exv10w1



 






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 (sometimes referred to herein as “Tekelec” or “Company”), and FRED LAX
(sometimes referred to herein as “Employee” or “Employee”), and shall become effective when
executed by both parties hereto (the “Effective Date”).



RECITALS




     A. Employee will cease to be an employee and officer of Tekelec at 5:00 p.m., California time,
on January 1, 2006, (the “Termination Date”).



     B. Employee desires to receive severance benefits under Tekelec’s Officer Severance Plan dated
May 14, 1993, as amended to date (the “Severance Plan”), which benefits are stated in the Severance
Plan to be contingent upon, among other things, Employee’s entering into this Agreement and
undertaking the obligations set forth herein.



     C. Tekelec and Employee desire to set forth their respective rights and obligations with
respect to Employee’s separation from Tekelec and to finally and forever settle and resolve all
matters concerning 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 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 January 2, 2006 and ending on the date on which the last installment of the
Severance Allowance is due and payable pursuant to Section 5.1 of this Agreement.



     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.




					
	 	 	 	 	 
	 
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	2.	 	MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS





     Each party hereto represents, warrants and covenants (with respect to itself/himself only) to
the other party hereto that, to its/his respective best knowledge and belief as of the date of each
party’s respective signature below:



     2.1 Full Power and Authority. It/he has full power and authority to execute, enter into
and perform its/his 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/him in accordance with its terms; it/he will not act or omit to act in any way which would
materially interfere with or prohibit the performance of any of its/his 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/he is a party (including, in the case of
Tekelec, its bylaws and articles of incorporation each as amended to date) or to which it/he 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.





	3.	 	CONFIDENTIALITY OBLIGATIONS





     Employee acknowledges that any confidentiality, proprietary rights or nondisclosure
agreement(s) in favor of Tekelec which he may have entered into in connection with his 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 Employee’s obligations thereunder. Without limiting the generality of the foregoing, no time
period set forth in this Agreement shall be construed as shortening or limiting the term of any
such Nondisclosure Agreement, which term shall continue as set forth therein.







					
	 	 	 	 	 
	 
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	4.	 	ANNOUNCEMENT; SERVICE AND PAYMENTS UNTIL TERMINATION





     4.1 Announcement of Resignation; Service through Termination Date. At a time to be
determined by the Board, Employee’s resignation will be announced and an appropriate press
statement





will be issued. Through the Termination Date, Employee shall continue to perform his duties
and responsibilities subject to the direction and control of the Board of Directors, faithfully
comply with the Board of Director’s directions and instructions, strictly adhere to all Tekelec
policies, and cooperate fully with the Board of Directors and the other officers and employees of
Tekelec to ensure a smooth, positive and non-disruptive transition. Employee will voluntarily take
at least five days of accrued vacation at a time of his choosing between the date of this Agreement
and December 31, 2005, but he shall not be obligated to use more than five such accrued vacation
days during the remaining term of his employment.



     4.2 Payments to Employee. Tekelec will pay any and all salary and accrued but unpaid
vacation owed by Tekelec to Employee up to and including the Termination Date. Employee will be
eligible for the 2005 Q4 bonus which shall be calculated and paid in accordance with the terms and
conditions of the Company’s 2005 Executive Officer Bonus Plan (“2005 Bonus Plan”). Tekelec agrees
to waive the requirement that Employee must remain in active status through the bonus payment date.
Employee shall receive 100% of his 2005 MBO bonus, which shall be calculated and paid in accordance
with the Company’s 2005 Bonus Plan.



     4.3 Post-Employment Consulting. In consideration for the Severance Allowance and
Benefits described in Section 5 below, which Employee acknowledges are more than he is entitled to
receive under the terms of the Tekelec Officer Severance Plan, Employee agrees that during the
period from January 2 through June 30, 2006, upon Tekelec’s request he will provide
litigation-related consulting or other work (including work that is subject to the provisions of
Section 11 (Cooperation) below), for up to fifty (50) hours, for which he will not be eligible to
receive any per diem compensation, bonus, employee benefits, stock options or other emolument
except for reimbursement for pre-approved, reasonable expenses, which expenses shall be charged and
paid in accordance with Tekelec expense reimbursement policy.




