**Exhibit 10.b**

 

**TELLABS, INC.**

 

**EXECUTIVE CONTINUITY ANDPROTECTION PROGRAM**

 

1.                                       PURPOSEOF PROGRAM.  The purpose of the Tellabs,Inc. Executive Continuity and Protection Program (the “Program”) is to attractand retain well-qualified individuals as executives and key personnel ofTellabs, Inc. and/or its Subsidiaries, and to provide a benefit to each suchindividual if his/her employment is terminated in connection with a Change inControl (as defined below).  The Programis intended to qualify as a “top-hat” plan under the Employee Retirement IncomeSecurity Act of 1974, as amended (“ERISA”), in that it is intended to be an “employeebenefit plan” (as such term is defined under Section 3(3) of ERISA) which isunfunded and provides benefits only to a select group of management or highlycompensated employees of the Company and/or its Subsidiaries.

 

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

 

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

 

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

 

(c)                                  “ApplicableRate” shall have the meaning ascribed to such term on the Applicable BenefitsSchedule.

 

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

 

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

 

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

 

(g)                                 “Changein 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 Actof 1934, as amended (the “Exchange Act”)), excluding for this purpose, theCompany or any Subsidiary of the Company, or any employee benefit plan of theCompany 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 anysuch plan which acquires beneficial ownership of voting securities of theCompany, is or becomes the “beneficial owner” (as defined in Rule 13d-3 underthe Exchange Act), directly or indirectly of securities of the Companyrepresenting twenty percent (20%) or more of the combined voting power of theCompany’s then outstanding securities; provided,

 

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

 

(ii)                                  Duringany two (2) consecutive years, individuals who at the beginning of such two(2)-year period constitute the Board and any new director (except for adirector designated by a person who has entered into an agreement with theCompany to effect a transaction described elsewhere in this definition ofChange in Control) whose election by the Board or nomination for election bythe 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 thebeginning of the period or whose election or nomination for election waspreviously so approved (such individuals and any such new director, the “IncumbentBoard”) cease for any reason to constitute at least a majority of the Board;

 

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

 

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

 

(B)                                noperson (as defined in Section 13(d) and 14(d) of the Exchange Act) (other thanthe Company, the Resulting Corporation or any employee benefit plan (or relatedtrust) of the Company or such Resulting Corporation) beneficially owns,directly or indirectly, twenty percent (20%) or more of, respectively, the thencombined voting power of the then outstanding voting securities of theResulting Corporation, except to the extent that such ownership resulted solelyfrom ownership of securities of the Company prior to the Business Combination;and

 

(C)                                atleast a majority of the members of the board of directors of the ResultingCorporation were members of the Incumbent Board at the time of the execution ofthe initial agreement, or of the action of the Board, providing for suchBusiness Combination; or

 

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(iv)                              Approvalby the stockholders of the Company of a complete liquidation or dissolution ofthe Company.

 

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

 

(i)                                     “Changein Control Severance Benefits” shall mean the compensation and benefitsprovided to a Terminated Participant pursuant to Section 6 of the Program.

 

(j)                                     “Changein Control Severance Multiplier” shall mean the multiplier used to determinecash Change in Control Severance Benefits paid to a specific TerminatedParticipant as determined by the Committee and set forth on the ApplicableBenefits 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 asfrom time to time appointed by the Board from among its members.  The initial Committee shall be the Board’sCompensation Committee.  In the absenceof an appointed Committee, the Board shall function as the Committee under theProgram.  On a Change in Control Date,and during the twenty-four (24)-month period following such Change in ControlDate, the Committee shall be comprised of such persons, whether or not suchpersons are members of the Board, as appointed by the Board prior to the Changein Control Date, with any additions or changes to the Committee following suchChange in Control Date to be made and/or approved by all Committee members thenin office.

 

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

 

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

 

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

 

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

 

(q)                                 “ExciseTax” shall have the meaning ascribed to such term on the Applicable BenefitsSchedule.

 

(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 BenefitsSchedule.

