EXHIBIT 10.1
EMPLOYMENT SEPARATION AGREEMENT
     THIS EMPLOYMENT SEPARATION AGREEMENT (the “Agreement”), which includes
Exhibits A, B and C hereto which are incorporated herein by this reference, is
entered into by and between TEKELEC, a California corporation (“Tekelec”), and
LORI CRAVEN (“Former Employee”), and shall become effective on the Termination
Date defined in Recital paragraph A below. (the “Effective Date”).
RECITALS
     A. Former Employee ceased or will cease to be an employee and officer of
Tekelec as of the close of business on June 30, 2006 (the “Termination Date”).
Former Employee will utilize her accrued paid time off commencing June 1, 2006
through the Termination Date. Except as provided in Section 11 of this
Agreement, after June 30, 2006, Former Employee will not be required to provide
any services as an employee, independent contractor or other service provider
for Tekelec or any related person or entity that along with Tekelec would be
considered a single employer under Section 414(b) or (c) of the Internal Revenue
Code of 1986, as amended.
     B. Former Employee desires to receive severance benefits under Tekelec’s
Officer Severance Plan dated May 14, 1993 (the “Severance Plan”), which benefits
are stated in the Severance Plan to be contingent upon, among other things,
Former Employee’s entering into this Agreement and undertaking the obligations
set forth herein.
     C. Tekelec and Former Employee desire to set forth their respective rights
and obligations with respect to Former Employee’s separation from Tekelec and to
finally and forever settle and resolve all matters concerning Former Employee’s
past services to Tekelec.
AGREEMENT
     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and conditions set forth herein, the receipt and sufficiency of which
are hereby acknowledged, Tekelec and Former Employee hereby agree as follows:
1. DEFINITIONS
     As used herein, the following terms shall have the meanings set forth
below:
     1.1 “Includes;” “Including.” Except where followed directly by the word
“only,” the terms “includes” or “including” shall mean “includes, but is not
limited to,” and “including, but not limited to,” respectively.
     1.2 “Severance Covered Period.” The term “Severance Covered Period” shall
mean a period of time commencing upon the Effective Date and ending on the date
on which the last installment of the Severance Allowance is due and payable
pursuant to Section 6.2 of this Agreement.

 

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     1.3 Other Capitalized Terms. Capitalized terms (other than those
specifically defined herein) shall have the same meanings ascribed to them in
the Severance Plan.
2. MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS
     Each party hereto represents, warrants and covenants (with respect to
itself/herself only) to the other party hereto that, to its/her respective best
knowledge and belief as of the date of each party’s respective signature below:
     2.1 Full Power and Authority. It/she has full power and authority to
execute, enter into and perform its/her obligations under this Agreement; this
Agreement, after execution by both parties hereto, will be a legal, valid and
binding obligation of such party enforceable against it/her in accordance with
its terms; it/she will not act or omit to act in any way which would materially
interfere with or prohibit the performance of any of its/her obligations
hereunder, and no approval or consent other than as has been obtained of any
other party is necessary in connection with the execution and performance of
this Agreement.
     2.2 Effect of Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transactions hereby contemplated:
          (a) will not interfere or conflict with, result in a breach of,
constitute a default under or violation of any of the terms, provisions,
covenants or conditions of any contract, agreement or understanding, whether
written or oral, to which it/she is a party (including, in the case of Tekelec,
its bylaws and articles of incorporation each as amended to date) or to which
it/she is bound;
          (b) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental agency or
court having jurisdiction over such party; and
          (c) has not heretofore been assigned, transferred or granted to
another party, or purported to assign, transfer or grant to another party, any
rights, obligations, claims, entitlements, matters, demands or causes of actions
relating to the matters covered herein.
     2.3 Representations and Warranties of Tekelec Only. Tekelec represents and
warrants that Former Employee is a “specified employee” within the meaning of
Code Section 409A(a)(2)(B)(i)
3. CONFIDENTIALITY OBLIGATIONS DO NOT TERMINATE
     Former Employee acknowledges that any confidentiality, proprietary rights
or nondisclosure agreement(s) in favor of Tekelec which she may have entered
into in connection with her employment (collectively, the “Nondisclosure
Agreement”) with Tekelec is understood to be intended to survive, and does
survive, any termination of such employment, and accordingly nothing in this
Agreement shall be construed as terminating, limiting or otherwise affecting any
such Nondisclosure Agreement or Former Employee’s obligations thereunder.
Without limiting the generality of the foregoing, no time period set forth in
this Agreement shall

