exv10w5



 







EXHIBIT 10.5




TEKELEC

2005 Executive Officer Bonus Plan



Tekelec (“Tekelec” or the “Company”) believes that a portion of each executive officer’s
annual compensation should be directly related to the Company’s financial performance and such
officer’s achievement of certain objectives. The 2005 Executive Officer Bonus Plan (“2005 Bonus
Plan”) is designed to motivate Tekelec’s executive officers and to reward them for their continuing
contributions to the Company’s business if in 2005 the Company achieves certain financial results
and/or such officers achieve certain individual, business or strategic objectives. The Company
believes that the achievement of these results and objectives is essential for the Company’s
success and for the continued growth in shareholder value.




2005 Bonus Plan:



Each Eligible Officer (as defined below), by virtue of his or her continuing employment with
Tekelec, will be eligible to receive:





	(i)	 	a quarterly bonus (“Quarterly Bonus”) based on the Company’s financial performance as
measured by the degree to which certain business units of the Company assigned to an Eligible
Officer attain pre-set, Board of Directors’ approved, operating income before bonus goals for
each calendar quarter during 2005; and
	 
	(ii)	 	an annual bonus (“Annual Bonus”) based on his/her achievement in 2005 of individual, business
or strategic objectives that the Company’s Chief Executive Officer (or, in the case of the
Chief Executive Officer, the Board of Directors) approves.




The calculation of each Eligible Officer’s Quarterly Bonus will be determined in part on the
business units assigned to such Officer and the weighting assigned to such business unit. For
example, 50% of the Chief Executive Officer’s Quarterly Bonus is based on the Company’s financial
performance on a consolidated basis while 17.5%, 17.5%, 7.5% and 7.5% of his bonus is based on the
financial performance of the Network Signaling Group, Switching Solutions Group, Communications
Software Solutions Group and IEX Contact Center Group, respectfully. For purposes of this 2005
Bonus Plan, there are five business units: Network Signaling Group (“NSG”), Switching Solutions
Group (“SSG”), IEX Contact Center Group (“IEX”), Communications Software Solutions Group (“CSSG”)
and the Company on a Consolidated Basis (“C”).



The Quarterly Bonuses payable to an Eligible Officer under the 2005 Bonus Plan will be calculated
as a percentage of such officer’s annual base salary of record in effect as of the last day of a
calendar quarter. The Annual Bonus payable to an Eligible Officer under the 2005 Bonus Plan will
be calculated as a percentage of such officer’s salary of record in effect as of the last day of
the calendar year, unless there has been a change in such Officer’s bonus participation level
during 2005 in which case such Officer’s Annual Bonus will be calculated using his/her actual 2005
earnings. In determining an Eligible Officer’s salary of record or actual earnings, certain
compensation and payments (e.g., reimbursement for moving expenses, bonus payments received under
the 2004 or 2005 Bonus Plan, stock option compensation, disability benefits, sign-on bonuses,
vacation cash outs, on call pay, and similar payments) shall be excluded. For purposes of
determining the amount of a Quarterly or an Annual Bonus, if an Eligible Officer is on a leave of
absence in excess of 30 days, such Officer’s actual earnings during such quarter or calendar year,
as the case may be, shall be used.




Eligible Officers:



Set forth below are (i) the executive officers who are designated as Eligible Officers for purposes
of the 2005 Bonus Plan and who, as such, shall be eligible to participate in the 2005 Bonus Plan
(all titles are positions with Tekelec unless otherwise specified); (ii) the business units
assigned to each such Eligible Officer; and (iii) the


1









 






percentage weighting assigned to each such business unit for purposes of calculating the bonuses
payable under this Plan:




	 	 	 
	Eligible Officers	 	Business Unit (Business Unit %)
	Chief Executive Officer & President

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Executive Vice President & Chief Operating Officer

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President & Chief Financial Officer

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Corporate Affairs & Gen’l Counsel

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	President & General Manager, NSG

	 	C (50%), NSG (20%), SSG (20%), CSSG (10%)
	President & General Manager, IEX

	 	C (50%), IEX (50%)
	President & General Manager, SSG

	 	C (50%), NSG (20%), SSG (20%), CSSG (10%)
	President & General Manager, CSSG

	 	C (50%), NSG (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Corporate Development

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Global Marketing

	 	C (50%), NSG (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Human Resources

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Operations

	 	C (50%), NSG (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)





