10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 29, 2000

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

            For the transition period from                         to                          

Commission file Number: 0-9692

TELLABS, INC.
(Exact name of registrant as specified in its charter)

Delaware	36-3831568
(State of Incorporation)	(I.R.S. Employer Identification No.)

4951 Indiana Avenue, Lisle, Illinois	60532
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (630) 378-8800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES   X           NO___

Common Shares, $.01 Par Value - 410,515,321 shares outstanding on September 29, 2000.

TELLABS, INC.
INDEX

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Comparative Statements of Earnings
	Condensed Consolidated Comparative Balance Sheets
	Condensed Consolidated Comparative Statements of Cash Flow
	Notes to Condensed Consolidated Comparative Financial Statements
Item 2.	Management's Discussion and Analysis
PART II.	OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits and Reports on Form 8-K
SIGNATURE

TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF EARNINGS
(Unaudited)
	Three		Nine
	Months Ended		Months Ended
(In thousands, except per-share data)	9/29/00	10/1/99	9/29/00	10/1/99
Net Sales	$870,603	$595,358	$2,310,832	$1,606,446
Cost of sales	403,571	244,262	1,081,995	650,149
Gross Profit	467,032	351,096	1,228,837	956,297
Operating expenses
Marketing, general and administrative	94,809	77,649	282,101	229,888
Research and development	104,262	79,333	300,566	217,721
Merger costs	-	1,929	5,760	1,929
Goodwill amortization	3,034	1,902	8,823	4,802
	202,105	160,813	597,250	454,340
Operating Profit	264,927	190,283	631,587	501,957
Other income (expense)
Interest income	14,449	8,840	40,697	25,373
Interest expense	(43)	(102)	(440)	(515)
Other	21,669	5,104	48,164	4,751
	36,075	13,842	88,421	29,609
Earnings Before Income Taxes	301,002	204,125	720,008	531,566
Income taxes	90,626	62,878	226,803	167,179
Net Earnings	$210,376	$141,247	$493,205	$364,387
Earnings per Share	$0.51	$0.35	$1.20	$0.90
Earnings per Share, Assuming Dilution	$0.50	$0.34	$1.18	$0.87
Average number of common shares
outstanding	410,354	405,546	409,642	404,098
Average number of common shares
outstanding, assuming dilution	419,160	417,935	418,946	416,482
The accompanying notes are an integral part of these statements.

TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE BALANCE SHEETS
(Unaudited)
	September 29,	December 31,
	2000	1999
(In thousands, except share amounts)
Assets
Current Assets
Cash and cash equivalents	$ 221,563	$ 310,553
Investments in marketable securities	905,584	657,449
Accounts receivable, net	691,303	626,741
Inventories
Raw materials	171,408	74,361
Work in process	50,536	38,108
Finished goods	143,418	73,327
	365,362	185,796
Other current assets	16,488	6,389
Total Current Assets	2,200,300	1,786,928
Property, plant and equipment	671,661	576,992
Less: accumulated depreciation	274,965	240,806
	396,696	336,186
Goodwill, net	75,286	87,275
Intangibles and other assets, net	193,884	144,236
Total Assets	$ 2,866,166	$ 2,354,625
Liabilities
Current Liabilities
Accounts payable	$ 171,286	$ 111,597
Accrued liabilities	125,251	116,733
Income taxes	57,820	47,205
Total Current Liabilities	354,357	275,535
Long-term debt	2,850	9,350
Other long-term liabilities	23,145	20,512
Deferred income taxes	6,403	1,723
Stockholders' Equity
Preferred stock: authorized 5,000,000 shares of
$.01 par value; no shares issued and outstanding	-	-
Common stock: 1,000,000,000 shares of $.01 par
value; 410,515,321 and 408,029,292 shares
issued and outstanding	4,105	4,080
Additional paid-in capital	420,355	376,648
Accumulated other comprehensive income
Cumulative translation adjustment	(159,203)	(82,915)
Unrealized net gains on
available-for-sale securities	13,129	41,872
Total accumulated other comprehensive income	(146,074)	(41,043)
Retained earnings	2,201,025	1,707,820
Total Stockholders' Equity	2,479,411	2,047,505
Total Liabilities and Stockholders' Equity	$ 2,866,166	$ 2,354,625
The accompanying notes are an integral part of these statements.

TELLABS, INC.
CONDENSED CONSOLIDATED COMPARATIVE STATEMENTS OF CASH FLOW
(Unaudited)
	For the Nine Months Ended
	September 29,	October 1,
(In thousands)	2000	1999
Operating Activities
Net earnings	$ 493,205	$ 364,387
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization	83,255	57,857
Provision for doubtful receivables	7,251	4,030
Deferred income taxes	5,806	(9,965)
Gain on investments	(47,663)	(7,707)
Merger costs	5,760	1,929
Net changes in assets and liabilities:
Accounts receivable	(90,892)	(20,046)
Inventories	(189,117)	(19,722)
Other current assets	1,078	(1,797)
Long-term assets	(62,308)	(45,692)
Accounts payable	64,527	27,848
Accrued liabilities	22,982	7,875
Income taxes	23,626	30,040
Long-term liabilities	2,855	1,923
Net Cash Provided by Operating Activities	320,365	390,960
Investing Activities
Acquisition of property, plant and equipment, net	(129,869)	(64,966)
Payments for purchases of investments	(574,767)	(575,035)
Proceeds from sales and maturities of
investments	303,816	346,717
Payments for acquisitions, net of
cash acquired	(535)	(110,264)
Net Cash Used in Investing Activities	(401,355)	(403,548)
Financing Activities
Proceeds from issuance of common stock	22,973	28,847
Proceeds from notes payable	--	4,000
Payments of notes payable	(6,500)	--
Net Cash Provided by Financing Activities	16,473	32,847
Effect of Exchange Rate Changes on Cash	(24,473)	(12,609)
Net (Decrease)/Increase in Cash and Cash Equivalents	(88,990)	7,650
Cash and Cash Equivalents at Beginning of Year	310,553	245,461
Cash and Cash Equivalents at End of Year	$ 221,563	$ 253,111
Other Information
Interest paid	$123	$284
Income taxes paid	$193,887	$144,044
The accompanying notes are an integral part of these statements.

TELLABS, INC.
NOTES TO CONDENSED CONSOLIDATED COMPARATIVE FINANCIAL STATEMENTS

1. Basis of Presentation:
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and the requirements of Form 10-Q and applicable rules of Regulation S-X and accordingly do not include all disclosures normally required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) which are necessary for a fair presentation. Operating results for interim periods are not necessarily indicative of operating results for the full year. Accordingly, the financial statements and notes herein should be read in conjunction with the Form 10-K of Tellabs, Inc. ("Tellabs" or the "Company"), for the year ended December 31, 1999, and the restated selected sections of the 1999 Annual Report filed with the Securities and Exchange Commission on June 2, 2000, on Form 8-K.

In addition, certain reclassifications have been made in the 1999 financial statements to conform with the 2000 presentation.

2. Business Combinations

In February 2000, the Company acquired SALIX Technologies, Inc. ("SALIX"), a developer of class independent switching solutions that enable service providers to offer next-generation, converged services, such as voice-over-ATM ("VoATM"), voice-over-IP ("VoIP") and Internet services, over any network infrastructure, in a transaction accounted for as a pooling of interests. The Company issued approximately 3,784,000 shares of its common stock in exchange for all the outstanding common and preferred shares of SALIX. During the first quarter of 2000, the Company recognized a pre-tax charge of $5,760,000 for costs related to the SALIX acquisition.

The Company has restated all prior consolidated financial statements presented to include the combined operating results, financial position and cash flows of SALIX as if it had been a part of the Company.