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be construed as shortening or limiting the term of any such Nondisclosure
Agreement, which term shall continue as set forth therein.
4. BENEFITS
     4.1 Life Insurance Continuation. In lieu of Tekelec’s continuation of
Former Employee’s life insurance benefits after the Termination Date, the
Severance Allowance described in Section 6.2 below has been increased by the
amount of $1800.00. Any conversion or continuation of life insurance after the
Termination Date shall be at Former Employee’s sole expense in accordance with
the terms of applicable life insurance policy.
     4.2 Health Care Insurance Continuation. Tekelec (at its expense) will
continue, for a period of 18 months following the Termination Date, health care
coverage including medical, dental and vision coverage for Former Employee and
her family members so long as they are “qualified beneficiaries” (as such term
is defined in the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”)) entitled to COBRA continuation coverage, such coverage to be provided
under Tekelec’s group health plan(s) generally available during such period to
employees participating in such plan(s) and at levels and with coverage no
greater than those provided to such Former Employee as of the Termination Date.
Thereafter, Former Employee (at her expense) may elect coverage under a
conversion health plan available under Tekelec’s group health plan(s) from
Tekelec’s health insurance carrier if and to the extent she is entitled to do so
as a matter of right under federal or state law.
     4.3 Other Benefit Plans. Except as otherwise expressly provided in this
Section 4 or as required by applicable law, Former Employee shall have no right
to continue her participation in any Tekelec benefit plan following such
employee’s termination.
5. STOCK OPTIONS
     5.1 Outstanding Stock Options. Exhibit A hereto sets forth any and all
outstanding stock options, warrants and other rights to purchase capital stock
or other securities of Tekelec which have been previously issued to Former
Employee and which are outstanding and vested as of the date hereof. Except as
specifically set forth in Section 5.2 below, nothing in this Agreement shall
alter or affect any of such outstanding stock options, warrants or rights or
Former Employee’s rights or responsibilities with respect thereto, including but
not limited to Former Employee’s rights to exercise any of her options, warrants
or rights following the Termination Date.
     5.2 Extension of Exercise Period. The parties acknowledge that in
connection with the filing of Tekelec’s Current Report on Form 8-K in
February 2006, wherein Tekelec announced that it would restate previously issued
financial statements, Tekelec is prohibited by applicable securities laws from
issuing any shares of its common stock (hereinafter referred to as the
“restriction”) and accordingly, Former Employee is unable to exercise any of her
stock options until Tekelec becomes current in its financial reporting and the
restriction lapses. In consideration for Former Employee’s release of claims set
forth herein, and her continuing performance of her obligations under the
Employment Separation Agreement (including but not

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limited to Former Employee’s obligations under Sections 7 , 8, 10 and 11
thereof), Tekelec agrees to extend the exercise period with respect to Former
Employee’s nonstatutory stock options (“NSOs”) totaling 323,752 shares as set
forth on Exhibit A, for a limited period following the lapse of the restriction
to the extent indicated in footnotes 2 through 5 therein. Upon the termination
dates as specified therein, said options to the extent not exercised shall
terminate and expire for all purposes.
     5.3 No Guarantees of Exercisability or Value; No Other Changes. Tekelec has
not extended the term of the Incentive Stock Option granted to Former Employee
on January 18, 2002 for 20,000 shares (the “ISO”), has not promised Former
Employee that the restriction will lapse prior to the termination of the ISO,
and Former Employee understands that there can be no assurance that Former
Employee will have the opportunity to exercise the ISO. Former Employee further
acknowledges that Tekelec has not guaranteed the value of any of Former
Employee’s nonstatutory stock options. Except as specifically set forth in
Section 5.2 above and Exhibit A, the time period through which Former Employee
may exercise her vested stock options shall expire in accordance with the terms
of the stock option plans under which Former Employee’s options were granted.
6. PAYMENTS TO FORMER EMPLOYEE
     6.1 Employee Compensation. Tekelec has paid or shall pay in 2006 within the
time period required by law, any and all salary and accrued but unpaid vacation
and sick pay owed by Tekelec to Former Employee up to and including the
Termination Date other than any severance payments owed to her under the terms
of this Agreement and certain bonuses as described in this Section 6.1(b)
          (a) Former Employee’s quarterly bonus due for the fourth quarter of
2005 (Q405) in the amount of $12,852.00, and her MBO 2005 bonus due in the
amount of $58,527.00 shall be paid at the same time as such bonuses are paid to
other similarly situated executive officers of Tekelec but in no event later
than the Termination Date.
          (b) The parties acknowledge that any bonuses due to Former Employee
for the first quarter of 2006 (“Q106”) and the second quarter of 2006 (“Q206”)
may not have been calculated and/or paid as of the Termination Date. Tekelec
agrees to pay Former Employee any bonus due for Q106 and Q206 under the 2006
Executive Officer Bonus Plan when such bonuses are calculated and paid to
similarly situated executive officers of Tekelec, but in any case on or before
December 31, 2006, and further agrees to waive the requirement that Former
Employee must be in active status on the bonus payment date(s) to receive her
bonuses for Q106 and Q206 Former Employee understands that Tekelec has not
promised that any bonus will be payable under the terms of the Executive Officer
Bonus Plan for such periods.
     6.2 Severance Allowance. In consideration for the release by Former
Employee set forth herein (including the release of any and all claims Former
Employee has or may have under the Age Discrimination in Employment Act (“ADEA”)
and Older Workers Benefit Protection Act (“OWBPA”)) and Former Employee’s
performance of her obligations under this Agreement

