Exhibit 10.4


 


NON-EMPLOYEE DIRECTOR


NON-QUALIFIED STOCK OPTION


 


GRANT AGREEMENT


 


THIS AGREEMENT is made as
of the         day of        ,
200    (“Grant Date”) by and between Cephalon, Inc. (“Company”)
and               
(“Grantee”).


 


RECITALS


 


A.                                   Grantee,
as a non-employee member of the Board of Directors of the Company (“Board”),
has been granted an option to purchase shares of the common stock of the
Company pursuant to Section 6(a) of the Cephalon, Inc. 1995
Equity Compensation Plan (“Plan”).


 


B.                                     The
option granted to the Grantee is intended to be a non-qualified stock option (“NQSO”),
which does not satisfy Section 422 of the Internal Revenue Code of 1986,
as amended.


 


NOW,
THEREFORE, it is hereby agreed as follows:


 


1.                                       Grant of Option.


 


Subject
to the terms and conditions set forth in this Agreement and the Plan, the
Company hereby grants to Grantee, as of the Grant Date, a NQSO to purchase the
number of shares of the common stock of the Company (“Option Shares”) specified
on the attached Notice of Grant of Stock Options (“Notice”), at the exercise
price per share set forth in the Notice.


 


This
option shall become null and void unless the Grantee accepts this Agreement by
executing this Agreement in the space provided on the last page of the
Agreement and returning it to the Company.


 


2.                                       Option Term.


 


Unless
sooner terminated in accordance with the provisions of the Plan or this
Agreement, this option will terminate at the close of business on the date
specified on the Notice, but in no event shall the option terminate later than
ten years from the Grant Date, (“Expiration Date”).


 


1





















 


3.                                       Option Nontransferable.


 


(a)                                  Except
as described in subparagraph (b) below, this option is not transferable or
assignable by the Grantee other than by will or by the laws of descent and
distribution, and during the lifetime of the Grantee, this option is
exercisable only by the Grantee.


 


(b)                                 Anything
contained in subparagraph (a) above notwithstanding, the Grantee may
transfer this option to family members, or one or more trusts or other entities
for the benefit of or owned by family members, consistent with applicable
securities laws and in accordance with such procedures as the Company may
prescribe; provided that the Grantee receives no consideration for the transfer
of the option and the transferred option continues to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.


 


4.                                       Date of Exercise.


 


The
option will become exercisable with respect to the Option Shares covered by the
option according to the following four year exercisability schedule, provided
that the Grantee is a member of the Board on the applicable dates:


 


	
  Date

  	
   

  	
  Option Shares Becoming Exercisable

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st anniversary of Grant Date

  	
   

  	
  25

  	
  %

  
	
  2nd anniversary of Grant Date

  	
   

  	
  25

  	
  %

  
	
  3rd anniversary of Grant Date

  	
   

  	
  25

  	
  %

  
	
  4th anniversary of Grant Date

  	
   

  	
  25

  	
  %

  



 


Exercisable
installments may be exercised in whole or in part, and, to the extent not
exercised, will accumulate and be exercisable at any time on or before the
Expiration Date, unless the option terminates earlier in accordance with the
terms of this Agreement or the Plan.  The
exercisability of the option is cumulative, but shall not exceed 100% of the
Option Shares.  If the foregoing schedule would
produce fractional Option Shares, the number of Option Shares for which the
option becomes exercisable shall be rounded down to the nearest whole Option
Share.


 


2





















 


5.                                       Termination of Director Status.


 


(a)                                  Should
the Grantee cease to be a member of the Board (other than by reason of retirement
(as defined below) death, permanent disability (as defined below), termination
for cause (as defined below) or Involuntary Termination within thirty-six (36)
months of a Change of Control (as provided in Paragraph 8)), this option will,
solely to the extent that it is exercisable immediately prior to such cessation
of membership on the Board, remain exercisable during the three-month period
following the date of such cessation of such membership on the Board; provided,
however, in no event will this option be exercisable at any time after the
Expiration Date.


 


(b)                                 Should
the Grantee cease to be a member of the Board on account of retirement, this
option will, solely to the extent that it is exercisable immediately prior to
such cessation of membership on the Board, remain exercisable until the
Expiration Date.  The Grantee will be
deemed to cease to be a member of the Board on account of retirement if the
Grantee resigns from the Board on or after serving at least 3 years as a member
of the Board.


 


(c)                                  Should
the Grantee become permanently disabled and cease by reason thereof to be a
member of the Board, this option will, solely to the extent that it is
exercisable immediately prior to such cessation of membership on the Board,
remain exercisable during the one-year period following the date of such
cessation of membership on the Board; provided, however, in no event will this
option be exercisable at any time after the Expiration Date.  The Grantee will be deemed to be permanently
disabled if the Grantee is, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration
of not less than one year, unable to engage in any substantial gainful
employment.


