Document:

exv10w47

 

Exhibit 10.47

AMENDMENT TO MANAGEMENT STOCKHOLDER’S AGREEMENT

     This Amendment, dated as of ___, 200_, to the Management Stockholder’s Agreement, dated as of
___(the “Agreement”), between ITC Holdings Corp., a Michigan corporation (the “Company”),
and the undersigned (the “Employee”).

WHEREAS, the Company and Employee have entered into the Agreement;

     WHEREAS, the Company and Employee desire to amend the Agreement in accordance with Section 18
thereof.

     NOW, THEREFORE, in consideration of the premises and mutual agreements set forth in the
Agreement and this Amendment, the parties hereby agree as follows:

     1. A new Section 26 is hereby added to the Management Stockholder’s Agreement as follows:

26. 2006 Long-Term Incentive Plan Grants. Notwithstanding
any provision in this Agreement to the contrary, grants made pursuant
to the Company’s 2006 Long-Term Incentive Plan and Common Stock
received pursuant thereto or upon exercise of options granted
thereunder shall not be subject to any of the terms of this Agreement.

     2. The term “Agreement” as used in the Agreement shall be deemed to refer to the Agreement as
amended through the date hereof, including without limitation this Amendment.

     3. This Amendment 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.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, all as
of the day and year first above written.

     ITC HOLDINGS CORP.

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 
	 	 
	Name:
	 	 	 	 
	 

	 	 
	 	 
	Title:
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

(signature)	 	 
	 
	 	 	 	 
	 

(print Employee name)exv10w48

 

Exhibit 10.48

SUMMARY OF STOCK OWNERSHIP GUIDELINES

Effective August 16, 2006

     The Stock Ownership Guidelines are applicable to directors and executive officers of ITC
Holdings Corp. The directors and executive officers must meet the applicable stock ownership
guideline by the later of August 16, 2011 or the fifth anniversary of when the guidelines first
become applicable to the individual. The guidelines require ownership of Company common stock
having a value as follows:

	 	•	 	five times annual salary in the case of the chief executive officer,
	 
	 	•	 	three times annual salary in the case of senior vice presidents,
	 
	 	•	 	two times annual salary in the case of other executive officers, and
	 
	 	•	 	five times the annual cash retainer in the case of directors.

     The following will count toward the ownership goals:

	 	•	 	shares issuable upon exercise of vested in-the-money stock options,
	 
	 	•	 	shares (including restricted shares) owned directly,
	 
	 	•	 	shares owned through 401(k), phantom units, RSUs or stock purchase plans, assuming
plan settles payments in stock, and
	 
	 	•	 	shares previously owned by executives but placed in trust for family members will
count towards the ownership threshold.

     Stock ownership positions will be considered as a factor in promotion or succession decisions
and failure to maintain the applicable minimum ownership threshold may result in payment of a
portion of annual incentives in Company stock or other action by the Compensation Committee. Stock
awards may not be sold after vesting unless the individual is in compliance with the applicable
ownership guideline, subject to hardship exceptions approved by the Chief Executive Officer. Stock
sales generally must be approved by the Chief Executive Officer and the General Counsel.

     The Compensation Committee may modify, amend, waive, suspend or rescind any aspect of the
guidelines at any time.exv4w2

 

EXHIBIT 4.2

TEKELEC

AMENDED AND RESTATED

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, SAR, Restricted Stock Award or Restricted 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
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 Global Market (“Nasdaq”), the fair market value per Share
shall be the closing price on the exchange or on the Nasdaq 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. “Freestanding SAR” means a SAR that is granted independently of any Options, as described
in Section 7.

     o. “Grant Price” means the price established at the time of grant of a SAR pursuant to Section
7, used to determine whether there is any payment due upon exercise of the SAR.

     p. “Incentive Stock Option” shall mean an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.

     q. “Marketplace Rules” shall mean the Marketplace Rules of The Nasdaq Stock Market, as
amended.

     r. “Nonstatutory Stock Option” shall mean an Option which is not an Incentive Stock Option.

