S-8

As filed with the Securities and Exchange Commission on July 1, 2004

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

TEKELEC

(Exact name of registrant as specified in its charter)

California	95-2746131
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
26580 West Agoura Road
Calabasas, California	91302
(Address of Principal Executive Offices)	(Zip Code)

Taqua, Inc. 2002 Stock Incentive Plan
Taqua Systems, Inc. 1998 Stock Option Plan
Tekelec Nonstatutory Stock Option Agreements
(Full titles of the plans)

RONALD W. BUCKLY, ESQ.
Senior Vice President, Corporate Affairs and General Counsel
Tekelec
26580 West Agoura Road
Calabasas, California 91302
(818) 880-5656
(Name, address and telephone number of agent for service)

Copy to:

KATHERINE F. ASHTON, ESQ.
Bryan Cave LLP
120 Broadway, Suite 300
Santa Monica, California 90401

TABLE OF CONTENTS

PART I: INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
	Item 3. Incorporation of Documents by Reference
	Item 4. Description of Securities
	Item 5. Interests of Named Experts and Counsel
	Item 6. Indemnification of Directors and Officers
	Item 7. Exemption from Registration Claimed
	Item 8. Exhibits
	Item 9. Undertakings
SIGNATURES
INDEX TO EXHIBITS
Taqua, Inc. 2002 Stock Incentive Plan
Taqua Systems, Inc. 1998 Stock Option Plan
Form of Nonstatutory Stock Option Agreement
Opinion of Bryan Cave LLP
Consent of PricewaterhouseCoopers LLP
Consent of PricewaterhouseCoopers LLP

CALCULATION OF REGISTRATION FEE

							Proposed
Title of	Amount			Proposed			Maximum
Securities	of Shares			Maximum			Aggregate			Amount of
to be	to be			Offering Price			Offering			Registration
Registered	Registered(1)			per Share			Price			Fee
Common Stock, without par value		488,874	(1)(2)	$	3.11	(4)	$	1,520,398.14	(4)	$	192.64
Common Stock, without par value		2,582	(1)(3)	$	85.60-$2,739.21	(4)(5)	$	3,108,186.07	(4)	$	393.81
Common Stock, without par value		515,000	(1)(4)(6)	$	18.08	(4)	$	9,311,200.00	(4)	$	1,179.73
							Total:			$	1,766.18

(1) This Registration Statement also covers such additional shares of Common Stock of the Registrant as may be issuable pursuant to anti-dilution provisions of these options. Pursuant to Rule 416(a) of the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement shall also cover any additional shares of the Registrant’s Common Stock that become issuable under the options covered hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that increases the number of the Registrant’s outstanding shares of Common Stock.

(2) Represents shares issuable upon exercise of options under the Taqua, Inc. 2002 Stock Incentive Plan granted to employees of Taqua, Inc., a Delaware corporation and wholly owned subsidiary of the Registrant (“Taqua”), who are now employees of the Registrant.

(3) Represents shares issuable upon exercise of options under the Taqua Systems, Inc. 1998 Stock Option Plan granted to employees of Taqua who are now employees of the Registrant.

(4) Estimated solely for purposes of calculating the registration fee. Pursuant to Rule 457(h) under the Securities Act, the Proposed Maximum Offering Price per Share and the Proposed Maximum Aggregate Offering Price are computed on the basis of the price at which the options may be exercised.

(5) These options include options to purchase 234 shares at an exercise price of $85.60 per share; 97 shares at $89.02 per share, 742 shares at $116.42 per share; 460 shares at $260.23 per share; and 1,049 shares at $2,739.21 per share

(6) Represents shares issuable upon exercise of options granted in connection with the Company’s acquisition of Taqua to certain employees of Taqua who are now employees of the Registrant.

(i)

PART I: INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

     The documents containing the information specified in Items 1 and 2 of Part I of Form S-8 will be sent or given to the holders of options as specified in Rule 428(b)(1) under the Securities Act. In accordance with the instructions to Part I, those documents are not filed with the Commission as part of this registration statement or a prospectus under Rule 424 of the Securities Act.

PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

     The following documents and information previously filed with the Securities and Exchange Commission are hereby incorporated by reference:

     Item 3(a)

The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

     Item 3(b)

The Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

The Registrant’s Current Report on Form 8-K filed with the Commission on February 25, 2004.

The Registrant’s Current Reports on Form 8-K filed with the Commission on February 25, 2004, March 4, 2004 and April 22, 2004 and its Current Reports on Form 8-K/A filed with the Commission on June 22, 2004.

     Item 3(c)

Item 1 of the Registrant’s Registration Statement on Form 8-A (Registration No. 0-15135) filed with the Commission on November 12, 1986, pursuant to Section 12 of the Securities Exchange Act of 1934.

     All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of filing such documents.

Item 4. Description of Securities.

     Not Applicable.

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Item 5. Interests of Named Experts and Counsel.

     Not Applicable.

Item 6. Indemnification of Directors and Officers.

     Section 317 of the California Corporations Code provides that a corporation may indemnify corporate “agents” (including directors, officers and employees of the corporation) against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with defending non-derivative actions if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful, and against expenses actually and reasonably incurred in connection with defending derivative actions if such person acted in good faith and in a manner such person believed to be in the best interests of the corporation and its shareholders. Indemnification is obligatory to the extent that an agent of a corporation has been successful on the merits in defense of any such proceeding against such agent, but otherwise may be made only upon a determination in each instance either by a majority vote of a quorum of the Board of Directors (other than directors involved in such proceeding), by independent legal counsel if such a quorum of directors is not obtainable, by the shareholders (other than shareholders to be indemnified), or by the court, that indemnification is proper because the agent has met the applicable statutory standards of conduct. Corporations may also advance expenses incurred in defending proceedings against corporate agents, upon receipt of an undertaking that the agent will reimburse the corporation unless it is ultimately determined that the agent is entitled to be indemnified against expenses reasonably incurred.

     The indemnification provided by Section 317 of the California Corporations Code is not deemed to be exclusive of any other rights to which agents of the Registrant seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent such additional rights are authorized in the articles of the corporation. Article V of the Registrant’s Restated Articles of Incorporation authorizes the Registrant to provide for indemnification of its agents for breach of duty to the Registrant and its shareholders, through bylaw provisions or through agreements with such agents, or both, in excess of the indemnification otherwise permitted by Section 317, subject to the limits on such excess indemnification set forth in Section 204 of the California General Corporation Law.

     Article VI of the Registrant’s bylaws provides for the indemnification of all past and current directors to the maximum extent and in the manner permitted by Section 317. Additionally, the Registrant has entered into Indemnification Agreements with its directors under which the Registrant has undertaken to indemnify each such agent to the fullest extent permitted by its Articles of Incorporation, bylaws and applicable law against all expenses, liability and loss (which are not paid by insurance or otherwise by the Registrant) reasonably incurred or suffered by such agent in connection with the defense of any action or proceeding to which the agent was or is a party or is threatened to be made a party by reason of conduct in his capacity as an officer or director, or in which the agent is or may be involved by reason of the fact that he is or was serving as an officer or

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director of the Registrant, not including actions brought for violation of Section 16 of the Securities Exchange Act of 1934, as amended, or for failure to qualify for an exemption under Section 4 of the Securities Act of 1933, as amended.

     The Registrant also maintains on behalf of its directors and officers insurance protection against certain liabilities arising out of the discharge of their duties.

Item 7. Exemption from Registration Claimed.

     Not applicable.

Item 8. Exhibits.

Exhibit
Number
4.1	Taqua, Inc. 2002 Stock Incentive Plan.
4.2	Taqua Systems, Inc. 1998 Stock Option Plan.
4.3	Form of Nonstatutory Stock Option Agreement dated as of April 8, 2004, together with schedule of optionees.
5.1	Opinion of Bryan Cave LLP.
23.1	Consent of PricewaterhouseCoopers LLP.
23.2	Consent of PricewaterhouseCoopers LLP.
23.3	Consent of Bryan Cave LLP (included in Exhibit 5.1).
24.1	Power of Attorney (see page 5 of this Registration Statement).

Item 9. Undertakings.

     (a) The undersigned Registrant hereby undertakes:

               (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

                    (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

                    (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;

                    (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

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               Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

               (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

               (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

     (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Calabasas, State of California, on July 1, 2004.

TEKELEC
By:	/s/ Frederick M. Lax
	Frederick M. Lax,
	Chief Executive Officer and President

POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Frederick M. Lax and Ronald W. Buckly, or either of them, his attorneys-in-fact and agents, each with full power of substitution for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including, without limitation, post-effective amendments and documents in connection therewith) to this Registration Statement, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do so and perform each and every act and thing requisite and necessary to be done in connection with this Registration Statement, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that either of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Frederick M. Lax Frederick M. Lax	Director, Chief Executive Officer and President (Principal Executive Officer)	July 1, 2004
/s/ Paul J. Pucino Paul J. Pucino	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	July 1, 2004
/s/ Jean-Claude Asscher Jean-Claude Asscher	Chairman of the Board	July 1, 2004
/s/ Robert V. Adams Robert V. Adams	Director	July 1, 2004
/s/ Daniel L. Brenner Daniel L. Brenner	Director	July 1, 2004
/s/ Martin A. Kaplan Martin A. Kaplan	Director	July 1, 2004
/s/ Jon F. Rager Jon F. Rager	Director	July 1, 2004

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INDEX TO EXHIBITS

Exhibit
Number	Exhibit
4.1	Taqua, Inc. 2002 Stock Incentive Plan.
4.2	Taqua Systems, Inc. 1998 Stock Option Plan.
4.3	Form of Nonstatutory Stock Option Agreement dated as of April 8, 2004, together with schedule of optionees.
5.1	Opinion of Bryan Cave LLP.
23.1	Consent of PricewaterhouseCoopers LLP.
23.2	Consent of PricewaterhouseCoopers LLP.