 


(d)                                 Should
the Grantee die while a member of the Board (or during the three-month period
referred to in subparagraph (a) or during the one-year period referred to
in subparagraph (c)), this option, to the extent it is at the time outstanding
under the Plan, shall remain exercisable until the Expiration Date or earlier
surrender of this option.  The executors
or administrators of the Grantee’s estate or the Grantee’s heirs or legatees
(as the case may be) will have the right to exercise this option, during the
remainder of the option term.


 


3





















 


(e)                                  Should
the Grantee’s membership on the Board be terminated for cause (including, but not
limited to, any act of dishonesty, unethical conduct, willful misconduct, fraud
or embezzlement, or any unauthorized disclosure of confidential information or
trade secrets), this option will immediately terminate and cease to be
exercisable when notice of such termination is given to the Grantee.


 


6.                                       Privilege of Stock Ownership.


 


The
holder of this option will have none of the rights of a stockholder with
respect to the Option Shares until such individual has exercised the option and
has been issued a stock certificate for the Option Shares.


 


7.                                       Manner of Exercising Option.


 


In
order to exercise this option with respect to all or any part of the Option
Shares for which this option is at the time exercisable, Grantee (or in the
case of exercise after Grantee’s death, Grantee’s executor, administrator, heir
or legatee, as the case may be) must take the following actions:


 


(a)                                  Execute
and deliver to the Senior Vice President of Human Resources of the Company a
stock purchase agreement in substantially the form of Exhibit A to this
Agreement (the “Purchase Agreement”), specifying the number of Option Shares
with respect to which the option is being exercised;


 


(b)                                 Pay
the aggregate exercise price for the purchased shares as specified by the Board
in one or more of the following alternative forms:  (i) full payment, in cash or by check
payable to the Company’s order, in the amount of the exercise price for the
Option Shares being purchased; (ii) full payment in shares of common stock
of the Company held for at least six months and having an aggregate fair market
value on the day of exercise (as determined under the terms of the Plan) equal
to the exercise price for the Option Shares being purchased; (iii) a
combination of shares of common stock of the Company held for at least six
months and valued at fair market value on the day of exercise (as determined
under the terms of the Plan) and cash or check payable to the Company’s order,
equal in the aggregate to the exercise price for the Option Shares being purchased;
or (iv) to the extent permitted by applicable law, by such other method as
the Board may approve; and


 


4





















 


(c)                                  Furnish
the Company with appropriate documentation that the person or persons
exercising the option, if other than the Grantee, have the right to exercise
this option.


 


8.                                       Certain Company Transactions.


 


(a)                                  “Change
of Control” shall mean a change in ownership or control of the Company
effected through either of the following transactions: (i) the direct or
indirect acquisition by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Company) of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
of securities possessing more than thirty percent (30%) of the combined voting
power of the Company’s outstanding securities pursuant to a tender or exchange
offer made directly to the Company’s stockholders which the Board does not
recommend such stockholders to accept; or (ii)  a change in the
composition of the Board over a period of twenty-four (24) months or less such
that a majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (1) have
been Board members continuously since the beginning of such period, or (2) have
been elected or nominated for election as Board members during such period by
at least a majority of the Board members described in clause (1) who were
still in office at the time such election or nomination was approved by the
Board.


 


(b)                                 “Corporate
Transaction” shall mean either of the following stockholder-approved
transactions to which the Company is a party: (i) a merger or
consolidation in which securities possessing more than fifty percent (50%) of
the combined voting power of the Company’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or (ii) the sale,
transfer or other disposition of more than 75% of the Company’s assets in a
single or related series of transactions.


 


c)                                      “Involuntary
Termination” shall mean the termination of the service of the Grantee which
occurs by reason of (i) such individual’s involuntary dismissal or
discharge by the Company or the successor thereto for reasons other than
Misconduct (as defined below), or (ii) such individual’s voluntary
resignation, in either case following: (a) a change in the Grantee’s
position with the Company or the successor thereto which materially reduces the


 


5





















 


Grantee’s
level of responsibility, (b) a reduction in the Grantee’s level of
compensation (including base salary, significant fringe benefits or any
non-discretionary and objective-standard incentive payment or bonus award) by
more than ten percent (10%) in the aggregate or (c) a relocation of the
Grantee’s place of employment by more than fifty (50) miles, only if such
change, reduction or relocation is effected by the Company or the successor
thereto without the Grantee’s consent. 
For purposes of this definition, the term “Misconduct” means the
commission of any act of fraud, embezzlement or dishonesty by the Grantee, any
unauthorized use or disclosure by such individual of confidential information
or trade secrets of the Company or its successor, or any other intentional
misconduct by such individual adversely affecting the business or affairs of
the Company or its successor in a material manner.  The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Company or its successor
may consider as grounds for the dismissal or discharge of the Grantee.