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     (including but not limited to Former Employee’s obligations under Section 7
hereof), Former Employee is entitled to receive, and Tekelec shall pay to Former
Employee a Severance Allowance in the aggregate gross amount of $648,033.00 (the
“Severance Allowance”), less all applicable withholding taxes. Such Severance
Allowance shall be paid by direct deposit into Former Employee’s bank account on
file with Tekelec according to the following schedule: Fifty percent (50%) of
the Severance Allowance ($324, 016.50, less all applicable withholdings and
deductions) shall be due and payable on January 3, 2007, and the remainder of
the Severance Allowance shall be due and payable in six (6) equal monthly
installments of $54,002.75 (less all applicable withholdings and deductions), on
February 2, 2007, March 2, 2007, April 3, 2007, May 2, 2007, June 4, 2007, and a
final payment on July 3, 2007. The parties specifically acknowledge and agree
that Former Employee has requested and Tekelec has agreed to accumulate and
defer all installment payments of the Severance Allowance that would otherwise
be due during the first six (6) months following the Termination Date in order
to comply with Section 409A of the Internal Revenue Code
7. NON-COMPETITION AND NON-SOLICITATION
     7.1 Subject and in addition to Former Employee’s existing fiduciary duties
as a former officer and employee of Tekelec to the extent such continues under
applicable law after Former Employee’s Termination Date, provided that Tekelec
has not breached any of the terms of this Agreement or any other currently
existing written agreements between Tekelec and Former Employee, Former Employee
agrees until the earlier of (i) the completion of the Severance Covered Period
or (ii) such date as Tekelec may terminate this Agreement for default hereunder:
          (a) Not to engage, either directly or indirectly, in any Competing
Business Activity (as defined below) or be associated with a Competing Business
Entity (as defined below) as an officer, director, employee, principal,
consultant, lender, creditor, investor, agent or otherwise for any corporation,
partnership, company, agency, person, association or any other entity; provided,
however, that nothing contained herein shall prevent Former Employee from owning
not more than 5% of the common equity and not more than 5% of the voting power
of, or lending not more than $25,000 to, any Competing Business Entity or any
business engaged in a Competing Business Activity; provided, further, that for
purposes of this agreement, any equity ownership, voting control or lending
activity of Former Employee shall be deemed to include that of (i) any family
member or (ii) person or entity controlled by Former Employee;
          (b) Not to call upon or cause to be called upon, or solicit or assist
in the solicitation of, in connection with any Competing Business Entity or
Competing Business Activity, any entity, agency, person, firm, association,
partnership or corporation that is a customer or account of Tekelec, currently
and/or during the Severance Covered Period, for the purpose of selling, renting,
leasing, licensing or supplying any product or service that is the same as,
similar to or competitive with the products or services then being sold or
developed by Tekelec;

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          (c) Not to enter into an employment or agency relationship with a
Competing Business Entity or involving a Competing Business Activity with any
person who, at the time of such entry, is an officer, director, employee,
principal or agent of or with respect to Tekelec; and
          (d) Not to induce or attempt to induce any person described in
Section 7.1(c) to leave her employment, agency, directorship or office with
Tekelec.
     7.2 For purposes of this Section 7, a “Competing Business Activity” shall
mean any business activity of a person or entity (other than Tekelec) involving
the development, design, manufacture, distribution, marketing, licensing,
renting, leasing or selling within the Territory (as defined below) of products
and services which are the same as, similar to or competitive with products or
services of Tekelec then in existence or under development. For purposes hereof,
the Territory shall include the United States of America, Canada, Central
America, South America, Europe, Japan, Australia, Singapore, China, India, the
Russian Federation and such other countries in which Tekelec then distributes,
markets, licenses, rents, leases or sells its products or services. An entity as
a whole shall be deemed to be a Competing Business Entity if it has one or more
business activities involving the development, design, manufacture,
distribution, marketing, licensing, renting, leasing or selling directly or
indirectly within the Territory of products or services which are the same as,
similar to or competitive with products or services of Tekelec then being sold
or under development and if and only if the revenues derived directly or
indirectly from engaging in such business activities by such entity represent
either more than 3% of the entity’s revenues or at least $5 million in aggregate
sales, or both, for the then-preceding 12-month period.
     7.3 The parties acknowledge that the provisions and obligations set forth
in this Section 7 are an integral part of this Agreement and that in the event
Former Employee breaches any of the provisions or obligations of this Section 7
or any other term, provision or obligation of this Agreement, then Tekelec, in
addition to any other rights or remedy it may have at law, in equity, by statute
or otherwise, shall be excused from its payment obligations to Former Employee
under the Severance Plan and this Agreement.
8. CONFIDENTIAL INFORMATION AND TRADE SECRETS
     8.1 Former Employee hereby recognizes, acknowledges and agrees that Tekelec
is the owner of proprietary rights in certain confidential sales and marketing
information, programs, tactics, systems, methods, processes, compilations of
technical and non-technical information, records and other business, financial,
sales, marketing and other information and things of value. To the extent that
any or all of the foregoing constitute valuable trade secrets and/or
confidential and/or privileged information of Tekelec, Former Employee hereby
further agrees as follows:
          (a) That, except with prior written authorization from Tekelec’s CEO,
for purposes related to Tekelec’s best interests, she will not directly or
indirectly duplicate, remove, transfer, disclose or utilize, nor knowingly allow
any other person to duplicate, remove, transfer, disclose or utilize, any
property, assets, trade secrets or other things of value, including, but not
limited to, records, techniques, procedures, systems, methods, market research,
new product plans and ideas, distribution arrangements, advertising and
promotional materials, forms,