The effective date of this 2005 Bonus Plan is January 1, 2005 (the “Effective Date”). Persons
appointed as executive officers of the Company after the Effective Date shall be eligible to
participate in the 2005 Bonus Plan if they are expressly designated as Eligible Officers under the
2005 Bonus Plan pursuant to a subsequent, duly adopted Board of Directors’ resolution. An Eligible
Officer whose title changes after the Effective Date shall be entitled to participate in the 2005
Bonus Plan on the same terms and conditions as applied immediately prior to such title change
unless either (i) the terms and conditions of such Eligible Officer’s participation in the 2005
Bonus Plan are changed pursuant to a duly adopted Board of Directors’ resolution; or (ii) the new
title is listed as an Eligible Officer in the Eligible Officer table set forth above in which case
such Officer shall participate at the bonus participation level corresponding to such new title.



In order to earn and be eligible to receive a Quarterly or an Annual Bonus, an Eligible Officer
must be employed by Tekelec or one of its subsidiaries as an Eligible Officer on the date on which
such bonuses are paid, unless such requirement is waived in writing by the Company’s Chief
Executive Officer in the case of an Eligible Officer other than the Chief Executive Officer, or by
the Board of Directors in the case of the Chief Executive Officer. An Eligible Officer who is on
an approved leave of absence from the Company during 2005 will, for purposes of determining
eligibility under the 2005 Bonus Plan, be treated as being employed by the Company during such
leave of absence.




Quarterly Bonuses:



The Company’s pro forma operating income before bonus (which excludes the effects of
acquisition-related amortization and other merger-related charges) calculated with respect to the
business units assigned to an Eligible Officer (“Operating Income before Bonus”) for each calendar
quarter will be the financial measure for the Quarterly Bonuses. If any business unit assigned to
an Eligible Officer fails to attain a Bonus Factor of 100%, then the Operating Income before Bonus
earned by the other business unit(s) assigned to such Eligible Officer in excess of the Operating
Income before Bonus corresponding to such other unit’s 100% Bonus Factor will be applied to make up
the shortfall (such additional amount so applied shall not exceed 10% of each such other unit’s
Operating Income before Bonus goal corresponding to its 100% Bonus Factor).



The amount of an Eligible Officer’s Quarterly Bonus is calculated as follows: First, the amount of
bonus payable as a Quarterly Bonus to an Eligible Officer with respect to each business unit
assigned to such Eligible Officer will be calculated by multiplying (i) the product of such
Eligible Officer’s annual base salary of record on the last day of a calendar quarter and the
Quarterly Bonus Percentage for such calendar quarter listed opposite such officer’s title in the
Bonus Participation Table below by (ii) the product of applicable Bonus Factor and the applicable
Business Unit Percentage (as determined in accordance with the Business Unit Percentages set forth
above). Stated mathematically, the amount of a Quarterly Bonus payable with respect to a business
unit assigned to an Eligible Officer equals (AxB)(CxD), where A = an Eligible Officer’s annual base
salary of record for a calendar quarter; B = the applicable Quarterly Bonus Percentage for such
Eligible Officer; C = the applicable Bonus Factor and D = the applicable Business Unit Percentage.
Secondly, the total amount payable to an Eligible Officer as a


2









 






Quarterly Bonus will be the sum of the bonus amounts payable to such Eligible Officer with respect
to all the business units assigned to him/her.



The amount of the Company’s quarterly Operating Income before Bonus will determine the applicable
Bonus Factor. Minimum quarterly Operating Income before Bonus
will result in a Bonus Factor of 25%; mid-point Operating Income before Bonus will result in a
Bonus Factor of 50%; and maximum quarterly Operating Income before Bonus will result in a maximum
Bonus Factor of 100%. There will be a linear increase in the percentage amount of the Bonus Factor
between (i) the minimum quarterly Operating Income before Bonus and the mid-point Operating Income
before Bonus; and (ii) the mid-point Operating Income before Bonus and the maximum quarterly
Operating Income before Bonus. Quarterly Operating Income before
Bonus Targets have been supplementally approved by the Board of
Directors.



