section shall
be reduced in scope and/or duration of time to such an extent that such court
(or arbitrator) would hold the same to be enforceable in the
circumstances.  The portions of this
Section with respect to scope and duration shall be separate and distinct and
fully severable without affecting the enforceability of the entire Section.


 


(d)                                 Not
Exclusive Covenants.  Nothing
contained in this Section 7 shall invalidate or affect any non-disclosure,
assignment of intellectual property, non-competition, non-solicitation or other
similar covenant or agreement that currently exists or may exist in the future
between a Participant and the Company or a Subsidiary and any such covenants
and agreement shall continue in full force and effect.


 


8.                                       CLAIMS.


 


(a)                                  Claims
Procedure.  If any Participant or
Beneficiary, or their legal representative, has a claim for benefits which is
not being paid, such claimant may file a written claim with the Committee
setting forth the amount and nature of the claim, supporting facts, and the
claimant’s address.  A claimant must file
any such claim within sixty (60) days after a Participant’s Termination
Date.  Written notice of the disposition
of a claim by the Committee shall be furnished to the claimant within ninety
(90) days after the claim is filed.  In
the event of special circumstances, the Committee may extend the period for
determination for up to an additional ninety (90) days, in which case it shall
so advise the claimant.  If the claim is
denied,


 





















 


the reasons for the
denial shall be specifically set forth in writing, pertinent provisions of the
Program shall be cited, including an explanation of the Program’s claim review
procedure, and, if the claim is perfectible, an explanation as to how the
claimant can perfect the claim shall be provided.


 


(b)                                 Claims
Review Procedure.  If a claimant
whose claim has been denied wishes further consideration of his/her claim,
he/she may request the Committee to review his/her claim in a written statement
of the claimant’s position filed with the Committee no later than sixty (60)
days after receipt of the written notification provided for in Section 8(a)
above.  The Committee shall fully and
fairly review the matter and shall promptly advise the claimant, in writing, of
its decision within the next sixty (60) days. 
Due to special circumstances, the Committee may extend the period for
determination for up to an additional sixty (60) days.


 


9.                                       TAXES.


 


(a)                                  Withholding
Taxes.  The Company shall be entitled
to withhold from any and all payments made to a Participant under the Program
all federal, state, local and/or other taxes or imposts which the Company
determines are required to be so withheld from such payments or by reason of
any other payments made to or on behalf of the Participant or for his/her
benefit hereunder.


 


(b)                                 Excise
Tax.  In the event payments paid to a
Participant under the Program are deemed to be excess parachute payments under
Section 280G of the Code, the Change in Control Severance Benefits payable to
the Participant shall be subject to reduction or the Participant shall be entitled
to receive a Gross-Up Payment (as defined in the Applicable Benefits Schedule)
to the extent provided under the Applicable Benefits Schedule.


 


(c)                                  No
Guarantee of Tax Consequences.  No
person connected with the Program in any capacity, including, but not limited
to, the Company and any Subsidiary and their directors, officers, agents and
employees makes any representation, commitment, or guarantee that any tax
treatment, including, but not limited to, federal, state and local income,
estate and gift tax treatment, will be applicable with respect to amounts
deferred under the Program, or paid to or for the benefit of a Participant
under the Program, or that such tax treatment will apply to or be available to
a Participant on account of participation in the Program.


 


10.                                 TERM
OF PROGRAM.  The Program shall be
effective as of the Effective Date and shall remain in effect until the Board
terminates the Program in accordance with Section 11(b) below.


 


11.                                 AMENDMENT
AND TERMINATION.


 


(a)                                  Amendment
of Program.  The Program may be
amended by the Board at any time with or without prior notice; provided,
however, that the Program shall not be amended during the twenty-four
(24)-month period immediately following a Change in Control Date.  In the event the Program was amended within
the six (6)-month period immediately preceding a Change in Control Date, to the
extent such amendments were less favorable to Participants generally, such
amendment shall automatically become of no further force and effect without further
action by the Company upon such Change in Control.


 





















 


(b)                                 Termination
of Program.  The Program may be
terminated or suspended by the Board at any time with or without prior notice;
provided, however, that the Program shall not be terminated or suspended during
the twenty-four (24)-month period immediately following a Change in Control
Date.  In the event the Program was
terminated within the six (6)-month period immediately preceding a Change in
Control Date, the Program shall automatically become effective without further
action by the Company upon such Change in Control.