EX-4.1

EXHIBIT 4.1

TAQUA, INC.

2002 STOCK INCENTIVE PLAN

1. DEFINITIONS.

     Unless otherwise specified or unless the context otherwise requires, the terms set forth on Exhibit A — Definitions, shall have the meanings used therein.

2. PURPOSES OF THE PLAN.

     The Plan is intended to encourage ownership of Shares by Key Employees and by directors of and consultants to the Company, its Affiliates and Strategic Partners in order to attract such people, to induce them to work for the benefit of the Company and its Affiliates and to provide incentive for them to promote the success of the Company and its Affiliates. The Plan provides for the granting of ISOs, Non-Qualified Options and Stock Grants.

3. SHARES SUBJECT TO THE PLAN.

     (a) The initial maximum number of Shares which shall be reserved and available for Stock Rights pursuant to this Plan shall be 9,189,319, subject to adjustment in accordance with Paragraph 16 hereof. Shares issued under the Plan may be authorized but unissued shares of Common Stock or shares of Common Stock held in treasury.

     (b) To the extent that any Option shall lapse, terminate, expire or otherwise be cancelled without the issuance of Shares, or if the Company shall reacquire any Shares issued pursuant to a Stock Grant, the Shares shall be available for the granting of other Stock Rights under the Plan.

     (c) Shares issuable under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Administrator.

4. ADMINISTRATION OF THE PLAN.

     (a) At the discretion of the Company’s Board of Directors, the Administrator of the Plan shall be either (i) by the full Board of Directors of the Company or (ii) by a committee (the “Committee”) consisting of two or more members of the Company’s Board of Directors. In the event the full Board of Directors is the Administrator of the Plan, references herein to the Committee shall be deemed to mean the full Board of Directors. The Board of Directors may from time to time appoint a member or members of the Committee in substitution for or in addition to the member or members then in office and may fill vacancies on the Committee however caused. The Committee may choose one of its members as Chairman and shall hold meetings at such times and places as it shall deem advisable. A majority of the members of the Committee shall constitute a quorum and any action may be taken by a majority of those present and voting at any meeting.

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     (b) Any action may also be taken without the necessity of a meeting by a written instrument signed by a majority of the Committee. The decision of the Committee as to all questions of interpretation and application of the Plan shall be final, binding and conclusive on all persons. The Committee shall have the authority to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option Agreement or Stock Grant Agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and shall be the sole and final judge of such expediency. No Committee member shall be liable for any action or determination made in good faith.

     (c) Subject to the terms of the Plan, the Administrator is authorized to:

i.	Interpret the provisions of the Plan or of any Option or Stock Grant and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan;
ii.	Determine which persons shall be considered eligible Participants in the Plan and which of such eligible persons shall be granted Stock Rights;
iii.	Determine the number of Shares for which Stock Rights shall be granted; and
iv.	Specify the terms and conditions upon which Stock Rights may be granted, including, but not limited to, the time or times when Stock Rights may be granted, shall become exercisable and the duration of the exercise period, and the price of Shares subject to each Stock Right.

Notwithstanding the foregoing, all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs. Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee.

5. ELIGIBILITY FOR PARTICIPATION.

     The Administrator will, in its sole discretion, name the Participants in the Plan, provided, however, that each Participant must be a Key Employee, director or consultant of the Company, an Affiliate, or of a Strategic Partner at the time a Stock Right is granted. Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an employee, director or consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the delivery of the Agreement evidencing such Stock Right. ISOs may be granted only to Key Employees. Non-Qualified Options and Stock Grants may be granted to any Key Employee, director or consultant of the Company, an Affiliate or Strategic Partner or any other eligible Participant. The granting of any Stock Right to any

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individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights.

     In determining the eligibility of an individual to be granted an Option or Stock Grant, as well as in determining the number of Shares to be optioned or granted to any individual, the Administrator shall take into account the position and responsibilities of the individual being considered, the nature and value to the Company or an Affiliate of his or her service and accomplishments, his or her present and potential contribution to the success of the Company or an Affiliate, and such other factors as the Committee may deem relevant.

     No Option designated as an IS0 shall be granted to any Key Employee of the Company or an Affiliate if such Key Employee owns, immediately prior to the grant of an Option, stock representing more than 10% of the combined voting power of all classes of stock of the Company or an Affiliate, unless the purchase price for the stock under such Option shall be at least 110% of its Fair Market Value at the time such Option is granted and the Option, by its terms, shall not be exercisable more than five years from the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code shall be controlling.

     Subject to the provisions hereof relating to adjustments upon changes in the shares of Common Stock, no employee shall be eligible to be granted Options covering more than 50,000 shares of Common Stock during any calendar year, except that this restriction shall not apply at any time prior to the date on which the Company lists any shares of its securities on any securities exchange. The restriction contained in this paragraph shall also not apply until the earliest of: (1) the first material modification of the Plan (including any increase in the number of shares of Common Stock reserved for issuance hereunder); (2) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (3) the expiration of the Plan; (4) the first meeting of stockholders at which Directors are to be elected that occurs after the close of the third (3^rd) calendar year following the calendar year in which occurred the first registration of an equity security by the Company under Section 12 of the Securities Act of 1934, as amended; or (5) such other date required by Section 162(m) of the Code.

6. TERMS AND CONDITIONS OF OPTIONS.

     Each Option shall be set forth in writing in an Option Agreement, duly executed on behalf of the Company and by the Participant to whom such Option is granted. The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto.

A. Non-Qualified Options: Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option:

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a.	Option Price: Each Option Agreement shall state the option price (per Share) of the Shares covered by each Option, which option price shall be determined by the Administrator but shall not be less than the par value per share of Common Stock.
b.	Each Option Agreement shall state the number of Shares to which it pertains;
c.	Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain conditions or the attainment of stated goals or events; and
d.	Exercise of any Option may be conditioned upon the Participant’s execution of certain agreements in form satisfactory to the Administrator providing for certain protections for the Company and its shareholders including, without limitation, requirements that:

i.	The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and
ii.	The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions.

B. ISOs: Each Option intended to be an IS0 shall be issued only to a Key Employee of the Company (and not any other person including a Key Employee of a Strategic Partner) and shall be subject to the following terms and conditions and to such additional restrictions or changes as the Administrator determines are appropriate but that are not in conflict with Section 422 of the Code:

a.	Minimum standards: The IS0 shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(A) above, except clause (a) thereunder.
b.	Option Price: Immediately before the Option is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code:

i. Ten percent (10%) or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each Option shall not be less than one hundred percent (100%) of the Fair Market Value per share of the Shares on the date of the grant of the Option as

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	determined by Administrator in accordance with Section 422 of the Code.
ii.	More than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each Option shall not be less than one hundred ten percent (110%) of the said Fair Market Value on the date of grant.

c. Term of Option: For Participants who own:

i.	Ten percent (10%) or less of the total combined voting power of all classes of stock of the Company or an Affiliate, each Option shall terminate not more than ten (10) years from the date of the grant or at such earlier time as the Option Agreement may provide.
ii.	More than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate, each Option shall terminate not more than five (5) years from the date of the grant or at such earlier time as the Option Agreement may provide.

d. Limitation on Yearly Exercise: The Option Agreements shall restrict the amount of Options which may be exercisable in any calendar year (under this or any other IS0 plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined at the time each IS0 is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed one hundred thousand dollars ($100,000), provided that this subparagraph (d) shall have no force or effect if its inclusion in the Plan is not necessary for Options issued as ISOs to qualify as ISOs pursuant to Section 422(d) of the Code.

7. TERMS AND CONDITIONS OF STOCK GRANTS.

     Each offer of a Stock Grant to a Participant shall state the date prior to which the Stock Grant must be accepted by the Participant, and the principal terms of each Stock Grant shall be set forth in a Stock Grant Agreement, duly executed by the Company and the Participant. The Stock Grant Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:

(a) Each Stock Grant Agreement shall state the purchase price (per share), if any, of the Shares covered by each Stock Grant, which purchase price shall be determined by the Administrator but shall not be less than the par value on the date of the grant of the Stock Grant;

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(b)	Each Stock Grant Agreement shall state the number of Shares to which the Stock Grant pertains; and
(c)	Each Stock Grant Agreement shall include the terms of any right of the Company to reacquire the Shares subject to the Stock Grant, including the time and events upon which such rights shall accrue and the purchase price therefor, if any.

8. EXERCISE OF OPTIONS AND ISSUE OF SHARES.

     To the extent that the right to purchase Shares under an Option has accrued and is in effect, an Option (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal executive office, together with payment of the full purchase price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.

     Each Option granted under the Plan shall, subject to the other provisions of this Plan, be exercisable at such time or times and during such period as shall be set forth in the Option Agreement.

     To the extent that an Option to purchase shares is not exercised by a Participant when it becomes initially exercisable, it shall not expire but shall be carried forward and shall be exercisable, on a cumulative basis, until the expiration of the exercise period. No partial exercise may be made for less than one hundred (100) full shares of Common Stock.