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patterns, lists of past, present or prospective customers, and data prepared
for, stored in, processed by or obtained from, an automated information system
belonging to or in the possession of Tekelec which are not intended for and have
not been the subject of public disclosure. Former Employee agrees to safeguard
all Tekelec trade secrets in her possession or known to her at all times so that
they are not exposed to, or taken by, unauthorized persons and to exercise her
reasonable efforts to assure their safekeeping. This subsection shall not apply
to information that as of the date hereof is, or as of the date of such
duplication, removal, transfer, disclosure or utilization (or the knowing
allowing thereof) by Former Employee has (i) become generally known to the
public or competitors of Tekelec (other than as a result of a breach of this
Agreement); (ii) been lawfully obtained by Former Employee from any third party
who has lawfully obtained such information without breaching any obligation of
confidentiality; or (iii) been published or generally disclosed to the public by
Tekelec. Former Employee shall bear the burden of showing that any of the
foregoing exclusions applies to any information or materials.
          (b) That all improvements, discoveries, systems, techniques, ideas,
processes, programs and other things of value made or conceived in whole or in
part by Former Employee with respect to any aspects of Tekelec’s current or
anticipated business while an employee of Tekelec are and remain the sole and
exclusive property of Tekelec, and Former Employee has disclosed all such things
of value to Tekelec and will cooperate with Tekelec to insure that the ownership
by Tekelec of such property is protected. All of such property of Tekelec in
Former Employee’s possession or control, including, but not limited to, all
personal notes, documents and reproductions thereof, relating to the business
and the trade secrets or confidential or privileged information of Tekelec has
already been, or shall be immediately, delivered to Tekelec.
     8.2 Former Employee further acknowledges that as the result of her prior
service as an officer and employee of Tekelec, she has had access to, and is in
possession of, information and documents protected by the attorney-client
privilege and by the attorney work product doctrine. Former Employee understands
that the privilege to hold such information and documents confidential is
Tekelec’s, not hers personally, and that she will not disclose the information
or documents to any person or entity without the express prior written consent
of the CEO or Board of Tekelec unless she is required to do so by law.
     8.3 Former Employee’s obligations set forth in this Section 8 shall be in
addition to, and not instead of, Former Employee’s obligations under any written
Nondisclosure Agreement.
9. ENFORCEMENT OF SECTIONS 7 AND 8
     Former Employee hereby acknowledges and agrees that the services rendered
by her to Tekelec in the course of her prior employment were of a special and
unique character, and that breach by her of any provision of the covenants set
forth in Sections 7 and 8 of this Agreement will cause Tekelec irreparable
injury and damages. Former Employee expressly agrees that Tekelec shall be
entitled, in addition to all other remedies available to it whether at law or in
equity, to injunctive or other equitable relief to secure their enforcement.

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     The parties hereto expressly agree that the covenants contained in
Sections 7 and 8 hereof are reasonable in scope, duration and otherwise;
however, if any of the restraints provided in said covenants are adjudicated to
be excessively broad as to geographic area or time or otherwise, said restraint
shall be reduced to whatever extent is reasonable and the restraint shall be
fully enforced in such modified form. Any provisions of said covenants not so
reduced shall remain in full force and effect.
10. PROHIBITION AGAINST DISPARAGEMENT
     10.1 Former Employee agrees that for a period of two years following the
Effective Date any communication, whether oral or written, occurring on or off
the premises of Tekelec, made by her or on her behalf to any person or entity
(including, without limitation, any Tekelec employee, customer, vendor,
supplier, any competitor, any media entity and any person associated with any
media) which in any way relates to Tekelec (or any of its subsidiaries) or to
Tekelec’s or any of its subsidiaries’ directors, officers, management or
employees: (a) will be truthful; and (b) will not, directly or indirectly,
criticize, disparage, or in any manner undermine the reputation or business
practices of Tekelec or its directors, officers, management or employees. In
response to any inquiries from prospective employers of Former Employee, Tekelec
will confirm dates of employment, positions held, and that Former Employee
resigned together with a statement that Tekelec’s policies prevent Tekelec from
providing additional information and that no negative inferences should be drawn
from Tekelec’s failure to do so.
     10.2 The only exceptions to Section 10.1 shall be: (a) truthful statements
privately made to (i) the CEO of Tekelec, (ii) any member of Tekelec’s Board,
(iii) Tekelec’s auditors, (iv) inside or outside counsel of Tekelec, (v) Former
Employee’s counsel or (vi) Former Employee’s spouse; (b) truthful statements
lawfully compelled and made under oath in connection with a court or government
administrative proceeding; and (c) truthful statements made to specified persons
upon and in compliance with prior written authorization from Tekelec’s CEO or
Board to Former Employee directing her to respond to inquiries from such
specified persons.
11. COOPERATION
     Former Employee agrees that for a period of five years commencing with the
Effective Date she will cooperate fully and reasonably with Tekelec in
connection with any future or currently pending matter, proceeding, litigation
or threatened litigation: (1) directly or indirectly involving Tekelec (which,
for purposes of this section, shall include Tekelec and each of its current and
future subsidiaries, successors or permitted assigns); or (2) directly or
indirectly involving any director, officer or employee of Tekelec (with regard
to matters relating to such person(s) acting in such capacities with regard to
Tekelec business). Such cooperation shall include making herself available upon
reasonable notice at reasonable times and places for consultation and to testify
truthfully (at Tekelec’s expense for reasonable, pre-approved out-of-pocket
travel costs plus a daily fee equal to one-twentieth of her monthly severance
compensation under Section 6.2 hereof for each full or partial day during which
Former Employee makes herself so available which shall be paid with reasonable
promptness following Tekelec’s receipt of an invoice from Former Employee) in
any action as reasonably requested by

