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                                                                    EXHIBIT 10.1

                                     TEKELEC
                  2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES

1. ESTABLISHMENT AND PURPOSES OF THE PLAN.

      Tekelec hereby establishes this 2004 Equity Incentive Plan for New
Employees to promote the interests of the Company and its shareholders by (i)
providing selected new Employees of the Company (including Employees who join
the Company as a result of an acquisition or a similar corporate transaction)
who are in a position to make material contributions to the successful operation
of the Company's business with an appropriate and material inducement to accept
employment, (ii) motivating such persons, by means of performance-related
incentives, to achieve the Company's business goals and (iii) enabling such
persons to participate in the long-term growth and financial success of the
Company by providing them with an opportunity to purchase stock of the Company.
All Awards under the Plan are intended to qualify as "employment inducement
grants" within the meaning of Marketplace Rule 4350(i)(1)(A)(iv).

2. DEFINITIONS.

      The following definitions shall apply throughout the Plan:

      a. "AFFILIATE" shall mean any entity that directly or indirectly through
one or more intermediaries controls or is controlled by, or is under common
control with, the Company.

      b. "AWARD" shall mean any Option, Restricted Stock Award or Restrict Stock
Unit granted pursuant to the provisions of the Plan.

      c. "AWARD AGREEMENT" shall mean any written agreement, contract or other
instrument or document, including without limitation an Option Agreement,
evidencing and reflecting the terms of any Award granted by the Committee
hereunder in such form or forms as the Committee (subject to the terms and
conditions of the Plan) may from time to time approve.

      d. "BOARD" shall mean the Board of Directors of the Company.

      e. "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time. References in the Plan to any section of the Code shall be deemed
to include any amendment or successor provisions to such section and any
regulations issued under such section.

      f. "COMMON STOCK" shall mean the common stock, without par value, of the
Company.

      g. "COMPANY" shall mean Tekelec, a California corporation, any
"subsidiary" corporation, whether now or hereafter existing, as defined in
Sections 424(f) and (g) of the Code, and any Affiliate, whether now or hereafter
existing.

      h. "COMMITTEE" shall mean the committee of the Board appointed in
accordance with Section 4(a) of the Plan or, if no such committee shall be
appointed or in office, the Board, provided

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that any Award approved by the Board shall also have been approved by a majority
of the Company's "independent directors" (within the meaning of the Marketplace
Rules).

      i. "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of employment by the Company. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Committee or in the
case of transfers between locations of the Company.

      j. "DIVIDEND EQUIVALENT" shall mean any right granted under Section 9(b)
of this Plan.

      k. "EMPLOYEE" shall mean any employee of the Company, including officers
and directors who are also employees.

      l. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

      m. "FAIR MARKET VALUE" shall mean, with respect to Shares, the fair market
value per Share on the date an award is granted (or in connection with the
Company's right to repurchase the Shares, the date of termination) as determined
by the Board in its sole discretion, exercised in good faith; provided, however,
that where there is a public market for the Common Stock, the fair market value
per Share shall be the average of the closing bid and asked prices of the Common
Stock on the date of grant (or, if there are no such prices for such date, on
the first preceding day on which there were such reported prices) as reported in
The Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotations System) or, in
the event the Common Stock is listed on a stock exchange or quoted on the Nasdaq
National Market System ("Nasdaq"), the fair market value per Share shall be the
closing price on the exchange or on the Nasdaq National Market System on the
date of grant of the Award (or, if there are no sales on such date, on the first
preceding day on which there were reported sales), as reported in The Wall
Street Journal.

      n. "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

      o. "MARKETPLACE RULES" shall mean the Marketplace Rules of The Nasdaq
Stock Market, as amended.

      p. "NONSTATUTORY STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option.

      q. "OPTION" shall mean a stock option to purchase Common Stock granted to
a Participant pursuant to the Plan.

      r. "option agreement" means a written agreement substantially in the form
attached hereto as Exhibit A, or such other form or forms as the Committee
(subject to the terms and conditions of the Plan) may from time to time approve,
evidencing and reflecting the terms of an Option.

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      s. "OPTIONED STOCK" shall mean the Common Stock subject to an Option
granted pursuant to the Plan.

      t. "PARTICIPANT" shall mean any Employee who is granted an Award.

      u. "PERMITTED TRANSFEREE" shall have the meaning set forth in Section 10.

      v. "PLAN" shall mean this Tekelec 2004 Equity Incentive Plan for New
Employees.

      w. "RESTRICTED STOCK AWARD" shall mean any Shares granted under Section 8
of this Plan and issued with the restriction that the holder may not sell,
transfer, pledge or assign such Shares and with such other vesting and other
restrictions as the Committee, in its sole discretion, may impose, which
restrictions may lapse separately or in combination at such time or times, in
installments or otherwise, as the Committee may deem appropriate.

      x. "RESTRICTED STOCK UNIT" shall mean any unit granted under Section 9 of
this Plan evidencing the right to receive one Share at some future date.

      y. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

      z. "SHARES" shall mean shares of the Common Stock, any shares into which
such Shares may be converted in accordance with Section 11 of the Plan and such
other securities or property as may become subject to Awards pursuant to this
Plan.

3. SHARES RESERVED.

      The maximum aggregate number of Shares reserved for issuance pursuant to
the Plan shall be 1,000,000 Shares or the number of shares of stock to which
such Shares shall be adjusted as provided in Section 11 of the Plan. Such number
of Shares may be set aside out of authorized but unissued Shares not reserved
for any other purpose, or out of issued Shares acquired for and held in the
treasury of the Company from time to time.

      Shares subject to, but not sold or issued under, any Award terminating,
expiring, forfeited or canceled for any reason prior to issuance of such Shares
shall again become available for Awards thereafter granted under the Plan and
the same shall not be deemed an increase in the number of Shares reserved for
issuance under the Plan.

4. ADMINISTRATION OF THE PLAN.

      a. The Plan shall be administered by the Compensation Committee of the
Board, which Committee shall consist of not less than two independent directors
and shall administer the Plan subject to such terms and conditions as the Board
may prescribe. Each member of the Committee shall be a "non-employee director"
for purposes of Rule 16b-3 under the Exchange Act and an "outside director" as
defined in the Treasury regulations issued pursuant to Section 162(m) of the
Code, and shall otherwise satisfy all applicable independence requirements set
forth in the Marketplace Rules. Members of the Committee shall serve for such
period of time as the Board

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may determine. From time to time the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused or remove all members of the Committee and thereafter directly
administer the Plan.

      b. Subject to the provisions of the Plan, the Committee shall have the
authority in its sole discretion to: (i) determine the type or types of Awards
(i.e., Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock
Awards or Restricted Stock Units) to be granted to each Participant in the Plan,
(ii) determine the Fair Market Value per Share in accordance with the terns of
the Plan, (iii) determine the exercise price of Options to be granted to
Employees in accordance with the terms of the Plan, (iv) determine the Employees
to whom, and the time or times at which, Awards shall be granted and the number
of Shares subject to each Award, (v) prescribe, amend and rescind rules and
regulations relating to the Plan, subject to the limitations set forth in
Section 12 of the Plan, (vi) determine the terms and provisions of each Award
granted to Participants under the Plan and each Award Agreement (which need not
be identical with the terms of other Awards and Award Agreements) and, with the
consent of the Participant, to modify or amend an outstanding Award Agreement,
(vii) accelerate the exercise date of any Option or the vesting of any
Restricted Stock Award or Restricted Stock Unit, (viii) determine whether any
Participant will be required to execute a stock purchase agreement or other
agreement as a condition to the issuance of Shares pursuant to an Award, and to
determine the terms and provisions of any such agreement (which need not be
identical with the terms of any other such agreement) and, with the consent of
the Participant, to amend any such agreement, (ix) interpret the Plan or any
agreement entered into with respect to the grant of Awards and the issuance of
Shares upon exercise of Options or the vesting of Restricted Stock Units, (x)
determine the eligibility of an Employee for benefits hereunder and the amount
thereof, (xi) authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Award previously granted or to
take such other actions as may be necessary or appropriate with respect to the
Company's rights pursuant to Awards or agreements relating to the grant or
exercise thereof and (xii) make such other determinations and establish such
other procedures as it deems necessary or advisable for the administration of
the Plan.