     Payment of the purchase price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, and so long as there is no adverse tax or accounting impact to the Company, through delivery of shares of Common Stock owned by the Participant for at least six (6) months and having a Fair Market Value equal as of the date of the exercise to the cash exercise price of the Option, or (c) at the discretion of the Administrator, by delivery of the grantee’s personal recourse note bearing interest at such rate as the Administrator deems to be prudent and in accordance with applicable tax and accounting practice, or (d) at the discretion of the Administrator, by any combination of the above. Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an IS0 as is permitted by Section 422 of the Code.

     When an Option is exercised, the Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s

     Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires or makes it desirable for the Company to take any

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action with respect to the Shares prior to their issuance. The Shares shall, upon delivery, be evidenced by an appropriate certificate or certificates for fully paid, non-assessable Shares.

     The Administrator shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Administrator shall not accelerate the exercise date of any installment of any Option granted as an IS0 (and not previously converted into a Non-Qualified Option pursuant to Paragraph 26) if such acceleration would violate any vesting limitation contained in Section 422(d) of the Code.

     The Administrator may, in its discretion, amend any term or condition of an outstanding Option provided (i) such amendment is permitted by the Plan, (ii) any such amendment shall be made only with the consent of the Participant to whom the Option was granted, or in the event of the death of the Participant, the Participant’s Survivors, if the amendment is adverse to the Participant, and (iii) any such amendment of any IS0 shall be made only after the Administrator, after consulting the counsel for the Company, determines whether such amendment would constitute a “modification” of any Option which is an IS0 (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holder of such ISO.

9. ACCEPTANCE OF STOCK GRANT AND ISSUE OF SHARES.

     A Stock Grant (or any part or installment thereof) shall be accepted by executing the Stock Grant Agreement and delivering it to the Company at its principal office, together with payment of the full purchase price, if any, in accordance with this Paragraph for the Shares as to which such Stock Grant is being accepted, and upon compliance with any other conditions set forth in the Stock Grant Agreement. Payment of the purchase price for the Shares as to which such Stock Grant is being accepted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator and only so long as there is no adverse tax or accounting impact to the Company, through delivery of shares of Common Stock owned by the Participant for at least six (6) months and having a fair market value equal as of the date of acceptance of the Stock Grant to the purchase price of the Stock Grant determined in good faith by the Administrator, or (c) at the discretion of the Administrator, by delivery of the grantee’s personal recourse note bearing interest at such rate as the Administrator deems to be prudent and in accordance with applicable tax and accounting practices, or (d) at the discretion of the Administrator, by any combination of (a), (b) and (c) above.

     The Company shall then reasonably promptly (as determined in paragraph 8 above) deliver the Shares as to which such Stock Grant was accepted to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the Stock Grant Agreement.

     The Administrator may, in its discretion, amend any term or condition of an outstanding Stock Grant or Stock Grant Agreement provided (i) such amendment is permitted by the Plan, and (ii) any such amendment shall be made only with the consent of the Participant to whom the Stock Grant was made, if the amendment is adverse to the Participant.

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10. RIGHTS AS A SHAREHOLDER.

     No Participant to whom a Stock Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Stock Right, except after: (a) due exercise of the Option or acceptance of the Stock Grant in compliance with the terms of the Stock Right and tender of the full purchase price, if any, for the Shares being purchased pursuant to such exercise or acceptance; and (b) registration of the Shares in the Company’s share register in the name of the Participant.

11. ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.

     By its terms, a Stock Right granted to a Participant shall not be assignable or transferable by the Participant other than (i) by will or by the laws of descent and distribution, except that an optionee may transfer Stock Rights that are not ISOs granted under the Plan to the Participant’s spouse or children or to a trust or partnership for the benefit of the Participant or Participant’s spouse or children, or (ii) as otherwise determined by the Administrator and set forth in the applicable Option Agreement or Stock Grant Agreement. The designation of a beneficiary of a Stock Right by a Participant shall not be deemed a transfer prohibited by this Paragraph. Except as provided above, a Stock Right shall only be exercisable or may only be accepted, during the Participant’s lifetime, by such Participant (or by his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any Stock Right granted under the Plan shall be null and void and without effect upon the bankruptcy of the Participant to whom the Stock Right is granted, or upon any attempted transfer, assignment, pledge, hypothecation or other disposition except as herein provided, including without limitation any disposition, attachment, divorce, trustee process or similar process, whether legal or equitable upon such Stock Right.

12. EFFECT ON OPTIONS OF TERMINATION OF SERVICE.

     A. Termination Other Than “For Cause”, Death or Disability. Except as otherwise provided in the pertinent Option Agreement, in the event of a termination of service (whether as an employee, director or consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply:

a.

A Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate (for any reason other than termination “for cause”, Disability, or death for which events there are special rules in Subparagraphs B, C and D, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in the pertinent Option Agreement.

b.

Except as provided in elsewhere in this Paragraph, in no event may an Option Agreement provide, if an Option is intended to be an ISO, that the time for

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	exercise be later than three (3) months after the Participant’s termination of employment.
c.	The provisions of this Paragraph, and not the provisions of subparagraph C or D, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy, provided, however, in the case of a Participant’s Disability or death within three (3) months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one (1) year after the date of the Participant’s termination of employment, but in no event after the date of expiration of the term of the Option.
d.	Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of employment, termination of director status or termination of consultancy, but prior to the exercise of an Option, the Board of Directors determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute “cause”, then such Participant shall forthwith cease to have any right to exercise any Option.
e.	A Participant to whom an Option has been granted under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.
f.	Except as required by law or as set forth in the pertinent Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate.

     B. Termination For Cause. Except as otherwise provided in the pertinent Option Agreement, the following rules apply if the Participant’s service (whether as an employee, director or consultant) with the Company or an Affiliate is terminated “for cause” prior to the time that all his or her outstanding Options have been exercised:

a.	All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated “for cause” will immediately be forfeited.
b.	For purposes of this Plan, “cause” shall include (and is not limited to) dishonesty with respect to the Company or any Affiliate, breach of fiduciary duty, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, material failure or refusal to comply with

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	Company’s published policies generally applicable to all employees, and conduct materially harmful to the business of the Company or any Affiliate. The determination of the Administrator as to the existence of “cause” will be conclusive on the Participant and the Company.
c.	“Cause” is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of “cause” occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute “cause”, then the right to exercise any Option is forfeited.
d.	Any definition in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination, shall supersede the definition in this Plan with respect to such Participant.

     C. Termination for Disability. Except as otherwise provided in the pertinent Option Agreement, a Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant:

a.	To the extent exercisable but not exercised on the date of Disability; and
b.	In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion of any additional rights as would have accrued had the Participant not become Disabled prior to the end of the accrual period which next ends following the date of Disability. The proration shall be based upon the number of days of such accrual period prior to the date of Disability.

     A Disabled Participant may exercise such rights only within the period ending one (1) year after the date of the Participant’s termination of employment, directorship or consultancy, as the case may be, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not become Disabled and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

     D. Termination Due to Death. Except as otherwise provided in the pertinent Option Agreement, in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors:

a. To the extent exercisable but not exercised on the date of death; and

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b. In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion of any additional rights which would have accrued had the Participant not died prior to the end of the accrual period which next ends following the date of death. The proration shall be based upon the number of days of such accrual period prior to the Participant’s death.

     If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one (1) year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

13. EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS.

     A. General. In the event of a termination of service (whether as an employee, director or consultant) with the Company or an Affiliate for any reason before the Participant has accepted the offer of, and complied with all purchase or acquisition requirements under, a Stock Grant in accordance with its terms, such offer of a Stock Grant shall terminate.

     For purposes of this Paragraph 13, a Participant to whom a Stock Grant has been offered under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a “Disability”), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.

     In addition, for purposes of this Paragraph 13, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate.

     Except as otherwise provided in the pertinent Stock Grant Agreement, in the event of a termination of service (whether as an employee, director or consultant), other than termination “for cause,” Disability, or death for which events there are special rules in subparagraphs B, C, and D, the Company shall have the right to repurchase all unvested Shares at the original purchase price.

     B. Termination For Cause. Except as otherwise provided in the pertinent Stock Grant Agreement, upon a termination of employment for cause, all Shares subject to any Stock Grant shall be immediately subject to repurchase by the Company at the purchase price, if any, thereof. For all purposes of this Plan, including this paragraph 13, “cause” shall have the meanings used in and shall be determined as provided in paragraph 12.

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     C. Termination Due to Disability. Except as otherwise provided in the pertinent Stock Grant Agreement, if a Participant ceases to be an employee, director or consultant of the Company or of an Affiliate by reason of Disability, the Company shall have the right to purchase all unvested Shares at the original purchase price, to the extent such rights of repurchase are to lapse periodically after the date of Disability, such rights of repurchase shall lapse on a pro rata portion of the Shares subject to such Stock Grant as would have lapsed had the Participant not become Disabled prior to the end of the vesting period which next ends following the date of Disability. The proration shall be based upon the number of days of such vesting period prior to the date of Disability.

     D. Termination Due to Death. Except as otherwise provided in the pertinent Stock Grant Agreement in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate, the Company shall have the right to repurchase unvested Shares at the original purchase price. To the extent such rights of repurchase are to lapse periodically after the date of death, such rights of repurchase shall lapse on a pro rata portion of the Shares subject to such Stock Grant as would have lapsed had the Participant not died prior to the end of the vesting period following the date of death. The proration shall be based upon the number of days of such vesting period prior to the Participant’s death.