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the CEO or the Board of Directors. Former Employee further agrees to immediately
notify Tekelec’s CEO in writing in the event that she receives any legal process
or other communication purporting to require or request her to produce
testimony, documents, information or things in any manner related to Tekelec,
its directors, officers or employees, and that she will not produce testimony,
documents, information or other things with regard to any pending or threatened
lawsuit or proceeding regarding Tekelec without giving Tekelec prior written
notice of the same and reasonable time to protect its interests with respect
thereto. Former Employee further promises that when so directed by the CEO or
the Board of Directors, she will make herself available to attend any such legal
proceeding and will truthfully respond to any questions in any manner concerning
or relating to Tekelec and will produce all documents and things in her
possession or under her control which in any manner concern or relate to
Tekelec. Former Employee covenants and agrees that she will immediately notify
Tekelec’s CEO in writing in the event that she breaches any of the provisions of
Sections 7, 8, 10 or 11 hereof.
12. SOLE ENTITLEMENT
     Former Employee acknowledges and agrees that her sole entitlement to
compensation, payments of any kind, monetary and nonmonetary benefits and
perquisites with respect to her prior Tekelec relationship (as an officer and
employee) is as set forth in this Agreement, Tekelec’s bonus plan for officers
as in effect from time to time, stock option and warrant agreements, COBRA,
Tekelec Indemnification Agreement dated April 8, 2005 by and between Tekelec and
Former Employee, and such other written agreements and securities between
Tekelec and Former Employee as may exist or as may be set forth on Exhibit B
hereto.
13. RELEASE OF CLAIMS
     13.1 General. Former Employee does hereby and forever release and discharge
Tekelec and the predecessor corporation of Tekelec as well as the successors,
current, prior or future shareholders of record, officers, directors, heirs,
predecessors, assigns, agents, employees, attorneys, insurers and
representatives of each of them, past, present or future, from any and all cause
or causes of action, actions, judgments, liens, indebtedness, damages, losses,
claims, liabilities and demands of any kind or character whatsoever, whether
known or unknown, suspected to exist or not suspected to exist, anticipated or
not anticipated, whether or not heretofore brought before any state or federal
agency, court or other governmental entity which are existing on or arising
prior to the date of this Agreement and which, directly or indirectly, in whole
or in part, relate or are attributable to, connected with, or incidental to the
previous employment of Former Employee by Tekelec, the separation of that
employment, and any dealings between the parties concerning Former Employee’s
employment existing prior to the date of execution of this Agreement, excepting
only those obligations expressly recited herein or to be performed hereunder.
Nothing contained in this Section 12 shall affect any rights, claims or causes
of action which Former Employee may have (1) with respect to her outstanding
stock options, warrants or other stock subscription rights to purchase Tekelec
Common Stock or other securities under the terms and conditions thereof; (2) as
a shareholder of Tekelec; (3) to indemnification by Tekelec, to the extent
required under the provisions of Tekelec’s Articles of Incorporation, Tekelec’s
Bylaws, the California General Corporation Law, insurance or contracts, with
respect to matters relating to Former Employee’s prior service as a director, an
officer,

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employee and agent of Tekelec; (4) with respect to any other written agreement
listed on Exhibit B hereto; and (5) to make claims against or seek
indemnification or contribution from anyone not released by the first sentence
of this Section 12 with respect to any matter or anyone released by the first
sentence of this Section 12 with respect to any matter not released thereby; or
(6) with respect to Tekelec’s performance of this Agreement. Further, Former
Employee waives specifically any and all rights or claims Former Employee has or
may have under the ADEA and/or the OWBPA, and acknowledges that such waiver is
given voluntarily in exchange for certain consideration included in the
severance benefits being paid pursuant to this Agreement.
     13.2 Waiver of Unknown Claims. Former Employee acknowledges that she is
aware that she may hereafter discover claims or facts different from or in
addition to those she now knows or believes to be true with respect to the
matters herein released, and she agrees that this release shall be and remain in
effect in all respects a complete general release as to the matters released and
all claims relative thereto which may exist or may heretofore have existed,
notwithstanding any such different or additional facts. Former Employee
acknowledges that she has been informed of Section 1542 of the Civil Code of the
State of California, and does hereby expressly waive and relinquish all rights
and benefits which she has or may have under said Section or any other
comparable section under the laws of North Carolina or other state as
applicable. Section 1542 reads as follows:
“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by her must have materially affected his settlement with the debtor.”
     13.3 Covenant Not to Sue on Matters Released. Former Employee covenants
that she will not make, assert or maintain against any person or entity that
Former Employee has released in this Agreement, any claim, demand, action, cause
of action, suit or proceeding arising out of or in connection with the matters
herein released, including but not limited to any claim or right under the ADEA,
the OWBPA, or any other federal or state statute or regulation. Former Employee
represents and warrants that she has not assigned or transferred, purported to
assign or transfer, and will not assign or transfer, any matter or claim herein
released. Former Employee represents and warrants that she knows of no other
person or entity which claims an interest in the matters or claims herein
released. Former Employee agrees to, and shall at all times, indemnify and hold
harmless each person and entity that Former Employee has released in this
Agreement against any claim, demand, damage, debt, liability, account, action or
cause of action, or cost or expense, including attorneys’ fees, resulting or
arising from any breach of the representations, warranties and covenants made
herein.
14. ASSIGNMENT
     Former Employee represents and warrants that she has not heretofore
assigned, transferred or granted or purported to assign, transfer or grant any
claims, entitlement, matters, demands or causes of action herein released,
disclaimed, discharged or terminated, and agrees to indemnify and hold harmless
Tekelec from and against any and all costs, expense, loss or liability incurred
by Tekelec as a consequence of any such assignment, transfer or grant.