	5.	 	SEVERANCE ALLOWANCE AND BENEFITS





     In consideration for the release by Employee set forth herein (including the release of any
and all claims Employee has or may have under the Age Discrimination in Employment Act (“ADEA”) and
Older Workers Benefit Protection Act (“OWBPA”)) and Employee’s performance of his obligations under
this Agreement (including but not limited to Employee’s obligations under Section 7 hereof),
Employee is entitled to receive, and Tekelec shall pay to Employee the severance benefits set forth
below:



     5.1 Severance Allowance. Tekelec will pay to Employee a Severance Allowance
calculated in accordance with the following formula: 1.5 times the sum of $525,000 plus Employee’s
actual bonus payments earned and paid for services rendered in 2005 under the 2005 Bonus Plan, as
shown on the Company’s payroll records. The Severance Allowance shall be payable in 12 monthly
installments, less all applicable withholding taxes, as follows: (1) an





					
	 	 	 	 	 
	 
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installment of $300,000
shall be payable on January 15, 2006; (2) an installment of $300,000 shall be payable on February
15, 2006; (3) an installment of $300,000 shall be payable on March 15, 2006; and (4) the remaining
balance due shall be payable in nine (9) equal monthly installments commencing on April 15, 2006
with the final
installment payable on December 15, 2006. All payments shall be made in accordance with the
terms and conditions of the Severance Plan (except as specifically modified by this Section 5.1).



     5.2 Life Insurance Continuation. Tekelec (at its expense) will continue, for a period
of 18 months following the Termination Date and provided that Employee remains insurable (under the
same underwriting criteria and at a premium not exceeding 110% of the premium being paid at such
Termination Date) during such 18 months, such term life insurance in like amount and on the same
terms and conditions as is in effect for such officer immediately prior to his Termination Date.



     5.3 Health Care Insurance Continuation. Tekelec (at its expense) will continue, for a
period of 18 months following the Termination Date, health care coverage for Employee and his
family members who are “qualified beneficiaries” (as such term is defined in the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”)) 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 Employee as of the Termination Date. Thereafter,
Employee (at his expense) may elect coverage under a conversion health plan available under
Tekelec’s group health plan(s) from the Company’s health insurance carrier if and to the extent he
is entitled to do so as a matter of right under federal or state law.



     5.4 Other Benefit Plans. Except as otherwise expressly provided in this Section 5 or
as required by applicable law, Employee shall have no right to continue his participation in any
Tekelec benefit plan following his termination on January 1, 2006.




	6.	 	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 Employee and which are outstanding as of the date hereof. The parties understand and agree that
Employee’s option installments that are scheduled to vest prior to January 1, 2006, shall vest in
accordance with the vesting schedules for such options. The time period through which Employee may
exercise his vested stock options as of the Termination Date shall expire in accordance with the
terms of the stock option plans under which Employee’s options were granted; provided, however,
that Tekelec agrees that the time period through which Employee may to extend the exercise period
to June 30, 2006, with respect to all options described in Exhibit A other than the 146,875 options
granted on January 31, 2003, Except as expressly set forth herein, nothing in this Agreement shall
alter or affect any of such outstanding stock options, warrants or rights or Employee’s rights or
responsibilities with respect thereto, including but not limited to Employee’s rights to exercise
any of his options, warrants or rights following the Termination Date.





					
	 	 	 	 	 
	 
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	7.	 	NON-COMPETITION AND NON-SOLICITATION





     7.1 Subject and in addition to Employee’s existing fiduciary duties as a former officer and
employee of Tekelec to the extent such continues under applicable law after 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 Employee, 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 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 Employee shall be deemed to include that of (i) any family member or (ii) person or
entity controlled by 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;




          (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 his
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 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,





					
	 	 	 	 	 
	 
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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 Employee breaches any of the
provisions or obligations of this Section 7 or if he materially breaches 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
Employee under the Severance Plan and this Agreement.