14. PURCHASE FOR INVESTMENT.

     Unless the offering and sale of the Shares to be issued upon the particular exercise or acceptance of a Stock Right shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

a. The person(s) who exercise(s) or accept(s) such Stock Right shall warrant to the Company, prior to the receipt of such Shares, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their Shares issued pursuant to such exercise or such grant:

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such             shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.”

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b. At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise or acceptance in compliance with the 1933 Act without registration thereunder.

15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.

     Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants which have not been accepted will terminate and become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation.

16. ADJUSTMENTS.

     Upon the occurrence of any of the following events, a Participant’s rights with respect to any Stock Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the pertinent Option Agreement or Stock Grant Agreement:

     A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, or (ii) additional shares or new or different shares or other securities of the Company or other non- cash assets are distributed with respect to such shares of Common Stock, the number of shares of Common Stock deliverable upon the exercise or acceptance of such Stock Right shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such events.

     B. Consolidations or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger, consolidation, private sale or sale of all or substantially all of the Company’s assets or otherwise (an “Acquisition”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that all Options must be exercised (to the extent then exercisable after taking into account any applicable acceleration of vesting) at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Options (to the extent then exercisable after taking into account any applicable application of vesting) over the exercise price thereof.

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     With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall either (i) make appropriate provisions for the continuation of such Stock Grants by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Acquisition or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that all Stock Grants must be accepted (to the extent then subject to acceptance) within a specified number of days of the date of such notice, at the end of which period the offer of the Stock Grants shall terminate; or (iii) terminate all Stock Grants in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Stock Grants over the purchase price thereof, if any. In addition, in the event of an Acquisition, the Administrator may waive any or all Company repurchase rights with respect to outstanding Stock Grants.

     C. Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company (other than a transaction described in Subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising or accepting a Stock Right shall be entitled to receive, for the purchase price, if any, paid upon such exercise or acceptance, the securities which would have been received if such Stock Right had been exercised or accepted prior to such recapitalization or reorganization.

     D. Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only after the Administrator, after consulting with counsel for the Company, determines whether such adjustments would constitute a “modification” of such ISOs (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Administrator determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments, unless the holder of an IS0 specifically requests in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the ISO.

17. ISSUANCES OF SECURITIES.

     Except as expressly provided herein, no issuance 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 Stock Rights. Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right.

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18. FRACTIONAL SHARES.

     No fractional shares shall be issued under the Plan and the person exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof.

19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

     The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an employee of the Company or an Affiliate at the time of such conversion. Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such Options. At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non- Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action. The Administrator, with the consent of the Participant, may also terminate any portion of any IS0 that has not been exercised at the time of such conversion.

20. WITHHOLDING.

     In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the exercise or acceptance of a Stock Right or in connection with a Disqualifying Disposition (as defined in Paragraph 21) or upon the lapsing of any right of repurchase, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law). For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise and shall not exceed the minimum amount required by law to be withheld. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer. The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.

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21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

     Each Key Employee who receives an IS0 must agree to notify the Company in writing immediately after the Key Employee makes a Disqualifying Disposition of any shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is any disposition (including any sale)of such shares before the later of (a) two years after the date the Key Employee was granted the ISO, or (b) one year after the date the Key Employee acquired Shares by exercising the ISO. If the Key Employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.

22. TERMINATION OF THE PLAN.

     The Plan will terminate on, the date which is ten (10) years from the earlier of the date of its adoption and the date of its approval by the shareholders of the Company. The Plan may be terminated at an earlier date by vote of the shareholders of the Company; provided, however, that any such earlier termination shall not affect any Option Agreements or Stock Grant Agreements executed prior to the effective date of such termination.

23. AMENDMENT OF THE PLAN AND AGREEMENTS.

     The Plan may be amended by the shareholders of the Company. The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under the Plan for favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code, and to the extent necessary to qualify the shares issuable upon exercise or acceptance of any outstanding Stock Rights granted, or Stock Rights to be granted, under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers. Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval. Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Stock Right previously granted to him or her. With the consent of the Participant affected, the Administrator may amend outstanding Option Agreements and Stock Grant Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan. In the discretion of the Administrator, outstanding Option Agreements and Stock Grant Agreements may be amended by the Administrator in a manner which is not adverse to the Participant.

24. EMPLOYMENT OR OTHER RELATIONSHIP.

     Nothing in this Plan or any Option Agreement or Stock Grant Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment, consultancy or director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or director status or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time.

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25. RESTRICTION ON ISSUE OF SHARES.

     (a) Notwithstanding the provisions of Paragraph 8, the Company may delay the issuance of Shares covered by the exercise of an option and the delivery of a certificate for such Shares until the delivery or distribution of any shares issued under this Plan complies with all applicable laws (including without limitation, the Securities Act of 1933, as amended), and with the applicable rules of any stock exchange upon which the shares of the Company are listed or traded.

     (b) It is intended that all exercises of options shall be effective, and the Company shall use its best efforts to bring about compliance with all applicable legal and regulatory requirements within a reasonable time, except that the Company shall be under no obligation to qualify Shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purpose of covering the issue of Shares in respect of which any option may be exercised, except as otherwise agreed to by the Company in writing.

26. RESERVATION OF STOCK.

     The Company shall at all times during the term of the Plan reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

27. NOTICES.

     Any communication or notice required or permitted to be given under the Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, if to the Company, to its principal place of business, attention: Chief Financial Officer, and, if to a Participant, to the address as appearing on the records of the Company.

28. GOVERNING LAW.

     This Plan shall be construed and enforced in accordance with the law of The Commonwealth of Massachusetts.

29. APPROVAL OF STOCKHOLDERS.

     The Plan shall be subject to approval by the vote of stockholders holding at least a majority of the voting stock of the Company present, or represented, and entitled to vote at a duly held stockholders’ meeting, or by written consent of the stockholders as provided for under applicable state law, within twelve (12) months after the adoption of the Plan by the Board of Directors and shall take effect as of the date of adoption by the Board of Directors upon such approval. The Committee may grant options under the Plan prior to such approval, but any such option shall become effective as of the date of grant only upon such approval and, accordingly, no such option may be exercisable prior to such approval.

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Adopted by Board of Directors: _______________

Adopted by Stockholders: ___________________

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EXHIBIT A

DEFINITIONS

“Administrator” means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the Administrator means the Committee.

“Affiliate” means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect.

“Board of Directors” means the Board of Directors of the Company.

“Code” means the United States Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder by the regulatory agencies with authority thereunder.

“Committee” means the committee of the Board of Directors to which the Board of Directors has delegated power to act under or pursuant to the provisions of the Plan.

“Common Stock” means shares of the Company’s common stock, $.001 par value per share.

“Company” means Taqua, Inc., a Delaware corporation.

“Disability” or “Disabled” means permanent and total disability as defined in Section 22(e)(3) of the Code. The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

“Fair Market Value” of a Share of Common Stock means:

     (1) If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or last price of the Common Stock on the Composite Tape or other comparable reporting system for the trading day immediately preceding the applicable date;

     (2) If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (l), and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded immediately preceding the applicable date; and

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     (3) If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine.

’’ISO” means an option meant to qualify as an incentive stock option under Section 422 of the Code.

“Key Employee” means an employee of the Company, an Affiliate or a Strategic Partner (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan.

“Non-Qualified Option” means an option which is not intended to qualify as an ISO.

“Option” means an IS0 or Non-Qualified Option granted under the Plan.

“Option Agreement” means an agreement between the Company and a Participant delivered pursuant to the Plan, in such form as the Administrator shall approve.

“Participant” means a Key Employee, director or consultant of the Company or its Affiliates to whom one or more Stock Rights are granted under the Plan and who are eligible to participate in this Plan under Paragraph 2. As used herein, “Participant” shall include “Participant’s Survivors” where the context requires.

’’Plan” means this Taqua, Inc. 2002 Stock Incentive Plan.

“Shares” means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of the Plan.

“Stock Grant” means a grant by the Company of Shares under the Plan also means the grant by the Company of a right to purchase Shares under a restricted stock purchase arrangement on terms that the Administrator deems appropriate.

“Stock Grant Agreement” means an agreement between the Company and a Participant delivered pursuant to the Plan, in such form as the Administrator shall approve.

“Stock Right” means a right to Shares of the Company granted pursuant to the Plan under a ISO, a Non-Qualified Option or a Stock Grant.

’’Strategic Partners” means any contractor, joint venture partner or other entity having a relationship with the Company, which relationship the Administrator, at its discretion, determines will promote the success of the Company.

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“Survivors” means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution.

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EX-4.2

EXHIBIT 4.2

TAQUA SYSTEMS, INC.
1998 STOCK OPTION PLAN

     Section 1. Definitions. As used in this Plan and all options granted hereunder, the following definitions shall apply:

          Board shall mean the Board of Directors of the Company.

          Code shall mean the Internal Revenue code of 1986, as amended.

          Committee shall mean the Compensation Committee selected by the Board charged with the administration of the Plan or, in the absence thereof, shall mean the Board.

          Common Stock shall mean common stock of the Company, par value $0.01 per share and any stock or securities received in exchange therefor or on account thereof.

          Company shall mean Taqua Systems, Inc., a Delaware corporation, and any successor thereto.

          Exchange Act means the Securities Exchange Act of 1934, as amended.