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15. FORMER EMPLOYEE REPRESENTATIONS
     Except as indicated on Exhibit C, from the period beginning on May 10, 2006
through the Effective Date , Former Employee represents and warrants that she
has not acted or omitted to act in any respect which directly or indirectly
would have constituted a violation of Sections 7, 8, 10 or 11 herein had this
Agreement then been in effect.
16. MISCELLANEOUS
     16.1 Notices. All notices and demands referred to or required herein or
pursuant hereto shall be in writing, shall specifically reference this Agreement
and shall be deemed to be duly sent and given upon actual delivery to and
receipt by the relevant party (which notice, in the case of Tekelec, must be
from an officer of Tekelec) or five days after deposit in the U.S. mail by
certified or registered mail, return receipt requested, with postage prepaid,
addressed as follows (if, however, a party has given the other party due notice
of another address for the sending of notices, then future notices shall be sent
to such new address):

             
 
  (a)   If to Tekelec:   Tekelec
 
          5200 Paramount Parkway
 
          Morrisville, North Carolina 27560
 
          Attn: Chief Executive Officer
 
           
 
      With a copy to:   Lynn K. Thompson, Esq.
 
          Bryan Cave LLP
 
          120 Broadway, Suite 300
 
          Santa Monica, CA 91204
 
           
 
  (b)   If to Former Employee:   Lori A. Craven
 
          1244 Bayleaf Ch. Road
 
          Raleigh, NC 27614-9167
 
           
 
      With a copy to:   Hugh W. Davis II
 
          Poyner & Spruill LLP
 
          P.O. Box 10096
 
          Raleigh, NC 27605-0096

     16.2 Legal Advice and Construction of Agreement. Both Tekelec and Former
Employee have received (or have voluntarily and knowingly elected not to
receive) independent legal advice with respect to the advisability of entering
into this Agreement and with respect to all matters covered by this Agreement
and neither has been entitled to rely upon or has in fact relied upon the legal
or other advice of the other party or such other party’s counsel (or employees)
in entering into this Agreement. Without limiting the generality of the
foregoing, Former Employee acknowledges that she has been encouraged to obtain
independent advice concerning the tax consequences of the severance benefits
payable under this Agreement including Section 409A of the Internal Revenue
Code, and that while both parties have cooperated in an effort to minimize any
adverse tax consequences, Tekelec has not made any

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representations (other than as set forth in Section 2.3 above) regarding, nor
indemnified Former Employee with respect to any tax liabilities that may be
imposed on her.
     16.3 Parties’ Understanding. Tekelec and Former Employee state that each
has carefully read this Agreement, that it has been fully explained to it/her by
its/her attorney (or that it/she has voluntarily and knowingly elected not to
receive such explanation), that it/she fully understands its final and binding
effect, that the only promises made to it/her to sign the Agreement are those
stated herein, and that it/she is signing this Agreement voluntarily.
     16.4 Recitals and Section Headings. Each term of this Agreement is
contractual and not merely a recital. All recitals are incorporated by reference
into this Agreement. Captions and section headings are used herein for
convenience only, are not part of this Agreement and shall not be used in
interpreting or construing it.
     16.5 Entire Agreement. This Agreement constitutes a single integrated
contract expressing the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous oral and
written agreements and discussions with respect to the subject matter hereof.
Notwithstanding the foregoing, the parties understand and agree that any
Nondisclosure Agreement and all other written agreements between Former Employee
and Tekelec are separate from this Agreement and, subject to the terms and
conditions of each such agreement, shall survive the execution of this
Agreement, and nothing contained in this Agreement shall be construed as
affecting the rights or obligations of either party set forth in such
agreements.
     16.6 Severability. In the event any provision of this Agreement or the
application thereof to any circumstance shall be determined by arbitration
pursuant to Section 16.10 of this Agreement or held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, or to be excessively broad
as to time, duration, geographical scope, activity, subject or otherwise, it
shall be construed to be limited or reduced so as to be enforceable to the
maximum extent allowed by applicable law as it shall then be in force, and if
such construction shall not be feasible, then such provision shall be deemed to
be deleted herefrom in any action before that court, and all other provisions of
this Agreement shall remain in full force and effect.
     16.7 Amendment and Waiver. This Agreement and each provision hereof may be
amended, modified, supplemented or waived only by a written document
specifically identifying this Agreement and signed by each party hereto. Except
as expressly provided in this Agreement, no course of dealing between the
parties hereto and no delay in exercising any right, power or remedy conferred
hereby or now or hereafter existing at law, in equity, by statute or otherwise,
shall operate as a waiver of, or otherwise prejudice, any such rights, power or
remedy.
     16.8 Cumulative Remedies. None of the rights, powers or remedies conferred
herein shall be mutually exclusive, and each such right, power or remedy shall
be cumulative and in addition to every other right, power or remedy, whether
conferred herein or now or hereafter available at law, in equity, by statute or
otherwise.