 

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

 

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

 

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(v)                                 “QualifyingTermination” of a Participant’s employment shall have the meaning ascribed tosuch term on the Applicable Benefits Schedule.

 

(w)                               “ReferenceBase Salary” with respect to a Participant means the annual base salary of suchParticipant as in effect immediately prior to the Termination Date (determinedwithout regard to any reduction which would constitute a basis for aParticipant’s resignation for Good Reason, if such Participant’s ApplicableBenefits Schedule contains a right to terminate for Good Reason), or, ifgreater, the highest annual base salary of such Participant as in effect duringthe period beginning on the Change in Control Date and ending on theTermination Date.

 

(x)                                   “RestrictionPeriod” means the post-employment period set forth on the Applicable BenefitsSchedule during which the covenants set forth in Section 7(b) shall apply to aParticipant.

 

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

 

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

 

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

 

3.                                       PARTICIPATION.  Only those executives and key personnel asthe Committee in its sole discretion may designate, from time to time, shallparticipate in the Program.  At the timethe Committee designates an individual as a Participant, the Committee shallalso designate the Applicable Benefits Schedule for such Participant’sparticipation in the Program.

 

4.                                       ADMINISTRATION.

 

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

 

(b)                                 Authorityof the Committee.  The Committeeshall have the maximum discretionary authority permitted by law that may benecessary to enable it to discharge its responsibilities with respect to theProgram, including but not limited to the following:

 

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

 

(ii)                                  to designate Participants and the Applicable BenefitsSchedule;

 

(iii)                               to establish the terms and provisions of, and to adopt aspart of the Program, one or more Benefits Schedules setting forth, among otherthings, the Change

 

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inControl Severance Multiplier, Protection Period and Restriction Period, andsuch other terms and provisions as the Committee shall determine;

 

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

 

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

 

(vi)                              to issue administrative guidelines as an aid to administerthe Program and make changes in such guidelines as it from time to time deemsproper;

 

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

 

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

 

(ix)                                toconstrue and interpret the Program and make reasonable determinations as to aParticipant’s eligibility for benefits under the Program, includingdeterminations as to Change in Control of the Company, Qualifying Terminationand disability; and

 

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

 

(c)                                  Actionby the Committee.  Except as mayotherwise be required or permitted under an applicable charter, the Committeemay (i) act only by a majority of its members (provided that any determinationof the Committee may be made, without a meeting, by a writing or writingssigned by all of the members of the Committee), and (ii) may authorize any oneor more of its members to execute and deliver documents on behalf of theCommittee.

 

(d)                                 Delegationof Authority.  The Committee maydelegate to one or more of its members, or to one or more agents, suchadministrative duties as it may deem advisable; provided, however, that anysuch delegation shall be in writing.  Inaddition, the Committee, or any person to whom it has delegated duties asaforesaid, may employ one or more persons to render advice with respect to anyresponsibility the Committee or such person may have under the Program.  The Committee may employ such legal or othercounsel, consultants and agents as it may deem desirable for the administrationof the Program and may rely upon any opinion or computation received from anysuch 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 whoseemployees have benefited from the Program, as determined by the Committee.

 

(e)                                  Determinationsand Interpretations by the Committee. All determinations and interpretations made by the Committee shall bebinding and conclusive to the maximum extent permitted by law on allParticipants and their heirs, successors, and legal representatives.

 

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(f)                                    Information.  The Company shall furnish to the Committee inwriting all information the Committee may deem appropriate for the exercise ofits powers and duties in the administration of the Program.  Such information may include, but shall notbe limited to, the full names of all Participants, their earnings and theirdates of birth, employment, retirement, death or other termination ofemployment.  Such information shall beconclusive for all purposes of the Program, and the Committee shall be entitledto rely thereon without any investigation thereof.

 

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

 

5.                                       TERMINATIONOF EMPLOYMENT ON OR AFTER A CHANGE IN CONTROL DATE.  If, during the period commencing on a Changein Control Date and ending on the last day of the Protection Period followingsuch Change in Control Date, a Participant’s employment is terminated undercircumstances constituting a Qualifying Termination, such TerminatedParticipant shall be entitled to receive the Change in Control SeveranceBenefits on or after the Termination Date.