Prior to the merger, SALIX operated on a June 30th fiscal year end. Restated consolidated financial statements for 1999 include the calendar results of operations, financial position and cash flows for SALIX. No material adjustments were recorded to conform the accounting policies of Tellabs and SALIX. Certain reclassifications and adjustments were made to conform the Tellabs and SALIX presentations, including the conversion of SALIX redeemable convertible preferred shares to common shares outstanding, for all periods presented, at the applicable exchange rates.

The table below shows the historical results of operations of Tellabs and the restated combination of SALIX for the periods prior to the acquisition date of the company.

(in thousands)	Three Months Ended 9/29/00	Three Months Ended 10/01/99	Nine Months Ended 9/29/00	Nine Months Ended 10/01/99
Revenue:
Tellabs	$870,603	$594,505	$2,310,563	$1,604,556
SALIX	--	853	269*	1,890
Consolidated total, as restated	$870,603	$595,358	$2,310,832	$1,606,446
Net Earnings (Loss):
Tellabs	$210,376	$144,040	$494,876	$370,466
SALIX	--	(4,269)	(2,532)*	(9,271)
Reversal of SALIX deferred   tax valuation allowance	--	1,476	861	3,192
Consolidated total, as restated	$210,376	$141,247	$493,205	$364,387

*Represents 2000 results for SALIX prior to the acquisition; SALIX's 2000 results after the acquisition are included in Tellabs' consolidated operating results.

3. New Accounting Policies:

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards that require companies to record all derivative instruments on the balance sheet at their fair value. Changes in the derivatives fair value are to be reported in earnings or other comprehensive income, as appropriate. The effective date of SFAS No. 133 was delayed twice, first by SFAS No. 137 issued in June 1999 and then by SFAS No. 138 issued in June 2000. Tellabs will adopt SFAS No. 133 in the first quarter of 2001. The Company has evaluated the impact of SFAS No. 133 and has determined that there will be no material effect on its consolidated results of operations, financial position or cash flows.

In June 2000, the staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101B, which extended the implementation date of SAB No. 101, "Revenue Recognition in Financial Statements," to the fourth quarter of 2000. The Company is currently evaluating the effect of SAB No. 101 and its related interpretive guidance.

4. Comprehensive Income:
 
Comprehensive income for the third quarter of 2000 was $160,240,000 and $157,192,000 for the third quarter of 1999. For the first nine months of 2000, comprehensive income was $388,174,000 compared to $333,017,000 for the first nine months of 1999.

5. Earnings Per Share Reconciliation:
 
The following table sets forth the computation of earnings per share:

	Three Months Ended		Nine Months Ended
	September 29,	October 1,	September 29,	October 1,
	2000	1999	2000	1999
Numerator:
Net earnings	$210,376	$141,247	$493,205	$364,387
Denominator:
Denominator for basic earnings per share- weighted-average shares	410,354	405,546	409,642	404,098
Effect of dilutive securities:
Employee stock options and awards	8,806	12,389	9,304	12,384
Denominator for diluted earnings per share- adjusted weighted-average and assumed conversions	419,160	417,935	418,946	416,482
Earnings per Share	$ 0.51	$ 0.35	$ 1.20	$ 0.90
Earnings per Share, assuming dilution	$ 0.50	$ 0.34	$ 1.18	$ 0.87

Management's Discussion and Analysis

Quarter Ended September 29, 2000, Compared to Quarter Ended October 1, 1999

Highlights and Non-Comparable Items
Sales for the quarter totaled a record $870.6 million, higher than any other quarter in the Company's history and 46.2% higher than sales in the comparable period last year. This marks the 37^th consecutive quarter in which sales for the current quarter surpassed prior-year levels. Net income for the quarter ended September 29, 2000, also a record, totaled $210.4 million, an increase of 48.9% compared to the third quarter of 1999. Diluted earnings per share for the third quarter of 2000 were $0.50 per share compared to $0.34 per share in the third quarter of 1999, an increase of 48.5%. Included in net earnings for the third quarter of 2000 was a pre-tax gain of $12.1 million ($8.3 million, after-tax, or $0.02 per diluted share) on the sale of stock held as an investment and a pre-tax gain of $8.6 million ($5.8 million, after-tax, or $0.01 per diluted share) on a distribution from one of the Company's technology investments. Included in net earnings for the third quarter of 1999 was a pre-tax gain of $6.9 million ($4.7 million, after-tax, or $0.01 per diluted share) on the sale of stock held as an investment and a pre-tax charge of $1.9 million ($1.3 million, after-tax) taken in connection with the acquisition of NetCore Systems, Inc. In order to provide a more accurate comparison of the Company's results of operations, the following discussion excludes the effects of the aforementioned gains and charges.

Results of Operations
Sales for the quarter ended September 29, 2000, were $870.6 million, an increase of 46.2% over the comparable period last year. The overall sales growth is primarily a result of strong sales of the Company's optical networking products, which increased 62.5% compared to the third quarter of 1999.

Optical networking products sales totaled $544.5 million for the quarter, compared to $335.1 million achieved in the prior year quarter. Strong TITAN® 5500/5500S and TITAN 532L systems sales fueled the growth in optical networking product sales. During the third quarter of 2000, the Company also made significant progress in bringing the newest members of its optical networking product family to market. Both the Tellabs' TITAN 6100 Optical Transport Switch (OTS) and the TITAN 6500 Multiservice Transport Switch (MTS) completed internal validation review, indicating that the products are ready for customer deployment. The Company expects to begin shipping the TITAN 6100 OTS in the fourth quarter of 2000, while the TITAN 6500 MTS is involved in field trials.

Broadband access product sales also showed improvement, with sales for the quarter totaling $203.8 million compared to $151.5 million attained in the third quarter of 1999. The 34.5% growth in broadband access product sales was driven mainly by robust CABLESPAN® 2300 universal telephony distribution systems sales.

Sales of next-generation switching products, while representing a substantial growth opportunity for the Company, fell to $51.3 million for the third quarter of 2000, compared to $72.5 million for the comparable period last year. The 29.3% decrease in next-generation switching product sales was attributable to lower sales of the Company's digital echo cancellers. In spite of the overall decline, next-generation switching product sales for the quarter included sales of the Company's SALIX® 7000 family of class-independent switching products, which continued to gain customer acceptance.

Revenues from Tellabs' services and solutions area totaled $65.7 million, an increase of 91.1% over the $34.4 million achieved in the third quarter of 1999. The substantial increase in revenue generated from this area primarily resulted from the strong optical networking product sales. Tellabs' services and solutions area derives revenues primarily from the installation and testing of the Company's systems.

For the quarter ended September 29, 2000, sales within the United States increased 69.3% over the comparable period last year and accounted for 72.4% of total sales. Sales outside the United States increased 7.8% and accounted for 27.6% of total sales.

Gross margin as a percentage of sales for the quarter was 53.6% compared to 59.0% for the third quarter of 1999. The reduction in gross margin as a percentage of sales was due primarily to higher component costs and parts shortages in 2000, coupled with higher sales of lower margin products.

Operating expenses for the third quarter of 2000 were $202.1 million compared to $158.9 million in the third quarter of 1999, excluding non-comparable items. As a percentage of sales, operating expenses for the third quarter of 2000 were 23.2%, an improvement of 3.5 percentage points compared to the same period last year. Research and development expenses totaled $104.3 million, an increase of 31.4% compared to the third quarter of 1999. The growth in research and development spending was attributable to Tellabs' continued efforts to bring new products to market in a timely manner. As a percentage of sales, research and development spending for the third quarter of 2000 was 12.0% compared to 13.3% last year. Marketing, general and administrative expenses for the third quarter of 2000 totaled $94.8 million, an increase of 22.1% over the comparable period in 1999. As a percentage of sales, marketing, general and administrative spending was 10.9%, a decrease of 2.1 percentage points compared with the third quarter of 1999. The decrease in marketing, general and administrative expenditures as a percentage of sales reflects the continued efforts of Tellabs' support functions to handle the current and anticipated growth of the business utilizing the most cost-effective means available.