 


(c)                                  No
Adverse Affect.  If the Program is
amended, terminated, or suspended in accordance with Section 11(a) or 11(b)
above, such action shall not adversely affect the benefits under the Program to
which any Terminated Participant (as of the date of amendment, termination or
suspension) is entitled.


 


12.                                 MISCELLANEOUS.


 


(a)                                  Offset.  Change in Control Severance Benefits shall be
reduced by any payment or benefit made or provided by the Company or any
Subsidiary to the Participant pursuant to (i) any severance plan, program,
policy or arrangement of the Company or any Subsidiary of the Company not
otherwise referred to in the Program, (ii) any employment agreement between the
Company or any Subsidiary and the Participant, and (iii) any federal,
state or local statute, rule, regulation or ordinance.


 


(b)                                 No
Right, Title, or Interest in Company Assets.  Participants shall have no right, title, or
interest whatsoever in or to any assets of the Company or any investments that
the Company may make to aid it in meeting its obligations under the
Program.  Nothing contained in the
Program, and no action taken pursuant to its provisions, shall create or be construed
to create a trust of any kind, or a fiduciary relationship between the Company
and any Participant, Beneficiary, legal representative or any other
person.  To the extent that any person
acquires a right to receive payments from the Company under the Program, such
right shall be no greater than the right of an unsecured general creditor of
the Company.  Subject to this Section
12(b), all payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts.


 


(c)                                  No
Right to Continued Employment.  The
Participant’s rights, if any, to continue to serve the Company as an employee
shall not be enlarged or otherwise affected by his/her designation as a Participant
under the Program, and the Company or the applicable Subsidiary reserves the
right to terminate the employment of any employee at any time.  The adoption of the Program shall not be
deemed to give any employee, or any other individual, any right to be selected
as a Participant or to continued employment with the Company or any Subsidiary.


 


(d)                                 Other
Rights.  The Program shall not affect
or impair the rights or obligations of the Company or a Participant under any
other written plan, contract, arrangement, or pension, profit sharing or other
compensation plan; provided, however, that each Participant must agree in
writing, as a condition to his/her participation in the Program and the receipt
of any benefits hereunder, that any previously existing change in control
and/or change in management


 





















 


agreement
between such Participant and the Company and/or a Subsidiary shall be
superseded in its entirety by the Program and be of no further force and
effect.


 


(e)                                  Governing
Law.  The Program shall be governed
by and construed in accordance with the laws of the State of Illinois without
reference to principles of conflict of laws, except as superseded by applicable
federal law (including, without limitation, ERISA).


 


(f)                                    Severability.  If any term or condition of the Program shall
be invalid or unenforceable to any extent or in any application, then the
remainder of the Program, with the exception of such invalid or unenforceable
provision (but only to the extent that such term or condition cannot be appropriately
reformed or modified), shall not be affected thereby and shall continue in
effect and application to its fullest extent.


 


(g)                                 Incapacity.  If the Committee determines that a
Participant or a Beneficiary is unable to care for his/her affairs because of
illness or accident or because he or she is a minor, any benefit due the
Participant or Beneficiary may be paid to the Participant’s spouse or to any
other person deemed by the Committee to have incurred expense for such
Participant (including a duly appointed guardian, committee or other legal
representative), and any such payment shall be a complete discharge of the
Company’s obligation hereunder.


 


(h)                                 Transferability
of Rights.  The Company shall have
the unrestricted right to transfer its obligations under the Program with
respect to one or more Participants to any person, including, but not limited
to, any purchaser of all or any part of the Company’s business.  No Participant or Beneficiary shall have any
right to commute, encumber, transfer or otherwise dispose of or alienate any
present or future right or expectancy which the Participant or Beneficiary may
have at any time to receive payments of benefits hereunder, which benefits and
the right thereto are expressly declared to be non-assignable and nontransferable,
except to the extent required by law. 
Any attempt to transfer or assign a benefit, or any rights granted
hereunder, by a Participant or the spouse of a Participant shall, in the sole
discretion of the Committee (after consideration of such facts as it deems
pertinent), be grounds for terminating any rights of the Participant or
Beneficiary to any portion of the Program benefits not previously paid.


 


(i)                                     Interest.  In the event any payment to a Participant
under the Program is not paid within thirty (30) days after it is due and
Participant notifies the Company and the Company fails to make such payment (to
the extent such payment is undisputed), such payment shall thereafter bear
interest at the prime rate from time to time as published in The Wall Street
Journal, Midwest Edition.