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     s. “Option” shall mean a Nonstatutory Stock Option to purchase Common Stock granted to a
Participant pursuant to the Plan.

     t. “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.

     u. “Optioned Stock” shall mean the Common Stock subject to an Option granted pursuant to the
Plan.

     v. “Participant” shall mean any Employee who is granted an Award.

     w. “Permitted Transferee” shall have the meaning set forth in Section 10.

     x. “Plan” shall mean this Tekelec 2004 Equity Incentive Plan for New Employees.

     y. “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.

     z. “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.

     aa. “Restricted Stock Unit Award Agreement” means a written agreement substantially in the
form attached hereto as Exhibit B, 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 the grant of Restricted Stock Units.

     bb. “SAR” means an Award, designated as a SAR, pursuant to the terms of Section 7 of this
Plan.

     cc. “SAR Award Agreement” means a written agreement substantially in the form attached hereto
as Exhibit C, 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 the
grant of a SAR.

     dd. “Securities Act” shall mean the Securities Act of 1933, as amended.

     ee. “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.

     ff. “Tandem SAR” means a SAR that is granted in connection with a related Option pursuant to
Section 7 herein, the exercise of which shall require forfeiture of the right to purchase a

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Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall
similarly be canceled).

3. Shares Reserved.

     The maximum aggregate number of Shares reserved for issuance pursuant to the Plan shall be
8,000,000 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, including without limitation Shares
withheld for the payment of taxes, 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 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., Options, SARs, 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 terms 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 SAR 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

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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
at least 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 SARs 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 SAR or to whom an Award is granted or to whom Shares are
otherwise issued pursuant to the 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 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

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date of grant shall be such future date. Notice of the determination shall be given to
each Participant 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 that the Option is intended to constitute a Nonstatutory Stock Option. The maximum
number of Shares which may be awarded as Options under the Plan during any calendar year to any
Participant 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.

     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 Participant 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. 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. Exercise of Options — In General. Any Option granted hereunder to a Participant
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 Participant 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.

     g. Procedure. An Option shall be deemed to be exercised when written or electronic
notice of such exercise has been given to the Company in accordance with the terms of the Option
Agreement by the person entitled to exercise the Option and full payment for the Shares with

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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 required by the
Committee and (ii) payment by the Participant 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).

     h. 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.

     i. Exercise of Shareholder Rights. Until the Option is properly exercised in
accordance with the terms of this Section 6, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock. No adjustment pursuant to
Section 11 below shall be made for a dividend or other right for which the record date is prior to
the date the Option is exercised.

     j. Termination of Eligibility. If a Participant 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 an Option, with the consent of the Participant, extend the period of time during
which the Participant may exercise his or her 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 an Option shall be exercisable following the date on which a Participant
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 an Option may be exercised, such Option, unless otherwise amended by the Committee, shall
only be exercisable to the extent the Participant was entitled to exercise the Option on the date
he or she ceased his or her Continuous Status as an
Employee; provided, further, that no extension shall be made at any time where
the exercise price per Share of such Option is less than the Fair Market Value of one Share at the
time of such proposed extension, unless it is determined that such extension will not cause the
Participant to incur additional tax and interest charges upon exercise of such Option under Section
409A of the Code.

     k. Death or Disability of Participant. If a Participant’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 Participant, 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

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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 Participant in the case of permanent or total disability, or in the case of death by the
Participant’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 Participant 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 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 an Option, with the consent of the Participant,
extend the period of time during which the Participant may exercise his or her 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 an Option shall be exercisable
following the date on which a Participant 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 an Option may be exercised, such Option, unless
otherwise amended by the Committee, shall only be exercisable to the extent the Participant was
entitled to exercise the Option on the date he or she ceased his or her Continuous Status as an
Employee, and provided further, that no extension shall be made at any time where
the exercise price per Share of such Option is less than the Fair Market Value of one Share at the
time of such proposed extension, unless it is determined that such extension will not cause the
Participant to incur additional tax and interest charges upon exercise of such Option under Section
409A of the Code.

     l. Expiration of Option. Notwithstanding any provision in the Plan, including but not
limited to the provisions set forth in Sections 6(j) and 6(k), an Option may not be exercised,
under any circumstances, after the expiration of its term.

     m. 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 Participant at the principal executive office of the Company or such other place as shall be
mutually agreed upon between the Company and the Participant, 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 Participant. 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

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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.

