TELLABS INC
EMPLOYMENT AGREEMENT -- CHAIRMAN OF THE BOARD AND CEO
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit1031.htm
<DESCRIPTION>EMPLOYMENT AGREEMENT -- CHAIRMAN OF THE BOARD AND CEO
<TEXT>
<html><body><font size="2">
<p><b><center>EMPLOYMENT AGREEMENT<br>
(Chairman of the Board and Chief Executive Officer)</b></center></p>

<p>
THIS AGREEMENT, made and entered into as of June 16,2002, by and between Michael J. Birck (the
&#147;Executive&#148;) and Tellabs, Inc., a Delaware corporation (the &#147;Company&#148;);</p>

<p><center><u><b>WITNESSETH THAT:</b></u></center></p>
<p>WHEREAS, the parties desire to enter into this Agreement pertaining to the continuing employment of the
Executive by the Company as the Chairman of the Board and resumption of his employment as Chief
Executive Officer;</p>

<p>NOW. THEREFORE. in consideration of the mutual covenants and agreementset forth below. it is hereby
covenanted and agreed by the Executive and the Company as follows:</p>

<dir>

<p>1. <u>Employment</u>. Subject to the terms of this Agreement, the Company hereby agrees to employ the
Executive as its Chairman of the Board of Directors and as its Chief Executive Officer during the
Agreement Term (as defined below), with such additions or modifications thereto which are
consistent with his authority, responsibilities and duties hereunder, as the Board of Directors of the
Company (the &#147;Board&#148;) may, from time to time, in its discretion and after consultation with the
Executive, adopt. The &#147;Agreement Term&#148; shall be the period beginning on June 16, 2002 (the
&#147;Effective Date&#148;) and ending on the second anniversary of the Effective Date, subject to earlier
termination as provided herein; provided, however, that the Agreement Term will be automatically
extended by twelve months on the rust anniversary of the Effective Date and on each anniversary
thereof, unless one party to this Agreement provides written notice of non-renewal to the other
party at least 30 days prior to the date of such automatic extension.</p>

<p>2. <u>Performance of Duties</u>. The Executive agrees that during his employment with the Company, he
shall devote his full business time, energies and talents to serving as its Chairman of the Board of
Directors and as its Chief Executive Officer and that he shall perform his duties faithfully and
efficiently subject to the directions of the Board. Notwithstanding the foregoing provisions of this
Section 2, the Executive may (i) serve as a director, trustee or officer or otherwise participate in
not-for-profit educational, welfare, social, religious and civic organizations; (ii) after consultation
with, and approval by, the Board, serve as a director of any for-profit business which does not
compete with the Company or any of its subsidiaries or affiliates, and (iii) acquire passive
investment interests in one or more entities; provided, that such activities described in clauses (i),
(ii) and (iii) are not prohibited under the Company&#148;s Integrity Policy and do not inhibit or interfere
with the performance of the Executive&#148;s duties under this Agreement.</p>

<p>3. <u>Compensation</u>. Subject to the terms of this Agreement, during the Agreement Term, while the
Executive is employed by the Company, the Company shall compensate him for his services as
follows:</p>

<dir><p>a. <u>Base Salary</u>. The Executive shall receive a Base Salary of $750,000 per annum
payable in 26 bi-weekly installments. The Executive&#148;s Base Salary shall be reviewed and
subject to increase or decrease annually by the Board pursuanto its normal performance review policies for senior executives, with the first such review occurring in 2003. Such
Base Salary shall be payable beginning on July 1,2002.</p>

<p>b. <u>Annual Bonus</u>. For each calendar year, the Executive shall be eligible to receive an
Annual Bonus payment in accordance with the Company&#146;s annual bonus plans as in effect
from time to time. The target level for each Annual Bonus shall not be less than 50% of
the Executive&#146;s Base Salary for the year, provided that the Company achieves the
applicable financial and strategic objectives established for the year. Commencing with
calendar year 2003, such objectives will be established by the Compensation Committee
of the Board, in consultation with the Executive and other senior officers. The Executive
shall be eligible to receive a bonus for calendar year 2002, based on the Company&#146;s
achievement of financial and strategic goals established for the year 2002.</p>