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     16.9 Specific Performance. Each party hereto may obtain specific
performance to enforce its/her rights hereunder and each party acknowledges that
failure to fulfill its/her obligations to the other party hereto would result in
irreparable harm.
     16.10 Arbitration. Except for the right of either party to apply to a court
of competent jurisdiction for a Temporary Restraining Order to preserve the
status quo or prevent irreparable harm, any dispute or controversy between
Tekelec and Former Employee under this Agreement involving its interpretation or
the obligations of a party hereto shall be determined by binding arbitration in
accordance with the National Rules for the Arbitration of Employment Disputes of
the American Arbitration Association, in Wake County , State of North Carolina.
Tekelec shall be responsible for paying the filing fee and tribunal costs
associated with arbitration. The arbitrators shall have the authority to permit
discovery, to the extent deemed appropriate by the arbitrator, upon request of a
party. The arbitrator shall have no power or authority to add to or, except as
otherwise provided by Section 16.6 hereof, to detract from the agreements of the
parties, and the prevailing party shall recover costs and attorneys’ fees
incurred in arbitration. Employee shall not be entitled to receive any
reimbursement of costs and attorneys’ fees pursuant to this section if the
parties agree that the reimbursement would be included in the Former Employee’s
income pursuant to Section 409A(a)(1)(A) of the Code, or would result in the
imposition of any additional tax or interest charge pursuant to
Section 409A(a)(1)(B) of the Code).The arbitrator shall have the authority to
grant injunctive relief in a form substantially similar to that which would
otherwise be granted by a court of law. The arbitrator shall have no authority
to award punitive or consequential damages. The resulting arbitration award may
be enforced, or injunctive relief may be sought, in any court of competent
jurisdiction. Any action arising out of or relating to this Agreement may be
filed only in the Superior Court of the County of Wake, North Carolina or the
United States District Court for the Eastern District of North Carolina.
     16.11 Choice of Law and Venue. This Agreement was negotiated, executed and
delivered within the State of North Carolina, and the rights and obligations of
the parties hereto shall be construed and enforced in accordance with and
governed by the internal (and not the conflict of laws) laws of the State of
North Carolina applicable to the construction and enforcement of contracts
between parties resident in North Carolina which are entered into and fully
performed in North Carolina. Any action or proceeding arising out of, relating
to or concerning this Agreement that is not subject to the arbitration
provisions set forth in Section 16.10 above shall be filed in the state courts
of the County of Wake, State of North Carolina or in a United States District
Court for the Eastern District of North Carolina and in no other location. The
parties hereby waive the right to object to such location on the basis of venue.
     16.12 Attorneys’ Fees. In the event a lawsuit is instituted by either party
concerning a dispute under this Agreement, the prevailing party in such lawsuit
shall be entitled to recover from the losing party all reasonable attorneys’
fees, costs of suit and expenses (including the reasonable fees, costs and
expenses of appeals), in addition to whatever damages or other relief the
injured party is otherwise entitled to under law or equity in connection with
such dispute; provided, however, that Former Employee shall not be entitled to
receive any reimbursement of costs, expenses and attorneys’ fees pursuant to
this section if the parties agree that the

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reimbursement would be included in the Former Employee’s income pursuant to
Section 409A(a)(1)(A) of the Code, or would result in the imposition of any
additional tax or interest charge pursuant to Section 409A(a)(1)(B) of the Code.
     16.13 Force Majeure. Neither Tekelec nor Former Employee shall be deemed in
default if its/her performance of obligations hereunder is delayed or become
impossible or impracticable by reason of any act of God, war, fire, earthquake,
strike, civil commotion, epidemic, or any other cause beyond such party’s
reasonable control.
     16.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
     16.15 Successors and Assigns. Neither party may assign this Agreement or
any of its rights or obligations hereunder (including, without limitation,
rights and duties of performance) to any third party or entity, and this
Agreement may not be involuntarily assigned or assigned by operation of law,
without the prior written consent of the non-assigning party, which consent may
be given or withheld by such non-assigning party in the sole exercise of its
discretion, except that Tekelec may assign this Agreement to a corporation
acquiring: (1) 50% or more of Tekelec’s capital stock in a merger or
acquisition; or (2) all or substantially all of the assets of Tekelec in a
single transaction; and except that Former Employee may transfer or assign her
rights under this Agreement voluntarily, involuntarily or by operation of law
upon or as a result of her death to her heirs, estate and/or personal
representative(s). Any prohibited assignment shall be null and void, and any
attempted assignment of this Agreement in violation of this section shall
constitute a material breach of this Agreement and cause for its termination by
and at the election of the other party hereto by notice. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and each
person or entity released pursuant to Section 12 hereof and, except as otherwise
provided herein, their respective legal successors and permitted assigns.
     16.16 Payment Procedure. Except as otherwise explicitly provided herein or
in the Severance Plan, all payments by Tekelec to Former Employee or by Former
Employee to Tekelec due hereunder may be by, at the paying party’s election,
cash, wire transfer or check. Except as explicitly provided herein or in the
Severance Plan, neither party may reduce any payment or obligation due hereunder
by any amount owed or believed owed to the other party under any other
agreement, whether oral or written, now in effect or hereafter entered into.
     16.17 Survival. The definitions, representations and warranties herein as
well as obligations set forth in Sections 7, 8 and 10 through 16 shall survive
any termination of this Agreement for any reason whatsoever.
     16.18 No Admission. Neither the entry into this Agreement nor the giving of
consideration hereunder shall constitute an admission of any wrongdoing by
Tekelec or Former Employee.
     16.19 Limitation of Damages. Except as expressly set forth herein, in any
action or proceeding arising out of, relating to or concerning this Agreement,
including any claim of