	8.	 	CONFIDENTIAL INFORMATION AND TRADE SECRETS





     8.1 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, 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, he 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, 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. Employee agrees to safeguard all
Tekelec trade secrets in his possession or known to him at all times so that they are not exposed
to, or taken by, unauthorized persons and to exercise his 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 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
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. 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 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





					
	 	 	 	 	 
	 
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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 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 Employee further acknowledges that as the result of his prior service as an officer and
employee of Tekelec, he 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. Employee
understands that the privilege to hold such information and documents confidential is Tekelec’s,
not his personally, and that he 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 he is
required to do so by law.



     8.3 Employee’s obligations set forth in this Section 8 shall be in addition to, and not
instead of, Employee’s obligations under any written Nondisclosure Agreement.




	9.	 	ENFORCEMENT OF SECTIONS 7 AND 8





     Employee hereby acknowledges and agrees that the services rendered by him to Tekelec in the
course of his prior employment were of a special and unique character, and that breach by him of
any provision of the covenants set forth in Sections 7 and 8 of this Agreement will cause Tekelec
irreparable injury and damages. 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.



     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 Employee agrees that for a period of two years following the Termination Date any
communication, whether oral or written, occurring on or off the premises of Tekelec, made by him or
on his 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.




					
	 	 	 	 	 
	 
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     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) Employee’s counsel or (vi) 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 Employee directing him
to respond to inquiries from such specified persons.




	11.	 	COOPERATION





     Employee agrees that for a period of five years commencing on January 2, 2006, he 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 himself
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 $4,000 for each full or partial day during which Employee makes himself so
available, provided, however, that Employee shall not be entitled to receive the daily fee of
$4,000 with respect to any work covered by this Section 11 and performed during the period January
2, 2006 through June 30, 2006, until Employee has first completed fifty (50) hours of consulting
work in accordance with Section 4.3 above) in any action as reasonably requested by the CEO or the
Board of Directors. Employee further agrees to immediately notify Tekelec’s CEO in writing in the
event that he receives any legal process or other communication purporting to require or request
him to produce testimony, documents, information or things in any manner related to Tekelec, its
directors, officers or employees, and that he 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. Employee further promises that when so directed by the CEO or the
Board of Directors, he will make himself 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 his possession or under his control which in any manner concern
or relate to Tekelec. Employee covenants and agrees that he will immediately notify Tekelec’s CEO
in writing in the event that he breaches any of the provisions of Sections 7, 8, 10 or 11 hereof.




	12.	 	SOLE ENTITLEMENT





     Employee acknowledges and agrees that his sole entitlement to compensation, payments of any
kind, monetary and nonmonetary benefits and perquisites with respect to his prior Tekelec
relationship (as a member of the Board of Directors and an officer and employee) is as set forth in
the Severance Plan, this Agreement, the Company’s bonus plan for officers as in effect from time to
time, stock option and warrant agreements, COBRA, and such other written agreements and securities
between Tekelec and Employee as may exist or as may be set forth on Exhibit B




					
	 	 	 	 	 
	 
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hereto. If there is
any inconsistency or conflict between this Agreement and the Officer Severance Plan, the 2005
Executive Officer Bonus Plan, the 1994 Stock Option Plan, the 2003 Stock Option Plan or any other
stock option agreement for the stock options listed on Exhibit A, the terms of this Agreement shall
control.