          Fair Market Value shall mean the (i) the last price on any date for a share of Common Stock as accurately reported by The Wall Street Journal under the NASDAQ Over-The-Counter Market, national market Issues, quotation system (or under any successor quotation system), or, if such stock is not traded on the over-the-counter markets, the closing price for a share of Common Stock as accurately report by The Wall Street Journal under the quotation system which reports such closing price or, if The Wall Street Journal does not report such prize, such price as reported by a newspaper or trade journal selected by the Committee, or, if no such price is available on such date, (ii) such price as so reported or so quoted in advance with the immediately preceding clause (i) for the immediately preceding business day or, if no newspaper or trade journal reports such price or if no such price quotation is available, (iii) the price which the Committee in acting in good faith determines through any reasonable valuation method that a share of Common Stock might change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts.

          ISO shall mean an Option granted under the Plan which meets the requirements of an incentive stock option under Section 422 of the Code and which is designated as an ISO by the Committee.

          NQSO shall mean an Option granted under the Plan which does not meet the requirements of an incentive stock option under Section 422 of the Code, and which is designated as a NQSO by the committee.

          Option shall mean a right to purchase Common Stock granted pursuant to the Plan.

          Option Agreement means the written agreement entered into pursuant to this Plan through which an Option is granted to a Participant.

          Optionee shall mean a Participant granted an Option under this Plan.

          Option Price shall mean the purchase price to be paid by an Optionee for each share of Common Stock purchased under an Option, determined in accordance with Section 7 of this Plan.

          Parent shall mean a parent corporation as defined in Section 424(e) and (g) of the Code.

          Participant shall mean a M1 time salaried employee of the Company or any Subsidiary, a director of the Company or any Subsidiary (irrespective of whether he also is an employee of the Company or any Subsidiary) or any consultant or independent contractor of the Company or Subsidiary, who, in the judgment of the Committee, in its sole discretion, is instrumental to the success of the Company or a Subsidiary.

          Plan shall mean the 1998 Stock Option Plan of the Company, as amended.

          Public Company. The Company shall be deemed to be a Public Company if (i) the Company has a class of securities registered pursuant to Section 12 of the Exchange Act and has been subject to the reporting requirements of Section 13 of Act for a period of at least 90 days immediately preceding the event giving rise to the necessity of determining if the Company is a Pubic Company, or (ii) the Company has a class of securities registered pursuant to the Securities Act of 1933 and has been subject to the reporting requirements of Section 15(d) of the Exchange Act for a period of at least 90 days immediately preceding the event giving rise to the necessity of determining if the Company is a Public Company.

          Qualified IPO shall mean the Sale of Common Stock for the account of the Company in a bona fide firm commitment underwriting pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act of 1933, as amended, resulting in (i) aggregate cash proceeds to the Company (net of underwriters’ commissions, discounts and fees) of not less than Twenty Million Dollars ($20,000,000) and (ii) a pre-money valuation of the Company of not less than Fifty Million Dollars ($50,000,000).

          Rule 16b-3 shall mean the Securities Exchange Commission Regulation § 240.16b-3 under the Exchange Act, or any successor regulation.

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          Stockholder shall mean the holders of outstanding shares of the Company’s capital stock.

          Subsidiary shall mean a subsidiary corporation defined in Section 424(f) and (g) of the Code.

          Substantial Stockholder means any person who owns, within the meaning of Section 422 and Section 424 of the Code, more than ten percent (10%) of the total combined voting power of all equity securities of the Company or of its Parent or any Subsidiary.

          Willful Misconduct shall mean intentional conduct in the course of a Participant’s employment or service as a director which in the sole determination of the Committee is materially detrimental to the interests of the Company and shall include, but not be limited to, wrongful appropriation of funds or the commission of any crime.

     Section 2. Purpose of the Plan. The purpose of this Plan is to provide a means whereby the Company may, through the grant of Options to employees, officers, directors, consultants and independent contractors of the Company and of any Subsidiary, attract and retain Participants, encourage ownership in the Company by Participants, and provide an incentive for such Participants to exert their best efforts on behalf of the Company and any Subsidiary.

     Section 3. Shares Available under the Plan. Options may be granted under the Plan with respect to 1,041,667 shares of Common Stock of the Company and all such shares shall be, and upon adoption of this Plan by the Board, are hereby, reserved for Options granted under the Plan subject to adjustment as provided in Section 16 hereof. The shares issued upon the exercise of Options granted under the Plan maybe authorized and issued shares or shares held by the Company in its treasury. If any option granted under the Plan shall terminate, expire or be cancelled as to any shares (not including the surrender of an Option under Section 12), new Options may thereafter be granted covering such shares.

     Section 4. Eligibility. The persons eligible to participate in the Plan as recipients of Options shall include only Participants.

     Section 5. Administration. The Plan shall be administered by the Committee. The Committee shall have full and final authority in its discretion, but subject to the express provisions of the Plan, to determine from time to time to whom Options shall be granted and the number of shares to be covered by each proposed Option; to determine the purchase price of the shares covered by each Option and the time or times at which options shall be granted; to interpret the Plan; to make, amend and rescind rules and regulations relating to the individuals in the eligible group to the Plan; to determine the terms and provisions of the instruments by which Options shall be evidenced; to take any action which may be taken only

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by a disinterested administrator under Rule 16b-3; and to make all other determinations necessary or advisable for the administration of the Plan.

     Section 6. Granting of options. From time to time the Committee shall select those Participants to whom Options shall be granted and shall determine the number of shares to be covered by each Option. In making any determination as to individuals to whom Options shall be granted and as to the number of shares to be covered by such Options, the Committee shall take into account the duties of the respective individuals, their present and potential contributions to the success of the Company or its subsidiary, and such other factors as the Committee shall deem relevant in accomplishing the purposes of the Plan. Each grant of an Option shall be evidenced by an Option Agreement executed by the optionee and the Company and such other instruments in such form as the Committee shall from time to time approve, which instruments shall (a) comply with and include expressly or by reference the terms and conditions set forth in the Plan; (b) shall specify whether the Option is an ISO or NQSO; and (c) may include such other provisions not inconsistent with provisions of the Plan as the Committee shall deem advisable, including vesting provisions. The terms and conditions of Options granted to each Optionee need not contain similar provisions. The recommendation or selection of an individual as a participant in any grant of Options hereunder shall not be deemed to entitle the individual to such Option prior to the time when it shall be granted by the Committee; and the granting of any Option shall not be deemed either to entitle such individual to, or to disqualify such individual from, any participation in any other grant of Options under the Plan.

     Section 7. Option Price. The Option Price per share of Common Stock to be acquired thereunder shall be determined by the Committee at the time the Option is granted, and shall not be less than the greater of the following: (a) the Fair Market Value of the Common Stock for which the Option is being granted, upon the date of the grant of the Option; and (b) with respect to an ISO granted to a Substantial Stockholder, 110 % of the Fair Market Value of the Common Stock for which the Option is being granted, upon the date of the grant of the ISO.

     Section 8. Option Period. Each Option Agreement shall specify the period for which the Option thereunder is granted and shall provide that the Option shall expire at the end of such period; provided that (a) the Option Agreement shall provide that the exercise of an Option shall not be permitted more than ten (10) years after the date on which the Option is granted; and (b) in the case of a Substantial Stockholder, the exercise of an ISO shall not be permitted more than five (5) years after the date on which the Option is granted.

     Section 9. Exercise and Payment.

          (a) Exercise of an Option shall be made by the giving of written notice to the Company by the Optionee. Such written notice shall be deemed sufficient for this purpose only if delivered to the Company at its principal office by personal delivery or by registered or certified mail, and only if such written notice identifies the Option being exercised, states the

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number of shares of Common Stock with respect to which the Option is being exercised and further states the date, no more than thirty (30) days after the date of such notice, on which the payment for such Common Stock shall be made. The payment for shares of Common Stock acquired pursuant to the exercise of an Option shall be made at the principal office of the Company. Upon the exercise of an Option, in compliance with the provisions of this section, and upon the receipt by the Company or its transfer agent of the payment for the stock so acquired, the Company shall deliver or cause to be delivered to the Optionee so exercising the Option a certificate or certificates for the number of shares of Common Stock with respect to which the Option is so exercised and payments is so made. The shares of stock shall be registered in the name of the exercising Optionee or in such name jointly with the Optionee as the Optionee may direct in the written notice of exercise referred to in this section, provided that in no event shall any shares of Common Stock of the Company be issued pursuant to the exercise of an Option until full payment therefor (including payment of any taxes required to be withheld by the Company) shall have been made as provided in Section 9(b) hereof, and not until the shares have been issued shall the exercising Optionee have any of the rights of a shareholder. All shares purchased upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

          (b) The purchase Price of the shares as to which an Option maybe exercised shall be payable in United States dollars in cash or by check to the Company. The Optionee also shall pay in such medium to the Company an amount determined by the Company for any applicable withholding taxes resulting from the exercise of an Option. In the sole discretion of the Committee, an Optionee may make such payments, in whole or in part, by exchange of shares of Common Stock of the Company having an aggregate Fair Market Value, as of the date of payment, equal to the aggregate exercise price for the Option exercised and the amount of any applicable withholding taxes. The Committee may for any reason decline to accept payment of the purchase price and/or withholding taxes by exchange of shares of Common Stock of the Company, or may impose such limitations or restrictions on such payment as the Committee, in its sole discretion, deems advisable.

     Section 10. Exercise in Event of Termination of Employment.