7. Share Appreciation Rights

     a. Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted
to Participants at any time and from time to time as shall be determined by the Committee. The
Committee may grant Freestanding SARs, Tandem SARs or any combination of Freestanding and Tandem
SARs.

          Subject to the terms and conditions of the Plan, the Committee shall have complete discretion
in determining the number of SARs granted to each Participant and, consistent with the provisions
of the Plan, in determining the terms and conditions pertaining to such SARs.

          The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and
shall be specified in the SAR Award Agreement. The Grant Price shall not be less than 100% of the
Fair Market Value of the Shares on the date of grant.

     b. SAR Award Agreement. Each SAR Award shall be evidenced by a SAR Award Agreement
that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee
shall determine in its sole discretion and which are not inconsistent with this Plan.

     c. Term of SAR. The term of a SAR granted under the Plan shall be determined by the
Committee, in its sole discretion, and except as determined otherwise by the Committee and
specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth anniversary
date of its grant.

     d. Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever
terms and conditions the Committee, in its sole discretion, imposes.

     e. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares
subject to the related Option upon the surrender of the right to exercise the equivalent portion of
the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its
related Option is then exercisable.

          Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of
the underlying ISO; (b) the exercise of the Tandem SAR may not have economic and tax consequences
more favorable than the exercise of the ISO followed by an immediate sale of the underlying Shares,
and the value of the payout with respect to the Tandem SAR may be for no more than 100% of the
excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem
SAR is exercised over the Option Price of the underlying ISO; (c) the Tandem SAR may be exercised
only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the
ISO; (d) the Tandem SAR may be exercised only when the underlying ISO is

9

 

eligible to be exercised;
and (e) the Tandem SAR is transferable only when the underlying ISO is transferable, and under the
same conditions.

     f. Payment of SAR Amount. SARs granted under this Plan shall be payable in Shares,
cash or such other property as may be designated by the Committee. Upon the exercise of a SAR, a
Participant shall be entitled to receive from the Company such number of Shares (or, in the case of
SARs exercisable for cash or other property, cash or property with a value equal to such number of
Shares) determined by multiplying:

	 	(i)	 	The excess of the Fair Market Value of a Share on the date of
exercise over the Grant Price; by
	 
	 	(ii)	 	The number of Shares with respect to which the SAR is
exercised.

          Such product shall then be divided by the Fair Market Value of a Share on the date of
exercise. The resulting number (rounded down to the next whole number) is the number of Shares to
be issued to the Participant upon exercise of a SAR.

     g. Termination of Employment. Each SAR Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the SAR following termination of the
Participant’s employment with or provision of services to the Company, its Affiliates, and/or its
Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the SAR Award Agreement entered into with Participants, need not be
uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based on the
reasons for termination.

     h. Nontransferability of SARs. Except as otherwise provided in a Participant’s SAR
Award Agreement or otherwise determined at any time by the Committee, no SAR granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution. Further, except as otherwise provided in a
Participant’s SAR Award Agreement or otherwise determined at any time by the Committee, all SARs
granted to a Participant under this Plan shall be exercisable during his lifetime only by such
Participant. With respect to those SARs, if any, that are permitted to be transferred to another
individual, references in the Plan to exercise of the SAR by the Participant or payment of any
amount to the Participant shall be deemed to include, as determined by the Committee, the
Participant’s permitted transferee.

     i. Other Restrictions. The Committee shall impose such other conditions and/or
restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may
deem advisable or desirable. These restrictions may include, but shall not be limited to, a
requirement that the Participant hold the Shares received upon exercise of a SAR for a specified
period of time.

10

 

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 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. Notwithstanding anything to the
contrary set forth herein, but subject to Section 14(i) hereof, delivery of Shares pursuant to a
Restricted Stock Award shall be made no later than 2-1/2 months after the close of the Company’s
first taxable year in which such Shares are no longer subject to a risk of forfeiture (within the
meaning of Section 409A of the Code).

     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.