 


(j)                                     No
Obligation to Mitigate Damages.  The
Participants shall not be obligated to seek other employment in mitigation of
amounts payable or arrangements made under the provisions of the Program and
the obtaining of any such other employment shall in no event effect any
reduction of the Company’s obligations under the Program.


 


(k)                                  Arbitration
of Disputes and Reimbursement of Legal Costs.  In the event of any dispute between the
Company and the Participant, whether arising out of or relating to the Program,
or otherwise, the Participant and the Company hereby agree that such dispute
shall be


 





















 


resolved by binding
arbitration administered by the American Arbitration Association (“AAA”) in
accordance with its Commercial Arbitration Rules then in effect, and judgment
on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.  Any arbitration
shall be held before a single arbitrator who shall be selected by the mutual
agreement of the Company and the Participant, unless the parties are unable to
agree to an arbitrator, in which case, the arbitrator will be selected under
the procedures of the AAA.  The
arbitrator shall be experienced in the resolution of disputes under employment
agreements or plans or programs similar to the Program maintained by major
corporations and shall have the authority to award any remedy or relief that a
court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction, and the parties hereby agree to the
emergency procedures of the AAA. 
However, either party may, without inconsistency with this arbitration
provision, apply to any court having jurisdiction over such dispute or
controversy and seek interim provisional, injunctive or other equitable relief
until the arbitration award is rendered or the controversy is otherwise
resolved.  Except as necessary in court
proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and the Participant.  The arbitration proceeding shall be conducted
in the Chicago, Illinois metropolitan area. 
In the event of any such proceeding, the losing party shall reimburse
the prevailing party upon entry of a final award resolving the subject of the
dispute for all reasonable legal expenses incurred, unless the arbitrator determines
that to do so would be unjust. 
Otherwise, each party shall be responsible for its own expenses relating
to the conduct of the arbitration (including reasonable attorneys’ fees and
expenses) and shall share the fees of the AAA equally.  Notwithstanding the foregoing, the
Participant shall be required to exhaust his/her rights under Section 8 prior
to proceeding with any arbitration hereunder.


 


(l)                                     Condition
Precedent to Receipt of Payments or Benefits under the Program.  A Terminated Participant will not be eligible
to receive Change in Control Severance Benefits or any other payments or
benefits under the Program until (i) such Terminated Participant executes a
general release of all claims arising out of said Participant’s employment
with, and termination of employment from, the Company in substantially the form
attached hereto as Exhibit A (adjusted as necessary to conform to then existing
legal requirements) (the “General Release”); and (ii) the revocation period
specified in such General Release expires without such Terminated Participant
exercising his/her right of revocation as set forth in the General Release.


 


(m)                               Assumption
by Successor to the Company.  The
Company shall cause any successor to its business or assets to assume this
Program and the obligations arising hereunder and to maintain this Program
without modification or alteration for the period required herein.


 





















 


BENEFITS SCHEDULE –I


 


	
  Change in Control Severance Multiplier

  	
  2.0

  
	
   

  	
   

  
	
  Protection Period

  	
  24 months

  
	
   

  	
   

  
	
  Restriction Period

  	
  24 months

  



 


With respect to Participants to which this Benefits
Schedule is applicable, the following shall apply:


 


“Qualifying Termination” shall mean (i) termination by
the Company of the employment of the Participant with the Company and all of
its Subsidiaries for any reason other than death, disability or Cause, or (ii)
resignation of the Participant for Good Reason.


The term “Cause” means (i) the Participant is
convicted of a felony or of any crime involving moral turpitude, dishonesty,
fraud, theft or financial impropriety; or (ii) a reasonable determination by
the Company that, (A) the Participant has willfully and continuously failed to
perform substantially his/her duties (other than such failure resulting from
incapacity due to physical or mental illness), after a written demand for
corrected performance is delivered to the Participant which specifically
identifies the manners in which the Participant has not substantially performed
his/her duties, (B) the Participant has engaged in gross neglect or gross
misconduct, or (C) the Participant has knowingly violated a material
requirement of the Company’s Integrity Policy, code of conduct, the Sarbanes
Oxley Act of 2002 or other material provision of federal or state securities
law.