 

6.                                       CHANGEIN CONTROL SEVERANCE BENEFITS.

 

(a)                                  CashPayment.  In the event of terminationof the Participant due to a Qualifying Termination within the Protection Periodfollowing the Change in Control Date, the Terminated Participant shall beentitled to receive a lump sum severance allowance within fifteen (15) businessdays of such termination, in an amount which is equal to the product of theChange in Control Severance Multiplier (as set forth on the Applicable BenefitsSchedule) times the sum of:

 

(i)                                     TheParticipant’s Reference Base Salary; and

 

(ii)                                  TheParticipant’s target bonus for the year which includes his/her TerminationDate.

 

(b)                                 ProRata Annual Bonus.  Following theTermination Date, the Terminated Participant shall be entitled to receive apro-rated annual bonus at target for the year which includes his/herTermination Date, based on the number of days which have elapsed during suchyear as of the Termination Date.  Suchpayment shall be paid at the same time as the lump sum payment is made underSection 6(a).

 

(c)                                  Paymentin Lieu of Benefit Continuation.  Inlieu of continuing the provision of medical and all other employee benefits andperquisites, including but not limited to executive allowance, retirement andany deferred compensation, to a Terminated Participant and his/her eligibledependents, the Company or its Subsidiary who employed the TerminatedParticipant shall also pay to the Terminated Participant as a lump sum paymentpayable with the lump sum payable under Section 6(a) an amount equal to tenpercent (10%) of his/her Reference Base Salary multiplied by the Change inControl Severance Multiplier.  Suchpayment shall be in addition to such Participant’s rights under theConsolidated Omnibus Budget Reconciliation Act of 1985 (commonly known asCOBRA).

 

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

 

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

 

(f)                                    OtherBenefits.  Notwithstanding anythingcontained in the Program to the contrary, the Company or the Committee may, inits sole discretion provide benefits in addition to the benefits describedunder this Section 6, which benefits may, but are not required to be, uniformamong Participants.

 

7.                                       PARTICIPANTCOVENANTS.

 

(a)                                  Non-Useand Non-Disclosure of Confidential Information.

 

(i)                                     Asa condition to receiving the right to participate in the Program and anybenefits hereunder, each Participant agrees that he/she shall not, at any timeduring employment or thereafter, make use of or disclose, directly orindirectly, any (A) trade secret or other confidential secret information ofthe Company, or any of its Subsidiaries or (B) other technical, business,proprietary or financial information of the Company or any of its Subsidiariesnot available to the public generally or to the competitors of the Company orany of its Subsidiaries (“Confidential Information”), except to the extent thatsuch Confidential Information (I) becomes a matter of public record or ispublished in a newspaper, magazine or other periodical or on electronic orother media available to the general public, other than as a result of any actor omission of him/her, (II) is required to be disclosed by any law, regulationor order of any court or regulatory commission, department or agency, providedthat he/she gives prompt notice of such requirement to the Company to enablethe Company to seek an appropriate protective order, or (III) is required to beused or disclosed by him/her to perform properly his/her duties to the Companyor any of its Subsidiaries.  Each Participantfurther agrees that on or before the Termination Date he/she shall return tothe Company all Company property, including but not limited to all records,memoranda, notes, plans, reports, computer tapes and software and otherdocuments and data which constitute Confidential Information which he/she maypossess or have under his/her control (together with all copies thereof).