11

 

     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 Restricted Stock Unit Award Agreement evidencing the Restricted
Stock Unit and subject to any 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 Restricted Stock Unit Award Agreement
which shall contain provisions determined by the Committee in its sole discretion 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. Subject to the provisions of the Plan and any Restricted Stock Unit
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, but in such a case subject to the same
vesting restrictions as the Restricted Stock Unit to which such dividend relates has vested, and
such deferral to last no longer than the vesting period to which such Restricted Stock Unit is
subject) 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 Restricted Stock Unit 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. Notwithstanding anything to the contrary set forth herein, but subject to Section 14(i)
hereof, delivery of Shares pursuant to a Restricted Stock Unit shall be made no later

12

 

than 2-1/2 months after the close of the Company’s first taxable year in which such Shares are no longer
subject to a risk of forfeiture (within the meaning of Section 409A of the Code).

     d. Termination of Continuous Status as an Employee. Unless otherwise determined by
the Committee or unless otherwise provided in the Restricted Stock Unit 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 Restricted Stock Unit 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
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 Participant only by the Participant or the Participant’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. 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

13

 

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 Participant and shall give each Participant 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 6(l) 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 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. 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, and except to the extent necessary to avoid the imposition of additional tax and/or
interest under Section 409A of the Code with respect to Awards that are treated as
nonqualified deferred compensation, 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

14

 

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.

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.

15

 

     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 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. 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.

     g. 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.

     h. 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

16

 

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.

     i. 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.

     j. 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
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.

     k. Amendment to Comply with Applicable Law. It is intended that no Award granted
under this Plan shall be subject to any interest or additional tax under Section 409A of the Code.
In the event Code Section 409A is amended after the date hereof, or regulations or other guidance
is promulgated after the date hereof that would make an Award under the Plan subject to the
provisions of Code Section 409A, then the terms and conditions of this Plan shall be interpreted
and applied, to the extent possible, in a manner to avoid the imposition of the provisions of Code
Section 409A.

15. Effective Date and Term of Plan.

     This Plan was originally adopted as of July 21, 2004. The effective date of this Amended and
Restated 2004 Equity Incentive Plan for New Employees is August 4, 2006. This Plan shall continue
in effect until July 20, 2014, unless sooner terminated under Section 12 of the Plan.

17

 

Exhibit A

AMENDED AND RESTATED

2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES

Stock Option Agreement

Tekelec hereby grants to you an Option under the Tekelec Amended and Restated
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
	 
	 	 
	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:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	      Participant	 	 	 	Date	 	 

 

 

TEKELEC AMENDED AND RESTATED

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
(“Tekelec” or the “Company”) to the Participant whose name appears on the Stock Option Agreement to
which these Terms and Conditions are attached.

	1.	 	Amended and Restated 2004 Equity Incentive Plan for New Employees. This Option is in all
respects subject to the terms, definitions and provisions of the Tekelec Amended and Restated
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 Participant.
	 
	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:

	 	(a)	 	in the form of cash from funds deposited in the “OptionsLink” on-line
securities account maintained by the Participant with E*Trade Securities LLC
(“E*Trade”) as an employee of Tekelec; or
	 
	 	(b)	 	through a special sale and remittance procedure commonly referred to as a
“cashless exercise” or “sell to cover” transaction pursuant to which the Participant
(or any other person(s) entitled to exercise the Option) shall concurrently provide
irrevocable written instructions:

	 	(i)	 	to E*Trade (through the Participant’s on-line account) to
effect the immediate sale of a sufficient number of the Shares purchased upon
the exercise of the Option to enable E*Trade 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 any certificate(s) or other evidence of
ownership for the purchased Shares directly to E*Trade in order to complete the
sale transaction.

	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. A Participant 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 Participant’s termination of employment
with the Company or Participant’s disability or death, the provisions of Sections 6 or
7 below shall apply to the right of the Participant to exercise the Option.
	 
	 	(b)	 	This Option shall be exercisable by following such procedures as may from time
to time be prescribed by Tekelec or E*Trade in connection with the OptionsLink on-line
securities account maintained by the Participant with E*Trade as an employee of
Tekelec.

1

 

	 	(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 or electronic
transfer of the shares to the E*Trade account maintained by the Participant as an
employee of Tekelec.

	5.	 	Restrictions on Exercise. This Option may not be exercised if the issuance of Shares upon
Participant’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
Participant 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 Participant 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 Participant 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 Participant was entitled to exercise this Option at the
date of such termination. To the extent that the Participant 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 Participant 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 Participant’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 Participant, but in any case only to the extent the Participant was
entitled to exercise this Option at the date of such termination. To the extent that the
Participant 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 Participant 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 Participant is insufficient to pay
such taxes or if no consideration is payable to the Participant, upon the request of the
Company, the Participant 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 Participant.