	13.	 	RELEASE OF CLAIMS





     13.1 General. Effective as of the Effective Date and as of the Termination Date,
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 (“Claims”) which are existing on or arising prior to the date of this
Agreement and the Termination Date and including any Claims which, directly or indirectly, in whole
or in part, relate or are attributable to, connected with, or incidental to the employment of
Employee by Tekelec, the separation of that employment, and any dealings between the parties
concerning Employee’s employment, excepting only those obligations expressly recited herein or to
be performed hereunder. Nothing contained in this Section 13 shall affect any rights, claims or
causes of action which Employee may have (1) with respect to his 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 Employee’s prior service as a director, an officer, employee and agent of
Tekelec; (4) with respect to his eligibility for severance payments under the Severance Plan or 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 13
with respect to any matter or anyone released by the first sentence of this Section 13 with respect
to any matter not released thereby; or (6) with respect to Tekelec’s performance of this Agreement.
Further, Employee waives specifically any and all rights or claims 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. Employee acknowledges that he is aware that he may
hereafter discover claims or facts different from or in addition to those he now knows or believes
to be true with respect to the matters herein released, and he 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. Employee acknowledges that he 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 he has or may have under said Section, which reads as follows:





					
	 	 	 	 	 
	 
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“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 him must have materially affected his
settlement with the debtor.”



     13.3 Covenant Not to Sue on Matters Released. Employee covenants that he will not
make, assert or maintain against any person or entity that 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. Employee represents and warrants that he has
not assigned or transferred, purported to assign or transfer, and will not assign or transfer, any
matter or claim herein released. Employee represents and warrants that he knows of no other person
or entity which claims an interest in the matters or claims herein released. Employee agrees to,
and shall at all times, indemnify and hold harmless each person and entity that 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





     Employee represents and warrants that he 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.




	15.	 	EMPLOYEE REPRESENTATIONS





     Except as listed by Employee on Exhibit C, from the period beginning on October 24, 2005, to
the Effective Date, Employee represents and warrants that he 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):




					
	 	 	 	 	 
	 
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	 	(a) If to Tekelec:
	 	Tekelec
	 

	 	 	 	5200 Paramount Parkway
	 

	 	 	 	Morrisville, North Carolina 27560
	 

	 	 	 	Attn: Ron Buckly, Esq.
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Lynn K. Thompson, Esq.
	 

	 	 	 	Bryan Cave LLP
	 

	 	 	 	120 Broadway, Suite 300
	 

	 	 	 	Santa Monica, CA 90401
	 
	 	 	 	 
	 

	 	(b) If to Employee:
	 	Fred Lax
	 
	 

	 	 	 	 

	 

	 	 	 	 

	 
	 	 	 	 
	 

	 	with a copy to:
	 	Sheldon H. Lytton
	 

	 	 	 	Kelly Lytton & Vann LLP
	 

	 	 	 	1900 Avenue of the Stars, Suite 1450
	 

	 	 	 	Los Angeles, California 90067-4405






     16.2 Legal Advice and Construction of Agreement. Both Tekelec and Employee have
received (or have voluntarily and knowingly elected not to receive) independent legal and tax
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, Employee has not
relied upon the legal or other advice of the General Counsel of Tekelec.



     16.3 Parties’ Understanding. Tekelec and Employee state that each has carefully read
this Agreement, that it has been fully explained to it/him by its/his attorney (or that it/he has
voluntarily and knowingly elected not to receive such explanation), that it/he fully understands
its final and binding effect, that the only promises made to it/him to sign the Agreement are those
stated herein, and that it/he 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 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




					
	 	 	 	 	 
	 
	 	Page 11








 









 







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.



     16.9 Specific Performance. Each party hereto may obtain specific performance to
enforce its/his rights hereunder and each party acknowledges that failure to fulfill its/his
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 Employee under this Agreement
involving its interpretation or the obligations of a party hereto shall be determined by binding
arbitration in accordance with the commercial arbitration rules of the American Arbitration
Association, in the County of Los Angeles, State of California.