 


The term “Good Reason” shall mean:


 


(i)                                     the
material reduction or material adverse modification of the Participant’s
authority or duties on or after a Change in Control Date, such as a substantial
diminution or adverse modification in the Participant’s title, status, or
responsibilities, from his/her authorities being exercised and duties being
performed by the Participant immediately prior to the Change in Control Date
(and as such authorities and duties may be increased due to promotions from
time to time after the Change in Control Date);


 


(ii)                                  any reduction in the Participant’s base salary from the base
salary which is in effect immediately prior to a Change in Control Date or as
may be increased from time to time thereafter;


 


(iii)                               any
failure to provide to the Participant the opportunities to participate on a
reasonable basis in the Company’s stock option plans, the annual bonus program
and any other bonus and incentive compensation plans (whether in effect on or
after the Change in Control Date) in which executives with comparable duties
are eligible to participate; or


 





















 


(iv)                              any
requirement, which occurs on or after a Change in Control Date, that the
Participant relocate his principal place of employment by more than a fifty
(50)-mile radius from its location immediately prior to the Change in Control
Date.


 


Notwithstanding the foregoing, any of the
circumstances described above may not serve as a basis for resignation for “Good
Reason” by the Participant unless the Participant has provided written notice
to the Company that such circumstance exists within thirty (30) days of the
Participant’s learning of such circumstance and the Company has failed to cure
such circumstance within thirty (30) days following such notice; and provided
further, the Participant did not previously consent to the action leading to
their claim of resignation for “Good Reason.”


 


Subject to the paragraph immediately following this
paragraph, if any payments or benefits received or to be received by the
Participant in connection with the Participant’s employment (whether pursuant
to the terms of the Program or any other plan, arrangement or agreement with
the Company, or any person affiliated with the Company) (the “Payments”), will
be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code
(or any similar tax that may hereafter be imposed), the Company shall pay at
the time specified below, an additional amount (the “Gross-Up Payment”) such
that the net amount retained by the Participant, after deduction of any Excise
Tax on the Payments and any federal, state and local income or other applicable
tax and Excise Tax upon the payment provided for by this paragraph, shall be
equal to the Payments.  For purposes of
determining the amount of the Gross-Up Payment, the Participant shall be deemed
to pay federal income taxes at the Participant’s highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the Participant’s highest
marginal rate of taxation in the state and locality of the Participant’s
residence on the date on which the Excise Tax is determined, net of the maximum
reduction in federal income taxes which could be obtained from deduction of
such state and local taxes.  The
computations required by this paragraph (and the immediately following
paragraph) shall be made by independent public accountants not then regularly
retained by the Company, in consultation with tax counsel selected by such
accountants.  The Company shall provide
the Participant with sufficient tax and compensation data to enable the
Participant or his/her tax advisor to verify such computations and shall
reimburse the Participant for reasonable fees and expenses incurred with
respect thereto.  In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder, the Participant shall repay to the Company at the time that
the amount of such reduction in Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by the Participant)
plus interest on the amount of such repayment from the date the Gross-Up
Payment was initially made to the date of repayment at the rate provided in
Section 1274(b)(2)(B) of the Code (the “Applicable Rate”).  In the event that the Excise Tax is
determined by the Internal Revenue Service or by such independent public
accountants to exceed the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties, fines
or additions to tax payable with respect to such excess) at the time that the
amount of such excess is finally determined. 
Any payment to be made under this paragraph shall be payable within five
(5) days of the determination of the accountants that such a payment is
required hereunder and, if


 





















 


applicable,
within five (5) days of such determination that the Excise Tax is greater or
less than initially calculated but, in no event, later than thirty (30) days
after the Participant’s receipt of the Payments resulting in such Excise Tax.


 


Notwithstanding anything in the foregoing paragraph to
the contrary, the foregoing provision shall not apply (therefore no Gross-Up
Payment will be made) and any Change in Control Severance Benefits (other than
those described in Section 6(e)) otherwise payable to the Terminated
Participant shall be reduced (but not below zero) such that no amounts paid or
payable to the Terminated Participant as Change in Control Severance Benefits
(other than those described in Section 6(e)) shall be deemed excess parachute
payments subject to Excise Tax, in the event the amount of such reduction does
not exceed ten percent (10%) of such Change in Control Severance Benefits (other
than those described in Section 6(e)). 
Unless the Participant shall have given prior written notice specifying
a different order to the Company to effectuate the foregoing, the Company shall
reduce or eliminate the Change in Control Severance Benefits (other than those
described in Section 6(e)), by first reducing or eliminating the portion of
such benefits which are not payable in cash and then by reducing or eliminating
cash payments, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the determination made
by the independent public accountants selected under the preceding
paragraph.  Any notice given by the
Participant pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing the
Participant’s rights and entitlements to any benefits or compensation.