2

 

	11.	 	No Right of Employment. Neither the Plan nor this Option 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.
	 
	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 Participant’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.

*   *   *   *

3

 

Exhibit B

AMENDED AND RESTATED

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 Amended and Restated
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	 	 

 

 

TEKELEC AMENDED AND RESTATED

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 (“Tekelec” or the “Company”) 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.	 	Amended and Restated 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
Amended and Restated 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. Notwithstanding anything to the contrary set forth herein, but subject to
Section 3 below, delivery of Shares pursuant to a Restricted Stock Unit Award shall be
made no later than 2-1/2 months after the close of Tekelec’s first taxable year in
which such Shares are no longer subject to a risk of forfeiture (within the meaning of
Section 409A of the Code).
	 
	 	(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, including without limitation any on-line securities
account maintained by the Participant with E*Trade Securities LLC (“E*Trade”) as an employee
of Tekelec. 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 (or other appropriate restrictions and/or notations to be associated with any
accounts in which such Shares are held) to make appropriate reference to such restrictions.

1

 

	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 Unit 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)	 	Cashless Exercise. The Participant may also elect to pay the Company his or
her obligations for the payment of such Taxes through a special sale and remittance
procedure commonly referred to as a “cashless exercise” or “sell to cover” transaction
pursuant to which the Participant (or any other person(s) entitled to receive the
Shares upon vesting) shall concurrently provide irrevocable written instructions:

	 	(i)	 	to E*Trade (through the Participant’s on-line account) to
effect the immediate sale of a sufficient number of the Shares acquired upon
the vesting of the Shares to enable E*Trade to remit, out of the sales proceeds
available upon the settlement date, sufficient funds to Tekelec to cover all
applicable federal, state and local income and employment taxes required to be
withheld by Tekelec by reason of such vesting and/or sale; and
	 
	 	(ii)	 	to Tekelec to deliver any certificate(s) or other evidence of
ownership for such sold Shares directly to E*Trade in order to complete the
sale transaction.

	 	(d)	 	[Payment by Withholding of Shares]. [if applicable] 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 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.
	 
	 	(e)	 	Company Rights. Any election pursuant to Section 4(a) or 4(b) above shall be
made in writing on such form or electronically in such manner (including through a
Participant’s on-line E*Trade account) 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.

2

 

	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.

	 	(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.

*   *   *   *

3

 

Exhibit C

AMENDED AND RESTATED

2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES

SAR Award Agreement

Tekelec hereby grants to you a Share Appreciation Right Award under the Tekelec Amended and Restated 2004 Equity
Incentive Plan for New Employees (the “Plan”), covering the number of share appreciation rights (“SARs”) set forth
below.

	 	 	 
	Name:
	 	 
	 
	 	 
	Employee ID #:
	 	 
	 
	 	 
	Date of Grant:
	 	 
	 
	 	 
	Type of SARs:

	 	[e.g., Freestanding or Tandem]
	 
	 	 
	Number of SARs:
	 	 
	 
	 	 
	SARs Payable in:

	 	[e.g., Shares of Tekelec Common Stock and/or Cash]
	 
	 	 
	Grant Price:

	 	$                                        
	 
	 	 
	Vesting Schedule:

	 	[e.g.,                      SARs on M/D/Y and as to the remaining                      SARs in 12 equal quarterly
installments, with the first such installment vesting on M/D/Y, and one additional installment vesting on the last day
of each calendar quarter thereafter, as long as you remain an employee of the Company or a subsidiary thereof.]
	 
	 	 
	Expiration Date:

	 	[e.g., Each installment of SARs 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 7 and
8 of the SAR Terms and Conditions attached hereto shall apply to your right to exercise the SARs.]

This SAR Award Agreement (this “SAR Award Agreement”) consists of this page and the SAR Terms and Conditions attached
hereto. By signing below, you accept the grant of these SARs and agree that these SARs are 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 SAR Award Agreement (including the SAR
Terms and Conditions attached hereto) and the Plan and (ii) this SAR Award Agreement and the Plan set forth the entire
understanding between you and the Company regarding these SARs and supersede all prior oral and written agreements
with respect thereto.