      c. All decisions, determinations and interpretations of the Committee
shall be final and binding on all Participants and any other holders of any
Awards granted under the Plan.

      d. The Committee shall keep minutes of its meetings and of the actions
taken by it without a meeting. A majority of the Committee shall constitute a
quorum and the actions of a majority at a meeting, including a telephone
meeting, at which a quorum is present or acts approved in writing by a majority
of the members of the Committee without a meeting shall constitute acts of the
Committee.

      e. The Company shall pay all original issue and transfer taxes with
respect to the grant of Awards and/or the issue and transfer of Shares pursuant
to the exercise of Options or the vesting of Restricted Stock Awards or
Restricted Stock Units and all other fees and expenses necessarily incurred by
the Company in connection therewith; provided, however, that the person
exercising an Option or to whom an Award is granted or to whom Shares are
otherwise issued pursuant to the

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Plan shall be responsible for all payroll, withholding, income and other taxes
incurred by such person on the date of exercise of the Option or of issuance or
vesting of Shares, as applicable.

5. ELIGIBILITY.

      Awards may be granted under the Plan only to Employees, and only as a
material inducement in connection with the Company's hiring of such persons
(including in connection with an acquisition by the Company or a similar
corporate transaction), whether as a new hire or as a rehire following a bona
fide termination of such person's Continuous Status as an Employee. Awards shall
not become effective unless and until the Participant actually commences
employment with the Company.

6. TERMS AND CONDITIONS OF OPTIONS.

      Options granted pursuant to the Plan by the Committee shall be either
Incentive Stock Options or Nonstatutory Stock Options and shall be evidenced by
an Option Agreement providing, in addition to such other terms as the Board may
deem advisable, the following terms and conditions:

      a. Time of Granting Options. The date of grant of an Option shall for all
purposes be the date on which the Committee makes the determination granting
such Option; provided, however, that if the Committee determines that such grant
shall be made as of some future date, the date of grant shall be such future
date. Notice of the determination shall be given to each Optionee within a
reasonable time after the date of such grant.

      b. Number of Shares. Each Option Agreement shall state the number of
Shares to which it pertains and whether such Option is intended to constitute an
Incentive Stock Option or a Nonstatutory Stock Option. The maximum number of
Shares which may be awarded as Options under the Plan during any calendar year
to any Optionee is 1,000,000 (as may be adjusted pursuant to Section 11 herein)
Shares. If an Option held by an Employee is canceled, the canceled Option shall
continue to be counted against the maximum number of Shares for which Options
may be granted to such Employee and any replacement Option granted to such
Employee shall also count against such limit.

      c. Exercise Price. The exercise price per Share for the Shares to be
issued pursuant to the exercise of an Option shall be such price as is
determined by the Board; provided, however, that such price shall in no event be
less than 100% of the Fair Market Value per Share on the date of grant of an
Option.

          In the case of any Option granted to an Employee who at the time of
grant owns or is deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code or otherwise) stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporations of the Company, the exercise
price per Share shall be no less than 110% of the Fair Market Value per Share on
the date of grant.

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      d. Medium and Time of Payment. The consideration to be paid for the Shares
to be issued upon exercise of an Option shall consist entirely of cash or check
payable to the Company or such other consideration and method of payment
permitted under any laws to which the Company is subject and which is approved
by the Committee, including without limitation (i) by delivery of a promissory
note, (ii) by tendering previously acquired Shares (valued at Fair Market Value
as of the date of tender) that have been owned for a period of at least six
months (or such other period as is necessary to avoid accounting charges against
the Company's earnings), (iii) if Shares are traded on a national securities
exchange or Nasdaq, through the delivery of irrevocable instructions to a broker
to deliver promptly to the Company an amount equal to the exercise price, or
(iv) any combination of (i), (ii) and (iii). In connection with all exercises of
Options and regardless of the medium of payment, the Optionee shall pay in cash
any amount necessary to satisfy the Company's withholding obligations.

      e. Term of Options. The term of each Option may be up to ten years from
the date of grant thereof; provided, however, that the term of an Incentive
Stock Option granted to an Employee who, at the time the Incentive Stock Option
is granted, owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company, shall be five
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.

         The term of any Option may be less than the maximum term provided for
herein as specified by the Committee upon grant of the Option and as set forth
in the Option Agreement.

      f. Maximum Amount of Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time an Incentive Stock Option is
granted) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year under all
incentive stock option plans of the Company exceeds $100,000, the Options in
excess of such limit shall be treated as Nonstatutory Stock Options.

7. EXERCISE OF OPTION.

      a. In General. Any Option granted hereunder to an Employee shall be
exercisable at such times and under such conditions as may be determined by the
Committee and as shall be permissible under the terms of the Plan, including any
performance criteria with respect to the Company and/or the Optionee as may be
determined by the Committee.

         An Option may be exercised in accordance with the provisions of the
Plan as to all or any portion of the Shares then exercisable thereunder from
time to time during the term of the Option. However, an Option may not be
exercised for a fraction of a Share.

      b. Procedure. An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company at its principal business
office in accordance with the terms of the Option Agreement by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company, together with
(i) any other agreements required by the terms of the Plan and/or Option
Agreement or as

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required by the Committee and (ii) payment by the Optionee of all payroll,
withholding or income taxes incurred in connection with such Option exercise (or
arrangements for the collection or payment of such tax satisfactory to the Board
are made).

      c. Decrease in Available Shares. Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised, except if the Option is exercised by
tendering Shares, either actually or by attestation.

      d. Exercise of Shareholder Rights. Until the Option is properly exercised
in accordance with the terms of this Section 7, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date the Option is exercised.

      e. Termination of Eligibility. If an Optionee ceases to serve as an
Employee for any reason other than death or permanent and total disability
(within the meaning of Section 22(e)(3) of the Code) and thereby terminates his
or her Continuous Status as an Employee, he or she may, but only within 90 days
following the date he or she ceases his or her Continuous Status as an Employee
(subject to any earlier termination of the Option as provided by its terms),
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that he or she was not
entitled to exercise the Option at the date of such termination, or if he or she
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate. Notwithstanding anything
to the contrary herein, the Committee may at any time and from time to time
prior to the termination of a Nonstatutory Stock Option, with the consent of the
Optionee, extend the period of time during which the Optionee may exercise his
or her Nonstatutory Stock Option following the date he or she ceases his or her
Continuous Status as an Employee; provided, however, that the maximum period of
time during which a Nonstatutory Stock Option shall be exercisable following the
date on which an Optionee terminates his or her Continuous Status as an Employee
shall not exceed the original term of such Option as set forth in the Option
Agreement and that notwithstanding any extension of time during which a
Nonstatutory Stock Option may be exercised, such Option, unless otherwise
amended by the Committee, shall only be exercisable to the extent the Optionee
was entitled to exercise the Option on the date he or she ceased his or her
Continuous Status as an Employee.