<p>c. <u>Annual Equity Awards</u>. The Executive shall be entitled to receive stock option grants
or other stock based compensation as may from time to time be awarded by the
Compensation Committee.</p>

<p>d. <u>Emplovee Benefits</u>. Fringe Benefits and Perquisites. The Executive shall be provided
with employee benefits. fringe benefits and perquisites on a basis no less favorable than
such benefits and perquisites are provided by the Company from time to time to the
Company&#146;s other senior executives. In the event of the Executive&#146;s termination of
employment with the Company for any reason other than termination by the Company
for Cause. the Executive shall be entitled to reimbursement of tax and financial planning
costs and an office and secretarial assistance on the same basis as provided during the
Agreement Term through the tenth anniversary of the date of termination of employment.
the Company&#146;s policies applicable to senior executives.</p>

<p>e. <u>Expense Reimbursement</u>. The Company will reimburse the Executive for all
reasonable expenses incurred by him in the performance of his duties in accordance with
f. Change in Control Benefits. Following the Effective Date, the Executive and the
Company shall continue to be a party to the change of control agreement which the
Company has entered into with Executive, it being understood that the Executive shall
only receive whatever incremental payments or benefits are provided under such change
of control agreement and that there shall be no duplication of payments or benefits under
this Agreement and such change of control agreement.</p>

<p>f.<u>Change in Control Benefits</u>. Following the Effective Date, the Executive and the
Company shall continue to be a party to the change of control agreement which the
Company has entered into with Executive, it being understood that the Executive shall
only receive whatever incremental payments or benefits are provided under such change
of control agreement and that there shall be no duplication of payments or benefits under
this Agreement and such change of control agreement.</p>

<p>g. <u>Additional Payments</u>. If any payments or benefits received or to be received by the
Executive in connection with the Executive&#146;s employment (whether pursuanto the terms
of this Agreement or any other plan, arrangement or agreement with the Company, or any
person affiliated with the Company) (the &#147;Payments&#148;), will be subject to the tax (the
&#147;Excise Tax&#148;) imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the &#147;Code&#148;) (or any similar tax that may hereafter be imposed), the Company
shall pay at the time specified below, an additional amount (the &#147;Gross-Up Payment&#148;)
such that the net amount retained by the Executive, after deduction of any Excise Tax on
the Payments and any federal, state and local income or other applicable tax and Excise
Tax upon the payment provided for by this paragraph, shall be equal to the Payments. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income taxes at the Executive&#146;s highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the Executive&#146;s highest marginal rate of taxation in the
state and locality of the Executive&#146;s residence on the date on which the Excise Tax is
determined, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. The computations required by this
paragraph shall be made by the independent public accountants then regularly retained by
the Company, in consultation with tax counsel selected by them and acceptable to the
Executive. The Company shall provide the Executive with sufficient tax and
compensation data to enable the Executive or his tax advisor to verify such computations
and shall reimburse the Executive for reasonable fees and expenses incurred with respect
thereto. In the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder, the Executive shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by the Executive) plus interest on the
amount of such repayment from the date the Gross-Up Payment was initially made to the
date of repayment at the rate provided in Section 1274(b)(2)(B) of the Code (the
&#147;Applicable Rate&#148;). In the event that the Excise Tax is determined by the Internal
Revenue Service or by such independent public accountants to exceed the amount taken
into account hereunder (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest,
penalties, fines or additions to tax payable with respect to such excess) at the time that the
amount of such excess if finally determined. Any payment to be made under this
paragraph shall be payable within five (5) days of the determination of the accountants
that such a payment is required hereunder and, if applicable, within five (5) days of such
determination that the Excise Tax is greater or less than initially calculated but, in no
event, later than thirty (30) days after the Executive&#146;s receipt of the Payments resulting in
such Excise Tax.</p></dir>