Excluding non-comparable items, other income for the third quarter of 2000 totaled $15.3 million compared to $6.9 million achieved in the third quarter of 1999. The increase in other income resulted primarily from growth in interest income resulting from both generally higher interest rates and higher average cash balances being available for investment.

The effective tax rate for the third quarter of 2000 was 30.1% compared to 30.8% in the third quarter of 1999. Overall, the Company's 2000 and 1999 effective tax rates reflect the benefits of R&D tax credits and lower foreign tax rates as compared to the United States federal statutory rate.

Nine Months Ended September 29, 2000 Compared to Nine Months Ended October 1, 1999

Highlights and Non-Comparable Items
Sales for the nine-month period ended September 29, 2000 totaled a record $2,310.8 million, 43.8% higher than sales in the comparable period last year. Net income for the nine months ended September 29, 2000, also a record, was $493.2 million, an increase of 35.4% over the comparable year total of $364.4 million. Diluted earnings per share for the first nine months of 2000 were $1.18 per share compared to $0.87 per share achieved in the first nine months of 1999.

During the first quarter of 2000, the Company restated its results of operations, financial position and cash flows for its pooling-of-interests merger with SALIX Technologies, Inc (For more information see Note 2. Business Combinations). Also, during the first quarter of 2000, the Company recognized a pre-tax gain of $19.2 million ($12.7 million, after tax, or $0.03 per diluted share) on the sale of stock held as an investment, a pre-tax distribution from one of its technology investments of $4.6 million ($3.1 million, after tax, or $0.01 per diluted share) and a pre-tax charge of $5.8 million related to the SALIX merger ($3.8 million, after tax, or $0.01 per diluted share). During the third quarter of 2000, Tellabs recognized a pre-tax gain of $12.1 million ($8.3 million, after-tax, or $0.02 per diluted share) on the sale of stock held as an investment and a pre-tax gain of $8.6 million ($5.8 million, after-tax, or $0.01 per diluted share) on a distribution from one of the Company's technology investments. During the third quarter of 1999, Tellabs recognized a pre-tax gain of $6.9 million ($4.7 million, after-tax or $0.01 per share) on the sale of stock held as an investment and a pre-tax charge of $1.9 million ($1.3 million, after-tax) taken in connection with the acquisition of NetCore Systems, Inc. In order to provide a more accurate comparison of the Company's results of operations, the following discussion excludes the effects of the aforementioned gains and charges

Results of Operations
Sales for the first nine months of 2000 totaled $2,310.8 million, an increase of 43.8% compared to the $1,606.4 million attained during the first nine months of 1999. The growth in sales was primarily a result of higher optical networking product sales. Sales of the Company's optical networking products for the first nine months of 2000 totaled $1,466.7 million compared to $938.5 million in the first nine months of 1999. Higher TITAN 5500/5500S and TITAN 532L system sales drove the 56.3% growth in optical networking sales. Broadband access sales for the first nine months of 2000 were $515.2 million compared to $361.4 million in 1999. Strong sales of the Company's CABLESPAN 2300 universal telephony distribution system, which were partially offset by weaker sales of the Company's MartisDXX® managed access and transport system, were responsible for the growth in broadband access product sales. Sales of next-generation switching products totaled $151.5 million compared to $201.8 million in the first nine months of 1999. Lower digital echo canceller sales were the primary cause of the 24.9% decrease in next-generation switching product sales. Revenues generated during the first nine months from the installation and testing of the Company's systems totaled $164.6 million compared to $97.9 million generated during the first nine months of 1999. The 68.3% growth in installation and testing revenues resulted primarily from higher optical networking product sales in 2000.

From a geographic standpoint, sales within the United States increased 59.4% and accounted for 78.0% of overall sales. Sales outside the United States increased 7.0% and accounted for 22.0% of total sales.

Gross margin as a percentage of sales for the first nine months of 2000 was 53.2% compared to 59.5% for the first nine months of 1999. The decrease in gross margin as a percentage of sales was due primarily to higher component costs due in substantial part to certain parts shortages in 2000, along with increased sales of lower margin products.

Operating expenses, excluding non-comparable items, for the first nine months of 2000 were $591.5 million compared to $452.4 million for the first nine months of 1999. As a percentage of sales, operating expenses were 25.6% compared to 28.2% in the first nine months of 1999. Research and development expenses totaled $300.6 million, an increase of 38.1% over the comparable period last year. The increased research and development spending reflects the Company's continued efforts at bringing new products to market, coupled with the inclusion of expenditures for Tellabs Denmark, which was acquired in the third quarter of 1999. As a percentage of sales, research and development expenses remained effectively unchanged. Marketing, general and administrative expenses totaled $282.1 million, an increase of 22.7% over the comparable period last year. The growth in marketing, general and administrative spending was attributable to costs incurred with supporting the current level of growth in the Company, together with the inclusion of Tellabs Denmark spending. As a percentage of sales, marketing, general and administrative spending for the first nine months of 2000 was 12.2% compared to 14.3% for the comparable period last year. The reduction in marketing, general and administrative spending as a percentage of sales reflects Tellabs' continued efforts at controlling spending levels while still being able to support the overall growth of the business.

Other income for the first nine months of 2000, excluding non-comparable items, totaled $43.9 million compared to $22.7 million for the first nine months of 1999. The growth in other income is attributable to higher interest income, which resulted from both generally higher interest rates and higher average cash balances being available for investment in 2000.

The effective tax rate for both the first nine months of 1999 and 2000 was 31.5%. Overall, the Company's 2000 and 1999 effective tax rates reflect the benefits of R&D tax credits and lower foreign tax rates as compared with the United States federal statutory rate.

Liquidity and Capital Resources

Cash and cash equivalents at September 29, 2000, were $221.6 million compared to $310.6 million at December 31, 1999. The decrease of $89.0 million in cash and cash equivalents is primarily attributable to the combination of additional investments in the Company's marketable securities portfolio and acquisitions of property, plant and equipment outpacing cash generated from operations. During the first nine months of 2000, the Company generated $320.4 million in cash from operations primarily from record earnings adjusted for non-cash gains and charges, totaling $547.6 million, which were partially offset by growth in inventories and accounts receivable.

At September 29, 2000, the balance of accounts receivable, less allowances, was $691.3 million, an increase of 10.3% over the December 31, 1999, balance of $626.7 million. Days sales in receivables outstanding (DSO) decreased in the third quarter to 72 days compared to 80 days at the end of 1999. This decrease reflects the Company's continued efforts to reduce DSO and improve related processes.

The inventory balance of the Company at September 29, 2000, was $365.4 million, an increase of 96.6% over the December 31, 2000, balance of $185.8 million. The Company is currently maintaining higher levels of inventory to both mitigate the effects of longer lead times on certain parts, as well as to support current backlog levels, new product introductions and field trials. The balance of goodwill, intangible and other assets grew $37.7 million during the first nine months of 2000. The main drivers behind this increase were investments in various new technology-based opportunities, internally-developed prototypes and purchased software.

During the first nine months of 2000, the Company used $401.4 million in cash for investing activities, the majority of which was used to fund the Company's short-term marketable securities portfolio. At September 29, 2000, the balance of the Company's short-term marketable securities portfolio totaled $905.6 million, an increase of $248.1 million compared to the balance at December 31, 1999. Tellabs also spent $129.9 million on the acquisition of property, plant and equipment in support of its ongoing efforts to increase manufacturing capacity and office space for development and support functions. To date, the Company has spent $23.0 million on the construction of its new corporate headquarters, which is scheduled to be completed in the third quarter of 2001.

Cash generated from financing activities during the first nine months of 2000 totaled $16.5 million, principally from the exercise of employee stock options. During 2000, the Company repaid outstanding debt acquired in the SALIX merger totaling $6.5 million.