      f. Death or Disability of Optionee. If an Optionee's Continuous Status as
an Employee ceases due to death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, the Option may be
exercised within 180 days (or such other period of time not exceeding one year
as is determined by the Committee at the time of granting the Option) following
the date of death or termination of employment due to permanent or total
disability (subject to any earlier termination of the Option as provided by its
terms), by the Optionee in the case of permanent or total disability, or in the
case of death by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but in any case (unless otherwise
determined by the Committee at the time of granting the Option) only to the
extent the Optionee was entitled to exercise the Option at the date of his or
her termination of employment by death or permanent and total disability. To the
extent that he or she was not

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entitled to exercise such Option at the date of his or her termination of
employment by death or permanent and total disability, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate. Notwithstanding anything to the
contrary herein, the Committee may at any time and from time to time prior to
the termination of a Nonstatutory Stock Option, with the consent of the
Optionee, extend the period of time during which the Optionee may exercise his
or her Nonstatutory Stock Option following the date he or she ceases his or her
Continuous Status as an Employee; provided, however, that the maximum period of
time during which a Nonstatutory Stock Option shall be exercisable following the
date on which an Optionee terminates his or her Continuous Status as an Employee
shall not exceed the original term of such Option as set forth in the Option
Agreement and that notwithstanding any extension of time during which a
Nonstatutory Stock Option may be exercised, such Option, unless otherwise
amended by the Committee, shall only be exercisable to the extent the Optionee
was entitled to exercise the Option on the date he or she ceased his or her
Continuous Status as an Employee.

      g. Expiration of Option. Notwithstanding any provision in the Plan,
including but not limited to the provisions set forth in Sections 7(e) and 7(f),
an Option may not be exercised, under any circumstances, after the expiration of
its term.

      h. Conditions on Exercise and Issuance. As soon as practicable after any
proper exercise of an Option in accordance with the provisions of the Plan, the
Company shall (i) deliver to the Optionee at the principal executive office of
the Company or such other place as shall be mutually agreed upon between the
Company and the Optionee, a certificate or certificates representing the Shares
for which the Option shall have been exercised or (ii) otherwise arrange for
such Shares to be issued to the Optionee. The time of issuance and, if
applicable, delivery of the certificate or certificates representing the Shares
for which the Option shall have been exercised may be postponed by the Company
for such period as may be required by the Company, with reasonable diligence, to
comply with any law or regulation applicable to the issuance or delivery of such
Shares.

         Options granted under the Plan are conditioned upon the Company
obtaining any required permit or order from the appropriate governmental
agencies authorizing the Company to issue such Options and Shares issuable upon
exercise thereof. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, applicable
state law, the rules and regulations promulgated thereunder and the Marketplace
Rules or the requirements of any stock exchange upon which the Shares may then
be listed. Any such issuance may be further subject to the approval of counsel
for the Company with respect to such compliance.

8. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.

      a. Grant. Restricted Stock Awards may be granted hereunder by the
Committee to Employees either alone or in addition to other Awards granted under
the Plan. A Restricted Stock Award shall be subject to such terms and conditions
as may be determined by the Committee and may be subject to vesting conditioned
upon the satisfaction of such requirements, conditions (such

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as a condition that the Participant's right to the Shares shall vest in
installments over a period of time during which services are to be provided to
the Company by the Employee), restrictions or performance criteria as shall be
established by the Committee and set forth in the Award Agreement. During any
period during which Shares acquired pursuant to a Restricted Stock Award are
subject to vesting conditions, such Shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of by the Participant. The
provisions of Restricted Stock Awards need not be the same with respect to each
Participant receiving such awards. The Committee has absolute discretion to
determine whether any consideration is to be received by the Company as a
condition precedent to the issuance of Restricted Stock Awards. The terms of any
Restricted Stock Award granted under this Plan shall be set forth in a written
Award Agreement which shall contain provisions determined by the Committee which
are not inconsistent with the Plan.

      b. Rights of Holders of Restricted Stock. Beginning on the date of grant
of a Restricted Stock Award and subject to execution of the Award Agreement, the
Participant shall become a shareholder of the Company with respect to all Shares
subject to the Restricted Stock Award and shall have all of the rights of a
shareholder, including the right to vote the Shares subject to the Restricted
Stock Award and the right to receive distributions made with respect to such
Shares; provided, however, that any Shares or any other property (other than
cash) distributed as a dividend or otherwise with respect to any such Shares as
to which the restrictions have not yet lapsed shall be subject to the same
restrictions as the Shares subject to the Restricted Stock Award.

      c. Delivery of Shares. Shares issued upon the grant of Restricted Stock
Awards shall, unless otherwise determined by the Committee, be maintained in the
custody of or on behalf of the Company until all applicable vesting conditions
have been satisfied. Shares subject to Restricted Stock Awards that are no
longer subject to restrictions shall be delivered to the Participant promptly
after the applicable restrictions lapse or are waived.

      d. Termination of Continuous Status as an Employee. Unless otherwise
determined by the Committee or unless otherwise provided in the Award Agreement
evidencing the Award, in the event of the termination of a Participant's
Continuous Status as an Employee, Shares which are subject to a Participant's
Restricted Stock Award which are not vested as of the date of such termination
shall be automatically forfeited by the Participant and cancelled by the Company
for no value.

      e. Waiver of Forfeiture. The Committee may, when it finds that a waiver
would be in the best interests of the Company and subject to such terms and
conditions as the Committee shall deem appropriate, waive in whole or in part
any remaining vesting restrictions with respect to any Restricted Stock Award or
any other conditions set forth in any Award Agreement.

9. TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS.

      a. Grant. Restricted Stock Units may be issued hereunder to Employees
either alone or in addition to other Awards granted under the Plan. A Restricted
Stock Unit is a bookkeeping entry that represents the right to receive one Share
to be issued and delivered at the end of the applicable vesting period, subject
to a risk of cancellation and to the other terms and conditions set forth in the
Plan and in any Award Agreement evidencing the Restricted Stock Unit and subject
to any

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additional terms and conditions established by the Committee. The Company shall
establish and maintain accounts for Participants in which the Company shall
record Restricted Stock Units and the transactions and events affecting such
units. Restricted Stock Units and other items reflected in the account will
represent only bookkeeping entries by the Company to evidence the Company's
unfunded obligations. The provisions of Restricted Stock Units need not be the
same with respect to each Participant receiving such Awards. The Committee has
absolute discretion to determine whether any consideration is to be received by
the Company as a condition precedent to the grant of a Restricted Stock Unit.
The terms of any Restricted Stock Unit granted under this Plan shall be set
forth in a written Award Agreement which shall contain provisions determined by
the Committee which are not inconsistent with the Plan.

      b. Rights of Holders of Restricted Stock Units; Dividend Equivalents.
Unless the Committee otherwise provides in an Award Agreement for Restricted
Stock Units, any Participant holding Restricted Stock Units shall have no rights
as a shareholder of the Company with respect to such Restricted Stock Units. The
Committee shall be authorized to establish procedures pursuant to which the
Company's payment of any Restricted Stock Unit may be deferred. Subject to the
provisions of the Plan and any Award Agreement, the recipient of a Restricted
Stock Unit may, if so determined by the Committee, be entitled to receive,
currently or on a deferred basis and with respect to the number of Shares
covered by the Award, payments ("Dividend Equivalents") in amounts equivalent to
cash, stock or other property paid by the Company as dividends on the Company's
Common Stock prior to the vesting of the Restricted Stock Units.

