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