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breach of contract, liability shall be limited to compensatory damages
proximately caused by the breach and neither party shall, under any
circumstances, be liable to the other party for consequential, incidental,
indirect or special damages, including but not limited to lost profits or
income, even if such party has been apprised of the likelihood of such damages
occurring.
     16.20 Pronouns. As used herein, the words “she”, “her” and “herself” shall
be deemed to refer to the feminine as the identity of the person referred to and
the context may require.
     16.21 Effectiveness. This Agreement shall become effective upon execution
by the later of the parties hereto to execute this Agreement.
17. 21 DAY REVIEW PERIOD; RIGHT TO REVOKE
Former Employee acknowledges that she was advised in writing to consult with an
attorney prior to executing this Agreement and represents and warrants to
Tekelec that she has done so, and further acknowledges that she has been given a
period of 21 days within which to consider the terms and provisions of this
Agreement with her attorney. If Former Employee has executed and delivered to
Tekelec this Agreement prior to the expiration of such 21-day period, then in
doing so, Former Employee acknowledges that she has unconditionally and
irrevocably waived her right to that unexpired portion of such 21-day period. In
addition, Former Employee shall have the right to revoke this Agreement for a
period of seven days following the date on which this Agreement is signed by
sending written notification of such revocation directly to each of Tekelec and
Ronald W. Buckly at the addresses specified in Section 16.1, supra, via hand
delivery.
18. 409A COMPLIANCE
     18.1 Severance Plan Superseded. The parties intend that this Agreement
shall constitute an amendment and restatement of the Severance Plan’s provisions
as they apply to Former Employee for the purpose of bringing the Severance Plan
documentation into compliance with Code Section 409A, effective retroactively to
January 1, 2005.
     18.2 Construction in Accordance with Code Section 409A. The parties agree
that, pending the effective date of final regulations, this Agreement shall be
administered in good faith in compliance with Section 409A of the Code, and
applicable guidance thereunder, with respect to any amounts treated as
compensation deferred after December 31, 2004. The parties intend that the terms
of this Agreement be construed in a manner consistent with Code Section 409A and
in a manner that will not result in amounts being included in the Former
Employee’s income pursuant to Section 409A(a)(1)(A) of the Code, or that would
result in the imposition of any additional tax or interest charge pursuant to
Section 409A(a)(1)(B) of the Code.
     18.3 Tekelec and Former Employee agree to cooperate to the extent
reasonably necessary (without unreasonable cost or burden to Tekelec) to prevent
amounts payable hereunder from being included in Former Employee’s income
pursuant to Section 409A(1)(A) of the Code or being subject to any additional
tax or interest charge pursuant to Section 409A(a)(1)(B) of the Code, provided
that there shall be no change in the value of Former

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Employee’s compensation or benefits or in Tekelec’s costs or administrative
burdens in fulfilling its obligations under the applicable plan, agreement or
arrangement.

                              TEKELEC       LORI CRAVEN
 
                           
By:
  /s/ Ronald W. Buckly       Signature:   /s/ Lori Craven            
 
                           
 
                            Name:   Ronald W. Buckly       Date Signed June  22,
2006
 
                           
 
  Senior Vice President, Corporate                        
Title:
  Affairs and General Counsel                        
 
                            Date Signed June  22, 2006                        

L. Craven          

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EXHIBIT A
OUTSTANDING STOCK PURCHASE RIGHTS

                                  Maximum                 Number of            
    Shares   Purchase             Purchasable   Price   Termination Plan/Type of
Security   Date Issued   As of 7/01/061   Per Share   Date
1994/ISO
  01/18/2002     20,000     $ 19.2100     September 30, 2006
 
                       
Ofcr/NSO
  01/18/2002     180,000     $ 19.210     Footnote2
 
                       
1994/NSO
  01/31/2003     37,500     $ 8.540     Footnote3
 
                       
1994/NSO
  01/31/2003     23,439     $ 8.540     Footnote 4
 
                       
2003/NSO
  03/05/2004     37,500     $ 18.800     Footnote5
 
                       
2003/NSO
  03/05/2004     4,688     $ 18.800     Footnote6
 
                       
2003/NSO
  04/02/2004     50,000     $ 17.330     Footnote7
 
                       
2003/NSO
  04/02/2004     6,250     $ 17.330     Footnote8

 

1   In connection with the filing of Tekelec’s Current Report on Form 8-K in
February 2006 wherein Tekelec announced that it would restate previously issued
financial statements, Former Employee is not able to exercise stock options
under Tekelec’s stock option plans until such time as Tekelec becomes current in
its SEC reporting and the restriction on the issuance of shares of Tekelec’s
common stock lapses.   2   The termination date shall be the later of the date
that is thirty (30) calendar days after the restriction lapses or September 30,
2006.   3   The termination date shall be the later of the date that is thirty
(30) calendar days after the restriction lapses or September 30, 2006.   4   The
termination date shall be the later of the date that is thirty (30) calendar
days after the restriction lapses ends or September 30, 2006.   5   The
termination date shall be the later of the date that is thirty (30) calendar
days after the restriction lapses or September 28, 2006.   6   The termination
date shall be the later of the date that is thirty (30) calendar days after the
restriction lapses or September 28, 2006.   7   The termination date shall be
the later of the date that is thirty (30) calendar days after the restriction
lapses ends or September 28, 2006.   8   The termination date shall be the later
of the date that is thirty (30) calendar days after the restriction lapses ends
or September 28, 2006.

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EXHIBIT B
LIST OF OTHER AGREEMENTS (Pursuant to §§12 and 13)

- None -

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EXHIBIT C
EXCEPTIONS (Pursuant to §15)

- None -

19