At September 29, 2000, working capital totaled $1,845.9 million compared to the December 31, 1999, total of $1,511.4 million. The Company's current ratio was 6.2 to 1 at September 29, 2000, compared to 6.5 to 1 at December 31, 1999. Management believes the current level of working capital will be sufficient to meet the Company's normal operating needs, both now and in the foreseeable future. Sufficient resources exist to support the Company's growth either through: currently available cash and cash equivalents, the conversion of marketable securities, cash generated from future operations, or short-term or long-term financing.

Forward-Looking Statements

Except for historical information, the matters discussed or incorporated by reference in this Quarterly Report on Form 10-Q are forward-looking statements that involve risks and uncertainties. Such risks and uncertainties include, but are not limited to, economic conditions; product demand and industry capacity; competitive products and pricing; manufacturing efficiencies; research and new product development; protection of and access to intellectual property, patents and technology; ability to attract and retain highly qualified personnel; availability and cost of components and critical manufacturing equipment; facility construction and start-ups; the regulatory and trade environment; availability and terms of future acquisitions; uncertainties relating to the synergies, charges, and expenses associated with business combinations and other transactions; and other risks that may be detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company's actual future results could differ materially from those discussed here. The Company undertakes no obligation to revise or update these forward-looking statements.

PART II. OTHER INFORMATION

ITEM 4. Submission of Matters to a Vote of Security Holders

Restated Results of Director Vote
The Company's Annual Meeting of Stockholders was held on April 19, 2000. At this meeting Peter A. Guglielmi and Jan H. Suwinski were re-elected as directors. In addition, Richard C. Notebaert was elected as a director to replace John D. Foulkes, Ph.D., who informed the Company that he was retiring from the Board and would not stand for re-election. These directors were elected for a term of office expiring at the Company's Annual Meeting of Stockholders in 2003.

Set forth below is a separate restated tabulation of the votes cast for and votes withheld with respect to each nominee for director elected at this meeting:

Director	Votes For	Votes Withheld
Peter A. Guglielmi	348,718,248	6,801,753
Richard C. Notebaert	335,711,450	19,808,551
Jan H. Suwinski	350,695,032	4,824,969

ITEM 6. Exhibits and Reports on Form 8-K

(A) Exhibits:

Exhibit 3.2	Amended and Restated By-Laws of Tellabs, Inc.
Exhibit 10.1	Employment Agreement - Chairman of the Board
Exhibit 10.2	Employment Agreement - President and Chief Executive Officer
Exhibit 27	Financial Data Schedule

(B) Reports on Form 8-K:

     The Registrant filed a press release on August 17, 2000, announcing that Michael J. Birck was named chairman of the board of directors effective September 18, 2000. Effective that same date, Richard C. Notebaert was named president and chief executive officer of Tellabs, Inc.

     The Registrant filed a press release on October 19, 2000, announcing earnings for the quarter ended September 29, 2000.

     The Registrant filed a press release on October 19, 2000, announcing the authorization by its Board of Directors to repurchase up to 4 million shares of its outstanding common stock.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

                       TELLABS, INC.
                     (Registrant)

                             /s Joan E. Ryan
                        Joan E. Ryan
                                       Chief Financial Officer

November 10, 2000
(Date)

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 3.2	Amended and Restated By-Laws of Tellabs, Inc.
Exhibit 10.1	Employment Agreement - Chairman of the Board
Exhibit 10.2	Employment Agreement - President and Chief Executive Officer
Exhibit 27	Financial Data Schedule

EX-3.2

AMENDED AND RESTATED BY-LAWS

OF

TELLABS, INC.

(As Amended and Restated August 16, 2000)

ARTICLE I

OFFICES OF REGISTERED AGENT

Section 1.1 Registered Office and Agent. The Corporation shall have and maintain a registered office in Delaware and a registered agent having a business office identical with such registered office.

Section 1.2 Other Offices. The Corporation may also have such other office or offices in Delaware or elsewhere as the Board of Directors may determine or as the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 2.1 Annual Meeting. An annual meeting of the stockholders shall be held on the third Wednesday in April in each year beginning with the year 1993, at the hour of 10:30 A.M., or in the event the annual meeting is not held on such date and at such time, then on the date and at the time designated by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the directors shall not be elected at the annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held as soon thereafter as may be convenient.

Section 2.2 Special Meetings. Special meetings of the stockholders may be called at any time by the Chairman of the Board of Directors or the President or by resolution of the Board of Directors and shall be called by the Chairman of the Board of Directors or President at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting.

Section 2.3 Place of Meeting. Meetings of stockholders, whether annual or special, shall be held at such time and place as may be determined by the Board of Directors and designated in the call and notice or waiver of notice of such meeting; provided, that a waiver of notice signed by all stockholders may designate any time or place as the time and place for the holding of such meeting. If no designation is made, the place of meeting shall be at the Corporation's principal place of business.

Section 2.4 Notice of Meeting. Written notice stating the place, date and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, or, in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, at least twenty days before the date of the meeting, either personally or by mail, by or at the direction of the President or the Secretary to each stockholder of record entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.

Section 2.5 Fixing Record Date for Determination of Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date to be not more than sixty days prior to the date of a meeting of stockholders, the date of payment of a dividend or the date on which other action requiring determination of stockholders is to be taken, as the case may be. In addition, the record date for a meeting of stockholders shall not be less than ten days, or in the case of a merger, consolidation or sale, lease or exchange of all or substantially all of the Corporation's property and assets, not less than twenty days immediately preceding such meeting. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 2.6 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of the stockholders, the corporate books, or to vote at any meeting of the stockholders.

Section 2.7 Quorum and Manner of Acting. Unless otherwise provided by the Certificate of Incorporation, as may be amended or restated from time to time (hereinafter the "Certificate of Incorporation"), or these By-laws, a majority of the outstanding shares of the Corporation entitled to vote on a matter present in person or represented by proxy shall constitute a quorum for consideration of such matter at any meeting of stockholders; provided, that if less than a majority of the outstanding shares entitled to vote on a matter are present in person or represented by proxy at said meeting, a majority of the shares so present in person or represented by proxy may adjourn the meeting from time to time without further notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the General Corporation Law of the State of Delaware, the Certificate of Incorporation, as may be amended or restated from time to time, or these By-laws.

Section 2.8 Voting Shares and Proxies. Each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, except as otherwise provided in the Certificate of Incorporation. Each stockholder entitled to vote shall be entitled to vote in person, or may authorize another person or persons to act for him by proxy executed in writing by such stockholder or by his duly authorized attorney-in-fact, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

Section 2.9 Inspectors. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon the list of stockholders produced at the meeting in accordance with Section 2.6 hereof and upon their determination of the validity and effect of proxies, and they shall count all votes, report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each such report shall be in writing and signed by at least a majority of the inspectors, the report of a majority being the report of the inspectors, and such reports shall be prima facie evidence of the number of shares represented at the meeting and the result of a vote of the stockholders.

Section 2.10 Voting of Shares by Certain Holders. Shares of its own stock belonging to the Corporation, unless held by it in a fiduciary capacity, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he or she expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.

ARTICLE III

DIRECTORS

Section 3.1 General Powers. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors, except as may be otherwise provided by statute or the Certificate of Incorporation, as may be amended or restated from time to time.

Section 3.2 Number, Tenure and Qualifications. The number of directors shall be eight, which number of directors may be changed from time to time by amendment of this Section, except as otherwise provided for in the Certificate of Incorporation. The directors shall be divided into three classes as provided in Article SIXTH of the Certificate of Incorporation, and shall be elected as therein specified. Class I directors shall hold office initially for a term expiring at the 1993 annual meeting of stockholders. Class II directors shall bold office initially for a term expiring at the 1994 annual meeting of stockholders. Class III directors shall hold office initially for a term expiring at the 1995 annual meeting of stockholders. At each annual meeting of stockholders, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors have been duly elected and qualified, unless sooner removed as provided in Article SIXTH of the Certificate of Incorporation. Directors need not be stockholders or residents of Delaware.