      c. Delivery of Shares in Settlement of Restricted Stock Units. Restricted
Stock Units (if not previously cancelled) will be automatically settled on or
about the vesting date or dates set forth in the Award Agreement evidencing the
Award. The Company may make delivery of Shares in settlement of Restricted Stock
Units by either delivering one or more stock certificates representing such
Shares to the Participant, registered in the name of the Participant, or by
depositing such Shares into an account maintained for the Participant and
established in connection with any Company plan or arrangement providing for
investment in Common Stock of the Company.

      d. Termination of Continuous Status as an Employee. Unless otherwise
determined by the Committee or unless otherwise provided in the Award Agreement
evidencing the Award, in the event of the termination of a Participant's
Continuous Status as an Employee, the Participant's Restricted Stock Units which
are not vested as of the date of such termination shall not vest and shall
automatically be cancelled for no value and without issuance of any Shares.

      e. Waiver of Forfeiture. The Committee may, when it finds that a waiver
would be in the best interests of the Company and subject to such terms and
conditions as the Committee shall deem appropriate, waive in whole or in part
any remaining vesting restrictions with respect to any Restricted Stock Units or
any other conditions set forth in any Award Agreement.

10. NONTRANSFERABILITY OF AWARDS.

      No Awards granted under the Plan, and no Shares subject to any such
Awards, that have not been issued or as to which any applicable vesting
restriction, performance or deferral period has not lapsed, may be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any

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manner, either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution or transfers between spouses
incident to a divorce. Options may be exercised during the life of the Optionee
only by the Optionee or the Optionee's guardian or legal representative.
Notwithstanding the foregoing, a Participant may assign or transfer an Award
with the consent of the Committee (each transferee thereof, a "Permitted
Transferee"), which consent may be granted or withheld in the Committee's sole
discretion, provided that such Permitted Transferee shall be bound by and
subject to all of the terms and conditions of the Plan and the Award Agreement
relating to the transferred Award and shall execute an agreement satisfactory to
the Company evidencing such obligations; and, provided further, that such
Participant shall remain bound by the terms and conditions of the Plan. The
Company shall cooperate with any Permitted Transferee and the Company's transfer
agent in effectuating any transfer permitted under this Section 10.

11. ADJUSTMENT UPON CHANGE IN CORPORATE STRUCTURE.

      a. Subject to any required action by the shareholders of the Company, the
number and type of Shares covered by each outstanding Award, and the number and
type of Shares which have been authorized for issuance under the Plan but as to
which no Awards have yet been granted or which have been returned to the Plan
upon cancellation, expiration or forfeiture of an Award, as well as the exercise
or purchase price per Share, as applicable, covered by outstanding Awards, shall
be proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split or combination or the
payment of a stock dividend (but only on the Common Stock) or reclassification
of the Common Stock or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company (other than
stock awards to Employees); provided, however, that the conversion of any
convertible securities of the Company shall not be deemed to have been effected
without the receipt of consideration. Any such adjustment shall be determined in
good faith by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, and the Committee's determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject to the Plan
or an Award.

      b. In the event of the proposed dissolution or liquidation of the Company,
or in the event of a proposed sale of all or substantially all of the assets of
the Company (other than in the ordinary course of business), or the merger or
consolidation of the Company with or into another corporation, as a result of
which the Company is not the surviving and controlling corporation, the Board
shall (i) make provision for the assumption of outstanding Awards by the
successor corporation, (ii) declare that any Option shall terminate as of a date
fixed by the Board which is at least 30 days after the notice thereof to the
Optionee and shall give each Optionee the right to exercise his or her Option as
to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable provided such exercise does not
violate Section 7(h) of the Plan, (iii) accelerate the vesting of Restricted
Stock Awards and Restricted Stock Units, or (iv) cause any Award outstanding as
of the effective date of any such event to be cancelled in

                                       11
<PAGE>

consideration of a cash payment or grant of an alternative option or award
(whether by the Company or any entity that is a party to the transaction), or a
combination thereof, to the holder of the cancelled Award, provided that such
payment and/or grant are substantially equivalent in value to the fair market
value of the cancelled Award as determined by the Committee.

      c. No fractional shares of Common Stock shall be issuable on account of
any action aforesaid, and the aggregate number of shares into which Shares then
covered by an Award, when changed as the result of such action, shall be reduced
to the largest number of whole shares resulting from such action, unless the
Board, in its sole discretion, shall determine to issue scrip certificates in
respect to any fractional shares, which scrip certificates shall be in a form
and have such terms and conditions as the Board in its discretion shall
prescribe.

12. AMENDMENT AND TERMINATION OF THE PLAN.

      a. Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable, and shall
make any amendments which may be required so that Options intended to be
Incentive Stock Options shall at all times continue to be Incentive Stock
Options for the purpose of Section 422 of the Code. An amendment to or the
termination of the Plan shall be subject to the approval of the Company's
shareholders only to the extent required by applicable law, including the
Marketplace Rules or the rules and regulations of any stock exchange on which
Shares are listed or quoted.

      b. Effect of Amendment or Termination. Except as otherwise provided in
Section 11 of the Plan, any amendment or termination of the Plan shall not
affect Awards already granted, and such Awards shall remain in full force and
effect as if the Plan had not been amended or terminated, unless mutually agreed
otherwise between the Participant and the Company, which agreement must be in
writing and signed by the Participant and the Company.

13. INDEMNIFICATION.

      No member of the Board or its Committee shall be liable for any act or
action taken, whether of commission or omission, except in circumstances
involving willful misconduct, or for any act or action taken, whether of
commission or omission, by any other member or by any officer, agent or
Employee. In addition to such other rights of indemnification they may have as
members of the Board, or as members of the Committee, the Board and the
Committee shall be indemnified by the Company against reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken, by commission or omission, in connection with the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that a Board or Committee member is liable for
willful misconduct in the performance of his or her duties; provided that within
60 days after institution of any such action, suit or proceeding, such Board or
Committee member shall in writing have offered the Company the opportunity, at
its own expense, to handle and defend the same.

                                       12
<PAGE>

14. GENERAL PROVISIONS.

      a. Withholding or Deduction for Taxes. The grant of Awards hereunder and
the issuance of Shares and all payments and distributions pursuant to this Plan
are conditioned upon the Company's reservation of the right to withhold, in
accordance with any applicable law, from any compensation or other amounts
payable to the Participant, any taxes required to be withheld under Federal,
state or local law as a result of the: (i) grant of any Award, (ii) exercise of
any Option, (iii) sale of Shares issued upon exercise of Options, (iv) delivery
of Shares, cash or other property, (v) lapse of restrictions in connection with
any Award, or (vi) any other event occurring pursuant to the Plan. To the extent
that compensation and other amounts, if any, payable to the Participant are
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Participant, including without limitation, as a
condition of the exercise of any Option, to pay in cash to the Company an amount
sufficient to cover such tax liability or otherwise to make adequate provision
for the delivery to the Company of cash necessary to satisfy the Company's
withholding obligations under Federal and state law. The Committee shall be
authorized to establish procedures for election by Participants to satisfy such
obligations for the payment of such taxes by tendering previously acquired
Shares (either actually or by attestation, valued at their then Fair Market
Value) that have been owned for a period of at least six months (or such other
period as may be necessary to avoid accounting charges against the Company's
earnings), or by directing the Company to retain Shares (up to the Participant's
minimum required tax withholding rate) otherwise deliverable in connection with
the Award.

      b. Other Plans. Nothing contained in the Plan shall prohibit the Company
from establishing additional incentive compensation arrangements.

      c. No Enlargement of Rights. Neither the Plan, nor the granting of Awards,
nor any other action taken pursuant to the Plan shall constitute or be evidence
of any agreement or understanding, express or implied, that the Company will
retain an Employee for any period of time, or at any particular rate of
compensation. Nothing in the Plan shall be deemed to limit or affect the right
of the Company to discharge any Employee at any time for any reason or no
reason.