 

(ii)                                  EachParticipant agrees that he/she will assign to the Company (or a Subsidiary ofthe Company), his/her entire right, title and interest in and to all discoveriesand improvements, patentable or otherwise, trade secrets and ideas, writing andcopyrightable material, which may have been conceived by him/her or developedor

 

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acquiredby him/her while he/she was employed by the Company, which may pertain directlyor indirectly to the business of the Company or any Subsidiary.  Participants agree to promptly and fullydisclose in writing all such developments to the Company. Participants, duringemployment and thereafter, shall without charge to Company, but at its expense,upon the Company’s request, execute, acknowledge and deliver to the Company allinstruments and do all other acts which are necessary or desirable to enablethe Company or any of its Subsidiaries to file and prosecute applications for,and to acquire, maintain and enforce, all patents, trademarks and copyrights inall countries.  Notwithstanding anythingcontained in the foregoing, pursuant to Employee Patent Act, 765 ILCS 1060/1 etseq. (1996), this Section 7(a)(ii) does not apply to any invention for which noequipment, supplies, facilities or trade secret information of the Company (ora Subsidiary of the Company) was used and which was developed entirely on theParticipant’s own time, unless (a) the invention relates (i) to the business ofthe Company (or a Subsidiary of the Company) or (ii) to the Company’s (or aSubsidiary of the Company) actual or demonstrably anticipated research ordevelopment, or (b) the invention results from any work performed by theParticipant for the Company (or a Subsidiary of the Company).

 

(b)                                 Non-Solicitation;Non-Competition.  As a furthercondition to receiving the right to participate in the Program and any benefitshereunder, each Participant agrees that during his/her employment and for theRestriction Period set forth on the Applicable Benefits Schedule, he/she willnot, without the written consent of the Company, directly or indirectly, onhis/her own behalf or on behalf of any other person or entity:

 

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

 

(ii)                                  solicitfor employment, or employ or retain, any person who was employed by the Companyor any of its Subsidiaries or affiliates (other than persons employed in aclerical or other non-professional position) within the six (6)-month periodpreceding the date of such hiring; or

 

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

 

TheParticipant is prohibited from engaging in the above activities in any state ofthe United States and in any country outside the United States in which theCompany does business.  Nothing insubparagraph (i) above will prohibit a Participant from acquiring or holdingnot more than one percent of any class of publicly traded securities of anysuch business; provided that such securities entitle such Participant to nomore than one percent (1%) of the total outstanding

 

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

 

(c)                                  Remedies;Injunctive Relief; Blue Pencil. Participants agree that the protective covenants set forth in thisSection 7 are reasonable and necessary to protect the legal interests ofthe Company and its Subsidiaries.  TheParticipant acknowledges and agrees that (i) a threatened or actual breachof any of the covenants and provisions contained in this Section 7 will resultin irreparable harm to the business of the Company or its Subsidiaries andaffiliates, (ii) a remedy at law in the form of monetary damages for anythreatened or actual breach by the Participant of any of the covenants andprovisions contained in this Section 7 is inadequate, (iii) in addition toany remedy at law or equity for such breach, the Company shall be entitled toinstitute and maintain appropriate proceedings in equity, including a suit forinjunction to enforce the specific performance by the Participant of theobligations hereunder and to enjoin the Participant from engaging in anyactivity in violation hereof and (iv) the covenants on the Participant’spart contained in this Section 7 shall be construed as agreements independentof any other provisions in the Program, and the existence of any claim, setoffor cause of action by the Participant against the Company, whether predicatedon the Program or otherwise, shall not constitute a defense or bar to thespecific enforcement by the Company of said covenants.  In the event of a breach or a violation bythe Participant of any of the covenants and provisions of the Program,(1) the running of the Restriction Period (but not of Participant’sobligation thereunder) shall be tolled during the period of the continuance ofany actual breach or violation and (2) the Participant shall be obligatedto pay to the Company the amount of any Severance Benefits or Change in ControlBenefits theretofore paid to the Participant (or if not yet paid, the Companyshall not be obligated to make such payments). If a court of competent jurisdiction (or an arbitrator in accordancewith Section 12(k)) would otherwise declare any portions of this Section 7void or unenforceable in the circumstances, such portions of this Section shallbe 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 thecircumstances.  The portions of thisSection with respect to scope and duration shall be separate and distinct andfully severable without affecting the enforceability of the entire Section.