Section 3.3 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Section, immediately after and at the same place as the annual meeting of stockholders. The Board of Directors may provide, by resolution, the time and place, either within or without Delaware, for the holding of additional regular meetings without other notice than such resolution.

Section 3.4 Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors, President or upon the written request of at least two directors. The person or persons who call a special meeting of the Board of Directors may designate any place, either within or without Delaware, as the place for holding such special meeting. In the absence of such a designation the place of meeting shall be the Corporation's principal place of business.

Section 3.5 Notice of Special Meetings. Notice stating the place, date and hour of a special meeting shall be mailed not less than five days before the date of the meeting, or shall be sent by telegram or be delivered personally or by telephone not less than two days before the date of the meeting, to each director, by or at the direction of the person or persons calling the meeting. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting,

Section 3.6 Quorum, Organization of Meeting and Manner of Acting. A majority of the number of directors as fixed in Section 3.2 hereof shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; provided, that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided in the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws.

(a) The Board of Directors shall elect one of its members to be the Chairman of the Board of Directors. The Chairman of the Board of Directors shall lead the Board of Directors in fulfilling its responsibilities as set forth in these By-laws, including its responsibility to oversee the performance of the Company, and shall determine the agenda and perform all other duties and exercise all other powers which are or from time to time may be delegated to him or her by the Board of Directors.

(b) Meetings of the Board of Directors shall be presided over by the Chairman of the Board of Directors, or in his absence, by the President, or in the absence of the Chairman of the Board of Directors and President by such other person or persons as the Board of Directors may designate or the members present may select.

Section 3.7 Informal Action by Directors. Any action which is required by law or by these By-laws to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of all of the directors or all of the members of such committee, as the case may be, at a duly called meeting thereof, and shall be filed with the minutes of proceedings of the Board or committee.

Section 3.8 Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors or of any committee designated by such Board, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence at such meeting.

Section 3.9 Resignations. Any director may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board of Directors, the President, or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.

Section 3.10 Vacancies.

(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class shall be filled as provided by the Certificate of Incorporation.

(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and the directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified or until their earlier resignation or removal.

Section 3.11 Removal. Any director or the entire Board of Directors may be removed, but only for cause, and only by the affirmative vote of (i) the holders of at least 75% of the voting power of the shares then entitled to vote at an election of directors, voting together as a single class, or (ii) a majority of the Board of Directors.

Whenever the holders of any class or series of capital stock are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, the provisions of this Section shall apply, in respect to the removal for cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.

Section 3.12 Compensation. The Board of Directors, by the affirmative vote of a majority of the directors then in office and irrespective of any personal interest of any of its members, shall have the authority to establish reasonable compensation of directors for services to the Corporation as directors, officers or otherwise. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or a committee thereof.

Section 3.13 Presumption of Assent. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 3.14 Interested Directors.

(a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:

(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or

(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders.

(b) Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IV

STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES

Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally or, if applicable, by any holder of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, one hundred twenty days in advance of the date of the proxy statement released to stockholders in connection with the previous year's annual meeting of stockholders, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, a reasonable time in advance of the meeting. For purposes of this Section, a "reasonable time in advance of the meeting" is at least fifteen days before the date that the proxy statement in connection with such meeting is to be mailed to the stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person and persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The presiding officer at the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

ARTICLE V

COMMITTEES

Section 5.1 Appointment and Powers. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation which, to the extent provided in said resolution or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that any such committee may, to the extent authorized in the resolution or resolutions providing for the issuance of such shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation thereof, or amending the By-laws; and, unless the resolution, By-laws or Certificate of Incorporation, expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware.

Section 5.2 Absence or Disqualification of Committee Member. In the absence or disqualification of any member of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Section 5.3 Record of Proceedings. The committees shall keep regular minutes of their proceedings and when required by the Board of Directors shall report the same to the Board of Directors.

ARTICLE VI

OFFICERS

Section 6.1 Number and Titles. The officers of the Corporation shall be a Chairman of the Board of Directors, a President and a Secretary. There shall be one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer and such other officers and assistant officers as the Board of Directors may from time to time deem necessary. Any two or more offices may be held by the same person.

Section 6.2 Election, Term of Office and Qualifications. The officers shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of stockholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall be elected to hold office until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Election of an officer shall not of itself create contract rights.

Section 6.3 Removal. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 6.4 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board of Directors, the President or the Secretary. Such resignation shall take effect at the time specified therein; and, unless tendered to take effect upon acceptance thereof, the acceptance of such resignation shall not be necessary to make it effective.

Section 6.5 Duties. In addition to and to the extent not inconsistent with the provisions in these By-laws, the officers shall have such authority, be subject to such restrictions and perform such duties in the management of the business, property and affairs of the Corporation as may be determined from time to time by the Board of Directors.

Section 6.6 President. The President shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors, the President shall, in general, supervise and manage the business and affairs of the Corporation and he shall see that the resolutions and directions of the Board of Directors are carried into effect. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation, or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws, or where otherwise required by law, the President may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, or may execute, or may authorize any officer or agent to execute, for the Corporation any contracts, deeds, mortgages, bonds or other instruments or the execution of which is in the ordinary course of the Corporation's business, and such execution may be accomplished either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. In addition, he shall perform all duties incident to the office of President and such other duties as from time to time shall be prescribed by the Board of Directors.

Section 6.7 Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Vice President, if one shall have been elected (or in the event there is more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of such designation, in the order of their election), shall perform the duties of the President, and when so acting, shall have all the authority of and be subject to all the restrictions upon the President. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the Corporation or a different mode of execution is expressly prescribed by the Board of Directors or these By-laws or where otherwise required by law, the Vice President (or each of them if there are more than one) may execute for the Corporation any contracts, deeds, mortgages, bonds or other instruments which the Board of Directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the Corporation and either individually or with the Secretary, any Assistant Secretary, or any other officer thereunto authorized by the Board of Directors or these By-laws. The Vice Presidents shall perform such other duties as from time to time may be prescribed by the President or the Board of Directors.

Section 6.8 Treasurer. The Treasurer, if one shall have been elected, shall be the principal financial officer of the Corporation, and shall (a) have charge and custody of, and be responsible for, all funds and securities of the Corporation; (b) keep or cause to be kept correct and complete books and records of account including a record of all receipts and disbursements; (c) deposit all funds and securities of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with these By-laws; (d) from time to time prepare or cause to be prepared and render financial statements of the Corporation at the request of the President or the Board of Directors; and (e) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be prescribed by the President or the Board of Directors. If required by the Board of Directors, the Treasurers shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.

Section 6.9 Secretary. The Secretary shall (a) keep the minutes of the proceedings of the stockholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation and see that the seal of the Corporation is affixed to all stock certificates prior to the issue thereof and to all documents the execution of which on behalf of the Corporation under its seal is necessary or appropriate; (d) keep or cause to be kept a register of the name and address of each stockholder, which shall be furnished to the Corporation by each such stockholder, and the number and class of shares held by each stockholder; (e) have general charge of the stock transfer books; and (f) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be prescribed by the President or the Board of Directors.

Section 6.10 Assistant Treasurers and Assistant Secretaries. In the absence of the Treasurer or Secretary or in the event of the inability or refusal of the Treasurer or Secretary to act, the Assistant Treasurer and the Assistant Secretary (or in the event there is more than one of either, in the order designated by the Board of Directors or in the absence of such designation, in the order of their election) shall perform the duties of the Treasurer and Secretary, respectively, and when so acting, shall have all the authority of and be subject to all the restrictions upon such office. The Assistant Treasurers and Assistant Secretaries shall also perform such duties as from time to time may be prescribed by the Treasurer or the Secretary, respectively, or by the President or the Board of Directors. If required by the Board of Directors, an Assistant Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine.

Section 6.11 Salaries. The salaries and additional compensation, if any, of the officers shall be determined from time to time by the Board of Directors; provided, that with respect to any officer who is also a director, such determination shall be made by a majority of the other directors then in office.