<p>4. <u>Indemnification</u>. The Company agrees that if the Executive is made a party, or is threatened to
be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a &#147;Proceeding&#148;), by reason of the fact that he is or was a director, officer or
employee of the Company or is or was serving at the request of the Company as a director, officer,
member, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether or not the basis of
such Proceeding is the Executive&#146;s alleged action in an official capacity while serving as a
director, officer, member, employee or agent, the Executive shall be indemnified and held
harmless by the Company to the fullest extent legally permitted or authorized by the Company&#146;s
certificate of incorporation or bylaws or resolutions of the Company&#146;s Board of Directors or, if
greater, by the laws of the State of Delaware, against all cost, expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or other
liabilities or penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Executive in connection therewith, and such indemnification shall continue as to
the Executive even if he has ceased to be a director, member, employee or agent of the Company
or other entity, with respect to acts or omissions which occurred prior to his cessation of
employment with the Company, and shall inure to the benefit of the Executive&#146;s heirs, executors
and administrators. The Company shall advance to the Executive all reasonable costs and expenses
incurred by him in connection with a Proceeding within 20 calendar days after receipt by the
Company of a written request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.</P>

<p>5. <u>Termination of Employment</u>. Upon termination of the Executive&#146;s employment for any reason,
the Executive or, in the event of death, the Executive&#146;s estate shall be entitled to the Executive&#146;s
Base Salary prorated through the date of termination. Any Annual Bonus awarded to the
Executive for a prior award period, but not yet paid to the Executive, and any employee benefits to
which the Executive is entitled by reason of his employment shall be paid to the Executive or his
estate at such time as is provided by the terms of the applicable Company plan or policy. If the
Executive&#146;s employment is terminated during the Agreement Term, the Executive&#146;s right to
additional payments and benefits under this Agreement for periods after his date of termination
shall be determined in accordance with the following provisions of this Section 5.</p>

<dir><p>a. <u>Death or Disability</u>. If the Executive&#146;s employment is terminated by reason of death or
by reason of the Executive&#146;s Disability, the Executive, or, in the event of his death, his
estate, shall be entitled to a prompt cash payment of a prorated Annual Bonus for the year
in which such termination occurs, based on the target Annual Bonus for such year. The
Executive or the Company shall be entitled to terminate the Executive&#146;s employment
because of the Executive&#146;s Disability during the Agreement Term. &#147;Disability&#148; means that
the Executive is disabled within the meaning of the Company&#146;s long-term disability
policy or, if there is no such policy in effect, that (i) the Executive has been substantially
unable, for 120 business days within a period of 180 consecutive business days, to
perform the Executive&#146;s duties under this Agreement, as a result of physical or mental
illness or injury, and (ii) a physician selected by the Company or its insurers, and
reasonably acceptable to the Executive or the Executive&#146;s legal representative, has
determined that the executive is disabled. A termination of the Executive&#146;s employment
by the Company for disability shall be communicated to the Executive by written notice,
and shall be effective on the 30th day after receipt of such notice by the Executive (the
&#147;Disability Effective Time&#148;), unless the Executive returns to full-time performance of the
Executive&#146;s duties be ore the Disability Effective Time.</p>
<p>b. <u>Termination for cause or Voluntary Resignation</u>. If the Executive&#146;s employment is
terminated by the Company for Cause or if the Executive voluntarily resigns from the
employ of the Compony, other than pursuant to a Constructive Discharge, all payments
and benefits to whic the Executive would otherwise be entitled under this Agreement
shall immediately cease, except as otherwise specifically provided above in this Section 5
with respect to his prorated Base Salary through the date of termination, his Annual
Bonus, if any, awarded for a prior award period but not yet paid and his previously
earned employee benefits. For purposes of this Agreement, the term &#147;Cause&#148; shall mean:</p>

<dir><p>The Executive is convicted of a felony or any crime involving moral turpitude
or</p>