 

(d)                                 NotExclusive Covenants.  Nothingcontained in this Section 7 shall invalidate or affect any non-disclosure,assignment of intellectual property, non-competition, non-solicitation or othersimilar covenant or agreement that currently exists or may exist in the futurebetween a Participant and the Company or a Subsidiary and any such covenantsand agreement shall continue in full force and effect.

 

8.                                       CLAIMS.

 

(a)                                  ClaimsProcedure.  If any Participant orBeneficiary, or their legal representative, has a claim for benefits which isnot being paid, such claimant may file a written claim with the Committeesetting forth the amount and nature of the claim, supporting facts, and theclaimant’s address.  A claimant must fileany such claim within sixty (60) days after a Participant’s TerminationDate.  Written notice of the dispositionof a claim by the Committee shall be furnished to the claimant within ninety(90) days after the claim is filed.  Inthe event of special circumstances, the Committee may extend the period fordetermination for up to an additional ninety (90) days, in which case it shallso advise the claimant.  If the claim isdenied,

 

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

 

(b)                                 ClaimsReview Procedure.  If a claimantwhose 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 statementof 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 andfairly review the matter and shall promptly advise the claimant, in writing, ofits decision within the next sixty (60) days. Due to special circumstances, the Committee may extend the period fordetermination for up to an additional sixty (60) days.

 

9.                                       TAXES.

 

(a)                                  WithholdingTaxes.  The Company shall be entitledto withhold from any and all payments made to a Participant under the Programall federal, state, local and/or other taxes or imposts which the Companydetermines are required to be so withheld from such payments or by reason ofany other payments made to or on behalf of the Participant or for his/herbenefit hereunder.

 

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

 

(c)                                  NoGuarantee of Tax Consequences.  Noperson connected with the Program in any capacity, including, but not limitedto, the Company and any Subsidiary and their directors, officers, agents andemployees makes any representation, commitment, or guarantee that any taxtreatment, including, but not limited to, federal, state and local income,estate and gift tax treatment, will be applicable with respect to amountsdeferred under the Program, or paid to or for the benefit of a Participantunder the Program, or that such tax treatment will apply to or be available toa Participant on account of participation in the Program.

 

10.                                 TERMOF PROGRAM.  The Program shall beeffective as of the Effective Date and shall remain in effect until the Boardterminates the Program in accordance with Section 11(b) below.

 

11.                                 AMENDMENTAND TERMINATION.

 

(a)                                  Amendmentof Program.  The Program may beamended 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 withinthe six (6)-month period immediately preceding a Change in Control Date, to theextent such amendments were less favorable to Participants generally, suchamendment shall automatically become of no further force and effect without furtheraction by the Company upon such Change in Control.

 

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

 

(c)                                  NoAdverse Affect.  If the Program isamended, terminated, or suspended in accordance with Section 11(a) or 11(b)above, such action shall not adversely affect the benefits under the Program towhich any Terminated Participant (as of the date of amendment, termination orsuspension) is entitled.

 

12.                                 MISCELLANEOUS.

 

(a)                                  Offset.  Change in Control Severance Benefits shall bereduced by any payment or benefit made or provided by the Company or anySubsidiary to the Participant pursuant to (i) any severance plan, program,policy or arrangement of the Company or any Subsidiary of the Company nototherwise referred to in the Program, (ii) any employment agreement between theCompany or any Subsidiary and the Participant, and (iii) any federal,state or local statute, rule, regulation or ordinance.

 

(b)                                 NoRight, Title, or Interest in Company Assets.  Participants shall have no right, title, orinterest whatsoever in or to any assets of the Company or any investments thatthe Company may make to aid it in meeting its obligations under theProgram.  Nothing contained in theProgram, and no action taken pursuant to its provisions, shall create or be construedto create a trust of any kind, or a fiduciary relationship between the Companyand any Participant, Beneficiary, legal representative or any otherperson.  To the extent that any personacquires a right to receive payments from the Company under the Program, suchright shall be no greater than the right of an unsecured general creditor ofthe Company.  Subject to this Section12(b), all payments to be made hereunder shall be paid from the general fundsof the Company and no special or separate fund shall be established and nosegregation of assets shall be made to assure payment of such amounts.