TEKELEC

	 	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Print Name:	 	 	 	 	 	Date	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	      Participant	 	 	 	Date	 	 

 

 

TEKELEC AMENDED AND RESTATED

2004 EQUITY INCENTIVE PLAN FOR NEW EMPLOYEES

SAR Award Agreement – Terms and Conditions

The following Terms and Conditions apply to the SARs granted by Tekelec (“Tekelec” or the
“Company”) to the Participant whose name appears on the SAR Award Agreement to which these Terms
and Conditions are attached (the “SARs”).

	1.	 	Amended and Restated 2004 Equity Incentive Plan for New Employees. The SARs are in all
respects subject to the terms, definitions and provisions of the Tekelec Amended and Restated
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.	 	Payment of SAR Amount. The SARS shall be payable in shares of the Company’s Common Stock
and, upon exercise of the SARs, in whole or in part, the Participant shall be entitled to
receive from the Company such number of Shares as is determined by multiplying (x) the excess
of the Fair Market Value of a Share on the date of exercise over the Grant Price times (y) the
number of Shares with respect to which the SAR Award is exercised, and dividing such product
by (z) the Fair Market Value of a Share on the date of exercise. The resulting number
(rounded down to the nearest whole number) shall be the number of Shares to be issued to the
Participant upon the exercise of the SARs. The Participant shall not be entitled to receive
any fractional Share or cash for any fractional Share as a result of any such rounding down
upon exercise of the SARs.

	3.	 	Exercise of SARs. The SARs shall be exercisable during their term only in accordance with
the terms and provisions of the Plan and these Terms and Conditions as follows:

	 	(a)	 	Vesting. The SARs shall vest and be exercisable cumulatively as set forth on
the first page of this SAR Award Agreement. Provided the Participant has been in
continuous employment with the Company since the grant of these SARs, the Participant
may exercise the exercisable (i.e., vested) portion of his or her SARs in whole or in
part at any time during his or her employment; provided, however, that
the SARs may not be exercised for a fraction of a Share. In the event of the
Participant’s termination of employment with the Company or the Participant’s
disability or death, the provisions of Sections 7 or 8 below shall apply to the right
of the Participant to exercise the SARs.
	 
	 	(b)	 	Manner of Exercise. The SARs shall be exercisable by following such procedures
as may from time to time be prescribed by Tekelec or E*Trade Securities LLC (“E*Trade”)
in connection with the OptionsLink on-line securities account maintained by the
Participant with E*Trade as an employee of Tekelec.
	 
	 	(c)	 	No Shareholder Rights. No rights of a shareholder shall exist with respect to
the Shares under the SARs as a result of the mere grant of the SARs or the exercise of
the SARs. Such rights shall exist only after issuance of a stock certificate or
electronic transfer of the shares to the E*Trade account maintained by the Participant
in connection with his or her employment with Tekelec.
	 
	 	(d)	 	[Tandem SARs. Any of the SARs which are Tandem SARs may be exercised by the
Participant for all or part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the related Option. A
Tandem SAR may be exercised only with respect to the Shares for which its related
Option is then exercisable.]

	4.	 	Delivery of Shares upon Exercise of SARs. The Company may make delivery of Shares upon
exercise of the SARs 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, including without limitation any on-line
securities account maintained by the Participant with E*Trade in connection with his or her
employment with Tekelec. 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 (or other appropriate restrictions and/or notations to be
associated with any accounts in which such Shares are held) to make appropriate reference to
such restrictions.

5. 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 exercise of the SARs and the issuance and delivery of Shares to the Participant, or
(ii) any other event occurring pursuant to this SAR Award Agreement or the Plan
(collectively, “Taxes”). Any election pursuant to this Section 4 shall be made in
writing on such form or electronically in such manner (including through the
Participant’s on-line E*Trade account) as shall be prescribed by the Company for such
purpose.
	 