ARTICLE VII

CERTIFICATES OF STOCK AND THEIR TRANSFER

Section 7.1 Stock Certificates. Stock certificates shall be in such form as determined by the Board of Directors and shall be signed by, or in the name of the Corporation by the Chairman of the Board of Directors, President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any of or all the signatures on the certificates may be a facsimile. All certificates of stock shall bear the seal of the Corporation, which seal may be a facsimile, engraved or printed.

Section 7.2 Transfer of Shares. The shares of the Corporation shall be transferable. The Corporation shall have a duty to register any such transfer provided there is presented to the Corporation or its transfer agents (a) (i) the stock certificate endorsed by the appropriate person or persons; and (ii) reasonable assurance that such endorsement is genuine and effective; and, provided that (b)(i) the Corporation has no duty to inquire into adverse claims or has discharged any such duty; (ii) any applicable law relating to the collection of taxes has been complied with; and (iii) the transfer is in fact rightful or is to a bona fide purchaser. Upon registration of such transfer upon the stock transfer books of the Corporation the certificates representing the shares transferred shall be canceled and the new record holder, upon request, shall be entitled to a new certificate or certificates. The terms and conditions described in the foregoing provisions of this Section shall be construed in accordance with the provisions of the Delaware Uniform Commercial Code, except as otherwise provided by the General Corporation Law of the State of Delaware. No new certificate shall be issued until the former certificate or certificates for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, wrongfully taken or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors or the President may prescribe consistent with applicable law.

ARTICLE VIII

DIVIDENDS

Section 8.1 Dividends. Subject to the provisions of the General Corporation Law of the State of Delaware and the Certificate of Incorporation, as may be amended or restated from time to time, the Board of Directors may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock.

ARTICLE IX

FISCAL YEAR

Section 9.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.

ARTICLE X

SEAL

Section 10.1 Seal. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.

ARTICLE XI

WAIVER OF NOTICE

Section 11.1 Waiver of Notice. Whenever any notice is required to be given under these By-laws, the Certificate of Incorporation, as may be amended or restated from time to time, or the General Corporation Law of the State of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE XII

INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

Section 12.1 Nature of Indemnity. Each Person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Corporation as provided in this Article and to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees) actually and reasonably incurred by such person in connection with such proceeding), and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 12.2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right and, subject to Sections 12.2 and 12.5 hereof, shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. Notwithstanding any other provision of this Article, to the extent that any director or officer, or employee or agent at the discretion of the Board of Directors of the Corporation pursuant to Section 12.6 of this Article, is by reason of such person's position with the Corporation a witness in any proceeding, such person shall be indemnified against all costs and expenses actually and reasonably incurred by him on his behalf in connection therewith.

Section 12.2 Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the Corporation under Section 12.1 of this Article or advance of expenses under Section 12.5 of this Article shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination is made by the Corporation that the director or officer is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within 60 days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 12.3 Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise.

Section 12.4 Survival of Rights. No amendment, alteration or repeal of this Article 12 or of any provision hereof shall be effective as to any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust or other enterprise, with respect to any action taken or omitted by such person in such position prior to such amendment, alteration or repeal. The provisions of the Article 12 shall continue as to any such person after his or her service in such position has ceased and shall inure to the benefit of his or her heirs, executors and administrators.

Section 12.5 Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the Corporation or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the Corporation would have the power to indemnify such person against such liability under this Article or under the General Corporation Law of the State of Delaware. The Corporation shall not be liable under this Article to make any payments of amounts otherwise indemnifiable hereunder if and to the extent that such indemnified person hereunder has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

Section 12.6 Expenses. Expenses (including attorneys' fees) incurred by any person described in Section 12.1 of this Article in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or Officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

Section 12.7 Employees and Agents. Persons who are not covered by the foregoing provisions of this Article and who are or were employees or agents of the Corporation, or who are or were serving at the request of the Corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the Board of Directors.

Section 12.8 Contract Rights. The provisions of this Article shall be deemed to be a contract right between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing.

Section 12.9 Merger or Consolidation. For Purposes of this Article, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

Section 12.10 Severability. If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Section 12.11 Certain Persons Not Entitled to Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Article, no person shall be entitled to indemnification or advancement of any costs, expenses or the like under this Article with respect to any proceeding, or any claim therein, brought or made by such person against the Corporation.

Section 12.12 Notices. Any notice, request or other communication required or permitted to be given to the Corporation under this Article shall be in writing and either delivered in person or sent by facsimile or certified or registered mail, postage prepaid, return receipt requested, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

Section 13.1 Contracts. The Board of Directors may authorize any officer or agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and the President may so authorize any officer or agent with respect to contracts or instruments in the usual and regular course of its business. Such authority may be general or confined to specific instances.

Section 13.2 Loans. No loan shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.

Section 13.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, or notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent as shall from time to time be authorized by the Board of Directors.

Section 13.4 Deposits. The Board of Directors may select, or may authorize the President, Treasurer or other officers to select, banks, trust companies or other depositaries for the funds of the Corporation.

Section 13.5 Stock in Other Corporations. Shares of any other corporation which may from time to time be held by the Corporation may be represented and voted by the President, or by any proxy appointed in writing by the President, or by any other person or persons thereunto authorized by the Board of Directors, at any meeting of stockholders of such corporation or by executing written consents with respect to such shares where stockholder action may be taken by written consent. Shares represented by certificates standing in the name of the Corporation may be endorsed for sale or transfer in the name of the corporation by the President or by any other officer thereunto authorized by the Board of Directors. Shares belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the name of any nominee designated for such purpose by the Board of Directors.

Section 13.6 Gender. Use of masculine pronoun shall be deemed to include usage of the feminine and neuter pronoun where appropriate.

ARTICLE XIV

AMENDMENT

Section 14.1 Procedure. These By-laws may be altered, amended or repealed and new by-laws may be adopted by the Board of Directors. Subject to the provisions of the Certificate of Incorporation, these By-laws may also be altered, amended or repealed by the stockholders of the Corporation.

EX-10.1

EMPLOYMENT AGREEMENT

(Chairman of the Board)

THIS AGREEMENT, made and entered into as of August 17, 2000, by and between Michael J. Birck (the "Executive") and Tellabs, Inc., a Delaware corporation (the "Company");

WITNESSETH THAT:

WHEREAS, the parties desire to enter into this Agreement pertaining to the continuing employment of the Executive by the Company;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Executive and the Company as follows:

1. Employment. Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its Chairman of the Board of Directors during the Agreement Term (as defined below), with the authority, responsibilities and duties described in the Company's By-Laws as amended and restated August 16, 2000, 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 "Board") may, from time to time, in its discretion and after consultation with the Executive, adopt. The "Agreement Term" shall be the period beginning on September 18, 2000 (the "Effective Date") 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 first 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.

2. Performance of Duties. 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 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's Integrity Policy and do not inhibit or interfere with the performance of the Executive's duties under this Agreement.

3. Compensation. 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:

a. Base Salary. The Executive shall receive a Base Salary of $680,000 per annum payable in 26 bi-weekly installments. The Executive's Base Salary shall be reviewed and subject to increase or decrease annually by the Board pursuant to its normal performance review policies for senior executives, with the first such review occurring in 2001.

b. Annual Bonus. For each calendar year, the Executive shall be eligible to receive an Annual Bonus payment in accordance with the Company'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'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 2001, 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 2000, based on the Company's achievement of financial and strategic goals established for the year 2000.

c. Annual Equity Awards. 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.

d. Employee Benefits, 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's other senior executives. In the event of the Executive'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.

e. Expense Reimbursement. The Company will reimburse the Executive for all reasonable expenses incurred by him (i) in connection with the negotiation and preparation of this Agreement, which reimbursement shall not exceed $25,000, and (ii) in the performance of his duties in accordance with the Company's policies applicable to senior executives.