          (a) If an Optionee’s employment or service as a non-employee director with the Company or a Subsidiary shall terminate for any reason other than disability (as specified in Section 10(d)), death, or Willful Misconduct, such Optionee may exercise his or her Option, to the extent that such Optionee may be entitled to do so, at the date of the termination of his or her employment or service as non-employee director, at any time, or from time to time before the earlier to occur of the expiration date specified in the Option Agreement or one (1) month after termination of such employment. Whether authorized leave of absence for military or governmental service shall constitute termination of employment or service for purposes of the Plan shall be determined by the Committee.

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          (b) In the event an Optionee’s employment or service as a nonemployee director with the Company or a Subsidiary is terminated by reason of Willful Misconduct or otherwise for cause, all Options granted to such optionee, which are not vested, shall terminate as of the date of termination of employment or service.

          (c) If an optionee shall die (i) while an employee or a non-employee director of the Company or a Subsidiary, or (ii) within one (1) month after termination (other than by reason of Willful Misconduct) of his or her employment or service as a non-employee or director of the Company or a Subsidiary, the Option may be exercised, to the extent that such Optionee shall have been entitled to do so at the date of the such Optionee’s termination of employment or service, by the person or persons to whom such Optionee’s rights under the Option pass by will or applicable law, or, if no such person has such right, by such Optionee’s executors or administrators, at any time, or   from time to time, within one (1) year after the date of such Optionee’s death, but in no event later than the expiration date specified in the Option Agreement or one (1) year after such Optionee’s death, whichever is earlier.

          (d) If an Optionee’s employment or service as a non-employee director with the Company or a Subsidiary is terminated because such Optionee is disabled (within the meaning of Section 22(e)(3) of the Code), such Optionee may exercise his or her Option in the manner provided in Section 10(a); provided that the one (1) month period specified in Section 10(a) shall be one (1) year.

     Section 11. Repurchase of Option.

          (a) Except to the extent otherwise provided in any stockholders agreement to which an Optionee is or may become a party, if an Optionee’s employment or service as a non-employee director with the Company or a Subsidiary shall terminate for any reason, and the Company is not a Public Company, the Company shall have the option to purchase from the Optionee or the Optionee’s successors (i) all Options granted pursuant to the Plan, to the extent the Optionee or the Optionee’s successors are entitled to exercise such Options, and (ii) all stock in the Company held by the Optionee or the Optionee’s successors pursuant to the exercise of an Option granted under the Plan or any stock or securities received in exchange therefor or on account thereof. The price for which the Company shall have an option to acquire such Options or stock shall be: (i) with respect to the Options, the difference between Fair Market Value of the stock to such Options and the Option Price, or (ii) with respect to the stock or securities, the Fair Market Value of the stock or securities. If the Company elects to exercise its right to acquire any Option issued under the Plan, the exercise of such right shall preclude the exercise by the Optionee or the Optionee’s successors of such Option.

          (b) Except to the extent otherwise provided in any stockholders agreement to which Optionee is or may become a party, if the Company is not a Public Company and the Optionee or any other person desires to make a disposition or all or any potion of the Common Stock acquired pursuant to the exercise of an Option granted under this Plan (or any

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stock or securities received in exchange therefor or on account hereof) to any person other than the Company, and had not receive the prior written consent of the Company, he or she shall first notify the Company and offer to sell his or her Common Stock to the Company at Fair Market Value on the date of notification. The offer to sell shall be in writing and shall be delivered by certified mail, return-receipt requested, and shall include the time of the proposed disposition and the number of shares to be transferred. The Company shall have the option to acquire such Common Stock for their Fair Market Value for a period of 90 days following the date of notification. Likewise, upon the death of the Optionee, or any other person holding Common Stock acquired pursuant to the exercise of an Option granted pursuant to this Plan, the Company shall have the option to acquire such stock or securities for their Fair Market Value for a period of 90 days following the date it is notified of such holder’s death.

          (c) In the event the Company elects to exercise any option reserved to the Company in the preceding two sections, it shall do so by giving notice within the time prescribed above, by certified mail, return-receipt requested, to the Optionee or the Optionee’s successor at the address set forth in the Stock Option agreement entered into pursuant to this Plan or as previously designated by the Optionee or the Optionee’s successor in written notice to the Company. In the event, the Company does not exercise its option, the holder of such Common Stock shall be free to make the disposition of such Common Stock to the extent he or she has so notified the Company, and only to the person named in the notice, for a period of 90 days after the expiration of the Company’s option, provided that the holder shall not make a disposition at a price or on terms more favorable than those stated in the notice to the Company without affording the Company a further option of 30 days within which to acquire such stock or securities at Fair Market Value.

          (d) In the event, the Optionee or any person desires to make a pledge or hypothecation of all or of any part of his or her Common Stock in the Company acquired pursuant to the exercise of an Option granted pursuant to this Plan as security for a loan, or performance of any obligation, he or she shall notify the Company in writing of the intention to do so. Such pledge or hypothecation or any transfer pursuant thereto shall be effective only if both of the following conditions occur: (i) the pledgee agrees to be bound by the terms of the Stock Option Agreement entered into pursuant to this Plan and agrees to notify the Company in writing within ten (10) days after any default of the pledgor with respect to the obligation; and (ii) the pledgor and pledgee agree in writing that any default with respect to the obligation shall be treated as a disposition by the pledgor of all of the Common Stock pledged, and the Company shall have the option to purchase such Common Stock as provided for above at its Fair Market Value.

          (e) Any transferee of the Optionee and any subsequent transferee shall be subject to the same restrictions on disposition, pledge or hypothecation of such Common Stock as applied to the Optionee. Any Common Stock issued pursuant to the exercise of an Option granted under this Plan shall be endorsed with the following legend:

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“NOTICE IS HEREBY GIVEN THAT THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS CONTAINED IN THE TAQUA SYSTEMS, INC. 1998 STOCK OPTION PLAN, A COPY OF WHICH IS ON FILE WITH THE OFFICE OF THE SECRETARY IF TAQUA SYSTEMS, INC. AND HAS BEEN PROVIDED TO THE OPTIONEE.”

     Section 12. Surrender of Options.

          (a) The Committee, acting in its absolute discretion, may incorporate a provision in an Option Agreement to allow an Optionee to surrender his or her Option in whole or in part, in lieu of the exercise in whole or in part of that Option, on any date that:

                    (i) the Fair Market Value of the Common Stock for which the Option was granted exceeds the Option Price for such Common Stock, and

                    (ii) the Option to purchase such Common Stock is otherwise exercisable.

          (b) The surrender of an Option in whole or in part shall be effected by the delivery of the Option Agreement to the Committee (or to its delegate) together with a statement signed by the Optionee which specifies the number of shares of Common Stock as to which the Optionee surrenders his or her Option and how he or she desires payment be made for such surrendered Option.

          (c) An Optionee in exchange for his or her surrendered Option, shall receive a payment in cash or in a Common Stock, or in a combination of cash and such Common Stock, equal in amount, on the date such surrender is effected, to the excess of the Fair Market Value of the Common Stock underlying the surrendered Option on such date over the Option Price for the surrendered Option, less any applicable withholding taxes resulting from such surrender. The Committee, acting in its absolute discretion, can approve or disapprove an Optionee’s request for payment in whole or in part in cash and can make that payment in cash or in such combination of cash and Common Stock as the Committee deems appropriate. A request for payment only in Common Stock shall be approved and made in such stock to the extent payment can be made in whole shares of Common Stock and (of the committee’s discretion) in cash in lieu of any fractional share of such stock.

          (d) Any Option Agreement which incorporates a provision to allow an Optionee to surrender his or her Option in whole or in part also shall incorporate such additional restrictions on the exercise or surrender of such Option as the Committee deems

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necessary to satisfy the conditions of Rule 16b-3 (or any successor exemption) to Section 16(b) of the Exchange Act.

     Section 13. Nontransferability. An option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution and, during his or her lifetime, the Option shall be exercisable only by such Optionee.

     Section 14. Securities Requirements.

          (a) The Company may require any Optionee, as a condition of exercising such Option, to give written assurances in substance and form satisfactory to the Company to the effect that such Optionee is acquiring the Common Stock subject to the Option for his or her own account for investment and not with any present intention or selling or otherwise distributing the same, and to such other effects as to the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.

          (b) Each Option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition of, or in connection with, the issuance or purchase of shares thereunder, such Option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification or to satisfy such condition, Any such postponement or limitation affecting the right to exercise an Option or the grant may be granted or exercised or the shares distributed, unless the Company and the Optionee choose to amend the terms of the Option to provide for such an extension; and neither the Company, nor any of its directors or officers shall have any obligation or liability to the Optionee or to a beneficiary as to any shares to which the Option shall lapse because of such a postponement or limitation.

          (c) In the case of officers and other persons subject to Section 16(b) of the Exchange Act, the Committee may at any time impose any limitations upon the exercise of an Option which, in the Committee’s discretion, are necessary or desirable in order to comply with the Section 16(b) and the rules and regulations thereunder. If the Company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any Options may be exercised, the Committee may, in its discretion and without the holders’ consent, so reduce such period on not less than fifteen (15) days’ written notice to the holders thereof.

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     Section 15. Duration of Plan. No Option shall be granted more than ten (10) years after the date of the adoption of the Plan by the Board. Nothing contained herein, however, shall terminate or effect the continued existence of rights created under Options issued hereunder and outstanding on the expiration date of the Plan, which by their terms extend beyond such date.

     Section 16. Capital Adjustments, Reorganization and Liquidation.