	 	(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)	 	Cashless Exercise. The Participant may also elect to pay the Company his or
her obligations for the payment of such Taxes through a special sale and remittance
procedure commonly referred to as a “cashless exercise” or “sell to cover” transaction
pursuant to which the Participant (or any other person(s) entitled to exercise the
SARs) shall concurrently provide irrevocable written instructions:

	 	(i)	 	to E*Trade (through the Participant’s on-line account) to
effect the immediate sale of a sufficient number of the Shares acquired upon
the exercise of the SARs to enable E*Trade to remit, out of the sales proceeds
available upon the settlement date, sufficient funds to Tekelec to cover 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 any certificate(s) or other evidence of
ownership for such sold Shares directly to E*Trade in order to complete the
sale transaction.

	 	(d)	 	[Payment by Withholding of Shares.] [if authorized] Subject to approval by
Tekelec and compliance with any applicable legal conditions or restrictions, 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 exercise of the SARs and which have a Fair Market
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 exercise date.
	 
	 	(e)	 	Company Rights. The Company also reserves the right, and the Participant
authorizes the Company, 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 upon exercise of the SARs.

	6.	 	Restrictions on Exercise. The SARs may not be exercised if the issuance of Shares upon
Participant’s exercise or the method of payment of consideration for such Shares would
constitute a violation of any

2

 

	 	 	applicable Federal or state securities law or other applicable law or regulation. As a
condition to the exercise of the SARs, the Company may require the Participant to make any
representation and warranty to the Company as may be required by any applicable law or
regulation.

	7.	 	Termination of Employment. If the Participant 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 Participant shall have
the right to exercise the SARs at any time within 90 days after the date of such termination
to the extent that the Participant was entitled to exercise the SARs at the date of such
termination. To the extent that the Participant was not entitled to exercise the SARs at the
date of termination, or to the extent the SARs are not exercised within the time specified
herein, the SARs shall terminate. Notwithstanding the foregoing, the SARs shall not be
exercisable after the expiration of the term set forth in Section 9 hereof.

	8.	 	Death or Disability. If the Participant 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), the SARs
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 Participant’s estate or by a person
who acquired the right to exercise the SARs by bequest or inheritance, or, in the case of
disability, by the Participant, but in any case only to the extent the Participant was
entitled to exercise the SARs at the date of such termination. To the extent that the
Participant was not entitled to exercise the SARs at the date of termination, or to the extent
the SARs are not exercised within the time specified herein, the SARs shall terminate.
Notwithstanding the foregoing, the SARs shall not be exercisable after the expiration of the
term set forth in Section9 hereof.

	9.	 	Term of SARs. The SARs shall expire and terminate for all purposes on [ ___,
20___], and may be exercised during such term only in accordance with the Plan and the
terms of the attached SAR Award Agreement; provided, however, that to the
extent an installment of the SARs is not exercised within the ___-year period following
the date on which such installment vests and becomes exercisable, such SARs shall expire and
terminate with respect to such installment. Notwithstanding any provision in the Plan with
respect to the post-employment exercise of the SARs, a vested installment of a SAR may not be
exercised after the expiration of the term of the SARs.

	10.	 	Nontransferability of SARs. No SAR may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution or
transfer between spouses incident to a divorce. Subject to the foregoing and the terms of the
Plan, the terms of this SAR Award Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Participant.

	11.	 	No Right of Employment. Neither the Plan nor the SARs 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.

12. Miscellaneous.

	 	(a)	 	Successors and Assigns. This SAR Award Agreement shall bind and inure only to
the benefit of the parties to the attached SAR Award Agreement (the “Parties”) and
their respective successors and assigns.
	 
	 	(b)	 	No Third-Party Beneficiaries. Nothing in this SAR Award 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 SAR Award Agreement is intended to
relieve or discharge the obligation or liability of third persons to any Party. No
provision of this SAR Award Agreement shall give any third person any right of
subrogation or action over or against any Party.

3

 

	 	(c)	 	Amendments.

	 	(i)	 	The Committee reserves the right to amend the terms and
provisions of the SARs without the Participant’s consent in order to comply
with any Federal or state securities law.
	 
	 	(ii)	 	Except as specifically provided in subsection (i) above, this
SAR 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
SAR 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 SAR 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 SAR Award 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 SAR Award Agreement or the application
of such provision to any person or circumstances is held invalid or unenforceable, the
remainder of this SAR 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.

* * * *

4

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