TELLABS, INC. EXECUTIVE CONTINUITY AND PROTECTION PROGRAM

 

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 Part