          (a) The number of shares of Common Stock which may be issued under the Plan, the number of shares reserved as stated in Section 3 hereof, the number of shares issuable upon exercise of outstanding Options under the Plan (as well as the Option Price per share under such outstanding Options) and the Option Price limitations as set forth in Section 7, shall be adjusted, as may be deemed appropriate by the Committee, to reflect any stock dividend, stock split, share combination, or similar change in capitalization of the Company.

          (b) The dissolution or liquidation Of the Company or merger or consolidation in which the Company is not the surviving corporation, shall cause each outstanding Option to terminate, unless there is an express assumption of the Option by the surviving corporation. Any outstanding Option may be exercised up to and including the date immediately preceding such termination if it has not otherwise expired and if it is then subject to exercise under the individual option grant. The Committee may, in its discretion, change the terms of any outstanding Option solely to the extent necessary to effect a substitution for, or assumption of, the Option in the event of any merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation.

          (c) To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive.

     Section 17. Rights as a Stockholder. An Optionee shall have no rights as a Stockholder with respect to the shares covered by his or her Option until the issuance of a stock certificate for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such stock certificate, except as provided in Section 16.

     Section 18. No Obligation to Exercise Option. The granting of an Option shall impose no obligation upon an Optionee to exercise such Option.

     Section 19. Withholding. The exercise or surrender of any Option granted hereunder shall constitute an Optionee’s full and complete consent to whatever action the Committee directs to satisfy federal and state withholding requirements, if any, including withholding under the Federal Insurance Contribution Act and requirements for withholding from wages as the Committee in its discretion deems applicable to such exercise or surrender.

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     Section 20. No Rights to Employment. Nothing hereunder shall be deemed to give an Optionee the right to be retained in employment by the Company for any period of time, and no provision hereunder or the granting of Options pursuant to this Plan shall be deemed to interfere with the right of the Company to terminate the employment of an optionee at any time without regard to the effect that such discharge will have on his or her rights, if any, hereunder or under any Option granted hereunder.

     Section 21. Application of Funds. The proceeds received by the Company from the sale of Common Stock pursuant to Options granted under the Plan will be used for general corporate purposes.

     Section 22. Rights to Receive Options. Neither the adoption of the Plan nor any action of the Committee shall be deemed to give any person any right to be granted an Option, or any other right hereunder, unless and until the Committee shall have granted such person an Option, and then his or her rights shall be only such as are prescribed in the instrument evidencing such Option.

     Section 23. Amendment or Discontinuance of Plan. The Committee may from time to time, with respect to any Common Stock on which Options have not then been granted, suspend or discontinue the Plan or amend it in any respect whatsoever; however, that no amendment shall be made which (a) changes the class of individuals eligible to receive Options or otherwise materially modifies (within the meaning of Section 16 of the Exchange Act or Rule 16b-3) the requirements as to eligibility for participation in the Plan or materially increases (within the meaning of Section 16 of the Exchange Act or Rule 16b-3) the benefits accruing to Optionee under the Plan, (b) increases the maximum number of shares of Common Stock with respect to which Options may be granted under the Plan, (c) changes the limitations on the Option price, or (d) amends the provisions of Section 15, without approval of the Stockholders of the Company, which must comply with all the applicable provisions of the Certificate of Incorporation and bylaws of the Company and the Delaware General Corporation Law.

     Section 24. Indemnification of Committee. In addition to such other rights of indemnification as they may have as members of the Board, each member of the Committee shall be indemnified by the Company against all costs and expenses reasonably incurred by such member. in connection with any action, suit, or proceeding to which such member may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Option granted thereunder, and against all amounts paid by him or her in settlement thereof (provided such settlement is approved by legal counsel selected by the Company) or paid by him or her in satisfaction of a judgment in any such action, suit, or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit, or proceeding, each Committee member affected shall notify the Company in writing, giving the Company an opportunity, at its own expense, to handle and defend the same before the Committee under-takes to handle it on his or her own behalf.

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     Section 25. Disqualifying Dispositions. If a Optionee disposes of its Common Stock acquired upon exercise of an ISO within two (2) years from the date the Option is granted or within one (1) year after the issuance of such Common Stock to the Optionee, the Optionee shall notify the Company of such disposition and provide information as to the date of disposition, sale price, number of shares disposed of and any other information relating thereto which the Company may reasonably request.

     Section 26. Approval by Shareholders. The Plan shall take effect upon adoption by the Board and approval by the shareholders of the Company within twelve (12) months after the Plan is adopted by the Board.

     Section 27. Governing Law. The validity and construction of the Plan and any agreements thereunder shall be governed by the laws of the State of Delaware.

Date Plan Adopted by Board:                    01/28/98
Date Plan Approved by Shareholders:       03/11/98

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EX-4.3

Exhibit 4.3

TEKELEC

FORM OF NONSTATUTORY STOCK OPTION AGREEMENT

     Tekelec, a California corporation (“Tekelec” or the “Company”), hereby enters into this Nonstatutory Stock Option Agreement (this “Option Agreement”) with _______ (the “Optionee”) effective as of April 8, 2004, whereby the Company grants to the Optionee the right and option to purchase an aggregate of _______ shares of Common Stock (the “Shares”) of the Company in accordance with the terms of that certain Employment Agreement dated ______ between Taqua, Inc., a Delaware corporation (“Taqua”) and wholly owned subsidiary of the Company, and the Optionee (the “Employment Agreement”). The grant of this Option fully discharges Tekelec’s obligations with respect to the grant to the Optionee of stock options to purchase Tekelec Common Stock under Section 3 of the Employment Agreement.

     1. Nature of the Option. This Option is intended to be a nonstatutory stock option and is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or to otherwise qualify for any special tax benefits to the Optionee.

     2. Exercise Price. The exercise price is $18.08 per Share, which price is not less than 100% of the fair market value thereof on the date of the grant.

     3. Method of Payment. The consideration to be paid for the Shares to be issued upon exercise of this Option shall consist entirely of cash or check payable to the Company.

     4. Exercise of Option. This Option shall be exercisable during its term only in accordance with the terms and provisions of this Option Agreement as follows:

          (a) This Option shall vest and become exercisable cumulatively in 16 equal quarterly installments of ______ shares each as long as the Optionee continues to serve as an employee of the Company, with the first of such installments vesting on September 30, 2004 and one additional installment vesting on the last day of each calendar quarter thereafter. Each vested installment of this Option will expire on the four-year anniversary of its vesting date (e.g., the installment vesting on September 30, 2004 will expire at the close of business on September 30, 2008). Subject to Sections 6, 7 and 8 hereof, the Optionee may exercise the exercisable portion of this Option in whole or in part at any time during the term hereof; provided, however, that the Option may not be exercised for a fraction of a Share. In the event of the Optionee’s termination of employment with the Company or the Optionee’s disability or death, the provisions of Sections 6 or 7 below, as applicable, shall apply to the right of the Optionee to exercise this Option.

          (b) This Option shall be exercisable by written notice which shall state the election to exercise this Option, the number of Shares in respect to which this Option is being exercised and such other representations and agreements as may be required by the Company. Such written notice shall be in the form of the Notice of Exercise of Nonstatutory Stock Option

1

in the form attached hereto, shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company or such other person as may be designated by the Company. The written notice shall be accompanied by payment of the purchase price or shall include a commitment to deliver the purchase price pursuant to a special sale and remittance procedure commonly referred to as a “cashless exercise,” in which case the Optionee shall concurrently provide irrevocable written instructions to a brokerage firm to effect the immediate sale of a sufficient number of the Shares purchased upon exercise of the Option to enable such brokerage firm to remit out of the sales proceeds available upon the settlement date sufficient funds to the Company 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 the Company by reason of such exercise and/or sale. As soon as practicable after any proper exercise of this Option in accordance with the provisions hereof, the Company shall deliver to the Optionee at the principal executive office of the Company or such other place as shall be mutually agreed upon between the Company and the Optionee, a certificate or certificates representing the Shares for which the Option shall have been exercised. The certificate or certificates for the Shares as to which this Option is exercised shall be registered in the name of the Optionee.

          (c) No rights of a shareholder shall exist with respect to the Shares under this Option as a result of the mere grant of this Option or the exercise of this Option. Such rights shall exist only after issuance of a stock certificate in accordance with Section 4(b) hereof.

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

     6. Termination of Employment. If the Optionee ceases to serve as an employee of the Company 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 continuous status as an employee of the Company, the Optionee shall have the right to exercise this Option at any time within three months after the date of such termination to the extent that the Optionee was entitled to exercise this Option at the date of such termination. To the extent that the Optionee was not entitled to exercise this Option at the date of termination, or to the extent this Option is not exercised within the time specified herein, this Option shall terminate. Notwithstanding the foregoing, this Option shall not be exercisable as to any vested installment after the expiration of the term of such installment set forth in Section 8 hereof.

     7. Death or Disability. If the Optionee ceases to serve as an employee of the Company 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 six months after the date of death or termination of employment due to disability, in the case of death, by the Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or inheritance, or, in the

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case of disability, by the Optionee, but in any case only to the extent the Optionee was entitled to exercise this Option at the date of such termination. To the extent that the Optionee was not entitled to exercise this Option at the date of termination, or to the extent this Option is not exercised within the time specified herein, this Option shall terminate. Notwithstanding the foregoing, this Option shall not be exercisable as to any vested installment after the expiration of the term of such installment set forth in Section 8 hereof.