 


(d)                                 Upon
the occurrence of a Corporate Transaction or upon Involuntary Termination of
the Grantee within thirty-six (36) months following a Change of Control, this
option shall remain exercisable until the Expiration Date or earlier surrender
of this option.


 


(e)                                  Immediately
following the consummation of a Corporate Transaction, this option shall
terminate and cease to remain outstanding, except to the extent assumed by the
successor corporation or its parent company.


 


9.                                       Compliance with Laws and Regulations.


 


(a)                                  The
exercise of this option and the issuance of Option Shares upon such exercise is
subject to compliance by the Company and Grantee with all applicable
requirements of law relating thereto and with all applicable regulations of any
stock exchange on which shares of the Company’s common stock may be listed at
the time of such exercise and issuance.


 


(b)                                 In
connection with the exercise of this option, Grantee will execute and deliver
to the Company such representations in writing as may be requested by the
Company so that it may comply with the applicable requirements of federal and
state securities laws.


 


6





















 


10.                                 Liability of Company.


 


(a)                                  If
the Option Shares exceed, as of the Grant Date, the number of shares that may
without stockholder approval be issued under the Plan, then this option will be
void with respect to such excess shares unless stockholder approval of an
amendment sufficiently increasing the number of shares issuable under the Plan
is obtained in accordance with the provisions of the Plan.


 


(b)                                 The
inability of the Company to obtain approval from any regulatory body having
authority deemed by the Company to be necessary to the lawful issuance and sale
of any common stock pursuant to this option will relieve the Company of any
liability with respect to the non-issuance or sale of the common stock as to
which such approval is not obtained.


 


11.                                 No Employment Contract.


 


Nothing
in this Agreement, the Notice or in the Plan confers upon Grantee any right to
continue membership on the Board or interferes with or restricts in any way the
rights of the Company (or any subsidiary), which are hereby expressly reserved,
to discharge the Grantee at any time for any reason or no reason, with or
without cause.  Except to the extent the
terms of any written contract between the Company and the Grantee may expressly
provide otherwise, neither the Company nor any of its subsidiaries is under any
obligation to continue the Grantee’s membership on the Board for any period of
specified duration.


 


12.                                 Withholding.


 


Grantee
hereby agrees to make appropriate arrangements with the Company for the
satisfaction of any federal, state or local income tax withholding requirements
applicable to the exercise of this option.


 


13.                                 Notices.


 


Any
notice required to be given or delivered to the Company under the terms of this
Agreement will be in writing and addressed to the Company in care of its Senior
Vice President, Human Resources at its corporate office at 145 Brandywine
Parkway, West Chester, Pennsylvania, 19380. 
Any notice required to be given or delivered to the Grantee will be in
writing and


 


7





















 


addressed
to the Grantee at the address indicated below the Grantee’s signature line on
the Agreement.  All notices will be
deemed to have been given or delivered upon personal delivery or upon deposit
in the U.S. mail, postage prepaid and properly addressed to the party to be
notified.


 


14.                                 Construction.


 


This
Agreement, the Notice and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to the
express terms and provisions of the Plan. 
Capitalized terms not otherwise defined herein that are defined in the
Plan shall have the meaning specified in the Plan.


 


All
decisions of the Committee or the Board, as applicable, with respect to any
question or issue arising under the Plan or this Agreement will be conclusive
and binding on all persons having an interest in this option.


 


15.                                 Governing Law.


 


The
interpretation, performance and enforcement of this Agreement will be governed
by the laws of the Commonwealth of Pennsylvania.


 


[SIGNATURE
PAGE FOLLOWS]


 


8





















 


IN WITNESS
WHEREOF, the Company has caused this Agreement to be executed in duplicate on
its behalf by its duly authorized officer and the Grantee has also executed
this Agreement in duplicate, all as of the day and year indicated above.


 


 


	
   

  	
  For
  Cephalon, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
  

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  



 


 


I hereby accept the
option described in this Agreement and the Notice, and I agree to be bound by
the terms of the Plan, this Agreement and the Notice.  I hereby further agree that all of the
decisions and determinations of the Committee and the Board, as applicable,
shall be final and binding.


 


	
   

  	
  Grantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  



 


9