         No Employee shall have any right to or interest in Awards authorized
hereunder prior to the grant thereof to such eligible person, and upon such
grant he or she shall have only such rights and interests as are expressly
provided herein and in the related Award Agreement, subject, however, to all
applicable provisions of the Company's Articles of Incorporation, as the same
may be amended from time to time.

      d. Notice. Any notice to be given to the Company pursuant to the
provisions of the Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to time)
at its principal office, and any notice to be given to a Participant to whom an
Award is granted hereunder shall be delivered personally or addressed to him or
her at the address given beneath his or her signature on his or her Award
Agreement, or at such other address as such Participant or his or her transferee
(upon any permitted transfer) may hereafter designate in writing to the Company.
Any such notice shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, registered or certified, and

                                       13
<PAGE>

deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
It shall be the obligation of each Participant holding Shares purchased upon
exercise of an Option or otherwise issued pursuant to Awards hereunder to
provide the Secretary of the Company, by letter mailed as provided hereinabove,
with written notice of his or her direct mailing address.

      e. Applicable Law. To the extent that Federal laws do not otherwise
control, the Plan shall be governed by and construed in accordance with the laws
of the State of California, without regard to the conflict of laws rules
thereof.

      f. Incentive Stock Options. The Company shall not be liable to an Optionee
or other person if it is determined for any reason by the Internal Revenue
Service or any court having jurisdiction that any Incentive Stock Options are
not incentive stock options as defined in Section 422 of the Code.

      g. Information to Participants. The Company shall provide without charge
to each Participant copies of its annual financial statements (which need not be
audited), which may be included within such annual and periodic reports as are
provided by the Company to its shareholders generally.

      h. Availability of Plan. A copy of the Plan shall be delivered to the
Secretary of the Company and shall be shown by him or her to any eligible person
making reasonable inquiry concerning it.

      i. Severability. In the event that any provision of the Plan is found to
be invalid or otherwise unenforceable under any applicable law, such invalidity
or unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.

      j. Form of Shares and Restricted Stock Awards; Stop Transfer Orders.
Shares issued or delivered under the Plan, including Shares subject to any
Restricted Stock Award, may be evidenced in such manner as the Committee in its
sole discretion shall deem appropriate, including, without limitation,
book-entry registration or issuance of a stock certificate or certificates. In
the event any stock certificate is issued in respect of a Restricted Stock
Award, such certificate shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Award. All certificates for
Shares delivered under the Plan pursuant to any Award shall be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Shares are then listed or quoted, and any applicable federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

      k. Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than

                                       14
<PAGE>

those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver the Shares or payments in lieu of
or with respect to Awards hereunder; provided, however, that the existence of
such trusts or other arrangements is consistent with the unfunded status of the
Plan.

15. EFFECTIVE DATE AND TERM OF PLAN.

      This Plan is effective as of July 21, 2004. This Plan shall continue in
effect for a term of ten years, unless sooner terminated under Section 12 of the
Plan.

                                       15
<PAGE>

                            CERTIFICATE OF SECRETARY

      The undersigned Secretary of Tekelec, a California corporation (the
"Company"), hereby certifies that the foregoing is a true and correct copy of
the Company's 2004 Equity Incentive Plan for New Employees.

      IN WITNESS WHEREOF, the undersigned has executed this document as of the
date set forth below.

Date: ___________________________ , 2004       _____________________________
                                               Ronald W. Buckly, Secretary

<PAGE>

[TEKELEC LOGO]

                  2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES
                             STOCK OPTION AGREEMENT

Tekelec hereby grants to you an Option under the Tekelec 2004 Equity Incentive
Plan for New Employees (the "Plan"), to purchase the number of shares of Tekelec
Common Stock set forth below.

NAME:

EMPLOYEE ID #:

DATE OF GRANT:

TYPE OF OPTION:                 NSO/ISO

NUMBER OF SHARES:

EXERCISE PRICE:

PAYMENT:                        Payment of the exercise price and applicable
                                taxes may be made (i) by cash or check and/or
                                (ii) pursuant to a "Cashless" exercise (see
                                Option Terms and Conditions attached hereto).

VESTING SCHEDULE:               16 equal quarterly installments; the first
                                installment will vest on _______________, and
                                one additional installment will vest on the last
                                day of each calendar quarter thereafter, as long
                                as you remain an employee of the Company.

EXPIRATION DATE:                Each of the 16 quarterly installments will
                                expire on the four-year anniversary of its
                                vesting (e.g., the installment vesting on
                                _______________ will expire at the close of
                                business on _______________); provided, however,
                                that in the event of your termination of
                                employment with the Company or your disability
                                or death, the provisions of Sections 6 and 7 of
                                the Option Terms and Conditions attached hereto
                                shall apply to your right to exercise the
                                Option.

This Stock Option Agreement consists of this page and the Option Terms and
Conditions and the Notice of Exercise of Stock Option attached hereto. By
signing below, you accept the grant of this Option and agree that this Option is
subject in all respects to the terms and conditions of the Plan located on
Tekelec's internal website at Teksource. Copies of the Plan and Prospectus
containing information concerning the Plan are available upon request to
_______________ at _______________ or _______________@tekelec.com.

You further acknowledge and agree that (i) you have carefully reviewed this
Stock Option Agreement (including the Option Terms and Conditions attached
hereto) and the Plan and (ii) this Stock Option Agreement and the Plan set forth
the entire understanding between you and the Company regarding this Option and
supersede all prior oral and written agreements with respect thereto.

TEKELEC

BY: _____________________________                   ___________________________
PRINT NAME: _____________________                   DATE
TITLE: __________________________

     ____________________________                   ___________________________
              OPTIONEE                              DATE

<PAGE>

                       TEKELEC 2004 EQUITY INCENTIVE PLAN
                                FOR NEW EMPLOYEES
              STOCK OPTION AGREEMENT - OPTION TERMS AND CONDITIONS

The following Terms and Conditions apply to the nonstatutory stock option
granted by Tekelec to the Optionee whose name appears on the Stock Option
Agreement to which these Terms and Conditions are attached.

1.    2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES. This Option is in all
      respects subject to the terms, definitions and provisions of the Tekelec
      2004 Equity Incentive Plan for New Employees (the "Plan") adopted by the
      Company and incorporated herein by reference. The terms defined in the
      Plan shall have the same meanings herein.

2.    NATURE OF THE OPTION. This Option is intended to be a NONSTATUTORY
      STOCK OPTION and is not intended to be an incentive stock option within
      the meaning of Section 422 of the Internal Revenue Code of 1986, as
      amended (the "Code"), or to otherwise qualify for any special tax benefits
      to the Optionee.