     8. Term of Option. Notwithstanding any provision to the contrary in this Option Agreement, each vested installment of this Option may not be exercised more than four years after the date on which such installment vested and may be exercised during such four-year period only in accordance with the terms of this Option Agreement. Notwithstanding any provision herein with respect to the post-employment exercise of this Option, this Option may not be exercised as to any vested installment after the expiration of its four-year term.

     9. Reservation of Shares. The Company covenants and agrees that all Shares will, upon issuance and payment in accordance herewith, be fully paid, validly issued and nonassessable. The Company further covenants and agrees that during the term of this Option, the Company will at all times have authorized and reserved for the purpose of issuance upon exercise of this Option at least the maximum number of Shares as are issuable upon such exercise.

     10. Dissolution; Liquidation, Consolidation, Merger or Reclassification. In the event that while this Option is outstanding, the Company proposes to dissolve or liquidate or to sell all or substantially all of its assets (other than in the ordinary course of business), or to merge or consolidate with or into another corporation as a result of which the Company is not the surviving and controlling corporation, the Board of Directors shall (i) make provision for the assumption of this Option by the successor corporation or (ii) declare that this Option shall terminate as of a date fixed by the Board of Directors which is at least 30 days after the notice thereof to the Optionee and shall give the Optionee the right to exercise this Option as to all or any part of the Shares, including Shares as to which this Option would not otherwise be exercisable, provided such exercise does not violate Section 8 hereof.

     11. Adjustment of Exercise Price and Number of Shares.

          (a) The number of Shares subject to this Option, as well as the exercise price per Share hereunder, shall be proportionately adjusted for any increase or decrease in the number of issued shares of the Company’s Common Stock resulting from a stock split or combination or the payment of a stock dividend (but only on the Company’s Common Stock) or any other increase or decrease in the number of issued shares of the Company’s Common Stock effected without receipt of consideration by the Company (other than stock awards to employees or directors of the Company); provided, however, that the conversion of any convertible securities of the Company shall not be deemed to have been effected without the receipt of consideration. Such adjustment shall be automatic and the form of this Agreement need not be changed because of any such adjustment in the exercise price or in the number of Shares purchasable upon exercise of all or any portion of this Option. Except as expressly provided herein, no issue by the

3

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 this Option.

          (b) No fractional shares of Common Stock shall be issuable on account of any action contemplated by Section 10 or Section 11(a) hereof, and the aggregate number of shares into which Shares then covered by this Option, when changed as the result of any such action, shall be reduced to the largest number of whole shares resulting from such action, unless the Company’s Board of Directors, 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 of Directors in its discretion shall prescribe.

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

     13. 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, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

     14. No Right of Employment. This Option shall not confer upon the Optionee any right to continue in the employment of the Company or limit in any respect the right of the Company to discharge the Optionee at any time, with or without cause and with or without notice.

     15. 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.

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          (c) Amendments.

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

               (ii) Except as specifically provided in subsection (i) above, this Option Agreement shall not be changed or modified, in whole or in part, except by supplemental agreement signed by the Parties. Either Party may waive compliance by the other Party with any of the covenants or conditions of this Option Agreement, but no waiver shall be binding unless executed in writing by the Party making the waiver. No waiver or any provision of this Option Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. Any consent under this Option Agreement shall be in writing and shall be effective only to the extent specifically set forth in such writing. For the protection of the Parties, amendments, waivers and consents that are not in writing and executed by the Party to be bound may be enforced only if they are detrimentally relied upon and proved by clear and convincing evidence. Such evidence shall not include any alleged reliance.

          (d) Notice. Any notice, instruction or communication required or permitted to be given under this Option Agreement to either Party shall be in writing and shall be deemed given when actually received or, if earlier, five days after deposit in the United States mail by certified or express mail, return receipt requested, first class postage prepaid, addressed to the principal office of the Company, in the case of the Company, or to the most recent principal residence address of the Optionee reflected in the Company’s records, in the case of the Optionee, or to such other address as either Party may request by written notice.

          (e) Governing Law. To the extent that Federal laws do not otherwise control, 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.

          (f) Entire Agreement. This Option Agreement constitutes the entire agreement between the Parties with regard to the subject matter hereof. This Option Agreement supersedes all previous agreements between the Parties, and there are now no agreements, representations, or warranties between the Parties, other than those set forth herein.

     (g) 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.

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     IN WITNESS WHEREOF, this Option Agreement has been duly executed on behalf of the Company by an authorized representative of the Company and by the Optionee as of the date and year first written above.

DATE OF GRANT: April 8, 2004	TEKELEC
	By:
		Frederick M. Lax
		President and Chief Executive Officer
		Employee name

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THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXECUTION OF THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

TEKELEC

NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION

     I, Employee name (“Optionee”), hereby agree, represent and warrant to Tekelec (the “Company”) as follows:

1.	I was granted a Nonstatutory Stock Option (the “Option”) on April 8, 2004.
2.	Pursuant to the Option, I was granted the right to purchase ____________________ shares of the Company’s Common Stock (the “Optioned Shares”).
3.	I am eligible to exercise the Option.
4.	I hereby elect to exercise the Option to purchase ____________ of such Optioned Shares (the “Shares”) at U.S.$18.08 per share, for an aggregate purchase price of U.S.$__________.
5.	Payment of Purchase Price (please check applicable box):

o	This Notice of Exercise is accompanied by a check representing payment in full of the purchase price for the Shares plus all applicable withholding taxes.
	OR
o	This exercise is a “cashless exercise” effected through my broker. Payment in full for the Shares (including all applicable withholding taxes) in the form of a check will be transmitted by my broker to the Company.

6. In connection with my exercise of the Option, I have received a copy of any Prospectus of the Company’s relating to the shares of the Company’s Common Stock issuable under the Option.

Dated:	, 200		OPTIONEE
		Signature:
Social Security Number
		Employee Name
		Address:

Received on behalf of Tekelec on , 200 .

Signature:

SCHEDULE OF OPTIONEES

Joseph Bennett
Gary Brown
Todd Daniels
Pablo Gargiulo
Thomas Hartnett
David Long
Donald Pratt, Jr.
Hermon Pon
Charles Vogt

EX-5.1

EXHIBIT 5.1

Bryan Cave LLP
120 Broadway, Suite 300
Santa Monica, CA 90401-2386
Telephone: (310) 576-2100
Facsimile: (310) 576-2200

July 1, 2004

Tekelec
26580 West Agoura Road
Calabasas, California 91302

     Re: Tekelec - Registration Statement on Form S-8

Ladies and Gentlemen:

     We have acted as securities counsel for Tekelec, a California corporation (the “Company”), in connection with the preparation of a registration statement on Form S-8 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Act”), to be filed with the Securities and Exchange Commission (the “Commission”) on July 1, 2004 in connection with the registration under the Act of an aggregate of 1,006,456 shares of Common Stock, without par value, of the Company (collectively, the “Shares”) consisting of: (i) 488,874 shares of Common Stock issuable upon exercise of options granted pursuant to the Taqua, Inc. 2002 Stock Incentive Plan; (ii) 2,582 shares of Common Stock issuable upon exercise of options granted pursuant to the Taqua Systems, Inc. Amended and Restated 1998 Stock Option Plan; and (iii) 515,000 shares of Common Stock issuable upon exercise of options granted to certain employees of the Company who were granted options in connection with their acceptance of employment with the Company upon the Company’s acquisition of Taqua, Inc. (the plans pursuant to which the foregoing options have been granted are referred to together herein as the “Plans”).

     In connection with the preparation of the Registration Statement, we have made certain legal and factual examinations and inquiries and examined, among other things, such documents, records, instruments, agreements, certificates and matters as we have considered appropriate and necessary for the rendering of this opinion. We have assumed for the purpose of this opinion the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies, and the genuineness of the signatures thereon. As to various questions of fact material to this opinion, we have, when relevant facts were not independently established, relied, to the extent deemed proper by us, upon certificates and statements of officers and representatives of the Company.

     Based on the foregoing and in reliance thereon and upon our review of applicable statutes and case law, it is our opinion that: (i) the Shares have been duly authorized and (ii) the

Shares, after the Registration Statement becomes effective and after any post-effective amendment required by law is duly completed, filed and becomes effective, and when the applicable provisions of “Blue Sky” and other state securities laws shall have been complied with, and when the Shares are issued and sold in accordance with the Plans and the Form S-8 prospectuses to be delivered to the holders of the options, will be validly issued, fully paid and non-assessable.

     We hereby consent to the inclusion of our opinion as Exhibit 5.1 to the Registration Statement and further consent to the reference to this firm in the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

     This opinion is rendered solely for your benefit in accordance with the subject transaction and is not to be otherwise used, circulated, quoted or referred to without our prior written consent. We are opining herein as to the effect on the subject transaction only of United States federal law and the internal (and not the conflict of law) laws of the State of California, and we assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction.

Very truly yours,

/s/ Bryan Cave LLP

BRYAN CAVE LLP

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our reports dated January 30, 2004 relating to the financial statements and financial statement schedule of Tekelec, which appears in Tekelec’s Annual Report on Form 10-K for the year ended December 31, 2003.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California
June 30, 2004

EX-23.2

EXHIBIT 23.2

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated April 6, 2004, except as to the second paragraph of Note 13 as to which the date is April 8, 2004, relating to the financial statements of Taqua, Inc., which appears in Tekelec’s Current Report on Form 8-K/A dated June 22, 2004.

/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 30, 2004