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.

g. Additional Payments. If any payments or benefits received or to be received by the Executive in connection with the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, or any person affiliated with the Company) (the "Payments"), will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Company shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by the 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'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's highest marginal rate of taxation in the state and locality of the Executive'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 "Applicable Rate"). In the event that the Excise Tax is determined by the Internal Revenue Service or by such independent public accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties, fines or additions to tax payable with respect to such excess) at the time that the amount of such excess 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's receipt of the Payments resulting in such Excise Tax.

4. Indemnification. 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 "Proceeding"), 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'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's certificate of incorporation or bylaws or resolutions of the Company'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'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.

5. Termination of Employment. Upon termination of the Executive's employment for any reason, the Executive or, in the event of death, the Executive's estate shall be entitled to the Executive'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's employment is terminated during the Agreement Term, the Executive'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.

a. Death or Disability. If the Executive's employment is terminated by reason of death or by reason of the Executive'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's employment because of the Executive's Disability during the Agreement Term. "Disability" means that the Executive is disabled within the meaning of the Company'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'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's legal representative, has determined that the Executive is disabled. A termination of the Executive'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 "Disability Effective Time"), unless the Executive returns to full-time performance of the Executive's duties before the Disability Effective Time.

b. Termination for Cause or Voluntary Resignation. If the Executive's employment is terminated by the Company for Cause or if the Executive voluntarily resigns from the employ of the Company, other than pursuant to a Constructive Discharge, all payments and benefits to which 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 "Cause" shall mean:

i. The Executive is convicted of a felony or any crime involving moral turpitude; or

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 resulting from incapacity due to physical or mental illness), after a written demand for corrected performance is delivered to Executive by the Board which 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 that such conduct was in, or not opposed to, the best interests of the Company.

c. Termination Without Cause. 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 target bonus for the year of termination and shall include a prorated bonus for the partial year ending on the last day of the Agreement Term.

d. Resignation for Constructive Discharge. The Executive's voluntary resignation for Constructive Discharge shall be treated for all purposes of this Agreement as a termination by the Company without Cause. For purposes of this Agreement, "Constructive Discharge" shall mean the occurrence of any of the following circumstances:

i. A reduction by the Company in the Executive's Base Salary or Annual Bonus target to an amount that is less than required under Section 3 above;

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's Board of Directors;

iii. Any action by the Company which results in significant diminution in the Executive'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's position and status as Chairman of the Board of Directors 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

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.

e. Change in Control. The term "Change in Control" of the Company means the first to occur of:

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 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 20% or more but then promptly reduces that ownership interest below 20%;

ii. During any two consecutive years (not including any period beginning prior to June 30, 2000), 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'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 "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, (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'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;

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

v. A tender offer (for which a filing has been made with the Securities and Exchange Commission "SEC") 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:

(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's securities, or

(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.

6. No Mitigation; No Offset. 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.

7. Confidential Information. 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'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.

8. Protective Covenants. 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,

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;

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

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.

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.

9. Remedies. 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.

10. Assignability, Binding Nature. 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.

11. Amendment. 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's Disability so as to render him incapable of such action, his legal representative may be substituted for purposes of such amendment.

12. Applicable Law. 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.

13. Severability. 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).

14. Waiver of Breach. 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.

15. Notices. 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):

to the Company:

Tellabs, Inc.

4951 Indiana Avenue

Lisle, Illinois 60532-1698

Attention: President and Chief Executive Officer

or to the Executive:

Michael J. Birck

4951 Indiana Avenue

Lisle, Illinois 60532-1698

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.

16. Arbitration of Disputes and Reimbursement of Legal Costs. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) 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 "Association") 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's and the Executive's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration Association equally.

17. Survivorship. 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.

18. Entire Agreement. 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.

19. Counterparts. 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.

IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has

caused this Agreement to 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.

EXECUTIVE:

MICHAEL J. BIRCK

COMPANY:

TELLABS, INC., a Delaware corporation

By: /s Brian J. Jackman

Its: Executive Vice President

ATTEST:

Secretary

EX-10.2

EMPLOYMENT AGREEMENT

(President and Chief Executive Officer)

THIS AGREEMENT, made and entered into as of August 17, 2000, by and between Richard C. Notebaert (the "Executive") and Tellabs, Inc., a Delaware corporation (the "Company");

WITNESSETH THAT:

WHEREAS, the parties desire to enter into this Agreement pertaining to the employment of the Executive by the Company;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Executive and the Company as follows:

1. Employment. Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its President and Chief Executive Officer during the Agreement Term (as defined below), with the authority, responsibilities and duties customarily exercised by a person holding that position, 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 "Board") may, from time to time, in its discretion and after consultation with the Executive, adopt. The "Agreement Term" shall be the period beginning on September 18, 2000 (the "Effective Date") and ending on the third 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 second 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.

2. Performance of Duties. The Executive agrees that during his employment with the Company, he shall devote his full business time, energies and talents to serving as its President and 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's Integrity Policy and do not inhibit or interfere with the performance of the Executive's duties under this Agreement. The Company acknowledges that the Executive has entered into a services agreement with SBC Communications, Inc. ("SBC") pursuant to which he may be obligated to provide consulting services to SBC and its subsidiaries through April 8, 2002. The Executive represents that any demands that would require him to devote time to SBC pursuant to such services agreement will not materially interfere with the performance of his duties under this Agreement.

3. Initial Stock Option Awards. The Executive shall be granted options under the Company's 1998 Stock Option Plan, as amended, to acquire up to 900,000 shares of the Company's common stock ("Common Stock") in accordance with the following:

a. On the Effective Date, the Executive shall be granted options to acquire 500,000 shares of Common Stock. Subject to the discretion of the Compensation Committee based on the Executive's performance, on the first anniversary of the Effective Date the Executive shall be granted options to acquire 200,000 shares of Common Stock, and on the second anniversary of the Effective Date, the Executive shall be granted options to acquire an additional 200,000 shares of Common Stock; provided, such options may be granted on earlier date or dates as the Compensation Committee may in its discretion determine. The date of grant of the options shall be referred to herein as the Award Date. Each option shall have a ten-year term commencing on the applicable Award Date, subject to earlier termination as provided in subparagraph (e) below upon termination of employment.

b. The option price ("Option Price") with respect to each option shall be the closing price on the applicable Award Date for sales of shares of Common Stock made and reported through the National Market System of the National Association of Securities Dealers, Inc. or such national stock exchange on which Common Stock may then be listed and which constitutes the principal market for the Common Stock, or, if no sales of Common Stock shall have been reported with respect to that date, on the next preceding date with respect to which sales were reported. Upon the exercise of any such options, the Option Price with respect thereto shall be payable in cash or its equivalent (including, for this purpose, the proceeds from a cashless exercise as permitted under the Federal Reserve Board's Regulation T), or by tendering (either actually or by attestation of ownership) shares of Common Stock previously acquired by the Executive in the open market or shares of Common Stock which have been held by the Executive for at least six months having an aggregate fair market value (determined as provided in the preceding sentence based on the closing sales price of shares of Common Stock) at the time of exercise equal to the total Option Price of the options.

c. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes with the definition of such term in Section 368 of the Internal Revenue Code) or any partial or complete liquidation of the Company, the number and class of shares subject to options awarded or to be awarded in accordance with subparagraph (a) above, and the Option Price for such options under subparagraph (b) above, shall be adjusted by the Compensation Committee of the Company's Board of Directors to prevent dilution of the Executive's rights.

d. The options relating to the 500,000 shares of Common Stock granted on the Effective Date in accordance with paragraph (a) above shall become vested and exercisable at the rate of 25% per year on each anniversary of the Award Date thereof. Each of the options relating to 200,000 shares of Common Stock described in paragraph (a) above shall become vested and exercisable at the rate of one-third per year on each anniversary of the Award Date thereof. To the extent not previously vested, all such options shall become fully vested and exercisable on the earlier of a Change in Control (as defined in subparagraph 6(e) below) or the Executive's termination of employment by reason of death, Disability (as defined in subparagraph 6(a) below) termination by the Company without Cause (as defined in subparagraph 6(b) below), or Constructive Discharge (as defined in subparagraph 6(d) below). To the extent not previously vested, all such options shall be immediately forfeited in the event of a termination of the Executive's employment for Cause or upon the Executive's resignation from the employ of the Company other than pursuant to a Constructive Discharge.