3.    METHOD OF PAYMENT. The aggregate exercise price of the Shares purchased
      upon an exercise, in whole or in part, of the Option may be paid in one or
      both of the following forms:

      (a)   Check made payable to the Company or its designated agent; and/or

      (b)   Through a special sale and remittance procedure commonly referred to
            as a "cashless exercise" pursuant to which the Optionee (or any
            other person(s) entitled to exercise the Option) shall concurrently
            provide irrevocable written instructions:

            (i)   to a brokerage firm to effect the immediate sale of a
                  sufficient number of the Shares purchased upon the exercise of
                  the Option to enable such brokerage firm to remit out of the
                  sales proceeds available upon the settlement date, sufficient
                  funds to Tekelec to cover the aggregate exercise price payable
                  for the purchased Shares plus all applicable Federal, state
                  and local income and employment taxes required to be withheld
                  by Tekelec by reason of such exercise and/or sale; and

           (ii)   to Tekelec to deliver the certificate(s) for the purchased
                  Shares directly to such brokerage firm in order to complete
                  the sale transaction.

                  Except to the extent the sale and remittance procedure is
                  utilized in connection with the Option exercise, payment of
                  the aggregate exercise price must accompany the Notice of
                  Exercise delivered by the Optionee to Tekelec in connection
                  with the Option exercise.

4.    EXERCISE OF OPTION. This Option shall be exercisable during its term only
      in accordance with the terms and provisions of the Plan and this Option as
      follows:

      (a)   This Option shall vest and be exercisable cumulatively as set forth
            on the first page of the Stock Option Agreement. An Optionee who has
            been in continuous employment with the Company since the grant of
            this Option may exercise the exercisable portion of his or her
            Option in whole or in part at any time during his or her employment;
            provided, however, that an Option may not be exercised for a
            fraction of a Share. In the event of the Optionee's termination of
            employment with the Company or Optionee's disability or death, the
            provisions of Sections 6 or 7 below shall apply to the right of the
            Optionee to exercise the Option.

      (b)   This Option shall be exercisable by written notice (in the form of
            the Notice of Exercise of Stock Option attached hereto, as amended
            from time to time) which shall state the Optionee's election to
            exercise this Option and the number of Shares being purchased and
            set forth such other information as may be required by the Company
            in connection with the exercise of the Option. Such written notice
            shall be signed by the Optionee and shall be delivered in person or
            by facsimile (818.880.0176) or certified mail to the Secretary of
            the Company or such other person as may be designated by the
            Company. The written notice shall specify the method of

<PAGE>

            payment of the aggregate exercise price in accordance with Section 3
            above. The certificate or certificates for the purchased Shares
            shall be registered in the name of the Optionee unless otherwise
            specified by the Optionee in the Notice of Exercise.

      (c)   No rights of a shareholder shall exist with respect to the Shares
            under this Option as a result of the mere grant of this Option or
            the exercise of this Option. Such rights shall exist only after
            issuance of a stock certificate in accordance with Section 7(h) of
            the Plan.

5.    RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance
      of Shares upon Optionee's exercise or the method of payment of
      consideration for such Shares would constitute a violation of any
      applicable Federal or state securities law or other applicable law or
      regulation. As a condition to the exercise of this Option, the Company may
      require the Optionee to make any representation and warranty to the
      Company as may be required by any applicable law or regulation.

6.    TERMINATION OF EMPLOYMENT. If the Optionee ceases to serve as an Employee
      for any reason other than death or permanent and total disability (within
      the meaning of Section 22(e)(3) of the Code) and thereby terminates his or
      her Continuous Employment, the Optionee shall have the right to exercise
      this Option at any time within 90 days after the date of such termination
      to the extent that the Optionee was entitled to exercise this Option at
      the date of such termination. To the extent that the Optionee was not
      entitled to exercise this Option at the date of termination, or to the
      extent this Option is not exercised within the time specified herein, this
      Option shall terminate. Notwithstanding the foregoing, this Option shall
      not be exercisable after the expiration of the term set forth in Section 8
      hereof.

7.    DEATH OR DISABILITY. If the Optionee ceases to serve as an Employee due to
      death or permanent and total disability (within the meaning of Section
      22(e)(3) of the Code), this Option may be exercised at any time within 180
      days after the date of death or termination of employment due to
      disability, in the case of death, by the Optionee's estate or by a person
      who acquired the right to exercise this Option by bequest or inheritance,
      or, in the case of disability, by the Optionee, but in any case only to
      the extent the Optionee was entitled to exercise this Option at the date
      of such termination. To the extent that the Optionee was not entitled to
      exercise this Option at the date of termination, or to the extent this
      Option is not exercised within the time specified herein, this Option
      shall terminate. Notwithstanding the foregoing, this Option shall not be
      exercisable after the expiration of the term set forth in Section 8
      hereof.

8.    TERM OF OPTION. This Option shall expire and terminate for all purposes on
      _______________, and may be exercised during such term only in accordance
      with the Plan and the terms of this Option Agreement; provided, however,
      that to the extent an installment of this Option is not exercised within
      the four-year period following the date on which such installment vests
      and becomes exercisable, this Option shall expire and terminate with
      respect to such installment. Notwithstanding any provision in the Plan
      with respect to the post-employment exercise of an Option, a vested
      installment of an Option may not be exercised after the expiration of its
      term.

9.    WITHHOLDING UPON EXERCISE OF OPTION. The Company reserves the right to
      withhold, in accordance with any applicable laws, from any consideration
      payable to Optionee any taxes required to be withheld by Federal, state or
      local law as a result of the grant or exercise of this Option or the sale
      or other disposition of the Shares issued upon exercise of this Option. If
      the amount of any consideration payable to the Optionee is insufficient to
      pay such taxes or if no consideration is payable to the Optionee, upon the
      request of the Company, the Optionee shall pay to the Company in cash an
      amount sufficient for the Company to satisfy any Federal, state or local
      tax withholding requirements it may incur as a result of the grant or
      exercise of this Option or the sale or other disposition of the Shares
      issued upon the exercise of this Option.

10.   NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
      assigned, hypothecated, gifted, transferred or disposed of in any manner
      either voluntarily or involuntarily by operation of law, other than by
      will or by the laws of descent or distribution or transfer between spouses
      incident to a divorce. Subject to the foregoing and the terms of the Plan,
      the terms of this Option shall be binding upon the executors,
      administrators, heirs, successors and assigns of the Optionee.

<PAGE>

11.   NO RIGHT OF EMPLOYMENT. Neither the Plan nor this Option shall confer upon
      the Optionee any right to continue in the employment of the Company or
      limit in any respect the right of the Company to discharge the Optionee at
      any time, with or without cause and with or without notice.

12.   MISCELLANEOUS.

      (a)   Successors and Assigns. This Option Agreement shall bind and inure
            only to the benefit of the parties to this Option Agreement (the
            "Parties") and their respective successors and assigns.

      (b)   No Third-Party Beneficiaries. Nothing in this Option Agreement is
            intended to confer any rights or remedies on any persons other than
            the Parties and their respective successors or assigns. Nothing in
            this Option Agreement is intended to relieve or discharge the
            obligation or liability of third persons to any Party. No provision
            of this Option Agreement shall give any third person any right of
            subrogation or action over or against any Party.

      (c)   Amendments.

            (i)   The Committee reserves the right to amend the terms and
                  provisions of this Option without the Optionee's consent to
                  comply with any Federal or state securities law.