     Arbitration may be conducted by one impartial arbitrator by mutual agreement. In the event
that the parties are unable to agree on a single arbitrator within 30 days of first demand for
arbitration, the arbitration shall proceed before a panel of three arbitrators, one of whom shall
be selected by Tekelec and one of whom shall be selected by Employee, and the third of whom shall
be selected by the two arbitrators selected. All arbitrators are to be selected from a panel
provided by the American Arbitration Association. The arbitrators shall have the authority to
permit discovery, to the extent deemed appropriate by the arbitrators, upon request of a party.
The arbitrators 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. The arbitrators shall have the
authority to grant injunctive relief in a form substantially similar to that which would otherwise
be granted




					
	 	 	 	 	 
	 
	 	Page 12







 









 







by a court of law. The arbitrators 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 Los
Angeles, California or the United States District Court for the Central District of California.



     16.11 California Law and Location. This Agreement was negotiated, executed and
delivered within the State of California, 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 California applicable to the construction and enforcement of
contracts between parties resident in California which are entered into and fully performed in
California. 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 Los Angeles, State of California or in a United States District Court
in the Central District of California 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.



     16.13 Force Majeure. Neither Tekelec nor Employee shall be deemed in default if
its/his 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 Employee may transfer or assign his rights under this
Agreement voluntarily, involuntarily or by operation of law upon or as a result of his death to his
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





					
	 	 	 	 	 
	 
	 	Page 13








 









 







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 Employee or by 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






					
	 	 	 	 	 
	 
	 	Page 14







 









 






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 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 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 “he”, “him”, “his” and “himself” 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





     Employee acknowledges that he was advised in writing to consult with an attorney prior to
executing this Agreement and represents and warrants to Tekelec that he has done so, and further
acknowledges that he has been given a period of 21 days within which to consider the terms and
provisions of this Agreement with his attorney. If Employee has executed and delivered to Tekelec
this Agreement prior to the expiration of such 21-day period, then in doing so, Employee
acknowledges that he has unconditionally and irrevocably waived his right to that unexpired portion
of such 21-day period. In addition, 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 Ronald W. Buckly at the Calabasas offices of Tekelec,
via hand delivery.





	 	 	 	 	 	 	 
	TEKELEC	 	FRED LAX
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ronald W. Buckly
	 	Signature:
	 	/s/ Fred Lax
	 

	 	 
	 	 	 	 
	Name:

	 	Ronald W. Buckly	 	 	 	 
	Title:

	 	Senior Vice President, Corporate Affairs and
General Counsel
	 	Date:  October 26, 2005
	 
	 	 	 	 	 	 
	Date:

	 	October 26, 2005	 	 	 	 







					
	 	 	 	 	 
	 
	 	Page 15








 









 








EXHIBIT A



OUTSTANDING STOCK PURCHASE RIGHTS



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Maximum	 	 	 	 
	 	 	 	 	 	 	Number of	 	 	 	 
	 	 	 	 	 	 	Shares	 	Purchase	 	 
	 	 	 	 	 	 	Currently	 	Price	 	Termination
	Type of Security	 	Date Issued	 	Purchasable (1)	 	Per Share	 	Date (2)
	 
	NSO
	 	 	03/05/04	 	 	 	131,250	 	 	$	18.80	 	 	 	06/30/06	 
	 
	NSO
	 	 	01/31/03	 	 	 	146,875	 	 	 	8.54	 	 	 	04/01/06	 
	 
	NSO
	 	 	01/18/02	 	 	 	93,750	 	 	 	19.21	 	 	 	06/30/06	 
	 
	NSO
	 	 	02/01/01	 	 	 	350,000	 	 	 	27.56	 	 	 	06/30/06	 








 




			
	(1)	 	As of the close of business on December 31, 2005 after giving effect to the options
scheduled to vest on such date.
	 
	(2)	 	The applicable termination date after giving effect to the termination of Mr. Lax’s
employment on January 1, 2006 and the amendment of Mr. Lax’s options in accordance with the
terms of Mr. Lax’s Separation Agreement.







					
	 	 	 	 	 
	 
	 	Page 16







 









 








EXHIBIT B



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




NONE





 









 








EXHIBIT C



EXCEPTIONS (Pursuant to §15)


NONE