e. In the event that the Executive resigns from the employ of the Company other than pursuant to a Constructive Discharge, or is terminated by the Company for Cause, any option or unexercised portion thereof granted under subparagraph (a) above may be exercised, to the extent such option would have been exercisable by the Executive on the date on which the Executive ceased to be an employee, within three months of such date, but in no event later than the date of expiration of the term of the option. In the event of a termination of the Executive's employment by the Company without Cause or by the Executive by reason of a Constructive Discharge, any such option shall be exercisable until the third anniversary of such date of termination, but in no event later than the expiration of the term of the option. In the event of termination of employment due to the death or Disability of the Executive while an employee of the Company or in the event of death within not more than three months after the date on which the Executive ceases to be an employee, any such option or unexercised portion thereof maybe exercised, to the extent exercisable at the date on which the Executive ceased to be an employee, by the Executive or the Executive's personal representatives, heirs or legatees at any time prior to one year after the date on which the Executive ceased to be an employee, but in no event later than the date of the expiration of the term of the option.

f. Options granted in accordance with subparagraph (a) above may be transferred by the Executive to the Executive's spouse, children or grandchildren ("Immediate Family Members") or to a trust or trusts for the exclusive benefit of such Immediate Family Members or to a partnership in which such Immediate Family Members are the only partners.

g. The Company shall take all steps necessary or desirable to register the shares subject to the foregoing options under an S-8 or other appropriate form.

4. Compensation. 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:

a. Base Salary. The Executive shall receive a Base Salary of not less than $750,000 per annum payable in 26 bi-weekly installments. The Executive's Base Salary shall be reviewed and may be increased, but not decreased, annually by the Board pursuant to its normal performance review policies for senior executives, with the first such review occurring in 2001.

b. Annual Bonus. For each calendar year, the Executive shall be eligible to receive an Annual Bonus payment in accordance with the Company'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'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 2001, 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 2000, based on the Company's achievement of financial and strategic goals established for the year 2000. The amount of the bonus shall be prorated to reflect the Executive's partial year of service from the Effective Date through the end of the calendar year.

c. Annual Equity Awards. Commencing with 2003, the Executive shall be entitled to annual stock option grants and, to the extent applicable, other stock based compensation on a basis no less favorable than the awards granted to other senior executives of the Company. Such awards shall be in addition to the initial stock option awards under Section 3 above.

d. Employee Benefits, 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's other senior executives.

e. Expense Reimbursement. The Company will reimburse the Executive for all reasonable expenses incurred by him (i) in connection with the negotiation and preparation of this Agreement, which reimbursement shall not exceed $25,000, and (ii) in the performance of his duties in accordance with the Company's policies applicable to senior executives.

f. Change in Control Benefits. Following the Effective Date, the Executive and the Company shall enter into a change of control agreement substantially similar to those which the Company has entered into with its other senior executives, 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.

g. Additional Payments. If any payments or benefits received or to be received by the Executive in connection with the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, or any person affiliated with the Company) (the "Payments"), will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Company shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by the 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'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's highest marginal rate of taxation in the state and locality of the Executive'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 "Applicable Rate"). In the event that the Excise Tax is determined by the Internal Revenue Service or by such independent public accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties, fines or additions to tax payable with respect to such excess) at the time that the amount of such excess 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's receipt of the Payments resulting in such Excise Tax.

5. Indemnification. 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 "Proceeding"), 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'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's certificate of incorporation or bylaws or resolutions of the Company'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'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.

6. Termination of Employment. Upon termination of the Executive's employment for any reason, the Executive or, in the event of death, the Executive's estate shall be entitled to the Executive'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's employment is terminated during the Agreement Term, the Executive'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 6.

a. Death or Disability. If the Executive's employment is terminated by reason of death or by reason of the Executive'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's employment because of the Executive's Disability during the Agreement Term. "Disability" means that the Executive is disabled within the meaning of the Company'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'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's legal representative, has determined that the Executive is disabled. A termination of the Executive'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 "Disability Effective Time"), unless the Executive returns to full-time performance of the Executive's duties before the Disability Effective Time.

b. Termination for Cause or Voluntary Resignation. If the Executive's employment is terminated by the Company for Cause or if the Executive voluntarily resigns from the employ of the Company, other than pursuant to a Constructive Discharge, all payments and benefits to which the Executive would otherwise be entitled under this Agreement shall immediately cease, except as otherwise specifically provided above in this Section 6 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 "Cause" shall mean:

i. The Executive is convicted of a felony or any crime involving moral turpitude; or

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) the Executive has willfully and continuously failed to perform substantially his duties as contemplated by Section 2 above (other than such failure resulting from incapacity due to physical or mental illness), after a written demand for corrected performance is delivered to the Executive by the Board which 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 that such conduct was in, or not opposed to, the best interests of the Company.

c. Termination Without Cause. 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 target bonus for the year of termination and shall include a prorated bonus for the partial year ending on the last day of the Agreement Term.

d. Resignation for Constructive Discharge. The Executive's voluntary resignation for Constructive Discharge shall be treated for all purposes of this Agreement as a termination by the Company without Cause. For purposes of this Agreement, "Constructive Discharge"" shall mean the occurrence of any of the following circumstances:

i. A reduction by the Company in the Executive's Base Salary or Annual Bonus target to an amount that is less than required under Section 4 above;

ii. The removal of the Executive from the position of President and Chief Executive Officer or the failure of the Executive to be nominated or reelected to the Company's Board of Directors;

iii. Any action by the Company which results in significant diminution in the Executive's authority, power, responsibilities or duties from those contemplated by Sections 1 and 2 above, or the assignment to the Executive without his written consent of any duties inconsistent with the Executive's position and status as President and 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 the Executive to the Company; or

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 the Executive to the Company.

e. Change in Control. The term "Change in Control" of the Company means the first to occur of:

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 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 20% or more but then promptly reduces that ownership interest below 20%;

ii. During any two consecutive years (not including any period beginning prior to June 30, 2000), 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'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 "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, (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'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;

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

v. A tender offer (for which a filing has been made with the Securities and Exchange Commission "SEC") 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:

(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's securities, or

(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.

7. No Mitigation; No Offset. 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.

8. Confidential Information. 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'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.

9. Protective Covenants. 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,

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;

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

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.

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.

10. Remedies. The Executive agrees that the restrictions set forth in Sections 8 and 9 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.

11. Assignability, Binding Nature. 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.

12. Amendment. 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's Disability so as to render him incapable of such action, his legal representative may be substituted for purposes of such amendment.

13. Applicable Law. 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.

14. Severability. 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).

15. Waiver of Breach. 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.

16. Notices. 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):

to the Company:

Tellabs, Inc.

4951 Indiana Avenue

Lisle, Illinois 60532-1698

Attn: Chairman of the Board

or to the Executive:

Richard C. Notebaert

2355 North Commonwealth

Chicago, Illinois 60614

with a copy to:

Mayer, Brown & Platt

190 South LaSalle Street

Chicago, Illinois 60603-3441

Attn: Herbert W. Krueger

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.

17. Arbitration of Disputes and Reimbursement of Legal Costs. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) 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 "Association") 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's and the Executive's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration Association equally.

18. Survivorship. 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.

19. Entire Agreement. 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.

20. Counterparts. 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.

IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has

caused this Agreement to 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.

EXECUTIVE:

RICHARD C. NOTEBAERT

COMPANY:

TELLABS, INC., a Delaware corporation

By: /s Michael J. Birck

Its: Chairman of the Board

ATTEST:

Secretary