<p>ii. A reasonable determination by a vote of directors comprising two-thirds of
the entire Board, after giving the Executive notice and an opportunity to be
heard, that, (A) Executive has willfully and continuously failed to perform
substantially his duties as contemplated by Section 2 above (other than such
failure resu ing from incapacity due to physical or mental illness), after a
written de nd for corrected performance is delivered to Executive by the
Board whic specifically identifies the manners in which the Board believes the
Executive has not substantially performed his duties or (B) the Executive has
engaged in gross neglect ,or gross misconduct, unless the Executive had a good
faith belief at such conduct was in, or not opposed to, the best interests of the
Company.</p></dir>

<p>c.<u>Termination With just Cause</u>. If the Company terminates the Executive without Cause,
the Executive shall be entitled to a prompt lump sum cash payment equal to the Base
Salary and Annual Bonus to which he would otherwise would have been entitled if he
had remained in the employ of the Company through the last day of the Term of this
Agreement. For purposes of the preceding sentence, the Annual Bonus component shall
be based upon the get bonus for the year of termination and shall include a prorated
bonus for the partial ear ending on the last day of the Agreement Term.</p>

<p>d.<u> Resignation for Constructive Discharge</u>. The Executive&#146;s voluntary resignation for
Constructive Dischage shall be treated for all purposes of this Agreement as a
termination by the Company without Cause. For purposes of this Agreement,
&#147;Constructive Discharge&#148; shall mean the occurrence of any of the following
circumstances:</p><dir>

<p>i. A reduction by the Company in the Executive&#146;s Base Salary or Annual Bonus
target to an 4mount that is less than required under Section 3 above;,/p>

<p>ii. The removal of the Executive from the position of Chairman of the Board of
Directors or the failure of the Executive to be nominated or reelected to the
Company&#146;s Board of Directors;</p>

<p>iii. Any action by the Company which results in significant diminution in the
Executive&#146;s authority, power, responsibilities or duties from those contemplated
by Sections 1 and 2 above, or the assignment to Executive without his written
consent of any duties inconsistent with the Executive&#146;s position and status as
Chairman of the Board of Directors, Chief Executive Officer of the Company as
contemplated by Sections 1 and 2 above, which action or assignment continues
after written notice thereof and a reasonable opportunity to cure of not less than
fifteen (15) days has been given by Executive to the Company; or</p>

<p>iv. Any other breach by the Company of any of its material obligations to the
Executive under this Agreement, which breach continues after written notice
thereof and a reasonable opportunity to cure of not less than thirty (30) days has
been given by Executive to the Company.</p></dir>


<p>e. <u>Change in Control</u>. The term &#147;Change in Control&#148; of the Company means the first to
occur of:</p>

<dir><p>i. Any &#147;person&#148; (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;)), 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 pursuanto the
terms of any such plan which acquires beneficial ownership of voting securities
of the Company, is or becomes the &#147;beneficial owner&#148; (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the Company
representing 20% or more of the combined voting power of the Company&#146;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 20% or more but then promptly
reduces that ownership interest below 20%;</p>

<p>ii. During any two consecutive years (not including any period beginning prior
to June 30, 2002), individuals who at the beginning of such two-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&#146;s stockholders
was approved by a vote of at least two-thirds 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 &#147;Incumbent Board&#148;) cease for any reason to constitute at
least a majority of the Board;</p>

<p>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 &#147;Business
Combination&#148;), in each case, unless, following such Business Combination, (i)
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
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
company resulting from such Business Combination (including, without
limitation, a company which as a result of such transaction owns the Company
or all or substantially all of the Company&#146;s assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the outstanding voting
securities of the Company; (ii) no person (excluding any company resulting
from such Business Combination or any employee benefit plan (or related trust)
of the Company or such company resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the then
combined voting power of the then outstanding voting securities of such
company except to the extent that such ownership existed prior to the Business
Combination; and (iii) at least a majority of the members of the board of
directors of the company resulting from such Business Combination 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;</p>


<p>iv. Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company; or</p>

<p>v. A tender offer (for which a filing has been made with the Securities and
Exchange Commission &#147;SEC&#148;) which purports to comply with the requirements
of Section 14(d) of the Securities Exchange Act of 1934 and the corresponding
SEC rules) is made for the stock of the Company, then the first to occur of:</p>