            (ii)  Except as specifically provided in subsection (i) above, this
                  Option Agreement shall not be changed or modified, in whole or
                  in part, except by supplemental agreement signed by the
                  Parties. Either Party may waive compliance by the other Party
                  with any of the covenants or conditions of this Option
                  Agreement, but no waiver shall be binding unless executed in
                  writing by the Party making the waiver. No waiver or any
                  provision of this Option Agreement shall be deemed, or shall
                  constitute, a waiver of any other provision, whether or not
                  similar, nor shall any waiver constitute a continuing waiver.
                  Any consent under this Option Agreement shall be in writing
                  and shall be effective only to the extent specifically set
                  forth in such writing.

      (d)   Governing Law. To the extent that Federal laws do not otherwise
            control, the Plan and all determinations made or actions taken
            pursuant hereto shall be governed by the laws of the state of
            California, without regard to the conflict of laws rules thereof.

      (e)   Severability. If any provision of this Option Agreement or the
            application of such provision to any person or circumstances is held
            invalid or unenforceable, the remainder of this Option Agreement, or
            the application of such provision to persons or circumstances other
            than those as to which it is held invalid or unenforceable, shall
            not be affected thereby.

                                     * * * *

<PAGE>

TEKELEC    NOTICE OF EXERCISE OF STOCK OPTION

I hereby notify Tekelec that I elect to exercise the options listed below to
purchase the number of shares of Tekelec Common Stock indicated below. In
connection with the exercise of my options and the purchase of such shares, I
have received and carefully reviewed a copy of the Company's Prospectus
containing information about the 2004 Equity Incentive Plan for New Employees
and the shares of Tekelec Common Stock issuable thereunder.

Section I: Personal Data  (Please print legibly)

<TABLE>
<S>                                        <C>
Name: ____________________________         Employee ID #:_________________________________________
Address:__________________________         SSN:  ___  ___  ___  -  ___  ___  -  ___  ___  ___  ___
City, State, Zip:_________________         Phone:  (___________)__________________________________
</TABLE>

Section II:  Statement of Intent to Exercise

Type of Option:         [ ]  Incentive Stock     [ ]  Nonstatutory Stock
(check one)                  Option (ISO)             Option (NSO)

<TABLE>
<CAPTION>
              Option Grant    # Shares                Exercise Price                                      Total Exercise
Option #         Date         Exercise                   per Share                 Taxes (NSO only)            Price
<S>           <C>             <C>             <C>     <C>                   <C>    <C>                    <C>
 _______      __________      __________      X         $__________         +          TBD          =        $__________
 _______      __________      __________      X         $__________         +          TBD          =        $__________
 _______      __________      __________      X         $__________         +          TBD          =        $__________
                                                                          Total amount due to TEKELEC:       $__________
</TABLE>

NSO EXERCISES ONLY: I understand that for NSO exercises I am required to pay
Federal and state income and employment taxes on the gain, as measured, as of
the date of exercise, by the difference between the option exercise price and
the fair market value of the shares purchased. Tax calculations will be provided
by the Stock Plan Administrator.

ISO EXERCISES ONLY: I will promptly notify Tekelec if I sell, transfer, gift or
otherwise dispose of any or all of the shares acquired upon the exercise of an
ISO at any time (a) within one year after the date hereof; or (b) within two
years after the ISO grant date.

Section III:  Method of Exercise  (Please check one)

[ ] Exercise and        [ ]  Same day sale of       [ ]  Same day sale of
    hold                     all shares exercised      _______ shares exercised

Section IV:  Method of Payment  (Please check one)

[ ] Cashless Exercise -                     [ ]  Check made payable to Tekelec
    - proceeds from sale of stock

Section V:  Broker Information

Name of Broker: _________________                Address:  ____________________
Contact Name:   _________________                Fax No.:  ____________________
Account No.:    _________________                Phone No.:____________________

Section VI:  Certificate Registration  (Please check one)

[ ] Issue stock in my name individually and mail stock certificate to the above
address.

[ ]  Issue stock in street name and send directly to my Broker at the above
address.

Employee signature: _______________________  Date: ________________ , 200______

Please return your completed Notice of Exercise to _________________________,
Tekelec Stock Plan Administrator.

Received by __________ on behalf of Tekelec on ___________, 200___. ___________
                                                                      Signature

<PAGE>

                                                                       EXHIBIT B

[TEKELEC LOGO]

                  2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES
                      RESTRICTED STOCK UNIT AWARD AGREEMENT

Tekelec hereby grants to you a Restricted Stock Unit Award under the Tekelec
2004 Equity Incentive Plan for New Employees (the "Plan"), as set forth below.
Capitalized terms defined in the Plan but not in this Agreement shall have the
meanings given to them herein.

NAME:

EMPLOYEE ID #:

DATE OF GRANT:

NUMBER OF
RESTRICTED STOCK UNITS:

NATURE OF
RESTRICTED STOCK UNITS:         Each Restricted Stock Unit represents the right
                                to receive one share ("Share") of Tekelec Common
                                Stock to be issued and delivered at the end of
                                the applicable vesting period, subject to the
                                risk of cancellation as described herein and in
                                the Plan.

VESTING SCHEDULE:               The Restricted Stock Units will vest on [______,
                                200__] or [the ___-year anniversary of the date
                                of grant], as long as you remain an Employee of
                                the Company through such vesting date(s).

FORFEITURE:                     If you cease to serve as an Employee for any
                                reason, any Restricted Stock Units which are not
                                vested as of the date of such termination shall
                                not vest and shall automatically be cancelled
                                and forfeited for no value and without any
                                issuance of Shares.

TAXES:                          Payment of the applicable taxes in connection
                                with the vesting of Restricted Stock Units may
                                be made by check or other permitted means or by
                                having the Company retain Shares otherwise
                                deliverable in connection with the vesting of
                                the Restricted Stock Units (see Restricted Stock
                                Unit Terms and Conditions attached hereto).

This Restricted Stock Unit Award Agreement consists of this page and the
Restricted Stock Unit Terms and Conditions attached hereto. By signing below,
you accept the grant of this Restricted Stock Unit Award and agree that this
Restricted Stock Unit Award is subject in all respects to the terms and
conditions of the Plan located on Tekelec's internal website at Teksource.
Copies of the Plan and a Prospectus containing information concerning the Plan
are available upon request to _______________ at _______________ or
_______________@tekelec.com.

You further acknowledge and agree that (i) you have carefully reviewed this
Restricted Stock Unit Award Agreement (including the Restricted Stock Unit Terms
and Conditions attached hereto) and the Plan and (ii) this Restricted Stock Unit
Award Agreement and the Plan set forth the entire understanding between you and
the Company regarding this Restricted Stock Unit Award and supersede all prior
or contemporaneous oral and written agreements with respect thereto.

TEKELEC

BY: ______________________________                      _______________________
PRINT NAME: ______________________                      DATE
TITLE: ___________________________

          ________________________                      _______________________
          PARTICIPANT                                   DATE

<PAGE>

                       TEKELEC 2004 EQUITY INCENTIVE PLAN
                                FOR NEW EMPLOYEES
               RESTRICTED STOCK UNIT AWARD AGREEMENT - RESTRICTED
                        STOCK UNIT TERMS AND CONDITIONS

The following Restricted Stock Unit Terms and Conditions apply to the Restricted
Stock Unit Award granted by Tekelec to the Participant whose name appears on the
Restricted Stock Unit Award Agreement cover page to which these Restricted Stock
Unit Terms and Conditions are attached.

1.    2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES. This Restricted Stock Unit
      Award is in all respects subject to the terms, definitions and provisions
      of the Tekelec 2004 Equity Incentive Plan for New Employees (the "Plan")
      adopted by the Company and incorporated herein by reference. Capitalized
      terms defined in the Plan but not defined in this Restricted Stock Unit
      Award Agreement shall have the meanings given to them in the Plan.