 

(c)                                  NoRight to Continued Employment.  TheParticipant’s rights, if any, to continue to serve the Company as an employeeshall not be enlarged or otherwise affected by his/her designation as a Participantunder the Program, and the Company or the applicable Subsidiary reserves theright to terminate the employment of any employee at any time.  The adoption of the Program shall not bedeemed to give any employee, or any other individual, any right to be selectedas a Participant or to continued employment with the Company or any Subsidiary.

 

(d)                                 OtherRights.  The Program shall not affector impair the rights or obligations of the Company or a Participant under anyother written plan, contract, arrangement, or pension, profit sharing or othercompensation plan; provided, however, that each Participant must agree inwriting, as a condition to his/her participation in the Program and the receiptof any benefits hereunder, that any previously existing change in controland/or change in management

 

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agreementbetween such Participant and the Company and/or a Subsidiary shall besuperseded in its entirety by the Program and be of no further force andeffect.

 

(e)                                  GoverningLaw.  The Program shall be governedby and construed in accordance with the laws of the State of Illinois withoutreference to principles of conflict of laws, except as superseded by applicablefederal law (including, without limitation, ERISA).

 

(f)                                    Severability.  If any term or condition of the Program shallbe invalid or unenforceable to any extent or in any application, then theremainder of the Program, with the exception of such invalid or unenforceableprovision (but only to the extent that such term or condition cannot be appropriatelyreformed or modified), shall not be affected thereby and shall continue ineffect and application to its fullest extent.

 

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

 

(h)                                 Transferabilityof Rights.  The Company shall havethe unrestricted right to transfer its obligations under the Program withrespect to one or more Participants to any person, including, but not limitedto, any purchaser of all or any part of the Company’s business.  No Participant or Beneficiary shall have anyright to commute, encumber, transfer or otherwise dispose of or alienate anypresent or future right or expectancy which the Participant or Beneficiary mayhave at any time to receive payments of benefits hereunder, which benefits andthe 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 grantedhereunder, by a Participant or the spouse of a Participant shall, in the solediscretion of the Committee (after consideration of such facts as it deemspertinent), be grounds for terminating any rights of the Participant orBeneficiary to any portion of the Program benefits not previously paid.

 

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

 

(j)                                     NoObligation to Mitigate Damages.  TheParticipants shall not be obligated to seek other employment in mitigation ofamounts payable or arrangements made under the provisions of the Program andthe obtaining of any such other employment shall in no event effect anyreduction of the Company’s obligations under the Program.

 

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

 

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resolved by bindingarbitration administered by the American Arbitration Association (“AAA”) inaccordance with its Commercial Arbitration Rules then in effect, and judgmenton the award rendered by the arbitrator may be entered in any court havingjurisdiction thereof.  Any arbitrationshall be held before a single arbitrator who shall be selected by the mutualagreement of the Company and the Participant, unless the parties are unable toagree to an arbitrator, in which case, the arbitrator will be selected underthe procedures of the AAA.  Thearbitrator shall be experienced in the resolution of disputes under employmentagreements or plans or programs similar to the Program maintained by majorcorporations and shall have the authority to award any remedy or relief that acourt of competent jurisdiction could order or grant, including, withoutlimitation, the issuance of an injunction, and the parties hereby agree to theemergency procedures of the AAA. However, either party may, without inconsistency with this arbitrationprovision, apply to any court having jurisdiction over such dispute orcontroversy and seek interim provisional, injunctive or other equitable reliefuntil the arbitration award is rendered or the controversy is otherwiseresolved.  Except as necessary in courtproceedings to enforce this arbitration provision or an award renderedhereunder, or to obtain interim relief, neither a party nor an arbitrator maydisclose the existence, content or results of any arbitration hereunder withoutthe prior written consent of the Company and the Participant.  The arbitration proceeding shall be conductedin the Chicago, Illinois metropolitan area. In the event of any such proceeding, the losing party shall reimbursethe prevailing party upon entry of a final award resolving the subject of thedispute for all reasonable legal expenses incurred, unless the arbitrator determinesthat to do so would be unjust. Otherwise, each party shall be responsible for its own expenses relatingto the conduct of the arbitration (including reasonable attorneys’ fees andexpenses) and shall share the fees of the AAA equally.  Notwithstanding the foregoing, theParticipant shall be required to exhaust his/her rights under Section 8 priorto proceeding with any arbitration hereunder.