Except as otherwise provided herein, the Quarterly Bonus will be payable in one lump sum (subject
to applicable withholding taxes and other applicable deductions) within 30 days after the Company’s
quarterly results are publicly announced. An Eligible Officer who is on an approved leave of
absence from the Company on the date on which Quarterly Bonuses are paid by the Company and
thereafter returns to active status as an Eligible Officer upon the end of such leave of absence,
will be paid a Quarterly Bonus to which he/she is otherwise entitled under this 2005 Bonus Plan
within 30 days following his/her return to active status as an Eligible Officer. An Eligible
Officer who is on an approved leave of absence from the Company on the date on which Quarterly
Bonuses are paid by the Company and thereafter fails to return to active status as an Eligible
Officer upon the end of such leave of absence, will forfeit his/her right to any Quarterly Bonus to
which he/she may otherwise be entitled for such quarter.




Annual Bonuses:



The percentage degree (0% to 100%) to which an Eligible Officer achieves his/her objectives for
2005 will be the measure for the Annual Bonus. The determination of the percentage degree to which
an Eligible Officer (other than the Chief Executive Officer) achieves his/her objectives will be
made by the Chief Executive Officer (or in the absence of a Chief Executive Officer, by the
Compensation Committee of the Board of Directors) by February 15, 2006. The determination of the
percentage degree to which the Chief Executive Officer achieves his objectives will be made by the
Board of Directors by February 15, 2006.



The amount of a bonus payable as an Annual Bonus to an Eligible Officer will be calculated by
multiplying (i) the product of such officer’s annual base salary of record (or actual earnings if
such Officer’s bonus participation level changed during 2005) for 2005 and the Annual Bonus
Percentage (prorated if such Officer’s bonus participation level changes during 2005) listed
opposite such officer’s title in the Bonus Participation Table below by (ii) the percentage degree
to which the Chief Executive Officer or the Board of Directors, as the case may be, determines that
such Eligible Officer has achieved his/her objectives for 2005.



Except as otherwise provided herein, the Annual Bonus will be payable in one lump sum (subject to
applicable withholding taxes and other applicable deductions) within 30 days of the Chief Executive
Officer’s or Board of Directors’ determination, as the case may be, of the percentage degree to
which the Eligible Officer has achieved his/her objectives for 2005. An Eligible Officer who is on
an approved leave of absence from the Company on the date on which Annual Bonuses are paid by the
Company and thereafter returns to active status as an Eligible Officer upon the end of such leave
of absence, will be paid an Annual Bonus to which he/she is otherwise entitled under this 2005
Bonus Plan within 30 days following his/her return to active status as an Eligible Officer. An
Eligible Officer who is on an approved leave of absence from the Company on the date on which
Annual Bonuses are paid by the Company and thereafter fails to return to active status as an
Eligible Officer upon the end of such leave of absence, will forfeit his/her right to any Annual
Bonus to which he/she may otherwise be entitled for 2005.




3









 








Bonus Participation Levels:



For purposes of determining an Eligible Officer’s Quarterly or Annual Bonus under the 2005 Bonus
Plan, the Quarterly Bonus Percentages (by calendar quarter) and the Annual Bonus Percentages for
the Eligible Officers shall be as follows:




Bonus Participation Table




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Annual
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Bonus
	Title	 	Quarterly Bonus Percentage	 	Percentage
	 	 	Q1	 	Q2	 	Q3	 	Q4	 	 	 	 
	Chief Executive Officer & President
	 	 	20.0	%	 	 	25.0	%	 	 	25.0	%	 	 	30.0	%	 	 	25	%
	Executive Vice President & Chief Operating Officer
	 	 	14.4	 	 	 	18.0	 	 	 	18.0	 	 	 	21.6	 	 	 	18	 
	Senior Vice President & Chief Financial Officer
	 	 	11.2	 	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	Senior Vice President, Corp. Affairs & General Counsel
	 	 	11.2	 	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, NSG
	 	 	11.2	 	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, IEX
	 	 	9.6	 	 	 	12.0	 	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	President & General Manager, SSG
	 	 	11.2	 	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, CSSG
	 	 	9.6	 	 	 	12.0	 	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	Senior Vice President, Corporate Development
	 	 	8.0	 	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Global Marketing
	 	 	8.0	 	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Human Resources
	 	 	8.0	 	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Operations
	 	 	8.0	 	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 






Discretionary Bonuses:



Discretionary bonuses may also be paid under the 2005 Bonus Plan, but only upon the express
approval of the Board of Directors in its sole discretion.