<dir>
<p>(A) Any time during the offer when the person making the offer owns
or has accepted for payment stock of the Company with 25% or more
of the total voting power of the Company&#146;s securities, or</p>
<p>(B) Three business days before the offer is to terminate unless the offer
is withdrawn first if the person making the offer could own, by the
terms of the offer plus any shares owned by this person, stock with
50% or more of total voting power of the Company's securities when
the offer terminates.</p></dir></dir>

<p>6.<u> No Mitigation: No Offset</u>. In the event of any termination of employment, the Executive shall
be under no obligation to seek other employment and there shall be no offset against amounts due
the Executive under this Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.</p>

<p>7.<u>Confidential Information</u>. The Executive agrees that, during his employment by the Company
and at all times thereafter, he shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or any of its
subsidiaries or affiliates, and their respective businesses, which shall have been obtained by the
Executive during the Executive&#146;s employment by the Company or during his consultation with the
Company after his termination of employment, and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the Executive in violation of
this Agreement). Except in the good faith performance of his duties for the Company, the
Executive shall not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it.</p>

<p>8.<u>Protective Covenants</u>. For a period of two years following the termination of Executive's
employment for any reason, the Executive shall not, without the written consent of the Board,
directly or indirectly,</p>
<dir>

<p>a. engage or be interested in (as owner, partner, stockholder, employee, director, officer,
agent, consultant or otherwise), with or without compensation, any business which is in
direct competition with the Company or of any of its subsidiaries in providing data, voice
or video transport, switching/routing, network access system and/or voice quality
enhancement solutions to service providers or end users;</p>

<p>b. hire any person who was employed by the Company or any of its subsidiaries or
affiliates (other than persons employed in a clerical or other non-professional position)
within the six-month period preceding the date of such hiring; or</p>

<p>c. solicit, entice, persuade or induce any person or entity doing business with the
Company and its subsidiaries or affiliates, to terminate such relationship or to refrain
from extending or renewing the same.</p></dir>

<p>Nothing in subparagraph (a) above, will prohibit the Executive from acquiring or holding not more
than one percent of any class of publicly traded securities of any such business; provided that such
securities entitle the Executive to no more than one percent of the total outstanding votes entitled
to be cast by security holders of such business in matters on which such security holders are
entitled to vote.</p>

<p>9.<u>Remedies</u>. The Executive agrees that the restrictions set forth in Sections 7 and 8 hereof are
reasonably and necessary to protect the legal interests of the Company. The Executive further
agrees that the Company shall be entitled to injunctive relief in the event of any actual or
threatened breach of such restrictions.</p>

<p>10.<u>Assignability. Binding Nature</u>. This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No
rights or obligations of the Company under this Agreement may be assigned or transferred by the
Company except that such rights or obligations may be assigned or transferred pursuant to a
merger or consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the Company and such assignee
or transferee assumes the liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence, it shall take
whatever action it legally can in order to cause such assignee or transferee to expressly assume the
liabilities, obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive other than his
rights to compensation and benefits, which may be transferred only by will or operation of law.</p>

<p>11.<u>Amendment</u>. This Agreement may be amended or canceled only by mutual agreement of the
parties in writing without the consent of any other person. So long as the Executive lives, no
person, other than the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof except that in the event of the Executive&#146;s Disability so as to render him
incapable of such action, his legal representative may be substituted for purposes of such
amendment.</p>

<p>12.<u>Applicable Law</u>. The provisions of this Agreement shall be construed in accordance with the
internal laws of the State of Illinois, without regard to the conflict of law provisions of any state.</p>

<p>13.<u>Severability</u>. The invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement, and this Agreement
will be construed as if such invalid or unenforceable provision were omitted (but only to the extent
that such provision cannot be appropriately reformed or modified).</p>

<p>14.<u>Waiver of Breach</u>. No waiver by any party hereto of a breach of any provision of this
Agreement by any other party, or of compliance with any condition or provision of this
Agreement to be performed by such other party, will operate or be construed as a waiver of any
subsequent breach by such other party of any similar or dissimilar provisions and conditions at the
same or any prior or subsequent time. The failure of any party hereto to take any action by reason
of such breach will not deprive such party of the right to take action at any time while such breach
continues.</p>