 

(l)                                     ConditionPrecedent to Receipt of Payments or Benefits under the Program.  A Terminated Participant will not be eligibleto receive Change in Control Severance Benefits or any other payments orbenefits under the Program until (i) such Terminated Participant executes ageneral release of all claims arising out of said Participant’s employmentwith, and termination of employment from, the Company in substantially the formattached hereto as Exhibit A (adjusted as necessary to conform to then existinglegal requirements) (the “General Release”); and (ii) the revocation periodspecified in such General Release expires without such Terminated Participantexercising his/her right of revocation as set forth in the General Release.

 

(m)                               Assumptionby Successor to the Company.  TheCompany shall cause any successor to its business or assets to assume thisProgram and the obligations arising hereunder and to maintain this Programwithout modification or alteration for the period required herein.

 

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**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 BenefitsSchedule is applicable, the following shall apply:

 

“Qualifying Termination” shall mean (i) termination bythe Company of the employment of the Participant with the Company and all ofits 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 isconvicted of a felony or of any crime involving moral turpitude, dishonesty,fraud, theft or financial impropriety; or (ii) a reasonable determination bythe Company that, (A) the Participant has willfully and continuously failed toperform substantially his/her duties (other than such failure resulting fromincapacity due to physical or mental illness), after a written demand forcorrected performance is delivered to the Participant which specificallyidentifies the manners in which the Participant has not substantially performedhis/her duties, (B) the Participant has engaged in gross neglect or grossmisconduct, or (C) the Participant has knowingly violated a materialrequirement of the Company’s Integrity Policy, code of conduct, the SarbanesOxley Act of 2002 or other material provision of federal or state securitieslaw.

 

The term “Good Reason” shall mean:

 

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

 

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

 

(iii)                               anyfailure to provide to the Participant the opportunities to participate on areasonable basis in the Company’s stock option plans, the annual bonus programand any other bonus and incentive compensation plans (whether in effect on orafter the Change in Control Date) in which executives with comparable dutiesare eligible to participate; or

 

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

 

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

 

Subject to the paragraph immediately following thisparagraph, if any payments or benefits received or to be received by theParticipant in connection with the Participant’s employment (whether pursuantto the terms of the Program or any other plan, arrangement or agreement withthe Company, or any person affiliated with the Company) (the “Payments”), willbe 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 atthe time specified below, an additional amount (the “Gross-Up Payment”) suchthat the net amount retained by the Participant, after deduction of any ExciseTax on the Payments and any federal, state and local income or other applicabletax and Excise Tax upon the payment provided for by this paragraph, shall beequal to the Payments.  For purposes ofdetermining the amount of the Gross-Up Payment, the Participant shall be deemedto pay federal income taxes at the Participant’s highest marginal rate offederal income taxation in the calendar year in which the Gross-Up Payment isto be made and state and local income taxes at the Participant’s highestmarginal rate of taxation in the state and locality of the Participant’sresidence on the date on which the Excise Tax is determined, net of the maximumreduction in federal income taxes which could be obtained from deduction ofsuch state and local taxes.  Thecomputations required by this paragraph (and the immediately followingparagraph) shall be made by independent public accountants not then regularlyretained by the Company, in consultation with tax counsel selected by suchaccountants.  The Company shall providethe Participant with sufficient tax and compensation data to enable theParticipant or his/her tax advisor to verify such computations and shallreimburse the Participant for reasonable fees and expenses incurred withrespect thereto.  In the event that theExcise Tax is subsequently determined to be less than the amount taken intoaccount hereunder, the Participant shall repay to the Company at the time thatthe amount of such reduction in Excise Tax is finally determined the portion ofthe Gross-Up Payment attributable to such reduction (plus the portion of theGross-Up Payment attributable to the Excise Tax and federal and state and localincome 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-UpPayment was initially made to the date of repayment at the rate provided inSection 1274(b)(2)(B) of the Code (the “Applicable Rate”).  In the event that the Excise Tax isdetermined by the Internal Revenue Service or by such independent publicaccountants to exceed the amount taken into account hereunder (including byreason of any payment the existence or amount of which cannot be determined atthe time of the Gross-Up Payment), the Company shall make an additionalGross-Up Payment in respect of such excess (plus any interest, penalties, finesor additions to tax payable with respect to such excess) at the time that theamount 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 isrequired hereunder and, if