 





















 


EXHIBIT A


 


FORM OF RELEASE


 


GENERAL RELEASE


 


1.  For valuable
consideration, the adequacy of which is hereby acknowledged, the undersigned (“Participant”),
for himself, his spouse, heirs, administrators, children, representatives,
executors, successors, assigns, and all other persons claiming through
Participant, if any (collectively, “Releasers”), knowingly and voluntarily
releases and forever discharges Tellabs, Inc., its affiliates, subsidiaries,
divisions, successors and assigns and the current, future and former employees,
officers, directors, trustees and agents thereof (collectively referred to
throughout this General Release as “Company”) from any and all claims, causes
of action, demands, fees and liabilities of any kind whatsoever, whether known
or unknown, against Company, Participant has, has ever had or may have as of
the date of execution of this General Release, including, but not limited to,
any alleged violation of:


 


•                                          The National
Labor Relations Act, as amended;


 


•                                          Title VII of
the Civil Rights Act of 1964, as amended;


 


•                                          The Civil
Rights Act of 1991, as amended;


 


•                                          Sections 1981
through 1988 of Title 42 of the United States Code, as amended;


 


•                                          The Employee
Retirement Income Security Act of 1974, as amended;


 


•                                          The
Immigration Reform and Control Act, as amended;


 


•                                          The Americans
with Disabilities Act of 1990, as amended;


 


•                                          The Age
Discrimination in Employment Act of 1967, as amended;


 


•                                          The Older
Workers Benefit Protection Act of 1990, as amended;


 


•                                          The Worker
Adjustment and Retraining Notification Act, as amended;


 


•                                          The
Occupational Safety and Health Act, as amended;


 


•                                          The Family
and Medical Leave Act of 1993, as amended;


 


•                                          Any other
federal, state or local civil or human rights law or any other local, state or
federal law, regulation or ordinance; or


 


•                                          Any public
policy, contract, tort, or common law.


 


Notwithstanding anything herein to the contrary, this
General Release shall not apply to: (i) Participant’s rights of indemnification
and directors and officers liability insurance coverage to which he was
entitled immediately prior to [INSERT DATE] with regard to his service as an


 





















 


officer of Company; (ii)
Participant’s rights under any tax-qualified pension or claims for accrued
vested benefits under any other employee benefit plan, policy or arrangement
maintained by Company or under COBRA; (iii) Participant’s rights under the
provisions of the Company’s Executive Continuity and Protection Program which
are intended to survive termination of employment; or (iv) Participant’s rights
as a stockholder.  Excluded from this
General Release are any claims which cannot be waived by law.


 


[For Current/Former California
Residents Only:]  This
General Release is intended to constitute a release of all of the claims
referenced herein, known or unknown, suspected or unsuspected.  Participant hereby expressly waives any
rights and benefits conferred by Section 1542 of the California Civil Code
which provides:  “A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”


 


2.                                       Participant
acknowledges and recites that:


 


(a)                                  Participant
has executed this General Release knowingly and voluntarily;


 


(b)                                 Participant
has read and understands this General Release in its entirety, including the
waiver of rights under the Age Discrimination in Employment Act;


 


(c)                                  Participant
has been advised and directed orally and in writing (and this
subparagraph (c) constitutes such written direction) to seek
legal counsel and any other advice he wishes with respect to the terms of this
General Release before executing it;


 


(d)                                 Participant
has sought such counsel, or freely and voluntarily waives the right to consult
with counsel, and Participant has had an opportunity, if he so desires, to
discuss with counsel the terms of this General Release and their meaning;


 


(e)                                  Participant
enters into this General Release knowingly and voluntarily, without duress or
reservation of any kind, and after having given the matter full and careful
consideration; and


 


(f)                                    Participant
has been offered 21 calendar days after receipt of this General Release to
consider its terms before executing it.


 


3.                                       This
General Release shall be governed by the internal laws (and not the choice of
law principles) of the State of Illinois, except for the application of
pre-emptive federal law.


 





















 


4.                                       Participant
shall have 7 days from the date hereof to revoke this General Release by
providing written notice of the revocation to Company’s General Counsel, in
which event this General Release shall be unenforceable and null and void. 


 


 


	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  [Participant’s
  Name]