<p>15.<u>Notices</u>. Notices and all other communications provided for in this Agreement shall be in
writing and shall be delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth
below (or such other addresses as shall be specified by the parties by like notice):</p>
<dir>
<p>to the Company:</p>

<p>Tellabs, Inc.<br>
One Tellabs Center<br>
1415 W. Diehl Road<br>
Naperville, Illinois 60563<br>
Attention: Senior Vice President &#150;Human Resources</p>

<p>or to the Executive:</p>

<p>Michael J. Birck<br>
One Tellabs Center<br>
1415 W. Diehl Road<br>
Naperville, Illinois 60563</p>
</dir>
<p>Each party, by written notice furnished to the other party, may modify the applicable delivery
address, except that notice of change of address shall be effective only upon receipt. Such notices,
demands, claims and other communications shall be deemed given in the case of delivery by
overnight service with guaranteed next day delivery, the next day or the day designated for
delivery; or in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail;
provided, however, that in no event shall any such communications be deemed to be given later
than the date they are actually received.</p>

<p>16.<u>Arbitration of Disputes and Reimbursement of Legal Costs</u>. Any controversy or claim arising
out of or relating to this Agreement (or the breach thereot) shall be settled by final, binding and
non-appealable arbitration in Chicago, Illinois by three arbitrators. Subject to the following
provisions, the arbitration shall be conducted in accordance with the rules of the American
Arbitration Association (the &#147;Association&#148;) then in effect. One of the arbitrators shall be appointed
by the Company, one shall be appointed by the Executive, and the third shall be appointed by the
fIrst two arbitrators. If the fIrst two arbitrators cannot agree on the third arbitrator within 30 days
of the appointment of the second arbitrator, then the third arbitrator shall be appointed by the
Association and shall be experienced in the resolution of disputes under employment agreements
for CEOs of major corporations. Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by either party in accordance with applicable
law in any court of competent jurisdiction. This arbitration provision shall be specifically
enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or
to award a remedy for a dispute involving this Agreement other than a benefit specifically
provided under or by virtue of the Agreement. If the Executive prevails on any material issue
which is the subject of such arbitration or lawsuit, the Company shall be responsible for all of the
fees of the American Arbitration Association and the arbitrators and any expenses relating to the
conduct of the arbitration (including the Company&#146;s and the Executive&#146;s reasonable attorneys&#146; fees
and expenses). Otherwise, each party shall be responsible for its own expenses relating to the
conduct of the arbitration (including reasonable attorneys&#146; fees and expenses) and shall share the
fees of the American Arbitration Association equally.</p>

<p>17.<u>Survivorship</u>. Upon the expiration or other termination of this Agreement, the respective rights
and obligations of the parties hereto shall survive such expiration or other termination to the extent
necessary to carry out the intentions of the parties under this Agreement.</p>

<p>18.<u>Entire Agreement</u>. Except as otherwise noted herein, this Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and supersedes all prior and
contemporaneous agreements, if any, between the parties relating to the subject matter hereof.</p>

<p>19.<u>Counterparts</u>. This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the same agreement.<br></dir>
IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has
caused this Agreemento be executed in its name and on its behalf, and its corporate seal to be hereunto
affixed, all as of the day and year first above written.</p>

<dir>  <dir><dir><dir> <dir> <dir><dir><dir>
<p>EXECUTIVE:</p>
<p>MICHAEL J. BIRCK<br>
<b><i>/s Michael J. Birck</b></i></p>

<p>COMPANY:</p>
<p>TELLABS, INC., a Delaware corporation<br>

by<b><i> /s Thomas A. Cook</b></i><br>
Thomas A. Cook II<br>
Its: Senior Vice President &#150; Human Resources</p>
</dir></dir></dir></dir></dir></dir></dir>

<p>ATTEST:</p>
<p><b><i>/s James M. Sheehan</b></i><br>
James M. Sheehan<br>
Secretary</p>
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</TEXT>
</DOCUMENT>