 

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

 

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

 

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**EXHIBIT A**

 

**FORM OF RELEASE**

 

**GENERAL RELEASE**

 

1.  For valuableconsideration, 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 throughParticipant, if any (collectively, “Releasers”), knowingly and voluntarilyreleases 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 tothroughout this General Release as “Company”) from any and all claims, causesof action, demands, fees and liabilities of any kind whatsoever, whether knownor unknown, against Company, Participant has, has ever had or may have as ofthe date of execution of this General Release, including, but not limited to,any alleged violation of:

 

•                                          The NationalLabor Relations Act, as amended;

 

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

 

•                                          The CivilRights Act of 1991, as amended;

 

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

 

•                                          The EmployeeRetirement Income Security Act of 1974, as amended;

 

•                                          TheImmigration Reform and Control Act, as amended;

 

•                                          The Americanswith Disabilities Act of 1990, as amended;

 

•                                          The AgeDiscrimination in Employment Act of 1967, as amended;

 

•                                          The OlderWorkers Benefit Protection Act of 1990, as amended;

 

•                                          The WorkerAdjustment and Retraining Notification Act, as amended;

 

•                                          TheOccupational Safety and Health Act, as amended;

 

•                                          The Familyand Medical Leave Act of 1993, as amended;

 

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

 

•                                          Any publicpolicy, contract, tort, or common law.

 

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

 

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officer of Company; (ii)Participant’s rights under any tax-qualified pension or claims for accruedvested benefits under any other employee benefit plan, policy or arrangementmaintained by Company or under COBRA; (iii) Participant’s rights under theprovisions of the Company’s Executive Continuity and Protection Program whichare intended to survive termination of employment; or (iv) Participant’s rightsas a stockholder.  Excluded from thisGeneral Release are any claims which cannot be waived by law.

 

**[For Current/Former CaliforniaResidents Only:]**  ThisGeneral Release is intended to constitute a release of all of the claimsreferenced herein, known or unknown, suspected or unsuspected.  Participant hereby expressly waives anyrights and benefits conferred by Section 1542 of the California Civil Codewhich provides:  “A GENERAL RELEASE DOESNOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST INHIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVEMATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

2.                                       Participantacknowledges and recites that:

 

(a)                                  Participanthas executed this General Release knowingly and voluntarily;

 

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

 

(c)                                  Participanthas been advised and directed orally and in writing (and thissubparagraph (c) constitutes such written direction) to seeklegal counsel and any other advice he wishes with respect to the terms of thisGeneral Release before executing it;

 

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

 

(e)                                  Participantenters into this General Release knowingly and voluntarily, without duress orreservation of any kind, and after having given the matter full and carefulconsideration; and

 

(f)                                    Participanthas been offered 21 calendar days after receipt of this General Release toconsider its terms before executing it.

 

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

 

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4.                                       Participantshall have 7 days from the date hereof to revoke this General Release byproviding written notice of the revocation to Company’s General Counsel, inwhich event this General Release shall be unenforceable and null and void. 

 

 
| Date:  |   |   |                       |   |
|--------|--------|--------|----------------------------|--------|
|   |   |   | [Participant’s  Name] |   |

 

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