2.    VESTING OF RESTRICTED STOCK UNITS AWARDS.

      (a)   Upon each vesting date for the Restricted Stock Unit Award
            (each, a "Vesting Date"), one share of Tekelec Common Stock shall be
            issuable for each Restricted Stock Unit that vests on such date,
            subject to the terms and provision of the Plan and this Restricted
            Stock Unit Award Agreement. Following vesting, the Company will
            issue and transfer such Shares to the Participant as soon as
            administratively feasible following satisfaction of any required
            withholding tax obligations as provided in Section 4 below.

      (b)   To the extent the Restricted Stock Units vest and Shares are issued
            and delivered to the Participant, such Shares will be free of the
            terms and conditions of this Restricted Stock Unit Award Agreement.

      (c)   No rights of a shareholder shall exist with respect to the
            Restricted Stock Units as a result of the mere grant of the
            Restricted Stock Units. Such rights shall exist only after issuance
            of the Shares following the applicable Vesting Date.

3.    DELIVERY OF SHARES UPON VESTING OF RESTRICTED STOCK UNITS. Restricted
      Stock Units (if not previously forfeited) will automatically be settled on
      or about the Vesting Date or Vesting Dates set forth on the cover page of
      this Restricted Stock Unit Award Agreement. The Company may make delivery
      of Shares upon vesting of Restricted Stock Units either by (i) delivering
      one or more stock certificates representing such Shares to the
      Participant, registered in the name of the Participant, or (ii) depositing
      such Shares into an account maintained for the Participant and established
      in connection with any Company plan or arrangement providing for
      investment in Common Stock of the Company. All certificates for Shares and
      all Shares shall be subject to such stop transfer orders and other
      restrictions as the Company may deem advisable under the rules,
      regulations and other requirements of the Securities and Exchange
      Commission, any stock exchange or quotation system upon which the Shares
      are then listed or quoted, and any applicable Federal or state securities
      law, and the Company may cause a legend or legends to be put on any such
      certificates to make appropriate reference to such restrictions.

4.    TAXES.

      (a)   RESPONSIBILITY OF THE PARTICIPANT. The Participant is responsible
            for any taxes required to be withheld under Federal, state or local
            law in connection with: (i) the vesting of the Restricted Stock Unit
            Award and the issuance and delivery of Shares to the Participant, or
            (iii) any other event occurring pursuant to this Restricted Stock
            Award Agreement or the Plan (collectively, "Taxes").

      (b)   PAYMENT IN CASH. The Participant may elect to pay to the Company an
            amount sufficient to cover such Taxes by delivering to the Company a
            check or by such other means as the Company may establish or permit.

      (c)   PAYMENT BY WITHHOLDING OF SHARES. The Participant may also elect to
            satisfy his or her obligations for the payment of such Taxes by
            having the Company retain that number of whole Shares which would
            otherwise be deliverable in connection with the Restricted Stock
            Unit Award upon vesting and which have a Fair Market

<PAGE>

            Value sufficient to satisfy the amount of the Taxes required to be
            withheld. "Fair Market Value" for this purpose shall be as
            determined in the Plan as of the last trading day before the
            applicable Vesting Date.

      (d)   COMPANY RIGHTS. Any election pursuant to Section 4(a) or 4(b) above
            shall be made in writing on such form as shall be prescribed by the
            Company for such purpose. The Company also reserves the right to
            withhold Taxes, in accordance with any applicable law, from (i) any
            compensation or other amounts payable to the Participant and/or (ii)
            the Shares otherwise issuable to the Participant.

5.    TERMINATION OF EMPLOYMENT. If the Participant ceases to serve as an
      Employee for any reason and thereby terminates his or her Continuous
      Status as an Employee, the Participant's Restricted Stock Units which are
      not vested as of the date of such termination shall not vest and shall
      automatically be cancelled and forfeited for no value and without any
      issuance of Shares.

6.    NONTRANSFERABILITY OF RESTRICTED STOCK UNITS. This Restricted Stock Unit
      Award may not be sold, pledged, assigned, hypothecated, gifted,
      transferred or disposed of in any manner either voluntarily or
      involuntarily by operation of law, other than transfers between spouses
      incident to a divorce. Subject to the foregoing and the terms of the Plan,
      the terms of this Restricted Stock Unit Award shall be binding upon the
      executors, administrators, heirs, successors and assigns of the
      Participant. The Shares issued upon vesting of the Restricted Stock Unit
      Award will not be subject to restrictions on transfer under this Section
      6.

7.    NO DIVIDEND EQUIVALENTS. The Participant shall not be entitled to receive,
      currently or on a deferred basis, any payments (i.e., "dividend
      equivalents") equivalent to cash, stock or other property paid by the
      Company as dividends on the Company's Common Stock prior to the vesting of
      the Restricted Stock Units.

8.    NO RIGHT OF EMPLOYMENT. Neither the Plan nor this Restricted Stock Unit
      Award shall confer upon the Participant any right to continue in the
      employment of the Company or limit in any respect the right of the Company
      to discharge the Participant at any time, with or without cause and with
      or without notice.

9.    MISCELLANEOUS.

      (a)   SUCCESSORS AND ASSIGNS. This Restricted Stock Unit Award Agreement
            shall bind and inure only to the benefit of the parties to this
            Restricted Stock Unit Award Agreement (the "Parties") and their
            respective permitted successors and assigns.

      (b)   NO THIRD-PARTY BENEFICIARIES. Nothing in this Restricted Stock Unit
            Award Agreement is intended to confer any rights or remedies on any
            persons other than the Parties and their respective permitted
            successors or assigns. Nothing in this Restricted Stock Unit Award
            Agreement is intended to relieve or discharge the obligation or
            liability of third persons to any Party. No provision of this
            Restricted Stock Unit Award Agreement shall give any third person
            any right of subrogation or action over or against any Party.

      (c)   AMENDMENTS.

            (i)   The Committee reserves the right to amend the terms and
                  provisions of this Restricted Stock Unit Award without the
                  Participant's consent to comply with any Federal or state
                  securities law.

            (ii)  Except as specifically provided in subsection (i) above, this
                  Restricted Stock Unit Award Agreement shall not be changed or
                  modified, in whole or in part, except by supplemental
                  agreement signed by the Parties. Either Party may waive
                  compliance by the other Party with any of the covenants or
                  conditions of this Restricted Stock Unit Award Agreement, but
                  no waiver shall be binding unless executed in writing by the
                  Party making the waiver. No waiver or any provision of this
                  Restricted Stock Unit Award Agreement shall be deemed, or
                  shall constitute, a waiver of any other provision, whether or
                  not similar, nor shall any waiver constitute a continuing
                  waiver. Any consent under this Restricted Stock Unit Award
                  Agreement shall be in writing and shall be effective only to
                  the extent specifically set forth in such writing.

<PAGE>

      (d)   GOVERNING LAW. To the extent that Federal laws do not otherwise
            control, the Plan and all determinations made or actions taken
            pursuant hereto shall be governed by the laws of the state of
            California, without regard to the conflict of laws rules thereof.

      (e)   SEVERABILITY. If any provision of this Restricted Stock Unit Award
            Agreement or the application of such provision to any person or
            circumstances is held invalid or unenforceable, the remainder of
            this Restricted Stock Unit Award Agreement, or the application of
            such provision to persons or circumstances other than those as to
            which it is held invalid or unenforceable, shall not be affected
            thereby.

                                     * * * *