* * * *




4









 








2005 Executive Officer Bonus Plan

Amendment 1




Eligible Officers



Effective April 1, 2005, the Eligible Officers and their corresponding Business Unit Percentages
are as follows:




	 	 	 
	Eligible Officers	 	Business Unit (Business Unit %)
	Chief Executive Officer & President
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Executive Vice President, Global Sales, Marketing & Cust. Service
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Executive Vice President, Global Business Group Solutions
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President & Chief Financial Officer
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Corp. Affairs & General Counsel
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	President & General Manager, NSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	President & General Manager, IEX
	 	C (50%), IEX (50%)
	President & General Manager, SSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	President & General Manager, CSSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Corporate Development
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Global Marketing
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Human Resources
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Operations
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)






Amended and Restated Bonus Participation Table



Effective as of April 1, 2005, the Quarterly Bonus Percentages and Annual Bonus Percentages are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Annual
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Bonus
	Title	 	Quarterly Bonus Percentage	 	Percentage
	 	 	Q2	 	Q3	 	Q4	 	 	 	 
	Chief Executive Officer & President
	 	 	25.0	%	 	 	25.0	%	 	 	30.0	%	 	 	25	%
	Executive Vice President, Global Sales, Marketing & Cust. Service
	 	 	18.0	 	 	 	18.0	 	 	 	21.6	 	 	 	18	 
	Executive Vice President, Global Business Group Solutions
	 	 	16.0	 	 	 	16.0	 	 	 	19.2	 	 	 	16	 
	Senior Vice President & Chief Financial Officer
	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	Senior Vice President, Corp. Affairs & General Counsel
	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, NSG
	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, IEX
	 	 	12.0	 	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	President & General Manager, SSG
	 	 	14.0	 	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, CSSG
	 	 	12.0	 	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	Senior Vice President, Corporate Development
	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Global Marketing
	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Human Resources
	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Operations
	 	 	10.0	 	 	 	10.0	 	 	 	12.0	 	 	 	10	 






6









 






2005 Executive Officer Bonus Plan

Amendment 2




Eligible Officers



Effective July 1, 2005, the Eligible Officers and their corresponding Business Unit Percentages are
as follows:




	 	 	 
	Eligible Officers	 	Business Unit (Business Unit %)
	Chief Executive Officer & President
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Executive Vice President, Global Sales, Marketing & Cust. Service
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Executive Vice President, Global Business Group Solutions
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President & Chief Financial Officer
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Corp. Affairs & General Counsel
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	President & General Manager, NSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	President & General Manager, IEX
	 	C (50%), IEX (50%)
	President & General Manager, SSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	President & General Manager, CSSG
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Corporate Development
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Global Marketing
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)
	Senior Vice President, Human Resources
	 	C (50%), NSG  (17.5%), SSG (17.5%), CSSG (7.5%), IEX (7.5%)
	Senior Vice President, Operations
	 	C (50%), NSG  (20%), SSG (20%), CSSG (10%)






Amended and Restated Bonus Participation Table



Effective as of July 1, 2005, the Quarterly Bonus Percentages and Annual Bonus Percentages are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Annual
	 	 	 	 	 	 	 	 	 	 	Bonus
	Title	 	Quarterly Bonus Percentage	 	Percentage
	 	 	Q3	 	Q4	 	 	 	 
	Chief Executive Officer & President
	 	 	25.0	%	 	 	30.0	%	 	 	25	%
	Executive Vice President Global Sales, Marketing & Cust. Service
	 	 	18.0	 	 	 	21.6	 	 	 	18	 
	Executive Vice President, Global Business Group Solutions
	 	 	16.0	 	 	 	19.2	 	 	 	16	 
	Senior Vice President & Chief Financial Officer
	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	Senior Vice President, Corp. Affairs & General Counsel
	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, NSG
	 	 	17.5	 	 	 	21.0	 	 	 	N/A	 
	President & General Manager, IEX
	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	President & General Manager, SSG
	 	 	14.0	 	 	 	16.8	 	 	 	14	 
	President & General Manager, CSSG
	 	 	12.0	 	 	 	14.4	 	 	 	12	 
	Chief Strategy & Corporate Development Officer
	 	 	13.0	 	 	 	15.6	 	 	 	13	 
	Senior Vice President, Global Marketing
	 	 	10.0	 	 	 	12.0	 	 	 	10	 
	Senior Vice President, Human Resources
	 	 	12.5	 	 	 	15.0	 	 	 	N/A	 
	Senior Vice President, Operations
	 	 	10.0	 	 	 	12.0	 	 	 	10	 







7